BSNL resurrects…

mahindra holidays’ initial public offer (IPO) seems to have revived the moods of many. So much so that Bharat Sanchar Nigam Ltd. (BSNL) is once again planning to bring its $10 billion IPO to floor. BSNL had announced last year to come out with its IPO. However, BSNL’s ambitious plans were sidelined due to opposition from Left and worker and employee unions. The stock market meltdown also crashed BSNL’s hopes to go public. Following the victory of the UPA regime with an overwhelming majority has once again revived BSNL’s reveries as the state run telecom operator now hopes to get a nod from the newly formed government. And it is also hoping to negotiate with the employee unions to a good effect. As per Kuldeep Goyal, Chairman, BSNL, the company will start with the (employee) unions once it gets the green signal from the government. Sources close to developments suggest that the government is planning to sell 10% stake in BSNL to raise around $10 billion with a paid-up capital of Rs.50 billion. BSNL, which garnered revenues to the tune of Rs.450 billion in FY 2008-09, is preparing itself to step on the gas and go on a mega expansion spree. Goyal has confirmed that BSNL is not only looking for telecom licenses in African countries, but eyeing probable acquisition opportunities. Though BSNL already has cash balance of Rs.300 billion in its books for the expansion projects, materialisation of the IPO will definitely be very timely and help in raising funds for expansion. Also, with declining average revenue per user (ARPUs), BSNL is also contemplating to join hands with a strategic foreign partner. Not only will it improve the company’s valuations (pegged at $100 billion), but will also enahnce BSNL’s brand equity. BSNL today is a laggard in the burgeoning Indian telecom sphere and is in talks with foregin players like AT&T, who are waiting to enter the Indian market. BSNL, like any other PSU, has a conventional management with a traditional working style. Joining hands with a strategic foreign partner will change that perception and turn around its fortunes.

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Monojit Lahiri examines this new phenomenon, loaded with contradictions

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Grab this. On the one hand, today more than ever, we reside in a global planet. On the other, the cute something-for-everybody and one-size-fits-all solution is simplistic, naïve and hopelessly obsolete in year 2009, right? No man is an island, is another view countered immediately, substantiated by the fact that man is ultimately the product of his roots and environment and therefore his version/vision of life is bound to be influenced and informed by it. God, so what gives? Is a global campaign – attempting to speak in one language across countries and people in a charming, persuasive and effective manner – a load of bullcrap? Or is it eminently possible if the basic lingua-franca of cutting-edge advertising (clarity, simplicity and imagination) creatively leveraged?

Ad Guru John Hegarty sets the ball rolling by rooting strongly for it and offers solid arguments. “If Hollywood, music and Picasso manages to do it, why can’t advertising? Aren’t we supposed to be specialists in a business mandated to bring brands and people together? Physical borders are man-made. The skill of truly great advertising practitioners is to generate ideas that are border-less. The real communicator looks at areas that unite – not divide – people,” he says. He admits that there will always be (political, ethnic, religious) differences between people, but when it comes to consumer behaviour and responses to brand messages and what they want out of it, amazingly, the similarities are stronger than people care to believe…! Another Dada Simon Sherwood endorses this view full-on and says that “unfortunately agency networks, mostly, are structured in ways that lend credence to the fact that different markets are different from each other. This creates confusion in both perspective and focus.”

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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On a road less travelled

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They’ve just launched their premium hatchback Ritz. But deep within the Maruti Suzuki headquarters, the only discussion ruling the strategy war room is about the unexpected results that their new-found rural strategy has reaped. That, perhaps, is a key reason why they have suddenly decided to not withdraw the Maruti 800 from the market.
By Pawan Chabra

India’s largest auto behemoth, Maruti Suzuki has made a little known change in their marketing strategy. Last year, they set up a separate, well-oiled sales and marketing department for India’s hinterlands. Of the 15,000 sales executives working with Maruti Suzuki all over India today, almost 2500 are these newly-appointed Rural Dealership Sales Executives (RDSEs). Young, energetic and raring to make their individual mark on their corporate bosses sitting in New Delhi and elsewhere, these lads have managed to add up significant numbers to the overall sales figures of the company even in these tough times. So much so that sales in rural areas, which used to be around 3-4% of total sales till last year, are hovering close to 9% this fiscal.

