BIG... BIGGER... ADAG! - Surbhi Chawla reviews the whys and wherefores...

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If RCOM added to ADAG’s overall brand value in a ‘big’ way, BIG TV – the company’s DTH venture – also added its brilliant mite, what with its much hyped launch. Add to that tactics like the launch of the new Reliance Energy bill in Mumbai – which has a very customer friendly and an easy to navigate design – and you have a brilliant positive word of mouth doing the rounds. Having said that, it is a clear fact that the recent gas controversy has taken its toll not only on the current ranking but also on group efforts moving them away from the primary business objectives. What is more critical is the scenario if the dispute and controversy continues further, the same might affect future rankings.

But what is more important is that ADAG does not build its brand only through its customers but also through numerous stakeholders on a daily basis. Shah tells us, “Reliance ADAG stocks are investor favourites. The task at hand has been to invest in micro-marketing initiatives rather than hi-decibel campaigns.” To meet this objective, Reliance Capital brand, for example, initiated an innovative drive to connect with its premium customer base through an association with theatre (in one specific case, Reliance Capital sponsored a musical show titled City of Dreams, which went on to be a complete sell out). ADAG, in the meanwhile, has kept reaping the benefits of being a valued brand for investors. The Reliance Infrastructure Fund, despite the market conditions, saw contrarian participation of over Rs.2,000 crores from retail investors, a figure which went completely beyond the forecasts.

The year 2008-09 also saw ADAG migrate ADLABS to BIG cinemas and heralded the launch of new BIG multiplexes across the globe, including in Malaysia and US. The BIG brand was also in the news for inking a multi billion dollar deal with Steven Spielberg to produce Hollywood movies.

“The BIG TV Brand will become even bigger with well planned & executed BTL & ATL [below the line, above the line] campaigns nationally,” adds Shah. Brand ‘BIG’ is also expected to strengthen ADAG’s play across platforms in the media and entertainment sectors, utilising the group’s education arms, NIS Sparta and NIS Academy. So where to from here on? How does ADAG make the last mile jump from the number three position to number one? With a lot of patience, and a little lesser of, well, controversies...

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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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Indraprastha Gas Ltd.

Entry Price: Rs.144
Target Price: Rs.161
EPS: 15.4 (FY10E)
P/E: 9.4 on FY10E EPS
Time Duration: At least one year
Rationale: Promising business model, robust growth in CNG vehicles and PNG customers in NCT of Delhi, timely expansion plans and low industry competition provides a long term & stable visibility to company’s future performance and growth trajectory. However, due to the supply side pricing constraints, margins are expected to remain under pressure.

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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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ANISHA MOTWANI, EVP, MKTG, MNYL

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1. Cadbury’s ‘Kya swaad hai zindagi ka’ campaign
2. ‘Thanda matlab Coca Cola’ campaign
3. The ‘Czechoslovakia’ ad from Max New York Life Insurances
4. ‘Yeh Fevicol ka mazboot jod hai, tootega nahin’ commercial
5. Closeup’s ‘Kya aap Closeup karte hain’ campaign

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

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S. NARAYAN, MKTG MNGR, VOLVO INDIA

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1. Airtel’s ‘India ka atoot network’ campaign
2. Happydent White
3. Thums Up
4. Chevrolet’s ‘I’m Indian, I’m Chevrolet’ campaign
5. Sony Ericsson’s ‘Thump!’ campaign featuring Hrithik Roshan, which led to growth in Sony Ericsson’s market share

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S. D. GUPTA, VP, CORP AFFAIRS, WHIRLPOOL

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1. Happydent chewing gum’s campaign for sparkling teeth
2. ‘Yeh Fevicol ka mazboot jod hai, tootega nahin’ campaign
3. Asian Paints’ ‘Har ghar kuch kehta hai’ campaign
4. Maggi Tomato Ketchup’s ‘It’s different’ campaign
5. ‘Mummy ka magic;’ campaign from Whirlpool

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

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Godrej’s strategic makeover...

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Adi may be old in years, but he does not want his brand to look old for sure. So to reinvigorate brand Godrej and give it a youthful appeal (at par with his aggressive Korean rivals), Adi Godrej and his senior management team adopted a complete makeover strategy for ‘Godrej’ at the beginning of FY 2008-09. The message of change was drilled into the collective psyche of the 23,000 strong Godrej ‘family.’ At that time, Adi Godrej told 4Ps B&M, “There has been a major change within us and we at Godrej have welcomed this change. Our employees have responded to this change positively.” The makeover, complete with fresh colours in their durable portfolio, paid off handsomely for Godrej. The group invested smartly in IPL’s season I to communicate the change. Ask them and Godrej Consumer Products Ltd. (GCPL) claims that the makeover gave required thrust for brands like Cinthol and Ezee. Insiders claim that the overall group has seen topline growth of over 20% in the year ended 31st March 2009. It’s April 2009, the onset of another fiscal year; the future beckons and the sprawling 3,500 acre Godrej ‘campus’ in Mumbai is still reaping in the gains of change!

