A.T. Kearney issue papers highlight the research, proven methodologies, frameworks, and unique points of view on timely topics that help our clients deliver immediate results and build a long-term advantage.
Greater and more intense competition and global value chains are leading to substantial shifts in what is expected of the supply chain function. It is no longer enough to simply connect supply and demand at optimal cost and service levels. Today’s business leaders are demanding more from their supply chains, including competitive advantage.
Coupled with India's unique operational challenges, such expectations make the role of a supply chain professional extremely complex. Yet there are examples of organizations across industries that have managed to move beyond the constraints in India to develop supply chains that lead to competitive advantage. How do they do it? What are the challenges, and how do they get beyond them? How do they define supply chain success?
To answer these questions, the Council of Supply Chain Management Professionals (CSCMP) in India and A.T. Kearney embarked on a first-of-its-kind joint study. Based on A.T. Kearney’s experience helping organizations in India and one-on-one conversations with C-level executives and senior-level supply chain professionals in the country, this paper highlights seven supply chain best practices—or themes—that successful organizations across India are using to gain competitive advantage.
Collaborate to integrate the value chain virtually. Collaboration can be at three levels: across functions, across the value chain, and beyond the value chain. For collaboration to work, it must be led by the dominant player, based on a win-win partnership with shared goals, and focused on the long term with clear markers for success.
Replace one-size-fits-all with a tailored approach. Organizations in India are more diverse than ever. So taking a one-size-fits-all supply chain approach does nothing more than compromise segment-specific needs.
Plan more frequently and across multiple horizons. Supply chain managers must be able to see the big picture while also focusing on the details. The key to doing both is in frequent and multi-horizon planning sessions: weekly reviews for short-term planning, and regular reviews for long-term planning.
Implement pull replenishment across the value chain. To deal with pressure on costs and services, leading supply chain organizations implement pull replenishment strategies across their entire value chains from customers to vendors.
Actively manage complexity. The best supply chain strategies integrate complexity management in all planning processes to prune that which is non-value added and capitalize on that which is value added.
Let business needs drive technology and automation choices. Technology and automation are integral to overcoming challenges in India. Leaders employ technology and automation thoughtfully and tailor it to their business needs.
Reconfigure the supply chain organization to include business management capabilities. The shift in supply chain expectations calls for a fundamental rethinking of the capabilities required of the supply chain. Today's organizations need to have a suite of business management skills in addition to their supply chain skills.Close
Could overtaxing harm telecom—an industry essential to economic growth and progress?
Increasing taxes on mobile phones is a short-term solution at best and a potential long-term inhibitor of economic growth, according to A.T. Kearney’s latest analysis of mobile sector taxation in Europe.
Indeed, the European Commission identifies telecommunications as a driver of economic progress. Countries that increase taxes and regulatory fees on this industry—as they have with tobacco and alcohol—not only discourage use of these products but also restrict investment and threaten growth in GDP, productivity, and jobs. This is as true for telecoms as it is for adjacent sectors such as banking and energy, where growth and innovation rank high on strategic agendas.
Telecom operators in Europe already contribute significant tax revenue to European governments—on average, 24 percent of the average price per minute (APPM). These contributions include the value-added tax (VAT), social security tax, corporate tax, regulatory fees, and telecom sector-specific taxes. Despite Europe’s fiscal crisis and the understandable search for more sources of funding, most countries have resisted sector-specific taxation on the mobile industry—just five have increased taxes on the mobile industry.
Our findings suggest that while the telecom industry should pay appropriate taxation and regulatory fees, a balance is needed between short-term revenue schemes and long-term strategies to support industry innovation and growth.Close
New revenues in Europe's telecom sector will only arrive with a significant commitment to deregulation to encourage success.
Telecommunications is one of Europe's most important economic sectors. Its largest companies have invested in building businesses in every continent. The services it provides—in particular the broadband and wireless infrastructure underpinning the Internet—are central to many other sectors of the economy and to the daily lives of almost every citizen. Its history of innovation and growth has been trumpeted as a major achievement of the European Single Market.
Yet financial performance has lagged of late, because of an imbalance between those investing in the Internet and those benefiting from its impressive growth; an erosion of the industry's pricing structures as over-the-top (OTT) substitutes bypass existing tariff structures that charge for voice and messaging bypassed by over-the-top (OTT) substitutes; a fragmented sector that restricts innovation and increases costs; and an adverse climate of regulatory price cuts, restrictions on commercial strategy, and high taxation of essential spectrum. On the positive side, demand for the industry's core offering—communications—is growing dramatically. The adoption of new services—from videoconferencing to social media—is accelerating in all demographic segments, powered by rapid technology evolution in network infrastructure, services, and devices.