Managing Director Shinzo Nakanishi cannot but help gloating. “We saw the slowdown hitting urban demand much before others did. So we immediately decided to expand our presence in the rural areas.” To say that the strategy has paid off will be an understatement. The decision made sense, especially as various estimates projected that only 19 out of every 1000 people in rural areas own a personal mode of transportation. Besides, even the availability of finance became difficult for urban customers due to a steep rise in interest rates. In contrast, customers do not normally depend on bank loans to buy cars in rural markets. No surprise then that Maruti Suzuki made a beeline for the high-growth hinterlands and surprised everybody with the booty they discovered, especially in Karnataka’s rural areas.

Apart from a strategic rural foray, the company also devised a planned approach to attract more corporate customers and from June last year, they also began specifically focusing on central government employees, relatively insulated from the downturn in the economy. What added to the appeal of central government babus and bankers as potential car buyers was the hefty arrears they had received, thanks to the recent 6th Pay Commission windfall. In the corporate segment too, Maruti has seen a growth of almost 60% plus in its sales. Another key strategy implemented late last year was to enhance the focus on PSU’s to finance cars.

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An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Kuch toh log kahenge, says Moto to the yuva...

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We all know that the handset market is ruled by Nokia, but 2006 saw the rise of Motorola in India. MotoFlip was their entry level vehicle and the beauty of this campaign was that it targeted the youth with the ‘looks expensive but costs less’ proposition. Was the campaign effective? Well, it certainly enhanced Motorola’s brand appeal and even market share rose from 9% to 13% that year. What’s more, ask Motorola and they’ll tell you that till date the sales of these entry level phones are going as strong!

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Sindoor: A cultural symbol for millions of Indians...

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Brand: ICICI Prudential
Agency: Lowe
ICICI Prudential used the greatest metaphor Sindoor – which encapsulates protection, for the purpose of concept selling in life insurance and communicating the generic benefit of protection. “Use of an Indian cultural symbol at once endeared the campaign to millions,” says Brand Guru Santosh Desai. Results were equally overwhelming; research conducted by ORG Marg put ICICI Prudential with highest score on image parameters like safety, services, good returns, et al. Between February 2001 and 2002, the company’s ad and brand saliency improved tremendously and helped it get a lead over other private insurers. And next, came Jeetey Raho! Still wondering why ICICI Pru is the biggest private insurer in the country?

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Does Creativity have an Expiry Date?

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Ogilvy’s hot-shot spoof champ (of Sprite fame) Ajay Gehlaut steps on the gas, straightaway. “It’s sad, but true that awe, respect and reverence for the grey-haired brigade is a thing of the past. In today’s world, speed with quality is the name of the game and youth appear to be hotter players in this space.” He points to a galaxy of young NCD’s, CD’s, even CEO’s (Prasoon Joshi) warming the hot-seat – something unthinkable two decades ago. “In this digital age, five years is considered decent experience. In the gaming scene, you have whiz kids at age 16! Its freaky, man! Information not wisdom is the new mantra.” Shyam Benegal, the iconic film-maker – who started out as a copywriter! – brings his brilliantly evolved spin to the table. “While all this energetic, excited, hi-octane stuff is true, one must realise that it is restricted only to the ad scene, which is only one narrow aspect of the creativity base/universe.” Benegal says that it is not a new thing at all. In earlier times too, youngsters defined the adbiz “and either you were kicked upstairs – or kicked out!” However, today out-of-the box and freak-out stuff seem to be the hot tickets and clearly the younger lot is much better at it than the oldies. Why? “Because as you grow older, maturity arrives and with it a sense of perspective, rationale and analysis – none of which really contributes to the free-for-all creativity demanded from today’s adland.” Structure, discipline, training have all evaporated into thin air. A very special, hallucinatory kind of mood and colour seems to be the flavour of the day, a willful suspension of disbelief stretched to the ultimate limit.” Chetan Verma, Corporate Communication Chief, PowerGrid, brings his informed views to the table. “I definitely think creativity comes with an expiry date and the reasons are simple. Never before has almost any product/service category enjoyed such huge youth-specific target groups and in this environment, thinking young [hence] is a must. Also, adaptability, flexibility and thinking-on-your-feet to hit the ground running are attributes that lend themselves much more to the younger lot than oldies. In a nano-second, consumer-driven world where tastes, beliefs, wants, needs and desires change at an alarming speed – frequent based on impulsiveness – no prizes for guessing which constituency can best track it - and crack it! Admittedly, there are spaces and segments that engage the older lot, but [everything considered] creativity and youngsters are indeed made-for-each-other.” Interestingly, the two kids who come on next, to wrap up the debate, beg to differ! Spiky, the hip-hop Creative Consultant at Leo Burnett, Mumbai, believes that age has nothing to do with creativity and cites the examples of M.F. Hussain, Piyush Pandey, Pops and Mohammed Khan, who remain icons. “Fads, fashions and trends admittedly are stuff beyond their bandwidth but there is an entire universe that need their specialised attention, skill and finesse. I think experience and maturity provides invaluable value-addition.” Shubhra Tandon, the young and attractive servicing dynamo – DraftFCB Ulka, Delhi – agrees totally. “I think, too much hoo-haa is made of this under-25 war-cry. Sure, its true, but c’mon yaar, there is life beyond the FMCG world!” A sharp head on young shoulders, Tandon believes that at the end of the day, advertising is neither about scoring brownie points, jargon-flashing nor a cold recitation of facts and figures. “Its about establishing a connect with life (and people) based on experience and human insight that are likely to touch, move (and therefore) convince more people to come around to their way of thinking”. A smart agency, she believes is one that has a blend of both. “Remember confluence – not conflict – is the most desired viagra in these recession-hit times!”

