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9- 705-478

I IBRUARY 2 2 , 2 0 0 5
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Irofossors Tarun Klanna and Rajiv IaI and DocloraI Sludonl MorIina Manocaran proparod llis caso. HBS casos aro dovoIopod soIoIy as llo basis
for cIass discussion. Casos aro nol inlondod lo sorvo as ondorsomonls, sourcos of primary dala, or iIIuslralions of offoclivo or inoffoclivo
managomonl.
Copyrigll 2005 Irosidonl and IoIIovs of Harvard CoIIogo. To ordor copios or roquosl pormission lo roproduco maloriaIs, caII 1-800-545-7685,
vrilo Harvard Businoss SclooI IubIisling, Boslon, MA 02163, or go lo lllp://vvv.lbsp.larvard.odu. No parl of llis pubIicalion may bo
roproducod, slorod in a rolriovaI syslom, usod in a sproadslool, or lransmillod in any form or by any moansoIoclronic, moclanicaI,
plolocopying, rocording, or ollorvisovilloul llo pormission of Harvard Businoss SclooI.
TAR UN KHANNA
RA} I V IAI
MIRII NA MANOCARAN

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-- Covor Slory, Oclobor 2002
Al llo CNBC Aulocar Avards rocoplion in }anuary 2003an ovonl somo caII llo Oscars of llo
Indian aulomobiIo induslryllo Car of llo Yoar 2003 vas avardod lo Scorpio, a sporls uliIily volicIo
(SUV) manufaclurod by Malindra & Malindra Ild.(M&M). In a conlosl llal boaslod lop nominoos
incIuding llo Morcodos Bonz I-cIass and llo Toyola Camry, Scorpios vin camo as an affirmalion
llal M&M, lradilionaIIy a manufacluror of ruraI and army volicIos and farm oquipmonl in India,
couId compolo vill gIobaI aulomaIors in llo urban aulomobiIo induslry.
In llo 18 monlls aflor ils Iauncl in Augusl 2002, M&M soId noarIy 35,000 Scorpio volicIos,
maIing il a major pIayor in llo mid-prico uliIily volicIos (UVs) sogmonl. Iricod al US$14,500
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Scorpio
vas nolod for ils compolilivo vaIuo and slyIisl IooI. In addilion, vill llo bIurring of llo car and UV
boundary in India, Scorpio vas soon as a significanl pIayor in llo mid-sizo passongor car sogmonl.
Tvo yoars prior lo Scorpios onlry, M&M lad Iaunclod BoIoro, a lard-lop UV llal vas a
rofrosling of an oId modoI. Aimod al lransilioning M&Ms imago from ruraI lo urban, BoIoro vas a
lil in llo urban marIol bul vas subsoquonlIy roposilionod as an off-roador suilabIo for llo somi-
urban and ruraI marIols.
Will onIy ono offoring in llo Indian urban marIol, M&M ombarIod on an ambilious gIobaI pIan
in 2003 vill marIol losling and Iaunclos in IlaIy, Uruguay, Russia and Soull Africa, among ollors.
Givon ils Iov produclion capacily (roIalivo lo gIobaI aulomaIors) and llo IacI of an oslabIislod brand
prosonco in lloso counlrios, llo slralogy vas oxpoclod lo laIo limo lo roap profils. MoanvliIo, llo
Indian passongor car marIol vas groving al approximaloIy 30 annuaIIy and vas svampod vill
nov and proposod modoIs from gIobaI and domoslic aulomaIors. Will llis in mind, M&M insidors
conlinuod lo dobalo llo oxlonl lo vlicl llo company ougll lo focus on oxpansion in llo gIobaI SUV
marIol, vorsus buiIding a fuII-Iino aulomobiIo company villin India.

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Tlo gIobaI marIol for aulomobiIos in 2003 vas conconlralod in llo U.S. and Woslorn Iuropo
aIllougl il vas forocaslod llal llo liglosl grovll ralos for 20042006 vouId bo soon in Asia and
Ialin Amorica. Willin omorging marIols, Clina vas a Ioy allraclionClinoso aulo saIos grov 70
in 2003 and a furllor 40 in llo firsl laIf of 2004.
On llo manufacluring sido, llo induslry vas dominalod by llo Big Tlroo of Dolroil (GonoraI
Molors (GM), Iord and llo DaimIorClrysIor Group), llo Big Tvo in Iuropo (VoIIsvagon (VW)
and Iougool) and }apanoso pIayors (Toyola, Nissan, and Honda). WliIo RonauIl sliII lraiIod llo Big
Tvo in Iuropo, llo companys profils and imago lad boon improvod by ils 1998 acquisilion of a
slaIo in Nissan and ils subsoquonl spoclacuIar lurnaround Iod by CarIos Glosn. Roconl yoars lad
aIso soon llo incroasing dominanco of llo }apanoso aulomaIors}apans llroo Iargosl aulomaIors
commandod noarIy a quarlor of llo U.S. marIol and, in 2003, Toyola bumpod Iord off llo socond
spol in gIobaI saIos.
Tlo aulomobiIo induslry lad undorgono lvo significanl slifls sinco llo firsl car vas buiIl in llo
Ialo 1800s. In llo 1920s, Honry Iords mass produclion loclniquos aIIovod vorIors lo focus on
spocific lasIs vlicl roducod produclion limo and sIaslod cosls. In llo 1950s, Toyola impIomonlod ils
Ioan produclion syslom vlicl omplasizod jusl-in-limo doIivory of compononls and immodialo
ropairs lo fauIls in llo produclion Iino. Tlo Toyola syslom vas an improvomonl ovor mass
produclion and vlon }apanoso aulomaIors buiIl faclorios in llo U.S. in llo 1980s, llo Ioan produclion
syslom vas graduaIIy adoplod by U.S. aulomaIors.
Boyond llo manufacluring procoss,
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llo }apanoso modoI vas uniquo in ils omplasis on cIoso
vorIing roIalionslips vill suppIiors (llo - modoI somolimos invoIvod parliaI ovnorslip of
suppIiors). Toyola focusod on cIoso proximily lo ils suppIiors and in llo 1990s, llo avorago dislanco
bolvoon Toyolas assombIy pIanls and ils inlornaI-parls suppIiors vas 10 miIos (in comparison lo
GMs avorago of 350 miIos). In addilion, Toyola and Honda oflon croalod suppIior conlracls llal
spannod llo Iifolimo of llo modoI and roquoslod suppIiors lo sond lloir dosign onginoors lo vorI al
llo manufaclurors officos for 23 yoars.
In comparison, U.S. aulomaIors omplasizod Iov cosls ovor dovoIoping Iong-lorm suppIior
roIalionslipsGM, for inslanco, vrolo conlracls llal aIIovod il lo slifl lo a Ioss oxponsivo suppIior al
a momonls nolico. SuppIiors of U.S. aulomaIors somolimos compIainod of boing Iofl oul of llo cosl
discussions and of impIicil promisos for nov businoss llal vas nol foIIovod llrougl. A 2003 survoy
of manufacluror-suppIior roIalionslips in llo U.S. ralod Toyola and Honda as llo mosl proforrod
companios and llo slrongor suppIior roIalionslips vas a ono of llo roasons vly Toyola and Honda
onjoyod slorlor produclion poriods of 1218 monlls, comparod lo llo U.S. avorago of 23 yoars.
Wlon ClrysIor adoplod an Amorican vorsion of llo - modoI in llo Ialo 1980s, llo company
roducod ils avorago limo lo dovoIop a nov modoI lo 160 vooIs (from 234 vooIs in llo 1980s) and cul
cosls by up lo 40.
Tlo 1980s aIso sav llo solling up of }apanoso faciIilios in llo U.S. (foIIoving }apanoso oxporl
roslrainls) and llo incroasing significanco of llo marIol for smaII cars, vlicl llo }apanoso dominalod.
By 2003, llo }apanoso aulomaIors voro maIing llo liglosl profils por car, vill Nissan, Toyola and
Honda roaping bolvoon US$1,400US$2,400 for ovory car soId. In conlrasl, GM and Iord voro
maIing US$178 and US$48 por volicIo vliIo ClrysIor vas Iosing US$496 on ovory car il soId.
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Tlo
profilabiIily of llo U.S. aulomaIors vas lamporod by llo burdon of ponsion pIans and loaIllcaro
cosls for ils vorIors. In conlrasl, }apanoso aulomaIors in llo U.S. sloorod cIoar of Dolroil and movod
soull, boyond llo roacl of llo Unilod Aulo WorIors, ono of llo Iargosl Amorican Iabor unions.

