This year IPL; in addition to the cricketing entertainment, created other news as well, the Vodafone Zoozoos. The cute, cuddly characters that featured in a series of 29 commercials that ran right through the IPL matches suddenly caught the imagination of the public.
Three other telecom companies ran strong brand campaigns — in fact new commercials- during the same period. Airtel created two pieces of communication leveraging the chemistry of Vidya Balan and Madhavan. Idea leveraged their tie-up with the Mumbai Indians to run an interactive campaign of talking to the stars. Aircel aired their MS Dhoni advertisement of ‘aur bolo’. Yet the animated Zoozoos became celebrities in their own rights and outdid the ‘celebrity’ campaigns. They popped up finally in the stands during the finals of IPL; there were lakhs of entries about them in the blogosphere. The Vodafone Zoozoos were more than an advertising piece; they created buzz for themselves that increased the campaign’s impact manifold!
Borrowing from the cartoon world, they appeal to the child in most of us — yet the contexts and situations in which they are placed and the services they sell are so adult and real. Rounded edges, weird sounds yet decipherable language, and fluidity of movement add to the ‘innocence of feelings’ in a world that is getting more and more ‘manipulative and angular’ in thought.
The fact that the Zoozoos outdid well-known celebrities this season re-confirms that advertising cut-through is not dependant on the use of known faces. A strong campaign can create celebrities and the Zoozoos provide Vodafone with characters that can not only become brand mascots but also be converted into merchandising that can be monetized. In fact, that’s the unique power of animated characters, eg Disney ones — they are brands in search of products — slap them onto anything connected especially to children and the price goes up.
It will be a good lesson for all those companies who spend huge amount to catch the eyeballs. This is sheer example of thinking outside the box.
Monday, June 22, 2009
Sunday, June 14, 2009
Recession, Employee discontent and economic recovery.
Debate has started everywhere in the world so as to whether or not the green shots of economic recovery are real, whether they are sustainable and how soon the recession would over. I am not sure, if the employee discontent and low motivation level of employees have been discussed in equal eager. I am also not sure, if high employee discontent has been recognized as the issue we need to handle.
There are two hard facts; first the employee discontent across the globe, across industry is so high that this level of discontent was not experienced in last quarter of century or so. Second, today’s corporate leaders, who have been developed their careers during the last twenty-five years or so, have little or no direct experience in handling serious employee discontent. This would, in my opinion, create a larger management issue when economic recovery starts to roll.
For example, Arcelor Mittal curtailed its European steel production by half in view of the market conditions. During the annual share holder’s meeting in May this year at company headquarters, 100 odd works attacked the company headquarters. Police has to be called to control the mob. This is in spite the fact that Arcelor Mittal had not taken any major lay-offs. Also in March this year, Sony France workers took hostile of its plant CEO and kept him overnight in the factory.
There are so many examples of recent past, in India and even in rest of the world, where employee discontent has out broken. I personally feel, recent Australian out broke on Indian students and workers are the example of that as well.
Assuming that employee discontent might spoil the economic recovery; thing we need to think about it is what corporate leaders can do about it?
The solution is tantalizingly simple, but requires a huge mindset change. Start treating people like people again.
With rise of software industry, the culture of labor union has reduced, thus labor issues have been reduced from corporate leaders agenda. (I am not arguing to form a labor union here, but trying to point out the shift in the scene and priorities. Though HR regained the importance like never before with software industry). Also, more line managers should realize that HR is the job of line managers and not the HR department alone, have personal connection with your team, understand the pains he/she is going through, and have personal touch to all your answers and solutions.
And every manager should begin this right now!
There are two hard facts; first the employee discontent across the globe, across industry is so high that this level of discontent was not experienced in last quarter of century or so. Second, today’s corporate leaders, who have been developed their careers during the last twenty-five years or so, have little or no direct experience in handling serious employee discontent. This would, in my opinion, create a larger management issue when economic recovery starts to roll.
For example, Arcelor Mittal curtailed its European steel production by half in view of the market conditions. During the annual share holder’s meeting in May this year at company headquarters, 100 odd works attacked the company headquarters. Police has to be called to control the mob. This is in spite the fact that Arcelor Mittal had not taken any major lay-offs. Also in March this year, Sony France workers took hostile of its plant CEO and kept him overnight in the factory.
There are so many examples of recent past, in India and even in rest of the world, where employee discontent has out broken. I personally feel, recent Australian out broke on Indian students and workers are the example of that as well.
Assuming that employee discontent might spoil the economic recovery; thing we need to think about it is what corporate leaders can do about it?
The solution is tantalizingly simple, but requires a huge mindset change. Start treating people like people again.
With rise of software industry, the culture of labor union has reduced, thus labor issues have been reduced from corporate leaders agenda. (I am not arguing to form a labor union here, but trying to point out the shift in the scene and priorities. Though HR regained the importance like never before with software industry). Also, more line managers should realize that HR is the job of line managers and not the HR department alone, have personal connection with your team, understand the pains he/she is going through, and have personal touch to all your answers and solutions.
And every manager should begin this right now!
Monday, June 08, 2009
After many stumbles, fall of an American giant
It is a company that helped lift hundreds of thousands of American workers into middle class. It transformed Detroit in to main spot in the world economy, as symbol of American talent for innovation. It built luxury cars and car for every purse & purpose; which led to a saying “What is good for GM, is good for America”.
And now it is filing for bankruptcy, something that would have been unthinkable few years back.
It is the story of GM.
Rarely has a company fallen so far and so fast as General Motors. And while its bankruptcy appeared increasingly likely in recent weeks, the arrival of that very moment still is a staggering blow.
Analysts say, GM began along and slow process of undermining itself long back. It’s strengths like rigid structure that provided discipline earlier on, became the weakness and it lost its feel for reading the American car market it helped create as Japanese car makers took away its most loyal customers as GM was going through serious of strategic and cultural missteps starting from 1960s.
GM gave in to union demands in 1990 and created a program that paid workers even if plants were not running; forcing it to build the cars and trucks it could never able to sell. Thus GM often resorted to a practice called “launch and leave”, spending billions upfront to bring vehicles to market, but then fail to keep supporting them with sustained advertising. With market share shrinking, GM could not give its multiple brands and car models the individual attention which eventually helped Honda attract customers to Accord and Toyota to its Camry. It also lost interest and the patience and effort required to position the brands in the correct market.
During all these years, GM didn’t notice the change in the market place, where Japanese and Korean automakers are bringing- in more fuel efficient, less maintenance vehicles by focusing on innovation; but kept on building its gas guzzlers. Consumers started blaming GM for sub-par vehicles. They might have given them second, perhaps third chance, but eventually shifted the loyalty. Result of this? Through April of this year, GM’s market share was 19%, a steep drop from its peak of 54% in 1954.
This moment would reverberate beyond GM’s headquarters in Detroit, to its factory towns in Indiana, Michigan, Louisiana and rest of the world, as GM was truly a global company having presence in lot of countries.
Ultimately GM would come out of chapter 11, might form a new company which is sleek and might focus on fewer and better brands, but the bankruptcy filing is a fall of true giant, which created and ruled the industry for several years.
And now it is filing for bankruptcy, something that would have been unthinkable few years back.
It is the story of GM.
Rarely has a company fallen so far and so fast as General Motors. And while its bankruptcy appeared increasingly likely in recent weeks, the arrival of that very moment still is a staggering blow.
Analysts say, GM began along and slow process of undermining itself long back. It’s strengths like rigid structure that provided discipline earlier on, became the weakness and it lost its feel for reading the American car market it helped create as Japanese car makers took away its most loyal customers as GM was going through serious of strategic and cultural missteps starting from 1960s.
GM gave in to union demands in 1990 and created a program that paid workers even if plants were not running; forcing it to build the cars and trucks it could never able to sell. Thus GM often resorted to a practice called “launch and leave”, spending billions upfront to bring vehicles to market, but then fail to keep supporting them with sustained advertising. With market share shrinking, GM could not give its multiple brands and car models the individual attention which eventually helped Honda attract customers to Accord and Toyota to its Camry. It also lost interest and the patience and effort required to position the brands in the correct market.
During all these years, GM didn’t notice the change in the market place, where Japanese and Korean automakers are bringing- in more fuel efficient, less maintenance vehicles by focusing on innovation; but kept on building its gas guzzlers. Consumers started blaming GM for sub-par vehicles. They might have given them second, perhaps third chance, but eventually shifted the loyalty. Result of this? Through April of this year, GM’s market share was 19%, a steep drop from its peak of 54% in 1954.
This moment would reverberate beyond GM’s headquarters in Detroit, to its factory towns in Indiana, Michigan, Louisiana and rest of the world, as GM was truly a global company having presence in lot of countries.
Ultimately GM would come out of chapter 11, might form a new company which is sleek and might focus on fewer and better brands, but the bankruptcy filing is a fall of true giant, which created and ruled the industry for several years.
Sunday, May 24, 2009
Back from Vacation
It was very good 10 days break, had a very good time. All these days while I was at my native, it rained and I felt like I am in some hill station.
Had relaxed time; spent time to connect with new people and did lot of reading.
Much required break, but now I am started feeling like “Welcome back to reality”.
Had relaxed time; spent time to connect with new people and did lot of reading.
Much required break, but now I am started feeling like “Welcome back to reality”.
Sunday, May 03, 2009
"The last lecture"
This is the novel which I just completed reading; and let me tell you this, it touched me more than any other book of recent past.
Each year at a series known as The Last Lecture, a Carnegie Mellon University faculty member is asked to deliver what would hypothetically be a final speech to their students before dying. It is a wonderful tradition in which both speaker and listeners take a moment to reflect upon what matters most in this life. In September 2007, the speaker, 47-year-old computer science professor and father of three, Randy Pausch, didn't have to imagine that he was confronting his imminent demise because, in fact, he was. Pausch had been diagnosed with pancreatic cancer and, at the time of his Last Lecture, had only been given three to six months to live. Pausch's speech, entitled "Achieving Your Childhood Dreams," was every bit as upbeat and inspirational as the man himself. Rather than focusing on dying, it was a speech about living, about achieving one's dreams and enabling the dreams of others, about truly living each day as though it were your last.
It was about the importance of overcoming obstacles, of enabling the dreams of others, of seizing every moment (because as Randy puts it "time is all you have...and you may find one day that you have less than you think"). It was a summation of everything Randy had come to believe. It was about living.
In this book, Randy Pausch has combined the humor, inspiration and intelligence that made his lecture such a phenomenon and given it an indelible form. It is a book that will be shared for generations to come.
Why this touches most is, Randy knows that he is going to die; but puts a brave fight and virtually prepares his entire family for life without him. He spends the available time very precisely. While reading, you could imagine through as what might have been going through in the entire family.
"We cannot change the cards we are dealt, just how we play the hand."
--Randy Pausch
Each year at a series known as The Last Lecture, a Carnegie Mellon University faculty member is asked to deliver what would hypothetically be a final speech to their students before dying. It is a wonderful tradition in which both speaker and listeners take a moment to reflect upon what matters most in this life. In September 2007, the speaker, 47-year-old computer science professor and father of three, Randy Pausch, didn't have to imagine that he was confronting his imminent demise because, in fact, he was. Pausch had been diagnosed with pancreatic cancer and, at the time of his Last Lecture, had only been given three to six months to live. Pausch's speech, entitled "Achieving Your Childhood Dreams," was every bit as upbeat and inspirational as the man himself. Rather than focusing on dying, it was a speech about living, about achieving one's dreams and enabling the dreams of others, about truly living each day as though it were your last.
It was about the importance of overcoming obstacles, of enabling the dreams of others, of seizing every moment (because as Randy puts it "time is all you have...and you may find one day that you have less than you think"). It was a summation of everything Randy had come to believe. It was about living.
In this book, Randy Pausch has combined the humor, inspiration and intelligence that made his lecture such a phenomenon and given it an indelible form. It is a book that will be shared for generations to come.
Why this touches most is, Randy knows that he is going to die; but puts a brave fight and virtually prepares his entire family for life without him. He spends the available time very precisely. While reading, you could imagine through as what might have been going through in the entire family.
"We cannot change the cards we are dealt, just how we play the hand."
--Randy Pausch
Sunday, April 26, 2009
Rural India is roaring!
If you dissect the quarterly/yearly results of Hero Honda; which were published last week; one this is very clear, it seems recession has not impacted Hero Honda and there is a growth reported by them. More importantly, they have achieved this through growth in rural India.
Less affected by recession, the rural economy is spending much of the higher income derived from a good winter crop of grains and pulses, high minimum support price from Government and the relief from the government waiver of farm loans.
The general election (business standard has predicted that 2009 General election would contribute 0.3% to GDP), summer holiday season, marriages and even the effect of sixth pay commission hikes; all are aiding a massive jump in sales.
The strength of rural economy is getting reflected in Fast moving consumer goods (FMCG), cement and telecom; in addition to two wheelers and tractors.
All of a sudden; rural consumer is of great importance for India Inc now. The marketing teams are busy in defining the strategy to attract rural attention. Interesting enough; rural market is untapped in many areas and there is lot of room for the business for all. Due to media network, even rural market is aware of the new trends and products. And unlike his urban counterpart; rural consumer is ready to spend and he need not to bother about his job loss and EMI to pay every month.
Unfortunately, our business (IT and ITES) doesn’t have an exposure to rural India!
Less affected by recession, the rural economy is spending much of the higher income derived from a good winter crop of grains and pulses, high minimum support price from Government and the relief from the government waiver of farm loans.
The general election (business standard has predicted that 2009 General election would contribute 0.3% to GDP), summer holiday season, marriages and even the effect of sixth pay commission hikes; all are aiding a massive jump in sales.
The strength of rural economy is getting reflected in Fast moving consumer goods (FMCG), cement and telecom; in addition to two wheelers and tractors.
All of a sudden; rural consumer is of great importance for India Inc now. The marketing teams are busy in defining the strategy to attract rural attention. Interesting enough; rural market is untapped in many areas and there is lot of room for the business for all. Due to media network, even rural market is aware of the new trends and products. And unlike his urban counterpart; rural consumer is ready to spend and he need not to bother about his job loss and EMI to pay every month.
Unfortunately, our business (IT and ITES) doesn’t have an exposure to rural India!
Sunday, April 19, 2009
‘Marriage made in Heaven’- Merger of Satyam and TechMahindra
This week saw a major deal is Indian IT industry where TechMahindra took over management control of Satyam. It will be a good relief for Satyam employees; they are in to more stable hands now; there was good amount of instability over last 3 months.
Also, appreciable point is how new board of Satyam and the Indian Government acted quickly to safeguard the Satyam employees, customers and shareholders. We saw a real quick decision making in this entire process; which is really commendable.
However, this deal is more strategic for TechMahindra; let’s see how;
Geography Expansion: TechMahindra is very strong in Europe and Satyam is strong in APAC and US. This merger will help TechMahindra to easily expand in to US and APAC, that too with strong customer base including GE, Cisco. This also helps to go beyond British Telecom in terms of new business and try cross selling in other existing customers. This is huge advantage. You can’t imagine the pain in building US operations from the scratch.
Business Expansion: TechMahindra is known for its telecom domain. Satyam is strong in SAP [About 45% of business] and Engineering Services business and BIFS. Thus TechMahindra will get built up practices of SAP and Engineering services. This is much required diversification.
Employee Base: Satyam has pretty strong sales force and outstanding techies, it is said, and some of the key business managers have already left though.
Thus, this deal seems to be a great fit and appears to be more strategic for TechMahindra. It leaped ahead as 4th largest IT company in India. Off course any deal comes with the challenge of managing the merger and management has to work towards aligning both the companies. Also, we should not forget the risk of liabilities Satyam might carry, no body knows about these liabilities as of now.
However, on paper it looks like; as what TechMahindra CEO put it ‘Marriage made in Heaven’.
Also, appreciable point is how new board of Satyam and the Indian Government acted quickly to safeguard the Satyam employees, customers and shareholders. We saw a real quick decision making in this entire process; which is really commendable.
However, this deal is more strategic for TechMahindra; let’s see how;
Geography Expansion: TechMahindra is very strong in Europe and Satyam is strong in APAC and US. This merger will help TechMahindra to easily expand in to US and APAC, that too with strong customer base including GE, Cisco. This also helps to go beyond British Telecom in terms of new business and try cross selling in other existing customers. This is huge advantage. You can’t imagine the pain in building US operations from the scratch.
