Established in 1936, the Khetan Group started off as bargainers of wares in Nepal. In the initial old ages their primary concern revolved around import of cloth and other indispensable trade goods from India and subsequently on from China and Burma.
The group through the last 70 old ages has grown to go one of the largest pudding stones in Nepal.Soon Khetan Group under the leading of Mr. Rajendra Khetan looks to consolidate its place as it continues to turn from strength to strength while conveying new concern sectors under its portfolio through horizontal every bit good as perpendicular enlargement. The Khetan Groups portfolio is spread across three primary industry sectors:Industrial: Within this sector the Khetan Group has established 5 major companies, viz.
( I ) Gorkha Brewery, ( two ) Himalayan Snax & A ; Noodles, ( three ) Himalayan Petrochemicals, ( four ) Bottlers Nepal & A ; Bottlers Nepal ( Terai ) and in conclusion ( V ) Gorkha Brewery s Liquor Wing.Amongst these companies Gorkha Brewery is recognized as market leader in Beer beer makers and sellers in Nepal holding more than 80 % market portion. Established as a joint coaction between the Danish Beer Giant Carlsberg and the Khetan Group the company retains the differentiation of being one of the largest foreign investings in the history of Nepal. In 2004, Gorkha Brewery started brewing and selling Sam Miguel beer, on the licence understanding with San Miguel Brewing International Ltd.
, Phillipines.The Himalayan Snax & A ; Noodles Private Limited was established in October 2000 in proficient coaction with Thai President Foods Plc of Thailand. Within a short clip since its origin it has been able to capture important market portion within the industry.Bottlers Nepal Limited ( BNL ) is the lone bottler of Coca-Cola merchandises in Nepal, and has two bottling workss ; viz.
Kathmandu ( Bottlers Nepal Limited BNL ) and Bharatpur ( Bottlers Nepal ( Terai ) Limited, ) which is 160 kilometer from Kathmandu, its capital.Fiscal Services: In this sector the Khetan Group has 3 major companies under its umbrella. They are: I ) Everest Life Insurance, two ) Laxmi Bank and three ) Prime Life InsuranceTrading and Investments Management: Under this umbrella the Khetan group invests in assorted little and rising concerns associated with Common Trading and few other Financial and Mineral Base Companies both at Public and Private degree. Additionally the Khetan group besides owned interest in the Himalayan & A ; Prime Group of Companies and in Nepal Bank.
In add-on to the wide sector the Khetan group is besides involved in industries such as bottling and filling of LPG, Drilling and deadening deep tubing Wellss for irrigation, Consultancy & A ; representation in the field of Telecommunication, Power, Transmission Line, Hydroelectricity, Construction, etc and existent estate.Since Khetan Group with the gamut of all these concerns is already the taking private sector company recognized amongst the highest subscriber to the treasury, their farther program to beef up our image and fiscal place. As per Mr. R.
K. Khetan, president of the Khetan Group, they aspire to be the best South Asiatic Multinational originating from Nepal.Present Corporate StructureThe corporate construction of Khetan Group is depicted as follows:Figure 1: Corporate Structure of Khetan GroupThe Khetan Group believes in the doctrine that concern should be run professionally and deputation of power and authorization should be given to respective staff at several degree. The Chief executive officer or Director of each company has entire authorization to do the determinations on behalf of the company.
The CEO likewise in any professional concern apparatus would be responsible to the BOD.However, the concatenation of bid is followed under the supervising and policy determination by the board and in some instances to avoid unneeded hold direction commission or thematic commission work to decide such issues. All companies have its ain direction, individuality, investing and merchandise nature and are single net income centres. They are non assorted up with each other to avoid struggle of involvement and cross investing.
The development of the Khetan Group started around 1875, when the so Rana government imported some merchandisers from Rajasthan and Bihar like Agrawals and Rauniyars severally. Khetan Group originates from M/S Kisun Ram Purna Mal which ab initio started with importing cloths and other indispensable trade goods from India in 1936. Later on it expanded imports from other parts of Asia such as China and Burma. Subsequently:It diversified into export of Jute and Lentils in early 1970s.
