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An Assignment on Strategic Audit of Escorts Ltd For the subject Business Policy and Strategic Management Submitted to Dr. Saboohi Nasim Subject Coordinator, BPSM Submitted by Gagan Varshney 12 MBA 08 Department of Business Administration Faculty of Management Studies & Research Aligarh Muslim University, Aligarh

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Page 1: Strategic audit of escorts

An Assignment on

Strategic Audit of Escorts Ltd

For the subject

Business Policy and Strategic Management

Submitted to

Dr. Saboohi Nasim

Subject Coordinator, BPSM

Submitted by

Gagan Varshney

12 MBA – 08

Department of Business Administration

Faculty of Management Studies & Research

Aligarh Muslim University, Aligarh

Page 2: Strategic audit of escorts


Company Profile

Escorts Limited Escorts Ltd is one of India's leading engineering conglomerates with over six decades of

experience. It has helped accelerate India‟s socio-economic development through its presence

across the high growth sectors of agri-machinery, construction & material handling

equipment, railway equipment and auto components. The company has diversified business

in to four different segments.

1. Escorts Agri Machinery (EAM),

2. Escorts Construction Equipment (BCE),

3. Escorts Railway Products (BRP) &

4. Escorts Auto Products (EAP)

Escorts Group The Escorts Group is an Indian multinational engineering conglomerate that operates in the

sectors of agri-machinery, construction and material handling equipment, railway equipment

and auto components. Headquartered in Faridabad, Haryana, the company was launched in

1944 and has operations in more than 40 countries. Escorts Group‟s management team

includes Rajan Nanda as the Chairman and Managing Director and Nikhil Nanda as the

Managing Director.

Products produced by Escorts comprises of: Tractors, crop solutions, cranes, loaders, shock

absorbers, struts, steering components, brakes for railways, couplers, etc.

It has around 6000 employees all over the world. (2011)

History Escorts Group was launched in 1944 by two brothers, Hari Nanda and Yudi Nanda, in the

name of Escorts Agents Ltd. in Lahore. Escorts Limited was incepted in 1960 after the

company set up its manufacturing base at Faridabad.

Since inception, Escorts Group has been associated with some of the world leaders in the

engineering manufacturing space including Minneapolis Moline, Massey Ferguson, Goetze,

Mahle, URSUS, CEKOP, Ford Motor Company, J.C. Bamford Excavators, Yamaha, Claas,

Carraro, First Pacific Company, Hughes Communications, Jeumont Schneider, Dynapac,

Honeywell, Ingeteam, etc.


1. Escorts Agri Machinery A pioneer of farm mechanisation in India, Escorts Agri Machinery (EAM) was launched in

1960. The company manufactures tractor under the brand names of Escort, Farmtrac and

Powertrac. EAM consists of four manufacturing plants that cover an area of 134,000 sq.m.

The company also has a plant in Poland, which is a 100% subsidiary and functions in the

name of Farmtrac Europe.

Page 3: Strategic audit of escorts


2. Escorts Construction Equipment Escorts Construction Equipment (ECE) manufacturers and markets construction and material

handling equipment; like cranes, loaders, vibratory rollers, Backhoe Loader and forklifts. The

company introduced the concept of Pick 'n' Carry hydraulic mobile cranes in the 1970s in

India. The ECE manufacturing and assembly facility is located across 250,000 sq.ft. of space

in Faridabad.

3. Escorts Railway Products Escorts Railway Products (ERP) is an ISO 9001 certified company that manufactures critical

railway components. ERP supplies air brake system, EP brake system, draft gears and

couplers, composition brake blocks, dampers and rubber components to Indian Railways.

4. Escorts Auto Products Escorts Auto Products (EAP) manufactures auto suspension products such as shock

absorbers, struts and telescopic front forks for the automotive industry. The company

pioneered automotive shock absorber manufacturing in India in 1966 in technical

collaboration with Fichtel& Sachs, Germany. The EAP manufacturing unit is spread across

an area of 12,500 sq. ft. in Faridabad.

Knowledge Management Centre Set up in 1976, the Escorts Knowledge Management Centre (KMC) is spread over 100,000

sq.m. area in Faridabad. This centre designs the entire tractor – engine, transmission plus

hydraulic systems and vehicle design consisting of sheet metal (including styling), controls

and accessories.

The KMC has facilities such as engine laboratory featuring computerized test beds with

online control, data acquisition and analysis, advanced vehicle testing laboratory, noise

vibration and harshness lab, metrology lab, and materials engineering lab. The KMC uses

3D-modeling, analysis and simulation software for engines, transmissions and vehicles.

