Beruflich Dokumente
Kultur Dokumente
26/11/2009
Agenda
Present Company
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Sectors of operation:
Automotive Farm equipment Financial services Trade and logistics Automotive components After-market IT Infrastructure sectors
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Organizational Structure
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History
1945
Incorporated by KC Mahindra and Ghulam Mohammad as a Mahindra & Mohammad to manufacture Jeeps under license of Willys Mahindra & Mohammad became Mahindra & Mahindra
Built on his expertise in the steel industry & began trading steel with UK suppliers
1948
Listed on Bombay Stock Exchange Entrance into world market as exporter of utility vehicles and spare parts Restrictions of License Raj
Forced to expand into other businesses, creating a tractor division
1986
1994
New Managing Director Anand Mahindra introduced new logo Successful launch of the Mahindra Scorpio (a wholly indigenously designed vehicle) Ranked among top 10 Indian companies in Global 200: The World's Best Corporate Reputations list. As well as one of Indias 40 largest companies
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Governance
Benefit:
Successfully integrate the beliefs, values, culture and ethics of Mahindra Group to the system and process
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Core Values
Good Corporate Citizenship
Seek long term success, in alignment with the country's needs, without compromising ethical business standards
Professionalism
Seek the best people for the job and giving them the freedom and the opportunity to grow Support innovation and well reasoned risk taking, but will demand performance
Customer First
Respond to the changing needs and expectations of the customers speedily, courteously and effectively
Quality Focus
Make quality a driving value in the work, in the products and in the interactions with others Believe that the quality is the key to delivering value for money to the customers
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Mahindra Samriddhi
Offer a wide range of agri-related services
Mahindra Applitrac
Offer total farming solutions to increase mechanization level
Mahindra Powerol
Produce Diesel Generating sets and engines
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International operations
Spread across six continents and in around 25 countries State-of-the-art manufacturing plants in India and China, as well as plants in USA and Australia Combined capacity to produce more than 170, 000 tractors a year More than 1000 dealers world-wide 25 to 125 HP category tractors for international market
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Area of Reference
5
Number of Plants
6
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Tractor categories
Domestic Market: 15 HP International Market:
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25 HP
75 HP
125 HP
Expansion
1994 M&M FES starts its expansion by entering Bangladesh and Nepal (throughout M/s Karnaphuli and M/s AGNI Incorporated Pvt. Ltd. serving as distributors, after-sale service and training) as well as the American market (Incorporation of MUSA and focus on hobbyist segment <100hp) 2003 Opening of second assembly line in Calhoun, Georgia (USA) to cut costs both for dealers and M&M as well as to improve (after)sale services. 2004 Entering markets of China (JV with JMCG, with a 12,000, 18-33 HP complementary production capacity and an established distribution network), Chile (throughout M/s Gildemeister) and Sri Lanka (M/S DIMO) 2005 Entering markets of Australia (opening of assembly and customer support centre in Acacia Ridge, Queensland), Africa (local dealers network), Serbia and Macedonia (throughout M/S AGROPANONKA MTZ FINKE and Intermotors). Opening of third assembly line in Red Bluff, California (USA) 2006 Entering the Iranian market throughout an alliance with ITMCo in order to access the 80% market share and assure high quality customer service thanks to the vast network hold by the partner 2007 Entering the Turkish market throughout a partnership with ITCE Group in order to touch the 80% of the farming community made by small and medium size farmers. Opening of 4 assembly plants in Chaad, Mali, Nigeria and Gambia that import SKU from India in order to deliver to African farmers affordable but still high quality tractors
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Expansion (continues)
2008 Entering markets of Botswana, Egypt, Niger, Congo, Yemen, Argentina and Cambodia Opening of fifth assembly plant in Ghana, Africa in partnership with ZoomLion Ghana Limited to ensure the technology transfer, provide employment opportunities and create a platform for skills training and capacity building of local artisans. 2009 Second JV in China with Jiangsu Yueda Group (Jinma brand). This strategic move let M&M access a huge distribution coverage (Yueda has footprint in more than 60 countries including USA, Russia, South-America and Africa), a larger manufacturing base both in terms of product line (now up to 125HP) and of economies of scale Brand building campaign in USA designed to touch upon the various aspects within the life of the typical Mahindra customer. Swaraj Brand 2004 M&M acquires 43,3% of the Punjab Tractors Limited, establishing its position of leader in the Indian tractor market. This acquisition let M&M acquire a wider customer base (with decreasing market share), a richer product portfolio also on an international basis and higher distribution coverage. 2006 Consolidation of stake to 64,4% and displacement of production at PTL in order to utilize its large manufacturing base 2008 Consolidation of stake to a complete merger. Under M&Ms management the sales of Swaraj brand increased by 57% and its market share went from 7,3% to 10,7%
