IIPM College: April 2013

Tuesday, April 30, 2013

Can the Dragon execute the ‘soft’ landing?

The world views with mixed feelings of awe, admiration, cynicism and even some apprehension, as the Chinese Communist Party undergoes a transition in leadership in August, as is customary in the country once in ten years. The 18th National Congress is now widely expected to see Xi Jinping and Li Keqiang as the new President and Premier of China, replacing Hu Jintao and Wen Jiabao respectively, a process which should be culminated by early next year.

It would be a gross understatement to call this the end of an era, besides the fact that it was the first peaceful regime change witnessed by the People’s Republic of China (Mao’s last years saw the Cultural Revolution accompanied by large scale violence and the end of Deng Xiaoping’s regime was marked by the infamous Tiananmen Square protests and subsequent military intervention). In the period since Hu Jintao first took over as General Secretary in 2002 and today, China has given the term ‘superlative’ a new meaning.

In 2002, China had a GDP (current US $) of $1.45 trillion, over 1/7th of US GDP of $10.59 trillion. The picture is starkly different now with Chinese GDP (current US $) at $7.29 trillion in 2011, which is a little less than half of US GDP of $15.09 trillion. Even in GDP per capita (PPP, current international $) terms, China has grown phenomenally, from $2,866 (less than 1/12th of US GDP per capita) to $8,442 (more than 1/6th of US GDP per capita). Net foreign assets (current CNY) have swelled from CNY 3.17 trillion to CNY 25.09 trillion. FDI (net BoP, current US $) has also surged from $46.78 billion in 2002 to $124.93 billion (2010). In 2010, China led the world in terms of exports of merchandise goods, which stood at $1.57 trillion (growth of 31% yoy) in value, and it cornered a share of 10.4% of global merchandise exports.

However, there is a catch, and a very critical one, and we are not talking about the malaise in China’s key export markets. Analysts have long argued that China’s ‘hard culture’ led by a one party top-down system will ultimately come face to face with its inherent limitations. This was evident to the world when Hu Jintao faced a massive rally from an estimated 4,00,000 protesters (as per the organisers) on his Hong Kong visit on July 1. They were protesting against the manner in which Hong Kong was run and also the way in which new Hong Kong Chief Executive Leung Chun-ying was appointed. In China, too, social unrest has been increasing quite alarmingly with rising social inequality. The Gini coefficient has breached the 0.47 mark, which is greater than 0.4, the accepted trigger for social unrest in an economy. The Chinese Academy of Governance estimates that the number of protests in China have doubled from 2006 to 2010 to 180000 incidents, which are over issues like corruption, forceful land grabs, Tibetan autonomy and environmental issues. The general mood is towards better people representation. Wen Jiabao himself commented last year, quite tellingly, that the Chinese government needed to embrace more democracy and implement wider political reforms to prevent the nation from descending into a chaos similar to the Cultural Revolution, which could undo much of the gains that the country has made over these years.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

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Adapting to climate change is key to food security

The impact of climate change on people and food systems is already being felt in more ways than one. To help vulnerable people cope with the effects of climate change, government needs to come up with strategies and adaptation measures that can minimise the risk. But the ground reality tells a different and deplorable story.

The impact of climate change is unfolding at a pace that’s much quicker than is being predicted. The risks of climate change loom ever more imminent for a country like India, where 70% of its agriculture is rain-fed and totally dependent on the vagaries of monsoon. Considering that over 65% of our 1.2-billion population depend on agriculture for a living and because people involved in agriculture tend to be poorer as compared to urban residents, the impact of climate change on the agriculture sector is far reaching with significant repercussions for our economy.

Various studies have shown that over 80% of farmers in India – who are mainly small and marginal farmers and contribute about 50% of the total crop production of the country – will be the most affected by climate changes. A World Bank report says incomes on the small rain-fed farms in Andhra Pradesh could decline by 5% under modest climate change and by over 20% under harsher conditions, bringing farmers closer to, and in many cases, under the poverty line. The report, while making a strong case for a shift in agricultural systems in order to overcome future climate change pressures, warns that if suitable measures are not acted upon to address the impact of climate change, the consequences would be grave and widespread. The report states that under the climate change scenario, sugarcane yields are expected to decline considerably (by nearly 30%) in Maharashtra, as a result of increased moisture stress caused by warmer climate in the future.

