Business Models Project

 Business Models, Institutional

Change, and Identity Shifts in Indian
Automobile Industry

Submitted by:

Group – 08

Mathan Kumar V 2016PGP207

Suhitha Raj P 2016PGP388
Varsha Sharma 2013PGP144
Hemanth Raj T 2016PGP409
Yadala Raveena 2016PGP436
Venkatesh J 2016PGP425

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 Table of contents

1. The activities, strategies, structures and decision-making processes of

multinational enterprises
2. Interactions between multinational enterprises and other actors,
organizations, institutions, and markets
3. Cross border activities of firms
4. How the international environment affects the activities, strategies,
structures and decision-making processes of firms
5. The international dimensions of organizational forms and activities
6. Cross-country comparative studies of businesses, business processes and
organizational behaviour in different countries and environments
7. Bibliography

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Activities, Strategies, Structures and decision-making processes of Multi-national enterprises:

Activities carried out by Multi-National enterprises in Automobiles industry:

Before 1991 Multinational companies’ role was not great in the economy of India. At that time,
Indian economy was dominated by public enterprises.

After the adoption of industrial policy of liberalisation and privatisation in 1991, the role of private
enterprises has been identified as vital for the growth of the Indian economy.

The following are the important activities carried out by MNCs in emerging economies like India:

1. Foreign Capital Investment:

Over the years, outside aid to developing countries has been decreasing. The reason is the
developed countries which lend money were not inclined to part with a higher proportion of their
GDP as backing to developing countries.

MNCs bridge this gap between the requirements of foreign capital in India by bringing in increased
foreign investment.

The liberalized foreign investment allows MNCs to make investments in India at different ceilings
specified for various industries or projects.

2. Non-Debt Creating Capital inflows:

MNCs and direct investments from them were not encouraged in India, before liberalisation of
Indian economy; India depended extensively on external commercial borrowing (ECB) which was of
debt-creating capital inflows. Because of this, the burden of external debt and debt service
payments reached the alarming figure of 35 per cent of our current account receipts. This created
uncertainties about our capability to satisfy the debt obligations and there was a flow of capital from
India and this resulted in balance of payments crisis in 1991. This problem can be avoided through
FDIs by MNCs.

3. Technology Transfer:

Multinational corporations transfer high end and advanced technology to emerging economies
which are essential for improving efficiency of operations and enable to start new productive
ventures which may require adoption of high technology. MNCs setting up their subsidiary
manufacturing units or joint venture units in developing countries like India, bring with them new
equipment and machinery embodying new technology. Along with that, skills, expertise and
technical know-how is also carried into the industrial environment. Therefore, MNCs help in the
technological advancement of the Indian economy.

4. Promotion of Exports:

With widespread network all over the world and manufacturing products efficiently leading to lower
costs, MNCs can play important role in helping exports of a country in which they enter and invest.
MNCs made large investment in plantations whose products they exported. Recently, Japanese
automobile company Suzuki made a large investment in Maruti Udyog with a joint collaboration with

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the Indian Government. These cars are being exported in a huge number to the foreign markets in
addition to being sold in Indian domestic markets.

In this scenario, GOI started granting permission to a multinational firm for investment in India,
subject to the condition that the concerned MNC would export their products so as to increase
foreign exchange for India.

5. Investment in Infrastructure:

MNCs have the ability to raise financial resources not only in India but also globally, in addition to
having deep pockets. Hence, they can invest in infrastructure and development in the country
helping in modernization and innovation.

This will give a boost industrial growth and help in creating employment and provide source of
income to many people in India. The outside economies spawned by investment in infrastructure by
these enterprises will pool in investment by the native private sector companies and will kindle
growth of economy.

Strategies:

The automobile industry across the globe has a variety of factors that are complex in nature and
impact the economic options available to the manufacturers:

Some of these factors are

 Globalization, market convergence and regionalization.

 Increasingly diversified consumer patterns of behaviour – Lesser acceptance of
standardized products and seeking individualized products that are customized to their
needs.
 Accelerated modification and diversification of the product portfolio – Shorter lifecycles of
products
 Pervasion of automobiles with digital technology
 Increased pressure for innovation and flexibility in development and manufacturing

The Challenge of Competitive Environment

Changing according to a dynamic environment is the core business objective, requiring updated
problem-solving capabilities and processes to be identified, designated and executed rapidly.

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A car manufacturer has seven major strategic levers to enable such adaptive behaviour:

• Brand management – Innovative strategies in Brand management help companies to be more

unique and abled to differentiate their products from the competitors.

• Customer relationship management –CRM helps a company to understand their customers and
their requirements and be responsive and flexible to changes in patterns of customer behaviour and
their consumption.

• Core competency management – This makes a company to emphasise on its core strengths and
become more mutable and buoyant by entering into strategic partnerships with suppliers with
capabilities in fresh skills or niche manoeuvres.

• Software management – It helps a company to be focused on software calibration and strike

calculated partnerships, which, in turn, help the company to become variable and resilient.