Business Expansion: TechMahindra is known for its telecom domain. Satyam is strong in SAP [About 45% of business] and Engineering Services business and BIFS. Thus TechMahindra will get built up practices of SAP and Engineering services. This is much required diversification.
Employee Base: Satyam has pretty strong sales force and outstanding techies, it is said, and some of the key business managers have already left though.
Thus, this deal seems to be a great fit and appears to be more strategic for TechMahindra. It leaped ahead as 4th largest IT company in India. Off course any deal comes with the challenge of managing the merger and management has to work towards aligning both the companies. Also, we should not forget the risk of liabilities Satyam might carry, no body knows about these liabilities as of now.
However, on paper it looks like; as what TechMahindra CEO put it ‘Marriage made in Heaven’.
Sunday, April 12, 2009
Tata Son’s US ambassador
Until I read this interview on India Knowledge @ Wharton; I didn’t even know that Indian business houses can think about such a strategic move.
To me it seems like a fantastic idea as I believe in building the relationships is the way to build business in any country. This is a fantastic move by Tatas having ‘an ambassador’ in US; from where they are having bigger business coming from.
The role definition is “I represent the views of the Tatas -- the objectives and goals of the Tatas in the United States. I interact with government officials, with regulators, with legislators [and] with people from the Executive Branch on some issues of concern and interest to the Tatas. I also report back to Tata headquarters -- to Bombay -- about what I hear in Washington, what the trends are, what people are thinking about India, what people are thinking about Indian business. I try to be a interlocutor, if you will, between the Tatas in India and the United States government in particular, but also with the population [or] America at large -- meaning with academia, with American business, with American think-tanks -- to sort of explain one to the other”
Link to the full interview is below; but I am pretty much impressed by this investment by Tatas.
Link to complete interview
True example of how visionaries always think differently!
To me it seems like a fantastic idea as I believe in building the relationships is the way to build business in any country. This is a fantastic move by Tatas having ‘an ambassador’ in US; from where they are having bigger business coming from.
The role definition is “I represent the views of the Tatas -- the objectives and goals of the Tatas in the United States. I interact with government officials, with regulators, with legislators [and] with people from the Executive Branch on some issues of concern and interest to the Tatas. I also report back to Tata headquarters -- to Bombay -- about what I hear in Washington, what the trends are, what people are thinking about India, what people are thinking about Indian business. I try to be a interlocutor, if you will, between the Tatas in India and the United States government in particular, but also with the population [or] America at large -- meaning with academia, with American business, with American think-tanks -- to sort of explain one to the other”
Link to the full interview is below; but I am pretty much impressed by this investment by Tatas.
Link to complete interview
True example of how visionaries always think differently!
Sunday, April 05, 2009
One Last Chance for Detroit
It used to be said that “what is good for General Motors is good for the USA”. That is not true any more. The company now accounts less than a fifth of all car sales in the US, while other companies produce and sell better, smaller, fuel-efficient cars that market might likes. And the word “bankruptcy” might have finally been uttered in GM context by president Obama; though he wants it to be “managed bankruptcy”; which means a safety net for employees and retires but not to the management.
Full bankruptcy of GM will pretty much destroys what remains of the company; and be a political bomb in terms of its psychological impact on the entire nation. So, there is one more chance given to the management; after CEO is been fired; in the hope that the union and bond-holders will make financial sacrifices needed to make company viable.
Now, new management at GM has to produce a plan for restructuring itself with-in next 60 days. But given the past failures of such plans; including the ones which was rejected last weekend by White House auto task force; it would be risky to assume that all will go well with-in next 60 days. This would be a huge task at hand; especially you are trying to revive a huge company like GM and that too in 60 days of stipulated period of time.
I think, this whole government’s protection net might act as an interim solution to a longer problem. It can’t solve the long term problems for sure. The issue with US auto industry is; over the years they produced over-priced gas guzzlers that have a declining market. Or as a management consultant would have put it; the companies are out of sync with the market.
In GM this was no secret, yet the company did little to address the issue and continue to focus on big gas-guzzlers because they were more profitable at that time and they thought this might continue. They didn’t notice decline in the profit margins and the sales.
It appears that; this would be one final chance for GM; if not the choice would be either sudden or slow death. If that happens, these 60 days would give us enough time to adjust ourselves to an idea of possible closure; merger or breakup.
Full bankruptcy of GM will pretty much destroys what remains of the company; and be a political bomb in terms of its psychological impact on the entire nation. So, there is one more chance given to the management; after CEO is been fired; in the hope that the union and bond-holders will make financial sacrifices needed to make company viable.
Now, new management at GM has to produce a plan for restructuring itself with-in next 60 days. But given the past failures of such plans; including the ones which was rejected last weekend by White House auto task force; it would be risky to assume that all will go well with-in next 60 days. This would be a huge task at hand; especially you are trying to revive a huge company like GM and that too in 60 days of stipulated period of time.
I think, this whole government’s protection net might act as an interim solution to a longer problem. It can’t solve the long term problems for sure. The issue with US auto industry is; over the years they produced over-priced gas guzzlers that have a declining market. Or as a management consultant would have put it; the companies are out of sync with the market.
In GM this was no secret, yet the company did little to address the issue and continue to focus on big gas-guzzlers because they were more profitable at that time and they thought this might continue. They didn’t notice decline in the profit margins and the sales.
It appears that; this would be one final chance for GM; if not the choice would be either sudden or slow death. If that happens, these 60 days would give us enough time to adjust ourselves to an idea of possible closure; merger or breakup.
Sunday, March 29, 2009
WOW (War on waste) - A Business Idea?
WOW (War on Waste) - A Business Idea?
Our WOW initiative made me to thing on some business plan.
First things first; Waste management with Indian context has no meaning. We tend to throw away the Waste as per our wish and there is no proper management of that Waste.
For example, Waste collection in Western countries happen systematically, where the paper, plastic, glass are collected separately and handled separately. Also, there Waste collection is so systematic, that you will not find more garbage on the streets. Also the recycling facilities are of higher standards there by ensuring the garbage is being cycled properly.
Cut to India, only 14% of the Waste in India is properly collected and recycled, compared to 70% in the west. The result we see all over the streets!
The main issue is, our wastage collection is not managed properly and India Inc has not noticed the potential of this opportunity. If managed as corporate it can be monetized. Our wastage collection is loosely spread and there is no management in that.
Indian paper industry imports Waste from West to produce the required paper and Waste collected in India feeds only 17% of the demand of this Industry. (Rest all is either imported or supplied through tree cutting) So, look at the opportunity!!
So, if a Pan India company can manage the Waste all over the country and streamline the operations, it will be a huge industry. Also, it will serve the benefit of environment as garbage collection will be clean, there by reducing the diseases spreading because of bad environment.
Our WOW initiative made me to thing on some business plan.
First things first; Waste management with Indian context has no meaning. We tend to throw away the Waste as per our wish and there is no proper management of that Waste.
For example, Waste collection in Western countries happen systematically, where the paper, plastic, glass are collected separately and handled separately. Also, there Waste collection is so systematic, that you will not find more garbage on the streets. Also the recycling facilities are of higher standards there by ensuring the garbage is being cycled properly.
Cut to India, only 14% of the Waste in India is properly collected and recycled, compared to 70% in the west. The result we see all over the streets!
The main issue is, our wastage collection is not managed properly and India Inc has not noticed the potential of this opportunity. If managed as corporate it can be monetized. Our wastage collection is loosely spread and there is no management in that.
Indian paper industry imports Waste from West to produce the required paper and Waste collected in India feeds only 17% of the demand of this Industry. (Rest all is either imported or supplied through tree cutting) So, look at the opportunity!!
So, if a Pan India company can manage the Waste all over the country and streamline the operations, it will be a huge industry. Also, it will serve the benefit of environment as garbage collection will be clean, there by reducing the diseases spreading because of bad environment.
Sunday, March 22, 2009
One Man Marketing Army
I thought of shifting a bit and discuss a non-corporate profile; who thinks like a corporate.
I am talking about Amirkhan, one of the people who I like because of his hard work and dedication and passion (Other person I like is Sachin Tendulkar, because of his sheer ability to improvise his game). Amir seems to do his homework completely before he gets on to shooting and classic example is Tare Zameen Par, where this homework was quite evident.
Have you noticed marketing effort around Ghajani? First there was a youth campaign around with his trendy hairstyle and then there was a serious of releases of Samsung mobiles, which he has used in the movie. The result? Gajani was run away success and this marketing effort was successful in creating the much required hype about the movie.
Also, Amir believes in quality and it is said he never endorses any brand if he doesn’t believe in its quality. His involvement is so much; it is said that you will see him using Titan watch, having Coca-Cola during breaks, having Tata Sky at home for watching TV, talking in Samsung mobile! (These are the brands he endorses) This is sheer dedication towards one brand and living what he says.
Let me not try to get in to review of his movies, my intention was to point out the marketing ability he has mastered recently and his involvement in making this marketing machinery works. And perhaps it appears that he does it single handedly and doesn’t involve any marketing research firm.
This amazes me!
I am talking about Amirkhan, one of the people who I like because of his hard work and dedication and passion (Other person I like is Sachin Tendulkar, because of his sheer ability to improvise his game). Amir seems to do his homework completely before he gets on to shooting and classic example is Tare Zameen Par, where this homework was quite evident.
Have you noticed marketing effort around Ghajani? First there was a youth campaign around with his trendy hairstyle and then there was a serious of releases of Samsung mobiles, which he has used in the movie. The result? Gajani was run away success and this marketing effort was successful in creating the much required hype about the movie.
Also, Amir believes in quality and it is said he never endorses any brand if he doesn’t believe in its quality. His involvement is so much; it is said that you will see him using Titan watch, having Coca-Cola during breaks, having Tata Sky at home for watching TV, talking in Samsung mobile! (These are the brands he endorses) This is sheer dedication towards one brand and living what he says.
Let me not try to get in to review of his movies, my intention was to point out the marketing ability he has mastered recently and his involvement in making this marketing machinery works. And perhaps it appears that he does it single handedly and doesn’t involve any marketing research firm.
This amazes me!
Sunday, March 15, 2009
It is Hero Honda vs. Honda now!
Honda Motorcycles and Scoters Ltd (HMSI) the fully owned Honda subsidiary, is now relatively small player in Indian motorcycle market with 14 percent share, selling mostly large engine capacity bikes. It also sells more scoters than bikes and it’s Activa scoter is a run away success.
This is changing fast. For, HMSI is taking on its own long-term partner in India, Hero Honda (In which Honda has 26 percent stake) and in the latter’s key area of dominance, the 100 cc mobike market. The Honda company is working on to get in to the same segment and hopes to get the market capture quickly, with it’s focus on quality. HMSI wants to make sure, the bike sales is more than its scoter sale. Which would be a big change from its current mix, where scoters are 65% of its entire sale.
It is quite evident that, this entry might give a sleepless night for Hero Honda, which enjoys 80% of the market share in 100 cc segment. And this segment also accounts about 60% of Hero Honda’s entire sales.
At the moment, both the players are not affecting each other and infact both are eating in to Bajaj’s market share. Recent data shows that Hero Honda’s sale was up 24 percent (Decent job considering the current economy and one of few companies who reported Q-o-Q increase in sales, how they did it is pretty interesting) and HMSI reported a jump of 14 percent.
Quite interesting!
Actually this is a clear example as how transparency works for benefit of both the parties. Each other are not affected because they know which segment they are targeting. Also, two companies have a committee which knows in advance what the other is planning to launch in India market, so that clashes can be avoided.
Notable point is 100 cc market has many segments and they would operate in areas where their partners do not. If we divide 100 cc segment in to parts starting from entry level to deluxe level, there is potential in every segment. And HMSI and Honda have clear demarcation as who will be in which segment. This helps to avoid competition among them selves and thus they are eating on Bajaj’s market share.
Personally speaking, there is lot of learning in this strategy if I apply this to our business operations. And I guess, we are in middle of similar situation and we need to appreciate moral of this strategy and see how all will be benefited.
This is changing fast. For, HMSI is taking on its own long-term partner in India, Hero Honda (In which Honda has 26 percent stake) and in the latter’s key area of dominance, the 100 cc mobike market. The Honda company is working on to get in to the same segment and hopes to get the market capture quickly, with it’s focus on quality. HMSI wants to make sure, the bike sales is more than its scoter sale. Which would be a big change from its current mix, where scoters are 65% of its entire sale.
It is quite evident that, this entry might give a sleepless night for Hero Honda, which enjoys 80% of the market share in 100 cc segment. And this segment also accounts about 60% of Hero Honda’s entire sales.
At the moment, both the players are not affecting each other and infact both are eating in to Bajaj’s market share. Recent data shows that Hero Honda’s sale was up 24 percent (Decent job considering the current economy and one of few companies who reported Q-o-Q increase in sales, how they did it is pretty interesting) and HMSI reported a jump of 14 percent.
Quite interesting!
Actually this is a clear example as how transparency works for benefit of both the parties. Each other are not affected because they know which segment they are targeting. Also, two companies have a committee which knows in advance what the other is planning to launch in India market, so that clashes can be avoided.
Notable point is 100 cc market has many segments and they would operate in areas where their partners do not. If we divide 100 cc segment in to parts starting from entry level to deluxe level, there is potential in every segment. And HMSI and Honda have clear demarcation as who will be in which segment. This helps to avoid competition among them selves and thus they are eating on Bajaj’s market share.
Personally speaking, there is lot of learning in this strategy if I apply this to our business operations. And I guess, we are in middle of similar situation and we need to appreciate moral of this strategy and see how all will be benefited.
Sunday, March 08, 2009
Mahabharata, Psychology and Need for living right.
More I watch Mahabharata, more I hear from Krishna’s character in that, I become emotional about life and teachings of our Vedic scriptures.
This weekend, I started thinking about important of being correct and living a correct life, without harming any one. It is important to pass on that knowledge or ‘Sanskar’ to our kids.
Life is complex and there is no easy shortcut for it. You have to face through all the issues; but where we tend to do mistakes is of not understanding the importance of values in our lives. We take our life granted, there by creating problems for ourselves.
I know, it is a bit of emotional, philosophical and spiritual; but right now my mind is full of life’s lessons, given by our Vedic scripts.
Is there any better gift to next generation than this?
This weekend, I started thinking about important of being correct and living a correct life, without harming any one. It is important to pass on that knowledge or ‘Sanskar’ to our kids.
Life is complex and there is no easy shortcut for it. You have to face through all the issues; but where we tend to do mistakes is of not understanding the importance of values in our lives. We take our life granted, there by creating problems for ourselves.
I know, it is a bit of emotional, philosophical and spiritual; but right now my mind is full of life’s lessons, given by our Vedic scripts.
Is there any better gift to next generation than this?
Sunday, March 01, 2009
Indian IT: Trouble Today, but Optimism for the Long Term
Knowledge@Wharton has an article on National Association of Software and Service Companies (NASSCOM) India Leadership Forum held in Mumbai in mid-February.
This is abstract of what was being discussed in that forum.
This is certainly good news for Indian IT industry that long term looks good. But, the article also talks about need for business model innovation and ability to adapt to the change. Off course that comes with lot of risks.
Long one, but lot of 'gnyan' .
http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4354
This is abstract of what was being discussed in that forum.
This is certainly good news for Indian IT industry that long term looks good. But, the article also talks about need for business model innovation and ability to adapt to the change. Off course that comes with lot of risks.
Long one, but lot of 'gnyan' .
http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4354
"The Cable Guy"
I watched a movie this weekend, The Cable Guy. This is the story of a cable person; who’s growing up as a child was a problem. This movie resolves around social issues if upbringing of a child is not proper.
The movie unfolds around a person, Steven, who happened to meet this cable guy and starts talking to him as friend. Cable guy didn’t understand what is friendship means and starts crossing the limit.
It is very good movie and gives lot of insights of why upbringing of a child is most important.
The movie unfolds around a person, Steven, who happened to meet this cable guy and starts talking to him as friend. Cable guy didn’t understand what is friendship means and starts crossing the limit.
