Business Functions and Process

INTRODUCTION
Organisations in the world today build on business processes and functions. The highly
competitive industries build on several strategies to survive and compete. The relaxation of
trade barriers by most countries has opened a new business arena on a global scale and
organisations in the current world compete locally and internationally though physically not
present internationally. This report is constructed to critically evaluate the decision of Hero
Motor Corp Ltd to launch a new product and its implications on the organisation’s various
functional areas and its resources.
Business processes are a group of interconnected activities which create a value by altering
an input into an output that is more valuable. Business processes include management
process, operational process and supporting processes. Each of these processes has significant
importance in the overall performance of an organisation. Management processes include
building strategy and decision making, operational processes include core business functions,
supply chain management, sales, marketing, manufacturing and purchasing etc. Supporting
processes on the other side include technical support, human resource management,
accounting and Research and development etc. Considering the nature of business chosen in
creating this report, all the business processes and functions mentioned above fall in place.
(Monk & Wagner, 2007)
Business processes have sub processes by which they are affected. This report also focuses
on various contemporary issues such as the effect of globalisation, market trends,
sustainability and risk management. Managers in organisations have the advantage of looking
at their businesses through the customers’ perspective with business processes. For example,
Dell computers adapted online customization of products. A customer chooses the
configuration he desires and purchases online. On a larger note, the organisation understands
what customers need. The company works on a build to order basis. The company also has
the ability to classify its customers based on geographical locations, age, gender etcetera, to
understand their customers’ needs through this process.
Having introduced the scenario of business functions and processes, a detailed study and
understanding is made on the company, the product it is trying to launch. Furthermore in this
report, individual functions that constitute the organisation are identified and how these
functions are integrated across the company with respect to the decision of launching a new
product is made.
COMPANY OVERVIEW AND PRODUCT – HERO MOTORCORP
The organisation chosen for this report is Hero Motor Corp Ltd. Hero Motor Corp Ltd is an
Indian Automobile company which was formerly known as Hero Honda Motors Ltd. Hero
and Honda collaborated and operated in India for more than two decades after they decided to
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find ways apart and operate in India individually. Hero motor Corp Ltd is the world’s largest
two wheeler manufacturer. It is located in India. The organisation also boasts to be the No 1
in the world in terms of unit sales per annum. Hero Motor Corp Ltd sells its products in three
different forms such as direct selling through website, corporate sales and merchandizing.
Hero Motor Corp Ltd currently has 16 products in the two wheeler market in India and plans
to launch a new motorcycle in the market. The name of the product is Hero – Impulse. Hero
Impulse falls into the category of 150 cc vehicles which is a high end product in Indian
markets. The vehicle has a high end ATFT engine and is targeted to customers who fancy
terrain riding. It also has various other high end technology based attribute which add value
to the vehicle. The vehicle is priced at INR 78,300 which is approximately GBP 900. The
vehicle categorises itself into an affordable price segment in India. Hero Motor Corp Ltd
works on the strategy of exploring global opportunities, improving operational efficiency and
aggressive expansion to reach its customers. The organisation invests heavily on brand
building and expansion to satisfy its customers and its shareholders. (Company profile, 2012)
AUTOMOBILE INDUSTRY -2 WHEELER IN INDIA
 GDP/Economy/Purchasing Power
Automobile Industry in India is one of the largest and fast selling industries in India. India is
a country where maximum transport is run on two wheelers and public transport.
Economically and demographically the automotive industry is positioned ideally for growth
considering the domestic demand and the export opportunities. India’s working age
populations has tremendously increased over the last two decades which creates high
purchasing power among all classes of people. The drastic development in technology,
services, distribution networks and manufacturing facilities has given better access to this
industry in India. The economy of India has grown at 9 per cent average over the last five
years and is predicted to be the same in the coming future. With the increase in economy and
the increase in employment every year in India, more and more people are expected to afford
vehicles in the future. The graphs below gives an insight into the GDP growth of India and
the projected purchase power of vehicles by Indian customers.
