Showing posts with label IIPM Institute. Show all posts
Showing posts with label IIPM Institute. Show all posts

Saturday, September 08, 2012

CANADA: DECELERATING GROWTH

After growing at a red hot annualised rate of 5.8% in Q1 2010, Canada’s Economic growth has come down to just 2% in Q2, 2010. Canadian policymakers now need to look beyond the ‘short cuts’, be it interest rates or output, if they want the Economy to sustain its growth momentum.

Even net exports made a 4.5 percentage point drag on overall GDP growth. Result: In July, Canada’s trade deficit widened to $2.69 billion, the biggest gap since records began in 1971. What’s more? Net exports have not been a positive contributor to GDP growth since Q1 2009. While it does not appear that the drag from net exports will slow down anytime soon, what’s more confusing is the continuing soft inflation (at 1.7%) amid weak productivity growth (0.6% yoy as of August 2010), fast wage gains, and a closing output gap. So, with fragile economic recovery underway and inflation rate at the bottom of its target range, is it appropriate on the part of BoC to further increase the interest rates after already having raised them thrice in 2010?

There are still many who don’t see this as a threat to the sustainability of the Canadian economy in the long run. Jimmy Jean, the US based economist at Moody’s Economy.com tells B&E, “The housing retrenchment was long expected and has not been excessively severe, even showing signs of recent stabilisation. The cooling observed in consumer spending ties in closely with the housing slowdown, which again makes sense and is not overly worrying in light of still-healthy income growth.”

But then, income growth is likely to slow further considering the impact of the weak GDP growth on employment (unemployment rate is already at 8%) and, in fact, one can already see it happening. Second quarter GDP data already indicates a slowdown in consumer spending growth to 2.6% (yoy) from 4.3% in Q1 2010. Though BoC had not replied back to B&E’s queries till the time the magazine went to print, it, however, in its latest press release, accepts that the recovery in Canada will be slightly more gradual than it had projected in its July Monetary Policy Report.

No doubt, looking ahead, the IMF too expects Canada’s economic recovery to be among the strongest of the G-7 countries over the next two years. But, at the same time it should not forget that when an economy is not working normally (as is the case with Canada), one cannot rely on the ‘short cuts’, be it interest rates or output. In other words, policymakers should leave the overnight rates at 1% during their next policy decision on October 19, 2010. Rather, they now need to work towards developing models that have a better understanding of money and credit flows at a more disaggregated level and that include the key institutional features of banking and capital markets. If Canadian policymakers look only at interest rates, inflation, and output, they might miss out on the bubbles that perhaps might be in the making. If that happens, it could spell a disaster for the Canadian economy. Well, they say, it’s always better to be safe than sorry!


Source : IIPM Editorial, 2012.
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IIPM : The B-School with a Human Face


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Tuesday, September 04, 2012

It pays at times to stay married!

Speculations abound on the probability of the Hero Honda JV heading for a sudden break up. B&E’s Pawan Chabra does a speed-check on the repercussions of such an event for both players

August 26, 2010. Venue: Taj Palace Hotel, New Delhi. SIAM’s 50th annual convention was in its last session before the day was called off. The theme of the session was crystal ball gazing for the Indian automotive industry, and the panel had eminent names of the industry like Anand Mahindra, Vice Chairman & MD, Mahindra & Mahindra, Abhay Firodia, Chairman, Force Motors, Ravi Kant, Vice Chairman, Tata Motors and Venu Srinivasan, CMD, TVS Motors. As the session was in its question and answer round, Madhur Bajaj, Vice Chairman, Bajaj Auto pointed out that it is somehow difficult to predict the future; as an example, Madhur forwarded the example that in the early 1980s, no one could have predicted that scooters will be replaced by motorcycles. Before Madhur could complete his statement, Abhay Firodia gesticulated towards the much respected Brijmohan Lall Munjal, Chairman, Hero Honda Motors (sitting next to Madhur Bajaj on the same table), giving a repartee, “He predicted it!” The statement consolidated the emotion of the event – that not only had the Munjals forecasted correctly the change, they had also acted on the same in a brilliant manner, by forging one of the most successful JVs in Indian corporate history with Honda Motor Corporation in 1984.

It was at a period when the country saw many JVs and alliances happening in the domestic circuit – be it Kinetic joining hands with Honda or TVS and Suzuki getting into an alliance. But the fact is that most of these alliances ended sour – including all those mentioned above; all except the Hero Honda JV.

