The new buzz word in Motown: Affordable luxury

The Indian automobile industry is facing one of its toughest periods in over a decade. In the period between April 2012 and February 2013, the industry registered a negative growth of -4.64% in the passenger cars segment. Sales of small and medium automobile segments are slacking off, which is in sharp contrast to the scorching pace of growth witnessed till a couple of years ago. Between FY2005-06 and FY2010-11, passenger car sales blazed at 15.2% per annum. That fell to 4.7% in FY2011-12, before languishing this past financial year.

The only silver lining has been the luxury end of the car market, which has been an exception to this anaemic trend. While the overall passenger vehicle industry has grown at a CAGR of 19.04% in the past four years, and the luxury vehicle segment has grown at a CAGR of 32.02% during the same period. Currently, of total car sales of 2.5 million, the luxury segment contributes only 1.2%. But the segment has been growing steadily over the past couple of years and is expected to contribute 4% of the total car sales in the next eight years. Experts believe that demand for luxury cars will rise to at least 50,000 vehicles by 2015, from 25,000 units sold in 2012.


Mercedes-Benz, which came to India in 1994, was the largest seller of luxury cars in India till a couple of years ago when fellow German rival, BMW, beat the company to the numero uno position in 2009. That year, Mercedes recorded 3,202 units in sales whereas BMW sold a good 3,587 units, topping the sales chart. Audi, which was then just making its presence felt in the Indian market, registered 58% of whopping yoy growth in 2009, selling 1,987 units. Since 2009, the competition has gotten more intense and scalding hot. The German players have been at each other’s throat, straining their muscles to outperform in the competitive luxury car market, which has grown thicker with the entry of newer players like Volvo and Jaguar Land Rover.

On one hand we have the entry level luxury brands like BMW, Audi, Mercedes and Volvo; on the other hand there are the mid-level luxury brands like Jaguar and Land Rover (starting from about Rs.5 million) and then there are the ultra-luxe brands, some of the biggest names in the sports car and super luxury segment, like Bentley, Lamborghini, Rolls Royce, Ferrari, Aston Martin, Maserati and Bugatti. The arrival of these big guns in the Indian market over the past two years has further redefined and segmented the luxury car market. So we now have the entry-level, mid-level, super luxury, sports cars and SUVs. Another key trend in this luxury space is the sudden upsurge in the entry level cars starting as low as Rs.2.2 million.

The trend was kicked off with BMW launching its X1 SUV model and lowering the entry level of its luxury cars to about Rs.2.2 million (ex-showroom). The idea is to generate volumes and so players like BMW are launching new products in the affordable luxury segment, where the demand actually is. In the process, the traditional luxury segment has now morphed into the premium category with most luxury car makers moving towards affordable luxury. In order to vroom ahead in this new “affordable luxury” category, BMW has introduced its sub-brand Mini Cooper, which it introduced at last year’s auto show in Delhi. It is planning to launch three models of this sub-brand in India − Mini Cooper, Mini Cooper convertible and Countryman, priced aggressively between Rs.2.49 million to Rs.3.19 million. Rivals Audi and Mercedes have also taken steps to create excitement in the entry level luxury segment. Last year saw Audi introduce its Q3 model (priced at Rs.2.67 million) while Mercedes has launched its B-class priced competitively at Rs.2.10 million, which competes with BMW X1 (priced at Rs.2.24 million).

As the churn in the luxury car market gets thicker, players are pulling out all the tricks to stay ahead in the competition by creating new segments and looking for new markets to generate demand. “As we move into the future, we are well positioned with a forward-looking strategy, progressive roadmap along with an exciting and emotional portfolio to tap the available market opportunities,” says Philipp Von Sahr, President, BMW India. So, BMW is tapping the market for commercial use of luxury cars such as premium hotels and cab owners and has gone for selling the stripped versions of its traditional luxury cars to generate incremental demand.

