The following points highlight the two main examples of corporate plan. The examples are: 1. Superhouse 2. Zessl.
Example # 1. Superhouse:
Superhouse is one of the top five leather goods exporters based in Unnao in Uttar Pradesh, India. It was established in 1976 by Mr Mukhtarul Amin, when he was just 23 years old. His father owned a tannery, but Amin wanted to grow beyond tanneries and into footwear. At that time, Europe had just opened up imports of economical footwear from various countries, including India.
The company got into exports of finished leather goods right from the beginning. Since then it has seen continuous growth on the back of quality raw material, design, and craftsmanship.
Its present turnover is Rs 3.33 billion. It has two established brands- ‘Allan Cooper’ and ‘Double Duty’. The brands are perceived as utility and style statement products, including footwear for ladies and gents and other leather goods and accessories. At present 75% of its revenue come from exports. But the margins from export are coming down, though export orders are growing, because of stronger rupee.
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If the rupee continues to gain strength, there will be a further erosion of net profits, which will come down from 13.7% to around 7% at c.i.f. (cost, insurance, and freight). In this changed scenario, the company has decided to focus to the domestic market. It finds huge opportunity in the domestic market. Super- house never tapped their potential in the domestic market.
Now, it has decided to open 20 stores in the current fiscal year and 30 stores in the next fiscal year. It is also developing an extensive franchisee network for cities, where it does not plan to set up stores. The company plans to invest Rs 1 billion for expansion in the domestic market in the next couple of years. Mr Amin observes ‘by making international styling available simultaneously in the domestic market, we are only bound to grow stronger and larger as a company’.
(The example is based on a report titled ‘Homeward bound’ published in Business India, 26 August 2007.)
In absence of a long-term plan, like corporate plan, Superhouse will find it difficult to implement the strategy.
Example # 2. Zessl:
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‘In 2001, with a turnover of Rs 202 million, we were really struggling to secure the basic future of the company. We were on the verge of a sellout. Just then, The World Trade Centre (New York) crash happened. At ZESSL, the phone kept ringing and enquiries about security systems started flowing. The enquiries were converted into orders.
In fact, the 9/11 attack has changed the face of the electronic security industry.
The global industry has been growing at the rate of 8 per cent since then, as compared to 4 per cent earlier. These tragedies are like turning points for our business as consciousness about security increases’ says Mr Pramoud V. Rao, a first generation entrepreneur and MD of Zicom Electronic Security System Limited (ZESSL) located in Mumbai, India. In 2001 the company’s turnover was meagre Rs 202 million, which is now surged to Rs 1.56 billion.
The security system business is like a pyramid. At the top of the pyramid is high-value, low-volume business. This basically comes from the government for defence, aviation, transportation, oil and gas, and the power sector. Then in the middle of the pyramid is the business derived from the diversified corporate sector—several large Indian and multinational companies in the field of info tech, telecom, media, banking, finance, industrial as well as IT parks, malls, etc., are its customers.
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Finally, at the base of the pyramid sits the retail and the home market. The top and the middle part of the pyramid is the B2B business, where the company has a major presence. But it neglected the bottom part. The changing landscape of India has inspired the company to get into this B2C business.
ZESSL has created a subsidiary, Zicom global, for this new vertical. The subsidiary will focus on the fastest growing residential and retail segment by offering various security products and solutions to 1.8 million new homes and shops getting constructed in India. In an endeavour to reach its customers, in June 2007, Zicom tied up with Future Media for setting up display counters (shop-in-shop) in 100 various stores, which include Big Bazar, Pantaloons, Brand Factory, and Furniture Bazar.
At present the company outsources all its products from overseas OEM alliance partners. But to survive and thrive in the retail business the real challenge is how to bring down prices making it affordable to the common man. To address this challenge, the company has decided to set up its own manufacturing facility.
It has set up a 100% subsidiary in China to manufacture low-tech, low-value, high-volume products like alarms and CCTV. It will continue to procure high-tech, high-value, and low-volume products from OEMs.
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The company has drawn up a plan to make it an Rs 5 billion company by the year 2009, of which 50% will be the retail contribution.
(The example is based on a report titled ‘Keeping a watchful eye’ published in Business India, 23 September 2007.)
The example brings out the importance of long-term plan, like corporate plan.