Ashok Leyland, India’s second-largest commercial vehicle maker, has hired consulting firms McKinsey & Company and Boston Consulting Group (BCG) to help improve its strategic performance. Main focus of the review will be on improving financial performance.
Over the past months Ashok Leyland’s performance has deteriorated. Net sales dropped by approximately 10% in comparison with a year ago and net profit by 23%, mainly due to low sales and high discounts it had to give on its trucks and buses. In addition to the difficult market conditions, the vehicle maker is having difficulty implementing its pricing strategy. “We have been unable to raise the prices of our products as planned for in our strategic plans, leading to lower margins” says Rajive Saharia, Executive Marketing Director of Ashok Leyland.
The outlook for the coming months is not much better. The global commercial vehicle market, especially in the category of medium and heavy duty trucks, will remain subdued in the coming two quarters. Industry volume is expected to fall further with double-digits and simultaneously pressure on discounts will continue to grow. In a bid to improve financial performance, Ashok Leyland has hired the two renown strategy consulting firms: The Boston Consulting Group and McKinsey & Company.
The consulting firms have been given two tasks: analyse the efficiency of operations (cost reduction) and assess the potential for revenue improvement (market entry + revenue optimization). No details have been announced on the specific tasks and responsibilities of McKinsey and BCG.