It is very good movie and gives lot of insights of why upbringing of a child is most important.
Sunday, February 22, 2009
Indian Aviation completes it’s full circle.
In 1995, Singapore Airlines and Tatas came together and proposed to start domestic airline. The idea was to invest jointly and have few airplanes to begin with, and expand eventually.
But this idea ran in to troubled waters as both home grown domestic players and government opposed this idea. The reason; the international carriers (Like Singapore airlines) have deep pockets and world class experience and domestic carriers can’t compete with them.
Fast forward fourteen years; Indian aviation seems to have completed its circle. With recent FDI changes, government has proposed to open investments from foreign airlines; which was being pushed by domestic airlines for some time now.
The reason seems to be obvious. Private carriers, without any foreign airline competition; have been burning the cash. The cumulative looses of these private players sums up to about $2 Billion. And they are in need of additional funding to keep the things moving. Given the global market situation; it is impossible to raise fresh funds; so these players are desperate for funding.
With most of the airports being run by private operators, who have collaboration with international players, it doesn’t make sense to draw the line. In case of airport operators, even 100% direct investment is allowed.
More importantly; in the recent part, almost all countries have opened up the direct investment in airlines industry. One of the arguments in 1995 was that not most of the countries have this liberalized policy.
I tend to draw parallels between aviation and telecom sectors in India. Kind of telecom revolution we are experiencing was possible mainly because of international players like SingTel and Vadafone among others, who took equity stakes in Indian players and helped the industry grow. Telecom has 74% direct investment policy.
Lets hope direct investment in India in aviation sector brings up required competition and revolution; so that common people like you and me can fly easily, without hurting the purse!
But this idea ran in to troubled waters as both home grown domestic players and government opposed this idea. The reason; the international carriers (Like Singapore airlines) have deep pockets and world class experience and domestic carriers can’t compete with them.
Fast forward fourteen years; Indian aviation seems to have completed its circle. With recent FDI changes, government has proposed to open investments from foreign airlines; which was being pushed by domestic airlines for some time now.
The reason seems to be obvious. Private carriers, without any foreign airline competition; have been burning the cash. The cumulative looses of these private players sums up to about $2 Billion. And they are in need of additional funding to keep the things moving. Given the global market situation; it is impossible to raise fresh funds; so these players are desperate for funding.
With most of the airports being run by private operators, who have collaboration with international players, it doesn’t make sense to draw the line. In case of airport operators, even 100% direct investment is allowed.
More importantly; in the recent part, almost all countries have opened up the direct investment in airlines industry. One of the arguments in 1995 was that not most of the countries have this liberalized policy.
I tend to draw parallels between aviation and telecom sectors in India. Kind of telecom revolution we are experiencing was possible mainly because of international players like SingTel and Vadafone among others, who took equity stakes in Indian players and helped the industry grow. Telecom has 74% direct investment policy.
Lets hope direct investment in India in aviation sector brings up required competition and revolution; so that common people like you and me can fly easily, without hurting the purse!
Sunday, February 15, 2009
End of Indian Retail??
Subhiksha, one of the leading Indian retail stores, which re-invented the retail business model with its no-frill store formats, is in news in recent months/weeks. It has not paid salary to its employees since October, vendors have not been paid and the operation is standstill.
With absolutely no encouraging news from any of Indian retail stores (Future group has been better comparatively) many have already started writing off Indian retail phenomenon. In my opinion it is not a correct thing to do, and we need to keep some fundamental things in mind before we re-evaluate Indian retail opportunity.
Firstly, India is still experiencing strongest economic growth since last 60 years, with 7 percent GDP in 2008-09 and perhaps between 6 to 7 in 2009-10. This growing economy throws many new opportunities. Secondly, modern retain still accounts only around 7 per cent of the total retail channel in India, still dominated by pop-and-mom stores. Thirdly, the consumer spending pattern is consistently shifting and mall mania has started creeping in. So Indian retail story is intact.
Having these factors; why Subhiksha (And by large retail players) ran in to problems?
Though, Subhiksha had tailor made business plan, but the biggest mistake probably was not building efficient supply chain and super-efficient retail operations organization. This is pretty much required to compete with next door Kirana shops and more even it is margin game. There was no financial and management investment in this area.
Also, Subhiksha tried to grow very fast. In this quest of growth, the basic paradigm of retail seems to be forgotten. Be it supply chain efficiency, optimized store location, store rentals or enhanced customer service which makes customers loyal.
I will go back to basic of what has been taught in B-school, keeping the fundamentals correct in business. There should be a close co-relation between operation and expansion and if we try to focus on only one thing at any given point in time, it is for sure we will run in to troubled waters.
With absolutely no encouraging news from any of Indian retail stores (Future group has been better comparatively) many have already started writing off Indian retail phenomenon. In my opinion it is not a correct thing to do, and we need to keep some fundamental things in mind before we re-evaluate Indian retail opportunity.
Firstly, India is still experiencing strongest economic growth since last 60 years, with 7 percent GDP in 2008-09 and perhaps between 6 to 7 in 2009-10. This growing economy throws many new opportunities. Secondly, modern retain still accounts only around 7 per cent of the total retail channel in India, still dominated by pop-and-mom stores. Thirdly, the consumer spending pattern is consistently shifting and mall mania has started creeping in. So Indian retail story is intact.
Having these factors; why Subhiksha (And by large retail players) ran in to problems?
Though, Subhiksha had tailor made business plan, but the biggest mistake probably was not building efficient supply chain and super-efficient retail operations organization. This is pretty much required to compete with next door Kirana shops and more even it is margin game. There was no financial and management investment in this area.
Also, Subhiksha tried to grow very fast. In this quest of growth, the basic paradigm of retail seems to be forgotten. Be it supply chain efficiency, optimized store location, store rentals or enhanced customer service which makes customers loyal.
I will go back to basic of what has been taught in B-school, keeping the fundamentals correct in business. There should be a close co-relation between operation and expansion and if we try to focus on only one thing at any given point in time, it is for sure we will run in to troubled waters.
Sunday, February 08, 2009
A tiring tale
It has been really a tiring week, last two weekends I have been traveling, which added to my physical tiring. This week has been an emotional roller coaster as well.
Tough times through up great challenges and really tests you are a leader and mentor. No, I am not only talking about your life in business, but it checks in your personal life as well.
Question is, how you can lead your family, who look at you as source of inspiration, in difficult times? How you can continue being an encouragement source for your kid?
Point is to look at positive things of life and wait for correct time.
Tough times through up great challenges and really tests you are a leader and mentor. No, I am not only talking about your life in business, but it checks in your personal life as well.
Question is, how you can lead your family, who look at you as source of inspiration, in difficult times? How you can continue being an encouragement source for your kid?
Point is to look at positive things of life and wait for correct time.
Monday, January 26, 2009
Operational Efficiency
As all the companies getting tighter on cost and seeing where they are spending each dollar; the question that come to me is operational efficiency and profitability.
Let me make it clear, I am not debating on if cost cutting is good or bad; it is certainly good to cut un-necessary cost, irrespective of good or bad times. I am thinking on operational efficiency.
In my opinion, there is a limit to which you can reach in operational efficiency; beyond that it is impossible to grow that number. It doesn’t make sense to try improving it any further. We should concentrate only so much on improving the efficiency, and there is no point in beating that any more. On the contrary, focusing on the business revenue and customer acquisition should be main focus and this focus has to be sharper during recession. There seems to be absolutely no alternative for this.
So, lets not get it wrong; it is business acquisition should be the prime focus of every company. If we put together a decent operational engine in place; that company becomes unbeatable.
Look at Wal-Mart, they have efficient supply and distribution system in place, a must have for any retail company. But rather than trying to make this system more efficient they have been focusing on increasing the business. Other examples are Big Bazar and ICICI bank. Both might not have state of the art and efficient operational excellence, but both seem to have focus on its customers.
It is DNA of a company which defines all such things and that is what we call as “Company Culture”. And this is precisely why some companies do well and some companies just can’t compete.
Any takers?
Let me make it clear, I am not debating on if cost cutting is good or bad; it is certainly good to cut un-necessary cost, irrespective of good or bad times. I am thinking on operational efficiency.
In my opinion, there is a limit to which you can reach in operational efficiency; beyond that it is impossible to grow that number. It doesn’t make sense to try improving it any further. We should concentrate only so much on improving the efficiency, and there is no point in beating that any more. On the contrary, focusing on the business revenue and customer acquisition should be main focus and this focus has to be sharper during recession. There seems to be absolutely no alternative for this.
So, lets not get it wrong; it is business acquisition should be the prime focus of every company. If we put together a decent operational engine in place; that company becomes unbeatable.
Look at Wal-Mart, they have efficient supply and distribution system in place, a must have for any retail company. But rather than trying to make this system more efficient they have been focusing on increasing the business. Other examples are Big Bazar and ICICI bank. Both might not have state of the art and efficient operational excellence, but both seem to have focus on its customers.
It is DNA of a company which defines all such things and that is what we call as “Company Culture”. And this is precisely why some companies do well and some companies just can’t compete.
Any takers?
Sunday, January 18, 2009
Stay Hungry Stay Foolish-Connecting Dots
Steve Jobs' 2005 Stanford Commencement Address
Drawing from some of the most pivotal points in his life, Steve Jobs, chief executive officer and co-founder of Apple Computer and of Pixar Animation Studios, urged graduates to pursue their dreams and see the opportunities in life's setbacks -- including death itself -- at the university's 114th Commencement on June 12, 2005
Drawing from some of the most pivotal points in his life, Steve Jobs, chief executive officer and co-founder of Apple Computer and of Pixar Animation Studios, urged graduates to pursue their dreams and see the opportunities in life's setbacks -- including death itself -- at the university's 114th Commencement on June 12, 2005
Sunday, January 11, 2009
Satyam Saga
I can’t even stop of thinking Satyma and its sudden collapse through entire this week.
Several magazines have written reams together on this story; TV/Internet media has covered this story so extensively that by now we know minute by minute details.
But I am with some other thing. My mind can’t even stop thinking about Satyam’s employees and the mental trauma they might be going through. We make financial plans and investments thinking about the projected salary and cash flow; and here they go, entire plan got toppled and they are not even sure if they will get this month salary.
This is tough time.
May god bless all of us!
Several magazines have written reams together on this story; TV/Internet media has covered this story so extensively that by now we know minute by minute details.
But I am with some other thing. My mind can’t even stop thinking about Satyam’s employees and the mental trauma they might be going through. We make financial plans and investments thinking about the projected salary and cash flow; and here they go, entire plan got toppled and they are not even sure if they will get this month salary.
This is tough time.
May god bless all of us!
Monday, December 29, 2008
No tears for 2008
We are about to send off yet another year in to history. Perhaps most dramatic year!
We saw almost everything in this year, high and crash of stock market; financial system melt down; manufacturing sector reaching it’s bottom; inflation high/lows. In summary, we have seen all, which literally created liquidity problems to working and business community. Arguably this termed as worst year industry ever seen; where impact was seen across all industries.
Internationally, this year saw meltdowns like Lehman Brothers, narrow escapes of GM, Ford, Citi. Officially entire world is in to recession. Bad numbers poured in from US, Europe, Japan, India, Russia and China.
In general, we are not yet out of recession; we still need to deal with its impact.
It was large belief that BRIC countries (Brazil, Russia, India and China) are largely insulated from what happening in US and Europe, this year proved that concept wrong. No body in insulated and it impacts all alike.
From social front, we saw worst terror attacks, which took entire world shocking.
Though, silver line being Indian sports; this year we have been on high. We also saw premier sports event, Olympics being conducted with at most precision.
So, there will be no tears in saying good bye 2008. Let’s hope we will have better 2009; where the happiness and energy in the industry comes back.
Wish you a happy and safe new year ahead.
We saw almost everything in this year, high and crash of stock market; financial system melt down; manufacturing sector reaching it’s bottom; inflation high/lows. In summary, we have seen all, which literally created liquidity problems to working and business community. Arguably this termed as worst year industry ever seen; where impact was seen across all industries.
Internationally, this year saw meltdowns like Lehman Brothers, narrow escapes of GM, Ford, Citi. Officially entire world is in to recession. Bad numbers poured in from US, Europe, Japan, India, Russia and China.
In general, we are not yet out of recession; we still need to deal with its impact.
It was large belief that BRIC countries (Brazil, Russia, India and China) are largely insulated from what happening in US and Europe, this year proved that concept wrong. No body in insulated and it impacts all alike.
From social front, we saw worst terror attacks, which took entire world shocking.
Though, silver line being Indian sports; this year we have been on high. We also saw premier sports event, Olympics being conducted with at most precision.
So, there will be no tears in saying good bye 2008. Let’s hope we will have better 2009; where the happiness and energy in the industry comes back.
Wish you a happy and safe new year ahead.
Sunday, December 14, 2008
“Stay Hungry, Stay Foolish”
This is the book I just completed reading. It is about 25 IIM graduates; who choose to find their own ways by rejecting corporate offers.
Reading stories of Sanjeev Bikchandani (Naukri.com), R.Subramanain (Subhiksha), Jerry Rao (Mphasis), Nirmal Jain (India Infoline) gives immense motivation and inspiration.
Couple common things I observed out of all these 25 profiles;
Risk Taking: Entrepreneurs are born risk takers. In each of these profiles, we get to see about this fact. They don’t hesitate to take the risks.
Hardworking and persistent: Once they dream; they constantly follow that to make it happen. Though there would be difficulties on the way. They are not losers!
One thing for sure; these guys are from different ring of the Saturn!
Sunday, November 16, 2008
How Mortgage Crisis in US Pushed The Whole World in to Depression.
Let me share you what I felt about this topic.
While we are getting ready to deal with ‘depression’ which has spread across the whole world now and saw some big names tumbling; the question comes up is, how in the first place a visibly simple mortgage crisis in US couple of years back turned to be a depression? Affecting the whole world?
The search leads to one word ‘derivatives’.
Derivatives are financial instruments that are used to reduce financial risk, just as a fire insurance policy is used to reduce the risk of a fire by compensating possible damage in the event of one. Why did, then, Warren Buffett, whose financial acumen is legendary, describe them recently as “weapons of mass destruction”?
Wikipedia definition of derivative is; these are financial contracts, or financial instruments, whose values are derived from the value of something else (known as the underlying). The underlying on which a derivative is based can be an asset (eg commodities, equities (stocks), residential mortgages, commercial real estate, loans, bonds), an index (eg interest rates, exchange rates, stock market indices, consumer price index (CPI) — see inflation derivatives), or other items (eg weather conditions, or other derivatives). Credit derivatives are based on loans, bonds or other forms of credit.
The main types of derivatives are: forwards (which if traded on an exchange are known as futures); options; and swaps.
Derivatives can be used to mitigate the risk of economic loss arising from changes in the value of the underlying. This activity is known as hedging. Alternatively, derivatives can be used by investors to increase the profit arising if the value of the underlying moves in the direction they expect. This activity is known as speculation.
It is not hard to see why such “derived” securities or “derivatives” have become so popular. A bank that makes a loan, for example, for a house, faces many different types of risk. The borrower, for instance, may not be able to return the loan on due date. Or, he may not be able to keep up with interest payments. Or, the market interest rate may rise far above the rate the bank has given the loan, leaving the bank stuck with a loan at a low interest rate. Or an earthquake might hit the area demolishing the borrower’s business. Or, high inflation may reduce the value of the loan by the time it gets repaid. Derivatives are a way to “hedge” against these risks. For example, a housing loan to a borrower in, say, Pune can be combined with a housing loan in Mumbai and another one in Bangalore under one common instrument and this combined “derivative” can be sold to an investor. This combination reduces the risk of disparate housing markets such as Pune, Mumbai and Bangalore all suffering downturns at the same time. The investor in this derivative rightly believes that the instrument he holds has a balanced risk.
If derivatives can diversify risk, as just described, what can go wrong? For one, the borrowers may have mis-represented their income. Or, the loan issuer may not have verified their incomes. Or, they may have borrowed 95 per cent of the value of their houses such that if property prices decline by, say, 20 per cent, the asset cover may become inadequate. In all of these cases, should interest rates rise sharply, from say, 6 per cent to 10 per cent, these borrowers may no longer be able to meet their monthly payments. When Greenspan, who was Chairman of the US Federal Reserve Board, was told about similar issues developing in the US mortgage securities market he believed that such problems in the housing sector would be restricted to a city and could never become a national, let alone an international problem.
