117 CHAPTER – 5 CASE STUDIES 5.1 Introduction This chapter presents the detailed survey conducted in two manufacturing organizations. These manufacturing organizations are actors in the context of present study. The objective of carrying out case studies was to critically analyze various facets of working of these organizations in general and processes followed for achieving strategic flexibility. These case studies were conducted in a phased manner starting from the evolution of the need for achieving the strategic flexibility with the help of dynamic capabilities in different manufacturing organizations. The present status, performance and financial indicators, process of dynamic capabilities achieved have also been studied. The detailed analysis of the case studies has been carried out and their results have depicted the industrial scenario regarding the research objective. The preliminary data provided by the survey has been validated by these case studies. To carry out case studies, the basis for selection of organizations has been discussed in Chapter – III, Design of the Study. Furthermore, the role of dynamic capabilities, effect of competitors’ strategies and environmental factors for achieving strategic flexibility have been collected and analyzed through case studies. The preliminary information provided by the survey has been validated by these case studies and the synthesis of the two will provide the required results. To carry out case studies, the basis for selection of organizations has been already discussed and presented in Chapter III, Design of Study. Accordingly, the case studies have been conducted at: • Hindustan Unilever Ltd. (HUL), Rajpura • Swaraj Mazda Ltd. (SML)), Ropar
Transcript
117
CHAPTER – 5 CASE STUDIES
5.1 Introduction
This chapter presents the detailed survey conducted in two manufacturing
organizations. These manufacturing organizations are actors in the context of present
study. The objective of carrying out case studies was to critically analyze various facets
of working of these organizations in general and processes followed for achieving
strategic flexibility. These case studies were conducted in a phased manner starting from
the evolution of the need for achieving the strategic flexibility with the help of dynamic
capabilities in different manufacturing organizations. The present status, performance
and financial indicators, process of dynamic capabilities achieved have also been
studied. The detailed analysis of the case studies has been carried out and their results
have depicted the industrial scenario regarding the research objective. The preliminary
data provided by the survey has been validated by these case studies. To carry out case
studies, the basis for selection of organizations has been discussed in Chapter – III,
Design of the Study.
Furthermore, the role of dynamic capabilities, effect of competitors’ strategies
and environmental factors for achieving strategic flexibility have been collected and
analyzed through case studies. The preliminary information provided by the survey has
been validated by these case studies and the synthesis of the two will provide the
required results.
To carry out case studies, the basis for selection of organizations has been
already discussed and presented in Chapter III, Design of Study. Accordingly, the case
studies have been conducted at:
• Hindustan Unilever Ltd. (HUL), Rajpura
• Swaraj Mazda Ltd. (SML)), Ropar
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5.2 Hindustan Unilever limited
Hindustan Unilever Limited (HUL) is one of the largest consumer
goods companies of India. HUL is owned by the British-Dutch
company Unilever which controls 67% majority stake in HUL. The major products of
HUL include foods and health, beverages, cleaning agents and personal care products.
HUL was formed in 1933 and was named as Lever Brothers India Limited and
later in 1956 was named as Hindustan Lever Limited through a merger of Lever
Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and United Traders Ltd. Presently HUL is
headquartered in Mumbai, India and has employee strength of over 16,000. It also
contributes to indirect employment of over 65,000 people. The company was renamed
as “Hindustan Unilever Limited” in June 2007.
Lever Brothers started its actual operations in India in the summer of 1888, when
crates full of Sunlight soap bars, embossed with the words "Made in England by Lever
Brothers" were shipped to the Kolkata harbor and it began an era of marketing branded
Fast Moving Consumer Goods (FMCG).
Hindustan Unilever's distribution covers over 2 million retail outlets across India
directly and its products are available in over 6.4 million outlets in the country. As per
Nielsen market research data, two out of three Indians use HUL products.
