STRATEGY MEMO

Business Policy & Strategic Management

Submitted To,
Prof. N.R. Govinda Sharma
Professor, SDMIMD

Submitted By,
A8

Abstract
Mahindra Two Wheelers Limited (MTWL) founded in 2008 is a group venture owned by
Mahindra & Mahindra Limited (M&M), which manufactures scooters and motorcycles.
Peugeot Motorcycles is a French automaker that builds small motorcycles primarily for the
European and Chinese markets. In January 2015, Mahindra Two Wheelers Limited completed
51% stake takeover in Peugeot Motorcycles. This stake acquisition is believed to help in the
betterment of both the parties. From Mahindras point of view the takeover is essentially for
access to Peugeot's technology for use in India, and not much else. There is not much of a
market left in France or Europe, and in China, where Peugeot sells the bulk of its scooters,
the competition is even worse than in India. As far as Peugeot Motorcycles is concerned,
backing of cash-rich Mahindra will help them to explore new market and increase sales.
The acquisition of Peugeot by Mahindra is just a beginning of long term strategy to create an
image and acquire a good market share in Indian market. The reason is simple. In the Indian
scooter market, Mahindra is nowhere in the picture. It is No 7 in a market with seven major
players. The market is, of course, is growing faster, but the top three players - Honda, Hero
and TVS Motors - account for over 86 percent of the market. Add Suzuki and Yamaha, both
players with strong brand images and technology, and the top five players account for 98
percent of the market.

Contents
About Mahindra Two Wheelers (MTWL)..................................................................1
About Peugeot Motorcycles (PMTC).......................................................................2
Abells Framework: Mahindra................................................................................. 2
Abells Framework: Peugeot................................................................................... 3
Issues Identified..................................................................................................... 3
SWOT Analysis: Mahindra-Peugeot deal................................................................4
Financial Analysis................................................................................................... 6
Porters five force analysis for two wheeler industry in India.................................6
Strategic Alternatives............................................................................................ 7
QSPM Matrix.......................................................................................................... 8
Cultural Clash: Mahindra & Peugeot......................................................................8
Recommendations................................................................................................. 9
References........................................................................................................... 10

About Mahindra Two Wheelers (MTWL)

Mahindra Two Wheelers Limited (MTWL) is a part of the USD 16.9 billion Mahindra Group.
Like all Mahindra companies, MTWL is guided by the three tenets of Rise i.e., Accepting No
Limits, Alternative Thinking and Driving Positive Change. With these three guiding
principles, the have built a range of scooters and motorcycles that offer distinctive styling,
solid performance, great mileage and superior ride quality on tough Indian roads. The
products are also packed with many consumer-inspired, new-to-market technological
innovations such as Height Adjustable Seat, Anti-Theft Alarm with Engine Immobiliser, Find
Me Lamps and Remote Flip Key among many others.
The high performance and innovative products are a manifestation of the strong technological
capabilities that have been developed at the highly advanced R&D Centre at Pune. It is
equipped with state-of-the-art facilities to develop world-class products. Home to several
talented engineers and designers, the Mahindra Two Wheelers R&D facility is headed by
two-wheeler experts who lead various futuristic technology and product development
projects.
All the products are manufactured at the state-of-the-art manufacturing unit in Pithampur,
Madhya Pradesh. The products have received wide-spread recognition from both leading auto
experts and consumers. The flagship motorcycle, the Mahindra Centuro has received over 11
industry and consumer awards while the newly launched scooter, the Mahindra Gusto, has
received 5 awards; in the Scooter of the Year and Innovation of the Year categories among
others.
The company is rapidly expanding the already significant distribution and customer service
networks across the country. Mahindra has more than 1500 touch points and are constantly
widening the reach. To serve the customers better, the company is now operating over 200
mobile service points on two wheelers.
MTWL has recently acquired a 51% stake in Peugeot Motorcycles (PMTC), part of the Euro
54 billion Peugeot S.A. (PSA) Group based in France. PMTC, a key player in urban mobility
in Europe for the last 116 years, is the oldest motorised two-wheeler manufacturer and offers
one of the most comprehensive range of scooters and mopeds, from 50cc to 400cc.Peugeot
Scooters offers one of the most comprehensive range of scooters and mopeds, from 50cc to
400cc, including the successful three wheeled scooter Metropolis. Peugeot Scooters sells in
more than 40 countries across Europe, Africa, Asia and Middle East. This partnership with
MTWL will help speed up international expansion and further build the global design and
technological capabilities. Mahindra would offer access to the India market, mass market
product technology while Peugeot brings premium range, a strong European footprint, and a
globally recognized brand.
Mahindra is expanding the global footprint and have a presence in 17 countries across South
Asia, Africa, Middle East and Latin America. MTWL products are as distinctive as they are

