And the race begins...

As Mahindra Holidays’ success inspires more companies to hit the primary market, investors too are fastening their seat belts for a joy ride, says Deepak R. Patra

The brave one wins! And it’s proven once again with the Initial Public Offer (IPO) of Mahindra Holidays and Resorts India Ltd. Strangled by the year long carnage at Dalal Street when the primary market was left high and dry, it came as the first IPO of the financial year 2009-10 breaking a four-month lull. Though market was stirred by the post election developments, no body was sure about the IPOs future; many questions were passing through the minds. While analysts were thinking over the possibilities of the IPO getting fully subscribed, investors were cautiously thinking whether to invest or not? But then, Mahindra Holidays’ bravery paid off. It ended up being almost 10 times over subscribed. However, this success of Mahindra Holidays has given rise to a million dollar question; is the primary market reviving thick and fast??

“Well, it’s a tough question to answer at this point of time,” says Prithvi Haldea, Founder-Managing Director, PRIME. Certainly, considering it’s just the first of the lot, it’s tough to predict the future outcomes, but the question remains, why did the company pick up this time to hit the market? “In September 2008 we had filed the draft prospectus with the Securities and Exchange Board of India (SEBI) and were waiting for the right time.

Post-election we could see a window of opportunity and just decided to cash on it,” explains Ramesh Ramanathan, MD, Mahindra Holidays’ and Resorts India Ltd. However, the company derived courage to launch the IPO from its stronger fundamentals and business model based on both growth and annuity. And of course, their past experience as Ramanathan further adds, “As such we are not completely new in the primary market. Earlier we had successfully accomplished Tech Mahindra IPO.”

Whatever may be the reason, but this IPO has seen the primary market revive for sure. More for the fact that with the launch of the IPO the grey market in Ahmedabad, which in general is considered as a litmus test for IPOs, has witnessed some movements almost after a year. Market men feel that the movements will start gathering momentum as new IPOs come in. Even though investors are still very cautious about investing, one cannot deny the fact that gradually now they are coming out of their shells. At least, the Qualified Institutional Buyers (QIBs) seem to be returning to the market. In Mahindra holidays’ IPO, the QIB portion was over subscribed by almost 13 times (bids received for 71,303,160 shares as against an offer of 5,559,165 shares), the highest among all the categories. Active participation of the QIBs certainly means that things will turn for good from here on.

Perhaps corporate India too is banking on the same fact. As many as 19 companies have already filed their Draft Red Herring Prospectus (DRHP) with the market regulator SEBI and are raring to hit the market soon. This includes a few big ticket IPOs too like NHPC Ltd. (issue size Rs.2500 crore), Adani Power Ltd. (Rs.2200 crore) and Oil India Ltd. (Rs.1400 crore). Combined together 19 companies, which have received a nod from SEBI, will be raising a whopping Rs.8900 crore from the market. But then that’s not all, while near about 20 applications are pending with SEBI for approval, many more like BSNL, Pradip Overseas, John Energy et al are evaluating their options to float IPOs, which seriously means the draught is set to be over as a new season of IPOs have just kick started with that of the Mahindra Holidays’. However, as per Prithvi Haldea, “Companies will remain cautious for sure as issue expenses with a failed IPO is too big a cost.”

Meanwhile, the investor community seem to be gearing up for the show. As per the data available with National Securities Depository Ltd. (NSDL) and Central Depository Services Ltd. (CDSL) during April and May nearly 1.84 lakh new demat accounts have been opened. And the momentum is picking up fast indicating that investors too are prepared to participate in the upcoming IPOs. But then, both parties must not forget, fundamentals will be the key for both parties.

Deepak R. Patra

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DEATH-ON-SALE!

The media also crashes in on the party. You simply have to look around at all the ratings-boosting coverage of MJ’s death for current evidence. TIME magazine has been particularly quick on the uptake. While the figures for their recent special commemorative issue on Jackson are still not available, a similar special issue on Princess Diana’s death by TIME sold more than 1.1 million copies. Natmags is releasing a commemorative 132-page Michael Jackson tribute magazine and a total of 200,000 copies of the glossy A4 title will be on sale for a month, priced at £2.99 per copy.

Memorial events too are going strong, where fans are ready to pay $50 to vendors for a picture next to a cut out of the King of Pop. Jackson’s funeral, in fact, has been the biggest in entertainment history, even bigger than Diana’s death and at par with the event of Obama’s presidential speech. Jackson’s cremation event was viewed by more than 750 million people. Going by Nielsen data, Princess Diana’s funeral saw 33.25 million viewers, while former President Ronald Reagan’s mid-day funeral drew 20.8 million people only.

Not to be outdone, even merchandise licensees from around the world have successfully tuned into manufacturing and distributing products using celebs who have passed away. In 2008, Elvis Presley Enterprises was sold by Elvis’ daughter, Lisa Marie, for $100 million. It should not come as a surprise therefore if tomorrow it is Michaels’ images and stamps. In the past, Diana dolls had become icons of the Princess after her death. They can still be bought for $188.95 from the Society for the Preservation of History. Franklin Mint’s porcelain portrait plate sells for $29.95 and Solid Silver Memorial Coin for $55.