According to Germanwatch’s Global Climate Risk Index, India ranked 7th amongst the most affected countries on the parameter of extreme weather conditions between 1990 and 2008. None of the developed countries figure in the ten most affected countries’ list, which points to the fact that it is the poorer countries like India and Bangladesh (ranked #1on the Climate Risk Index) that are most vulnerable to climatic risks. For example, over the last 100 years in the state of Odisha, 49 years have seen floods, 30 have seen droughts, and 11 faced other extreme weather events like cyclones. Another study has shown that the number of villages in India experiencing drought is increasing. For example, in the state of Gujarat, only 2,000 villages experienced drought in 1961, but by 1988, over 145,000 villages were affected.

Although agriculture contributes only 20% to the GDP of Indian economy, its significance in terms of sustaining large swathes of population cannot be overstated. About 70% of the Indian population still live in rural areas where agriculture provides the only source of income and livelihood. Most of the rural folk live off small farms that are dependent on timely and sufficient rainfall during the monsoon months between June and September. However, with the changing climate, rainfall patterns have become erratic, leaving farmers exposed to the risks of drought and floods. “The agriculture sector in India is already facing problems relating to sustainability. To those daunting challenges, climate change adds further pressure on agriculture, adversely affecting the poor,” says economic expert S.K Dutta. “Climate change is already affecting the ecology and depleting the levels of soil fertility. Add to that the practices of over-drawing of water, decreasing forest covers and over-usage of pesticides and manures, which in turn adversely affect soil produce over the long term, and you get a very grim outlook for the future,” he adds. Experts have estimated that every one degree rise in temperature is likely to lead to a 5-10% decrease in crop yields. Thus, rice production in India could decrease by almost a tonne/hectare if the temperature goes up 20 degree Celsius, while each 10 degree rise in mean temperature could cause wheat yield losses of seven million tonnes per year.

When crop yields are adversely impacted by changes in the climate, it becomes almost unavoidable to keep food price inflation under leash. Already, shortage of food grains due to flood and drought in several parts of India is a big factor in food price inflation, which the country has been grappling with in recent months. Food price inflation stood at an uncomfortably high 9.94% in March this year, the most recent month for which figures were available when this story went to press. The most worrisome part of food price inflation is that it pushes marginal sections of the society, including poor farmers, under greater duress. A study by the Asian Development Bank states that at current levels of increase in food prices, India’s poor were likely to increase by 2.9% and 2.1% in the rural and urban areas respectively.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Saturday, April 27, 2013

An OPEC disaster moment!

Last month, for the first time in history, Saudi Arabia failed to control OPEC’s discrete members. The June OPEC meeting couldn’t reach consensus – and such a situation has happened only once before in history. For whatever it’s worth, OPEC’s cartelized unity was important for the global economy and oil stability. What now?

“It was one of the worst meetings we’ve ever had. We were unable to reach an agreement.” That’s how Saudi Oil Minister Ali al-Naimi described the 12-member Organization of Petroleum Exporting Countries (OPEC) meet that was held in June this year. The meet concluded with fissures emerging within the group. On one hand, Saudi Arabia, along with Kuwait, Qatar and the UAE, proposed an increase in group crude oil output by 1.5 million barrels a day to 30.3 million barrels a day; while on the other hand, member countries including Iran, Libya, Angola, Ecuador, Algeria and Venezuela warned OPEC of near-term collapse of oil prices. Critically, and dangerously, this is the first time that Saudi Arabia has failed to control the group! This diplomatic disaster gets further complicated when you consider the abysmal fall in OPEC’s market share over the last 6 years from 65% to 35%. The meeting ended sans consensus for the second time in OPEC’s history (the first instance was the meeting in the 1980s during the Iran-Iraq war)!

There seems to be a new power equation forming with Saudi Arabia on one side and Iran on the other. Interestingly, the member countries on Iran’s side have more oil reserves compared to member countries supporting Saudi Arabia. Venezuela (a prominent member of Iran-led group in OPEC), for instance, has more than 500 billion barrels locked under their part of the earth – around twice that of Saudi Arabia!

