IIPM FACULTY: October 2008

Thursday, October 23, 2008

Watashiwa india desu...

‘I am India!’ is what it means, and Honda seems to have practised its Japanese despite having travelled all over the world, all year long! Proof: It’s India sojourn...

The launch of the Honda Civic hybrid recently was no Baku-Shan

(Japanese ‘semblance in a woman’s beauty’), as aesthetically, the car seemed perfect to make its competitors feel insecure. The most significant Honda launch in the country yet, the Civic hybrid according to Honda, “is a commitment to the environment” and “will certainly create a stir in the market.” But even then, there has been a Kusukusu (suppressed giggling) doing rounds in the Indian auto circles due to the exorbitant price the car comes at, which dangerously borders more substantial E-segment cars. However, the world’s number six car maker has to open its eyes wide. India is changing and so is it’s perception about certain categories. Since 2005, there has been a paradigm shift in consumer preference, especially with the launch of Swift by Maruti. The Premium-compact segment (Rs.4 Lakh+) was never perceived the same again, both by the manufacturers and the consumers. In such a scenario, the company is truly facing a tough challenge to launch its compact car Jazz in India. The launch delay in one of the fastest growing automobile markets in the world, India, has been linked to the company’s relentless struggle to get the pricing right, as the car would be up against formidable competition like Maruti Swift, Hyundai i20 and Skoda Fabia. Furthermore, to retain its leadership, the company has already relaunched the Accord in India for the third time in less then six years!

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Read these article :-
ZEE BUSINESS BEST B SCHOOL SURVEY
B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)
IIPM makes business education truly global (Print Version)
The Indian Institute of Planning and Management (IIPM)
IIPM Campus

Top Articles on IIPM:-
'This is one of Big B's best performances'
IIPM to come up at Rajarhat
IIPM awards four Bengali novelists
IIPM makes business education truly global-Education-The Times of ...
The Hindu : Education Plus : Honour for IIPM
IIPM ranked No.1 B-School in India, Management News - By ...
IIPM Ranked No1 B-School in India
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The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
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India eNews - IIPM Ranked No1 B-School in India
IIPM Delhi - Indian Institute of Planning and Management New Delhi ...
domain-b.com : IIPM ranked ahead of IIMs

Tuesday, October 21, 2008

Wrong diagnosis

RBI needs to solve, not spoil!

Inflation may have failed to knock the spirit of the higher-income group, but the rise in inflation from 7% to above-11% has forced middle-class families to cut their regular budget around by 50%!

The build-up with the drawn-out explication started with the

RBI’s nagging suspicion in October 2006 that there ‘could be elements of overheating in the Indian economy’. By December 2006, the RBI raised CRR by 50 basic points to reduce inflationary pressures and by the end of January 2007, it raised the repo rate to 7.5% citing the demand supply mismatch in food as a credible reason.

The benefit of observation makes it evident to all of us (including the RBI and the government) that these measures have done nothing to improve the supply of food. The ever-rising rates and financing costs are killing the Index of Industrial Production (IIP) which slipped to 3.8% during May 2008, as against 10.6% in the same month during the previous year, with manufacturing showing signs of sharp deceleration.

Instead of increasing demand through loan-waivers & National Rural Employment Guarantee Schemes, without addressing supply constraints (which has increased inflationary pressures), the government & RBI should rather adopt a problem-solving approach like subsidising lower-income consumers on food!

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Monday, October 20, 2008

Which ‘part’ do you like?

The auto components industry could be the next big thing for India after software, pharmaceuticals and BPO. Sounds astounding?! Digest this: As per the automotive mission plan 2016, the auto industry plans to attain a domestic turnover of $145 billion by 2016 and provide more than 25 million jobs. So, with such huge plans it’s only natural to expect a parallel growth rate for the industry if not more.