This would normally have been true, but mortgaged-backed securities were sold not only nationally in the United States but also throughout Europe and Asia. When the US housing bubble burst and borrowers started defaulting on their mortgage payments, the value of the mortgage securities fell precipitously. The shock waves were transmitted throughout the world. What started as a crisis in some specific parts of the US now became a worldwide financial crisis.
While we are getting ready to deal with ‘depression’ which has spread across the whole world now and saw some big names tumbling; the question comes up is, how in the first place a visibly simple mortgage crisis in US couple of years back turned to be a depression? Affecting the whole world?
The search leads to one word ‘derivatives’.
Derivatives are financial instruments that are used to reduce financial risk, just as a fire insurance policy is used to reduce the risk of a fire by compensating possible damage in the event of one. Why did, then, Warren Buffett, whose financial acumen is legendary, describe them recently as “weapons of mass destruction”?
Wikipedia definition of derivative is; these are financial contracts, or financial instruments, whose values are derived from the value of something else (known as the underlying). The underlying on which a derivative is based can be an asset (eg commodities, equities (stocks), residential mortgages, commercial real estate, loans, bonds), an index (eg interest rates, exchange rates, stock market indices, consumer price index (CPI) — see inflation derivatives), or other items (eg weather conditions, or other derivatives). Credit derivatives are based on loans, bonds or other forms of credit.
The main types of derivatives are: forwards (which if traded on an exchange are known as futures); options; and swaps.
Derivatives can be used to mitigate the risk of economic loss arising from changes in the value of the underlying. This activity is known as hedging. Alternatively, derivatives can be used by investors to increase the profit arising if the value of the underlying moves in the direction they expect. This activity is known as speculation.
It is not hard to see why such “derived” securities or “derivatives” have become so popular. A bank that makes a loan, for example, for a house, faces many different types of risk. The borrower, for instance, may not be able to return the loan on due date. Or, he may not be able to keep up with interest payments. Or, the market interest rate may rise far above the rate the bank has given the loan, leaving the bank stuck with a loan at a low interest rate. Or an earthquake might hit the area demolishing the borrower’s business. Or, high inflation may reduce the value of the loan by the time it gets repaid. Derivatives are a way to “hedge” against these risks. For example, a housing loan to a borrower in, say, Pune can be combined with a housing loan in Mumbai and another one in Bangalore under one common instrument and this combined “derivative” can be sold to an investor. This combination reduces the risk of disparate housing markets such as Pune, Mumbai and Bangalore all suffering downturns at the same time. The investor in this derivative rightly believes that the instrument he holds has a balanced risk.
If derivatives can diversify risk, as just described, what can go wrong? For one, the borrowers may have mis-represented their income. Or, the loan issuer may not have verified their incomes. Or, they may have borrowed 95 per cent of the value of their houses such that if property prices decline by, say, 20 per cent, the asset cover may become inadequate. In all of these cases, should interest rates rise sharply, from say, 6 per cent to 10 per cent, these borrowers may no longer be able to meet their monthly payments. When Greenspan, who was Chairman of the US Federal Reserve Board, was told about similar issues developing in the US mortgage securities market he believed that such problems in the housing sector would be restricted to a city and could never become a national, let alone an international problem.
This would normally have been true, but mortgaged-backed securities were sold not only nationally in the United States but also throughout Europe and Asia. When the US housing bubble burst and borrowers started defaulting on their mortgage payments, the value of the mortgage securities fell precipitously. The shock waves were transmitted throughout the world. What started as a crisis in some specific parts of the US now became a worldwide financial crisis.
Sunday, October 19, 2008
`It`s excitement, not stress`-Article on Chanda Kochhar
As joint MD of ICICI Bank; Chanda Kochhar has achived a lot.
Following is the link appeared in Business Standard; it gives a lot of insights.
http://www.business-standard.com/india/storypage.php?autono=337265
She call stress as excitement!
Following is the link appeared in Business Standard; it gives a lot of insights.
http://www.business-standard.com/india/storypage.php?autono=337265
She call stress as excitement!
Sunday, September 14, 2008
Business Around Entertainment Channels
There are so many entertainment channels which are coming out in
Sunday, September 07, 2008
Go Kiss the world!
This is the auto-biography of Subrato Bagchi; which I just completed reading.
The pinnacle of my career at Wipro brought with it the opportunity to work directly for Azim Premji. Mitta had taught me to be a good human being before trying to be a leader. From Ashok Soota, I learnt what it takes to be a good leader. It was by observing Azim Premji from close quarters that I learnt about leadership from an entrepreneurial standpoint. Premji was acutely aware of the challenges that lay ahead for Indian companies in a progressively open economy. I learnt my final lesson on leadership on my last day at Wipro. He wanted me to stay back. I told him that one of my reasons for leaving was that we were very different people, we thought differently. He answered: “That is the reason we should work together.”
Sunday, August 31, 2008
Should we start teaching Mandarin to our kids?
After seeing spectacular closing ceremony at the Beijing Olympics and feeling the vibrations of Chinese drummers; one question we need to ask; how did China managed to put together such a spectacular show? And what it means to the rest of the world?
One thing is sure; China didn’t build this overnight; there is a hard work of 7 years (It was decided in July-2001 that China will hoist these games), there is a meticulous planning, spectacular management. Entire China has been preparing for this moment.
Let’s reflect on how China and USA have spent last seven years; China has been preparing for Olympics and USA has been preparing for al-Qaida. China has been investing in sports infrastructure/nation building and USA has been investing in installing metal detectors and security processes. I am not saying, what USA was/is doing wrong, probably it was required to fight terrorism. And as a country USA was supposed to respond to 9/11.
But, results are there to see for all of us. Lets look at the infrastructure China has built up, super speed electromagnetic trains; ultra modern airports, spectacular high-ways and great industry revolution. On the contrary USA seems to have missing the ‘Nation Building’ activities; for which America has been famous for.
For argument, we can say, though cities have good infrastructure; but rural China is like old; lacking proper facilities; in fact no one knows more about how China is! But point I am making is; under the banner of 2008 Olympics, China started a domestic revolution and a nation building process and I am sure; they will only stop when entire nation building process is complete. Now they have a proven process in hand.
I think, entire world need to take a note of it; though it is too early to say any thing. There could be a competition to US in technology, engineering, education and infrastructure.
It might be a good idea to start teaching Mandarin to our kids! Probably they might have to go to China to see future as we are seeing our future in US!
Who knows?
One thing is sure; China didn’t build this overnight; there is a hard work of 7 years (It was decided in July-2001 that China will hoist these games), there is a meticulous planning, spectacular management. Entire China has been preparing for this moment.
Let’s reflect on how China and USA have spent last seven years; China has been preparing for Olympics and USA has been preparing for al-Qaida. China has been investing in sports infrastructure/nation building and USA has been investing in installing metal detectors and security processes. I am not saying, what USA was/is doing wrong, probably it was required to fight terrorism. And as a country USA was supposed to respond to 9/11.
But, results are there to see for all of us. Lets look at the infrastructure China has built up, super speed electromagnetic trains; ultra modern airports, spectacular high-ways and great industry revolution. On the contrary USA seems to have missing the ‘Nation Building’ activities; for which America has been famous for.
For argument, we can say, though cities have good infrastructure; but rural China is like old; lacking proper facilities; in fact no one knows more about how China is! But point I am making is; under the banner of 2008 Olympics, China started a domestic revolution and a nation building process and I am sure; they will only stop when entire nation building process is complete. Now they have a proven process in hand.
I think, entire world need to take a note of it; though it is too early to say any thing. There could be a competition to US in technology, engineering, education and infrastructure.
It might be a good idea to start teaching Mandarin to our kids! Probably they might have to go to China to see future as we are seeing our future in US!
Who knows?
Sunday, August 17, 2008
A ‘Golden’ Business Opportunity.
First of all, congratulations Abhinav Bindra; you made us feel great! We, all Indians; salute you for your hard work, dedication and determination. It was an incredible job!
Coming to business side of it; I feel it is a ‘Golden’ business opportunity. In fact, for two individuals; one Abhinav and second one is Michel Phelps.
This is a right time for our brand guru’s to focus on sports other then cricket. With Abhinav being a house hold name now; corporate world can utilize his fame to market their brands. There is other side of the story as well; if Abhinav gets promoted by corporate; non-cricket sports get more visibility. Though there is no history in India of non-cricket brand ambassadors; it might just start, who knows?
Phenomenon Phelps made history in this Olympics; and I am sure his brand is now ready to explode. CNN reported his current brand value is $30 million! Phelps has become a synonymous to swimming as Born Borge (Arguably) was to tennis or Tiger Woods is for Golf. By doing nothing; Swimming will get more popularity in whole world by Phelps name. That is the fame and brand he has created himself.
Corporate America is famous in catching such great players and builds the branding around him/her. Sports Marketing is very systematic there and I am sure Phelps will en- cash this.
I believe; both these cases are real golden opportunities, if done right.
After seeing Olympics this time; I can’t help myself but jump the lane and ask myself; how much our city (Pune) is prepared for an international event like CYG?
Do we really care that we want to be a good host?
Coming to business side of it; I feel it is a ‘Golden’ business opportunity. In fact, for two individuals; one Abhinav and second one is Michel Phelps.
This is a right time for our brand guru’s to focus on sports other then cricket. With Abhinav being a house hold name now; corporate world can utilize his fame to market their brands. There is other side of the story as well; if Abhinav gets promoted by corporate; non-cricket sports get more visibility. Though there is no history in India of non-cricket brand ambassadors; it might just start, who knows?
Phenomenon Phelps made history in this Olympics; and I am sure his brand is now ready to explode. CNN reported his current brand value is $30 million! Phelps has become a synonymous to swimming as Born Borge (Arguably) was to tennis or Tiger Woods is for Golf. By doing nothing; Swimming will get more popularity in whole world by Phelps name. That is the fame and brand he has created himself.
Corporate America is famous in catching such great players and builds the branding around him/her. Sports Marketing is very systematic there and I am sure Phelps will en- cash this.
I believe; both these cases are real golden opportunities, if done right.
After seeing Olympics this time; I can’t help myself but jump the lane and ask myself; how much our city (Pune) is prepared for an international event like CYG?
Do we really care that we want to be a good host?
Sunday, August 10, 2008
The High Performance Entrepreneur
This is the title of a book I just completed reading, it is by Subroto Bagchi, co-founder of MindTree consulting, a mid-sized IT and consulting company.
On top, this book is about guidelines of creating a company, from a business idea, to IPO. The start, the VC pitch one need to make, branding & marketing etc.
In addition to above tips, this book gives enormous amount of learning for building a team; managing customers and managing difficult times; especially times like 9/11 and global recession. This book runs through different stages of a company, from a start-up from an apartment to multi-million dollar company. The author narrates MindTree story while he speaks these different stages. It catches because you can actually co-relate a theory with an example.
MindTree story is real amazing by itself; in terms of the way it progressed to achieve $100 million in a span of 6 years. This book gives a detailed description of culture and value system MindTree has and why it was build in that way. Author stresses the need for quality of services and gives instances as why this is important in today’s world.
In all, it has very good tips about starting and building a company. And it is an inspiring story to read. And more important lesson I learnt is following the dream you have, even if you face difficulties. After all, all MindTree founders were from pretty general middle class background and it is their hard work and resilience made their dream come true.
Building a company and watching it grow is like seeing your kid growing and going to college!
On top, this book is about guidelines of creating a company, from a business idea, to IPO. The start, the VC pitch one need to make, branding & marketing etc.
In addition to above tips, this book gives enormous amount of learning for building a team; managing customers and managing difficult times; especially times like 9/11 and global recession. This book runs through different stages of a company, from a start-up from an apartment to multi-million dollar company. The author narrates MindTree story while he speaks these different stages. It catches because you can actually co-relate a theory with an example.
MindTree story is real amazing by itself; in terms of the way it progressed to achieve $100 million in a span of 6 years. This book gives a detailed description of culture and value system MindTree has and why it was build in that way. Author stresses the need for quality of services and gives instances as why this is important in today’s world.
In all, it has very good tips about starting and building a company. And it is an inspiring story to read. And more important lesson I learnt is following the dream you have, even if you face difficulties. After all, all MindTree founders were from pretty general middle class background and it is their hard work and resilience made their dream come true.
Building a company and watching it grow is like seeing your kid growing and going to college!
Sunday, August 03, 2008
Nano: Tata’s Costly Promise?
There should be no doubts about that innovative idea, market it is targeting and given the technology and process knowledge, Tata Motors will bring out the Nano as designed. But, question need to answer is, is it going to be a costly promise?
Back in January, when Tata first unveiled the Nano at the Delhi auto show, this would-be king of econo-boxes grabbed more attention than anything shown at the North America International Auto Show in Detroit held the same month.
No matter. The Nano, a 623cc-engine compact that will get 20 KPL, instantly won kudos as a showcase of frugal Indian engineering. It sent shock waves through the auto world as carmakers reassessed how cheaply they could make small vehicles. For Ratan Tata, the car symbolized something much grander than just another product.
Steel Prices:
One problem is that Tata's cost concerns with the Nano are more serious than those faced by other automakers. First, at a time when global steel prices are touching record highs, prices in India are rising even faster.
Singur Plant:
Rising input prices aren't the only factor increasing costs. Tata Motor admits that its Nano plant in Singur is not ready yet because of protests and it might drag a bit, adding the costs, or it’s manufacturing has to be shifted to Pune site; which can’t handle Nano production yet, adding to total cost of operations.
No surprise, then, that analysts are wondering how Tata Motors can earn a profit on the Nano.
Supplier:
One obvious answer is to look at suppliers. But suppliers, already scrambling to make parts as cheaply as possible, can only be squeezed so far. So, this option will not going to yield more.
Volume:
Other option would be to look at volume, as per one analyst, until production volumes hit 500,000 units, it's difficult to be optimistic about any profits.
Passing rising costs on to car buyers through higher prices looks to be more difficult. With the 100,000-rupee price not up for negotiation, one option is to sell a larger proportion of higher-specification Nanos, which come with electric windows, air conditioning, and central locking. But while luxury Nanos will be more profitable per vehicle, higher prices risk edging out many customers who until now could only afford two-wheelers. One difficulty is that as the price edges closer to the Maruti 800, the Nano becomes less of bargain.
Business is all about such catch-22 situations!
Back in January, when Tata first unveiled the Nano at the Delhi auto show, this would-be king of econo-boxes grabbed more attention than anything shown at the North America International Auto Show in Detroit held the same month.
No matter. The Nano, a 623cc-engine compact that will get 20 KPL, instantly won kudos as a showcase of frugal Indian engineering. It sent shock waves through the auto world as carmakers reassessed how cheaply they could make small vehicles. For Ratan Tata, the car symbolized something much grander than just another product.
Steel Prices:
One problem is that Tata's cost concerns with the Nano are more serious than those faced by other automakers. First, at a time when global steel prices are touching record highs, prices in India are rising even faster.
Singur Plant:
Rising input prices aren't the only factor increasing costs. Tata Motor admits that its Nano plant in Singur is not ready yet because of protests and it might drag a bit, adding the costs, or it’s manufacturing has to be shifted to Pune site; which can’t handle Nano production yet, adding to total cost of operations.
No surprise, then, that analysts are wondering how Tata Motors can earn a profit on the Nano.
Supplier:
One obvious answer is to look at suppliers. But suppliers, already scrambling to make parts as cheaply as possible, can only be squeezed so far. So, this option will not going to yield more.
Volume:
Other option would be to look at volume, as per one analyst, until production volumes hit 500,000 units, it's difficult to be optimistic about any profits.
Passing rising costs on to car buyers through higher prices looks to be more difficult. With the 100,000-rupee price not up for negotiation, one option is to sell a larger proportion of higher-specification Nanos, which come with electric windows, air conditioning, and central locking. But while luxury Nanos will be more profitable per vehicle, higher prices risk edging out many customers who until now could only afford two-wheelers. One difficulty is that as the price edges closer to the Maruti 800, the Nano becomes less of bargain.
