pratibimb - the tapmi magazine

8/7/2019 Pratibimb - The TAPMI Magazine

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Volume - 1, Issue - 2 February,

A Students Initiative

A Bi-Monthly Magazine


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A remote village in Kerala is famous for a unique feat. The artisans in this

village, Aranmula have perfected the craft of making a mirror without using any

glass. Through one of the toughest and most skilful jobs humans have ever

done, these gifted people have found the right mix of various metals which

when alloyed together give one of the best mirrors in the world, a mirror that

has zero convexity - one that reflects the truth the real pratibimb.

Going through the second edition of PRATIBIMB, the student magazine of

TAPMI, I was reminded again of the skilful art that made the Aranmulakannadi,

the world famous. Like that work of art, the magazine had taken extra pains to

reflect the contemporary thoughts and action in management without any

skewness or bias. It needs a lot of courage to look at things and form unbiased

opinions. To a large extent the second edition of Pratibimb achieved the same.

The magazine provides a holistic view to management, from the perspectives of

various specializations offered. Not only does it include insights from our veryown students, but also embraces ideas from the best brains across the country.

The magazine also has expert inputs from across the industries, thereby

bringing the academia and industry together.

It gives me immense pleasure to congratulate the team members for their

sincere and consistent efforts in bringing out this edition of Pratibimb and would

also like to extend my heartfelt wishes for all their future endeavours.

Saji Gopinath

DIREC

TORS

MESSAGE


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We proudly present to you the second issue of

Pratibimb.

Pratibimb, as the word implies, is the

reflection of management. It is the

reflection of the latent creativity that exists

in every sensitive human mind; a

materialization of the desire to express

oneself. The purpose behind Pratibimb would

remain the same - to give a platform to

individuals to express themselves in the best

possible manner with ideas that would

produce change.

Continuing with the tradition of Pratibimb,

we have added a new section called

INSIGHTS which encapsulates the lives of

renowned management thinkers of our era.

The first article in this section is contributed

by our faculty, Prof. Vijaya, who has

interests in Individual and Interpersonal

Dynamics.

We thank all the students from various

colleges who have put in their efforts to pen

down amazing articles and have also poured

in entries for our finance game Beat-The-

Market. The entries for Beat-The-Market

were judged by Mitesh Thacker, chief trading

analyst, and Prof. S. N. Rao, Associate

Professor of Finance at SJM School of

Management, currently on sabbatical leave

at T.A. Pai Management Institute .

There are many more articles which we are

sure will grab your attention and are aimed

to tickle the grey cells in you..

We hope Pratibimb would provide a standing

ground for students to not just compete

amongst their peers but also to show theirskills, talent and knowledge to the world

outside which includes the vast Alumni base

of TAPMI and organizations in the

corporate world.

At the end, I would like to congratulate all

the members of Team Pratibimb who were

behind the success of this issue. I would also

like to thank to our Director Dr. Saji

Gopinath for his inspiration and Prof.

Chowdari Prasad and Prof. Jaba Mukherjee

for their continued and valuable guidance.

We thank all those who gave us feedback

which includes many corporate wizards,

alumni, faculty and students who tried to

improve the issue. Im sure you will be able to

notice the change. Please continue to send in

your suggestions and contribution to

[email protected].

Enjoy Reading!!!

Rahul Garg

Editors Corner

Chief-EditorRahul Garg

Editors

Rohit KumarPreetha D.

Creative DesignerVarun Sunil

MemberHima Sachdeva


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ContentsContents

Marketing

Brands in Rural India 5

Commercial Breaks: The Despised Hygiene? 8

CRICVERTISEMENTS 10

Finance

Will Chinese Yuan become the next reserve cur-

rency? 13

2010- The Year of Commodities 16

Interview

An Interview with Professor Jagdish Seth 20

HR

Opportunity recognition and project selection:

Some approaches for small enterprises 24Marvin Bower The Management Thinker 28

Expectations from the new age employer 32

Systems

Social Networking: Is it really social? 36

Operations

Achieving competitive advantage through supply

chain 38

08

10

28

24 20


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forcing them to venture out into the untapped

rural market. Since the same branding campaign

couldnt be applied in rural India, organizations

are coming up with new branding strategies, new

product range and ingenious distribution network

dedicated to rural consumers.

Scope for Innovation

On the brand marketing front, though we have

seen some magnificent early efforts which made

brands synonymous to the product (Colgate for

toothpaste, Lifebuoy for Soap), major innovations

required to drive the rural demand are still

lacking. A few attempts have been made in case of

product segments like tractors and fertilizers, butvery few are from the cross-market segments.

Again, attempts have been made to localize the

marketing campaign by translating them into local

languages, but they couldnt strike a chord with

people since the regional touch had been ignored.

Rural marketing needs to be focused on, since

majority of population there, is uneducated and

highly sensible to culture as well as the value

system. Thus, advertisements should be designed

to project the product as an extension of local

culture. For example instead of selling Ghee in

cylindrical pet bottles, specially designed Matka

shaped bottles could be used.

Rural Branding Strategy

Strategy to Connect: Brands like ITC and HUL

have come up with the concept of E-choupal andProject-Shakti. These projects are launched to

create symbiotic relationship between village

leadership and organization by acting as facilitator

for carrying out effective agro-trade. Since village

leadership plays a vital role in word of mouth

publicity at the village level, it can provide a

conducive environment for launching a new

product under the umbrella of facilitatororganization. These are the perfect examples of

using benevolent leadership along with

combination of product profiling.

