Showing posts with label IIPM Going World Class. Show all posts
Showing posts with label IIPM Going World Class. Show all posts

Monday, October 08, 2012

Wealth Creation or Crony Capitalism?

from nano to sezs; from aviation to telecom, india inc. is a tale of state patronage

Some time during 1998, the media went into a tizzy. For the unthinkable had happened. First, the Delhi Police raided the office and residence of the Group President of Reliance Industries Ltd. V. Balasubramaniam. There were allegations that Balasubramaniam (or Baalu as the legendary lobbyist of the late Dhirubhai Ambani was famously known) had ‘violated’ the Official Secrets Act. Then again, officials of CBI raided the office of Reliance at Nariman Point in Bombay and even the fabled residence of the Ambanis called Sea Wind. All sorts of rumours flew thick and fast at that time. There were dark whispers that Baalu was in trouble because someone finally had the guts to nail him for getting access to the Union Budget even before it was presented to the Parliament. Most business journalists presumed that to be true; even though the allegations have never been proven. More than the raids, it was the political context of the time that had raised eyebrows across all and sundry. A government led by the BJP with Atal Bihari Vajpayee as Prime Minister was ruling India. Hacks, lobbyists and pundits were writing and talking extensively about how the rise and rise of the BJP and the decline and fall of the Congress had dealt a crippling blow to the ‘connections’ that Dhirubhai Ambani could boast of in New Delhi. Many had thought that the salad days of Reliance Industries, when it comes to getting ‘favourable’ back door benefits from the government at the centre were over.

They were conclusively proven wrong. It was under a BJP-led government in 2001 when Reliance made a classic back door entry into the mobile telephony sector of India – without a valid license! Mobile phone service providers like Bharti cried foul and loudly complained against this unfair treatment and asked for a level playing field. The matter went to the Supreme Court and Reliance was effectively given a back dated license after it agreed to pay a license fee. Then again in 2008, rivals cried foul when Reliance Communications, now led by Anil Ambani, was given licenses for launching GSM services across India. This time under the UPA government, but as we said, that debate is no longer relevant.

For some things never do change in India and for India Inc.!

When it comes to covering India Inc., the media has clear perceptions about entrepreneurs and business houses. It is taken for granted that the Ambanis are unmatched when it comes to ‘managing’ the environment in North and South Block. Of course, the Ambanis are also admired for the ‘wealth creating’ skills; but there is always that touch of cynicism when one mentions their name in the list of India’s top business houses. But no such sniggers are heard when it comes to discussing ‘clean companies’ like Infosys and business houses like the Tatas.

Unfortunately, like most perceptions, these pre-conceived notions are merely manufactured myths. The reality is: everybody takes advantage of ‘State’ patronage to create an aura of entrepreneurship and innovation. Take India’s most respected business house Tata. When Ratan Tata unveiled the dream car Nano in January, 2008 in New Delhi, the media went simply hysterical. Even the foreign media, which is usually condescending towards most things Indian, lauded the Nano as a modern day marvel. So hyped was the coverage that you would think Ratan Tata might get the Nobel Prize for leading a team of innovators that could make a car for less than Rs.1 lakh.

Amidst all this, someone like Mamta Banerjee was branded a spoilsport as she was protesting the acquisition of land in Singur in West Bengal for the Nano factory. Bristling when some media outlets gathered the guts to say that the manner in which Tata Motors was acquiring land would sully the good name of Tatas, Ratan Tata made a melodramatic statement to a TV channel: “ If I believe that we were doing something wrong, then I will be the first one to pull out… You put a gun on my head and pull the trigger or take the gun away, I won’t move my head.” Move he did. Both his head and Tata Motors’ factory moved lock stock and barrel from West Bengal to Gujarat. But even as it was shifting base, Tata Motors approached the Calcutta High Court requesting an order to stop the Right to Information Commission from revealing details about the tacit agreement it signed with the West Bengal government.


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face


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Saturday, October 06, 2012

Can Ratan Tata Salvage his Nano Dream?