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Figure 1 (Source: KPMG: Indian Automobile Industry, Evolving Dynamics (2010))
The graph clearly explains the annual passenger vehicle volumes against the GDP growth in
India. Similarly the growth in the population with high income levels can be seen in the
graphs below:
Figure 2: (Source: KPMG: Indian Automobile Industry, Evolving Dynamics (2010))
From the above two graphs it can be clearly understood that there has been a rise in the
income of average Indian and the purchasing power has drastically increased in Indian
markets. The automobile industry in India has seen interesting changes over the last decade.
A decade filled with recession has caused major companies in India a considerable loss in
sales, but, the rise in demand from Indian buyers and the rise in purchasing power has
stabilized this equation. The domestic volume of sales in the years 2009 – 10 can be seen in
the graphs below:
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Figure 3 (Source: KPMG: Indian Automobile Industry, Evolving Dynamics (2010))
The graph clearly explains the percentage growth of vehicles purchased in 2009 – 10 out of
which 76 per cent constitute the two wheelers segment. This shows a great factor of demand
in the market as well as a great opportunity for companies to launch new products. Although
the growth in demand exists, the automobile industry in India finds it difficult to place a
strategy due to high competition and other external factors such as lack of infrastructure,
roads, and transport etcetera.
ANSOFF’S MATRIX:
In this section Ansoff’s matrix is used to understand the current position of the company in
launching a new product and developing a strategy based on it. Ansoff’s matrix is a major
advantage for organisations to understand the current strategic position and evaluate the
competitiveness of the organisation. Below is a diagram illustrating the Ansoff’s matrix.
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Figure 4 (Source: Ansoff’s Matrix, 1948)
The above chart distinguishes the newness of the product and newness of market. The
product that falls in each of these columns can be distinguished and a strategy can be
developed in order to reach its customers effectively. The product chosen in this research
falls under the category of new product and same market which has 8 times higher risk
strategy than selling its products (existing) in existing markets. The advantage of using this
matrix is that a graphical representation helps in identifying the products position in the
market thereby understanding the complexity involved in making a decision towards building
a strategy. However, the external factors do not account in this matrix. Individual functions
that constitute the organisation are therefore identified and the necessity to integrate these
functions across the organisation is justified in this report. The strategic decision making in
launching a new product in an existing market requires heavy research and development and
involves identifying the target market and placing the product at the right moment. To do so
and to attain maximum success, the internal organisational functions have to be aligned based
on the strategy developed. Organisations face difficulty in doing so due to many external and
internal factors and it takes a strong strategy to overcome these difficulties. In the modern era
of unconventional marketing strategies, extreme customer centric, high globalisation and
competition it is important to assess the organisations capability and therefore draw a line on
the sustainability of the organisation.
FOCUS ON CUSTOMERS: CRM
Customer relationship management is one of the key business processes that define the
success of an organisation. Maintaining customer relationship is being perceived as a strategy
which is process oriented and that which creates a value for both the seller and the buyer.
(Lambert, 2010) Management teams of organisations identify key customers who are highly
valued and are targeted as a part of the organisation’s key business strategy. The customers
potential is evaluated before a set of customers are targeted for profits. To maintain and
strengthen this bond for more sales or ultimately success for the new product launched,
organisations should make sure that all its corporate functions actively participate and
cooperate with each other to attain success. (Ryals and Knox, 2001)
FUNCTIONAL AREAS AND RESOURCES THAT WILL BE AFFECTED BY
THE DECISION:
(CONSIDERING globalisation / Competition / sustainability / risk management)
Below is the list of functional areas and resources identified which will be affected by the
decision of Hero Motor Corp to launch a new product in the market. These functional areas
have to be integrated with respect to the focus on customers.
A. Operations Management
B. Sales and Marketing
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C. Post-Sale Service
The importance of integrating these business functions is to clearly automate the entire
organisation into one functional unit. All these functional business units have significant
importance individually. The decision of launching a new product into the market by the
company has substantial effect on all the business areas and functions of the organisation.
The effect of this change and the ways of attaining a competitive advantage are discussed in
this part of the report. Additionally the issues relating to the strategies implemented and the
ways to control them are discussed in this section.