Product Re-designing: Brands can be launched in

specially packed variant of its flagship items to

suit the demand and purchasing power of rural

India. Since these variant will be smaller and

cheaper, people can easily afford to buy it. This is

the perfect example of matching the brandpersonality with that of environment. Example:

Specially packed biscuits or bread with fewer

slices (3/4) could cater to huge rural market.

Ingenious Distribution: Lakhs of women in rural

areas earn a living by selling brand products and

thousands of enterprising young men and women

are being enthused to become part of the vastdistribution system as a means of starting on the

ladder of entrepreneurship in their own right.

Marketing ManiaPratibimb | Feb. 2011


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Organizations can leverage upon this cheap,

motivated and highly penetrated task force for

grass root brand building and distribution. This

model can be used as a pilot project for launching

the new products at village level.

Conclusion

In nutshell, it can be said that currently in the

rural market, a brand may be more like a myth,

but the scenario is changing and organizations are

working towards capitalizing the opportunity by

creating brand awareness and hence vouching forbrand realization at rural level.

References

1. HUL plans major rural push,

thehindubusinessline.in, June 2010, http://

www.thehindubusinessline.in/2010/06/09/

stories/2010060952690500.htm

2. B. S. Raghavan, Rural India as growth engine,

thehindubusinessline.in, June 2010, http://

www.thehindubusinessline.in/2010/06/04/

stories/2010060450240900.htm

3. How India Earns, Spends and Saves A Max

New York Life-NCAER case study

highlights the need for financial literacy,

financialexpress.com, Feb 2008, http://

www.financialexpress.com/news/how-india-

earns-spends-and-saves-a-max-new-york-lifencaer-study-highlights-the-need-for-

financial-literacy/270710/0

4. S.Jain, K.Swarup, Effect of advertising on

enhancing brand personality and consumer

buying decisions, Journal of International

Management, v.6, July-Dec,2009

5. Rural marketing in India: A case study By G.

Srinivas Rao

6. India Brand Equity Foundation (IBEF) study

on Indian rural market

7. Unilever in India - Rural Marketing

Initiatives, a case study. ICMR.

Marketing ManiaPratibimb | Feb. 2011


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COMMERCIAL BREAKS: THE DESPISED HYGIENE?Rohit Arora | TAPMI

Advertising may predispose individuals to

respond positively or negatively towards a productor brand. Such elements, as the execution of the

advertisement, the mood created by the

advertisement, the degree to which the viewer is

aroused, and even the context within which the

advertisement is received, (e.g., television program

or magazine), may affect their feelings about the

advertisement, and in turn their feelings about the

product or brand (Stern and Zaichkowsky,

1991).1 Another important variable which might

affect the viewers feeling, especially for a TV

advertisement, that can be included in the list of

variables given by Stern and Zaichkowsky, could

be the time length of the advertisements or of the

commercial break itself.

In spite of being the costliest media for

advertising, TV has always been regarded as one

of the most efficient and economic media to reach

consumers, due to the shear fact that it provides

more reach, in terms of eyeballs grabbed, to the

advertisers.2 Though there is a lack of statistics in

this field in the Indian context, many reports

suggest that the increasing clutter of

advertisements has started creating a repulsion

effect on the viewers for the advertisements.

While the early 70s saw a norm of having a 60second advertisement in America, the same for the

present day has come down to around 30 seconds,

with more than 10% of the commercials booking

spots for less than 15 seconds. The same trendseems to be followed in India as well. With the

overall break time being increased over the period,

the number of advertisements being aired has

increased by a large amount, creating a feeling of

irritation among the viewers.

With time, the consumers have been empowered

more than ever, by technology, and it has become

imperative to know if the viewers, so sought after,

actually watch the large number of advertisementsor if the evolving technology has enabled the

viewers to skip the advertisement by quickly

changing the channel (known as channel grazing)

to watch a recorded version (zapping or zipping)3,

of the show, courtesy, the invention of DVR, just

to ensure that they are not disturbed by the long

chain of advertisements which sometimes

continue for longer durations than the show itself.

The increasing number of downloaded daily soapsdoes indicate that the consumers are shifting

towards other technologies to watch things which

were limited to T.V. till a few years back. A

report by Morgan Stanley published in 2009,

based on the experience of an intern, states that,

there is a lesser inclination for television among

teenagers or the younger generation; this is

supported by a number of factors, one of which

is, the large number of advertisements on T.V.

which they want to avoid.4

Though many researchers mention the extent of

clutter in their research, most of the studies still

have been restricted to a general attitude of the

viewers towards the advertisements, various

factors or stimuli which they judge the ads on and

their effectiveness. Kallem and Naved (2002)

mention that There is a strong possibility of

irritation on the part of the viewers when their

popular program is interrupted by the

commercials. Because of this, if a negative attitude

Pratibimb | Feb. 2011 Marketing Mania


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develops towards the TV commercials, then the

purpose of airing them will become self

defeating.5

The first question to ask here should be Is it

really true that advertisements are driving the

viewers away from television set or is it just a

perception? At the end of the day, everyone might

find advertisements intervening in their joyful

expedition to their favorite

program but as mentioned by

Anthony Ulwick in his book

What customers want, we, as

consumers, never know what

we really like and what we

dont. It, hence, is important tofirst understand what makes

the viewers change the channel

during a commercial break.

