Volume 5, Issue 5 | 1

BEACON

VOLUME 5ISSUE 5

2 | May 2017 Volume 5, Issue 5 | 3

The SIMCON - SIMSREE consulting club is an initiative

started in 2012 for those students in pursuit of excellence in

management consulting and strategic management. Aimed

at creating awareness among the students about consultancy

as a discipline, the club strives to maintain strong relations

with top consultancy firms and provide platform to craft highly

skilled & competent consultants from SIMSREE. The club is

a resource for information about consulting and a place for

students to obtain real-world consulting experience.

SIMCON provides an avenue of interaction among faculty,

students and alumni through competitions, live projects,

guest lectures, and conclaves. For this purpose the club has

also been publishing its monthly newsletter – BEACON (BE

A CONSULTANT) and maintains a FACEBOOK PAGE where

latest news and development in the consulting industry are

posted.

ABOUT US

VOLUME 5ISSUE 1

MISSION

To create awareness amongst the students about consulting industry & its latest trends.

To maintain strong relations with top consultancy firms.

Contributions invited:

To make this feature a successful effort, we seek continued involvement and contribution from our readers, that is YOU. We invite articles, research papers, and trivia on themes related to consulting. Be it industry news, consulting trends, a joke, a cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down your thoughts and mail your entries to simcon.simsree@gmail.com.

Best Regards,

SIMCON - SIMSREE CONSULTING CLUB

VISION

To provide platform to craft highly skilled & competent consultants from SIMSREE.

To provide exposure to students via competitions, live projects, guest lectures & conclaves.

Niranjan SATAM

Aditya SINGAL

Jasprit TANEJA

ApurvaGHUTUKADE

Mangesh LAVTE

AjayKHONA

Vidhi THAKKER

OUR TEAM

IndrajitHUI

OUR PRESENCE

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SIMSREE Consulting Club

4 | May 2017 Volume 5, Issue 5 | 5

CONTENT

16-17

OUR TEAM 03

BRAND ANALYSIS 11

CONCEPT OF THE MONTH

18

COMPANY ANALYSIS 05

CASE ANALYSIS 16

Nestlé IndiaCOMPANY ANALYSIS

VOLUME 5ISSUE 5

11-15

6 | May 2017 Volume 5, Issue 5 | 7

Vidhi ThakkerAditya Singal

Nestlé S.A- a Swiss transnational food and drink

company is headquartered in Vevey, Vaud,

Switzerland. Nestlé’s products include medical

food, bottled water, coffee and tea, baby food,

dairy products, breakfast cereals, pet foods,

snacks, to name a few. The company was

established in 1905 by the merger of the Anglo-

Swiss Milk Company which was formed in 1866

by brothers George and Charles page and Farine

Lactée Henri Nestlé, founded in 1866 by Henri

Nestlé.

NESTLÉ India- a subsidiary of NESTLÉ S.A. of

Switzerland is a dynamic company providing

the customers in India with products of global

standards and committed to shareholder

satisfaction. The company has earned its

credence and esteem by focusing on integrity,

honesty and fairness in all the aspects of

business.

NESTLÉ India has presence across India

with 8 manufacturing facilities and 4 branch

offices. The 4 Branch Offices are located at

Delhi, Mumbai, Chennai and Kolkata and help

facilitate the sales and marketing activities.

The NESTLÉ India’s Head Office is located in

Gurgaon, Haryana.

PEST AnalysisPolitical

Nestle should focus on various political dynamics

such as import export excise duties, taxation,

government permission to enter into the target

segment and also to introduce hygiene products

that are allowed by the regulated bodies in

India. Nestle should comply with the changes

in regulation surrounding food standards (Maggi

issue) and marketing actions. The company

should also consider the government stability

and recognize risks involved Nestle needs to

consider the changes in global regulations and

maintain its quality standards.

Economic

The Indian consumer being price conscious,

Nestle should price their products accordingly.

It is important to be cognizant of changing

inflation, income levels of the consumers and

economic growth rates.

Nestle has taken an initiative to produce its

products at a local level to satisfy its consumer

as well as to promote the economic worth of

farmers.

Social

Nestle has committed to reduce salt, sugar,

sodium and trans-fats content in its product

for the Indian consumers keeping their health

in mind. The company adheres to its strong

values and principles in order to build the trust

of its consumers. Nestle promotes family time

in a world of convenience through its Maggi

Noodles.