If we are talking of legendary celebs, we can’t miss out on Marilyn Monroe. More than 40 years after her death, licensing her famous poses and pout have made more than $30 million in fees for Anna Strasberg, the wife of Ms. Monroe’s former acting coach, and her business partner, a professional peddler of dead peoples’ images. Marilyn Monroe’s images alone have pulled in more than $30 million since her death and $8 million in 2007 alone. In 2004, Robert Sillerman (a wealthy American businessman who deals in building and selling media companies) paid Lisa Marie Presley $100 million for an 85% stake in Elvis Presley Enterprises Inc. And not to miss out on the Monroe frenzy to entice potential consumers, Mercedes-Benz still features Monroe (along with James Dean) in some of their ad campaigns.

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Source : IIPM Editorial, 2009

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

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Itz the magic called Ritz, after many other hitz...

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Maruti Suzuki is upbeat about the semi-urban and rural markets. But it has bigger plans... Shinzo Nakanishi, MD, Maruti Suzuki India, live & exclusive...

4Ps B&M: How is Ritz different from the other models selling under the same segment? Is it BS-IV compliant?
SN: The Ritz combines modern European design, the sporty feeling of the Swift, the latest in engine technology and Suzuki’s globally acclaimed expertise in compact cars. Ritz further reiterates parent Suzuki Motor Corporation’s commitment to bring global car models with a contemporary design, style and next generation fuel-efficient, environment-friendly engine technology for its customers in India. The Ritz will be made available with the latest K12M engine in the Indian market. With Ritz, Maruti Suzuki has fulfilled the promise of offering at least one new product to the Indian consumer, every year. We now have eight cars in the A2 category including the Ritz. With the Ritz, we are offering a first BS-IV compatible vehicle from Maruti’s stable for the Indian consumer. Moreover, we are launching it much before the guidelines are made mandatory in the country. Globally, the Splash has been an instant hit and we are hoping for a similar response from the Indian market for the Ritz.

4Ps B&M: Don’t you think the Ritz will eat up your own market share in the A2 category. WIll it negatively affect your company by attracting the Swift buyers?
SN: No, it will rather expand the overall market in the A2 category. This is something that Maruti Suzuki has been doing for a long time now. Like when we launched the new Zen when WagonR was already in the market, some people thought it will not work; but it carved out a new market for itself in the industry. India is a compact car country, yet of a diverse nature where no two consumers think alike. In fact, with Ritz, we wanted to give the consumers a choice within the Maruti Suzuki brands. There is no denying that Ritz has been made on the Swift platform but unlike Swift, Ritz is a family car and is targeted at an altogether different platform. In fact, we believe that there will be no cannibalisation and it will carve a different segment for itself, rather than negatively hammer Swift’s market share.

4Ps B&M: Do you expect the new Ritz to outsell Maruti Swift?
SN: No, we do not expect to do so with the Ritz, but we do expect it to become a market leader in the segment it operates. Swift has already become an iconic product in the time frame of four years...

4Ps B&M: Have you set any production or sales target for the new Ritz model?
SN: No. We haven’t decided on any production or sales target. Rather, we have all the capabilities needed to meet the demand, and we will supply as much as the market wants.

4Ps B&M: But there is still a long waiting period for Swift and Swift DZire. How are you planning to deal with that?
SN: We have already increased our capacity of producing diesel engines to 2,00,000, and by the end of this year, we are planning to take the figure further to 3,00,000. In total, we have a capacity of producing one million units and we usually keep the break-up of production very flexible. In fact, a 10-15 day waiting period doesn’t hurt the company or doesn’t take the customers away. Rather, it makes the company much more efficient, for in any case, blocking up inventory doesn’t make any business.

4Ps B&M: Can you throw some light on the pricing of the Ritz?
SN: Ritz will be available in five different variants i.e. three in petrol i.e. the LXi, VXi, and ZXi and two in diesel i.e. the LDi and VDi. The Ritz will be available at an introductory price of Rs.3.9 lakh for an LXi and Rs.4.99 lakh for a VDi.

4Ps B&M: This seems quite interesting as Splash is available at a much higher price point in the European markets. How did you manage to pull the price down?
SN: Well, the common use of the Swift Platform and the high localisation i.e. 95% has empowered us to introduce Ritz at a much lower price point than expected in the country.

4Ps B&M: Splash is also available with a 1L engine in the European countries. Why have you not introduced the same in the Indian market?
SN: Ritz will be available in a 1.2L engine in India, and that’s because we thought that the 1L engine was unsuitable for the Indian market.

4Ps B&M: Why haven’t you introduced any ZDi variant for the Ritz in India?
SN: That wouldn’t have made sense as the price in that case would have been too high!

4Ps B&M: Are you planning to phase out any product out of the Indian market?
SN: Honsestly, we have no plans to phase out any existing model from the Indian market.