A close analysis reveals a pro-West and anti-West split. Undoubtedly, Saudi Arabia, Qatar, UAE and the likes would love to increase oil output to keep their dominance high and collect as many ‘petrodollars’ as possible. The other group is conceived to be a firm believer of an anti-West philosophy with Iran in the lead. As is known, US has imposed strict sanctions on Iraq and has very fragile terms with Libya (after NATO’s attack) and Venezuela (where US has imposed sanctions against state-controlled oil companies). These nations are more worried about international oil prices and demand-supply dynamics than America’s diktats. Moreover, for the first time in 36 years, Iran (the second largest oil producer in OPEC) was unanimously chosen for the presidency of OPEC last year. As a part of the rotation policy, the

baton has been passed to Iraq (a member of the Iran-led group) this year. This gives the Iran-led group an opportunity to defy US and its allies.

Moreover, the new hot spots of oil exploration across the world are threatening OPEC’s business at large. For instance, the Athabasca Oil Sands in Canada are estimated to have 1.7 trillion barrels of crude bitumen, out of which a large chunk is exported to US every day. Similarly, Jubilee Field in Ghana has reserves of more than 500 million barrels of oil; French Guiana recently found 700 million barrels of oil within their territory, the Aldous field of Norway is said to have 1.2 billion barrels of recoverable oil reserves and Mozambique discovered 7.5 billion barrels of oil in 2010.

Interestingly, OPEC, which has 78% of global oil reserves, produces only 35% of oil supply; while non-OPEC countries who possess 22% of global oil reserves, produce more than 60% of oil supply! Shockingly, OPEC collectively produces lesser oil now than it used to produce in the 1970s! A Wikileaks cable quotes Al-Husseini (former Executive Vice President for Exploration & Production, Saudi Aramco) thus, “It is possible that Saudi reserves are not as bountiful as sometimes described and the time line for their production is not as unrestrained as Aramco executives... would like to portray.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Thursday, April 25, 2013

Can JSPL keep its global expansion plans on track?

Jindal Steel & Power Ltd. (JSPl) has reasons to cheer as it has been able to deliver growth in profitability for the past fiscal when the entire sector has been facing severe margin pressures. But in the midst of environmental and regulatory hurdles back home and an unfortunate debacle in Bolivia, can the company keep the investor sentiment bright? Ashish Kumar of B&E undertakes an insightful visit to the company's Raigarh plant and interacts with senior officials on how they plan to keep the growth story going
When you land on the airstrip of “Jindal Airport” inside the three million tonne per annum capacity integrated steel plant of JSPL at Raigarh, the first thing that strikes you about this once sleepy town in the state of Chhatisgarh is the visible abundance of yellow metal. And no, we don’t mean gold, but the numerous yellow coloured JCB machines and cranes that keep the town bustling 24/7, a sight unimaginable over two and a half decades ago.

As is the norm with industrial townships, the plant area stands out as an island of affluence relative to the surrounding area, and the company has painstakingly endeavoured to provide its employees with every possible facility. In fact, to further secure their commitment, the company provides stock options to all employees, from the topmost official in the plant to the driver who took us around the area. However, the influence of the company on the town is quite evident when you talk to the locals around, so much so that a sizeable number of them prefer to deposit their hard earned money with JSPL for safekeeping, rather than with the five odd bank branches in the area! While the Jindal Hotel in Raigarh has no relation to the group (just a case of clever branding), the town has a state of the art auditorium set up by the company, where locals can watch the latest movies. JSPL has also provided mobile healthcare vans, among other facilities, as a part of its drive to ensure harmonious relationships with the community there. So far, their land acquisition drive in the area has been successful (read: no major flare up, even though all locals haven’t accepted the compensation/R&R/employment terms), making it rare in a milieu wherein numerous projects have been stuck in land acquisition controversies.