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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IPL 2009 has been relocated to South Africa. Good; now we’ll have zoo animals cheer their hearts out! satish chapparike does a safari check...

Shahrukh khan to Host IIPM 4Ps Annual Business and Marketing Quiz

Eden Gardens, Kolkota… May 24th, more than one lakh noisiest spectators packed inside the world’s biggest cricket ground. The final ball of IPL – 2009 is due. Kolkata Knight Riders’ Ishant Sharma is striker and Mumbai Indians’ Sachin Tendulkar is getting ready to bowl that death ball. One ball and four runs and the most coveted IPL trophy would land in the kitty of the home team. If not, 1987 kilometers away from Kolkata, on the shore of Arabian Sea, Mumbai will celebrate! A slow flighted delivery from Tendulkar lands on the off stump and turns slightly towards leg. Sharma lofts the ball towards deep long on and the ball disappears into the sky beyond the giant flood lights of Eden – a Six & crackers light up the sky above Eden Gardens! The stadium erupts. Knight Riders are champions of DLF IPL-2009.

Imagine the same situation at Wanderers in Johannesburg in South Africa on May 24th, Sunday evening. Even if the same script turns into a reality in South Africa, the atmosphere in and around Wanderers will not be the same. Here, Kolkata will not erupt with joy in the same manner. There won’t be more than 35,000 spectators there and most of them will not be Indian cricket lovers. At this moment, the only option for Indian cricket lovers is to watch the IPL-2009 on television, lifelessly.

So, why has this happened? Well, because cricket in India is no longer just a sport. It is lucrative business! An investment of around Rs.1,000 crore amasses more than Rs.10,000 crore in 36 days! Exciting cricket in the foreground, glamorous cheer leaders in the background, Bollywood stars and business tycoons in the VVIP gallery, million dollar sponsorship deals, thousands of spectators in the stadium and more than 60 million television viewers across the globe… And now to top it all, the venom of politics has also been injected into it. The result? Everyone is benefited except the true cricket lover who wanted to be at the Eden Gardens (or Chepauk or Chinnaswamy Cricket stadium) to catch the excitement first hand.

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Handing over the reins of the company to outsider CEOs is not the latest twist in the tale for Dabur...

But it sure has helped the company to wade through troublesome waters, growing from an ayurvedic company to a complete beauty and healthcare giant. Research had proven it before, Dabur has proven it again. What next now?Angshuman Paul answers...

You’d have heard of many slumdogs turned millionaires (no reference to that film here; read the editorial for it). And no surprises – we know of one too; not exactly a slum dweller though, but one who rose up the social and capital ladder, from a small pharmacy in Kolkata to a posh green office in Kaushambi (Ghaziabad)... Yes, Dabur, a Rs.3,000 crore ayurvedic-product manufacturing company, owns it!