4Ps B&M: But there were rumours doing the rounds sometime back about Maruti phasing out the Maruti 800 and Omni?
SN: That’s not true. We are not phasing out the Maruti 800 or Omni. Rather, the engineers are working on making them BS-IV compliant.

4Ps B&M: With the launch of SX4, everyone expected Maruti to shift its focus from small cars. So does the launch of A-star and Ritz signify that Maruti is again changing focus to the small car segment?
SN: We never shifted our focus from the small car segment. Rather, with the SX4, we expanded our portfolio and entered a segment where we wanted to improve our grip.

4Ps B&M: What are you expectation with the new government?
SN: The government helped a lot to deal with the last dull phase in the automotive market. Then whether it be the excise cut or the petrol price going down, it surely helped many players to sustain in the second half of 2008. And with the new government, I do not expect anything going back. If they can provide more help, everyone will be more than happy.

4Ps B&M: Is Maruti Suzuki planning a hybrid for the country?
SN: If Maruti Suzuki brings a hybrid in the country, it will be through Suzuki Motor Corporation, Japan. The current hybrid that Suzuki has is a big car but they are working on developing a smaller hybrid. Let them develop and then we will think about bringing the same into the Indian market. Interestingly, there are many more options for the Indian market in the form of electric cars, CNG and LPG. We are looking at launching some CNG variants, but that will only happen after it gets a nationwide presence. Apart from that, we are working on a National Hybrid Project with the government to develop hybrids for the country in association with M&M and Tata Motors.

4Ps B&M: How was the company able to post a mind-blowing growth in the last fiscal when the other autocos were suffering?
SN: In times of a slowdown, people actually do not prefer taking any risk. They prefer purchasing brands on which they have full trust, and in the automotive market, Maruti Suzuki comes on top on these grounds. Moreover, we saw the slowdown affecting urban areas of the country, so we instead moved aggressively into the rural and the semi-urban market, which helped a lot to cope up with the slowdown. The revenue contribution from the rural markets shot up to 9% this year, compared to 3.5-4% last year.

4Ps B&M: The next five years... Where do you see Maruti?
SN: I want to see the company continuously lead the auto industry in the country and keep the overall market share more than 50%.

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

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Idea Cellular

IIPM Best B-school

Brand: Idea Cellular
Agency: Lowe

Idea Cellular came up with this rocker of a campaign this year with Abhishek Bachchan donning different avatars to target seperate consumer sets. The revenues increased by about 53% y-o-y. Isn’t that a good idea, Sirji?

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

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MEHUL CHOKSI, CHAIRMAN, GITANJALI GROUP

Shahrukh khan is coming to IIPM - IIPM 4Ps Quiz

1. ‘Kya swaad hai zindagi ka’ campaign from Cadbury’s
2. Airtel ad featuring Shahrukh Khan and Sachin Tendulkar
3. ‘Bond with the best’ campaign from Reid & Taylor featuring Amitabh Bachchan
4. Kajol’s Asmi ad campaign
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With general elections 09’ looming close on the horizon, the fortunes of many regional parties are on an ascendant. From TDP and BJD to SP and BSP, they are all singing their own happy tunes, with not a care for their national counterparts. In fact, the theatrics and bloating demands of these regional parties is making even national leaders of stature squirm in their hot-seats! A host of au courant airlines are taking the cue and are bent on exploiting this ‘regional’ power viz. operate in a limited territory, and building a strong local base. Star Aviation, Zav Airways, King Airways, Sky King Aviation, Premier Airways and a (still unnamed) cargo carrier are ready to hit Indian skies with ambitions to lure regional travellers. All these carriers will be off in the air pretty soon, as they have already secured approvals for importing aircraft. Star Aviation, with a 10-aircraft fleet strength and a $300 million investment plan, will be the first to fly, aiming to serve intra-state travellers down south. Zav Airways, with two Bombardier 80-seater and 70-seater aircrafts, is another regional carrier aiming at eastern and north-eastern states. King Airways will operate in north India and Sky King Aviation, like Zav, will serve the north-eastern audience. “Actually we are coming up with mid-size aircrafts; seat capacity mostly 70/80, and we are expecting 95% occupancy on each and every aircraft. The big-size crafts (of other airlines) are with 200-seat -capacity of just 50% occupancy,” reveals Kishor Zavery, Chairman, Zav Airways to 4Ps B&M.

These late entrants have little going for them though; as economic slowdown, depleting air traffic, increasing operating costs et al are over burdening their flight load and pulling them back to the ground. To top it all, they seem to have got the timing all wrong. “There are too many airlines already, with too many seats, chasing too few passengers. Airlines need to ensure that they match capacity with demand,” agrees Binit Somaia, Regional Director, Centre for Asia Pacific Aviation.