Likewise, Audi is contemplating to launch several initiatives on the pro\duct front this year. It plans to assemble the entry level Q3 SUV, which is giving good competition to the BMW X1, in India by the second quarter of this year. The price of Audi Q3, which starts from Rs.2.6 million, is expected to come down further once Audi starts assembling the Q3 in India. The car maker at present assembles sedan A4, A6 and SUV Q5, Q7 in India. Even, Mercedes has plans for expanding its product portfolio. “We would be launching one or two products, starting this year, with a B-class launch. And soon we would be launching an A-class product as well. Secondly, we are investing heavily on production at our factories. We want to make our CKD (complete knocked down) units because it take 2-3 years to get the CKD portfolio ready,” says Debashis Mitra, who was Director, Sales & Marketing, Mercedes India, before quitting just a few days ago.

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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

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

BBA Management Education

Fairs can spell money!

Cultural and religious festivals in India are of immense importance

Truly, religious festivals have not been confined to religious activities. Their contributions extend to economic development, employment creation and tourism. Among all, Kumbh Mela is one of its kind, claiming to be the world’s largest religious festival. The mela, which occurs once in three years in four different places including Allahabad, Haridwar, Ujjain and Nashik alternatively, is happening currently in Allahabad. Around 100 million people are expected to join this 55-day festival. However, the economic contribution too is as gigantic as its crowd. A report by the Associated Chambers of Commerce and Industry of India estimated that the mela will generate about $2.2 billion of income for the city and create thousands of jobs. However, it is not the only religious festival generating revenue and employments for Indians; there are other melas including Sonepur Mela and Onam in the southern state of Kerala. The Sonepur mela brings good business to the local people. There were over 600 shops where sale of around 3,000 heads of cattle has been recorded. Onam, a festival of Kerala, has taken the international route, being celebrated in different places of the Middle-East including Dubai and Qatar.

Still, there are many lessons to learn from the way many countries have modified their festivals and marketed them at an international level. The Rio de Janeiro carnival has positioned itself as an international event, attracting an estimated 1.1 million visitors to the city in 2012 and with 5.3 million people taking part in street parties, an increase from 4.9 million people in 2011. Similarly, the Venice carnival attracts over three million tourists. Another classic example is that of the Mardi Gras carnival in the United States which generates a direct revenue of $ 144 million (more than $ 500 million by some other estimates) attracting more than five million visitors in New Orleans every year.

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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

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

BBA Management Education

“Market size is growing”

B&E: Luxury car makers are moving towards affordable luxury. Wll this trend affect the core luxury car segment?
Kumar Kandaswami (KK):The luxury car market will more or less stay on track in terms of numbers and figures. I don’t think anything big is going to happen in the traditional luxury car segment. Yes, the market has slowed down and replacement of luxury cars will take a little more time. Corporate houses and businesses are big consumers of luxury cars and they get tax benefits on such purchases. But when profits are low there is no need to hide tax. So businesses are not buying as much as they used to in the high growth years. Affordable luxury product lines are new categories that players are trying to create to grow and expand the market. We need to see how these segments will evolve. But they would not replace the conventional luxury sedans.  

B&E: Apart from players like Mercedes, Audi, BMW, other players are also entering the luxury auto market. Do you think India is ready for such action in this segment?
KK: It will take some time for market to develop. India is a small market for everybody to jump in. Players are waiting for the market size to increase by 60,000 to 70,000 units, but that will take 3-4 years .Newer players like Volvo are doing fairly well and want to expand but developing the network and infrastructure will prove to be time consuming.

