0There are two dimensions to consulting

CONSULTING DIMENSIONS

Consulting

Process

Tools

Project structuring

Roles and responsibilities

Execution

Sequencing - Workplan

Client management

Frameworks

Analysis Tools

se

nio

rity

1Typical Elements of Consulting Process

Problem Structuring : Key Issue Identification

Team formation and Work-plan creation

Problem Solving

Data collection and analysis

Option generation and evaluation

Recommendation

Syndication

Implementation

The process is not sequential but iterative

2Frameworks and Tools

3 Porters Diamond

Porters Five Forces

Demand Estimation

Value chain analysis International Case Studies

GE-McKinsey BCG matrix SWOT

Different frameworks / tools are available to address specific questions

Question Framework / Tool

TOOLS

Which industry will be globally competitive in the long term?

How attractive is this industry?

What is the demand likely to be?

How is the industry evolving

Which business to focus on? Which to divest?

Theory

4Different frameworks / tools are available to address specific questions

Question Framework / Tool

TOOLS

What are the broad

competitive strategies?

What are the opportunities

for growth?

What is the heterogeneity

of the market?

At what price to sell?

Which capabilities should

be developed / improved to

be competitive?

How much cost to cut to

survive competition / import

threat?

Which are my most

lucrative customers?

Discipline of market leaders

Generic strategies

Ansoff Matrix

7 degrees of freedom

Market segmentation

Pricing model

Benchmarking (on CSFs,

process, costs)

Cost curve

Import price parity

Pocket margin analysis

Theory

5Different frameworks / tools are available to address specific questions

Question Framework / Tool

TOOLS

What is the competitive

situation like?

What is the synergy benefit

/ value to be paid?

Which products to

manufacture to maximize

profits given resource

constraint?

Acceptability of a new

product in the market/

launch of existing product

in a new market

Company strategy during

changing market conditions

Competitive landscape

Incremental cash flow

analysis

Contribution per resource

analysis

4 Ps framework

3 C framework

Theory

6Different frameworks / tools are available to address specific questions

Question Framework / Tool

TOOLS

Which are the most

important factors affecting

value? By how much?

What does the strategic

roadmap look like

How should my

warehouses / factories be

geographically distributed?

Which of the capital item is

a better alternative?

What will be the impact of

this discontinuity?

Tornado Analysis

Three horizons

LP

Life cycle analysis

Butterfly analysis

Theory

Frameworks and Tools for Industry Analysis

8Value chain analysis can be used to understand industry evolution

CONTRACTING WORKFLOW - INDIA V/S INTERNATIONAL

Much bigger role for an AC contractor in India

Responsibility

Activity International India

Project planning Architect Architect

System design AC consultant AC contractor

Preparation and evaluation of tender documents

AC consultant AC consultant

System performance responsibility

AC consultant AC contractor

Sourcing equipment AC contractor from independent manufacturers

AC contractor is also a manufacturer

System integration and commissioning

AC contractor AC contractor

Service and repairs AC contractor and manufacturer AC contractor

VALUE CHAIN ANALYSIS Case

9Value Chain analysis can also be used to understand industry structure

VALUE CHAIN ANALYSIS Case

Content Origination

& GenerationAggregation

Marketing &

Distribution

Last Mile/

Exhibition

TV Production Houses Broadcasters Cable Terre

strial

DTH

Films Producers/Directors Studios Cinema Halls

VCD/DVD Cos. Video Stores/Retail

Music Artists/Recording

Studios

Music Companies Retail Internet

Radio Music Cos./Artists Radio Stations

Print

Newspaper Newspaper Houses

Retail / Web

Franchisee

Magazine

Books

Publishers

Internet Website/Niche

Players

Third Parties Telcos / ISPs Wire line/Wireless

Platforms

10

VCA can be used to identify gaps / strategic fit of acquisition candidate

CaseVALUE CHAIN ANALYSIS

AccessLD

Services

Intnl

Backbone

Dom Intnl Dom Fixed Mob Cable ISP Data Video

V A

ServicesContent

S/W, Apps

& Tech.

Aggr. Gen. Serv. Prod.