Certainly the auto components industry has been one of the fastest

growing (at a CAGR of 20% since 2000) manufacturing sectors in India. In fact FY 2007-08 saw the industry soar with exports crossing the $4-billion mark and investments touching new highs ($7.2 billion). What more, the industry experts estimate the global sourcing of components from India to double from the current $2.95 billion to $5.9 billion in 2008-09, and touch $20 billion by 2015 (ACMA)! All thanks to the escalating demand from both within India, and overseas. “Indian auto component industry is today emerging as one to be reckoned with. With more & more global auto majors setting up manufacturing facilities in India the industry is poised to grow,” N. K. Minda, MD, N. K. Minda Group, a leading component manufacturer tells B&E. Certainly, it’s because of these factors the domestic auto components industry is heading for a whopping 18% growth in the near future. Even the export market is estimated to reach $2.7 billion by the year 2010 (ACMA). However, what is more striking is the fact that exports to OEMs and tier I suppliers now constitute over 75% of total exports as against a mere 35% in the early 1990s.

No doubt, India enjoys a cost advantage with respect to casting and forging as production costs in India are 25-30% lower than their western counterparts. However, with increase in input costs and rising steel prices, the industry now seems to lose this price advantage to their Asian peers including China, Thailand, et al as these players offer a cost advantage of about 12% over their Indian counterparts. Moreover, “the auto components industry in India today is highly fragmented.

However, this presents a simultaneous opportunity as well as a challenge for the players,” avers Yezdi Nagporewalla, Auto analyst with KPMG. These factors, coupled with an unfavourable tariff regime, are now pushing India towards becoming a net importer of auto components. Moreover, “concerns about quality also remain. We still lack original R&D activities. But I am sure that these issues will get resolved soon,” adds Minda. However, “the challenge is to manage the rising cost of raw material and at the same time stay competitive,” avers N. K. Dhand, Chairman and MD, MGT.

Certainly the industry is transforming, and the boost in demand will see the emergence of several new players in the industry. But, to improve upon the domestic auto component industry, the players surely need to adhere to global standards, be quality conscious, inculcate some original R&D activities while maintaining globally acceptable innovative standards.

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Saturday, October 18, 2008

The next-gen car features

NISSAN PIVO

The PIVO is a revolutionary concept which

obviates the need to reverse. The 360o rotating cabin seats two in comfort. The next-gen car features a cutting edge lithium-ion battery pack.

KTM X-BOW

This 700 KG rocketship develops a whopping

300 bhp from its 2L engine. The car is designed for the ultimate adrenaline rush, alfresco...

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Friday, October 17, 2008

Easy, Sir, the strain is on us!

Rate hikes alone can’t tame inflation. It’s time for some real action at the fiscal end too...
Given a chance, he would have been India’s hope (may be the only one)

at the Olympics! No doubt, the apostolic zeal with which Yaga Venugopal Reddy, Governor, RBI, has been power lifting India’s monetary burden, he could have easily won India a Gold at the ongoing Beijing Olympic Games. Consider, for instance, his latest monetary stance (first quarter of FY 2009) and the uphill push, yet again, to the overnight lending rate (Repo) and cash reserve ratio (CRR). It has certainly been sterner than expected. “While we were expecting only a 25 bps hike in the Repo or the CRR by the RBI, this move of a 50 bps Repo rate & a 25 bps CRR hike has come as a surprise. Our expectation was keeping in view the past monetary tightening by RBI, which have started to reflect in the tempering GDP growth rate and IIP data,” Hitesh Agrawal, Head of Research, Angel Broking tells B&E.

No doubt, Reddy has played by the book – rates should rise with rising inflation! RBI has already hiked CRR by 125 bps and Repo by 75 bps in FY ‘08. In fact, many anticipate the rate to further climb to between 9.25% & 9.5% during the next quarter, as they tag inflation at around 15% by October end. So, the stance by Reddy definitely makes sense. However, when it comes to results, he still seems to be at square one.

While inflation remains unchanged (at 11.98% on a y-o-y basis & has hit a 13-year high), growth, however, has slowed down. Even the M3 y-o-y growth at 20.5% still remains obstinately above RBI’s comfort zone of 16.5-17%. Moreover, it’s the buoyant commodity prices (part of the global inflation congregation) which are affecting wholesale price index. So in such a scenario, it’s a little difficult to say whether monetary tightening alone would bring down headline inflation. The only thing it will affect will be the growth and investment scenario in India. Even according to the ET Intelligence Group, the growth in investments from cash flow for the top-50 companies, that nearly tripled all through FY ‘07 (a whopping 180% growth) is moderating (19%).