Business is all about such catch-22 situations!
Sunday, June 15, 2008
Importance of Strategy- A good story
One day, there was a blind man sitting on the steps of a building with a hat by his feet and a sign that read: "I am blind, please help".
A creative publicist was walking by him and stopped to observe he only had a few coins in his hat, he dropped a few more coins in his hat and without asking for his permission took the sign, turned it around, and wrote another announcement. He placed the sign by his feet and left.
That afternoon the creative publicist returned by the blind man and noticed that his hat was full of bills and coins. The blind man recognized his footsteps and asked if it was him who had re-written his sign and he wanted to know what did he write on it? The publicist responded: "Nothing that was not true, I just rewrote your sign differently".
He smiled and went on his way.
The blind man never knew but his new sign read : "TODAY IS SPRING AND I CANNOT SEE IT".
Change your strategy when something does not go your way and you'll see it will probably be for the best. Have faith that every change is best for our lives.
A creative publicist was walking by him and stopped to observe he only had a few coins in his hat, he dropped a few more coins in his hat and without asking for his permission took the sign, turned it around, and wrote another announcement. He placed the sign by his feet and left.
That afternoon the creative publicist returned by the blind man and noticed that his hat was full of bills and coins. The blind man recognized his footsteps and asked if it was him who had re-written his sign and he wanted to know what did he write on it? The publicist responded: "Nothing that was not true, I just rewrote your sign differently".
He smiled and went on his way.
The blind man never knew but his new sign read : "TODAY IS SPRING AND I CANNOT SEE IT".
Change your strategy when something does not go your way and you'll see it will probably be for the best. Have faith that every change is best for our lives.
Ranbaxy Deal: It is two way street.
The promoters of Ranbaxy Laboratories are not the first to sell out of their company nor will they be the last. But this remains the only case so far of a successful, listed, globalized enterprise with national leadership in a growth industry deciding that it does not have a bright enough future on its own, and that it needs to be a part of a larger corporate entity. It therefore underlines the point that even as Indian companies are stalking the world picking up companies like Corus, this is a two-way street.
Many will feel a twinge of regret that a company that has been a symbol of successful Indian entrepreneurship in a research-intensive field has decided to throw in the towel, for this is the flip side of Indians celebrating corporate acquisitions overseas (and Ranbaxy has done its share of them). But the time may have come to set nationality questions aside, and to look at business rationale with the same clinical detachment with which Malvinder Singh has put Ranbaxy's future ahead of his own natural desire to hold on to his corporate inheritance.
The issues that Ranbaxy faced, and which it hopes to solve by becoming a subsidiary of Daiichi Sankyo, are technical and financial. On the technical side, it needed a stronger product pipeline. Implicit in the change of ownership is also the admission that the company's strategy for research and generics has run into a headwind, and therefore that the game has to be re-invented. Financially, the company has been burdened by the prospect of having to redeem $400 million of convertible bonds issued in dollars. On the Daiichi Sankyo side, the company gets market entry into some 60 countries, a strong production base and a low-cost research capability.
It seems to be a time of M&As, it is quite interesting to follow the strategy behind such deals.
Many will feel a twinge of regret that a company that has been a symbol of successful Indian entrepreneurship in a research-intensive field has decided to throw in the towel, for this is the flip side of Indians celebrating corporate acquisitions overseas (and Ranbaxy has done its share of them). But the time may have come to set nationality questions aside, and to look at business rationale with the same clinical detachment with which Malvinder Singh has put Ranbaxy's future ahead of his own natural desire to hold on to his corporate inheritance.
The issues that Ranbaxy faced, and which it hopes to solve by becoming a subsidiary of Daiichi Sankyo, are technical and financial. On the technical side, it needed a stronger product pipeline. Implicit in the change of ownership is also the admission that the company's strategy for research and generics has run into a headwind, and therefore that the game has to be re-invented. Financially, the company has been burdened by the prospect of having to redeem $400 million of convertible bonds issued in dollars. On the Daiichi Sankyo side, the company gets market entry into some 60 countries, a strong production base and a low-cost research capability.
It seems to be a time of M&As, it is quite interesting to follow the strategy behind such deals.
Sunday, May 18, 2008
Prize Catch or Head-Scratcher?: HP offer to EDS.
This week’s blog is just continuation of last week’s story of mergers and acquisitions. But EDS and HP deal is more of global in nature.
When Hewlett-Packard announced its $13.9 billion acquisition of tech services giant Electronic Data Systems on May 13, pundits heralded it as a bold move by HP CEO Mark Hurd. In one stroke, it seemed, he had put HP on a stronger footing with market leader IBM in the fiercely competitive tech services business. Together, HP and EDS will create a services giant with $38 billion in revenues, compared with IBM's $54 billion.
Yet a closer look at the deal raises questions about Hurd's strategy and choice of dance partner. EDS, pioneered the practice of taking over corporations' computing operations, was slow to respond in the early 2000s to the threat of nimble Indian rivals offering services at sharply lower prices. Revenues stagnated, and EDS racked up huge losses. Eventually, the company increased its overseas hiring, and bought control of an Indian company, MphasiS. (I wrote in my blog about this merger of EDS and Mphasis as how it makes sense and which was eventually figured in Rediff)
So this deal may not change the game when it comes to one of the most important factors in tech services. The top-tier services companies need large, low-cost, global workforces, and their operations need to be tightly integrated so employees with diverse skills collaborate smoothly. IBM, Accenture, and Indian companies such as TCS, Infosys and Wipro lead in this effort, while EDS and HP have lagged. The services sector is going through a shift, and this merger doesn't address the global service-delivery challenges that HP faces.
For Hurd, the logic is simple. He prizes EDS's giant outsourcing business because it has a large number of customers producing annuity-style revenues. There isn't much overlap between the companies. And he says there will be considerable cost savings. EDS CEO Ronald Rittenmeyer will run the services subsidiary.
Hurd, who excels at cost-cutting, had a choice between buying a big racehorse seemingly past its prime or a young colt with lots of potential. He bought the mature horse. Now we'll see if he can whip EDS back into shape.
When Hewlett-Packard announced its $13.9 billion acquisition of tech services giant Electronic Data Systems on May 13, pundits heralded it as a bold move by HP CEO Mark Hurd. In one stroke, it seemed, he had put HP on a stronger footing with market leader IBM in the fiercely competitive tech services business. Together, HP and EDS will create a services giant with $38 billion in revenues, compared with IBM's $54 billion.
Yet a closer look at the deal raises questions about Hurd's strategy and choice of dance partner. EDS, pioneered the practice of taking over corporations' computing operations, was slow to respond in the early 2000s to the threat of nimble Indian rivals offering services at sharply lower prices. Revenues stagnated, and EDS racked up huge losses. Eventually, the company increased its overseas hiring, and bought control of an Indian company, MphasiS. (I wrote in my blog about this merger of EDS and Mphasis as how it makes sense and which was eventually figured in Rediff)
So this deal may not change the game when it comes to one of the most important factors in tech services. The top-tier services companies need large, low-cost, global workforces, and their operations need to be tightly integrated so employees with diverse skills collaborate smoothly. IBM, Accenture, and Indian companies such as TCS, Infosys and Wipro lead in this effort, while EDS and HP have lagged. The services sector is going through a shift, and this merger doesn't address the global service-delivery challenges that HP faces.
For Hurd, the logic is simple. He prizes EDS's giant outsourcing business because it has a large number of customers producing annuity-style revenues. There isn't much overlap between the companies. And he says there will be considerable cost savings. EDS CEO Ronald Rittenmeyer will run the services subsidiary.
Hurd, who excels at cost-cutting, had a choice between buying a big racehorse seemingly past its prime or a young colt with lots of potential. He bought the mature horse. Now we'll see if he can whip EDS back into shape.
Sunday, May 04, 2008
Aztechsoft acquisition: Is this start of consolidation?
This week’s news that caught my thinking is Mindtree’s acquisition of Aztechsoft. On paper, it looks like a good deal in terms of money Mindtree will spend to acquire. Also, from strategic point of view, it might help Mindtree to gain that extra mile it wanted. Analysts believe, this is merger of synergies.
It is true, Mindtree has a target of meeting 1 billion in revenue and it wanted a portfolio in product development area. Off course this acquisition serves that purpose.
Since I am a small time investor in Mindtree, I would naturally want their top line to grow. But, the question that came to my mind is; is this start of consolidation in Mid-tier services companies in IT sector?
With rupee appreciation, challenging global conditions, stiff competition from global companies; are few points why doing business looks difficult for mid/small companies. I am not entirely ruling out a possibility of running the business in spite of these conditions. But the overall condition seems to be real challenging.
This kind of consolidation is quite natural and it is phenomenon across all industries. I remember my MBA professor telling about “Rule of consolidation”. It seems, in all the sectors, the consolidation happens and 3 or 4 big players will control the entire business there after. I remember him quoting American Airline Industry, American Retail industry, American Pharmacy industry. And surprisingly this rules sounds sense!
Off course I am not of the opinion that there will be only 3 or 4 companies in IT sector. But, the question I am raising is, is this beginning of consolidation? Where slightly bigger player will acquire smaller companies? Or is it just one-of-those cases?
I believe, we need to watch this mid-tier sector very closely and I am sure there will be surprises! Who knows?
It is true, Mindtree has a target of meeting 1 billion in revenue and it wanted a portfolio in product development area. Off course this acquisition serves that purpose.
Since I am a small time investor in Mindtree, I would naturally want their top line to grow. But, the question that came to my mind is; is this start of consolidation in Mid-tier services companies in IT sector?
With rupee appreciation, challenging global conditions, stiff competition from global companies; are few points why doing business looks difficult for mid/small companies. I am not entirely ruling out a possibility of running the business in spite of these conditions. But the overall condition seems to be real challenging.
This kind of consolidation is quite natural and it is phenomenon across all industries. I remember my MBA professor telling about “Rule of consolidation”. It seems, in all the sectors, the consolidation happens and 3 or 4 big players will control the entire business there after. I remember him quoting American Airline Industry, American Retail industry, American Pharmacy industry. And surprisingly this rules sounds sense!
Off course I am not of the opinion that there will be only 3 or 4 companies in IT sector. But, the question I am raising is, is this beginning of consolidation? Where slightly bigger player will acquire smaller companies? Or is it just one-of-those cases?
I believe, we need to watch this mid-tier sector very closely and I am sure there will be surprises! Who knows?
Sunday, April 20, 2008
The business behind IPL
The much waited IPL, the T-20 format of funfair, has started. Pundits jumped in quickly to announce it as hit, in terms of revenue, TV viewrship and on the field tickets being sold.
If we look at the business side of this format, it really makes great sense. And I think the concept of the game, revenue generation model, team ownership and even the concept of cheer leaders, is being lifted from American sports industry. The whole business behind IPL to me looks like a MLB, NFL or NBA, except one change, BCCI (Or body like BCCI) is not the ultimate beneficiary there! Every dollar earned comes back to franchisee.
The basic revenue model for the franchisee is; in-ground ticket sales, in-ground marketing revenue, and other in-ground sales revenue. Considering the amount of money they spend on team players, and other costs they need to take care, it might not be possible for franchisee to break even in first couple of years.
However, if the great rush continues and people keep coming to ground and keep watching; no question; it really makes sense from business perspective. After all, every franchisee should make money by end of the season.
I do see few challenges as well; first thing is to manage the entire team in a professional way. As I can’t stop drawing similarities between a MLB and IPL, this format of the cricket should bring out competitive side of every player and players should not treat this like an exhibition match. Also, for owners, there has to be a tight monitoring of the revenue generated vs. cost incurred for team, otherwise, like any business, owners will end up loosing money.
In end, it is good for fun and it would be successful in entertaining the cricket lovers and in that sense it has served its purpose.
But question un-answered for me is; which team you really support?
If we look at the business side of this format, it really makes great sense. And I think the concept of the game, revenue generation model, team ownership and even the concept of cheer leaders, is being lifted from American sports industry. The whole business behind IPL to me looks like a MLB, NFL or NBA, except one change, BCCI (Or body like BCCI) is not the ultimate beneficiary there! Every dollar earned comes back to franchisee.
The basic revenue model for the franchisee is; in-ground ticket sales, in-ground marketing revenue, and other in-ground sales revenue. Considering the amount of money they spend on team players, and other costs they need to take care, it might not be possible for franchisee to break even in first couple of years.
However, if the great rush continues and people keep coming to ground and keep watching; no question; it really makes sense from business perspective. After all, every franchisee should make money by end of the season.
I do see few challenges as well; first thing is to manage the entire team in a professional way. As I can’t stop drawing similarities between a MLB and IPL, this format of the cricket should bring out competitive side of every player and players should not treat this like an exhibition match. Also, for owners, there has to be a tight monitoring of the revenue generated vs. cost incurred for team, otherwise, like any business, owners will end up loosing money.
In end, it is good for fun and it would be successful in entertaining the cricket lovers and in that sense it has served its purpose.
But question un-answered for me is; which team you really support?
Sunday, March 09, 2008
India’s Best Managed Companies.
This week’s Business Today has a survey, ‘India’s best managed companies’. There are some parameters with which these companies are surveyed, like HR policies, Innovation, Customer focus and community services etc.
My biggest surprise after reading this is, there is no IT company appearing in this list. This led to so many questions in my mind.
- Is IT industry HR policies are not in par with other industries?
- The common perception is, IT Company’s talent management is of global standard, is that not true?
- IT service companies, to my knowledge at least, are best known for its service to customers and this industry is highly influenced by western culture in terms of service.
- Innovation: - I have a big question mark on this as well. Some companies have really innovative products and business models.
My intention is not really questioning the survey and its credibility; rather I am looking at software industry and trying to answer these questions to my self.
First thing comes to my mind is, is software industry is forgetting the common and basic rules of business? I can claim, for sure not. You can’t be in business without following the basic rules of the game.
So, next question mark I have is on HR. I personally feel, we, as an industry, needs to improve in this field. We need to be more innovative in terms of talent management, building the common feeling of team. Given the industry we are in to, what ever we have done in this area is very less. We all need better working place, better balance between work and life.
And, more importantly, we need to build the culture of innovation within the company. Apple and Google are true example of how innovation can be taken in to new height. Have you seen a screw fitted in to an iPod?
I can go on listing the things, which I feel we are missing. But, I would like to hear from you all. I would like to see a discussion on this.
Ideas? Suggestions? Feedback? Inputs?
Sunday, January 27, 2008
Kingfisher+Deccan : How much sense the merger makes?
Recently Kingfisher acquired Deccan Aviation’s majority stake. Both are like Chalk and Cheese, with different operating philosophies and different target segments. What, then, is the rationale behind their merger? Why did this happen after all?
The two airlines have different business models and cater to totally different passenger segments. Air Deccan, after it’s arrival in 2003 has rewrote the Indian aviation industry. With low cost operating model, Air Deccan bought the prices down and thus allowed Indian middle class and business travelers to afford the prices. Result: domestic air travel really took off. However Deccan is still bleeding in terms of revenue.
First and obvious outcome of this merger is the consolidation in the sector. The reason is, weaker players pay more attention to cash generation than profitability and that brings down the financial health of the industry. So, this merger will help industry in consolidation.
Other compelling reason behind the merger is the potential for huge savings from cost synergies, route rationalization and bulk order deals. A close look at the two airlines reveals that except the business model there is no fundamental difference between two airlines. Sharing parking lots, maintenance, flight operations, cabin crew, pilots and ground staff really will save a lot of cost. Besides marketing network created by Deccan can be used by Kingfisher and visa versa.
Also, with this merger Kingfisher will get license to operate international sector. Due to 5 years ban, Indian operators are not allowed to enter international sector for 5 years of their operation. Since Air Deccan is operating since last almost fives years, getting the international license will not be an issue for Kingfisher.
Tough Air Deccan is at the lower end of the spectrum with lost cost service and Kingfisher is operating in service and business sector. But merger is promised to maintain separate identities thus serving entire spectrum of the industry. With international sector getting added up, it will only help in revenue generation. So, merged entity will serve low cost sector, service sector and international sector, thus becoming one preferred carrier for all needs.