Player1

Player2

Player3

Player 5

Player6

Player 7

Player 4

VoiceSatcom

Player8

Significant Presence

Recent / Small Presence

Limited Geog. Presence WIP / Under Evaluation

11

Value chain can also be used to identify opportunities for efficiency improvement

VALUE CHAIN

Farms/

Fisheries/

Poultry

Semi-

Wholesalers

Wholesalers

Or

Consolidators

Manufacturers Clearing &

Forwarding

Agents

Distributors Traditional/

Organized

Retail

End

consumers/

Caterers

50

Selling

Price

Of Farmer

53 59

33.5Landed Cost of

Fresh Produce- 30.9

27.0 (17.0) 18.0 (18) X Y

Z A B C D

Domestic

Exports

FactoryWarehou

se

Distribut

or

Warehou

se

Retailer

Warehou

se

Consume

r

Port of

Origin

Port of

destinatio

n

Distribut

or

Warehou

se

Retailer

Warehou

se

Consume

r

Key

Stakeholders

Cost Build

(Org. Retail)

FarmsVillage

Mandis

Large

Mandis

Organized players demand

greater margins

Includes wastages,

transportation etc

12

Du Pont : PROFITABILITY

Du Pont analysis helps in understanding the drivers of profitability

ROCE

Asset or CE turnover(Sales / CE or Total assets)

Margins (%)(NOPAT / Sales)

Fixed Asset or Fixed

CE turnover

Working Capital

turnover

Receivables turnover

Inventory turnover

Payables turnover

Revenues

Costs

By regions / Products /

Customers

Material, Conversion

Benchmark Trend, Industry etc

13

Margins have improved, however current asset turnover has declined

ROCE (%)

(NOPAT / Capital Employed)

10.6% 11.6%

5.8%

11.0%

2000 2001 2002 2003

Margins (%)

(NOPAT / Sales)

3.6%

9.1%8.8% 7.0%

2000 2001 2002 2003

Total Asset Turnover

(Sales / Total Assets)

1.2 1.271.62 1.56

2000 2001 2002 2003

Fixed Asset Turnover (Sales

/ Net Fixed Assets)

1.51.7 1.7 1.8

2000 2001 2002 2003

Current Asset Turnover

(Sales / Net Current Assets)

5.85 5.41

30.24

12.98

2000 2001 2002 2003

1905

2370

2190

2025

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

14

Demand supply analysis helps understand industry situation

2396

875

525

420

365

11596

Capacity

Player 6

Player 5

Player 4

Player 3Player 2

Player 1

Overcapacity

till 07-08

Total Industry Capacity

Total

95% Utilisation

Domestic

consumption

Domestic demand supply situation (000 tonnes)

CAGR 4%

DEMAND - SUPPLY Case

15

Ansoff matrix is used to generate opportunity ideas for the client

IDENTIFICATION OF GROWTH OPTIONS

New Products / Services

Unrelated diversification

Maximize sales with existing customers

Redefine market to

attract new customers

Expand into new

geographical segments

New

Pro

ducts

Mark

et

Need

s

Pro

du

ct

Typ

e

Exis

tin

g

Pro

ducts

Served Unserved

Market Type

MARKET

PENETRATION

PRODUCT

DEVELOPMENT

MARKET

DEVELOPMENT

DIVERSIFICATION OPPORTUNITIES

(Indicative only)

New applications for existing products

New product development

Strategic alliances/ acquisition to become

dominant international player in chosen

niche

Diversify into new unrelated business

16

Seven Degrees of Freedom is a good framework to identify opportunities

DEGREES OF FREEDOMMaximisation of

existing

customers

versus

Step-outs

into new

competitive

arenas

Existing

competitive

arenaversus

Expansion

into new

geographies

Existing

geography versus

Acquisition and/

or consolidation

within current

industry

Existing

industry

structureversus

Innovation of

value

delivery

system

Existing value

delivery

system

versus

Innovation of

products and

services

Existing

products and

servicesversus

Attraction of

new customers

Theory

17

Seven degrees of freedom framework was used to identify strategic growth options for an

airline catering company

Innovation of products

and services

STRATEGIC OPTIONS FOR GROWTH

Step-outs into new

competitive arenas

Ground handling Full service restaurants (FSR), Quick service restaurants (QSR) Retail / institutional laundry

Expansion into new

geographies International expansion

Innovation of value

delivery system Frozen Foods

Options selected

through

discussions with

client team

Maximisation of existing

customers

Attraction of new

customers Private label to retailers Railway catering

Domestic expansion Airport lounges, restaurants / snack bars Airline laundry Cabin service

LCC Segment

Case

18

The BCG Matrix would help in capital allocation across the portfolio of businesses

OBJECTIVE

A large chemicals manufacturer, wanted assistance in capital allocation decisions across its existing

businesses

BCG Matrix was used to assist in capital allocation decisions across businesses

Over a period of time, the same matrix will be used to track the trajectory of each business

Case

19

Product Historical Growth% Future Growth %

A 3 4-5

B 0.1 3-4

C 5.5 5-6

D 8.5 5-7

E 2.0 2-3

F 4 3-4

G 6.0 6-7

H 6.0 6.5

PRODUCT GROWTH RATES

Case

20

Product Clients Share (%)

Leader/ No. 2 Player Share of Leader/ No.