But apparently, corporate history is set to be re-written. The technological agreement between Honda and the Hero group was due to expire in 2014, but reports are now filtering out that Honda is attempting to move away from the relationship by attempting to sell their stake in the JV, The day these yet unconfirmed reports hit the stock bourses, Hero Honda saw its share price falling by over 6%. But that’s clearly not the worrying part for the Hero group. It’s quite evident that the parting of ways could inflict much more damage to the Hero group; which will be left lagging on the technology front.

In reality, even till last month, there was no such talk, report or discussion about any future breakup. When B&E met Anil Dua, Senior VP – Marketing & Sales, Hero Honda, in August 2010, he had enthusiastically commented, “Honda has had the most profitable JV with the Hero Group in India and as the companies have been launching right products at the right time, the strategy has paid off very well.” On the contrary, sources in the industry are of a view that the main issue of dispute between the two giants is on royalty payments. In case such a breakup does occur, the option of getting a new technology partner, developing its own R&D or continuing with Honda’s support are the most probable choices for the Hero group. For the uninitiated, the Hero Group owns a majority stake in the JV (see chart) and with Honda moving out, it would not only take a huge pile of cash reserves from Hero (to acquire the stake, if it wants to stop others from buying into the company) but the company could also take a temporary blow on volumes (due to supply issues). The market leader is already facing supply constraints and has seen its market share fall from over 50% since time immemorial to 44% in September 2010; and competitors like Bajaj Auto & TVS Motors have been quick to build on the opportunity.



 
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Saturday, September 01, 2012

IN THE FAST LANE

Last year’s slowdown was a blessing in disguise for the public sector behemoth SBI, forcing it to become truly competitive. And the bank has only moved ahead since then. Avneesh Singh finds out how

Financial inclusion may be a buzzword for India Inc. but when it comes to groundwork, a majority of them falter. But not this “Banker to Every Indian” for whom ‘inclusion’ is about carpet bombing the Indian geography with its presence, a strategy that has seen it (leave aside the associate banks) reach over 12,450 branches and 16,584 ATMs across India. In fact, in the next two years, the drive is barbarically brobdingnagian (if one could use such a term) for SBI wishes to now get 1,00,000 un-banked villages in its connectivity map! What’s more? At a time when trust was witnessing a free fall, this bank everyday attracted more than `1.7 billion average deposits (during FY2010). While deposits were up by `620 billion (a 8.36% yoy growth – from `7.42 trillion in March 2009 to `8.04 trillion in March 2010), gross advances too were up by `929.40 billion registering a growth of 16.94% from `5.48 trillion in March 31, 2009 to `6.41 trillion in March 31, 2010.

Not surprisingly, the net interest income rose by a significant 13.41% to `236.71 billion in FY 2010 (up from `208.73 billion in FY 2009). And the reason for all this is interestingly in one area. When banks were shunning retail customers, SBI took the lead in lending to the ‘shunned class’ and consequently became the single largest retail lender in India (education loan up by 34.61%, auto loan up by 45.44% and housing loan portfolio up by 31.69%). Even in corporate lending, SBI diversified its loans across segments, thereby minimising the probability of loss. In fact, the large corporate loans reported a significant jump of 18.51% during the last fiscal. But that does not mean that it has completely ignored the bottom of the pyramid, which for the fact makes over 90% of India’s total population. As part of its microfinance programme SBI has credit linked more than 1.71 million self help groups across India with cumulative credit of `115.62 billion.

When asked about the secret behind this stellar performance, S. K. Bhattacharya, MD, SBI told B&E: “performing well has become a habbit for employees at SBI. No doubt, top management devices strategies and policies, but the real business takes at the branch level. So, it’s the employees of the bank who should be credited for this performance.” Further, thanks to a resurgent focus on maintaining a cost effective operating architecture, the bank has successfully brought down the average cost of deposits by 50 basis points to 5.80% and kept its net NPA (non performing assets) at 1.72% (of gross assets) as on March 31, 2010. In fact, the ratio of high cost bulk deposits to total domestic deposits too has come down from 10.74% in March 31, 2009 to 1.79% in March 31, 2010.


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Friday, August 10, 2012

Enemies in the shadows

As Sri Lanka negotiates the detritus of a long and tragic ethnic conflict, huge challenges loom over the tentative reconciliation process. B&E’s Surabh Kumar Shahi reports from Vavuniya

Ponnambalam Ramanathan was part of Sri Lanka’s tragic war. It was a long time ago. He is now part of the wobbly peace now. Four years ago, a LTTE veteran of ten years, he accompanied a small assault team that detonated a bomb inside the office of a political entity which was a constituent of the government alliance then. Ramanathan does not remember exactly how many were killed. He just remembers that no one was left. He killed two people.

