India to rise from 14th to 7th biggest manufacturer in 20 years

My purpose in forwarding the following article is NOT to promote the interests of the Indian company which forms the subject of this case study of how, in the 21st century globalized world, Indian manufacturers are taking on the world’s largest companies including mighty American corporates, but merely to illustrate the fact that, not only in the sphere of software and high tech, but even in the area of manufacturing, India is graduating to become a mammoth powerhouse.

Cheers,

Ram Narayanan
US-India Friendship
http://usindiafriendship.net/
http://usindiafriendship.blogspot.com/


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The tractor maker who has John Deere on the run

Anand Mahindra is one of the architects of a new empire rising in India. Meet him, and hear him speak, in the first of a four-part series this week by Marcus Gee

MARCUS GEE
mgee@globeandmail.com

April 8, 2008 at 7:08 AM EDT

MUMBAI — Anand Mahindra was at the World Economic Forum in Davos, Switzerland, last year when Robert Lane, chairman of U.S. farm equipment concern Deere & Co., approached him.

"I’ve been to your dealerships and seen all your manuals," he told Mr. Mahindra, whose Mumbai-based Mahindra & Mahindra Ltd. has been taking on the maker of John Deere tractors in the U.S. market.

Well, replied Mr. Mahindra with a laugh, "that’s good news and bad news."

The bad news is that the world’s biggest tractor maker has put Mahindra & Mahindra in its sights. The good news, both for Mr. Mahindra and India, is that a behemoth like John Deere is worried enough to bother.

Indian manufacturers have never troubled the sleep of executives in the rich world. India is well known for its outsourcing and information technology skills - even, more recently, for the global shopping sprees of its acquisitive billionaires - but its manufacturers are minnows beside the sharks of China, South Korea and Taiwan.

Gradually, that has begun to change.

India’s manufacturing industry grew at an annual rate of 9 per cent over the past four years, on pace with its booming economy. Boston Consulting Group predicts that India will be the 11th-biggest global manufacturer by 2015 and the seventh-biggest by 2025, up from 14th in 2005.

Mr. Mahindra, 52, is one of the reasons. The urbane, Harvard-educated business leader has taken his family firm from a staid domestic maker of jeeps and tractors to a global player with ambitions in everything from SUVs and auto parts to movie making and time share resorts. In naming him Businessman of the Year for 2007, Business India magazine called the M&M managing director "the poster child for the global Indian."

His M&M has dealerships in 25 countries and subsidiaries in Europe, Australia and South Africa. Its revenue has grown 20-fold in 17 years.

Already the largest tractor maker in the world’s largest tractor market - India - it has become third largest in the world by units sold and plans to be first by 2010. It makes India’s most popular SUV, the Scorpio, and has joined with France’s Renault to make the Logan, a no-frills sedan for Indians. It plans to launch the Scorpio and two models of pickup truck in the U.S. market next year.

"On the manufacturing side, they’re top class," said Jamshed Dadabhoy, an analyst with Citigroup in Mumbai.

Mr. Mahindra is the first to admit that Indian firms still cannot compete with the cheap skilled labour and first-rank infrastructure of Chinese manufacturers. "If we had to put out a million Barbie dolls, we just couldn’t," he said.

But India has some distinct advantages: a sophisticated stock market where companies can go to raise money in a hurry; a young, eager work force; the English language; and, above all, well-managed, forward-looking companies such as M&M.

While China’s leading companies tend to be run or heavily influenced by the state, India’s are more often private, family-owned conglomerates - sprawling business houses with storied names like Birla, Tata and Ambani. After decades of stifling government regulation, these firms are emerging as fierce global competitors under a new generation of leaders.

Mr. Mahindra is a typical product of that generation. Like many educated Indians, he is charming, hospitable and effortlessly articulate. A sought-after luncheon speaker, he mixes quotations from T.S. Eliot with references to Hindu mythology. Instead of poring over earnings reports on the weekend, he sets sails on his 45-foot catamaran Dreamcatcher, taking the helm while his fashion-editor wife, Anuradha, "balances her champagne glass."