Against this backdrop, A.T. Kearney has researched the health of the European industry, its plans and prospects to return to growth, and the contribution that the policy framework can make. We cooperated with the industry association ETNO, interviewing many of its members (and some operators that are not members) and discussing our findings with ETNO's leadership, but this report is an independent report that does not necessarily represent the views of ETNO or its members. In this report, we offer these findings as a contribution to an important debate on the future of the industry. This discussion is active in the policy arena: the European Commission has recently demonstrated an important realignment in its thinking on fibre investment and the related wholesale price regulation, and it will shortly review key market definitions and issue recommendations on non-discrimination and costing methodologies. All governments have been debating revisions to the treaty governing international communications via the International Telecommunications Union (ITU).
Many industry players are considering how their businesses must evolve to remain competitive in the marketplace and attractive to investors. Each company will pursue its own strategy, and inevitably some will do so more successfully than others, but each of them, we believe, must address three broad strategic imperatives:
- Break out of the deflationary price spiral and move to pricing models that better reflect the value for the customer
- Raise the effectiveness of innovation and launch new services that can compete with global champions
- Move beyond the pursuit of incremental efficiency gains and pursue the path of consolidation and transformation common to maturing, capital-intensive industries
For each of these, the policy framework in Europe must evolve—not to disappear nor to substitute the work of management and investors, but to eliminate roadblocks and create a level playing field.Close
As healthcare providers feel the squeeze they are turning increasingly to analytics for solutions.
Gone is the comfortable era of near-zero price elasticity when a well-negotiated fee schedule and a heavy patient volume were enough to guarantee healthcare providers a comfortable existence. As payers, both public and private, require demonstrable value for their money, and cost containment becomes the order of the day, pressured providers around the developed world are increasingly deploying value-driven analytics, a systematic, business-led framework designed to build out the necessary skills, processes, and infrastructure for a successful business data analytics capability that can lead to transformative improvements in healthcare praxis, economics, and outcomes. The paper discusses the three practical guidelines governing the operating model of a value-driven analytics capability: identifying the value drivers of the business; developing a complete, mutually reinforcing set of capabilities to extract insights; and quantifying the value to the business.Close
How can India minimize the environmental impact of its auto industry while maintaining growth?
Car sales in India are going through the roof as the country continues to grow and prosper. More people with money means more goods and services and more cars to transport them. While prosperity is a welcome addition to the India economy, the impact on the environment is not. In fact, the environmental challenge raises some important questions: How can India minimize the environmental impact caused by the transportation sector without impacting the country's growth momentum? Which automotive technologies are environmentally friendly? How can Indian automakers sell "green" cars at a price that will suit cost-conscious Indian consumers?
To answer these questions, A.T. Kearney and the Confederation of Indian Industry (CII) conducted a joint study to identify and prioritize key actions for cost-effective green mobility. This report explores various options available to India to move toward a green mobility paradigm with lower carbon dioxide equivalent (CO2e) emissions—and therefore less impact on global warming—and lower emission of regulated pollutants such as particulate matter (PM), monoxides of nitrogen (NOx), carbon monoxide (CO), and unburned hydrocarbon (HC).
This report examines the opportunities available for a more cost-effective, greener mobility future for the consideration of all stakeholders: industry, government, and consumers.Close
Government-industry collaboration can improve weapon system performance.
Many large sustainment programs use performance-based logistics (PBL) strategies to buy a level of maintenance performance rather than specific parts or components, and the arrangements have brought great benefits and savings to defense programs. Yet when funding is cut, programs can struggle to find solutions to maintain system performance at required levels, because so much of the day-to-day management responsibility has been outsourced.
However, the tools for strong sustainment results are there, even in a time of austerity. By ensuring that they are shooting for the same goals and have a solid view of program performance, the government and its partners can build a culture of trust and collaboration that brings long-term success for all parties.
For large military programs to succeed over the long term, the government and its contractors have two priorities: understand each other’s definition of success, and maintain a reliable view on program performance. These fundamentals lead to better collaboration and greater trust between the government and its suppliers and result in more informed and effective sustainment.
While the benefits will not come overnight, they do not require an organizational restructuring. Rather, the government and industry can pilot a small number of focused efforts quickly to make an immediate impact:
- Define the data required, not just what is provided.
