Why Mahindra wants to make it big in North America

Mahindra & Mahindra (M&M) has come a long way from the time it first entered the US tractor market in 1994. Back then, it sold about 500 units a year in a market dominated by players like John Deere and New Holland, both with a history of more than 100 years each. Today, M&M is the third largest player in the 0 to 150 horsepower segment (it does not play in the very large tractor segment), selling about 25,000 units a year with a market share of about 15 percent. Its revenues total $600 million and the company has five distribution/assembly plants in the country apart from 550 dealers.

M&M, the largest tractor maker in the world by volume, has made substantial investments in creating the infrastructure and building the brand in the US market, which is considered highly competitive. "We invested heavily in re-engineering the products and offering a brand promise that we are here to stay and grow," said Mani Iyer, President & CEO, Mahindra USA (MUSA). He was speaking to visiting journalists at  MUSA's North American headquarters in Houston, USA. The investments have indeed delivered, with revenues growing by six times in the last five years, and the operations have been profitable though he refused to divulge the quantum. M&M wants to achieve a turnover of $1 billion by 2020.

The company is eyeing significant success in the US for more than one reason. "Being successful in the US is critical to call ourselves a truly global brand," says Iyer. There are more tangible reasons as well. Emission norms in the US are very strict and doing well in that market will help the company prepare for the eventual tightening of norms back home in India. Also, the customers here are very demanding, and satisfying them means the company can succeed anywhere else in the world. They are more evolved especially when it comes to comfort, ergonomics and design. A lot of these learnings can be used in India and other emerging markets when they mature. Iyer also sees learnings from the way business is conducted in the US when it comes to the process of dealing with dealers and customers, especially in using digital technologies.

The success that M&M has tasted in the country so far has come as a result of a well-crafted strategy. It has been successful in offering a value proposition that includes reliability, quality, innovation and a brand promise that sits well with its edgy challenger attitude.

At a time when its competitors are reducing the weight of their tractors, M&M continues to make its products heavy. "This makes our vehicle more stable and adds to its reliability," says Cleo Franklin, Chief Marketing Officer and Vice-president (Strategic Planning), Mahindra North America."We brand our products as the toughest tractors in the world," he added. Being an India, where difficult soil and other conditions necessitates sturdy tractors, this comes easy for M&M.

It has also leveraged on its consciousness for quality. M&M is the only company in the world to win both the Deming Award and the Japanese Quality Medal, considered to be the ultimate reward for quality. So confident is the company about its products that it offers a seven year warranty -- highest in the US market. "Our competitors took a while to react," says Franklin.

The company has also been innovating. "Through reverse innovation, we launched a two-wheel drive tractor in the market. Competitors and analysts did not expect it to succeed but today we have almost 90 percent share of that market segment," says Iyer. The company also innovated by offering a zero percent interest option in the tractor market.

M&M is now expanding beyond the US market. It recently opened a distribution centre in Canada followed by another in Mexico. It has acquired a distributor in Brazil. "Brazil will become the central point of our operations in South America," says Iyer.

As the volumes rise, the company has begun debating the need for a full-fledged manufacturing operation in the US. "It will eventually come, in three to five years," Iyer adds. "We already have the numbers to start ground-up manufacturing."

(This writer was in Houston at the invitation of M&M)