K. G.

JOSHI COLLAGE OF ARTS &

N.G. BEDEKAR COLLEGE OF COMMERCE
T.Y (Banking & Insurance) Semester 6
TH

Submitted By : Ankush Bhole
Roll No. 23
Subject:
TURNAROUND MANAGEMENT

Project on:
BPR (Business Process Re-Engineering) in Mahindra &
Mahindra

Subject Teacher:
PROF. Mrunmayee Thatte





2

Acknowledgement
This project topic of BPR in Mahindra & Mahindra has given
me a great deal of knowledge and understanding of the concept of
BPR and how it is used to turn a sick unit into a profitable one.
I would like to thank my Professor. Mrunmayee Thatte for her
unparalled support for helping me get through this project.













Name; Ankush Bhole
Roll No. 23
Date ; 08/02/2013
3

INDEX
Sr No. Contents Pg No.
1. Introduction
01
2. Restructuring Core and Non-Core Business
02
3. Restructuring Farm Equipment Business
02
4. Project Blue-chip
03
5. Future Trends Latest Updates
06
6. Business Units:
09
7. Management Structure:
11
8. Globalization:
11
9. Road Ahead
14
10. Current Scenario
14
11. Conclusion
15


4

Introduction

M&M was established in 1945 started by two brothers; J.C. Mahindra and K.C.
Mahindra. The Company Started as manufacturer of general purpose utility
vehicle and carried production of 75 jeeps in 1948. The company became
Mahindra and Mahindra Ltd. In 1955 Over the period the company diversified
into hotels, financial services, auto components, IT, infrastructure development
and trading. Companys electronics and instrumentation division was set up in
1968. MOU with British Telecom was signed in 1989 for development of
opportunities in telecommunication. In 1994 company established Mahindra
USA to promote tractor sales worldwide. Philosophy followed by the top
management is to strengthen the competitive position in the domestic market
before launching an ambitious globalization programme. M&M showed
excellent results in 2004 with PAT up by 139% from that of 2002-03. Company
had Rs.1000cr reserves separate for domestic and overseas acquisitions. Top
management realized that M&M had a real opportunity to become a Truly
Global brand. Thus need for restructuring is through realization of
businesses not closely related to core competencies. As a result, a massive
Change Exercise i.e. BPR exercise started in 1994; a change from functional
to SBU structure. The criteria was only those business with a global potential
will be a going concern. As a result of which 6 autonomous SBU were formed
with completely empowered presidents for each SBU. The Intention was to
provide direction for future growth of various business lines.





5

Restructuring - Core & Non-Core Business
Restructuring Core and Non-Core Business

Restructuring Farm Equipment Business
Company thought of restructuring its farm equipment business. Project
Vishwajeetwas a major restructuring programme conceptualized by Mckinsey
aimed at turning M&M into a leading tractor producer in global arena by 2005.
As a part of this strategy, the Farm equipment business was divided into 38
different BU classified under 5 divisions. The divisions were marketing and
customer relations, manufacturing and supply chain, product development and
R&D services, performance management and international operations.




6

Project Blue-chip
Why Project Blue-chip?
In December 2002, M&M reached a low point in its history. Depressed
revenues and high costs reduced profit margins considerably
Share price fell from Rs.322 in 2000 to Rs.114 in 2002 and it was listed
out from BSE index. ROCE reduced from 17.09 to 8.92
M&M set up a CTPO (Corporate Turnaround Programme Office) and
articulated the need for a sharper focus on financial returns. CTPO was set
up as a guiding and monitoring mechanism
With 32 subsidiaries on board, investors were unhappy. 18% of investment
and returns were only 5.7%. But Mr. Anand believed that diversification
was not the problem
Due to this, a restructuring exercise known as Project Blue-chip was initiated to
raise the bar on performance.
What did Project Blue-chip do??
Benchmarks like market share, sales and profits were replaced by free cash
flow and ROCE
ROCE brings in the efficiency of utilizing the capital
Free-cash flow makes businesses see to that some dividends flow back to
M&M so that they can be reallocated
A Policy was imposed. Which stated that - The businesses had to compete
for capital and those with highest returns would get the capital
Operations were overhauled. M&M undertook cost cutting and streamlined
its manufacturing facilities
Senior officers started working along with other workers on shop floor

7

HR angle
Prior to BPR, HR was not a key element of strategy formulation.


