Mahindra Tractors is an international farm equipment manufacturer of Mahindra & Mahindra. In 2010, Mahindra became the world’s highest-selling tractor brand by volume. Mahindra’s largest consumer base is in India, China, North America, and a growing market in Australia. The company is the largest manufacturer in India2 and has the capacity to build 150,000 tractors a year.
M&M produced its first tractor in 1963, the Mahindra B-275. Mahindra Tractors sold about 85,000 units annually making it one of the largest tractor producers in the world.4 To expand into the growing tractor market in China, Mahindra acquired majority stake in Jiangling.

Mahindra Tractors operates in ten countries and has a fairly large customer base in the United States, Australia, Chile, Serbia, Indian Subcontinent, Iran, Syria and a major part of the African continent among many more.6 Mahindra operates in China, North America and Australia through its subsidiaries, Jiangling, Mahindra USA and Mahindra Australia. It also operates in some Indian states through its subsidiaries Mahindra Gujarat and Swaraj.
Sales & Distribution Channel:
128587545148500Mahindra, one of the oldest tractor manufacturing companies in India, is still No. 1. However, recently the company has shown a downward trend probably having already peaked in the sales cycle.
Table 1 shows the monthly sales trends of Mahindra Tractors in the last three years along with the YOY growth figures. Last year the company had shown a 20% growth but in the FY 2015 the company’s sales declined by approximately12%.

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Mahindra Tractors has had the maximum sales volumes in Uttar Pradesh. In April 2014 they achieved a sale of 2,818 tractors. This was closely followed by sales in Madhya Pradesh and Maharashtra.

Mahindra ; Mahindra tractor products are sold to about 36 countries located across the regions of America, Asia, Europe, Middle East, Africa and Oceania regions through their several regional offices. The products are mainly distributed through a network of dealers who play an important role in taking the Company’s products to end customers. Currently the Company maintains a network of more than 1,000 dealers located across global regions.

Within India, as well as in countries where the company has manufacturing facilities, the company handles the sales to dealers directly. However, in countries where the company does not have a manufacturing facility the company appoints distributors (usually only one per country), who in turn, handles inventory as well as sales to all the dealers within their country.

Dealers place the order with the factory per a monthly requirement/sales target. After production, the tractors are sent to the dealer on trucks. The whole process may take approximately7-10 days on an average. In case of an urgent order, the waiting time is 2-3 days.

275018519395100The delivery of goods to dealers in a particular region is usually from the nearest factory. The tractors once manufactured are sent to the regional warehouses of Mahindra. From there depending upon the demand from the dealers or the Samriddhi centers tractors are dispatched to them. The goods are mostly dispatched directly to the dealers as per their requisitions but, sometimes when sales achievements fall short of targets, Mahindra may keep the product at warehouses or stockyards which are usually company-owned but may also be hired premises (depots) as well. Mahindra Tractors have also appointed some super stockists from whom the dealer can buy the tractors directly at a premium for immediate delivery or for the purpose of taking advantage of available credit opportunities.
The Company sells the tractors through the dealers only. The company has also appointed some wholesalers who are super stockists of tractors and spares. These super stockists also maintain exclusivity of brand for the tractors but they are free to stock other non-competing products of other brands. However, the company and the super stockist do not sell to the customer directly. Only the dealers actually sell the tractors to the end user. This is true even if a deal with an institutional buyer is negotiated between Mahindra and the end user. The sale will still go through the dealer in the region the end user is located in. As far as spare parts go, the super stockiest can supply to the local retailers and Mahindra authorized service agencies.

All the dealers have exclusive dealerships. A Mahindra dealer can only stock Mahindra products and Swaraj Dealers will stock only Swaraj products. However, it has been observed that if you approach a Mahindra dealer for a Swaraj Tractor they promise to help arrange for it. However, the Company will never attempt to bypass the dealers. The dealer performance measure is calculated based on the following variables: Sales, Time required to solve the service related problem, Satisfaction of the customer, Training of employees and Motivation of employees etc.
At one time the dealer attrition was not more than 5%, since Mahindra products were easy to sell. However, recent trends reveal that the dealers are feeling highly stressed with regards to their actual sales margins. Their market is being eroded by competitors who are offering heavy discounts and business has become very difficult to sustain at those prices. The rumor is that dealers are reported to be relinquishing their dealerships in large numbers and are increasingly choosing to restrict themselves to sale of spare parts and services either officially or unofficially since they have a ready infrastructure.

The Company sometimes pushes the product to the dealers during the off-season. For example, let’s say 5 tractors are kept at the showroom of the dealer for sale. After approximately 15-20 days, the Company sales staff pushes the dealer sales staff for sales and demands payment for tractors. We have not heard of any forced sales. Dealers who opt out become independent and a part of the after-market. With a particular case we found it was a voluntary parting. The dealer had been performing well but said that cut-throat competition has shrunk his margins. Non-performing dealers can be terminated by the company after a few warnings.

Below figure shows statistics of Mahindra dealer footprints across various states in Indian region. As of now the Company has a well-established dealer network in 17 states within India with around 870 dealers. Unsurprisingly, the Uttar Pradesh region has the most dense dealer network for Mahindra tractors, totalling 159 dealers which represent approximately 18% of their total dealer network.
Typical Organizational Structure:
Below diagram shows an outline of the typical Mahindra tractor dealer organization.