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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

IIPM Global Exposure
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BBA Institute

There’s much to fix between the piers

A raft of infrastructure issues is affecting the growth and prospects of our ports. In the face of capacity constraints, lack of connectivity and inadequate mechanization, ports are burdened with excess traffic they can’t handle

India’s vast coastline, stretching around 7,500 kms, is home to 13 major ports and around 200 non-major ports. These are spread across the nine maritime states that stretch along the country’s western and eastern corridors. Considering that about 95% by volume and 70% by value of the country’s international trade is carried on through maritime transport, ports in India are expected to demonstrate efficiencies to sustain the demands of growing international trade. Even otherwise, modern seaports the world over play the role of logistic hubs in the global transport system, integrating the supply chain and offering a competitive edge to exporters and importers.

Historically, ports were measured on their ability to accommodate ships and other modes of transport effectively and efficiently. Contemporary developments in transportation, however, dictate that emphasis shift to the ability of ports to fulfill new roles in the logistics era in the context of operating within integrated global supply chain systems. Ports are therefore expected to demonstrate efficiencies that help to cut total logistic costs and improve the overall competitiveness of exported and imported products.

Unfortunately, even in the wake of India’s growing maritime trade in the world market and the unprecedented growth in bulk commodities and containerized trade, major ports in India have failed to expand capacity and develop facilities commensurate with the growth in trade. In FY2011-12, Indian exports accounted for $303.7 billion, logging an annual growth of 21%. Meanwhile, imports grew to $488.6 billion, a 32.1% growth. This rapid growth in trade can be sustained only if the port infrastructure keeps pace with the increasing volumes of cargo. Indian ports, over the past decade, have seen a sharp surge in traffic, which has almost grown four-fold to 9.7 million TEU (One TEU represents the cargo capacity of a standard intermodal container, 20 ft. long and 8 ft. wide) in 2011, from 2.4 million TEU in 2001 - a growth of 395%. But our port-handling capacity is way short when compared to the throughput of major ports globally. Even the 9.7 million TEU handled by Indian ports last year represents just 8% of the global benchmark ratio for economic output and one-twelfth of global container traffic averages. Given that the Indian economy grew 7.8% for fiscal 2012, ports in India are in urgent need of capacity augmentation in order to meet the country’s growing economic needs and also to grow our share of international trade.

Over the last decade, our average annual growth rate of port cargo volume has been about 10% and container traffic is projected to grow to 40 million TEU by 2025. But India’s ports are ill-equipped to meet this surge in demand as they have not been able to significantly ramp up their capacity and efficiency. As a result, our ports are congested and lack cutting-edge facilities. Till date, no Indian port is capable enough of handling large container vessels. Thus, most of international cargoes are off-loaded at Colombo or nearby ports and then transported to India in bits and pieces. This very incapability robs Rs.10 billion from traders. Even the custom clearance at ports increases the transport time by an average of 84 hours. Not surprising that the World Bank has ranked India’s port infrastructure at 3.86 in 2010, where 1 stands for extremely underdeveloped and 7 for well developed.

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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

 

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

ExecutiveMBA

Does this P&G ceo deserve the axe?

P&G chief Bob McDonald has come under fire after activist investor William Ackman called on the board to dismiss him. B&E finds out whether McDonald deserves more time and what the larger concern really is – survival of the CEO or the very company?

Bob McDonald, CEO of the $193 billion-worth consumer goods maker Procter & Gamble (P&G) hasn’t had an easy year so far. His neatly laid-out corner office on the eleventh floor of P&G’s Cincinnati headquarters, with mid-sized containers of the company’s products placed neatly on four columns of three glass racks each, do not reflect his not-so-calm state of mind. Outside it, employees are talking though. So are investors. Walk into the boardroom and you realise why all is not well at the company. At least not when its CEO is concerned. In recent weeks, he has won blame for not leading the company down the path of prosperity.

McDonald is not worried about winning support of fellow board members. They trust him. In the past three months, they have silenced critics by claiming so twice. The bother is an investor named William Ackman who today owns 1% of P&G’s shares.