Viewers have more than one

reason for changing the channel

during a commercial break, and

their tendency to avoid breaks, is just one of those

many. Viewers also look at commercial breaks, as

an opportunity for refreshment/change or even

relief from the prolonged program, which they

exploit by surfing through the channels and/or by

indulging themselves in some other activity a

phenomenon which can be explained by the term

- Multitasking.

Nelson, L. (2010, October), in his research paper

Defend Your Research: Commercials Make Us

Like TV More, exclaims the same by

mentioning the cognitive importance associatedwith an advertisement during a movie or a TV

show by the viewers. The research which studies

the impact of advertisements on the likeability of

a movie or a TV show among different viewers

explains that even though the viewers when asked

directly may prefer a commercial free program,

they eventually enjoy a show more with

commercial breaks.

Where does the tradeoff come to an end then?Viewers need a break, even though they might not

realize it and will not accept the intervention of

advertisements. The problem can further be

subdivided and studied to find an optimal

solution. What can be the reason of a stated

aversion towards advertisements if the viewers

enjoy the programs more with breaks? One

possible reason might be the repetitive nature orlack of content in the advertisements. The present

worlds consumer wants to make the best out of

the time and resources available and lack of any

new information demeans this desired outcome.

Hence, may be campaigns with more creativity

and a refreshing look might, will be able to break

through the clutter. Can we use it to explain thesuccess of the Vodafone campaign? May be not

yet, not until the phenomenon is established but

still, a slight relation can be observed for sure.References:

1. Singh, R., Vij, S. (2008). Public Attitude

Towards Advertising: An Empirical Study of

Northern India. ICFAI Journal of Marketing

Management.

2. Ronald, W., Whitewill, K., & Thomas, J.

(2008). Advertising Procedure (16th ed.).

Pearson Education, Inc.

3. Oguinn, T. C., Allen, C. T., & Semenik, R.

J. (2003). Advertising and Integrated Brand

Promotion (3rd ed.). Vikas Publishing

House.

4. Khan, K.M., & Khan N.M. (2002). Facets ofIndian Advertising and Consumer Behaviour:

An Empirical Approach. Kanishka Publishers.



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CRICVERTISEMENTSSiva Harsha Karra & Ankur Gajjaria| TAPMI

Cricket is an excellent sport where different teams

play the battle of the bat and the ball on-field, butthere also runs a parallel battle off-field where

many companies play the game ADICKET to

create an impression

in the viewers minds

in the short time-slots

available to air their

commercials. The

game fought here,

depends on thebatting order or the

quick runs they make

in those few balls.

The batting order in

ADICKET refers to

the order of the

advertisements aired in the respective break; it

may be just after the wicket or just before the next

over starts and the number of balls refer to the

number of seconds available to telecast. With thechanging game, the avenues to advertise on air,

have grown dramatically. They can be broadly

classified into ON-Field

and OFF-Field.

Many players across

different industries have

played the Advertising

Premier League (APL)

in IPL3. Someinteresting findings

about the different

players performances,

strike rates and averages

have come out in the

research study

conducted by us

represented in the above

graph.

The most number of

advertisements (Graph:

Frequency) aired was by

VODAFONE with the

ZOO-ZOOs providing the

entertainment which had

already created their fan

base. Others on the top

were TATA PHOTONPLUS, LG INFINIA &

KARBONN. TATA PHOTON PLUS was a

boom boom player scoring quick runs in few

balls. The



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Advertisement just showed the price reduction to

Rs 2499 in 7 seconds and was aired just before

the bowler got ready at his mark to bowl the next

delivery.

The new IPL season has brought 93% new

advertisements while some companies persisted

with the old ones. The zoo-zoo advertisements,

for instance, brought out the new Power to

You series of advertisements. Other companies,

Maaza for instance, continued the same theme of

Aam ki pyas bujhao advertisements, but with a

new ad launched at the time of IPL. Consumer

electronics items like mobile phones, T.V. etc are

the most frequently aired sector. The new low

cost Mobile companies like Karbonn, Micromaxxand Lava etc. stole the show.

The commercials varied across different types,

from humor to Energy.

Most of theadvertisements (26 %)

were informative (figure.

2) while 21 % were

inspirational as they

inspire the viewer and

address the aspirations of

the viewer, especially the

youth. 18 % of the

advertisements used humor to

put the point across and the uniqueness of thecontent was the hallmark of 12% of the

advertisements. Since IPL matches are considered

family viewing, only 1% of the advertisements

had sensual content with JK cement being a one

OFF. The batting order i.e. the slot in the break

had the opening batsman VODAFONE scoring

most of the times and the pinch hitter beingTATA photon plus.The batting order i.e. the slot in the break had the

opening batsman VODAFONE scoring most of

the times and the pinch hitter was TATA photon

plus. The remaining players came at different

slots. The slots in the break have different

monetary costs associated with them and here

comes the role of the advertising firm to select the

right slot with its financial limitations. The othersectors included DTH, Insurance, Beverages,

Automobiles and FMCG etc. Godrejs Go Jiyo

social campaign created a little curiosity initially,

but faded away, as the tournament progressed.