A. Operations management
a. Supply chain management
b. Operations Strategy (accessories and parts sale / inventory control
management / purchasing management / warehouse management)
c. human resource management
d. Financial management
The above listed factors constitute the operations management business function and play a
key role in defining strategy for the new product. The new product launched by Hero Motor
Corp – Hero Impulse – is targeted to the market that it already exists. However the product is
entirely new and has high risk in defining strategy. Therefore the functions are understood
and integrated with each other. Having understood the growth in India in automobile industry
and the removal of trade barriers, Hero Motor Corp Ltd has the opportunity to expand its
supply chain overseas and spread its wings across many other countries in doing its business
operations. The implications of these changes and the aggressive approach of Indian
automobile industries introduce a new approach to engineering and or manufacturing its
products. Rapid development of supply chain management enhances organisational
performance and reduces the time for an organisation to reach its customers. Hero Motor
Corp Ltd has majority of its suppliers placed across China, South Korea and India. The
design, initiative, planning and management of a new product takes a considerable amount of
time and it is important for organisations to make this in less time to beat competition. (Saad
and Patel, 2006)
More and more organisations in India tend to develop a comprehensive supply chain system
and then link it to the organisation’s strategy. The requirement of the organisation is taken
into account when formulating a strategy in developing a supply chain system. (Sahay and
Mohan, 2003)
Similarly according to Chopra et al (2007),
“A company’s competitive strategy defines, relative to its competitors, the set of customer
needs that it seeks to satisfy through its products and services.”
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Figure 5: Self-explanatory - relationship between SCS – Competitive strategy performance
Supply chain management has an effect both internally and externally for Hero Motor Corp
Ltd. When developing a strategy, Hero Motor Corp should place the idea of building strategy
in bias to the external and internal environments. In order to achieve a competitive edge over
competitors it is important to create a strategic fit between supply chain management and
competitive strategy. Based on the above strategy, identifying a competitive strategy
involves the following factors,
1. Quality: Maintaining high quality standards in product or service.
2. Cost: Strategically place the price of the product. This involves considering several
factors such as production cost, competition, market value and other liabilities of the
company etc.
3. Delivery time: The entire supply chain which involves the gathering of raw material
to selling the product to the customer. The lesser the time involved, the better
competitive edge an organisation has. The company gains credibility if it delivers its
product or service on time
4. Demand: The capability to meet demand requirements in a long run.
5. New product development: The risk of introducing a new product into the market
which is highly competitive. (Soni and Kodali, 2011)
The above factors have to be taken into account on priority to design a competitive strategy
for Hero Motor Corp to launch its new product into the market.
Apart from the above factors, implementation of supply chain strategy involves the following
steps,
1. Capital reduction: Trying to understand various monetary issues and uncertainties in
the market and minimize the investments in logistics, yet attain maximum output. As
Hero Motor Corp Ltd is an organisation which exists in the market for over 2 decades,
this factor can be achieved with ease.
2. Cost reduction: Transport costs and storage costs can be reduced with proper supply
chain strategy. In terms of new product development, the company needs to cut down
on excess inventory and utilize any excess stock if suitable.
3. Customer service: Improved service quality and increase in customer service.
Human resource management is integrated as a part of operations. Performance management
is monitored and strategized with human resource management. Performance management is
used to assess the progress in the direction of predetermined goals. New product development
involves HRM to closely monitor performance in the organisation to attain maximum success
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rate. The main advantage of performance management is that it whole and solely concentrates
on the results or outcomes that are desired. It does not concentrate on the processes or the
way the work is done. The business functions and processes decide the pattern or the process
the work has to be done and performance management attempts to complete it in time.
Performance management aligns organisational processes and activities. (Sita, 2008)
B. Sales and marketing
a. sales
b. marketing
c. customer support service
The above listed factors and business functions play an important role in defining strategy.
Sales and marketing is incomplete without a proper supply chain. The demand factors in the
market influence Hero Motor Corp Ltd to launch a new product. However due to the huge
amounts of demand in the market the organisation has to realize that the supply chain is quick
enough to get the product to the market. After the product is released into the market, the
sales part of the strategy is initiated. However, marketing of a product starts form the initial
stages once the design is finalised. The sales and marketing area requires information from all
the business functions involved in the organisation. The communication between customers
and the company or the point of sale is done online, or in the retail. Technology and web
systems are integrated so that the marketing and sales team is addressed with sales count. All
the sales orders have to be passed on to supply chain management in order to plan for future
purposes. The trend in the sales is identified by the sales and marketing team and is passed on
to all the other business functional areas in order to build the company’s strategy towards the
new product. As Hero’s new product ‘Impulse’ is the 17th product of its company, the idea of
strategically placing the product might not differ, but the target market unlike the other
vehicles is different in this case. Hero ‘Impulse has’ been designed for customers who prefer
terrain or off road driving especially for adventures. The idea of targeting its customers and
having a customer centric focus is challenging in a country like India where most people
purchase motor bikes for daily purposes. The regions where these customers exist have to be
outlined in order to place their product. Defining strategy for sales and marketing involves
collaboration of all the business functions so as to place the product for better sales. The price
of the product is defined with respect to the manufacturing cost, which in turn is dependent
on finance departments and which is in turn dependent on the operations team.
The relation between human resource department and marketing and sales department can be
vital as well. For example if there is a vacancy of a job in the marketing and sales department,
it is human resource department’s job to hire and recruit a suitable candidate for the job.
However this report focuses on the decision taken by Hero Motor Corp Ltd in launching a
new product. According to Wagner and Monk (2007),
The common inputs that come into sales and marketing are
1. Data of orders placed.
2. Data of the customers.
3. Unit costs.
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The common outputs from sales and marketing are,
1. Product pricing
2. Employment needs
3. Development of new sales strategies
The marketing and sales departments have to focus on sales orders and sale forecasts and
communicate thoroughly with the operations team to meet the demand – supply.
C.
i.
ii.
iii.
Post sale service
servicing and testing
service sales and support
research & development
Post sale service forms the key and most important business function now - a – days. In the
highly competitive market, no company compromises on post-sale services. It has become a
major factor that customers consider before making a purchase. From the organisation’s
perspective, post – sale service can be identified as a process of retaining a customer even
after the sale (Payne and Frow, 2006). The three factors identified under post – sale services
business function are servicing and testing, service sales and support and research and
development. Firms that offer durable goods offer post sale services at a high rate.
According to Clark and Armistead (1990), there is a strong strategic relation between post
sale services, customer satisfaction and customer retention. Additionally, the design,
production, sales and post-sale services are strongly interlinked to each other. Post sales can
develop and differentiate the company and give a competitive edge over others.
Research and development process is interlinked with operations, marketing and sales and
post-sale services. Hero Motor Corp has a high standard research and development centres
which concentrate on new technologies in building vehicles with respect to Indian standards
and conditions. The information flows in all directions thereby helping the organisation
perform better if they plan to launch an improvised version of the current product Hero –
Impulse.
All these processes are interlinked with other business functions thoroughly.
Hero Motor Corp Limited offers 6 free servicing after a purchase of its vehicle. These vehicle
servicing are free of cost. This makes the customer feel more satisfied with the company and
attains a good will with the organisation. This can lead to word of mouth publicity which is in
turn helping the marketing functionality. Similarly service sales and support teams indulge in
reporting customer complaints and reporting it back to operations / supply chain / marketing
functions. The company gains feedback from the customers which are shared with other
functions in the organisation which in turn helps in the overall performance of the
organisation. (Post Sale Service, 2012)
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The above three functions namely operations management, sales and marketing and post-sale
services have been identified as three major functions that will have impact on. A thorough
understanding of strategy and the integration of these systems is explained further in this
report with regards to customer focus.
According to Madhok (1997) organisational competitiveness in new product development
can be achieved through three important steps.
1. Identifying the key or most important choices of distribution and customers
2. Assessing the organisational ability in launching a new product
3. Evaluating the impact of new product on the market and the overall competitive edge
that the organisation gains in launching the new product.
In the case of Hero Motor Corp, the organisation is well established in the country and
finding distribution channels is not a difficult task. However as the product is designed to a
specific set of customers the organisation needs to develop a strategy in identifying these
customers and strategically attracting the customers to purchase these products.