• Quality management – QM will help ensure that companies grow their maturity in flexibility, by
becoming a cross functional concept over the whole value-add chain;

• Product development management – Handling product development along with a focus on

expansion of competencies in innovative technologies will enable fir to become more capricious by
the optimization of collective engineering. Greater resilience can be accomplished by standardized
methods and the increased use of simulated testing. Localized development and decentralized
activities will help to increase sensitivity to customers’ requirements.

• Expansion management – Management of expansion into newer topographies and nations require
focus on the wants in these new markets with varied cultures and respond to evolving market
settings and requirements.

Focusing on these 7 strategic levers, automobile manufacturers raise their latent to effectively cope
with the challenges of globalization, individualization, digitalization and growing competition.

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Structure:

According to changing regulations of the market and the dawn of advanced technologies, non-
traditional, unconventional business models are booming, often coexisting in the same market and
industry space. A barbell-like structure is arising, with a few big players on top, a narrow middle, and
then smaller, fast-moving players at the bottom, in many industries. Similarly, commercial
boundaries are growing blurrier as intertwined "ecosystems" of suppliers, manufacturers, and
consumers emerge. Even elementary structural norms are being toppled: for example, the advent of
vigorous private equity financing is changing corporate proprietorship, life cycles, and performance
scenarios. Winning companies, which use competences gained by new structural possibilities, will
exploit these transformations.

Decision making Processes:

Regarding the decisions related to a foreign subsidiary, a parent company can either centralize
decision-making at the headquarters or decentralize those decisions to the subsidiary.

At the subsidiary level, the following factors would favour centralized decision-making:

 Sourcing of goods
 Inter-company dealings with the parent firm
 minor holdings
 New subsidiaries

The following factors are better-off with decentralized decision-making:

 distinctive native demands

 high local labour costs and financing undertakings
 higher diversity in the product portfolio
 Larger subsidiaries

Centralization seems like a better option at the firm level, since vertical integration and far-reaching
parent company knowledge in the country of the subsidiary is greater. On the other hand,
decentralized decision-making would be more effective, as the scale and scope of international
business and the inexperience of the parent company in the foreign country will be a shortcoming.
Finally, at the country level, for markets with an unstable business environment, as well as a culture
of authority, centralized decision-making is recommended. If there is extensive market competition
at the lower level, decentralization would be called for.

BUSINESS APPLICATION

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Research shows, decentralizing decisions down to subsidiaries when they should be centralized is a
much greater mistake, even though unsuitably centralizing decisions can impact organizational
performance. The impact is greater on the bottom line, and it is also much more costly to reverse
the blunder. Bringing decision-making scope back to the parent company is not easy, and may
comprise revision of employment contracts, reforming the location of established knowledge, and
fine-tuning accounting and core control systems — not to mention the organizational political
fallout.

Interaction between multinational enterprises and other actors, organizations, institutions and
markets

Founded in 1945 as a steel trading company, Mahindra entered automotive manufacturing in 1947
to bring the iconic Willys Jeep onto Indian roads. Mahindra follows a unique business model of
creating empowered companies that enjoy the best of entrepreneurial independence and Group-
wide synergies.
Over the years, the Group has developed a large product portfolio catering to a diverse customer
base spanning rural and semi-urban customers, defence requirements and luxurious urban utility
vehicles. In 2002, it launched the indigenously engineered world-class sports utility vehicle-Scorpio,
which bridges the gap between style and adventure, luxury and ruggedness, and performance and
economy.
The Group exports its products to several countries in Europe, Africa, South America, South Asia and
the Middle East.
The Automotive Sector continues to be a leader in the utility vehicle segment with a diverse portfolio
that includes mass transport as well as new generation vehicles like Scorpio and Bolero.

Mahindra interaction with multinational enterprises and other actors :

In early 1990s, the country’s economic liberalisation and potential competition from global players
had left M&M, a maker of pick-up trucks and jeeps for the rural market, with three options: Exit the
automotive sector, become a licenced manufacturer for another company or develop own products.
And Mahindra chose to develop its own products and compete with the world.

Some twenty years down the line Mahindra has come to dominate the Indian SUV market in which
almost every major global carmaker is fighting for a share. The most significant change has been :
Riding on strong product development abilities. M&M has managed to launch several successful
products.

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The availability of meagre resources in 1993-94 did not permit large-scale investment in research.
However, the focus was on fixing what was possible. The minimum requirement of infrastructure
was built and people were trained.

The first product to emerge from Mahindra's newly-refurbished shop was a pickup truck in 1997,
followed by Bolero, an SUV, in 2000 which replaced their Armada, which had been launched in 1993.
(M&M, initially assembled multi-utility vehicles under a licence agreement with Willys Jeep).

Though Bolero was the first product to be developed in-house, it used the Armada’s chassis, roof
and door. Bolero turned out to be very successful and it also bolstered and widened the company’s
product range which had, thus far, included pick-up trucks and jeeps predominantly focussed on the
rural markets.

M&M had never launched a product for the urban market and it did decided to develop a new
vehicle. The product was Scorpio.
An integrated design and manufacturing centre was set up at their Kandivali plant in Mumbai. It did
the initial styling but did not have the capability to make the clay model, or design the body. For
that, it opted for a UK consultant. In fact, bulk of the development was led by consultants. For

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instance, AVL Austria designed the engine. However, M&M ensured that its engineers worked
alongside the consultants during this process.

