Tuesday, April 30, 2013

National

Maruti Suzuki: labour unrest
Voilence leaves India Inc. aghast
Some are calling it a conspiracy while others say that it is purely an issue between labour and management. But the bloodshed at Maruti Suzuki’s Manesar factory in Haryana, which claimed the life of one senior manager and injured close to 100 others, has triggered fears of the bad old days of stubborn trade unionism. While Maruti is counted among the best wage providers in the Manesar industrial belt, 40% of the workers at the Manesar plant are hired on a contractual basis. As such their salaries could be about 50% of the payout given to the regular workforce. With rising aspirations of a young workforce and the company’s continuous efforts on cost cutting, the simmering discontent eventually took an ugly turn. A similar kind of unrest at the same plant last year had cost the company a whopping Rs.25 billion. This time round the figure could be even higher as the company may have to keep the plant shut for more than a month. For a plant that on an average rolls out a car every 13 seconds, the loss would be staggering. The lockdown will also affect production of the company’s bestselling Swift Desire diesel car. Apart from financial losses, this kind of forced shutdown will also damage India’s ambition of becoming a global automobile manufacturing hub.

wipro: profitable quarter
Good news for IT sector
Indian IT service provider Wipro Ltd. announced a 18.37% y-o-y rise in its consolidated net profit of Rs.15.80 billion for the first quarter of the financial year 2012-13. Unlike its larger peer Infosys, whose earnings results have failed to excite the market, Wipro good numbers have brought cheer to the IT sector. The company says its clients are resorting to more and more outsourcing in an attempt to reduce their operational expenses, and Wipro is looking to gain from its clients’ spending. The company also said that in today’s complex business environment, global corporations are increasingly investing in transformational technology initiatives to improve competitiveness. Wipro sees this shift as an opportunity for it to lead this change and help customers differentiate in this fast evolving market However, the company has projected a flat growth of $1.54 billion revenue from its global IT services for the second quarter (July-September) of this fiscal. Also, despite the increase in its profit, the third-largest software firm of the country has hit some speed bumps in terms of revenue earned in dollar. The company recorded a 1.36% dip in terms of dollar revenue for the first quarter this fiscal. IT services revenue in dollar terms was impacted by $25 million due to cross-currency volatility. IT services business accounts for 78% of the company’s revenue and 93% of its operating income, which at 21% in the first quarter was 1% lower y-o-y but fractionally (0.3%) higher sequentially from 20.7% in the previous quarter. In the June quarter the firm also managed to bag 37 new customers and employed 2,632 new employees in IT services. India’s $100 billion plus export driven outsourcing sector is facing a tough time as big clients from Europe and North America have cut down their overall spending.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
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Friday, April 26, 2013

Letters to the Editor

Opinion builder

I am a regular reader of Business & Economy magazine. Your choice of topics and the research that goes into them is very impressive as is the quality of writing in every issue. The editorial columns are amazing and it gives immense knowledge, which assists me in generating my opinions on current topics in the industry. I especially liked your cover story on on the joint research with Tuck Business School as it offered a detailed case study, which not many publications go into. I also look forward to reading the sector analysis articles as they tend to summarise the past, present and future of the covered sector very precisely. I must say that each and every issue of B&E offers some or other brilliant piece to read. I wish you all the best for your magazine and hope you people continue with such amazing work in future.

Sriwant Wariz,
National Marketing Manager, Fujifilm India

Great analysis

This was the first time I have read Business & Economy. Just after going through the magazine, I decided to write a small appreciation letter and regards to the team for the tremendous and faithful work that they have done. They have done true justice to the covered sectors and the stories are real insiders. The smart charts and intellect analysis of the sectors as well as the corporation were mind blowing. I would say that it has an edge over the other local magazines in the country as it more of an international and world class magazine. I would just like to suggest that you cover news and analysis of international companies in greater detail.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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Wednesday, April 24, 2013

Innovation Ecosystems

Ron Adner, Associate Professor of Business Administration, Tuck School of Business at Dartmouth, Author of the new book The Wide Lens: A New Strategy for Innovation, writes on the role of innovation ecosystems
 
There is a blind spot that undermines great managers in great organisations even when they identify real customer needs, deliver great products, and beat their competition to market.

