identifying and addressing social problems

Closing Remarks

Gurgaon, November 2015

Identifying and addressing social problems that intersect with businesses

Shared Value Initiative

2SVII 2.pptx

Contents Page

This document shall be treated as confidential. It has been compiled for the exclusive, internal use by our client and is not complete without the underlying detail analyses and the oral presentation. It may not be passed on and/or may not be made available to third parties without prior written consent from .

© Roland Berger

A. Understanding the environment – Economic, political and social 4

B. India inc. at the intersection of shared value and profitable growth 16

3SVII 2.pptx

AmbitionPersonal, Institutional, National

EnvironmentEconomic, Regulatory,Social

Social Problems and Business Opportunities : An area where India is showing how to co-exist responsibly and profitably

Businesses

Households Government

SHARED VALUE

Creating profitable business opportunities to address real social problems appears to be the sweet spot for share value creation

4SVII 2.pptx

A. Understanding the environment –Economic, political and social

5SVII 2.pptx

The Indian elephant has learned how to dance – India's GDP has incre-ased by about 7.5x since 1980, 3 times faster than global expansionIndexed GDP growth1) [1980 – 2014, 1980 = 1 ]

Source: US Department of Agriculture Economic Research service, Real GDP (2010 dollars) Historical, available at http://www.ers.usda.gov/data-products/international-macroeconomic-data-set.aspx

0

1

2

3

4

5

6

7

8

1995 2000 2005 2010 20141980 1985 1990

GDP

grow

th, x

times

World

India

GDP CAGR

1980-1985

1985-1990

1990-1995

1995-2000

2000-2005

2005-2010

2010-2014

India 5.16 5.95 5.08 6.08 6.72 8.31 5.45

World 2.67 3.54 2.09 3.46 3.05 2.59 2.65

Comments

> India’s GDP growth has consistently exceeded 5% over the last 35 years

> Since economic reforms of 1991, India has achieved the following:– Four-fold GDP growth– Poverty alleviation for ~225 mn

Indians– Increase in telecom penetration

from 6 mn in 1991 (1% penet-ration) to 915 mn in 2013 (73% penetration)

– Construction of 45,466 km of national highways between 1991 and 2013 – four times the length of the total Autobahn network!

> Growth has been achieved despite vagaries of global markets, internal strife, and politics – proof of India’s resilience

1) All GDP numbers used for calculation are in 2010 US dollars

A India’s growth story

6SVII 2.pptx

278

2,371

88.4%

6.12%

China’s GDP in 2001

India’s GDP in 2014

2,097

India’s GDP in 1980

While its GDP growth has been much below that of China, consider-ing the 13 year lag in reforms, the difference does not seem so stark

Comments

> China’s GDP has not dipped below 8% in the 6-year periods between 1980 and 2014

> Chinese GDP has increased by a factor of 24 since 1980 levels (compared to 7.5x in India over the corresponding period)

> Key success factors of the ‘Chinese economic miracle’ has been abundant investment in infrastructure and creation of a strong export-focused manufacturing sector

> India’s 2014 GDP was 88.4% of China’s 2001 GDP– China’s economic reforms

took place in 1978, 13 years prior to India’s landmark economic reforms and end of the License Raj

Indexed GDP growth1) [1980 – 2014,1980 = 1 ]Comparison of India’s 2014 GDP with China’s 2001 GDP, accounting for 13-year lag1) [USD m]

Source: USDA, Roland Berger

Comparison of GDP growth: India vs. China, 1980 to 2014 [%]

0

5

10

15

20

25

20142010200520001995199019851980

GDP

grow

th, x

times

GDP CAGR

1980-1985

1985-1990

1990-1995

1995-2000

2000-2005

2005-2010

2010-2014

China 9.58 9.80 10.79 9.13 9.76 11.21 7.99

India 5.16 5.95 5.08 6.08 6.72 8.31 5.45


China India

1) All GDP numbers used for calculation are in 2010 million US dollars

time adjusted difference of 12% vs. China & India

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Contrary to China's manufacturing-led growth model, India's growth has been propelled by services GDP split by sectors1) , India vs. China [%]

