CASE STUDY:CASE STUDY:Mahindra & Mahindra Ltd. – Farm Equipment Sector: Mahindra & Mahindra Ltd. – Farm Equipment Sector:

Acquisition of Jiangling Tractor CompanyAcquisition of Jiangling Tractor Company

byby

N. KrishnaKumarN. KrishnaKumar

Guide: Dr Abhijit GangopadhyayGuide: Dr Abhijit Gangopadhyay

Nivedit S. MathurNivedit S. Mathur

Bihag ShahBihag Shah

Gowri SundarmurthyGowri SundarmurthyDate:4th June 2010Date:4th June 2010

Outline of the presentation:-Outline of the presentation:-

1. Introduction of Case2. M&M’s Vision and Mission3. OD & Business Strategies4. JTC5. Feasibility Study of JV – SWOT Analysis6. Recommendations 7. JV of M&M and JTC

Mahindra & Mahindra : A to ZMahindra & Mahindra : A to Z

•Mahindra & Mohammed changed to Mahindra & Mahindra.

• Diversified business in other sectors such oil drilling, bearings, times-share resorts and instrumentation in addition to Jeeps & tractors.

K.C. Mahindra Gulam Mohammed J.C. Mahindra

• Established on 2nd Oct 1945 jointly (Mahindra & Mohammed)

Mission:-“We don’t have a group-wide mission statement. Our core purpose is

what makes all of us want to get up and come to work in the morning”

-Anand Mahindra

Vision:-Indians are second to none in the world. The founders of our nation and of our company passionately believed this. We will prove them right by believing in ourselves and by making M&M Ltd. known worldwide for the quality of its product and services.

Vision & Mission

“Any Company would not remain overtime, in business that did not have a global potential.” – Anand Mahindra.

Organizational Development: The need for Change:

Each headed by President – part of group Management board.

Lateral Recruitment in company.

Trade &

Financial Services

IT Services

Farm Equipment

Services

Automotive

Restructuringinto

4 SBU’s

Business StrategyBusiness Strategy

Business Strategy: In Dec 2001, company identified FES (Farm Equipment Sector) as a core business.• In 2002, Operation Blue Chip was implemented.It aimed at strengthening domestic operations as a precursor to going global.

“ GO HOME THEN GO ABROAD”

Operation Blue Chip:-• Replaced performance measures into two new benchmarksMarket Share Free Cash FlowSalesProfits Return On Capital Employed (ROCE)

• Reserve of INR 7 billion generated by Apr 2004.

Organizational Development: The need for Change:

Anticipation of Market & Business Strategy:Anticipation of Market & Business Strategy:

• In 2000, Project Vishwajeet was implemented, conceptualized by McKinsey & Company.

•Bring down the break-even point from 54,000 units to 35,000 units by 2003.

•Only company to make profit in 2001 when the domestic market collapsed.

• In 2003, won Deming Prize for major advances in quality improvement; the only tractor company in the world to win the award.

Organizational Development: The need for Change:

Business Strategy: Globalization Template - FiltersBusiness Strategy: Globalization Template - Filters

For Market Selection•Industry Filter•Product/Technology Filter•Price/Earning Filter

•Attractive But Low Volume Market•Price Sensitive But High Volume Market•High Tech & High hp Market

For Company Selection•Product Portfolio•Product Technology•Market Reach•Quality Systems & Processes•Scalability•Openness Of Management•Liabilities

Jingling Tractor Company (JTC)USA, China, Australia & Africa

Organizational Development: The need for Change:

CHINA MARKET – ENTRY STRATEGYCHINA MARKET – ENTRY STRATEGY

Step 1: A team & tractors were sent to China from India to test the market opportunity.

Step2:The team targeted a single province having large land holdings suitable for company’s 25 – 75 hp range of tractors.

Step 3:Sold tractors at a price 20% higher than the rivals (John Deere), sending strong message of, “Superior Quality & Performance”.

Step 4:Tie – up with a local partner

Jiangling Tractor Company : A to ZJiangling Tractor Company : A to Z

HISTORY•Part of government owned Jiangling Motor Company (JMCG).

•30 % stake of JMCG was owned by U.S Ford Motor Company.

•Factory located at Nanchang with production capacity of 10,000 units & 3,000 engines annually.

•Operated in 20 – 30 hp range with 42 dealerships.

•Work force of 710 people which was 50 % more than the requirement.

•Problem of low-capacity utilization, surplus labor & escalating costs.

•Contribution of JTC in JMCG turnover fell from $1billion to $3.5 million.