The Small Wonder has been Struggling to Match The Demands of its Target Group after The Settlement of the Initial Hype. The Storm is over. B&E gives a Detailed Analysis of The Past Issues and The Future that Lies Ahead for The Nano

Though the small nano uses less gasoline than many larger cars, the enormous potential numbers could mean an equally enormous environmental impact, an exponential rise in carbon emissions as well as other kinds of pollutants. The United Nations’ top climate scientist, Indian economist Rajendra Pachauri has said he is already “having nightmares” about precisely this scenario

”This was a prominent blogger writing soon after the launch of the Nano in January 2008

And of course, there was the brouhaha over the traffic jams, the pressure on Indian roads and what not. I remember my Editor-in-Chief Arindam being slightly baffled by the extraordinary hype generated in Indian as well as global media in January 2008 when a proud and beaming Ratan Tata wowed everyone by saying “A Promise is a Promise” while unveiling the Nano at the Auto Fair. The promise he was referring to was the one to keep the price of Nano at Rs.1 Lakh(0.1 million). Arindam was baffled because he was perhaps the only person who had written a stinging article in 2007 lambasting Tata and West Bengal Chief Minister Buddhadev Bhattacharya for the ugly mess at Singur, the original site chosen for the Nano factory. He had also logically argued how and why a Rs.1 Lakh(0.1 million) car was actually a chimera. Of course, not many alleged pundits of corporate India paid much attention back then. I remember journalists – who otherwise display better sense on some rare occasions – forecasting that Indians will buy more than 1 million Nanos a year very soon.

Sooner or later, reality has a nasty habit of catching up with hype. In early October this year, I sent a fairly long SMS to the Editor-in-Chief basically saying that it is perhaps time for a big story on the Nano since there were persistent and unflattering reports about the actual volume of sales of the Nano. In my SMS, I pointed out that July 2010 was the best month ever for the Nano with sales of 9,000 units. And sales started heading south after that – even though the Indian auto industry was in the midst of an unprecedented boom. We both agreed that it was time for an analytical story on the seemingly inexplicable inability of Tata Motors to increase volume sales of the Nano despite the hype around the brand.


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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Monday, September 10, 2012

Missing the Multiplier

Independent India has seen the MSME sector grow by leaps and bounds and is proving to be the most promising and reliable sector for job creation and poverty alleviation in India. Despite an elaborate and dynamic policy framework, the road to the next level for MSMEs continues to be hindered largely due to the lack of adequate and timely credit.

The Micro, Small and Medium Enterprises (MSME) sector is widely considered to be the engine of the Indian economy. Constituting over 80% of the total number of industrial enterprises, it serves as the backbone of the nation’s industrial development. However, since independence, it has been suffering from some fundamental problems (poor credit availability, low level of technology, less skilled manpower, low production capacity and others), which have been the major roadblocks in its endeavour to scale up.

Globally considered as the driver of all economies (developed & developing) and a medium for promoting equitable development, SMEs in India contribute significantly to the manufacturing output, employment and exports of the country. According to the 4th All India Census by GoI, Ministry of MSME, it is estimated that in terms of value, the sector contributes 45% to manufacturing output and 40% to total exports. The sector is an umbrella for around 30 million units (both registered and unregistered in both manufacturing and service enterprises) and is the biggest employment provider after agriculture; providing employment to 59 million people (2006-07), which is supposed to grow to around 70 million by 2010. Producing more than 8000 products for national and international markets, SMEs’ contribution to India’s GDP has risen three-folds from 6.04% in 2000-2001 to 17% in 2009-10, and is expected to reach 22% by 2012.