Technological

With the help of social media, Nestle should

try to penetrate different segments and create

awareness about its products through various

campaigns. For example, #WeMissYouMaggi

campaign was used to revive Maggi Noodles

after it was banned in India. Tie up with

Snapdeal to facilitate the comeback of Maggi

Noodles. There is a tremendous scope in using

e-commerce as a platform for marketing.

The use of technology will help narrow down

the gap between the consumers and the

company and thus it allowing direct interactions

between them. Nestle is uses the state of the

art technology for the production of various

products, they are meeting the global standards

by installing the contemporary plants.

FINANCIAL PERFORMANCENet Sales

Because of the ban on Maggi Noodles, the

Net Sales, for the year ended 31st December,

2015, took a hit and was therefore down by

17.2%. Net Sales worth Rs. 3,034.0 million had

to be withdrawn from the market due to Maggi

Noodles issue. It’s said to be one of the largest

recalls in Nestle’s history which has been in

business for over 100 years.

Profit after tax

Profit after tax growth remained healthy from the

year CY07 to CY11 with higher revenue growth

and sustainable higher margins. However, the

PAT growth rate plummeted till the year CY13

owing to a decrease in revenue growth and

increase in interest cost and depreciation, thus

8 | May 2017 Volume 5, Issue 5 | 9

impacting earnings. Having repaid its debt in

CY14, the PAT increased by 6% to Rs. 1184.7

Cr. However, due to nationwide recall of Maggi

Noodles, PAT decreased by 52.5% to Rs. 563.3

Cr. According to a report by ICICI Securities Ltd.,

earnings will grow by 26.8% CAGR in CY16-18E.

Key financials

CY15 CY15 CY17E

Net Sales 8,123.3 9,159.3 10,470.8

EBITDA 1,633.9 1,849.9 2,077.8

Net Profit 563.3 926.5 1,280.1

EPS 58.4 96.1 132.8

Source: ICICI Securities Ltd.

BUSINESS STRATEGIES

Improve penetration across product portfolio:

Suresh Narayanan, Nestlé India’s chairman

and MD, earlier, Nestlé’s aim was to rationalize

the product but now they will be focusing on

volumes to steer growth. According to him,

market penetration and market share are driven

by actual consumption of products, not just by

increasing value through prices. Maggi was one

of the highest contributors to sales and thus

contributing to the revenue. However, the year-

on-year decline in revenues in 2015 was entirely

on account of loss of sales from Maggi as it was

banned over allegations that it contained lead

beyond permissible limits and for mislabelling

of flavour enhancer monosodium glutamate.

Having known this fact, the company is

now focusing on innovation and launching

new products in categories such as milk and

nutrition, chocolate and confectionery, coffee

and beverages, and dairy. The company is

aware that it can extend its portfolio in the

chocolates market with Kit Kat and Munch. It

also extended Maggi Noodles to Maggi Hot

Heads range of instant noodles to target the

youth. The new range includes four different

types of spicy instant noodles. The company

will be announcing more launches in the coffee,

dairy and chocolates segment. According to a

research report by Motilal Oswal, this strategy

on focusing on volumes is a good move, since

disproportionate focus on profitability / margins

had impacted Nestlé’s topline performance

over 2012 to 2015. Edelweiss Securities wrote

in a report that “Nestle is transforming from a

bottom line focused company to one which also

lays emphasis on healthy top line growth and

market share gains, with focus on innovation

and brand equity”.

Making healthier products

Nestle SA, based at Vevey in Switzerland,

announced globally that it is committed to

reduce sugar, sodium and saturated fats and

trans-fats content in its products. Nestle had

also announced that more than 99% of fats and

oils in its foods and beverages will not contain

trans-fats, starting from January 1, 2017. Nestle

aims to reduce sugar and sodium content by 5%

and 10% respectively, by 2020. The company is

also committed to reduce the dependence on

eliminate all artificial colors from its products.

Nestle India tying up with PayTM

Nestle India introduced a new variant of KitKat,

KitKat Duo in order to beef up its chocolate

portfolio with new products. This was a part

of its market strategy to price the company’s

premium products cheaper. In an interview

Nikhil Chand, General Manager, Chocolates and

Confectionery, Nestlé India, said that the core

consumer of the Nestle products are in the age

group of 17 to 21 years. In order to target the

core consumers the company had tied up with

PayTM for a limited period for cash back offers.