- Take advantage of existing data sources.
- Bring change to operations.
- Employ the right business intelligence.
Daisuke Yabuki discusses the Bank of Japan's plan to make huge purchases of Japanese government bonds.
How global food companies capture diverse opportunities.
Global food companies, from seed producers to quick service restaurant (QSR) operators, from agrochemical enterprises to branded food manufacturers, have built business empires in the developed world. For the largest among them, developed markets typically account for as much as two-thirds of their business turnover. But as growth slows across much of Europe and North America, attention has turned to emerging markets.
The record is clear. We know that replicating business models, products, management systems, and processes used in developed economies does not work in emerging countries and that success belongs to those that identify the singularities of each market and adapt accordingly. Our client experience, coupled with our examination of many of the best-known cases of profitable internationalization among food manufacturers and QSR operators, has led us to develop a six-point framework to assess different food markets and their specific needs. The paper discusses these points in more depth:
- Know and address consumers’ health and nutrition needs.
- Cater to shoppers’ tastes and preferences.
- Remember that volume trumps margin.
- Drive the trend in packaged food consumption.
- Innovate, adapt, and (re)configure to solve supply chain issues.
- Understand and comply with regulations.
The explosive growth of China's hospitality market will continue unabated over the next decade.
China's hotel industry has experienced meteoric growth. Some analysts suggest the market is reaching its saturation point, but when compared with hotel penetration rates in mature markets, China, with just four rooms per 1,000 capita, appears low. We believe that over the next 10 years hospitality in China will become a $100 billion industry with 6.3 million rooms and reach eight 8 rooms per 1,000 capita.
The paper outlines five trends that could make or break hospitality players looking to capitalize on the growth in China, and offers key takeaways for each:
- Growth will vary across segments.
Key takeaway: There is ample room to grow and new entrants will emerge.
- Consolidation will occur in the high-end and mid-scale segments.
Key takeaway: Capture mid-scale and high-end business now, before further consolidation.
- Travelers are becoming more sophisticated.
Key takeaway: Adapt your concepts, offerings, and economics.
- New models and formats.
Key takeaway: Innovate and prepare.
- 5. Government continues to shape the market.
Key takeaway: Develop a clear government-relations strategy.
- Growth will vary across segments.
Palm oil has become a crucial ingredient in a wide range of products. But the future lies in new oils.
A major global commodity, palm oil has found its way into a staggering array of snacks, confectionery goods, moisturizers, shampoos, margarine, and even biofuels.
Palm oil's rapid rise has come at a cost. The most hospitable climates are situated within 20 degrees of the equator, the same region where tropical rain forests flourish and carbon-rich peatlands abound. Indonesia and Malaysia alone comprise more than 10 percent of the world's remaining tropical rain forests, yet some predict that if current trends continue, Indonesia's surviving rain forests will almost entirely disappear by 2022. Deforestation is especially noticeable on Borneo, an island more than twice the size of Germany.
Some users of palm oil have partially shifted their demand to other available oils, but the impact of these oils is limited due to their higher cost, lower efficiency, poorer health profile in some applications, and lower versatility compared to palm oil.
New oils, then, must be a part of the solution. They can change the game by revolutionizing the way we address sustainability challenges, but the question of which new oil will prevail and what benefits can be realized remains unknown.
We therefore call upon three stakeholders that could provide a step change in advancing new oils:
- Create a forum that commits to enabling technical feasibility and successful commercialization of new oils.
- Issue regulations and provide incentives to promote the development and use of new oils.
- Create awareness and promote demand for new oils from buyers and end consumers.
Evaluation metrics may look as if they tell the story but can be misleading.
It is widely recognized that a significant percentage of merger and acquisition (M&A) transactions fail to deliver value to shareholders. What goes wrong? How is it that acquisitions on average seem to create negligible returns? It can be tempting to blame poor merger integration for the meager returns, and certainly the execution of an integration can have a major impact on whether or not a transaction is regarded as successful. However, it may also be useful to consider if the deal was worth doing in the first place. Maybe some transactions should never have happened.
A.T. Kearney joined forces with the United Kingdom's Investor Relations Society to understand exactly which metrics and analyses get the most emphasis in evaluating proposed M&A transactions, and in this paper we discuss our findings. The research introduced a surprising insight: The impact on earnings per share (EPS) is by far the most emphasized metric used to evaluate proposed M&A transactions between public companies.