However, there are some very serious stakeholder issues that JSPL hasn’t been able to maneuver its way through as well. It faces the ire of the Coal Ministry due to delayed development of the Jitpur coal block allocated to it in Jharkhand (along with 29 other companies who got coal mining blocks). Their proposed 5 million tonne per annum steel green field project in Jharkhand is stuck for quite sometime due to this. Moreover, while the company has taken several initiatives to minimise environmental degradation like making bricks and cement out fly ash and planting some 3 million trees (initiatives that were visible in and around their Raigarh plant), it has also come under close scrutiny of the environment ministry for beginning construction work in the non-forest area for the Angul steel plant in Odisha, before the forest area was cleared by the ministry. In addition, the National Green Tribunal cancelled the environmental clearance for their coal & washeries plant in Chhattisgarh, as it claims that the public hearing of the matter was not conducted in the right way. Land acquisition issues have similarly cropped up with regard to the Rs.350 billion steel plant project in the West Midnapore district in West Bengal. Commenting on the issues, N. A. Ansari, whole- time director and executive director, JSPL Raigarh laments, “Lack of clear cut policy measures has affected not just us but the whole sector. Regulations need to be practically feasible and consistent to reduce the environment of uncertainty.”

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Wednesday, April 24, 2013

The next ‘Red’ wave!

‘Multi-polar world order, political dynamics, economic transformation’ – if you’ve had enough of all these terms and want to understand China, then this is the book that can help without taking a toll on your head

When Fareed Zakaria (in his book The Post American World) says that we are moving towards a multi-polar world wherein America will have to factor in the position of countries like China and India, then it must mean something. There are hundreds of authoritative commentators out there writing about the rise of China. Unfortunately, most of them are based out of China. So what we generally get to read is a ‘view from the top’. From that perspective, Shaun Rein’s The End of Cheap China: Economic & Cultural Trends That Will Disrupt the World comes across as one of those rare, reliable handbooks that one can pick up to actually understand how China has become one of the world’s most influential economic and political centres in a short span of time, and where it’s headed from here on. As a writer, he attempts to answer what everyone is wondering, “What is China evolving into and what does that mean for the rest of the world?” What makes Rein’s book the real deal is his background. He first came to China as a teenager in the 1990s when the government was pushing for a major privatisation of the economy. At that time, the market was inefficient: buying a plane ticket was a nightmare and fresh milk was non-existent except for in 5 star hotels. More interestingly, members in his wife’s family were personal friends with Zhou Enlai and Mao. This helps Rein in portraying the dynamics of the relationship between China’s masses and governments. Additionally, he is able to draw on inferences from data compiled by his market research firm over a decade. When you have access to such insights, something compelling is bound to come forth. In the book, he interviews billionaires, senior government officials, poor migrant workers and even prostitutes to track China’s changes. There are chapters on modern Chinese women, lessons from China’s sex industry, and how Chinese demand for commodities will cause tension with the rest of the world. Rein goes on to analyse how companies can benefit from these changes and argues that China will successfully make the transition to a modern developed economy. If you happen to be a businessman who wants set up operations in the Mainland but don’t know much about the country, this book is a good place to start.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Friday, April 19, 2013

Yamaha: Can it fire on all cylinders?

The Japanese bike maker plans to take its sales in India to a million bikes in another two years, but its ambition could come a cropper if it fails to rack up volumes in the base segment.

Ask Hiroyuki Suzuki, MD & CEO, India Yamaha Motor, about his plans of relaunching the once iconic RX100 brand in India and you find his face crease into an impish smile. In case you haven’t caught on and are still waiting for more pronounced cues, he goes on to gently shake his head. For legions of bike lovers, during the 1980s and the ’90s, the RX100 was the hottest bike in town, and the brand continues to evoke a warm nostalgic memory even 15 years after it went off the shelf.

However, a lot of water has flown under the bridge since Yamaha took the RX100 off its production lines. Subsequent models like RXG, RX-135 and RXZ failed to live up to the promise generated by the superb RX100. While these brands failed to make a splash, competitors like Hero Honda and Bajaj Auto kept relentlessly jockeying up their market share. Around 2006, things had turned downright bleak for the Japanese bike maker and it was losing money by the barrel. As per various market reports around this time, Yamaha incurred losses to the tune of Rs.10 billion in the last six years and it was seriously considering pulling out of India altogether. But thanks to its heady success earlier, Yamaha’s Japanese headquarters decided to give the second-fastest growing market in Asia a second shot.