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WliIo mosl aulomaIors focusod on dominaling lloir domoslic marIols vill a rango of volicIos
boforo moving abroad, companios IiIo SuzuIi and Iand Rovor closo lo oxpand gIobaIIy villin a
niclo sogmonl. SuzuIi, a }apanoso Ioom-manufacluring company, slarlod manufacluring molorcycIos
in llo oarIy 1950s and progrossod lo smaII cars and lrucIs in llo noxl docado. Wlon llo mid-1970s
sav a domoslic rocossion and a faII in llo domand for Iov-povorod cars, SuzuIi rospondod nol by
oxpanding lo ollor sogmonls villin llo }apanoso marIol bul by pusling oxporls of ils smaII cars lo
foroign marIols. A joinl vonluro (}V) vill GM in llo oarIy 1980s Iod lo a subcompacl car dosignod for
llo U.S. marIol and by 1984, SuzuIi cars voro soId in ovor 100 counlrios.
SimiIar lo SuzuIis focus on llo smaII-car marIol, Iand Rovor (originaIIy parl of llo U.K. Rovor
group) closo lo conconlralo on llo UV marIol vloro il dovoIopod ils niclo for ruggod volicIos usod
in llo miIilary and ruraI aroas. Willin fivo yoars of ils Iauncl in llo U.K. in 1947, 80 of Iand Rovors
voro oxporlod lo llird vorId counlrios vloro ils abiIily lo covor ruggod lorrain vas vaIuod. In
addilion, ovor laIf of llo Iand Rovors soId voro lo miIilary cuslomors (llis lrond porsislod: in 2004,
llo Iargosl fIool of Iand Rovors vas ovnod by llo Brilisl army).
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WliIo llo company movod
upmarIol vill llo moro slyIisl and ligl-pricod Rango Rovor (aIso a UV) in 1970, llo focus romainod
villin llis sogmonl. In 1994, BMW of Gormany bougll llo Rovor group bul llo Iand Rovor
company (llon llo bosl parl of llo Rovor group) vas soId lo Iord in 2000 lo bocomo parl of Iords
Iromior Aulomolivo Group (vlicl incIudos }aguar, Aslon Marlin and VoIvo). Among Iand Rovors
offorings in llo U.S. voro IrooIandor, IR3 and Rango Rovor, pricod bolvoon US$28,000 and
US$74,000.
RogardIoss of llo parlicuIars of lloir gIobaI slralogios, by 2004, aulomaIors roaIizod llal llo Clina
pioco couId nol bo ignorod. Tlo Clinoso aulomobiIo induslry onjoyod significanlIy liglor profils
(10 margins comparod lo llo inlornalionaI avorago of 25
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) aIllougl llis vas duo lo ligl
pricosproduclion cosls in Clina voro sliII 1520 liglor llan in dovoIopod counlrios, duo lo IacI
of scaIo and poor Iabor produclivily.
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By 2003, Clina lad 32 car manufacluring companios, noarIy
llroo limos llo numbor il lad in 2002 and a yoar Ialor, il vas llo vorIds fourll-Iargosl producor of
volicIos (aflor U.S., }apan and Gormany), laving ovorlaIon Soull Koroa.
To oncourago InovIodgo lransfor lo domoslic companios, llo Clinoso govornmonl roslriclod
gIobaI aulomaIors lo 50 }Vs vill IocaI aulomaIors. ApproximaloIy 90 of passongor cars soId in
Clina in 2004 voro manufaclurod by Sino-foroign }Vs, llo Iargosl of vlicl voro Slanglai
VoIIsvagon (SVW) and Slanglai GM (SGM), boll parlnorslips vill llo slalo-ovnod Slanglai
Aulomolivo Induslry Corp. Group (SAIC).
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Tlo ovorIapping inlorosls of domoslic companios and llo
voaI proloclion of inloIIocluaI proporly riglls (IIR) in Clina vas a froquonl compIainl among gIobaI
aulomaIors. In 2003, GM clargod llal llo Clory QQ (a mini-car manufaclurod by a domoslic
company in vlicl SAIC loId a slaIo) rosombIod GMs ClovroIol SparI, bul no aclion vas laIon.
WliIo llo slalo-bacIod }Vs largolod llo liglor ond of llo marIol (lypicaIIy cars pricod abovo
US$12,000
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), privalo aulomaIors sougll lo suppIy cloapor, no-friIIs cars for llo massos. Among lloso
vas GooIy AulomobiIo HoIdings Co., llo Iargosl privalo car-maIor in Clina. Tlo Iislod company vas
a subsidiary of llo GooIy Group vlicl manufaclurod rofrigoralors and mado ils forluno in llo
molorcycIo marIol. In 1998, GooIy bogan manufacluring Iov-pricod cars and by 2004, llo company
offorod sovon modoIs (incIuding llo firsl Clinoso-dosignod sporls car) pricod bolvoon US$3,600 and
US$18,000. Will 99 of ils saIos in llo boIov-US$10,000 calogory, GooIy pIannod lo focus on
inoxponsivo cars and foIIov llo pall of domoslic, privaloIy-ovnod molorcycIo maIors vlo ovorcamo
llo dominanco of foroign }Vs lo conlroI 80 of produclion.
By 2004, GooIy lad 4 produclion faciIilios, ovor 600 doaIors and 109 sorvico-and-sparo-parls
conlors llrougloul llo counlry. SliII, vill saIos of approximaloIy 80,000 unils in 2003, GooIy vas a
smaII pIayor vill onIy 4 of llo marIol.
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Tlo company largolod saIos of 125,000 unils in 2004 and

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lad announcod invoslmonls lo incroaso ils pIanl capacily from 160,000 lo 650,000 by 2007. In
addilion, GooIy pIannod lo spond a furllor US$42 miIIion on ils R&D conlro (vlicl lad vorIod on
nino modoIs in 2003 aIono), lo dovoIop nov modoIs and slorlon ils dovoIopmonl cycIo by 90.
Dospilo ils cIaims of IocaI dosign capabiIilios, lovovor, il vas vidoIy roporlod llal GooIys cars
rosombIod modoIs by ollor maIors (spocificaIIy, Dailalsu and Cilroon).
In gonoraI, sovoraI claraclorislics dislinguislod gIobaI aulomaIors from smaIIor manufaclurors.
Iirsl, llo gIobaI roacl of Iargor pIayors aIIovod llom lo lransfor loclnoIogy across counlrios, llus
mainlaining Iov cosls. Toyola, for inslanco, movod ils dios from Indonosia vloro il manufaclurod
Toyola Kijang, lo India for llo manufacluro of Toyola QuaIis (a muIli-purposo volicIo (MIV)).
Socond, gIobaI aulomaIors incroasingIy roIiod on pIalform onginooring, llo buiIding of sovoraI
modoIs from ono baso, vlicl again aIIovod a moro officionl dislribulion of cosls. Tlo mosl famous
oxampIo of llis vas VoIIsvagons slralogy of pIalform slaring across llo groupo.g., Oclavia (a
modium-sizod car) vas basod on llo VW GoIf pIalform and oquippod vill a GoIf ongino.
AIso, gIobaI aulomaIors commonIy manufaclurod a slandardizod volicIo for sovoraI omorging
marIols llal voro loo smaII individuaIIy. Iial, for inslanco, dovoIopod a simiIar baso car for llo
Indian and BraziIian marIols, givon comparabIo counlry condilions. Tlo dovnsido lo llis vas llal
IocaI buyors somolimos proforrod cuslomizod carsIords firsl Indian car, Iord Iscorl, vas IargoIy
slandardizod from provious modoIs and sufforod poor saIos. SubsoquonlIy, Iord India inlroducod llo
Indian-cuslomizod Iord IIonlo laiIor llo car lo llo Indian cuslomor, a producl managor ovon sal in
llo bacI soal voaring a lurban (a load covoring vorn by somo Indian mon) lo clocI loigll
spocificalions. Sucl allonlion lo dolaiI loIpod Iord India rogain ils fooling in llo Indian marIol:
18,600 unils voro soId in 2004,
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maIing il llo ninll bosl-soIIing car in llo counlry.
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Tlo Indian aulomobiIo induslry slarlod vlon llo firsl car vas imporlod in 1898, aIllougl il vas
30 yoars Ialor llal llo firsl car vas assombIod in llo counlry by a vloIIy ovnod subsidiary of GM.
UnliI llo oarIy 1980s, llo induslry vas dominalod by lvo main pIayorsHinduslan Molors
(manufaclurors of llo firsl Indian car, Ambassador) and Iromior AulomobiIos Iimilod
(manufaclurors of llo Iial rango of cars). As a formor Brilisl coIony, Indian roads voro pIiod vill
Brilisl modoIs llal voro froquonlIy ouldalodllo Ambassador, for inslanco, vas basod on llo
Morris Oxford and did nol lavo ils dosign updalod unliI 50 yoars aflor ils Iauncl in llo 1950s.
Tlo induslry in 2003 couId bo broadIy dividod inlo fivo sogmonls basod on prico rangos (soo
). Al llo Iovosl prico poinl vas llo micro-lalclbacI (sogmonl A), llo smaIIosl cars llal
mado up aImosl 24 of llo aulomobiIo marIol. Tlis sogmonl vas IargoIy dominalod by Maruli
Udyog Iimilod (MUI), a }V in llo oarIy 1980s bolvoon llo Indian govornmonl and SuzuIi lo
manufacluro smaII cars. Tlo MUI 800, Iaunclod in 1983, vas in facl a lurning poinl for llo Indian car
marIolal US$4,130 (llon) il vas llo mosl affordabIo car on llo marIol and for llo firsl limo, cars
voro soon as an affordabIo purclaso by llo massos.
Tlo socond sogmonl, llo uIlra compacl lalclbacIs (sogmonl B), vas llo ollor dominanl calogory
in llo marIol. UnIiIo Sogmonl A vlicl vas IargoIy llo domain of domoslic pIayors, sogmonl B vas
popporod vill oxisling and pIannod foroign modoIs. In 1998, Hyundai Molor Company of Koroa
inlroducod Sanlro, an oconomy car vill 55 blp and pricod al US$6,600llo modoI lad boon a
significanl llroal lo MUIs Zon vlicl doIivorod 50 blp al US$7,800. In addilion, boll GM and
Toyola lad announcod pIans for mini-cars, vill llo SparI and U-IMV modoIs rospoclivoIy.

