Mahindra &Mahindra

– A Strategic Perspective

Group 5
Abhinav Pratap Singh 0911215
Emmanuel Joseph PRESENTATION NAME
0911233
Sagar Gaikwad 0911235
K Vamsi Praveen Company Name
0911240
Sumon Das 0911276
 Agenda
Industry Definition
Defining the Problem
Recommendations
Industry Analysis
Company Analysis
Plans for Implementation & Timeline
Financial Projections
 Defining the Industry

Indian Automobile Industry

Two-wheeler Commercial vehicle Passenger Vehicle

Consists of all two –wheeler companies Consists of all three wheelers, trucks and other vehicles used for commercial purposes
Passenger Cars SUV MU
 Defining the Industry
• Indian Passenger vehicle industry falls under the
broader category of the automobile industry
• The passenger vehicle industry consists of 3
segments – Passenger cars, SUV’s and MUV’s
• Passenger cars has the major market share in this
industry of 78.6% with a growth rate of 25.58 %
• The rest of the market is accounted for by MUV’s
and SUV’s
 Mahindra & Mahindra
• Mahindra & Mahindra manufactures automobiles
starting from 1949
• Only commercial vehicles till it started launching
Utility Vehicles. Scorpio gave the visibility.
• About 7% market share in Passenger Vehicle
Industry & half of market share in Utility vehicles
segment.
• Mahindra & Mahindra was ranked second in the
prestigious Most Trusted Car Company in India
 Defining the Problem

Mahindra & Mahindra has only a limited

presence in passenger cars segment, which
comprises of 79% of the passenger vehicles
industry.
 Recommendations
• Mahindra can enter the passenger car
segment, with small cars in specific.

Extending the partnership with Renault for

other models

Indigenous development
Industry Analysis
 Internal Rivalry
Medium attractiveness
Rivalry
 Moderate number of
competitors No. of competitors
 High growth rate of 5
12%
Startegic stakes Industry Growth
 High Fixed cost– less
rivalry
 High Differentiation –
Low rivalry
 High switching cost 0
 High openness in terms
Openness of terms of sales Fixed Cost
of sale – Low rivalry
 Strategic stakes are
high for competitors

Switching Cost Differentiation

 Buyer Power
Medium – high attractiveness
Buyer Power
 Large number of buyers – less
power
 Low Availability of substitutes –
High power Number of
buyers
 High switching cost – Low buyer
power Buyer's profitability 5 Availability of substitues
 Less threat of backward integration
– low buyer power
 High threat of forward integration –
High power to incumbents Contribution of cost 0 Switching Cost
 High contribution to quality – High
power of incumbents
 High contribution to cost – Low
power of incumbents Contribution to quality Buyer's threat of backward integration
 Buyers profitability is high for
luxury cars Industry's threat of forward integration
 Supplier Power
Low – Medium
attractiveness Supplier Power

 Large no. of suppliers –

high power of incumbents
 Low availability of
Substitutes – Low power
 High Switching cost – Low
Number of
suppliers
Industry's importance to supplier 5 Availability of substitues

power of incumbents
 Less chance of Forward
integration by suppliers
 High chance of Backward Contribution of cost 0 Switching Cost

integration by industry
 High contribution to quality
– Low power of incumbents
Contribution to quality Supplier's threat of forward integration
 High contribution to cost for
incumbents Industry's threat of backward integration
 Industry’s importance to
supplier is high
 Threat of Substitutes
Medium – High
attractiveness Threat from substitutes

 Availability of
Low availability of close close subsitutes
substitutes – Other
modes of public 5
transport are not close
substitutes to replace
passenger cars

 High switching cost/

substitutes price value is
worse
0
 Medium profitability for
producers of substitutes

Profitability Switching Cost/

Price value
 Barriers to Exit

Low attractiveness
Barriers to exit
 The equipment used is Assets Specialisation
highly specialized and
4
cannot be used in other
industries – High barrier to
Exit
2
 High cost of exit

 Low Government
Restrictions post 0
liberalization – Low barrier
to exit

Government Cost of Exit

Restrictions
 Barriers to Entry
High attractiveness
Barriers to entry
 Economies of scale are large –
high barrier to entry Economies of
Scale
 High product differentiation – high
Government 5 Product
entry barrier Protection Differentiation
 High brand identity- High barrier
to entry as it requires brand
building
 High switching cost
Access to
 Limited access to channels of raw material Brand identity

distribution – high entry barrier 0

 High capital requirement – high
entry barrier
 Restricted access to
technology – high entry barrier Access to Switching Cost
technology
 Access to raw material is
moderately restricted
 Minimal govt. protection – Low Capital Requirement Access to Channels
barrier to entry of distribution
 Role of Government

Low attractiveness
Government Regulations
 Low industry protection
post liberalization
Industry
 Low industry regulation – Protection
Attractive to incumbents 4

Government Regulations
 Highly restrictive 2

custom and tariff

0
regulation

Customs and Tariff Restrictions Industry

Regulation
 Overall Industry Analysis

Overall medium Overall

attractiveness Barriers to Entry

4
 Moderate to High rivalry as
Rivalry among
industry has established Government Actions Competitors
players whose strategic
stakes are high 2
 Low bargaining power of
buyers – attractive to
incumbents
0
 Low bargaining power of
suppliers – attractive to Threat of substitutes Barriers to Exit
incumbents
 High barriers to entry and
exit – high capital investment
 Low availability of
substitutes – attractive to
incumbents Power of Suppliers Power of Buyers