In 2007, soon after launching superbikes like R1 & MT01 in the Indian market, Yamaha turned to what it is best known for – making motorcycles that are technologically ahead of their times in terms of styling, performance and features. Products like R15 and FZ series were launched in the Indian market. Their initial success spurred Yamaha to continue with its game plan of introducing models that successfully attract the Gen-Y biker. As a result, in subsequent years, Yamaha launched products such as Fazer, FZ-S, SZ-R and others. Today, the company sells 14 models in the Indian market and claim that it has over 15% market share in the premium motorcycle segment. The overall market share of Yamaha in India is just around 3% even today, but considering the intensified competition in the Indian two-wheeler segment, the comeback plan has worked well for the company so far.

Continuing with its quest to pump up sales, Yamaha posted a growth of 32% in domestic sales during August 2011 as compared to its sales in August last year. The company registered sales of 29,934 units in August 2011 as against 22,683 units in the same month last year in the domestic market. The overall sales recorded were 39,490 units in August 2011 compared to 30,461 units in August 2010, a growth of 30%. But Yamaha is hungry for more and is making redoubled efforts to push its sales further. MD Suzuki claims that Yamaha will be able to tot up sales of 530,000 units in 2011 out of which around 360,000 units will be sold in the domestic market while it is looking to export over 170,000 units. Next year, the company’s target is to sell over 650,000 units and scale it up to a million by the end of 2013.

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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

Tuesday, April 16, 2013

Climate change is a matter of justice

Climate change is a global problem: If countries are not confident that others are addressing it, they will not feel an imperative to act themselves

Before the Copenhagen climate-change summit two years ago, the two of us sat together in Cape Town to listen to five African farmers from different countries, four of whom were women, tell us how climate change was undermining their livelihoods. Each explained how floods and drought, and the lack of regular seasons to sow and reap, were outside their normal experience. Their fears are shared by subsistence farmers and indigenous people worldwide – the people bearing the brunt of climate shocks, though they played no part in causing them.

Now, two years later, we are in Durban, where South Africa is hosting this year’s climate-change conference, COP17, and the situation for poor people in Africa and elsewhere has deteriorated even further. In its latest report, the United Nations Intergovernmental Panel on Climate Change concludes that it is virtually certain that, in global terms, hot days have become hotter and occur more often; indeed, they have increased in frequency by a factor of 10 in most regions of the world.

Moreover, the brutal paradox of climate change is that heavy precipitation is occurring more often as well, increasing the risk of flooding. Since 2003, East Africa has had the eight warmest years on record, which is no doubt contributing to the severe famine that now afflicts 13 million people in the Horn of Africa.

These are the consequences that a mere one degree of warming above pre-industrial levels has wrought. The UN Environment Programme’s just published report Bridging the Emissions Gap shows that over the course of this century, warming will likely rise to four degrees unless we take stronger action to cut emissions. Yet the latest evidence demonstrates that we are not acting – the International Energy Agency’s World Energy Report 2011 reveals that CO2 emissions have rebounded to a record high.

We are alarmed that expectations for COP17 are so low. Where is the global leadership that must respond urgently? We desperately need a global deal. At the heart of this deal is the preservation of the Kyoto Protocol. The Protocol is not a perfect instrument. It does too little to cut global emissions, and it requires too few countries to cut their emissions growth. But it is part of international law, and that is vital.

Climate change is a global problem: if countries are not confident that others are addressing it, they will not feel an imperative to act themselves. So, having a legal framework with clear and common rules to which all countries are committed is critically important – and the only assurance we have that action will be taken to protect the most vulnerable.

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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

Monday, April 15, 2013

Ranbaxy’s cookie – will it crumble?

Much of Ranbaxy’s fortunes is riding on the way its impasse with the USFDA over Lipitor generic sales pans out. The timely resolution of the dispute can make a big difference for India’s largest drugmaker – between making a fortune and being content with making a living. Caution: November is fast-approaching.

The feelings run both ways. Indian generic drugmakers exporting to US are salivating over a goldmine of opportunity worth $96 billion that is expected to come their way from drugs going off-patent between 2011 and 2013. Also, governments the world over – US, Europe and Japan, as also fast-growing markets such as Brazil, Russia, India, China, Turkey, Mexico and South Korea – are pushing for cheaper, generic drug equivalents. But the bumper bonanza in generics may still slip from the grasp of Indian pharma companies because of quality concerns and the underlying fear of possible litigation. Not a pleasant sight.