The key player in an advertisement is the Brand

Ambassador be it the ZOO-ZOO, or a celebrity.

Advertisements with Akshay Kumar were aired

more frequently than any other celebrity based

commercials. Abhishek Bachchans advertisementswere also recurrently aired. Among sports stars,

Sehwag and Gambhir together had the maximum

number of advertisements aired during IPL 3.

The statistics showing each player are interesting,

but the actual performance (Figure.3) was

observed using a detailed market research survey

which was conducted using a questionnaire with

some interesting findings coming out. Telecomads like VODAFONE, AIRTEL and IDEA were

one of the most highly advertised and had a high


Figure 3: Brand recall

Figure 2. Types of AD's


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recall value. Viewers were looking for creativity

factor in the advertisements followed by the

emotional factor. The Realistic factor was the

least important, according to respondents. There

were only a few ads that reflected the emotional

factor. Most of the viewers took a break orswitched channels during the strategic time out

and during the innings break. So, the

advertisements shown during these times were less

recalled. The Ticker advertisement had a very low

recall.

FACTORS to be considered by a

Sports Marketing Firm

1) The viewer is mostly interested in anentertaining or an emotional commercial which

catches his attention and thus high recall value is

associated with high exposure.

2) The slots in the break have different monetary

costs associated with it and here comes the role of

the advertising firm to select the right slot within

its financial limitations.3) Another key factor in an advertisement is the

Brand Ambassador may it be the ZOO-ZOO or a

celebrity.

So, the challenge is to come up with creativerefreshing short commercials with the right brandambassador.The other prominent forms of commercials are

the bottom of the screen Tickers and the In-

stadium screen commercials. The In stadium

screen Ads which are aired during the over is anindication that the aired time of the game cricket

is decreasing and the advertising time is

increasing.

The tickers used at the bottom of the screen was

used by the sanitary ware company Jaguar and

automobile company Hyundai which promoted

all their brands from Santro to Verna with

different taglines associated with different

incidents like the fall of a wicket or a boundaryetc. CBZ also promoted its Xtreme bike using a

ticker, with every six hit.

Now the time has come for the marketing

companies to explore the OFF-Field

opportunities. The most important player here is

the spectator. The only way hes involved, as ofnow, is by holding the 4 and 6 placards, but

hes going to play a major role in the time tocome. Heres the challenge: To come up withideas where the marketing company makes himpromote the brand directly or indirectly.

But, the question to be answered is whetherWE have any role in defining the rules of thegame ADICKET.



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WILL CHINESE YUAN BECOME THE NEXT

RESERVE CURRENCY?

Abhik Saha | BIM Trichy

Introduction

To begin with the first point lets see what the

basic requirements are for a currency to become a

global currency. The first and the foremost point

is probably the confidence that most of the

nations have on their own economy. All other

reasons mostly revolve around this main factor.

To illustrate this point lets take a virtual example.

Say there is a basket of nation that exists likeA,B,C,D,E and each of them have a distinct

currency of their own. Now the country that is

economically better-off has an edge over the

others to position its currency as global currency,

simply because of the reason that the other

countries perceive that particular country to be

the most stable, independent and as one, which is

unlikely to make any drastic changes in its

economy and more specifically, its exchange rates.

Now what problems can arise due to sudden

changes in exchange rate? Lets denote currency of

each country like currency of A as Ax and so on.

Also assume A is better positioned among the

other 5 countries in terms of its economy. Now

say B makes some export to country C. In this

trade, B would prefer to take Ax from C rather

than the home currency Cx. Simply because Ax is

perceived to be more stable than Cx in terms of

exchange rate fluctuations due to its strongeconomy.

Now what signifies a strong economy and its

resiliency to disturbances in global phenomenon?

The size of the economy is no doubt an

important indicator of a strong economy. Also the

country is presumed to have a current account

surplus arising out of trade balances. The size,

depth and openness of financial markets of the

country are also very important parameters forbecoming global currency. Another factor is the

free convertibility of the currency to othercurrencies.

The rise of Dollar as the global

currency

In 1944, after the collapse of Gold standard, the

Dollar was made the global currency and other

countries could exchange Dollar for a particular

amount of gold. The United States wasundoubtedly the largest economy with 175 billion

dollars. A few countries had pegged their own

currencies to the US dollar. Even a few countries

like Panama adopted the Dollar as their own

currency and rejected the proposals to have their

own currency. Also the dollar has served as the

most used medium of exchange in financial

transactions from that time onwards until today

across the globe. Trends in the volume of

currencies across years stand as a testimony to thefact that the dollar had ruled supreme over the

years. In fact it has been observed over the years

that dollar consists of almost half of the global

currency transaction through the years.

(Share of various important

currencies in foreign exchange market)

Also the Dollar has been the most considerable

part of foreign exchange reserves of variouscountries.

Challenges to the dollar & the rise

of Renminbi

The dollar has faced considerable competition

since early 1980 when the Japanese yen was

increasingly used, but the usage decreased with

recession in 1990. Since 1999, Euro has providedstiff competition because of the large size of the

economy and more number of countries adopting

Euro as the national currency. But the recent Euro

Finance FrenzyPratibimb | Feb. 2011


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crisis has caused the Euro a huge setback on

becoming the reserve currency. But recent

developments in the currency warfare come from

the second largest economy of the world, China,

which has poised serious threats to the greenback.

