IIPM ARTICLE AND EDITORIAL: April 2013

Saturday, April 27, 2013

B&E Infographics

Annual results: India inc.

India Inc. report card FY 2012

Events in the global arena kept india inc. in distress throughout the year. Gloomy macroeconomic conditions on the domestic front further added to their woes. though corporate India managed to save their topline during the past financial year, increased input costs played spoilsport for them as the bottomline shrank by over 8%, as suggested by the aggregate financials of 275 BSE 500 companies, which announced results by May 18, 2012.

Tough year on all fronts

Aggregate yoy revenue growth for BSE 500 companies (275 companies that announced their results by May 18) in FY 2012 remained at a healthy 23.9% with a marginal improvement over last year’s 23.03%. However, increased input costs have hit margins. Aggregate net profit after tax shrank by 8.79% for the above-mentioned period as compared to a superb growth of 24.39% in the previous year. With global markets still under pressure and the European epidemic getting worse by the day, the current fiscal, too, looks quite challenging and the key issue for India Inc. would be to keep their costs under check to safeguard their margins. Nevertheless, corporate India may soon get a breather from raw material costs as analysts expect commodity prices to settle down in the near future.

Banks post strong growth

The banking sector managed to achieve a 34.4% growth in revenues yoy, the highest among the sectors picked. Revenues for BSE IT companies increased by 25.58% yoy as compared to 19.73% recorded in the previous fiscal. However, a look at public sector companies shows a starkly contrasting picture. The aggregate revenues of all PSUs, which are part of the BSE PSU index, grew by 22.92% yoy in FY 2012 as compared to a growth of 25.87% in FY 2010-11. Both Banking and IT sectors surpassed the aggregate of Sensex constituents, which posted a revenue growth of 23.8% for the last fiscal. Going forward, considering the demand situation in India, analysts expect the situation with revenues to remain optimistic, but margins may continue to be stressed.

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Source : IIPM Editorial, 2013.
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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Friday, April 26, 2013

International

facebook: ipo debacle

The sizzle and fizzle of the most hyped IPO

Apple’s co-founder Steve Wozniak had reportedly warned Mark Zuckerberg about the glitches he might face on taking Facebook public. But when the hottest and most awaited IPO finally made it to Nasdaq on Friday, May 18, the mood was ebullient. Facebook’s public debut seemed like the greatest coming-out party in Wall Street’s history. Nobody thought that the euphoria would come crashing down barely hours later. For all the frenzy and ecstasy that went into the making of the Facebook IPO, the stock’s performance on the bourse has been quite anticlimactic. In a portentous sign of all that could go wrong and take the whoop out of investors’ joy, the IPO’s execution of trade was delayed by nearly 30 minutes on the first day itself. And things have gone from bad to worse thereafter. The share price tanked by nearly 13.1% by day five of trading. Even earlier, by day three itself, it had become clear that the breathlessly hyped $16-billion IPO would face difficulty in living up to its giddy expectations. The fall in the stock’s value and the accompanying embarrassment turned decidedly disconcerting after news emerged that Morgan Stanley, the lead underwriter of the Facebook IPO, had played some hokey-pokey by not fully disclosing the company’s revenue forecast in the run-up to the IPO. As a result of these avoidable shenanigans, not only is the stock still trading well below its initial offering price of $38 over a week after listing, the company is also now having to contend with shareholder lawsuits and government investigations. The IPO, which was universally touted as the poster child of the business of social media, could well become the new whipping boy for more Wall Street reform. However, not all investors have lost hope. Many believe that the IPO can still take Facebook’s valuation to nearly $104 billion and churn out money in the long run. But the ranks of believers are fast diminishing.

Nokia: Troubled business

Can Nokia pull itself up again?

It has been more than two years now since Finnish handset maker Nokia began losing steam to players like Apple and Samsung. The company has lost nearly 23.8% in global handset market share. Nokia’s handset shipments stood at 82.7 million units in the 1st quarter of 2012 (down from 108.5 million units in Q1, 2011). Analysts fear that considering the rate at which Nokia is burning its cash reserves, it may not be able to ward off the risk of debt default. Just five years ago, Nokia had piled up a whopping $12.54 billion in cash reserves, but over the past five quarters, it has used up $2.7 billion to prop up its faltering business. And there could be another outgo of $2.51 billion in the next quarter. The company’s short-term bonds for 2014 have already been rated as junk by Standard & Poor’s and Fitch.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Wednesday, April 24, 2013

“Regulatory processes are complex & non-transparent”

Dr. Gopichand Katragadda, Managing Director, GE India Technology Center talks to B&E about how India can build a world class ecosystem for itself

B&E: What is your view on the ecosystem in India with respect to the R&D outcomes that GE seeks?
Gopichand Katragadda (GK): A research ecosystem was one of the critical considerations for GE to set up the John F. Welch Technology Center in Bangalore. A good intellectual property culture and law, the presence of several successful R&D establishments, and a good pipeline of talent are amongst the things working for India.

