Showing posts with label China. Show all posts
Showing posts with label China. Show all posts

Wednesday, April 24, 2013

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, January 19, 2013

Japan the new Iran?

Japan is distancing itself from the US and affirming its own foreign policy. Is this the start of a new political order?

As Yukiya Amano, a Japanese, takes over the Director General’s post in the International Atomic Energy Agency (IAEA), what should have been actually a booster shot for America’s fight against renegade nuclear loose cannon countries like Iran and North Korea has become more of a hanging question, with policy circles undecided on whether America actually supports Amano or not – in fact, the question is, does America support Japan anymore or not? The immediate provocation goes back to an article published in Washington Post on October 22, 2009, where a US State Department official was quoted radically stating, “The hardest thing right now [for America] is not China, it’s Japan.”

For a country which has been a staunch ally of US for more than a sixty years and for a country which still calls its armed forces as self defence force, thanks to the stigma of the 2nd World War and the restrictions imposed on it by the Security Council, one might ordinarily find it difficult to gauge as to what might have provoked such a change of heart among the US officials. The growing Chinese military and economic prowess and its hush-hush global ambitions are known to many. But is Japan, the country with the second largest economy in the world and one which till now has deliberately never leveraged its economic prowess for military ambitions, about to change?

To understand the changing paradigm of this relationship, one has to take into account the fact that one of the key aspects of the Japan-US relationship was and is the Japan-US Security Treaty. This treaty signed in 1951 and coming into force in 1952, though going through several reforms, continues to be the pillar of bondage between the world’s top two economies. With changing times, the end of Cold War and a phoenix like rise of China, this relationship too was supposed to go for a change for the positive. In Asia, US had always consistently seen Japan as not only a trusted ally but one which would be of great help to contain China both economically and military. The massive US military base in the Southern Japanese islands of Okinawa, being in the proximity of Taiwan and China, essentially works as a safety valve to keep China and others on leash.
 

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.
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Thursday, January 03, 2013

CHINA: TAXING POLICY

Restrictive tax policy will affect China’s foreign investment flows

The move definitely fills the pockets of the Chinese treasury, but it would discourage the institutional investors, who would withhold their investment plans fearing the possibility of paying higher tax. Moreover foreign investors, who are reliant on dividend payouts, would act more cautiously before dishing out their hard earned money for the Red Chip companies. This would not only have implications on the companies but would also affect the huge foreign investments which China gloats over.

“It is important for China to rebalance its pattern of growth to get more growth from services and consumption, and less from industry,” explains Dr. Louis Kuijs, Senior Economist, World Bank. A more rational tax policy combined with shift in focus from manufacturing to other industries is what China needs to continue its double digit growth. Shells are best left exported!


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles.
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Thursday, December 06, 2012

Colour me pink...

As the government relents, steel players must get their house in order

“Don’t put the steel industry between two prongs, where one prong is regulated by the suppliers of raw materials and the other end is held by the regulated prices. This way the steel industry will crash…” said Moosa Raza, President, Indian Steel Alliance (ISA), when B&E interviewed him in March 2008. Though ISA has since dissolved, but Raza’s words are finding resonance today, as all major steel players of the country have, one after the other, posted losses for the third quarter ending December 2008. Will 2009 see the Indian steel sector resurface or drown?

While net profit of Tata Steel and SAIL dipped by 56.36% and 56.4% respectively; JSW Steel recorded a net loss of Rs.1.27 billion as opposed to Rs.3.55 billion during the same period last year. “The losses were mainly due to rise in raw material costs, slackening demand in the home market and foreign exchange fluctuations,” points out a Mumbai-based steel and metal analyst.

The problems with the sector date back to 2007, when India’s iron was being guzzled by China whereas the latter was not allowing its coking coal and coke to be exported to India. This lead to high prices of coking coal and coke (key ingredients in steel manufacturing), which forced steel players to increase selling prices of their products. That’s when the Government of India intervened, unfairly, if you take the steel players’ perspective, and withdrew tax benefits entitled to the steel sector in March 2008. The Government also banned exports and scrapped the Duty Entitlement Pass Book (DEPB) Scheme, which allowed steel players duty-free imports of raw materials equivalent to the value of exports. A drop in demand of steel in the domestic market by sectors such as automotive, construction, et al further worsened the situation. And this is reflective in the current balance sheets of the Indian steel players. If those owning captive mines like Tata and SAIL are facing reversals, imagine the plight of the others.


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

For More IIPM Info, Visit below mentioned IIPM articles.