Last year, Russia had called for a supernationalreserve currency which got considerable support

from the Chinese counterparts.

The Chinese currency on the other hand has

posed a threat to the dollar. Lets see the

condition of China, the second largest economy as

of now very carefully.

For the last 20 years, when the USA and the other

European nations were busy showing off their

powers, China had been able to extract the

production capacity of the west and positioned

itself as the manufacturing house of the world.

Hence when the United States and Europe have

groped in financial crisis, China had been able to

show a strong GDP growth figure, thus sustainingtheir wealthy condition. It has a huge trade

surplus arising out of its marvelous export

orientation and favorably devalued currency. It

has a massive US$2.5 trillion in Forex reserves,

thereby making the United States, the powerful

nation, its debtor. China has also been able to set

up its Sovereign Wealth Fund, China Investment

Corporation, with a $200 Billion, to manage its

Forex reserves of $ 2.5trillion. All these factors

press hard for Yuan becoming the globalcurrency.

But that is just the beginning of the story. The

Chinese leadership is now opining to reduce its

excessive dependence on dollar assets (estimated

to be $ 2trillion) because of the mounting fiscal

deficits of the USA which may weaken the

greenback considerably. Also the Chinese areplanning to take bold steps to bring the Renminbi

into competition with the dollar as a medium of

international trade by making the Renminbi a

freely convertible currency whose value would be

determined by the market, investors and

companies around the world freely buying and

selling it. As per analysts, the tentative date of free

convertibility is 2020, though the Western world

is pretty skeptical about the fact.

But these perceptions have started to change since

Beijing undertook a few measures like completing

currency swaps i.e. providing Yuan to central

banks of other countries, to be used in trade with

China, like Argentina, Hong Kong, Indonesia,

South Korea and many more. These arrangements

ensure that these countries no longer need the US

currency to transact with China. It had also

denominated bilateral trade ties with Brazil in

both the countries currencies. All these are

evidences of increasing faith of other countries

towards the Renminbi.

Emerging markets now account for 55% of

Chinas trade, which is expected to increase

further. A switch from the dollar to the Renminbi

for trade settlement would be a lucrative option

for the EU nations to deal with China as it will

then require only one time Forex trade. China canactually do even more; it remains as one of the

most preferred investment destination in the

world. Large foreign institutions can already buy

shares in mainland firms through a $30 billionqualified foreign institutional investor (QFII)

program but they must first invest in U.S.

dollars, which are then converted into Yuan. A

new plan known as the mini-QFII extends that

to Hong Kong brokerages, and lets them invest

Yuan directly.



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If Chinese corporations start selling Yuan

denominated bonds, the Yuan may find increased

acceptance due to its high return rates.

The way ahead

But the path is not that easy for Yuan. Makingthe currency convertible would make the Yuan

appreciate with respect to all other currencies,

which might provide the exporters a real shock

and cause social unrest, which could also reduce

the GDP growth rate. China had been able to

create a huge forex reserve by virtue of its current

account surplus which in turn is due to its largely

undervalued currency. Now, once the Yuan is

made freely convertible, China may not be able tosustain its huge current account surplus. Also the

bond markets in China are not too well developed

and hence, it is unlikely that FIIs will be pouring

huge money, in the near future. Chinas huge forex

reserves are mainly believed to be in USD in the

form of government treasury holdings.

Yuan may also rise parallel to the Greenback and

may become the reserve currency, instead of

displacing the latter. The idea may seem a littlecounterintuitive, but a logical thought would

perhaps make it clearer. Historically, the monetary

system in the world did not have the idea of two

global currencies, but that doesnt mean we would

not see anything like that in the future. In fact the

idea of two global currencies is very much feasible

and there shouldnt be any theoretical or

economic repercussions. We have to realize that

America is an economic superpower and its not

so easy to dethrone its currency. In fact America

would continue to purchase in terms of dollars

and would not take up any other currency so

easily. So in order to trade with America, other

countries would have to keep the door to USD

open. At the same time, countries may reduce

their excessive dependence on dollar and

accumulate Renminbi, due to increased

opportunities of trade with China. In that case,

both the Greenback and the Redback may serve as

global reserve currencies, at least in the near

future.

In this case, a new concept of Currency

depending on trade or Trade Circles may

come up. Every country would have some

projections of their future trade requirements and

accordingly they would maintain their forex

reserves. This may result in some countries having

huge Dollar reserves whereas on the other hand

some countries having huge Renminbi reserves.

This will bring the Dollar with direct

confrontation with the Renminbi. This condition

is likely to sustain for some time until and unless

one of the two nations, China or America, evolve

as undisputed leaders in each and every sense.

Conclusion: The dollars supremacy is no doubt

challenged, and the strongest competitor is the

Chinese Yuan. Now its remaining to be seen

what lies ahead. Philosophically, what has never

happened before is waiting to happen now. So,

Dual Reserve currency may be on the cards on a

10-15 years time horizon.