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Priyanka Rai analyses how the harnessing of bias, prejudice and fear has emerged as a smart marketing strategy for political parties in India

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About a quarter of a century ago, the ‘fear factor’ entered the holy citadels of marketing strategy in India, both for luring consumers to ‘buy’ your product and for luring voters to ‘buy’ your political party. Back in the 1980s, upwardly mobile urban Indians were discovering the perils of stress and cholesterol. The home grown FMCG company grabbed the lurking fear of ‘heart attack’ and parlayed it into a pioneering marketing cum advertising campaign to sell the cooking oil brand Saffola. The brand still relies on the ‘fear factor’ to lure consumers.

Around the time Marico was discovering the power of fear, the young whiz kids running the Congress election campaign for Rajiv Gandhi in 1984 were stumbling upon something similar – the cloud of fear and uncertainty that hung over the Indian electorate after the assassination of Indira Gandhi. The 1984 election campaign of the Congress has now become a classic case study of how to stoke fear to win. Newspapers (there was hardly any television back then) were littered with huge ads that talked somberly of India being torn asunder by terror.

The underlying message was: buy Saffola if you want to prevent a heart attack; and buy Congress if you want to prevent a disintegration of India. Arguably, both campaigns have worked wonders for their promoters. And ever since then, fear, prejudice, bias and apprehension have become the standard tools of trade for many consumer brands and most political parties.

Of course, political parties, like consumer product companies, have mastered the art of deceptive jargon that ends up packaging their core message as positive panacea. Here is what the President of the BJP, Rajnath Singh has to say about the core competencies of Brand BJP, “We promise to give good governance, clear direction and inclusive development irrespective of caste, creed, religion and region. We will de-communalise development and we will introduce no communal angle while allotting budgets or discriminate between the populace on the basis of their religious affiliation.”

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Source : IIPM Editorial, 2009

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

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A can of ‘Windows’

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Microsoft is now starting its own exclusive stores to revitalise its branding image. But the strategy is deeply flawed, says Karan Mehrishi of 4Ps B&M

“If it didn’t work the first time, go back to basics,” at first it might seem that software giant Microsoft has got nothing to do with this saying; a recent event has changed perspectives in a big way. For the uninformed, the Seattle-based company is all set to unleash a concept that brings it back to the basic ‘brick and mortar’ model. Soon, Microsoft will launch its very own specialty retail stores across America that will deal exclusively in Microsoft’s product portfolio. For the purpose, Microsoft has hired David Porter as the Corporate V-P for this new experiment. Porter has been proclaimed a wise choice, as he brings twenty five years worth of experience with none other than the retail giant WalMart.

These stores, known as ‘Gurus’, will sell almost all Microsoft products including the Windows series software, Xbox and compatible games. There will be a plethora of Microsoft branded products under one roof and the company plans to bring in more branded merchandise in its purlieu. Analysts see this as a strategy to increase customer touch points and have a branding platform to revitalise the sagging Microsoft brand. The dissatisfactory performance of Vista has been a cause of concern for the software giant and the new retail stores may be used to revitalise this platform. Apparently, the company now feels that consumer association can be accessed only through personalised solutions via a brand specific conduit. Microsoft has been constantly working towards making its brand more effective. The company has lately been working with hardware partners to check flaws in the Windows platform and ways to improve performance. According to Brad Brooks, Corporate V-P (Window Consumer product marketing), “We want to know how customers’ experience not only products, but the company itself… we did our own studies to evaluate not only how our products work for the average person, but how our business works for them.” These stores not only offer the consumer a full range of product portfolio but also guarantee a holistic customer involvement. “Customers have told us they want Microsoft to play a more active role in their technology experiences,” adds Brooks. Additionally, other brand extensions or non-related items can also be used to utilise the full potential of this concept. Also, there is much heartburn in the Microsoft camp over the lead taken by Apple in its brand promotion through a catchy product line-up and zingy branding exercises. According to some estimates, Apple stores are highly profitable and have in fact promoted ‘brand Apple’ better than any other exercise in Apple’s history. Even if Microsoft does not need much direct marketing in its primary business, i.e software, the brand was suffering from the ‘long in the tooth syndrome’. “We must deliver a world-class shopping experience that aligns with the brand promise and our online presence,” says Bill Veghte, Senior V-P (Windows Business Group).

27Shopping experience indeed. But with what? Zune, Windows 7 and Xbox? Or would it be with special movie screenings on the making of Bill Gates or Steve Balmer? Yes, they can provide servicing of computers running Microsoft software, but that’s not an easy proposition, thanks to the compatibility issues that Microsoft software faces with different softwares. If they sell products of a few windows PC makers, they could end up alienating the others. Considering these factors, one wonders how they justify the real estate space and the costs involved. Moreover, other partner retailers of Microsoft are hardly amused, as they would have to compete with the ‘mother ship’ now. Rather than being an act of exceptional genius, this seems to be an inexcusable strategic blunder on the part of the company as of now.

