Case Study Description of IndusInd Bank: Residual Income Valuation
In early 2013, an analyst at an insurance company was examining whether IndusInd Bank, a mid-size bank in India, would be a good investment for the insurance fund's equity portfolio. From January 2008 until March 30, 2013, the bank's stock had tripled under its new management. The analyst wondered whether deploying funds in the bank would yield any significant returns. He decided to use the available financial information and the residual income valuation method to forecast the company's stock price. Varun Dawar is affiliated with Institute of Management Technology, Ghaziabad. Rakesh Arrawatia is affiliated with Institute of Rural Management. Saumya Ranjan Dash is affiliated with Indian Institute of Management Indore.
Swot Analysis of "IndusInd Bank: Residual Income Valuation" written by Varun Dawar, Rakesh Arrawatia, Saumya Ranjan Dash, Arit Chaudhury includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Indusind Residual facing as an external strategic factors. Some of the topics covered in IndusInd Bank: Residual Income Valuation case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the IndusInd Bank: Residual Income Valuation casestudy better are - – challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs,
geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of IndusInd Bank: Residual Income Valuation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in IndusInd Bank: Residual Income Valuation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Indusind Residual, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Indusind Residual 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 IndusInd Bank: Residual Income Valuation can be done for the following purposes –
1. Strategic planning using facts provided in IndusInd Bank: Residual Income Valuation case study
2. Improving business portfolio management of Indusind Residual
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 Indusind Residual
Strengths IndusInd Bank: Residual Income Valuation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Indusind Residual in IndusInd Bank: Residual Income Valuation Harvard Business Review case study are -
Highly skilled collaborators
– Indusind Residual 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 IndusInd Bank: Residual Income Valuation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Indusind Residual
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Indusind Residual does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Indusind Residual is one of the most innovative firm in sector. Manager in IndusInd Bank: Residual Income Valuation Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Finance & Accounting industry
– IndusInd Bank: Residual Income Valuation firm has clearly differentiated products in the market place. This has enabled Indusind Residual to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Indusind Residual to invest into research and development (R&D) and innovation.
Learning organization
- Indusind Residual 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 Indusind Residual is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in IndusInd Bank: Residual Income Valuation Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Indusind Residual has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Strong track record of project management
– Indusind Residual is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Indusind Residual has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Indusind Residual to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Indusind Residual is one of the leading recruiters in the industry. Managers in the IndusInd Bank: Residual Income Valuation are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Indusind Residual is present in almost all the verticals within the industry. This has provided firm in IndusInd Bank: Residual Income Valuation 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.
Training and development
– Indusind Residual has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in IndusInd Bank: Residual Income Valuation 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.
Successful track record of launching new products
– Indusind Residual has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Indusind Residual 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.
Weaknesses IndusInd Bank: Residual Income Valuation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of IndusInd Bank: Residual Income Valuation are -
Low market penetration in new markets
– Outside its home market of Indusind Residual, firm in the HBR case study IndusInd Bank: Residual Income Valuation needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Indusind Residual is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Indusind Residual needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Indusind Residual to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Indusind Residual has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High cash cycle compare to competitors
Indusind Residual 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 operating costs
– Compare to the competitors, firm in the HBR case study IndusInd Bank: Residual Income Valuation 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 Indusind Residual 's lucrative customers.
Lack of clear differentiation of Indusind Residual products
– To increase the profitability and margins on the products, Indusind Residual needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study IndusInd Bank: Residual Income Valuation, in the dynamic environment Indusind Residual has struggled to respond to the nimble upstart competition. Indusind Residual has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As IndusInd Bank: Residual Income Valuation HBR case study mentions - Indusind Residual takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the IndusInd Bank: Residual Income Valuation 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 Indusind Residual has relatively successful track record of launching new products.
Skills based hiring
– The stress on hiring functional specialists at Indusind Residual 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.
No frontier risks strategy
– After analyzing the HBR case study IndusInd Bank: Residual Income Valuation, 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 IndusInd Bank: Residual Income Valuation | 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 IndusInd Bank: Residual Income Valuation are -
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. Indusind Residual can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Indusind Residual to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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. Indusind Residual 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
– Indusind Residual 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.
Developing new processes and practices
– Indusind Residual can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Indusind Residual can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Indusind Residual 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Indusind Residual 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.
Building a culture of innovation
– managers at Indusind Residual 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.
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 Indusind Residual in the consumer business. Now Indusind Residual can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Indusind Residual 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.
Better consumer reach
– The expansion of the 5G network will help Indusind Residual to increase its market reach. Indusind Residual will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Indusind Residual can use these opportunities to build new business models that can help the communities that Indusind Residual operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Threats IndusInd Bank: Residual Income Valuation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study IndusInd Bank: Residual Income Valuation are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Indusind Residual 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.
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. Indusind Residual 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.
Regulatory challenges
– Indusind Residual 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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology acceleration in Forth Industrial Revolution
– Indusind Residual has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Indusind Residual needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study IndusInd Bank: Residual Income Valuation, Indusind Residual 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 .
Environmental challenges
– Indusind Residual 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. Indusind Residual can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing wage structure of Indusind Residual
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Indusind Residual.
High dependence on third party suppliers
– Indusind Residual high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Indusind Residual with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Indusind Residual 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.
Shortening product life cycle
– it is one of the major threat that Indusind Residual is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of IndusInd Bank: Residual Income Valuation 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 IndusInd Bank: Residual Income Valuation 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 IndusInd Bank: Residual Income Valuation 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 IndusInd Bank: Residual Income Valuation 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 IndusInd Bank: Residual Income Valuation 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 Indusind Residual needs to make to build a sustainable competitive advantage.