Years ago, Mr. Gopinath changed the rules of the Indian aviation industry and rudely woke up the established players with his innovative pricing policies. Following this merger, Indian aviation industry will be consolidated with three players, Indian-Air India, Kingfisher and Jet-Jet Light.
The bottom line is, Mr Mallya’s gambit may result in a win-win situation. And also, good for passengers.
After all we want good service and also want to save money when we fly, isn’t?
The two airlines have different business models and cater to totally different passenger segments. Air Deccan, after it’s arrival in 2003 has rewrote the Indian aviation industry. With low cost operating model, Air Deccan bought the prices down and thus allowed Indian middle class and business travelers to afford the prices. Result: domestic air travel really took off. However Deccan is still bleeding in terms of revenue.
First and obvious outcome of this merger is the consolidation in the sector. The reason is, weaker players pay more attention to cash generation than profitability and that brings down the financial health of the industry. So, this merger will help industry in consolidation.
Other compelling reason behind the merger is the potential for huge savings from cost synergies, route rationalization and bulk order deals. A close look at the two airlines reveals that except the business model there is no fundamental difference between two airlines. Sharing parking lots, maintenance, flight operations, cabin crew, pilots and ground staff really will save a lot of cost. Besides marketing network created by Deccan can be used by Kingfisher and visa versa.
Also, with this merger Kingfisher will get license to operate international sector. Due to 5 years ban, Indian operators are not allowed to enter international sector for 5 years of their operation. Since Air Deccan is operating since last almost fives years, getting the international license will not be an issue for Kingfisher.
Tough Air Deccan is at the lower end of the spectrum with lost cost service and Kingfisher is operating in service and business sector. But merger is promised to maintain separate identities thus serving entire spectrum of the industry. With international sector getting added up, it will only help in revenue generation. So, merged entity will serve low cost sector, service sector and international sector, thus becoming one preferred carrier for all needs.
Years ago, Mr. Gopinath changed the rules of the Indian aviation industry and rudely woke up the established players with his innovative pricing policies. Following this merger, Indian aviation industry will be consolidated with three players, Indian-Air India, Kingfisher and Jet-Jet Light.
The bottom line is, Mr Mallya’s gambit may result in a win-win situation. And also, good for passengers.
After all we want good service and also want to save money when we fly, isn’t?
Sunday, January 20, 2008
Employee Polls
Did you ever wonder why these employee polls are being conducted? Did you fell these are waiste of time and money?
Jack Welch tries to answer these 'obvious' question in his column in Business Week.
Good Read!
http://www.businessweek.com/magazine/content/08_04/b4068090140030.htm?chan=magazine+channel_opinion
Jack Welch tries to answer these 'obvious' question in his column in Business Week.
Good Read!
http://www.businessweek.com/magazine/content/08_04/b4068090140030.htm?chan=magazine+channel_opinion
Sunday, January 13, 2008
Power of Strategy- ITC's Bingo Story.
ITCs entry into wafers market with Bingo chips is an excellent case study of how to enter in to already overcrowded market and be successful with right strategy.
A year ago, ITC Foods was looking at new business segments to expand its product portfolio. The packaged snacks category was growing at approximately 25-30 per cent every year. But it had only one national player — PepsiCo’s Frito-Lay. Ten months after it entered the category with its wafer snack brand, Bingo, ITC’s foray into the Rs 1,800-crore branded snack market has fetched the company a 16 per cent market share across the country.
Bingo’s success story is about how a combination of leveraging synergies, building on consumer insights and high decibel advertising can win the game. There were many advantages for ITC to enter this segment. The company could leverage its existing distribution network and also source from farmers easily, as its earlier foray into categories like atta and biscuits had already given it access to the supply chain.
Once this decision was made, a cross-functional team of eight individuals were sent across the country to research the snacking habits of the Indian consumer. After travelling to 14 cities and speaking to more than 1,000 people, the team came back with an insight that Indian consumers were looking for novelty and excitement in existing snacks.
The team found that while vada pavs and samosas still sell, vada pav with cheese and paneer-filled samosas, or for that matter, tomato-flavored khakra were the ones that excited the new and more demanding Indian consumer. Based on this information, the company decided to look at chips with innovative flavors.
For the recipes, the company went to the chefs in its hotels. The chefs came back with 16 flavors with twists like bindaas masti chaas, chatkila nimbu achar and tandoori paneer tikka-flavoured potato chips, chilli and tomato-flavored mad angles — inspired by khakras — and other snacks. The company decided that youngsters in the age group of 16-30 are the most experimental and hence they would be the primary target audience.
But there was another challenge. Advertising in the category was extremely crowded. Every week, two-three new brands (many of them, local) are launched and more often than not, they are targetted at the youth.
ITC also ensured that it reached its audience through every possible medium. It first created a website www.bingeonbingo.com with offers, online games, downloads and even mobile games. The site was advertised with banners on websites such as Yahoo!, Rediff and Sify.
On television, the company booked 10 to 15 spots per channel per day on youth channels such as MTV and Star World, mass Hindi channels like Zee and Star TV, and news channels. It also had around 20 spots on a variety of radio channels and advertised in most leading national dailies. In the top-30 cities, over 1,000 outdoor hoardings advertised the product.
But, analysts believe the Bingo story is more about well-leveraged distribution. The company distributed more than 4 lakh large racks, to display the brand at all points of sale. The racks created so much impact that even competitors like market leader Frito-Lay’s introduced its own version of wafer racks. After all in India, joh dikhta hai, wahee biktha hai,”.
It is all about offering a differentiated product or service, which will clinch the market share. ITC has been there and have done it!.
A year ago, ITC Foods was looking at new business segments to expand its product portfolio. The packaged snacks category was growing at approximately 25-30 per cent every year. But it had only one national player — PepsiCo’s Frito-Lay. Ten months after it entered the category with its wafer snack brand, Bingo, ITC’s foray into the Rs 1,800-crore branded snack market has fetched the company a 16 per cent market share across the country.
Bingo’s success story is about how a combination of leveraging synergies, building on consumer insights and high decibel advertising can win the game. There were many advantages for ITC to enter this segment. The company could leverage its existing distribution network and also source from farmers easily, as its earlier foray into categories like atta and biscuits had already given it access to the supply chain.
Once this decision was made, a cross-functional team of eight individuals were sent across the country to research the snacking habits of the Indian consumer. After travelling to 14 cities and speaking to more than 1,000 people, the team came back with an insight that Indian consumers were looking for novelty and excitement in existing snacks.
The team found that while vada pavs and samosas still sell, vada pav with cheese and paneer-filled samosas, or for that matter, tomato-flavored khakra were the ones that excited the new and more demanding Indian consumer. Based on this information, the company decided to look at chips with innovative flavors.
For the recipes, the company went to the chefs in its hotels. The chefs came back with 16 flavors with twists like bindaas masti chaas, chatkila nimbu achar and tandoori paneer tikka-flavoured potato chips, chilli and tomato-flavored mad angles — inspired by khakras — and other snacks. The company decided that youngsters in the age group of 16-30 are the most experimental and hence they would be the primary target audience.
But there was another challenge. Advertising in the category was extremely crowded. Every week, two-three new brands (many of them, local) are launched and more often than not, they are targetted at the youth.
ITC also ensured that it reached its audience through every possible medium. It first created a website www.bingeonbingo.com with offers, online games, downloads and even mobile games. The site was advertised with banners on websites such as Yahoo!, Rediff and Sify.
On television, the company booked 10 to 15 spots per channel per day on youth channels such as MTV and Star World, mass Hindi channels like Zee and Star TV, and news channels. It also had around 20 spots on a variety of radio channels and advertised in most leading national dailies. In the top-30 cities, over 1,000 outdoor hoardings advertised the product.
But, analysts believe the Bingo story is more about well-leveraged distribution. The company distributed more than 4 lakh large racks, to display the brand at all points of sale. The racks created so much impact that even competitors like market leader Frito-Lay’s introduced its own version of wafer racks. After all in India, joh dikhta hai, wahee biktha hai,”.
It is all about offering a differentiated product or service, which will clinch the market share. ITC has been there and have done it!.
Tuesday, January 01, 2008
New Year Resolutions for 2008.
- Get more profitable revenue for MatrixOne Services group.
- Be regular in blogging/writing articles.
- Continue hitting gym! (With same intensity that I have currently)
- Read more and think strategy!
Sunday, December 30, 2007
It really happened in India!- A Book review.
I completed this book, almost in single sitting. And found this really good book. There is a ton of new things in the book, which we can adopt in day-to-day professional life.
Mainly, Kishore talks about how to dream big and convert that dream in to reality. This is book about step by step process of building a business group, starting from a humble beginning. Starting with Pantaloon retain, how Kishore build the big business empire ranging from apparel, home solutions, grocery and micro-retail (Focusing on retail in rural India), is really an astonishing story.
There are few new things which captured my mind. The idea of empowering managers of all level, there by building an organization which is known for making decisions and owing that. Like painting employee’s house on the eve of Diwali (Best known HR policy!). Coming up with new business structure every three years in order to be in business, up-to-date.
Innovative thinking or ‘re-writing’ the rules keeping the basic values intact is one thing which is being referred through out the book. Kishore writes, “An Organization dominated by systems, analyses and processes, will only be good at repeatedly performing one particular task very well. But it wouldn’t be able to innovate or create something really new”.
What stuck me is Kishore’s focus on business growth. He says, ‘if you focus more on operation, there is a limit to an extent you can improve the efficiency, rather then that companies need to focus on growth, operational efficiency comes by itself by following well defined processes”.
This book is all about having a dream and working to make it come true. It is a dream of middle class man, with all possible limitations one could have in life. Paulo Coelho writes in The Alchemist, ‘And, when you want something, the entire universe conspires in helping you to achieve it’.
It is all about that, having a dream and following that! In summary, it is a must read.
Finally; wishing you all a happy and prosperous New Year 2008. May your all dreams come true in this New Year.
Mainly, Kishore talks about how to dream big and convert that dream in to reality. This is book about step by step process of building a business group, starting from a humble beginning. Starting with Pantaloon retain, how Kishore build the big business empire ranging from apparel, home solutions, grocery and micro-retail (Focusing on retail in rural India), is really an astonishing story.
There are few new things which captured my mind. The idea of empowering managers of all level, there by building an organization which is known for making decisions and owing that. Like painting employee’s house on the eve of Diwali (Best known HR policy!). Coming up with new business structure every three years in order to be in business, up-to-date.
Innovative thinking or ‘re-writing’ the rules keeping the basic values intact is one thing which is being referred through out the book. Kishore writes, “An Organization dominated by systems, analyses and processes, will only be good at repeatedly performing one particular task very well. But it wouldn’t be able to innovate or create something really new”.
What stuck me is Kishore’s focus on business growth. He says, ‘if you focus more on operation, there is a limit to an extent you can improve the efficiency, rather then that companies need to focus on growth, operational efficiency comes by itself by following well defined processes”.
This book is all about having a dream and working to make it come true. It is a dream of middle class man, with all possible limitations one could have in life. Paulo Coelho writes in The Alchemist, ‘And, when you want something, the entire universe conspires in helping you to achieve it’.
It is all about that, having a dream and following that! In summary, it is a must read.
Finally; wishing you all a happy and prosperous New Year 2008. May your all dreams come true in this New Year.
Sunday, December 16, 2007
It happened in India!
‘It happened in India’ is the autobiography of Kishore Biyani, founder and CEO of Future Group. Future Group has retail brands like Pantaloon, Central, Big Bazaar, Food Bazaar, and Pyramid.
Recently I purchased this book and have started reading it. It is too early to write a review on this book yet, I need to turn more pages to do that. But, this post is all about my first thoughts about Future Group and first generation entrepreneur, Kishore Biyani.
Mr Biyani has understood the Indian buyer’s mindset very well. And more ever, he is more of a calculated risk taker. This book talks about his strategy in all segment of retail business in India. He talks about ‘Sabase sasta din’ concept in Big Bazaar and how it created the word of mouth publicity among the people. This book can be liked because of such innovative ideas.
Being first generation entrepreneur, it is not easy to set up such a large business. We can see very few people who have been there and have done it. Sunil Mittal from Bharati group is another person who has done that. Mr. Biyani’s great achievements are in dreaming about big things and execute them up to greatest accuracy. In this way, it seems to be an inspirational reading.
Though, his ideas seems to be inspired from American retain business, like Home Depot (His recent venture of Home Town has similar business plan), Central (Similar business plan of Target) and Big Bazaar (Similar to WalMart), but these are truly ‘Indianized’ to server Indian consumer.
Any way, watch is space for more posts related to this book if I find it truly good. I am sure he has some thing to offer!
Recently I purchased this book and have started reading it. It is too early to write a review on this book yet, I need to turn more pages to do that. But, this post is all about my first thoughts about Future Group and first generation entrepreneur, Kishore Biyani.
Mr Biyani has understood the Indian buyer’s mindset very well. And more ever, he is more of a calculated risk taker. This book talks about his strategy in all segment of retail business in India. He talks about ‘Sabase sasta din’ concept in Big Bazaar and how it created the word of mouth publicity among the people. This book can be liked because of such innovative ideas.
Being first generation entrepreneur, it is not easy to set up such a large business. We can see very few people who have been there and have done it. Sunil Mittal from Bharati group is another person who has done that. Mr. Biyani’s great achievements are in dreaming about big things and execute them up to greatest accuracy. In this way, it seems to be an inspirational reading.
Though, his ideas seems to be inspired from American retain business, like Home Depot (His recent venture of Home Town has similar business plan), Central (Similar business plan of Target) and Big Bazaar (Similar to WalMart), but these are truly ‘Indianized’ to server Indian consumer.
Any way, watch is space for more posts related to this book if I find it truly good. I am sure he has some thing to offer!
Saturday, December 15, 2007
Sunday, December 09, 2007
The Five Messages leaders should manage
I was reading a review in ‘Harvard Business Review’ this weekend, titled ‘The Five Messages leaders should manage’, by John Hamm.
This is all about functioning of CEO and what they need to really focus on. Author says, CEOs need to focus on how to pass the correct message through out the organization, it’s very vital for company’s success. He compares the situation with Emergency Medical System, where all the team members seem to be on the same page, all the times. The doctors, the paramedics, the nurses, all of them share the same thought when comes to saving a life. The same situation should be there in the organization. Otherwise, the vision and dream of a company will remain in the boardrooms only. Author says, CEOs should not assume that all his top management shares the same thought that leads to disaster. CEO should inspire the organization to take up responsibilities for creating better future.
1) Organization Structure and Hierarchy.
Organization restructure should happen to align with market competition and that should always aim to take up the competition. In this competitive market place, aligning the company structure is the need of hour and CEOs needs to do a better job on communicating the organization changes up to the bottom level. Otherwise it just creates confusion amongst employees about what is the future of the company and who is what in new organization. Communication should be so effective that there should be no room for confusion or fear.Author gives example of HP and its then boss. He says, when reorganization happened, everyone was so confused about their future that the actual work stopped for 12 weeks, which is one full quarter! Instead, he says, with in 48 hours of announcement of restructure, CEO should have a company wide meeting and a web cast as why this is been done. To keep the confusion to a bottom level, CEO should have involved everyone in the structure plan.
2) Financial Results:
Results are another powerful concept that left unmanaged, poses a risk to a company’s long term health. When a CEO tells, focus on our results, senior managers often interpret that as meaning ‘Do whatever it takes to meet investor expectations’. By loosing the sight of the connection between employee behavior and results and failing to take advantage of existing opportunities, thus leaders miss out building a long term value for their firms.Results should be used as diagnostic tools in the service of improving future execution.
3) The Leader’s sense of his or her job.
Surrounded by people who seek their feedback and approval, some fall in to the trap of thinking that their responsibility is to be the person who has all the answers. The ‘answer man’ falsely believes himself to be the final arbiter of conflicts, decisions and dilemmas. This puts him in to a very lonely and isolated position.Effective leaders should understand their role is to get answers from others. Everyone has answers, ask questions, especially when some thing goes wrong.
4) Time Management:
Every executive feels that time is in short supply. CEO must communicate to the company that resource of time must not be squeezed for all it is worth but instead must be strategically utilized. Time is fixed to choose wisely within constraints.
