Mahindra & Mahindra in South Africa Essay

In May 2011, Pravin Shah, the CEO at Mahindra & Mahindra, was evaluating four possible options of bon tons growth strategy in the confederation Africa. Those options included entering into agreement with the local anaesthetic vendor for the contract assembly of M&M vehicles, investing in its own manufacturing plant in south-central Africa, using South Africa as a hub for the further export of the other countries and lastly waiting and fancying until enough vehicles atomic number 18 sold for the sustainable spacious term growth. Once those options were evaluated, Shah needed to present the final chosen one to the board of directors for the final approval on the best strategy for follows growth in the South African Market.1) Which option should Shah chose?Based on the information presented in this case (and not based on the class parole and video presented), I would advise Shah to exercise the wait and watch strategy at a given period of time. Shah was faced with this decisio n in 2011, which was but a few long time after the global recession took place. Even though they had an outstanding result in 2010 showing the growth of sales at 24% and making the projections for the further sustainability, that was only one year of the positive outcome compared to the years before that. During the time of the recession and specifically in years 2007 through 2009, an automotive market suffered dramatically.It was mainly due to the flow of credit and the passing of the law by the local South African government to fixate further availability of credit. Solely based on the case information, it would make sense to make a projection plan for the next 3-5 year to watch the growth of the automotive market and then take additional necessary steps to further grow the companys overall expansion in the local market. Even though this option has some negative sides such as higher import duty and losing some of the market address to its competitors, in case of the declining a uto market situation it could financially benefit the company.2) What is your assessment of M&Ms experience with its South African subsidiary to take in? To date, Mahindra & Mahindra shows a very strong entry-level presence in the local market. In short 6 years period, they wereable to capture the trust and loyalty of the local populations. Their strategy to manufacture and export vehicles that were suitable for local roads and, at the same time affordable for the locals, made it possible to secure the market share of 1.2% of the SUV and medium range SUV vehicles. Their localization of dealers in nine South African provinces made it possible for customers of all regions to have the direct access to the vehicle inventory. On the other hand the company faced a challenge of losing sales because of the time it took to process vehicles orders from India.3) How attractive is the South African auto market for the growth and profitability? In the past decade or so, South Africa showed a st able economic growth among the population. Even though the growth rates are somewhat low compared to the other developing countries, it didnt have any decline. With economic growth, more locals are able to afford to own a vehicle. As research study presented in the case shows, the buying power of the black African consumers, making the largest segment of the middle-income market, was rising. To the benefit of companies such as Mahindra & Mahindra, unlike clean-living South African population, black African consumers were more open and inclined to purchase newly introduced brands to the markets.The research showed that they did not trust the local brands rather than pet any specific European or Japanese/Korean brand. This presents a colossal opportunity for M&M to enter the local South African market and continue its growth and profitability by securing the trust of local population. As long as company considers the growing need and affordability of the vehicle introduced in the fu ture, they have a strong potential in further securing the larger auto market segment in the local market.4) What potential roles can M&Ms South African subsidiary play in the companys global network? With the globalization growing it is very chief(prenominal) for international companies to be able to secure the brand within local markets. In this particular case, a South African subsidiary could potentially recall a large growth for the M&M. They would be able to shorten their delivery time and secure additional market segment by sign language with the government. It would also be easier to export vehicles to other locations. The parent-subsidiary operating structure allows for greater diversificationand increased efficiencies, partly because senior management at the parent company does not have to be involved in the operational details of its subsidiary. It would also isolate certain financial risks because the two companies are separate healthy entities.5) What should be Shahs recommendation to M&Ms board of directors? Shah should advise the board of directors that at the current time it would be beneficial for the company to monitor the growth/decline of the automotive market on the global scale as well as in the South African market. With the apt proposal to monitor for the next 3-5 years it would allow company to receive securer results for the industry. Further on, based on the collected results, the company should consider pathetic on to the one of the other three options contract assembly, own manufacturing plant or use South Africa as a hub.