XTRAPower - John Molson MBA International Case...
Transcript of XTRAPower - John Molson MBA International Case...
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XTRA Power ALEX BILL
BAILEY GLENN
KYLE JANSEN
MICHAEL PETER
June 2013
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The Decision Making Process
Increase market share and capacity
Provide New Services
Buy Ba-eries from
Customer
Marke8ng Plan
Conven7onal Channels
Online Adver7sing
Supply Chain Network
Retailer Rela7onships
Create Distribu7on Network
DLSP
Expand Produc8on
XTRA Auto
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Takeaways
Addi7onal Considera7ons
Implementa7on
Recommenda7on
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Agenda Current Situa7on
Analysis
Alterna7ves
Recommenda7on
Implementa7on
Metrics
Addi7onal Considera7ons
Q & A
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The QuesFon Asked
How can we best configure our supply chain?
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Electricity In India
Unreliable Inconsistent flow
Power cuts Demand Exceeds supply
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BaIery Market in India
Rs 200 Billion
Growing by 25% yearly un7l 2015
45%
45%
10%
Industry Structure
Organized Unorganized Imports
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Indian BaIery Industry Lead Storage
Ba-ery Industry
Automo7ve Ba-ery 64%
Original Equipment
Replacement 70-‐75%
Industrial Ba-ery 36%
Telecom USP/Inverter Power & Railway
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Lead Acid BaIeries
70-‐75% of Ba-ery Market • Performs during power cuts (high temperatures)
Gap between demand and supply • Par7cularly in summer
Lead is 60-‐70% of ba-ery cost • India imports 99% of their lead • Gap between demand and supply • 3x India’s produc7on level (1,642,000 MT)
Fragmented Market
• Exide Industries • Amara Raja Ba-eries • Luminous Power Technologies
• Su-‐Kam Power Systems
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New Standards in Manufacturing
Recycling
Ba-ery Collec7on
Transport
Storage
Recycling
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The Indian Consumer BATTERY DECISION
Brand Credibility
Retailer Recommenda8on
Price
Warrant
Aker Sales Service
TECHNOLOGY USE
Internet Access 45%
Smartphone Adop7on 30% and Growing
Mobile Social Home
Internet Is Expensive
Public Wifi Hotspots
SMS Payments
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RevisiFng the QuesFon
How can we best configure our supply chain?
Reality Check
How can we best compete in a highly fragmented, underserved market?
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SWOT Analysis
Strengths Weaknesses
Opportuni7es Threats
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SWOT Analysis STRENGTHS
• Demand is higher then current supply
• Diversified ba-ery offerings • Long standing rela7onships with retailers
• Ability to recondi7on ba-eries
WEAKNESSES
• Unable to meet current demand
• Small market share
• High inventory holding costs
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SWOT Analysis OPPORTUNITIES
• Rapidly increasing demand for lead acid ba-eries
• Expand recondi7oned ba-ery opera7ons
• New ba-ery technology
THREATS
• Highly fragmented market
• Compe7tor bringing new ba-ery technology to the market
• Current compe77on
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Our Company
XTRA Power Group
XTRA Power Auto Industries
XTRA Power Energy Systems
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What do we currently offer our customer?
Our Products • Inverters • Solar lanterns • Uninterrup7ble Power Supply (UPS) systems
• Ba-eries • Open shielded • Heat shielded
33%
62%
5%
PROPORTION OF BATTERY REVENUES
Open Shielded Heat Shielded Recondi7oned
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What we need for our BaIeries
Lead
• Terminals • Plates
High quality polypropylene
Plas7c container 75%
23%
2%
COST PERCENTAGE Lead Polypropylene Other Materials
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Our Margins
0%
50%
100%
150%
200%
250%
300%
Heat Shielded Ba-eries Open Shielded Ba-eries Recondi7oned Ba-eries
% Margin
Margin for Retailers Our Margins
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Where do our customers buy our products?
