BUSINESS ENVIRONMENT

ASSIGNMENT

On

Mahindra and Mahindra

Finance (India)

For

Internal Evaluation and

External Evaluation

Submitted to
Prof. Nityanand Jha
Prepared by
Krapanshu Rathi
Sem 3 (2018-2023)
Roll no.
 Introduction

Mahindra & Mahindra Financial Services Limited (MMFSL) is a Rural NBFC

headquartered in Mumbai, India. It is amongst the top tractor financer in India and offers a wide
range of financial products to address varied customer requirements. The NBFC has 1000+
offices spread across 1 in every 3 villages across India with a total of more than 4.7 Million
customers till date.

Mahindra Finance started on 1 January 1991, as Maxi Motors Financial Services Limited. They
received the certificate of commencement of business on 19 February 1991. On 3 November
1992, Mahindra Finance changed their name to Mahindra & Mahindra Financial Services
Limited. Mahindra Finance is registered with the Reserve Bank of India as an asset finance,
deposit taking NBFC.

In 1993 it commenced financing M & M Utility vehicles and in 1995 started its first branch
outside Mumbai, in Jaipur. Began financing Non M & M vehicles in 2002 and got into the
business of financing of commercial vehicles and construction equipment in 2009. 2011 was the
year in which they had a joint venture with Rabobank subsidiary for tractor financing in the US
and consolidated the product portfolio by introducing small and medium enterprises (SME)
financing.

Mahindra and Mahindra Finance Services Limited is one of india leading non-banking
finance companies. Through a vast network of branches, they provide personalized finance for
the widest range of utility vehicles, tractors and cars, focusing on the rural and semi urban sector.

MMFSL’s rural financing is considered as the coverstone of poverty reduction, rural

development and inclusive growth in many parts of the country with a majority of our country’s
population living in rural india, their loan to over 10,00,000 customers belonging to the low
income groups have proved to be catalyst in helping rural india surge ahead in a big way.

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 VISION AND MISSION OF MAHINDRA AND MAHINDRA FINANCE

VISION

“TO BE A LEADING FINANCE SERVICE PROVIDER IN SEMI URBAN IN SEMI

URBAN AND RURAL AREA.

MISSION

“TO TRANSFORM RURAL LIVES AND DRIVE POSITIVE CHANGE IN THE

COMMUNTIES.”

VALUES

 Entrepreneurship
 Integrity
 Teamwork
 Risk Mitigation
 Customer Centricity

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 ENVIRONMENTAL ANALYSIS

PESTEL

 P – POLITICAL
 E – ECONOMICAL
 S – SOCIAL
 T – TECHNOLOGICAL
 E- ENVIRONMENTAL
 L - LEGAL

Political Factors:
 Government Regulations and Deregulations – The government is adhering to all the
rules and regulations under World Trade Organization norms. There is consistency in both policy
making and implementations of those policies.
Democracy & Other Democratic Institutions – According to Rajeev Kumra the
democratic institutions are needed to be strengthened further so that business such as Mahindra
Loans can thrive in an open, transparent and stable political environment. Strengthening of
democratic institution will foster greater transparency and reduce the level of corruption in the
country.
 Role Local Governments Play – Local governments are highly influential in the policy
making process and implementation as most of the policies and regulations are implemented by
the local government as enforcement agencies mostly report to local government in their own
states regarding various laws
 International Trade & Other Treaties – The country has a good record of adhering to
international treaties it has done with various global partners. The government of each party has

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adhered to the treaties done by previous governments, so there is a consistency in both rule of
law and regulations.
Economical Factors:
The economic factors that Mahindra Loans should evaluate both in the present market and one in
which it wants to enter are – inflation rate, GDP growth rate, disposable income level etc.

Demand Shifts from Goods Economy to Service Economy – The share of services in the
economy is constantly increasing compare to the share of manufacturing, goods, and agriculture
sector.

