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SM-II COURSE WRAP UP
IIM Indore PGP – Mumbai
Shubhabrata Basu
Module – I: Business for Profit
SCA = Σ(∏=SP-CP)
Σ(∏=SP-CP)
9 Land Mines
Danger Real
Inadequate Resources
Unclear SOPs
Inadequate Performance Monitoring
Inadequate Rewards & Punishment
Poorly Communicated Strategy
Poor Leadership or Uncommitted Leaders
Unclear Accountability
Org. Silos & Culture Blocking Execution
Low Skill & Capability Base
Capital Labour/Employees Land Characteristics
Dangers from factors of Production that limits performance
First Level Analysis: How to Manage the Dangers
and reduce Costs
Module – I: Business for Profit
SCA = Σ(∏=SP-CP)
Σ(∏=SP-CP)
Products & Services in a
Market
Selling
Life Cycle
Determine which product
how long?
Product Portfolio Analysis
BCG Matrix
Estimate Changes in (i) Industry Demand & (ii) Product Demand
Σ(Product Demand) = Industry Demand
ID (↑) & Relative PD (↓) – ?
ID (↑) & Relative PD (↑) - STAR
ID (↓) & Relative PD (↑) - CC
ID (↓) & Relative PD (↓) - DOG
Nurture
Observe
Butcher
1 2 3 4 5 6 7 8 90
20406080
100
Industry Growth RateGrowth Rate of Product Market Share
? * CC D
What to Observe or Nurture with ????
9 Land Mines
Module – I: Business for Profit Module – IV: Business NOT-FOR Profit
SCA = Σ(∏=SP-CP)
Σ(∏=SP-CP)
BCG Matrix
1 2 3 4 5 6 7 8 90
20406080
100
Industry Growth RateGrowth Rate of Product Market Share? * CC D
Strategy => [Structure, Systems, Style (or SOP], [Staff, Skills], [Shared Values = ∏]
Now expand Business Horizon – Enlarge Market => Growth Strategies
9 Land Mines
Module – I: Business for Profit Module – IV: Business NOT-FOR Profit
SCA = Σ(∏=SP-CP)
Σ(∏=SP-CP)
BCG Matrix
Strategy => [Structure, Systems, Style (or SOP], [Staff,
Skills], [Shared Values = ∏]
Module – II: Growth Strategies
9 Land Mines
Growth => ∏
Organic Growth - Innovative Adoption of Technology – Nucor Steel
Inorganic Growth – Acquisition & Integration of Businesses – Newell Corp.
Inorganic Growth – Merger of Perceived Complementary Businesses – HPC
Intermediate Form of Growth – JVs and Strategic Alliances – Fuji XeroxMatured Economies
Emerging Economies – Tata & Big Bazaar
Mix of Organic Growth, JVs & Acquisitions
How to do it?
Module – I: Business for Profit
SCA = Σ(∏=SP-CP)
Σ(∏=SP-CP)
BCG Matrix
Strategy => [Structure, Systems, Style (or SOP], [Staff,
Skills], [Shared Values = ∏]
Module – II: Growth Strategies
9 Land Mines
Growth => ∏
Matured Economies
Emerging Economies
Organic Growth, JVs & Inorganic (M&A)
Module – III: Corporate Processes
Review & Monitoring
Mechanisms BSC
Finances
Sales/Customers Processes Intangibles
Balance Score Card
If BSC is reVIEW & Monitor – where & whom to look at?
Balance Score Card
Financials
Customers
Processes
Learning
Top Management
Immediate Boss
Peers
Subordinates
Self
Customers
Pair & Share
Incompatible Pair – how to share?
Module – I: Business for Profit
SCA = Σ(∏=SP-CP)
Σ(∏=SP-CP)
BCG Matrix
Strategy => [Structure, Systems, Style (or SOP], [Staff,
Skills], [Shared Values = ∏]
Module – II: Growth Strategies
9 Land Mines
Growth => ∏
Matured Economies
Emerging Economies
Organic Growth, JVs & Inorganic (M&A)
Module – III: Corporate Processes
Review & Monitoring
Mechanisms BSCFinances
Sales/Customers Processes Intangibles
Pair & Share Knowledge
Implicit TacitExplicit
I Know what I Know & I Know what I Don’t Know
I don’t Know what I Know
Insecurity (so Incentives) Nature
Socialize, Externalize, Combine, Internalize
Yet Cousin Products May FAIL!!! - ∏=0
Why Cousin Products may Fail• If Firm tries to seek rents from a new product whose
– Original utility (hence part of innovation cost) was discovered by the customers and – Firm was not willing to recognize (financially the same)
• New product has limited utility for the customer (i.e. customer cannot find new uses)
Firm’s Own Standard Expectations (knowledge and processes required to build the standard – interval/ratio scale)Exceeded/Above Not to my std. Succeed
Not Exceeded/Below Failure Co. is cheating me – but may still buy
Below Above
Category Standard Expectations – explicit standards and units (ticking checklist – nominal scale)
Module – I: Business for Profit
SCA = Σ(∏=SP-CP)
Σ(∏=SP-CP)
BCG Matrix
Strategy => [Structure, Systems, Style (or SOP], [Staff,
Skills], [Shared Values = ∏]
Module – II: Growth Strategies
9 Land Mines
Growth => ∏
Matured Economies
Emerging Economies
Organic Growth, JVs & Inorganic (M&A)
Module – III: Corporate Processes
Review & Monitoring
Mechanisms BSCFinances
Sales/Customers Processes Intangibles
Implicit TacitExplicit
I Know what I Know & I Know what I Don’t Know
I don’t Know what I Know
Socialize, Externalize, Combine, Internalize
Who Uses it and How?