Indian drug firms, which account for about a third of US applications for approval to sell generics, could add $2 billion to $2.5 billion to their US market sales over the next five years, doubling their revenue from the country, according to Morgan Stanley. Though the outlook for Indian companies looks good due to continued demand for generic drugs – or chemically similar versions of original medicines – ratings agency Fitch singles out regulatory concerns and litigation as a key risk. The US Food and Drug Administration (USFDA) has in recent times raised regulatory concerns and quality issues of varying degrees of seriousness with regard to a host of Indian companies, be it Ranbaxy, Claris, Sun Pharma or Lupin. With Ranbaxy, for instance, which stands to gain the maximum from original drugs going off-patent thanks to its licence to sell the generic version of Lipitor – Atorvastatin in the US market, quality issues have dogged the company from late 2008, just after it was acquired by Japanese drug major Daiichi Sankyo in a $4.6-billion deal earlier in the same year.

For Ranbaxy, the ghost of its regulatory problems with the USFDA still remains to be exorcised. India’s largest pharma company by sales (Rs.81.47 billion during FY2010) with operations in 46 countries has been facing a regulatory clampdown from the American drug regulatory body (USFDA) for about three years now, which has affected its prospects for launching products in the US market. This is how it started. In 2008, Ranbaxy had sealed an agreement with Lipitor’s original maker Pfizer and obtained from it a licence to sell a generic version of Lipitor in the US market from November 30, 2011. Due to its first-to-file status with the USFDA, Ranbaxy also got the exclusivity right on the drug for 180 days before other manufacturers can introduce their versions of the drug in the US market. But late that year, a bomb fell on Ranbaxy. The USFDA imposed a ban on import of the company’s 30 generic drugs, after two of the company’s manufacturing facilities in Dewas and Paonta Sahib failed on quality parameters. This run-in with the USFDA has led to a delay in the approval of the drug copy of Lipitor, a blockbuster drug for lowering cholesterol.

With clouds of doubts hanging heavily on Ranbaxy’s Lipitor gambit, investors are getting edgy and the company’s earnings have fallen in recent times. In the second quarter ended June this year, Ranbaxy posted a 25% drop in quarterly profit, hurt by slowing overseas sales and rising costs. In Europe, the company’s growth has been sluggish given the pricing pressure in most countries of the continent.

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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

Saturday, April 13, 2013

The Best a man can get?

When P&G bought Gillette for $57 billion in 2005, it earned Criticisms galore. Six years later, The Brand has already added $32 billion to P&G’s kitty. If Gillette’s India Market Performance improves fast, the coffers will only swell further. And there are signs of that happening.

The electric shaver and the safety razor have cut deep into the American and European markets but many Indians still strop their own razors or visit a barber for a shave. In fact, as per a CII official, over 50% of India’s 600 million males shave outside their homes in salons. Naturally, for Gillette, the world’s top razor-blade maker, India is a highly attractive market with a vast potential. Indian men on an average shave only 2.5 times a week, far lower than, say, Koreans and Japanese. But cracking this market, especially the mass segment, is not proving to be easy for Gillette. Years of conventional marketing and advertising have won it a premium brand image, but Gillette lags behind rivals in India because consumers can’t afford to buy its flagship products. So while it dominates the Rs.10 billion blades and razors category at the top-end of the market, family-owned Indian companies such as the Houses of Malhotra and Vidyut dominate the mass market.

Gillette India’s revenue of Rs.8.52 billion for FY2009-10 (July ‘09 to June ‘10) looks healthy given that it contributes to 19.4% of its parent Procter and Gamble’s India business (which amounts to Rs.44 billion). But Gillette’s India glory-tale is chicken-feed when compared to the brand’s global revenue of roughly $8 billion! Understood that the brand globally contributes to a much lower 10.13% of the total sales of P&G, but the fact that India contributes just 2.37% of Gillette’s total revenue invites nothing less than shame for a 28 year-old brand. Across the world, Gillette accounts for about 70% of the razors and blades sales, but in India, it has failed to live up to its spectacular global performance. And even though it is currently the market leader in the five billion-units-a-year razors and blades market in India with roughly 40% share, its performance here pales in significance to its global dominance. Just 10% of Indian men who shave use Gillette blades, compared with about 50% worldwide.