Of all the problems faced by MSMEs, non-availability of timely and adequate credit at reasonable interest rates is the most significant. Despite its commendable contribution to the nation’s economy, SMEs do not get the required support from the concerned government departments, banks, financial institutions and corporates, which hampers its competitiveness in the national and international markets. One of the major causes for low availability of bank finance is the high risk perception of the banks in lending to SMEs and consequent insistence on collaterals (despite strict RBI guidelines not to insist upon collateral against a loan), which are not easily available with these enterprises. Manas Kumar Nag, CGM-SME, SBI, adds another perspective to the problem, “Generally, SMEs coming for loans are not aware of their financial position, which leads to lack of transparency and hesitation from our side.” The problem is most acute for micro enterprises and first generation entrepreneurs requiring small loans. Let us look at the options that are available to them.

In the year 2000, the Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched by the Government of India to provide collateral-free credit and strengthen the funding system to facilitate smooth flow of credit to the SME sector. To operationalise the scheme, GoI and Small Industries Development Bank of India (SIDBI) jointly set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Both the existing and the new enterprises were eligible to be covered under the scheme. Under this scheme, the lender should give importance to project viability and the borrower should avail the credit facility purely on the primary security of the assets financed. The Credit Guarantee Scheme (CGS) reassures the lender that, in case of any default by the unit that availed collateral free credit facilities, the Guarantee Trust would reimburse the loss incurred by the lender up to 80 to 85% of the credit facility.


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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Thursday, August 30, 2012

THE CAPTAIN OF THE SOUTH KOREAN SHIP

AFTER BEING THE CLEAR #2 IN THE INDIAN PASSENGER VEHICLE SEGMENT FOR OVER 11 YEARS, THE TIDE SEEMS TO BE TURNING IN FAVOUR OF ITS CLOSEST COMPETITORS. CAN H. W. PARK, THE CAPTAIN OF THE SOUTH KOREAN SHIP, STEER IT CLEAR OF THE MANY ICEBERGS ON THE WAY? BY PAWAN CHABRA

The market leader has even announced a plan to stage a comeback in the Indian market, starting with the launch of the Alto K10, coupled with five CNG models (of the SX4, the EECO, the WagonR, the Alto and the Estilo models), and the automatic A-Star. But even Shashank Srivastava, CGM – Marketing, Maruti Suzuki India, confesses, “A lot depends on how many units of the Nano does Tata Motors plan to sell in the Indian market.”

The issue of capacity crunch is also keeping many Hyundai investors on tenterhooks. Currently, its Sriperumbudur (Chennai) plant, with an annual manufacturing capacity of 600,000 units, is operating at full capacity. But as insiders quote, the auto major has an option of stretching it to 670,000, by modifying the assembly lines. The worrying fact is – Hyundai has not revealed plans to do that. Hyundai’s Saxena says, “If there is more demand for our products, we will possibly look into it. But I don’t think there will be a need for capacity expansion this year, perhaps not even in 2011.” But despite this, Park has good news for his investors.

Hyundai will land some hard punches on its competitors with the launch of its small car (reportedly scheduled for 2012), that will be positioned in the A2 minus segment, which would then be in direct competition with the Alto. The product is expected to bring high volumes to the company, which will then help it claw back market share in the domestic arena. Park reveals, “We are in the development stage of the model and it is going very well. However, I can’t comment on the time frame of the launch in the Indian market,” says Park. To this, Saxena adds, “While our small car will not compete with the Nano, when we are looking at such a model, we are looking at high numbers...”

Most likely, even though Tata Motors will again displace Hyundai as the #2 player for some more quarters to come, one cannot deny that Park still leads one of Hyundai’s most profitable overseas subsidiaries, which is also the #1 exporter of passenger cars from India, with exports of 285,658 units in FY2009-10 (64% market share in exports, while Maruti and Tata command a much lower 33.1% & 1.5% respectively). In fact, production figures prove how after Hyundai China (production volume of 570,309 units in 2009), the Indian subsidiary, with an output of 559,880 units in 2009, is the most important for the Chaebol.