Module – I: Business for Profit
SCA = Σ(∏=SP-CP)
Σ(∏=SP-CP)
BCG Matrix
Strategy => [Structure, Systems, Style (or SOP], [Staff,
Skills], [Shared Values = ∏]
Module – II: Growth Strategies
9 Land Mines
Growth => ∏
Matured Economies
Emerging Economies
Organic Growth, JVs & Inorganic (M&A)
Module – III: Corporate Processes
Review & Monitoring
Mechanisms BSCFinances
Sales/Customers Processes Intangibles
Implicit TacitExplicit
I Know what I Know & I Know what I Don’t Know
I don’t Know what I Know
Socialize, Externalize, Combine, Internalize
Module – IV: Leadership & Society
How Leaders view their Companies• Profit Maximize (Short Term)• Profit Normalize (Longer Term)
Social Sector Case Study – Module IV – GSRTC Case
Issues in the Case
• Raj Gopal (IAS) – MD – VC of GSRTC• Present a revival plan before CM
– CM sided with TU on Wage Negotiation– Projected recovery/turnaround doubtful– Career in jeopardy
• Plan to Position GSRTC & take fresh Strategic Perspective involving:– Scale/scope of operations – Some Compromises on routes, Hedge against TU Retaliations, – Modes of Operations (own/outsourced), Value Chain Analysis, – Aspiration of TUs & Politically inclined Board and – Path Dependence in transport sector
Exercise of Options vis-à-vis PEST Considerations
Options in Case Impacts most pronounced in theReduce P-Tax Political Front Economic Front - -
Govt. D-E Swap Political Front Economic Front Social Front -
Govt. Arrear payment + Moratorium
Political Front Economic Front Social Front -
Tariff Revision - Economic Front Social Front -
Enhanced Capacity Usage - Economic Front - Techno Front
Charging Bus-Adda Fees Political Front Economic Front - -
1% MACT Cess & Toll Tax Political Front Economic Front Social Front -
Market Survey Revenue - Economic Front Social Front -
Outsourcing in Tribal Areas Political Front - Social Front -
Route Deregulation Political Front Economic Front - Techno Front
Write off Depreciation A/c - Economic Front - -
GSRTC a PSE in Institutional Void
• Nation Newly Independent – State Bifurcation– No State Transport Service (no specific assets)– Minimal Public Transport (limited options)– No clarity on sharing of BEST’s assets (bounded rationality)
• Market Failure Condition (Institutional Void)
• Creation of GSRTC (bifurcating BEST)– No Information Searching Cost, no bargaining, contracting, monitoring,
enforcement cost for passengers
• State administered MONOPOLY• But Scenario Changed – Post 1991.
Industry Analysis of STUs post 1991
• Automobile Manufacturers (Tata, Ashok Layland, Volvo)
• Diesel/CNG Suppliers (IOC, BP, Reliance, HP)
• Auto Parts, Bus Body (own)• Labour – Drivers, Checkers• BOT Highways – EW/NH/SH
– Toll Taxes• Other Accessories and
indirect Service Providers
• Passengers (Long Distance)• Passengers (Short Haul –
within City)• Passengers (Govt. Staff)• Special Category Passengers
requiring subsidies• Families & Tourists• Passengers in Remote
Locations or in Lean Routes• Passengers – Point to Point
• Other STUs• Indian Railways• Air Service (Limited)• Waterways (Steamer Service)
• Private Stage Carriage• Private Contract Carriages• Low Cost Airlines• Better Train Services• Cars (SUVs) on Long Drives
• Google – Chat, Skype• Home Office, Emails• Tablets and Phablets• Flipkarts & e-Commerce• Home Theatre, Youtube, DTH
From Demand to Positioning of GSRTC
• Passengers (Long Distance)• Passengers (Short Haul –
within City)• Passengers (Govt. Staff)• Special Category Passengers
requiring subsidies• Families & Tourists• Passengers in Remote
Locations or in Lean Routes• Passengers – Point to Point
Generic Need
NEED ACCESSAll categories – Transit
Experience (@ Bus Stations) + Travel
Experience + Booking Experience + Other
Services
Specific Need
NICHE VARIETYLong Haul, Short Haul,
Govt. Staffs, Special category, Remote – (TRANSPORT only)
Specific Consumer Generic Consumers
What Generic Strategy Should GSRTC Choose?