Financial Market Structure and Availability of Capital at Reasonable Rates – The quantitative
easing policy of Federal Reserve has led to liquidity flooding all across the global financial
markets. Mahindra Loans can borrow cheaply under such circumstances. But this strategy entails
risks when interest rate will go up.

Fiscal and Monetary Policies – The Republican government tax break culture has increased the
deficit and it can lead to fiscal trouble for the economy in coming years.

Government Spending – As mentioned in the political factors, government of the country is

running deficit budgets. The implication for Mahindra Loans is that it can boost sales of its
product in short run but also expose Mahindra Loans to medium term forex and currency
depreciation risks.

Price Fluctuations in both Local and International Markets – Compare to the level of quantitative
easing in last decade the prices of Mahindra Loans products and prices of overall products have
remained sticky in the US market. Mahindra Loans should consider the fact that at deficit levels
of United States in an emerging economy can lead to rampant inflation and serious risks of
currency depreciation.

Level of Household Income and Savings Rate – Increasing consumption and stagnant household
income in United States had led to credit binge consumption. It has decimated the culture of
savings as people don’t have enough to save. Mahindra Loans needs to be careful about building
marketing strategy that is dependent on “Purchase on Credit” consumer behavior.

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 Social Factors:

Social factors such as demography trends, power structure in the society, women
participation in workforce etc. have immense impact over not only the country's economy but

also on workforce talent availability and level of consumer demand.

Societal Norms and Hierarchy – What sort of hierarchy and norms are acceptable in society also

influence the types and level of consumption in a society. In highly hierarchical societies the
power of decision making often reside at the top.

Power Structure in Society – Mahindra Loans should carefully analyze both - What is the power
structure in the society? How it impacts the demand in the economy. For example, the power
structure in US economy is slowly moving towards the older generation as that generation has
higher disposable income compare to the younger generation.

Level of Social Concerns & Awareness in Society – Higher level of social concerns in the society
often result higher consumer activism and pressure from non-governmental organizations, &

pressure groups.

Technological Factors:
Technology is fast disrupting business models across various industries. Some of the

technology trends that are impacting the macro environment are – developments in artificial
intelligence, use of machine learning and big data analytics to predict consumer behavior,

growing importance of platforms over service providers etc.

 Level of Acceptance of Technology in the Society – Mahindra Loans has to figure out the level

of technology acceptance in the society before launching new products. Often companies enter
the arena without requisite infrastructure to support the technology oriented model.
Research and Development Investment Levels – If there is high level of investment in
technology development sector then there are high chances of building a self-sustaining
ecosystem that drives innovation. Mahindra Loans can leverage such a situation to hire the best
people in business.

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Environmental Factors:

Environmental factors are fast gaining traction not only among consumers but also among
regulators and policy makers. Climate change and changing ecosystem is leading to the
extinction of more than 20% of species on the planet by the turn of this century.

Influence and Effectiveness of Environmental Agencies – The role of environment standards

enforcement agencies is critical in safeguarding norms. But often in emerging countries these
agencies delay the process as a tactic to extract bribes. Mahindra Loans should be aware of
presence of such practices in a country.

Legal Factors:
Time Taken for Court Proceedings – Even if the country has best of the laws, it doesn’t mean
much if they can’t be enforced in a timely manner. Mahindra Loans should do a primary research
regarding how much time it often takes to conclude a court case in the country given the sort of
legal challenges Mahindra Loans can face.

Employment Laws – What are the employment laws in the country and are they consistent with
the business model of Mahindra Loans. For example, Uber employment system is not consistent
with French laws and it is facing challenges in the country.

Securities Law – What are the securities law in the country and what are the conditions to list the
company on national or regional stock exchange.

Independence of Judiciary and Relative Influence of Government – The judiciary independence

often reflect both strength and credibility of the institutions in the country.

Data Protection Laws – Mahindra Loans needs to assess what are the data laws in the country
and what it needs to do to comply with them. For example, most of EU countries now want the
EU citizen data to be saved in EU countries only.