Retailers • Only touch point with the customer
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Our Retailers 72 Retailers in New Dehli
51 Retailers in Northern India
123 Retailers total
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Retailer RelaFonship
• Wait for ba-eries to be taken away and recondi7oned
Unhappy about
incurring holding costs
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Costs Breakout
46%
4%
49%
Direct Costs
Raw materials Packaging
Logis7cs 52% 47%
1% Overhead
Employee Salaries
U7li7es
Marke7ng Costs
Direct Costs Overhead
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Projected Sales of Current Ops ('000s INR) 2012 2013 2014 2015 2016 2017 2018
Heat shielded ba-eries
93,678
89,957
112,446
140,558
168,669 199,030 228,884
Open shielded ba-eries
100,055
126,246
157,808
197,259
246,574 308,218 385,272
Recondi7oned ba-eries
14,294
17,834
22,293
27,866
34,832 43,540 54,425
Others 119,978 126,000 132,300 138,915 145,861 153,154 160,811
Total
328,005
360,037
424,846
504,598
595,936 703,941 829,393
% Change 10% 18% 19% 18% 18% 18%
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PotenFal Sales Supply Chain Sales
Current 18,000 Open 8,100 Heat 9,900
DLSP + GI 38,160 Open 17,172 Heat 20,988
Total Replacement 43,200 Open 19,440 Heat 23,760
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Pricing DistribuFon Suppliers Lead Time Price (avg) Price DifferenceAvani Int. 7 715Dolphin Power 6 915Galaxy Electricals 6 200Haley Power 4 220Transport (per kg/km)Cretto 12 1.6DLSP 4 2.35
28%
10%
47%
Suppliers Lead Time Price (avg) Avg. Holding CostAvani Int. 7 715 11.52
Dolphin Power 6 915 12.63 10%Galaxy Electricals 6 200 2.76
Haley Power 4 220 2.03 -‐27%Transport (per kg/km)
Cretto 12 1.6 0.04DLSP 4 2.35 0.02 -‐51%
Estimated WACC 12%(in rupees)
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CriFcal Success Factors Cri8cal Success Factor What We Have Sustainable Compe88ve
Advantage?
Profitability 24% No.
Distribu7on Currently long lead 7mes No.
Innova7on/ Recondi7oning Capability
Ba-eries perform under extreme opera7ng condi7ons/ Technology
Yes.
Mee7ng the Customer’s Needs
Unable to meet current demand
No.
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IntroducFon of AlternaFves Renew opera7ons with Cre-o and focus on current ba-ery produc7ons
Select a new supplier and focus on current ba-ery produc7ons
Extend recondi7oned ba-ery opera7ons
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AlternaFve 1 – Renew OperaFons with CreIo and ConFnue with Current baIeries PROS
• Established rela7onship with supplier
• Li-le opera7onal change
CONS
• Unable to meet the increasing demand
• Will not sa7sfy current retailers
• Con7nued expensive inventory holding cost
• Will not op7mize our opera7ons
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AlternaFve 2 – Select a New Supplier and Focus on Current BaIery Products PROS
• Be-er lead 7mes
• Could decrease the gap between supply and demand
• Sa7sfy retailers complaints
CONS
• Complete restructuring of the supply chain
• Temporary loss of sales during transi7on period • Could take 1 year for all changes to take effect
• Increased overhead from new employees
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AlternaFve 3 – Extend RecondiFoned BaIery OperaFons PROS
• Market has extremely high margins
• Take advantage of high demand
• Increase market share
CONS
• Difficult to obtain used ba-eries
• Nega7ve customer perspec7ve of used ba-ery quality
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EvaluaFon of AlternaFves Cri8cal Success Factor
Renew Opera8ons with CreYo
Select a New Supplier
Recondi8oned BaYery Opera8ons
Profitability Moderate High High
Distribu7on Low Moderate Moderate
Innova7on/ Recondi7oning Capability
Low Moderate High
Mee7ng the Customer’s Needs
Low Moderate High
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The Recharge Plan
The Recharge Plan
Provide New
Services
Buy Ba-eries from Customer
Marke8ng Plan
Conven7onal Channels
Online Adver7sing
Supply Chain
Network
Retailer Rela7onships
Create Distribu7on Network
DLSP
Expand Produc8on
XTRA Auto
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The Recharge Plan Timeline