Gillette’s personal care products – shaving systems and cartridges, razor blades, toiletries, and shaving brushes – represent what the company is all about in India. The category accounts for a little over Rs.6 billion in sales – 70.42% of all that the company rustled up sales-wise during its last accounting fiscal (ended June 2010). Next in the pecking order is oral care, comprising toothbrushes and other oral care products. This division brought in sales of Rs.2.2 billion or 25.82% of all sales. Then there is the portable power products division, made up of battery sales, which rang in 3.76% of its sales.

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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, April 12, 2013

One in Every 10 Workers in India is a Child

The Observance of The World Day against Child Labour on 12th June has Brought back a Host of Issues behind this Social and Economic Malady. What are we doing about Child Labourers? Will The Practice Entrench itself into Perpetuity or can it be Wiped Out?

Child labour - defined as work that harms, abuses and exploits a child (aged between 5-14) or deprives a child of an education - is an ugly reality of life in India as it is in many other parts of the developing world. It is usually characterised by low or no wages, long hours, dangerous and unhealthy conditions and lack of physical and social security. The other is that these children are deprived of freedom, childhood, education, fun and play, and natural development. An official Government of India report states that child labour is ‘economically unsound, psychologically disastrous and physically as well as morally dangerous and harmful… Working children are denied their right to survival and development, education, leisure and play, and adequate standard of living, opportunity for developing personality, talents, mental and physical abilities, and protection from abuse and neglect.

India has the dubious distinction of employing the largest number of child labourers in the world. There are between 60 and 115 million working children in India - the highest number in the world (Human Rights Watch 1996 ) - with a majority of them engaged in hazardous activities like working with dangerous machinery, sharp tools and loads they are not strong or mature enough to handle. Carpet making factories, glass blowing units, matchsticks and fireworks manufacturers employ child labourers in thousands. Glass and bangle making units alone are estimated to employ over 70,000 working children.

Why is child labour so prevalent in India? Poverty is the obvious reason though not the only one. According to a 2005 World Bank estimate, 41.6% of the total Indian population falls below the international poverty line of $1.25 a day. Child labour is therefore looked upon as a source of income for poor families. A study conducted by the ILO Bureau of Statistics found that “Children’s work was considered essential to maintaining the economic level of households, either in the form of work for wages, of help in household enterprises or of household chores in order to free adult household members for economic activity elsewhere.” In some cases, the study found that a child’s income accounted for between 34% and 37% of the total household income.

The International Labour Organisation points to a strong correlation between income levels and child labour across countries, with poor countries registering high rates of child labour. According to government figures (Census 2001), over 53% of the child labour in India was accounted for by the five states - UP, AP, Rajasthan, MP and Bihar. Karnataka, Maharashtra and West Bengal together had about 20% of the child labourers in India.

Another cardinal reason for child labour is the lack of access to education. In some areas, education is not affordable, or is found to be inadequate. With no other alternatives, children spend their time working. Besides poverty and lack of education, there are also other factors that indirectly promote child labour in India. These include: Parental illiteracy, social apathy, parental ignorance regarding the bad effects of child labour, exploitation of cheap and unorganised labour, family practice of teaching traditional skills to children and ineffective child labour laws in terms of implementation.

In attempting to cure this social malaise, many developed countries have stopped importing any product from the developing countries that may have used child labour as an input. But the question arises whether banning goods made up of child labour is the remedy. Trade bans on goods produced by child labour have often had the unintended effect of forcing the children into other paid work at a lower wage and a more demeaning work condition.

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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

Sunday, April 7, 2013

Forward march to revisit past fallacies!

Instead of taking a close look at its own policies that led to the recent public agitations, The government is now looking at ways to attack freedom of press, just for being the carrier of bad news.

Prime Minister Manmohan Singh on August 30 announced the setting up of a group that will specifically deal with regulating the media in order to make it more accountable. The decision was taken at a cabinet meeting, which saw some adamant pressure from members who were upset with the way the media covered the anti-corruption agitation of Anna Hazare. According to sources, there was also a strong belief among a majority of the PM’s colleagues that the entire movement was actually fuelled by the media. In the wake of these developments, the government is now looking to devise ways and means to address the issue by curtailing exaggerations in press reports. Some of the ministers have even been critical of the ‘anti-government’ slant in the coverage, and have been pressing for curbs both in the Cabinet meeting as well as in the newly-constituted Group of Ministers (GoM) on media and paid news. The composition and powers of the group are not clear yet. Interestingly, the government says it wants to put curbs on the media without curbing the freedom of the press.