HUL is the market leader in Indian consumer products with presence in over 20
consumer categories such as soaps, tea, detergents and shampoos amongst others with
over 700 million Indian consumers using its products. Eighteen of HUL's brands
featured in the ACNielsen Brand Equity list of 100 Most Trusted Brands Annual Survey
(2012).
The company has a distribution channel of 6.3 million outlets and owns 35 major
Indian brands.
5.2.1 Business Initiatives and Strategy
The snapshot of the milestone achieved and the business strategy decisions are
delineated and presented in the Table 5.1.
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.
Table 5.1 The snapshot of the achieved milestone at HUL
Year Snapshot of achieved milestone by the company
1888 • Sunlight soap introduced in India.
1895 • Lifebuoy soap launched; Lever Brothers appoints agents in Mumbai, Chennai,
Kolkata, and Karachi.
1902 • Pears soap introduced in India
1903 • Brooke Bond Red Label tea launched
1905 • Lux flakes introduced.
1913 • Vim scouring powder introduced
1914 • Vinolia soap launched in India.
1918 • Vanaspati introduced by Dutch margarine manufacturers like Van den Berghs,
Jurgens, Verschure Creameries, and Hartogs.
1922 • Rinso soap powder introduced.
1925 • Lever Brothers gets full control of North West Soap Company.
1926 • Hartogs registers Dalda Trademark.
1930 • Unilever is formed on January 1.
1931 • Hindustan Vanaspati Manufacturing Company registered on November 27
• Sewri factory site bought.
1932 • Vanaspati manufacture starts at Sewri.
1933 • Application made for setting up soap factory next to the Vanaspati factory at Sewri;
Lever Brothers India Limited incorporated on October 17.
1934 • Soap manufacture begins at Sewri factory in October; North West Soap Company's
Garden Reach Factory, Kolkata rented and expanded to produce Lever brands.
1935 • United Traders incorporated on May 11 to market Personal Products.
1939 • Garden Reach Factory purchased outright; concentration on building up Dalda
Vanaspati as a brand.
1941 • Agencies in Mumbai, Chennai, Kolkata and Karachi taken over.
1943 • Personal Products manufacture begins in India at Garden Reach Factory.
1947 • Pond's Cold Cream launched.
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1951 • Shamnagar, Tiruchy, and Ghaziabad Vanaspati factories bought.
1956 • Three companies merge to form Hindustan Unilever Limited, with 10% Indian equity participation.
1957 • Unilever Special Committee approves research activity by Hindustan Unilever.
1958 • Research Unit starts functioning at Mumbai Factory.
1959 • Surf launched.
1962 • Formal Exports Department starts.
1963 • Head Office building at Backbay Reclamation, Mumbai opened.
1964 • Etah dairy set up, Anik ghee launched; Animal feeds plant at Ghaziabad; Sunsilk shampoo launched.
1965 • Signal toothpaste launched; Indian shareholding increases to 14%.
1966 • Lever's baby food, more new foods introduced; Nickel catalyst production begins; Indian shareholding increases to 15%. Statutory price control on Vanaspati; Taj Mahal tea launched.
1967 • Hindustan Unilever Research Centre opens in Mumbai.
1968 • Fine Chemicals Unit commissioned at Andheri; informal price control on soap begins.
1969 • Rin bar launched; Fine Chemicals Unit starts production; Bru coffee launched
1971 • Clinic shampoo launched.
1974 • Pilot plant for industrial chemicals at Taloja; informal price control on soaps withdrawn; Liril marketed.
1975 • Ten-year modernization plan for soaps and detergent plants; Jammu project work begins; Close-up toothpaste launched.
1976 • Construction work of Haldia chemicals complex begins; Taloja chemicals unit begins functioning.
1977 • Jammu synthetic Detergents plant inaugurated; Indian shareholding increases to 18.57%.
1978 • Fair & Lovely skin cream launched. 1979
• Sodium Tripolyphospate plant at Haldia commissioned.
1982 • Government allows 51% Unilever shareholding.