To understand where the real trouble began, we turn back the pages to the second quarter of this year. On June 20, McDonald presided over a conference organised by Deutsche Bank in Paris. The CEO predicted lower-than-expected quarterly profits in the third quarter of 2012 (Q1, FY2012-13 as per P&G’s calendar). McDonald confessed that there were deep-rooted problems in P&G’s innovation mill and the subsequent execution of its strategy. For him, the admission did not bode well. Call it chance. On the same day, when Paul Polman (CEO of P&G’s biggest rival Unilever) delivered his speech at the Rio+20 summit in Brazil, he uttered no word of worry over Unilever’s bottomline or the existing lukewarm buyer ecosystem in his 15 minute-long monologue.

That Polman would have been worried about investors ready to question him on Unilever’s financials is out of question. Despite weak consumer sentiments in US and EU (where Unilever earns 44% of its revenues), his company’s bottomlines have increased in the past three years. Between FY2009 and FY2011, it rose by 26.17% to $5.51 million. In this light, McDonald’s talk that very day – which also included his plans to restructure the company and restore order in a troubled house – can be understood to be a mere justification of why P&G’s profits have fallen by 15.55% in the same period (to $10.76 billion).

This is where William Ackman (founder and CEO of hedge fund Pershing Square Capital Management LP) walked in. An activist investor, he is known for management shakeups at retailers like Target and J.C. Penny. By the time July began, he was already sitting on a neat 1% of P&G’s stock, which his company bought for $1.8 billion. His first move post-purchase gave a sign of things to come. He forced McDonald to meet him on September 4, 2012, with a 75 page-long document of the issues that are troubling P&G. Also present were P&G board members Jim McNerney (CEO, Boeing) and Ken Chenault (CEO, AmEx). What Ackman was really trying to do was convince two key members of the P&G board through a quick chat that it was time for McDonald to leave. Investors were excited to hear of an intellectually quick Ackman arm-twisting the top management. That the company’s stock (which had remained flat for most of the past two years) unexpectedly rose to a 54 week intraday high of $70 – a 13% appreciation since trade began that day – was proof enough! But it wasn’t to be that easy for Ackman. Was he right in asking McDonald to vacate his chair?

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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

 

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

BBA Management Education

A weak power sector: What’s the cure?

Power blackouts that occurred recently have put the spotlight back on a troubled power sector. Grid failures, shortage of coal supply, financial losses, poor infrastructure & governance, and political finger-pointing are making matters worse

For some, it was their worst experience ever. For others, it was a repeat of the horror. We are referring to the blackouts that left over 680 million people in a state of darkness and despair for long hours together on July 30 & 31, 2012. But more than the unforgiving power cuts and crippled state of trains and metro rails that resulted from failure of three transmission grids in the country, it was the kind treatment offered to the one responsible for the disruption that embarrassed India, Sushil Kumar Shinde (the-then power minister), that made bigger headlines. Post the incidence, Moodbidri Veerappa Moily was made the power minister and Shinde was asked to take charge of a higher office in the government. [He is today the Union Home Minister.] When questioned over objections raised by critics on this move, Shinde clarified that he rated the performance of the power ministry under his tenure as nothing short of excellent. “I have briefed the Prime Minister’s Office... In USA, light does not come for four days. Here we got it in a matter of hours. People should appreciate how work is done at the grid,” was Shinde’s justification. [He was referring to a blackout in North America in 2003 that lasted 4 days.]

Starting 2.35 AM on July 30, the whole of North India experienced a power cut for 10 hours after the Northern Grid tripped. The next day saw a bigger outage hitting 19 States and two Union Territories when the Northern, Eastern and North-Eastern grids all went on the blink. An estimated 684 million people, or a-tenth of the world’s population, were left without power for up to 8 hours. Shinde was quick to blame States like UP, Punjab and Haryana for overdrawing power.

The event that lasted two days was just a bellyache – a symptom of the deep malaise that afflicts governance in the power sector in India.

