At first Mahindra was a company dedicated to manufacturing general-purpose
Utility vehicles that later turned into a conglomerate with interests in oil drilling, bearings, time-share results, and instrumentation along with jeeps and tractors. In 1991 the Harvard educated scion told M&M that they would not continue business with them if they didn’t have global potential, resulting in the businesses being regrouped into four strategic business units (SBUʼs) such as; automotive, farm equipment services, IT services and trade and financial services.
The company anticipated an economic downturn in the tractor industry that resulted in M&M creating the Operation Blue Chip. The drive was ...view middle of the document...
Global export trade in tractors was valued at $8.6 billion in 2003, North America was the largest tractor market taking up 27 percent of tractor sales globally, India fell second with 21.5 per cent, third was West Europe with 21.2 per cent and fourthly was China at 20 per cent. Looking into the future, the United States, India, China, East Europe, and South America were seen as the growth as the future markets and there were four major players that were already global; John Deere, Case New Holland, AGCO and Kubota. All of these market leaders were all technology leaders as well and offered more then farm equipment to construction, forestry, and commercial equipment where was tractor sales took up 25 percent of consolidated revenues for M&Mʼs diversified company.
Farm Equipment Sector’s globalization began with exports to South Asian Association for Regional Cooperation such as Nepal, Bangladesh and Sri Lanka but when 1994 came along, there was still little globalization evidence at M&M until the launch of Operation Blue Chip and a second assembly and distribution center was set up in Calhoun, Georgia.
“The template was built around a series of filters. We used the filters to xero down, by a process of elimination, on the particular global market and the particular company within it that we wanted to do business with. There were three filters to start with: industry filter, product/technology filter, and price/earning filter. By applying these three filters, we
Segmented the total market into three categories: attractive but low volume market; price sensitive but high volume market; and high tech and high HP market. We focused on the first two categories, compromising USA, China, Australia and Africa. The selection of the company for alliance was on the basis of seven filters: product portfolio; product technology; market reach; quality systems and processes; scalability; openness of management; and liabilities. The template also had an entry mode for exports, Greenfield, JV and acquit ion.” Said Choudhari
M&M first started by sending a team from India and tractors to test out the market opportunity. They targeted providence in China where large land holdings suited the range of the 25- to 75-hp tractors it was offering. They offered their prices 20 percent above the rivals in China to convey the “superior quality and performance” but later decided the next step would be to get leverage local advantage to compete with the low Chinese costs. M&M believed that the local manufacturing would also power its global strategy would wouldn’t work without factoring in the Chinese market.
China started making their own tractors in 1978 and not only had farm ownership but also machinery ownership and by 1994 71 percent of Chinese farm machinery belonged to individuals, 10 percent to state, and 19 to collectives. The farming eventually created a cycle improving farm productivity and freeing up rural labor to work in township and village...