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

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“It is not an ideal scenario”

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From shift in the IPL’s venue to the overall cricketing in the sub-continent. satish chapparike caught up with ICC’s Chief to talk about all this and more...

4Ps B&M: What’s your view about shifting IPL from India?
HL: Safety and security is paramount and IPL is a domestic tournament run by the BCCI. If the organisers and the Indian Government are unable to reach a compromise to allow the tournament to take place with what are deemed to be the necessary levels of security, then those organisers will do what is in their best interests. From the IPL’s perspective it is not an ideal scenario.

4Ps B&M: Do you think that the terror attacks in Pakistan will have a long term impact on cricket in the sub-continent?
HL: Security has always been a concern no matter where the game is being played. It is impossible to predict the long-term impact of the issue on cricket anywhere. It is something that we have said we will begin to discuss at the ICC’s Board meeting, set to take place in Dubai in the middle of next month.

4Ps B&M: The situation in Pakistan, Sri Lanka and India is worrying. So what is going to happen to 2011 World Cup, which is slated to be played in the sub-continent?
HL: Currently there is no plan to change the hosts of the 2011 ICC Cricket World Cup. The sub-continent countries – Pakistan, India, Sri Lanka and Bangladesh are still the hosts of the event. We will continue to monitor the situation closely. However, there is always a back-up venue for any major ICC event and for this event it is Australia and New Zealand, which was agreed by the ICC Board sometime ago.

4Ps B&M: Don’t you think IPL is growing beyond BCCI and ICC in terms of business venture and economic goliath?
HL: IPL is owned and run by BCCI, which is a member of ICC. IPL is a domestic event and to try to compare it to an ICC international event is not appropriate. ICC events such as the World Cup and the ICC World Twenty20 involve international teams, which are also ICC member countries.

4Ps B&M: One cannot deny that there are talented young cricketers in ICL who have been denied a chance of representing their country. Comment.
HL: ICC is in favour of a resolution to the issue of ICL, as that is in the best interest of cricket. It is an issue that will be considered during the ICC’s next Board meeting in Dubai.

4Ps B&M: With Twenty20 becoming so popular, will test cricket become extinct?
HL: Test cricket is the pinnacle of our game, cherished by international players as the ultimate in our great sport. Our members have also expressed a desire to ensure the primacy of international cricket, particularly test cricket. In fact they have formed a working group made up of representatives of all ICC members to ensure that test cricket is promoted well so that it continues to flourish. ICC and its members believe there is space for all three formats of the game to be embraced by all.

4Ps B&M: What are your plans to revive test cricket?
HL: Test cricket is strong. One simply needs to look at the recent series between South Africa and Australia & the ongoing performance of the Indian cricket team to support this fact. ICC’s members are determined to ensure it grows stronger and the working group referred to already is one way of ensuring this. Each format has its own history. Test cricket is 132-years-old but still appeals to many people around the world. Even ODIs have been going for almost 40 years and have produced nine ICC Cricket World Cups dating back to 1975. Twenty20 cricket too has brought a new audience to the game, inspired a more positive approach in the other formats and produced a thrilling inaugural ICC World Twenty20 in 2007. The game is lucky to have such a great spread of formats.

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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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Satyam and Subhiksha! The two have a deeper connect than just the alliteration effect.

The former is a case of malfeasance and the latter may be driven by negligence, but both represent failures of India Inc. in these troubled times, says Pawan Chabra...

It’s like the lull after the storm. The two-storey structure in Delhi’s Neb Sarai district wears a deserted, gloomy look. On the ground floor, a big, rust-eaten lock has shut the door to the Subhiksha discount store that services the area, telling a tale of gross mismanagement and misplaced ambitions of R. Subramanian, the 40-something managing director of the now floundering retailer. The top floor residence converted into an office is home to the north zone headquarters of Chennai-based retailer. But that was till a few weeks ago. Employees on the retailers’ rolls (who incidentally have not been paid their salaries since October) have stopped coming to work because vendors and the landlords’ goons hound them for unpaid bills. The empty cubicles here today tell another poignant tale of the more than 20,000 direct and contractual employees of the disgraced retailer...

“You can’t trust RS (R. Subramanian),” a senior manager at Subhiksha’s Delhi office laments on condition of anonymity. “In our last telecon, he told me he’s sending October-November salaries for the entire office. The cheques did arrive by post, but only to bounce the next day,” he adds disgustedly. It’s not just the employees at the beleaguered retailer, investors, banks and sundry other creditors who are chanting a similar mantra: overnight, the dapper IIM and IIT educated entrepreneur, R. Subramanian has turned from being a hero to a big zero. To be fair, his business model was indeed outstanding and arguably even copied by the likes of Kishore Biyani and Mukesh Ambani. Those who once recognised him to be a dynamic, intelligent man and hailed his ability to talk on two mobile phones, use the laptop and still have a business dialogue with those sitting across the table from him; are now on a fault-finding spree. “Subhiksha was a firm centralised in R. Subramanian. There was never any management committee that we knew of; the CFO could not sign a Rs.5 cheque; and there were no balance sheets available for the last one year,” says another hapless Subhiksha employee. For the year ended March 31, 2007 (there were no accounts audited after June 2007), Subhiksha’s profit before tax was Rs.18.36 crore on a turnover of Rs.839.56 crore.