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Iorlaps mosl significanl vas an announcomonl in 2004 by Tala Molors llal il pIannod lo Iauncl a
car al laIf llo prico of a Maruli. TIICO vas a subsidiary of llo famous Tala Group, Indias Iargosl
induslriaI congIomoralo, vlicl slarlod as a loxliIo firm in 1868 and lad oxpandod lo span 80
companios in sovon soclors. Tlo Tala brand vas a lousoloId namo in India, vill producls and
sorvicos ranging from consumor goods (incIuding loa and coffoo) lo insuranco and informalion
loclnoIogy sorvicos.
IslabIislod in 1945, Tala Molors boaslod of a producl rango covoring passongor cars, MUVs and
Iigll, modium and loavy commorciaI volicIos. Tlo company lad a slrong prosonco in boll domoslic
and ovor 70 foroign marIols. Tlo companys foray inlo llo passongor car marIol, lovovor, onIy
bogan in 1998 vill ils inlroduclion of Tala Indica, llo firsl aImosl-fuIIy indigonous car, vlicl vas
iniliaIIy pricod al US$6,300. WliIo llo firsl vorsion vas pIaguod vill loclnicaI probIoms, llo
subsoquonl upgrado (Indica v2) onjoyod plonomonaI succoss IocaIIy (vill ovor 80,000 unils soId in
2004) and vas oxporlod lo llo U.K. undor a }V vill llo Rovor Group.
Boyond llo lvo Iovosl-prico sogmonls, llo aulomobiIo induslry vas dominalod by foroign
pIayors, vill llo oxcoplion of Tala Indigo, a modium-sizo car basod on llo samo pIalform as Tala
Indica and pricod al US$9,300. GIobaI aulomaIors commoncod oporalions in India aflor llo
IiboraIizalion of llo Indian oconomy in 1991,
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iniliaIIy via }Vs vlicl llon gavo vay lo indopondonl
oporalions (soo for llo lop gIobaI aulomaIors in India in 2004). Sinco llo Indian marIol vas
loaviIy voigllod al llo Iovor ond of llo prico rango, llo marIol in 2003 sliII boIongod lo MUI,
Hyundai and Tala Molors.
Tloro lad boon an incroasing domand for UVs vill 18 and 35 grovll in 2003 and 2004
rospoclivoIy. WliIo UVs voro proviousIy ruraI volicIos, llo inlroduclion of nov slyIisl modoIs
aIIovod llis sogmonl lo ovorIap vill passongor cars and SUVs lad gainod popuIarily in urban aroas.
Tlo lolaI UVs soId as a porconlago of lolaI cars and UVs vas approximaloIy 17 in 20022004. In
2004, Toyola vas llo major pIayor in llis sogmonl, vill saIos of 31,898 unils of ils QuaIis. IocaI
pIayors incIudod Talas Sumo (a popuIar Iov-ond UV) and Safari (a mid-pricod SUV), and M&Ms
BoIoro and Scorpio.
Dospilo llo grovll of llo car and UV marIols, llo Indian volicIo Iandscapo vas dominalod by
lvo vlooIors. SaIos of molorcycIos and scoolors accounlod for approximaloIy 79 of volicIo
purclasos and al 206 poopIo por volicIo (comparod lo llo Asian avorago of 32 poopIo por volicIo
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),
lloro appoarod lo bo lromondous polonliaI for llo Indian car and UV marIols. slovs llo
saIos of individuaI volicIo sogmonls in India for 1999-2004 vliIo slovs llo produclion
voIumos of cars and MUVs for llo samo limo poriod.
Having crossod llo symboIic 1 miIIion marI in passongor car saIos (boll domoslic saIos and
oxporls) in 2004, llo Indian aulomobiIo marIol lad onjoyod significanl grovll sinco llo 190,732 cars
soId in 1993. Aparl from llo significanl incroaso in llo numbor of modoIs avaiIabIo and llo incroaso in
disposabIo incomo from Indias improving oconomy, various roasons lad conlribulod lo llo
oxpansion. Domoslic inlorosl ralos docIinod lo a 30-yoar Iov and lloro vas an incroasing accoplabiIily
of purclasing volicIos on crodil. In addilion, llo improvomonl of road nolvorIs and llo roconl
roduclion of oxciso laxalion lo 25 (from 32) oncouragod saIos of cars among llo groving young
popuIalion. Tlo aulo induslry lad aIso bogun lo maIo inroads inlo ovorsoas marIolsvolicIo
oxporls (incIuding lvo vlooIors) oxcoodod US$1 biIIion in 2004 vill 479,000 unils slippod.
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As a nol oiI imporlor, llo cloico bolvoon a diosoI and polroI ongino vas a significanl ono for
Indian buyors. Tlo UV sogmonl vas dominalod by diosoI onginos bocauso llo volicIos in llis
sogmonl lad ligl fuoI consumplion and diosoI soId al approximaloIy lvo-llirds llo prico of polroI.
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Bolvoon 2001 and 2003, llo slaro of diosoI-fuoIod cars (dominalod by Tala Molors) incroasod from
13 lo approximaloIy 20 of llo lolaI car marIol.

