TCS: An Entrepreneurial Air-Express Company in Pakistan – Case Solution

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TCS: An Entrepreneurial Air-Express Company in Pakistan Case Answers

1. Given the challenging country context of Pakistan, why has TCS done so well?

Pakistan, as described in the case, had a very challenging marketplace for businesses to compete and survive at that time. Yet, TCS managed to do well over the years and grow to become a major player in this market.

There are several reasons for this, for which I will outline the most important ones as they are depicted in the case description.

The first and most important step for TCS was to form an early joint venture with DHL and take advantage of their systems to establish a first-mover advantage and the first entry barrier that would prevent other potential competitors from entering the market. They did well, in the beginning, to outsource their domestic air transportation to PIA, as using their own airplanes at that point in time would have been too expensive without external financing.

Furthermore, Awan showed persistence during the negotiation and battle against the Pakistan post office to get the approval that restricted TCS from delivering business-related documents. Succeeding in getting permission was not only beneficial to the company’s own growth but also stimulated competition.

The brothers then went on to establish a major partnership when they closed the contract in 1985 with the Pakistan Banking Council which signaled trust to the public and attracted first public attention that contributed to their positive image and was a founding stone of their success path.

Apart from the decision to bootstrap the company, i.e., to grow organically without external funding, the use of leasing instead of massive purchasing activities kept TCS uninfluenced by external interests so that the brothers remained in power to vote and decide about the firm’s future strategy.

In spite of some corruption and bribery attempts by the Pakistani elite, the brothers knew that their reputation was at stake, and they consequently stuck to their principles to turn down such attempts and requests for favors at any cost.

From the very beginning, the Awan brothers were smart enough to pay taxes in the context of massive tax evasion in Pakistan and thus built up a reputation of integrity and trustworthiness.

Certainly, their effective leadership style also contributed to the company’s growth. Awan has been described as the shaper of the firm’s culture by personal example, and he managed to foster a culture and environment of innovation, openness, and collaboration that turned out to be a major driver in retaining employees and securing niche market opportunities.

At the same time, TCS gave back part of its profit to the community by donating to various charities, which certainly improved its reputation among the population as well.

With regard to their employees, the company put emphasis on building a great culture that employees considered even more important than their remuneration, which was even above average. This kept employees in the company and decreased turnover.

Another aspect of TCS’s success can certainly be found in looking at the firm’s portfolio of business segments. Incorporating and managing four different segments, thus diversifying and minimizing risk, is smart also with regard to competitors who were competing in all segments.

However, TCS was able to gain major market share in all segments through its first-mover advantage and the differentiation of services, e.g., entering the international courier services market and offering a one-stop solution for the customer’s entire courier needs was a niche market that the company embraced and took advantage of.

The establishment of an efficient and innovative incentive-based operations system and distribution network helped the company to succeed and dominate second-movers and competitors, not with a low-cost strategy but rather with a differentiation strategy.

The decision to expand to Canada and UAE was crucial in order to maintain growth rates and tap new market potential internationally and can also be considered a driver that made TCS successful.

Turning down merger and sale requests as well as approaches to go public, Awan felt that his company was not mature enough to be distributed to many shareholders, and he remained in power and total control of the company that he successfully led with a clear mission statement as well as a well-defined strategy and values.

He ultimately succeeded in building a sizeable company despite major obstacles, including pressure from the Pakistan post system, a political environment prone to corruption with many regulations in place, and a nonexistent market for venture capital.

2. What is your assessment of the company’s past financial policies? Do they make sense?

The main financial policies employed by TCS can be summarized in that they managed to grow organically without external funding with the extensive use of leasing. They were able to generate sufficient cash flows internally without taking up any long-term debt. This enabled them to…