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Health & Safety Laws – What are the health and safety laws in the country and what Mahindra
Loans needs to do to comply with them. Different countries have different attitude towards
health and safety so it is better for Mahindra Loans to conduct a thorough research before
entering the market.

Laws regarding Monopoly and Restrictive Trade Practices – As a new player Mahindra Loans
shouldn’t be worried about the monopoly and restrictive trade practices law.

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 PORTER’S FIVE FORCES

 The five forces identified in Porter's model can effect MAHINDRA AND MAHINDRA
FINANCE SERVICES LIMITED EMPOWERING RURAL CUSTOMERS IN INDIA ’s
ability to serve its clients and make a profit.
 A change in any of the five forces may regularly require a business unit from
MAHINDRA AND MAHINDRA FINANCE SERVICES LIMITED EMPOWERING
RURAL CUSTOMERS IN INDIA to reassess the market place given the general change
in industry data and dynamics. The general industry appeal and attractiveness.
 MAHINDRA AND MAHINDRA FINANCE SERVICES LIMITED EMPOWERING
RURAL CUSTOMERS IN INDIA should apply and centre their skills, plan of action or
business models to accomplish profits above the business average

Threats of New Entrains:

 New entrants to an industry bring new potential and a choice to increase the market share
and overall share of the pie that puts pressure on price, costs, and the investment price
essential to compete.
 For MAHINDRA AND MAHINDRA FINANCE SERVICES LIMITED
EMPOWERING RURAL CUSTOMERS IN INDIA, particularly while new entrants are
diversifying from different markets into the chief industry, they will be able to leverage
existing talents and cash flows to shake up the opposition.
 The risk of entry in an industry depends upon on the peak of entry barriers and limitations
that are a blessing for players such as MAHINDRA AND MAHINDRA FINANCE
SERVICES LIMITED EMPOWERING RURAL CUSTOMERS IN INDIA and on the
response that new entrants can count on from existing players.
 If entry barriers are low and novices count on little retaliation from the entrenched
competition, the chance of entry is high, and profitability for MAHINDRA AND
MAHINDRA FINANCE SERVICES LIMITED EMPOWERING RURAL
CUSTOMERS IN INDIA will be moderated.

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 It is the danger of entry, not whether the entry of new players takes place that holds down
profitability.

Bargaining Power of Customers:

 The buyer for MAHINDRA AND MAHINDRA FINANCE SERVICES LIMITED

EMPOWERING RURAL CUSTOMERS IN INDIA is not necessarily the group that
consumes the product – but rather refers to the group of customers that purchases the
product from MAHINDRA AND MAHINDRA FINANCE SERVICES LIMITED
EMPOWERING RURAL CUSTOMERS IN INDIA to either distribute further, retail it,
or even consume it.
 Hypermarkets and supermarkets, as well as independent retailers and distribution agents
to end consumers, are the core buyers for MAHINDRA AND MAHINDRA FINANCE
SERVICES LIMITED EMPOWERING RURAL CUSTOMERS IN INDIA that make up
the market’s volume.
 Supermarkets and hypermarkets, along with many food chains that are concentrated,
which increases the buyer power.
 Products are stocked with buyers and retailers by MAHINDRA AND MAHINDRA
FINANCE SERVICES LIMITED EMPOWERING RURAL CUSTOMERS IN INDIA
based on consumer demand.
 Products offered by retailers are differentiated based on several characteristics – not only
reliant upon product characteristics but also consumer segment characteristics. Because
of this, retailers are expected to offer a wide range of the same product category. This
works towards negating and weakening the overall buyer power.
 Buyer power is assessed to be moderate to high.

Threats of Substitute:

 There are always different alternatives or substitutes for various products that lead an
industry.