Whether or not Park manages to retain the silver sceptre, the domestic market will remain key to Hyundai’s future. With the domestic market size growing by the day, fragmentation is inevitable. He has to focus on profitable volumes (and not ranks), with the key adjective being ‘profitable’ (given that currently, for every Nano that Tata Motors manufactures, it makes a loss due to capex depreciations). Park’s job as a CEO is to keep the volumes high and profits thick. For now, he is doing that. Tata Motors may focus hard on the Nano and critics may write volumes about how the product will ensure a second spot for Tata Motors, but experts opine that such low-priced products with wafer-thin margins, can hardly give companies a sustainable lead. There will be much more botheration for Park over the next couple of years in the form of Bajaj-Renault’s ultra low-cost car, FIAT’s model below the Punto and Volkswagen’s small car. But he needs to remember that increasing capacity is key, focusing on the Indian market with good margin products is important and keeping his investors happy (with profits) is religion. And for the sake of this religion, Park should not fret over giving away the runners-up trophy.


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Monday, August 13, 2012

FM to CM

chandrasekhar bhattacharjee explores the possibility of a power-sharing arrangement in post-2011 polls West Bengal, with Pranab Mukherjee becoming CM first, followed by Mamata

Those, who follow Indian politics at the national level as well as the state-level, are familiar with the rocky relationship that Trinamool Congress supremo Mamata Banerjee has enjoyed with her alliance partners. While the infamous departure from the NDA Cabinet takes the cake, the latest example has been the agitations and street protests against the Centre’s decision to hike fuel prices. But Mamata has matured as a politician and, as a balancing act, said the following on a television show, “If the people want Pranab Mukherjee as the Chief Minister, let him become the CM. I am willing to work under him even as a clerk. I have no ambition for any particular post. I have no personal possession other than my jhola. I am in politics only to serve the people.”

The political grapevine has it that Mamata’s statement should not be seen as an extension of olive branch. The Trinamool Congress and the Indian National Congress might actually be contemplating an arrangement in which the two will share the chief minister’s chair with Pranab Mukherjee taking the seat first. While leaders in both the parties termed this as mere speculation, such an arrangement could actually benefit the state of Bengal, many observers feel.

The dice of the 2011 Assembly polls in West Bengal are loaded in favour of the Opposition. Both the Trinamool and the Congress are aware of the Herculean effort needed to reverse the undoings of the 35-year-old Left Front (Read CPM) rule and lead the state towards betterment. Kumud Bhattacharya, former Pradesh Chhatra Parishad president turned political commentator says, “Mamata may think of utilising Pranab Mukherjee’s expertise and wisdom to give a push at the beginning. She can then take over and run the government without many hiccups”. He admits there are problems though, the biggest being acceptability of such an arrangement by the Trinamool rank and file.

A section of political analysts also feels that Mamata may opt for this arrangement as this will help her play the role of Sonia Gandhi in state politics. It will ensure that the Congress sticks to the alliance. On the other hand, Mukherjee’s wisdom and experience would come in handy in offsetting any situation of lawlessness that may arise out of the Left Front’s electoral defeat. Mukherjee’s proximity to the CPI(M) can also help the matter.

“But, will Pranab Babu, No. 2 in Raisina Hills agree to surrender that enormous power to become a mere chief minister,” questions eminent political analyst Siddhartha Sen. According to him, “Technically, there is nothing wrong in sharing political power of the state. There has been instances of such sharing in other states. But for that a smooth understanding between Sonia Gandhi and Mamata Banerjee is most important. But, the problem is in Pradesh Congress itself. Pranab Mukherjee does not have much of a mass appeal. He will have to be dependent on his party leaders which may make Mamata Banerjee jittery.”

Eminent journalists like Dilip Ghosh Chowdhury and Amit Sarbadhikari term such an arrangement as ‘hypothetical’. According to Ghosh Chowdhury, “I don’t think this is possible. People of Bengal do not trust Mukherjee so much, not even leaders of his own party. Apart from that, Trinamool is gradually being dragged into conflicts with the Congress. Inner conflicts in Trinamool-ruled panchayats are also coming up. The two parties have virtually no floor coordination in the state Assembly. I will not be surprised if the alliance is over before Assembly polls.”