5) Corporate Culture:
Culture is not created by declarations; it derives from expectations focused on winning. Culture that encourages performance if you hire right people and implement processes that will allow the company to win. CEOs who fail to communicate the vision and expectations very clearly, produce meaningless culture.
I feel these are important points to be shared by a leader, after all, we all follow a CEO or a leader while we are with corporate hat.
Leaders should sell dreams and show path to execute this.
There is no other way out there!
This is all about functioning of CEO and what they need to really focus on. Author says, CEOs need to focus on how to pass the correct message through out the organization, it’s very vital for company’s success. He compares the situation with Emergency Medical System, where all the team members seem to be on the same page, all the times. The doctors, the paramedics, the nurses, all of them share the same thought when comes to saving a life. The same situation should be there in the organization. Otherwise, the vision and dream of a company will remain in the boardrooms only. Author says, CEOs should not assume that all his top management shares the same thought that leads to disaster. CEO should inspire the organization to take up responsibilities for creating better future.
1) Organization Structure and Hierarchy.
Organization restructure should happen to align with market competition and that should always aim to take up the competition. In this competitive market place, aligning the company structure is the need of hour and CEOs needs to do a better job on communicating the organization changes up to the bottom level. Otherwise it just creates confusion amongst employees about what is the future of the company and who is what in new organization. Communication should be so effective that there should be no room for confusion or fear.Author gives example of HP and its then boss. He says, when reorganization happened, everyone was so confused about their future that the actual work stopped for 12 weeks, which is one full quarter! Instead, he says, with in 48 hours of announcement of restructure, CEO should have a company wide meeting and a web cast as why this is been done. To keep the confusion to a bottom level, CEO should have involved everyone in the structure plan.
2) Financial Results:
Results are another powerful concept that left unmanaged, poses a risk to a company’s long term health. When a CEO tells, focus on our results, senior managers often interpret that as meaning ‘Do whatever it takes to meet investor expectations’. By loosing the sight of the connection between employee behavior and results and failing to take advantage of existing opportunities, thus leaders miss out building a long term value for their firms.Results should be used as diagnostic tools in the service of improving future execution.
3) The Leader’s sense of his or her job.
Surrounded by people who seek their feedback and approval, some fall in to the trap of thinking that their responsibility is to be the person who has all the answers. The ‘answer man’ falsely believes himself to be the final arbiter of conflicts, decisions and dilemmas. This puts him in to a very lonely and isolated position.Effective leaders should understand their role is to get answers from others. Everyone has answers, ask questions, especially when some thing goes wrong.
4) Time Management:
Every executive feels that time is in short supply. CEO must communicate to the company that resource of time must not be squeezed for all it is worth but instead must be strategically utilized. Time is fixed to choose wisely within constraints.
5) Corporate Culture:
Culture is not created by declarations; it derives from expectations focused on winning. Culture that encourages performance if you hire right people and implement processes that will allow the company to win. CEOs who fail to communicate the vision and expectations very clearly, produce meaningless culture.
I feel these are important points to be shared by a leader, after all, we all follow a CEO or a leader while we are with corporate hat.
Leaders should sell dreams and show path to execute this.
There is no other way out there!
Sunday, November 25, 2007
Need for CGO (Chief Globalization Officer)!
The world is getting flatter and globalization has become a necessary thing for the expansion. If we look at any company, from Auto Major GM to Starbucks to WalMart, every one has global plans. And they want to expand globally.
The world is getting truly flatter and each company now required to work with different countries and people with different culture. Take example of Corus deal of Tata Steal or latest joint venture of Mahindra with Nissan motor company, globalization is the mantra for each organization. And each company needs to work with a global partner. And it is equally important to get this thing right; otherwise it might collapse at any point of time.
Even competition is getting global. We have a level ground now and competition is getting really global. Tata Motor is competing with GM and Ford to acquire Fiat and Mahindra tractors are competing with John Deer in US in farm equipment segment.
With this kind of global competition and global alliance, it is required to have a CGO, Chief Globalization Officer, who can really spearhead the idea of globalization, the business plan associated with global expansion and plan for the exact execution of it.
There are a lot of challenges in expanding globally, one need to get the supporting global level processes; also it is equally important to have global level quality. And this kind of preparation needs a lot of planning and careful execution. One needs to really build a global scalable business model.
Global Inc can get this right? Or do they need to have a CGO?
The world is getting truly flatter and each company now required to work with different countries and people with different culture. Take example of Corus deal of Tata Steal or latest joint venture of Mahindra with Nissan motor company, globalization is the mantra for each organization. And each company needs to work with a global partner. And it is equally important to get this thing right; otherwise it might collapse at any point of time.
Even competition is getting global. We have a level ground now and competition is getting really global. Tata Motor is competing with GM and Ford to acquire Fiat and Mahindra tractors are competing with John Deer in US in farm equipment segment.
With this kind of global competition and global alliance, it is required to have a CGO, Chief Globalization Officer, who can really spearhead the idea of globalization, the business plan associated with global expansion and plan for the exact execution of it.
There are a lot of challenges in expanding globally, one need to get the supporting global level processes; also it is equally important to have global level quality. And this kind of preparation needs a lot of planning and careful execution. One needs to really build a global scalable business model.
Global Inc can get this right? Or do they need to have a CGO?
Monday, November 19, 2007
Private Equity Funds and CEOs
I was reading an article in Business Week about the pressure private equity funds put now a days on CEOs (Of companies they manage). Those CEOs are under tremendous pressure to perform, financially.
This article is cover up of Citi Financial CEO quitting last week due to bad performance during recent couple of quarters, where Citi had to write off heavy funds because of American mortgage slowdown.
It might be true, perhaps. USA business is now days heavily loaded with equity fund managed companies. In India, situation is bit different, however scene is changing fast and many equity funds are coming up.
Question I have is, is it fare to pressurize to deliver more? Or it is all fare? One view point is, equity funds are also under pressure to perform and they need quick bucks as well.
Or CEOs should have free hand?
I know question is not simple, but I am still searching for answer.
This article is cover up of Citi Financial CEO quitting last week due to bad performance during recent couple of quarters, where Citi had to write off heavy funds because of American mortgage slowdown.
It might be true, perhaps. USA business is now days heavily loaded with equity fund managed companies. In India, situation is bit different, however scene is changing fast and many equity funds are coming up.
Question I have is, is it fare to pressurize to deliver more? Or it is all fare? One view point is, equity funds are also under pressure to perform and they need quick bucks as well.
Or CEOs should have free hand?
I know question is not simple, but I am still searching for answer.
Sunday, October 28, 2007
American Sports Business
Currently I am in US on a business trip. Got a chance to be here on a weekend and watch the Baseball World Series (!!). That triggered off this post.
If we keep aside the sports part and look at business face of it; we will be surprised to see how American Capitalism is playing a major role in sports as well. Sports business has really matured in America, where all players deal through their professional agents for the contracts.
There are two parts of it, one is professional agents in sports and another is corporate world’s involvement in these sports.
In a way, it is good for players. Their agents can take care about money and team a player needs to play, leaving players to concentrate on the game. In this way, they need not worry about the contract details. An agent’s main aim is to sell the players in his portfolio for more money.
These agents also guide the players in terms of career, about the care they need to take about their fitness, the public image they need to build, the social service they need to do in order to stay afloat. This kind of advice will certainly help players to be in the game for longer time.
Mark McCormick is supposed to be founding father of this kind of sports business, where his consulting company guided players like Bon Borge, Martina Navratilova, Jimmy Conners etc.
Each ball club is managed by a professional management team, led by their CEO. His ultimate aim is to generate more revenue for the ball club. So, they will hire more good players with the idea that if players are good, team will advance to next stage of the game (Like Semi final, Final etc) and thus brining more people to watch, which is nothing but more revenue. Such times these ball clubs and CEOs are under pressure to perform, so does the coaches. Coaches needs to take the ball club in to newer heights, otherwise their jobs will be at stake.
The point what we need to note is, American sports runs as any other business. And we can see the American management effect; like being ruthless, expecting results and generating more revenue, in all sports.
Compare this to India; the Subhash Chandra’s ICL has some elements of it, but yet to see how this gets shaped up. But, this is certainly a good change, it is just a beginning.
It is any way better than having out-of-the-form players getting selected based on number of years of experience he/she has, or because of he/she belongs to particular state.
What do you say?
(Don’t take me wrong, I am not against any player, I don’t follow Cricket :-)
If we keep aside the sports part and look at business face of it; we will be surprised to see how American Capitalism is playing a major role in sports as well. Sports business has really matured in America, where all players deal through their professional agents for the contracts.
There are two parts of it, one is professional agents in sports and another is corporate world’s involvement in these sports.
In a way, it is good for players. Their agents can take care about money and team a player needs to play, leaving players to concentrate on the game. In this way, they need not worry about the contract details. An agent’s main aim is to sell the players in his portfolio for more money.
These agents also guide the players in terms of career, about the care they need to take about their fitness, the public image they need to build, the social service they need to do in order to stay afloat. This kind of advice will certainly help players to be in the game for longer time.
Mark McCormick is supposed to be founding father of this kind of sports business, where his consulting company guided players like Bon Borge, Martina Navratilova, Jimmy Conners etc.
Each ball club is managed by a professional management team, led by their CEO. His ultimate aim is to generate more revenue for the ball club. So, they will hire more good players with the idea that if players are good, team will advance to next stage of the game (Like Semi final, Final etc) and thus brining more people to watch, which is nothing but more revenue. Such times these ball clubs and CEOs are under pressure to perform, so does the coaches. Coaches needs to take the ball club in to newer heights, otherwise their jobs will be at stake.
The point what we need to note is, American sports runs as any other business. And we can see the American management effect; like being ruthless, expecting results and generating more revenue, in all sports.
Compare this to India; the Subhash Chandra’s ICL has some elements of it, but yet to see how this gets shaped up. But, this is certainly a good change, it is just a beginning.
It is any way better than having out-of-the-form players getting selected based on number of years of experience he/she has, or because of he/she belongs to particular state.
What do you say?
(Don’t take me wrong, I am not against any player, I don’t follow Cricket :-)
Sunday, October 21, 2007
The man who rewrote the supply chain concept-Michael Dell
I got a new Laptop, as my earlier IBM Lenovo got screwed up. The new one is sleek, Dell made, D630; boots and works faster!
This new one really made me to think about Dell Inc and the man behind its remarkable success, Michael Dell. Michael Dell came up with an innovating idea of selling directly to customers and thus redefining the supply chain concept. Its very hard business plan to reproduce and I guess this was Dell's USP when it started its business, in the area where there were established players like IBM, HP, and Compaq.
In 1994, Dell was a struggling second-tier PC maker. Like other PC makers, Dell ordered its components in advance and carried a large amount of component inventory. If its forecasts were wrong, Dell had major write-downs. Then Dell began to implement a new business model. Its operations had always featured a build-to-order process with direct sales to customers, but Dell took a series of ingenious steps to eliminate its inventories. The results were spectacular.
Over a four-year period, Dell's revenues grew from $2 billion to $16 billion, a 50 percent annual growth rate.
Profitability management, coordinating a company's day-to-day activities through careful forethought and great management, was at the core of Dell's transformation in this critical period. Dell created a tightly aligned business model that enabled it to manage away the need for its component inventories.
However, at the heart of Dell's profitability management was a seemingly impossible dilemma: the company had adopted a build-to-order system, yet it had to commit to purchase key components sixty days in advance.
Profitability, not inventory
The inventory in a channel is determined by the variance in supply and the variance in demand. Unless these variances are reduced, channel inventory can only be moved around, not eliminated. I think of this as the "waterbed effect." When you sit on a waterbed, it sinks in one spot and bulges in another. The water is redistributed but the amount stays the same.
Through its use of profitability management, Dell matched supply and demand on a daily, weekly, and monthly basis. It sharply reduced the variance, and the need for inventories simply disappeared.
In many companies, inventory substitutes for profitability management, tying up valuable capital and preventing the company from focusing on day-to-day business alignment. In most companies, managers face a choice between managing inventory and managing away the need for it.
This principle can be implemented to any industry, even to Software industry. We also deal with inventory, supply and demand.
By the way, are we managing profitability or inventory in our group? If the answer is profitability, we can have our cake and eat it too! If not, how we can improve?
This new one really made me to think about Dell Inc and the man behind its remarkable success, Michael Dell. Michael Dell came up with an innovating idea of selling directly to customers and thus redefining the supply chain concept. Its very hard business plan to reproduce and I guess this was Dell's USP when it started its business, in the area where there were established players like IBM, HP, and Compaq.
In 1994, Dell was a struggling second-tier PC maker. Like other PC makers, Dell ordered its components in advance and carried a large amount of component inventory. If its forecasts were wrong, Dell had major write-downs. Then Dell began to implement a new business model. Its operations had always featured a build-to-order process with direct sales to customers, but Dell took a series of ingenious steps to eliminate its inventories. The results were spectacular.
Over a four-year period, Dell's revenues grew from $2 billion to $16 billion, a 50 percent annual growth rate.
Profitability management, coordinating a company's day-to-day activities through careful forethought and great management, was at the core of Dell's transformation in this critical period. Dell created a tightly aligned business model that enabled it to manage away the need for its component inventories.
However, at the heart of Dell's profitability management was a seemingly impossible dilemma: the company had adopted a build-to-order system, yet it had to commit to purchase key components sixty days in advance.
Profitability, not inventory
The inventory in a channel is determined by the variance in supply and the variance in demand. Unless these variances are reduced, channel inventory can only be moved around, not eliminated. I think of this as the "waterbed effect." When you sit on a waterbed, it sinks in one spot and bulges in another. The water is redistributed but the amount stays the same.
Through its use of profitability management, Dell matched supply and demand on a daily, weekly, and monthly basis. It sharply reduced the variance, and the need for inventories simply disappeared.
In many companies, inventory substitutes for profitability management, tying up valuable capital and preventing the company from focusing on day-to-day business alignment. In most companies, managers face a choice between managing inventory and managing away the need for it.
This principle can be implemented to any industry, even to Software industry. We also deal with inventory, supply and demand.
By the way, are we managing profitability or inventory in our group? If the answer is profitability, we can have our cake and eat it too! If not, how we can improve?
Sunday, October 07, 2007
Fit To Be A Effective Leader
I am a firm believer of the fact that leaders should have a high energy level, which generally reflect how they interact with customers and employees.
Its vital to have a very positive body language.
I was reading an article about how keeping fit is important for leaders. This business week article gives some examples and concludes how it would help you to become a better communicator.
So, one needs to start hitting the treadmill
Its vital to have a very positive body language.
I was reading an article about how keeping fit is important for leaders. This business week article gives some examples and concludes how it would help you to become a better communicator.
So, one needs to start hitting the treadmill
Sunday, September 30, 2007
What makes an effective executive?
I was reading this article in ‘Harvard Business Review’. Here is the summary of this article.
To become an effective leader, one need not necessarily be a man with charisma. What made them all effective is that they followed the same eight phases.
1) They asked, “What needs to be done”.
This question, almost all the times will have more then one urgent task. Jack Welch came up with answer, every five years, “what are needs to be done, now” and each time he came up with different answer.
2) They asked, “What is right for enterprise”.
Asking this question while making important decisions do not some times guarantee the best results, but not asking this question always leads to bad decisions.
3) They developed action plans.
Executives are doers. Knowledge is of no use for executives unless it is been translated into deeds. But before jumping in to action, executive needs to plan his course of action. How he wants to execute, about desired results, problems, check-in points etc.In addition to an execution plan, this action plan should contain a system for checking the results. Typically two; one halfway through and other towards the end. Without an action plan executives becomes a prisoner of events.
4) They took responsibility for decisions.
5) They took responsibility for communicating.
6) They were focused on opportunities rather then on problems.
Problems should be taken care of off course, but taking action on problems will not create results, it prevents the damage, where as focusing on opportunities produce results. Executives should put their best people on opportunities then on problems.
7) They ran productive meetings.
Decide before meeting, what kind of meeting this would be and set a fixed agenda. Its equally important to take MOM and distribute the action items to all present in the meeting. Also, it’s important to follow-up on these action items.
8) They thought and said, “we’ rather then “I”.
