Tuesday, August 28, 2012

How(l) do you do?

Pampered pooches ‘howl out aloud’ and ask for a life that they truly deserve. It’s time to train the trainers!

Ayesha was down in the dumps when she lost Toggle, her 5-month-old black Labrador puppy. To cheer her up, like a true dog enthusiast and a concerned friend, I got her Ginger, a female German shepherd puppy. Ayesha’s eyes filled with tears of joy as she hugged me and Ginger simultaneously! I felt she might go overboard with joy, and pamper her pooch to no end, so I gave her a few tips to raise a perfect puppy. Lost in the joyous moment and completely involved in Ginger, she nodded to whatever I blabbered and probably forgot everything as soon as I left.

Today, Ginger is a year old and has the right to climb-up on the couch, cuddle-up in bed and snatch anything she feels like from any of the members’ hands. She definitely is the pack leader. According to Ayesha, Ginger is the lady of the house and she commands/demands respect. “She need not go for a walk, because it’s too hot and we stay on the second floor. She needs a pedicure every month and has to visit the spa for her massage and hair grooming. I recently got these incredibly cute shoes for her from the pet shop and I can’t wait to order the organic towels for her, which I saw on the net the other day!” said Ayesha. Ayesha supposedly can’t get enough of Ginger, but has forgotten that Ginger is an animal, and probably deserves a life not as girlish!

Several dog owners’ never-ending whims and fancies lead to pooches being pampered silly. A booming industry is now tapping into the true potential of pet lovers in India. A certain few might stall at ‘Windsor’, Khan Market for picking up a mint chewy or a designer leash. Be it a relaxing aroma bath at ‘Scooby Scrub’ or a nice pool party at ‘Kennel 1’, people in most metros are splurging non-stop for their furry companions. All around the world this scenario persists. In China, dogs are being groomed to sport fashionable bright red or green fur on their tail or around the neck. Not only that, some people are shelling out extra bucks to give their pooches a panda-like look! Meanwhile, some insecure pet owners in the U.S. are happily paying-up a whopping $30000 insurance policy for their canine buddies!


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Monday, August 27, 2012

War within

Army’s stand is perplexing

A few days back, the Indian Government challenged the Delhi High Court judgment regarding permanent commission to women in the army by moving the Supreme Court of India. On March 12, 2010, the HC had directed the government to allow grant of permanent commission to women in army and air force. Under this directive, women serving in the short service commission program would be treated at par with their male counterparts, which will be applicable to future recruitments only. While the air force has complied with the order already, the army has gone on record to say that it is not ready to provide permanent commission to women yet.

As of now, women in the Army are only recruited for Short Service Commission (period of 14 years) unlike their male counterparts, who enjoy permanent commission after five years. This move by the government and the army does come out as highly discriminatory, despite claims to the contrary.

Source : IIPM Editorial, 2012.

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

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Friday, August 24, 2012

INDIA’S LARGEST PRIVATE SECTOR BANK

IT’S NEITHER AN EXTREME OF ADVENTURISM NOR AN EXTREME OF CONSERVATISM, THE APPROACH THAT INDIA’S LARGEST PRIVATE SECTOR BANK, ICICI BANK, NOW SEEMS TO FOLLOW IS THE MIDDLE PATH

In the meanwhile, to add to the irritation basket of Kochhar, on and off, there were numerous reports on how the bank’s so-called collection agents were harassing customers to recover dues; this wasn’t definitely helping brand ICICI and the collection agents were perhaps not the best brand ambassadors. Kochhar went for a swift course correction. Realising that the approach towards collection needed to be preventive than curative, the services of the collection agents were done away with. Now, collection is an in-house job; those who sell loans double up to follow up on the payments. ICICI Bank, once known for its aggressiveness, has in a way called off the frenzy of expansion and market share and settled down to the basics of safe banking. The very mantra of growth, market expansion, size and scale that mattered the most for the bank was put on hold and the operational focus was more oriented to balanced growth for sustainable and higher income.

