M&M plots global roadmap for farm machinery

It was around three years ago when the top guns at Mahindra & Mahindra (M&M) did a mapping exercise of the global agricultural machinery market.

The fact that it was a $155 billion industry was no surprise but the other reality — that tractors took up only $55 billion of this kitty — was food for thought. The larger chunk was farm machinery whereas this was the exact opposite for India with tractors dominating the scene.

“What was going in M&M’s favour was that we were the world’s number one in volumes and strong in India with two brands that were doing well. The question therefore was what next?” recalls Rajesh Jejurikar, President, Farm Equipment Sector (FES).

Clearly, there was a big growth opportunity overseas, which would mean focusing on tractors in silo or in tandem with farm machinery. M&M also set itself a target in boosting its global business to 50 per cent by 2019, up from 30-odd per cent three years back.

“All this had to be on value terms which meant redefining our roadmap. To make these shifts meant acquisitions in the farm machinery space because there was no way we could catch up otherwise to compete globally,” says Jejurikar.

It is this strategy that has led the company to a spate of acquisitions in recent times encompassing Japan (Mitsubishi Agricultural Machinery), Finland (Sampo Rosenlew) and Turkey (Hisarlar). In each of these cases, there is a twin focus point in terms of geography and product/technology. The three streams of product portfolio that have been created as a result represent individual centres of excellence.

The first is in Japan — the hub for rice transplanters, rice harvesters and lightweight tractors. The acquisition of Mitsubishi will set in place a global portfolio around these three categories. “All product development here will be from Japan,” says Jejurikar.

Likewise, Sampo Rosenlew in Finland is a combine harvester company and all non-rice harvester product development will happen from this centre of excellence. This means that even if anything is required in India, it is Finland that will lead the development, which will then be localised for India. Hisarlar in Turkey, the more recent acquisition, is the third centre of excellence for tractor implements.

From M&M’s point of view, there are three streams of farm machinery in place today: Rice harvester/transplanter, combine harvester and tractor implements, which are also the three centres of product excellence globally. “The key is to create products which will feed into the rest of the geographies that we are developing. It is a web of product and market,” says Jejurikar.

The underlying goal here is revenue and not just numbers. For instance, Turkey is a 50,000 units-per-annum tractor market valued at $1.5 billion compared to India which is six lakh units but just $4 billion. The difference lies in Turkey’s larger horsepower tractors that command a higher price.

“The strategy we have now is organic with inorganic and each acquisition we make is relatively small. However, we grow these businesses organically by making the global connections,” explains Jejurikar.

The idea is to create a starting point and then build the businesses: Feed the distribution chain with products that come from different parts of the M&M networks; and then create inter-dependency between various elements of design, market, brand and so on.

One of M&M’s important tractor markets is the US where it has built a good presence. There is assembly and distribution happening here though no product development yet. The company has now added Mexico and Brazil to its kitty where an assembly plant is managed from the US.

“For the moment, we have the US around which are Brazil and Mexico. Then we have Japan which is a hub for ASEAN. Africa is an export market from India and now Turkey will contribute too. From Turkey, you have the Middle East and CIS with Finland playing its role also,” says Jejurikar.

The FES chief believes that though the farm machinery business in India is negligible today, it will grow in the next five years with greater land consolidation and corporatisation. As he reasons, harvesters will become big and unless M&M has the technology, it cannot compete with others.

“We are creating world class products to prepare us when it comes to protecting our home turf. By being out there, we are already competing with the world’s top guns and have the technological capabilities to fight them in India,” says Jejurikar.

M&M is also keen on working with universities on new technologies and creating advanced centres across the world. “For instance, we may create a satellite advanced technology centre in the US to leverage the robotics ecosystem of North America. We are talking to universities and start-ups around the world to build technological capabilities of a higher order,” he adds. In the process, this will become a centre of excellence by itself, not for product but for technology.

With these recent acquisitions, Jejurikar clearly has his hands full. His priority is to drive integration, synergies and cultural assimilation. “I spend a week in Turkey and then with the Japanese before sometimes with the French for Peugeot scooters since two-wheelers are also my responsibility,” he says. Working with different cultures all the time is not the easiest of tasks and one needs to be patient, adaptive and flexible.

The underlying strategy is not to overwhelm these companies with Mahindra processes and tell them what is good for them. “On the contrary, we look at their strengths and then build on that. We also expose them to our best practices, values and processes,” says Jejurikar.

For instance, in the case of Mitsubishi in Japan, there have been a lot of visits happening to and fro at least four times a year. The Japanese see for themselves what the Mahindra Rise philosophy is all about in terms of pushing the envelope and making the impossible happen. Today, there is a Japanese contextual representation of what Rise is.

“The key is to expose them to everything without stuffing it down their throats.

After all, there is an Indian and a Japanese way of working and building a common language takes time which is what is happening now with multiple teams working together,” says Jejurikar. The following year will see the launch of a product in India, which is the localisation of a Japanese tractor.

Needless to add, there are lessons to be learnt from Mitsubishi too. “Their ability to plan and put everything on a single sheet of paper is extraordinary The blend between the discipline/rigour of the Japanese and our flexibility/adaptability is the key to pooling strengths. The challenge is to get the balance right and this is where patience and a give/take policy works,” adds Jejurikar.

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