IIPM College: March 2013

Thursday, March 28, 2013

A Question in Time... of Time!

In This well Entrenched analysis, B&E’s Angshuman Paul goes Inside The Legacy Organization of Emami and breaks down Various Issues The Group is Addressing... most to do with Succession Planning and Strategic Orientation.

When you visit the Kolkata Head Office of Emami Group at EM Bypass, you get an immediate feel of a penchant for tradition. Exactly 15 large statues (or statuettes, if you may) of the elephant God Ganesha jump out to catch your attention in the lobby of Emami’s corporate office. It’s obvious that they’ve been placed in that order to make a very definitive point to the critical visitor – and a point that reaffirms the essence of this organization, the family way of doing business. It’s quite obvious that this penchant is as prevalent in the management philosophy of the corporation, from the structure, to leadership, to the way span and scope of control has been built, and obviously, to how succession planning has been laid out in this well and truly Indian corporation.

Entrepreneurship Professor John Davies at Harvard Business School wrote in one of his papers that “in family businesses (companies whose ownership is controlled by a single family)... the lack of effective governance is a major cause of organizational problems.” Strangely, however much the world of self-fulfilling analysts and business correspondents like I might wish to the contrary, Emami seems to be an anti-thesis to John Davies’ argument, the outlier, or the exception that remains as a symbol of positive performance for statistical distributions. Emami has remained committed through decades to governance benchmarks that have promoted and encouraged transparency, open communication and almost a matrix approach to behavioural management.

At the same time, unlike their rival company Dabur, which has been particularly keen on trying out almost each and every new jargon in the stream of professional management, Emami has stuck steadfast to the belief that the family-way to run a business, is the right way. Uniquely, theirs is a closely knit group despite the business currently being run by the children of the two founders – R. S. Agarwal and R. S. Goenka – who are in fact unrelated by blood, though they have an identical first name of Radhe Shyam, and apparently even schooled together.

From the early 1970s, when Emami started manufacturing cosmetic products from just one small factory in Kolkata and distributed products through hand pulled rickshaws, today, when Emami is in a position to create products that can be game changers in the Indian FMCG world, the growth has been superlative – some opportunistic, some opportune. For example, when Fair & Handsome was launched, the first year generated Rs.270 million, and resultantly created a market of men’s fairness creams worth Rs.2 billion. Today, the Emami brand occupies a turnover of around Rs.1 billion, purely driven by a well timed opportune exploitation of the Indian male’s cosmetic sentiments. At the same time, Navratna and Boroplus are the undisputed front runners for the company at an annual turnover of Rs.3 billion each. Today, the company has factories in Kolkata, Abhoypur, Amingaon, Panthnagar, Baddi, Dongri, Silvassa & Vapi. From undertaking exercises in brand extensions, the company has now set up an R&D division, which spends about Rs.400 million on research into FMCG products. It is now increasing presence by at least 10,000 stores per year. If that’s how family-businesses are run, then perhaps the anti-thesis to Davis’s theorem is truer in India than the truism purported in his original conjecture.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)

Monday, March 25, 2013

B&E This Fortnight

INTERNATIONAL
ECONOMY & BUSINESS STRATEGY

GOOGLE 2.0

In what is considered to be a strategic shift in its boardroom, Larry Page, Co-founder & President of Google Inc., is set to assume charge of the Mountain View giant as CEO, starting April 1, 2011. Eric Schmidt, who had been playing the business-brain of the company since 1999, will continue as Executive Chairman and will focus primarily on strategic deals & partnerships, broader customer & business relationships and government outreach. This critical decision comes right after the announcement of its financial results for the quarter ending December 2010, in which the company reported GAAP net income of $2.54 billion, a rise of 28.93% when compared to the same period the previous year. Revenues stood at $8.44 billion, representing a y-o-y increase of 26%. This change in management seems to signal that even the management has now realised that in order to keep pace with the manner in which Google is venturing into newer arenas, it has to get newer and younger thoughts into its boardroom. Apart from the search engine business, the Silicon Valley based giant is betting big on the Android OS, YouTube and a secret project which will be a direct competitor to Facebook. A mutated DNA will pose some big challenges. Can Page work out an integrated plan to make the $195 billion giant bigger?