Sitting inside a rehabilitation camp in a suburb of Colombo, he does not want to recall those days. He surrendered in 2006 outside and promptly threw away the cyanide capsule that any LTTE cadre, was supposed to swallow to evade arrest. He is now learning carpentry and is almost impervious to any emotions. But he regrets the violence.

Such optimism seems misplaced in today’s Sri Lanka. To overwhelm the LTTE, the regime had augmented the war machine to match the callousness of its opponent. It is now tackling the fallout of that war. As it confronts accusations of human rights abuses, the regime tries to alleviate the uncertainty and mistrust among ethnic Tamils after the conflict that lasted close to 30 years. The president, therefore, has an uphill task of reconciliation before him.

In the refugee camps in the North many Tamils are still struggling to survive. Between 150,000 to 300,000 refugees are still there. They somehow managed to survive the last stages of the battle. However, the end of the conflict has triggered questions regarding their future and the odds of co-existence between the Sinhalese and Tamils.

The first step is to allow the remaining refugees to return home. Without this, all talk of reconciliation would be meaningless. Talking to B&E, Wickremabahu Karunaratne, leader of the New Left Front, says, “The government has stressed it has sifted about 10,000 rebels from among the refugees. Then what are the camps for? Let the people return and take the initiative in the peace process.”

The government too understands the issue and is keeping it on its priority list. However, the process is painfully slow and ridden with red-tape. The regime’s non-clarity over their plan to develop and reconstruct the north and east is not helping at all. With the elections out of the way, the regime needs to take local communities and political leaders into confidence before beginning the process of reconstruction. “The military influence over policies and control over the population need to end. Only demilitarisation can lead to confidence-building,” says K Sarweshwaran, a political scientist based in Colombo. The regime must also allay fears that demographic changes could dilute the Tamil character of the north.

Restoring land comes next. A huge section of the Tamils sent out of the IDP camps have not returned home nor have they been resettled. Instead, they have been sent to “transit centres” in their respective home districts. These are essentially schools, government buildings and places of worship which are far away from any means of livelihood. Also, the homes of many of these Tamils were either partially damaged or fully destroyed during the conflict. And most of these houses have also been relieved of household items and any items of value. The regime must come up with adequate compensation so that the people might restart their life.

Return of agricultural land will be another essential step. But there are teething problems. Large tracts of farmland, riddled with land-mines laid by the LTTE, are yet to be de-mined. Farming is impossible on these plots. Even in areas that have been officially de-mined, the exercise had been done only up to “battlefield use” standards, not up to “humanitarian” standards.

The government on its part has done a few things that will help mend ties. For example, the allotment of rice for the northern and eastern region has been increased so that till the time agriculture is impossible, there is a constant supply of rice. Also, the government and financial institutions have decided to reduce interest rates and taxes on loans in these regions. This will encourage investors as well as bring in much-needed change in infrastructure in the area. Tender for a new railway line connecting the region with other parts of the country has already been floated. In some of the sections, the work has already started. All these initiatives are part of the regime''s “Northern Spring” initiative.

Strengthening of democratic institutions would be equally crucial. Sarath Fernando, moderator of the Movement of Lands and Agriculture Reform, told B&E, “A country needs strong democratic institutions for confidence building. We are no exception.” A strong independent media is the need of the hour. One of the conflict’s casualties has been an independent press that can openly criticise both the parties without any fear of retribution. Sri Lanka’s ranking in a press-freedom index has slid in recent years as prominent journalists critical to both the Rajapaksa political family and the LTTE have been assaulted, threatened and even killed.


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Wednesday, July 18, 2012

Breaking The ‘class’ Ceiling

While there have been Welcome Instances of Individual Largesse Towards Education, B&E’s Anindita Chakraborty provides an as-is-where-is Analysis of The State of Education Philanthropy in India

Concepts like “philanthropy” and “corporate donations” in the field of education aren’t new to India Inc. Our nation has witnessed such ideological initiatives from wealth generators since quite some time. Perchance the legacy started with the Tata Group founder Jamshetji Tata laid the foundation for the same back in 1892 for encouraging education through donations. Sir Ratan Tata Trust (founded after the death of Sir Ratan Tata, the younger son of Jamshetji), a public foundation for grants, was founded in 1919. The Trust looked towards being a catalyst for India’s development by giving grants to institutions in various areas; and the focus was particularly in the direction of education and medical aid. Since then, a number of other corporations have made significant contributions towards the education cause over the years.