References:

1. The Bretton Woods Agreement (20 July,1944), ena.lu, July 1944, http://www.ena.lu/bretton_woods_agreement_20_july_1944-020703828.html

2. World Currency, en.wikipedia.org, http://en.wikipedia.org/wiki/World_currency

3. Foreign Exchange Reserves, en.wikipedia.org,http://en.wikipedia.org/wiki/

Foreign_exchange_reserves4. John Foley and Wei Gu, Chinas Yuan: Aguide for the perplexed, blogs.reuters.com, Sep

2010, http://blogs.reuters.com/

columns/2010/09/10/chinas-yuan-a-guide-for-

the-perplexed/


15


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2010 THE YEAR OF COMMODITIESPrashant Rishi, Preetham N| IIM Lucknow

IntroductionAfter two years of the financial crisis, 2010 has

been relatively a good year for the investors

worldwide. There was an across-the-board rise in

all the major asset classes stocks, bonds,

commodities and dollar. This is the first time

since 2005 that all the four asset classes have

closed in the green at year-end. However, among

these, commodities were the star performers. The

following indices give us the picture:1. The Thomson Reuters/Jefferies CRB index,

which tracks 19 materials, gained 17% in

2010.

2. MSCI All Country World Index (for stocks)

went up 13%, dividends reinvested.

3. The Bank of America Merrill Lynchs Global

Broad Market Index showed 4.88% global

bond returns.4. The U.S. Dollar Index gained 1.5%.

Figure 1: CRB Index December 29, 2010,Source: Green Faucet

This is the first time since 2007 that commodities

have outperformed the other asset classes. In2007-2009, growths in all the asset classes were

highly correlated with each other. This correlation

was observed due to the effect of global economic

growth on the fate of assets, in the wake ofrecession & subsequent recovery. However, in

2010, this growth correlation of asset classes

faded, with commodities accelerating ahead of

stocks, bonds and dollar.

In this article, we discuss not only some of the

major drivers that drove the demand for

commodities, but also some major classes of

commodities which remained red hot in 2010.

Finally, we conclude with an outlook ofcommodities for the year 2011.

Demand Drivers of Commodities in

2010

Some of the major reasons that drove the demand

for commodities in the year 2010 are:

1. Emerging Market (EM) Economies:

China is estimated to have grown by nearly10% in the year 2010. As a major consumer

of global commodities, it has

largely driven the commodities

rally in 2010.

2. Financialization of

Commodities: There was anincreased interest from hedge

funds, pension funds and other

institutional investors whichinvested close to USD 60

billion in commodities in

2010. This rally sparked off an

interest in retail investors who

bought into commodities through the

numerous Exchange Traded Funds (ETF)

and Exchange Traded Notes (ETN).

3. Environmental Hazards and Calamities:

Floods in Pakistan destroyed the harvest ofcotton contributing to a rise in its price.

Pratibimb | Feb. 2011 Finance Frenzy
http://www.greenfaucet.com/technical-analysis/update-2011-outlook-for-commodities-remains-positive/50011http://www.greenfaucet.com/technical-analysis/update-2011-outlook-for-commodities-remains-positive/50011http://www.greenfaucet.com/technical-analysis/update-2011-outlook-for-commodities-remains-positive/50011


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Similarly, the drought in Russia &

Kazakhstan sent the price of wheat soaring.

4. Inflation: Negative real interest rate in thedeveloped world, along with increased

liquidity (in the wake of QE), has brought in

heavy money supplies to commodities, asmore and more people lose faith in fiat

money.

Growth Analysis

Metals

1. Palladium: A metal used in automobileengines; it rose by 97.3% fueled by the

growth in auto production in Asia and NorthAmerica.

2. Gold & Silver: A 5% rate hike in China tocurb inflation led to worries of overheating in

the emerging markets. This turned the

investors towards perceived safe havens

leading to a rise of 29.8% in gold and 84%

in silver. Most commodity analysts are bullish

on silver to rise further in 2011, since gold to

silver price ratio is at 59:1, as against the 200-

year historical average of 17:1.

3. Copper: Copper staged an impressive rally in2010 from the commodity-wide sell-off that

occurred when the global financial crisis hit

three years ago. While copper demand in

western economies were weak, it remained

strong in emerging economies such as China,

the worlds largest consumer of the metal,

driving up its prices by about 30.2%. Another

factor that contributed to its rise is its

diminishing worldwide supply, caused by a

fall in its mining activity.

Agricultural Produce

Continued imports by China, flooding of fields in

Canada and dryness in Kazakhstan and South

America curtailed the supply of agricultural

produce in the international markets. This, along

with the other factors discussed above, drove the

prices of agricultural produce to record levels. For

example, cotton & wheat rose by 92% & 47%

Pratibimb | Feb. 2011

Figure 2: Gold Price: Recent Trends Source: Business Insider

Figure 3: Gold/Silver Ratio, Source: Silver Prices.Net

Finance Frenzy
http://www.businessinsider.com/chart-of-the-day-gold-price-july-2010-7http://www.businessinsider.com/chart-of-the-day-gold-price-july-2010-7http://www.silver-prices.net/the-2010-silver-buying-guide/http://www.silver-prices.net/the-2010-silver-buying-guide/http://www.silver-prices.net/the-2010-silver-buying-guide/http://www.businessinsider.com/chart-of-the-day-gold-price-july-2010-7


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respectively, while increased demand for coffee

increased its price by 77% to 13-year high.

