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Veteran Ad-Guru Alyque Padamsee is up next with all cylinders firing! He endorses the last point vehemently. “New agencies inducted, immediately get into the act and one of the first things they do is trash the stuff that the previous agency did”. He cites the case of the classic LIRIL campaign where the girl, waterfall and signature tune defined the brand. “Now we have it replaced by this re-play of an old Levers launch of 2000! And, does anyone really care about how many parts of the body … I mean, how ridiculous!” He reminds us that THE MARLBORO MAN remains intact and continues to rule. So does the MRF mascot and the UTTERLY BUTTERLY girl. “Clients must really be very careful before leaping into a zone of changing for the sake of changing”. Hi-Profile Artist Sanjay Bhattacharya is more direct. “I think it’s become a fashion today to demolish anything that is traditional in the name of being contemporary, relevant and consumer-driven. It’s total bullcrap and only reflects their inability to intelligently and creatively blend the time-tested brand value with new-age focus. There is nothing wrong with moving away but, my feeling is that it’s done mostly to be perceived as a product or corporation that is keeping with the times … how defensive, insecure and negative!” Ogilvy’s NCD Abhijit Avasthi winds up this debate with his very own evolved perspective. “For me, a mascot is a property that any brand would have created and built up. The issue is the level and depth of work invested into this mascot over time, to constantly maintain a meaningful connect and relevance with the targeted constituency. That is THE real key”. He feels that the Onida guys must have their reasons to do away with the devil. As for new teams and agencies demolishing all work of the old teams, he believes “only a silly, insecure and immature people would take that course. Smart teams would see the big picture before deciding on the way ahead”.

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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 Sunday Indian:- B-SCHOOL RANKING SCAMSTERS EXPOSED!
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The Indian automakers are thinking beyond the run-of-the-mill cash discounts to generate more sales this festive season.

Pawan Chabra finds out what the auto giants are really up to

“Hopefully, this season will prove a lot better, as there was hardly anything to celebrate about in the last festive season. At least for us, business was very dull,” says Sumit Desai, an auto-dealer in the capital. This thought signifies the common sentiment that is currently floating around in the country, for festive seasons are times when you anticipate and expect better tidings. In fact, on the back of the collapse of Lehman Brothers and the stranglehold on financial schemes by all national banks, almost all the auto companies have experienced a fall in sales figures during the year gone by, a time frame most dealers would want to wipe out from their memories. However, this festive season, the automotive companies are leaving no stone unturned to ensure a healthy growth rate. Interestingly, they have gone a step beyond, offering cash discounts, maintenance packages and even gold to the consumers and have rather become more innovative in their marketing efforts. In fact, some companies are waiving off taxes up to 40% for the consumers, if their booking date falls on or before September 30, 2009. While in one particular print ad, it is clearly mentioned that Toyota Kirloskar Motors has decided to ‘raise’ prices beyond September 30, 2009, in another one by GM (for the Chevrolet brand), it is announced that the end date of the Navratra Gold Utsav is September 30, 2009. Of course, the reality is that the festival season has just started, but automakers are scuttling to garner as much as they can from the market, in an attempt to exploit all forms of above-the-line marketing vehicles to the hilt.

And the efforts are evidently paying rich returns. In Gujarat, the demand for two-wheelers and four-wheelers has surpassed the supply levels. Similar is the story in other parts of the country. Going forward, the dealers are expecting further growth in the sales units. Notwithstanding that, this time, ‘festive discounts’ have actually not been used as the prime attraction to lure the target audience. There have been a slew of launches in both the two-wheeler (Yamaha’s V-Max & Limited Fazer, Hero Honda’s Karizma ZMR, Bajaj Discover 100cc, et al) and passenger car manufacturers (like Ford’s new Endeavour, Mercedes’ E-Class Sports, Maruti’s Estilo, et al). Then there are some marketers who opt for alternate means to attract minds, instead of the humdrum ‘lowered prices’ bait; one such is the use of aggressive marketing campaigns. To bring one such case to notice, BMW has organised a BMW Expo in its exclusive dealer outlets, for its prospective consumers, wherein all current BMW models have been made available for a test drive. A spokesperson from BMW explains the logic behind such an initiative: “It’s better to offer the consumer a test drive than offer a cash discount. More importantly, in the segment that we are operating in, cash discounts hardly help attract more consumers,” explains BMW’s spokesperson.

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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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In fact, it started with the launch of A-star in November 2008, when the company used the digital space in a big way to create buzz in the market and continued its efforts with the launch of the Ritz, which also witnessed a launch of a micro site marutisuzukiritz.com to generate excitement in the market. “Maruti Suzuki targets youth in a big way and we realized that to stay close to them, digital media is the optimal choice,” explains Srivastava. The company also has a dedicated team tracking down the action across the digital space i.e. blogs about Maruti Suzuki and the general feedbacks of the consumers. However, as Srivastava states, it was indeed some task to convince the top management, the need to take the digital route.