Physical prototypes are then tested for performance, durability and reliability.

Awards and Recognitions • Industry Leadership Award to Escorts for pioneering work in agri-mechanization revolution

(Agriculture Leadership Summit, 2010)

• Greentech Environment „Gold‟ Award to the Escorts Knowledge Management Centre for

outstanding achievement in environment management in the engineering sector (2011)

• Greentech Safety „Silver‟ Award to Escorts Agri Machinery for achievement in safety

management in engineering sector (2011)

• Business Leader in Safety Award to Escorts Agri Machinery for encouraging innovation in

the field of safety and quality (Safety Innovation Awards, 2011)

• Best Supplier for Development in Suspension Award to Escorts Auto Products from Suzuki

Motorcycle India Pvt. Ltd. (2012)

Page 4: Strategic audit of escorts


Strategic intent:

At Escorts, our vision and values are the guidingforce behind all our endeavours:

We have always believed in being a customercentric Company for realising our aim

ofbecoming one of the top engineering companiesof India. We see ourselves not as just a

supplierof products, but as a complete solutions providerto our customers. In doing so, we are

workingtowards contributing our bit to India‟s growthstory and bringing in quality change in

the livesof people.

The company is committed to excellence in engineering, innovation in products, development

of market-relevant technologies and the highest of cost efficiencies in order to create value

for its customers and shareholders.

Our Mission/Vision

By 2020, Escorts will be among the top 3 Engineering Companies in India. We shall achieve

this goal by being the preferred solution provider to the needs of our customers, by practicing

respectful and ethical business practices, by being the employer of choice within the

engineering industry, and by providing superior returns to our investors.

Our Strategic Values

Our Strategic Values define how we will achieve the envisioned future. These must be

embedded into our manner of thinking and ways of work.

Customer Centricity

Acute sensitivity to the needs and experiences of the customer shall guide all that we


Excellence We will strive to achieve and surpass world class standards in all that we do.

Innovation 1. We will use the power of technology and imagination to deliver solutions to the

customers needs.

Agility We will operate in our markets with the ability to change direction and position with

nimbleness and speed.

Page 5: Strategic audit of escorts


Comment on Strategic Intent of the Company

The company wants to become customer centric and complete solution provider to the

customer. Since company is an engineering conglomerate, so its mission is quite

understandable that it wants to be in top 3 engineering companies in India. Obviously,

efficiency will be needed for this.

And by bringing effectiveness, it will be able to serve the welfare of the society, e.g.

producing sophisticated & affordable Tractors, will help agriculture sector of the country to

grow, which will certainly affect overall growth of India.

So its intention seems to be like „helping others as well as itself‟. This is quite encouraging to

its employees & workers for bringing efficiency & effectiveness. Moreover, other

stakeholder would also be pleased by the growth of the company.