In the mid-1970s it started the company Bottlers Nepal Limited. BNL became the lone bottlers for Coca-Cola in the full state.In 1989 it established Gorkha Brewery which would travel on to go the largest Brewery in Nepal.In 1993 in a joint venture with Habib Bank of Pakistan and other Nepali concern groups it started the Himalayan Bank in Nepal.
Today the Himalayan bank is recognized as one of the top 500 Bankss in Asia.In 1994 it started the Everest Insurance Company one of the taking public insurance companies in Nepal.In 2000 the Khetan Group further diversified its portfolio by come ining into the bites nutrient industry by establishing the Himalayan Snax & A ; Noodles company in a joint venture with Thai Presidents Foods PLC.In April 2002 the Group set up its 2nd banking company Laxmi bank.
This bank was chiefly for booster s retentions.In June 2007 the group initiated the formation of Prime Life Insurance Company Limited.Apart from these companies the Khetan group has besides ventured into existent estate, bottling and distribution of LPG, telecommunication etc.The group has made legion parts towards societal development of Nepal.
Analysis of Khetan group gave our squad the alone position to look at a big pudding stone holding a diverse portfolio. We began our undertaking with looking at the organisation construction ( describe in figure 1 and calculate 2 ) and measuring the strengths and failings of the group ( Refer Appendix A for the SWOT analysis of Khetan Group ) . Subsequently we delved into measuring the portfolio direction schemes of the group and assessed how the company has gone about constructing up its current portfolio of companies.Our aims was to happen out the strengths of the portfolio and besides measure the growing portion matrix of the portfolio in order to understand the Stars ( High growing, high portion ) , the Cash Cows ( Low growing, high portion ) , the Dogs ( Low growing, low portion ) and the Question Marks ( High growing, low portion ) based on the public presentation of the companies under the portfolio.
Our aim is to urge how to optimise the Khetan group s portfolio based on the growing portion matrix. We besides assessed Khetan group s methodological analysis of traveling for new acquisition and concern enlargements. Last, we analyzed the possible synergism chances to optimally utilize the company s resources under the portfolio for accomplishing cost benefits and bolstering the overall public presentation of the group. Political EnvironmentNepal officially the Federal Democratic Republic of Nepal, is a Landlocked state in South Asia and, as of 2010, the universe s most recent state to go a republic.
It is bordered by Peoples s Republic of China on the North, and by India to the south E and West. Nepal has experienced dramatic political alterations in the past few decennaries. Governments in Nepal have tended to be extremely unstable as a consequence of which no authorities has survived for more than two old ages for the last two decennaries.A motion in April 2006 brought about a alteration in the state ‘s administration by which an interim fundamental law was formed with the King giving up power, and an interim House of Representatives was formed with Maoist members.
In August, 2008, Maoist leader Prachanda was elected Prime Minister of Nepal, the first since the state ‘s passage from a monarchy to a democracy. On May 4, 2009, Mr. Pushpa Kamal Dahal resigned over ongoing struggles over bagging of the Army head.The Khetan group began its concern from 1936 and experienced big alterations and challenges in political environment.
However, it has strived to keep good dealingss with the authorities to guarantee that the political instability of Nepal does non adversely affect Khetan Groups concern. Chairman of Khetan Group, Mr. Rajendra Khetan is a member of the Constituent Assembly and has many ties with other authorities associations. Political alterations could give the domestic companies large influence.
For illustration, different Torahs and regulations about revenue enhancement, duty and labour harmonizing to different authorities entities make the company adapt consequently. The political alterations put a large-scale impact on the investing schemes and so on. One of the major jobs of changeless political alterations is the deficiency of consistent policy devising.This has a direct bearing on the concerns as it makes it really hard for them to do long term schemes.
Harmonizing to Mr. Khetan, this is the major hinderance to the growing of the company. Khetan Group is active in puting up association to buttonhole with the authorities.Economic EnvironmentNepal ‘s gross domestic merchandise GDP for the twelvemonth 2008 was estimated at over US $ 12 billion, doing it the universe s 115th-largest economic system.
In malice of holding a work force of 10 million, Nepal suffers from acute deficit of skilled resources. Its long-standing economic understanding underpins a close relationship with India. It besides has a pegged exchange rate with the Indian Rupee which has its ain set of impact on the economic system. The economic system is highly dependent on foreign assistance.
It receives assistance from India, Japan, the United Kingdom, the United States, the European Union, China, Switzerland, and Norse states.The economic system is still really little and lacks fight. Poverty is acute ; per-capita income is less than US $ 470.Purchasing power of the local public still really low.
Lack of buying power has a major impact on the concern environment in Nepal and this causes most concerns to vie on cost. It is really hard for concerns to concentrate on the quality facets of the merchandise as it is merely excessively expensive to make so. This has led to fierce monetary value wars in many industries. This has besides been identified as one of the chief restraints to the growing of the group.
Social EnvironmentThe state has been enduring from high degrees of illiteracy. Net primary registration rate was 74 % in 2005. It now is about 90 % . So it s noticeable that the state s instruction degree is bettering.
More attempts are being made to speed up the state s talent-manufacturing machine – the instruction system. However, it s still a job that in Nepal it s hard to retain the endowment since abroad occupations are more attractive with higher wage, other benefits bundle, calling developing infinite and life environment. Khetan Group high repute and good HR patterns allows it to pick the pick of the limited endowment pool. Its concerns are one of the few in Nepal that is able to enroll from the good concern school in Nepal.
There is a immense sum of societal agitation in the state due to really high degrees of unemployment. Added to the unemployment job is that really high degree of politicization of labour groups in the county. This has had an highly inauspicious impact on the concern environment of Nepal. In most concerns ( peculiarly in the large 1s ) , the workers have organized into brotherhoods which belong to different political parties.
Many times, the actions of the brotherhoods are non peculiarly good to the long term good being of the company.This state of affairs is even more acute in the fabrication sector. Khetan Group has major fabrication concerns. However, Khetan Group is one group which has managed to keep good industrial dealingss.
They have focused on industry where the jobs with labour unionisation are the least. Companies that have fabricating units tend to hold the low terminal labour that are extremely politicized ( particularly by the Maoist brotherhoods ) . In service oriented concerns, companies are more restrained against this. This is one of the grounds Khetan group had chosen to diversify into the services sector.
Technology EnvironmentAs an impact of globalisation, Nepal has been exposed to more and more advanced engineerings in recent times. Many domestic companies have come up with new engineerings, and some SME companies are besides seeking to import international engineerings and reassign them locally.Khetan group s primary concerns are in nutrient, brewery, bottling, petrochemical, insurance and banking services. The company prides in being technologically superior to all its domestic competition.
This stands out as one of the most important competitory advantage for the Khetan Group. The group has besides been maintaining a stopping point oculus on new technological promotions as possible avenues of concern enlargement. Some sectors such as telecommunication and energy are demoing marks of growing.However, the overall degree of technological development remains really low as compared with the remainder of the universe.
It is besides noteworthy that although a few major metropoliss have really good cyberspace incursion rates, the bulk of the state is wholly incognizant of this new engineering. This has meant that concerns in Nepal are still non able to leverage the power of the Internet to make more figure of people and therefore spread out their range. Businesss have to still trust on traditional supply ironss.Portfolio schemeCorporate ScopeKhetan group operates in three different sectors, industrial, fiscal services and trading and investing directions.
The current corporate construction is horizontal with managers and CEO of single corporates describing to the Chairman of the board, Mr Rajendra K. Khetan.Many of the concerns in the portfolio are already market leaders. The group has prudent fiscal policies and uses really low debts to finance its capital construction.
As the group is besides known to pull and retain the best work force in the state. Many of its concerns are run by the best qualified people in the state.The Khetan Group believes in the doctrine that single SBU s CEO or manager should a high degree of liberty to run the concern professionally independently. In our interactions with the Khetan Group Chairman, he mentioned that, in order to give the SBU adequate reactivity, all companies have their ain trade name, direction squad, individuality, and fiscal investing.
Corporate DistributionLike many other Asiatic concern pudding stones, the Khetan Group typically target concern ventures which demonstrate chances of profitableness. Although the group s three sectors are rather unrelated, we noticed that most of the concerns are making rather good in footings of the market portion and profitableness.Here we put the Khetan group concern Matrix graph. We describe the comparative competitory place by market portion in X-axis and the Business Grow rate in Y-axis.
We found that most of the KG s concerns lie in Cow and Question Markss.Star: BNL is the lone one Star in Khetan Group s portfolio. A star operates in a high growing market and needs big measure of hard currency to prolong the high market portion. BNL is the lone bottler of Coca-cola merchandises in Nepal.
Khetan Group has been in this concern for 15 old ages. Now the group holds 22.5 % interest and enjoys high net income border in this concern.Cow: These concerns have big market portion, but are in industries with lower growing rates proposing that they operate in comparatively mature industries.
The cattles in Khetan Group are Gorkha Brewery and HSNL. Gorkha Brewery has really high market portion and is besides really profitable. However, HSNL does non hold high net income border, one ground of which could be the really high selling disbursals in this concern. The company still believes that noodles consumption per capita in Nepal is really high, which provides good chances in this sector.
They hope to force the noodles trade name to achieve a greater market portion and move to the top place in the sector.Question Markss: Question Markss in Khetan Group are PLIC, LBL and HBL. PLIC is a life insurance company and HBL and LBL are in the banking sector. As Khetan group mentioned, decennaries ago, Nepali concerns could non conceive of come ining the service sector because of the closed economic system.
However, certain households explored this service industry in Nepal. Among four households, Khetan Group happened to get down HBL which was the first private sector company. This led to the group come ining into other service industries like non-life insurance, air hose ( which was closed subsequently on ) .Dog: The Dog in Khetan Group is HP ( Himalayan Petrochemicals ) .
It is in a comparatively low growing market and besides has comparatively low market portion. The other company EIC is in the insurance industry. EIC likely is non precisely a Canis familiaris because if we define the parametric quantities a small otherwise, it may really good stop up in the cow class. It is one of the older companies in the portfolio and has really good net income borders.
Remark on Overall SchemeThe Khetan group believes all their concerns are of import to them. In fact, all their companies and trade name today are amongst the market leaders except commercial banking that they envision promoting to that place in the following twosome of old ages. The entry standards to new concern by the group are to optimise return and minimise the investing hazard.There are ever two stages of how strategic programs are developed at Khetan Group.
At the first phase, the group with other possible investor discuss on inside informations sing investing determination and future programs for any given concern or any new concern venture. And in the 2nd stage, the concerns within the group ( SBU ) so put their ain marks and one-year programs, which are reviewed on a timely footing. The executive Board would reexamine the concluding program made by several SBU and O.K.
if required.We could reason that so far this household concern group is running successfully with their current scheme. However, we still happen some points that could be improved with our recommendations at below.RecommendationThe recommendations for the Khetan Group fall under two classs.
The first one falls under synergisms and the 2nd one falls under portfolio rebalancing.SynergiesWe surely believe that the corporate office for the Khetan group needs to be structured a little more. There needs to be some maps that need to be housed in the corporate office. Basically, the corporate office needs to place the maps that can be centralized without haltering the liberty of the single concerns excessively much.
1. Media purchasing: The first thing that can be centralized is the media purchasing map. The group owns concerns in the FMCG sector and is known to hold immense advertizement outgos. The media purchasing map can be set up at the corporate office and this can be used as a shared resource by all companies within the group.
Buying media infinite as one group will surely give them significant price reductions with the media companies.We nevertheless do non urge that they centralize maps which have anything to make with the selling messages. We think that making this will negatively halter the liberty of the concerns. While it would be nice to hold all companies working with one Media Company, it could besides be a major restraint.
The concerns should liberate to plan their ain selling schemes as selling is really specific to each concern.2. Legal Servicess: The 2nd map that can be centralized is the legal services. There should be a to the full mature legal section within the corporate office.
It is really dearly-won for each of the concerns to hold its ain set legal sections.Since much of the legal work is besides really boring and cumbrous, this could deviate direction attending in the concern units. The legal section demands to be a shared resource Centre for all the concerns to utilize. As the legal section becomes more mature, it could even be a beginning of competitory advantage as it will go experts at managing legal affairs of many different sorts of companies.
3. Audited account Servicess: The 3rd map that can be centralized is scrutinizing services. This map needs to be centralized for two grounds. The first ground being that the group as a whole can negociate really good auditing fees from the hearers.
The 2nd ground being that it will give the group more control over what is being put out to the populace. For a group like the Khetan group, it is really of import that they guard against any accounting malpractices which could take to their corporate image being tarnished.4. Buying or purchase map: The 4th map that can be centralized is the purchasing map.
A purchasing section can be set up in the corporate office which takes attention of the purchasing demands for all the companies. The purchasing section will negociate and purchase anything that any of the companies need. This could run from direct stuffs and services to indirect stuffs and services.The cardinal purchasing section can acquire really good trades on most of the purchases as they have more volumes.
Furthermore, this section will hold people who are specializers at this map. Over clip, this section could be a beginning of competitory advantage for the group. In fact overtime, this could be a map that may be developed into a gross Centre.5.
HR map: Lack of human resources has been identified as one of the major factors that can restrict growing for the group in the hereafter. This makes it even more critical to hold the HR map centralized at the corporate degree. This does non intend that the single SBUs will non be making their ain hiring. This lone means that when they need to engage, they forward the demands to the corporate central office which in bend will be responsible for forming this full activity.
In a manner, the concern units will non necessitate to blow excessively much clip believing about how to travel about the full procedure as hiring could be a very clip devouring procedure. This will guarantee that the concern units focus on their concern issues. On the other manus, this will besides guarantee that the corporate office gets better at engaging competent people. As the corporate centre gets better, it can get down to strategize about developing directors for the hereafter by holding people work in different concern units.
One of the major jobs in Nepal is that it is really hard to retain competent people as they leave for abroad chances. The Khetan group could germinate into an organisation which gives attractive chances in footings of calling development. The centralised HR map can be developed into a strategic competitory advantage in the long tally.6.
General disposal: Nepal as a state is traveling through immense political transmutation which has resulted in the formation of hawkish trade brotherhoods and workers in the recent yesteryear. Many valuable concern hours are spent on deciding complex labour differences, particularly in the fabrication sector.The single concern units need to be helped in undertaking these jobs which in many instances are a consequence of much bigger political hassles. One of the many strengths of the Khetan group is its ties and connexions with the assorted power-centres of the state.
Administration of such jobs can be taken up at the corporate degree so that the directors at the concern units can concentrate on bettering the market portion of their several concerns.7. Finance map: A CFO can be hired at the corporate degree to organize all finance related activities for all the concerns. Each concern will evidently hold its ain finance director but the corporate degree CFO will be more responsible for alining the fiscal aims with the overall corporate scheme.
E.g. It might be decided at the corporate degree that one of the concerns needs to be divested or liquidated. It will be the occupation of the corporate CFO to look into fiscal deductions of such a determination.