There was no expertise in India to build either a press or paint or body shop. Buying these from
established players would prove prohibitively costly. M&M therefore began to scout for other
options. For instance, it identified a Korean company which had some expertise in body shops but
had never developed one fully. However, M&M still gave it the order as it would cost half the
amount it would have to pay established players. A paint shop, set up as part of the Ford-Mahindra
joint venture in 1994, was put to use for Scorpio. These measures were part of cost cutting process.

Three things went in favour of Scorpio—its aggressive styling, powerful 109 horsepower engine and
a price point of Rs 6 lakh. The company was bent on making Scorpio a success. It also dropped the
Mahindra name from the brand just in case the ‘rural’ image put off the urban customer.

The Scorpio’s eventual success offered several learnings to M&M. First, that it has the capacity to
develop all-new vehicles. Second, to develop those vehicles, it needs to build the necessary

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capabilities in-house rather than rely on consultants. This would help reduce costs and lead time to
the market. Third, customers would not always be charitable.

The need to enhance and refine the product development process became obvious. But Scorpio had
drained the company’s resources and they had to hit the pause button on the plan of revamping
capabilities. Not for long though: As Scorpio’s success grew, so did M&M’s revenues and profits
which rose sharply.

In 2005 the idea of Mahindra Research Valley (MRV) was conceptualised as an integrated product
development centre that will have the best environment, infrastructure and people for R&D in the
auto industry.

Since its launch, three new products have emerged out of MRV. The XUV 5OO was developed in four
years at a cost of Rs 650 crore (25 percent lower than Scorpio at then prices).

Arjun Novo—a tractor developed at a cost of Rs 300 crore.

The third product, the New Scorpio, was launched with updated design and technology.

Engineers at MRV are working on 20 new products/variants and three new tractor platforms apart
from developing many new technologies ranging from in-car infotainment, alternate fuels, emission
and safety standards and light weighting the car to improve fuel efficiency.

MRV has also helped M&M improve the quality of all its products. At any given time, over 300 tests
are being conducted to improve performance and customer experience.

Mahindra and other Global players

To bridge this gap between M&M and other Global players, Mahindra entered phase II of his
strategy by setting up a technology centre in Detroit in early 2014. The Mahindra North America
Technology Centre (MNATC) with 64 employees effectively complements MRV.

MNATC was set up to speed up our development prowess. In five years time, the Detroit centre
planned tp expand to house 500 staff members, focus on fit and finish as well as reliability among
other aspects.
These moves pointed to the creation of a hub-and-spoke product development model at M&M. At
the core is MRV with young engineers and the necessary physical infrastructure. MNATC brings
experience and technology to the table.

M&M had acquired SsangYong Motor’s research facility in November 2010 for. M&M and SsangYong
collaborated on developing four new engines. This joint effort included both designing and sourcing.

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Mahindra expansion into international markets :

1969 :

Mahindra establishes its export division with its first order of 600 jeeps for the Yugoslavian market.

1970’s :

Mahindra begins exporting vehicles to Nigeria and other African countries.

1990’s :

Mahindra begins exporting to Nepal in early '90s.

Circa 2000 :

The Bolero was launched, which transformed the image of the company with its contemporary looks
and style. Mahindra increased its global aspirations and expanded further afield.

2002 :

Mahindra launched India’s first indigenous SUV, the Scorpio. Scorpio was by far one of the most
exciting products ever developed by M&M and one that would give it immense recognition.
In addition to the Scorpio, Mahindra also developed the Mahindra Pik Up, based on the Scorpio
platform, exclusively for overseas markets.

Early 2000s :

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Mahindra made its presence in Tanzania, Sri Lanka, Congo, Madagascar, Mozambique, Ethiopia,
Rwanda , Burundi and Nigeria .

2004 :

Mahindra opened its first office outside India marking its presence internationally.
Mahindra South Africa, a JV company, was also set up in South Africa for sale of the Scorpio and
Bolero Pik Up.

2005 :

Mahindra Europe was established in Italy with the launch of the Scorpio and Bolero Pik Up.
Mahindra also made a foray in the Other European market in the same year.

2006 :

M&M launched a product solely for the overseas market, the Mahindra Pik Up which was built on
the Scorpio platform.

2007 :

Mahindra consolidated its position in neighbouring countries including Bhutan. The company also
forayed into Morocco, Algeria and Ghana, consolidating its position in the African continent.
Mahindra also ventured into Chile and Peru in South America with the introduction of the Mahindra
Pik Up.

2008 :

Mahindra Automotive Australia is formed to strengthen Mahindra’s position in Australia. The market
of Paraguay is opened for Mahindra Business

2009-10 :

The iconic Brand Mahindra Thar was launched in Italy and South Africa. Also the consolidation of
Farm and Auto Business in Mahindra , leveraging on the synergy for International Business.

2011 :

Mahindra expanded its footprints in South America in Uruguay, Ecuador. Also Mahindra XUV500,
Mahindra's first global SUV platform, a monocoque with significant inputs in styling and
development from customers across the globe was launched.
There was a simultaneous launch for Mahindra XUV500 in South Africa .
Also Mahindra Next Big Pik up was launched exclusively for International Markets, Mahindra Genio .

