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Applied Theory in Strategy and Competition

GROUP B6
PGP/32/283 RAHUL R KAMATH
PGP/32/286 NISHANT SARAWAGI
PGP/32/291 KARANVIR SINGH
PGP/32/306 SUMIT KUMAR
PGP/32/315 POOJA DILIP BORIWAL
PGP/32/336 ARUSHI GUPTA
PGP/32/338 RANJIT KUMAR GWALIA
PROJECT To examine the performance of Five Indian Business Group firms and compare these with
OBJECTIVE independent firms in the same industry with respect to the differences in performance

BUSINESS GROUPS, INDUSTRIES AND INDEPENDENT FIRMS

Sr. No. Business Group Company Industry Independent Firm for comparison

1 JSW group JSW Steel Steel Steel Authority of India Limited(SAIL)

2 Tata Group Tata Motors Automotive Maruti Suzuki India Limited

3 Aditya Birla Group (ABG) UltraTech Cement Cement Ambuja Cement

4 Godrej Group Godrej InfoTech IT Services Infosys

5 Biyani Group (Future Group) Big Bazaar Retail D-Mart


Steel Industry: JSW Steel, JSW Group vs. SAIL
Comparing Numbers
(As of March, 2017)

Revenue Gross Debt- No. of Avg Sales Avg Wages Inventory


(in Profit Equity Employees per per Days
Million) (Margin) Ratio (000) Employee Employee
556,046 21.9% 1.4 11.8 46,931 1,434 75

Revenue Gross Debt- No. of Avg Sales Avg Wages Inventory


(in Profit Equity Employees per per Days
Million) (Margin) Ratio (000) Employee Employee
445,018 0.2% 0.5 83 5,364 1,080 129

Inference:

Private vs Public Key differentiator


Higher Operational Efficiency I/O theory applied
Steel Industry: JSW Steel, JSW Group vs. SAIL

Vertical Integration:
Issue of Commitment & Concept of lower Transaction Cost

SAIL has integrated backwards and owns captive iron ore mines and coking
coal mines ( Not completely some of it was imported )
Last year, the profits dipped for SAIL as it was cheaper to get the raw
materials from the commodity market and hence JSW steel made much
higher profits.
But JSW is now planning to invest in auctions for the raw material mines.

Product Portfolio:
JSW has a sharper focus on value added and special products, leading to a
higher profitability.
In contrast, 25% of SAILs products are in the form of semi finished steel
resulting in lower value addition
Cement Industry: UltraTech Cement (ABG) vs. Ambuja Cement
Cement Industry: UltraTech Cement (ABG) vs. Ambuja Cement

Second largest market Globally with


Indian Cement Industry

capacity of ~ 411 mtpa after China (~


2400 MTPA)
Market Composition: North - 35%,
East - 16%, West - 13%, South - 36%
Fragmented Market: No of plants ~
195, owned by ~ 55 players Top 5
players holds ~ 50% of capacity
Consolidation in industry at regular
intervals
Surplus capacity in the sector c 140
million tonnes

Trade Non-Trade
Competitors

20 20
35 33

80 80
65 67

INDUSTRY AMBUJA ACC UTEC


Automotive Industry: Tata Motors, Tata Group vs. Maruti Suzuki India Ltd.
OPERATIONAL
PERFORMANCE

Tata Motors Ltd is an Indian multinational Maruti Suzuki India Ltd (Joint Venture), is an
automotive manufacturing company & a member of automobile manufacturer in India; parent: Suzuki
the Tata Group Motor Corporation (56.21%)
Market Ranked 5th in 2015 Responsible Business Rankings It has a market share of 47.4 % of the Indian
Share (By IIM Udaipur); Recognized for its world-class passenger car market
quality, originality, engineering & design excellence
Market Share: CV: 49.4% , PV: 5.2%

Founded 1945; 60,000 (2016) 1981; 40,000 (2017)


