Financial re engineering.new ppt

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Financial re engineering.new ppt

  1. 1. Submitted to:- Submitted by : Shrikant S Panikar
  2. 2. <ul><li>According to Michael Hammer and James Champy (1993)…. </li></ul><ul><li>“ The fundamental rethinking and radical redesign of business </li></ul><ul><li>processes to achieve dramatic improvements in critical contemporary </li></ul><ul><li>measures of performance, such as cost, quality, service, and speed.” </li></ul><ul><li>Maximizing customer value and minimizing consumption of resources while delivering the products and services.  </li></ul><ul><li>According to Thomas H. Davenport (1993)…. </li></ul><ul><li>“ Encompasses the envisioning of new work strategies, the actual </li></ul><ul><li>process design activity, and the implementation of the change in all its </li></ul><ul><li>complex technological, human and organizational dimensions”. </li></ul>
  3. 3. <ul><li>Financial Re-engineering is done for various business reasons and those could be ... </li></ul><ul><li>Poor financial performance, </li></ul><ul><li>External competition, </li></ul><ul><li>Erosion of market share, or   </li></ul><ul><li>Emerging market opportunities. </li></ul>
  4. 4. <ul><li>Financial Re-engineering is not limited to, but also includes… </li></ul><ul><li>Organizing Around Processes:- </li></ul><ul><li>- Formation of teams to perform an entire process </li></ul><ul><li>- Eliminate/minimize hand-offs </li></ul><ul><li>Process Improvement:- </li></ul><ul><li>- Opportunity Driven </li></ul><ul><li>- Incremental </li></ul><ul><li>Product and Service Opportunities:- </li></ul><ul><ul><li>- Customer:- How can the customer’s wants and needs be better understood? </li></ul></ul><ul><ul><li>- Product / Service:- What improvements or added value can be made to products and services? </li></ul></ul>
  5. 5. <ul><li>Operational Goals:- </li></ul><ul><li>- Quantify the redesigned business process </li></ul><ul><ul><li>- Address The process as a whole as well as Individual activities </li></ul></ul><ul><li>Business Process Goals:- </li></ul><ul><li>- Set performance levels for the entire business process in term of: </li></ul><ul><ul><li>(1)Financial:- How much does/will the process cost to perform? </li></ul></ul><ul><ul><li>(2)Organization:- What will the organizational structure look like? </li></ul></ul><ul><li>Deliverable Goals:- </li></ul><ul><li>Set performance levels for interim and ultimate process deliverables </li></ul><ul><li>in terms of: </li></ul><ul><li>(1)Quality </li></ul><ul><li>(2)Efficiency </li></ul><ul><li>(3)Cost </li></ul>
  6. 6. <ul><li>MYTH </li></ul><ul><li>It is not rightsizing or downsizing . </li></ul><ul><li>It is not about reorganizing the organization . </li></ul><ul><li>It is not the effort of a single leader . </li></ul><ul><li>Empowered Team members, use of groupware & coexist . </li></ul><ul><li>REALITY </li></ul><ul><li>Cost cuttings often lead to Layoffs, outsourcing & downsizing. </li></ul><ul><li>Identification of focused business process clusters reorganized the organization </li></ul><ul><li>Reengineering is often found to be a strategy of a narcissistic style of leadership </li></ul><ul><li>In fighting communication challenges, survivors management & the resistance for reengineering by the professionals are often underestimated . </li></ul>
  7. 7. <ul><li>March 26, 2008 – Tata Motors Ltd. of India agreed to acquire the entire share capital of Land Rover and Jaguar Cars Ltd from Ford Motor Co. </li></ul><ul><li>The two transactions are estimated to have a combined value of an estimated $2.3 billion. </li></ul><ul><li>The purchase consideration includes the ownership by Jaguar and Land Rover or perpetual royalty-free licences of all necessary Intellectual Property Rights, manufacturing plants, two advanced design centres in the UK, and worldwide network of National Sales Companies. </li></ul>
  8. 8. <ul><li>Value Capture </li></ul><ul><li>The deal value of $ 2.3 b is almost equal what Ford paid for the brand of Jaguar alone(approx $ 2b). The opportunity to buy brands like Jaguar and Land Rover ,which are rated among the top luxury brands in their respective segments, for cheap doesn’t come knocking every time. </li></ul><ul><li>Fast Growing Market Segment </li></ul><ul><li>With about 30% growth rate, the luxury car segment is the top growing segment in India and has already seen the entry of biggies like Audi and Porsche. With established distribution network in India, Tata Motors can offer top-rated products for these segments. Though the absolute numbers may be small and would reduce due to the current downturn, the gains would be huge when the economy turns around and the salaries rise. </li></ul>
  9. 9. <ul><li>Deal Financing </li></ul><ul><li>Tata Motors financed the deal through a bridge loan of $ 3 billion arranged through a consortium of 8 banks. It intended to refinance that loan though a mixture of domestic and international equity issues and debt. However because of the liquidity crunch, a deal now will be more expensive than they'd initially planned for. </li></ul><ul><li>Key Risk Factors </li></ul><ul><li>The key risk after this acquisition would be the performance of JLR. Any drop in profitability would have an impact on Tata Motor’s consolidated financials. </li></ul><ul><li>A prolonged downturn in commercial vehicle demand would </li></ul><ul><li>stretch domestic profitability and cash flow. </li></ul><ul><li>Further downturn in the global auto industry. </li></ul><ul><li>Increasing cost of capital and liquidity crunch can hit bottom-line of Tata Motors much more severely. </li></ul>
  10. 10. <ul><li>“ Tata bought the companies because they believed that these two brands have a lot of growth potential in terms of revenue and sales.” </li></ul><ul><li>In the first 10 months of 2008 Land Rover's US sales fell by 37 per cent to 25,377 compared to the same period in 2007. Jaguar's sales in the same period helped by the new XF sedan were not as badly hit but its sales still fell 3.6 per cent to 12,575. </li></ul><ul><li>At the same time while Jaguar's UK sales rose 11 per cent against last year's same period, Land Rover's sales fell almost 27 per cent to 30,241 units. </li></ul><ul><li>Not surprisingly then like GM, Ford Motor, Mercedes and BMW suffering the downturn in the West, China, Russia and India seem bright spots for JLR also. </li></ul>
  11. 11. <ul><li>Tata's confidence in JLR may not be misplaced. This year in Russia, Land Rover has turned out to the leading premium brand. Its sales grew 79 percent to 17,439 in the first 10 months of 2008 while Jaguar saw a more than 60 per cent growth to 1,423 units. </li></ul><ul><li>Tata expects China to be Land Rover's No. 5 market this year and Jaguar's seventh largest, while Russia likely to be Land Rover's No. 3 and Jaguar's No 2 market. </li></ul><ul><li>JLR's immediate priority is to set up a distribution network in India for both brands and the company feels that it can sell 2,000 to 3,000 units here to come on level with other premium brands such as BMW and Mercedes within two to three years. </li></ul>
  12. 12. <ul><li>Thank You for Your Time. </li></ul>

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