2012 :

The market of Columbia was opened to strengthen the presence in South America.

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Cross border investments

Cross-border investment is defined as the net inflows of investment to obtain an enduring

management interest in any company operating outside of investor’s operating economy.

Mahindra & Mahindra actively involves in investing in the foreign economies to expand its
businesses. One such endeavor is opening its first Greenfield car fabricating plant in Detroit, the
primary Indian auto organization to have a unit in US. The organization has invested $1.5 billion in
the US to generate a revenue of $2.5 billion and to employ more than 3000 Human resources. The
investment plan is to make all the above parameters to double in three years. The company views
America to be attractive place to invest but still wary of the Trump's immigration policies. The
company is focusing on investing in both new and already existing businesses including product
development. Mahindra and Mahindra had initially developed a SUV including a pickup truck. But
M&M had dropped these plans and decided to invest in new mobility mega trends of the millennial
shared economy. 

Mahindra and Mahindra (M&M) has introduced an industrial facility and a research Center for
electric two wheelers in Ann Arbor, Michigan, US. With an underlying ability to deliver 9,000 vehicles
every year, the plant will assemble its first electric two-wheeler later this year; the capacity can be
expanded to 20,000 a year later. Christened Genze, it is the first electric vehicle from the company
after it entered the two-wheeler segment in 2008.

Recently M&M has announced its entry into Turkey nation through Hisarlar Makina Sanayi ve
Ticaret Anonim Şirketi (Hisarlar) company acquisition. It is a farm equipment company based out
of Turkey. The association is aimed at entering into the farm equipment business in Turkey and
Europe. The industry which is fragmented in these countries and chances are more for Mahindra to
capture most of the market with its advanced products and flexible product lines.

Inter-firm Trade

Mahindra and Mahindra has been aggressively involved in globalizing and expanding their portfolio
of business to include new categories of farm machinery. One such initiative is rolling out a Joint
Venture with Yeuda Groups in China. This will be the second tractor venture of Mahindra in China,
after the Mahindra’s current tractor business namely, Mahindra China Tractor Company Ltd.
(MCTCL). m

The new Joint venture is located in Yancheng city of Jiangsu Province. The JV’s product portfolio
consists of tractors ranging from 16 HP to 125 HP. The new company Mahindra Yueda Yancheng
Tractor Company (MYYTCL) has a strong distribution network in china covering more than 25
provinces in the country. MYYTCL also lead to building on existing exports operations in more than
60 countries such as USA, Russia, etc.

The Sector of farm products has also found significant success in the international market. Mahindra
(China) Tractor Co. Ltd. manufactures tractors for the fast growing Chinese market, USA and some
other western nations. In addition to tractors, they also manufacture other farm related products for

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China. Today, the 'Mahindra' tractor can be easily recognized as a powerful symbol of productivity
and performance across the north Americas and China.

Technology transfer:

Mahindra and Mahindra has aggressively involved in gaining new knowledge required in the field of
automotive and communication industry. With its cutting technologies Mahindra and Mahindra has
standardized most of their process in a very efficient manner. With its attempt to gain and share
more knowledge in the field of electronics and communication, Mahindra and Mahindra has recently
agreed on a Memorandum with Shachaf Engineering Ltd. to work jointly on the design &
manufacturing of strategic electronics.

Shachaf Engineering Ltd. is a private company, based out of Israel. It has offices in growing markets
China and in India (Bangalore). Shachaf has many of expertise in designing edge technology PCB,
PCBA, BP, sheet metal, Heat Sink, AL and copper CNC parts as well as knowhow in LTCC substrates
for RF applications.

As per this MoU, Mahindra would collaborate with Shachaf Engineering to manufacture electronics
subassemblies and systems for aerospace & automotive applications. Scope of this understanding
would involve design, manufacturing and sourcing activities in Israel and India. Technology transfer
& organization of training in specific areas, as jointly identified by the parties, would also be part of
the scope of the collaboration.

Offshore services:

Mahindra Graphic Research Design (MGRD), is a famous recognized player in the engineering
companies of Italy which offers solutions to companies in automobile field and also provides services
in managing difficult process. Recently, MGRD has converted the knowledge and information
acquired during the stages of process in the automobile sector into competence. This competence
ranges from style to production with specialization for body in white, closures, internal trims,
dashboards, external trims. This competence enables MGRD to manage its own resources, those of
its suppliers and to support the clients’ internal teams in order to guarantee quality and success of
the product through process optimization, and time and cost saving.

Business models, Institutional change and identify shifts in India Automobile Industry – Mahindra

How external factors in India impact Mahindra and Mahindra:

Mahindra Automotive Division, being a part of Mahindra group which is a conglomerate, will have a
huge advantage in terms of supplier relations as the company is present in almost all the sectors,
related to automobile manufacturing

Make in India: Make in India is a Government initiative that encourages investment to manufacture
in India and make India into a hub of design and manufacturing, and to increase the contribution of
manufacturing sector in GDP in next few years. Mahindra electric (owned by Mahindra and
Mahindra) , which is the only producer of electric passenger vehicles in India might have an impact
as many global companies might enter in the Indian market, as an immediate move of Make in India

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initiative. Though the company has the first mover advantage, it is trying to establish relations with
its partners and building an ecosystem. Mahindra has joined hands with Ola, along with the
Government to provide electric mass mobility services using Electric Vehicles to the users as a pilot
project in Nagpur, and looking forward to expand the service to other locations.