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Monday, October 29, 2012

CHINA: WTO

WTO finally pulls up errant China

China has also restrained the number of foreign films that can be released on her own soil to 20 each year. This policy has given birth to rampant piracy across the country, where movie or music DVDs are available at sums as paltry as $1. Even though American movie companies have tried tooth and nail to keep prices low, they are suffering. Although the WTO has nudged China to clamp down on piracy, it is difficult to curb bootlegging altogether in this vast country (which is an outcome of China’s own pigeonhole). China’s unprecedented growth over the last 3 decades was primarily triggered by export of manufactured goods that have been outsourced through China by the West. But this Asian giant has been very slyly restricting imports, except for raw materials and intermediate goods (for example computer chips are imported from Japan to be assembled in China and then to be shipped to the US).

The US sees this saga as an opportunity to ensure that China complies with the rules of the WTO and ergo protects intellectual property rights, something they haven’t done since they joined the organisation in 2001. But knowing the dragon’s incorrigible tendencies to act in self interest, this dispute may not be dying down very soon. For them, back to the wall literally means back to the Wall...


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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Tuesday, August 21, 2012

Your butt is my smokin’ problem

Smoking regulation has achieved some success; but it is pathetic that governments don’t have the honesty and sincerity to completely ban cigarette production globally – it’s clear how well money and lobbying works

It is appalling that despite all the medical advances mankind has made, the twenty first century still grapples with diseases that are perhaps even deadlier than those in the dark ages and have killed millions. The least we can do is to not add to the already depressing statistics through a social ill like smoking.

Innumerable researches have concluded that cigarettes contain 11 different known compounds that cause cancer. And almost everyone in any corner of the world – smoker or a non-smoker – is quite convinced that there are enough reasons to quit smoking irrespective of age, wealth, colour of skin or region where they live. Nearly every nation on this earth has realized the need for policy interventions and have gone some distance as well. They have achieved some success too, especially in the developed part of the world. As per data provided in Tobacco Yearbooks by Economic Research Service, US Department of Agriculture, during the 17 years between 1990 and 2007, while production and export of cigarettes in the US dropped by about 34%, consumption decreased by 31%. In 1990, cigarette production was 709.7 billion units, which came down to 471.6 billion in 2007. While the consumption was around 487 billion units per year in 1990, it came down to 360 billion in 2007 in the US. The picture is pretty similar in other developed nations of the world.

However, this does not mean that the job is done. Data on a global scale presents a horrifying picture today – more than ever before. There are 1.1 billion smokers in the world, and if current trends continue, the number is expected to reach 1.6 billion by 2025. More horrifyingly, of these, about 80% live in the low or middle-income countries. There are over 300 million smokers in China itself; consuming over 1.7 trillion cigarettes a year, which means 3 million cigarettes a minute. Researches further show that approximately 10 million cigarettes are purchased every minute; 15 billion are sold each day, and over 5 trillion are produced and used annually.


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Friday, July 20, 2012

It’s a Dry World, Literally

Desertification of World’s arable land poses a Great Threat to Human Civilization, and Coordinated Action is a must

By the year 1994, when the UN General Assembly declared ‘June 17’ as the “World Day to Combat Desertification and Drought,” one-third of the earth was converted into desert. Shockingly, desertification of the world’s arable land since decades has been slowly and steadily threatening and endangering livelihoods of millions of inhabitants, benefitted by relative ignominy in the minds of global leadership. It first came to public notice during 1968-1974, when the great Sahelian drought and famine in Africa killed 2,00,000 people and millions of their animals. This forced UN to initiate actions to combat desertification, particularly in Africa.

UN responded and addressed the issue of desertification of arable land on a global scale 34 years ago in 1977, by organising the first international conference in Nairobi, Kenya to promote public awareness and the implementation of the UN Convention to Combat Desertification. Since then, efforts have been taken up globally as well as by nations individually, yet fertile dry lands have been continuously becoming deserts at an alarming clip.

The United Nations Environment Programme (UNEP) has indicated a serious threat from desertification. Horrifyingly, according to the US Bureau of Land Management study, over 40% of continental American land is at risk of desertification. Over the last five decades, over 1.2 billion hectares of land – equivalent to the area of China and India combined, has experienced soil deterioration in developing countries. Another research by the journal of Life Cycle Assessment (LCA) that measured the degradation of the planet’s soil concluded that 38% of the world is made up of arid regions at risk of desertification. What is more shocking is that more than 20,000 square miles of land worldwide is getting converted into desert land annually.

This poses the greatest danger to inhabitants as well as to ecology. UNEP has estimated that the livelihoods of over 1 billion people are in danger in over 100 countries, due to arable lands transforming into deserts. Gradual desertification is forcing thousands of people from Africa to migrate to Europe. Researches show that a prime reason for Mexicans to migrate to US is that their dry lands are fast turning into deserts. Over 16.66% of the population of Mali and Burkina Faso has already been displaced due to desertification. Moreover, the economic impact is huge. As per UNEP, it costs the world around $42 billion every year. Desertification in the poorest continent Africa costs some $9 billion per year and a whopping $21 billion per year in Asia. It costs some $5 billion in North America, $3 billion each in Australia & South America and $1 billion in Europe.
 

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