The last time that India witnessed a regime of media censorship was in the 1970s when Indira Gandhi had imposed emergency rule in the country. The suspension of all civil and political rights soon followed and so did political censorship. In fact, this continues to be the only dictatorship that modern India has ever witnessed till date. To be fair, the recent move by the present government cannot be compared with the Emergency, but the agenda to control free speech looks alarmingly similar and, as experts put it, deplorable and regressive.

The Anna Hazare movement is not the first instance where the government failed to gauge public sentiment. Neither is this the first instance that the government has tried to curb the freedom of the press. In 2007, the government came out with a draft Broadcasting Services Regulation Bill, tagged as the country’s ‘most sweeping attempt to infringe on free speech’. Serious concerns were voiced on the belief that live telecast of the 26/11 Mumbai strikes had helped the Pakistani terrorists. The government had then proposed restrictions on live telecast of such emergency situations, permitting only “authorised feeds” to be telecast. The proposed law, which is still under consideration, is actually the result of a Supreme Court decision in 1995 when the court mediated a dispute over telecasting rights of a live cricket match. The court deemed India’s airwaves a scarce resource and “public property”, which should not be monopolised by the government or private broadcasters, but regulated for national interest. The Apex court recommended that the government create an independent statutory body to act as the custodian of airwaves. The proposed move saw some stiff opposition from media agencies who took up the matter with the PM. In their representation, the editors said the proposed measures to “gag the electronic media” had caused immense disquiet in the journalistic fraternity and among all those who believe in the right to freedom of expression.

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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

Monday, April 1, 2013

Ravages of substance abuse: economic costs and implications

Substance abuse as a Societal Issue not just has an Adverse Impact on Individuals and Stakeholders, but also Impacts Organisational Performance in ways Unimaginable. There has been no formal Approach to Addressing this ill, but recent initiatives might Succeed in Working out a model that appeals to The Business fraternity as well.

Do you have any idea how much economic and social damage is caused by substance abuse? And are you aware of how much could be done to address the problems if only the business opportunities inherent in finding solutions were better developed and more widely known?

The social and economic costs
Think about the distribution pertaining to the severity of substance abuse in India. It ranges from low to high, with a large proportion of the population in the category of those with little or no use, the lowest level of severity, and with no need for any sort of special treatment. In the US, this category includes roughly two thirds of the population. At the high end are alcoholics and addicts whose problems have been diagnosed and are under going treatment. This is a very small proportion of the population, less than 1% in the US. In between these two extremes, however, are two other groups – those who would be diagnosed clinically as being dependent but who are not receiving treatment and many more whose alcohol and other substance use – though not addictive — is significantly harming their ability to function soundly. You would be surprised at how much of the population falls into these two categories. In the US, for example, some 24 million people are dependent but are not receiving treatment, and another 60-70 million people are not clinically dependent but fall into the category of “harmful use”, i.e. their use of substances has harmful effects not only on themselves but also on those around them. While, we don’t have reliable information for India, we suspect that the proportions are not too dissimilar, with somewhere around one-third of the population needing or standing to benefit from treatment but not receiving it.

Now stop and think for a moment about how substance abuse affects people’s performance in the workplace. Not only are employees less productive than they might otherwise be, but the probability that they will have accidents in the workplace increases and their impact on their fellow employees reduces overall productivity. And these are the people whose level of substance abuse is moderate; despite their involvement with alcohol or opiates, they are able to hold down a job notwithstanding their absenteeism and diminished productivity. They fall into that category described above called “harmful use”. What if there were interventions that employers could use to help them reduce their involvement with substances? How big would the economic payoffs to the companies be? Were they to receive treatment, we can hypothesise that not only would they be more productive in the workplace, they might be more effective in other roles they play in their families and communities. And finally, what about those people who would be defined clinically as dependent and who need treatment but are not currently getting any? What are the costs, economic and otherwise, to Indian society? Estimates of the economic costs alone run into tens of billions of dollars or more.

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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