FDI: With the allowance of 100% FDI in the automobile sector, the entry barriers for the foreign
companies in terms of regulations has reduced, improving the conditions of investment in India and
carry the manufacturing operations of major global automakers. This increases the intensity of the
competition in India.

GST: After the implementation of GST the company Mahindra and Mahindra has reduced the prices
of all its vehicles, hence impacting the volume of sales directly. The government has set low GST to
encourage the use of electric vehicles and boost the sales of EVs. This is expected to have a positive
influence on usage of EVs and hence the sales. Mahindra with a first mover advantage is expected to
gain out of this decision by the government.

National Green Tribunal ban of diesel vehicles: As a result of emissions caused by the diesel
vehicles, Supreme Court has banned the diesel vehicles in few cities of the country which are of over
a certain capacity and longing for a certain period. The vehicle sales are going to be at threat in long
term, if the same decision is extended to other locations of the country.

Ban on BS-III Vehicles and BS-IV norms: Government of India has banned the sales of BS-III vehicles
in India, hence making a move towards BS-IV vehicles, to reduce the impact of emissions. Few
automakers like Toyota has made an early strategic move towards usage of BS-IV vehicles even
before the ban and availed the advantage after the ban of BS-III vehicle’s sales. Other automakers
including Mahindra and Mahindra got affected due to the inventory problems.

International Environment effect on the activities, strategies, structure and decision making
processes of Mahindra and Mahindra:

While other companies are largely concentrating on improvement of dealer network, marketing and
sales function, Mahindra and Mahindra has invested on Research and Development to increase the
competitive advantage, and to improve the sustainability of the company. The company has
acquired a majority stake in SSangYong Motors of South Korea, which is a major exporter in the
world. Similarly the company had formed Joint Ventures with various other companies to build an
ecosystem globally.

Driverless Cars: Major companies around the world are investing in Automatic/Semi Automatic cars.
Mahindra and Mahindra have also invested in development of these cars and commercial vehicles,
along with the technical help from Tech Mahindra. Though there are safety and other regulations act
as hurdles for launch of these vehicles in Indian market, it has a huge potential in Foreign markets.
Google, Tesla and other automakers are making a huge investment in the development of Driverless
cars.

Electric cars: With the increase in the awareness of the emissions caused by the fuel cars, there is an
increase in the demand for the Electric cars all over the world. Automakers are investing heavily on
the development of the electric vehicles, to gain a competitive edge with their features. Mahindra
and Mahindra have invested a large amount in the technological advancement in terms of capacity

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of the battery and also in the infrastructural investment to increase the plant capacity to produce
more electric cars.

Infrastructure facilities: In the absence of better infrastructure facilities in the country/region of

targeted market, the sales are little difficult as they are directly dependent on the facilities available
for the citizens. For example, without proper availability of electricity to the users, it is difficult to
manage the sales of electric vehicles.

Pollution/Carbon Emission: Mahindra and Mahindra is the first Indian company to join EP100 in
2016, whose initiative is to increase the energy productivity in their companies. Mahindra and
Mahindra is also the first Indian company to introduce internal carbon pricing to reduce the
emissions of green house gases. The company had always invested a significant amount of efforts to
reduce the affects of emissions to the environment and also to follow sustainable practices which
helps in long term.

Steel availability: Raw materials constitute about 47% of the total costs for manufacturing of an
automobile, out of which 47% is the cost of the steel which is the primary raw material used in
manufacturing. Hence domestic availability of the steel plays a major role in choosing the
manufacturing location. Any fluctuation in the price of the steel directly impacts the cost of the
vehicle and hence the sales.

Economic Conditions: The sales of the automobiles largely depend on the macro economic
conditions in any country. Automakers target those companies, for which the growth rate is
constantly increasing with a good amount of disposable income. Local fuel prices, GDP, easy
availability of credit drive the growth and volume of auto sales.

Labour: After the cost of raw materials, he major costs lie in the labour costs. Hence the
manufacturing locations and the assembly location in case of exports play a crucial role in the
Operating costs. Assembly plant locations of Mahindra and Mahindra have been selected
strategically, keeping in view of Labour costs, raw material availability and other overhead costs.

Trump’s Policies: Though the talent is expected to shift as a result of immigration, the affect can be
seen after 5-10 years. Mahindra and Mahindra is soon going to launch its utility vehicles in US and a
manufacturing plant in Detroit. Trump’s focus on Make in America may have positive effects on this
Indian company, while the design and development of the cars based on the market research there
might face some issues due to immigration.

Oil Prices and Fuel efficiency: Oil Prices and fuel efficiency are major drivers of sales of vehicles.
Hence the country of the target market should have positive relations with the major oil exporters of
world. The fuel efficiency and emissions are majorly governed by weight of the vehicle and the
engine. With the use of substitute raw materials like Aluminium, Plastic in the body of the vehicles,
the manufacturers are reducing the weight of the vehicles. Substitutes are expensive compared to
the cost of steel, hence a trade-off between weight of the vehicle and cost. With the effect of
stringent regulations regarding emissions and safety, use of substitute raw materials is going to have
an impact on the auto manufacturers.