So what’s there to tell beside the dramatic surge of Dabur’s brand valuation over the past years? Run through the management cadre and you’d understand how Dabur has managed this feat, not often associated with ayurvedic companies! Change in management style is what has helped the company to a great extent, change from being a family-run business to a professionally-run organisation. So what’s the latest where earnings are concerned for the herbal giant? Call it a change in management that has turned things around for Dabur, but surprisingly, even during times when most pharma companies are being weighed-down by losses, Dabur’s financials sit pretty, having posted a smashing y-o-y topline growth of 19.9% for Q3, FY 2009 to touch Rs.779 crore. Of course, many experts (like Angel Broking) claim that there was a significant 4-5% contribution of the associated price hike in the overall growth in profitability of Dabur, but the truth also is that the topline growth was primarily due to the swashbuckling advancements made by its International Business Division, which on a y-o-y basis grew by a handsome 48.2% during Q3, FY2009, led by markets like Egypt (85%), Bangladesh (65%) and North Africa. What’s better? As per analysts at Angel Broking, the estimated net sales for the company for FY2009 also stands at a handsome Rs.2,818 crore, a growth of 19.3% y-o-y, and the highest in the past three years! Great numbers, and perhaps enough to give many investors smiles; but that’s perhaps where troubles start surfacing...

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An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Chrysler desperately needs strong alliance partners like Fiat to move towards more fuel efficient cars, analyses Karan Mehrishi of 4Ps B&M

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A part from auto parts, they were providing R&D support to Chrysler not very long ago. Now all that French auto parts supplier Faurecia is providing Chrysler is legal headaches to add to its financial ones. Faurecia claims that Chrysler had promised to pay R&D costs in addition to the parts costs for the Chrysler PT Cruiser and Sebring, Dodge Avenger and Nitro and Jeep Liberty; costs amounting to some $110 million. Fancy those misleading names by the way. Chrysler is neither ‘cruis’ing in the market, nor is it in a position to ‘avenge’ the competition, ‘dodge’ trouble or, for that matter, at ‘liberty’ to dictate terms with its suppliers!

It isn’t new for Chrysler to fall in trouble with alliances or mergers. Interestingly, it seems to be getting into another big one - with Italy-based Fiat Auto. Apparently, Chrysler is coxing Fiat to supply much needed small car technology; in return the Italian can have access to a 35% stake (through an unbinding agreement of course) in whatever it can salvage. All the best with that!

More seriously, though, Chrysler needs all the support it can get, even if it means going back the dreaded alliance route, else it may not even be able to survive an alliance with itself now. In this downturn hit economy, the big three are under state obligation to turn ‘consumer pocket friendly’ – a thought that they had banished from their cerebral cortex for almost fifty years. If not, the Detroit majors might not get the federal bailout package, that’s apparently helping their CEOs sleep well at night. However, out of the earmarked $12 billion, Chrysler is eligible for less than $4 billion with the rest going to bigger brother GM. In order to meet the incumbency, Chrysler now desperately wants to churn out small cars that will appeal to ‘poorer’ customers, who may have had enough of ‘big on engine-big on size-low on quality’ American cars. Fuel guzzling is not in fashion anymore and Fiat is the best fit at this time. The Turin-based manufacturer supposedly has the world’s foremost repertoire of small car making techniques and offers cutting edge designs. Fiat also holds the patent for the class leading CRDi diesel technology that’s taking the world by storm. Through a significant stake in Chrysler, Fiat on its part can have access to the larger American market and can market its lesser known brands like Lancia and Alfa Romeo to the affluent Americans. Also, there now appears to be a possibility where American customers will start looking beyond the fuel guzzling v8s and seriously consider the next generation diesels from Fiat’s stable. Convincingly, there now appears to be a great deal of synergies between the two partners and finally some rationale in the relationship will prevail.

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An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Citigroup has once again resorted to restructuring – this time, however, by shedding off its decade-old strategy...

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Citigroup has once again resorted to restructuring – this time, however, by shedding off its decade-old strategy of becoming a financial supermarket and splitting into two. But will it be of any help? MANISH K. PANDEY analyses...

Some companies have it in them, some don’t. We are talking about the ability to rewrite history. That’s what Citigroup did some ten years ago when it decided to provide investment advice along with traditional banking. Unfortunately however, Citigroup is now going through the painful process of giving up that strategy in a not-so-historic way.

As cost cutting measures and pink slips are failing to provide the bank with much needed succour, CEO Vikram Pandit seems to be at his wits’ end looking for a saving grace. And interestingly, but not surprisingly, he has realigned Citigroup’s current dealings into two separate businesses – Citicorp and Citi Holdings. Raison d’être: to free up capital and save the group from the collapse – may be his last attempt to make Citigroup stand on its feet!