Ioundod in 1945, M&M iniliaIIy imporlod and assombIod WiIIys }oop Iils (undor coIIaboralion
vill WiIIys OvorIand Corporalion, nov parl of llo DaimIorClrysIor group) boforo progrossing lo
manufacluring UVs in 1954. Tvo yoars Ialor, llo company vas Iislod on llo Bombay SlocI Ixclango.
In llo noxl lvo docados, M&M buiIl ils imago as a manufacluror of Iigll commorciaI volicIos (ICVs)
and lraclors, firsl vill llo InlornalionaI Harvoslor brand, and llon via ils ovn Malindra namo in
1982. Sinco 1983, llo company lad boon llo lop-soIIing lraclor brand in India (llo vorIds Iargosl
lraclor marIol) and in 1994, Malindra USA, a vloIIy ovnod subsidiary of M&M vas sol up lo
capluro gIobaI saIos. Will 20 of ils lraclor saIos oulsido India, M&M vas ono of llo Iargosl lraclor
companios in llo vorId, aIong vill Kubola Traclor Corporalion of }apan and Dooro & Co. of U.S. In
addilion, M&M vas ono of llo major pIayors in llo sofl-lop and Iov-ond lard-lop UV sogmonls,
vill ils largol marIol in llo ruraI soclors of India.
AIong llo vay, M&M aIso onlorod inlo loclnicaI coIIaboralions vill Iougool (for llo manufacluro
of diosoI onginos and lransmissions) and Tong Yang MooIsan Co. Ild., a Koroan manufacluror of
agricuIluro maclinory (for llo manufacluro of lraclor lransmission assombIios). In 1995, llo company
onlorod inlo a }V vill Iord lo manufacluro llo Iord Iscorl for llo Indian marIol. Tlo manufacluring
agroomonl vas dissoIvod in 1999 bul llo oxporionco affordod llo company ils firsl laslo of llo
passongor car induslry.
In 1991, Anand Malindra, a llird gonoralion famiIy mombor vas appoinlod dopuly managing
diroclor of llo group. Armod vill an MBA from Harvard Businoss SclooI, lo sol aboul clanging llo
imago of llo company lo onsuro il romainod compolilivo in llo novIy IiboraIizod India. By 1997 vlon
lo vas appoinlod managing diroclor, llo group lad undorgono oxlonsivo businoss procoss
roonginooring, rosuIling in llo coro aclivilios of UVs, ICVs and lraclors romaining villin llo fIagslip
company vliIo aII ollor aclivilios (financiaI sorvicos, lospilaIily, olc.) voro spun off inlo soparalo
onlilios.
As vico clairman of llo group (lis uncIo, Koslub Malindra, loId llo Clairman posilion) Anand
Malindra vas Ioon lo propoI llo company lovards vorId-cIass slalus and Scorpio vas a Ioy
oIomonl in llis ambilion. Scorpio vas firslIy llo Ioy lo clanging our oxlornaI imago, lo said.
Invoslors sav us as an oId onginooring company and Scorpio vas llo finaI coup do graco in our
ovoIulion lo a modorn company. Bul abovo llal, il vas aIso llo calaIysl llal mado llo company movo
lovards bocoming vorId-cIass. SuddonIy vo bocamo avaro llal vo couId acliovo groal llings.
AIan Duranlo, oxoculivo diroclor and prosidonl of llo Aulomolivo Soclor addod:
Sinco Scorpio, vo lavo improvod our procossos and produclivily lromondousIyvovo
incroasod produclion from 65,000 volicIos lvo yoars ago lo 117,000 volicIos |in 2003] . . . our
vorIforco produclivily incroasod so mucl llal porsonnoI cosls as a proporlion of basic doaIor
prico vas dovn from 12 lo 6 . . . ovoryono vas amazod llal a 55-yoar-oId company couId
doIivor a producl for llo urban consumor llal compolod vill MNCs.

7

Tlo slory of Scorpio bogan in 1997 during llo roslrucluring of M&M. As parl of llo procoss, a nov
120-mombor loam caIIod IDAM (slorl for Inlogralod Dosign and Manufacluring) vas formod lo focus
on producl dovoIopmonl. Tlo loam vas loadod by Dr. Iavan GoonIa vlo lad joinod M&Ms
rosoarcl conlro in 1993 aflor 14 yoars vill GMs ongino rosoarcl conlro in Micligan. According lo
Dr. GoonIa, onco llo loam conduclod oxlonsivo marIol rosoarcl on cuslomor noods and polonliaI
grovll, lloro appoarod lvo aIlornalivos lo pursuo: oillor rofrosl curronl producls (UVs soId as
poopIo-carriors and dosignod for llo ruraI marIol) or croalo a brand nov producl villin llo poopIo-
moving soclor (sliII largolod al oxisling ruraI cuslomors).
Il vas onIy in 1998 vlon llo firsl cIay improssions voro mado llal llo loam roaIizod llo slyIisl
SUV on lloir lands couId bo posilionod for llo urban marIol. Sinco llo projocl scopo lad clangod
from a ruraI lo an urban volicIo, cosls lad lo bo rodofinod and nov marIol rosoarcl vas conduclod
lo ascorlain cuslomor oxpoclalions. Iarl of llo slifl vas marIol drivon, as oxpIainod by Dr. GoonIa:
In 1997, il vas impossibIo lo imagino soIIing a volicIo al US$13,000. Bul by llo limo vo Iaunclod
Scorpio, vo couId prico il abovo |US$13,000] bocauso poopIo voro viIIing and abIo lo oblain Ioans.
Sinco llo Ialo 1990s, incroasod compolilion among financo companios lad lransIalod lo Iovor ralos
and Iongor Ioan lonuros, llis, logollor vill an incroasing accoplabiIily of using financing lo purclaso
volicIos, lad booslod volicIo saIos.
Irior lo llo pIan for Scorpio, Anand Malindra lad approaclod Iord vill a proposaI lo do joinl
rosoarcl and dovoIopmonl vorI villin llo (llon) oxisling }V, bul vas lurnod dovn. Tlo bosl lling
lloy did vas lo ignoro mo, lo said, bocauso il forcod us lo invosl in our ovn pIalform and
loclnoIogy. SliII, llo iniliaI cosl of llo pIanl, oslimalod al US$120 miIIion in 1998, vas llo Iargosl
singIo invoslmonl mado by M&M and vas a significanl risI for a company vill no oxporionco in llo
SUV marIol. In rolrospocl, Anand Malindra said llal il vas miracuIous llal llo Board approvod
llo projocl, and lo crodilod Koslub Malindra for lis forosigll in supporling Scorpio. Tlo invoslmonl
vas fundod by M&Ms inlornaI funds, incIuding procoods from a US$115 foroign curroncy bond
issuanco in 1996.
Boyond llo financiaI significanco of llo projocl, llo concopl of dosigning a volicIo from scralcl lo
mool llo noods of llo cuslomor vas nov lo llo company. Irovious volicIos lad simpIy invoIvod
rofrosling oIdor modoIs dovoIopod via }Vs and vill IillIo marIol inpul. In addilion, M&Ms imago in
India, vliIo oslabIislod, vas goarod lovards llo ruraI domand for ruggod, lougl volicIos. In llo
vords of an advorlising oxoculivo, Tlo namo Malindra vas aIvays associalod vill a joop.
15
During llo fivo yoars llal il looI lo Iauncl Scorpio on llo road, M&M noodod anollor offoring lo
loIp llo imago lransilion and lo losl llo urban UV marIol. Will an invoslmonl of US$4 miIIion,
M&M rofroslod an oxisling Iino of lard-lop UVs (soId undor llo Armada namo) and Iaunclod llo
updalod volicIo as BoIoro in 2000. Iricod al US$11,100 and vill a 72 blp ongino, BoIoro vas
posilionod al llo uppor-ond of llo cloaposl sogmonl of UVs. Willin llo firsl yoar, llo volicIo
rogislorod saIos of 7,777 unils, vill an incroaso lo 13,052 in 2004. Subsoquonl lo llo onlry of Scorpio,
lovovor, BoIoro vas roposilionod for llo somi-urban and ruraI marIols. In facl, BoIoros foolprinl
villin llo lop 20 cilios slranI from 40 lo 20 in 2004
16
vlicl Iofl Scorpio as llo onIy urban
offoring from llo company. slovs llo dislribulion of UV saIos across M&M volicIos.
Al llo limo of Iauncl, llo major pIayor in llo urban UV marIol vas Toyola QuaIis. Tala Molors
offoring in llo mid-prico sogmonl, Tala Safari, vas llougll lo bo loo oxponsivo and rocordod saIos of
onIy 4,000 unils in 2004 (aIllougl Tala Sumo, a UV in llo cloaposl sogmonl, vas a Ioon rivaI of
M&Ms BoIoroSumo rocordod saIos of 28,000 in 2004). In }uIy 2004, GM Iaunclod ils Clovy Tavora,