Agricultural sector: With the budget plans focused on the encouragement of Agriculture, the tractor
sales are expected to have good markets. The government initiatives in the benefit of farmers and

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awareness and technical programs targeted to enlighten the farmers about the usage of modern
farming techniques will push the sales of Tractors.

M&M and Renault

Type: Joint Venture

Date announced: February 23rd 2005

Deal Type: M&M and Renault will form a joint venture with 51:49 ratio holdings in the newly formed
entity. The deal is operational for a single product line only I.e., Renault Logan. [1]

Strategic Advantages: The deal helps Renault in Launch and distribution of Logan in SAARC countries
through M&M. Renault will also get the knowledge of the operational efficiencies of M&M are uses
it for the production of Logan.

Exit: On April 17th 2010 Renault and M&M announced the restructuring plans for the Joint Venture.
In the new structure M&M will buy Renault ‘s equity stake making the entity a 100% fully owned
M&M subsidiary company. M&M will take over the operations of the entity whereas Renault will
help in providing support in acquiring key components which include engine and transmission
components. Also, post restructuring Renault will sell the completely knocked down (CKD) kits to
M&M and will get royalty. [2]

M&M and Jeco Holding AG

Type: Acquisition

Date Announced: September 29th 2006

Deal Type: M&M will acquire 67.9% of stake in Jeco Holding AG at an enterprise valuation of about
€140 Million

Strategic advantages: The deal Helps M&M to establish a significant foot print in continental Europe.
This deal also helps M&M to serve its customers (OEM’s across geographies) better with synergies
from 3 locations i.e., UK, Germany and India. [3] M&M will also get access to superior technology,
Intellectual property and a global customer base.

M&M and Schonweiss & Co. GmbH

Type: Acquisition

Date Announced: January 1st 2007

Deal type: M&M through its subsidiary Mahindra Forgings Global Limited acquired 90.47% stake in
Schnoweiss & Co. GmbH.

Strategic Advantages: M&M will now have Strong European base and will establish a firm foothold.
The deal expands Mahindra’s “Design to Delivery” philosophy in Components space. The deal will
also convert M&M into a fully integrated auto component provider from Indian subcontinent. [4]

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M&M will also get access to the technical abilities of Schonweiss & Co. GmbH and marquee
consumers in Europe.

M&M and Punjab Tractors

Type: Acquisition

Date announced: March 8th 2007

Deal Type: M&M will acquire 45% controlling stake in Punjab tractors Ltd and will pay close to
₹1000 crores.

Strategic advantages: The deal helps M&M to enter into fast growing farm vehicles sector in India.
M&M will have access to low cost engine and auto component divisions of Punjab Tractors Limited.
[5]

For Punjab Tractors the deal provides access to go global and to reach out to large clientele. The deal
also provides the vast network of M&M.

M&M and Engines Engineering

Type: Acquisition

Date: June 5th 2008

Deal Type: M&M bought 70% of controlling stake from the promoter Alberto Strazzari for ₹40
Crores.

Strategic Advantages: Engines Engineering will help in developing research and development
capabilities of M&M in two wheelers. It also provides one stop solution from conception, styling,
design, on line assembly, marketing and industrialization for M&M’s vehicles. Engines engineering
has a variety of clientele and the experience helps M&M in creating efficient and stylish products.
For Engines engineering the deal helps in entering in to India. The deal also helps in the growth of
Engines Engineering by providing access to low cost engineering excellence.

Split:

Date announced: February 4th 2012

Type: Selling back the controlling stake 70% back to the promotor Alberto Strazzari

Reasons: OEM’s expressed their apprehensions with Engines engineering regarding the intellectual
property compromising since M&M holds the majority stake. [6] M&M’s products directly compete
with the clients of Engines Engineering and they expressed their concerns regarding the close
association between M&M and Engines Engineering. To ensure business continuity and to maintain
the client network and growth of Engines Engineering, M&M sold off its stake.

M&M and Kinetic Honda

Type: Acquisition

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Date announced: 30th July 2008

Deal Type: M&M acquired the business assets of Kinetic Motor Company Limited (KMCL) for 110
crores and formed a new company, Mahindra Two wheelers limited, where in M&M will hold 80%
stake in the new company. [7]

Strategic Advantages: The deal provided M&M entry into two wheeler market in India which is
under penetrated at that time and has lot of growth potential. Also, the deal creates M&M into an
end to end player in two wheeler segment and a full range player in automobile industry. M&M now
can Leverage the trend of growing consumer base and higher disposable incomes. [8] KMCL will now
have to access to M&M’s manufacturing capabilities, wide network of dealers and distributors.