Source: Planning commission database, ADB Economics working paper "The service sector in India", June 2013

GDP split – India vs. China [2014] Sectoral split in India's GDP Comments

1) Share to total GDP at constant 2004-05 prices

> Financing and business services were the fastest growing categories in theIndian services sector in 1980, while growth in Industry, mining and manufacturing remained stagnant

> Transport, storage and communication services were the main drivers of growth in the services sector in 2000, while growth in Industry and manufacturing remained stagnant

> In 2014, export of software services was the largest contributer to India's services sector, whereas Telecom and software together drive India's global brand image in services

> India's export of financial services too witnessed a high growth of 34.4% in 2013-14

43%

48%

26%

Agriculture14%

Services60%

Industry

China India

9%

50%60%

15%

15%

15%9%

9%

9%28%20%

12%

39%

7%

2000

3%

1980

2%

2%4%

2014

3%

Agriculture ManufacturingServices

Mining & QuarryingAllied services

Other Industry


8SVII 2.pptx

Rising disposable incomes combined with falling interest rates and increasing net domestic savings show a strong consumption story India Net domestic savings [INR bn], Lending rates [%], PDI per capita1) [INR] and Avg. amount of debt per household [INR]

Source: RBI, World Bank, NSS reports

0

10

20

30

40

50

60

70

80

90

100

1980 1985 1990 1995 2000 2005 2010 20150

10,000

20,000

30,000

40,000

50,000

60,000

70,000INRPercent

Personal disposable income per caita , INRNet domestic saving, INR bnLending interest rate, %

1) PDI = Personal Disposable Income

32,522

7,5391,906661

84,625

11,7713,6181,030

2012200219911981

UrbanRural

Average amount of debt per household [INR]Select macro-economic indicators of India


9SVII 2.pptx

Further, India's labour productivity gains over the period 1999-2007 and 2008-2011 have clearly outpaced increases in salariesGrowth in wages and labor productivity in Asia, 1997-2007 and 2008-11 (%)

Source: Global Wage Report 2012/13, International Labor Organization

-2-10123456789

101112131415

-5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Labour productivity growth (%)

Real

wage

grow

th (%

)

IRACDA

CHI

MAC

ISA

KOR

MYABAN

SNG

ITHAIND

HKSRI

PHL

NEP

PAKFU

-6

-4

-2

0

2

4

6

8

10

12

14

-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13

Real

wage

grow

th (%

)

Labour productivity growth (%)

CHI

MAC

VN

BANMON

NEP

ISAMYA

HK

IND

THASNG

KOR

PHL

IRA

1) China CHI, Cambodia CDA, Indonesia ISA, Islamic Republic of Iran IRA, Republic of Korea KOR, Malaysia MYA, Singapore SNG, Bangladesh BAN, Thailand THA, India IND, Macau (China) MAC, Hong Kong (China) HK, Sri Lanka SRI, Philippines PHL, Myanmar MYN, Mongolia MON, Nepal NEP, Pakistan PAK, Fiji FIJ

45°

1999-20071) 2008-20111)

45°


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India's import and export intensity has also consistently grown over the last 35 years, comparable with China during the last 5 yearsImport/Export Share [1980 – 2014, % GDP]

Source: World Bank database

0

5

10

15

20

25

30

35

40

45

50

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

% of GDP

Germany, export India, exportChina, exportIndia, importGermany, importChina, import


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FDI as well as FII flows have grown significantly since 1991, with a cumulative inbound FDI /FII of nearly USD 0.5 trillion since 1993India FDI & FII inflow [1993 – 2014, USD bn]

Source: Department of Industrial Policy & Promotion, UNCTAD, SEBI

(10)(5)05

1015202530354045505560

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

USD bn1)

1) USD billion at current prices and current exchange rates 2) For period Apr 2000 to Jan 2015 3) Except fertilizers 4) INR/USD exchange rate = 60 has been used

FDI inflows by country & Sector, cumulative 2000-20152)

Netherlands

23.0% 6.0%

6.0%7.0%

Japan

9.0% UK

USA

MauritiusSingapore

13.0%

36.0%

Others

17.0%

7.0%

Construction10.0%

4.0%

Automobile

5.0%Drugs & Pharma

5.0%

Computer hardware & software6.0% Telecommunications

Services

Chemicals3)

45.0%Others

FDI inflow in India FII inflow in India4)


12SVII 2.pptx

Moreover, India’s outward FDI performance has been impressive –and has grown by 30x since the period 1990-99!