thoughtful. Explore the range and discover the delight of riding high on trust, reliability and
innovation. (Mahindra Two Wheelers, n.d.)

About Peugeot Motorcycles (PMTC)

PMTC is the oldest motorised two-wheeler manufacturer and offers one of the most
comprehensive range of scooters and mopeds, from 50cc to 400cc. Peugeot Scooters sells in
more than 40 countries across Europe, Africa, Asia and Middle East. This partnership with
MTWL will help speed up international expansion and further build Mahindras global design
and technological capabilities. Peugeot Motorcycles is a subsidiary of the French automaker
Peugeot that builds small motorcycles primarily for the French domestic market. Peugeot
manufactured their first motorcycle in 1898 with a De Dion-Bouton engine mounted on the
rear wheel. This model was shown at the 1898 Paris Exhibition but never manufactured.
Peugeot did manufacture tricycle in 1898 although most of the machine was actually
manufactured by De Dion-Bouton. In 1900 Peugeot started to manufacture quadricycles but
these fell out of favour and ceased to be produced by 1903. In 1901 spurred on by the success
of the French built Werner Brothers and Company Moto Bicyclette, Peugeot produced their
own motorcycle using a Swiss made Zrcher and Lthi (ZL) engine. (Peugeot Company,
n.d.)
The Peugeot 500 M, a 500 cc dual overhead camshaft model appeared in 1914, the first of
this type. Peugeot was the French motorcycle production leader until the 1950s producing
many models. Today Peugeot is the only French motorcycle maker. Following the virtual
abandonment of mopeds in favour of scooters by customers, Peugeot has directed its
construction to this product. The brand is now famous for their manufacture on its sites
Dannemarie (300 employees) and Mandeure (800 employees). The brand has developed
large-displacement scooters (125 cc and above), in addition to its models of entry-level
Ludix, which it announced in 2008 the relocation to China.[2] Peugeot Scooters are
especially popular in Switzerland and France. Peugeot currently concentrates on 14 different
scooter models with engines which range from 50 to 500cc. (Peugeot Two Wheelers, n.d.)

Abells Framework: Mahindra

Who is being satisfied?

Young population who want style and power. Since the youth in India do not have enough
choices when it comes to powerful and relatively affordable motorcycles PMTC represents a
good opportunity for MTWL to expand and satisfy the needs of existing and potential
customers. It also offers a sturdy travel option for families

What is being satisfied?

The need for stylish two wheelers that are more efficient than products of competitors and
provides a great experience. It is distinct and stylish form all other two wheelers currently in
the Indian market. By catering to various strata of customers MTWL is able to meet varied
needs of all the consumers in the market.

How the customer needs being satisfied?

Variety of bikes and scooters with consumer-inspired, new-to-market technological

innovations. Since value for money is one of the biggest aspects that all customers in India
look for fuel efficiency as well as durability is a highlight. Customers can get world class
technology which were accessible only to a few in the country before at economical price
ranges which should satisfy a significant number of the population.

Distinctive Competencies

Height Adjustable Seat, Anti-Theft Alarm with Engine Immobiliser, Find Me Lamps and
Remote Flip Key. Very few quite possibly, none of the competitors provide all of these
capabilities. Mahindra aims to capture the market by stressing on these competencies
especially those of an advanced manufacturer in Europe. The technology collaboration should
be emphasised so as to compete with giants like Bajaj and Hero.

Abells Framework: Peugeot

Who is being satisfied?