1984 • Foods, Animal Feeds businesses transferred to Lipton.
1986 • Agri-products unit at Hyderabad starts functioning - first range of hybrid seeds comes
out; Khamgaon Soaps unit and Yavatmal Personal Products unit start production.
1988 • Launch of Lipton Taaza tea.
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1991 • Surf Ultra detergent launched.
1992 • HUL recognized by Government of India as Star Trading House in Exports.
1993 • The erstwhile Brooke Bond India acquires the Kissan brand from the United Breweries Group, giving HUL an entry into the foods business.
1994 • HUL's largest competitor, Tata Oil Mills Company (TOMCO), merges with the company, the biggest such in Indian industry till that time.
1995
• HUL forms Unilever Nepal Limited, HUL and US-based Kimberley-Clark Corporation form 50:50 joint venture - Kimberley-Clark Lever Ltd. - to market Huggies diapers and Kotex feminine care products. Factory set up at Pune in 1995; HUL acquires Kwality and Milkfood 100% brand names and distribution assets. HUL introduces Wall's.
1996 • HUL and Indian cosmetics major, Lakme Ltd., form 50:50 joint ventures - Lakme
Lever Ltd.; HUL enters branded staples business with salt; HUL recognized as Super Star Trading House.
1996 • Merger of Group company, Brooke Bond Lipton India Limited, with HUL, with effect from January 1; HUL introduces branded atta; Surf Excel launched.
1997 • Unilever sets up International Research Laboratory in Bangalore; new Regional Innovation Centres also come up.
1998 • Group Company, Pond's India Ltd., merges with HUL with effect from January 1,
1998. HUL acquires Lakme brand, factories and Lakme Ltd.'s 50% equity in Lakme Lever Ltd.
2000 • HUL acquires 74% stake in Modern Food Industries Ltd., the first public sector company to be disinvested by the Government of India.
2002 • HUL enters Ayurvedic health & beauty centre category with the Ayush range and Ayush Therapy Centres.
2003 • Launch of Hindustan Lever Network; acquisition of the Amalgam Group
2004 • Launch of "Pureit" water purifiers
2006 • Brookefields food operations moved to Mumbai
2007 • Company name formally changed to Hindustan Unilever Limited after receiving the approval of share holders during the 74th AGM on 18 May 2007
2010 • HUL head office shifted from the landmark Lever House, at Backbay Reclamation, Mumbai to the new campus in Andheri (E), Mumbai.
2012
• HUL’s state of the art Learning Centre was inaugurated at the Hindustan Unilever campus at Andheri, Mumbai.
• Customer Insight & Innovation Centre (CiiC) was inaugurated at the Hindustan Unilever campus at Andheri, Mumbai.
• Won the Golden Peacock Occupational Health and Safety Award for 2012 in the FMCG category for its safety and health initiatives and continuous improvement on key metrics
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5.2.2 Company Facilities
Hindustan unilever owns 45 main units and has over 50 third party units in India
with a range of 65 brands spanning 20 distinct categories such as food and healthcare,
soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee,
and water purifiers etc. Its main portfolio includes leading household brands such as
anti-marks during the year. The company has successfully applied its internal R & D in
launching improved versions of Lux and Hamam soaps, including a new variant on Lux
launched with improved consumer benefits. Lux liquid hand wash and body wash were
also introduced in the market along with a range of facial cleansing products of Pond’s,
Fair & Lovely, Vaseline and Dove.
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The company also launched new variants of Dove hair care range, including
shampoo and conditioner, in order to meet the needs of different segments of the hair
care market. The company re-launched the clear shampoo with a separate range for men
and women. Pepsodent Germicheck was also re-launched with some major
improvements during the year. Fire-Freeze, a new dual-sensation extra-freshness variant
of Closeup was introduced during the year. R&D in the areas of foods and beverages
made a significant contribution last year to the Company’s foods & beverages portfolio
by delivering a number of innovations in the market. Among them were an exciting
range of instant soups under Knorr with the great taste of soups and crunch of croutons.
