- Perspectives toward 2030
Joint study by A.T. Kearney and the German Association of the Automotive Industry (VDA) finds the truck manufacturing industry is on the cusp of major change.
These emerging economic clusters have jump-started industries and accelerated economic development in mature and developing markets worldwide.
With high infrastructure growth expected in India, the earthmoving and construction equipment (ECE) market is estimated to increase by 20 to 25 percent.
As years-old cost pressures maintain a chokehold on margins, Europe’s airlines can improve their performance and win market share.
The hospitality industry is on the cusp of a major market shift to Asia and Latin America.
Change is coming to the hospitality industry. Although Western countries still drive the global hospitality business, it won’t be long before emerging Asian and Latin American countries take the lead. Over the past three years, the number of available hotel rooms in the BRIC countries has jumped by almost 20 percent and we project that by 2025 there will be about 2 billion new middle-class consumers, most of them in Asia.
The major hotel chains are well aware of this trend, and virtually all have announced ambitious plans targeting emerging markets. However, virtually all those plans call for building upscale properties—basically ignoring the great potential that budget and mid-range customer segments offer. Thus the major chains face the great risk that strong local players will snatch the lion’s share of the high-profit mid-range customer segment—this is already happening in China. In other emerging countries, such as India and Indonesia, budget and mid-scale development opportunities still await the major chains.
The major chains can seize those opportunities by applying a three-pronged strategy for growth: choose the right countries and timing for development, manage scale effects locally, and adapt global brands and concepts to the local clientele. This paper takes a detailed look at each.Close
Home delivery of large-format products—appliances, furniture, electronics—falls short of today's expectations. Isn’t it time to deliver all the goods?
The market for home delivery of large-format products such as appliances, furniture, and electronics is poised for growth but structural hurdles are blocking retailers and home delivery service (HDS) providers from capturing that growth. A nationwide HDS integrator could resolve these issues—while also unlocking sizable savings and improving customer service—but it hinges on the willingness of retailers, HDS providers, and investors to work together. Each side faces unique challenges: For retailers, these include disagreement on “role” in home delivery, near-term cost pressures, and no immediate HDS option; for HDS providers lack of size and density, operational issues, and investment muscle are the biggest hurdles.
Similar to UPS and FedEx in parcel delivery, an integrator would be a national service provider offering an end-to-end (line haul and last mile) network with leading capabilities and technology to sustain best-in-class performance. In addition to unlocking and passing on significant cost savings to retailers large HDS integrator networks would unlock breakthrough scale and density while reducing coordination complexity. The value created by integrating will increase the pie for both retailers and HDS companies.Close
- Supply Chain Management Review, July–August 2013
With a market poised for growth and retailers generally uncertain about the need to differentiate through home delivery, a nationwide home delivery service integrator could resolve these issues while also unlocking sizable saving and improving customer service.
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.
- The right way to think about network optimization
Networks are complicated, and managing them requires an expansive strategic imagination.
The conventional way of looking at a network is through the direct-value lens: How much does it cost to run the network? Networks are a great deal more complicated than that, and managing them—or, more fittingly, optimizing them—requires an expansive strategic imagination.
No matter what kind of network one manages—hospitality, retailing, banking, leisure, telecommunications whatever it might be—once the network is built, it immediately begins its evolution. Even within a single local market, the network is evolving all the time. As the network goes through its life cycle, perspectives on sustaining it must change as well. The means for doing this are distilled in A.T. Kearney’s Network Optimization Tools, or KNOTs, comprised of eight elements, each focused on a strategic element of the network.
The English word knots translates as les nœuds in French, or nodes. This is an apt image for thinking about the symbiosis of the local and the networked—the balance of savoir-faire métier and savoir-faire local, of the collective intelligence of the network and the specific intelligence of the individual.
Think of KNOTs not as a laundry list of best practices used to build an optimal network but as electrons—each one discrete and at the same time interacting around the nucleus. A national bank develops financial products centrally, but the local branch manager manages the relationship with customers. The national bank maintains good relations with the regulators while the branch manager cultivates the good will of the town mayor. A manufacturer’s leverage with suppliers may be directly proportionate to its number of plants, yet procurement is not only about concentrated volume. It is also about expertise the manufacturer owns in a multitude of categories and brings to bear in the local nodes of its network.
A sobering counterexample is the flameout of video retailer Blockbuster, which channeled its energies into adding thousands of stores and tens of thousands of employees in North America and Western Europe only to be caught off guard by competitors such as Netflix and the rapid adoption of streaming video. In hindsight, Blockbuster’s history suggests an unbalanced emphasis on its real estate network and not enough on the customer experience. The result was catastrophic.