Third time ‘unlucky’!
How does it feel like losing a CEO whose very look confirms that he was responsible for a 264% rise in value of your stockholding in just the past two years? This story is of Steven P. Jobs, who has taken yet another break from Apple – his second since 2008. Though many experts claim that he will be back in few months, and that COO Tim Cook’s appointment as acting CEO is only a temporary affair, this time, the fears of Jobs’ end as CEO, have intensified. The last time when he took a break, Jobs was back in time for the iPad launch. However, this time around, shareholders and analysts alike are more apprehensive about his return. Apple has no blockbuster launches lined up for 2011, except a modified second version of the iPad (the iPad 2). In fact, the tech giant only plans to make minor modifications to its existing line of products. When news of Jobs’ leave became public, Apple’s stock crashed by 8% on NASDAQ, when trading opened the day following the announcement on January 17, 2011. Will Jobs be back? Will Apple’s market value fall in his absence? Will Apple a company that was once “too big to fail” become one “too big to save”? Questions that only Jobs can answer and time can prove.

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Sunday, March 17, 2013

Borrowing ‘Riches’ no More

With the Economic Recession bringing about Unprecedented levels of Public Debt, The Industrialized Nations on Earth are facing their Worst ever fears of Insolvency and High Levels of Inflation if Current Profligate Fiscal and Monetary Policies Continue Unabated

Riches running on debt

It was for the first time ever since World War II that the public debt of the industrialized nations actually crossed the primary balance figure as percentage of GDP showing the biggest signs of crumbling for the global financial system triggered by the subprime mortgage crisis. In fact, overall fiscal balances (net of government financial rescue programmes) have been deteriorating sharply since the crisis began, rising by 20 to 30 percentage points of GDP in just 3 years. But the biggest problem this time is that employment and growth are unlikely to return to pre-crisis levels in the foreseeable future partly due to large scale outsourcing. Thus, unemployment and other benefits would be paid for several years and high levels of public investment will have to be maintained.

It’s costly getting old

With the European economies ageing fast led by big EU economies countries like Germany, Italy and Spain coupled with their cradle to grave kind social welfare systems, EU is in for a long rough ride with a further swelling of its healthcare and pension budgets in the future. greece has already capitulated while many others are almost insolvent. On the other hand, USA, the world’s most populous nation with a near universal healthcare system, is already bleeding with a colossal budget deficit resulting in sky high debt levels. It is projected that in order to meet its age-related spending liabilities the United States would need a permanent improvement in its budget balances of the order of 2.6% of 2009 GDP in the next 50 years and 3.2% in 75 years.

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Monday, March 11, 2013

“We Believe that all The Channels Will Co-Exist”

Kensaku Konishi has been leading the Initial surge of Canon in India that began from 2006, A surge he attributes to Major Strategic Realignments and the Aggressive Pursuit of Localised Campaigns. In this Exclusive Discussion with Virat Bahri, He talks about the Company’s long term plans in India and the Recent Key Initiatives being taken to Build on The Initial Momentum.

B&E: What were the major strategic changes you took when you joined Canon India operations?
Kensaku Konishi (KK): When I came here, first of all people’s responsibilities were not clear. They simply liked to do it function by function. When we talked about camera for instance, not one person could tell me the reason why the sales was bad. That is why we changed our organisation from function-based to product-based. We set up separate copier, camera and printer divisions and appointed division heads with authority and responsibility. That also upped their morale. Secondly, we also needed more people as sales is a very local oriented activity. It was about taking care of channel partners and end users. Earlier there were only 400 people, we doubled up to 800. We started the city campaigns as well. The Indian market is very big. Our share was small, so we could not adopt nation wide campaigns. So we launched citywide campaigns. All resources were put into a city, including people money, et al and we also focussed on channel contacts, partner meets, training, et al. Through these activities, we improved market share. In 2009, we had some campaigns like print city campaigns to conduct such activities city by city together. Since the beginning of this year, focus has shifted to tier 2 and 3 cities as well. We use trucks as mobile showrooms carrying all 80 different models and visiting tier 2 and 3 cities. That creates a lot of enthusiasm and noise in the local city.