Journalist-turned columnist Amit Sarbadhikari said, “Such kind of understanding between the Congress and the Trinamool is very much possible. But in that case, both the parties have to carry the same weight. If they secure nearly the same number of seats, then Pranab Mukherjee can be a contender for the post of chief minister. But honestly, will the people of West Bengal accept such a formula? People, who want to bring ‘parivartan’ and who hit the streets, want to see her in control of Writers’ Building.” Secondly, if Pranab Mukherjee becomes the chief minister, he would have to bank upon mostly on Congress leaders like Deepa Dasmunshi, Abdul Mannan et al who have not really proven their worth.

Noted theatre personality Bibhas Chakraborty has been in the forefront of the anti-CPI(M) movements in recent years, since the Singur and Nandigram days. He told B&E, “As a citizen, I do cast my vote for one party or the other. But, a citizen’s responsibility in India ends there. The winning party or alliance will elect its leader who will go on to become the chief minister. So, where is people’s or citizen’s role in the process? A citizen or a voter has no chance to elect ministers. That’s why I feel no urge to comment on this matter. But recently, Mamata Banerjee herself has said that Pranab Mukherjee might be the next chief minister. If she and her allies win the race, they can elect Pranab Mukherjee as their leader.”


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Thursday, August 09, 2012

GREEN TRANSPORT: AIR TRAVEL

A takeoff towards greening the aviation sector is not financially viable. Can we ensure its sustainability?

According to Germany’s central environmental office, a day-time average sound pressure level of 60 decibel 
has the ability to increase the incidence of coronary heart disease by 61% in men and 80% in women, while a night-time average sound pressure level of 55 decibel increases the risk of heart attacks by 66% in men and 139% in women. Surprisingly, flights still take off with noise pollution levels of as much as 150 decibels on an average.

Ironically, aviation has an inextricable link to the key industries of global trade and tourism. So state governments are reluctant to tax and regulate the industry either on the basis of environmental impact or on the basis of health issues. Although governments have woken up to the need of keeping residential colonies away from airports, with the growing population of many metropolitan centres, it is but inevitable that the civilian population reaches the fringes of airports. Now, as the issue of climate change is gaining prominence, governments too are expressing concerns. The European Council asked airlines to take part in the Kyoto emissions reduction scheme to reduce emission levels by 20-30% by 2020. Leaders in the G8 summit also expressed their expectations from the International Civil Aviation Organisation to do more beyond state governments’ requirements. Airlines are increasingly incorporating alternative fuel-efficient engines using biofuel, hydrogen and other renewable sources. The DHL group is buying eight new Boeing 777-200 LRF and six 767-300ERF under its GoGreen initiative to increase carbon efficiency by 4%. France has developed Electra, a single-seater battery-powered experimental plane. Virgin flew a Boeing 747 part-fuelled by bio-diesel from London to Amsterdam. Airbus has pledged to produce more greener planes before 2020. These are but niche initiatives. However, long term success will depend on the role of governments in improving infrastructure and encouraging alternative energy engines. The environmental cost will have to be incorporated heavily in air travel fare – and that’s inevitable!


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Wednesday, July 18, 2012

Google’s Telecom Power Grab Gambit

Google is Huge. Its m-cap of $201 Billion Proves it. And it can Easily Grow Bigger by Conquering The Communications Industry, in toto, by Becoming a Telecom Operator. Question is – should it take The Chance?