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Source : IIPM Editorial, 2009

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

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Whoever said ‘when the going gets tough, the tough get going’ was not just a true genius at word play

but also one who had possibly seen-it-all happen to the so-considered ‘great brands’, from atop the citadel of capitalism... A ground reality check by Aditi Prasad

Swapan and Kanha are having a harrowing time these days. Exams are round the corner and to add to all their mugging-up stress is their mother’s unrelenting commitment to feed them wholesome meals, which she says would increase their memory (thank you mom… irrespective of all those leafy meals, the Berlin Wall still fell in 1989!). Their daily dose of the yummy Horlicks-flavored glass of milk, three times a day, is perhaps the only bright light in this gloom-filled examination period.

Unlike these strained teenagers, examination time (January-March) every year is a great time for health drink powders like Horlicks and Boost, Glaxo Smithkline’s (GSK) flagship health drink powders for kids. It is GSK’s peak sales period, following which demand slumps by about 10-12%, thanks to a near-halt in hot drinks by consumers in the ensuing summer months. And so begin the good times for kids and bad times for brands like Horlicks.

A couple of summers ago however marketers at GSK decided to challenge these bad times head on. They launched a cold-consumption campaign for Horlicks – first by teaming up with the launch of the successful movie Ice Age 2 in India and then by roping in the Taare Zameen Par child star Darsheel Safary and adding summer variants to their portfolio. The chilled drink positioning for Horlicks not just translated into red-hot national sales for Horlicks during the summer of 2008; but also gave the brand a chance to keep its visibility high throughout the year.

Here’s another story. In Y2K, McDonald’s globally began facing the worst time in its juicy-burger history and reported its first quarterly loss in 2002. The book Fast Food Nation had captured the imagination of America and sales slipped on the back of increased health consciousness. What did the global QSR chain do? It fought back! It launched healthy burgers (?!); removed super size options from its menu; re-cast its mascot Ronald in a new ‘fighting fit’ avatar; launched a global ‘I’m Lovin’ It’ campaign; went on a market development spree by opening 1,200 overseas restaurants in 2003 alone; launched extensions like McCafe and McTreat, and more. The important thing is that today McD’s is on top of the situation again!

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

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As the economic meltdown rings the ‘panic bell’ for Toyota Motor Corporation, the company is struggling with an unwieldy - inventory build up.

4Ps B&M’s Karan Mehrishi analyses...

It’s not often when business stories victimise Toyota for bad business acumen. The Japanese is perhaps one of the very few automotive behemoths which does every thing right or at least until now. So when the news about Toyota sales decline came in, we were surprised and skeptical for all the wise reasons. It has been more than 70 years since Toyota has reported a negative forecast about its performance. As per reports, Toyota expects its global sales to be close to 7 million units, a full 540,000 less than previously projected. The numbers which are 7% less than estimated figures will be a mind numbing 20% less than 2008’s 8.9 million in sales.

Global slowdown and poor consumer confidence have taken their toll on Japanese manufacturers as well, and Toyota along with Nissan and Honda are facing the heat. Toyota, which lost 35% sales in its largest market, US, in December 2008, seems to have bowed a bit to the market forces. Even in Japan, the home market sales failed to reach the 1.5 million mark, an event that occurred after 25- 30 years.

“Currently, the financial crisis is negatively impacting the real economy worldwide and automotive markets, especially in the developed countries, are contracting rapidly. This is an unprecedented situation and we are already taking measures,” said Mitsuo Kinoshita, Executive VP, Toyota Motor Corp. As a result, Toyota has already established an emergency committee to revive profits in the near future by working on production cost reduction and profit maximisation in order to improve operating margins. Even though Toyota overtook GM as the largest automotive manufacturer in the world in terms of net sales, it is perhaps following the former’s path to the bottom.

Toyota’s Global Master Plan is being blamed for this adverse situation. According to this plan, Toyota was to achieve the position of market leader by way of product planning and aggressive expansion. Though the strategy was in line with Toyota’s successive product planning, which included the new Lexus IS series and the new Toyota Yaris-derived small cars. The plan has proved to be ill-timed considering the current situation. Despite the fact that higher volumes were required to meet the unprecedented demands for Toyota products globally, it was also true that some large markets were already stagnating. The supplementary utilisation of the excess capacity generated here could also not be used in fast emerging markets because of strict import laws already incorporated in those countries. Also, the appreciation of the Japanese Yen vis-à-vis the Dollar and Euro, played an important role in falling margins. Since Toyota still manufactures its key components at its Japanese mother plants, an expensive Yen was a spoilt sport. Additionally, the plan called for expansion and the company pushed forward with disrespect for future scenarios. As the global economy took a turn for the worse, just like GM and Ford did earlier, Toyota too was stuck with stock that nobody was interested in buying. Years of excess capacity resulted in unsold inventory, which continues to bog Toyota’s coffers.

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Source : IIPM Editorial, 2009

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

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Our true gladiators

IIPM set to beat economic slowdown

On the other hand, while the automobile sector is hit by a major roadblock; the performance of Hero Honda is indeed incredible. Of course, they owe this to their incredible brand name and strategy of cashing in on the rural riches. The ‘bottom of the pyramid’ unquestionably helped them beat the slowdown and post reasonably good profits. The pharma sector was not much impacted by the economic slowdown and Glaxosmithkline Pharmaceutical (GSK) and Zandu Pharmaceutical (Zandu) continued with their superb performances.