The cashback offer along with the KitKat packs

was a strategy to penetrate brand among not

only the new users but also the existing users.

COMPETITOR ANALYSIS

Hindustan Unilever Ltd (HUL)

Hindustan Unilever Ltd. is an Indian consumer

goods company dealing in beverages, foods,

personal care products, to name a few. Two out

of three Indians use HUL products according to

Nielsen market research data. HUL’s distribution

10 | May 2017 Volume 5, Issue 5 | 11

covers over 2 million retail outlets in India

directly and its products are available in over

6.4 million outlets across the country.

• Business Strategies

‘The Compass’- It was the business strategy

initiated by HUL in 2009 to make sustainable

living commonplace and their Vision to grow

their business and increasing their social impact.

They are looking for increasing the number of

sustainable products and creating a brighter

future for everyone. They desire to build a

world where everyone lives well.

• The Agenda

Brands that offer balanced nutrition, good

hygiene and the confidence that comes from

having clean clothes, clean hair and good skin.

Products which are sustainably sourced and

used in a way which protects the earth’s natural

resources. Respect for the rights of the people

and communities we work with throughout the

world.

• Marketing Strategies

Hindustan Unilever has a direct selling network

called Hindustan Unilever network (HUNL).

Lever Home markets home products, Ayush

Therapy markets health products, D.I.Y markets

male grooming products and Aviance markets

beauty products. To reach various customers

in urban as well as rural markets, the company

has a no-holds barred policy and has set up

various distribution networks.

The company has a Direct and Indirect Coverage

Scheme. Under Direct Coverage Scheme, the

company has a common stockist that provides

for every outlet under its zone. Under Indirect

Coverage Scheme, the company targets those

retailers in villages that are near urban markets.

The stockist is instructed so that covers all the

villages in its vicinity.

• Pricing Policy

The pricing policy of HUL is simple of low costs

products. The quality of the products is not

compromised and they have simply cut down

on cost because of far-reaching distribution

channel. As soon as its competitors increases

or decreases the prices of the products so does

HUL

12 | May 2017 Volume 5, Issue 5 | 13

Pulse CandyBRAND ANALYSIS

Founded in 1929, the Dharampal Satyapal (D.S)

group which is the parent company of Pulse

,is involved in a variety of sectors like Food

Beverage, Hospitality, Agro forestry, Tobacco,

Packaging and Mouth fresheners. Under its

umbrella, it manufactures Catch spices, Pass

Pass mouth freshener, Rajnigandha Pan

Masala as well as Ksheer dairy products. In its

confectionary sector, it manufacturers Pass

Pass Chingles and Pass Pass Pulse. Their focus

now is on developing the foods & beverages

and the confectionery verticals.

In February 2015, the DS Group - manufacturer

of brands such as Rajnigandha (Pan Masala),

Baba (Tobacco) and Catch (spices) -- entered

the candy segment with Pass Pass 'Pulse'.

Today, the Kaccha Aam-flavoured hard-boiled

candy with a tangy twist, which fans also call

the 'magical core' or the 'masala bomb', is a Rs

100 crore brand and a leader in the segment.

Timeline

Pulse was launched to capitalise on the fastest

growing HBC (Hard-Boiled Candy) segment

in the confectionery basket. While the overall

sweet candy category, pegged at Rs 6,000

crore, is growing at 14 per cent year-on-year,

the Rs 2,100 crore HBC segment is growing at 23

per cent. Kaccha Aam (26 per cent) and Mango

flavour (24 per cent) together claim 50 per cent

share in the HBC market. Raw mango was thus,

Indrajit Hui

Ajay Khona

Volume 5Issue 5

14 | May 2017 Volume 5, Issue 5 | 15

the obvious choice. The makers also realised

that there were only straight flavours such as

mango, orange and caramel in the market.

Hence, there was a need for innovation. And

particularly In India where people prefer to eat

raw mango with something tangy whether it is

'aam panna' or a slice of raw mango sold on

the roadside, it is incomplete without the tang

or the spices. It gave the idea of a powder filled

candy.

The candy market had started shunning the Rs

0.5 price point a couple of years ago with big

players such as Mondelez, PVM (Perfetti Van

Melle), and Parle launching or re-launching their

products at Re 1. High raw material costs, fewer

50 paise coins in circulation, and the demand

for higher margins by retailers were some of

the factors that propelled the wave.

