Dr Bhagwan Koirala and the change program at Shahid Gangalal National Heart Centre (SGNHC)

We try to analyze the change program at SGNHC under the leadership of Dr Bhagwan Koirala. We compare the process with the 8-step Change Management Model proposed by John P. Kotter. 

The 8-step Change Management Model and Change at SGNHC

Figure: 8-step Change Management Model and Transformation at SGNHC

The transformation at SGNHC from a small hospital catering only OPD services to an international standard heart care center was possible due to the team-spirit, capability and dedication of the employees under shrewd leadership of Dr. Koirala. Personal financial interests and nepotism were discouraged, while punctuality in service was developed.

Dr. Koirala followed majority of the 8-step change management model to bring about the transformation at SGNHC. He met with the employees and brought about the sense of urgency from Day-1. He portrayed dire situation of the hospital and generated employees drive towards change. Senior doctors were consulted to create a common agenda for the hospital. The vision was a set, which was mutually acceptable to the existing employees. The vision was communicated to the employees repeatedly through meetings.

The best way to communicate expectations is by demonstrating them. Leading by example was the motto of Dr. Koirala at SGNHC. He listened to every grievance from the employees and tried to instill service mentality among the employees. 

Doctors at SGNHC were encouraged to go for international exposure and learn best practices in the field from respected international institutes. Innovative ideas to improve the quality of operation and thus the service rendered to patients were supported. 

Change was implemented in an incremental process. Day-to-day improvement was emphasized. New improvements were initiated once the older ones were institutionalized. Systems and procedures were made more powerful than the people. Starting from selecting patients for free-care and free-services to appointing of staff to provision of resources, everything was made procedural. Accountability of actions was instigated.

The change process did have some areas of improvement too. Although the doctors were encouraged for exposure, administration team was not groomed to develop better managerial expertise. Formal trainings and development programs were not carried out to develop service mentality among employees. Similarly, succession planning at SGNHC was not developed. This led to some friction (although temporary) while building on the change process, once Dr. Koirala stepped down from the executive director post.

Overall, it seems Dr. Koirala had succeeded in his vision of developing SGNHC into an international standard facility. From just an OPD ward to a 150 bed heart care centre, the institution has served a huge population of Nepalese heart patients. Costs of heart surgeries are very minimal (basic closed heart by-pass surgery costs about 80,000 to 90,000 Rupees). Mortality rate of the operations are at par with American public hospitals. Over 1200 heart surgeries are done per year. With innovative financial operations like cross-pricing (cabin beds are priced higher so that some beds can be allocated for needy and poor for free), the institution has made heart care accessible and affordable to many. Above all, it has generated hope among Nepalese, that good things are possible in Nepal. Behind this hope is the leader – Dr. Bhagwan Koirala.

The Way Ahead for Wal-Mart

On one hand, Wal-Mart is losing its competency in price leadership in the US, while its international expansion activities are problem-rich. It suffered net loss of $15.699 billion for the year 2012. According to a report by Forbes, the products at Wal-Mart are 19% more expensive than at Amazon.

Moving forward, Wal-Mart must first try to strengthen its competency in price leadership and then expand in the international market. We thus recommend a sustainability strategy followed by growth strategy for Wal-Mart.

Sustainability

Sustainability of its price leadership competence is under fire, causing serious questions on its value proposition. The following strategies could help Wal-Mart regain its competitive edge in retail business in terms of prices:

·         E-Commerce and Mobile Presence

In 2011, online purchases from Wal-Mart website accounted to just 1.1% of total sales. At $4.9 billion sales, it lags even the likes of Apple Inc. in terms of online sales. With lower overhead costs in terms of reduced staff, rental and utility expenses, Wal-Mart would be more competitive in terms of prices if it were to expand its sales percentage through online sales.

Interactive website should be developed to handle the maximum purchase activity. Massive investments are to be put into place for successful delivery of online sales. Integration with mobile applications could help the matter further. But, the return in competitive advantage in terms of pricing means it can then sustain its value proposition.

·         Remodeling Physical Stores

Physical stores could be modified to deliver services. For products, apart from being a sales store, it could act as a showroom with focus on brand promotion and customer acquisition. Sales orders could be taken in store or via the online services, and delivery made through the distribution hubs. Similar model is being followed by the Brazilian retail chain Casas Bahia. This model would help sustain the cost competitiveness of the retail chain by reducing space required for stores, focusing on competency, i.e. SCM, and reduced staff requirements.