Notably, the recent times have seen a new trend among the top honchos of India Inc. – which is, to work independently of their corporate CSR activities and donate huge sums individually. Cut to the decade that just brushed by (2000-2010) and we saw Nandan Nilekani, co-founder of software company Infosys, donating $5 million between 1999 and 2002 to IIT, Mumbai. Wipro Chairman Azim Premji, with his own foundation Azim Premji Foundation, is aiming to add value to primary education at the grass-root level. Social activist Rohini Nilekani donated Rs.1 billion to Arghyam, her own foundation, started in the year 2001. In October 2010, the Tata group donated $56 million to Harvard Business School. Even N. R. Narayana Murthy donated $5.2 million to Harvard and its publishing concern for a series on Indian literary heritage.

India currently has 69 billionaires; more and more wealth is getting concentrated among the top 5% of the country. On the other hand, nearly 40% of the 1.2 billion Indian population is still impoverished and 35% of its population is still illiterate. Only around 15% of Indian students manage to reach high school and just 7% manage to graduate. The educational scenario has definitely improved over the years but the hard facts still pain us immensely, and make us realise that there is still a long way to go.

Clearly, while private investment is one way out to save India’s education scenario (and should be considered equivalent to philanthropy only, given that it was the government’s job to give education to the masses), there are organisations with finances, yet without the inclination to get into the business of education – and philanthropy is the best solution in such cases. There is more to it than just donating for a cause. Personal interests also play a major role behind hefty educational donations as they help in wealth generation in the long run. Rohini Nilekani, Chairperson, Arghyam, wrote in one of her articles, “In a modern nation state, such shrewd wealth creation is tolerated only when it is widely believed that a large social purpose is being served. This puts the onus squarely on the wealthy to prove their work and philanthropy becomes a subject of national importance, especially in a country where such glaring inequality still prevails.” The spin-off benefits are immense as well, since the image that these leaders build for themselves also creates a halo around their organisations, giving them invaluable goodwill for the long run.

But a number of these leaders are intent on carrying these initiatives beyond mere grandstanding. Azim Premji opined once on the importance of the cause, “Education is perhaps the most powerful enabler of human life and equity... for it takes the collective imagination and effort of a society to will itself to newer heights.” The exemplar Narayana Murthy said during the AIF Annual Summit, 2009, in New York, “It becomes the responsibility of the civil society and the corporations to add value to the efforts of the government in making sure that the society becomes better, be it through educational initiatives, health care initiatives or nutritional initiatives.”

If one takes a long term view, and the one that Рalthough sounding suspiciously clich̩d Рis correctly held and followed by social economists, the poor of today have to be given the opportunities to move up the pyramid, since they can be the drivers of the markets of tomorrow. The idea of sustainable and holistic growth is a global trend, and visionary leaders realise that in the contemporary world, society is rating them according to not only the worth of their donations, but also the intent that is behind such donations.


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BMW has done well to Establish itself in The Domestic Market

For years Together, The Indian Luxury car market had always seen Mercedes Top The Charts. The year 2009 saw a change in The form of BMW. From the 3 Series to The Gran Turismo, BMW has done well to Establish itself in The Domestic Market. And now, it’s betting big on The New X1. Will it prove The Crowd-Puller for BMW? 

B&E: Like in 2009, the company again overtook Mercedes in the second half of 2010. What major strategies did you adopt to repeat this feat?
AS: We went the way we wanted to go. It is not about an arrogant organisation but about a self-confident organisation. We wanted to be #1 as we have always perceived that as a symbol of success. Obviously, people got nervous in the beginning of 2010, as we were running behind for months. But we did not panic and hence, did not do anything stupid. We knew that there was a new 5-Series hitting the market in the second half, which would help cover the gap. And it did just that.

B&E: The luxury car market has shaped up well in 2010. What kind of growth are you expecting in 2011?
AS: We are very bullish for next year. However, I don’t know whether we will be able to grow at the same pace as we did in 2010, because 2009 was a period of slowdown, wherein the luxury car segment did not grow much. But now with X1 in our portfolio coupled with the growth in dealership network, we do hope for double digit growth in 2011 as well.