At the time when Pulse was launched, 86 per

cent of the industry was at Rs 0.5 for a candy

weighing anywhere between 2-2.5 grams. The

DS Group decided to go with Re 1 instead, and

to justify the price, the weight was increased to

4 grams.

STP Analysis

SEGMENTATION

• Geographic

1. North Region, Northeast Region, Central

Region, East Region, West Region & South

Region

• Demographics:

1. Age: Anyone above 5 years of age.

2. Gender: Male & Female

3. Income Groups: 5000-10000 || 10000-

20000 || 20000 +

4. Psychographic: High on Health

Consciousness & Low on Health

Consciousness

5. Behavioral: Rate of Usage & Loyalty Status

TARGETING

Raw mangoes are relished by people of all age

groups and geographies in India, so there was

no particular target group singled out for Pulse.

The candy, with its tangy taste, was expected

to cut across age groups in a market focussed

on kids, and therefore, flooded with straight

and sweet flavours. Pulse was intended to be

an anytime, anywhere candy. And India being

a tropical country where you need to keep

having something to keep the saliva going in

the typical hot weather,it is one of the most

soothing candies.Since Rajasthani and Gujarati

cuisines share a similar tanginess as Pulse, the

company decided to test-market it in these

states first. The exercise proved so successful

that it had to be converted into a full-fledged

launch.

POSITIONING

In low price high volume, there is always a need

of developing a sale story for the salesman, to

enable them to place the product at the outlet,

and for the retailer to push the product trial to

the customers. As soon as the trials started

gaining traction, the product strength took it

forward. Word of mouth started catching up

as most people started referring the candies to

their friends and colleagues. At some places it

became a mouth freshener of sort after lunch

at others it was a regular get together Candy

among friends in a college class. The word had

set in.

The awesome part of its success story in

positioning itself is that Pulse has hardly spent

a single penny on any marketing. The whole lift

in demand is due to word of mouth publicity.

Demand became much more than the supply

and currently the company is able to meet only

60-70% of the demand.

Brand loyalty - The unorganised candy market

in India is big, and no brand has been able

to break the tradition of flavour over brand,

wherein customers ask for "orange, mango or

mint wali" candy. Pulse has changed that. It

has taken the category from impulse-driven to

Pulse-driven.

Pricing strategy-. Looking at the success of

Pulse, other players have started launching

similar versions at Re 1. The shift in price points

are mainly due to factors such as fluctuating

raw material costs, especially sugar that fuelled

this trend almost three years back, and today,

only 30-40 per cent products fall in the Rs 0.5

segment. The rest are Re 1 and above.

Volume :Since the unit price is low, one has to

sell large volumes. It is difficult business. Our

Kaccha Mango Bite (Rs 0.5) has entered the Rs

100 crore league, while Melody (Re 1) still has

to. Other than Parle, DS group competes with

companies such as Perfetti Van Melle, Mondelez

India, and ITC which have candy brands such

as Alpenliebe, Cadbury Chocolairs, and

Candyman, respectively.

Barriers to entry and exit :According to

Nielsen India, the category has low entry

barriers as a result of which new players

enter the market every year; there are

fairly quick exits too. Low entry-exit

barriers facilitate innovation on formats

and flavours in the category, the most

recent one being in the coffee-flavoured

segment. The eclairs and soft toffees'

segments grew in single digits in 2015.

The Advertising Push

Pulse makers believe it is one of the

most successful examples of brands

16 | May 2017 Volume 5, Issue 5 | 17

built through the concept of word-of-mouth,

with social media playing a big role. While

the company pushed Pulse through in-store

promotions and one outdoor advertisement at

certain select locations in NCR, its fans were

active in the online world. The brand has

presence on all social networking platforms

including Facebook, Instagram and Twitter.

In fact, the catchphrase on the outdoor ad -

'Pulse of India' - was also suggested by the

digital fans.

DS Group awarded the mandate for Pulse to

Scarecrow Communications last December. The

group believes that Advertising is not going to

drive sales. It will be reinforcement. Their main

objective is to own the innovation Pulse stands

for. About the challenges of advertising a brand

that is already quite successful, the group feels

there are various opinions about the product.

People are claiming ownership, and they do

not want to violate that thought of 'Meri Pulse

Candy'.