The target market of Peugeot motorcycles is the Premium segment customers. They
have great products with good design and technology.

What is being satisfied?

The need for high end two wheelers that looks luxurious with a backing of innovative
technology that provides a great experience.

How the customer needs are being satisfied?

New to the market innovations with emphasis on styling and luxury.

Distinctive Competencies

Style, DRLs, parking brake, driver and passenger backrests and adjustable
windscreen.

Issues Identified

Mahindra entered the two wheelers segment in 2008 by acquiring Kinetic motors.
Even after 6 years of entering the market, the company finds it very difficult to sustain
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and gain a mentionable market share in the Indian Two wheeler market. This is
mainly because of the huge competition from giants like Hero, Honda, Bajaj etc.
having good products and great technology backup.
The market share of Mahindra Two Wheeler, which sells three motorcycles and six
scooters, stood at only per cent by the end of February 2015 (Business standard, n.d.)
The company has plans to expand to foreign markets to increase sales, and also
enhance its brand presence.
In January 2015, Mahindra Two Wheelers Limited completed a 51% stake takeover in
Peugeot Motorcycles.
Peugeot Motorcycles builds premium motorcycles primarily for the European and
Chinese markets.
Peugeot claims a 9% market share in European markets and 2% market share in the
Chinese market. (Motoworld, n.d.)
Peugeot is an ailing company, which hasn't seen profits in a decade.
The transaction between Mahindra Two Wheelers Ltd and Peugeot Motorcycles
would involve infusion of 15 million euro into Peugeot Motorcycles to finance
projects implemented through the partnership.
This stake acquisition is believed to help in the betterment of both the parties. From
Mahindras point of view the takeover is essentially for access to Peugeot's
technology for use in India, and not much else.
As far as Peugeot Motorcycles is concerned, backing of cash-rich Mahindra will help
them to explore new market and increase sales.

SWOT Analysis: Mahindra-Peugeot deal

Strengths

Brand Recognition:

Mahindra and Peugeot has good brand recognition in their home country as well as around
the world. Mahindra which started with tractors has diversified itself into various sectors and
markets. They provide great products and has a large number of loyal customers. As far as
Peugeot is considered it is one of the oldest company in the world with rich culture and great
history. Peugeot is a well know brand and is present is more than 50 countries.

R&D / Engineering Capabilities:

Mahindra has state of the art research facilities around India and abroad. They have divided
the research division into different sectors based on different domains. Mahindra introduces a
product only after through testing and reworking. (Mahindra R&D, n.d.)
Innovation is the one of the core strategies of Peugeot group. They have top notch research
facilities around the world, where they produce great products. Innovation is one of the
competitive advantage of the Peugeot group. (Peugeot Innovation, n.d.)
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Market Opportunities:

Peugeot has a presence in the Chinese market with a 50-50 joint venture Jinan Quingqi
Motorcycles with Quingqi Motorcycles. This will help both Peugeot as well as Mahindra to
acquire market share in Chinese market. Jinan Quingqi Motorcycles has a series of scooters
for different age group and demographic population.

Weakness:

Peugeot has a market in 50 countries, but the service network is not really efficient.
The service shops are not strategically placed. They have very less number of service
outlets around the world. Because of this problem the people are reluctant to buy
Peugeot products, because they dont want to get into trouble after making the
purchase.

Mahindra has a weak vendor and dealer network compared to its competitors.
Because of this problem the customers sometimes find it very difficult to get their
vehicles serviced or has to wait a long time to get their ordered vehicle. Another
problem is that the dealers and vendors are not ready to push certain products to the
customers because of certain issues like the profit margin. This can cause problems in
pushing the products of Peugeot as well through Mahindra dealers.

The focus of Peugeot two wheelers is only up on commuters. Because of this strategy
the company is missing out a large segment of the market. The Commutes market is
also very small and a lot of competitors are there in the market. This will have a
negative effect on the Mahindra-Peugeot deal.

