7/17/2012

Managing in economic volatility

Capital investments Working capital requirements Sales & profitability Fixed costs Debt & equity Customer confidence Customer satisfaction New vs. existing customers Competition intensity Market share Process architectures Capacity investments planning Capacity utilization Supply chain management Organizational structure Authority & decentralization Organizational communication Motivation Productivity Investor management Return on investments Cash flow management Impact on balance sheet items Impact on profit & loss account Product lifecycle Distribution networks Global pricing New vs. existing product performance Production & materials planning Warehousing Service operations Global sourcing Performance appraisals Employee remuneration Managerial leadership Career planning Promotions Dividend payouts Stock prices New capital generation Foreign exchange Business planning Product architectures New product development Product life cycles Product innovation Asset turnover Materials turnover Business partner relationships Process innovation Employee recruitment Employee turnover Employee satisfaction Salary structures Innovation & entrepreneurship Finance Human Operations Customer

Group Assignment: 30 marks (4 slides only) Individual assignment: 20 marks (1-2 page document) Select any company to analyze impact of recession Select any topic for research in terms of what are the impact of recession, how companies can respond to Create a balanced scorecard for the company to help these impacts, best practices followed, good examples deal with economic volatility. (15 marks) of management during recession, mistakes made, etc. Develop an execution plan for any initiative identified through the balanced scorecard. (15 marks)
2012 Sandeep Khedkar. All rights reserved. 1

Sandeep Khedkar

Simplified model to understand business cycle dynamics

High pressure to achieve target sales Cut-throat competition Very high pressure to report business results Increase in unscrupulous practices Formation of economic bubble High increase in competition Uneconomic capacity utilization Demand much lesser than estimated Higher revenues for supplying organizations Increasing capacity investment Higher employment levels Higher income levels Increasing consumption

Expansive Greed cycle Increase in money availability

Over-optimistic calculation of rising demand driven by greed

Withdrawal of money from system Bursting of economic bubble Economic panic & low confidence Poor capacity utilization High fixed costs burden

Government intervention to improve liquidity

Increased economic confidence

Lower consumption

Liquidity crunch

Improved business results

Contractive Fear cycle Employee layoff & plant closures

Increase in business failures

Decrease in competition
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2012 Sandeep Khedkar. All rights reserved.

7/17/2012

Performance measurement
Effectiveness of a business process can be determined based on two factors: Measurement & evaluation of past & current performance Future goals expressed by organization strategy Use of balanced scorecard to measure the all-round performance of an organization on four interrelated dimensions 1. Financial profitability 2. Customer satisfaction 3. Process efficiency & effectiveness 4. Organizational learning & development Represents organizational performance as a series of cause-effect relationships Analysis can be top down, but the actions required are usually bottom up Note: To address an identified challenge in a particular managerial area, need to identify specific managerial action to be taken & explain how it can be implemented successfully Perspective Finance Customer Operations Human
2012 Sandeep Khedkar. All rights reserved. 3 Sandeep Khedkar

Objectives

Measures

Targets

Initiatives

Case Suzlon in the wind energy solutions space

Business drivers Volatility of conventional fuel prices (+) Increasing demand for energy (+) Drive for sustainable development (+) Government policies (-) Global economic conditions (-) High infrastructural investment (-) Rapidly evolving technology (-) Critical success factors Ability to manage environmental dynamics Capital investment capability Technology leadership and intensiveness Global access with wide product portfolio Ability to provide complete solutions Background of the economic crisis at Szulon Leading player in wind energy solutions Aggressive leadership plans using acquisitions Highly leveraged position Drying of order book due to global recession Costly servicing of product defects More than 90% fall in share prices Dealing with the crisis Short term actions Restructuring of debt & improving cash flows Resolution of product defects for C-Sat. Analyze and improve company operations Long term actions Focus on global market segmentation and positioning Develop product portfolio (innovation & tech) Lowering the cost of mfg. and delivery Consolidation of operations Focus on financial performance References - www.suzlon.com; analyst reports; news articles Case Analysis What were the reasons that the company was faced with a severe economic crisis? Use cause-effect diagrams to identify core demand supply imbalances. Prepare a relevant balanced scorecard for the company to ensure overall economic performance. For any one of the initiatives identified by Suzlon, prepare a project master plan to ensure its successful execution towards achievement of business objectives?
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2012 Sandeep Khedkar. All rights reserved.