37,224

3,3511528732

1980-891970-791961-69 2007-14

102,850

2000-071990-99

0

10,000

20,000

30,000

40,000

50,000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Indian OFDI1961-2014 [USD mn]

Indian OFDIand IFDI [USD mn]

Comments

> Outward FDI in India increased significantly post-2004 due to – key policy relaxations, e.g.,

ceiling on outward FDI was removed, state-owned enterprises were encouraged to invest abroad (e.g., oil and gas companies like GAIL and ONGC)

– restructuring activities of large Indian conglomerates in the 1990s had generated large cash reserves, which they used to acquire international companies

> Knowledge-intensive industries such as pharmaceuticals, information technology, and automotive dominated outward FDI during the period 2004 to 2010

>Source: UNCTAD, The Rise of Indian multinationals, Roland Berger

Overview of India’s Outward FDI (OFDI) and Inward FDI (IFDI)

Inflow Outflow


13SVII 2.pptx

After two challenging years1), the Indian economy now shows signs of recovery – including falling inflation and declining interest rates

7.07.56.64.74.84.44.84.55.35.55.36.16.97.77.88.28.98.88.6

6.07.9

6.15.86.17.57.8

Q2 153)

Q1 15

Q4 14

Q3 14

Q2 14

Q1 14

Q4 13

Q3 13

Q2 13

Q1 13

Q4 12

Q3 12

Q2 12

Q1 12

Q4 11

Q3 11

Q2 11

Q1 11

Q4 10

Q3 10

Q2 10

Q1 10

Q4 09

Q3 09

Q2 09

Q1 09

Source: MOSPI; RBI, IMF; Press; Economic Advisor of India; Ministry of Finance, India; DIPP; Roland Berger

GDP growth rate2) [%]

India industrial production (% YoY growth rate) Bank repo rate [%]

15

10

5

0

-5

Apr-15

Apr-14

Apr-13

Apr-12

Apr-11

Apr-10

Apr-09

Apr-08

-4.5-2.3-1.8

0.5

3.94.85.07.37.67.57.77.7

10.09.59.79.49.010.310.4

7.1

1.41.6

6.7

10.810.9

Q2 154)

Q1 15

Q4 14

Q3 14

Q2 14

Q1 14

Q4 13

Q3 13

Q2 13

Q1 13

Q4 12

Q3 12

Q2 12

Q1 12

Q4 11

Q3 11

Q2 11

Q1 11

Q4 10

Q3 10

Q2 10

Q1 10

Q4 09

Q3 09

Q2 09

Q1 09

Inflation – WPI annual change2) [%]

1) As a result of the global economic crisis and policy paralysis of the previous government; 2) Refers to Financial Year i.e. Q1 (Apr-June), Q2 (July-Sep), Q3 (Oct-Dec) and Q4 (Jan-Mar)3) Estimated GDP 4) Includes July and Aug. data


India – key macroeconomic indicators (1/2)

5

Apr-08

Apr-09

Apr-13

Apr-15

Apr-11

Apr-10

Apr-14

Apr-12

14SVII 2.pptx

Further, the trade deficit is narrowing, fiscal deficit is on the decline, and FDI inflows are on the rise

Source: RBI, IMF; Press; DIPP; Roland Berger

150

100

50

0Q1 15

Q4 14

Q3 14

Q2 14

Q1 14

Q4 13

Q3 13

Q2 13

Q1 13

Q4 12

Q3 12

Q2 12

Q1 12

Q4 11

Q3 11

Q2 11

Q1 11

Q4 10

Q3 10

Q2 10

Q1 10

Q4 09

Q3 09

Q2 09

Q1 09

Trade DeficitImportsExports

Foreign trade [USD bn] Debt and fiscal deficit [% of GDP]