Oil and Natural Gas

Figure 4: Oil Prices Recent Trends, Source:Calculated RiskOil closed at USD 91.38 per barrel, recording a

gain of 15.2%. The year started with a low

demand for oil due to reduced manufacturing

activity in the developed world (owing to

recession). This led to stockpiling of oil, which

was offset to some extent by robust demand from

the developing countries. Towards the latter half

of the year, manufacturing picked up its pace in

the developed world. This, along with debasementof major currencies around the world, led to a rise

in demand for oil, thereby increasing its prices.

Oil moved in a band from USD 68 to 92

throughout the year.

Natural gas, on the other hand, was a major loser

closing 21% lower than its previous years close.

Low demand and increased production of shale

gas from North America brought down its prices.

Commodities 2011 Outlook

While the developed economies are on the path to

recovery, demand from the developing countries is

expected to remain strong. Growing populations

with increasing middle class is expected to

stimulate demand for infrastructure, housing,

energy and improved nutrition (especially meat).

Subsiding of the fear of double dip in the US andgrowth in manufacturing activities in the west,

along with sustained growth in developing

countries is expected to reduce the inventory of

oil from current mark of 60 days leading to an

increase in its prices. Most analysts expect it to

cross USD 100/barrel in mid-2011.

Same is the case with precious metals. Most

economists predict that increased printing of

dollars by Fed (QE 2) will make investors lose

faith in USD and will increase demand for metals

like gold and silver. However, it should be noted

that in case the expectation of dollar depreciation

does not come true, precious metal prices might

fall. This can be caused by many possible

scenarios in 2011 (like a US stock market crash,

trouble with other currencies like Euro & Yen and

implosion of a country in Euro zone to name afew) & can make the precious metals cheaper.

The overheating of the Chinese economy poses

another risk to the estimated growth of

commodities. The anticipated policy tightening

by the Chinese government to curb inflationary

pressures may slow down the growth in the

economy thereby dampening the Chinese demand.

At the end, we can say that commodities areexpected to continue their rally in 2011, but this

depends on a multitude of economic factors, like

high inflation in US, weak dollar & continued

growth in China.

References

1. Danske Bank, Commodities 2010: Five

Themes to Drive Commodity Markets This Year,

oilngold.com, January 2008, http://www.oilngold.com/analysis/research/

commodities-2010-five-themes-to-drive-

commodity-markets-this-year-2010010810624/

2. Andrew Binet, Why Jeff Rubin Still Sees

Triple-digit Oil Prices by 2011,

theglobeandmail.com, June 2010, http://

www.theglobeandmail.com/report-on-business/

industry-news/energy-and-resources/why-jeff-

rubin-still-sees-triple-digit-oil-prices-by-2011/article1598427/

http://calculatedriskimages.blogspot.com/2010/07/oil-prices-july-2010.htmlhttp://calculatedriskimages.blogspot.com/2010/07/oil-prices-july-2010.htmlhttp://calculatedriskimages.blogspot.com/2010/07/oil-prices-july-2010.html


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3. Michael Checkan, Commodities 2011:

The Road Ahead, December 2010, http://

www.gold-eagle.com/editorials_08/

checkan120710.html

4. Commodity Forecast for 2010, 2011,

http://seekingalpha.com, December 2009,http://seekingalpha.com/article/178037-

commodity-forecast-for-2010-2011

5. Silver Investing Opportunity, October

2010, http://www.esilverinvesting.com/silver-

investing/silver-investing-opportunity

6. Update: 2011 Outlook for Commodities

Remains Positive, greenfaucet.com, December

2010, http://www.greenfaucet.com/technical-analysis/update-2011-outlook-for-commodities-

remains-positive/50011


Beat the MarketAs Jim Cramer, a former hedge fund manager, and a best-selling author put it, As long as you enjoy

investing, you'll be willing to do the homework and stay in the game I mean I'm not smarter than themarket, but I can recognize a good tape and a bad tape. I recognize when it's right and when it's wrong and

that's what my strength is.

Stock markets have never been predictable, you may apply the best of logic and reasoning but there could

be a possibility that you may falter if the emotions of the investors take control.

The entries for this contest have been judged by Mr. Mitesh Thacker, Head Research & Trading Analyst,

www.miteshthacker.com and by Prof. S N Rao, Associate Professor of Finance at SJM School of

Management currently on sabbatical leave at T.A. Pai Management Institute.

The winning entry of Beat the Market, first edition is of Mr. Piyush Agarwal and Mr. Ankur Gupta, IIFT,

Delhi!!!

We thank all the participants for their effort.

Beat the Market is a game designed to prove your mettle in stock market analysis. You have to pick any 2

listed companies from BSE and analyze their stock movements till 1 st April, 2011. On the basis of

fundamental and technical analysis you need to give us your share price estimate of these two stocks as on

24th April, 2011. Fundamental & Technical analysis will carry 70% weight while 30 % weight will be given to

Accuracy of the estimated prices in the final score.