Keeping in mind the September 2008 episode, the bank focused on a base of stable depositors, and hence more small savings (on which a mere 3.5% interest is paid) and current accounts (on which the banks have to pay zero interest) thereby turning the operations more profitable. The bank is neither operating with too much of adventurism nor with too much of conservatism. Though optimistic of the long-term scenario, the bank at present is taking cautious steps. Moreover, the customer orientation apparently has improved dramatically. The multiple calls that customers would receive from different sales people of ICICI Bank 24x7 have gone into a limbo.

Now, you really don’t have five different sales people calling you at five different hours of the day trying to push five different products of the bank. The entire approach has changed, with the focus now on a one-point contact to the customer. The “Khayaal Aapka” ad campaign is a step forward in customer focus and managing activism...but one that might not be needed in the near future.


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Thursday, August 23, 2012

A WHOLE NEW AGE OF CORPORATE DHARMA

BE IT LEE SCOTT, RICHARD PARSONS, AKIO TOYODA OR HOWARD SCHULTZ, CEOS OF THE WORLD TODAY CAN ONLY IGNORE STAKE HOLDER ACTIVISM AT THEIR OWN PERIL

It started as a movement and soon became an industry. Today the activism ‘industry’ is composed of individuals and organisations that, in fact, make a living from activism. In the middle of all this, organisations consistently face the heat whenever they make a wrong move; be it deliberately or otherwise. Larry Ellison, CEO, Oracle, once famously said, “A corporation’s primary goal is to make money. The government’s primary role is to take a big chunk of that money and give it to others.” But with the rise in activism globally, the expectations and calls for accountability by organisations have clearly grown. B&E takes a look at some of the prominent stakeholder groups globally that keep the activism torch burning bright.

Shareholder Activism: Boon or Bane

In this unquestionable era of globalisation, shareholder activism undoubtedly has a huge impact. These activists are strategically and operationally involved in the companies where they have vested financial interest. Managements of large corporations are severely constrained with their decision making on even short-term (and at times, day-to-day) operations when these activists enter the game. An activist investor may only need to secure a 10-15% ownership stake in large companies in order to place a disproportionate amount of pressure on management, especially considering the average attendance in shareholder meetings. Shareholder activism has been subject to a lot of criticism and a number of cases have been in the global limelight. In 2006, renowned shareholder activist Carl Icahn led a group that called for the breakup of Time Warner into four different companies, cost-cutting efforts and stock buyback worth $20 billion. Eventually the group won concessions, including the $20 billion stock buyback, $1 billion in cost-cutting measures and the appointment of a new board of directors. In another case where Carl Icahn was involved, Genzyme, the world’s biggest maker of enzyme drugs for genetic diseases was last year, was forced to close down production because of alleged manufacturing plant contamination. During the fourth quarter, Carl Icahn owned Icahn Capital LP more than doubled its Genzyme stake to 4.8 million shares, when they started dropping due to the factory problems.

A research conducted in 2008 by the Ohio University documents a 59% success rate for Carl Icahn with respect to achieving his stated goals in his target firms. In an article published by the Wall Street Journal titled ‘Why Carl Icahn is bad for investors’, Prof. Lynn Stout says, “Shareholder activists that corporate boards fear most today are hedge funds like Mr. Icahn’s: unregulated pools of wealthy investors who take large positions in a few select companies, use their ownership position to pressure boards into strategies they claim unlock ‘shareholder value,’ and then dump their stock as soon as the price rises.” He also confirms that a common goal of an activist campaign is to see to it that the target company is sold off to a private equity firm. This also leads to fewer good public companies to invest in for shareholders. Shareholder activism can at times be also healthy. A report published by IPREO in 2007 on shareholder activists shows that 50% of investors who participated in the survey believe that activism is helpful depending on the situation. In cases where the activist’s intent is right, they should work together towards a win-win situation.