B&E: How does GE perceive R&D ecosystems from a strategic perspective, and what initiatives are you taking to from your end?
GK: GE has contributed to the Indian innovation ecosystem in multiple ways – interacting with academia through funded projects; funding students research through GE fund scholarships; awarding best Ph.D thesis with an environmental impact; funding innovative student run programs such as fuel-efficient cars; conducting and participating in thought leadership symposiums with topics in innovation and intellectual property; participation in policy development and advocacy. Our team members have written extensively, in books and journals, on innovation in the context of India. Over the past three years, the team has also focused on product delivery to the India market with specific focus on energy, healthcare & locomotives.

B&E: What sort of efforts and stakeholder collaborations are required to bring R&D in India at par with global standards?
GK: Focussing on a few areas might actually make this a century of Indian innovation.
• There needs to be greater collaboration between industries & universities. Today, there is enormous government support for research at some universities. However, it is now time for the government to mandate university-industry collaborations as a criteria to access some of these funds and then use strategic intellectual property as a metric of success on these projects. A good model to look at in this context is the Semiconductor Research Corporation (SRC). It was originally setup in 1981 in response to the US steadily losing integrated circuit market share to Japan. SRC’s charter was to provide a competitive edge to its member companies by sponsoring cutting edge university research. Over the past 24 years, SRC has channeled $854 million in cutting-edge semi-conductor research. Today, through the efforts of SRC & others, the market trend in the semiconductor industry is now in favour of the US.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Saturday, April 20, 2013

Do ‘Megatrends’ mean ‘Megabucks’ for DuPont?

Post economic meltdown, Ellen Kullman, CEO – DuPont, has focused the company around innovation through science. The idea is to use DuPont’s formidable research capabilities to meet the needs of diverse growth markets. And that’s where the real challenge lies.

It’s not easy to manage a 210-year-old company – a company that is credited with having invented the modern business model. From an explosives maker to a chemical company, DuPont has reinvented itself twice since 1802 and is yet again in the process of doing it for the third time as it moves towards becoming what it calls “a science based discovery business”. But if one looks at the way employees are groomed at the Delaware-based innovation giant, it becomes clear how such a diverse conglomerate is stably managed.

Take the President, Chair and CEO – Ellen Kullman – for instance. Her ascent to the top has been quite unusual. As an amateur in the industry, Kullman joined GE where she got the chance of observing Jack Welch while working under the then GE Vice-Chairman Edward E. Hood Jr.. After selling CT Scanners for the US based multinational, Kullman moved on to DuPont in 1988. Within a decade, she was running the company’s titanium dioxide business. In fact, she became the first woman Vice President ever at DuPont, managing 6,000 employees and a business generating $2 billion. In August 1998, Kullamn was summoned by Chad Holliday (then CEO). He discussed the possibility of setting up a consulting business around DuPont’s safety practices and suggested that Kullman spearhead it. On the face of it, asking her to leave a key position and initiating something that was completely unrelated to DuPont’s core business areas was like saying, “We don’t need you here. In the meanwhile, try this new project till you get a real job.” After giving considerable thought (and despite her close associates advising her not to take the plunge), she accepted the offer and made the project a $6 million business. It is perhaps this sort of experience that made her an ideal candidate for the top job.

However, when Kullman became CEO in January 2009, the financial crisis had gobbled up growth prospects around the globe. In fact, the economic meltdown revealed that despite catering to a distinct set of customers, there were formidable cracks in the company’s business model. Net income for 2008 fell to $2 billion as against $2.98 billion in 2007. As the crisis unfolded, sales declined by more than 50% in some divisions. First quarter earnings per share in 2009 declined by 59% to $0.54 (compared to the same period last year) . From a high of $52.62 in July 2007, the stock fell to an all time low of $16.87 in March 2009. As a response, Kullman attempted one of the most radical restructuring initiatives in the company’s history. Through 2009, DuPont’s 23 business units were integrated into 13. The initiative resulted in a reduction of 2,500 jobs (primarily in the the motor vehicle and construction related businesses in Western Europe and US). By the end of the year, DuPont had achieved $1.1 billion in fixed cost productivity. Although it was a bitter experience, it gave management a chance to look at new opportunities. As Kullman puts it, “When we looked at the strategic level during the financial crisis we asked ourselves, where are we headed as a company?” One key observation was that the agriculture and nutrition business contributed $8.3 billion to revenues (amounting to 31% of total sales volume). Encouragingly, it was more or less insulated from the after effects of the financial crisis. As a result, DuPont decided to diversify from its key products – Kevlar fabrics (used to manufacture a wide array of blades) and titanium dioxide pigment – to heavily focus on the food and nutrition business by acquiring Danisco (a Danish producer of nutrition and health-related products and enzymes) for $6 billion. It also forayed into innovative markets like solar energy, enabling materials for electronic components, and enzymes that help turn crops, like switch grass, into energy. So what is it that is forcing a 210-year-old chemical giant to initiate such a big shift?