Employees (no.) Among top 3 in Global CV & Domestic PV by FY The Leader in the Indian Automobile Industry,
Vision 2019; Sustainable Financial Performance, Exciting creating customer Delight and Shareholders wealth;
Mission Innovations A pride of India
Values We innovate mobility solutions with passion to Motorise India
enhance quality of life Customer Obsession Fast , Flexible and First Mover
Integrity, Teamwork, Accountability, Customer Innovation and Creativity Networking and
Focus, Excellence, Speed Partnership Openness & Learning

Tata Motors excels when it comes to innovation Maruti Suzuki positions itself as a provider of
through intensive research and development e.g. security, confidence, reassurance, value-for-money
Competitive
Nano (least expensive car) & good resale value. Business strategies of MUL are
Advantage
Heavy Focus on CSR combination of lower cost & differentiation for its
Manufacturing
Jamshedpur, Pune, Lucknow, Uttarakhand, Gujarat, different products
facilities
Karnataka Heavy focus on operational efficiencies
New Delhi, Haryana, Gujarat
Automotive Industry: Tata Motors, Tata Group vs. Maruti Suzuki India Ltd.
FINANCIAL
PERFORMANCE

Revenue 2.697 trillion (2017) 58,612 crore (2016)


Net Income 7,454.88 crore (2016) 4,630.90 crore (2016)

ROE (%) 1.04 (March 2016) 16.92 (March 2016)


ROCE (%) 0.67 (March 2016) 16.38 (March 2016)

Basic EPS (Rs. Cr.) 0.68 (March 2016)


Cash EPS (Rs. Cr.) 151.33 (March 2016)
7.92 (March 2016)
Book Value/ 244.88 (March 2016)
Share (Rs. Cr) 65.87 (March 2016)
894.27 (March 2016)
IT Services: Godrej InfoTech, Godrej Group vs. Infosys

Software services and consulting company


Headquarters: Bengluru, Karnataka Industry: IT Services, IT Consulting
Services: business consulting, information Products: ERP, Microsoft Dynamics,Infor,SAP
technology and outsourcing services Services: IT Consulting, ERP Implementation,
Industry: IT Services, IT Consulting Software Product Sales, Maintenance & Support
Parent Group: Godrej
Listed Company on BSE and NSE
Headquarters: Mumbai
IT Services: Godrej InfoTech, Godrej Group vs. Infosys

INFOSYS GODREJ INFOTECH

Serving 1162 clients in 45 countries to create and execute Focus on providing business and technology solutions for
strategies for their digital transformation.Third largest IT the projects, construction, oil & gas and real estate
Company in India. industries
Provides end - to - end business solutions that leverage With its domain expertise in the area has resulted in
technology for our clients across the entire software life significantly lower operating costs, increased asset
cycle: consulting, design, development, re - engineering, utilization for their clients
maintenance, system integration, package evaluation and
implementation Godrej Infotech Ltd, embarked on the journey of Business
Excellence using EFQM 2013 which outlines the
Strategy:To build a sustainable organization that suits the foundation of achieving sustainable excellence in any
agenda of its clients, while offering profitable growth for organization.
investors. To achieve this objective, the company intends to
apply the priorities of renew and new to its own business Have ISO 9001:2015 Quality Systems Certification for
and cascade it to everything it does Analysis, Design, Coding, testing, Delivery and
Maintenance of Commercial Application Software
Have 84 sales and marketing offices and 116 development
centers. Infor awarded Godrej Infotech for "Golden Deal of the
Year for 2013
Derive 97.3% of revenue from repeat business this year.
IT Services: Godrej InfoTech, Godrej Group vs. Infosys

RETURN ON CAPITAL RETURN ON NET WORTH


EMPLOYED
ROCE (%) RONW(%)
140 180

120 160

140
100

120
80
100
Godrej
60
80 Infosys

40
60

20 40

20
0
2008 2009 2010 2011 2012 2013 2014 2015 2016
0
Godrej Infosys
2008 2009 2010 2011 2012 2013 2014 2015 2016
IT Services: Godrej InfoTech, Godrej Group vs. Infosys

