Rejuvenating spirits...

The Most Revolutionary Concept In Education PLANMAN CHE CENTRE FOR HIGHER EDUCATION, Supported by IIPM India’s Leading B-School

Bharti Enterprises, in March 2007, had announced an initiative aimed at creating a diversified conglomerate of the future. It had unveiled its new apex level organisation structure reinforcing the best in class governance model with strategic intent to lead, build and grow its all businesses. And the move has certainly paid off! The new structure has not only strengthened empowerment and accountability for business leaders of individual companies thereby enhancing the existing high degree of professionalism in the group, but has also raked in moolah for group companies with Bharti Airtel (which reported 57.4% increase in net profit)once again being the first in line!

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

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Relaxed in Recession

The Most Revolutionary Concept In Education PLANMAN CHE CENTRE FOR HIGHER EDUCATION, Supported by IIPM India’s Leading B-School

Small surprise that both Vikram Bakshi and Amit Jatia, the JV partners of McDonald’s in India (north & east and west & south respectively), vow that the slowdown is not bothering them the least. Instead same store sales have risen 20% y.o.y in January 2009, they say. No wonder a calm serenity pervades McDonald’s cozy corporate office in New Delhi these days, in stark contrast to the air of general gloom (and doom) that serenades most of corporate India and the world. And it’s not just the sun-kissed terrace, colorfull bougainvilleas and shiny red and yellow interiors in this corporate home (yeah! that’s what McDonald’s country offices are called!) that are behind the smiles on the faces of McDonald’s guys here... it’s also the secret knowledge that revenues from India are likely to go up soon, contributing a healthier chunk (than the present 5%) to the burger company’s global revenues. After all, McDonald’s is all set to raise prices over the next three years, simultaneously marking a shift in its India strategy in tune with the times. The new positioning being discussed is to gradually shift McDonald’s decade-old positioning in India from “affordibility” to “convenience”, with a thrust on the new breakfast menu and their McDelivery service. “We also plan to keep our stores open from 7am till midnight enhancing convenience for consumers,” says Vikram Bakshi.

So why the need to shift track now, especially if everything is as hunky dory as they claim? The answer, my dear friend, they tell us, is in the rising input costs over the last year. Given the pressure from their vendors, sources within McDonald’s India confirm that burger-happy consumers can expect a starting hike of at least 5% for almost every Big Mac product, by the second quarter of this year. In fact, the number of products under the Rs.20 tag – Happy Price Menu – have already declined from seven to four, with the food retailers’ new ads communicating the change with the ‘starts at Rs.20’ slogan. Explains Bakshi “McAkloo Tikki burger is our flagship product and that is why it continues at Rs.20.” A smart strategy indeed if one were to take into account the fact that most fast food chains have either already raised/ or contemplating an increase in their prices, in the wake of rising input costs, declining footfalls and a steep rise in real estate costs over the last year. Take Pizza Hut for example. Company sources admit that the dine-in pizza chain has “been disturbed” even in India. Pizza Hut rates have risen almost 40% over the last six months.

So how is it that McDonald’s India can afford to sit back and defer its price rise over three years? The answer to that question is also the solution to the many problems that organised retail in India is facing. It’s all about McDonald’s unique supply chain management that additionally ensures that every McD outlet across the world serves the same taste to flatter its consumer’s platter. Abhijit Upadhye, Director, Supply Chain Management, McDonald’s India believes that transparent relationship with vendors has ensured that price increases can be staggered over the next three years, instead of being implemented at one go. “We are working with our vendors to handle the cost issue,” he explains.

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Source : IIPM Editorial, 2009

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

For More IIPM Info, Visit below mentioned IIPM articles.
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No more forecasts

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The SEBI restriction on AMCs charting 'indicative returns' to lure more investors is all set to limit their marketing prowess

Life has never been so tough for Asset Management Companies (AMCs) in India. While a downturn in the equities market has already thwarted their aggressive customers, the path now has been paved for even ‘play safe customers’ to turn their backs. Market regulator Securities and Exchange Board of India(SEBI)’s unpleasant New Year’s gift to the AMCs (its latest circular) has announced, “It is...decided that the mutual funds shall not offer any indicative portfolio and indicative yield. No communication regarding the same in any manner, whatsoever, shall be issued by any mutual fund or distributors of its products.” Simply stating, this bans all AMCs from luring investors by showing them a portfolio that they are mulling of building and the anticipated return thereof. Industry experts may consider this as a step taken in the right direction; but mutual fund houses are set to face the heat in marketing tactics.

