CASE ANALYSIS
Mahindra and Mahindra company was established on 2nd October jointly by Mahindra and Mohammed. The company has a diversified business including the business of oil drilling, bearing, time share resorts, as well as Jeeps and tractors. The company is one of the leading companies in the tractor market of India. Moreover, the company has earned its customers satisfaction by providing an excellent quality product as well as exceptional customer care services to its customers.
The company is recently considering expanding its business globally to enhance the customer base as well as the increase the profitability of the company. The Farm Equipment Services section of Mahindra and Mahindra has decided to penetrate into the Chinese industry. The company has decided to penetrate into the market by making a joint venture with Jiangling Tractor Company (JTC). JTC is a well-established state-owned company. It has made a reputable name in the entire Chinese market by serving its customers with exceptional quality products. However, due to lack in some areas the company has a drastic decrease in the profits. The company was making revenues up to 1 billion and the revenues were decreased drastically to approximately 4 million. Because of this decrease, its parent company, JMCG has taken away its interest from the company. JTC is facing serious problems of rising overhead costs as well as wastage of resources.
M&M has analyzed the business portfolio of JTC and has concluded that the problems of JTC are temporary and could be resolved easily as well as the management of M&M believes that JTC will be highly suitable for them to penetrate into the entire Chinese market. The management of M&M has finally decided to create a joint venture with JTC and is trying to make the effective strategy for the process of integration and restructuring.
ANSWER TO QUESTION # 1
JTC is a good target to M&M for acquisition. The Historic background of JTC depicts that the company has performed very well in its initial stages, the company provides its parent company JMCG, a revenue of approximately 1 billion dollars. The company’s performance became lower due to lack of interest from the parent company. This indicates that the company has a potential to perform well if it is provided with all necessary resources.
M&M has a desire to enlarge its product range to increase the consumer base of the company as well as to capture a huge market share in the entire industry. The product folio of JTC is such that it will provide an opportunity to the company to enhance as well as diversify its product range. The company could enter into the product range of 20 to 30 Hp. This will help the company to enhance its profitability and to diversify its sales.
The acquisition price of JTC should be the same as calculated in exhibit 1, and it is estimated that the probable benefits that would be derived from JV will succeed the cost at a very high margin. Moreover, JTC has a good relation and has a build up a good reputation in the Chinese markets over the time. Moreover, JTC has a good knowledge of the facts and figures of the Chinese market as well as it has good collaborations with the Government and the major suppliers of raw material in the industry. This will help M&M in easily penetrating and entering into the Chinese industry as well as it will enable the company to cope up and adhere with the norms and regulations of the industry.
The collaboration of both companies will benefit both of the company as M&M could globalize its brand as well as expand its business. Moreover, this will provide a stand to JTC to regrow its business as collaborating with M&M will provide JTC to operate on a huge scale because of the gigantic size of business and huge area of operations of M&M. This will resolve the problem of a rise in unnecessary costs and overheads of JTC, as the increase in a size of operations will be enough to absorb the overheads of the company.
The partnership structure is established in such a way that it allows the employees and management of both the companies to coordinate effectively with each other as well as the partnership structure allows the top management of both the companies to allocate resource effectively and efficiently in such a way that it enhances the overall profitability and proficiency of the company...........
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