Meanwhile, it is worth pondering over the reasons as to why and how these stocks managed to outperform the benchmark indices. The sustenance of India’s structural growth and the consumption theory gels well with the results. It is no wonder that neither of these stocks mirrored the inherent overall weakness and fragility in the markets. Speaking to 4Ps B&M, Jagannadham Thunuguntla, Equity Head SMC Capitals Ltd, explains, “FMCG and healthcare are defensive sectors wherein there is stability and continuity in terms of performance. Moreover these sectors to a large extent are recession proof.” Perhaps this is why these companies are sitting on surplus cash and investments.

Well this is not all for 2008; the service sector which accounts for more than half of India’s GDP continued to expand at an impressive pace during the September ‘08 quarter. Activity in trade, hotels, transport and communications again rose at a double-digit rate. Meanwhile, despite a global financial storm, India’s finance, insurance and real estate sector reported a stunning 9.2% expansion as gross fixed capital formation was buoyant during the quarter. As the inflationary pressure moderated (thanks to softening of demand and falling commodity prices) and the interventions of the central bank came at the right moments the markets did respond to it warmheartedly. The year end saw the stock markets recovering and inching closer to the 10K mark. Perhaps that’s why they say, ‘all is well that ends well’.

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Source : IIPM Editorial, 2009

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

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Reliance on, Sensex gone!

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Reliance Power, which had no assets, little cash flow and just the Reliance tag to its credit, launched some smart advertising to launch the mother of all IPOs in January this year. Oversubscribed 72 times, this one created stock market history. But soon after, the markets went into a tailspin from which they’ve not recovered till date. This was also the first time that a company had floated a 360 degree brand campaign to boost investor sentiment, before an IPO. Soon others like Fortis and Emaar also replicated this concept but with little success. R-Power started a new trend, which may eventually return, once the markets show some signs of recovery.

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Source : IIPM Editorial, 2008

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

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IIPM set to beat economic slowdown
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Living on the ‘virtual’ edge...

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What further differentiates the company from its counterparts in the industry is its conservative and cautious approach towards business. One instance of this can be seen in its overseas expansion strategy, which it has restricted just to countries in the Gulf region in the form of naukri.com Gulf. So what’s the reason behind this? As an analyst justifies, “In India, Info edge started fifteen years back, but it’s just over the past five years that the company has grown at a much faster rate. And thus it wants to be more cautious before taking the plunge into newer oceans...” Even Oberoi agrees to it wholeheartedly as he quotes, “Our investments are based on the business potential. We review our new businesses on a quarter-to-quarter basis. We see what is working and what is not and we put more resources on issues that are getting profitable.” Indeed, for Info Edge, there seems to be no hit-and-trial methodology!

When it comes to inorganic growth, the company is always open to newer acquisitions but logically, at the right price and in the right space. Thankfully, here is a player who is not blind to realities and getting double-sized overnight! So is everything rosy for the online entity? Well, not really. With 40% of its revenues coming from the IT industry, there is somehow a feeling of over reliance on one sector that may finally prove the poison pill for the company. Secondly, the company for long has been unsuccessful in replicating the success of naukri.com in all other verticals like – matrimonial (Jeevansathi.com), real estate (99acres.com) et al as Ambarish Raghuvanshi, CFO, Info Edge confesses, “Another challenge for us is to raise the bar for our mid-sized businesses and increase their size to what naukri.com is today...” However, the brighter part of this dark picture is that despite the global downturn, the company’s revenues have been least affected. For instance, despite the real estate prices falling, 99acres.com has grown appreciably - a revenue growth of 98.9% during Q2, 2009 as compared to the same a year ago. Moreover, its other arm – Jeevansathi has recorded a revenue growth of 40.3% during Q2 2009, certainly boosting the company’s potential of earning more by the day, downturn or no downturn. What’s a sweeter surprise? When companies across the board are focussing on slowing down and decreasing production or selling off assets, Info Edge has its eyes set on expansion. As an analyst avers, “Online classified markets earn a lot due to heavy spending by various sectors, with education and job being a major source.” Surely, when it comes to the job market, Info Edge has already taken the lead and, “when it comes to the education market, it has its hands on,” adds an industry expert.