M&M and Reva Electric Car Company

Type: Acquisition

Date announced: May 26th 2010

Deal type: M&M acquired 55.2% of equity stake for an undisclosed value and infused an additional
₹45 crore capital in to the new entity called Mahindra Reva (Now Mahindra Electric)

Strategic Advantages: Reva Electric will get the much needed capital to develop products. Entry in to
global electric vehicle space will be easier for Mahindra group. The Electric Vehicle (EV) technology
of Reva will be used for Mahindra’s Mini-Truck, Maxximo and other Mahindra’s vehicles. This move
will strengthen Mahindra’s sustainability initiatives and will provide access to compete in Electric
vehicles market on a global scale. [9]

M&M and SsangYong Motor company

Type: Acquisition

Date announced: November 24th 2010

Deal type: M&M acquired 70% stake by $378 Million in stock and $85 Million in corporate bonds.

Strategic Advantages: SsangYong is loss making and is looking for a partner to turn around. M&M’s
Financial capability, experience and operational efficiency helps SsangYong in achieving this. M&M
and SsangYong will create a global competitive Utility Vehicle player. [10] The synergy helps M&M to
create a new portfolio of premium SUV’s for Indian Market and also helps in SsangYong’s growth.

M&M and CIE

Type: Alliance

Date announced: June 17th 2013

Deal Type; Share Swap between M&M and CIE, Mahindra will get a 13.5% of stake for €96.24 Million
in CIE Automotive SA whereas CIE will get 51% of stake for €100 Million in the newly formed
combined entity called Mahindra CIE Automotive. Mahindra CIE Automotive is formed by merging all

19
Mahindra’s auto component businesses into Mahindra Forgings Unit. Mahindra will get a 20% stake
in Mahindra CIE Automotive while the remaining is owned by institutional and public shareholders.

Strategic Advantages: CIE will get easy entry into the fast growing Asian market. CIE will also get
ready-made access to clientele of M&M. M&M will gain access to global markets and technology in
the auto-component business. This deal helps M&M by reaching a global scale without any
significant cash outflow. [11] With this deal CIE will become the leader in forging business. CIE will help
M&M to reach out to new geographies and grow collective portfolio in the coming years.

M&M, Tech M and Pininfarina

Type: Acquisition

Date announced: 14th December 2015.

Deal Type: M&M and Tech Mahindra bought 76% of stake of Holding company Pincar for €25.3
Million and an additional €20 Million is Invested in capital in Pininfarina. Also, M&M and Tech
Mahindra gave €114.5 Million Guarantee to creditors. [12]

Strategic advantages: Pininfarina will get Access to large client base of M&M. [13] Pininfarina will serve
the engineering needs for Tech Mahindra, aids in direct design and provides engineering inputs.
Pininfarina brand will help in Developing and maintaining a luxury line of products under M&M. [14]
M&M & Pininfarina are already working on developing a luxury electric sports car for Indian Market
which helps them in bring volumes as well. [15]

Business models, Institutional change and identify shifts in India Automobile Industry – Mahindra

Cross country comparative studies of businesses, business processes and organizational behaviour in
different countries and environments

Cross country comparative of Mahindra businesses:

In India, Mahindra and Mahindra operates in various divisions on its own. It built from scratch
mostly. Its alliances, partnerships and acquisitions in India are comparatively very less to its foreign
businesses. It doesn’t take all of its businesses to foreign countries. It chooses selected few (mostly
farm equipment and sports utility vehicles)

Mahindra & Mahindra has spread its business across in various countries such as Africa, Australia,
Latin America, USA, and Asia Pacific. [1]

In India, it works in the operations of aerospace, aftermarket, agribusiness, automotive,

components, construction equipment, consulting services, defence, energy, farm equipment, finance
and insurance, industrial equipment, information technology, leisure and hospitality, logistics, real
estate, retail, and two wheelers.

Each country has its own managing part to take care of its operations. The management considers
the group as the ‘federation of independent companies’. [2]

Mahindra’s cross country business model majorly based upon

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  Joint venture with best automobile related manufacturers
 Partnerships
 Acquisitions
 Distribution of its products through tie-ups

From its history, we can know the following things:

Partnerships:

It entered into a joint venture with International Truck & Engine Corporation, USA.

It entered into an agreement with an international commercial vehicle parts trading company,
Plexion Technologies in Mauritius.

It joined with French automaker Renault in order to establish Greenfield passenger car
manufacturing plant in India.

Launch in various countries:

Mahindra & Mahindra launches new models in various countries as per the specific need/culture.
Due to this, it receives higher demand for its products and makes the business profitable.

 It introduced its Scorpio PIK-UP in South Africa.

 It launched sports utility vehicles and pick-up trucks in US from 2009.
 It introduced Mahindra PIK-UP in Australia.
 It even launched Axe FAV, an extreme off-road multi terrain defence purpose vehicle.
 It launched utility vehicles, XUV500 and Scorpio, in order to enter into Kenyan passenger
vehicles market.

Alliances/Partnerships with foreign companies:

Mahindra & Mahindra also enters into agreements with companies in the target countries to sell
Mahindra’s products, Tractors and Automobiles

 It entered into a memorandum of understanding with Saigal family of Pakistan for Tractor
exporting business to that country
 On Oct 2006, it entered into an agreement with ITMCo, Iran Tractor Manufacturing Co, to
sell tractors in Iran.
 It established a deal with Global Vehicles USA which is selling used cars as well as arranges
financial assistance as well.