The market mayhem of 2008 witnessed a free fall in the net asset value (NAVs) of all equity-based mutual funds. The agonistic display of the returns can be well understood from the fact that of the 271 open ended equity funds, whose one-year returns are listed in MutualFundsIndia.com, unbelievably only 12 have delivered a positive yield with the highest offering of just 9.75% by UTI Spread Fund (Growth). Negative returns have gone up to as high as -80.88% as delivered by JM Small & Midcap Fund (Growth). Debt funds, on the other hand, have quite clearly outperformed equity MFs. Of the 270 odd open ended debt and liquid schemes listed in MutualFunds India.com only 34 have landed their investors in the negative zone that too with a maximum of -16.16%. No doubt such performance has made investors divert their corpus to debt funds.

In this sudden rush of investors, debt funds have got themselves into a higher degree of competition to grab a larger share of the pie and have finally landed in a situation where they are using indicative returns on their indicative portfolios as a main tool to attract customers. The problem with this in the first place is that such portfolios are just indicative, not real (without an obligation on the fund manager to pay at that rate). Further, as they are not real, at the time of high competition fund managers may present inflated figures to grab more investors. Thus SEBI has mentioned in its circular, “This practice should be prohibited as the indicative portfolio and indicative yield may be misleading to the investors.”

On the contrary, Sanjeev Sharma, Fund Manager (Debt), Escorts MF avers to 4Ps B&M, “It is a direct indication that the government is trying to reduce competition between MFs and banks. The short-term yield of bonds is around 10% and that of the MFs is above that and this is giving tough competition to banks which are already facing a blow from RBI’s pressure to cut interest rates.” No doubt, his words have some thought provoking elements, but then misleading investors (with indicative yields) should not be tolerated. Thus, while its time for AMCs to find new marketing tricks, for the customers its time to be rational instead of getting carried away by just indicative figures.

Deepak Ranjan Patra

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Source : IIPM Editorial, 2009

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

For More IIPM Info, Visit below mentioned IIPM articles.
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IIPM set to beat economic slowdown
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“Rahman should have got this recognition a decade ago”

Three-time National Film Award winner, Madhur Bhandarkar welcomes the global recognition that has come for musician AR Rahman

What is your view of "Slumdog Millionaire’s" worldwide success?
This is expected. Though the film is directed by a British Director, Danny Boyle, the star cast is from India. Music is scored by our own legendary AR Rahman. Most of the production team is from India and the film was shot completely in India. So, we have popular faces like Anil Kapoor, Irrfan Khan, Saurabh Shukla and Mahesh Manjrekar in the movie. When four Golden Globe awards, 11 BAFTA and 10 Oscar nomination type of international recognition comes, people certainly go gaga about it. It’s natural. Because, we Indians are sentimental people and we always look towards West for recognition.

Does it mean Oscar is the ultimate stamp of cinematic excellence in world cinema?
In commercial and popular sense, yes, but in the artistic sense no. Forget about the controversies and forget about the `Indian slums and poverty sell in the West’ theory. For the first time our own Rahman has been nominated for three Oscar awards. That itself is a great honour.

Would you rate the background music of "Slumdog Millionaire" as AR Rahman’s all time best?
No, I am not saying that. Rahman would have got the Oscars at least eight to ten years ago. He is a genius and God of cinematic music world. The Mozart of Madras has scored much more melodious back scores. If you go through his career, from Roja to Ghajini, he has scored many memorable and heart wrenching original back ground scores. Today, he is the world's topmost music composer. I am sorry to say but it took long time for global recognition to come and fall into his lap. At last the so-called West has recognised his talent through "Slumdog Millionaire" and he truly deserves that award. No doubt about that.....Continue