Philips Electronics fell victim to this blind spot when it spent a fortune to pioneer high-definition television (HDTV) sets in the mid-1980s. The company’s executives drove a development effort that succeeded in creating numerous breakthroughs in television technology, offering picture quality that customers loved and that the competition, at the time, could not match. Yet, despite sterling execution and rave reviews, Philips’s high-definition TV flopped. Even the most brilliant innovation cannot succeed when its value creation depends on other innovations – in this case the high-definition cameras and transmission standards necessary to make high-definition TV work – that fail to arrive on time. Philips was left with a $2.5 billion write-down and little to show for its pioneering efforts by the time HDTV finally took off 20 years later.

Sony suffered from a similar blind spot, winning a pyrrhic victory as it raced to bring its e-reader to market before its rivals, only to discover that even a great e-reader cannot succeed in a market where customers have no easy access to e-books. And Johnson Controls, which developed a new generation of electrical switches and sensors that could dramatically reduce energy waste in buildings and deliver substantial savings to occupants, discovered that unless and until architects, electricians, and a host of other actors adjusted their own routines and updated their own capabilities, the value of its innovations would never be realised.

In all these cases, smart companies and talented managers invested, implemented, and succeeded in bringing genuinely brilliant innovations to market. But after the innovations launched, they failed. The companies understood how their success depends on meeting the needs of their end customers, delivering great innovation, and beating the competition. But all three fell victim to the innovator’s blind spot: failing to see how their success also depended on partners who themselves would need to innovate and agree to adapt in order for their efforts to succeed.

Welcome to the world of innovation ecosystems – a world in which the success of a value proposition depends on creating an alignment of partners who must work together in order to transform a winning idea to a market success. A world in which failing to expand your focus to include your entire ecosystem will set you up for failure. Avoidable failure.

There is a growing trend to not go it alone. In a 2011 survey of senior executives by the Corporate Executive Board, 67% expected new partnerships, and 49% expected new business models, to be critical drivers of their growth in the upcoming five to ten years.

To be sure, great customer insight and execution remain vital. But they are only necessary – not sufficient – conditions for success. Rather, two distinct risks now take center stage:
? Co-innovation Risk: The extent to which
Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles
 
the success of your innovation depends on the successful commercialisation of other innovations.
? Adoption Chain Risk: The extent to which partners will need to adopt your innovation before end consumers have a chance to assess the full value proposition.



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Reverse innovation

If you happen to be the CEO of an Indian corporation, you might do well to pick up this book in order to understand the opportunities that your country has created and how the very existence of your company threatens competition in resource rich nations. But make no mistake, this book is really meant for a very limited set of readers – individuals in leadership roles at MNCs based in the rich world. For a very long time now, the spectacular rise of third world nations has rendered a lot of ‘management terminologies’ almost obsolete. How do you explain the phenomenon of Western nations importing certain innovations from countries like India and China (megamarkets with microconsumers), when the Harvards & Apples of this world have taught the exact opposite for years altogether? To be true, economic turmoil coupled with weak demand in their home markets has compelled companies to increasingly shifting their focus to developing markets. But there is hardly any organisation, which can boast of a concrete game plan for growing in countries like Bangladesh, India and China. Most of them are in the ‘market share race’ when they should actually be front runners in the ‘market development race’. Dr. Vijay Govindarajan and Chris Tremble, believe that there is a way they can do so. They call it Reverse Innovation. In fact, this concept might even become a source of competitive advantage for companies that can leverage it. Take Mahindra & Mahindra (M&M) for instance. When the Indian automobile major arrived in US with its sturdy 35 horsepower tractors, Deere & Company (the dominant tractor brand) didn’t even feel mildly intimidated. After all, who would prefer a brand that sounded anything unlike America and sold low power red tractors. Instead of taking the competition head on, M&M decided to excel in a small agricultural niche. To offset the negativity that would be associated with a third world brand in those days, M&M forged relationships with small dealerships offering personalised services. The bet paid off. M&M grew by around 40% in US from 1999-2006 and is now the number one tractor maker globally (by units). This case (along with several others discussed in the book) in summary, represents Reverse Innovation.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
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Saturday, April 20, 2013

Optimal Mix: Managing a portfolio of supply contracts

The oil and refinery business is complex. Sometimes, companies lose on profit margin and market share if they don’t have an idea of managing supply contracts. The right mix of long- and short-term contracts can lead to a bigger profit.