Page 6: Strategic audit of escorts


Environmental Appraisal-using Industry

Analysis template

Table 1: Rivalry among competitors

Attractiveness Remarks

Low High

1 2 3 4 5

No. of


Large @ Small



Slow @ Fast

Fixed Cost High @ Low

Differentiation Low @ High

Switching Cost Low @ High

Openness of

terms of sales

Secret @ Open



Large @ Small



High @ Low

Table 2: Barriers to exit

Attractiveness Remarks

Low High

1 2 3 4 5



High @ Small

Cost of exit High @ Small



High @ Small

Page 7: Strategic audit of escorts


Table 3: Barriers to entry

Attractiveness Remarks

Low High

1 2 3 4 5

Economies of


Small @ Large



Low @ High

Brand identity Low @ High

Switching cost Low @ High

Access to

channels of


Easy @ Limited



Small @ Large

Access to


Easy @ Restricted

Access to raw


Easy @ Restricted



None @ substantial

Table 4: Threat from substitutes

Attractiveness Remarks

Low High

1 2 3 4 5

Availability of

close substitute

High @ Low

Switching cost Low @ High


price value

Better @ Worse

Profitability of

producers of


high @ low

Page 8: Strategic audit of escorts


Table 5: Bargaining power of buyers

Attractiveness Remarks

Low High

1 2 3 4 5

Number of


Small @ Large

Availability of


Many @ Few

Switching cost Low @ High

Buyer‟s threat

of backward


High @ Low


threat of



Low @ High

Contribution to


Low @ High

Contribution to


High @ Low



low @ High

Table 6: Bargaining power of suppliers

Attractiveness Remarks

Low High

1 2 3 4 5

Number of


Small @ Large

Availability of


Few @ Many

Switching cost High @ Low


threat of



High @ Low


threats of



Low @ High

Contribution to


High @ Low

Contribution to


High @ Low


importance to


low @ high

Page 9: Strategic audit of escorts


Table 7: Government actions

Attractiveness Remarks

Low High

1 2 3 4 5



Low @ High





High @ Low

Customs and




High @ Low

Table 8: Overall assessment

Attractiveness Remarks

Low High

1 2 3 4 5

Barriers to


@ 4.1

Rivalry among


@ 3

Barriers to exit @ 2

Power of


@ 3.62

Power of


@ 3

Threat of


@ 3.75



@ 2.66



@ 3.16

Page 10: Strategic audit of escorts


Business Portfolio Analysis using BCG Matrix:

On the basis of the information available in the

annual report & other documents, I can classify

its product in BCG Matrix as follows:

Cash cow: Agri-Machinary Group (including

many tractors) Despite the fact that Escorts

Tractors has just 13.2% market share in

Domestic industry, its share would be said

sufficiently enough to say as big; because it is an

old player in this industry and improve the

economical condition at the time of post-

independence. Its growth has been moderate. So

these products come in Cash Cow categories.

Star: Construction Equipment Group

Escorts is one of the company providing services to Government of India to make new

railway infrastructure in the country. Its relative share is quite sufficient. Also, a high growth

is being predicted after the announcement from Govt of making huge investment in the field.

So rate of growth is also high.

Dog: Construction equipment

Relative share is low due the presence of competitors, such as- JCB, Jaypee Group. Also

there is not a good growth in this field.

Q mark: Auto-Suspension Part Group

Despite of the moderately increasing revenue, this group of products is facing uncertainty;

due to the presence of already established competitors.

Revenue break-up of different categories of products at Escorts:

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1. Agri Machinery Business

2. Construction Equipment Group

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3. Railway Equipment Business

4. Auto Suspension Part Group

With the government planning to invest $1 trillion in infrastructure development, Co. see

huge market potential for its products.

Page 13: Strategic audit of escorts


Various types of the Strategies adopted by

the Organisation

The global economy is experiencing stiff challenges and India is not left untouched by the

impact. The agricultural and infrastructure sectors have been some tough times of late, with

growth hitting a lull in several regions. Escorts has chosen to mitigate this impact with a

strategy that focuses on highly profitable and niche products. It is tactically modifying its

product mix and undertaking global technology tie-ups to reengineer itself and attain

efficiencies of cost and time in its manufacturing operations.

The Company is adopting strategy of entering various markets in different foreign countries

by giving its franchises, distributorship, etc. (local responsiveness).

For the company, there is a high pressure to be locally responsive in the world industry.

And, pressure for cost reduction is High; So company is trying to become Transnational



In April 2010, Escorts launched its high-end premium tractor range – FARMTRAC in

Morocco, one of the largest tractor markets in Africa. Poor tractor penetration and accelerated

growth of agri sector provide huge potential for growth in Morocco. FIRST MATERIEL is

Escorts authorised distributor in Morocco, who will be responsible for assembling the

tractors, which will be imported from India in a semi knocked-down state. FIRST

MATERIEL will also be marketing and promoting the FARMTRAC brand locally and will

also ensure after-sales service support.

Recently, Escorts launched Farmtrac Range in collaboration with TATA International

Phnom Penh, Cambodia, in September 11, 2013:

News: Escorts Limited, India‟s leading tractor manufacturer, today announced its entry into

Cambodia with the launch of its premium tractor range - Farmtrac. For the launch, Escorts

has collaborated with TATA International which will operate as the distributor (TATA South

East Asia (Cambodia) Ltd.) of the brand. With world-class technologies, impressive features,

and stunning looks – these new tractors are set to revolutionize the Cambodian tractor


The Farmtrac tractor series is aimed to take the agriculture in Cambodia to the next level.

With a range from 25 HP to 110 HP and their four wheeled drive, the models are best suited

for paddy, sugarcane, palm and rubber plantations in the country. These tractors come with

standard 12x12 synchromesh transmission for suitable speeds and easier loader work.

Page 14: Strategic audit of escorts


For internationalisation, it is following Waterfall Strategy.


In 2010, Escorts went for market development in Africa. There it entered step-by-step into

the various markets.

In 2013, Escorts enters Cambodia, to strengthen its position in South East Asia

The company is following Cost Leadership Strategy. A firm commitment to cost discipline

has helped the company set its sights on frugal manufacturing, and as a result, improve its

operational margins.