We organize our network nomenclature into three types: production networks, service networks, and distribution networks. La Poste, for example, is a production network in that it operates like a factory producing a product: collecting and distributing mail. Taxi companies, railroads, and airlines are other good examples of production networks. The nodes in these networks are more than just infrastructure. One must own the nodes or there is no business to manage. Closely related to the production network is the service network, typified by telecommunications and hospitality. A hotel network, for instance, cannot deliver a night’s sleep over the Internet. The consumption of its product is done at the local level even though each node in the network is supported by the expertise of the whole. The service is the network.
A distribution network is retail in all senses of the word, especially in its tailoring of products to meet the needs of local customers. Distribution networks are high touch and in certain ways are the easiest networks to think about in terms of nodes. The most familiar example, literally the most concrete, is a brick-and-mortar retail chain. Find a Wal-Mart, and its distribution center will not be very far away.Close
A combination of factors in India’s airline industry could result in a new generation of smaller, faster, more fuel-efficient passenger aircraft.
India’s airline industry has enjoyed tremendous growth in recent years, with its revenue passenger kilometers boasting a compound annual growth rate of more than 20 percent from 2004 to 2011. More importantly, India is poised for significant growth in air traffic. If India’s airlines are to make the most of this growing demand, they will need to expand their fleets. And while fleet growth is likely to occur across all aircraft categories, we believe aircraft designed for regional service (60–120 seats) will grow fastest.
Five key factors will drive the demand for regional aircraft in India over the next 15 years:
- There will be Increased demand for travel between regional hubs and tier 2 and 3 towns.
- There is limited aircraft handling capability at smaller airports.
- Demand for “long-thin” routes will increase.
- New short-haul aircraft will emerge.
- Favorable regulations continue to reign in India.
The combination of these factors leaves little doubt that the concept of regional routes flown by a new generation of short-haul regional aircraft is poised to take off in India.Close
A.T. Kearney's latest study on the courier, express, and parcel industry finds there is plenty to be optimistic about—mainly that growth should continue.
The courier, express, and parcel (CEP) industry in Europe saw growth in 2011 that was almost identical to the year before: Revenues grew 4 percent and volumes rose 6 percent for the second consecutive year. While this is good news for the industry, overall revenue per shipment declined further in 2011, underscoring the industry's continued margin pressures even as international shipments—which have a higher revenue per shipment—grow steadily. Our latest study of the CEP industry highlights its current state and future direction, discusses the four trends that are shaping it, and finds that there is plenty to be optimistic about—mainly that growth should continue.Close
How do the leaders stay consistently ahead of their markets while formerly thriving businesses fail?
What causes one leading company to stay consistently ahead of the market while another formerly thriving company flounders? The question is intriguing—and pressing, too, during these times of volatility. To explore the reasons and possible solutions, we conducted a study of industry champions. The result was a matrix that measures market success—a combination of growth in sales relative to market growth, and market share relative to the next largest competitor. Where BCG's matrix was created to help companies plan their portfolios, this matrix is used to chart a company's evolution and derive insights about its strategies. We call it the four seasons matrix:
- Spring. Companies that have outgrown their market but are not (yet) market leaders
- Summer. World leaders that have outgrown their markets
- Autumn. World leaders with below-average growth, gradually losing their positions
- Winter. Market followers that are growing more slowly than their market
We chose the axes of growth and market share because both metrics have a strong, proven relationship to long-term profitability and shareholder value. Combining those measures provides a solid basis for picking long-term winners.Close
Innovation is much more than a succession of grand themes and big ideas.
Not long ago, The Accor Group, a European leader in hotels, was looking for a way of distinguishing its brands among travelers by reimagining the decor of its rooms. Instead of a predictable experience, it wanted guests to enjoy almost infinite variation in room design. The challenges were many, not least that the physical layout of the rooms could not be altered. And another thing: The hotel chain wanted to pursue this innovative concept in branding while reducing its costs of construction and refurbishment by 50 percent.
A model existed for such an undertaking, and it came not from the hospitality industry but from the automotive business. Companies such as Volkswagen and PSA Peugeot Citroën are masters at design differentiation on a common platform. The Volkswagen Tiguan, for example, is built on the same platform as the Audi SUV. But the model of a common platform is not restricted to the factory floor. Rather, it is a process that extends across the value chain. It begins with a broad concept, continues with a multifunctional team overseeing design and development, building and testing prototypes, and finally rolling out a new automobile. The result is a kind of plug-and-play approach to building an entire car.
We applied the same approach to hotel rooms. Figure 1 illustrates our hotel value chain—from concept rooms, design, and prototypes to reference rooms and launch. Franchisees use an online room configuration tool to choose room designs and expedite assembly. Rooms are customized using plug-and-play modules of wall treatments, colors, patterns, furniture, accessories, and more.
This innovative approach to room design has been a huge success. We did not look at innovation as a succession of grand themes and big ideas—vision, principles, leadership, or culture—as many people do. Talking about it this way can lead one to pursue the perfect rather than the optimal. Instead, we viewed the project as the "practical work" of innovators as we endeavored to achieve optimal innovation.Close
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