In addition, swift interest rate hikes would inevitably debilitate India’s competitiveness. Even Moody’s Investors Service says that risks confronting India’s economy have grown, though not yet to the extent of threatening the government’s Baa3 foreign currency and Ba2 local currency ratings. “Higher oil prices and the lack of adequate fiscal policy reactions amidst high pent-up price pressures are putting the burden of macro-economic adjustment on the monetary authorities... policy as well as market interest rates could rise, & sharp deceleration in growth may follow,” avers Aninda Mitra, VP & Sr. Analyst, Moody’s Sovereign Risk Unit. Even RBI has lowered GDP growth projection for FY ‘09 from 8-8.5% to 8% (its weakest since 2004).

No doubt, inflation based on WPI has risen significantly in the last six months, but this has more to do with supply side constraints. A further hike could choke off growth & sow the seeds of stagflation. So, it’s time that Reddy should step off the weight training a bit & let the earlier two hikes in repo and CRR rates show up in the system. Moreover, the goverment should realise that the solution lies in fiscal and supply side management. Else the overburden would once again leave India with nothing but empty hands!

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Thursday, October 16, 2008

Return of the ‘Zee’di…

…and vehemently this time with more lethal weapons and combat skills
Remember the Hollywood blockbuster The Terminator – the first

of three science-fiction action-thrillers starring Arnold Schwarzenegger. “I will be back” was what Arnold exclaims in the end. Well, somewhat similar was the roar made by Zee TV & its holding company Zee Entertainment Enterprises Ltd. (ZEEL) when critics wrote obituaries about it as it lost its leadership on the Indian idiot box to Murdoch’s Star Plus (the flagship brand of Star Network India) in early 2000. However, eight years later, there seems to be hardly any credence left to those claims Zee is back with a bang, both in terms of profits and TRPs. And the numbers speak for themselves!

The first quarter profit of ZEEL in FY ‘08-09 stood at Rs.1.61 billion, a mind boggling 98% jump from just Rs.812.70 million during the same period last year. Even the revenues for this quarter shot up by 38% to Rs.5.42 billion as compared to Rs.3.91 billion during the same period last year. The main drivers of this quantum jump were advertising revenues, which shot up by 37% to Rs.2.79 billion. So what got them back? “ZEEL’s broadcasting business is doing well. Their programming mix has found greater acceptance among their audience. This has resulted in strong & sustained TRPs, which have helped them monetise their advertising and subscription revenues better, and in turn resulted in stronger profitability,” avers Salil Pitale, Head, Media & Telecom, Enam Securities.

In fact, early this year Zee TV (the flagship channel of ZEEL) outsmarted Star Plus in the prime time band. However, for the past couple of months

Star Plus’ TRPs have shot up again resulting in a tough neck-to-neck fight between the channels. So can ZEEL sustain this upsurge in its performance? “Everybody thought they were dead, but they fought back & fought vehemently… if they continue with the same fervour they surely have a fair chance to outsmart Star Plus”, says a media analyst on conditions of anonymity. Moreover, ZEEL is now planning to bank on niche content to garner profits from existing gaps in the television business. The first niche offering from ZEEL’s stable will be a golf channel to be named Ten Golf, which will be rolled out in another two to three months time. “We will be number one or strong number two in all the categories of channels… we maintain that we will grow more than the industry growth,” Punit Goenka, CEO, ZEEL tells B&E.

Further, riding on their improved profits and higher growth in the movie business (projected to grow at 13% CAGR to reach Rs.176 billion by 2012), ZEEL is planning to expand its movie production and distribution business. In fact, it has already announced to invest Rs.8.5 billion in their movie business with nine movies already on the floor. “We will be producing a complete package of films – be it big-budget films or otherwise. We will also try to de-risk the model as much as we can,” Goenka shares with B&E. And if that clicks well, Zee is slated to become a dominating force in the entertainment business in the coming time.