Apart from digital initiatives, the company has also made efforts to improve on its retail experience front. For the uninitiated, Maruti Suzuki which today has around 800 dealerships in the country, was selling its vehicles through 55 dealerships till 1995. The Indian consumers had a mindset that Maruti outlets always have a long waiting list and that its showrooms are only made for documentation purposes. “Today, the retail experience of a person visiting a Maruti Suzuki dealership is entirely different to what it was five years ago,” adds Srivastava. The company has also changed its advertising strategy in a big way in the past five years. Then let it be the successful no-brand ambassador strategy or the use of more bright colours and added glamour in the TVCs and the print campaigns, the company has surely connected with the youth of the country in the right way.

There is no denying that the DNA of the company is still the same of a small, fuel-efficient carmaker, but has it done enough to ensure that its ‘easy service quality’ has not been lost in its quest to become the new-gen carmaker? “It was a change that the company anticipated much before and hence we increased the network of workshops and the company today services around a million vehicles per month,” defends Srivastava. The company has surely made the right changes at the right time to stay at the top spot in the industry and with the perfect blend of Suzuki’s technology and the perfect know-how of the Indian market, Maruti is in no mood to leave either of the two #1 spots - the market leadership and the tag of the most valuable brand in the Indian automotive industry.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2010.

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

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Café Coffee Day is changing.

Not satisfied with quenching your coffee cravings, the top team at this coffee retail juggernaut is bent on adding variety to your hunger moods too. By Angshuman Paul

There are two monikers that dot virtually every main street of Bangalore – the first is a liquor shop with the United Breweries board displayed boldly at its entrance and the second is the deep red square of another beverage brand - Café Coffee Day (CCD). Incidentally, both brands have scripted their origin and eventual success from this very garden city. Even the head office of Amalgamated Bean Coffee Trading Company (mother company of Café Coffee Day) is located on the Vittal Mallya Road, named after the father of UB Group’s present chairman, Vijay Mallya. Notwithstanding the stark differences in respective turnovers, the similarities between the two brands run even deeper than such skin-deep appearances. UB Group’s flagship brand Kingfisher managed to transcend its almost generic association with beer to boldly venture into the aviation sector; while Amalgamated Bean Coffee Trading Company’s (ABC) 13-year-old flagship brand CCD is now aspiring to do exactly that by moving beyond mere coffee to straddle the gamut of hunger moods of the Indian consumer.

Alok Gupta, Director, Café Coffee Day is especially excited about the positioning revamp for brand CCD and its implications for the coffee retail chain’s future. Donning the role of a barista (see picture) at the spanking new 2,500 sq. ft. Coffee Day Lounge in the heart of Bangalore city, the man and his team had already warmed up for our early morning meeting with their respective cups of Cappucinos (incidentally Cappucino alone contributes almost 30% to the total turnover for CCD) before this author shot off his first query. Why? “Look, there are three categories of consumers at CCD. There are those who want to have coffee; there are the youngsters who wish to hangout and then there are those who want to grab a quick meal. That third category of consumers is growing fast and we want to cash in on to every hunger mood of the consumer so that CCD is the preferred choice even for his meals.

Clearly, ‘HungerMood’ is all set to become their new range of enhanced offerings (from sandwiches to the sweets section) to the consumer with a planned investment of about Rs.150 crore in this fiscal itself. “There will even be more health related products like probiotic yogurt and burgers,” announces Alok. Foodies can also get ready to expect region specific localised menu from CCD in the near future. In fact, the test-marketing of their localised menu has already begun in some regions. In February this year, CCD test-launched the Rajma Chawal meal in select stores in Delhi and NCR; and the month of May saw the rollout of parathas at CCD stores in Punjab and Chandigarh. Maharashtra is next on the localisation radar, but Alok refuses to give any details about the type of menu roll out planned for the state.

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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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Explains Ramesh Viswanathan, Exec. Director, CavinKare

“The only other company like us with a spread of independent brands is Dabur,” points out CKR. Clearly, the man loves comparing himself to the Burmans and hopes to replicate the stupendous success of Dabur in the FMCG segment. Yet, come to think of it, it is Nirma that CavinKare has a lot in common with. Both companies have been tagged as price warriors giving HLL and P&G a run for their money in the detergent and shampoo businesses respectively. CavinKare too got positioned as a price warrior (the sachet player) and has more or less followed Nirma’s footsteps in its heydays. Like Nirma, CavinKare too has diversified into other product categories and is aggressively taking on the urban market now. But here’s the catch. While MNCs first saturated the urban market and are now moving rural; CavinKare is moving in reverse. Being a strong player in the low-income category, CavinKare is now climbing up the ladder to also straddle the upper middle class group. So will CavinKare be able to replicate its success among the urban consumers or will it fizzle out, like Nirma did? “It (Nirma) played on price alone. Price is a vehicle to get entry into the market, but not a differentiating factor in the long run,” clarifies CKR, arguing that CavinKare has already discarded its low price image. He gives the example of Meera, their herbal hair wash powder, which is today priced at Rs.2 (at par with Sunsilk and Clinic Plus). Even fairness cream Fairever has been priced higher than HUL’s Fair&Lovely. Acquired last year for Rs.28 crore, the Maa range of fresh fruit drinks (pitted against Mazaa, Slice & Frooti) have also been shrewdly priced at Rs.13 for 250ml (Mazza is available at Rs.12 for 200ml). So, CavinKare entered the business as a price warrior, but on its part, it has made a valiant effort to discard that positioning. The recent launch of Chik Satin shampoo is an effort to develop this fresh brand imagery. Explains Ramesh Viswanathan, Exec. Director, CavinKare, “The aim of Chik Satin was to focus on the ‘bottle’ consumer whose shampoo needs are very different from that of existing Chik consumers.” With a premium look and feel, Chik Satin is focusing on attracting the urban consumer. “The strategic tie up with Coty for Adidas and Jovan is also aimed at gaining greater strength in the urban and metro markets,” adds Viswanathan.

But changing consumer mindset is not easy, says Anand Ramanathan of KPMG. “Transcending from a premium to a mass positioning is easy, but the reverse is not true,” he says, adding that even as CavinKare reverse straddles (via Chik Satin Shampoo or Nyle premium shampoo), it is imperative for them to not deviate from existing brand imagery, a fatal move for its existing consumer base. The reverse is also true. Ramanathan gives the example of CavinKare’s toilet cleaner brand Topp Mopp. “It is difficult for a relatively new entrant–despite competitive pricing to survive,” he says. Topp Mopp’s positioning was similar to rivals like Reckitt Benckiser’s Lizol in urban markets. But since toilet cleaners as a category belongs to the SEC A segment, CavinKare’s imagary (that of a SEC B and C player) created a disconnect. Result? Despite a big distribution push, Topp Mopp’s brand imagery did not coincide with the group’s positioning and the product failed.

But an undeterred CKR is moving ahead confidently with all cylinders blazing. His big bets now to secure a pan-India urban base are coming from areas like personal grooming, restaurants and dairy business. Trends in Vogue, CavinKare’s salon retail chain is expanding. Cashing in on the growing personal grooming market, CavinKare has also launched two separate beauty salons – Limelite (a unisex salon for urban youth) and Green Trends (family beauty salon), straddling high and mid income groups. “With our experience in personal care, it was natural for us to enter the retail of personal grooming services,” shares B. Nandakumar, CEO, Trends In Vogue. Having spread its footprint across the southern market (Bangalore, Hyderabad, Chennai, Trichi, Coimbatore, Madurai), CavinKare is now expanding its salon business in the north as well. And while the business may seem like a me-too of HUL’s Lakme Salon business, Nandakumar is quick to refute the notion. “Unlike Lakme beauty salons, we don’t use our own products but source professional products. Besides, all our Trends In Vogue parlours are self-owned,” he explains.

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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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AMCs find a shelter...

While market volatility is keeping investors away, fund houses have identified infrastructure as the new bet to lure them, says Deepak Ranjan Patra

When a country’s finance minister enhances allocation to urban infrastructure by a mind-boggling 87% to Rs.12,887 crore with a promise that infrastructure investments will be further increased to more than 9% of the GDP in next five years, you definitely need no rocket science to find out which sector will make it to the top of the investors’ minds. Yes, infrastructure is hot today in India and no one wants to miss this clear opportunity to make some moolah. So, how could the mutual fund industry stay sideway? Almost all Asset Management Companies (AMCs) have geared up to this infra-growth. Asserts R. K. Gupta, MD, Taurus Mutual Fund, “In coming six months you will see all fund houses having their own infra funds dedicated to the sector.” But the question remains, are these AMCs really hoping to offer a good return to the investors or are they just trying to skim the market when the buzz is still heavy?

Bandeep Singh Ranger, Chairman, IndusView avers, “Finance Minister’s commitment to increase investments in the infrastructure sector to more than 9% of the GDP by 2014 from 5% currently and other rural development and welfare programs opens scope for investment opportunities.” Moreover, Finance Minister’s inclination towards Public Private Partnership clears ground for the private players to avail a cool share in the returns to be generated. This combined with the fact that India is now considered as the preferred destination for doing business among the emerging BRIC countries (World Bank Report titled ‘Doing business 2009’) makes it a point worth mentioning that the sector may also see some foreign investments flowing in. Considering the expectations, possibilities, “the sector will now become hotter than ever,” claims Vinayak Banarjee, Chairman, Feedback Ventures.

However, AMCs’ rendezvous with the infrastructure companies is nothing new. Infra stocks always have been a part of different mutual fund schemes for the simple fact that majority of the BSE 500 companies belong to the domain. As a matter of fact, stocks of infra-based companies form a large portion of many of the diversified equity funds. The only new thing about the current trend is that this time around the AMCs are coming up with sector specific infra funds like ‘Reliance Infrastructure fund’ launched by Reliance Mutual Fund promising to invest in infrastructure and infrastructure related companies only. The fund managers too seem upbeat on the returns as Sundeep Sikka, CEO, Reliance Capital Asset Management told to media during launch of the new fund, “Undoubtedly, infrastructure is a key priority for India and we also hope a spurt of infrastructure spending in the economy on the back of the stable government and ease of project financing. Moreover, the valuation looks more attractive. The right time is now to invest in infrastructure and infrastructure-related firms.”

Explaining the prevailing bullishness in the sector R. K. Gupta explains, “Over the last two years other sectors are by and large flat or downward. The only good sector available is infrastructure. Moreover, it’s at a poor level in the country and government can’t survive without taking to higher levels. That means there is a better future in the sector with ample opportunities.” Perhaps that’s why Gupta feels that almost every fund house will soon have some infra-related funds in their portfolio. But the question is what impact will this flurry of infra funds have on the investors? Well, a lot of confusion as to which fund to chose.

Definitely it’s a tough time for the retail investors. While the abrupt volatility at the stock market is pulling them from entering into the market, launch of a number of infra-based funds are giving their investment strategy a tough time in case of mutual funds. The most common advice given by analysts at the moment is to go for existing funds with proven track records rather than jumping into the NFO bandwagon. The very basic reason for the same is that most of the new funds are typical sector funds, where the constituents are associated with similar type of risk that is attached to the sector. For the same, such funds often lack proper defensive stocks ending up as high-risk investments. In fact, the risk quotient associated with infrastructure sector as such is more than many others. That’s why, it’s time when investors need to be a little meticulous in their approach even though they know that infrastructure is the next big thing for them.

Deepak Ranjan Patra

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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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We won’t be surprised if your answer is a big “NO!”, for you only know this company as HTC !

Surbhi Chawla debates on the strategic & branding issues of HTC...

After a long lull of six months, the smartphone category has once again become the talk of town, with a slew of high profile launches. First, it was Samsung Star and Star 3G. They were followed by the Nokia N97, and now, HTC plans to get back at competitors’ heels with its first Android-based handset in India – HTC Magic. So what prompted such enthusiastic acts on the part of the smartphone manufacturers? Well, despite the fact that consumer spending on mobile handsets dried up during the first quarter of 2009 (it fell by 19% as compared to the same period in 2008, according to Gartner), the smartphone category recorded a swashbuckling growth of 25% during the same period, all thanks to the terrific market performance of the Apple iPhone, BlackBerry Pearl, BlackBerry Storm and of course, the HTC’s Android phone – G1. That was global, how about local? The story is no different for the smartphone market in India too, where sales in this category is currently growing between 20-25% (a trend expected to continue till 2010). And of all the ‘smart’ brands, perhaps the least discussed of late has been HTC. But does that mean that all is silent and still behind the HTC wall. 4Ps B&M decided to pay a visit to HTC’s Indian headquarters, to uncover strategies that it has drawn-out, to run through competition in India.

We begin with the HTC Magic. Surely, there are some ripples that this so-considered ‘magic’ device from HTC’s stable is causing, but of course, minus the loud marketing efforts made by Apple during the launch of its iPhone in India, about a year back. Of course, the unavailability of the handset model currently makes it a tad difficult to make predictions about its future, but some issues are as apparent as they can get, and the trouble starts right where its strength lies -the Android mobile OS on which HTC works. The USP of an Android is that it is open-source which enables one to install a host of applications on their handsets as per one’s needs. The problem is that Android’s application store is not functional in India yet, therefore customers who buy the Magic would have to play around with the existing applications that come pre-loaded with this handset or develop something for themselves. Simply stated, a hurdle that stands between HTC and the success of its latest Android-based handset.

So aren’t officials at the company worried over the same? Not really, as Jack Tong, Vice-President, HTC APAC states, “I think the response that Android mobiles have received worldwide was at times even beyond expectations and we expect something similar in the Indian market.” Of course, a spokesperson in the company acknowledged the fact that, “availability of an application store would have sweetened the offering.” However, he goes ahead and optimistically opines that there would be plenty of early adopters willing to get their hands on HTC Magic, despite the roadblock.

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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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Is ‘young’ the undisputed flavour of the day?

Are yesterday’s sweethearts suddenly, dreaded victims of the don’t-call-us-we’ll call-you disease? Monojit Lahiri surveys the scene...

Recently, a screaming headline in a tabloid grabbed my attention. Out of work Sush loses ad deal to petite Asin. A gorgeous, glamorous, sophisticated diva like Sushmita Sen, given the heave-ho (for a product she’s been associated with for years – Pantene) and replaced by young, pretty [but nowhere as charismatic or enjoying pan-India popularity with the upmarket crowd] South Indian actress Asin, of Ghajini fame! Why, even the great King Khan – whose other name seemed to have been ‘Pepsi Khan’ – is, reportedly, dropped from Team Pepsi in their latest outing. Ditto for yesterday’s queens Ash Rai Bachchan, Rani Mukherjee and Preity Zinta, say adbiz and Bollywood insiders. On the cricket front too, similar tremors have been felt. Yesterday’s icons Saurav Ganguly, Rahul Dravid, Anil Kumble, V.V.S. Laxman, even the sensational Sachin Tendulkar, have suffered anything between a meltdown to a slowdown. It’s the T-20 kids – Dhoni, Yuvraj, Ishant, Raina, Zaheer and gang – that are zooming centre-stage and replacing them in the endorsement sweepstakes. In Bollywood, new dazzlers rocking it include Kareena Kapoor, Priyanka Chopra, Asin, Genelia, Jiah Khan, Katrina Kaif, Imran Khan, Ranbir Kapoor, Neil Nitin Mukesh, Kangana Ranaut, Deepika Padkone, even Farhan Akhtar! With half of our one billion population said to be under the age group of 25, marketers are indeed getting hot n’ heavy in the business of torpedoing this target base, all the way!

Is it working… and what drives it? Who better to kick-off this debate with the very person who founded and coined the ground-breaking term youngistan – which for Washington Post defines young India as also TV channels and political parties identifying the new India – Soumitra Karnik, Creative Head of JWT’s Pepsi team who says, “Much as I am tempted to say that I suddenly dreamt it all up one stormy night – like fake directors or smart plagiarists! – I didn’t! Its just that, while reading up something, the words ‘Young’ and ‘Hindustan’ struck me as interesting cues for coining something new, fresh, simple along street-speak lines that would resonate with the target base. That’s how it was really born. If it captured popular imagination instantly, I guess its largely because it was red-hot topical, had the required bindaas tone to it and reflected the mood, colour and voice of today’s most important segment-youth.” Karnik doesn’t munch his words and packs in a solid punch when he says that today’s marketers live in the here n’ now and grab only what they believe will rock their product. “They are pretty much like fair-weather friends – and why not? They have a job to do. If its not working, then its goodbye time! The new kids on the block, both in the Cricket and Bollywood arena, reflect this reality in dramatic fashion, right? The age of loyalty is over, boss. It is the age of Return on Investment (ROI)!”

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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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TO HELL WITH CORE COMPETENCE

The Most Revolutionary Concept In Education PLANMAN CHE CENTRE FOR HIGHER EDUCATION, Supported by IIPM India’s Leading B-School

Take for instance the white goods major LG. Hit by a decline in consumer spending in urban areas, this hitherto premium brand has made a paradigm shift in its strategy and is now focusing on the rural market. Not only is LG rolling out a line of entry-level products, it is also investing heavily in channel expansion and setting up services network for its rural customers. Moon Bum Shin, MD, LG Electronics India Ltd, asserts, “Our penetration in the rural markets is low, but we are taking it as a potential market for future as it is very important in terms of profit. In a span of ten years, the market anatomy for urban and rural would be really in a good balance.”

But that’s not all India Inc. is experimenting with; a host of companies are capturing the market and improving their sales in their own different ways. While for the first time ever, Maruti extended its sales season till February (instead of offering discounts only till December), big real estate players are giving unheard of freebies (getting a Mercedes free on the purchase of a penthouse is no big deal now) or even developing ultra-low budget houses to lure lower and mid-segment consumers. Even public sector banks, like SBI, which had never seen the sunnier side of marketing spends ever, have scaled up their ad investments like never before, given the general negative perception in the market about private banks.

If Kingfisher, in order to improve occupancy of its full service carriers, cut its fares by 50-60% in January 2009 (and subsequently reversed the strategy a few days later; and re-reversed it in February); Skoda Auto, which has always produced premium sedans and hatchbacks (like Fabia) have announced the launch of a small car in the range of Rs.3-5 lakhs to capture the mid and lower segments. The retail space too is seeing a few first-time strategies adopted by companies. Says Arvind Singhal, Chairman, KSA Technopak, “Reliance Industries, the promoter of Reliance Retail, has generally not been open to joint ventures and strategic alliances. Yet, for their retail start-up, very early on, they’ve started seeking partnerships.” He further adds that even Shoppers’ Stop has started to actually shut down nonviable formats, which is also a shift in their strategy. “Overall, the focus of retailers being on achieving profitability first, and then on aggressive growth, itself is a shift in strategy,” Singhal avers.

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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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CHINESE POTION

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In a toughening market, Lenovo needs to bring in products that stand out, and yet are priced right

In the midst of their growing animosity, there remain precious few companies like Lenovo, who symbolise the power of American and Chinese collaboration. That bond now stands considerably weakened, for Lenovo, the world’s 4th largest PC maker has got on board Yang Yuanqing, former Chairman of Lenovo as CEO, replacing their American CEO William Amelio, who held the mantle of the firm since 2005. Also, Liu Chuanzhi (who was instrumental in the formation of the company 25 years ago) has taken the post of Chairman.

The reasons, however, are more to do with fading fortunes rather than Sino-US relations. The company posted losses to the tune of $96.7 million as opposed to a profit of $171.7 million during the same period last year. Revenue and sales too dipped to $35.92 billion and $3.6 billion from $44.94 billion and $4.5 billion respectively. The main reason was the dampening of demand in the US and European markets and a weak dollar against a CNY. However, amidst gloomy quarterly results and a recession-stricken economy, a ray of optimism is still beaming across Lenovo as it has got on board their former team of Chinese management. Will focusing on ‘Chinese solutions’ set the distraught PC maker back on track?

“Chuanzhi said that the company would refocus on the China market, and expand offerings for homes and small businesses. The biggest challenge (for Chuanzhi) will be to craft and execute a revised business/product strategy during the current economic crisis,” professes Charles King, Principal Analyst, Pund-IT, Inc. Hitherto, Lenovo’s primary focus had been on enterprise customers, which heavily contributed to losses in the last quarter. “This seems a reasonable response… But it’s difficult to see how consumers and SMBs will contribute significant revenues over the short term,” King adds. The company is seeking the low cost route to return to profitability. Moreover, it has to contend with stronger competitors, particularly HP & Acer, which have gained market share y-o-y by 3.5% and 31.1% respectively in the December quarter, while Lenovo has suffered a decline of 4.5% y-o-y (Gartner).

Concentrating on the Chinese market seems to be a good proposition for the time being as further penetration in the US and European markets in such tumultuous times will be difficult. Explains Rob Enderle of Enderle Group, “No competitor will give up shelf space without a fight and currently Lenovo needs much more retail shelf space.” Enderle opines that Lenovo should follow the Apple model of building high profile products and driving consumers to them. “This approach results in fewer products that will require less shelf space and puts most of the rest of the problems within Lenovo’s control,” avers Enderle. With this kind of pull strategy, Lenovo can gain significant bargaining power over retailers. But it must also realise that it cannot price such ‘wow’ products at a significant premium at the moment, so it needs to balance price and features diligently for the recession hit market.

Savreen Gadhoke

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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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THE TALE OF TWO 'CITI'ES...

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If the whopping $10.42 billion losses for the nine months ending September 30, 2008 were not enough, Citigroup has once again reported a net loss of $8.29 billion for the fourth quarter of 2008 – its fifth-straight quarterly deficit in a row. Revenues at $5.6 billion are heavily affected by write-downs and losses in securities and banking. This also includes $6.1 billion in net credit losses, which surely means that Citigroup is actually moving on similar lines to meet the fates of many (like Lehman Brothers and Merrill Lynch) who have already fallen flat in their bouts against subprime devil. In fact, today Citigroup is one of the biggest unsecured creditors with a sickeningly shocking $138 billion (an unbelievable 23% of Lehman’s gross outstanding debt of $613 billion) unsecured exposure to the Lehman collapse! Even for the full year 2008, Citigroup has reported a net loss of $18.72 billion against a net profit of $3.62 billion in 2007. Moreover, Citigroup’s share that has plunged over 77% last year on the US bourses (more than 43% in the year through the day of announcement of split), which points out to a further deteriorating situation.

Considering this, the possibility of a revival of this financial conglomerate appears somewhat bleak. Even if the restructuring process ends up without any problems, where the heck on earth will Pandit find a buyer for these limping assets of Citi Holdings amid the dismal state of economies where the loan losses will only worsen. However, on a positive note, instead of attempting to cut costs by not only throwing out employees but interestingly by controlling colour copying, printing, et al (which Pandit tried a few months back), the group has seriously taken up some restructuring plan which if successful can really be a ray of hope for the dying Citigroup.

Meanwhile, the group has also named former Time Warner CEO Richard Parsons (who ran Time Warner from 2002 to 2007) to head its board of directors, replacing Chairman Win Bischoff. But how different will he be from his predecessors is still a big mystery! Moreover, we shouldn’t forget that he was the one who saw the brilliant supernova merger between Time and AOL. Brilliant because the post merger entity which had a combined value of $247 billion at the time of merger in 2000-01, is worth a mind numbingly low $58 billion today. But Parsons may be valuable to Citi for at least one reason: his proximity to US President Barack Obama (he was one of 17 members of Obama’s Transition Economic Advisory Board). Interestinly, Treasury had become one of Citigroup’s biggest investors last year when it acquired $52 billion of preferred shares in the group under the Troubled Asset Relief Program. However, it’s still unclear what the relationship will be between the Treasury and Citi.

So, under such circumstances the best-case scenario for the Citigroup will be a orderly managed sale process of its assets under Citi Holdings (if in case it finds any suitor). Else we can only hope that Pandit does not have to face the situation that former Citi CEO John Reed faced recently. Reed, who engineered the Travelers deal with another former Citi CEO Sandy Weill in 1998, had confessed to the Financial Times in April 2008, “The specific merger transaction clearly has to be seen as a mistake,” and he was unclear whether the company’s model or management deserved the greater share of blame for its problem. God forbid, if in case Pandit has to face such a situation, he might be equally clueless in the blame game that follows!

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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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While the biggies were biting dust...

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While the biggies were biting dust, fighting against all odds the ‘defensive stocks’ managed to create wealth for their shareholders, says Gyanendra Kashyap

Lord Byron, English poet and satirist remarked, “Adversity is the first path to truth”. True to his words, the adversities of the stock market in 2008 in a way challenged almost every myth present at the market place. And now, the investor fraternity in retrospect would rather prefer to forget the ‘heroics of the bear’ in 2008. It is true that with the collapse of the stock market, asset prices and commodities an unprecedented fear psychosis gripped the minds of the investors; yet despite all these adversities the truth is ‘2008 was actually not that bad as has been painted!’ Sherman Chan, Economist, Moody’s Economy.com, justifies, “India’s economic performance remained surprisingly solid in the first three quarters of 2008 due to robust domestic demand. GDP climbed 7.6% year on year in the September quarter; an enviable outcome compared with neighboring economies, many of which have entered recession or at least experienced a significant slowdown.”

If the stock market (Sensex) is considered as the only economic parameter which decides the fate of the economy (and foreign investment) then the performances of HUL, Godrej Consumer, Glaxosmithkline Pharmaceuticals, Zandu Pharmaceuticals and Hero Honda which have respectively delivered returns to the tune of 14.7%, 20.6%, 10.9% , 7% and 15.3% are worth considering. Don’t just go by the numbers if you consider that they are smaller, because numbers are often deceptive, understand the contextual essence. The stellar performances have come at a time when the stock markets were held hostage to possibly one of the worst crisis in recent times with foreign institutional investors pulling out more than Rs.530 billion and the benchmark Sensex crashing by a whopping 51.2%.

In a so called bear market when wary investors play defensive, the fast moving consumer goods (FMCG) stocks and pharma stocks have outperformed the benchmark index to emerge as the best performers. An analysis by Centre for Monitoring Indian Economy (CMIE) brings forth the point that in 2008 out of the 20 top performers 7 belonged to the FMCG sector. Despite the inherent weakness and competition in the market, their calculated strategy of pushing volumes and price increase seems to have paid off. In the present scenario HUL is amongst the few stocks that have managed to evade value erosion; as a matter of fact the market capitalisation of HUL on December 31, 2008 was pegged at Rs.276.45 billion as against Rs.239.17 billion on January 1, 2008. Though the absolute increase in market capitalisation may seem marginal (Rs.37.28 billion), considering the fact that behemoths like Reliance Industries, Wipro, Grasim Industries, DLF and Reliance Infra have eroded wealth to the tune of 53.2%, 54.6%, 67.6%, 73.6% and 74.53%; 15.56%; wealth apprehension definitely calls for a round of applause.

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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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A ‘Color’ful clutter buster

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With Akshay ‘Khiladi’ Kumar, agreeing to host the desi version of Fear Factor Extreme with thirteen damsels, there was no way that Indian audiences could resist keeping their eyes off it! Khatron Ke Khiladi along with other differentiated content like Jai Shri Krishna and Balika Vadhu marked the entry of Viacom’s new GEC – Colors. The Indian audience, which just about had enough of kitchen politics, song & dance-based reality shows and were fed up with the laughter challenges of the world, welcomed this fresh wave of content that this channel offered. Colors instantly bagged the number three spot in the GEC race and is still going strong (last few weeks, it’s at No.2). With new serials like Dancing Queens up its alley, this one plans to continue its upward stride. But fame is fickle. Stalwarts Zee and Sony will not sit idle for long...

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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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Real world is not the place that an online player like Info Edge would want to be in at the moment...

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But this ‘virtual entity’ isn’t without its share of recessionary headaches either, writes Neha Sariaya...

What does the term ‘garage’ got to do with every successful entrepreneurship venture? Internationally of course, you’d have heard of names galore who made their mark in their home garage, but in India? Well, wonderfully, here too, the situation is no different! You’ll get the drift of our argument when you finish this paragraph... When you are born to succeed as an entrepreneur, you learn a thousand ways to achieve your ends, or rather start your golden journey. And Sanjeev Bikhchandani, MD and CEO, Info Edge (India) Ltd. certainly had a few of those tricks up his sleeves. And what degree of solidarity in vision are we talking about? When dotcom startups fell all around like nine pins during the turn of the millenium, Sanjeev’s virtual brainchild held its spot tight, and grew with every passing year. Of course there were the hiccups, but fighting his way to make the most of opportunities was much that he learnt having started operations in the servant quarter above his garage paying Rs.800 as monthly rent in 1990 (Hey! Wait! Did you miss that one? He started operations in the servant quarter above his ‘garage’!)

It is 2008, and his once small dotcom startup can boast of current assets of Rs.646.6 million (as on March 31, 2008). So what was the first to-market mode that the company followed? “We used to take job ads and make direct calls to our clients just like direct selling of a product. It was then a small company with a few people working for it. After we took funding the first thing we did was to move to a new office and started off different teams for different functions like marketing, technology etc,” reminisces Hitesh Oberoi, Whole time Director & Chief Operating Officer, Info Edge. As far as expansion to frontiers beyond was concerned, Oberoi adds, “We expanded to other cities beyond Delhi, and also enhanced our offerings and changed our prices.” Today, when you measure the brand awareness quotient of the company’s first online portal, naukri.com, to the blooming of many others under its umbrella such as Jeevansaathi.com, 99acres.com, Quadrangle.com, Brijj.com and the latest being Shiksha.com, one can safely conclude that it has been quite a journey. Even Ankit Kedia, Analyst, Centrum Broking, agreeingly voices out, “They enjoy the first mover advantage till date. The company has a brand name and a large circulation. Thus they enjoy the biggest pool of resources...” And the proof of dominance? Today, naukri.com has been able to retain its no.1 spot and has witnessed a growth rate of about 56% over the years with a market share of 50% followed by competitors like Monster.com and Timesjobs.com which accounted for about 35% and 15% of the online job application marketpie during 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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India Inc. is apparently sitting on a goldmine

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Well, this may be true for a few companies in the emerging markets, but businesses and industries in the global north (US, UK et al) are willingly avoiding infrastructural changes. And why is that? Here comes the Kwai river bridge. For polluting companies, interestingly, it is cheaper to buy carbon credits than to invest in environment protecting and technologically advanced machinery or in related innovation. Think about the hilarious situation. While as near as in July 2008, a unit of carbon credit was trading at above €33, currently, the same unit is languishing at €16. That basically means that companies belonging to developed economies, that have huge amounts of spare cash (more so as they refused to invest all along in greener technology) can buy even surplus carbon credits in the currently underpriced market for future indiscretions. Such companies might have the audacity to become bigger polluters in the future (based on the bank that they are creating of purchased carbon credits) or might have the temerity to even sell these surplus credits, once their per unit price appreciates, to book magnanimous profits.

It is but apparent that the enormous amounts generated by the so-termed Kyoto style trading has benefited the biggest industrial polluters the most, both in the past (when carbon credits purchase was just basically a licence to forego green investments) and in the future (when they’ll easily be able to forecast how much bigger their emission can be). But having said that, the fact is that all this gives no reason why India should not benefit from such an easily available source of foreign exchange.

India Inc. is apparently sitting on a goldmine. And why India is falling behind China in numbers is not because the companies have opened their eyes to the pitfalls in the carbon trading market. It is simply because of the general lack of awareness that India Inc. has been somehow losing on the opportunities to monetize carbon credits. For starters, ask yourself. If you’re a top manager in any company, do you even have an idea where exactly to register to start carbon trading? Do you even know how, say, non-manufacturing entities can also register and earn millions in carbon trading? If your answers are close to being negative, don’t be surprised, as a majority of India’s CEOs fail to pass muster and the test too. KPMG confirms in their November 2007 report (Climate Change: Is India Inc. Prepared?) that only a measly 21% of top CEOs in India had taken steps to mark out their ‘carbon footprint’.

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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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