B&E: A few days back, you turned down a deal that could have seen 101 BMW cars being purchased in Aurangabad. Some months back, your arch rival Mercedes-Benz signed a similar deal successfully. So, why did you decline the offer?
AS: We have set up dealerships across the country to treat customers as individuals. If customers group-up and start demanding a 25% discount on the retail price, no individual in the country would thereon buy BMW cars without a 25% discount. It would have been the first step of brand erosion at the cost of a 101 units increase in sales volume. Though I would have loved to sell 101 more cars, post a long discussion on this in New Delhi, we finally decided that it was not worth jeopardising the BMW brand (and dealers’ profitability) for the sake of volumes.



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Monday, October 22, 2007

“It’s like going to a specialized shop or going to a large mall”

Currently, the main competitors for SREI are behemoths like ICICI, GE & Citibank. Argues Kanoria, “But the entire business model that we have (the integrated model), there is no other competitor, which is offering this entire thing in a similar fashion that we are.” While ICICI Bank, GE Capital or Citibank can provide only financing of equipments; for other services like leasing or rental, deposit of equipments, they have to come to SREI. SREI even helps them to sell equipments in the domestic, as well as the international market, via auctions. Kanoria sums it up, “It’s like going to a specialized shop or going to a large mall.”
For Complete IIPM Article, Click on IIPM Article

Source: IIPM Editorial, 2006

An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
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Friday, October 05, 2007

The death of river Noyyal

Meanwhile, the effluents haven’t spared Tirupur city either. Since the ground and surfacewater are polluted, drinking water has become undrinkable. And it’s not only pollution, the groundwater level has plummeted to 800 feet below. One bitter example is that even the colour of the water that one gets from tender coconuts in these areas have changed. Outraged by the increasing impact of the pollution, the villagers surrounding Tirupur decided not to allow the units to take waterfrom their wells. The industrial units have to buy water from outside faraway places at a higher price. Some have gone to the extent of buying farmlands with wells to draw water and there sure are protests against it.

The fight against the pollution is going on. The court has ordered closure of textile and dyeing units until they set up treatment plant with reverse osmosis process. Now those units are setting up treatment units. As per government’s order, they have to complete it before July 2007. M.Balamurugan, Founder of an NGO named Kurinji Foundation states to B&E, “The dyeing units will construct the treatment plants and there’s no doubt about it. But will they run them considering that the running costs are so high? They will keep them as a show piece. What is required is continuous monitoring. We documented these cases in our short film Noyyal- Tho laintha thadangkal’ (Noyyal- the lost way). In the downstream region of Noyyal, many have skin diseases & other miseries.”

He adds another point, “Instead of accusing the dyeing units, in reality we have to point our fingers at the exporters. They don’t raise their payment to the dyeing units according to the rise in the cost of dyeing as treatment plants are involved. They feel their margin will decrease.’’ Well, profits are good; but at what costs?! Sure, dying never got more sinful!
For Complete IIPM Article, Click on IIPM Article
Source: IIPM Editorial, 2007
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
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Tuesday, September 11, 2007

Currently, there are two ways to manage waste in India – one is landfills and the other is incineration

The core issues remain – absence of segregation of waste at source; lack of technical Currently, there are two ways to manage waste in India – one is landfills and the other is incinerationexpertise and arrangement; no proper collection, segregation, transportation, and treatment/ disposal systems employed by ULBs.

The pathetic state of garbage disposal results from the fact that the policy-makers residing in the comparative clean Lutyens’ Delhi, have blissfully closed their eyes to the filth strewn across other parts of the country. There is no dearth of laws to keep the cities clean, but no one has the will to implement them. We simply depend upon the winds to fl y away the garbage from our vicinity into our neighbour’s backyard. That way, we’ll continue to live a degraded standard of life.
For Complete IIPM Article, Click on IIPM Article

Source: IIPM Editorial, 2007

An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
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Wednesday, September 05, 2007

... on the green front! Defamed by Greenpeace, Apple makes amends

“Apple knowsApple more about “clean” design than anybody, right? So why do Macs, iPods, iBooks and the rest of their product range contains hazardous substances?” reads the latest Greenpeace campaign. However, Steve Jobs still thinks that Apple is a green company and he also manifests that it is greener than its competitors like HP and Dell. “It is generally not Apple’s policy to trumpet our plans for the future. Unfortunately, this policy has left our customers and the industry in the dark about Apple’s desires and plans to become greener”.
For Complete IIPM Article, Click on IIPM Article

Source: IIPM Editorial, 2007

An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
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