B&E: What is the significance and rationale behind the recent foray into exclusive retail stores?
KK: Earlier, the home market was just cameras for us. Now we do believe that a lot of homes are using printers. We realised that the home market is getting much bigger than before. We learnt that from our Image Express initiative when we went to tier 2 and 3 cities like Udaipur, Jaipur and Indore. A similar number of printers and cameras are being sold at single spots in these cities. There is definitely a big group of people using printers in their homes. Shopping patterns of new families are also changing. Many people told me, when I came here, that shopping malls are great in India; people go and see but do not buy. Now they’re buying – movies, restaurants, apparel as well as electronic gadgets. Unfortunately, our traditional retail shops sometimes do not have the kind of scale to go to such shopping malls. They are normally satisfied with a growth of 10-15%. That is why we will intentionally open our exclusive stores in such kinds of busy and modern shopping malls or streets to conduct our sales. We now have traditional channel, national retail chains and brand shops. We believe that all these will coexist because of the diversity of the customers, and this brand shop will improve the brand image for the customers and help our channel too.

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Sunday, March 10, 2013

POLICY LEAD: GREEN BUILDINGS

United Nations Environment Programme (UNEP) has stated that “No Other Sector has such a High Potential for Drastic Emission Reductions then the Building Sector”. India can be a Major Contributor to it if its Green Building Revolution picks up but for that, Government Policy and Private Sector must work in sync.

Exclusively for green buildings, the globally recognized Leadership in Energy and Environment Design (LEED) certification system established by the US Green Building Council (USGBC) is present in India as LEED India run by the non-profit organization India Green Building Council, a part of CII. Currently, it has more than 700 registered and 120 buildings in 2010 alone with around 1500 buildings registered and around 300 certified since the system's inception in India. But, it's in cost premiums incurred by developers of green structures wherein lies the twist in the tale. Or is there a twist? As per numerous experts, the total capital investments in a green building are just 3-5% higher than that of a conventional building. On the other hand, the breakeven for a green project occurs within 4-5 years, atleast 2-3 years earlier than conventional cases owing to reduced energy usage mostly in air-conditioning and maintenance. As per Chandrashekar Hariharan, CEO and Co Founder of Bangalore based BCIL, a major green building developer in South India, “There is indeed no extra cost. However, it must be added that where there are additional elements -- such as air-conditioners or any other facility that one builds as an energy-efficient feature, one should look at paybacks. The cost of such amortization of capital are low today extending some times to as much as 7 to 15 years, thanks to the very low tariff regimes for energy, water and waste collection. Our cities have to stiffen these prices. This is imperative for encouraging new technology and to improve payback frameworks."

The real difference lies in the category of a building. A majority of investments in India and globally are into commercial green buildings simply because of basic difference that commercial properties are leased out in more than 90% of the cases while residential property is almost always sold to the end consumer. Thus, for an office space, the long term benefits accrued through savings in air conditioning etc are huge for the client making it viable to pay a premium for the same. Its only in case of high end residential space where customer is more sensitive about the product than the price and can consider paying extra for a green residence while in the mass market low/mid end residential space, customer is extremely price sensitive prohibiting entry of green developers.

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Wednesday, March 6, 2013

B&E’S POWER TALK SERIES

Managing Director and CEO, IDFC, Defends his Strategies to B&E’s

B&E: What is your capital adequacy ratio at the moment and what is the outlook for the period ahead?
RBL: According to the RBI guidelines 75% of our assets must be invested or lent for infrastructure projects. We must always maintain a capital adequacy ratio of 15% at any point of time. But we are doing a good job and are operating with a CAR that is much more than 15%. Our capital adequacy stands at around 25%.

B&E: Your current balance sheet size is only Rs.350 billion? How do you expect it to grow over the next five years?
RBL: No one can predict the future. So it is hard to comment. But, our balance sheet has grown over 30% in the past 5 years and I am sure that the growth will be faster in the years to come. Moreover, with increasing private participation, the country’s infrastructure sector too is set to fly high bringing in lot more opportunities for us. We have a very robust prospect to grow our balance sheet size in the next few years.

B&E: There are a lot of environmental concerns related to infrastructure sector. How do you see these affecting the sector and IDFC?
RBL: It will certainly have an impact on the whole infrastructure sector. But if you see this from IDFC’s point of view, bulk of our investment is in power projects and it is certainly different from constructing a road. A power project enjoys a greater degree of freedom as compared to a highway project. Environmental issues will undoubtedly affect the infrastructure sector, but I think, over the next 5 years, the sector still has enough opportunities for the company to grow rapidly. As far as our investments are concerned, we have taken all the necessary approvals and we will continue to do that on a continuous basis.

