Global Business Solution – Report on Mahindra India Establishing in Australia

Global Business Solution – Report on Mahindra India Establishing in Australia

Table of contents:

Executive summary
Introduction
Background and details of Coles Australia
Analysis of current issues/problems
a. Trade factors
b. Marketing
c. Company structure
d. Management
e. Operations
f. Suppliers
g. Competitors
h. Customers
i. Effects of government and the environment
j. Global and regional trends
k. Strategic initiatives and directions
Solutions and recommendations
a. No cost option
b. Very low cost option
c. Moderate cost option
d. Full solution without cost restrictions
Conclusion
References


















Executive summary
Mahindra Group is one of the largest industrial conglomerates in India. The report focuses on the analysis of the establishment of business in Australia by Mahindra Group. The report reveals difficulties in terms of the different culture, mentality, level of development of India and Australia. Nevertheless, the conglomerate can succeed if it establishes the business in Australia on the ground of merger or acquisition.












Introduction
The contemporary business environment is favourable for the international market expansion. Traditionally, companies based in developed countries tended to expand their business internationally entering new markets, including markets of developing countries. However, the development of globalization contributes to the shift in the general trends that can be traced in the contemporary economy. In this regard, many companies operating in developing countries have managed to get strong positions in domestic markets and attempt to expand their business internationally. At this point, it is worth mentioning Mahindra India, which is one of the largest conglomerates in India. At the moment, the company has gained a tremendous success in India and attempts to expand its business internationally entering Australian market. However, it is obvious that the company may face substantial difficulties, while entering Australian market because it is quite different from Indian ones, including not only the consistently higher level of socioeconomic development of India but also the cultural difference between Australia and India. Nevertheless, the company can succeed on the condition of the elaboration of the effective plan of the market expansion and use of substantial financial resources.
Background and details of Mahindra India
Mahindra India is one of the largest industrial conglomerates in India. Mahindra group has gained a tremendous success in India and expanded its business entering new industries through acquisition and mergers with other companies uniting them into the solid organizational structure. The conglomerate unites different companies operating in different industries that facilitates the business development of Mahindra because Mahindra Group can use its companies to save costs and to increase profits. In actuality, the company focuses on the international business expansion and Australia is one of the target markets for Mahindra because this country has substantial natural resources and entering Australian market may bring Mahindra Group considerable benefits. Moreover, in a long-run perspective, through entering Australian market Mahindra Group can enter markets of other developed countries and improve consistently its position in the Asia-Pacific region. On the other hand, Mahindra Group is likely to face substantial difficulties while entering Australian market because it needs to have substantial financial resources and human resources to enter Australian market and succeed because the socioeconomic development of Australia is consistently higher compared to India and competition as well as business relationships in Australia are quite different from those in India. Anyway, the contemporary business environment is favourable for the international market expansion because Australia needs foreign direct investments to stimulate the economy growth and business activities in Australia.
Analysis of current issues/problems
a. Trade factors
The current development of international trade contributes to the successful penetration of Mahindra to Australian market because the industrial conglomerate can enter Australian market easily because there are no substantial barriers, such as fiscal ones that can raise serious problems Mahindra Group had to overcome. The development of international trade facilitates trade between countries, including trade between India and Australia.
b. Marketing
The marketing is extremely important for the business development, especially when Mahindra Group attempts to enter Australian market. As the matter of fact, Mahindra Groups will need to focus on the development of its business in Australia and it can take advantage of its existing facilities and businesses in India (Weiler, 2002). What is meant here is the fact that the conglomerate includes companies operating in different industries, which can supply their products to Australia or receive products and resources from Australia. The lack of fiscal barriers and free trade will help the conglomerate to develop the trade and exchange between its companies located in India and Australia. The supply of products and resources from India will save costs of the company because the price of products and resources produced in India is lower compared to Australia due to a lower labour cost in India. As a result, Mahindra Group can save costs and conduct flexible pricing policies in Australian market. At the same time, Australian market is attractive for Mahindra Group because it may help the company to make a breakthrough into the Asia-Pacific region as well as international markets at large.