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Source : IIPM Editorial, 2008

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

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...and the perpetrators

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Despite all this, estimates still put the Indian carbon trading market to reach $100 billion by 2010. It is surprising to note that power generating, transmitting and distributing companies, fertiliser companies (National Fertilisers, GNFC et al), cement, steel and textiles industries have not actively pursued the multibillion bonanza, even though the awareness is there. Agrees Ashutosh Pandey, Founder and Head of Carbon Advisory Business at Emergent Ventures, as he shares his thoughts with 4Ps B&M, “CDM awareness level in a few industries such as steel, cement, oil & gas, paper, sugar, renewable energy is very good,” at the same time accepting that “still, a lot needs to be done in SME and government sector; areas that need more coverage include energy efficiency (supply & demand), electricity distribution system revamping, agriculture, plantations, transportation and residential sector.” Despite our open letter to Ratan Tata beseeching him for writing the recent letter to powers that be, it is seriously rare to find companies like the Tata group that have appointed top firms like E&Y and McKinsey & Co. to measure their current carbon footprint and extrapolate the futuristic carbon footprints for the group entities (Tata Steel, Tata Motors, Tata Power, Tata Power and TCS).

Likewise, other companies could and should take a leaf out of the success stories of even ‘enterprises’ like Tirumala Temple, Muni Seva Ashram, Sai Baba Temple in Shirdi, which have been making revenues unbelievably from carbon credits. On the other hand, companies such as Reliance Industries, Tamil Nadu Newsprint, SRF, Bharat Forge, JCT, Philips Carbon Black, Oswal Woolen and Usha Martin, which have certified emission approvals from the UNFCCC, can certainly be more innovative in reducing emission and increasing their earnings from the credits earned. There is a price for everything, the same holds true for carbon emissions where the market is becoming more liquid – in the Indian context, this calls for the policymakers to set more aggressive reduction targets; and the companies on their part need to play along, profitably so.

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Source : IIPM Editorial, 2008

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

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No fireworks this Diwali...

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This Diwali seems a quiet one for the movie marketers. The fireworks that generally surround Bollywood around Diwali season are missing.Though there are some major releases like Golmal returns, Fashion, and Roadside Romeo scheduled for this Diwali, there is not even 1/5th of the buzz that generally surrounds the festive season. "There are good films lined up but surely this is not a huge Diwali for Bollywood," avers Rauf Ahmed, renowned film critic & ex-editor, Filmfare. Many attribute this missing hype to no Shahrukh or Akshay release in this festive season. "If SRK's Rab Ne Bana Di Jodi was to be released there would have been much noise on the marketing front," says a media analyst.

Pallavi Srivastava

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

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MURDER ON ELM STREET

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Recalls hit customers badly, and may also destroy brand value, but if they are not done in a timely way, the repercussions could be even more deadly

“A bullet once fired out of the barrel cannot be recalled.” Nor can the target save himself normally, unless, of course, the target is Neo and we are talking about the scintillating Matrix trilogy; where Keanu Reeves enthralls us with his bullet dodging skills.

Ahem... well, coming back to reality, companies that face the flak for ‘unproductive’ products, find themselves in a similar situation. They can recall products, but by then, it’s normally too late; the damage is done; the target has been shot; and the company’s image gets a bigger blow in turn. And the latest victim is Cadbury. The horrendous milk scandal in China has forced the British chocolate giant – Cadbury Plc to direct Cadbury Asia Pacific (its Asian arm) to recall 11 types of its Chinese-made chocolates (manufactured in Beijing & distributed in Taiwan, Hong Kong & Australia) as tests revealed presence of melamine-laced dairy content in the sweets. Kraft Foods Inc. (Oreos) and Mars Inc. (M&Ms and Snickers) are also investigating claims by Indonesian authorities that high traces of the chemical have been found in their products.

The road to corporate glory is replete with failures; and recalls too, which plague some of the best names. Take Sony, which recalled four lakh units of Sony Vaio laptops due to potential burn hazards from overheating and short circuits. Hondo Motors recalled 5,81,353 mini vehicles in Japan to fix a faulty fuel pump that could cause the engine to stop. Nokia issued a product advisory to recall close to 46 million Nokia-branded BL-5C batteries between December 2005 and November 2006, when it received complaints that in rare cases, the batteries could potentially overheat while charging, causing the battery to dislodge.

So what can such ‘late in the day amends’ achieve? Graham Hales, Group Chief Communications Officer, Interbrand opines, “A product recall may cause uncertainty in a brand and may therefore place the brand under greater scrutiny of choice amongst its competitors.” But David Haigh, CEO, Brand Finance counters, “If handled professionally product recalls can strengthen brand equity.” The company must ensure that trust is not broken and recall is swift and efficient. Hales points out that “the risk of allowing inferior or under-performing products to represent the brand will cause greater loss in the long term.”

Another mistake that most companies do, which ostensibly leads to customer losing their faith in the brand is blaming their out-sourced manufacturing units for the entire problem. Cadbury chocolates were manufactured in Hong Kong, Nokia had outsourced the manufacturing of batteries to Japan-based Matsushita Battery Industrial. But putting the blame on an outside party will only dilute the brand equity. “Customers can’t be won with excuses and buck passing,” avers Haigh.

Difficult as it may sound, the company has to admit, apologise, and make amends swiftly. To err is human; to persist in error is develish; and in this case, suicidal as well.