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 These substitutes may be direct or indirect– the direct substitutes are the same category
products. produced by different players; indirect substitutes are the ones from different
product categories that can replace the product for MAHINDRA AND MAHINDRA
FINANCE SERVICES LIMITED EMPOWERING RURAL CUSTOMERS IN INDIA.
 Switching costs for direct substitutes is not very high for consumers.
 The per-unit-volume prices may be higher or lower.
 This makes the threat of substitute high.
 From the point of view of the consumer, there are some differences between the ways
different products of the same or similar category are used, but many consumption
decisions are a matter of personal taste - this makes products vulnerable to the threat of
other substitutes.
 Overall, the threat of substitutes is assessed to be moderately high.

Bargaining Power of Suppliers:

 The main sources for production are the following:

 Supplies from vendors – sourcing from independent suppliers.
 Own manufactured equipment and resources: this model is practised by companies that
are well integrated backwards and forwards.
 For MAHINDRA AND MAHINDRA FINANCE SERVICES LIMITED
EMPOWERING RURAL CUSTOMERS IN INDIA, there are numerous independent
suppliers within the industry, and all comprise of a few pretty small operations that lead
to weakened overall supplier power.
 Independent sellers and suppliers, however, can locate different opportunities and invest
in alternative markets – which can be a challenge for MAHINDRA AND MAHINDRA
FINANCE SERVICES LIMITED EMPOWERING RURAL CUSTOMERS IN INDIA.
 Suppliers can integrate forward into the decision making and business dynamics
themselves as well.

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 Also, to the buyers, the quality of the supplies and the raw materials is of utmost
importance.
 However, in an industry with a high number of suppliers, MAHINDRA AND
MAHINDRA FINANCE SERVICES LIMITED EMPOWERING RURAL
CUSTOMERS IN INDIA can switch to different suppliers at any time without
experiencing any costs of the business.
 Overall bargaining power of suppliers is assessed to be moderate.

Competitive Rivalry among Existing Firms.

 The market is highly fragmented, which makes it more competitive.

 The market is never too concentrated, and as a result, it has players of varying size of operation –
from very small to big players.
 Producers have begun to make use of brand management techniques and contemporary
merchandising by launching bold brands, label designs and marketing campaigns to become more
identifiable to the public.
 Purchasers and buyers have a wide range of products to choose from, with relatively low
switching costs. These factors tend to intensify rivalry.
 Though players in the industry may off niche or premium products, they also continue to operate
in the mass markets at large, which again leads to high competition.
 The high fixed cost and the high bargaining power of the buyers, which can lead to the lowering
of the prices from manufacturers add to the highly competitive nature of the industry.
 The overall rivalry is assessed to be high.

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 SWOT ANALYSIS

Strengths:

1. Mahindra Finance is leading company in NBFCs

2. The credit rating of this company is very high
3. There are lots of branches in india
4. Mahindra Finnance has many types of product which help the financial
sector
5. Lower cost lead to higher profit for Mahindra Finance
6. Mahindra Finance only needs to target new customers in order to grow
their business
7. Mahindra Finance has lage asset base of rs. 5000 crores.

Weaknesses:

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 1. Mahindra Finance does not make advertisement of its product
2. A lack of scale means Mahindra Finance cost per unit of output is very high
increasing volume, while maintain quality, would help reduce their cost.
3. High amount of non-performing loan
4. A tarnished reputation can hurt Mahindra Finance brand in the eye of consumers.

Opportunities:

1. The online market offer Mahindra Finance the ability to greatly expand their
business.
2. New product can help Mahindra Finance to expand their business and diversity
their customer base
3. New services
4. New technology
5. Leveraging the balance sheet allows Mahindra Finance to quickly expand into
other market.

Threats:

1. A bad economy can hurt Mahindra finance business by decreasing the number of
potential
2. Consumer can change their taste very quickly
3. Intense completion can lower Mahindra Finance profits, because competitors can
entice consumers.
4. In case of vehicle financing company has tough competition from large banks like
state bank of india, ICICI etc.

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