Mahindra & Mahindra in South Africa

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M&M SA with an easier transition. South Africa is a strategic location which can provide further growth to Northern African countries and other continents. This global growth is aligned with the company culture and expectations. In this plan M&M SA can use subsidiary as a hub to other countries and continents. This will certainly decrease M&M’s dependency to operations in India providing a leaner and simpler operations taking advantage of shortened lead times. Which will improve exports to other African countries and other continents. M&M SA has a trading but not a manufacturing experience in South Africa. The subsidiary will provide information on resources, local knowledge and better relations with subcontractors, government officials as they will provide insider perspective to the countries culture and political environment.

As I analyzed throughout the case the market profitability and M&M SA’s subsidiary relations, I would recommend that M&M SA should implement its own manufacturing plant in South Africa. This aligns with company’s objectives of doing business in the long term in South Africa and being a major player in this market. The company has been doing business in the South African market for almost seven years and they have a good knowledge on how to respond to the local market in terms of cultural differences, national infrastructure, government demands and local competitors. For example, M&M SA has critical information about government regulations such as import duty rebates, MIDP program or APDP program which will be implemented following after the MIDP phase off. M&M SA has also strong command of the consumer preferences, customer segmentation. They have knowledge that they have opportunity with black African customers in terms of brand savviness of these people. M&M SA is grasping this opportunity as an entry level opportunity. Having a subsidiary to take them through these learning steps will be a huge benefit as well.

M&M SA already missed some opportunities in the market by not having a manufacturing plant in South Africa: paying 25% import duties, not being able to take advantage of APDP, cheaper components in the South African markets, further building customer trust in the competitive environment.

An alternative to this option is wait and watch but this option has some negative outcomes such as higher import duty compared to local assemblers as we already mentioned above. This will result with higher costs and higher price levels for the end users. This might also result with losing some of the market share to its competitors as their target market black African customers are mostly price sensitive.

Appendix 1

SWOT Analysis

Strength Being a global player aligned with their market entry strategy, prior expansion experience, strong financials

Weaknesses Low brand awareness among South African buyers

Opportunities Growing demand in South Africa, recovering economy, Globalization

Threats Competition from other strong global automotive brands, high tariffs, risk of armed conflict

Critical Aspects to be considered for manufacturing in South Africa

Political aspects: Political unrest in surrounding countries, unstable political environment, government legislations: MIDP phasing out and adopting APDP will benefit local manufacturers as it

Social: Low quality work force, small middle class

Economy: Black African’s have a higher disposable income compared to white Africans, recovering from recession, high potential market growth