Unilever’s flagship brand Fruttare made with real fruits was launched in the frozen
dessert segment.
5.2.6 SWOT Analysis at HUL
Table 5.2 SWOT Analysis at HUL
Strengths Weaknesses
• Number one on FMCG. • Following same policies in all the plants
throughout the world. • High emphasis on safety and quality. • Very strong in-house R&D base. • High commitment from top management. • Wide range of products to satisfy the needs
of customers. • Large network of vendors. • Large number of sales outlets.
• Influence of strong worker union. • HUL has to procure some raw material from
other countries like china, so there are fluctuations in the price of raw material.
• Frequent transfers of employees.
Opportunities Threats
• Rising demand of cosmetic products in the
country. • People are becoming more and more health
conscious so there is an increasing demand of health products.
• The company has started exploring rural areas.
• Growing competition in the market • Reducing profit margins due to increased
competition. • Retaining the trained manpower as a
challenge for the company. • Competitors like ITC Nestle, P&G, Himami
who are manufacturing specific range of products.
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5.2.7 SAP Analysis at HUL
Table 5.3 SAP Analysis at HUL
Situation Process
• Strong R & D base with R & D labs in Mumbai and Bangalore. and a team of 750 people
• The company is manufacturing a large variety of products.
• Many other MNCs have entered in this business, giving strong competition to HUL
• Manufactures are offering large verities of products at competitive prices.
• Leadership in technology, innovation and R&D for increased localization.
• Production capacity of the company has increased manifold over the years.
• Increased demand of health products and cosmetic products in the market.
Human Resources • Organizing various programmes for imparting
training to the employees. • Providing multiple forums for learning of
employees. • Strengthening four key areas: building a robust
and diverse talent pipeline, enhancing individual and organizational capabilities for future readiness, driving greater employee engagement and strengthening employee relations further through progressive people practices at the shop floor.
R & D, Innovation and Technology • R & D team working in the areas of Health and
Hygiene, Laundry, Household Care, Skin Care, Water Purification, Beverages, Frozen Dessert and Naturals.
• Bringing new and innovative products in the market and increasing customer base.
• Introducing new verities of products to retain market share.
• Technology up gradation by addition of CNC’s, packaging machines, automation, bio mass based boilers etc.
Alliance • Creating joint Marketing plans with reputed
organizations. • Entering into strategic sourcing with third party
units across the country.
Actors
• Chairman Board of Directors as the key policy maker.
• Managing Director and executive directors to manage day-to-day operational affairs.
• Participation of all the employees to achieve organizational goals and objectives.
• Skilled trained and flexible workforce. • Vendors to HUL for their suggestions and
participation in cost saving and sourcing. • All the customers for their feedback and
suggestions. • A large number of sales outlets
5.2.8 Learning Issues Based upon the detailed study and analysis of HUL, following learning issues have
emerged:
Growing competition
• Manufacturing industry has experienced an unprecedented degree of change in
the recent years due to highly uncertain environmental dynamism. Organizations
need to develop flexibility at strategic level in order to cope with the external
pressure posed by frequent changes. Any organization not adapting these
changes may experience decline in profit and market share.
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• An organization may face high degree of competition from competitors, having
better ability to respond to market changes and equipped with better capabilities.
• The case of HUL has revealed that when it came to intense fight with its
competitors, it was mainly due to better capabilities and very high flexibility to
fulfill customer’s requirements which took the company out of blues.
Pace of change
• Apart from having high level of capabilities to change, the change must be at an
adequate pace. The organization must be able to proact or react quickly to
market conditions, customer demands and competitors action. The detailed study
of HUL reveals that the company is fast enough to adopt these changes. This is
evident from frequent launching of new products and improvements in existing
products, The company has extended its base in Health and Hygiene, Laundry,
Household Care, Skin Care, Water Purification, Beverages, Frozen Dessert and
Naturals in the recent years.