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Tuesday, April 16, 2013

Mindful leadership – When east meets west

In an exclusive B&E feature, Prof. William George, Professor of Management Practice at Harvard Business School, talks to sean silverthorne, editor-in-chief of hbs working knowledge, about how He looks to the East as a model for developing strong business leaders and how Leaders with low emotional intelligence (EQ), despite having a high IQ, often lack self-awareness and self-compassion, leading to a lack of self-regulation and loss of their very own jobs.

Prof. William George of Harvard Business School, an expert on leadership development, recently teamed with Tibetan Buddhist meditation master Yongey Mingyur Rinpoche to present a conference on “mindful leadership,” a secular process to explore the roles of self-awareness and self-compassion in developing strong and effective leaders. “To our knowledge, this is the first time that a Buddhist Rinpoche and a leadership professor have joined forces to explore this subject and see how Eastern teaching can inform our Western thinking about leadership and vice versa,” George says. For George, leaders who don’t develop self-awareness are subject to becoming seduced by external rewards, such as power, money, and recognition. They also have difficulty acknowledging mistakes, an Achilles’ heel that has crippled a number of CEOs who have appeared in the news recently. Excerpts from the interview:

Q: What is mindful leadership, and what are its benefits?
William George (WG): Mindfulness is a state of being fully present, aware of oneself and other people, and sensitive to one’s reactions to stressful situations. Leaders who are mindful tend to be more effective in understanding and relating to others, and motivating them toward shared goals. Hence, they become more effective in leadership roles.

Q: How does one become mindfully aware?
WG: I would not claim to be an expert in this area. Our Mindful Leadership seminar focused on the practice of meditation as one of those ways, with a variety of meditation techniques taught by Rinpoche. This was strictly a secular teaching, not a Buddhist one. In my experience I have observed that people become more mindful through prayer, introspective discussions, therapy, & the use of reflective techniques & exercises.

Q: You have said that few leaders lose their jobs because of lack of intelligence, but many do so because of lack of emotional intelligence. Can you talk about this a little more and cite a few examples?
WG: Leaders with low emotional intelligence (EQ) often lack self-awareness and self-compassion, which can lead to a lack of self-regulation. This also makes it very difficult for them to feel compassion and empathy for others. Thus, they struggle to establish sustainable, authentic relationships. Leaders who do not take time for introspection and reflection may be vulnerable to being seduced by external rewards, such as power, money, and recognition. Or they may feel a need to appear so perfect to others that they cannot admit vulnerabilities and acknowledge mistakes. Some of the recent difficulties of Hewlett-Packard, British Petroleum, CEOs of failed Wall Street firms, and dozens of leaders who failed in the post-Enron era are examples of this.

Q: The two essential aspects of effective leaders, you explain, are self-awareness and self-compassion. Could you please elaborate?
WG: An essential aspect of all effective leaders is authenticity; that is, being genuine and true to one’s beliefs, values, and principles that make up what we call someone’s True North. Authenticity is developed by becoming more self-aware and having compassion for oneself, without which it is very difficult to feel genuine compassion for others. Self-awareness starts with understanding one’s life story and the impact of one’s crucibles, and reflecting on how these contribute to motivations and behaviours. As people come to accept the less-favoured parts of themselves that they do not like or have rejected, as well as learning from failures and negative experiences, they gain compassion for themselves and authenticity in relating to the world around them.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Friday, April 12, 2013

Global Development Horizons 2011

Amidst the transformative change that the global economy is witnessing, it is anticipated that within the next two decades the rise of emerging economies will inevitably have major implications for global economy and geopolitics. The world bank argues that a new world order with a more diffused distribution of economic power is emerging. B&E analyses the shift towards multipolarity.

The new Growth Poles

Over the course of two millennia, there have been several instances of shift in global economic powers. The period of China’s Tang dynasty to the Ming dynatsy (600-1600), saw to it that China was the dominant force in the global economy accounting for a quarter of the global growth. The Renaissance phase coupled with the advent of the industrial revolution saw the coming of age of the European economies (e.g. Italy, Spain, France , Great Britain). Post World War II, innovation and consumer demand propelled the United States to the position of world’s foremost economic power with Germany, Japan and the former Soviet Union playing pivotal roles. Post the financial crisis of 2008-09, the global economy is tilting towards new growth poles.

Dynamics of Growth Poles

In the wake of the financial crisis, the global macro-economy is apparently poised to follow a two-track course. Considering the baseline scenario, the World Bank estimates that the emerging economies’ share of global output will expand in real terms from 36.2% (in 2010) to 44.5% by 2025. A closer scrutiny reveals that China will lead this impressive rise in share of global output. What is interesting to note is the fact that despite the demography driven changes (the old age dependency ratio in China is expected to double between 2010 and 2025), China will be able to maintain its comparative advantage in manufacturing. Consistent with historical productivity trends, India’s annual growth in 2025 will be 5.4%.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Thursday, April 04, 2013

Will Indian Online travel Boom invite M&As?

The Indian Online Travel Industry has witnessed tremendous growth since 2004. Today, it’s the most Crowded space in The E-Commerce Segment with new players joining The Race every year. Question is – how will this Overcrowded space grow spacious?

As more and more Indians turn to the web for their travel needs, the online travel portal market in the country is gearing up for a bigger action in the coming days. With travel portals now offering a host of new services – putting forth their travel packages and providing safer mode of payments – booking travel online is no more confined to getting a low-cost airline ticket. In fact, these portals are now becoming travel guides rather than just ticketing stations. As per comScore’s data for April 2011, the number of visitors to travel sites in India increased 32% compared to last year. The study by the US-based digital market research company revealed that around 18.5 million visitors (age 15 or older visited) turned to the Internet for their travel needs in April 2011. While Indian Railways led the list of the top 10 visited sites, registering 8.4 million visitors this year (an increase of 8% from the previous year), Online Travel Agency sites (OTAs) secured the remainder of the four top spots in the category. MakeMyTrip reached nearly 3.9 million visitors (up 63%) followed by Yatra Online with 3.5 million visitors (up 82%) and ClearTrip.com with more than 2.1 million visitors (up 80%). Interestingly, the US-based Expedia Inc. secured the #5 position with 1.8 million visitors (up 12%).

This clearly indicates that there is a distinct shift in consumer preference as more and more people now prefer to plan and book their travel, and holiday needs online. According to travel industry research company PhoCusWright, India’s online travel market is the fastest-growing online travel market in the Asia Pacific region. What’s more? The company expects the Indian online travel industry to grow at a whopping 28% rate to top $7 billion by 2012. And it’s because of this reason that OTAs are now exploring newer avenues to generate revenues. In fact, revenue from advertising has already taken a backseat, and the focus now is more on cross selling of products, combination of products, et al. Further, with the rise in the sales of non-air products, industry players are confident that newer product categories will be explored in the travel and holiday space.

The increased pumping of money in the sector has also helped portals spend more to attract customers. In the last couple of years, most of the sites broke-even, securing a comfortable position. For instance, Nasdaq-listed MakeMyTrip registered a profit of $3.7 million in Q4 FY2011 as compared to a loss of $1.3 million in the same period last year. Even for the financial year ending March 2011, it had a profit of $4.8 million as against a loss of $6.2 million in FY 2010.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Tuesday, April 02, 2013

Direct Tax Code: A boon for IT Sleuths!

A Closer Look into The Provisions of The Proposed Direct Tax Code reveals India’s Digression from a Trust-Based system of Taxation to one which is Based more on The Element of distrust.

The existing Income Tax Act, which came into legislation in 1961, has often been criticised for being economically inefficient and incompatible with the current requirements and inequitable to all tax payers. Thus, to avoid this criticism and to replace archaic rules, the Ministry of Finance finally came out with the draft of Direct Tax Code (DTC) Bill in August 2009. But, the draft Bill, after being introduced in public domain, received a lot of criticisms on certain amendments in relation to removal of existing tax subsidies, and modifications in the tax rate structure that it sought to introduce. So, in June 2010, the ministry again issued a new revised DTC Bill and presented the draft to the Union Cabinet.

In what the government has claimed to be an attempt towards bringing path breaking changes to the existing tax regime in India, the DTC Bill, which is proposed to be implemented from April 1, 2012, will replace the five decade old legislation. In fact, in the foreword to the Tax Code, Union Finance Minister Pranab Mukherjee said that “the aim is to eliminate distortions in the tax structure, introduce moderate levels of taxation, expand the tax base, improve tax compliance, simplify the language and lower tax litigations.” Meanwhile, the Bill is being scrutinised by the Yashwant Sinha-led Parliamentary Standing Committee on Finance.

Personal income tax, as almost all salaried persons will agree, in our country is one of the highest in the world. More open and honest an employer is in terms of disclosing remunerations, worse it is for the employees because taxable income goes up. There is no denying that the present system is outdated and rewards dishonesty and non-disclosure of income by way of lower tax. The rationale for introducing DTC, government says, is to increase the efficiency and equity of the tax system by eliminating the plethora of tax exemptions or subsidies that create distortions. Its major policies include replacement of profit-linked exemptions with investment linked incentives, particularly for export units, and reduction in the tax rates to bring more people and companies under the tax net. Even the government wants a modern tax code in step with the needs of an economy, which is now amongst the largest in Asia. “In India, tax reforms have lagged behind growth. It is a big challenge for politicians and policymakers to keep the pace of reforms with growth,” Jeffrey Owens, Director of the OECD Centre for Tax Policy and Administration, said during a recent visit to New Delhi, adding, “Indian economy has transformed in the last two decades. Along with high growth, it has increasingly become the importer and exporter of capital. But tax regulations have largely remained the same. You have to change with the changing environment.” While the rationale behind the government’s proposals with respect to the DTC has been largely accepted as a right step in the right direction, a closer look into the provisions of the proposed tax code reveals India’s digression from a trust-based system of taxation to one which is based more on the element of distrust.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist). For More IIPM Info, Visit below mentioned IIPM articles

Monday, April 01, 2013

Do Outsider CEOs really Add Value?

Contemporary Evidence suggests that Outsiders may be likely to Excel and Outperform Insiders at Companies that are in crisis. But Historical and Empirical Research Suggests otherwise. Where does reality stand?

It was the spring of 1985, and the board of Apple Computer decided it no longer needed the services of one Steven P. Jobs. The main dramatis persona in the tech world’s biggest unfolding drama of a quarter-century ago was John Sculley, the Pepsi executive whom Apple’s board had brought in as CEO to oversee Jobs and grow the company — similar to Eric Schmidt’s role with Google founders Larry Page and Sergey Brin — in 1983.

Was Apple’s board right in bringing outsider Sculley to revive the waning fortunes of the company? The truth is that, depending on the company and its situation, it can be just as important to bring in outsiders as it is to develop homegrown talent. Around the time Sculley came on board, Apple was struggling with low Macintosh sales and there was a need to bring some order to the creative chaos Jobs had unleashed. Sculley got Jobs out of his hair two years after taking over Apple. In the course of undertaking his major reorganisation, Sculley fired 1,200 employees (20% of the total workforce) and put the broken parts of the company together to form one unified Apple and delivered its biggest growth, percentage wise, in its history prior to the return of Steve Jobs in 1997.

Like Apple, there are many global companies that are famous for promoting talent and grooming leaders from within but have all brought in outsiders when they needed to. According to analysts, the health, stability and competitive position of the company at the time of transition are the critical factors in determining whether an insider or an outsider is the best choice. Experts contend that insiders perform more consistently when their companies are in a healthy state at the time of appointment, whereas outsiders perform better when the company is in some form of crisis.

Ford CEO Alan Mulally, a longtime former Boeing executive, transformed an iconic American company that was on the brink of bankruptcy. Under Mulally, decision-making became more transparent, once-fractious divisions began working together, and cars of better quality started rolling faster from design studio to showroom. Mulally may be getting the rewards and accolades now, but who remembers what Ford was like in ’06, ‘07 and ‘08 when bold and difficult decisions were being made and people wondered if the aerospace executive could cut it in the automotive world. “Many doubted Mulally’s ability when he first came to Ford. There are doubters no more. He has proved to be an outstanding leader, and helped the company reach new heights,” said Michelle Krebs, an automotive expert and Senior Analyst for auto experts Edmunds.com. To get a sense of Mulally’s contribution to Ford’s turnaround, take a look at the increase in the value of the company from 2008 to 2011 as measured by its market capitalisation. During the period there has been over 1000% increase or an increase of $51.26 billion. A 1% share of that would be $512 million. The share price of the company has soared from a low of $1.26 on November 19, 2008, to $18.97 on January 13, 2011 and is currently trading around the $15 mark.

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