Left bounces back in business

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The recent victory in Hamburg has enhanced the Left’s appeal in German coalition politics

A spectre is haunting the capitalist Germany now. The spectre of eastern communism. It’s been almost three decades now since the Berlin Wall was brought down & West Germany triumphed over the East. Throughout this long period, the mainstream German political parties, be it the Christian Democrats (CDU), the Liberal Free Democrats (FDP), the Social Democrats (SPD) or the Greens, collectively treated the children of East German communism as pariahs.

Did they succeed in their effort? Yes, but only until some members of the erstwhile East German Communist Party reinvented themselves in a changed political landscape through the formation of a new political outfit.

The Left Party, daring the de facto political untouchability, set out a fresh campaign, which eventually started producing results. When the results of the Feb. 24 Hamburg state election were out, Chancellor Angela Merkel’s CDU lost absolute majority in the state, which simply endorsed the shift of political Centre to the Left. The CDU won 42.7% of popular votes down from the 47% it bagged in 2004. CDU’s main rival SDP scored 34%, 4% higher than the 2004 figure. The most interesting performance is that of the Left Party which is set to enter the Hamburg Parliament for the first time with 6.5% of the votes. Hamburg result was just the continuation of what happened in the state of Hesse in January. The Christian democrats lost absolute majority in Hesse as the Left Party, along with the Social Democrats, emerged as a crucial player.

When the Left Party bagged some seats in the 2005 general elections, both the conservatives & the Social Democrats joined hands together to deny any national relevance to the communists. That cooperation led to the formation of Volksparteien – the CDU and SPD alliance – which has now become a liability for both the parties. The SPD, which earlier ruled out any kind of alliance with the Left, has now changed its tone, expressing willingness to have an informal power sharing agreement at state levels. In Hesse, they started efforts to win the outside support of the Left. SPD chairman Kurt Beck has backed the move. On the other side, Hamburg’s conservative mayor Ole von Beust is now hoping to retain power by winning the support of the Greens. The Left knows that the current political impasse in the country could not be solved without taking them into the mainstream political process. Today or tomorrow, it has to happen. After all, it is election season in Germany. And the spectres seem to be on their way back.

B&E edit bureau: Stanly John

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Nokia’s march to the top

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After its continuing dominance in the global market, Nokia now aims to conquer the important US market

It was exactly a year ago, when Nokia’s CFO Rick Simonson outlined company’s plan to increase pressure on its closest rival Motorola. Simonson pointed towards further reducing the entry-level prices of Nokia’s phone in an attempt to widen its lead over Motorola in the global handset market. Nokia’s strategy worked well with its global market share soaring to an emphatic 39.4% in the Q3 07 while Motorola lost its second position to Samsung and now has a minimal market share of 12.9%.

However, what Simonson and his team could not turnaround was Nokia’s fate in the important US market where this global handset leader occupies a distant fourth position. According to Strategic Anlaytics, Nokia is struggling to compete in the US market with a minimal market share of 11% while Motorola is comfortably placed at the top with an impressive 33% share. Even the players like Samsung and LG, which stand nowhere near Nokia in the global market are giving it a tough fight in the US. The fact is that Nokia hasn’t been able to come up with a definitive winning formula for the US market. Nokia’s dismal performance there can also be attributed to the fact that the company hasn’t been able to collaborate effectively with the wireless service providers. Even the appointment of Mark Louison (as President for North America) to collaborate with specific US carriers, didn’t furnish the desired outcome.

However, on January 10, Mark Louison announced that the Nokia would be launching 12 new handset for the US market in the year 2008. “It’s not unreasonable you’d see between six to 12 new operator-specific devices this year. It’ll probably be more than this,” said Louison.

He further commented, “You’ll see some of that in the first half of 2008, with the velocity to increase that in the second half and going full steam ahead in 2009.”

Despite all these, Nokia must not forget that even Motorola is playing its cards to stay ahead in the US market and improve its performance in the global arena. “With Motorola’s new product line coming out soon, the company should be able to achieve continued growth in shipment volume during the fourth quarter,” says Tina Teng, analyst for iSuppli.

With its new subscriber specific strategy, Nokia can definitely hope to amend its poor performance in the US market. However, with Samsung and Motorola making inroads into the global handset markets with a renewed vigour, maintaining the global crown, along with marching ahead in the US mart won’t be a cakewalk for this Finnish giant.