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Financial performance
F2009 results include PTL numbers from 1st August 2008
Raised Rs 400 Crore in Non convertible debentures even in a hostile market Domestic market share increased to 40.8% as result of merger Growth of 25.1% in domestic market in comparison to 0.6% of growth of entire industry Significant costs reduced as result of merger Maintained good ratings despite the current economic scenario
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Main challenges
Record increases in raw material prices, followed by industry wide price increases Increasing labor cost Continued high interest rates for tractor loans High NPAs & resulting stringent lending norms remain a concern Tractor industry exports likely to remain depressed
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Agenda
Present Company
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Large companies (John Deere, AGCO, and CNH) produce a full array of products, smaller companies generally make a single product line
Production of diesel engines is the major separator between large and small companies large amounts of capital and expertise required Big companies have large economies of scale annual revenue of about $350,000 per employee Small companies can be successful by making specialized equipment - annual revenue per employee of about $150,000
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Strategic acquisitions and Joint Ventures to survive and prosper in an increasingly consolidated market with global reach
Competitiveness, efficiency, distribution competence & network, manufacturing strength, market knowledge, access to markets
Major products: tractors, self-propelled harvesting combines, tractor attachments, equipment used for crop production and farm animal management
Tractors account for about 30% of the market, combines 25% Strong and durable tractors for small and medium farmers - Product range going up to 125HP Low cost manufacturing in China and India for exports
Strategic Markets
Mature Markets
US
EU Obtained qualification to sell under MCTCL brand Niche position in US, probably has no other option in other mature markets like EU Largest export market Niche market of hobbyist segment Sales of MUS decreased by 32% due to crisis/recession and changing exchange rates Refocus from declining US market on Africa
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Strategic Markets
Home Market
India One of the largest tractor markets in the world by volume, low penetration Market leader with 40,8% market share, sales increased by 25% despite flat industry National tractor market is fragmented with 13 national players Merger with Punjab Tractors - consolidation, enforced market leadership, cost savings, economics of scale, sourcing benefits, productivity increase
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Political-Regulatory Pressures
India: Agriculture priority area for Government
Population base dependent on farming and allied industries, like in many emerging markets Government support prices for crops in India Union budget credit allocation to agriculture to offset liquidity crunch, strict lending norms or farm loans due to higher NPAs, high interest rates for tractor loans, increasing raw material/tractor prices F-09, the Government of India has proposed to allocate Rs. 2.8 lakh crores / $ 62.2 Bn for agricultural credit Strong focus on irrigation projects and investment for development of rainless areas with an outlay of Rs. 20,000 crores/ $ 4.4 Bn
China:
Abolition of tax on agriculture Subsidy for tractor purchase
Political instability
Present in many target countries (Nepal, Africa)
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Socio-Economic Pressures
Transition from many, small subsistence producers
Fewer and larger commercial producers - larger farm operations overall More non-farm employment
World population of 9.1bn in 2050 raise overall food production by 70% between 2005/07 and 2050
Production in the developing countries would need to almost double Demand for cereals is projected to reach some 3 bn tonnes by 2050, up from todays nearly 2.1 bn tonnes Food and animal feed, bio fuel (political regulations) Production of biofuels (ethanol & biodiesel) tripled since 2000 is projected to double again within the next decade
90% of production increases to come from augmenting yields and cropping intensity, only 10% by expanding arable land
Developing countries: ratio at 80/20 Land-scarce countries: achieve growth by improving yields
Global recessionary pressures - Indian economy slowed down BUT impact on rural economy minimal
Lower levels of mechanization significant growth potential
Commodity prices
Fuel prices (60% of cost of running tractor) and preference of petroleum as most tractor have diesel engines
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Technological Pressures
Market consolidation in every area of farming, demand for increased efficiency will in the long run demand for larger machines as soon as capital and level of development are sufficient
In developing markets the hobbyist segment is marked by competition from second hand retailers Need to diversify in more upscale products at some point to cover full portfolio
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Competitive Map
Revenue Growth
Global Presence