When an oil refining company spends billions of dollars to build or upgrade a refinery, one of its main concerns naturally is how to get a good return on such a massive investment. In particular, the company would like to make sure that it sells the refinery’s products – mostly gasoline – in markets that would maximise its profit. A guaranteed long-term contract to supply gasoline seems most desirable, but the company may also want the flexibility of pursuing higher profit margins offered by shorter term contracts.

This was the dilemma faced by BP, one of the world’s largest oil and gas companies, as it completed a multi-billion dollar upgrade of its Whiting refinery in Indiana that would increase the refinery’s production by 1.7 million gallons of gasoline and diesel a day. To help BP find the best way to sell the refinery’s output year after year, I along with Shanshan Wang, PhD ‘11, developed a model that would allow gasoline companies to optimally adjust their portfolio of supply contracts over time, in anticipation of changing market conditions. This model is discussed in our study titled “Contract Portfolio Optimisation for a Gasoline Supply Chain.” While the work is motivated by BP, it has broad application to gasoline suppliers across the industry, which generates around $300 billion in annual revenue in the United States.

Gasoline, which is produced by processing crude oil in a refinery, is marketed to three distinct channels. The first is the branded channel where gasoline with specialty additives is sold through stations that bear the name of a major supplier such as BP, and are owned by independent firms or so-called branded “jobbers.” A BP jobber is obligated to sell only BP gasoline and BP is obligated to supply all the gasoline that the stations need. The contract typically runs for 10 years but virtually lasts forever, since an industry law called the Petroleum Marketing Practices Act prohibits BP from terminating the contract.

Gasoline also can be sold as a generic commodity through the unbranded channel, such as gas stations at Costco, Walmart, and Safeway. These outlets will typically negotiate a price to buy a specific volume of gasoline from a supplier for one year.

The spot market is the third channel, and that is where the major suppliers, unbranded jobbers, and other distributors come together to buy and sell gasoline. Refiners can sell any leftover product to the spot market after satisfying their contract commitments.

The key to maximising profit is in choosing how much of the refinery’s output should be sold to each channel given the uncertainty in the price and demand for gasoline. If BP sells its gasoline through an inappropriate mix of channels, then it may either not sell out its capacity or end up selling at a much lower profit, By adjusting the share that each channel receives over time to reflect changing business conditions, as opposed to a strategy of simply fixing the shares, the company’s expected profit can increase by more than 40% under some scenarios.
 

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

Lower GDP Stats
Despite desperate attempts of the government to move the numbers in the economy’s favour, GDP growth projections for the current fiscal year remains at 6.9% against last year’s figure of 8.4%. The slowdown in investments and low industrial output are the reasons for this decline. However, finance minister Pranab Mukherjee is still confident that the numbers will look up when full data for the year 2011-12 becomes available. The government has already run up fiscal deficit of 92.3% of its budget estimates in the first nine months of the current year, mainly due to less than anticipated tax collections. The central government has managed to raise Rs 5.2 trillion in revenue during the period, which is 61% of the budgeted target for the entire fiscal. The figures indicate that the government will find it difficult to meet its budgeted fiscal deficit target of 4.6% for the current fiscal. A lower than expected 1.8% growth in the index of industrial production (IIP) for the month of December 2011 has not helped matters either. Meanwhile, much to the relief of the government, the wholesale price inflation is on a 26 month low and is expected to stay at these levels at least for the next few months.

Airlines cheer
Much to the relief of airlines the group of ministers (GoM) has okayed the proposal for direct import of aviation turbine fuel (ATF), which contributes around 40% of the overall operating cost of an airline. However, the decision is yet to get the Cabinet go-ahead, which will open the way for implementation of the scheme. Airline operators have been lobbying for quite sometime for either imposing a flat 4% sales tax or to allow them to import ATF directly. The GoM’s approval of the scheme sent share prices of airlines like Jet Airways, Kingfisher and SpiceJet on an upward spiral as investors cheered the move. Allowing direct import of ATF will help airlines to save on sales tax, which varies from state to state. The absence of a uniform sales tariff has forced airlines to bear the cost of around 30% rise in their fuel expense on a y-o-y basis. Surprisingly, ATF in India is at least 60% higher than prices in West Asia or even Southeast Asia. ATF makes for 40-50% of the total cost for airlines companies. No wonder that operators like Jet and SpiceJet have been complaining that it’s the high fuel cost that has been responsible for their December quarter losses.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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Tuesday, April 16, 2013