0

2

4

6

875

70

35

65

FY14FY13FY12FY11FY10FY09 FY152)

Fiscal DeficitNational debt

INR vs. EUR exchange rate

Q1 14

7.2

Q4 13

5.7

Q3 13

2.5

Q2 13

8.9

Q1 13

3.8

Q4 12

12.3

Q3 12

5.1

Q2 12

6.5

Q1 12

13.4

Q4 11

3.4

Q3 11

5.0

Q2 11

5.2

Q1 11

5.8

Q4 10

5.0

Q3 10

5.6

Q2 10

8.3

Q1 10

7.0

Q4 09

5.2

Q3 09

6.0

Q2 09

8.7

Q1 09

7.4

Q3 14

Q2 14

Q4 14

7.56.4

9.9

Q1 15

9.5

1) High FDI in Q4 2012 due to US $7.2 billion Reliance Industries-British Petroleum (BP) deal and in Q1 2012 due to investments held up in the previous year 2) Estimate

FDI Inflows1) [USD bn]


India – key macroeconomic indicators (2/2)

55606570758085

FY15FY14FY13FY12FY11FY10FY09FY08

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> Pandit Madan Mohan MalaviyaNational Mission on Teachers and Teaching: To ensure a coordinated approach so as to holistically address the various shortcomings relating to teachers and teaching

> Unnat Bharat Abhiyan: Launched with an aim to connect institutions of higher education, including IITs, NITs and IISERs, etc. with local communities to address development challenges

> SWAYAM (Study Webs of Active-Learning for Young Aspiring Minds): Programmed Professors of centrally funded institutions like IITs, IIMs, central universities will offer online courses to citizens of our country

The new government has created a positive momentum in the country and is expected to drive the development agenda

Infrastructure Development

> Revival of Special Economic Zone (SEZ), streamlining the Public Private Partnership (PPP) models and creating Infrastructural Investment Trusts (InvITs). Highlights include ‘100 smart cities’ manifesto and Diamond Quadrilateral rail network

> Sardar Patel Urban Housing Mission: Proposed scheme endeavors to build 30 million houses by 2022 for the economically weaker sections

> Digital India: Development of relevant infrastructure for National e-governance

Small Investment Reforms> Re-introduction of Kisan Vikas

Patras: Providing safe and secure investment avenues to the small investors

> Sukanya Samriddhi Account: launched with sole objective of financial planning for the marriage of Girl Child

> MUDRA Bank Yojana: Bring stability to the microfinance system through regulation and inclusive participation

> Pradhan Mantri Jan Dhan Yojana -Rolling out bank accounts for every household

Skill Development Insurance Reforms> Pradhan Mantri Suraksha

Bima Yojana: Personal accident policy

> Pradhan Mantri Jeevan JyotiBima Yojana: Provides risk cover in case of an untoward incident

> Atal Pension Yojana: The investors will be able to get pension of INR 1,000 to INR 5,000 per month, at the age of 60 years

Key reforms undertaken under new Modi-led government


Source: Secondary research, Roland Berger

Liberalization

> Liberalization of FDI in defence production, railway infrastructure and insurance

> Bilateral diplomacy and neighbours first policy -Meetings with South East Asian leaders to lay the groundwork to plan an active role in Asia

> FDI in Defence has gone up from 26 to 49%, with more investment allowed on a case to case basis

Rationalization of institutions> Creation of Special

Investigative Team (SIT) tounearth illegal money stashed in tax havens

> Replacing Planning Commission with a new institution

Procedural Reforms

> Implementation of Goods and Services Tax (GST) set to be implemented towards tax rationalization

Manufacturing focus> Make in India- Major new national

program designed to transform India into a global manufacturing hub

16SVII 2.pptx

0123456789

1011

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

GDPgrowth [%]

RussiaUSBrazil

China

India

GDP Per capita [USD]

Germany

The long-term forecast is positive – in terms of real GDP, India is expected to jump to #3 position by 2030

Source: Goldman Sachs BRIC Report; World Bank; Roland Berger Analysis

GDP size in real terms GDP 2010 [USD} GDP 2030 [USD]

GDP growth and GDP per capita 2010 vs. 2030


17SVII 2.pptxSource: www.moneycontrol.com, Economic Times, Roland Berger

1) Standalone company revenue

While the resilience of the Indian economy is encouraging, the growth of India's top 50 companies has been nothing short of spectacular

B Innovative India Inc.