Around the dinner table when he was growing up, his family talked about jazz and politics, not the business. His mother, a teacher and author who escaped her modest background to try acting in Bollywood movies, was as much an influence as his father, himself a "reluctant businessman" who studied diplomacy at Harvard.

The younger Mahindra studied film at Harvard before taking an MBA at the business school, finally joining the family firm in 1981 and working his way up. "I’m not someone who’s going to recite the 10 commandments of business and tell you I slaved from the age of 17 and had a lemonade stand," he said.

He would rather talk about "the right brain," and how creative thinking can foster innovation. To keep his senior executives mentally flexible, he takes them to Harvard every year for sessions not just on business strategy but science, public policy and philosophy, with concerts to enliven the evenings. He calls the program Mahindra Universe.

But don’t mistake his sense of balance for detachment. Like many Indian business leaders, he is impatient to see India catch up with its global rivals. "A company like ours - whose DNA is Indian, whose character is Indian, who wants to become an Indian multinational - well, if this succeeds, it’s a sign that Indian business in general has what it takes to succeed," Mr. Mahindra said in an interview in his company’s Mumbai office tower. "If we don’t, there’s something wrong."

Mr. Mahindra traces the firm’s competitive zeal to its founders. His paternal grandfather, J.C. Mahindra, became India’s iron and steel czar during the Second World War, rationing the precious commodities in a time of shortage. J.C.’s brother, K.C. Mahindra, was the head of India’s supply mission in Washington. He channelled U.S. material to Britain’s forces in India. They went into business together after the war, trading iron and steel, then assembling jeeps - "two salaried blokes," as Mr. Mahindra puts it, "who got patriotic and decided to start a company with the princely sum of 100,000 rupees" (about $2,500 at today’s rates).

In 1947, just as the company was starting up, India won its independence from Britain. "So in a sense they were born at the same time, born with the same ideals as the country: To prove that this new country could survive and compete with the best in the world."

Like many others, the company languished under the "licence raj," the strict regime of protectionism and government micromanagement that prevailed until a financial crisis forced New Delhi to open up the economy in 1991.

So when Mr. Mahindra took over from his uncle Keshub and father Harish in 1997, "we decided we should live up to the founders’ expectations."

As India emerged from decades of stultifying government regulation, Mr. Mahindra shaped it up for national and global competition. He took on the company’s powerful unions. He shut unproductive plants. He hired away top executives from Xerox and General Motors and India’s Tata Group.

As India’s economy took off, he launched new products like the hardy Scorpio, which withstood competition from established brands such as Honda, Ford and Toyota to grab a quarter of the domestic market. Plans for an eco-friendly hybrid are on the books.

But Mr. Mahindra seems proudest of M&M’s success against Deere & Co., the Illinois company founded in 1837 whose green-and-yellow vehicles are a symbol of American industrial might.

"John Deere considers us enemy No. 1," says Mr. Mahindra. "We are the little baby cobra they have to kill."

M&M has found a niche in the United States with its sturdy, relatively low-horsepower tractors, popular among hobby farmers and suburban lawn masters who don’t need a monster tractor and like Mahindra’s reliability. Sales have grown 25 to 30 per cent over the past four years, putting Mahindra fourth in the market, inching toward third.

Deere was worried enough that it offered a $1,500 (U.S.) rebate to anyone who would trade in his or her Mahindra for a John Deere. Mahindra, for its part, tried to lure Deere customers with an ad showing a pretty blonde riding a Mahindra. "Deere John," read the caption, "I have found someone new."

Success or failure in the United States won’t make or break M&M, but Mr. Mahindra takes the Frank Sinatra view: "If you can make it there, you can make in anywhere."

"That’s why you go to certain sophisticated markets, because it pulls you up to a different weight class of competition," he said. "That’s why you do the U.S., that’s why you do the U.K. They’re the ones that keep yanking us into the future."

Companies like Mr. Mahindra’s M&M are doing the same for India.

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The Series

By Marcus Gee, in Mumbai

Wednesday: Airport developer G.M. Rao is modernizing India’s crumbling infrastructure.

Thursday: Information-technology wizard Azim Premji leads

India’s rise as a flat-world competitor.

Friday: Industrial magnate Ratan Tata shakes up the global auto market by launching the world’s cheapest car.