·         SCM Improvements

There has been news of empty shelves at Wal-Mart. This means the SCM needs further fine-tuning. In addition, to be able to provide home delivery at humongous proportions, SCM needs to be further improved. 

Ø  Relationships with Suppliers and Employees: Cases of poor working conditions at the suppliers of Wal-Mart have been the talking point for numerous pressure groups. In addition, the employee issues at Wal-Mart are creating lot of negative sentiments in the developed world. Wal-Mart should work with the suppliers and the employees to create better working conditions by creating and strictly following code of conduct. On the long run, the associated costs due to these activities would seem minimal compared to the losses in brand name and legal suits.

·         Social Media and Data Analytics

Social media should be further integrated in the marketing approaches to understand the consumer behavior and serve the customers. With the integration of this into the central MIS, efficient decisions on SCM and other operational activities would be ensured. MIS should be developed to determine demand of customers more accurately throughout its stores to achieve cost advantage by holding the correct inventory. This would further lead to optimum utilization of resources and thus reduce costs.

These activities should be integrated and should consolidate each other to create a synergy and help retain the cost competitiveness to Wal-Mart.

Growth

Major part of profits of Wal-Mart is being contributed by the market outside of US. With purchasing power of customers rising significantly in the emerging nations, Wal-Mart has no option but to expand in these markets. Nevertheless, as shown by the failure in South Korean market, Wal-Mart needs to understand that the strategy made for US will not necessarily work in other markets. Customization to cultures and customer behavior are the key; so is the relation with the government. We propose the following model for Wal-Mart in its international expansion:

·         Joint Ventures

The retail industry in the emerging nations is comprised of few organized retail chains and numerous smaller local stores. To understand the consumer behavior and supplier relations, Wal-Mart should enter these markets by joint-ventures with successful local business houses. This will reduce the risks of government intervention too. After understanding the operations and the needs, Wal-Mart can then go for maximum allowed stake (by government of concerned nations) in these partnerships.

·         Customization

As discussed earlier, understanding and customizing to diversity would be a key to success for Wal-Mart in the emerging economies. For this, apart from the local partners in JV, MIS should guide the decisions in the operations in these stores.

Wal-Mart should focus on transnational strategy where it will be able to adapt to local needs of the market like in China, leverage unique advantage of local markets to drive sales, market share and profit growth but with a central corporate facility. Knowledge of customer behavior would strengthen the validity and acceptance of actions.

·         Develop and Follow Standards

One dilemma faced by organizations headquartered in US while expanding in the emerging markets is what standards to follow? - The ones of US or those of the home country. On the short run, the latter may be beneficial, but on the long run, this will come to haunt the organization. A lot of such issues have surfaced for Wal-Mart over the years. While moving ahead, Wal-Mart should develop “code of conduct” for its global operations and comply to it strictly. This will ensure that the international expansion is sustainable and accepted by the home country government and citizens.

Even while following growth strategies, Wal-Mart should work on the sustainability strategies: - strengthening its resources for sustaining its competitiveness in price leadership.

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Envisioning the Future of Retail Market

Online Stores

Internet has brought paradigm shifts in all the industries. Internet enables companies to increase their connectivity while reducing the overall costs. In retail industry, online stores have an advantage over brick and mortar stores with their lower overhead costs. This makes players like Amazon extremely competitive in cost leadership segment. With the development of internet payment gateways and consumer acceptance over the credibility of stores, online purchases are likely to grow significantly over the coming years.

Even in emerging economies, where credit cards and internet payment gateways are not accessible to mass, “cash on delivery” services enable online stores to foster. E.g.: Flipkart in India.

According to technology and research firm Forrester, we can expect e-commerce to increase (in US) by 13 percent in the year 2013, to a whopping $262 billion.

Mobile Stores

Smartphones have presented a new market to the retailers. Enabled with rich applications[1] and QR code integration, smartphones have fostered the development and incorporation of virtual shopping screens and even robotic store displays in the retail industry[2].

Consumers have been empowered of being able to buy things online straight from their phone and being able to buy things in store with their phone[3]. Companies like Square are further pushing this trend with devices and applications to make purchases from phones a commonality.

Store within a Store

One of the major issues faced by physical retail stores like Wal-Mart is the growing staffing costs. Retailers like J.C. Penney have found innovative concept of “store within a store”. The retailer sub-lets the space to the product maker and the counter is staffed by an employee of the product maker, not the retailer. Whether it is Chanel or Lancome or some other brand, each product maker is “showcased” at its own counter[4]. 

While competing in the cost leadership segment, reduction in the overhead costs gives an improved competitive edge to the retailers. Thus, acceptance and appliance of this model in the future by more retailers is a reality.