Savreen Gadhoke

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we are not rattling off names of some quixotic food ingredients

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Chalet, Cabana, Mews, Ginger, Lemon Tree, Peppermint, Berggruen… hey wait, we are not rattling off names of some quixotic food ingredients; instead these are innovative brand names for some equally innovative hospitality ideas at work. By Neha Sariya

When Roots Corporation – a subsidiary of Indian Hotels Limited (which also runs the Taj Group of hotels) ventured into a new concept of self-help hotels called Ginger in 2004, trade pundits were skeptical about its success. After all, whoever heard of a hotel, where you’d have to do everything yourself: from checking in to ironing your clothes. Ginger had no liveried bellhops asking for tips, instead guests were met by baggage carts with help-yourself signs; ATM style self check-in counters replaced the traditional receptionist; even the mustachioed gatekeeper was missing in action! However, the strategy was perfectly timed. Ginger’s low cost and Rs.999 tariff plans created a rage among budget travellers, who were in any case reeling under the demand-supply gap in the budget hotels segment. Today, with 14 properties across India, this one’s all gingered up for the future riding on its early mover’s advantage. Predictably, Ginger’s success prompted a host of me-too’s in the segment and a slew of budget hotels started popping out of the woodwork, including Lemon Tree, Peppermint and global players like Berggruen and Best Western.

But hey, they missed the bus! Analysts claim that as opposed to 5-Star hotels, which witnessed 100% occupancy in 2007, budget hotels did not share similar occupancy rates, largely because a large chunk of travellers to India were either business travellers or international tourists. Little surprise that now, everyone – from local tycoons like Anand Mahindra and K.P. Singh to global biggies like Hilton and Mariott, everyone is focused on pioneering alternative luxury hospitality concepts to set cash registers ringing.

The race is to dominate new luxury hospitality segments, ranging from residential hotels or service apartments, destination resorts, condo hotels, vacation ownership and private resident’s clubs. For instance, Taj Wellington Mews and Lakeside Chalet Marriott Executive Apartments are already luring a spate of global professionals to their swank service apartments in the financial capital’s suburbs. Companies like RCI (Resort Condominiums International) are thinking differently, and filling in the gap for vacation ownership and time sharing concepts in India, where a group of vacationers pay in a lump sum for spending a specific time period in any resort. The vacation ownership industry is growing at a CAGR of 20% today.

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

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Don’t Supply; Just Partner...

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...Says Jon Wilkins, Founder Partner, Naked Communications

Jon Wilkins
Founding Partner,Naked Communications

“Creative provision is more volatile as ideas are ephemeral and creative agencies have never been able to genuinely prove the pay back to their clients,” believes Wilkins, even as he outlines the shape of things to come in the global and Indian advertising industry

Naked refuses to be called either an advertising firm or a media planning agency. Started in 1999, the founders like to call themselves something between an ad-shop and a communication consultancy. Already delivering ground breaking strategies for some of the world’s biggest brands (Coca-Cola, Nestle & Nokia), Naked is now interested in the Indian market and is currently talking to clients here, as also scouting for partners and potential acquisitions. Founding partner, Jon Wilkins makes a case for the future of advertising...

4Ps B&M: According to AdWeek, $27.5b of advertising business went into review in 2007. How do you explain the bitterness in client-agency relationships?
JW: There is no right answer to this but clients have to find partners who can help them build value through communications, and as the landscape changes in India, more clients will need more partners or new partners to help them navigate this opportunity or threat. Clients should always strive to get the best services from their agency partners, so it’s not a surprise that business moves around. In the west this is more marked than in the east, where long term relationships are valued higher.

4Ps B&M: Which sectors are most volatile i.e. seeing maximum account movement and why?
JW: Service oriented businesses are perhaps the most obvious volatile category, in that they are highly competitive, highly. Segmented and under pressure to build maintain and grow long term customer relationships. They require the broadest communications expertise, and face the biggest challenges with digital disintermediation.

4Ps B&M: How does Naked’s model fit into the evolving scheme of things?
JW: We rarely pitch and are more often invited in by clients to help them realise value, unblock problems or create opportunities through our communications approach. We get business when clients want to accelerate growth beyond the norm, or have a problem that conventional TV led advertising can’t fix, or when to be honest they value the idea of experimenting with new channels and new opportunities and struggle to find strategic partners that are engaged enough with this new digitally framed fragmented communication landscape.

4Ps B&M: How do you see client-agency relationship evolving in the changing market dynamics?
JW: A true agency partner must help the client achieve his business and marketing goals. As such they must be entirely objective and align their goals with that of the client. This isn’t about ‘owning’ every conceivable executional delivery capability. It’s about being able to come up with big ideas not campaigns, understanding how to integrate an idea, a customer journey and multiple channels seamlessly to deliver against objectives set, and an ability to be able to genuinely measure your contribution to your clients success.

Many agencies and holding companies think the future is about owning more means of production, we believe in ‘open source’ collaboration and an ability to work with best of breed partners in every discipline. It’s an impossible and thankless task to try and own everything and everyone in a rapidly changing communications environment. You need to offer a one stop shop but it’s not what you own, it’s who you know!

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