Prior to BPR After implementing BPR
Multi layered Flat
Work divided among different people
One person given responsibility for
entire process
Functional departments Interdisciplinary teams
Less training More emphasis on training
Performances were not measured Performance management system
Less "new blood" More "new blood - retiring and fired
No outsourcing
Outsourcing non-core manufacturing
activities
Limited meetings with workers Regular meetings with workers

Impact/Results of Project Blue-chip
Tractor division undertook major cost-cutting exercise and brought down
the BEP from 54,000 units to 35,000 units
Auto business free cash flow target for first half of 2003-04 was Rs.50
crore and it achieved Rs.150 crore
Net sales for first half of 2004 increased by 28%, operating profit was up
by 34%
M&M stock had touched 52 week high of Rs.390.25, up from Rs.112.55 a
year ago
8

Crisis being over, Mr. Anand felt that the next challenge was to make the
businesses globally competitive, drive innovation for old and new businesses
and strive for leadership.
















9

Future Trends Latest Updates

1. Mahindra flies into aerospace
Auto maker Mahindra & Mahindra has entered the aerospace market with
acquisition of two Australian aircraft component manufacturing companies.
Mahindra has acquired majority stakes in Aerostaff Australia (AA) and
Gippsland Aeronautics (GA) for a total commitment of approximately Rs 175
crore, jointly with Kotak Private Equity. The Mahindras will hold 75 per cent in
each of the companies, which will enable the Indian engineering group with
interests in software to make small aircraft.The tie-up will enable the company
make 2-20 seater, turboprop aircraft, said to be the fastest growing aircraft
segments in general aviation.
Mahindra will retain the existing managements of GA and AA. Anand
Mahindra, Vice Chairman and Managing Director, Mahindra Group, said,
M&Ms move into the Aerospace segment is deliberate, bold and timely, and
is supported by a renewed demand for economical air transportation around the
world. Our investment in component capability addresses the growing needs of
both the civil and defence markets.
AA is a manufacturer of aircraft components and assemblies for large aerospace
OEMs (other equipment manufacturer). AAs acquisition will help catapult
M&M into the burgeoning Defence Offset and Commercial Aviation market.
GA is an established brand in general aviation and has delivered more than 200
FAR 23 certified planes in 32 countries.
The aerospace deals mark a new high in the evolution of the Mahindra group,
which, besides having a recent high-profile entry into passenger cars, was also
in the news this year as its software arm Tech Mahindra entered as a white
10

knight to rescue Satyam Computer Services, the countrys fourth largest
information technology exporter, from a corporate fraud.
M&M is in to the stage of Business Process Redefinition and is building on
its capabilities to diversify broader in to the automobile segment. From
tractors to aircrafts is an extraordinary development of business.

2. M&M Chinese JV to invest $40 mn for engine plant, R&D unit
Mahindra & Mahindra invested around USD 40 million (Rs 188 crore) in China
to set up a new R&D centre, engine plant and in modernising its tractor unit at
Yancheng. The JV--

The JV--Mahindra Yueda (Yanchang) Tractor Company (MYYTCL)--was set
up in 2008 after Mahindra & Mahindra (M&M) acquired a majority stake in
Yueda Group subsidiary, Yancheng Tractors. M&M currently holds 51 per cent
stake in the JV.
The tractor plant at Yancheng currently has a capacity to produce 38,000 units
annually, manging from 16 horse power (HP) to 125 HP. The modernisation of
tractor plant will improve productivity and quality and consolidate the
Yancheng manufacturing operations.

