SVKM’s Narsee Monjee Institute of Management Studies -
Bangalore
Business Valuation
End Term Examination
Individual Assignment
Submitted by
Name Roll No. SAP ID
Raghav Rathi B033 80203190138
Submitted to
Prof. Rajesh Madhavan
Question 2
“There is nothing permanent except change”, this saying has been very well established by this
pandemic not just to philosophers but to big business houses as well. A decline in GDP,
devastated business cycle, cash crunches for keeping the businesses afloat etc. are just few
catastrophic effects that all the businesses have seen across the globe. All these effects, brings
us all to think on our ways and strategies of doing business along with our ability to quickly
respond to the changes happening in the outside world.
One such way has been discussed in the article “When Asset Light is Right”. The answer to the
very subject line in my view is today, more than ever. Asset light model is a model where the
organization owns a lessor amount of capital assets against the revenues they are generating.
There are many ways like outsourcing, asset sharing, licensing etc. through which business can
become asset light organizations. Now, there are a number of benefits like better return on
assets, flexibility and growth prospects to name a few that comes with asset light model. But,
seeing the current need of hour flexibility and ability to grow in the dynamic world are the two
most critical synergies that every organization is looking for. Asset light model helps
organizations to quickly respond to technological or demand changes, disruptions like this
pandemic, and new market opportunities. One of the best example one can quote is for third-
party logistic services organizations like LetsTransport, Delhivery etc. which have seen
exceptional demand from FMCG companies during the pandemic. During, this time period
where companies focus was on the production capacity of the necessary food items, third party
vendors like LetsTranspot helped them in providing the mid and last mile deliveries to their
retailers, as the whole supply chain was disturbed because of mobilization of the labor force.
After, the lockdown companies like Britannia were even thinking of hiring delivering trucks
instead of owning them on a permanent basis as it provides them the flexibility of reducing or
increasing their fleet at any pint of time against marginal increase in their cost. Apart from the
flexibility, such kind of models helps an organization to ram up their growth rate with a lower
capital requirements. Hostel chains like Oxford Campus and Stanza Living are renting or leasing
out their furniture instead of purchasing them which gives them an option to rapidly penetrate
the market. As we can notice from the past year data, that both companies have opened up a
combined 15 sites in Bangalore within a time span of year. Now, one can possibly argue here
with the fixed amount of lease and rent amount that companies has to pay, but as mentioned in
the article many hotel chains has typed with local partners and decided an fixed proportion of
the revenue as their lease payments are some methods through organization can prosper.
All, these things or synergies are something that every organization requires today by ease of
getting out from their old model or businesses and tapping on the current changes happening
around in the world without losing on their capital and this all can be achieve through such
model. Now, as the article suggests even I am not suggesting that every organization should
rely on such model but we can definitely go back and check our goals and targets at different
point of business cycles and take an informative call. Many companies like Zara are doing
exceptionally well with asset heavy model but one has to ask how many such organizations
have we seen around in apparel brands who are performing exceptionally well with such asset
heavy model. Now, many organizations who have tried or willing to move towards asset light
model are facing some issues like product quality standards or brand control. But, in today’s
technologically advanced control one can take steps like collocating partner organizations,
controlling inputs and outputs with advanced software tools and a guided team of supervisors
and manager at every step and by closely working with their partner organizations. Hence, in
the current scenario where consumer demands, demographics and our way of lifestyle are
rapidly changing there is a dire need for the business houses to change along and this can be
achieved in a comfortable manner with asset light business model.