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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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With the success of the FZ16 & YZF-R15, Yamaha India is back with a vengeance.

So does this dual-blast attack leave the current premium segment topdog, Bajaj Auto panting? Pawan Chabra answers...

What’s ‘power’ when it comes to two wheelers? Is it more vital than ‘mileage’, for aren’t bikes supposed to go light when it comes to burning that lethal hole in your wallet? So what’s more important? Well, the answer is – both, depending on when! Confused? Recall how Yamaha set the Indian roads on fire for two-wheelers with the launch of its RX100, then considered perhaps the most therapeutic creation man had ever created for India! That was reality then, and suddenly ‘power’ had attained an all new meaning for the Indian two-wheeler freaks! Cut to today, you’d learn to appreciate that the bookish types were after all right when they’d claimed how fuel costs would one day become an important determinant of consumer choice in this product category. Power-bikes had failed in the face of Hero Honda’s ‘fuel-efficiency’ might. Yamaha, was merrily grounded, and worse, with time, it faded into the past... living merely for the sake of its past glories!

Then the inevitable happened, proving how no thought, technology or even product for that matter lasts forever. And suddenly power-hungry speedo-maniacs found another reason to raise a toast to the longevity of their adrenaline glands! The Pune-based Bajaj Auto launched the Pulsar range in the year 2000, and the premium segment simply came alive... resurrected! Power-bikes were back into being fashionable amongst the Indian populace! And this trend continues till date. So what’s the latest in this game of Mr. Might versus Mr. Mileage? Well, Mr. Might continues to rule (at least for now), and has even found another contender to don the top hat in Yamaha India!

Interestingly so, Yamaha’s slumber has been broken. And don’t bless the ever rising summer temperatures in India for this; it was perhaps the pain of having been banished from two-wheeler stardom as long as 13 years back that played the alarm gong! The R15 & FZ16 launches just worked magic for the company – precisely what the doctor had prescribed. Even though the models are not crank happy rocket-ships like the legendry RX100, they offer much more for the present style & performance craving youth. The premium offerings have taken the market by storm. If numbers speak louder than words, here are some for the uninformed: Yamaha posted a mind numbing 192% growth in the month of January 2009 (sales for January 2008 stood at 18,320 units), while on the other hand, arch-rival Bajaj saw its sales deflated by a heart-rending 34%. The irony is that,w Yamaha can continue giving more nightmares to Bajaj. But is comeback ‘sustainable’ is the question to be asked...

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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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Swords are flashing in the skies as aircraft majors Boeing and Airbus get ready to fight with grit and splendour.

4Ps B&M’s Ratan Lal Bhagat scans the battle field...

Swaying the razor sharp swords, delivering flying kicks, mind-numbing punches and artful killing moves; the Samurais were the ultimate masters of war. Fighting till their last drop of blood, the Bushido following knights did everything to keep their flags flying high. Even in the worst situations their sole motive was to knock their opponent down and emerge victorious. Today the global skies are witness to a similar warfare between two modern Samurais, Airbus and Boeing, masters in their own right. After rivaling each other in almost everything, the two are fighting the Battle of Kawanakajima and the victor will take the honours. In these difficult times winning or loosing is a matter of survival; a minor slip and the other would deliver the deathly kick.

For decades Boeing had been the undisputed emperor in the arena with numerous successful jetliners. Hinged with multiple projects being pursued and then being cancelled (the Sonic Cruiser project being one of them), Boeing began to lose ground to a competitive and aggressive Airbus. Subsequently in 2003, Boeing lost the crown of market leader to Airbus, which gained an upper hand by offering an aircraft in almost every commercial aircraft class. The Toulouse based manufacturer has gradually expanded it’s family of aircrafts that now includes the A330, A340 and the mammoth A380, making a huge dent in Boeing’s market share. The A320, for instance, has been preferred by several low cost operators over the traditionally used B737 series. “Not only does it (A320) offer the widest fuselage in the market but it offers the most space and passenger comfort. When it comes to operating cost the A320 Family is simply the best,” said John Leahy, COO, Airbus. But Boeing has no plans to take the blows lying down and is leaving no stone unturned to gain back what it lost. The American is all set to combat the Airbus lineage with its own salvos including the 737, 777, 747-8 along with its most ambitious and talked about project: the Dreamliner 787.

In a major blow to Boeing, however, customer expectations for higher operating costs have helped Airbus outdo Boeing. “Airbus aircrafts are considerably more fuel efficient and profitable, and many airlines plan to replace aging aircrafts with the new planes,” supports Michael Englund, Chief Economist, Action Economics. Airbus has also developed a universal cockpit design for its entire fleet. This helps in optimum pilot utilisation thus saving training cost. This eventually has led to the increasing market share of Airbus lately.

Over the last fiscal, Airbus has won 777 net orders (900 new gross orders), valued at a mouth watering $100 billion at catalogue prices. “At Airbus we are prepared and confident: our leadership team is aligned, integration is progressing well and we have a solid financial basis...” said Tom Enders, CEO, Airbus. This has fuelled the growth of Airbus in terms of market share now at 54% for all commercial aircrafts. “In terms of aircraft deliveries, Airbus exceeded Boeing in 2008 by more than one hundred planes (483 to 375), but Boeing had to defer delivery of approximately 100 planes because of a labor strike,” explains Craig Fraser, Analyst, Fitch Ratings, thus discounting the lead and putting both of them on the same podium.

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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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In India, the idea of corporate governance is well received; however, its implementation is left stranded.

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Regulators certainly need to develop draconian teeth just like the US had put in after the Enron case, feels Manish K. Pandey…

It was just three months ago, when it had won the coveted Golden Peacock Global Award for Excellence in Corporate Governance for 2008. Come 2009 and B. Ramalinga Raju, the former and now disgraced chairman of India’s fourth largest IT firm, Satyam “relieves the burden on his conscience” by bringing to light, one of the biggest-ever frauds in Indian corporate history. Shocking, mind-numbing, atrocious, disgraceful, cheats, and so on… adjectives pour in from all directions as the mystery starts unfolding.

Events still continue to unfurl but as they now pave a way deep inside Satyam’s financials it’s clear that Raju couldn’t have done it alone. As per critics the pliant partners at Price Waterhouse, the so-called ignorant directors, nearly quiescent government body (Ministry of Corporate Affairs) and, above all a horde of politicians who supported Raju (presumably for favours) were his shrewd partners in the crime.

In whatever direction the investigation may point out, but the Satyam fiasco has certainly revealed the dark underbelly of Indian capitalism. It has not only questioned the integrity of promoters but also the levels of corporate governance in India. The objective of the corporate governance is to build an environment of trust and confidence among shareholders by augmenting company’s performance and accountability. So how can a management with only 10% stake decide on a Rs.80 billion investment and 90% of the shareholders have no say at all in the deal? Isn’t it just a mockery of corporate governance rules?

Certainly this is not for the first time that such a thing has happened. Instances ranging from the South Sea Company in 1720 (popularly known as South Sea Bubble where the company got exclusive rights to trade in the South Seas through unethical means) to Daily Mirror’s Robert Maxwell in 1980’s (manipulation of the pension schemes run by Maxwell’s businesses), to Enron in 2001 (that created a web of SPVs to hide debt on its books and inflated revenues), to Lehman Brothers in 2008, and many others alike prove the point at the international front.


Even in India it’s not for the first time. However, the only difference is that the scandals are not of this magnitude. Like Satyam, Sterlite too was alleged to adopt fraudulent practices to bag a tender floated by GAIL last year. Even Bearings (promoter of BFL), abstained from voting when their business was getting acquired by MphasiS. How can we forget Global Trust Bank, where the auditors were again Price Waterhouse?... India Inc. too is full of such examples.

No doubt change has come to corporate India - from family-owned businesses that were involved in issues such as nepotism, mismanagement, lack of transparency, et al to a scenario where companies are professionally managed – but the pace of it has been really slow. Even today still more than half of the companies on the benchmark indices Sensex and Nifty are family-controlled which hampers the evolution of corporate governance in India. In an exclusive interaction, Naresh Gupta, MD, Adobe India tells 4Ps B&M, “Indian corporate culture is still in a nascent stage as opposed to their American and European counterparts. Moreover, a deep integration with global environment has quickly come to them. But, Satyam fiasco will make sure that corporate governance matures in India.”

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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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‘Singh’ definitely is a ‘Kingg’

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

As Akshay Kumar romanced Katrina Kaif in Egypt, it became one of the biggest thunderstorms to have hit the tinsel town in 2008. The buzz created by Singh Is Kingg was such that it became a runaway hit even before it was released and earned great bucks in paid previews: Rs.50 lakh in India and £50,000 in UK. The rustic innocence of Akshay Kumar as a village-boy made him the undisputed King of Bollywood. In fact, what made this flick iconic was the fact that just before its release, Manmohan Singh won India’s first confidence vote of the decade in the Lok Sabha on July 22, 2008 enabling him to pursue the Nuclear Deal with US. The release of the film also coincided with the Indian cricket team’s Australian tour, where Bhajji, after the much hyped quarrel with Andrew Symonds became another King for Indians. Good or bad – publicity is, after all, publicity!

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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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No more selfish motives in broadcast media

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The Telecom regulatory Authority of India (TRAI) which also regulates the broadcast media has advised the political parties, religious bodies, urban and local bodies and state governments to stay away from public broadcasting. The regulatory authority has recommended that political & religious body and the state governments should not be allowed to run and own broadcast outfits like cable, DTH, TV channels et al. Those who are already involved in such business should plan to phase out in another three to four years. The recommendations, if made binding by the government, will surely benefit the broadcast industry as the involvement of such parties in the business has put a question mark on the integrity of the medium. There have been debates on the issue raising concerns that such involvements may lead to the misuse of the medium to fulfil the political and other considerations of the party in concern.

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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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IS GREEN THE WAY TO GO?

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With global success stories like these to swear by, almost every marketer in India is wondering whether the green gamble will pay off this side of the Indus! And instead of losing sleep over the question, they are following the age old way – that of testing the market by soft-launching green products and services and letting consumers be judge and jury. Leading the pack without hesitation are the IT behemoths, who know that they can’t forever avoid the growing breed of environmentalists who swear by the sword to oppose them for anything that hurts the environment. If HCL Infosystems, the lone Indian-origin hardware company, introduced a complete lineup of eco-efficient consumer and business notebooks, compliant with the RoHS (Restriction of Hazardous Substances) directive last year, global giant Dell plans to produce (and also market in India) laptops and desktops that will use 25% less energy by 2010. Many IT majors have even begun designing their products in consideration of its environmental impact at each stage of the product’s life cycle. While the first steps have only just been taken in India, globally technology giants have been benefitting from their green initiatives for some time now. Apple, in fact, has discovered that going green literally translates into alternative revenue streams. Apple recycled 13 million pounds of e-waste in 2006, equivalent to 9.55% of all Apple products sold seven years earlier. Watchers at Apple expect these revenues to reach 20% in 2008.

Even Big Blue is keenly acquiring green hues, and is not restricting itself to merely eco-efficient notebooks. Under ‘Project Big Green’, IBM is selling green solutions to those corporate data centres where energy constraints and costs are limiting their ability to grow. The promise is that these solutions will help each data centre to cut their energy costs by half (a typical 25,000 square foot data centre spends $2.6 million in power annually). In India, the Big Blue (or should we say green!) has already executed data centre projects exceeding 2.5 lakh square feet for over 55 clients. Neeraj Sharma, Director, Infrastructure services, IBM (India) told 4Ps B&M, “Monetarily speaking, IBM saw strong signings performance of its Green Data Center services offerings that were announced in the second quarter of 2008. Nearly $220 million in new business have been signed in the 2nd quarter of 2008.”

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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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Gyanendera Kashyap of 4Ps B&M analyses the ifs and buts of the deal...

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Is it the futuristic upturn in the auto industry or merely a ploy to eliminate competitors that is guiding the merger negotiation between GM and Chrysler? Gyanendera Kashyap of 4Ps B&M analyses the ifs and buts of the deal...

Centenary celebrations for General Motors, indeed glorious for the long-heritage American carmaker; but what did it receive as its 100th birthday gift? An accumulated jaw-dropping $58.41 billion in net losses for the bygone quarters! And then there was the uninvited Wall Street devil, doing all in its might to break the backbone of all Detroit four-wheeled giants. So what’s it like for GM today? The firm, arguably is currently in the leanest phase in its history, so much so that some critics believe that filing for bankruptcy would be the best hope pill to cure the fatal disease of extinction.

Over the last five years, it has invariably been in the red and on a cumulative basis has suffered losses to the tune of a pathetic $44.57 billion. The reasons: sales and profits have declined in the past many quarters for all three; manufacturing units are being closed down, again by all three; and most importantly, while the entire American auto industry is reeling under pressure, two of them (GM & Chrysler) are discussing a possible merger (Christ!!!). David Wyss, Chief Economist, Standard & Poor, attempts an explanation of the turbulent environment as he points out, “Sales of new vehicles are hurt by the recessionary economic environment and the increasing difficulty of financing for US buyers.” Very true for US, but the current situation as a result of the ongoing dislocation in the credit markets and deteriorating economies in Asia and Europe are no different for global automakers alike. Amid this turbulence, consolidation cannot be ruled out. And this is exactly what GM and Chrysler are talking about. Negotiations in the power corridors of Detroit are reflective of the competition from Japanese automakers and the need for restructuring. But what is worth pondering over is the fact that a year earlier, GM (which had lost out the bid to merge Chrysler with itself to Cerberus Capital Management) had concluded Chrysler wasn’t a good fit. A year later, and suddenly so, it thinks that it has found a saviour and is discussing a possible merger?!

Usually mergers account for more job losses rather than additions, and this is what is the worrying fact. At a time when behemoths are filing for bankruptcies and seeking for Fed assistance, downsizing in the name of corporate restructuring would amount to an absolute catastrophe. Skepticism prevails over the merger or a tie-up between GM and privately-held Chrysler, as it would not do much to address either company’s financial issues in terms of reducing structural costs. As a matter of fact, over the bygone four quarters, GM has posted terrifying losses and its sales of $38.1 billion during Q2, 2008 represent a fall of 18.2% as compared to the same period a year back. On the other hand, Chrysler lost $510 million during the first quarter of 2008 and its sales declined by over 25% as compared to the previous quarter. (This also raises questions over the logic behind the valuation of Chrysler at $7.4 billion which was bought by the PE firm Cerberus Capital Management last year.) Moreover, given the fact that GM is trying to free up $15 billion by 2009 and Chrysler’s admittance that it won’t be in a position to post profit in 2008, the merger is clearly not a ‘natural and healthy’ fit for the two ailing bigwigs! Instead a partnership or expanding existing ties would be more financially viable.

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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 scramble is on in Africa

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Africa has certainly captured the world’s at­tention. In fact, global leaders – both business and political – are making regular and long stopovers at a land once called ‘The Dark Continent.’ Raison d’être: Africa is on the verge of an economic rebirth. Statistically, many of the fastest growing economies in the world are in Africa, providing global brands an opportunity to invest and reap returns. “After Africa there will be no ‘there’. The landscape has its challenges but there are large returns to be made,” agrees Dr. Aditya Dev Sood, Founder, Center for Knowledge Societies, which recently came up with a report on the Tata-fication of Africa. And that’s the reason why every sane country or brand in the world is busy making plans for its Africa sojourn, if not already there. The most desperate of the lot seem to be the two Asian giants – China and India – who not only have flooded the continent with their wares but are also gearing up for a war which will result in the next colonisation of Africa, but this time in terms of brands. Jindal Steel, Kirloskar, TCS, Tata Motors, Aptech, Satyam, SBI, Bank of Baroda, Exim Bank, Ranbaxy, Cipla, HCL, NIIT, Dabur, Tata Coffee, BHEL, Tata Power, Suzlon, Essar, OVL, Havells India, Videocon, UB group… the brand list from India goes on and on! Even those who seemed to have lost their past glory in the continent because of the colonial preeminence are once again making strategic investments across the continent. For instance, Tata Motors was a well known truck brand in Africa well into the 1960s, when it was finally supplanted by European competitors (once the colonial powers in the continent). Now, the resurgent Tata Group has been making strategic investments in Africa to regain its supremacy. In fact, the Group wants to launch its much hyped people’s car – Nano – in Africa much before its official launch in India.

And that’s the case with every other Indian brand. While FMCG major Dabur has recently set up a new manufacturing facility in Nigeria with an investment of about $4 million, the $5-billion durables-to-oil Videocon Group is gung-ho over its African investment plans ranging from telecom to consumer durables to oil. The Exim Bank of India has recently (in March 2008) signed a MoU with African Export-Import Bank (Afreximbank) to extend a $30 million line of credit to finance Indian exports to Africa.

Says Pawan Goenka, President, Mahindra & Mahindra, “There are a couple of important markets like Africa on our radar. Though 95% of our sales come from India at present, but we will have a separate renewed strategy for these markets soon.” There are more examples of such Africa-fication by Indian brands. In fact, CII expects India’s exports to reach $500 billion by 2013, if the past growth trend continues.

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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.
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gyanendra kashyap moves amidst the marketers this festive season and discovers that it really is the best of times and also the worst of times...

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Be it India or the US, the fun and frolic of the festive season will be far from what it used to be. Haigh offers his candid view, “This year’s festive season is most definitely going to be a less merry period for high street retailers. With consumer credit shrinking, retailers are going to feel the squeeze as consumers look to cut credit spending habits on gifts by looking for alternative, cheaper, value for money options.” However, in the case of India, experts are grasping at potential silver linings. Shushmul Maheshwari, CEO, RNCOS E -Services, spells optimism, “The recent pay hikes and arrears given to more than 5 million government employees after implementation of 6th Pay Commission report can bring back the lost momentum in the industry. Rising advertising expenditure, various promotional schemes will give further boost to industry sales.”

But while an increase in advertising and marketing spends by companies have upped sales in a majority of categories, yet the distressing fact is in the weakening rate of acceleration. Take Agro Tech Foods (Sundrop, Act II, Rath), which increased its ad spend by 70% in 2007-08. Its sales have tanked correspondingly by 2.64%. Similarly, P&G Hygiene and TTK Healthcare, which increased their ad spends by 11.44% and 5.45% respectively, saw a corresponding drop in sales by 6.14% and 6.45% and the list continues with the sorry saga.

So is advertising the pivotal point which governs sales? Maheshwari explains, “More than ad spending, consumer purchasing power plays an important role in driving sales. Although various companies have increased their ad spending by 15% to 20% in the past but high inflation, sky rocketing consumer loan rates and shrinking disposable incomes are slowing growth rates in 2008.” To overcome the tumultuous phase, Titus, Senior Creative Director, O&M, suggests, “Companies could have a meltdown budget. Keep money aside. And if there is no fall, then the money can be classified as savings.”

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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.
IIPM Programme :- SUPERIOR COURSE CONTENTS
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When IIPM comes to education, never compromise
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Why is HUL worried?

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Predictably, for now the categories that are attracting maximum momentum in Indian retail are low-involvement ones – food (especially staples), perishables, personal care, apparels and accessories. Let’s say a Mrs. Roy goes for her monthly shopping to a Big Bazaar outlet. She assuredly picks up HUL’s Surf Excel detergent, moves on and picks up Care Mate, an in-store personal care label of the retailer, loves a Tee she bought for her 3-year old (the brand is another in-store label called Little Devils), but when she reaches the dairy products section, she can’t see her favourite brand of butter (it’s there actually – hidden in the second row). What she sees instead is Fresh-n-Pure butter. Puzzled, she asks the in-store helper for his opinion, who assures her of the quality. Even the price is lower than the usual big brand she buys. Boasts Rakesh Biyani, CEO, Future Retail: “The price that we offer is also much lower than any other player.” Result: she happily drops Fresh-n-Pure butter into her overflowing shopping bag and makes for the cash counter.

And that, my dear reader, in a nutshell, is why big brands are feeling the heat. Hindustan Unilever, P&G, Marico and ITC to Madura Garments and Arvind Mills have begun shivering in anticipation of the brand bloodshed that awaits them. As the organised retail cart gathers more momentum, and as more retailers realise that private labels not only give them better margins (they can rake in as much as 20% higher margins as opposed to outside brands), but also put them in a position of strength to negotiate betters terms with the big outside brands, the die will unflinchingly be cast in the retailer’s favour. In the US, 20% of all store sales on an average come from private labels, and the percentage zooms up to about 30% and over 50% in Canada and Europe respectively. And while some retailers have tuned in to the Marks & Spencer model a la Tata’s Westside and Trent, others like Spencers and Nilgiri have proven that even the supermarket model (a healthy mix of private labels and outside brands) can flourish in India. Explains Thomas Varghese, CEO, Aditya Birla Retail, “That private brands are slowly beginning to capture share of market in almost every category is a fact. Sales are increasing at rates faster than the national brand counterparts.”

As for the consumer, he is lured by the promise of similar quality and a cheaper price tag. A big reason why private labels are priced competitively is because they have virtually non-existent marketing and distribution budgets. Marketing is done for the store rather than for in-store brands. While this may be a point of frustration for many private label managers, yet absence of such costs enables retailers to pass on the benefit to consumers and also improve overall product quality. Walk into a Westside store, and you’ll see sneakers that look similar to a pair of shoes from Nike, just at much lower prices. Nike refuses to comment and when we asked Smeeta Neogi, Head-Marketing, Westside, she simply said: “We don’t see a reason for a brand to be threatened by another.”

But the fact is that in-store brands are winning the price war. There is also the underlying factor that the point of purchase (the retail store) is under the retailer’s control and he can choose to display his brands more favourably than outside brands. Adds R. Subramanian of Subhiksha: “We focus on in-store advertising for our brands as it influences the buying behaviour of consumers.”

However, organised retail has only just penetrated 5% of India’s total retail environment. So, clearly these private labels are missing out on a large untapped market segment. Besides, low prices cannot entice the really brand conscious consumer. Analysts feel that this is where branding comes in and global retailers like Wal-Mart and Tesco have set a classic example of positioning their private labels by deeper penetration, and by tying up with other retailers across segments. This ‘multiple availability’ format ensured that global retailer Carrefour could create successful brands in the personal care segment. Has the same begun to happen in India? “You can’t tie up with rivals to promote your private label, but you can always do that with players who are not into typical retailing business,” replies Damodar Mall, CEO, Innovation & Incubation, Future Group. Sources reveal that Future Retail is already mulling a tie-up with BPCL’s In & Out Stores. Such multiple availability of these private brands will send the signal that a new brand has arrived in the market. But that’s not enough to create brand value. Retailers are now resorting to channel blurring, and in some instances, even advertising their respective brands (Remember John Miller from Future Brands). “If food services companies bring their products on retailers’ shelves, then retailers can also sell their products through food service outlets. Such co-branding is common in Europe,” explains Jonathan Banks, Business Insight Director, The Nielsen Company, UK.

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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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When IIPM comes to education, never compromise
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Are the heydays for American legacy brands over? Steven Philip warner wonders...

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Another arrogant American brand Tommy Hilfiger is undergoing a similar trauma. Where ‘European’ brands like Gucci, Louis Vuitton, Chanel, Cartier, Christian Dior, Fendi, H&M, Zara et al find a mention in the 2008 Milward-Brown rankings of the world’s top 100 brands, the American Tommy is nowhere in the list! Legacy, right? Tommy unlike its European counterparts refused to allow its garments’ production units to move to low-cost nations, advertised to the bare minimum, and all we have today is a shadow of what Tommy Hilfiger was! It has been plagued by what Beth Higgins of Euromonitor International states as, “Yesterday, it was a company-oriented marketplace. Today it is focused on the customer. The companies should keep innovation up.” Lack of innovation and pricing faults got better of Tommy!

Then there are other American brands which have just failed to give up the addiction to ‘I am legend’ tag; GM being one. Its glorified Hummer and other fuel-guzzling machines and its unwillingness to move towards making fuel-efficient cars have brought the brand close to the hangman’s noose. Ford is another example. Having been the supplier of vehicles to the US army, the ‘big-car-big-engine’ maker forgot that the consumer market is more elastic than the armed forces. Result: despite having made efforts at revamping its product mix, the company has not been able to make any ‘brand revival’ impact on consumers. Both Detroit giants were too proud about the economies of scale they had achieved. The result: Ford and GM reported the highest loss ever in their histories during 2006 & 2007 respectively; both being the global highest for those years!

Then there are instances of big business for banks becoming bad business for brands. Think about it, Citi, the world’s largest banking giant has lost value on both globally recognised branding rankings – Interbrand’s Survey 2008 and Millward Brown’s 2008 Survey. New CEO Vikram Pandit is taking bold steps, hiving off unprofitable assets and taking bolder job-cut decisions. But will it revive the once glorified and legendary Citi? Ask a broker on Wall Street, and he’d bet more on a sub-Saharan bank! But then, Citi isn’t the only one close to the grave; names like Merrill Lynch, Lehman Brothers, Bear Sterns, Freddie Mac and Fannie Mae have already kissed the dust. Guess why? Unlike their competitors, the brands had no representation in retail banking and had grown to what they were by taking huge risks! One day, the bet didn’t pay off and it was over for them. Realising this, Goldman Sachs and Morgan Stanley have even denounced their investment banking dreams having received a nod from the Fed to start off a retail banking arm on September 22, 2008. Guess you’ll soon have a Goldman Sachs bank branch opening right near your home… Would you trust your savings with it?! There are also experts who doubt the very fact that the American financial giants had strong brands, ever! One Brent Scarcliff, Creative Director, Scarcliff-Salvador Inc. feels that, “Companies like Merrill Lynch, Lehmann Brothers and Citi never had strong brands; they are commodity companies who are highly vulnerable...” Their model of existence had clearly become unsustainable, but they gave a blind eye to the warnings; they were too proud to! Experts, weren’t they? Now, encomiums would be written about them whose brands crashed faster than even the twin-towers!

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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.
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IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA
IIPM - Admission Procedure
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IIPM : EXECUTIVE EDUCATION
IIPM’s 36th Glorious Year of Academic Excellence
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...

Korean and Japanese clients treat agencies like ‘agents’ or ‘suppliers’

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Sprint across from telecom to consumer durables and the story is no different. In a sector dominated by just 5-8 major advertisers, the year 2007 saw 11 accounts coming under review. Insinuating at the frequent agency changes in the segment, a top-notch veteran of the ad-world, under condition of anonymity, fires: “Korean and Japanese clients treat agencies like ‘agents’ or ‘suppliers’. They believe that suppliers have to be changed every now and then... Worse, agencies are putting up with this rubbish.” Clearly, ad agencies have cause to worry. Their very raison-de-taire is under threat?

Besides, competition and media fragmentation is forcing advertisers to acknowledge that it’s really not easy to reach out to the masses with frugal budgets. If ad spends in 2007 totaled Rs.22,721 crore; estimates suggest that the sum will rise to a mind baffling Rs.36,731 crore by 2010. Rising ad spend is accompanied by an even greater weightage on accountability from the clients side. Every paisa spent on communication needs to count, be justified and superimposed with insane media costs, life is not getting any easier for marketers. “Margins are coming down. Competition is heating up. The business is getting cut-throat with cost-benefit ratio and value-for-money aspect taking on scary dimensions. Market dynamics have changed and most categories are swirling in turbulent markets,” offers Dentsu’s Gulu Sen, suggesting that the scenario is prompting (forcing?) clients to get sharper, clued-in and informed.

The perform or perish scene is adding to the already high churn-rate of CMOs in companies – average tenure of a marketing chief nowadays is at best 18-24 months in the high drama, high competition environment. Small surprise that a new CMO prefers to bring in an agency that he/ she is comfy with, so that he rakes in results quickly to please his new bosses. And here’s the biggest proof of the diminishing role of agencies. In the good old days, when agency was partner, creative hotshots had access to even the CEO, MD and Promoter of the company; now his area of influence has been reduced to just the brand’s marketing team, so the call for changing the ad agency can actually be taken at the CMO level. So while CMOs are lamenting the seeming lack of adrenalin-pumping enthusiasm from their agencies, the flustered agency guys are almost taking it as a personal insult.

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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.
IIPM Programme :- SUPERIOR COURSE CONTENTS
Now IIPM's World-Class Education... for everybody!!
IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA
IIPM - Admission Procedure
IIPM, GURGAON
IIPM : EXECUTIVE EDUCATION
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...