With Citicorp, Pandit now plans to focus on leveraging the competitive advantages of the group’s global banking business and through Citi Holdings – which will be made up of brokerage and retail asset management (including Smith Barney, Nikko Cordial Securities, Nikko Asset Management and Primerica Financial Services), local consumer finance (including CitiFinancial and CitiMortgage in the US, and consumer finance operations across the globe) and a special asset pool – he wants to keep an eye on group’s riskier assets and hard-to-manage ventures. “With lower risk and a streamlined set of businesses, we expect Citicorp to be a high-return and high-growth business. And with Citi Holdings, we will tighten our focus on risk management and credit quality for businesses with strong market positions but that are not central to our core franchise,” avers Pandit. In fact, Pandit has also agreed to give up control of the Smith Barney brokerage to Morgan Stanley and even plans to sell the CitiFinancial consumer-lending unit and Tokyo-based Nikko Asset Management, once the hive off process is complete.

Certainly by doing so he can now strive to further reduce operating costs and allow Citigroup to sell or spin off any of Citi Holdings assets to raise cash but then is it actually going to be profitable is the question that is doing the rounds in many minds. “There are certainly ‘good bank’ and ‘bad bank’ components in Citigroup’s balance sheet, and our assumption is that with a role for the government, Citi can find a profitable path. But without treasury involvement, the path will be more dicey,” Mike Englund, Chief Economist, US-based Action Economies tells 4Ps B&M. No doubt the new move is a sort of back to basics – to focus on the pure banking by shedding off the idea of creating a financial supermarket – but then it doesn’t change Citi’s business model at all. The move only separates the business on paper with Citi’s current problems lying intact.

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An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Nightmare times to knock on guilty celebrity-endorsed doors… Jail for brand ambassadors! Hefty fine for companies! Monojit Lahiri investigates...

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Okay guys, the sublime, never-ending and blissful honeymoon that the celeb Brand Ambassadors elite club [read: Bollywood & cricket stars] enjoyed, pocketing insane mega-bucks by endorsing brands for companies, could have hit a killer road-block! The new Companies Bill 2008 proposes to toss any – or every – celeb into the slammer for up to three years, if found guilty of being party to propagate misleading claims and inducing customers to buy the product advertised. The companies involved are under the scanner as well. If found guilty, they will have to shell out a cool Rs.50 lakh [from a piddly Rs.1 lakh, earlier] in fine, for cheating and frauding the unguarded consumer. However, there is one bright spark. The Prosecution will have to ‘conclusively prove’ that the celeb endorser was aware he/she was making a false statement or representation – or that he/she did what he/she did, without ascertaining the facts.

The ad-frat, industry & celeb-management guys appear dumbstruck at what, they believe, is a ‘draconian’ move. Hot-shot photographer Atul Kasbekar leads the charge by going on record stating, “This is ridiculous! How on earth can a celeb be held responsible for worms in the brand of chocolate he endorses?!” Sanotsh Desai, head honcho of the Future Group, believes that the dice is – very unfairly – loaded against the celebs. “A penalty of Rs.50 lakh for the company and jail sentence for the celebrity is absurd.”

Anuja Chauhan, Executive Creative Director, JWT (whose debut novel The Zoya Factor is making big waves with the chick-lit diwanas) brings her own spin to the table. “I think its a good idea... specially if the brand endorser is endorsing the brand as himself... as in as Shahrukh Khan as opposed to as Rahul/Raj, or as Amitabh Bachchan as opposed to as Dadaji or whatever... and specially when the brand is targeting a lower or more rural SEC of consumer who truly take what the celebrity says to be the Gospel Truth. When some international brand comes to India and tries to woo me, I don’t know the brand, I just know the endorser. He’s the guy I totally believe in, he’s the one who introduces me to the brand and vouches for it. It’s like a friend introducing a stranger to you. So if the stranger takes you for a ride, you will go to your friend only, and say, yaar tooney toh mujhe duba hi diya...”

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Tickling your ‘Dzire’

1500-plus IIPM students placed across the country with 44 bagging international offers

Maruti’s sedan version of Swift took the auto industry by surprise, when it was launched in May. Priced competitively at Rs.4.49 lakh, Maruti Suzuki’s Swift Dzire was intelligently positioned for the aspiring middle class, who with their growing incomes wanted to upgrade to sedans, but were unable to do so, because of heavy price tags. Swift Dzire became an instant hit with as much as six months wait-list. It fit the bill of a stylish entry level sedan and not too heavy on the pocket either. This one made the cut with minimum marketing budgets!

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Another ‘City’ ready to sleep!