Four looks like a crowd

Sony is looking to get a better grip on its mobile phone division by acquiring Ericsson’s stake in the JV. But a real turnaround may require radical rethinking on the company’s strategy

For Chairman, President & CEO Howard Stringer, who is expected to step down next year, mixed feelings would normally be a given. But he may mostly end up contemplating on what could have been. Sony hired the Welsh-born former President, CBS and founder, TELE-TV, in 2005 to turnaround its businesses and revive the brand’s iconic status. Neither of the aims seem to have been met.

This year, the TV business is expected to lose money for the eighth year in a row with competitors like Samsung gnawing away market share fast. Other businesses like computing and gaming also face tough competition from the likes of Microsoft and HP. Sony Corp. has sold a lot of its TV manufacturing plants since 2009. It now plans to further restructure the division, which may include teaming up with other companies or spinning off the business in its entirety. At one point of time, Sony was worth $100 billion. Today it is valued at $18.05 billion (November 7). Its m-cap is down by more than 50% since Stringer became Sony’s first non-Japanese CEO. Despite being the first mover and market leader in portable music players, Sony lost it all and Apple is the one, which really struck gold on multiple occasions with iPod, iPhone and iPad. There were some victories – like gaming, Blu-Ray and 3D film making, and Stringer has successfully unleashed a series of cost cuts in the company. But mere cuts, unless they are accompanied by strong & inspiring ideas and painstakingly immaculate execution, cannot take a company too far.

On October 27, 2011, Sony announced that it would be acquiring Ericsson’s stake in the Sony Ericsson JV for $1.45 billion. If one looks at Sony’s performance over the past decade, it gets apparent that apart from financial misfortunes, its strategy has been a complete misfit across business segments (except for gaming). And smartphones is one of them, a wrong that Sony hopes to correct with this deal.

In 2000, Sony was struggling to make a mark in the global cell phone market with a marginal 1% market share. It then forged a JV with Stockholm-based Ericsson in August 2001. However, the JV bombed, as it managed to appreciate market share by a mere 1%. The company is now looking at upping its stakes in smartphones. When contacted by B&E, Sony’s spokesperson for A-Pac commented, “It has been Sony Ericsson’s target to become a leader in the global Android phone market in terms of value share. (rf. Sony Ericsson’s CY11Q3 market shares are 11% in value). Through integration of Sony Ericsson, Sony will be able to integrate functions such as product R&D and design, and accelerate adoption of new platforms & technologies for better user experiences.”


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
 
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
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Monday, April 15, 2013

Can Amazon’s Kindle Fire turn the heat on Apple’s iPad?

The iPad has spawned an array of wannabes and clones but Amazon’s Kindle Fire tablet is being hailed as a truly disruptive product that could shake Apple’s hold on the tablet market.

A100 years from now, when a Pulitzer prize winning author of that generation pens down a book on the consumerisation of IT, he’ll probably pick up year 2011 as the starting point. In more ways than one, 2011 will be remembered as the year that kick-started a train of events, which transformed the technology landscape once and for all. First it was Hewlett Packard (the world’s largest IT corporation) announcing its exit from the PC business. Then Steve Jobs, the world’s most definitive authority on technology passed away. In between the Jeff Bezos led Amazon.com jumped on to the IT (hardware) bandwagon — a domain that had hitherto been left largely untested by the online mega-store.

And on the topic of Amazon’s IT ambition, despite its sensational and bold gambit in the arena of consumer technology, it calls for an audacious leap of faith to even imagine that there can even be a formidable competitor to Apple. Legions of techno geeks will avow that there is none to match Apple when it comes to integrating hardware and software so brilliantly. All the same, none can fail to observe how a single product — the Kindle Fire — launched by Amazon recently, gives this company the potential to achieve a feat that in every way matches Apple’s technology and design prowess.