• With the help of superior and very high innovative capabilities, strong in house
R & D base, better human resources and technology advancements, the company
has been able to keep the pace with highly dynamic market conditions.
Strategic flexibility dimensions
• The company has a very strong and highly developed vendor’s base that
provides high level of flexibility in supply chain.
• The company has witnessed large number of expansion projects in the past
decade. These expansions can be attributed to strategic sourcing, large number
of vendors and strong human resource base. The high level of manufacturing
flexibility can also be attributed to these factors as well as high level of
innovative capabilities.
• Strong in house R & D base as always helped the company to achieve higher
levels of new product flexibility. The company is always able to launch new
products quickly as soon as the need arises.
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5.2.9 Action
The business initiatives taken by HUL depict their success story against
competitors. The reduction of market share is unavoidable due to tough competition, but
still HUL has been able to be a market leader in the areas like Health and Hygiene,
Laundry, Household Care, Skin Care, Water Purification, Beverages. The strong in-
house R&D base, implementation of information and communication technology in a
phased manner, strong support of vendors and suppliers has helped the company to
achieve different dimensions of strategic flexibility, quality, productivity, cost cutting
and achieving short delivery time of new or modified products. The company needs to
further enhance its technological competence and continually employ VA/VE
techniques in house and at vendors place to further improve the various business
performances.
5.2.10 Performance
Major factors of importance for achieving strategic flexibility that need to be
closely monitored in the case of HUL with equal importance are enhancing
technological capabilities, strengthening human resources, expanding the vendor
network and encouraging in-house R & D.
The level of strategic flexibility dimensions has been depicted in figure 5.2
Figure 5.2 Level of strategic flexibility at HUL
02468
10
Manufacturing Flexibility
Market Flexibility
Supply Chain Flexibiity
New Product lexibility
Expansion Flexibility
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5.3 Swaraj Mazda Ltd.
Swaraj Mazda Limited was established in 1983. SML is a
Chandigarh, India based automobile company, owned by the Sumitomo Corporation of
Japan and Punjab Tractors Limited of India, with a technical collaboration
with Isuzu and Mazda of Japan. Sumitomo upped its stake in the company in 2009 by
purchasing all of Punjab Tractors remaining shares, raising their stake to 53.5%
Production began in 1985.
The company is a leading manufacturer of light commercial vehicles like trucks,
buses, ambulances, police personnel carriers, water tankers and special vehicles. It
exports its products to countries like Nepal, Zambia, Bangladesh, Kenya, Tanzania,
Ghana, Ivory Coast , Rwanda Syria and Jordan etc. It has a dealer network of about 128
dealers spread throughout India. Swaraj Engines and Punjab Scooters are its associate
companies.
Swaraj Mazda Ltd. entered a new Technical agreement with Isuzu Motors, Japan
in the year 2006. In 2009, Swaraj Mazda started to roll out luxury buses and medium-
duty trucks powered by Isuzu Engines from a new plant in Punjab. The company has
plans to build multi-axle trucks, tractor units and refrigerated trucks within the next
three years. They are currently marketed under the Swaraj Mazda Isuzu brand. In
addition, Swaraj Mazda Ltd. is moving to offer the Isuzu D-Max pickup.
Former associate company Punjab Tractors Ltd. manufactured agricultural
tractors and combine harvesters under the Swaraj brand name before selling 64.6%
to Mahindra Tractors. In 2009, Mahindra and Swaraj Mazda settled a dispute over the
use of the Swaraj name, allowing Swaraj Mazda to continue using the name for only
two more years.
In a board meeting of the Company held on October 1, 2010, the Board of
Directors decided to change the name of the company from Swaraj Mazda Limited
to SML ISUZU Limited.
5.3.1 Business Initiatives and Strategy
The snapshot of the achieved milestone and the business strategy decisions are
delineated and presented in the Table 5.4.
