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 - – competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, increasing transportation and logistics costs, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, technology disruption,
there is increasing trade war between United States & China, increasing household debt because of falling income levels, 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 -
Diverse revenue streams
– Exit Tpg is present in almost all the verticals within the industry. This has provided firm in Shriram Transport Finance case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
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.
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.
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.
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.
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.
Superior customer experience
– The customer experience strategy of Exit Tpg in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Exit Tpg is one of the leading recruiters in the industry. Managers in the Shriram Transport Finance are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Learning organization
- Exit Tpg is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Exit Tpg is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Shriram Transport Finance Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Exit Tpg is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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 -
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.
High bargaining power of channel partners
– Because of the regulatory requirements, Gennaro Bernile, Anand Shankar, Rahul Rajani suggests that, Exit Tpg is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Exit Tpg supply chain. Even after few cautionary changes mentioned in the HBR case study - Shriram Transport Finance, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Exit Tpg vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Shriram Transport Finance HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Exit Tpg has relatively successful track record of launching new products.
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.
Products dominated business model
– Even though Exit Tpg has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Shriram Transport Finance should strive to include more intangible value offerings along with its core products and services.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Shriram Transport Finance, is just above the industry average. Exit Tpg needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Interest costs
– Compare to the competition, Exit Tpg has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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 -
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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Exit Tpg can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
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.
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.
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.
Leveraging digital technologies
– Exit Tpg can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Exit Tpg can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Shriram Transport Finance, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
Using analytics as competitive advantage
– Exit Tpg has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Shriram Transport Finance - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Exit Tpg to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 -
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.
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.
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.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Exit Tpg is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Exit Tpg with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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 .
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
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.