B&E: There are complaints coming from the banking sphere that Infrastructure Finance Companies are enjoying an unfair advantage over the banks because now they can raise funds through tax free bonds and External Commercial Borrowings. What’s your take on this?
RBL: I do not think it is true because there is an upper limit on the amount that we can raise through these sources. However, I think competition is healthy for the industry. It is really important for us to tap domestic savings and overseas funds to finance our infrastructure growth as the country still needs a great amount of funds to meet its infrastructure development dreams.

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Tuesday, March 5, 2013

R-ADPL: The report card!

One year back, Reliance ADPL came out victorious on its new turf of airports development by winning the bid to develop 5 airports in Maharashtra. B&E meets Reliance’s top executives to get the mid term progress report by Swati Sharma

First the quick recap. After Delhi and Mumbai airports were given an attempted world-class makeover, Airports Authority of India (AAI) had planned to put to use surplus land in 35 non-metro airports with an estimated cost of `8 billion. The process of bids had been initiated by AAI amid speculations and criticism coupled with constant scrutiny. There were resonant protests from the Planning & Revenue Department and the Finance Department about the land price being undervalued; even the lease being given for 95 years was contested (government land cannot be generally given on lease for more than 30 years). Reliance Airport Developers Pvt. Ltd (RADPL), a subsidy of Reliance Infrastructure, became the top bidder among 8 shortlisted companies which had the most potential. After a whole lot of dramatic legal play about the privatisation of airports and taking uncountable bids and long-drawn court cases which ended last year, RADPL bagged the bid for the development of 5 small airports in Maharashtra, namely in Baramati, Nanded, Latur, Osmanabad and Yavatmal. The massive land of 601 hectares was acquired at `630 million on a 95-year lease through a competitive privatisation process undertaken by the Maharashtra Industrial Development Corporation (MIDC), which still remains the principal owner of these airports. Some of these airports had not been used for almost 20 years. The government had already spent `3.39 billion between the years 1995-2007 to develop the five airports, out of which only two operated regular flights. Given that kind of support investment by the government, RADPL seemed to have a great start. One year down, B&E caught up with RADPL top management to find out the progress in the past year, the strategic map charted and the specific challenges of the coming future.

Surprisingly – and positively – RADPL’s development plans involve not only target marketing for each airport, but also support infrastructure development beyond the airport. For example, Reliance plans to develop Baramati as a general aviation hub for corporate jets for an investment of `1 billion in the next three years including a maintenance, repair and overhaul (MRO) facility which will further serve as an alternative to deal with the problems of land and air space congestion in bigger airports like Mumbai. This also includes setting up a four star hotel in Baramati. In Yavatmal Airport, which was set up in 1993, there will be a nucleus for big industrial houses with the facilities of recycling aero parts. At Nanded and Latur, the most active airports, passenger numbers have shot up from almost zero to 3,200 per month and 32 commercial flights per month after the takeover. Nanded is now connected to Delhi, Mumbai, Nagpur and Latur with Go Air even starting Airbus A320 flights on the Delhi-Nanded-Mumbai route with day and night operations. Vidya Basarkod, Business Head and CEO, RADPL tells B&E, “We believe that regional airports are the future of the aviation industry; the concept will surely catch up in the years to come and we are doing our best. A lot has to be done still.” Apart from the airport infrastructure development, RADPL has also set up a Flight Training Academy in Osmanabad by Blu-Ray Aviation to be started in October, 2010 and a contract has been signed for another academy in Nanded.

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Tehran has the last laugh on the Arab streets

As America shapes its Iranian discourse on the flawed logic of Arab’s Persian mistrust, Tehran has the last laugh on the Arab streets, says Saurabh Kumar Shahi

The results can barely be reassuring for those who would like to deem that the Islamic Republic is becoming alienated from its regional neighbours and that Arabs are all set to be on their feet alongside Israelis to shore up military exploits by Israel or the US against Iranian nuclear mark.

Among the respondents, 57% thinks that Iran’s nuclear programme is intended at developing nuclear weapons. Nonetheless, 77% of these exclusively Arab respondents perceive that Iran has the right to follow its nuclear programme; only 20% consent that Iran should be stressed by the global community to discontinue the programme. The figure for the support is up from 53% in 2009.

Ironically, in Egypt and Morocco, two of the Arab countries whom the West perceives as strongly anti-Iran, 81% and 84% respectively consider that Iran is within its sovereign right to do so. Even in Wahabi Saudi Arabia, around half of the population wants Iran to develop such weapons and consider that act rightful. However, the most extraordinary conclusion in this year’s poll is that 57% of the respondents consider that Iran’s attainment of nuclear weapons would be a positive and constructive outcome for the region, whilst merely 21% deem this to be a negative outcome.