But before dwelling on how the launch of Kindle Fire can help Amazon grab an enviable standing in the IT industry, it would be pertinent to go over how the company has been faring under founder and CEO Jeff Bezos over the past few years.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
 
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

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Friday, April 12, 2013

An Opportunity that Grabbed us

Benefits of Economy and a Quicker Passage to The Operating table have Made India one of The Front Runners in Medical Tourism. But Critical Failings, from The Government as well as The Private Sector, mean that India is Failing to Adequately tap The Opportunity

Since time immemorial, the mystical land of India has been enchanting foreigners from all over the world. Healing of the body, mind & spirit has been one of the country’s most compelling value propositions, one which even a young Steve Jobs couldn’t resist, many years ago. And as the costs of healthcare have soared, particularly in developing countries, India’s hospitals and physicians have made all possible efforts to become a destination for tourists who seek not just therapeutic solutions but a range of other treatments and sight seeing tours; adding to the “wellness” factor. Almost a decade has passed since medical tourism was originally envisioned as a major phenomenon in India.

A 2009 report by the Confederation of Indian Industries (CII) & McKinsey forecasts that medical tourism will generate $2.4 billion between 2009–2012 for India by attracting 1.1 million health tourists, up from 150,000 in 2002. India’s share in the global tourism industry is expected to rise to around 3% by 2013 (RNCOS report) with revenues of around $3 billion and a CAGR of 26% during 2011–2013.

There are over 3,371 hospitals and around 754,985 registered practitioners catering to the needs of traditional Indian healthcare. Indian hotels are also entering the wellness services market by collaborating with professional organisations in a range of wellness fields. According to the Ministry Of Tourism, as against an ordinary vacationer’s per-capita spend of $3,000 per visitor, the average medical tourist in India shells out more than $7,000 per visit. Traditionally patients from neighbouring SAARC countries and Middle East frequented hospitals in India. But patients from Africa and even Europe and US have started coming only in the last five years. Pricing is the clear advantage. The Planning Commission points out that India is far economical compared to peer countries. For example, heart bypass surgery costs $6,000 in India, $7,894 in Thailand, $10,417 in Singapore, $19,700 in Britain and $23,938 in the US.

India spends roughly 6% of GDP on healthcare and is expected to reach 8% by 2012. Private sector expenditure in healthcare is expected to reach $45 billion by 2012. But in comparison with America’s 15.3%, Switzerland’s 11.3% or France’s 11.1%, the country still falters when it comes to quality as well as quantity of medical facilities. B&E does a reality check to analyse whether the country has really lived up to the hype.

The flip side has majorly been the role of the government; or may we say, the lack of it. Although infrastructure spending for health care has intensified, only the private sector has flourished. Top Indian corporate hospitals like Apollo, Fortis, Wockhardt, Max and Manipal have stepped in to provide quality healthcare and technology. Nearly 75% of health care services and investments in India are provided by the private sector.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
 
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Thursday, April 04, 2013

Reaching out for The Broadband Dream

Over a year has Passed by since The Broadband Spectrum auction, which raised hopes of bringing Internet to The Masses. What’s delaying The Launch of BWA services?

Can Internet penetration in India match the surge in the number of mobile phone subscribers? It’s a far-fetched thought at the moment. Today, every second person in the country owns a mobile phone. At last count, the number of wireless phone subscribers stood at 840 million and tele-density had crossed the 50% mark. According to Voice&Data, approximately 10 million mobile phones were sold in India every month in 2010, while at the same time, an average of 622,000 new users signed up each day to a mobile service; adding 227 million new mobile subscribers in 2010. In contrast, the total number of internet subscribers in India is just 18 million out of which those with a broadband connection make up a paltry 11 million, according to Telecom Regulatory Authority of India. That’s 9 million less broadband connections than what was originally targeted by the government. India was supposed to double its rate of broadband reach to 2% – 20 million broadband connections – by 2010, but missed it by a long shot. In comparison, other Asian nations like China, South Korea and Japan have broadband penetration of 21%, 95% and 75% respectively. According to the latest figures from China’s Internet Network Information Center, the number of internet users in China rose to 457 million at the end of June, 2010, an increase of about 73 million over the past six months. The figures show that the number of broadband users reached 126 million while the internet penetration rate climbed to about 34%. On the other hand, in India, the rate of growth of Internet connections actually fell to just 4.4% during the December quarter, 2010, or 23% compared to the last three months of 2009.

