Monojit Lahiri examines the reason for the demise of Onida’s Devil, the latest in a list of disappearing mascots

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First things first. Why are mascots created? Be it the Energiser Bunny, the MGM Lion, the McDonald’s clown Ronald, the Merrill Lynch Bull, the Eveready Cat, Smokey the Bear, the Jolly Green Giant … don’t they still reverberate endearingly in public memory, projecting their own brand of charm? Smart, evolved and insightful marketers unleashed these characters with a clear focused agenda – create something memorable in tune with the architecture and value of the brand and project it in a warm, human way that will connect simply and easily with the prospective customer. Make the inanimate come alive in an entertaining and public-friendly way so that, soon, it acquires a life of its own. Leverage it creatively to fuel brand recall.

In recent times, however, this thinking has gone in for a re-think! Be it the adorable Murphy-baby, HMV dog, Asian Paints Gattu, they’ve all exited. Even the iconic Maharajah was handed his walking slick and hat (crown?) before the Air India biggies realised their blunder and brought him back. Thank God, the Amul mascot still cavorts around … As this goes into print, Onida’s ‘Devil’ has been put to sleep – the symbol that epitomised the brand and show-pieced several memorable ad campaigns. What’s behind these dramatic shifts? A hysterical anxiety to be perceived as modern, contemporary, tuned-in and global in today’s competitive and cluttered market? A pitch for relevance and the here n’ now, soft focusing mushy sentimentality and obsolescence? Global companies don’t seem to be in such a tearing hurry to bid their mascots goodbye … why us?

Sid Ray, Executive Director of Response (Kolkatta) fires the first salvo. While he completely goes along the way the KFC and McDonald’s mascots have been successfully retained (even when the look and feel of their focus has been Indianised) he reckons that the Devil is a different kettle of fish. “It is possible that the marketing team felt that with capital investment involved in an age of heavy-duty competition, techno-onslaught and product features playing a key role, the Devil and the slogan have been rendered obsolete. They don’t fit into the scheme of things”. Dipankar Mukherjee, VP – Marketing, Ideas (East) agrees. “Competition, technology but most importantly cost structures have, I guess, forced them to re-look and re-invent their focus. Mascots anyway are cute and stuff but at crunch-time, they are unlikely to influence the purchase intent. Other more compelling, market and consumer-driven aspects come into play”. However, both agree that often, new teams, have a tendency to sling out everything that the old team had brought to the table – just to signal their entry and prove a point!

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Source : IIPM Editorial, 2010.

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

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60 MINUTES WITH PAWAN MUNJAL

It took us months of constant badgering to catch up with Pawan Munjal. After all, his schedule is packed for weeks ahead with power lunches, conferences and dealer meets. In between he also sewed up multi-million deals for HH’s sponsorship of Champions Trophy and the 2010 Hockey World Cup. Phew! Quick, over to him...

ON TOPLINES & MARKET SHARE

4Ps B&M: Your topline success is because you got it right or Bajaj got it wrong?
PM: I won’t comment on competition but as far as HH is concerned, we got our strategy mostly right. We decided what we wanted to achieve and went about it systematically.

4Ps B&M: What about January when sales were flat? Did you fear that your topline strategy may backfire?
PM: Long before the economy saw the fiscal meltdown or the slowdown hit, the Indian two-wheeler industry was already facing a crisis because of retail finance. But even in a declining industry we were able to maintain growth. We were doing better than the industry. Yes, stagnant sales earlier this year were a cause of concern. (Pauses) Particularly because we were also spending a lot of money, investing in our new plant at Haridwar, building capacity etc. Obviously, as a company, we knew that this was a challenge. But we could see that we were doing better than the rest of the industry. So we said, let’s use this adversity as an opportunity, build on it and go all out on advertising and brand building.

4Ps B&M: So you plan to cross the 4 million mark by the end of this fiscal?
PM: (shrugs) I don’t know where the 4 million figure has come from. But despite all the gloom around the economy, we are sure to exceed that.

4Ps B&M: And will market share go beyond the 60% plus as on date?
PM: The target is the numbers and market share will follow.

THE NEW POSITIONING

4Ps B&M: HH is known as a 100cc bike company. Are you now aiming for a premium position?
PM: (shakes his head) I think what you are talking about is how outsiders perceive us. Inside Hero Honda, we’ve known for a long time that we don’t want to be a leader in just one segment. We want to be a leader in the complete sense of the word, not just in sales, market share and bottomlines. We want to be seen as a prized company to work for. In terms of HR we should have the best practices; in terms of fiscal prudence, we should have the best practices. Coming back to the premium segment, but people forget that we were the first to enter the segment with CBZ.

4Ps B&M: Yes, but that was in the 1990s. Somewhere, Bajaj won that race?
PM: (nods sadly) you are right. In that premium segment we did not manage leadership. But last couple of years we decided that we have to have leadership across segments. We should not be seen as a company for the rural masses only, selling fuel economy products. So we refreshed our portfolio in the segment and have been growing at almost 40% in the segment. We want to be a company that the youth would like to be associated with. And that is why we have been consciously associating with youth centric programs like MTV Roadies, Sa Re Ga Ma Pa and others. Sports is also youth and we’re involved in cricket, golf and now even hockey.

4Ps B&M: And have you been successful in changing that perception?
PM: We’re not there yet. But the perception is slowly changing. We’re moving in the right direction. And it’ll happen soon!

4Ps B&M: So is there a plan to move into the 300-350cc bike segment?
PM: I personally think that the cc of an engine does not matter so much, unless you’re talking 1000 or 1500cc. For the rest, what matters is the image, the aura and the youthfulness of the company. And the last few years, we’ve invested heavily in advertising, marketing and branding. Big budget ads, any worthwhile show on TV, and all big sporting events, you would have seen Hero Honda everywhere. The idea has been to leverage the buzz created.

4Ps B&M: That’s why the shift from Desh Ki Dhadkan to Dhak Dhak Go?
PM: Yes! We launched Dhak Dhak Go in 2008 that is when we really sharpened our focus on the premium segment. Dhak Dhak Go was an evolution from Desh ki Dhadkan to make our brand more youthful and energetic.

4Ps B&M: Now you’ve brought back ‘fill it-shut it-forget it’. Is that not back to fuel efficiency positioning?
PM: Over the years we were doing so much else that the Fill it-Shut it-Forget it thought was forgotten. But fuel efficiency is still the most important buying criteria for consumers in India. Competition is forever touting mileage. The idea to get back the popular slogan was not to talk about numbers and tom tom that we give 90 or 80 kilometers. We wanted to remind consumers that we were the ones that started it all and tell them to start reliving their past.

ON PERSONAL STRENGTHS

4Ps: What makes Pawan Munjal tick?
PM: Relationships. One of the biggest pillars of HH is relationships across stakeholders – people within the organisation, the whole value chain, dealers – it’s actually a strong well-knit team. Take the Haridwar plant. Going from 0 to 4000 units per day, without the backing of suppliers, and with an entirely new team was not easy. But it happened because of relationships and a professional work environment.

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Source : IIPM Editorial, 2010.

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

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“Riding the crest of India’s IT success, Infosys has always set high standards for excellence. It has played a key role in implementing best practices and setting standards in corporate governance and HR management in India. As a key player in the knowledge industry, Infosys has recognized the value of its human assets in maintaining and increasing its strategic competitiveness. The Company has earned India stupendous reputation of a high quality software development destination which has traditionally been known for its low-cost, low-level software solution provider. So, it is justified to call it the “trailblazer” of Indian IT industry. major developments in the Indian IT sector, in recent years, could not have been possible without brand Infosys”

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Source : IIPM Editorial, 2010.

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

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Tata Tea Ltd.

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Entry Price: Rs.775
Target Price: Rs.1,325
EPS: 97.85
P/E: 8.65
Time Duration: One year plus
Rationale: Tata Tea has seen strong improvement in the market share for its ‘Premium’ and ‘Agni’ brands in the domestic market. The tea prices have remained firm in last couple of months and it is expected to remain firm considering stable production and increasing demand. It is also looking at expanding in the overseas market.

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Source : IIPM Editorial, 2010.

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

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Who said it’s getting murky at Merc?!

4Ps B&M: Do you believe that the increasing competition will pose a threat to your leadership position and especially are the aggressive launches by BMW a point of worry for you?
WA: For us, the important thing is to have a set of satisfied customers as it will be the only factor, which will drive sales & profitability going forward. If you look at India overall, we believe that we have a very good product portfolio and network density. We are currently investing Rs.150 crores in the network itself, both to increase its reach and to ensure that the Mercedes Benz retail experience is the best in the country.

4Ps B&M: When you talk about increasing the reach, are you referring to opening more dealerships in the Tier-II and Tier-III cities?
WA: The expansion will definitely happen in the Tier-II and Tier-III cities basically driven by two things, one is the overall situation of the city i.e. how many people are making what kind of money and how many cars are already on the road. These are some parameters that will determine where we will set up the shop next. The way we set up is in a very structured manner i.e. we will set up the service centre first, moving to sales and then slowly upgrading the sales & service experience to ensure that we give the best retail experience. If you look at the metros, we have new investments coming up there too. We are opening a new showroom in South Bombay, Gurgaon. In fact, by the first half of 2010 we will have 20+ new facilities across the country.

4Ps B&M: You also mentioned about upgrading your retail experience, what is that all about?
WA: This is an investment to upgrade our facilities for e.g. we are moving from a smaller facility to a relatively larger facility so that the consumer can savour more of the Mercedes brand.

4Ps B&M: Is it something like a boutique showroom, which BMW did recently?
WA: BMW is relatively new to the country and so are their investments. We are making all the possible efforts to ensure that Mercedes is not left behind. But I don’t think we will do a boutique showroom rather we will focus on opening significant showrooms, which will give an opportunity to the consumer to experience what Mercedes brand is all about and also experience our product portfolio.

4Ps B&M: But the per cent growth that BMW filed was almost double that of Mercedes in the last fiscal. Do you believe that it will pose a threat to your leadership position?
WA: That’s particularly because of the lower base that they have. If you look at the growth of Audi, it is currently three times to that of BMW.

4Ps B&M: Agreed but BMW again has a target of 3,000 units this year and if Mercedes does almost the same the company did in the first half (1500 units) don’t you think it will be a threat to your leadership position?
WA: For us the important thing is to have the right product and the right processes in the right year in front of the Indian consumer, which will drive both the sales and profitability going forward. We have a good position in the C & the S-class segment and we will roll out the E-class soon, which globally outsells competition.

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Source : IIPM Editorial, 2010.

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

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The BIG Man’s Holy Grail...

Behl is banking on BIG TV’s present Pay per View (PPV) bouquet to deliver. The DTH player has recently spiced up its PPV offerings with live shows, exclusive concerts, et al, while other players have stayed with mere movie content in the segment. BIG TV, in fact, was the first player in the industry to come up with a monthly subscription plan for movies in their PPV bouquet, enabling customers to view them anytime during that month as opposed to charging separately for each featured movie being offered in that month. “The response for our PPV services has been very encouraging,” agrees Behl, confident about the imminent success of their strategy. After all, as per estimates, India’s PPV segment is estimated to grow at 16% annually to log revenues of $11.3 billion by 2012. Behl is hoping for the segment to emerge as a key driver of the DTH business not only in India, but the whole of Asia. His hopes are not misplaced. Independent market research has shown that India will remain a leading PPV market in Asia with superior growth prospects in the near future.

“Over the next few years, Reliance BIG TV expects PPV to contribute nearly 10% of its revenues,” says Behl. No wonder, Behl is now also planning to introduce sports and events content in its PPV bouquet. Having already bagged the rights for the commemorative concert for Michel Jackson – ‘Live In Bucharest: The Dangerous Tour’ – the company is also in talks with other Indian and international content providers to offer more such content on their platform. Behl says that they are also looking at adding more meat to their overall content strategy. BIG TV is lining up a slew of interactive features and a major revamp of its filmed entertainment content, besides bringing in whole new range of channels, which were not available to Indian TV viewers in India till now. Rumour has it that BIG TV will be offering the entire FOX bouquet to its consumers shortly.

The other strategy that Behl is deploying to beat rivals in the segment has been drawn from his experience while working with HUL’s Vim brand almost a decade ago. “Consumer Insight is the key. While with HUL, I visited my rural consumers and even washed utensils in their homes to understand customer psyche,” he says, adding that he is planning to conduct a similar exercise at BIG TV to find out what more services could the viewers want and need. Besides, the focus is also on providing the latest technology (ahead of competitors) to consumers. With this in mind, BIG TV had launched DTH services on the MPEG 4 platform (while others like Dish TV and Tata Sky are still sticking with the MPEG 2 platform).

However, some of the enthusiasm at BIG TV has not really translated into action. At the time of launch only, BIG TV had announced that it would be coming out with a DVR based set top box that would allow consumers to record and pause live TV. But it’s almost a year now (and Tata Sky and Sun Direct have already launched the technology) and there has been no news from BIG TV of the same. Quiz Behl on that and he is prompt with his reply. “We will be offering it shortly. We are looking at providing more options to customers to choose from,” he says. The plan is also to price the DVR competitively for which BIG TV guys are currently exploring all options to offer modified DVR sets at a cheaper price. The strategy may actually stand Ambani junior’s DTH ambitions in good stead - and allow him to prove his prowess in yet another consumer-centric business.

As for Behl, the uphill journey has only just begun and requires a great deal of hard work. But then, his almost child-like passion for everything has already become the stuff of legends at ADAG. Sources who work closely with him never cease to sing paeans about his involvement with everything big and small. “Unlike other CEOs who delegate more, he worked round the clock during the BIG TV launch, rolling up his sleeves with the rest of us to ensure it went smoothly,” says a team member on conditions of anonymity. Added to his deep well of marketing expertise and seeking spirit about consumer insights, this focused approach is precisely what has endeared him to Anil Ambani. This BIG man is certainly turning out to be one big asset for the ADAG camp!

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Source : IIPM Editorial, 2010.

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

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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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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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Source : IIPM Editorial, 2009

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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Source : IIPM Editorial, 2009

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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Source : IIPM Editorial, 2009

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’

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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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