Business Environment

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Case study on Mahindra and Mahindra.
Introduction.

The objective of this case study is to analyze the business environment of

Mahindra and Mahindra. Business environment refers to the external and
internal forces that impact the functioning of a business. It’s very important to
understand one’s business environment because the survival of the business
depends on it. Business environment is dynamic if the company doesn’t
change accordingly then business is sure to fail.

In this report we’ll be looking at the macroeconomic factors affecting the

industry, analyzing the industry profile, analyzing the company profile, the
financial performance of the company and a SWOT analysis of the company.

Macroeconomic factors affecting Automobile Industry.

Urbanization: As new cities develop and existing ones get larger people
would require vehicles to travel. If the public transportation is not sufficient,
then the demand for personal vehicles increases.

Income level: As income level of the population increases more and more
people will be able to afford cars. As income increases luxury becomes
necessity. Also maintenance and repairs also become affordable to people.

Demography: As the average Indian gets younger day by day, the

automobile companies should modify their offerings so that it fits the interest
of the new generation.

Interest rates: When interest rates are reduced spending on investment is

increased. This also increases consumer spending. Therefore as automobile
production increases, sales also boom. Vice versa is applicable if interest
rates are increased.

Cost of raw material: Raw materials for the automobile industry include
steel, iron, rubber etc. When it’s cost increases, the cost of manufacturing a
car also increases. Therefore the companies have to increase the market
price too. This may lead to poor sales. On the other hand if there’s a
reduction in prices then the market price may reduce.
Industry profile

Automobile industry is one of the key industries in India and also one of the
largest. It has grown and advanced much after the economy was opened up.
When Indian automobile industry was in its infancy, it depended very much on
foreign technology. However, with time, manufacturers have started using
indigenous technology. The automobile industry in India is the 4th largest in
the world. India produced around 5.2 million units in 2018.

Company profile
Mahindra & Mahindra was setup as a steel trading company in 1945 by the
name of Mohammed and Mahindra. It was later renamed to Mahindra and
Mahindra. It saw the opportunity to manufacture SUVs, heavyweight and
lightweight commercial vehicles, tractors, 2 wheelers, pickups and saloon
cars and then forayed into the automobile industry. It’s the largest tractor
manufacturers in the world and one of the largest automobile manufacturers
in India. Two of its largest competitors are Tata and Maruti Suzuki. Mahindra
and Mahindra is part of the larger Mahindra Group, a conglomerate in India.
Financial Performance.

From the balance sheet we can see that the net worth of the company is
rising over the years. This is a good trend.
Also if we look at the P&L a/c we can see that the sales is increasing year by
year. The Profit after tax also keeps increasing. The company is performing
really good. Although the Earnings per share has reduced in the previous
year, the current year sees a rise again.
SWOT Analysis.

Strength Weakness
*Market leader in multiple automotive *Geographic dependence.
segments. *Product recalls.
*Strong R&D wing. *2 wheeler segment not doing well.
*Perfectly suited for Indian market.
*Low after sale cost.

Opportunity Threats
*Growth in the industry. *Competition from Tata, Ford etc.
*Increasing demand for electric *Strict regulations.
vehicles. *Rising fuel prices.
*Emerging nations.

Strengths.
Market leader in multiple automotive segments: The company is
the market leader in producing tractors and utility vehicles. It also has
strong market share in commercial and passenger vehicles segment.

Strong R&D wing: Highly focused Research and Development wing

which is focused on developing new products. M&M uses the Value
addition and Value Engineering approach and is trying to develop
modularity into their products.

Perfectly suited for the Indian market: M&M vehicles are perfectly
suited for the Indian road conditions.
 Low after sale cost: The after sale cost is lower than the indusrty
average and spare parts have wide availability.

Weakness.
Geographic dependence: M&M is highly dependent on the Indian
market. If there’s an economic slowdown or inflation then the
company will suffer.

Product recalls: On February 2015, M&M recalled some XUV500

cars due to some technical problems. Such incidents affect brand
image badly.

2 wheeler segment is not doing well: The growth in the segment is

slow and the demand is flat.

Opportunity
Growth in the industry: The automobile industry is growing year in
year and in the last 3 years there was a growth of 12%.

Increasing demand for electric vehicles: There is an increasing

demand for electric vehicles and this is anticipated to increase
exponentially.

Emerging nations: M&M can try to tap into the emerging nations
which has great potential.

Threats.
Competition from Tata, Ford etc: This puts intense pressure on the
company and has to innovate regularly.

Strict regulations: Government regulations on noise levels, emission

levels etc keep changing and this increase the company’s compliance
cost.

Rising fuel prices.

References.
www.economictimes.indiatimes.com
https://en.m.wikipedia.org/wiki/Mahindra_%26_Mahindra
https://en.m.wikipedia.org/wiki/Automotive_industry_in_India
https://www.marketing91.com/swot-analysis-mahindra-mahindra/
https://www.slideshare.net/mobile/SanjivNarula/impact-of-macro-economic-factors-on-
auto-industry-71030206