c. Company structure
The conglomerate comprises companies operating in different industries, which are closely intertwined and cooperate with each other effectively (Mohrman, 1998). Basically, the conglomerate has a complex structure because companies comprising the conglomerate operate autonomously and they are united by the common marketing strategy and goals but each company attempts to gain advantage of its position from the cooperation with other companies comprising the conglomerate. At this point, it is worth mentioning the fact that the conglomerate can benefit from such cooperation but, on the other hand, the coordination of policies and actions of all companies comprising the conglomerate implies the development of the effective communication system (Ogbu, 1993). Moreover, conglomerate needs to coordinate actions of its companies that make it not very flexible and rigid in a way. The rigidity may be a substantial drawback in the contemporary business environment, whereas the expansion of the conglomerate to Australian market may raise new problems related to the communication and maintenance of cooperation between units of the conglomerate because along with new companies the conglomerate can create or acquire in Australia the company will face the problem of cultural barriers. The acquisition or creation of a new company/companies in Australia will need the restructuring of the entire conglomerate to include them into its structure and integrate them into the conglomerate.
d. Management
Mahindra Group uses the management style which has proved to be effective in India but the question concerning its effectiveness in Australia persists. In this respect, it is important to understand that Indian management and culture are different from Australian ones and methods and style used by managers in India will not always work in Australia. For instance, Australian managers and employees are more inclined to democratic, liberal relationships between managers and employees than Indian ones. Moreover, Indian managers and employees are accustomed to the strict hierarchy structure and division of employees and managers depending on their status in the organization and society. Such a hierarchy is unacceptable for Australian managers and employees, who are accustomed to get equal treatment regardless of their social status. Therefore, the conglomerate will need to close the cultural gaps and develop new management style to operate in Australia successfully.
e. Operations
The development of business in Australia is quite different from the development of business in India. Mahindra Group should take into consideration transparency of business in Australia which is not always the case of business in India. In fact, the conglomerate will need to create a positive public image and take into consideration ethical issues, while developing business in Australia. For instance, environmental concerns of Australian public may be a serious challenge to the conglomerate. However, at the moment Mahindra Group can pay little attention to environmental issues, while operating in India solely.
f. Suppliers
Traditionally, Mahindra Group used local suppliers, whereas, in the course of the development of the conglomerate, Mahindra Group attempt to create the closed cycle of production, where companies comprising the conglomerate supply resources and parts to other companies of the conglomerate which manufacture some products, such as vehicles. In fact, the conglomerate can extrapolate its model on Australian market as well. In this regard, the emergence of free trade may be favourable for Mahindra Group, although the local government can impose certain limitations, which may raise barriers for the trade between companies operating in India and supplying products or resources to Australia and vice versa.
g. Competitors
Mahindra Group faces the competition from the part of other industrial conglomerate. In this regard, the company is likely to face a strong competition from the part of industrial conglomerates based in Australia. In addition, other industrial conglomerates operating internationally will increase the rivalry in Australian market.
h. Customers
The conglomerate can count for customers and customer loyalty in Australia because Mahindra Group can provide its customers with products and services at lower price compared to its rivals. In this regard, the company can decrease the price due to the use of cheap labour in India and, thus, decreasing the price of products manufactured in Australia using resources and materials shipped from India to Australia. In addition, the shipping between companies located in India and Australia and comprising Mahindra Group can decrease costs and price even more.
i. Effects of government and the environment
In actuality, the government of Australia conducts loyal policies in regard to foreign investors. However, if the conglomerate can deteriorate the position of domestic companies, Australian government can attempt to protect them from the international expansion. Nevertheless, taking into consideration the involvement of Australia in international free trade agreements, the government will not raise substantial barriers on the way of Mahindra Group to Australian market, especially if the conglomerate will invest substantial financial resources in Australian economy.
j. Global and regional trends