Commenting on the investment plan, Mahindra Group Vice Chairman and MD
Anand Mahindra said, "I am pleased to see the high level of commitment of
MYYTCL to bring superior products for the Chinese customers, which is being
reinforced by the investment decisions taken by the two partners." Yueda Group
Chairman Chen Yunhua said with the new investment MYYTCL will increase
its presence in the Chinese agricultural machinery market.
11

M&M is moving in to new markets and sectors by leveraging on its Joint
Venture.
3. Mahindra & Mahindra wants to do a Scorpio in scooters
Mahindra & Mahindra, which launched two models in the Scooter segment
Rodeo and Duro in September. The response was stupendous with sales of
7,000 scooters a month. The company plans to expand capacity shortly.














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Business Units:

The two principal divisions of the company were farm equipment and
automotive. The more diversified groups covered a wide range of markets:
automotive, farm equipment, financial services, infrastructure and development,
IT and automotive components. M & M had two main tractor manufacturing
plants located at Mumbai and Nagpur in Maharashtra.
Around 90% of the tractor exports were to the US for small to medium sizes
uses. They also exported to countries like Nepal, Bangladesh, Sri Lanka as well
as African countries. Mahindra Shubhlabh Services (MSSL) was a virtual
marketplace where farmers and traders of agricultural commodities could sell,
produce, obtain finance, buy seeds and fertilizers, rent farm equipment and
check the latest weather information.
The automotive division manufactured and sold utility vehicles and LCVs. It
had a market share exceeding 50%. M&M also operated Automartindia, a B2C
portal which served as a virtual marketplace that allowed consumers to buy or
sell used automobiles.
From 47028 units in 2002-03, tractor sales went up to 49576 in 2003-04. The
growth came despite exports falling by 17%. The tractor division won the
Deming prize in 2003, the first tractor manufacturer across globe to win the
award. The tractor segment growth was driven by the success of M&Ms three
new launches the Bhumiputra, Sarpanch and Arjun. These 3 brands accounted
for 50% of the total tractor sales reported in 2003-04.
M&M felt that Mahindra Financial Services, in which it had a 97% stake, was a
good candidate for an IPO. M&M believed Mahindra Financial Services was
one of the few companies that actually understood the rural markets. Post-dated
cheques and other sophisticated financial instruments did not work here.
13

Mahindra Financial Services had already started offering insurance products
both life and general.
Mahindra British Telecom (MBT), a joint venture between M&M and British
Telecom (BT) specialized in telecom software, with the former holding a 57%
stake in the joint venture and BT holding the rest. The company filed a draft
prospectus with the Securities and Exchange Board of India in 2000.
Mahindra Consulting, which had partners like Computer Associates, IBM,
Microsoft, SAP and SDRC was headquartered in Austin, Texas. The Group
offered domain expertise in the automotive industry through Mahindra, Logisoft
Business Solutions, a joint venture with the TVS family.
The infrastructure and development segment included real estate, project
consultancy and design engineering consultancy and hospitality.
In 2002-03, Mahindra Holidays and Resorts India generated an income from
operations of Rs. 62 crore with a PAT of Rs. 2.8 crore but accumulated losses
were Rs. 26 crore. Club Mahindra had started targeting non-resident Indians
(NRIs) in a big way. Mahindra City, also involved in infrastructure, was a
business park promoted by M&M and the Tamil Nadu Industrial Development
Corporation.
Siroplast (sheet-moulding compounds and dough-moulding compounds) and
Mahindra Ugine Steel Company (alloy steel products) supplied automotive
components to major OEMs like TELCO, Ashok Leyland, Maruti Udyog and
Bajaj Auto. These companies also exported to the US and Europe.
Incase of the three major business groups farm equipment, automotive and
auto components, M&M had planned to make separate IPOs and spin them off
into separate businesses as the top management felt that the investors seemed to
have preference for focused businesses.
14

Management Structure:

M&M believed in a strong board of directors. Below the board of directors was
a management board, which consisted of Anand, the presidents and the
executive vice-presidents. They met once a month to discuss issues that affected
the company as a whole. The war-room concept introduced in March 1998, was
essentially a monthly meeting of each SBU, in which some people from other
units were also expected to attend.

