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Question

Mahindra & Mahindra (M & M) is a major player in the tractor and certain segments of the automobile market

in India. After an impressive growth for a few years, the tractor market in India has been stagnating during 1998-1999 to 2000-2001.

M & M has been selling its tractors and utility vehicles in foreign markets including USA. Some of the components for its products have been sourced from abroad.

M & M has a 100 per cent subsidiary in USA, Mahindra USA, with a strong network of 100 dealers. Mahindra has a five per cent market share in the US market in the 20-30 horse power (HP) range.

As a part of the strategy aimed at building a global supply chain, Mahindra USA has signed a memorandum of understanding (MoU) with the Korean tractor major Tong Yang, a part of the $ 2 billion Tong Yang Group, according to which Mahindra will source high horse power (mostly 25-40 hp range) and sell them around the world under the M & M brand name.

To start with, the premium range of tractors will be sold in the US. M & M's current tractor range is more utility-oriented and lacks the aesthetic appeal that Tong Yang's tractors have, a must for a strong presence in the US market.

Questions

 1) What are the advantages and disadvantages of global sourcing?

2) How will the foreign market expansion help M & M ?

3) How does the strategic alliance with Tong Yang benefit M & M ?

 4) What are the possible risks of the alliance ? How can they be overcome/ minimised ?

Top Answer

Advantages Reduction in labor cost since local equipment may be expensive to purchase. Increases innovation due to research... View the full answer

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