The global and regional trends are characterized by the growing cooperation and economic integration of countries. In such a situation, Mahindra Group can benefit from close economic cooperation and enter Australian market. On the other hand, the recent economic recession increases the risk of the introduction of protectionist policies by local governments, including Australian one.
k. Strategic initiatives and directions
Mahindra Group has to develop its business internationally to gain a better marketing position and to maintain its marketing performance. Australia is an attractive and prospective market for Mahindra Group. Therefore, the conglomerate has chosen the right strategy to expand its business internationally, entering Australian market.
Solutions and recommendations
a. No cost option
The no cost option is hardly applicable in case of Mahindra Group and its attempt to enter Australian market. The company can hardly succeed without substantial investments into establishing business in Australia. Nevertheless, it is possible to admit that the company can enter the market through the development of the chain of dealers selling products manufactured by Mahindra Group, for instance, vehicles. The low price and relatively good quality of vehicles can provide the company with a good ground for the market expansion, especially in the time of economic recession. Therefore, with minimal investments the conglomerate can enter Australian market. Alternatively, the conglomerate can sell a technology or license to an Australian company and gain interests from sales of the products manufactured on the ground of this technology or license. In such a case, Mahindra Group will not need to invest and this option will not need costs. First, Mahindra Group will need to promote its technology and find the company ready to buy it. After that, the conglomerate will need to analyse the local market to assess the extent to which the business established in Australia will be profitable and what interests Mahindra Group can gain. Finally, the conglomerate can sign the agreement with the target company in Australia.
b. Very low cost option
The conglomerate can enter Australian market through the merger of a company belonging to the conglomerate with an Australian company. In such a situation, the conglomerate will need to invest into the restructuring of the new company but, in response, Mahindra Group will get access to Australian market and steadily the conglomerate can expand its business in Australia. At first, the conglomerate has to find the target company and make an offer. Second, the conglomerate should merge its company with an Australian one. Third, the conglomerate should conduct restructuring and establish control over the new company. Finally, Mahindra can start market expansion. However, the company is likely to face problems with establishing control over the new company. Instead, the conglomerate will need to share profits with the Australian company.
c. Moderate cost option
Alternatively, Mahindra Group can use acquisition to enter Australian market. This option is more expensive compared to merger. For instance, Mahindra Conglomerate can purchase a company that is about to run bankrupt in Australia but which has reputation and renowned in Australia. On finding such a company, the conglomerate should assess its potential and volume of investments needed. Next step is the acquisition of the company. And finally, the conglomerate should invest into the business development to gain a share in Australian market.
d. Full solution without cost restrictions
Finally, Mahindra Conglomerate can choose the most expensive, full solution option without cost restrictions which is establishing business in Australia. The establishment of business in Australia will need substantial financial resources from the part of Mahindra Group as well as human resources. Nevertheless, the establishment of business in Australia will allow the company to receive the maximum return on investments due to the full possession of facilities and business in Australia. In addition, this will be important experience Mahindra Group can use in other countries, especially developed ones. At the same time, the conglomerate is likely to need to employ local professionals because they know specificities of Australian culture and can maximize the effectiveness of the organizational performance. In addition, the conglomerate will need to purchase the land and facilities where it can develop its business in Australia. Therefore, Mahindra Group should pass through several stages to establish its business in Australia. First, the conglomerate should define the industry, where it can be particularly successful. Next, the conglomerate should analyse the market and assess prospects of business development and risks that accompany establishment of business in Australia. Thirdly, the conglomerate should define the facilities and land it has to purchase, start construction and, finally, recruit the personnel for the new company.

Conclusion

Thus, taking into account all above mentioned, it is important to place emphasis on the fact that Mahindra Group can enter Australian market successfully but it is preferably to use merger or acquisition to establish business in Australia and succeed in this country. In such a way, the conglomerate will overcome cultural and communication barriers using local professionals, managers and employees and use the existing facilities and infrastructure.


References:

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Global Business Solution – Report on Mahindra India Establishing in Australia 8.7 of 10 on the basis of 4427 Review.