Effective executives differ widely in their personalities, strengths, weaknesses, values and beliefs. All they have in common is, they will get the things done. Effectiveness is a discipline and like any other discipline, effectiveness can be learned and must be learned.
I think we all have a lesson to learn from this article.
To become an effective leader, one need not necessarily be a man with charisma. What made them all effective is that they followed the same eight phases.
1) They asked, “What needs to be done”.
This question, almost all the times will have more then one urgent task. Jack Welch came up with answer, every five years, “what are needs to be done, now” and each time he came up with different answer.
2) They asked, “What is right for enterprise”.
Asking this question while making important decisions do not some times guarantee the best results, but not asking this question always leads to bad decisions.
3) They developed action plans.
Executives are doers. Knowledge is of no use for executives unless it is been translated into deeds. But before jumping in to action, executive needs to plan his course of action. How he wants to execute, about desired results, problems, check-in points etc.In addition to an execution plan, this action plan should contain a system for checking the results. Typically two; one halfway through and other towards the end. Without an action plan executives becomes a prisoner of events.
4) They took responsibility for decisions.
5) They took responsibility for communicating.
6) They were focused on opportunities rather then on problems.
Problems should be taken care of off course, but taking action on problems will not create results, it prevents the damage, where as focusing on opportunities produce results. Executives should put their best people on opportunities then on problems.
7) They ran productive meetings.
Decide before meeting, what kind of meeting this would be and set a fixed agenda. Its equally important to take MOM and distribute the action items to all present in the meeting. Also, it’s important to follow-up on these action items.
8) They thought and said, “we’ rather then “I”.
Effective executives differ widely in their personalities, strengths, weaknesses, values and beliefs. All they have in common is, they will get the things done. Effectiveness is a discipline and like any other discipline, effectiveness can be learned and must be learned.
I think we all have a lesson to learn from this article.
Sunday, September 16, 2007
98.3 FM Radio Mirchi: What is the business Plan?
Yes, we do keep hearing Radio FM during some part of our day, may be it is during morning hours or during drive to office or back home. Though we enjoy the songs and RJ’s presentation, the business model which works behind the scenes is kind of complex.
It is untold truth that every business needs to be profitable to exist and it is fundamental element. And where does Radio Mirchi makes it money?
Daily Ads: The first revenue model comes to our mind are the advertisements being broadcasted during entire day. It does get revenue, but is that revenue a business can relay on? Mind you, the number of ads being broadcasted per day more or less can’t be increased, so this revenue is fixed. It can’t really make your top line grow.
In order to be competitive and to make top line grow, each FM needs to engage itself in backend revenue generator models. Look at the events being promoted by Radio Mirchi. They typically get involved with some firm and organize events through out a particular city or area, there by generating revenue from it. The associated firm gets a great marketing boost.
In addition to this, FM radios are being hooked up by marketing firms to survey a particular segment of people. With out our notice we kind of share our information about what we like and what are our shopping habits. This kind of marketing data has a huge value. Off course we do share our cell phone the moment we call.
In addition to this, companies select FM radios for promoting their products or service. Like ‘tikat Thursday’ or ‘Blockbuster Budhawar’, where companies give free vouchers and try promoting the services, needless to say, Radio Mirchi makes money in addition to Vouchers it sends to winners.
In US, the Satelight radio got a huge success, because of the unique business model they have in place. Perhaps it is slightly complex by the way in which it operates and generates money, but it is for sure a money spinner for investors.
We are kind of used to AIR broadcasting where, every thing was decided by the broadcasting ministry. And AIR, typically, don’t bother about the fact that it has to generate money. But, new FM radios needs to have a growing business and this market segment will only get interesting going forward.
‘Mirchi sunnewale always khush!’ :)
It is untold truth that every business needs to be profitable to exist and it is fundamental element. And where does Radio Mirchi makes it money?
Daily Ads: The first revenue model comes to our mind are the advertisements being broadcasted during entire day. It does get revenue, but is that revenue a business can relay on? Mind you, the number of ads being broadcasted per day more or less can’t be increased, so this revenue is fixed. It can’t really make your top line grow.
In order to be competitive and to make top line grow, each FM needs to engage itself in backend revenue generator models. Look at the events being promoted by Radio Mirchi. They typically get involved with some firm and organize events through out a particular city or area, there by generating revenue from it. The associated firm gets a great marketing boost.
In addition to this, FM radios are being hooked up by marketing firms to survey a particular segment of people. With out our notice we kind of share our information about what we like and what are our shopping habits. This kind of marketing data has a huge value. Off course we do share our cell phone the moment we call.
In addition to this, companies select FM radios for promoting their products or service. Like ‘tikat Thursday’ or ‘Blockbuster Budhawar’, where companies give free vouchers and try promoting the services, needless to say, Radio Mirchi makes money in addition to Vouchers it sends to winners.
In US, the Satelight radio got a huge success, because of the unique business model they have in place. Perhaps it is slightly complex by the way in which it operates and generates money, but it is for sure a money spinner for investors.
We are kind of used to AIR broadcasting where, every thing was decided by the broadcasting ministry. And AIR, typically, don’t bother about the fact that it has to generate money. But, new FM radios needs to have a growing business and this market segment will only get interesting going forward.
‘Mirchi sunnewale always khush!’ :)
Sunday, September 09, 2007
Check De India!
I watched Check De India, this weekend. And found many management lessons in it. It’s an amazing movie made keeping sports business in mind.
Team Comes First! :- It stresses the importance of playing as a team. In fact, ¾ th of movie Kabir Khan tries to build a team, which mentally thinks and acts in one direction. And more ever, he keeps on telling his players to ‘pass’ the ball, instead of glorifying themselves by scoring more goals. One’s person ego or personal pride should not come in between, they were for common purpose of winning the championship and they need to make sure they achieve that.
This is an amazing lesson we can learn from this movie. We need to think about team first, individual later. This is the reason of success of any team. This is true with sports or with any business team.
Motivation: Kabir kept on motivating his team, even they lost a game. He had strong faith on his team that they will deliver and up to his expectation they did deliver.
It is foolish to assume that each team member is equally capable of delivering the things. But, keeping everyone’s contribution to peak level is what coaches do. They know in which area each player is good at and they make moves accordingly.
Strategy: The main job of a coach is to make strategic moves, keeping his team in mind and Kabir exactly did that. Be it breaking ‘one-to-one’ mapping of Koreans or thinking about the final penalty push to be a straight one and signaling his team member to prepare for that, he made good strategic moves.
Build the dream: Kabir built a dream in team members that we will win the world cup, this is all coaches and business leaders will have to do. It is ultimately up to players to perform and make things work. Coaches can’t play themselves and win; it is players who do that. Building the dream and making sure each player has the same passion and dedication is extremely important, Kabir did exactly that.
Attention to details: Coaches and business leaders need to keep attention to the details. In this movie, coach kept track of even a small thing that might distract the team thinking and tried to minimize such things. Like, having one bad player in the team, who wants to disturb the rhythm. He took some tough calls, but it was for team again. There was no personal ego involved in it.
As a movie, there might be some negatives points; and I am not here to discuss that. But the theme is about the team. Why team comes first and why team needs contribution from each one to be a successful. It is about setting a goal, and taking your team towards that, even though people call you ‘Tughalak’. This movie certainly gives message to corporate world.
Check de India!
Team Comes First! :- It stresses the importance of playing as a team. In fact, ¾ th of movie Kabir Khan tries to build a team, which mentally thinks and acts in one direction. And more ever, he keeps on telling his players to ‘pass’ the ball, instead of glorifying themselves by scoring more goals. One’s person ego or personal pride should not come in between, they were for common purpose of winning the championship and they need to make sure they achieve that.
This is an amazing lesson we can learn from this movie. We need to think about team first, individual later. This is the reason of success of any team. This is true with sports or with any business team.
Motivation: Kabir kept on motivating his team, even they lost a game. He had strong faith on his team that they will deliver and up to his expectation they did deliver.
It is foolish to assume that each team member is equally capable of delivering the things. But, keeping everyone’s contribution to peak level is what coaches do. They know in which area each player is good at and they make moves accordingly.
Strategy: The main job of a coach is to make strategic moves, keeping his team in mind and Kabir exactly did that. Be it breaking ‘one-to-one’ mapping of Koreans or thinking about the final penalty push to be a straight one and signaling his team member to prepare for that, he made good strategic moves.
Build the dream: Kabir built a dream in team members that we will win the world cup, this is all coaches and business leaders will have to do. It is ultimately up to players to perform and make things work. Coaches can’t play themselves and win; it is players who do that. Building the dream and making sure each player has the same passion and dedication is extremely important, Kabir did exactly that.
Attention to details: Coaches and business leaders need to keep attention to the details. In this movie, coach kept track of even a small thing that might distract the team thinking and tried to minimize such things. Like, having one bad player in the team, who wants to disturb the rhythm. He took some tough calls, but it was for team again. There was no personal ego involved in it.
As a movie, there might be some negatives points; and I am not here to discuss that. But the theme is about the team. Why team comes first and why team needs contribution from each one to be a successful. It is about setting a goal, and taking your team towards that, even though people call you ‘Tughalak’. This movie certainly gives message to corporate world.
Check de India!
Sunday, September 02, 2007
Aligning to client’s culture
I was reading a panel discussion abut BPO and outsourcing. The participants have stressed on the importance of aligning to the vendor and their culture for success of an outsourced project.
I have been working in this kind of industry since almost 6. Obviously I prefer and encourage offshoring with my clients, but not many clients have understood the importance of aligning with vendor’s culture. During one of the project, I remember our CEO told us, align to their culture, and then you can expect better results.
This is most forgotten part of such projects. The responsibility on both parties, vendor needs to understand the culture of client and client needs to understand vendors. I found some general outings and discussion about sports or general issues tend to break this barrier. One should not feel, the technical part is one and all. Off course it is important, but alignment helps to cover a long road.
The way we normally handle clients is that we restrict them to project related discussions and technical discussion. This is important to discuss these with client. But, my whole point is that we should not restrict only to this. Building the relationship is equally important.
After all, we all would like to be treated well and respected at our work by clients, is that right?
I have been working in this kind of industry since almost 6. Obviously I prefer and encourage offshoring with my clients, but not many clients have understood the importance of aligning with vendor’s culture. During one of the project, I remember our CEO told us, align to their culture, and then you can expect better results.
This is most forgotten part of such projects. The responsibility on both parties, vendor needs to understand the culture of client and client needs to understand vendors. I found some general outings and discussion about sports or general issues tend to break this barrier. One should not feel, the technical part is one and all. Off course it is important, but alignment helps to cover a long road.
The way we normally handle clients is that we restrict them to project related discussions and technical discussion. This is important to discuss these with client. But, my whole point is that we should not restrict only to this. Building the relationship is equally important.
After all, we all would like to be treated well and respected at our work by clients, is that right?
Sunday, August 26, 2007
India’s Retail Business Space
Over last couple of years, India is witnessing so many new comers in retain market segment. This space is already getting over crowded! Leaving apart other retain market segments like electronics, apparel etc, let’s look at vegetables and grocery retail in recent times.
India has been predominantly dominated by next door, ‘pops-and-mom’s store’, or next door ‘kirana dukan’. But, what we are witnessing in current time is a systematic retail business, in the form of Relience Fresh, More, Subhiksha, Spencer etc.
Historically, Indian consumer is cost sensitive and some retain players seems to have understood this. Unlike in US, where people can drive for an hour to get to a WalMart, Indian consumer tends to look around their home for grocery. Traditional cash-and-carry kirana shops provided this kind of facility so far.
Now, the current players have an uphill task in providing the goods at low cost, matching the Kirana Shop cost to be successful in business. The biggest challenge is the real estate. Retailers need to find a space, which is nearer to most of the consumers. And any space with-in city limits costs more in India. In addition to this, logistics is another challenge, with poor road infrastructure; shipping takes more time and money.
Subhiksha seems to have overcome the cost of infrastructure with their unique business plan of having their stores in places which are less costly. Also, The reason why a Subhiksha can price HLL goods so much cheaper than the corner kirana store is not so much that HLL gives it to Subhikhsa cheaper (there is some of that too) but primarily because Subhiksha knows how to make money by turning inventory faster at a rock bottom margin.
The great success of WalMart in US is because of consumer segment they target at, and the lowest cost they provide for goods. Their infrastructure management and supply chain have been key reasons for this success. Example, they always have WalMarts out side city limit.
What we need to observe is WalMart’s entry in to India, where their key success points will be challenged by Indian conditions. In a wise move, they have decided to enter with an Indian partner. This retail market segment is the space to be watched.
But, in all this, consumer is going to be benefited. That’s all we want!
India has been predominantly dominated by next door, ‘pops-and-mom’s store’, or next door ‘kirana dukan’. But, what we are witnessing in current time is a systematic retail business, in the form of Relience Fresh, More, Subhiksha, Spencer etc.
Historically, Indian consumer is cost sensitive and some retain players seems to have understood this. Unlike in US, where people can drive for an hour to get to a WalMart, Indian consumer tends to look around their home for grocery. Traditional cash-and-carry kirana shops provided this kind of facility so far.
Now, the current players have an uphill task in providing the goods at low cost, matching the Kirana Shop cost to be successful in business. The biggest challenge is the real estate. Retailers need to find a space, which is nearer to most of the consumers. And any space with-in city limits costs more in India. In addition to this, logistics is another challenge, with poor road infrastructure; shipping takes more time and money.
Subhiksha seems to have overcome the cost of infrastructure with their unique business plan of having their stores in places which are less costly. Also, The reason why a Subhiksha can price HLL goods so much cheaper than the corner kirana store is not so much that HLL gives it to Subhikhsa cheaper (there is some of that too) but primarily because Subhiksha knows how to make money by turning inventory faster at a rock bottom margin.
The great success of WalMart in US is because of consumer segment they target at, and the lowest cost they provide for goods. Their infrastructure management and supply chain have been key reasons for this success. Example, they always have WalMarts out side city limit.
What we need to observe is WalMart’s entry in to India, where their key success points will be challenged by Indian conditions. In a wise move, they have decided to enter with an Indian partner. This retail market segment is the space to be watched.
But, in all this, consumer is going to be benefited. That’s all we want!
Saturday, August 18, 2007
Mumbai Dabbawalas
I was reading a news article about Mumbai Dabbawalas. They will be offering the consultancy services in logistics management to India Inc.
Dabba service has been rated as Six-Sigma quality by management guru, C.K.Prahlad, this means one failure at one million attempts! And the logistics management of Dabbawalas is been study material for all major B-Schools.
But, the question we need to ask here, can we reproduce the same concept in other cities? Agreed, their supply chain and logistics management is fail-proof, but is it a model which can be reproduced? Can we have this kind of service in other cities like Bangalore, Delhi?
Answering this question might not be straight forward. Because, on first instance, reproducing this model looks very difficult in other cities.
But, this leads to a new question, what is there in the logistics model of Dabbawalas, which Indian Inc can take and adopt?
Answer is simple. Dabbawalasa are lead by simple management principles and systematic approach that minimizes the confusion and enhanced efficiency of resources. Corporations use technology for implementing certain principles. But if you are directly implementing the principles, there is no need for technology. Indian Inc may not replicate Dabbawalas experience, but they can definitely adopt the principles.
Business model success depends on the basic management principles!
Dabba service has been rated as Six-Sigma quality by management guru, C.K.Prahlad, this means one failure at one million attempts! And the logistics management of Dabbawalas is been study material for all major B-Schools.
But, the question we need to ask here, can we reproduce the same concept in other cities? Agreed, their supply chain and logistics management is fail-proof, but is it a model which can be reproduced? Can we have this kind of service in other cities like Bangalore, Delhi?
Answering this question might not be straight forward. Because, on first instance, reproducing this model looks very difficult in other cities.
But, this leads to a new question, what is there in the logistics model of Dabbawalas, which Indian Inc can take and adopt?
Answer is simple. Dabbawalasa are lead by simple management principles and systematic approach that minimizes the confusion and enhanced efficiency of resources. Corporations use technology for implementing certain principles. But if you are directly implementing the principles, there is no need for technology. Indian Inc may not replicate Dabbawalas experience, but they can definitely adopt the principles.
Business model success depends on the basic management principles!
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