While Conventional Wisdom dictates a Differentiation Strategy – GSRTC is constrained by the Fact that it is a
State Transport Undertaking (STU) – and hence MUST serve WITH OR
WITHOUT Profits (Universal Service Obligation – USO Norms)
Generic Strategy at WorkChallenges:1. High CapEX on VOLVO/Good Quality Buses, Bus Station Infrastructure, IT2. Ensure High Passenger Traffic (High Load Factor) and or 3. Reduce WC Requirement & Recoup Investment Cost
Generic Strategy at WorkChallenges:1. High CapEX on VOLVO/Good Quality Buses, Bus Station Infrastructure, IT2. Ensure High Passenger Traffic (High Load Factor) and or 3. Reduce WC Requirement & Recoup Investment Cost
Focus Cost Cost Leadership• Fixed Priced Tickets (no dynamically changing ticket prices)• Free Services at the Bus Stations• Large Subsidies to Passengers• Travel in LEAN Routes• Diesel Buses (overall running cost – low)• Salary head – dual role Driver-Conductor/contract workers• WHAT ELSE???Gross Revenue Realized per Bus is lower than private players
Focus Differentiation
Differentiation• Some Luxury Buses (Volvo) to attract tourists & occasions
Is the VALUE CHAIN OF GSRTC Robust enough to support these?
Value Chain of GSRTC – Problem AreaProcurement
• Uniform L1 based 3 bid Tender – time consuming
• Govt. Regulations for min rates to be followed
• Reverse Auctioning
Infrastructure• Own State of Art
Maintenance and Repair Facility
• IT Backbone for monitoring & Tracking
• Better amenities at Stations - PPP Mode
Technology• Tradeoff between
Diesel & CNG Bus – low WC vs. High Overall Cost
• IT Infrastructure – ETM, SMS, Tracking, BD service
Human Resource• Unionized permanent • Inflation linked wages• Small productive
workforce (Drivers) vis-à-vis total (high overhead)
• Politicized & IAS/GAS dominated Board
• Bus Chassis, • W/C - Diesel, CNG,
Engine Oil etc, • Bus Body
Accessories, • Labor – Driver,
Conductor, Checker, Maintenance Staffs, other office staffs,
• P-Tax(*) & other Regulatory Cess,
• Office Stationeries
• Route Scheduling• Running• Checking against
Pilferage & (W/T)• Preventive
Maintenance• Breakdown
Service• Renting out
Luggage Space
3T Experiences in • Ticket Booking
(ETMs/ Online)• Travel in good
quality bus• Transit @ Bus
Stations• Others Services• Fixed Priced
Tickets• Safe Travel
• Essential Services
• Website• Bulk SMS• ETMs• Word of
Mouth• First Mover
Advantage• Bus Body for
Posters• Benchmark
w.r.t. others
• SMS ticket confirmation
• Entertainment @ Bus Station
• Substitute Bus service in case of a breakdown
Can You Reduce Cost in the Value Chain?Procurement
Reverse Auction – Better Salvage Value (reduce corruption) –
others Govt. Procedures – NO!
InfrastructurePPP - no cost & Rental Revenue;
IT infra → lower pilferage – Savings; Other Infrastructures need higher Load Factor (incl.
contracting out facilities)
TechnologyConforming to CNG Regulation – Higher
Lifecycle Cost; IT infrastructure - Yes
Human ResourceDriver-cum-conductor in contractual Role – YES (but opposed by Union)Others mostly – NO!!!
• No Bargaining Power w.r.t. Fuel, Govt. Taxes; Very
• Low Bargaing Power with Labour – Permanent PSU employees;
• Low Bargaining Power (L1 Contract) w.r.t. Accessories, Engine Oil, Bus Chassis)
• Overall No to Low!
• Some Operational Efficiency in the Benchmarking Process and Renting out of Bus Space
• Overall – Very Small Savings
• ETM/Online → Low Pilferage
• Safe Travel & Transit quality are Industry Standard for the fare
• Moderate to Low Advantage
• First Mover Advantage
• Institutional Stamp
• Some Advantages present
• Better Support services – but delays can be counter – productive
• Some Advantages Present
Can You Reduce Cost in the Value Chain?
Procurement(→↓)
Infrastructure(→?)
Technology(↓→)
Human Resource
(↓)
Π (-ve)
(GSRTC is in
RED)Input(↓)
Process(↓)
Output(→↓)
Marketing & Sales
(→)
After Sales Service
(→)
All Inclusive Value Chain!!!
P I T H ΠI P O M A
Logistics Chain
Supply Chain
Value Chain
P=f(I, T) I=f(T) Factors of Production – Kapital & Labour
Your Firm’s Valuation (think of Financial IPO) depends on HOW
WELL you are organized here
Learning – STEP BY STEP Method
• Look at the Value Chain and Reconsider:– Whether Generic Competitive Strategy was Right– Whether Positioning Strategy was Appropriate– Whether Industry Analysis was Adequate
• Re-analyze and Recommend whether to– Relook at Factor Inputs (9 Land Mines)– Service Offerings (BCG Matrix)– Systems and Processes (Knowledge & service design)– Evaluation (Balance Score Card)– Recommendations (Leader’s Perspective)
SM-I
SM-II
ALL THE VERY BEST FRIENDS
May God Bless You All