What options should Shah

choose?
Options that are available:-
1. Contract Assembly
2. Own Manufacturing
3. Wait and Watch
4. Use South Africa as a Hub
 Continued
Contract Assembly- Agreement with a local
vendor to use the latters surplus facility for
contract assembly of M&Ms vehicles.
Pros- 1. Reduc tion in cost of shipping CBUs from
India to Africa.
2.Vehicles could be assembled in SA for
export.
3.Costs could be reduced by locally sourcing
components.
4.No need of major upfront investment.
Cons- 1. Fear of loosing the control.
2.Risk of threatening the brand image.
 Continued
Own Manufacturing-Establish their own
manufacturing facility.
Pros-1.Demonstrate commitment to the
customers.
2.Opportunity to lock in the customers.
3.Enhance brand awareness and loyalty.
4.Provide after sales service.
5. Beneficial Government
regulations( MIDP)
Cons-1.Pressure to sustain high production levels.
2.Many of the vehicle production costs
were fixed.
 Continued
Wait and Watch-
Pros-1.Sales suffered but confidence level had
increased.
2.M&M could use its prevailing business
model.
3.Take advantage of the recessionary period
to reduce costs.
Cons-1.Long order cycle and lead time.
2.High import duty of 25 % .
 Continued
Use south Africa as a Hub-Use SA as a hub
to sell CBUs to other countries in African
continent.
Pros-1.M&M can take lead in shaping industry
structures, segmenting markets and establishing
brands.
2.Long term objective of building a global
SUV brand in Africa.
3.Fastest growing economies in the
region
Cons-1.Political risks in many African countries.
2.Unfamiliar markets of African
continents.
 Continued
M&M has built its distribution network , after sales
service and has experience on trading in SA and
what it needs is an assembly operation where it
can also leverage economies in scale in low
volumes.
Under the current situation M&M should find a
partner that will work under an assembly contract
and assemble imported CKDs on behalf of M&M
for its African market.
 3. How attractive is the South African
Auto Market for growth and profitability?

Formal Entry to SA: Feb 2005

51% Subsidiaries/ 49% Local partners
(Since October 2004)
Entry Strategy: Focus on Niche SUV
Markets,
Segmented towards Passenger and
Cargo traffic
Value Proposition: At least 20-30%
less than the nearest competition
 Shipment of Parts from India
assembled in South Africa
M&M Management style was
considered tough from earlier days
Global Plans: Same vehicle and parts
launches simultaneously in Indian
and South African markets
 In 5 years of doing Business in SA, M&M
had sold around 11000 vehicles, securing
1.2% of Pickup truck market share
Future Goals:
1. Increasing the existing market share
upto 5%.
2. Targeting Mining, Farming companies as
well as Families for development of
Pickup truck and passenger vehicles.
3. Creating a strong loyal base of
customers
4. Creating an Entry point in South Africa.