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Table 5.4 The snapshot of the achieved milestone at SML
Year Snapshot of achieved milestone by the SML
1983 • Swaraj Vehicles Ltd. incorporated (in July).
1984 • Joint Venture and Technical Assistance concluded between Punjab Tractor Ltd., Mazda Motor
• Punjab Tractors offloads 15% of equity stake in favour of Sumitomo Corporation, Japan in June.
• Mazda Motor Corporation offloads 15% of equity holding in favour of Sumitomo Corporation,
Japan in August.
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2006
• Permission from Government for new manufacturing facilities at existing site obtained in January.
• Dividend rate lowered to 55% due profit decline Technical Assistance
• Agreement with Isuzu Motors signed in June. Aggregate vehicles sale crosses 1,00,000 in August.
• Construction of Buildings for vehicle expansion and new Bus Body Plant taken up in August.
2007 • Dividend rate maintained at 55% Trial Production of Isuzu Bus LT134 taken up in July.
2008 • Dividend rate maintained at 55% Highest-ever Profits in the history of the Company.
• Launch of Ultra Luxury Buses in July.
2009 • Sumitomo raised its stake in the Company to 53.5% by buying entire equity holding of Punjab
Tractors Ltd. in the Company in January.
2010
• During the financial year 2009-10 company had issued 3,984,946 equity share of Rs. 10 each at a
premium of Rs. 190 per share on rights basis to the Equity shareholders of the company in the ratio
of 11 equity shares for every 50 Equity shares held on the record date and raised Rs. 7,969.89 lacs
for financing of Expansion project, repayment of loan taken from Allahabad Bank (for Expansion
Project) and for general corporate purposes.
2011 • Swaraj Mazda renamed as SML ISUZU LIMITED
5.3.2 Business Performance of SML
In fiscal year 2011-12, commercial vehicle (CV) industry achieved sales of
9,02,000 vehicles representing growth of 19% over the previous year. Out of this, SML
Isuzu segment (5.0 ton to 12.0 ton GVW) accounted for 1,27,300 and represented 14%
of aggregate volumes.
SML has sold a total of 13,646 vehicles during last year against previous year
sale of 12,870 vehicles. Together with sale of spare parts, net revenue for 2011-12 was
Rs. 1042.2 crores as shown below:
(Rs. In Crores)
On sale of Vehicles 968.1
On sale of Spare Parts etc. 74.1
Total Net Revenue 1042.2
The snapshot of the performance of the company and trends in various performance
indicators are listed in figure 5.3.
5.3.3 Dynamic capabilities at SML
Technology, innovation and R&D
SML gets its technology from Isuzu Ltd. Japan. SML has developed in-house R & D
facilities.
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Total Expenditure of SML on Research & Development during 2011-12:
(Rs. in lakhs)
(a) Capital 101.35
(b) Recurring 863.40
(c) Total 964.75
(d) R&D expenditure as a %age of total turnover 0.93%
Earnings per share (In lacs) Profit after tax (In crores)
Sales Volume Share price (In Rs.)
Figure 5.3 Business performance of SML during last five years
The in-house Research & Development facility at SML has been duly
recognized by Department of Scientific & Industrial Research (DSIR), Govt. of India
since 1987. Major R&D achievements made by the company include:
0
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30
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2007 2008 2009 2010 2011 2012 2013
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• Production and launching of S7 model buses on 5100 mm wheel base on SML
platform.
• BS IV compliant engines production and adoption in various models on SML
platform.
• Production of IS12 T model cowl chassis on ISUZU platform in vehicle plant.
• Up gradation of Super 12 model truck on SML platform and adoption of 310
diameter clutch in place of 260 diameter.
• Development of new differential lock rear axle option for 4 wheel drive vehicles
on SML platform
• Design and development of prototype of new, front engine 10.5 meter bus model
IS12B on ISUZU platform.