The organisational ability to launch has to be thoroughly assessed. The organisation has the
ability to launch new products. The impact of the new product may as well create a
competitive edge to the organisation as it is the first organisation to launch a product
particularly for a type of customers. If the organisation manages to place its product perfectly,
then the competitive edge is automatically achieved by the company.
The organisation can gain competitive advantage through many of the following ways,
1. The organisation has the ability to with stand demand supply ratio with the kind of
infrastructure and labour it possesses.
2. Hero motor Corp Ltd is the world’s largest two wheeler manufacturer.
3. The economy of India has grown at 9 per cent average over the last five years and is
predicted to be the same in the coming future.
4. Increase in purchasing power of Indian population.
5. Hero Motor Corp Ltd has majority of its suppliers placed across China, South Korea
and India. So it automatically gains higher market coverage and penetration
6. Strong supply chain management.
The evolution of automobile industry over the years has opened many routes for Indian
automobile industries to gain competitive advantage in many areas. All the above listed
factors help Hero Motor Corp Ltd to gain competitive advantage over other organisations.
CONCLUSION
In the rapid growing world, it is important for Hero Motor Corp Ltd to carefully analyse its
strategic position in the market before it launches new products. However with the
capabilities the organisation has it can easily attain success. Integration of all business
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functions and proper collaboration leads to success. Customer relationship management has
to be undertaken in order to achieve competitive advantage.
Customer relationship management is one of the key business processes that define the
success of an organisation. Maintaining customer relationship is being perceived as a strategy
which is process oriented and that which creates a value for both the seller and the buyer.
(Lambert, 2010) Management teams of organisations identify key customers who are highly
valued and are targeted as a part of the organisation’s key business strategy. The customers
potential is evaluated before a set of customers are targeted for profits. To maintain and
strengthen this bond for more sales or ultimately success for the new product launched,
organisations should make sure that all its corporate functions actively participate and
cooperate with each other to attain success. (Ryals and Knox, 2001)
Customer relationship when planned and implemented properly helps in reducing inventory
depending upon the demand factors, and can lead to an improved performance on the whole.
The impact of focusing on customers in developing strategy and integrating business
functions are as follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Stronger relationships with customers
The margin of products can be increased
The customer share can be increased
The alignment of services and cost – to – serve resulting in an improved mix
Increase in productivity
Increased trade
Low – profit customers can be reduced
Increased network or market share
Exploration of new and untapped distribution channels through supply chain
management
10. Maintain human resource – working capital ratio
11. Easier approach to make – to – order
12. Stronger and improved strategy in utilizing assets
13. Increased research and development based on customer feedback
14. Improved product development
The factors listed here are a few important factors that have been taken into account in
integrating various business functions of the organisation Hero Motor Corp Ltd. The
customer centric focus on this report has vital importance on the listed business functions.
In addition to the above factors, globalisation plays a vital role on the automobile industry in
India. The supply chain of Hero Motor Corp Ltd extends to China and South Korea. The cost
of purchasing raw materials or parts from these countries is comparatively low to the cost
from local manufacturers. Hence Hero Motor Corp Ltd and other automobile companies
purchase parts from these countries. The problem identified here is the time of supply chain
increases if the raw materials have to come from a different country rather than its home
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base. This problem can be controlled and eradicated by using strong logistics and faster
transportations facilities. The overall production cost should be taken into consideration in
doing so.
Hero Motor Corp Ltd has sustained as the leading seller of two wheeler vehicles in India over
a decade. Hence sustainability of the organisation as a whole is unquestionable. However,
sustainability of the new product is questionable due to high competition. There is a high
amount of risk in placing a strategy to the product’s selling. The new product is targeted to
customers who prefer adventure riding and this segment of market is untapped by the Indian
automobile industry so far. Considering the risk involved in manufacturing a vehicle for this
purpose, Hero Motor Corp Ltd needs to incorporate strong marketing strategy to achieve its
goals. Enterprise resource planning helps organisation to plan and focus on their objectives
and work towards their goals.
This report has focused on all major issues that were found relevant in identifying functional
areas for the organisation. A critical analytical approach has been formulated in
implementing strategic decisions and the issues relating these decisions have been
summarized.
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