Phase 1: Year 1
Phase 2: Years 2-‐3
Phase 3: Years 3-‐5
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New Services Phase 1 • Source pick up agents • Establish price for buying back ba-eries • Iden7fy new pick up loca7ons • Criteria: • Li-le to no leasing cost • Convenient to large popula7on • Low crime zones • Poten7ally current retailers
Phase 2 • Pick up loca7ons opera7onal
Phase 3 • Begin forming an R&D department
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MarkeFng to Retailers: Value Service and Price
Aware
Industry Shows Expand Sales Agent Territory
Know
Con7nue Training Advocate
Top Dollar for Rechargeable Ba-eries
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MarkeFng to Customers: Value Brand & Service
Aware
Wifi hot spots Pickup loca7on signs English & Hindi
Know
Website Infographics
Advocate
Bollywood Escala7ng Payment
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Supply Chain Management Phase 1 • Source transport op7on • Contract
• Nego7ate with DLSP
Phase 2 • Operate with DLSP • Source other suppliers for lead • Criteria: • Large manufacturing capacity • Low cost logis7cs • Inves7gate automa7on opportuni7es • Evaluate produc7vity of pick-‐up loca7ons
Phase 3 • Possible automa7on of ba-ery repurchasing process
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Expand ProducFon Phase 1 • Inves7gate leverage current manufacturing capability with XTRA Auto division
• Source new loca7on within current facili7es
Phase 2 • Establish transfer price • Begin producing more ba-eries from other division • Trade between two divisions
Phase 3 • Possible sourcing into other ba-ery produc7on facili7es
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Budget (in rupees) Addi8onal Costs Year 1 Year 2 Year 3-‐5
New Services 350,000 440,000 550,000
Supply Chain Mgmt 300,000 300,000 300,000
Expand Produc7on 200,000 250,000 315,000
Marke7ng 100,000 100,000 300,000
Total 950,000 1,090,000 1,465,000
Supply chain management relates to new revenue method and sourcing Produc7on expansion includes new costs of sourcing more expensive material and logis7cs costs 25% yoy growth expected
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Metrics • Double profits by end 5 Profitability
• Decrease lead 7mes • Decrease holding costs Distribu7on
• Double capacity in 5 years Innova7on/
Recondi7oning Capability
• Sell 36,000 units in 2018 Mee7ng the Customer’s Needs
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AddiFonal ConsideraFons Will lead ba-eries s7ll be relevant in upcoming years? • How will advancements in new technologies change the Indian market?
Could we reuse lead in our depleted heat shielded ba-eries?
Could we leverage our rela7onship with bike retailers?
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Risks and MiFgaFons
Risk
New ba-ery technologies
Failed nego7a7ons with DLSP
Probability
60%
25%
Mi7ga7on
Con7nued R&D
Maintain rela7onship with Cre-o
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Appendix The Decision Making Process
Takeaways
Agenda
The Ques7on Asked
Electricity In India
Ba-ery Market in India
Indian Ba-ery Industry
Lead Acid Ba-eries
New Standards in Manufacturing
The Indian
Consumer
Revisi7ng the Ques7on
SWOT Analysis
SWOT Analysis
SWOT Analysis
Our Company
What do we currently offer our customer?
What we need for our Ba-eries
Our Margins
Where do our customers buy our
products?
Our Retailers
Retailer Rela7onship
Costs Breakout Projected Sales of Current Ops
Poten7al Sales
Pricing Distribu7on Cri7cal Success Factors
Introduc7on of Alterna7ves
Alterna7ve 1 – Renew Opera7ons
with Cre-o and Con7nue...
Alterna7ve 2 – Select a New Supplier and Focus on Curren...
Alterna7ve 3 – Extend Recondi7oned Ba-ery Opera7ons
Evalua7on of Alterna7ves
The Recharge Plan The Recharge Plan Timeline
New Services
Marke7ng to Retailers: Value
Service and Price
Marke7ng to Customers: Value Brand & Service
Supply Chain Management
Expand Produc7on
Budget (in rupees)
Metrics
Addi7onal Considera7ons
Risks and Mi7ga7ons
Why switch?
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Why switch? Secure Supply Chain
Increase throughput to capture more market
More sales = more recondi7oning