• Chassis assembly as well as bus body for new 12 meter rear engine bus with
higher capacity of power line designed and prototypes developed on Isuzu
platform.
• Company has commercially launched air-conditioned luxury buses
manufactured at its new bus body plant, after obtaining clearance from
Government testing agencies and extensive test marketing.
Human Resources
SML has always strived to attract the best talent, provide refreshing work
environment, retain achievers and out-performers and inculcate in the employees loyalty
for the organization. Raising employees' involvement in the decision making process
and grooming them for leadership positions has been an ongoing process.
During 2010-11, Company has accomplished a four years wage agreement in
order to bring about further improvement in work culture with increased thrust on
productivity quality and cost reduction. Employee strength at SML as on 31st March,
2012 was 1098.
Alliances
SML has major technical alliance with Isuzu Motors. The company has also
entered major alliances with Peugeot and renault of France, Volkswagen and Man of
West Germany, Leyland of U.K., TAM of Yugoslavia and Isuzu Duihatsu and Mazda of
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Japan for technological collaborations. While evaluating the relevant technologies of
these countries, the major criteria was to select a vehicle powered by a four cylinder
diesel engine, capable of providing maximum pay-load capacity best suited for local
conditions and fuel efficient thus ensuring best value for money to the Indian consume.
5.3.4 SWOT Analysis at SML
Table 5.5 SWOT Analysis at SML
Strengths Weaknesses
• A very strong in house R & D centre. • Full technology transfer from Isuzu Ltd.
Japan. • Large number of developed vendors
connected online with the company. • In house development of IT software like
SAP. • Internal brainstorming of employees.
• Bus body manufacturing is outsourced. • Some costly parts and components are
imported from other countries. • Steep rise in the steel price. • No model up gradation of products like Sartaj,
Samrat and Super etc. for the past many years.
Opportunities Threats
• Easy availability of loans. • Rising demand of mini buses with
encouragement to tourism, education and healthcare by Government of India.
• Rising demand of vehicles with alternate fuels like CNG, LPG
• Govt policies like excise rate. • Reducing profit margins. • Rising market share of new entrants and small
scale manufacturers of agricultural equipment. • Rising price of diesel and potential threat of
decontrol of diesel prices. • Reducing profit margins. • Performance of Railways and movement in
freight rates are also key factors that have a bearing on demand for cargo carriers.
5.3.5 SAP Analysis at SML
Table 5.6: SAP Analysis at SML Situation Process
• Full technology transfer from Isuzu Ltd. Japan.
• SML is manufacturing a large variety of commercial and agricultural vehicles.
• A large number of competitors are offering similar products at competitive prices.
Human Resources • Recruiting skilled managers and technical
personals through campus placements from various reputed institutes.
• Raising employees’ involvement in the decision making process.
• Giving special emphasis on the multi-skilling
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• Better road conditions giving better economy.
• There has been a steep rise in the sales of commercial vehicles in the country due to growth of tourism, health care industry and educational institutes.
• Abnormal rise in steel prices would lead to higher production cost
• Extra burden from new emission norms would also lead to higher production cost which may not be fully neutralized by revision in selling prices in view of intensely competitive operating environment.
• Quality improvement and cost reduction activities are some of the major initiatives taken by the Company to minimize its vulnerability to business risks.
of employees. • Encouraging team work culture through new
incentive policies. • Continuous education of employees.
R & D, Innovation and Technology • Upgradation of its R&D centre. • Establishment of new manufacturing facilities
for chassis and bus body fabrication • Allocating sufficient funds for in-house R & D.
Total R&D expenditure for the year 2012-2013 as a %age of total turnover was 0.93%.
• Continuously upgrading the existing technology and getting new technology whenever required.
• Changing the existing chassis design to meet the customer’s requirements.
• Updating and making modifications in the existing products to improve their performance as discussed earlier.
• Manufacture of factory-finish buses, ambulances, LCV’s, tankers and school buses..
Alliance • Technical alliance with Isuzu Motors. • Entering into strategic alliances with partners
across the globe for technology transfer and other strategic issues.
• Developing new ancillary units / vendors for the timely and smooth supply of components.
Actors
• Chairman and Board of Directors as key policy makers.
• Vice-chairman and Managing Director to manage day to day affairs.
• Managers and supervisors of the company.
• A sufficiently large network of vendors across the country.
• Skilled, trained and flexible workforce.
5.3.6 Learning Issues
Based upon the detailed study and analysis of SML, following learning issues have
emerged:
Growing competition
• In order to maintain profit, competitive advantage and market share in the
era of tough competition, organizations must be flexible and quick enough to
respond to changing market conditions
• The case of SML shows that the company is facing tough competition from
local level competitors like Sonalika, Standard Combines, and Preet Tractors
etc. apart from global level competitors like TATA, Ashok Leyland and
HMT. An organization may face high degree of competition from
competitors, having better ability to respond to market changes and equipped
with better capabilities.
138
Pace of change
• Apart from having high level of capabilities to change, the change must be at
an adequate pace. The organization must be able to proact or react quickly to
market conditions, customer demands and competitors action. The detailed
study of SML reveals that the pace at which the company reacts to the
market conditions is not as high as compared to its competitors. This is
evident from the fact that no up gradations have been made in some old
models like Sartaj, Samrat and Super for the past many years.
• However the company has its own R & D plant and it spends a considerable
amount on R & D every year which helps them to incorporate the technical
changes required in various models.
Strategic flexibility dimensions
• The company has a very high supply chain flexibility that can be attributed
to the fact that it has a very large and highly developed vendor’s base that
ensures the smooth availability of parts and components when required.
• The company has undergone many expansion projects in the recent times.
The most recent expansion was the starting of bus body plant near Ropar.
• Strong .In- house R & D at SML is very useful in improving the technical
features of their products. It also helps in doing innovations in the existing
products though the frequency of launch of new products is comparatively
low.
5.3.7 Action
The detailed study of SML indicates that the company has been experiencing
enormous amount of pressure due to number of factors like changing Govt. policies,
reduction in market share and small scale unorganized competitors eating its market
share.
5.3.8 Performance
Major factors of importance for achieving strategic flexibility that need to be
closely monitored in this case with equal importance are enhancing technological
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capabilities, attaining new product flexibility, maintaining and expanding the vendor
network and entering into strategic alliances with partners.
The level of strategic flexibility dimensions has been depicted in figure 5.4
Figure 5.4 Level of strategic flexibility at SML
Table 5.7 Comparison of strategic flexibility dimensions of the two manufacturing organizations
Organization HUL SML
Product Mix
Manufacturing of food products, beverages, cleaning agents and personal care products.
Manufacturing of light commercial vehicles like trucks, buses, ambulances and special vehicles
Type of Organization OEM OEM
Customer Focus Very high High
Emphasis on innovation Very high High
Investments in internal R & D Very high Very High
1 Dynamic Capabilities
I Use of Advance Technology +++ ++++
Ii Technological Capabilities ++++ ++++
Iii Innovative Capabilities +++++ +++
02468
10
Manufacturing Flexibility
Market Flexibility
Supply Chain Flexibiity
New Product lexibility
Expansion Flexibility
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Iv R & D Capabilities +++++ ++++
v Alliance Capabilities ++++ ++++
vi Human Resource Capabilities ++++ ++++
2 Level of Strategic Flexibility Dimensions
I Manufacturing Flexibility ++++ +++
Ii Market Flexibility ++++ ++++
Iii Supply Chain Flexibility +++++ +++++
Iv New Product legibility +++++ +++
v Expansion Flexibility ++++ +++
+ = not at all (very low), ++ = to some extent (low), +++ = to moderate extent (medium), ++++ = to a large extent (high), +++++ = to full extent (very high)
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