Digitalisation Strategy: One of the biggest achievement of Escorts in IT has been the Group-

wide single-instance application of the ERP application. The consolidation of four

independent email domains on the cloud was another award-winning initiative undertaken by

Escorts. The single email domain has strengthened the organisational brand and considerably

lowered functional complexity and sustenance cost.

Marketing Strategy: We introduced a series of tractors for premium and marginal farmers

that bring value to the customers and significantly increase Escorts‟ market share. With an

aim of being the leader in premium tractor market with our Farmtrac brand and be

predominant in the mid segment market, major product extensions have been aptly

introduced along with a 360° marketing approach.

Human Resource Strategy: Manpower cost management is also under intense review to

ensure a balance between the human resource requirements of today with the needs of the

future and that they both align at optimum business levels. Our strategy is to be a Company

where employees can achieve their potential, grow and excel.

Operational Strategy: End-to-end operations optimisation is underway and within 36

months, we will see the tractor business shrink its plants from the current three to two. This

will take the capacity to 120,000 tractors from the current 95,000 tractors. As a result,

indirect costs are expected to reduce and yield significant savings.

Agreements with Banks:

In 2010, Escorts entered into a Memorandum of Understanding (MoU) with Punjab

National Bank (PNB) for financing the dealers of Escorts Limited. Under the arrangement,

PNB will extend working capital finance to the dealers of Escorts Ltd across the country by

the way of Drawee Bill Discounting Facility.

Recently, Escorts signed a Memorandum of Understanding (MoU) with State Bank of

India (SBI) for providing financial assistant to its newly launched agri service infrastructure

called Escorts Crop Solutions (ECS). It is an initiative through which Escorts intends to

provide “end to end farm machinery” through custom hiring route to small & marginal


Page 15: Strategic audit of escorts


Strategy Implementation:


GOVERNANCE Company‟s philosophy on Corporate Governance is founded upon a rich legacy of fair,

ethical, professional and transparent governance practices. Company has benchmarked itself

against the global best practices and is conscious that accomplishments of an organization are

reflection of its professionalism, conduct and ethical values of its management and

employees. Company is committed to practicing sound corporate governance and upholding

sound business standards in conducting its business. Accordingly, Company is continuously

working towards building trust with shareholders, employees, customers, suppliers and other

stakeholders based on the principles of good corporate governance, viz. integrity, equity,

transparency, fairness, disclosure, accountability and commitment to values.

Company has always believed that an independent Board following international practices,

transparent disclosures and empowerment of shareholders are as necessary as its financial

results for creating and sustaining shareholder value. To achieve this, your Company

inculcates a culture in which high standards of ethical behaviour; individual accountability

and transparent disclosure are ingrained in all its business dealings and shared by its Board of

Directors, management and employees. Company strives towards establishing systems and

procedures to ensure that its Board of Directors is well informed and well-equipped to fulfil

its overall responsibilities and to provide the management with the strategic direction needed

to create long-term shareholder value. The Company is in full Compliance with the

requirement of Code of Corporate Governance as prescribed in the Listing Agreement and in

this regard the following details are provided for the information of stakeholders and public at



The composition of the Board of Directors is in conformity with Clause 49 of the Listing

Agreement, as amended from time to time. The Board of Director(s) along with its

Committee(s) provide leadership and guidance to the Company‟s management and directs,

supervises and controls the performance of the Company. The Board of Director(s) of the

Company comprises of distinguished personalities, who have been acknowledged in their

respective fields. As on the end of financial year, four out of the seven Directors on the Board

are independent and nonexecutive and one is non-independent and non-executive. Mr.Rajan

Nanda, Chairman is also acting as Managing Director of the Company duly assisted by Mr.

Nikhil Nanda, Joint Managing Director of the Company and both of them are in whole-time

employment of the Company. All Independent Non-Executive Directors are compliant with

the requirements of the Listing Agreement for being an Independent Director and have

confirmed that they meet the ‘Independent’ Criteria as mentioned under the above Clause 49

of the Listing Agreement. Apart from reimbursement of expenses incurred in the discharge of

their duties, the payment of sitting fees and/or commission that these Directors are entitled

under the Companies Act, 1956 as Non-Executive Directors, none of these Director(s) has

Page 16: Strategic audit of escorts


any material pecuniary relationships or transactions with the Company, its Promoters, its

Directors, its Senior Management or its Subsidiaries and Associates which would affect their

independence. The Senior Management have made disclosure to the Board confirming that

there are no material, financial and/ or commercial transactions between them and the

Company, which could have potential conflict of Interest with the Company at large. As on

30th September, 2012, the Board comprises of seven Directors. The names and categories of

Directors, the number of Directorship and Committee position(s) held by them in the

companies, meetings attended by them and other relevant particulars are given below.