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Wednesday, October 15, 2008

Dumb Happens

So do reforms! The lame duck Indian government claims a renewed commitment to reform measures... Dumb happens!
Patton was, in his own words, “a b@$#ard!” Indian politicians

and this World War II legend have a lot in common [we hasten to clarify, this ‘commonality’ is explained ahead :-)]. Not given to linguistically invigorating views, General Patton’s most famous war tactic till date has been his mastery of diversionary attacks, nomenclatured ‘The Dumb Theory’: ‘To escape the enemy’s perspective in one geography, purposefully create diversionary hits in other geographies.’ And for our dear ruling politicians, touting ‘reforms’ has been one such blatant diversionary tactic used shamelessly without remorse and fail.

Within a week of winning the no-confidence motion, the government has attempted to move everyone’s attention from the cash scam in the Parliament – and even from the killing inflation – to reforms. The UPA government has once again started pushing all its major reform measures and that too clearly in a tearing hurry. But what seems to be a genuine effort on the government’s part, is nothing more than a sham. The next general election is obviously a cherry that demands a cake. After all, it’s now less than a year away. And for a nation of 400 million and more illiterates, what better a way for politicians to win votes than, voila, reforms! Having said that, yes, the monsoon session of the Parliament has been postponed till September 2008. The ‘window of opportunity’, ergo, to push through major reforms exists for the government only till around October. That implies that there is a huge possibility that all reform measures will be pushed only in the media and through grandiose speeches rather than in real terms. ‘Dumb’ does happen; but let’s analyse, what has been the actual performance of the current government on various reforms.

Throughout its tenure, the UPA government has blamed its allies for being a blockage in the way of smooth starting of reforms. But the opposition has not been too kind either. Arun Jaitley, General Secretary, BJP, laments, “The performance of the UPA government has been that of one of the miserable and non-performing governments. After the tainted vote of confidence, it has been proved that not only are its ministers tainted but also is the entire government.” But these extreme words could easily be attributed to verbose vitriol than to logical astuteness.

But then, even a sham of a look at certain ‘reforms’ is enough to blow the cliched lid open. For example, the Employee Provident Fund Organisation may have opened its doors to three private players, but there is no regulation in the pension fund management segment. Did someone whisper the Pension Fund Regulatory Development Authority Bill?! For information, the PFRDA bill hasn’t even been passed. Can it be passed in the next two months? Even if it does, it remains hollow with the current structure. Does that again sound a trite ‘Jaitley’ish?

Then one could steal a ghost of a look at bank reforms. The government has asked for the bankers’ views on reducing the stake of government in banks. It’s a brilliant delaying tactic, to put the ball in as many courts as possible. And even the concept of asking bankers is quite an ostensible move, and timed aptly, as the same question resounds! How is the government going to even implement any banking divestment even if they get the process structured out?

With only eight months remaining in hand, it is evident that the government cannot put into force any of the reforms. Agrees Dharmakirti Joshi, Director and Principal Economist, Crisil to B&E, “Reforms are always front-ended during a government’s tenure and not back-ended. This means, as the elections come closer, the speed of reforms go down. Insurance reforms, for example, have been left aside.” If you wish to see FDI reforms, then similar views are mirrored to B&E by Rajiv Kumar, Director and Chief Executive, Indian Council for Research on International Economic Reforms (ICRIER), who is not so optimistic about FDI limits going up in the insurance sector and the opening up of the retail sector to foreign investment since the government itself is “not clear” about it.

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Tuesday, October 14, 2008

ICC & cricket!

You won’t believe what we found

While the world remains far from really bringing global peace and security, global bodies like UN, its allies or even the International Criminal Court (ICC), remain very far from their objectives.