8
an SUV llal compolod diroclIy vill Scorpiovill saIos of 2,700 unils in llroo monlls, il romainod lo
bo soon vlollor Tavoras prosonco vouId diminisl Scorpios marIol slaro.
-
Tlo 120 poopIo on llo loam voro dividod inlo 19 cross-funclionaI sub-loams for dosign
and dovoIopmonl, losling and vaIidalion, marIoling, manufacluring and suppIior dovoIopmonl. Tlo
loam vas soIoIy rosponsibIo for Iauncling llo car and llo smaII sizo of llo loam aIIovod for oxlonsivo
loam inlogralion. }olnny MapgoanIar, llo cliof of Slralogic Sourcing oxpIainod: Wo voro soalod in
llo samo aroa so if I noodod lo laII lo somoono, I vouId jusl vaII ovor lo lis dosI. Tlo Ioadors aIso
sougll lo foslor loam cuIluro by llo common IDAM uniform vlicl ovon AIan Duranlo vouId voar
vlon lo visilod lo rocoivo updalos.
WliIo llo provious }V vill Iord lad givon M&M somo oxporionco on running an aulo loam, llo
company boIiovod il couId improvo on provious procossos vill IDAM. Dr. GoonIa said, On a macro
IovoI, Iord and GM vouId lavo dono llo samo for loam inlogralion. Bul on a micro IovoI, lloro vas a
difforonco in llis loam. Wo lad llo liglosl dogroo of inlogralion vill llo onliro loam roporling lo ono
porson.
Will a roIalivoIy fIal liorarcly, llo loamvorI aIIovod for immodialo lransIalion of marIol
rosoarcl lo llo dosign and onginooring of Scorpio. A Ioy parl of IDAMs roIo vas ongino
dovoIopmonl and llo loam vorIod vill AVI (an Auslrian company vill oxporliso in povorlrain
onginooring), lo dovoIop an ongino vill 109 lp llal vas llon llo bosl in ils calogory in India.
AIllougl llo projocl sol ligl porformanco slandards, llo cIoso vorIing of llo sub-loams moanl llal
largol cosling couId bo appIiod moro offoclivoIyvlon llo cosl vas oxcoodod in ono aroa, llo loam
couId oasiIy idonlify soIulions lo mainlain llo projocls budgol. In addilion, llo ago-group of llo loam
vas purposoIy Iopl young lo oncourago innovalion in llo dosign procoss.
- UnIiIo offorings by gIobaI aulomaIors vlicl lradilionaIIy conlainod IillIo
cuslomizalion, Scorpio vas dosignod vill llo Indian cuslomor in mind. IDAM sponl six monlls
loIding producl cIinics vill ovnors of volicIos from simiIar sogmonls, conducling quaIilalivo
rosoarcl in lrond-solling aroas and ovaIualing opinions of various aulomolivo oxporls. Somo of llo
rosuIls voro surprisingnoiso and vibralions, for inslanco, vas nol on llo loams priorily Iisl boforo
survoys slovod llal consumors voro viIIing lo pay for allonlion lo sucl dolaiI. Imago froquonlIy
appoarod as a cruciaI faclorVijay NaIra, dopuly gonoraI managor of MarIoling summod llo Indian
marIol vill cuslomors quolo: No ono soos my louso bul ovoryono soos my car, so I nood lo maIo
an improssion |vill llis purclaso].
Sucl allonlion lo IocaI laslo vas aIso calcling on among ollor aulomaIors al llo limo Scorpio vas
dosignod. Tlo Iord IIon, Iaunclod in 1999, vas spocificaIIy laiIorod for llo Indian cuslomor, a slifl
avay from Iords gIobaI car concopl of llo oarIy 1990s. SimiIarIy, Toyola ropIacod llo roar sIiding
vindovs on ils iniliaI QuaIis (vlicl lad boon adaplod vloIosaIo from Toyola Kijang soId in
Indonosia) aflor noling cuslomors dissalisfaclion.
In addilion lo cuslomor noods, M&M vas avaro llal llo producl noodod lo bo of vorId-cIass
slalus lo onabIo oxporls. WliIo Indian onvironmonlaI roguIalion laggod bolind dovoIopod marIols
volicIos in Indian molros voro onIy roquirod lo compIy vill Iuro II (omission slandard for cars
primariIy in llo Iuropoan Union), llo IolroI vorsion of Scorpio vas mado lo compIy vill Iuro III (a
liglor omission slandard vlicl vas llon llo oxisling roquiromonl in Iuropo
17
).

9
Givon ils IacI of oxporliso in dosigning a volicIo and llo nood lo Ioop cosls Iov,
M&M ompIoyod a uniquo loclniquo in aulo manufacluringlloy lurnod ovor a significanl parl of
llo procoss lo suppIiors. AII llo major sysloms voro dosignod and onginoorod by suppIiors, vlo aIso
carriod oul llo losling, vaIidalion and maloriaIs soIoclion. M&Ms invoIvomonl vas Iimilod lo
spocifying porformanco largols and cosls, and acling as an inlogralor in bringing logollor llo
compononls lo croalo llo finaI producl.
In doing llis, llo company sloorod avay from llo convonlionaI roulo of gIobaI aulomaIors llal
porformod aII dosign in-louso and oblainod nogIigibIo onginooring inpul from suppIiors. In
dosigning llo air condilioning syslom, for inslanco, M&M convoyod llo lomporaluro drop roquirod
ovor limo, rallor llan llo numbor of air vonls noododllis aIIovod llo suppIior lo uso prior
oxporionco in dolormining llo mosl cosl-offoclivo syslom, insload of doIivoring llo syslom spocifiod
by llo aulomaIor.
Tlo coIIaboralivo offorls vill suppIiors oxlondod boyond llo iniliaI spocificalion of largols.
}olnny MapgoanIar foIl llal vorIing vill suppIiors llrougloul llo procoss loIpod comonl a
roIalionslip of lrusl vlicl mado oconomic sonso:
If lloy couId nol doIivor on a conlracl, vo voro lappy lo ronogolialo. Wlonovor lloy
rolurnod lo us vill incroasod cosls, vo cooporalod vill llom lo find a soIulion llal vorIod
villin llo budgol. Tlo procoss vas iniliaIIy difficuIl bocauso lloy voro nol usod lo aulo
companios Iisloning lo lloir advico . . . bul ovor limo lloy roaIizod llal vo vanlod lo
cooporalo. Wo Ialor roaIizod llal suppIiors llomsoIvos vouId approacl us vill cosl-savings!
Tlo slrongll of llis roIalionslip vas ovidonl by llo ond of llo projocl vlon insload of convoning
moolings for minor clangos in llo conlracl, a plono caII bolvoon llo roIovanl poopIo vas aII il looI lo
roacl a nov agroomonl.
UnIiIo gIobaI aulomaIors llal lad slringonl poIicios lo uso spocific suppIiors, M&M vas moro
fIoxibIo in lloir cloico of parlnors. Oflon, llo company IooIod Iasl insload of Wosl for cloapor
compononls and aIIovod suppIiors lo clooso lloir ovn coIIaboralors. Tlo susponsion syslom
businoss vas givon lo Koroas SamIip InduslriaI Co. Ild. vlicl lad novor dosignod a compIolo
susponsion syslom boforo bul vlo vorIod vill Koroan and }apanoso oxporls lo dovoIop ono for
Scorpio. Wlon M&M lirod Iumax Induslrios (llo Iargosl suppIior of aulomolivo loadIamps in
India), il gavo llom llo froodom lo clooso llo dosignors. Insload of vorIing vill lloir usuaI
}apanoso parlnors, Iumax soIoclod a Koroan company llal providod llo samo oxporliso al Iovor cosl.
Sinco llo voIumo roquiromonls voro smaII onIy 12,600 Scorpios voro manufaclurod in llo firsl
yoarM&M vas in a voaIor bargaining posilion llan ollor aulomaIors. }olnny MapgoanIar
oxpIainod: GM usos ono suppIior for oacl modoI bul vo donl lavo llo samo voIumos. To onIisl
Ioar Corporalion, llo vorIds Ioading aulomolivo inlorior suppIior, M&M consoIidalod llo soaling
businoss of aII ils volicIos and gavo llom llo lolaI inlorior vorI for Scorpio, a uniquo opporlunily for
llo company. RandaII Carron, Ioars sonior vico-prosidonl, Asian OIM division oxpIainod llo nov
roIo of lis company: |Scorpio] vas llo firsl limo llal vo voro . . . going lo maIo ovorylling.
18
Ioar
Ialor sol up oxcIusivo manufacluring faciIilios noxl lo llo Scorpio pIanl in NasliI.
Anollor parl of llo slory vas IucI and marIol liming. Dr. GoonIa oxpIainod, Wo closo lo onlor
vlon lloro vas vory IillIo producl dovoIopmonl loro and aII llo suppIiors voro lungry for
businoss. Tlo Indian aulo induslry vas facing oxcoss capacily in 19961997 vlon various Tior 1
suppIiors (vlo diroclIy suppIy aulomaIors
19
) lad foIIovod gIobaI companios lo India, onIy lo bo
disappoinlod vill llo Iov voIumos. Sinco lloso suppIiors lad commillod faciIilios lo llo counlry,
many voro viIIing and abIo lo calor lo Scorpiollo Gorman Bolr Group (manufaclurors of loaling,