2 player (%)

Relative Share

A 64 1 A 12 5.33

B 9 2 B 26 0.34

C 15 3 C 37 0.40

D 37 D 25 1.48

E 60 E 23 2.60

F 36 F 26 1.38

G 70 G 27 2.59

h 6 4 H 35 0.17

MARKET SHARE

Case

21

STPP, Salt and Soda Ash are the cash cows, Bi Carb is the star product

Relative Market Share1

Gro

wth

(%

)

BCG MATRIX (PAST GROWTH)

?

Low

Cash Cow

Star

High

Low

High

Dog

1.0

6%

What is the flaw in this portfolio analysis?

Case

22

Usage of future growth reveals that the company may not have any star business in future

Relative Market Share1

Gro

wth

(%

)

BCG MATRIX (FUTURE GROWTH)

?

Low

Cash Cow

Star

High

Low

High

Dog

1.0

6.5

Case

23

Similarly, the A/C matrix was applied to rationalize Company Xs portfolio

Low High

Low

High

Att

rac

tiven

ess

Capability

RAC-InstitutionalCommercialMiningTextiles

HE&PS

Furniture

Machine Tools

Contract

WC

Construction

PM VSGL

Pumps

MHBDLTR

VAI

Water Poll.

Priority Non priorityWatch / Improve

Chemicals

RAC-HH

ATTRACTIVENESS- CAPABILITY MATRIX Case

24

Pocket margin analysis helps in improving realisations without increasing list price

POCKET MARGIN ANALYSIS Theory

25

Build Up (Waterfall) analysis helps understand how an aggregate entity stacks up

WATERFALL ANALYSIS Case

510

38

3134

12

4126

53623

246

All figures in Rs.

Cr

Material Cost

Interest

on

Debtors5

Addressable

cost base

Raw Material2 Packing

Material

Utilities &

Other

variable

costs

S&D

Costs4Fixed

Manf.

Expenses

Corp.

Overheads

Manpower Interest

on

Inventory5

Manpower and

Other Fixed

Expenses

Sales and

Distribution Costs

Conversion Costs

Interest on

RM/WIP

Inventory3

26

678

659

685

713

741

771

802

597

826

615

804

775

740

722

'00-01 '01-02 '02-03 '03-04 '04-05 '05-06 '06-07 '07-08 '08-09

Incremental cash flows can be used to calculate value of opportunity

INCREMENTAL CASH FLOW

Expected Sales (000 tonnes)

Post-Deal

Production capacity

SA Qty (000 t)

Bicarb Qty (000 t)

18

3

Bicar

b

SA

Year 01-02

55

12

02-03

55

12

03-04

55

12

04-05

55

12

05-06

55

12

06-07

Likely value

created by the deal

~ Rs X Cr

54

0

07-08

30

0

08-09

Case

27

Exchange rate of Rs A per USD

Average Urea Price Taken as $ X / MT FOB Black Sea as the lower limit

NG Units Naphtha Units Fuel Oil Units Mixed Energy

Co

st

of

Pro

d, R

s. / M

T

IPP Max. Rs. x1/ MT ($

x2/MT)IPP Min. Rs. x3 / MT

($ x4/MT)

Prod. Capacity 000 MTPA

Pla

yer

1

Pla

yer

2

Pla

yer

3

Pla

yer

4

Pla

yer

5

Pla

yer

6

Pla

yer

7

Pla

yer

8

Pla

yer

9

Pla

yer

10

Pla

yer

11

Pla

yer

12

Pla

yer

13

Pla

yer

14

Pla

yer

15

Pla

yer

16

Pla

yer

17

Pla

yer

18

Pla

yer

19

Pla

yer

20

Pla

yer

21

Pla

yer

22

Pla

yer

23

Pla

yer

24

Pla

yer

25

EXPECTED CAPACITY

TO BLEED OFF

5.989 MMTPA

Applying ICC along with IPP(Import parity Price), we could infer how the industry will fare

in future

INDUSTRY COST CURVE Case

28

Michael Porter has defined five generic competitive strategies for businesses

GENERIC STRATEGIES Theory

Overall Low-Cost Leadership

Strategy

Broad Differentiation

Strategy

Focused Low-Cost

Strategy

Focused Differentiator

Strategy

Best-Cost

Provider Strategy

A Broad

Cross-

Section of

Buyers

A Narrow

Buyer

Segment (or

Market Niche)