Opportunities:

Growing Population:

Indian Two-Wheeler Industry is the largest in the world as far as the volume of production
and sales are concerned. India is the biggest two-wheeler market on this planet, registering an
overall growth rate of 9.5 percent between 2006 and 2014. (Business map, n.d.)
The population of India is increasing fast and the two wheeler segment is also booming.
Because of this, there is always room for new players in the market.

Increase in women Riders:

The women riders has increased drastically in the past few years. Nowadays companies are
introducing scooters only for ladies. This is a great market with lot of growth opportunities in
the future.
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Growing demand for premium models:

Indian premium motorcycle market is forecast to grow at a CAGR of more than 30% during
2014-19. Peugeot is a premium segment vehicle and have a great opportunity in the Indian
premium segment. (Business map, n.d.)
Threats:
Both Peugeot and Mahindra faces huge competition from local as well as international
markets. In India, Hero, Baja, Suzuki and Honda are the main players. Companies like Harley
and Kawasaki are also introducing great products in the Indian markets. The Indian market is
highly competitive in terms of pricing and technology.

Financial Analysis
Mahindra Two Wheelers:
Return on Total Assets (ROA)
Debt-Equity Ratio
Long Term Debt-Equity Ratio
Current Ratio
Fixed Assets turnover ratio
Inventory turnover ratio
Debtors turnover ratio
Interest Cover Ratio

0.010
5.83
1.20
0.50
2.48
6.89
23.94
-10.19

These ratios shows the financial position of the company. All the other ratios indicate that the
company is in under loss. This is mainly because the company is going through an expansion
process and is busy acquiring market share. The company have a total sales turnover of 840
Crore in 2014. The company is currently in loss. No further financial details are available as
the company is privately held.

Porters five force analysis for two wheeler

industry in India
1. Threat of new entrants
Entry barriers are very high in the two wheeler segment
Huge investment is needed since large plant and machineries are needed along
with skilled labour and efficient R&D department.
Setting up of sales and service centre is hard for a new entrant
Well established players are already present
Conclusion: Threat of new entrants is low

2. Threat of Substitutes
Major substitutes are public transport, low end cars, auto rickshaws etc.
Since only two people can travel in a two wheeler, probability of people switching
to alternate mode of transport is higher
Elder people and people with health issues will chose buses over two wheelers
Other major reasons can be- 1) Relative quality of substitutes can be higher
2) Switching cost is lower
Conclusion: Threat of substitutes is high

3. Rivalry among Competitors

Main Players in two wheeler industry are Hero, Honda, Bajaj, and Yamaha.
Price, Product and quality play an important role for rivalry among competitors.
Methods adopted to attract customers are- Loan facilities, low rate of interest,
discounts and long term warranties.
Conclusion: Rivalry among competitors is high

4. Bargaining power of suppliers

Number of suppliers operating is very high.
Steel, aluminium, tyres and tubes are available in abundant.
Since the companies change their models often, they keep close relations with
their suppliers.
The supply business is quite fragmented.
Conclusion: Bargaining power of suppliers is low.
5. Bargaining power of Buyers
Five to six popular brands are present.
Buyers are fully aware of the seller costs and products.
Wide variety of models and brands to choose from.
Buyers chose brands with reputation and better service facilities.
Conclusion: Bargaining power of buyers is high

Strategic Alternatives

Strategy 1
The takeover by Mahindra is to Peugeot's technology for use in India, and not much
else. Peugeot have a technology centre with a strong ability to do styling and engine
development and vehicle development with testing.
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Strategy 2
The stake takeover by Mahindra is part of a diversification strategy. Through Peugeot
Mahindra will have an easy access to foreign market and a strong presence in
European market.

QSPM Matrix
Quantitative Strategic Planning Matrix (QSPM) is a tool that helps in evaluating the alternatives. As
per the analysis done before we have arrived at two alternative strategies which have been added in
the QSPM.