Blog and Consumer Activism

Evelyn Murphy, who was the Lieutenant Governor of Massachusetts from 1987 to 1991, once quoted “Corporations will keep doing things the way they’ve always been done, unless they face ongoing public scrutiny, or a real threat to their reputation and self-respect.” Globally, ethical consumerism is a market on its own, and has been growing at 14% per annum. The latest edition of the Ethical Purchasing Index values this market at around $34 billion. Consumer activism is a very old phenomenon, as old as the origins of the word ‘boycott’ in Victorian Ireland. Such movements are known to spread geographically from an epicentre. And this epicentre is now increasingly moving online. The internet has taken consumer activism to new dimensions as information can be exchanged from anywhere. According to China Internet Network Information Center, China will overtake US in terms of Internet users in another five years. Similar is the case with other developing nations around the world where disposable incomes and internet penetration are on the rise. The latest example of backlash against a giant corporate house from the public is Starbucks. Banking on the boom in coffee houses, Starbucks became the undisputed leader. Due to corporate clout and deep resources it was able to overthrow many mom and pop coffee start ups that tried to make their presence felt. But in Kansas city, Starbucks is facing some heavy competition; simply because coffee lovers are now supporting the once struggling coffee start ups. It so happens that whenever there is a coffee shop that seems to be doing good business, it either is acquired by Starbucks or a fresh Starbucks outlet pops up in the vicinity. Starbucks says that it has no such strategy but some evidence does exist to indicate that this happens. This pattern is attested by the Specialty Coffee Association of America. Allegations that it does not pay coffee farmers adequately are also affecting brand equity.


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Wednesday, August 22, 2012

Administrative reforms – the need of hour

India’s economic journey from the times of the measly Hindu rate of growth is indeed incredible. Economic reform coupled with administrative reform is the way forward

India was a leading manufacturing country in the world in the early 18th century. It had 22.6% share in the world’s GDP, which came down to around 16% by 1820, closer to its share of world population. It had a developed banking system and vigorous merchant capital, with a network of agents, brokers and middlemen. Given the enormous financial surplus, a skilled artisan class, large exports, plenty of arable land and reasonable productivity, the question is why didn’t a modern industrial economy emerge in India? Instead, why did India become impoverished?

Nationalists claimed that Lancashire’s new textile mills crushed India’s handloom textile industry and threw millions of weavers out of work. India’s textile exports plunged from a leadership position before the start of Britain’s Industrial Revolution to a fraction. In recent years some historians have challenged this nationalist picture. They have argued that Indian industry’s decline in the 19th century was caused by technology. The machines of Britain’s Industrial Revolution wiped out Indian textiles, in the same way that traditional handmade textiles disappeared in Europe and the rest of the world. Indian weavers were, thus, the victims of technological obsolescence. Since India consistently exported more then she imported in the second half of the 19th century and early 20th century, Britain used India’s trade surplus to finance her own trade deficit with the rest of the world, to pay for her exports to India, and for capital repayments in London. This represented a massive drain of India’s wealth.

Consider the following hundred year trend: between 1900 and 1950, the Indian economy grew on the average 0.8% a year; but the population also grew at about the same rate; thus, net growth in income per capita was nil and we rightly called our colonial economy stagnant. After Independence, economic growth picked up to 3.5% between 1950 and 1980, and population grew by 2.2%; hence the net affect on income was 1.3% per capita, and this is what we mournfully referred to as “the Hindu rate of growth.” Nehru’s socialism had shackled the economy with fierce controls on the private sector, pejoratively called ‘Licence Raj’; hence its annual GDP growth was 1.5% points below even the Third World average between 1950 and 1980.

As a benchmark, recall that the West’s industrial revolution took place at a 3% GDP growth and 1.1% per capita income growth after 1820. To appreciate the magnitude of the Indian change after 1980, let me illustrate: If India’s per capita GDP had continued growing at the pre-1980 level, then its income would have reached present American capita income levels only by 2250; but if it continues to grow at the post-1980 rate then it will reach those levels by 2066: a gain of 184 years!


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