Shopping Experience: New Types of Value for Customers

It is going to very difficult for traditional retail stores to compete with online stores in terms of price. To pull the customers from comfort of their home to the stores, retailers have to create and sell shopping experiences[5]. Strategic alliances with brands to develop retail stores as brand and product showroom could be the way ahead[6].

Online stores still lack browsing and discovery experiences that satisfy curiosity. Retail stores can work on new types of value addition for customers. Retail spaces can relax customers, offer refreshments, and provide entertainment while creating the conditions to engage in a conversation that builds brand loyalty.

Customization

As retailers expand across the globe, there will be a need to customize strategies as per the customer’s behavior. Wal-Mart accepted this fact in 2006 and developed merchandising strategy to reflect each of six demographic groups. As retailers plunge into international expansion, one-size-fits-all strategy will not work. The successful retailers in the future will incorporate customer preferences across geographies and ethnicities, and customize accordingly.

Data Analytics

As the world is becoming more and more digitized, there will be hoards of information available for retailers to analyze and better fit their strategies to the needs of the consumers. More insights on consumer behavior and strategizing accordingly will ensure better performance. Use of social media will be a key to the extraction of this information. Retailers will increasingly use omni-channel approach to track customers across all channels.

 

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[1] (Kanada, 2013)

[2] (Silverstein, 2013)

[3] (Phillips, 2012)

[4] (Ganos, 2013)

[5] (Jhonson, 2011)

[6] (Geddes, 2011)

Nepalese RMG Industry: Reviving the lost glory

From the heights of 1999/2000, when the total RMG export was about NRs 12 billion to the lows of 2011/2012, when the total RMG export was NRs 4.05 billion, Nepalese RMG industry has continuously loosing international market to African and the South Asian manufacturers. One of the major damage was due to the removal of duty-free and quota-free access to its market by the then largest importer of Nepalese RMG – USA in 2004. Add to this, USA gave special preference to RMGs from African nations. The exports of RMG from Nepal declined sharply during this period, i.e. NRs 12 billion in 2002/2003 to NRs 6.7 billion in 2004/2005, with almost all the decline in the US market.

Picture Source: http://ekantipur.com

To sustain, Nepalese RMG industry searched for other markets where it enjoyed preferential treatment. Japan, Canada and the EU market were the places to go. All these markets gave preferential treatment to the garment exports from Nepal. But, the industry must be cautious in terms of serving these markets. Japan and Canada could be just another USA. On the other hand, EU policies are very less subject to changes. Also, the EU gives special treatment to Nepal, along with Laos, through the derogation facility – the products needn’t fulfill the stringent criteria of rules of origin in order to get the duty-free access to the market. Another advantage of putting a lot of effort in this market is the sheer size of it – population of over 500 million.

But, the industry should take the treatment as only the stepping stone to these markets. In order to sustain and grow in the market, the industry has to build its core competency and build its competitiveness as soon as possible. One of the most important features of the industry is that it can provide the quality preferred by the customers at the lowest prices. Another major advantage is that the customers trust Nepalese manufacturer over their South Asian counterparts due to past experiences.

In order to make an impact in the European market, the RMG industry has to be able to partner with bigger retail chains and deliver their large orders – running in millions of pieces. But, due to regular load shedding, requirement of large labor force which would give rise to stronger unions flexing their muscle, irregular raw material supply and no standards on quality of end products which result in rejection of orders after they are shipped to the markets, the garment producers haven’t been able to accept and deliver large orders.

Strengthening the existing association – Garment Association of Nepal (GAN) in order to share risks and opportunities among the members, should be able to solve the issues. GAN should act as a virtual company with the members acting as its satellite plants. The volume of raw material from the suppliers would be massive if the members acquired from GAN, which in turn purchased from the suppliers. This would increase the bargaining power of the purchasers and thus the timely delivery of materials with consistent quality would be possible. Also, taking huge orders from the European retailers would be possible, with GAN dividing the orders among the members as per their competency. Developing quality standards for the products and the production process by the association would remove the possibility of the customers rejecting the orders after they have reached Europe. Also, collaborative shipping would be possible. Huge volume of shipments would also mean lower costs via the concept of economies of scale. 

These activities would sharpen the core competency of the industry, i.e. to provide quality at lowest prices. This will not just enable the industry to sustain in the European market but also grow there and in other markets, reviving the lost glory of the industry.

(The article is based on the research done by a group (named Kanzen) of MBA 3^rd term students of KU School Management, as per the requirements of their course – Global Business Management)