It was Google’s listing day at NASDAQ. The date – August 19, 2004. Google co-founder Larry Page & CEO Eric Schmidt were nervously busy in conversation, and most around them were more than pleased to allow the elaborately laid-out breakfast (with poached eggs perched on shiny pedestals, deliciously placed canapés and flatwares full of crème fraiche, besides others) help ease their anxiousness. The time: 9:24 am. The plan – in few minutes, the Macy’s suit-clad Page would Chair the opening of the market, then drive a few blocks north to Morgan Stanley Building on 1585 Broadway and watch investors play with the Google stock. The bell gonged and for those brief moments, nothing looked more glorious than the $100-valued stock, coded “GOOG”. “Congratulations, congratulations. It’s going to be a great success,” shouted NASDAQ President Rob Greifeld. Everything for Google, seemed to go as per plan. However, 10 minutes later, a commotion broke out. Two women wearing black skirts cried out for water & napkins. Reason: Page had landed himself on a plate full of Crème fraiche! Then flew a remark from Schmidt: “These things happen. We’ve seen worse.” It was as if he was expecting such a Page-act. But even he knew that this one, was not planned.

Not everybody agrees, but Page & Sergey Brin did not have their “Google” all planned out from day 1. And this has served them well. One day it was, in early 1999, when the two co-founders’ offer to sell their brainchild for $750,000 was turned down. Today, Google is worth $201.35 billion (as on Jan 18, 2011). And from investing millions on self-driven Robot cars, to risking $5 billion in a project in late-2010, to put in place a 350-mile-long undersea line to harness wind energy along the Atlantic seaboard, of late, the company has started laying wagers on strange cards. Trouble is – most of these plans appear “over-ambitious” and too futuristic. Question is – can it therefore move away from adventure, and invest in something more “planned”?

The answer – an obvious yes. After giving to the world the most successful mobile OS in recent times – the Android (with 25.6% of global share, powering 0.25 million new devices per day; says Goldman Sachs Analyst Fred Krom to B&E, “Google’s Android climbed from powering 5% of global handsets in 2009 to a high-teens percentage in 2010, outstripping Apple’s iPhone”), and having proved that it can manufacture handsets as well (the Nexus), Google could well be on its way to disrupting dynamics in the mobile industry, thereby becoming your next wireless carrier, and even bigger than the likes of Verizon & AT&T.

Google already has a low-cost voice telephony service in place in US – the Google Voice, where users are given their own unique telephone numbers. The very successful service was launched in May 2009. It spread like wildfire. Five months later, it had 1.4 million users, with 0.57 million using it every day. Experts claim that though the base has already moved into the 10 million plus zone (as of end-2010), only a small fraction of users actually pay for it (for ISD calls to telephones). So does this make for a profitable undertaking? The fact that the profitable Skype (bottomline of +$13.1 million in H1, 2010) has only 6% of “paid users” makes Google Voice’s case strong.


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Tuesday, October 07, 2008

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. Crisis in Bihar BJP blows overThe 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. A section of the party had been targeting Modi after two senior ministers from the BJP were dropped from the Nitish Kumar Cabinet and the portfolios of two more were changed.....Continue

Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Tuesday, April 01, 2008

Food biz: feeling the heat?

While Mother Dairy aspires to be a food biggie in the near future, presently its fruit and vegetable venture is constantly threatened with entry of biggies like Reliance. Sunil Bansal, Fruits and Vegetables Division of Mother Dairy, however, defends his turf saying that “other players have a presence far away from the city hubs, but we have a strong presence in the neighbourhood. Moreover, we are comparatively low priced and factors like our ‘touch and buy’ policy have made us consumer friendly,” he snaps.

Agreed that such strategies are enabling the company to clock staggering sales worth 400 tonnes of fruits and vegetables everyday, but what Bansal should remember is that retail biggies are not the only threat in the processed foods and vegetables market, which Rabo India Finance estimates will be a Rs.8,200 billion by 2009-2010. ITC and Dabur have also entered the game with all cylinders firing. Dabur already commands the Rs.500 crore packaged fruit based drink market (Dabur’s Real has a market share of 57%). So is Safal under threat? Replies Thachil, “In processed peas, Safal is the market leader and we are just two years old in juices. It will take us time to capture the market. Safal is doing well in exports too.” Not a hollow boast! Last year Safal generated a cool Rs.100 crores worth of exports.
For Complete IIPM Article, Click here

Source: IIPM Editorial, 2008

An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative

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