TV campaign for Pulse candy

Pulse has rolled out its first TV commercial this

year. Pulse Candy, with a tangy twist, makes

the ad standout! It offers a complete experience

starting with a fruity taste and peaking with

a tangy surprise in the end. This irresistible

taste of Pulse candy is extended to the brand

communication, with the tag line of ‘Pran jaaye

par Pulse na jaaye’, with humorous examples

of how far people can go to save their favorite

Candy, Pulse. After all, parting with precious

belongings is something one does not like. The

tagline ‘Pran Jaaye Par Pulse Na Jaaye’ truly

establishes the right appeal of Pulse candy

The first TVC, conceptualized by J. Walter

Thompson Company, is the master commercial

that outlines the length to which people will go

to hide their Pulse Candy and also the extent

people will go to get their hands on a Pulse

Candy.

The film opens on the protagonist who is

asleep in his room – this is when his house

mates, on a day off, decide to play a prank on

him to get their hands on his Pulse stash. We

suddenly see his roommate run in and wake

him up, screaming that the house in on fire. The

protagonist, in a blurred sleepy state on seeing

smote and sparks, actually assumes that the

house is on fire, as he sees his friends running

to collect their precious belongings. This is

when our guy springs to action, rushing to save

his hidden Pulse Candies; from inside a remote,

the one hidden in a DVD drive, to some, hidden

in a trumpet. Once he has managed to get his

hand on the stash, he rushes out. That’s when

the plot unravels, a well-crafted ploy that has

his friends creating the fire and smoke, amongst

others. At the end, the plot succeeds and he

has to give up his hidden stash of candies, but

not until he manages to keep one for himself.

The commercial ends with the tag line that says

– ‘Pran jaaye par Pulse na jaaye’

Differentiating Factors

One Rupee Game - Any candy which can

refresh the taste buds with an initial sweetness

followed by saltiness at a cost of one rupee is

sure to have a decent hand when it comes to

number of boxes the shopkeepers bring to their

shops.

Extensive Research - Pulse was conceptualized

in 2013 and the product team dedicated

more than two years on it before it's official

launch. They realized that kaccha aam

was eaten across all ages around every

part of the country in one way or the other.

Apart from that, they capitalized on the

fact that it is eaten with a mixture of salt

and spices to add more flavor to it. This

led to the foundation of Pulse. And this

is where it beat its competitors, the extra

inclusion of spices did the trick The Surprise

Element- Everyone loves surprises! Now this is

what Pulse gives in here. Eat , eat , ...BOOM! -

The powder which is in the middle of it suddenly

scatters all over the tongue and KaBoom it is!

This can be closely compared with Center

Shock.

The Road Ahead

Pulse plans on spending Rs 8 crore on a

complete marketing campaign. The advertising

and marketing budget for Pulse Candy this year

stands at 6-7 per cent of its annual turnover.

Pulse Candy will go ahead with a total approach

to marketing in 2017 by releasing ads in popular

national and regional channels and support

it with campaigns on digital, BTL and other

promotional platforms. Pulse also has plans to

introduce new flavors and formats to keep the

consumer involved.

India has the largest number of young

consumers who are also the decision makers

in many homes today, so the brand needs to

break the clutter in the communications space

within the category. A campaign has been

planned on social media as well. Pulse candy

will be focusing on innovative ideas that will

establish the brand thought as well as engage

with the digital audience.

Volume 5, Issue 5 | 19 18 | May 2017

It may appear strange that while buzz is so

strong around India’s e-commerce industry and

companies like Flipkart and Snapdeal, the best-

performing IPO in recent corporate history is a

brick-and-mortar supermarket. Recent IPO of

Avenue Supermarkets Ltd was a grand success.

Avenue Supermarkets Ltd , India’s Walmart in the

making, as a number of analysts have called it is the

parent company behind a chain of supermarkets

and hypermarkets called D-Mart. Incorporated in

2002, Avenue Supermarts Limited is among the

largest and the most profitable F&G retailer in

India. Company offers a wide range of products

with a focus on the Foods, Non-Foods (FMCG) and

General Merchandise & Apparel product categories.

It is a company founded by Mr. Radhakishan

Damani, an astute investor in the Indian equity

market. The company has 112 stores located across

41 cities in India and it operates and manages all of

them. The company also operates distribution and

packing centres which form the backbone of the

supply chain to support its retail store network. It

has 21 distribution centres and six packing centres

in Maharashtra, Gujarat, Telangana and Karnataka.

