Sm-II Course Wrap Up

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


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?


SCA = Σ(∏=SP-CP)

Σ(∏=SP-CP)

BCG Matrix




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?


SCA = Σ(∏=SP-CP)

Σ(∏=SP-CP)

BCG Matrix




9 Land Mines

Growth => ∏

Matured Economies

Emerging Economies



Review & Monitoring

Mechanisms BSCFinances


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)


SCA = Σ(∏=SP-CP)

Σ(∏=SP-CP)

BCG Matrix




9 Land Mines

Growth => ∏

Matured Economies

Emerging Economies



Review & Monitoring







Who Uses it and How?


SCA = Σ(∏=SP-CP)

Σ(∏=SP-CP)

BCG Matrix




9 Land Mines

Growth => ∏

Matured Economies

Emerging Economies



Review & Monitoring







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

Sm-II Course Wrap Up

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