 Government regulations are

almost absent
 Current Strategies

Launch of the Bolero Stinger

Mahindra Tourister School Bus

Mahindra & Mahindra in South Africa and other Sub-Saharan countries

 Current Strategies

The Alfa Passenger

Mahindra-Renault Collaboration

Launch of Mahindra Pik-Up Utility Vehicle in Australia

 Emerging Trends

Growth of Small Car Segment

Saturation of Global Auto Market

Increasing Auto Exports from India

 Strengths
and ITand
ty standard
effecteffect

advantage
IT ski ll s
skills

advantage SWOT Analysis-Industry

Weakness
engi neering
standard
1. Multiplier

1. Low i nvestment in R&D

Strengths

Weakness
4. Geographical
engineering

2. Fragmented components i ndustry

1. Multiplier

3. Quali

1. Low i nvestment
3. Large mi ddl e clinass
R&D
4. Geographical
3. Quality

2. 4.
Fragmented components
Transportation i ndustry
i nfrastructure
Low cost,

3. Large mi ddl e cl ass

4. Transportation i nfrastructure
2. cost,
2. Low

SWOT

1. Competition
2. Direct

1. Competition
2. Direct

Threats
4. Goods and Service Tax (GST)

andand
countries
3. Foreign Players

Threats
4. Goods and Service Tax (GST)
2. High Growth Rate

Indirect
countries
3. Foreign Players

fromfrom
1. Quality products
2. High Growth Rate

Indirect
Opportunities
1. Quality products

low low
Taxes
Opportunities

costcost
Taxes
 Stations
Op portunities

Stations
RisingRising
1 . 2 2 .4 % growth in pas s enger Vehi cl e
Op portunities
2 . FDI increas ed at 4 7 .2 5 % YoY

Competition
Cost Cost
for Service
1 . 2 2 .4 % growth
3. Customs
in pasduty
s enger Vehi cl e
2 . FDI increas
4 . Excis e Duty
ed atdecreas % YoY
4 7 .2 5ing

Threats
Competition

TaxService
material
3. Customs duty
4 . Excis e Duty decreas ing

3. Rising

Threats
Tax for
material
2. Raw
3. Rising

1. Service
2. Raw
1. Service
SWOT
2. Diversification into unrel ated arenas
technology and substandard)
2. Diversification into unrel ated
1. Consumer Perception( Lowarenas
on
technology and substandard)
Weakness
1. Consumer Perception( Low on
Weakness
SWOT Analysis-M&M
Company analysis
Critical Success Factors
Sourcing &
Support
HR
activities Practices

Standardi-
sation M&M

Information
Technology
 VRIO Analysis
Non- Non-
Resource Valuable Rare imitable Substit
utable

Dedicated in-house Sourcing Expertise

Backward integration into forging, gears, etc

Technology implementations- SAP BW, etc

Human resource practices- Saptachakra

Standardisation of PQCDSM

Growth strategies – inorganic

 VRIO Analysis

Slack

●
Highly Labour intensive
●
Manufacturing units across the country- top management plays crucial role

Hold-up risk

●
Separate sourcing teams
●
Raw materials – gear manufacturing, forging
Value Chain

Cost Leader
Backward Integration
Services
 Estimated Timeline

Market Launch

Development Stage

Conception Stage

Dec-10 Dec-12 Jun-13

 (Figures in Rs. Crores)
Ratio Analysis
Mar'05 Mar'06 Mar'07 Mar'08 Mar'09
Key Financials          
Sales 7,695.59 9,347.57 11,363.05 11,503.48 12,921.50
Fixed Assets 1,326.63 1,335.65 1,528.59 1,698.49 2,555.51
PAT 489.39 597.72 961.28 891.46 867.50
Leverage Ratios          
Debt-Equity Ratio 0.52 0.3 0.46 0.59 0.77
Long term Debt-Equity Ratio 0.6 0.4 0.53 0.62 0.83
Liquidity Ratios          
Current Ratio 1.19 1.24 1.37 1.1 1.06
Quick Ratio 0.78 0.83 1.01 0.74 0.83
Inventory Turnover Ratio 10.66 11.13 13.42 12.49 14.60
Profitability Ratios          
Profit margin (%) 7.56 10.28 10.34 9.45 6.22
Return on long-term funds 24.32 23.17 26.09 19.64 12.36
Per share data          
EPS 45.92 36.72 44.88 46.15 30.69
SOURCE: http://money.rediff.com/companies/mahindra-and-mahindra-
ltd/10520003/ratio
 Financial Projections
 (Figures in Rs. Crores) Mar'09 Mar'10 E Mar'11 E
Key Financials      
Sales 12,921.50 17,627.9 19,283
EBITDA 921 2,462.6 2,562
PAT 867.5 2,055.9 1,992.2
Growth %      
Sales 14.1 36.4 9.4
EBITDA -21.3 167.5 4
PAT 6.7 11.7 10.3
Profitability (%)      
AROE 18.1 34.6 27.3
AROCE 13.3 27.1  
Per share data      
EPS 30.69 65.6 6.9
BVPS 18.12 23.02 27.62
Valuation Ratios      
P/E 42.1 16.5 15.7
Cash P/E 30.2 13.9 13.3
P/BV 6 4.7 3.9
EV/EBITDA 29.2 11.5 10.6
SOURCE: Emkay Research report of M&M dated 4th January 2010
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