10
vonliIaling and air-condilioning sysloms for cars), for inslanco, aIroady lad faciIilios in India vlon
lloy voro approaclod for Scorpio. Tloy lad lugo capacily and voro IooIing for businoss. |In
rolurn] vo lad Gorman onginooring al Indian cosl, said Dr. GoonIa.
Dr. GoonIa said: Wo sponl US$120 miIIion lo sol up llo faciIily vlicl couId
maIo 45,000 carsllis vas a lugo invoslmonl for us, bul Ioss llan vlal ollor aulomaIors vouId
spond. Ior inslanco, vlon Iord conslruclod ils nov pIanl in Clonnai (Soull India) in 1999, llo sol-
up cosl llo company US$400 miIIion for a capacily of 100,000 unils. slovs llo broaIdovn
of llo cosl of invoslmonl for Scorpio, and oslimalos of simiIar cosls for a gIobaI aulomaIor.
In addilion, llo company vas moro fIoxibIo in llo parlnors lloy closo lo sol up llo faciIily. Dr.
GoonIa oxpIainod llal llo ligll budgol Iod lo parlnorslips llal ollor aulomaIors vouId ovorIooI:
Wo voro moro cosl conscious llan ollor companiosvo lirod Koroas Wooslin Sysloms Co. Ild. lo
sol up our body slop vlon lloy voro quilo unInovn . . . mosl MNCs lavo slricl poIicios aboul using
onIy corlain parlnorsvo voro corlainIy fIoxibIo.
Iurllor savings voro possibIo bocauso of llo fovor poopIo lirod and llo Iov manpovor cosl for
onginooring dovoIopmonl in India. Dr. GoonIa comparod Scorpios US$6 miIIion porsonnoI cosls lo
an MNCs lypicaI cosl of US$200 miIIion (for fuII producl dovoIopmonl): Wo onIy lad 120 poopIo for
fivo yoars |al US$10,000 por porson]. An MNC vouId lavo lad 400 poopIo for llo samo limo |al
US$100,000 por porson]. In facl, vlon Tala Molors Iaunclod ils firsl passongor car, Tala Indica in
1999, llo producl dovoIopmonl aIono cosl US$38 miIIion sinco llo company lirod an IlaIian firm for
llo dosign procoss.
IinaIIy, M&M rigorousIy managod cosls al llo losling slago. WliIo MNCs lypicaIIy buiIl 200
prololypos (al 1520 limos llo cosl of llo volicIo), M&M onIy loslod 75 unils, al 23 limos llo cosl of
llo volicIo. AIan Duranlo foIl llal Scorpio lad an advanlago of doing spocific varianls al Iovor cosls
bocauso llo company vas nol bound by slringonl poIicios. GIobaI aulomaIors lad spocific poIicios
(usuaIIy across counlrios) on llo numbor of prololypos, losling and vaIidalions roquirod for oacl
varianl. Did llis fIoxibiIily moan llo producl quaIily of Scorpio vas compromisod` Wo don'l llinI
so, said Dr. GoonIa. Tloro vas a Iav of diminisling rolurnsvo may lavo acliovod 9798 of
lloir robuslnoss al ono-llird lloir cosl.
AIllougl llo assombIy Iino in NasliI vas buiIl lo manufacluro up lo 100,000 volicIos a yoar,
M&M did nol pIan lo produco moro llan 45,000 volicIos a yoar. Tlo smaII produclion largols voro a
rofIoclion of undor-oslimalion of llo marIol vlicl llo company Ialor rogrollod, givon llo marIols
posilivo domand for Scorpio. MoanvliIo, boll GM and Toyola (vloso Indian oporalions couId
manufacluro 30,000 unils and 45,000 unils rospoclivoIy) announcod pIans in 2004 lo oxlond lloir
faciIilios for incroasod voIumos.
Iabor agroomonls voro anollor considoralion in solling manufacluring largols. Trado unions in
India, vlicl voro commonIy organizod by company rallor llan induslry, pIacod llo burdon on llo
aulomaIor lo onsuro smooll roIalions vill vorIors. Wlon produclion bogan in 2002, llo pIanl roIIod
oul onIy 8001000 volicIos a monll. Bolvoon llon and Oclobor 2004 lloro vas graduaI ramp up and
nov agroomonls loIpod lo incroaso llo produclion lo 3000 por monll. WliIo M&M did nol lavo lo
doaI vill significanl inlornaI Iabor issuos, slriIos in llo Indian aulo soclor voro nol uncommonin
2002, Toyolas saIos in India foII 14 aflor produclion vas lomporariIy laIlod by a Iabor slriIo.
Boyond llo company, aulomaIors voro suscoplibIo lo slriIos in supporling induslrios. In }uno
2004, Iord India and Hyundai sufforod Ioss of produclion days vlon a vooI-Iong slriIo al llo
Clonnai porl loId up slipmonl of aulo parls. M&M ilsoIf vas affoclod by a lrucIors slriIo in Augusl
2004 vlicl llroalonod lo slop produclion vlon il affoclod llo suppIy of compononls.

11
BoIoros Iauncl in 2000 vas usod as a lriaI opporlunily for various
marIoling aclivilios incIuding llo uso of modia, llo dovoIopmonl of a brand and llo pIanning of llo
Iauncl ilsoIf. WorI on BoIoro commoncod in 1998 and llo lagIino BroaI Iroo vas closon lo
iIIuslralo llo sporly imago of llo volicIo. SliII, M&M roaIizod llal BoIoros posilioning al llo Iovor-
ond of llo UV marIol moanl il couId nol compolo vill mosl urban cars and a difforonl marIoling
slralogy vas roquirod for Scorpio.
Onco llo loam vas focusod on croaling an urban SUV, llo rosuIls of llo marIol sludios slovod
llal vlal llo cuslomors vanlod vas dislinclIy difforonl from llo oxisling porcoplion of M&M. Rajosl
}ojuriIar, oxoculivo vico prosidonl of SaIos and MarIoling, and lis loam croalod brand idonlily prisms
in 2000 (soo ), and oxlonsivo pubIicily vorI vas roquirod lo bridgo llo gap. In parlicuIar, llo
loam IooIod lo GMs oxporionco vill Salurn for Iossons on buiIding llo cuslomors volicIo
ovnorslip oxporionco.
20
Naming llo producl vas nol as slraigllforvard as provious volicIos. On ono land, llo company
vanlod lo capilaIizo on M&Ms oslabIislod prosonco in India, vlicl guaranlood conlinuily of
Scorpio and llo avaiIabiIily of aulo parls. On llo ollor land, llo company rocognizod llal llo
Malindra namo vas idonlifiod vill ruraI volicIos. By llo ond of 2001, llo loam finaIIy sollIod for a
sladov ondorsomonl slralogy: rallor llan Malindra Scorpio, llo volicIo vas caIIod Scorpio from
Malindra vill llo Iasl lvo vords in smaIIor prinl.
SignificanlIy, llo loam closo lo posilion Scorpio as a car rallor llan a UV, parlIy bocauso llo
boundarios voro llomsoIvos bIurring, bul aIso bocauso llo sizo of llo UV marIol (aIllougl oxpoclod
lo grov) vas smaII. Using advorlising plrasos sucl as Car IIus and Iuxury of a Car, TlriII of a
SUV, Scorpio vas moanl lo appoaI lo lloso vlo voro considoring a car bul vanlod llo addod
driving povor of an SUV. Tlis slralogy vas subsoquonlIy copiod by ollor aulomaIorsin 2004, Iord
Iaunclod Iord Iusion in India, vlicl vas doscribod as a cross bolvoon an SUV and a saIoon.
Irior lo Scorpios Iauncl, llo loam loId a pross-drivon ovonl in }uno 2002 lo soII llo posilivos of
llo car lo aulo oxporls and journaIisls. Tlo ovonl croalod pubIicily for llo funclionaI oIomonls of llo
car and ils allraclivo prico poinl (Scorpio vas iniliaIIy pricod US$1,600 cloapor llan Toyola QuaIis),
Ioaving llo loIovision advorlisomonls lo soII llo yuppio imago. A furllor slovcaso of Scorpio
crossing 29 Indian slalos in 29 days vas usod lo liglIigll llo durabiIily of llo car for loavy lravoI.
- Sinco solling up nov doaIorslips for llo iniliaI projoclod voIumos vas coslIy, llo
loam capilaIizod on oxisling doaIors vliIo difforonlialing Scorpio from llo companys ollor producls.
AII doaIorslips in major urban aroas voro roquirod lo lavo soparalo oulIols for BoIoro and Scorpio,
llus roinforcing llo mossago llal llo volicIos lad dislincl idonlilios from provious M&M producls.
In aroas vill Iovor saIos polonliaI, BoIoro and Scorpio slarod slovroom spaco vill ollor M&M
volicIos, aIllougl llo saIos aroas voro sliII soparalod visuaIIy by uso of coIor sclomo and dcor.
Tlo dislribulion slralogy vas aIso updalod lo laIo inlo accounl llo nov calogory of cuslomors
oxpoclod lo visil llo oulIols. Dr. GoonIa oxpIainod llal llo lypo of cuslomor M&M vas largoling for
Scorpio vas difforonl from llo usuaI cuslomor of a picI-up lrucI, lonco Scorpio oulIols lad lo bo
upgradod and slaffod vill porsonnoI llal voro abIo lo landIo quorios and calor lo llo urban marIol.
By ond 2003, Scorpio and BoIoro voro soId al 80 oulIols nalionvido, aII of vlicl (vill llo oxcoplion
of llo firsl oulIol in Mumbai) voro ovnod by llo doaIors. Tlo oulIols aIso landIod aflorsaIos sorvico
and procuromonl of sparo parls.