Globalization:

Our Experiences in US, Greece and South Africa taught me a hard lesson: you
have to go into global markets very methodically and have clear strategic intent
- Anand Mahindra

Anand Mahindra saidEach business of M&M should clearly define :
Markets it wanted to enter.
Market share in each product category
Design the marketing mix.
Cost of building a global brand does not seem to cause much worry. Hence
Aanad was ready to invest once difference between global and domestic brands
is established. All six divisions to go global individually without any cross
subsidization. Each brand needs to be developed on its own. No business would
continue if it does not have global potential.A minimum 20% of revenue of all
M&M companies to come from outside India.
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Tractor Segment
It is Indias largest exporter of tractors.High potential markets are: China,
Australia and Europe. It formed strategic alliances for broadening product
portfolio. e.g: Tong Yang Mooslan (South Korea), Mitsubishi (Japan),
Jiangling (China).Major success of tractors and SUVs was in china. It had
huge growth in exports to US under its 100% subsidiary MUSA. MUSA
marketed through online web portals, chat and community centers and word
of mouth by US farmers and opinion leaders.In addition other promotional
media such as TV ads, Billboards, auto fairs were also used. Korean and
Japanese tractors were also sold under MUSAs brand name.



Automotive Segment
IT targeted markets like South Asia, South Africa and Latin America which
were similar to India. More than 1600 vehicles exported in the year 03-04.
New target markets like Europe ,Russia, Italy, Spain and Portugal were
sought.Strategic alliances for assembly of CKD kits in these markets were
made to increase volumes.Target was set which is of 20% of volumes from
global countries in next 2 years.
Auto Components/Engineering Services
Emerged as a core business to provide auto components and services to global
auto producers in India and abroad. Acquisition opportunities in international
markets such as Europe.
16

IT and Telecom
MBT provided telecom solution worldwide. It was a joint venture between
M&M and British Telecom. It had global network of offices in US, UK, West
Asia, India, Singapore and Australia.
Bristlecone
Major stake in the company providing supply and consulting services in the US.
Financial Services
Targeted Markets like Sri Lanka, Nepal, Bangladesh, Myanmar and Bhutan for
financing M&M vehicles and tractors.
Trading And Leisure
Using its Expertise in competitive sourcing it had plans to expand in West Asia and Africa.
Mahindra Holiday & Resorts targeted NRIs in US, Dubai, Kuwait and West Asia.








17

Road Ahead

If group or sector is a market leader, widen the gap.
By end of 2004, each SBU needed to be in top 3.
For manufacturing companies, 20% revenues should come from
products not more than 4 years old.
For service companies, 20% of the offerings had to be new.
20% annual revenues should come from exports.
All targets to be achieved by all companies in 3 years.
Current Scenario
Two-wheelers
o Acquisition of Kinetic Motors in 2008 and launched Flyte
o Now its coming up with 2 more 125 cc gearless power scooters
Rodeo and Duo
Media and entertainment firm Mumbai Mantra
o Plans to make 28 releases per year
o Currently making 10 films in Hindi, Bengali, Bhojpuri and in
English at cost of about Rs 130-150 crore.
Leisure Boat manufacturing
o The company is all set to open up a new manufacturing unit to
manufacture fibreglass powerboats, cabin cruisers and catamarans.
The company is planning to foray through Mahindra Ocean Blue, a
joint undertaking with Mumbai-based marine operator Ocean Blue.





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Conclusion
Before entering the global competition, strengthen position in domestic
market.
Become a global company before becoming a global brand.
BPR exercise leaded to:
o Flat structure removing highly under-productive, militantly
unionized, and bloated workforces.
o Productivity improvement, inventory reduction, quality
improvement and change in mindset of the people
To fight recession further improvisations taken up like cost reduction of
material, operations and manpower as well as the reduction of non-value
added activities (NVAs).
Focus on product development
New measures of performance like ROCE( Return on Capital employed)
and free cash flows facilitated intra-business competition to gain capital.