ICC was established by a few host countries after agreeing to a

Rome statute in 1998 with a purpose to examine severe crimes and genocides. The report card is that they failed to do so [deadly civil war in Congo, gender-based crimes in Uganda... nothing was considered]. It strived to punish Al-Bashir (left, current Uganda President) for genocides in Darfur but failed again. ICC has failed thoroughly in the last decade; but it is not alone to blame. US has never favoured the ICC. It withdrew support quite early from the Rome treaty. Whenever ICC tried to punish some of the wanted criminals, including top US Army officers [either alone or in collaboration with the UN Security Council], US destroyed the proposals using its veto power. Most of ICC’s permanent members did the same for their interest. Since inception, while China used its veto power 6 times, UK, France, US and Russia have used it 32, 18, 81 and 122 times respectively. Why does ICC exist then? To play cricket we guess [What? It’s not the same?!].

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Monday, October 13, 2008

Charge of the six million ‘song’ brigade!

Having been undermined by a half and criticised by the other, Napster has finally removed the ‘Kick Me’ sticker off its back!
The pioneer of online music has something new to offer. With

intentions to put a ‘new’ footing in the music industry, Napster Inc, flagged off its online MP3 download store on May 20, 2008. Clearly Napster believes in what Chris Gorog, CEO, Napster Inc. puts as, “Unlimited Music Model is what consumers would move towards eventually”! The online giant proudly claims a collection of 6 million tracks – 800,000 more than the second-largest Amazon MP3 shop. Napster also claims to have the largest catalogue of independent labels.

In what it calls as a direct challenge to Apple’s iTunes, the huge collection is compatible on any portable music device including mobile phones (including Apple’s iPod and iPhone). And of course it must be mentioned that every song on Napster’s MP3 store is DRM-free, which only menas that it can be easily transferred to an unlimited number of computers and devices and will play in just about every music software program known to mankind.

Apparently this whole offer comes with a plus as even soundtracks without IPRs are available here, which gives Napster fans some fun to explore lesser known talents. Though iTunes, the biggest retailer of music in US accounts for about 70% of all music sales, Napster is steadily positioning itself to compete by making easily downloadable soundtracks compatible with Apple’s gadgets and services. All its MP3 songs purchased on the Napster web based service are synched to its customers’ iTunes library. This sends a clear warning signal to Apple officials who would have written down Napster long time back. At the present moment, the MP3 store can be accessed using a browser or with a software downloaded for Windows, Mac OS or even Linux. However, Napster wants to jump the queue in this regard too as Napster also plans to open an online streaming service using which the users will not have to bother about installations.

But there are challenges nevertheless. Firstly, the Napster website is slow to load and doesn’t work in Apple’s Safari browser. Secondly, Napster has to work on the poor user interface front. The random order in which search results are displayed make it extremely unfriendly and the prices which are hiden behind tool tips make the overall image all the more shadier. Finally with tracks priced at 99 cents and albums at $9.95, the prices are clearly not the best in the market (Amazon beats it hands down in this regard).

Having surpassed Amazon in size of collection and having thrown sand in the face of Apple with its DRM-free format, Napster finally seems to have gotten rid of the ‘kick me’ sign on its back.

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
Read these article :-
ZEE BUSINESS BEST B SCHOOL SURVEY
B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)
IIPM makes business education truly global (Print Version)
The Indian Institute of Planning and Management (IIPM)
IIPM Campus

Top Articles on IIPM:-
'This is one of Big B's best performances'
IIPM to come up at Rajarhat
IIPM awards four Bengali novelists
IIPM makes business education truly global-Education-The Times of ...
The Hindu : Education Plus : Honour for IIPM
IIPM ranked No.1 B-School in India, Management News - By ...
IIPM Ranked No1 B-School in India
Moneycontrol >> News >> Press- News >> IIPM ranked No1 B-School in ...
IIPM ranked No. 1 B-school in India- Zee Business Survey ...
IIPM ranked No1 B-School in India :: Education, Careers ...
The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
Deccan Herald - IIPM ranked as top B-School in India
India eNews - IIPM Ranked No1 B-School in India
IIPM Delhi - Indian Institute of Planning and Management New Delhi ...domain-b.com : IIPM ranked ahead of IIMs