Weig
ht

Access to Peugeot
technology to be Stake takeover is
used
in
Indian mainly to diversify
Markets
to foreign Markets
AS

TAS

AS

TAS

Brand
Name
and
Name Reputation
0.2

0.2

0.6

Research
Development

0.4

1.2

0.4

0.3

0.3

1.2

Strength

and

Market Opportunities
Weakness

Weak service Network

SUB
(Internal)

0.1

0.1

0.3

TOTAL
1.8

2.5

Opportunities
Growing Population

0.4

0.8

1.2

Increase
Riders

0.5

1.5

Growing demand for

premium models
0.2

0.8

0.6

0.4

in

Women

Threats
Growing Competition

0
0.4

1.6

10

SUB
(External)

TOTAL

Total Score

4.2

3.7

6.2

From the QSPM matrix we can see that the second strategy, that is to diversify to foreign
markets have more attractiveness based on the strengths, weakness, opportunities and threats
of the deal.
Peugeot also must have some strategies and motives behind this agreement with Mahindra.
The strategies is that the equity infusion from Mahindra will help Peugeot become a debt-free
company and also give an access to markets like India and other emerging markets. Because
Peugeot Motorcycles is an ailing company and is in loss for the last few years. They havent
relapsed any new models of two wheelers in the past few years.

Cultural Clash: Mahindra & Peugeot

When two companies from two different countries come together to do business via merger
or acquisition, there is a huge possibility of occurring a cultural clash. Both Mahindra and
Peugeot are entirely different in terms of vision, mission and the culture within the
companies. The employees will find it very difficult to cope with the changing conditions
because of the acquisition. There are various etiquettes to be followed in each countries like

In India:

Shaking hands is a common practice in business interactions.

Decisions are strongly influenced from the top. Usually one person makes all major
decisions.
Business cards are exchanged and Indians are very conscious of the protocol.
Initial business entertainment is done in restaurants in prestigious hotels.
Business can be discussed during meals.
For business, men generally wear suits and ties
Gifts are not normally expected at the first meeting. Gifts may be given once a
relationship develops.

In France:

It is not acceptable in France to drop in on someone unannounced and such conduct

will be taken as an act of rudeness, whatever the occasion.
Punctuality is treated quite casually in France, although there are some regional
differences, the further South you go the more casual the approach to time is.
Gift-giving among business associates is not common practice in France.
Fashion and appearance are much more important in France than in most other
countries in the world. Even low-paid, entry-level executives buy the best clothes they

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can afford. Generally, dress tends to be on the formal side for both men and women,
whether in business or social situations.
Offices open early as well as close early and weekends are sanctimonious.

Both the companies has to take into consideration these aspects while doing business with
each other.

Recommendations

Mahindra Two Wheelers produces products for the mass segment and Peugeot for the
premium segment. So Mahindra should try to keep both the companies separate and
the offerings of both the companies should not be mixed up.
There is a possibility of occurring a cultural clash, because both the companies comes
from different background. So the companies should take necessary measure to
mitigate the problems that can occur.
The acquisition can lead to lot of confusion regarding the power and hierarchy in the
organisation. So the companies have to make sure that all the power structure is
properly defined and clearly communicated.

References
Business map. (n.d.). Retrieved from Map of India business:
http://business.mapsofindia.com/automobile/two-wheelers-manufacturers/
Business standard. (n.d.). Retrieved from http://www.businessstandard.com/article/companies/year-will-be-critical-for-m-m-two-wheelersgoenka-115040700693_1.html
Mahindra R&D. (n.d.). Retrieved from Mahindra Reserach and Development:
http://www.mahindra.com/What-We-Do/InformationTechnology/Services/RandD-Engineering-and-Manufacturing-Services
Mahindra Two Wheelers. (n.d.). Retrieved from Mahindra:
http://www.mahindratwowheelers.com/aboutus.aspx
Motoworld. (n.d.). Retrieved from China Moto Word:
http://www.chinamotorworld.com/index.php?c=news&a=view&id=1329
Peugeot Company. (n.d.). Retrieved from Peugeot Website:
http://www.peugeot.com/en/brand/history/two-wheelers
Peugeot Innovation. (n.d.). Retrieved from Innovation in Peugeot Motors:
http://www.psa-peugeot-citroen.com/en/automotive-innovation
Peugeot Two Wheelers. (n.d.). Retrieved from Wikipedia:
https://en.wikipedia.org/wiki/Peugeot_Motorcycles

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