Acquisitions:

Mahindra & Mahindra has spread its presence across globe through acquisitions as well. The model
for acquiring new companies is based on the combination of facilities, technology and dealer
network.
 It acquired one of the leading German forging company Schoneweiss. It acquired it through
Mahindra Forgings Global ltd., based in Mauritius.
 It acquired very famous GRD Italy, an Italian design house.

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  It acquired majority stake in Ssangyong Motor Company (SMC), a South Korean based
automobile manufacturers.
 It partnered with Navistar Inc., of the U.S. in order to enter into heavy commercial vehicle
segment.
 It tied up with Mitsubishi Agricultural Machinery, Higashiizumo in Japan, to deliver FarmTech
prosperity.
 It partnered with networking hardware company Cisco, headquartered at California.
 It created a joint venture with Telephonics Corporation to create an integrated systems
structure. This is to manufacture systems for Air Traffic Management services, Homeland
security and other merging surveillance requirement. The plant which was set up in
Bangalore created airborne radar systems. [3]
 It made a joint venture with Sanyo Special Steel and Mitsui & Co., Ltd., headquartered in
Japan, to produce Carbon, Alloy & Tool Die Steels in as Cast, Forged, Rolled, Turned, Heat
treated and Ring forged supply condition. This venture supplies the product to many
multinational and domestic companies. [4]
 It partnered with Snap Deal to see its vehicles online.

Business processes:

Business processes are based upon the following three things in any industry.

1. Strategy, Infrastructure and Product

2. Operations
3. Enterprise Management

Strategy, Infrastructure and Product:

The strategy in expanding its business across countries will be mostly through Joint ventures,
Partnerships and Acquiring.

As part of their Globalization strategy and also to change design as per the local foreign markets, it
builds plants near to that location. Depending upon the market size, it will decide either to produce
Mass or small scale for bigger market segments or Niche market segments respectively.

This helps Mahindra not to depend upon 3rd party manufactures for special Niche markets.

For example, it built a plant in USA to produce Greenfield off-road utility vehicles. The design is done
at Mahindra’s North American Technical Centre and in Detroit and reduced its dependency on 3rd
party OEMs (Original Equipment Manufacturers).

It procures raw materials from optimal and economically feasible foreign sources. It gets it Wagon-
building plates from Yawata, Tokyo.

These are the following major strategies Mahindra & Mahindra follows: [5]

1. Collaboration and tie-up with foreign companies

2. Procurement of raw materials from optimal and economically feasible foreign
3. Expansion of the product basket, with continued innovation
4. Entry into world market

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 5. Backup or contingency plan in time of crisis
6. Procurement of licenses from abroad
7. Environmental-friendly inventions
8. Product redesigning to meet consumer’s needs
9. Making market presence through advertisement and enhancement of brand image

Infrastructure:
Mahindra & Mahindra always starts with small size plants to manufacture products for niche
segment in the target market and then slowly increase the capacity to expand into mass production.

Product:

Mahindra doesn’t try to launch its entire model in foreign countries. It will launch as per the utility
component of a particular model. For example, it introduced Scorpio PIK-UP in South Africa, which
has rough road.

It partners with various companies to improve the quality of the vehicle manufacturing. Be it in
technology implementing like radar, design implementing like interior and exterior looks, etc.,
Mahindra & Mahindra always partners with best companies in foreign and implement those best in
service in their manufacturing, for example forging, casting, manufacturing, stamping, steel, etc.,

Operations:

It has a connected network throughout the world and even has its own IT infrastructure to support
it. One of the subsidiaries of MM, Tech Mahindra, builds its own software for both in-house usage
and also it sells to other companies as well.

Mahindra & Mahindra handles its international operations through its International Operations
division.

Enterprise management:

As I have mentioned already, Mahindra & Mahindra considers itself as a federation of individual
businesses. Hence it enhances each division to work individually but integrate all divisions for
managing purpose.

It has separate divisions for handling its foreign divisions of various design process.

For example,
Mahindra Systech handles
Forgings:
 Mahindra Forging Europe – Ag
 GSA
 Schonoweiss & Co GMBH
 JECO
 Strokes UK
 Falkenroth

Organisational behaviour of Mahindra across countries:

23
Though Mahindra & Mahindra acquires organisations in foreign countries, it carefully secures the
culture in those regions.
It never tries to disturb the existing organisation practices in terms of work culture and ethics. It may
try to optimize the effectiveness of the organisation by changing its processes but not its culture.

Mahindra & Mahindra encourages talents across the entire organisations. It recognizes talents as
well as appreciates as well through Network of Talent councils: [7]

References :

1) http://www.thehindubusinessline.com/todays-paper/mahindra-ties-up-with-renault-joint-
venture-to-make-logan-cars-in-india/article2169628.ece
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70.html
3) http://www.automotiveproductsfinder.com/News/M-M-forges-a-JV-with-Jeco-Holding-
AG/93529
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firm-schoneweiss-107012901014_1.html
5) http://timesofindia.indiatimes.com/business/india-business/PM-asks-PSUs-to-go-for-
listings-acquisitions/articleshow/1738457.cms

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 6) http://www.indiancarsbikes.in/auto-news/mahindra-exits-engines-engineering-selling-
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 27) Rajeev Dubey, Developing Lessons from Mahindra & Experience Leaders Mahindra,
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