SALES GROWTH RATE RETURN ON EQUITY


Sales Growth Rate(%) ROE(%)
80 180

70 160

60 140

50
120

40
100

30
80

20
60
10
40
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 20
-10
0
-20 2008 2009 2010 2011 2012 2013 2014 2015 2016

Godrej Infosys Godrej Infosys


IT Services: Godrej InfoTech, Godrej Group vs. Infosys

NET PROFIT MARGIN


NET Profit Margin(%)
35.00

30.00

25.00

20.00

15.00

10.00

5.00

0.00
2008 2009 2010 2011 2012 2013 2014 2015 2016

-5.00

-10.00

Godrej Infosys
Retail Industry: Big Bazaar, Future Group vs. DMart

Big Bazaar, A retail entity of Future Group


Organised Retail was 9% of total retail in FY 2016; Will touch 12% by FY 2020.
Ranked 14th in the Most Trusted Brand survey done by Nielsen and ET
Speed and agility Primary drivers for customer service
Difficult to replicate store network
Follow EDLP, with time pricing and bundling discounts (Wednesday bazaar,
festive discounts)

Improve Customer Experience Operation Parameters (FY16-17)


Big Bazaar as a brand started with Customer Entry ~300million
providing quality products at an Avg Ticket Size is INR 1155
extremely affordable price. As the Avg Value Per Piece is INR 143
chain grew, price, along with best 12% same store sales growth
range and depth of merchandize National footprint 235 stores
became the primary customer in 124 cities with 10.18 million
proposition sq. ft. space
Big Bazaar is moving towards 3.4% expansion in EBIT with
becoming a service-led retail ROCE of 16.9%
brand that provides an Market Cap Rs 27000+ Cr
unparalleled shopping experience
to every segment of customers.
Retail Industry: Big Bazaar, Future Group vs. DMart

D-Mart Good Products Great Value


Reached market cap of more than Rs 75000 Cr
D-mart bagged profits of Rs 483 crore on the back of Rs 11,881 crore in
revenue
Limited assortment as compared to Reliance Fresh or Big Bazaar
Thrives on low margins, 3-step business model similar to Walmart
Very high inventory turnover ratio ( 14.9 compared to BigBazaars 4.9)
It has never closed, moved or shut down a store

Cautious Approach Operation Parameters


Radakishan Damanis D-Mart is Store Ownership Model D-
extremely cautious in the way it Marts rental costs are only 0.2%
operates and expands of total sales compared to 8% for
Sales Mix largely limited to food Biyanis Future Retail
and groceries; Stayed away from National footprint 131 stores in
high-end electronics, jewellery, 10+ states with 4.06 mn sq. ft.
watches space of retail business area
Avoid creating private labels or 39% YoY increase in revenues,
brands 52% YoY increase in PAT (FY16-17)
Big Bazaar opening stores in malls, Sales growth from the same store
D-Mart limits its opening only on 24%
location and shopper density
OBSERVATIONS

Business groups are deeply rooted in the social and economic; and account for significant part of value-add generation
in India

Knowledge-based hierarchies in business groups result in intangible assets which are complementary for productivity

Group affiliation has some beneficial effect on the financial performance of member firms

Business Groups have lesser issues with commitment to large investments (Non-productive) than independent firms
THANK YOU

REFERENCES
www.brcommunity.com/articles.php?id=b659
www.wiggo.com/mgmt8510/Readings/Readings3/venkatraman1986amr.pdf
www.emeraldinsight.com/doi/full/10.1108/09555340310455191
www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1554.pdf?b0e881e57b91b5bfd2b6e0382c06b619
Company Fillings , Annual Reports of Maruti Suzki India Ltd., Tata Motors & other firms
Wikepedia, Company Websites
www.moneycontrol.com

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