The IPO Success

On 1st march D-Mart owner Avenue Supermarts

decided to go public and raise Rs 1870 crores

through IPO of approximately 6 crore equity shares

with a face value of Rs 10 each via book building

route. The objective was to use the proceeds

for repayment of loans, NCD (Non convertible

debentures) redemption, purchasing fit outs for

new sores, & other general corporate purposes.

In the long run the company plans to expand

its store network in south and west of India and

then gradually to other parts through its cluster

focussed expansion strategy. The bid opened

on 8th march for 3 days with a price band of Rs

295 - 299, with 50% shares reserved for qualified

institutional buyers.

Details of the bid

BRLM (Book Running Lead Managers) - Kotak

Mahindra Capital Co. Ltd, Axis Capital Ltd, Edelweiss

Financial Services Ltd, HDFC Bank Ltd, ICICI Securities

Ltd, Inga Capital Pvt Ltd, JM Financial Institutional

Securities Ltd, Motilal Oswal Investment Advisors

Pvt Ltd and SBI Capital Markets Ltd. Link Intime

India Pvt Ltd is the registrar to the issue.

• Bid Date - 8th to 10th March, 2017

• Bid Range - Rs 295 - 299

• Face value - Rs. 10

• Number of shares - 4.43 crores (approx.)

• Public listing date - 21st March, 2017

The IPO was oversubscribed 104.5 times on the

final day of bidding with the total bids received

amounting 463 crore as against 4.43 crore

shares issued for bidding. The shares issued for

D’mart IPO CASE ANALYSIS

Apurva GhutukadeJasprit Taneja

Volume 5Issue 5

qualified institutional buyers were oversubscribed

144 times and that of non institutional investors

277 times. Retail investors category shares were

oversubscribed 7 times.

Not only that, on the day of listing the stock opened

at 600, more than twice the issue price of 299. It

is currently trading at 743 which is 148% higher

than the issue price. The shares of smart doubled

on day-1, during the pre-open call auction, a 45

minute window before actual trading to allow price

discovery of the share. During the actual trading on

day-1 to curb volatility, stocks are allowed to move

between the price band of +/-10% only, which in

this case was 725 to 483 on an equilibrium price

of 602.

Reasons for IPO success

D’Mart’s strategy is different from other Indian

retailers such as Reliance Fresh and Future group.

It hasn’t expanded itself into multiple segments,

rather being restricted to food and grocery

segment. The main differentiator being value

retailing, i.e., providing quality products at fairly

low prices by keeping the profit margin low, which

has been the main philosophy of Damani.

With lower amount of investments D’mart has

been able to generate higher profits on the back

of comparatively lower revenues when compared

to its competitors Reliance Fresh and Future Retail

over past few years. This success of D’mart can

be attributed to various small factors which add

up to create synergy for the company leading to

its success. D-Mart focusses on providing value

retailing and daily low prices to the customers.

Customers remain loyal to the brand which is

beneficial in the long run Strong supplier and

vendor network which helps in procuring goods at

lower cost and high qualityD-Mart focusses only

on food and grocery unlike other competitors

like Reliance Fresh and Future Retail which have

diversified into the electric goods, apparels and

home segments category as well.

EDLP and EDLC pricing strategy (Everyday Low

Price and Everyday Low Cost) thus more savings

for customers

No-discount Model - profitable in long run as it

helps in retaining customers which are hence

loyal to the company, higher profit margin for the

company

Selective expansion with stores as of now only

present in Mumbai and Ahmedabad, with a cluster

based expansion strategy, targeting market on the

basis of adjacencies and focusing on an efficient

supply chain, for example targeting densely

populated residential areas with a majority of

lower-middle, middle and aspiring upper-middle

class consumers

Volume 5, Issue 5 | 20 Volume 5, Issue 5 | 21

ownership model with all the

shops owned by ASL itself or on

rent with a long term agreement

of more than 30 years

High PAT of 40-50% over the

years with a high inventory

ratio and high profit margin and

return on assets

There is a lesson to be learnt

from this success of the Avenue

Supermarts for the Indian

e-commerce companies which

have been in continuous losses

after burning up all of venture

capital money and thousands

of layoffs. The mere focus on

profitability by adman has set

an example for other retail

businesses in India which have

been relying on heavy discount

based model to woo customers.

Also the brick and mortar stores

which are expanding rapidly

and experimenting very quickly

need to stop and do a reality

check. As the company moves

forward, its biggest competition

will not only be keeping true

to its business model but also

staving off the threat posed by

rivals that are slowly maturing

and looking to take a bigger

share of the retail pie.

22 | May 2017 Volume 5, Issue 5 | 23

Volume 5Issue 5

Code HalosCONCEPT OF THE MONTHEver wondered how did Netflix beat Blockbuster,

Google beat Yahoo, Amazon beat Borders and

Apple beat Kodak? All these firms mastered a

new set of rules to become successful.

In the book Code Halos: How the Digital

Lives of People, Things, and Organisations

are Changing the Rules of Business, authors

Malcolm Frank, Paul Roehrig and Ben Pring

describe the convergence of digital and real

economy of the 21st century as Code Halos.

The concept has been coined by Cognizant

Center for the Future of Work. With Code

Halo thinking, organizations can catalyze their

businesses.

Aditya Singal

Code Halos is something that surrounds you,

this article, your friends and family, your

colleagues etc. This article has a Code Halo

of virtual information surrounding it: peers

reading this article, reviews, information about

the person who has written this article and

more. Similarly you readers have your own

opinions, likes and dislikes, a unique taste in the

form of entertainment, literature, your current

job responsibilities, your social network etc.

If it was possible to connect this information

about yourself with this article, then it would

be possible to determine whether you would

really enjoy this article before you even start

to read it.

The word “halo” in Code Halo is nothing but the

data the surrounds people, organizations, and

devices – the data that is powerful, robust and

grows continually rich and complex. Each and

every halo contains a code which organizations

can use to understand their employees more

deeply.

Let us understand Code Halos with an example.

Code Halos for the insurance industries are

• Customer Halo

The data originates from various customer

touch points, channels and it can utilized for

engagement and customized services.

Customer Halo can provide key insights about

channel preferences, risk profiles, product

preferences, customer satisfaction and lifestyle

events.

• Risk Halo

Insurance products, which include insurance

units such as auto, home, watercraft and its

environment, have risks associated with them

and therefore generating rich Code Halo.

These must be integrated with the core

business of the insurer in order to facilitate

business decisions.

• Product Halo

The auto and home insurance sectors have

halo entities that signify the product’s historical

performance, market forecasts, economic

climate, customer demographics, regulatory

environment, distribution channels, competition

and customer sentiment.

When product Code Halos interact with

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business processes, they generate streams of

data that can provide insights into predicting

the product’s future outcomes.

• Employee Halo

Employees in an Insurance companies, -

underwriters, actuaries, claims adjusters and

call center representatives – when provided

with historical records, help them evaluate a

prospective customer’s application or service

existing customers.

• Partner Halo

Insurers can equip their partner ecosystem by

generating rich halos in order to meet customer

expectations.

A health insurance company Aetna has

partnered with a nonprofit healthcare system

Inova, to deliver healthcare at an affordable

price by creating an ecosystem of physicians,

patients or members, health systems and

health plans.

• Enterprise Halo

Enterprise Halo can include customer sentiment

about a marketing campaign; media coverage

regarding a litigation case which a firm recently

lost; opinion of an analyst about a new product

launch and the financial performance of the

company.It is formed by the general perception

about the brand.

There are vast transformations in mobile

phones, newspapers, books, insurance, movie

rentals, consumer goods and travel services

industries. They follow a similar pattern called

as the Crossroads Model.

Crossroads Model

There are five stages in the Crossroads Model:

Ionization, Spark, Enrichment, Crossroads and

After the Crossroads.

1. Ionization: The changing economic

pressures, enhanced customer expectations

and new technologies together create

an environment and a context for Code

Halos. Insurers should gather reliable data

from credible sources.

2. Spark: Once Code Halos are formed, new

algorithms are developed. The Code Halos

collide and form an innovative spark which

quickly reshapes enterprise processes

and customer interface. Insurers should

leverage data insights to reengineer

enterprise processes and enhance the

customer experience.

3. Enrichment: During this stage the Code

Halos grow in number of users as well as

the value of data by orders of magnitude

thus giving rise to creation of new product

and process. Insurers should innovate and

develop new products, processes and

business models, in order to create better

value for customers.

4. Crossroads: In the Crossroads stage, Code

Halos reach critical mass and create new

customer expectations and economic

models. Insurers that adapt to changing

business environment and conditions will

accelerate growth, while those who don’t

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Volume 5Issue 1

may fall behind the competition.

5. After the Crossroads: After the Crossroads,

companies have to divergent paths, with

significant momentum (both negative and

positive) which is difficult to reverse.