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The irony in this case is that Circuit City’s closest rival Best Buy (who has also eaten Circuit City’s share of earnings) recently registered $2.15 billion in operating income, maintaining a surplus due to which many market experts are considering that City’s quagmire is a case of internal mismanagement. But then there is an another set of market experts who still expect many more retailers to stand in the chapter 11 list in times to come. Doron Levy, President, Captus Business Consulting, who belongs to the latter category, asserts, “We will see some more bankruptcies in the near future, but I really see consolidation on the horizon for many chains. Some have really strong business models, but are not managed correctly. I do have some specific retailers that I could foresee going into bankruptcy and eventually disappearing form the retail landscape all together.” Talking on the same lines, David .J. Livingston, retail consultant, DJL Research points out, “I think we will see an onslaught of closings among the small specialty stores located in shopping malls. This will result in the downfall of several real estate investment trusts which own these malls.” Though unfortunate, but retail is always affected in some or the other way from the roadblocks in the growth of any industry for that matter. So, the position of the retailers in the economic chain today is simply determined by what they sell. The slowdown in spending, though, would have an impact virtually across the horizon.

It’s not only retail outlets who are tightening their belts; online retailers are also joining the bandwagon as they are cutting their marketing and promotional budgets to stay profitable. Adding to that, online retailers are using tactics like free shipping to attract more buyers. And the decision seems wise enough. As per a study by Hitwise, the click-rate of online retailers is going down drastically. But then, market experts are still very much in favour of growth in online retail in the coming times. The annual holiday survey by Deloitte, clearly showed that Online spending is the 2nd best shopping destination for consumers after discount departmental stores. And the sheer power of online retailing gets more clear if we go by growth figures as National Retail Federation has announced a 2.2% projected growth in overall retail sales, which stands too low in comparison to the 12% projected growth in the online sphere. So, we can be sure of one thing – online retail will grow in times to come due to the simple reason that the fundamentals are quite compelling at the moment.

But you can’t be that sure of the growth in the overall retail sector as the prevailing turmoil may not end in the short-run. The only point favouring the growth of US retail industry is that there are many big retailers like WalMart, Tesco et al who are still in an expansion mode. Livingston emphasises, “Even though the economy has been difficult, there are still many retailers expanding. Wal-Mart continues to build stores with varied formats. Target is building, Tesco is building. Perhaps not at a fast pace, but they are.” But we can expect many more not-so-huge retailers going out of business in times to come. This will surely be one Christmas that they won’t forget in a hurry.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Investigates the paradox of why the bigger polluters will gain more in carbon trading in future!

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The emission reduction scheme is based on ‘cap and trade’ wherein the total annual emissions are capped and the market allocates a monetary value to any shortfall through trading. Businesses can exchange, buy or sell carbon credits in international markets at the prevailing market price. Over the years, it has become a source of earning revenue in developing countries. And how? Companies in this part of the world are typically less polluting (as they’re less ‘producing’) and the extra credits are sold to firms in developed countries. But strangely, in the future, it would surely be the more polluting companies that would stand to gain from this system of carbon trading.

But first, some more facts. This market is continuously growing and has been attracting huge investments. Investment banks (like Morgan Stanley, Merrill Lynch et al) have been active players and many carbon funds have been set up, with investors in those funds either planning to use the carbon credits that result from those investments for compliance purposes directly (e.g. with the EU-ETS), or simply as investments to sell. The ICECAP fund run by Natsource is an example of this. China (thanks to its large size, economies of scale in originations, favourable investment climate), which has quadrupled its number of projects in the pipeline from January 2007 to March 2008, dominates the global carbon market with 73% share in terms of transacted volume followed by India.

It is also a fact that India has gained a considerable share in the carbon trading market and companies have reaped in huge profits. Torrent Power, which recently switched over from a coal-fired power plant to natural gas (in a bid to reduce GHGs) earned 3.2 million carbon credits (this translates to whopping earnings of €54.14 million). In 2007, two projects of JSW Steel were awarded 5.4 million carbon credits (out of which one project was issued 4 million carbon credits). Examples like these will make it easy to understand why companies try hard to grab a part of the carbon credit market. It’s easy million dollar earning. As a matter of fact, India Inc. can exploit numerous business opportunities in developing low carbon technologies, an area which is expected to grow to $3 trillion per year by 2050.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Never say die... till U’re dead!

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As a matter of fact, the sector as a whole has also been marred by stringent RBI regulations which does not make life any easier for players like Omaxe. The central bank has increased interest rates to control inflation, besides restricting fund flows in it. “As the availability of funds from banking sector is being restricted for the Real estate players – both big and mid-size players are compelled to borrow from the High Net-worth Individuals (HNIs) at high interest rates of about 20% which is not helping their cause anyway,” explains Wadhwa. Omaxe and party have got another setback from foreign inflows too with the global crisis looming large over and with the investors keeping doors locked in the wake of the US financial crisis.

Nevertheless, Omaxe seems to have solved the cash-crunch puzzle to fund its mega projects. It has strategically opted for debentures to accelerate the pace of completion of its projects as Goel explains, “To mobilise large funds, Omaxe has taken the route of debentures for the consistent endeavour of completing all our projects on time.” Strengthening the financial standing of the company, Omaxe has also paid 60% of the total term facility of Rs.3.0 billion taken from Indiabulls Financial Services Limited. Also it has paid-up the entire outstanding sum on debentures issued to LIC Mutual Fund. Despite the fact that the term facility was for a period of 3 years, this was done to strategically prepay the loan in order to free up the equity. Omaxe is also planning to retire the outstanding of Rs.1.2 billion shortly. So in the face of such a cash crunch, is the plan of ‘going public’ in the pipeline too? “No,” confirms Goel. Issuing an Initial Public Offering (IPO) is one aspect of fund raising which the company wants to stay clear of looking at the currently volatile market. Moreover the company’s total debt of $600 million (which carries an annual interest rate of 16%), also has to be taken care of, as investors get restless by the day.

Omaxe has also unleashed plans to concentrate more on affordable housing projects in the price range of Rs.3 lakh to Rs.10 lakh to fight the dying demand in high-end housing. It has planned out investments totalling $20 billion to develop 10 lakh ‘affordable’ homes for low-income consumers. “The need for affordable housing is driving the real estate industry now. Our prefabricated township and affordable rate & reservation based allotment are the USP of the project making it a hot cake,” explains D. P. Srivastava, Vice President, Omaxe Limited.

So there you are – troubles indeed for Omaxe and others in the realty market, but one ray of hope is the mid and low-income Indians who may just be willing to spare their dimes for some value-for-money asset as Srivastava further justifies, “Omaxe will develop the corridor and build affordable housing units by using cost-effective technologies and using land-sharing techniques...” All is therefore not lost. With the RBI slashing CRR rate twice in quick succession, about Rs.600 billion is expected to be pumped into this sector. Troubles galore, but that ray of hope on the horizon may just keep Omaxe and party going. “Never say die... till you’re dead,” is the way to be for all in the sector; for now...

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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The bigger you get, the better for you... Mr. Rohtas Goel, CMD, Omaxe Ltd

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Are the big builders and brand names easing out the small and mid-size developers?
The real estate sector is heading towards being the favourable for end-users. A stable economy and rising inflation rate have forced companies to cut costs. This has resulted in a lot of struggle ahead for mid-size developers with small projects. Small and mid-size developer need to join hands to build big projects together.

During this cash tight situation will small and mid-size developers and their small projects find it difficult to complete their projects on time?
Banks are going slow on funding a real estate project and the prices of land, materials and labour have increased two fold. Small and mid-size property developers are in a cash-tight situation finding it difficult to meet their project deadlines and only big developers with large budgets, brand names and mega projects would be able to make it.

Will only big developers with large budgets, brand names and mega projects be able to survive this slump? Or is there still hope for small and mid-sized players?
Larger players with mega projects will be able to survive this slump since they can identify with end-customers and match their expectations with superior performance.

Small and mid sized players who are not able to strategise their business in the current market scenario and who have less expertise in the development of real estate will surely feel the liquidity crunch. These players can only survive by consolidating their expertise to complete a project. This is between one developer who has land but no resources and the other who has the resources.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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monojit lahiri attempts a checkout to this disturbing phenomenon of kids moving away...

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Creative. Fun-biz. Arty. Glamorous. Culture-specific. Intellectual. Cerebral. Idea-driven. Business/market-friendly. Life-enhancing… Advertising has always spawned a zillion descriptions and definitions. It was that rare calling that fused mystique with market-forces in one magical sweep. It was that rare profession that embraced both the pin-striped B-School types and the bindas Art-College guys without hiccups or hassles. It was that rare career-path that attracted the brightest and best creative minds, desperate to be liberated from the stereotypical jobs (Law, Engineering, Medicine, Bank, Government) available in the market to explore avenues that informed, engaged, entertained, even empowered. Whatever happened to that magnetic pull? Why is Adland losing its allure as a desirable career-destination? What has triggered this deadly drought?

Motorola’s Senior Director, Sales and Distribution (India and South West Asia), Lloyd Mathias is convinced that it has to do with the slew of alternative career-choices available (on a silver platter) to today’s bright kids. “Where were the choices, even a decade and a half ago? It was all so closed, restricted and stereotypical. Also, tradition and convention played a much bigger part, so one usually followed the path that was safer and risk-free. Today the spread available allows for more adventuring,” shares Mathias. He also believes that money plays a huge part in this dramatic re-alignment, “The kind of packages that fresh B-School grads are offered can be mind-blowing.” Finally, he points to a distinct lack of iconic and inspirational leaders whose vision and values prompted, persuaded and motivated an earlier generation to go for it. “Today, it appears to be an each-for-himself and god-for-all situation! It’s more individual personalities – than team – that are celebrated. Maybe it defines the times we live in…,” he adds.

Sid Roy, Executive Director of the Kolkata- based Ad Agency, Response agrees, “In these consumer-driven times, bright new-age kids, confronting the perils of peer-pressure every day, fall victims to the big-bucks syndrome. Quite natural. The options. The packages… and most importantly what it promises them in terms of lifestyle statements… no Ad Agency job can touch that! Also, the profile of this new-gen – unlike the previous one – is different. It’s about impatience, speed and now! Experience and Gray-haired eminence has been buried. It’s performance today that matters! How the work impacts bottom lines!” Roy believes that while all of this is not a bad thing, it has led to “a generation of net-literate, Googled, book-illiterate types. A constituency that lacks vision, values or wisdom and hopes to compensate by getting all of life’s answers through the Internet. Scary!”

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Changing agencies is not a good idea

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But have clients got their priorities right? Pressure, competition, cut throat rivals, breaking the clutter, media fragmentation, accountability and delivery apart, in the final analysis, is it really a good idea to change your existing agency? Brand-building does take truckloads of creative and emotional intelligence. And perhaps agency B may not really be able to deliver the same EQ to your brand as perhaps agency A did. “Yes! Changing agencies is not a good idea. After all, a constant agency adds continuity to the brand proposition,” says Chauhan of Rediffusion.

He could be right! You only go back to the 41-year-old Amul butter campaign, famous for puns on current events, to know that stable brand management is vital. Sylvester DaCunha of DaCunha Associates is the man responsible for the campaign’s vitality since the beginning. Even Fevicol (Fevicol Ka Jod) trails a similar path with its two decade old relationship with agency O&M. B. O. Mehta, President, Pidilite Industries told 4Ps B&M: “The brand has grown with Ogilvy, they know the DNA of the brand, which it would be difficult for any new ad-agency to take up.”

Or take Nike globally. Ever since ad man Dan Wieden coined the ‘Just Do It’ slogan 20 years ago, the brand has stayed with the same agency and prospered in the process.

But for that kind of an enduring relationship, passion and honesty are the two key ingredients. Agencies must treat the brand as their own babies and clients must give agencies the status of ‘partners’ not ‘vendors’. The only way out of this current client-agency quagmire is for agencies to move back up the value chain. Kamath of Star India concurs. “The real opportunity for the industry now is to go back upstream and become a consulting partner again.” Kamath has a valid reasoning.

The moving up the value chain has already started, with communication strategy outfits like ‘Naked Communications’ hitting the scene in the west. Described by the Washington Post as the ‘future of advertising’, Naked considers itself as the conductor of the brand communication opera, works corroboratively with existing agencies (creative, media, digital and BTL) and simply ‘partners’ the client. Naked understands the future as getting all folks to be responsible for the brand together. Basically, the world’s changed and marketers know it. It’s up to agencies now – they must wake up and smell the coffee! As a fitting sign off to this piece, we bring to you Jon Wilkins, the founder-partner of Naked Communications (see adjoining page), spelling out the future course of advertising in India and across the world, as he sees it!

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
Now IIPM's World-Class Education... for everybody!!
IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA
IIPM - Admission Procedure
IIPM, GURGAON
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IIPM’s 36th Glorious Year of Academic Excellence
4Ps Power Brand Awards 2007
When IIPM comes to education, never compromise
Why Study Abroad When IIPM Gives You 3 global Advantages!
IIPM Ranked No. 1 B-School In Global Exposre - Zee...