This strengthens this magazine’s estimation that however much a few Sunni Arab privileged – and they are not many frankly – might wish to witness Iran being “cut down to size”, there is extremely diminutive popular support for conflict with the Iranian regime on the Arab alleys.

It appears Washington has been building its perceptions about things based on the views of Arab diplomats and so-called experts who have been widely out-of-sync with opinion on the streets. Asked to rank the two nations that pose the principal threat to the Arab world, 88% of the voters named Israel and 77% named the US – the top two scorers on this query, by orders of enormity over any other nation on the globe. Contrary to that, merely 10% Arabs think Iran to be a bigger threat than both these countries. And just to put it in perspective, these polls were not conducted in Syria, Iraq, Qatar and among Gazans and other Palestinians – the groups who are supposed to be pro-Iranian and staunchly anti-American.

And if that was not enough, when asked to name the world leader that they approve of the most, 12% of the Arab respondents named Iranian President Mahmoud Ahmadinejad. It makes him the third most admired leader in the Arab world – after Turkish Prime Minister Recep Tayyip Erdogan and Venezuelan President Hugo Chavez. “Arab perceptions of the US are shaped principally through the prism of the Arab-Israeli question. And Arab perceptions of Iran are truly the function of perceptions of the US and projection for harmony in the Middle East,” says Hillary Mann Leveret, an Iran watcher based in Washington DC, while talking to B&E.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Friday, March 1, 2013

Sanjiv Batra

Chairman, MMTC with jayant mundhra on past, present and future of the company...

One of the mini ratna public sector enterprise Minerals and Metals Trading Corporation of India (MMTC) is not only one of the leading bullion traders in the country, but also recognised as an assaying and hallmarking centre for gold jewellery by the Bureau of Indian Standards. Also, a co-promoter of two of India’s brand new exchanges — Indian Commodity Exchange Limited and United Stock Exchange Limited — MMTC has a track record of uninterrupted profit and dividend payment for the past 40 years. In a bid to woo retail customers of gold and bullions in the country, the comapny has recently tied up with Gitanjali Jewellers for the ‘Festival of Gold’ a jewellery exhibition to showcase quality jewellery. In an exclusive interaction with B&E, Sanjiv Batra, CMD, MMTC, talks about the present trend in the Indian gold market and how the comapny is planning to leverage it. Excerpts:-

B&E: How has been the journey of MMTC since its inception? Are you planning to move ahead?
SB: The company was incorporated in 1963 to regulate the international trade of minerals and metals. From a turnover of Rs. 67.79 crore in the first full year of operations (1964-65), we have grown by leaps and bounds to a turnover of over Rs. 45,000 crore (for financial year 2009-10). At present, we are trying to bring in more machinery to India to produce as many as 356 tonnes of gold and 144 tonnes of silver per year. The journey has been an encouraging one, and indeed we are learning everyday.

B&E: The recent economic turmoil has impacted almost all companies across the globe. How did you manage to sheild yourselves?
SB: Let me tell you about a survey that we did in 2006 in connection with the acceptance of the gold that we were producing. After surveying our distributors, we found that as many as 90% gold sales was heading south. But post-2007, when the economic turmoil hit the market, things started changing in our favour. The economy might have gone down, but the demand and price of gold remained strong throughout the period. Moreover, the upheaveal in the country’s share market encouraged investors further to go for gold as a safe bet. And such a trend in demand was unseeen till last year. However, till March this year, we witnessed 240 million tonne of gold. This trend helped us to grow strong even during the slowdown.

B&E: Does price play a significant role when it comes to gold in a market like India? How are you using the potential of the market?
SB: Gold is always considered as an asset and it is the surging demand that encourages its growth. Besides India, the trend is similar in other countries too. It was only during 1999-2003, when gold prices were unstable. For the past seven years, the prices have gone more on the positive side. Interestingly, this has happened despite many crises happening on the way.

India has always seen a strong demand for gold. If you look at the figures, this year we had to import more gold so as to meet the domestic demand. This clearly indicates that despite trading at a high price level, the passion for acquiring the yellow metal has not received a dent in India. While the gold production in the world is receding, India is showing a complete different scenario. Since our market is internal-driven one, if the Indian consumers are happy then it’s really good for us.

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