Saturday, October 11, 2008

Ghatothkach cannes play

Is the world ready for an Indian hero’s animated adventures?
Raja Harishchandr

a was the first Indian full-length film directed by Dadasaheb Phalke which was based on the legend of Harishchandra as described in the Ramayana and Mahabharata. It had hit the screens way back in 1913 and since then, Bollywood has definitely come a long way from the era of black and white mythological films with the latest craze being animation. Of late, animation films have been winning a roaring applause in Hollywood and the Hindi versions of the same received great response from the Indian audience from across the world. Finding Nemo, The Incredibles, Happy Feet and Ice Age are some such films which not only fared well commercially, but also opened up a completely new business opportunity for retailers in India, with soft toys of such characters, kids stationery, lunch boxes, school bags and other kids’ merchandise making way to the shops.

Spurred on by this success story, Bollywood followed suite with a plethora of animation films like Hanuman, Bal Ganesh, Hanuman Returns and My friend Ganesha, based on characters from Hindu mythology. Despite being marketed well, these films didn’t turn out to be runaway successes.

What such films contributed was not just advanced technology and a new kind of storyline, but also a trend where the adult audience also displayed the same enthusiasm and excitement as did the little ones. Hence began a new era of animation films targeted at every cine lover, promoted and packaged like any other Bollywood masala flick. Ghatothkach-Master of Magic happens to be the first animation film to do so. Says Smita Maroo, Vice President, Shemaroo Entertainment, “With the increase in adult audience for such films, we have given this film a Bollywood-style narrative with drama, magic, action, comedy and music.”

For such animation film enthusiasts, in the pipeline is Karan Johar’s Kuchi Kuchi Hota Hai, an animated version of the award-winning Kuch Kuch Hota Hai, Yash Raj film’s and Walt Disney co-production Meet the Roadside Romeo, Pritish Nandy Communication’s animated version of popular films like Howrah Bridge, Amar Prem, Barsaat Ki Ek Raat and Ek Khiladi Ek Hasina; with the aim to recreate the magic of these films using animation. Interestingly, Ghatothkach-Master of Magic, directed by Singeetam Srinivasa Rao of Appu Raja and Pushpak fame, produced by Shemaroo Entertainment and Sun Animatics, made both in 2D and 3D, has been released in English apart from Hindi, Tamil, Telugu, Kannada, Malayalam and Bengali to reach a wider audience. Revolving around the escapades of Ghatothkach, the mighty son of Bhim, the prince of the forest blessed with magical powers, this film has managed to generate a lot of curiosity amongst both the Indian and International audience.

“Most of the animation films made so far have been based on well known gods and goddesses. But this film is based on a lesser known mythological character which does not enjoy a ‘God status’ in Hindu mythology, thereby making it very interesting in terms of characterisation and packaging,” reinstates Maroo. Such is the magic of Ghatothkach...that the film happens to be the very first Indian animation flick to be premiered at the Cannes Film Festival this year. “Last year we had promoted the film at the Cannes and by God’s grace the film received a very good response. There are no boundaries to creativity in animation, and with such films’ market flourishing, I think it is the right time to move towards the unknown,” adds Smita Maroo.

With trends changing fast, it is difficult to predict what future holds for this genre (animation). For now, just sit back and sing along... “Main hoon Ghatothkach…”

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Friday, October 10, 2008

Currency Crisis!

Slowdown and crisis together
Everyone seems to be confused about where exactly the Rupee is headed and whether the Chinese currency Renmimbi will ever appreciate or not. The only thing where there is a clear consensus is that the American economy is in trouble and that a slowdown in the American economy will have a definite impact on currency movements and values in Asia.

With US Federal Reserve’s decision to slash the interest rate by

0.75% in order to give a momentum to a sluggish US economy, the global exchange rate seems to get disturbed. This decision will eventually affect the FDI flows in India and China. Moreover, with slashing of interest rates in US, the FDI flow and the Indian currency (as well as the Chinese currency) will get negatively affected.

The Fed Rate cut did spark some relief, but the poor performance of top US investment banks like Goldman Sachs and Lehman Brothers did neutralise the positive effect. However, China’s renminbi gained some ground against the Japanese yen and the Hong Kong dollar to stand at 6.4564 yuan against 100 Japanese yen and 0.96189 yuan against one Hong Kong dollar! seems shocking.. Huh..

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Tuesday, October 07, 2008

Don’t worry pop, I’ll make sure I blow it all up!

From the Editor’s desk, come to you smashing strategies sons of owners have used to devastate family businesses
The reference is directly to the question of whether companies

that are led by founders or their heirs perform better or worse than corporations whose reins are held by non-family CEOs, given the fact that globally, and even in India, there has been a propensity of cases with the likes of Bill Ford, Michael Dell, the Bajaj family, Ambanis, Ranbaxy, and many more sticking on hedgehog-like to the concept of not leaving family control. Consider this – 33% of US companies, a numbing 66% of the European economy, and closer home, a huge 52% of Nifty and a huger 57% of Sensex corporations are family run, with a high probability of having legacy CEOs!

Perhaps the most dramatic paper that electrifyingly shook age-old perceptions was the one presented in 2004 by stalwart professors Belen Villalonga (Harvard Business School) and Raphael Amit (Wharton), who analysed “all” Fortune 500 firms and proved unequivocally that not only do the stock returns of family firms consistently show higher levels of risk, but also that “when ‘descendants’ (of founders or founding families) serve as CEOs, firm value ‘is’ destroyed!” If one presumed that modern corporate governance norms were enough to mitigate the damage caused by family successors, Villalonga and Raphael prove further that descendant CEOs “destroy value whether or not the family has control-enhancing mechanisms.” While the most noted 2003 research by London Business School proffered that family businesses “risk their growth potential if they fail to recruit from outside,” most amusing was the Economist research at the turn of the century that commented how the death of a significant inside shareholder resulted in a shareholders’ wealth increase (“the larger the deceased’s shareholding, the bigger the subsequent rise!”). Strangely, this finding gets humungous support from the subsequent benchmark 2005 research paper titled ‘Firm Performance...In Family Managed Firms’ by David Hillier (Leeds) and Patrick McColgan (Aberdeen), which documents positive stock price increases to the “announcement of the sudden death of a company’s founder executive.” But more seriously, they also indisputably brought out how family CEO successions are almost always followed by dramatic declines in not only stock performance, but dangerously, even operating results!

Not surprisingly, the exits of family CEOs from family owned firms led to increases in operating performance, revenues, employment, stock value, but only if the new CEO being appointed was from outside the family! A fact vindicated a few years before in 2003 by the radical Pérez-González of Columbia Business School; and even by Professor Borokhovich of Cleveland University; and by Bath, Trygve, Schone of Institute of Social Research (Journal of Corporate Finance, 2005); Slovin (Louisiana University) and Sushka (Arizona University)... the list is so endless that it seems stupid to keep on repeating the same fact. Clearly, family firms not only should hire professional outside management at the top, but also need to most definitely ensure that the CEO is “NOT” appointed from the family.

So could excellently performing Indian firms like Infosys (with 17% promoter holding), Wipro (81% family holding and Premji at the helm), Bharti Airtel (61% with the Mittals), Hero Honda (55% with Munjals), Reliance Industries (51% promoter holding; Mukesh heading the business) etc be guilty of actually not giving to shareholders what they could actually have if they had had ‘non-family’ CEOs? Interestingly, unlike the west model, most of the above firms – with the Tata group standing as a mercurial example – have now employed extremely qualified outside CEOs for separate SBUs within the group! And those which haven’t? According to the exemplary BDO Stoy Hayward Survey, only around 10% of family-businesses globally survive past the 3rd generation. The world’s second richest individual Warren Buffet wrote in 1993 that “logically the most effective in ensuring first-class management” is a setup where the CEO is not from the owner-class! Is it any wonder that both he and his best friend, the world’s richest individual, Bill Gates, have confirmed that their descendants will “NOT” inherit their legacies? Hmm, perhaps I need a legacy before I even think about following them, eh

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Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative