The client is part of a leading Indian business group having business operations in IT software and hardware. The top management is considering unrelated diversification, with the following criteria:
- Investment outlay of about 500 crore in the new ventures
- Investment horizon of about 5 years
- Returns on Investment (ROI) of about 15%
The top management therefore wants to identify attractive business opportunities in the shortlisted industry segment.
UC Identified 197 Industry segments (Manufacturing, Services and Trading) as a starting point to begin the process of short-listing. UC understood the clients’ needs for unrelated diversification and defined a five level filtration criteria to arrive at the attractive segment:
- Level I – Management Constraints
- Level II – Future Outlook
Key parameters were Projected Industry Size, Projected Growth, Fragmentation, Operating Margins, Capacity Utilisation
- Level III – Risk-Return Profile
Mapped 43 industry segments on a Risk (China Threat, Intensity in Innovation, Branding and Distribution) – Return (Global demand, India Advantage and ROCE) prioritisation matrix
- Level IV – Attractiveness of Industry sub-segments and Ease of acquiring/ building capability
Mapped 18 sub-segments on portfolio selection matrix; sub-segment attractiveness (P/E, Size, Growth, Competitive intensity, competitive capacity and Acquisitive opportunity) and Ease of acquiring/ building capabilities (People, R&D, Sourcing, S&D and Technology)
- Level V – Portfolio decision
Defined industry sub-segments as stars, pearls, oysters and elephants based on ease of building/acquiring capability and segment attractiveness
UC delivered the criteria by which the client can choose their business opportunitie and made recommendations for eight opportunities in new lines of business.