OTHER COMPANIES On the Company‟s Board is a member of more than ten committees and Chairman of more

than five committees (Committees being, Audit Committee and Investors‟ Grievance

Committee) across all the companies in which they are Director. All the Director have made

necessary disclosures regarding Committee positions held by them in other companies and do

not hold the office of Director in more than fifteen public companies.

BOARD MEETINGS During the financial year 2011-2012 the Board of Directors met Five (5) times on the

following dates:-

28th November, 2011, 14th February, 2012, 15th March, 2012, 15th June, 2012, 24th

September, 2012

The gap between any two Board meetings did not exceed four months.

Board Meeting Procedures

The detailed agenda papers containing all information relevant for discussions at the meeting

are sent to the Directors in advance so that each director has enough time for a meaningful

discussion at the Board Meetings. Besides the business items, the agenda includes the items

required to be considered by the Board of Directors as per the Listing Agreement. The

required information as enumerated in Annexure I A to Clause 49 of the Listing Agreement

are regularly made available to the Board of Directors for discussion and consideration at

Board Meetings.

Information supplied to the Board

Regular presentations are made to the Board of Directors covering Business Operations,

Finance, Sales, Accountsand Marketing, Compliances and all the other important business


The Annual Operating and Capital Budget(s) are approved by the Board of Directors. The

Board spends considerable time in reviewing the actual performance of the Company vis-à-

vis the budgeted.

Code of Conduct

The Board had prescribed the Code of Conduct for all Board Member(s) and Senior

Management. The Code of Conduct has been posted on Company‟s web site www.


Page 17: Strategic audit of escorts


Strategy Evaluation using Balanced Score

Card approach

Financial Perspective They are good at this account. Recently Govt announced to make huge investment in

Infrastructure Sector. And Escorts is supplying various construction related products,

and also products for Indian railway. Moreover, its tractors are used in agri as well as

in non-agri fields. So there is huge opportunity for such an organisation.

Customer Perspective Escorts has recently flagged off one of its biggest „customer connect‟ campaigns.

Titled SAMPARK, this national level service campaign has 1200 Escorts-trained

engineers and technicians cover 36,900 machines in the field. Through this initiative,

they are attempting to get closer to their customers.

According to the company, “We see ourselves not as just a supplier of products but as

a service provider to our customers. Our successes are made possible by our ability to

view the market from our customer‟s eyes. For us, lifetime value of our customer

based on inherent value exchange is the growth driver and not just the price based

profit motive. Our customers have reaffirmed our faith in our value system by

becoming champions for the products they have bought and experienced.” Others are, After sale services, giving training to distributors to understand the

demand of customers, etc.

Internal Business perspective To get the maximum return on investment, the company is aiming for zero-defect

production at its manufacturing facility. In order to facilitates this, Escorts has started

Service Audit for Finished Goods – an initiative under which in product support

specialists are auditing all its new machines, and rectifying their faults, if found.

Company continues to implement its leadership management programme to

strengthen talent pool and promote greater employee diversity.

Innovation/Learning Company says, its people are its true ambassadors. Its strategy is to be a Company

where employees can achieve their potential, grow and excel. Over the years, the

Company has built a diverse and talented team. In the last few years, they have

established their People, Performance and Growth framework, which provides it with

a structure for managing the performance and development of its people and aligning

them with the Group strategy.

With the bold strategy of launching a new product every six months at Escorts Agri

Machinery, it introduced a series of tractors for premium and marginal farmers that

bring value to the customers and significantly increase Escorts‟ market share.

Page 18: Strategic audit of escorts


Suggesting future strategies and way

forward to the company

Besides all the adopted strategies, Company should try to take foreign venture completely

under its possession.

Company should try to find new market (countries) by making its products, especially

tractors more customized according to the environmental & financial conditions of that


Future plan of Actions New Product Introduction

• Up-gradation of transmissions to meet emerging applications & offer customer convenience


• Design and development of new series of tractors with contemporary features to meet

changing requirement of Indian farmers.

• Continuous up-gradation of existing tractor models.

• To develop new products/variants to meet changing applications requirement.

• Compliance to safety and emission regulations.

• Cost effective design solutions to meet customer emerging needs.

• New Technologies absorption for continuous improvements.

• More Innovative features.

Page 19: Strategic audit of escorts



Escorts Annual Report 2012

World of Escorts; Vol.20, July 2013

Newsletter Aug 2010

Strategic Policy & Business Management by Azhar Kazmi