Mr Ashok Sethi
Chairman
Importance of TCM in
Service Sector
• Information Technology
• Hospitality
• Travel
• Transportation
• Media
• Entertainment
• Sports
• Healthcare
• Wellness
• Finance
• Retail / Ecommerce
• Insurance
• Professional Services
• Design
• Marketing & Sales
• Energy
• Education
• Asset or Facility Management
Service Industries – Importance to GDP Growth
2
Mckensey Insights
Service Sector contributed 54.3% to India’s GVA in 2018-2019
Service Sector growing at 7.5%
• The Essence of Strategy is choosing what not to do.
• Consumers tend to be more price sensitive if they are purchasing products that are undifferentiated
• Competition on dimensions other than price is less likely to erode profitability because it improves customer value
• When all competitors aim to meet the same needs or compete on the same attributes , the result is zero sum competition
• Quality differentials have a tendency to erode as an industry matures
Quotes by Michael E Porter
3
Porter’s Model of Generic Strategies
4
• Greater Value through lower prices or through greater perceived service for the cost paid.
• Cost a source of competitive advantage when market has standard service and low differentiation.
• Low Cost Service Providers could be result of:
1. Economies of Scale
2. High Productivity & Efficiency
3. Use of Technology
4. Service Model
5. Cost culture
• Differentiation a source of competitive advantage when service provides differentiated value like convenience, speed, reliability, reach, etc
• Great Examples …. Jio, Electricity utilities, Low cost airlines, logistic companies, , courier companies, IoT, etc
TUTOR 2U
Achieving Sustainable Value based Competitive Advantage
5
Air lines Industry
6
• Globalization
• Consumer Behaviour
• Low cost business model evolutions Develop Differentiation/Value
• Low cost technologies Develop Cost Leadership
• Innovations Bundle Services
• Country Policies
• M&BD Consulting 01.11.2016
Elements of Pricing Pressure Impacting Corporate Strategy
7
• Unmanned deliveries … use of drones
• Shared Economy through crowd sourcing … DHL tried
• RFID Tags and QR Codes
• AI Based delivery route optimizers
• Use of Points of Sales Devices… Personal Pick up
Cost Efficient Innovations driving Courier Industry Competitiveness
8
The NEWSPACES TNS EDIORIAL MAY 2018
• DTDC – Invests in cloud solution and plans to have hand held devices in all its shop floors by 2020. Adoption of technology reduces manpower by 8-9%
• Blue Dart – Comes out with most innovative collection system of Cash on delivery through Mobile Point of sale and digital wallets during demonetization period not to hamper its business.
• FedEx – In 2019 tries pilot using drones for delivery
• First Flight to ground Air Express Operations … 2007
• TCS signs a deal with India Post to transform country’s mail delivery system
• India Post – Speed Post .. One India One Charge… High Serviceability… Using Internet for tracking …. 1.4 crore packets per month … most economical
Çourier Companies – Competitive Focus
9
• Automation
• Robotics
• Wearable Technology / AI
• Drones
• Self Driving Vehicles
• Cloud Computing
• Internet of Things
• Block Chain
• Light Assets … Aggregation
Cost Efficient Innovations Driving Logistics Industry Competitiveness
10
The Business Journal
• CTC Freight Carriers Pvt Ltd …. Considered no 1 in 2018 – considered efficient network operations
• Flex Port – uses multi purpose cloud software and data analytics software
• Convoy – Founded in 2015 , Convoy is a network of truck drivers connected through a mobile App.
• Soft-wares like Turvo and Haven becoming popular for efficient operations.
• Safe Express invests in Logistics Parks for efficient operations under GST regime.
• Aggarwal Movers & Packers launched two mobile Apps – APML Suvidha & APML Sathi in 2018
• Indian Railways – Keeps Growing the convenience at minimal costs ( normally transport is subsidized business)
• Ola / Uber set the trend of low cost aggregators in logistics
Logistics Companies Differentiated Cost Efficient Focus
11
• Customers want banking to be easy
• Customers want options to how they bank
• Customers want responsive customer service
• Customer want to be better understood
• Customer want great value from their financial products and services
• Lower expense ratio, entry load and exit load in mutual funds
Financial Market & Banking Services -Customer Focus at No Extra Cost
Confidential 12
Microsoft Industry Blog 2017
HDFC launched – Missed Call Recharge, Humanoid Robot IRA, Biometric based Loan, Vahan Gyan, etc
• Web based management system can automate inventory management and decrease the costs
• E Commerce store has less overheads than physical store
• Efficient sales as you come to know your customer’s needs and likings
• No physical store required
• Expanding business is on marginal costs and does not require huge capexes
• E Commerce has better reach
• Running E commerce store is simple
Cost Advantages in E Commerce Industry
13
Mckensey Insights
Hotels … 3 star , 4 star , 5 star , Luxury …. Porter’s competitive strategy
Taj Group .. Zinger, Gateway, Vivianta, Taj Mahal
Restaurants … Grade 1, grade 2
Trend … Budget Hotels and Luxury Hotels – DLF with Hilton started budget brand Garden Inn
Franchisee Models
Management Fee Models
Cost & Differentiation Strategy in Hospitality Sector
14
Mckensey Insights
• Remote meter reading (AMR, Local area network technologies) – Smart meters, faster, no human intervention , eliminate commercial losses
• Bill variability – Analytics and AI based to deduct anomalies and attend complaints
• Billing and dispatch … On line … Go green
• Collection…. Wide choices
• Self healing grids
• GIS based design optimization
• Workforce on line optimization … SAP or other sales module
• GIS based asset inventory visibility
• CRM
• SMART DISCOMS
Electricity Distribution – Digitalization to be cost and time
efficient
Confidential 15
• “Pricing is actually pretty simple” … Customers will not pay literally a penny more than the true value
of the product – Ron Jhonson , Could not turn around J C Penny
• “Pricing is the exchange rate you put on all the tangible and intangible aspects of your business –
Value for Cash” – Patrick Campbell
• “ With the price of life these days , you’ve got to get everything for free you can” – Carl Rogers
• “The moment you make a mistake in pricing , you’re eating into your reputation or your profits” –
Katherine Paine
• “Price is what you pay. Value is what you get” – Warren Buffet
Pricing Strategy ---- Insight into Value for Money
16
Cost Relevance and Buisness Cycle
17
Article on net
Kondratiev Economic Cycle Wave - 1920
18
Innovations cause Improvements
Wikipedia
US Economic (Unemployment) Cycle – Cost Relevance
19
India’s Robust Growth Story & Cost relevance -
Market Share & Sailing through troughs in Economic Cycle
20World Bank Blogs & CEIC
• Economic downturns are impossible to predict and sure as sunrise. Build resilience now, because when the
sun comes up , you’d better be moving.
• Resilient cut costs ahead of the curve. By the first quarter of 2008, Resilient already had cut costs by 1%
compared with year before.
• The Resilient maintained and expanded their cost lead as the recession moved towards Trough.
• The Resilient primarily focused on operational effectiveness and aligning sales and administrative costs
movement.
• SOUTH WEST AIRLINES
• BIG BAZAR
• AMAZON
• INDIGO / SPICEJET
• TAJ BUDGET HOTELS
• DISCOMS – FRANCHISEES
Relevance of Cost Effectiveness – Business Longivity &
Health – Conclusion
21
Mckensey Insights
22