With this in mind, we look at two common and related myths surrounding EPS and demonstrate why these are at best unhelpful and at worst potentially misleading.Close
In this follow-on to A.T. Kearney's maturing consumer study, a Consumer Goods Forum expert roundtable examines how to tackle the needs of an aging population.
The human population is aging at a truly stunning pace. Within 35 years, there will be more people alive older than 60 than there are people younger than 16. By the 2050s, well over one-third of the adult populations of Spain, Germany, Japan, Italy, and Russia will be older than 60. For the rest of the 21st century, the fastest-growing consumer group in the world will be people over the age of 60. This demographic earthquake—“agequake”—requires us to rethink the nature of our social contracts and our pension and health systems—not to mention the way we design our products and our stores, the way we hire and train and educate people, and the way we think of our careers, our family structures, and our communities. As birthrates fall and people live healhier longer, aging consumers will work long and amass more wealth than ever before.
This paper examines the findings of a recent A.T. Kearney study of maturing consumers and presents insights from an international roundtable of industry and academic experts convened in October 2012 to discuss solutions specific to members companies of The Consumer Goods Forum.
The study of aging consumers revealed several conclusions:
- Shopping and spending habits change with age. Older people enjoy shopping, not only as a necessity but also as a social and leisure experience.
- Promotions are scrutinized, thoroughly. 43 percent of study participants say they will buy promotional products only if they believe the quality is comparable to their usual purchase, 34 percent say they buy goods on promotion whenever they can, and 22 percent say promotions have no impact on them.
- Technology use is extensive among older consumers. The use of technology is widespread, with 69 percent of respondents having both fixed-line and mobile phones.
- Health benefits and the environment are not key concerns. Surprising to some, a larger proportion of mature consumers do not seem to focus on a product’s health benefits or environmental footprint.
- Advertising is not very appealing. Many in our study express a negative view of advertising, finding it too loud and too focused on young people and rock music.
The CGF's expert roundtable emphasized several major themes:
- Whatever you do, do not call them or think of older people as “the elderly.”
- Aging consumers want to be respected.
- Career patterns are going to change.
- Aging consumers are not a homogenous group.
- CGF member companies have a unique role in bringing people together.
- It is in the best interests of CGF members to address these issues.
- This agequake is an urgent issue.
Shared services will play a major role in the next chapter of India's growth story.
India has become a global hub for shared services, serving many global companies in search of lower costs, more efficient processes, and business transformation. Indian companies, however, have not emphasized shared services, preferring to focus primarily on top-line growth. This is changing, however, as Indian companies see shared services as an important step in enabling growth and innovation and driving efficiency.
The classic scope of services delivered by shared services will need to change as organizations increasingly demand a shared services model, even for core activities. This trend will require new business models, stronger provider-user relationships, and transformational contracts.
There will be a number of challenges in achieving this transformation in the role of shared services in India. This will require a greater collaborative effort by customers, service providers, and the government.
Within this context, the Confederation of Indian Industry (CII) and A.T. Kearney worked together to provide a perspective on the current state of shared services in India. This paper highlights the benefits, identifies drivers for growth, and pinpoints the imperatives for key stakeholders, including shared services users, providers, and government. We hope this paper encourages a deeper discussion about the role that shared services can play in the next chapter of India's growth story.Close
Curves are magnificent things. Think of the Jaguar E-Type or the Sydney Opera House. Mergers have curves, too—synergy curves.
For mergers, there is a window of opportunity for capturing the most benefits. A synergy curve defines this window and, ultimately, the success or failure of a merger. The result of months of preparation, planning, and implementation, the curve shows the accumulation of synergies over time. In successful mergers synergy curves are defined in the early stages and used as a driving force for the integration. A merger with a sense of urgency is far more likely to reach its full potential and by plotting a synergy curve during the planning of the merger senior executives can see the speed at which synergies could be delivered and track the planned accumulation of synergies over time. Plotting a curve also helps clarify the deal's strategic rationale, fundamental to maximizing synergy delivery. As the deal progresses through announcement and toward close, the curve's accuracy can be refined as more data is made available. A final curve takes shape as the synergies are tested through the development and sign-off, and once completed, can be used throughout the integration to benchmark, plan, and track the synergy delivery rate. In this paper, we bring together our experience and data from many mergers to describe the types of synergy curves for various integration strategies, and highlight the typical time frames for delivering synergies at an overall level and at the level of individual functional work streams. Used correctly, the synergy curve is the fundamental tool for successful synergy delivery and, to the CEO, the cornerstone of a successful merger.Close