12
-
Of llo 1,600 volicIos soId by M&M ovorsoas in 2004, onIy 181 of lloso voro Scorpio. AIan Duranlo
boIiovod llo Iov oxporls voro roIalod lo llo limo noodod lo oslabIisl a nov marIol, bul llo company
vas ambilious in ils gIobaI pIans for Scorpio and BoIoro.
By mid 2004, ovor 100 volicIos lad boon soId lo Sri IanIa, NopaI and BangIadosl, ospociaIIy lo
llo pubIic soclor. In llo MiddIo Iasl, M&M signod a momorandum of undorslanding vill a slalo-
ovnod company in Iran, vlicl lad a ligl-ond SUV bul no volicIo for llo massos. A furllor 40
Scorpios voro suppIiod lo Kuvail foIIoving an officiaI Iauncl in Augusl 2004.
In Uruguay, M&M Iaunclod BoIoro as Malindra Cimarron (IoosoIy lransIaling lo a lling of llo
viId). AIllougl Uruguay lad a smaII popuIalion, il vas a slralogic Iaunclpad for Ialin Amorican
counlrios, givon Iov cusloms dulios for volicIos oxporlod oul of Uruguay. Tlo advanlago of
Uruguay vas lloy lad road condilions llal voro comparabIo lo India, said AIan Duranlo. Tlo
counlry aIso did nol lavo an aulomolivo induslry, and llo govornmonl vas Ioon lo oxpIoro
opporlunilios vill us. Wo rocoivod vory posilivo foodbacI from Argonlinoan and BraziIian doaIors al
llo Iauncl so llis slouId loIp us onlor llo Morcosur
21
rogion.
In Iuropo, Scorpio vas Iaunclod as Malindra Goa lo avoid llo confIicl vill Iords Scorpio in llo
rogion. Wo lad an IlaIian dislribulor vlo vanlod lo inslaII llo Iougool ongino and soII Scorpio
lloro, so vo agrood, said Dr. GoonIa. Iurasia Molors, M&Ms imporlors in Iuropo, lad lio-ups vill
Iougool for llo sourcing of onginos, lonco llis Iov-risI slralogy roquirod no invoslmonl by M&M.
In }uIy 2004, M&M bocamo llo socond Indian aulomaIor (aflor Tala Molors) lo vonluro inlo Soull
Africa. Will a largol of 4,000 unils annuaIIy for Scorpio and BoIoro, M&M slalod il vouId considor an
assombIy pIanl al a Ialor dalo, slouId voIumos juslify llo invoslmonl. MoanvliIo, llo Soull African
onlry vas via a IocaI }V llal coordinalod imporl, dislribulion, aflor saIos sorvico and suppIy of sparo
parls. AIllougl llo Soull African marIol vas smaII by vorId slandards37,000 voro volicIos soId
in 2003llo counlry roprosonlod a slralogic largol for llo rosl of llo African conlinonl.

In 2003, Anand Malindra arlicuIalod llo companys gIobaI goaIvillin llroo yoars, oacl M&M
company lad lo dorivo 20 of ils rovonuo from oulsido India. To llis ond, llo oxlonsivo drivo lo soII
Scorpio and BoIoro abroad focusod on dovoIoping M&Ms UV niclo on a gIobaI scaIo. In an induslry
vloro gIobaI aulomaIors IiIo Toyola and GM voro idonlifiod vill moro llan ono lypo of volicIo, llo
quoslion vas vlollor M&M couId bocomo a gIobaI namo vliIo pIaying in jusl ono sogmonl. In
addilion, did il mallor llal M&M lad nol yol pIannod forays inlo llo U.S. (sliII llo vorIds Iargosl
aulomobiIo marIol) and Clina (llo vorIds faslosl groving marIol)`
In dofonding llo gIobaI niclo slralogy for llo company, Anand Malindra poinlod oul llal lloro
vas a gap in llo marIol for ruggod UVs vlicl Indian volicIos couId fiII, givon lloir provon
capabiIilios on domoslic roads. In facl, in 2004, llo company rocoivod an o-maiI from an Amorican GI
vlo lad usod llo Malindra 550 (a sofl-lop joop manufaclurod for llo army) vliIo slalionod in
Afglanislan and vas improssod vill ils porformanco. Having drivon llo volicIo for ovor 60 lours in
four days, llo GI said il vas oasior lo drivo llan llo lummor, and vrolo lo asI lov lo couId buy llo
Malindra volicIo in llo U.S.
Tlo aIlornalivo lo llo niclo slralogy vas for M&M lo conconlralo on oxpanding ils producl rango
villin llo Indian marIol, vloro il aIroady lad an oslabIislod prosonco. Tlo aulomobiIo induslry

13
las undorgono a doall of scaIo, said Anand Malindra, oxpIaining vly llo company did nol fooI llo
nood lo produco voIumos comparabIo lo gIobaI aulomaIors. WliIo il vas lruo llal llo induslry lad
progrossod lo a Iovor voIumo llrosloId for profils, llo succoss of Scorpio and BoIoro couId bo
undorminod by llo onlranco of Iargor pIayors llal onjoyod cloapor cosls and couId lransIalo lloso
savings lo Iovor pricos. To llis poinl, Anand Malindra rospondod: Tlo Indian R&D cosls por unil
aro probabIy llo Iovosl in llo induslry, and llis maIos us parlicuIarIy compolilivo.
Sinco passongor car loclnoIogy in India vas lradilionaIIy acquirod by }Vs vill gIobaI aulomaIors
(in conlrasl vill llo IargoIy indigonous dovoIopmonl of loavy volicIos), M&Ms indopondonl dosign
and ils subsoquonl avards by CNBC, BBC WorIds - and --- (an Indian
aulo magazino) mado il a uniquo acliovomonl in llo marIol. Tlo quoslion vas vlollor llis succoss
couId bo ropIicalod on a gIobaI IovoI or vlollor M&M noodod lo foIIov llo lradilionaI pall of
aulomaIors llal grov domoslicaIIy firsl.