Consolidated Revenue of India's Top 50 companies in 2014, CAGR 2005-2014 [%]

Overall, India’s top 50 companies have grown at a combined CAGR of 21% between 2005 and 2014!

Sr No Company Revenue

FY05 (INR bn)Revenue FY15 (INR bn) CAGR

1 India Oil Corporation Limited 1,334.07 4,495.09 13%2 Reliance Industries Limited 665.97 3,754.35 19%3 TATA Motors 195.33 2,627.96 30%4 State Bank of India 545.36 2,572.89 17%5 Bharat Petroleum Corporation* 638.57 2,380.87 14%6 Hindustan Petroleum Corporation* 652.18 2,066.26 12%7 Oil and Natural Gas Corporation 597.47 1,608.95 10%8 Larsen & Toubro 597.47 1,608.95 10%9 TATA Steel 159.99 1395.04 24%10 Hindalco Industries 101.05 1,042.81 26%11 TATA Consultancy Services 97.48 946.48 26%12 ICICI Bank 169.17 902.16 18%13 Essar Oil* 6.37 832.06 63%14 NTPC 235.16 806.22 13%15 Coal India Ltd 298.87 741.20 12%16 Adani Enterprises 150.05 645.82 16%17 Mangalore Refinery and Petrochemicals 206.93 574.77 11%18 HDFC Bank 37.31 574.66 31%19 GAIL* 135.91 567.42 15%20 Bharti Airtel* 79.03 554.96 22%21 Punjab National Bank 103.88 548.84 18%22 Infosys Ltd 71.29 533.19 22%23 Maruti Suzuki 110.33 508.01 16%24 Housing Development Finance Corporation 36.89 483.16 29%25 Canara Bank* 91.16 483.00 18%

Sr No Company Revenue

FY05 (INR bn)Revenue FY15 (INR bn) CAGR

26 Bank of India 71.77 479.63 21%27 JSW Steel* 70.35 460.87 21%28 Bank of Baroda 80.44 460.18 (2014) 21%29 SAIL* 325.69 457.11 3%30 AXIS Bank 23.28 438.44 34%31 Chennai Petroleum Corporation 162.96 418.66 10%32 Wipro* 72.36 416.35 19%33 Petronet LNG 19.45 395.00 35%34 Mahindra & Mahindra* 76.96 389.45 18%35 ITC Ltd 76.39 365.07 17%36 Union Bank of India 57.36 356.07 20%37 Motherson Sumi Systems 7.81 350.32 46%38 TATA Power Company 49.55 343.67 21%39 Grasim Industries 94.10 328.47 13%40 Vedanta* 14.09 325.02 37%41 HCL Technologies 33.51 321.44 (2014) 29%42 Idea Cellular 27.95 (2007) 312.79 35%43 Hindustan Unilever 110.61 (Dec 2005) 308.06 11%44 Bharat Heavy Electricals* 106.86 301.83 11%45 IDBI Bank 33.59 297.20 (2014) 27%46 Ruchi Soya Industries 39.08 283.09 22%47 Central Bank of India 61.44 283.03 17%48 Hero Motorcorp 100.86 (2006) 275.85 12%49 Aditya Birla Nuvo Limited 3,1.89 265.16 24%50 Indian Overseas Bank 47.51 260.77 19%

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India Inc.'s innovation focus and need to differentiate has come about as a result of its need to compete in higher margin businesses

Source: Competitive Advantage of Emerging Market Multinationals, Roland Berger

Comparison of China vs. India on competitive advantage

Government-specific advantages (GSA)

Firm-specific advantages (FSA)

China India

Country-specific advantages (CSA)(E.g., land, natural resources, labour, location, climate etc.)