B&E edit bureau: Devdeep Singh

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

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Valuable Asset

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Nirma’s Hiren Patel has the same instincts as his father, says SAVREEN GADHOKE

Google ‘Hiren Patel’ and you are unlikely to find more than a few links. Search using more key words and there are only a handful of articles that have his reference. That’s the low profile that Hiren maintains, despite being in charge of the Rs.25 billion consumer-care giant, Nirma, along with his brother, Rakesh. Agrees Dipankar Roy, Regional Director, FICCI (Ahmedabad), “He is not very flamboyant and is totally entrenched in his culture. He believes in doing more and talking less. Hiren is a soft-spoken, young, dynamic leader who believes in action.”

For those who know him, he’s in the mould of his father. In his younger days; Karsanbhai started as a small-time chemist at Gujarat’s Department of Mining & Geology, prepared washing powder in his backyard, and started selling 20 packets a day on a bicycle while returning from office. Hiren may emulate his father more over time. When he was older; Karsanbhai took on the might of Unilever when he launched Nirma, which originated from his daughter name, Nirupama. Reminisces Harish Bijoor, CEO, Harish Bijoor Consults, “Nirma was established as a home-grown business with a unique consumer proposition.”

But it was under Hiren’s leadership that the brand reached a new level. From being touted as a value-for-money detergent manufacturer, Nirma made the transition to a premium products maker. For example, Hiren played a key-role in acquiring the India manufacturing, marketing & distribution rights of global beauty care soap, Camay, in 2002. Globally, Camay is owned by P&G Home Products. Call it far-sightedness or sheer instincts, this move increased revenue channels as competition in the soap & detergent market became cut-throat.

While launching two premium variants of Camay, Milk Cream and Saffron, in 2002, Hiren disclosed that he would position the brands in the skin care segment to give them a broader perspective, & price them lower than competitors. He hoped Camay would be able to do well this time, referring to the fact that P&G had earlier failed to reposition the brand in the premium segment.

Even as Nirma has gone forward to acquire a premium image, it has strived to strengthen its backward integration initiatives. On November 27, 2007, it acquired the US-based natural soda ash manufacturer, Searles Valley Minerals. for over $200 million. An official statement said: “The acquisition would enable the company to raise soda ash capacity to more than 2 million tonnes a year, placing it among the world’s top seven producers.” Nirma’s scrip price spiraled, closing at Rs.220.05 on the day, an impressive 7% higher than the previous day’s close. According to news reports, the move gives Nirma an access to low-cost raw material, apart from an entry into newer markets.

Like his father, who created a new market for detergents, Hiren has tried to do the same. When he re-launched Nirma Shudh salt in 2002, he said that the “salt will be a distinct business. We aim to be a major foods player within the next two years. Be it a product or segment, Nirma believes in creating markets.” However, many analysts believe that diversification is not Hiren’s, or Nirma’s, cup of tea. They maintain that each time the group entered new categories, it was unable to make an impact.

For instance, Camay has a miniscule share in the marketplace. The salt business is still quite small as a proportion of the group’s overall turnover. It’s only in the bread-n-butter business of soaps and detergents that the group is doing well. According to the latest report by Centre for Monitoring Indian Economy, Nirma commands a 20% market share in the detergent powder segment. The company recorded consolidated net profits of Rs.1.15 billion and net sales of Rs.22.9 billion in 2006-07.

In addition, there’s a question mark on the management capabilities of the Patel brothers, Hiren and Rakesh. Critics claim that they have been unable to make the shift from being a family-managed firm to professionally-run. An analyst at FICCI, who started his career at Nirma, says, “I felt that they lacked professionalism and were conservative. But, of course, they are hard working. And whatever may be their successes and failures, they take it on their own shoulders.”

Also, Hirenbhai, as he is fondly called within the organisation, has managed to strike an emotive chord with his employees. “Once an employee committed a grave mistake because of which the company incurred losses. Hirenbhai took control of the situation, and made sure the matter was not leaked publicly. And, in a calm manner, he explained the repercussions of such mistakes to the employee. The idea was that the individual realises his folly and does not repeat it again,” recalls a current employee.

Adds the same employee, “Hirenbhai knows how to take care of people. It is his care and the individual importance he bestows on employees that has enabled him to motivate them. No wonder, in Nirma, all employees share a long-term relationship with the organization.” And Roy of FICCI adds, “Hiren is a soft-spoken, young, and dynamic leader who believes in action.” Maybe, these are the qualities that have worked in his favour. Whether Hiren emulates the successes of his father or not, the fact remains that the MD of Nirma Consumer Care lives in a world that’s defined by one mantra – take Nirma to newer heights.

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

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