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1. How attractive is the South African auto market for growth and profitability? What is your assessment of M&M’s experience with its South African subsidiary to date?
As a company culture Mahindra & Mahindra believes that globalization gives M&M access to new technologies, new markets and new skill sets. South African market was being considered as a growth market for the future by M&M and therefore the company wanted to expand in the South African market.
In general the automotive industry was picking up following a recession between 2007 and 2009 and during 2010 it exceeded projections. Although the competition was fierce and leader brands production was higher than M&M, the company had found a niche SUV market which had a constant growth in its market share.
Another indication that South Africa indeed was a growth market with high profitability is that they had exports larger than 70 countries including Japan, Australia, Unites States and United Kingdom. M& M had saw an entry level opportunity in black African consumers by strengthening their brand equity. Black Africans earned less but they had higher disposable income, they were buying new vehicles, and lastly they preferred features providing design and comfort. M&M was ready to use this card to penetrate into the South African market where they saw high profit margins.
M&M formally entered the South African market in February 2005 by forming a 51% subsidiary M&M SA with a local partner. This was a very good move from M&M SA’s perspective as there were no local automobile brands, which would provide a great opportunity for them to increase their brad equity in the market. This was also a good move from their part to utilize the situation to gather further information about the market and get a local business perspective.
The company continued exporting cars to the South African market from India. With the new subsidiary the company formed a network of service outlets for its customers and a spare parts distribution network. This way M&M SA started to implement its own brand equity and brand recognition into the new market.
As a company culture Mahindra & Mahindra believes that globalization gives M&M access to new technologies, new markets and new skill sets. South African market was being considered as a growth market for the future by M&M and therefore the company wanted to expand in the South African market.
In general the automotive industry was picking up following a recession between 2007 and 2009 and during 2010 it exceeded projections. Although the competition was fierce and leader brands production was higher than M&M, the company had found a niche SUV market which had a constant growth in its market share.
Another indication that South Africa indeed was a growth market with high profitability is that they had exports larger than 70 countries including Japan, Australia, Unites States and United Kingdom. M& M had saw an entry level opportunity in black African consumers by strengthening their brand equity. Black Africans earned less but they had higher disposable income, they were buying new vehicles, and lastly they preferred features providing design and comfort. M&M was ready to use this card to penetrate into the South African market where they saw high profit margins.
M&M formally entered the South African market in February 2005 by forming a 51% subsidiary M&M SA with a local partner. This was a very good move from M&M SA’s perspective as there were no local automobile brands, which would provide a great opportunity for them to increase their brad equity in the market. This was also a good move from their part to utilize the situation to gather further information about the market and get a local business perspective.
The company continued exporting cars to the South African market from India. With the new subsidiary the company formed a network of service outlets for its customers and a spare parts distribution network. This way M&M SA started to implement its own brand equity and brand recognition into the new market.