Mahindra & Mahindra Case Study

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A few other contrasts have presented itself between white and black Africans. White Africans on average earn more but also spend more, whereas the black Africans earned less but also spent less, leaving them with a higher disposable income. Also white Africans tend to prefer buying second-hand vehicles, whereas black Africans were buying new automobiles. Lastly, white Africans prefer functional attributes to their cars, i.e. good mileage, but black Africans are more converted by features, based on aesthetics, design and comfort.

4. Alternatives

To figure out which one of the aforementioned option is the best, all four options have been evaluated against one another in the decision matrix below, concluding that Contract Assembly is the best option. [pic 3]

5. Implementations

5.1 HR Implementation

In order to make contract assembly a part of M&M (SA), the company should hire a recruitment team that best suits the company’s goals. During the selection process of the assemblers, the team will need to outweigh efficiency (incorporate low wages) with effectiveness (hire expert assemblers). Not only is the company a cash flow positive one, it also aims to be significant in the African market; therefore, identifying effectiveness as the most indispensable driver is highly logical. However, the recruiters will need to take the resulting higher wages into consideration. Thus, M&M (SA) should hire an HR team that will select highly skilled assemblers that are aligned with the organisation’s mission and vision, which is key in gaining local market share.

5.2 Marketing Implementation

In order to improve brand equity and awareness, the following steps should be put into action:

- Good after sales: Execute surveys after customers buy the brand’s cars. Offer special customer service in case a customer is unsatisfied.

- A good and solid warranty policy.

- Make sure that the components are available and affordable: When buying a car it is essential to keep in mind how much components will cost if there is a complication. Thus, M&M (SA) should make the brand attractive by offering affordable components including a high level of availability, like Toyota.

- Celebrity endorsement and trendy commercials: Black Africans tend to rely on the “famous, well-known” brands. If one makes a commercial with a popular, famous person, prospects will have the idea that the featured brand offers high quality. This way people will remember the name “Mahindra & Mahindra” and link it to the famous/well-known person.

- Focus on design/interior: Black Africans truly appreciate it if a car has a nice and good-looking interior. This might be an incentive for potential clients to buy the car over another well-known brand. Also, a sophisticated interior gives the impression that it is a prestige car, yet offered at a competitive price.

- Collect positive reviews from customers: After collecting many positive reviews they should be published at the website, in turn these could be showed to prospects. This can result in the establishment of trust, which is essential for M&M (SA), as the company currently has a low brand equity.

5.3 Logistics Implementation

When choosing for the Contract Assembly option the logistics will become simpler, as most part is outsourced the other party. One does not have to import whole cars and pay a huge amount of import taxes because all the cars will be assembled in South Africa. Parts will be kept in warehouses in South Africa not only so that they are easily accessible for the assemblers, but also for the local market, since availability is of great importance for the South African people. By enabling the local people to buy parts from the warehouses, M&M (SA) can get in closer contact with the local market and analyse which parts are needed most so that they can keep their supply up to date with the demand. Once the brand is commonly recognised and the cars will be demanded more, M&M can use South Africa to distribute the cars further throughout Africa. This way most African countries will be reached.

5.4 Financial Implementation

When going with the contract assembly, certain expected returns are calculated. For the short term (2012, 2013 and 2014), an increase in sales of 2.5%, 3.5%, and 4.5%, respectively (Exhibit 8.4). These percentages are achievable, and it is wise for M&M (SA) to focus on small increases in % each year. On the other hand, the cost of sales will decrease over the years (Exhibit 8.5). The reason for this is that going with contract assembly has the advantage of reducing some costs on shipping, and by locally sourcing some of the components and extra fitments. In overall (Exhibit 8.6) shows that the profit after tax increases after executing contract assembly. This means that by the end of 2014 it might be feasible and beneficial for Mahindra & Mahindra to start their own manufacturing plant.

6. Time Planning

The time planning (Exhibit 9.7) shows for the recommended implementation. The planning is comprised by the following steps: Locating the vendors and setting up contracts with them; Compose a plan for the supply-chain and logistics; (starting parallel) prepare, perform and improve marketing actions, according to their success. And lastly, operate the business and evaluate/ improve its effectiveness. After three years, it is recommended to look at the possibility and feasibility of setting up the own manufacturing plant.

6.1 Long-Term Plan

After three years the contracting of local vendors will likely have provided M&M (SA) with a significant profit that can be used to further invest in marketing actions to increase its brand equity. After this has been done, M&M would be wise to create its own manufacturing plant. This option will now be less risky because there will likely be a steady demand for M&M vehicles, giving the factory the opportunity to sell and produce more products, in order to reach the break-even point fairly quickly. Once 50.000 units are produced annually, M&M would be eligible for the ADPD's tax reduction grant. Having their own plant will fulfil M&M's goal of becoming a long-term player in the market, while reducing risk as success and brand equity have likely already been built up by the local vendor strategy.

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