On the face of it, many would assume that the power ministry has its task cut out for itself. But hasn’t it always been so? Are long power cuts new to India? Has the 100 million tonne gap between coal demand and supply just emerged? Are issues related to supply of coal and gas new? Or has the fact that over 400 million people still lack access to electricity just struck India?

The recent grid failures that won India international shame and exposed the lack of grid discipline in the Indian power sector, could act as a trigger to implement corrective measures to eradicate problems which the sector is reeling under. That would call for bold measures on the part of the new minister.

To begin with, he will have to put in place a system that ensures strict adherence to grid discipline (a present, violations due to overdrawing of power by various states are common). As per the Central Electricity Regulatory Commission (CERC), it had issued four directives to States not adhering to their set limits of drawing power. But to no avail. The reason – political compulsion. Moily though, claims that the guilty will be brought to book. “There is a provision to imprison authorities or the state chief secretary for disobeying grid discipline. Perhaps we need to enforce that,” he said.

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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

 

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

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.

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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

 

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

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

and Arindam Chaudhuri (Renowned Management Guru and Economist).

 

For More IIPM Info, Visit below mentioned IIPM articles

 

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

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.

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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

 

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

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.
 

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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

 

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

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.

Read more.....

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

 

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

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.

Read more....

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

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

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

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.

Read more....

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

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

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

Sunny Side up for DTH Firms

India’s DTH Industry is Making a Bold Gambit to take off into Profit zone on The Back of Growing Popularity for High-Definition and value-added Services.

Decades ago, when celebrated American author and critic John Mason Brown spoke about television being chewing gum for the eyes, the visual medium was still years away from efflorescence. Today, as the total number of digital TV households worldwide fast approaches the 1-billion mark, representing a penetration rate of 65%, those words have even found global utterance.

According to UK-based research and forecasting agency Informa Telecoms & Media, which delivers strategic insight on the display industry based on global market data and primary research, more than 401-million digital TV homes are expected to be added between the end of 2010 and the end of 2015, with China contributing a massive 136 million, followed by India with 47 million. A recent report by DisplaySearch, a leading global market research and consulting firm specialising in the $770-billion display supply chain market, says total worldwide television shipments increased 6% from 205 million units in 2009 to 218 million units in 2010.

The boom in TV sales is feeding the demand for high-end LCD and LED television sets by consumers looking for quality TV viewing. Industry observers say that there are about 13 to14 million households buying LCD and LED TVs every year in India. Approximately 700,000 LCD TVs were shipped by brands in India during the month of October alone last year. As television buyers in India gravitate to purchasing more of flat panel displays, direct-to-home (DTH) satellite television has emerged as the choice medium for digital and high-definition (HD)-quality video over other media channels like digital cable networks or IPTV, offering a broader entertainment experience to subscribers. On offer are entertainment, news and lots more options such as searching for job vacancies on TV, looking for prospective marriage partners and choosing travel packages across India that DTH viewers living in even remote nooks & corners of the country can choose from. Proliferation of television channels, viewers increasing sensitivity to quality transmission & programming of their choice and a growing demand for value-added services, have further promoted DTH revolution in the country.

“The need to be entertained, coupled with the diversity of broadcast channels, pay-per-view (PPV) opportunities, gaming and interactive services are the biggest growth drivers for DTH in India,” says a senior executive of a DTH service provider. “The big opportunity for DTH in India”, believes R. C. Venkateish, Chief Executive Officer, Dishtv, “is a virgin market served only by terrestrial broadcaster Doordarshan”. There are still large swathes of cable-starved areas in the country, where people watch only Doordarshan channels. Also, by and large, cable networks in India still run on analog technologies and are not yet digitised. According to analysts, the Indian market has a huge opportunity despite having seven DTH players, including government-owned DD Direct. The total number of households in India is estimated around 232 million, of them only 141 million have TV sets. Of the total number of the households, 116 million have cable and satellite connections of which DTH users count for just 31 million.

Read more....

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

For More IIPM Info, Visit below mentioned IIPM articles

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