A World Bank study shows that every increase of 10% in broadband penetration can lead to an increase in GDP growth by 1.4%, and can add more than 200 million jobs. Last year, the French government announced a budget of €2.8 billion for broadband penetration. In 2009, when the rest of the world was grappling with recession, the Australian government set aside a specific fund for broadband penetration.

Clearly, internet penetration is very important for the economic growth of a country. However, it has been more than a year since Broadband Wireless Access spectrum was auctioned in India, barely days after the controversial 3G spectrum sales. The BWA auction raised Rs.385.4 billion compared with Rs.677.2 billion for the 3G spectrum. But while 3G services were launched by private operators in December 2010, none of the private operators has rolled out BWA services. Only BSNL, which was given start-up spectrum much earlier than private operators, has launched BWA services in a few circles on WiMax technology.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
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Investors, Meet Alan. Alan, Meet The Investors. Now get along!

Alan Mulally, Ford’s turnaround guy won’t speculate about his own fate. The stock market will. This time, it is his China Strategy that has made them Unhappy. Has Mulally lost his Midas touch?

On a cold February morning of 2007, Mulally’s Falcon jet landed on the airstrip of a 330 acre auto-testing facility in East Haddam (Conn.), 720 miles due East of his office in Dearborn (MI). He was accompanied by two of Ford’s senior engineers. For Mulally, this was his first field trip to conduct a detailed trial of every Ford model on the market shelf. For 4 hours, he patiently listened to all the complaints made by third-party experts about his company’s vehicles. That the new Ford Edge SUV had no electronic opener and no handle on the rear making it impossible for five-footers to close the hatch was one. When questioned, his engineers exuded lumps of defensive excuses. First, their new boss gave them a piece of his mind. Then, he took out two pens and notepads from his satchel and followed it up with a command: “You know what? Just listen and take notes.” Mulally was prepared. He did not care about the humiliation his engineers suffered while standing amidst a gang of auto reviewers. He was least bothered about them being uncomfortable. What Ford needed then was correction of many mistakes, not cloaks that concealed the rust.

Every top executive in the automobile industry today, carries around with him a heavy backpack of tales. For Alan Mulally, much of what it holds is about resentment and confrontation. Be it insiders or outsiders, engineers or investors, he has waded through miles of objections and excuses to make Ford a profitable machine again.

What is widely known outside the walls of Ford’s offices is about Mulally being a Mr. Dear CEO. He never was. At 7 am every Thursday, Mulally meets 15 of his top executives in a windowless conference room, a floor below his 12th floor office in the company’s headquarters in Dearborn. It is called the Thunderbird Room. In these meetings, every reporting officer gets to know that Mulally has held his feet to the fire. He cares little about the displeasures earned in the path to progress. When in early 2009, Mulally decided to even consider postponing his plans to launch the new F-Series (because he wanted to clear out Ford’s inventory), he made many senior officials unhappy, including his global marketing chief James Farley.

He has also angered the markets in the past. It happened on November 29, 2006, when he pledged all of the company’s assets for $23.6 billion to US bankers in a packed hotel ballroom in New York. Ten trading sessions later, the stock was down 15.79% to $6.88 per share. During Q1, 2008, Mulally decided to show no loyalty to brands like Volvo, Jaguar, Land Rover & Aston Martin. He sold them off. The silence in the ever-giggling investor category became more pronounced. One trading session after the JLR deal was announced on March 27, 2008, Ford’s stock fell 6.83% to $5.59. During the eight months that followed, Ford’s stock plummeted to a historical low of $1.26 (Nov 19, 2008). The company lost a further $14.8 billion in FY2008 (the highest in its 105 year history) and burned 61% of its cash reserves ($21.2 billion) that year alone. Mulally’s promises of a turnaround tale had started looking like scrap metal. But the unexpected happened and Ford was back on its feet as the #2 car seller in the large US and EU markets during 2009 and 2010 (a situation last seen in FY2000). Credit goes to Ford’s lower-priced, smaller vehicles (which makes up 48% of Ford’s global sales today). The company made $9.28 billion in net profits.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles
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