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Competitive Positioning
20
50
100
150
250
300
350
400
450
500
550
600
HP
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Competitors
John Deere
50% sales in North America Focus: technological innovations, size, power 2008, spent $943 mio/3.7% of net sales of equipment on R&D Revenues: $28.400 mio R-growth 2007: 18,1% Employees: 56.700
AGCO
Revenues mostly western EU, 10 North America, strong in Brazil Multibrand business, only farm equipment Revenues: $8,424.6 mio. R-growth 2007: 23,4% Employees: 15.600
CNH
size of JD business very global 2nd largest in farm equipment Grown through aquisitions Revenues: 18.476 mio. R-growth 2007: 15,7% Employees: 31.500
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Outlook
Stabilizing world economy
Growth of Indian economy
World demand for agricultural equipment forecasted to rise by 3,8% annually to $112 bn in 2012
Need for increased mechanization in emerging markets Replacement related demand in industrialized countries
Competition from world leaders increasing, they strive to profit from promising emerging markets
Introducing machinery specifically designed according to needs of emerging economies Have leverage and innovative experience which will be hard to compete with A global footprint
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Agenda
Present Company
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Internationalization
Anand Mahindra , the new CEO restructured company into 6 businesses in 1994 to deal with Indias liberalization and globalization
Farm equipment sector Automotive Automotive components, Financial services, Infrastructure development, Software
Reengineered business processes, brought in new people, invested in information technology, and reduced head count. M&M corporate launched the Operation Blue Chip in 2002
Focus on achieving global competitiveness FES was identified with global potential Emphasis on innovation Emphasis on customer centricity
I believe that business families should behave like aggressive private equity companies. They must
allocate capital, demand performance, create synergies, sustain value systems, and implement good governance practices, but they should let professional managers run the companies.
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Encirclement Strategy
India
Segment Scope
Africa+ Asia
Diversity
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International Diagnosis v
Specific Advantage Quality and product reliability thanks to manufacturing strength (After)sale service and fast adaptation to market thanks to vast and well-rooted dealer network (1500+) High price competitiveness thanks to low cost production of SKD units to be assembled according to local needs
M&M: expanding international presence and first establishment of multinational hubs (USA, Australia)
Localisation Advantage USA: untapped hobbyist segment Africa: 1-lakh tractors annual growth in medium term thanks to rich natural resources China: access to increasing domestic demand (+32% between 03 and 08) and to economies of scale thanks to larger manufacturing base
Internalisation Advantage Learning enhancement both in management practices and in Farm Equipment Sector in general Optimization of production by increasing economies of scale Help in diversifying country risk Increased possibility to acquire talents
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Specific features
20-125 HP reliable tractors Lean and agile: production of SKU in India and assembling in local facilities Emerging markets: M&M ties up relationships with established local distributors network (e.g. in Sri Lanka, Bangladesh and Nepal with one of top10 corporate houses) Mature markets: Investments to adapt brand image to customer lifestyle (Mahindra USA brand building campaign through sponsoring
Marketing
Finance
Rated AA- by CRISIL for long term ,highest rating for short term Been Able to raise capital in International Markets
M&M enters particularly strategic markets through JVs (China and Iran) or Partnerships (Turkey)
Strategy M&M has managed to balance the global downturn by focusing on emerging economies
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International market: FES plans to expand aggressively into newer markets and strengthen its presence in existing markets
In the long term growth opportunities may be capped if M&M remains in its field of small tractors, especially if big players enter the market. Diversifying within area of expertise seems to be a sensible move.
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Agenda
Present Company
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Recommendations
US strategy may need to be revisited as incongruent with overall encirclement strategy which has higher probability of success. Enter the Brazilian market for instance by acquiring Agrale S.A. a small player producing smallto-medium HP tractors, with shrinking volumes and pricing pressure from OEMs and large players.
Short term
Medium term
Maintain the cost leadership and current margins which are more than double the global leaders to sustain an edge Keep on with the current strategy of encirclement starting from China, Africa and finally Middle East and Europe in order to gain critical mass in growth markets, also by avoiding large M&A Capitalize on growing in adjacencies, especially Applitrac business, through the current strategy of investments and JVs
Long term
Address the high-end tractor market after having gained critical mass and with current competitive proposition
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