Mahindra & Mahindra in South Africa Essay

In May 2011, Pravin Shah, the CEO at Mahindra & Mahindra, was evaluating four thinkable excerptions of follows developing dodge in the southeasterly Africa. Those options include entering into agreement with the local vendor for the engagement assembly of M&M vehicles, investing in its own manufacturing plant in southmost Africa, using South Africa as a hub for the further export of the other(a) countries and lastly waiting and watching until enough vehicles are sold for the sustainable long 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 callers growth in the South Afri jakes Market.1) Which option should Shah chose?Based on the information presented in this sheath (and not establish on the class discussion and video presented), I would sack Shah to perform the wait and watch strategy at a given uttermost of time. Shah was faced with this decision in 2011, which was only a few days after the worldwide recession took place. Even though they had an outstanding expiry in 2010 showing the growth of gross revenue at 24% and making the projections for the further sustainability, that was only one year of the positive outcome compared to the old age before that. During the time of the recession and particularally in long time 2007 by dint of 2009, an automotive merchandise suffered dramatically.It was mainly due to the flow of credit and the base on balls of the law by the local South African government to set up further availability of credit. Solely based on the case information, it would discombobulate sense to make a projection plan for the next 3-5 year to watch the growth of the automotive marketplace and then take special necessary steps to further grow the telephoners boilers suit expansion in the local market. Even though this option has nigh negative sides such as higher import duty and losing some of the ma rket share to its competitors, in case of the declining auto market position it could financially usefulness the company.2) What is your assessment of M&Ms sense with its South African subsidiary to date? To date, Mahindra & Mahindra shows a very ardent 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 fable and export vehicles that were suitable for local roads and, at the same time renderable for the locals, make it possible to secure the market share of 1.2% of the SUV and forte range SUV vehicles. Their localization of dealers in nine South African provinces made it possible for customers of all regions to abide 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 stable 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 query study presented in the case shows, the buying power of the barren African consumers, making the largest segment of the middle-income market, was rising. To the benefit of companies such as Mahindra & Mahindra, unlike white South African population, black African consumers were more open and inclined to purchase newly introduced leaf blades to the markets.The research showed that they did not trust the local brands rather than preferred any specific European or Japanese/Korean brand. This presents a colossal luck 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 af fordability of the vehicle introduced in the future, they have a strong potential in further securing the bigger auto market segment in the local market.4) What potential roles can M&Ms South African subsidiary mash in the companys global network? With the globalization growing it is very important for international companies to be able to secure the brand within local markets. In this particular case, a South African subsidiary could potentially mean a large growth for the M&M. They would be able to shorten their delivery time and secure additional market segment by signing 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, partially because senior management at the parent company does not have to be involved in the operational details of its subsidiary. It would also withdraw certain financial risks because the two companies are separate legal 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 reasonable 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 moving on to the one of the other three options contract assembly, own manufacturing plant or use South Africa as a hub.