Having talked about all the activities and maps that could be integrated at the Khetan group, we besides feel that their current scheme of giving liberty to all concern units is a major portion of the group s success. In a little economic system like Nepal, it is non possible for a concern group to turn to a important size without prosecuting concerns in unrelated countries.The current scheme allows the group to prosecute any investing and incorporate it easy with the group. Therefore, we feel that while the group strives towards pull outing synergisms, they should besides be really sensitive about non fiddling with the independency of the concern units.
They should endeavor for a construction where all the concern units feel that the corporate office is at that place to assist them and non command them.Portfolio RebalancingThe group should besides look at making an ideal portfolio of concerns. Below are two images. One is the ideal portfolio and the 2nd 1 is the Khetan group portfolio.
Figure 3: BCG Matrix ( Khetan Group Vs Ideal Portfolio )The portfolio map looks really impressive so. In fact it looks reasonably close to an ideal map. A few schemes to better the map would be:1. Star Strategya.
There is merely one star in the portfolio. The star in this portfolio is Bottlers Nepal. Typically a star operates in a high growing market and is hard currency impersonal as it requires a batch of investings to maintain or increase the market portion. The group needs to be really careful to non take money out of Bottlers Nepal.
It will bring forth a batch of hard currency but will necessitate about most of it to consolidate its market place. As the market matures and the growing rate for the market falls, if the star has managed to retain the high market portion, it will turn into a cow which can be milked.B. It is really noteworthy that the group is short of stars.
The group needs to work difficult towards making more stars. This can be done by geting houses in high growing markets or organically underdeveloped houses. KG identifies the instruction, energy and communications as markets that are high growing.2.
Cow schemea. These are the foundations on which the concern grows. Typically, the hard currency cattles will be in markets with low growing rates. The cattles will hold a really good market portion and should hold low costs.
They should be bring forthing hard currency for the full group. The hard currency they generate is used to change over the inquiries Markss to stars. Therefore, there is no point in holding immense outgos for the cattles.B.
In KG s instance, the hard currency cattles are Gorkha Brewery and HSNL. GB is highly profitable but HSNL is non. This is likely because the group is seting excessively much accent on marketing HSNL merchandises. They should merely concentrate on cutting costs at HSNL and milking the concern as it already has a good adequate market place.
3. Question Markss schemea. The inquiry Markss for KG are PLIC, LBL and HBL. The inquiry Markss are typically hard currency absorbers.
They are in high growing markets but they have weak competitory places. As they operate in high growing markets, they face really high degrees of competition.B. Ideally the size of the inquiry Markss should be little plenty ( size of the bubbles in the diagram above ) so that the company s resources are adequate to turn them into stars.
In KG s instance, the size of HBL seems to be excessively big. KG has to do a determination to put in around two of its inquiry Markss as it will be really hard to prosecute all of the inquiry Markss.c. Apart from the scheme of puting in the two inquiry Markss ( LBL and PLIC ) , the other scheme ( in instance of HBL ) should be to deprive.
It is typically really dearly-won to change over inquiry Markss into stars and it looks like HBL due to its sheer size could be really dearly-won to transform into a star. The 2nd best option in this instance is to deprive HBL and utilize the returns to fund the other inquiry Markss.4. Dog Strategya.
There is merely one Canis familiaris in the KG portfolio and that is HP. Because dogs operate in low growing markets and besides have a weak competitory place, they are typically a large drain on the group resources. They generate hard currency but is normally non plenty even for themselves. In really rare instances, Canis familiariss can be turned around by clever concern cleavage and focused niche markets.
B. In the instance of HP, it seems to be worsening in profitableness. The group needs to do a determination about it reasonably shortly. The two options areFind purchasers for the concern if possible and sell it.
If non possible to make so so expression at the 2nd option listed here.Stop any investing in the concern and get down to milk the concern every bit much as possible. Take as much hard currency out of the concern and allow it deceasePerform farther market cleavage and seek to shift the concern to the new sections. In a low growing market, there will typically be rivals with entrenched place.
There will be some rivals who have a cow in the market. It will take a immense sum of resources to wrest market portion off from such entrenched concerns.;