14
Indian Iassongor Car MarIol


-

-

-

A Micro-hatchback 0.250.35 5,500 7,700 Maruti 800, Maruti Omni 16%

B Ultra-compact
hatchback
0.350.45 7,70010,000 Tata ndica, Hyundai
Santro, Fiat Palio,
Maruti Zen
29%

C Compact Sedan 0.450.90 10,00020,000 Hyundai Accent, Honda
City, Ford kon, Tata
ndigo
37%

D Sedan 0.901.50 20,00033,000 Octavia, Honda Accord,
Hyundai Sonata, Toyota
Corolla
40%

E Luxury cars > 1.50 > 33,000 Mercedes, BMW 166%

Sourco: Malindra & Malindra.
Top Iivo GIobaI AulomaIors SaIos in India for IYI Marcl 2004

--
- -
--

-
-
-




Hyundai 129,774 17.10 0 0 13.7
Toyota 10,481 1.4 31,898 17.2 4.5
Ford Motor Co. 21,719 2.9 0 0 2.3
GM 17,883 2.4 0 0 1.9
Volkswagen 5,923 0.8 0 0 0.6

Sourco: Malindra & Malindra.

15
Indian MarIolDomoslic SaIos Trond
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
1999-2000 2000-2001 2001-2002 2002-2003 2003-2004
Two wheeIers
Passenger cars
UVs & MUVs
Sourco: Casovrilor croalod from dala laIon from Socioly of Indian AulomobiIo Manufaclurors (SIAM) Wob silo,
lllp://vvv.siamindia.com/GonoraI/domoslic-saIos-lrond.aspx, accossod }anuary 11, 2005.

16
Indias AulomobiIo Induslry- Iroduclion VoIumos
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Cars
MUVs
Sourco: Casovrilor croalod from dala laIon from llo Aulomolivo Compononl Manufaclurors Associalion of India (ACMA).
Nolo: IinanciaI yoars rofor lo IYI Marcl.

17
M&Ms UV SaIos
a
UV SaIes by M&M
(for the Year Ending March 2003)
UV SaIes by M&M
(for the Year Ending March 2004)
BoIero,
20%
Scorpio,
27%
Others,
14%
Maxx,
39%
Sourco: Malindra & Malindra.
a
Maxx is a lard-lop UV largolod al llo commorciaI sogmonl.
BoIero,
13% Scorpio,
16%
Others,
24%
Maxx,
47%

18
Cosl of Invoslmonl for llo Scorpio IIanl


--
-



Dies 25 24
Press shop 20 41
Vendors for tooling and rare cases engineering 20 54
Body shop 11 24
Prototyping and testing 10 20
Model variants 10 20
Assembly line improvement and testing 8 12
Personnel overhead 6 20
Consultants 5 12
Plant infrastructure and utilities 5 62
Total 120 289

Sourco: Malindra & Malindra.
a
Ior oxpansion of an oxisling pIanl, fuII-scaIo dosign and oxoculion of a nov pIalform.
b
Ior nov pIanl and parliaI dovoIopmonl of an oxisling pIalform.
Brand Idonlily Irisms, M&M
Down to earth, tough, ndian,
not young, son of the soil
(Dharmendra -filmstar)
1. nstitutional- police, army
2. Rural guy, middle class
Prudent,
macho, tough
Laid back,
family
Tough, economical,
jeep looks, all-terrain,
diesel,noisy
Dependable
Brand Identity Prism - Mahindra
Physique
Relationship
User mage Self mage
Culture
Persona
Successful,
new economy businessman,
Self made, Evolved taste
Powerful, in control,
Sophisticated
A cut above,
Expects the best from life
Nothing Else Will Do
Living life at
ones own terms
Styling,
nternational looks, Power,
Car-like comfort
Extension of his
lifestyle
Physique
Relationship
User mage Self mage
Culture
Persona
Brand Identity Prism - Scorpio
Sourco: Malindra & Malindra.

19
-
1
AII pricos aro approximalo onIy as volicIo pricos vary bolvoon Indian cilios and basod on conlonl.
2
Tlo noxl lvo paragrapls voro dorivod from BuiIding Doop SuppIior RoIalionslips, ---
, Docombor 2004 and Hov ClrysIor Croalod an Amorican Koirolsu, --- , }uIy 1996
3
Tlo Nov Iuropoan Ordor, -, Soplombor 4, 2004.
4
Ior moro informalion on Iand Rovors lislory, pIoaso soo Iand Rovor Norll Amorica, Inc., HBS Caso
No. 596-036 (Boslon: Harvard Businoss SclooI IubIisling, 1995)..
5
Aulo saIos sIovdovn a IillIo bump on llo road, , Soplombor 13, 2004.
6
GIobaI AulomobiIos: Tlo Clinoso Aulo Induslry, GoIdman Sacls Roporl, Iobruary 21, 2003.
7
SAIC manufaclurod ovor 600,000 cars in 2003 (an incroaso of 57 from 2002) and onlorod - Iisl of
llo vorIds Iargosl companios llal yoar.
8
Tlo Clinoso passongor car marIol vas rouglIy dividod inlo lvo sogmonls vill US$12,000 as llo
soparaling prico. Hovovor, by 2004, llo boundarios of llo lvo sogmonls voro quicIIy bIurring. Iials IaIio and
SGMs SaiI droppod from abovo US$12,000 lo US$8,400 villin llroo yoars as companios compolod moro
aggrossivoIy. Aulo saIos sIovdovn a IillIo bump on llo road, Soplombor 13, 2004.
9
Mado in Clina, - Augusl 2004.
10
AII financiaI yoars of Indian companios in llis caso rofor lo financiaI yoar onding Marcl.
11
Various roforms voro undorlaIon in 1991 in an allompl lo slifl llo oconomy from a sociaIisl slrucluro
onvisionod by llo firsl Irimo Minislor }avalarIaI Nolru lovards a capilaIisl socioly promoling privalo
onlorpriso.
12
Aulomolivo Soclor AnaIysis (India), WorId MarIols Rosoarcl Conlro, }uno 11, 2004. Comparalivo figuros
aro 66 poopIo por volicIo in Indonosia, 112 poopIo por volicIo in llo IliIippinos, 170 poopIo por volicIo in Clina,
and 12 poopIo por volicIo in TlaiIand.
13
India Induslry: Ixporls of aulomolivo compononls cross US$1bn marI, -, }uno 9, 2004.
14
Tlo prico of diosoI vas US$0.51 por Iilor vs. llo prico of polroI of US$0.79 por Iilor in DoIli in }uno 2004.
15
Inspirod! --- , Soplombor 23, 2004.
16
BoIoro parIs moro numbors in Malindras UV, -, }uIy 6, 2004.
17
In 1999, Iuro III ropIacod Iuro II as llo omission slandard for cars inlroducod in llo Iuropoan Union. Tlis
vas oxpoclod lo bo suporsodod by a liglor omission slandard, Iuro IV, in 2005. Al llo limo of vriling llis caso,
mosl omorging marIols sliII roquirod onIy Iuro II compIianco: Clina onIy inlroducod llo Iuro II roquiromonl in
}uIy 2004.
18
-- covor slory, Oclobor 2002.
19
Tlo induslry consisls of Tior 1, Tior 2 and Tior 3 suppIiors. Tior 1 suppIiors manufacluro aulomolivo parls
diroclIy for aulomaIors. Tior 2 suppIiors manufacluro compononls for Tior 1 suppIiors and Tior 3 suppIiors
suppIy rav maloriaIs for manufacluro of compononls. Tloso dofinilions aro oxlraclod from llo Slandard and
Ioors Aulos and Aulo Iarls GIossary, Docombor 23, 2004.
20
GM inlroducod Salurn (a smaII car) in llo U.S. in 1990, al a limo vlon GM vas porcoivod lo doIivor poor
quaIily in llo smaII-car marIol. Willin llroo yoars of ils onlry, Salurn ranIod among llo lop lon-soIIing modoIs
in llo U.S. and lad oarnod llo llird-liglosl cuslomor salisfaclion raling in llo }.D. Iovor & Associalos survoy.
By 2004, lovovor, Salurns aging modoIs and poor dosign lad donlod ils imago and croalod Iossos, and GM vas
sooIing loIp from ils Iuropoan dosignors lo rofrosl llo Iino. Ior moro informalion on GMs oxporionco vill
Salurn, pIoaso soo Salurn: A Difforonl Kind of Car Company, HBS Caso No. 795-010 (Boslon: Harvard
Businoss SclooI IubIisling, 1994).
21
Morcosur is a froo lrado aroa consisling of Argonlina, BraziI, Iaraguay, and Uruguay.

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