•JMCG decided to de-focus on JTC by offloading 80% of tractor affiliate.

•Government was also interested in exiting the tractor business.

0500

10001500200025003000

Budget 2004 Jul-04 2003

050010001500200025003000

DOWNTURN IN TURNOVER

BUSINESS STRATEGY OF JTC TO OVERCOME DOWNTURN

•Concept of, “Reverse Engineering” was implemented.

•Partnering with local universities for new technology development.

•More focus on global market inspite of only 2.5% domestic market share.

•Still struggled to sustain in the market.

Feasibility Study of JVFeasibility Study of JV

SWOT Analysis

Strength Extended product portfolio of M&M (20-30hp). JTC - Focus on Quality State owned enterprise –local brand name readily available “Feng Shou”. Technically skilled team of JTC readily available. Govt. Support Influence on manufacturing facilities from Ford & Isuzu who were collaborated with JTC. Good Chemistry with Management & Straight forward Mang. style

Weakness Restructuring of JTC. Over head cost & surplus resources of JTC. Lack of Efficiency in new plant layout. Multi franchise. Ineffective Dealership – often switched to competitors. JTC global focus. Cultural barriers like language & food habits.

Opportunities Can fulfill M&M’s goal to be global player. Easy entry to Chinese market with support of local partner. To export the Chinese tractors range to India & Indian tractor range to China to suit the demand respectively. If M&M provided after sales services they can be more competitive in Chinese market. Expected growth of 13.2% 2004 to 2008. Further open door to US market where FS254 of JTC was already doing well.

Threats Undeveloped Banking facility in China. Legal considerations. JTC was part of JMCG & even Ford holding 30% stake, so 3 companies were involved in JV. Distant location of the Manufacturing units from the city.

Reasons for Going for JV

1) 20% turn over by 2009 2.5% in Chinese Market and 13% in <25hp category.

2) Product range Complementary to M&M’s range. 18-33hp of JTC – requirement of growing Indian Market and higher hp from India to China

3) Chinese Market entry “Feng Shou” brand was popular already.

4) Management JTC – Straightforward and Cooperative Management.

5) Manufacturing facilities Influenced by Ford & Isuzu

6) Company focus Quality focus & Readiness to M&M’s quality practice.

M&M Objective Fulfillment by JTC

Recommendations

Keep DoingKeep DoingKeep DoingKeep DoingStart DoingStart DoingStart DoingStart Doing

More ofMore ofMore ofMore of

Less OfLess OfLess OfLess Of

Stop DoingStop DoingStop DoingStop Doing

• Process of JV – JV agreement, securing approval of company name, business license.

• Asset transfer contract.

• Protocol for takeover of plant equip., inventory, land & building.

• Finalizing contracts with suppliers and dealers of JTC.

• Game Changer – After Sales Services.

• Restructuring.

• Improve Over head cost.

• Process of JV – JV agreement, securing approval of company name, business license.

• Asset transfer contract.

• Protocol for takeover of plant equip., inventory, land & building.

• Finalizing contracts with suppliers and dealers of JTC.

• Game Changer – After Sales Services.

• Restructuring.

• Improve Over head cost.

• Training of the employees

• Improve the existing accounting and costing system.

• Mapping skills of employees.

• Training of the employees

• Improve the existing accounting and costing system.

• Mapping skills of employees.

• Study of the Chinese & Export market.

• Establishment in Chinese market.

• After Sales services.

• Exclusive Franchise.

• Study of the Chinese & Export market.

• Establishment in Chinese market.

• After Sales services.

• Exclusive Franchise.

• Hi-tech & High HP product as the demand is less.

• Hi-tech & High HP product as the demand is less.

• Entry through Green field projects.• Entry through Green field projects.

(Star Fish Analysis)

M&M ACQUISITION OF JIANGLING TRACTOR COMPANY

Mahindra officials with the JTC team. Mahindra officials with the JTC team. Mr. Anand Mahindra, VC & MD, M&M, visits the Chinese facility with JTC officials. Mr. Anand Mahindra, VC & MD, M&M, visits the Chinese facility with JTC officials.

Jiangling Tractor facility. Jiangling Tractor facility. Signing of the MOU in China. Signing of the MOU in China.

JIANGLING TRACTOR COMPANY - CHINA

The China Task Team. The China Task Team. Scouting for a partner in China. Scouting for a partner in China.

Inside view of the JTC facility. Inside view of the JTC facility. Inside view of the JTC facility. Inside view of the JTC facility.