Critical Evaluation:
As shown in Table 1 Mahindra tractor sales and growth rates have shown a decline in the FY ending March 2015 to approximately 233,258 from 267,635 in FY ending March 2014. The trend shows that the month of October is usually the best period for the Company, while June and Sept. have been good months as well. The sales have been particularly low starting in December and extending until March every year.
It was found that Swaraj Sales are between 32-35% of the total Mahindra Tractor Sales in FY 2014. The share of Swaraj has grown slightly in FY 2015 and is anywhere between 34-37% in all months of 2015.
It appears that some of the reasons for the downward slide include the fact that:
1. Tractor prices of Mahindra are on the higher side. Please refer to Table II in the Appendix E that compares the dealer price of Mahindra with other manufacturers.

2. Availability of newer and more crop-centric models by other brands.

3. Mahindra technology had slow in innovation in the past. Although, they have recently stepped up their R;D facility and have even opened a state of the art plant in Zaheerabad the effect of the same will take some time to translate into results.

4. Being a very large conglomerate with diversified business interests they are lacking the focus and the aggression of Sonalika which is an owner-driven organization.

5. Currently, due to a downturn in the industry, the market conditions are reported to be very tough. The customers are also very demanding. Due to this reason the employee attrition is on the rise both in the case of employees as well as the dealers. Still Mahindra, Swaraj and TAFE are considered to be the better places to work.

The company said tractor sales may remain under pressure for the next two quarters and growth is expected to pick up from the second half of the year ending March 2016.

The Company does ATL (above the Line) and BTL (Below the Line) marketing activities. ATL Marketing includes the mass communication advertisements like TV, Print, radio etc. BTL activities are more customer-focused. They educate the farmers with the benefits of the product and are the touch points. These activities provide the Company with the Deep Customer Understanding (DCU).

BTL Activities
BTL activities are more customers focused. They educate the farmers with the benefits of the product and are the touch points. These activities provide the Company with the Deep Customer Understanding (DCU). Some activities are:-
Free Service Camps- Company organized free service camps for the farmers to get in touch with them and understand their needs better.
Mobile Vans- These mobile vans are there to give information to farmers placed in remote areas.
Local or State Events- Participate in local fests or local events.
Local mechanic Meets- Sponsor or be present in the local mechanic meet.
Exchange Mela- Set up exchange Mela to attract old customers and promote their new products.
0% Finance Schemes – Start this schemes to attract more customers.
Mahindra Samriddhi Centers – Mahindra has 155 Samriddhi centers throughout India which provide insurance products, sell and maintain tractors and implements, and run productivity demo farms and soil and irrigation water testing facilities.  They also deliver knowledge updates on the weather, crops, eradication of pests and diseases, and mandi (agricultural markets) locations and prices. Through these centers the Company keeps in touch with its customers and their needs. They organize various camps and invite the farmers and give them education and in turn get good brand coverage.
Events and Road Shows:
Reach satellite villages around the event village
Create visibility about the event
Leverage dealers in network within geographic network.
Educate load bearing capacity at dealer facilities
Reinforce load carrying features of the tractor
Incorporate prize offerings within the pitch (i.e. gold coins) for participating
Live simulated experience of air flow technology and initiate spot booking for follow-up
Out of Home
Create static visibility with wall paintings, fascia boards etc.

Branding of “agri-inputs” and mechanic outlets
Direct Marketing
Close enquiry through direct marketing
Meet the prospects at their work place
Book spot sales at their place
11. Advertisements
National advertisements are done by Mahindra. Local ads are done on shared basis. This is done by the dealer in consultation with the area manager of the company. If the advertisement is successful and gets good results then the dealer will do repeated activity each month to increase sales. If there is not a significant impact on sales, then they will move to a bi-monthly basis or as decided between area manager and dealer. There are stringent guidelines about the ads size, logo etc. which is first checked and ratified by the company and thereafter ads are released in the newspaper.
Mahindra has a corporate communications department that decides the content. The advertising department decides the frequency, timing as well as which newspapers would feature their advertisements.
During the Financial year ending March 2014, the company has taken out Advertisement worth $50.21 million (Previous year $48.09 Million) and made an expenditure on Sales promotion expenses worth $34.94 million (Previous year $ 21.90). This works out to advertising spend of 5-7% on the Turnover and the sales promotion expenses are around 2-3.5%.

12. Blogs and Social Media:
It has been observed that Mahindra is using social media such as YouTube to extensively project their brand as one of the best available in the industry. Blogs are not very successful in India since most of the farmers are illiterate. Extended warranty and service on parts fetch the company an overall gross margin of 15-20%. When bundled with financing options, the company ensures positive sales for their tractor business. The situation is a win-win for both Mahindra ; Mahindra Ltd as well as Mahindra Finance Ltd. The finance options are at par with the industry standards and have a strict adherence to Reserve Bank of India regulations since the Mahindra Finance is a non-banking financial institution.
There is no spillover of the financing costs onto M;M Ltd as that is completely on the account of Mahindra Finance Ltd (MFL) and MFL is a highly successful venture. They not only finance Mahindra Tractors but have lot of incentives for farmers in general and this leads to many more leads as a result.

It has been reported that public sector banks charge close to 12% of interest rates on loans and non-banking financial institutes such as MFL charge slightly higher rates of interest (Around 16-8%). However, farmers still prefer using their services due to the ease of obtaining loans. The ratio of bank loans to loans disbursed by MFL is reported to be 50:50.

Areas of Improvements: