Friday, November 30, 2012

LEADERSHIP: HOWARD STRINGER

Sony will have to be more realistic in its short term strategy in the wake of new challenges

These results leave Stringer with a tough job ahead. Stringer, an alumnus of University of Oxford, joined Sony Corp. as its member of the board in 1999 and went on to become the first non-Japanese to lead the company, after heading Sony’s US operations for six years.

It was under his leadership that Sony achieved a record profit of 369.43 billion yen ($3.73 billion) for the year ending March 2008. But could he not foresee what lay ahead of the company?

Rob Enderle of Enderle Group states, “These problems are historic and Stringer, while making some progress, has been too little too late. Sony needs a massive restructuring and, so far, no one appears to have the authority or will to do that.” Is it the same Stringer, who made rival divisions of Sony work together?

Furthermore, stock price of Sony has fallen by 56.9% since January 1, 2008 to $23.29 on November 10. Low consumer spending & the economic crisis further complicate the challenge. Sony would now have to focus more on its non-premium offerings and lower prices on its premium products. Lay offs are also not ruled out. Desperate times call for desperate measures, ''like.no.other''!


Source : IIPM Editorial, 2012.

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Agony of the second spot

Yahoo!'s only worthwhile option now seems to be AOL

The saga of the top three search engine providers has a script quite similar to a typical love triangle. First, Microsoft made public a hostile bid of $31 per share to acquire Yahoo!, which was later raised to $33 per share earlier this year; but Yahoo!’s board declined the offer. Then Yahoo! rushed for a tie up with Google; but has itself become the scorned suitor now; with Google citing regulatory issues (parents in the love triangle analogy!). Google was looking at placing ads on Yahoo!’s search queries, which would have brought as much as 80% of the search advertising market into Google's control. But Google opted to move out citing that it would’ve resulted in protracted legal battle and damaged its relationships with partners. In addition, the search engine giant also blamed regulator and advertiser concerns after the Justice Department’s interference.

Rob Enderle, Prinicipal Analyst, Enderle Group says, “The impact of the deal plug out will probably be harder on Yahoo! than on Google which is why Google pulled the plug. It leaves Yahoo! looking like they were unable to execute another strategy and Google remains dominant in the space.”


Source : IIPM Editorial, 2012.

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Thursday, November 29, 2012

Realise India’s economic potential

Reforms can help realise India’s economic potential, provided there are ‘real’ reforms!

The reforms that Dr. Manmohan Singh launched in 1991 have done much to simplify the maze of regulations and licensing that stifled entrepreneurship, but the job is only half done. India rates only around the 50th percentile of the 2007 World Bank rankings on the dimensions of government effectiveness, regulatory quality, rule of law, and control of corruption. In the bank’s latest survey of business environment, almost 60% of those questioned rated corruption as a major or moderate obstacle; the corresponding number for the functioning of the judiciary was about 30% and that for taxes and regulation, 40%. India ranks only 48th among 131 countries on the World Economic Forum’s competitiveness index. This is not good enough for a would-be economic superpower. Business is a mixture of competition and cooperation. Everyone knows and extols the social benefits of competition. In contrast, cooperation is usually identified with cartelization and social harm.

But there are dimensions of cooperation that benefit not only the business community but society as a whole. Improvements in the institutional infrastructure of property right protection and contract enforcement, and improvements in most physical infrastructure, are cases in point. Take corruption, which is rated the most serious obstacle. When firms compete to win lucrative public contracts or licenses using corruption, some win and others lose. But even the winners have to give up some or even much of their profits to pay the bribes. To be sure, each will retain a temptation to cheat and gain an advantage at the expense of others through bribery. What is needed is a system whereby the others can deter the cheater with a credible threat of punishment. Suppose the community has a norm that no one should engage in bribery to win a favorable contract or license. If a member violates this norm, the community stipulates that no others will have any dealings with him. The cheat is going to need some things – material inputs, trade credit, and so on – from the others. If the others ostracise him, he will be unable to fulfill the contract and so won’t profit from his bribery. Of course he can try to induce some of the others to violate the ban by offering them shares in his profits. But that will dilute his profit. More importantly, community also stipulates that anyone who engages in dealings with a cheat is himself labeled a cheater and ostracised. If the business community, with some support from the government, establishes the needed infrastructure, and if the government pursues Rodrik’s other criteria, then India’s great economic potential can be fully realised...


Source : IIPM Editorial, 2012.

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Monday, November 26, 2012

Why we do what we do

In other words, the reasons for our super-obsession with criticising India!

The arguments were intense. Half of our editorial team was arguing for running a purely national Scrutiny section, as opposed to covering international stories too. And half was arguing against the premise, debating that we should cover even international stories. The only problem was, they were the same halves! In other words [if you’re not thoroughly confused already], while one half was arguing for and against the same issue, the other half was thoroughly disinterested in having to do anything with it! Well, we were tickled breathless – we kid you not, it’s the same case with India. While one half of us Indians are busy inanely arguing for and against issues without understanding what stand to take, the other (illiterate?) 600 million odd half is busier organising the daily meal, finding out a place to defecate, ensuring that the girl child & lady of the house don’t get raped, and of course, ensuring death doesn’t become a family issue this week.

India, as a noted foreign economist put it, is a stale mistress few would like to wed, and sadly, fewer to bed. Change today, in India, is a word privy more to private corporations than to government bureaucracy. Many of those who are opposed to change often swear by the Constitution to rationalise their opposition, without realising that even the Constitution has been amended a smashing number of 93 times – vindicating the fact that what was of relevance in the past needs to change its dimension for the future. The context in which we mention this is that India is galore with organisations that in some sense are past their prime, but can play stunning change agents to bridge the ever increasing rural urban divide. For example, while the Indian government is gearing up to open up the banking sector to foreign companies, what it doesn’t realise is that many of India’s homegrown problems [like the fact that more than 50% Indians don’t have access to banking] can be solved by homegrown solutions like converting, say, the India Post into a separate bank, thereby at one go creating nearly 130,000 bank branches for rural India!


Source : IIPM Editorial, 2012.

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Sunday, November 25, 2012

“The AMP target is achievable”

Dillip Chenoy, Director General, SIAM

B&E: On the Automotive Mission Plan.
DC: As far as the AMP is concerned, it is well on track and I think the 10% (as part of the GDP) mark is achievable. Earlier the government thought that the AMP was a bit conservative. Soon the Ministry of Heavy industries will start to initiate the plan and things will move in a positive direction.

B&E: Causes for general market volatility in the Indian auto market.
DC: Increased operating costs, interests rates and a depressed market is putting pressure on the industry as people are postponing their purchases. If the interests rates are reduced, it is beneficial for the consumers. When sales increase it is good because there is volume in the market.

B&E: On the resurrection of the two-wheeler industry after a continuous bad phase.
DC: The two-wheeler industry has gone through some tough times in the last few years, therefore it has now taken a couple of initiatives and plans like launching new products and schemes which have brought back the sales numbers.

B&E: On the July 2008 sales.
DC: There are three factors discussed this month, first growth of passenger vehicles has been lower then expected. Secondly, the two-wheeler industry has grown well, and thirdly commercial vehicles and three-wheeler sales have improved this month as compared to the last couple of months.


Source : IIPM Editorial, 2012.

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Saturday, November 24, 2012

Low on sugar, lower on spice!

It’ll be tough to turn around SpiceJet without a radical reorganisation

For quite some time, the Indian aviation market was pouring over with news flashing from all across about SpiceJet looking for a stake sale, ever since the hostile winds in the sector have taken their toll. With esteemed players like Anil Dhirubhai Ambani Group, Kingfisher Airlines and even Jet Airways competing to gain control, speculations abounded on who will finally relish the spicy taste of this airline company. Finally, investing firm WL Ross & Co. LLC gets to be the “lucky” one. The company has recently invested some $80 million in SpiceJet and will own close to 15% stake. But will SpiceJet be able to decisively clear the air pocket with this investment?

The industry challenges remain the same as before the deal, namely the convergence of a high cost environment and slowing demand. However, the deal will provide some cash flow relief and additional time for the carrier to develop an effective strategy to navigate the difficult industry conditions,” comments Binit Somaia of Centre for Aviation.


Source : IIPM Editorial, 2012.

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Thursday, November 22, 2012

INFRASTRUCTURE DEVELOPMENT: DAM REHABILITATION

Governments rarely consider rehabilitation while drafting dam projects

The problem is that such rehabilitation moves are completely subject to political deviancies, wherein one government might be appreciative of the same – to earn brownie points – but another government, from another political camp, might be totally against the implementation of the same. Sadly, even celebrities lose no time in jumping on the media bandwagon to cry hoarse about their support (or lack of it) to the ‘movement’.

Can’t an Indian government just face up to the current reality and do something about such problems in relocation and resettlement. For crying shame, a formal Rehabilitation & Resettlement Bill was passed finally only in the year 2007, a full sixty years after Independence. We suspect it’ll take another sixty before they put the Bill into action... 


Source : IIPM Editorial, 2012.

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Classical music comes into vogue!

Imagine selling rock guitars when classical music comes into vogue! Surely, a difficult external environment can overwhelm the best of them. B&E profiles three key sectors that merit a mention for profitable or not-so-profitable reasons. psus, of course have been included for their prominence in the list

Market capitalisation of ICICI bank (on June 24, 2008) was at $18.01 billion (as compared to SBI’s mcap of $17.71 billion); ample reasons to suggest why Brand Finance Plc. has rated the brand value & mcap of ICICI as ‘very strong’; HDFC bank has been rated strong on the same parameters. Going by the current rate of growth and promises that the new players show (AXIS, HDFC & ICICI banks have respectively registered 62%, 39% & 34% surge in profitability), the day may not be too far when more of them occupy the coveted B&E Power 100 ranks. For the last couple of years, the industry has been posting healthy annual growth rates of over 20%, its profit pool is all set to increase to $20 billion by 2010 and $40 billion by 2015 (BCG estimates).

On parameter to parameter basis, private players have given a beating to their public sector counterparts on all fronts. Notwithstanding the global crisis, net profits of private players, even in the tumultuous Q4, was much higher than the others; their growth in net profit was pegged at 46.45% as compared to 28.06% for public sector players. The impact of the global credit crisis and liquidity crunch was very limited and primarily affected banks with international operations to some extent. Nevertheless, the slowdown in the global economy and the Q4 debacle did make its impact; explains Ajinkya Dhavale, Analyst, Motilal Oswal, “In Q4, the Bankex declined by 27% mainly due to uncertainties and concerns on account of – farmer loan waiver as announced by the FM, large derivatives exposures of private banks on behalf of clients, MTM provisions on international investments and mounting inflation and slowing industrial/manufacturing activity.” Agrees Abhishek Agarwal, Research Analyst, Religare Securities Limited, “Major impediments were moderation of credit demand, increase in inflation and interest rates, MTM losses on credit derivatives exposure and defaults in retail segments, especially in the last quarter.” Despite all these hiccups in the last quarter of FY ’08, the average interest and income earned by 16 private banks was 35.5% and 33.40% respectively. Increased emphasis by private players on international operations has contributed a huge chunk to their revenues. The limited downside risks associated with banks, stable outlook and strong corporate profitability and comfortable liquidity conditions are suggestive of future prospects. According to a Pricewaterhouse Coopers report, India is likely to emerge as the third largest banking hub in the world by 2040. The projections hold true despite the global financial market downturn; more so after the Bear Stearns fiasco in the last quarter.


Source : IIPM Editorial, 2012.

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Wednesday, November 21, 2012

All for one American? For one?!

GM’s in big trouble with collosal value eroded. Will the rescue team get this American out of troubled waters?

Hollywood flick Tears of the Sun reminds you of a nation torn-apart by violence; there’re good guys too though, fighting hard to save those bearing the brunt of it all. So why’re we talking about this in an automobile tale? Well, there’s something of this brewing in downtown Detroit (welcome to America, folks!) where there’s nothing short of a murder happening, with General Motors losing 61.09% of its market value during just the past eight months to touch $9.18 billion as on June 11, 2008. Explaining its back-to-the-wall state, in an exclusive revelation to B&E, Greg Martin, Head of communications, GM North America confesses, “The US market has been much more competitive than at any other time...” Naturally, what he meant was that it was to blame for GM’s poor performance in recent days. ‘Negative impact’ are the words because even if were to consider the past three long years, the company has not returned a single year of profit, and its combined aggregate net loss has touched a mind-numbing $52 billion! And for the records, even the most recent Q1 2008 result shows a merciless loss of $3.25 billion! Such is the plight of this auto-maker – murderous indeed! But just like Bruce Willis led his team of soldiers to save those involved, there’s GM’s hero, Rick Wagoner with his management team saving GM for all the precious dimes it’s worth.

So, will he succeed? Unlike past GM conferences, the one on June 3, 2008 was different; rather, very. For once, GM dropped its ‘Go-Green’ attitude and spoke of something more urgent. And there was a new momentum generated besides just Chairman Rick Wagoner using his favorite lines of motivation. “We have made a lot of progress on our turnaround plan. However, recent developments have made it necessary for us to take additional actions,” said Wagoner. These lines were followed-up by a restructuring plan disclosure which would save the company $1 billion in costs over the next three years. Surely a mid-term target and a precious one in these hard loss-making times!


Source : IIPM Editorial, 2012.

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Tuesday, November 20, 2012

Ghatothkach cannes play

Is the world ready for an Indian hero’s animated adventures?

Raja Harishchandra was the first Indian full-length film directed by Dadasaheb Phalke which was based on the legend of Harishchandra as described in the Ramayana and Mahabharata. It had hit the screens way back in 1913 and since then, Bollywood has definitely come a long way from the era of black and white mythological films with the latest craze being animation. Of late, animation films have been winning a roaring applause in Hollywood and the Hindi versions of the same received great response from the Indian audience from across the world. Finding Nemo, The Incredibles, Happy Feet and Ice Age are some such films which not only fared well commercially, but also opened up a completely new business opportunity for retailers in India, with soft toys of such characters, kids stationery, lunch boxes, school bags and other kids’ merchandise making way to the shops.

Spurred on by this success story, Bollywood followed suite with a plethora of animation films like Hanuman, Bal Ganesh, Hanuman Returns and My friend Ganesha, based on characters from Hindu mythology. Despite being marketed well, these films didn’t turn out to be runaway successes.

What such films contributed was not just advanced technology and a new kind of storyline, but also a trend where the adult audience also displayed the same enthusiasm and excitement as did the little ones. Hence began a new era of animation films targeted at every cine lover, promoted and packaged like any other Bollywood masala flick. Ghatothkach-Master of Magic happens to be the first animation film to do so. Says Smita Maroo, Vice President, Shemaroo Entertainment, “With the increase in adult audience for such films, we have given this film a Bollywood-style narrative with drama, magic, action, comedy and music.”


Source : IIPM Editorial, 2012.

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Sunday, November 18, 2012

Crisis in Bihar BJP blows over

Coordination body to calm down rebels seeking Modi's head

The looming crisis in the Bihar BJP unit has abated somewhat. The rebel MLAs who had been demanding the head of deputy CM Sushil K Modi for failing to protect their interests in the Nitish-run government, have been told by the party that there can be no leadership change. All it would promise was a coordination body with rebel leaders on the board.

“The rebels can rebel as much as they like, both Modi or and state BJP president Radha Mohan Singh will stay put for the moment. A reshuffle is out of the question,” said a senior BJP leader in Delhi.


Source : IIPM Editorial, 2012.

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Wednesday, November 14, 2012

POLITICS: BILLIONAIRES

Millions of dollars are pumped into election by billionaires
 
Private equity tycoon Ronald Burkle is the Clintons’ good friend who has raised over $20 million for democrats in the US election campaign. This has become the norm for rich Americans, from Warren Buffet to Jim Walton. However, people in the developing world are also getting richer. Though most billionaires on the Forbes list are from the developed world, a majority of new inclusions are from developing countries too. Billionaires in Asia have increased to 50. The picture in Africa and Middle East is also same. The region is now home to 26 billionaires, including six newcomers, with a total worth of $85 billion.

However, the emergence of billionaires means many positive ramifications in the economy and standard of living of the fellow citizens in developing countries. With that, can their interest and affiliation with politics and significant contributions in politics and election campaigns make politics more popular or interesting among uneducated common citizens? Or will their emergence just result in taking over of the bureaucracy where citizens are misguided in choosing their representatives, leaders!


Source : IIPM Editorial, 2012.

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Sunday, November 11, 2012

Mohali team in an exclusive

Preity Zinta talks at length about her agenda for the Mohali team in an exclusive with neha sarin of B&E

B&E: What is your strategy to grab eyeballs & ensure viewership for your franchise?

PZ: Our strategy is to have a great team and to play a great game... I think if your product is not good, you can go on and on and on marketing it but nothing’s going to happen. So the whole deal is to ensure that we have a quality product, we have great cricketers, we have the youngest team and I am the youngest owner at IPL. Our team has an average age of 24.75 years for the boys as it’s a 20:20 team. But besides that, it’s a 3 hour game, so we will ensure we package it well, there is enough entertainment for everybody out there to enjoy the game. But the principal factor remains the same: the game has to be good.

B&E: What value addition does Ness Wadia bring to the team? Will Dabur formally support the team and how much?

PZ: We are four partners and all of us have our roles to play and we don’t need to be singled out. We all bring something to the team. Whether Dabur will support or not, you have to wait and watch.

B&E: What would your advertising gimmick be for promoting the team?

PZ: We are more of a young team, with a heart…which will do anything to get the job done. So there is a lot of passion, fervour, aggression, dedication and most importantly, ethics. 


Source : IIPM Editorial, 2012.

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IPL franchise in an exclusive

Bollywood superstar Shahrukh Khan discusses his IPL franchise in an exclusive with angshuman paul of B&E

 B&E: What are your aspirations for your IPL team?

SRK: I dream that the kids and young generation of Kolkata (and of the entire country) will be fans of my team. That’s my dream as an entertainer and more importantly, my passion for sports and cricket. Let me remind you I have acquired the IPL franchise, not only from the business point of view, so my plans aren’t efficient corporate plans. I believe that to do future planning in business, you must be experienced & I don’t think like businessmen.

B&E: So you will not be adopting any conventional corporate strategies in order to generate revenues?

SRK: I have invested a big stake and as an investor I am concerned about every move of the team but as such, as I said, I don’t know the art of business. Even I don’t have huge funds which big business houses or other industrialists in the field of sports have. So at this time I do feel I won’t be able to survive in the business of sports. But yes, overall the business of sports is very interesting and profitable, both for businessmen and for our country too.


Source : IIPM Editorial, 2012.

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Saturday, November 10, 2012

L&T: HEDGING LOSSES

L&T must adopt a more conservative approach to hedging

Counters Swapnil Pawar, Director, Park Financial Advisors, “If it is on account of a business linked hedging, we do not see anything wrong with the loss.” If the prices went up and had been left unhedged; this would have shown in the loss of profits.

The company is increasing its efforts to shift to a ‘cost plus’ model to mitigate the impact of rising commodity prices. “From an earlier level of about 5-10% on a “cost plus basis”, now the company is looking at receiving almost 40% of its orders under this”, according to Abhishek. Robust performance of core business would enable L&T to sail through with ease. But it must take serious steps towards better risk management considering that its exposure to volatile commodity markets has increased quite significantly over the past few years.


Source : IIPM Editorial, 2012.

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Thursday, November 8, 2012

Thank God, I managed to pass!

Although the real impact of the US slowdown is yet to be felt, India Inc. is facing the brunt in advance

Perhaps ‘slowdown’ is the most talked about word since we entered the year 2008. Raison d’être, the present state of the US economy! While the world is going apprehensive over a probable recession in the US and its impact on the world economy, the word slowly and quietly seems to associate itself with India Inc. A closer look at its Q3 report card confirms the same.

After a superb show for quite sometime now, India Inc.’s profitability seems to be on a downward slope for the third quarter of the financial year 2007-08. As per the results announced so far (2,024 companies as on February 4, 2008) aggregate gross sales of India Inc. stand at Rs.5.49 trillion as compared to Rs.4.75 trillion for the same period in the previous fiscal, registering 15.5% growth. Indeed way below the 28% growth recorded during Q3 FY 2006-07. However, the worst is when you consider the reported profit after tax growth figures, which have come down to 27% to reach Rs.704 billion from a high of more than 50% in Q3, 2006-07. So who is to be blamed?

“Rising input prices are the culprit,” reasons R. K. Gupta, MD, Taurus Mutual Fund. According to him, “Prices of raw materials have gone up during last half year or so. But due to the market competition, companies are failing to pass it to consumers. As a result their bottom line is getting affected.” A further analysis of profitability reveals that the growth story dips further (to 24%) if one doesn’t considers India Inc.’s ‘other incomes’, which would perhaps be injustice as other incomes is one area that India Inc. would gloat over; after all it has gone up by a whopping 77.5%. But then, what about the volatility in the share market? Isn’t this decline in growth going to affect it further? “Markets will definitely react to Q3 earnings, but they will be more interested in the future earnings due to the fact that better earning prospects will continue to lure investors, despite a poor previous quarter earning acting as a caution,” says an optimistic K. K. Mittal, Fund Manager, Escorts Mutual Fund. However, one thing is for sure – the current Q3 results will not help much in eliminating the ongoing volatile phase in the market.


Source : IIPM Editorial, 2012.

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IIPM : The B-School with a Human Face
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