Mark

et

Ta

rget

Lower-Cost Differentiation

Type of competitive advantage being pursued

29

Generic Strategies: Examples

Nirma

Wheel Lemon

Wheel Active

Ghari

Ariel

Surf Excel

Washing machine powders by local

manufacturers

Genteel

Ariel Matic

Surf Quick Wash

Type of Competitive Advantage

Lower Cost Differentiation

Mark

et

Targ

et Bro

ad

Ran

ge

Fo

cu

sed

/ N

ich

e

GENERIC STRATEGIES: WASHING POWDERS Examples

30

Competitive landscaping can help understand competitive intensity across segments

Current Scenario New Offerings/ Future Products

Tractor Trailer

M/HCV Truck

L/ ICVs

Buses

Pla

yer

1

Pla

yer

2

Pla

yer

3

Pla

yer

4

Pla

yer

5

Pla

yer

6

Pla

yer

7

Pla

yer

8

New

Pla

yer

1

New

Pla

yer

2

New

Pla

yer

3

New

Pla

yer

4

New

Pla

yer

5

Current Offering

Future Planned Offerings

Potential Offerings

New

Pla

yer

6

Pla

yer

9

Pick ups

COMPETITIVE LANDSCAPE Case

Pla

yer

1

Pla

yer

2

Pla

yer

3

Pla

yer

4

Pla

yer

5

Pla

yer

6

Pla

yer

7

Pla

yer

8

31

Benchmarking along CSFs help identify strengths and weaknesses

BENCHMARKING

Key Success

Factors

Track Record

Engineering &

Design Skills

Financial

Strength

Project

Management

Player

1

Play

er 2

Play

er 3

Play

er 4System

Providers

Comments

Most large players are at par.

System providers will not be able

to take up mega projects due to

financial constraints.

Companys performance has improved over last year, would

improve further with IT based

control.

High Low

Improvement Decline No Change

Co

mpa

ny

Companys achievement over

last year

Play

er 5

Player

6

Case

32

Internal Benchmarking across locations / time helps understand variations

BENCHMARKINGCase

0

500

1000

1500

2000

2500

Jalandhar Hoshiarpur Sangrur Bathinda Ropar Ludhiana Patiala Gurdaspur Amritsar

1

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6

2.8

3

Fuel Adjusted Economy Index

Energy Economy Index

Fuel Costs (Rs/Gcal)

Ludhiana emerges as the

most energy efficient plant in

terms of thermal energy

However, Sangrur is the

most cost effective plant due

to its fuel mix

33

Radialized passenger car aftermarket is most likely to generate demand for Kevlar

KEVLAR: NEAR TERM DEMAND FROM TIRES

49%

70%

90%

2%10% 11%

1% 2% 3%

'98-99 '01-02 '05-06

Passenger Cars LCVs MHCV

% of tires sold

Radialization (2006-07)

1979

JK introduces radial

tires in India

1995

Radials introduced by car

OEM market

Radials primarily in replacement

market for passenger cars

Performance improvement promised by radials resulting in faster switch in replacement segment

Understanding the

Industry evolution

to identify future

developments

Case: Demand Estimation in Tires

34

Like radialization, Kevlar tires likely to have initial demand from passenger car market

Passenger Car

Tires- Aftermarkets

Potential Kevlar

Demand

47,000 tons

~40 tons

Radialization ~90%

Quantity of Aramid/Tire ~9%

Penetration of Kevlar ~1%

2007 2010 2012

40

Potential Kevlar Demand (tons)

100

140

KEVLAR: NEAR TERM DEMAND FROM TIRES

35

Going ahead significant increase in Trucks & Buses radialization can be expected

INFLECTION POINT: INDIA 2010

Surge in

radialisation

once it reaches

9-11%

India will most

likely be in the

area of

inflection in

2010

Global trends indicate a sharp increase once 9-11% radialization is

achieved

Inflexion Area

Radialisation Trends

0

10

20

30

40

50

60

70

80

90

100

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2006 2010

Perc

en

tag

e R

ad

iali

zati

on

Western Europe Japan North America China Russia India

India

approaching

Area of

inflexion

Experience of

other markets

to estimate

trends

36

Demand for Kevlar has potential to grow beyond X tons by 2012

TYRE KEVLAR DEMAND

Kevlar PVs Demand Kevlar CVs Demand

2007 2010 2012

40

Potential Kevlar Demand (tons)

Overall

opportunity

100

140

Total Demand

Estimates from

past industry

evolution in Indian

market

Opportunity from

past industry

evolution in other

market