MAHINDRA IN SOUTH AFRICA
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- Which option should Shah choose?
Shah should make South Africa a hub that will sell all imported CBUs to other African countries.
Advantages
- This could lead to more significant African markets
- African nations never suffered during the global recession hence recovered faster.
- South Africa is ranked top in the business environment compared to other nations.
- South Africa already exports vehicles; therefore, they can use the knowledge to rule.
Disadvantages
- Stiff competition from other vehicle exporting companies in South Africa
- Wastage of time since ordering a car from India to South Africa takes about three months
- Fast-growing economies also are faced with macro-economic risks.
- What is your assessment of M&M’s experience with its South African subsidiary to date?
M&M has shown a powerful entry-level presence in the local market in South Africa. In less than six years, the company was able to earn loyalty and trust from the local population because it offered high-quality services (Roux, 2016). The company made sure that it manufactured and exported vehicles that could operate on the local roads and also made sure that the cars were cheap and easily affordable to the local population. The company was able to manufacture SUV vehicles that were able to secure a market range of 1.2% of the total market share (Morrell, 2019). Many roads in African countries are poor and have huge bumps; therefore, while manufacturing a car, such factors must be considered. The dealers of the cars were localized in over six provinces in South Africa to help customers from all regions of the country to have excellent access to the vehicles. This idea has helped reduce transportation costs and taxes imposed on cars, therefore, attracting more customers to the company. The manufacture of quality cars that are suitable for local roads has attracted more customers to the industry. According to Sharma (2018), the industry has grown exponentially over the past few years due to the use of correct market strategies and operations. Every year the company has had an increase in the total number of customers due to the good quality of services that are offered by the company. Through the capturing of a broader market, the organization has been able to increase its revenue every fiscal year. The local manufacturing of cars has boosted the sales of the firm hence earning more income.
- How attractive is the South African auto market for growth and profitability?
Masondo, (2018), stated that the South African automotive company accounted for over 11% of the exports the country manufactures. The country has witnessed a stable economic growth rate, which has played a vital role in the growth of the automotive industry. Despite the rates of growth to below as compared to other developing countries, there has not been a decline in its growth. Most of the South African citizens are middle class hence having a higher disposable income, meaning they can purchase and own a car. Most Africans dreams are owning big vehicles, and therefore, the company has provided a platform for this to happen. The citizens prefer foreign cars over domestic cars, thus allowing M &M to thrive best in the South African market. The locals believe that imported vehicles are of good quality and cheap as compared to the domestic ones hence preferring them. The local producers offer the vehicles at a higher price while the M&M provides its vehicles at affordable prices. This strategy has assisted the company to thrive and outdo its close rivals in the local market. Customers, however, prefer quality vehicles making the company reach and capture a broader market. Besides, the government has lessened the bureaucratic procedure, for example, reduced tariffs charged from imported products. This move has enabled the company to ship its products in large quantities because of the favorable terms laid by the government. The low tariffs charged on the vehicles mean the vehicles will also be cheap hence attract more customers (Kattumuri & Kurian, 2017).
- What potential roles can M&M’s South African subsidiary play in the company’s global network?
India’s multinational company has employed over 113,00 employees, about 12% representing the foreigners (Haldipur, et al., 2017). Many people have been hired into the industry and can earn a living and live a happy life. The role played by the M&M company is vital for it to thrive in the global market. The company operating in South Africa has helped it to attract foreign customers and also have better access to the African market. Furthermore, it will assist in on-time delivery of products to customers. Its strategic location in over eight provinces will facilitate the quick delivery of commodities to customers. According to Gereffi (2019), the industry can act as an export hub hence reducing its dependency on Indian operations. Basing its services in India will take time for decisions concerning a particular issue to be made, thus negatively affecting the functioning of the company (Borg, et al., 2019). Lastly, is that the company will reduce its risk when supported by local investors. Investors will be able to fund and provide solutions to problems affecting the industry hence improving its efficiency and effectiveness. The industry in South Africa plays a vital role in the company.
- What should be Shah’s recommendation to M&M’s board of directors?
For the growth of the subsidiary in South Africa, the board of directors should monitor the growth of the company and the fall of the automotive market. The economy of South Africa has, for many years, been crippled, and therefore the company should be able to understand the customers spending patterns to be safe. This will assist the industry in understanding the better results and deciding whether to construct a manufacturing plant or use South Africa as a hub.
References
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Gereffi, G. (2019). Global value chains and international development policy: Bringing firms, networks, and policy-engaged scholarship back in. Journal of International Business Policy, 2(3), 195-210.
Haldipur, R., Narapareddy, V., & Vishwanath, S. R. (2017). Wipro Ltd.: The Demerger of Wipro Enterprises. Asian Case Research Journal, 21(02), 347-375.
Kattumuri, R., & Kurian, S. (2017). Sustainable urban development in India: a tale of two Mahindra World Cities.
Masondo, D. (2018). South African business nanny state: the case of the automotive, industrial policy post-apartheid, 1995–2010. Review of African Political Economy, 45(156), 203-222.
Morrell, R. (2019). Vehicle for Southern African Knowledge? Men and Masculinities and Research from South Africa. Men and Masculinities, 22(1), 34-43.
Roux, A. (2016). Everyone’s Guide to the South African Economy 12th edition. Penguin Random House South Africa.
Saraf, P. (2016). Automotive in South Asia: From Fringe to Global. World Bank.
Sharma, J. (2018). The study of Training and development at Mahindra CIE automotive LTD–Shaper, Rajkot.