Discuss the synergies realized in GATI KWE Joint Venture.

Also, explain
which of the parent firm benefits more from the joint venture.

Synergies:
The Gati-KWE joint venture today offers an unmatched service offering that brings in local
experience with global expertise. Gati-KWE is a 5500 people strong company with an annual
turnover of Rs 15273 million.
Gati brings its experience of Indian market and provided the wonderful service and
infrastructure of Gati Ltd., with its 4,000 trucks in operation making time-and-date specified
deliveries, and add to it the Service Mind of KWE to provide service under the Gati-Kintetsu
Brand. The Gati is best in providing quality services at competitive price and shares its expertise
of customer satisfaction of providing best solution by giving timely and correct information.
Gati also brings its 5000+ customer network.
KWE offers to the JV its global experience in third party logistics warehousing, supply chain and
freight forwarding capabilities, which the partners expect will help in creating an unmatched
offering and superior value to their customers. This all will come along with the KWE brand.
KWE also brings to the table its Warehousing knowledge and reverse engineering. The JV
expects to provide a seamless transfer for cross border trade through a single window solution
to its customers such as Texas Instruments, HP, Panasonic, Toshiba and other global players.
Both the companies believe in customer satisfaction first and align the joint venture towards
customer sensitivity and deliver beyond customer’s expectations by providing timely and
accurate information with best of their knowledge and technology expertise. The JV also
provides the last mile delivery, special service (Bike express for safely, quickly and reliable
product, excess baggage) to increase customer penetration and retention rate.
With the increasing usage of internet and mobile penetration, growing acceptability of online
payments and favorable demographics; the Indian E-commerce market flourishes with a CAGR
of 32%. Both the companies looking forward to grab this opportunity by sharing their risks and
develop their presence in all the sectors and integrate their knowledge across their supply
chain.
KWE will benefit more from the JV because of the following reason:

Increasing Revenue
Revenue in Asia region jumped 26.4 percent to 23.935 billion yen. Kintetsu wanted to increase
its presence overseas apart from Japan. KWE India, subsidiary of Kintetsu World Express (KWE)
introduced India’s first Good Distribution Process (GDP) warehouse at the Hyderabad airport
cargo satellite building handling pharmaceutical logistics. This helps the group reduce its
dependency on one region for revenues. In addition, it opens new avenues for growth. Thus,
wide geographic presence provides the group with a platform to cash in on new opportunities
and makes the group less susceptible to the unfavorable conditions existing in the areas of its
operations.

Diversifying its Business portfolio

KWE diversifying its business portfolio by investing in other business like real estate,
pharmaceutical, bus services to not just dependent on one business for profits. Growth in
emerging and developing economies like India represents a valuable opportunity for Kintetsu to
enhance its presence in these regions.
While Kintetsu's majority of operations are located in Japan, the company wanted to increase in
construction spending in Asia-Pacific which can be possible by its good presence in international
market. The infrastructure construction market in emerging markets is estimated to grow by
128% over the next decade to 2020, compared with just 18% over the same period in
developed countries.
This indicates a very high future demand for the construction of residential and non-residential
projects. In addition to the private spending in these countries, the governments are also likely
to invest largely in several infrastructure projects. According to the recent estimates,
governments in Asia will need to invest around $8 trillion in infrastructure over the next ten
years. The huge investments are a result of the rapid urbanization.

Ageing population of Japan

Japan has the fastest ageing population in the world as one in five Japanese people are now
over the age of 60. Nearly two million people in Japan are now aged over 80, but they too play
a key role in family life and in the economy. By 2015, one in four Japanese citizens will be 65 or
older. According to the Japanese statistical organization, 23.1% of the population of Japan
consists of elderly citizens (citizens of age 65 and above). As a result, the workforce in Japan is
shrinking and expected to experience 18% decrease in its workforce by 2030 which will force
Kintetsu world Express to move to other countries for its operations and countries like India is
known for the cheap labor which help Kintetsu to decrease its operational cost.
Question: Discuss the effect of GATI KWE Joint Venture on the
Competitiveness in the Indian Courier/Logistics Industry.

Ans: To analyze the impact of this JV. let’s first try to dive into the current scenario of logistics
industry in India. Main features of the industry are: -

 Till now Indian logistics industry is dominated by freight forwarders who did not add any
value for the customer.
 Industry is fragmented and is dominated by small unorganized players.
 Medium term growth in the industry is expected to be in range of 8-10%.
 Current market size is US$ 160 Billion.
 Indian government has announced that it is working at the policy in order to set up new
logistics plan in the country.
 With a plan to promote proper integrated logistics, industry has seen lot of new startups
implementing tech solutions to the logistics sector to improve performance.
Key Drivers: -

 With implementation of e-way bill, industry is seeing a reduced transit time due to fewer
checkpoints and savings in terms of 18-20% reduction in turnaround time.
 Growth in industrial consumption and focus on exports is increasing the volume.
 Many companies are outsourcing non-core activities like warehousing to integrated
logistics service provider.
 Increase in demand for large warehouses in big cities as well as in smaller ones to
implement automation I warehousing activities.
 Governments push in terms of transportation infrastructure & multi modal terminals to
promote logistics.
Impact: -

 The merger will intensify competition in the market place in terms of rivalry among
participants to grab higher share of warehousing and integrated SCM business.
 With the formation of JV, race will intensify in the industry to implement tech enabled
solution to reduce cost, increase efficiency, reduce turnaround time & maintenance time
etc.
 With formation of this JV, other players in the industry are also planning to manage their
business into various business units like warehousing, coast to coast shipping, cold
container shipping etc.
 With intensifying competition and introduction of technology in the industry, cost to the
customer will fall partly due to competition and partly due to reduced cost to the
company.
 This will lead to consolidation in the industry in terms of small unorganized players
working on contract for big players who may introduce asset light model in the industry
with vehicles owned by small operators and bigger players providing technology and
business to them.