Case Study Description of Shriram Transport Finance
In December 2012, the stock of Shriram Transport Finance Company (STFC) had just breached the a‚¹750 mark, signifying an appreciation of close to 80 per cent for the calendar year of 2012. Texas Pacific Group (TPG), the global private equity firm, had invested in STFC at a time when the share price was hovering around a‚¹100. As was the case with most private equity firms, a successful exit from an investment was of paramount importance for TPG in order to reap handsome returns. In the course of charting the exit path from an investment, private equity firms had to consider several critical issues including exit structure, timeline for exit, and regulatory hurdles. There were three usual choices of exit routes: initial public offering, trade sale, or secondary sale. Each of the exit routes had its own advantages and disadvantages. Was this the right time for TPG to exit STFC? If yes, which option should TPG pursue? Gennaro Bernile is affiliated with Singapore Management University. Anand Shankar is affiliated with Singapore Management University. Rahul Rajani is affiliated with Singapore Management University.
Swot Analysis of "Shriram Transport Finance" written by Gennaro Bernile, Anand Shankar, Rahul Rajani includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Exit Tpg facing as an external strategic factors. Some of the topics covered in Shriram Transport Finance case study are - Strategic Management Strategies, Financial management, International business and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Shriram Transport Finance casestudy better are - – talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, increasing energy prices, there is backlash against globalization, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models,
there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Shriram Transport Finance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Shriram Transport Finance case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Exit Tpg, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Exit Tpg operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Shriram Transport Finance can be done for the following purposes –
1. Strategic planning using facts provided in Shriram Transport Finance case study
2. Improving business portfolio management of Exit Tpg
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Exit Tpg
Strengths Shriram Transport Finance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Exit Tpg in Shriram Transport Finance Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Exit Tpg in the sector have low bargaining power. Shriram Transport Finance has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Exit Tpg to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Exit Tpg digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Exit Tpg has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Organizational Resilience of Exit Tpg
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Exit Tpg does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Exit Tpg are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Sustainable margins compare to other players in Finance & Accounting industry
– Shriram Transport Finance firm has clearly differentiated products in the market place. This has enabled Exit Tpg to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Exit Tpg to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Exit Tpg has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Exit Tpg has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Highly skilled collaborators
– Exit Tpg has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Shriram Transport Finance HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Exit Tpg has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Shriram Transport Finance Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Effective Research and Development (R&D)
– Exit Tpg has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Shriram Transport Finance - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Finance & Accounting field
– Exit Tpg is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Exit Tpg in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Exit Tpg is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Gennaro Bernile, Anand Shankar, Rahul Rajani can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy in the Shriram Transport Finance Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses Shriram Transport Finance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shriram Transport Finance are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Shriram Transport Finance, it seems that the employees of Exit Tpg don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High cash cycle compare to competitors
Exit Tpg has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Low market penetration in new markets
– Outside its home market of Exit Tpg, firm in the HBR case study Shriram Transport Finance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Exit Tpg is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Exit Tpg needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Exit Tpg to focus more on services rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Exit Tpg has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Exit Tpg is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Shriram Transport Finance can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring
– The stress on hiring functional specialists at Exit Tpg has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Shriram Transport Finance has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Exit Tpg 's lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Shriram Transport Finance, in the dynamic environment Exit Tpg has struggled to respond to the nimble upstart competition. Exit Tpg has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Exit Tpg products
– To increase the profitability and margins on the products, Exit Tpg needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study Shriram Transport Finance, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Opportunities Shriram Transport Finance | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Shriram Transport Finance are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Exit Tpg can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Exit Tpg has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Manufacturing automation
– Exit Tpg can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Low interest rates
– Even though inflation is raising its head in most developed economies, Exit Tpg can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Exit Tpg to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Buying journey improvements
– Exit Tpg can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Shriram Transport Finance suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Building a culture of innovation
– managers at Exit Tpg can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Creating value in data economy
– The success of analytics program of Exit Tpg has opened avenues for new revenue streams for the organization in the industry. This can help Exit Tpg to build a more holistic ecosystem as suggested in the Shriram Transport Finance case study. Exit Tpg can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Exit Tpg in the consumer business. Now Exit Tpg can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Exit Tpg can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Exit Tpg can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Exit Tpg to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Exit Tpg to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Exit Tpg can use these opportunities to build new business models that can help the communities that Exit Tpg operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Exit Tpg in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Threats Shriram Transport Finance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Shriram Transport Finance are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Exit Tpg.
Consumer confidence and its impact on Exit Tpg demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Shriram Transport Finance, Exit Tpg may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Exit Tpg will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Environmental challenges
– Exit Tpg needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Exit Tpg can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Exit Tpg business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Exit Tpg in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Exit Tpg needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Exit Tpg in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Exit Tpg can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Regulatory challenges
– Exit Tpg needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Exit Tpg can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Exit Tpg can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Shriram Transport Finance .
Weighted SWOT Analysis of Shriram Transport Finance Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Shriram Transport Finance needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Shriram Transport Finance is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Shriram Transport Finance is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Shriram Transport Finance is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Exit Tpg needs to make to build a sustainable competitive advantage.