(E.g., physical infrastructure, human capital, educational systems, quality of governance reflected in policy making and execution, etc.)

(E.g., firm-level assets and capabilities that contribute to competitive advantage)

> Strict labour law regulations

> Good pool of talent

> Poor physical infrastructure

> Inconsistent, ineffective government policies

> Ranks low on Ease of Doing Business

> Historically, Indian companies have not competed on cost alone as weak government and infrastructure impact cost competitiveness negatively

> In this environment, a purely operational excellence, low cost manufacturing strategy is insufficient as CSA and GSA prevent Indian companies from achieving the same cost position as their Chinese counterparts

> Innovative, higher margin businesses are a must for survival

> Successful Indian companies have had to overcome significant challenges in terms of CSA and GSA

> Professional management> Clear focus on becoming

best-in-class in knowledge-intensive industries

A Innovative India Inc.

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B. India inc. at the intersection of shared value and profitable growth

20SVII 2.pptx

In our belief some of the major themes in this journey evolve around;-

Intersection of social problems and business. What does it imply ?


1. Redoing Products, Services – Making them more relevant to social needs

2. Deriving a new and more relevant definition of productivity – Linking productivity to many more objectives than commercial value add

3. Creating local industrial competence clusters – Building local ecosystems of excellence

4. Creating scaleable impact – Expanding impact at multiple levels and in a multitude of ways.

5. Linking economics with social progress – setting the context of business and rooting it in overall developmental agenda for the society

21SVII 2.pptx

There are several examples that have done the above well at multiple levels not only domestically but also internationally, across a variety of industries

Ge has leveraged technology, innovation and a deep understanding of consumer needs to create the low cost ECG machine for markets like India taking healthcare delivery to millions more in an environment where service delivery is localised, easy, cost effective and maintainance free.

Godrej Consumer Products Ltd has championed science and technology to drive innovation and create market-disruptive products; it has adapted products from its global businesses and localized them with the help of consumer insights, local suppliers, and an innovative and dynamic R&D organizationWith its efforts in extensive rural marketing, frugal engineering, building a profitable and efficient supplier base and strong customer relationship management, Maruti Suzuki has maintained its market leadership position in India for 3 decades. Moreover, it has overtaken its parent in terms of valuation; it accounted for 33% of Suzuki’s auto revenue & 55% of EBIT in FY15A prime example of a successful business built on the principle of shared values via leveraging its strong parentage, understanding of customer priorities, development of local sales force, and customized credit-appraisal and collection mechanisms

Customer focussed and asset-lite-no-frills-low-price-hub-based model focusing on a core set of specialized services, Vaatsalya's operating model can be applied in Western markets where concerns about increasing healthcare costs are growing

Source: Secondary reports, Roland Berger

GEMedical Devices

Godrej Consumer Products Ltd.:FMCG

Maruti Suzuki:Automotive

Mahindra Rural Finance:Financial Services

Vaatsalya:Healthcare Services


1

2

3

4

5

22SVII 2.pptx

Godrej Consumer Products Ltd has championed science and techn-ology to drive innovation and create market-disruptive products

Analysis of testing and validation processesContinuous improve-ment of R&D processes to reduce time to market & increase flexibilityUsing ingredients after detailed understanding The team ensures that the raw materials stack up against the function-al requirements of the product prior to usage, e.g., reusability, interactions, etc.

Focus on Chemistry and science of ingredients

Godrej innovations

> Godrej’s hair color sachet was borrowed from its Argentinean business and localized with the help of local suppliers

> Godrej’s Good Knight Fast Card was adopted from its Indonesian business via partnership with suppliers to drive down cost

Drive small innovationsFocus on continuous and small improvements, so as to become faster and more agile E.g., rather than testing hair color via human hair trials, the team developed multi fabric strip testing that are easy and fast to use and allow reproducible testing and formula optimization across a range of colors

Driving R&D to small innovations

Technical track of employeesApart from hiring the standard management employees, Godrej hired at higher salary, technical experts such as polymer chemists, flavor & fiber experts, etc who would provide "out of the box" thinkingOther HR effortsCompensation of R&D teams was modified, cross-functional teams were set up, all to drive innovation

Hiring technical experts & other HR efforts

Create new marketsFocus on untapped mark-ets & disruptive ideas – it adopts technologies from its global acquisitions and localizes these to disrupt the market and drive volumesWith the help of in-house qualitative R&D, and partnerships with local suppliers to drive efficiency, Godrej has successfully adapted international products to suit the Indian consumer

Adopting ideas and technology to suit the Indian consumer & price point

Case Study: Godrej Consumer Products has championed science to drive innovations



23SVII 2.pptx

Mahindra’s Rural Finance business is a prime example of a successful business built on the principle of shared values


Case study: Mahindra Rural Finance is driving prosperity and respect in rural India

1

2

3

4

5

6

Building trust: Leverages the good reputation of Mahindra Finance by getting past customers of Mahindra Finance to interact with prospective Mahindra Rural Finance customers Understanding customer priorities: Develops an in-depth understanding of the rural customer’s priorities to redefine product offering – smaller principal amounts, flexible payment terms, etc.Relationship building: Recruits sales force from the local community who become brand ambassadors and reach potential customers through word-of-mouth and concept sellingCustomized collection processes: Encourages timely loan repayment via provision of further loans, collects cash & uses technology to minimize pilferage, trains sales & collection manpower to accurately gauge credit worthiness and repayment capacity of customerCreating customer databases: Builds customer databases leveraging know-how of sales force to know financial situation of customers, reschedule loans, offer attractive loan rewards, etc.

Risk assessment: Develops reliable estimates of potential earnings / repayment via income models based on customer profile & farm; further performs formal assessment via proprietary software

Mahindra Rural

Housing Finance

Customer Acquisition

Collections

Cred

it ap

prais

al

Trust

Building trust

Relationship building

Understanding prioritiesIncome models

and Risk Assessment

Creating customer databases

1

2

3

5

6

Customized collection

4


24SVII 2.pptx

Cost-efficient and investment-lite model: > With a network of 15 hospitals Vaatsalya creates value by

improving price negotiations with vendors and standardizing operating procedures

> Capital expenses for land are avoided by leasing the land; moreover, Vaatsalya operates in semi-urban areas such as Hubli, Bijapur etc., where rentals are low

> Investment are tailored to keep costs low. In tier II cities. Without land cost (about 30% of the total) the company invests about INR 0.3 million for instruments etc.

Vaatsalya's operating model can be applied in Western markets where concerns about increasing healthcare costs are growing

VaatsalyaBusiness

model

HR-friendly policies Marketing

awareness

Focus on cost-efficiency

Core set of specialized services

Investment-litemodel

Strong customer focus

1

2

4

5

Core set of specialized services: Focus on time-sensitive, high priority services for which travel is unfeasible, e.g., intensive care facilities, neonatal care, nephrology, etc.Integrated marketing effort: ATL & direct marketing efforts customized to target customer segments, e.g., radio campaign, telephone helpline, door-to-door visits, referral bonus, tie-ups with government insurance programs, etc.

HR-friendly policies: Attractive compensation structure to incentivise doctors to relocate to small cities, provision of greater autonomy and control to doctor staff, rotation of key medical staff

Case Study: Vaatsalya provides quality healthcare to semi-urban areas efficiently


Core value proposition: A for-profit chain of hospitals and clinics in India which strives to provide quality healthcare in semi-urban and rural areas

3 Strong customer focus: Focus on customers via stringent feedback mechanisms and increased operational efficiency, e.g., use of IVRS1) based booking system, customer satisfaction surveys, detailed KPI tracking, etc.

1) Interactive voice response system


25SVII 2.pptx

So what does this tell us about the intersection of social needs and business solutions

1. Listening to the customer and appreciation of the gap is critical

Local solutions for local needs which are relevant2.

Innovation in approach, ability to leverage technology and driving efficient product definitions is critical3.

Bottom line is both profitability as well as social relevance4.

Source: Roland Berger

Summary