Prize: Rs. 1000 /-

Rules: You can pick any stocks but the stocks should be from different industry

You need to send us file by 09:59 AM, 4 th April, 2011

You may analyze in a team of not more than 2 members

The file should not be more than 7 pages long including cover page, the cover page should contain the

team name, team members name, Institute name, contact number

File name should be BTM__

Mail the file at [email protected]


20/42

20

InterviewPratibimb | Feb. 2011

AN INTERVIEW

WITH PROFESSOR

JAGDISH SHETH

Charles H. Kellstadt Professor of Marketing,

Goizueta Business School, Emory University

Dr. Jagdish Sheth is the Charles H. Kellstadt

Professor of Marketing in the Goizueta Business

School and the founder of the Center for

Relationship Marketing (CRM) at Emory

University. Prior to his present position, he was on

the faculty of the University of Southern California,

where he founded the Center for

Telecommunications Management, the University

of Illinois, Columbia University and the

Massachusetts Institute of Technology. Dr. Sheth is

an expert on geopolitical realignment of nations,

global competitiveness and strategic vision for globalenterprises.

Dr. Sheth has been conferred with the P.D.

Converse Award, Charles Coolidge Parlin Award

and the Irwin McGraw Hill Distinguished

Marketing Educator Awards by the American

Marketing Association.

Dr. Sheth has worked for numerous industries and

companies in the U.S, Europe and Asia, both as anadvisor and as a seminar leader. He is an

internationally recognized business consultant and

his clients include AT&T, BellSouth, Cox

Communications, Delta, Ernst & Young, Ford, GE,

Lucent Technologies, Motorola, Nortel, Pillsbury,

Sprint, Square D, 3M, and Whirlpool. He has given

more than 5,000 presentations in at least twenty

countries. He is also on the Board of Directors of

several public companies, including Norstan and

Wipro Limited.

A prolific author, Dr. Sheth coauthored a textbook

with Banwari Mittal, Customer Behavior. In 2000,

Dr. Sheth and Andrew Sobel published a best seller,

Clients for Life and in 2001, the book Value Space,coauthored with Banwari Mittal, was published.

Another book, The Rule of Three, was coauthored

with Dr. Rajendra Sisodia and published in 2002.

In 2007, Dr. Sheth published The Self-Destructive

Habits of Good Companies... And How to Break

Them. Dr. Sheth's most recent book is Chindia

Rising.

In this interview, we have posed various questionsfrom his books and his previous research. To know

the answers, read on !!!


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21

Sir, as you have done an extensive research on

CRM practices, how do these practices differ in

India as per your observations from the rest of the

world?

The differences are not as strong as thesimilarities. The processes, the infrastructure, i.e.,

the databases and the data-mining capabilities are

very similar for CRM. The differences are

probably on three fronts:

i) The decision making processes by customers is

centralized in India. In foreign countries the

decision making is decentralized to whoever is in-

charge. So we have to do both bottom-up and top

-down selling there.

ii) The gap between the customer and supplier in

terms of technical knowledge is much greater

here. So there is lot more need of education and

awareness and not just selling. Over there the

customer in B2B and even a consumer is lot more

knowledgeable. We think that is going to be

equalized with more online information. It is just

a matter of time.

iii) The third one is much more complex. It is

because of very strong diversity here which means

there is no such thing as a national thing, its

always local view. We are having lot more

diversity at the state level which is basically the

influence of sub-cultures.

How easy or difficult is it to maintain the

relationship with customers in India?

The relationship is maintained at multiple levels.The owner of the business has to make sure that

their succession planning takes place. You have to

establish continuity with your customers People

still tend to start with a company and stay for a

long time with the company, where as in the US,

the churn of managers is much higher except on

the technical side. There is lot more stability and

predictability here.

You have given seven self-destructive habits ofgood companies in your book Why Do Good

Companies Fail? What about unethical conduct

of the top management? Which category would

this factor belong to?

The company is akin to a living being. Therefore

the leader of the company must be more like a

medical doctor where his key skill lies indiagnosis and not cure. Whether a bad ethical

aspect is really one of the seven bad habits is

something to ponder over. It is out of arrogance

that unethical habits tend to monopolize. There is

an eighth bad habit for most companies having an

uncanny nave way of plateauing the potential of

their own people. After paying mega bucks they

dont allow them to do what they need to do.

There is an old theory which is known as Petersprinciple which states your rise to the level of

incompetency. But this is just the opposite. The

thinking is that the company somehow through

processes, human resource reward system, always

stuck you and gets less out of you and therefore is

not good for the company.

Talking about arrogance, what about the cases of

Enron and Satyam?

Enron became very arrogant, GM became veryarrogant and so do Satyam, they believed that

nobody can touch them whether they commit

ethical or unethical practices. Satyam thought that

they knew everybody in Andhra Pradesh and

therefore they can do whatever they want to do.

Unethical behavior doesnt happen because people

are unethical by nature but its the opportunities

and circumstances that create the temptation and

an opportunity pretty much. When you are alisted company, you get into the trap of

performing year after year.

In your book, Why Do Good Companies Fail?

you wrote about the dangerous habits (internal to

the organization) that good organizations develop

which eventually lead to their failure. What are

the external factors that can make a good

organization fail and how should organizations

tackle these factors?The big habit that we have mentioned is called

denial. When you deny the new realities it is



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22

external and when you are not able to change as

the environment change thats when you collapse.

We have talked about six external factors in a

paper titled Why Good Companies Fail, when

they change you must be more adaptable and ifyou are not able to adapt you dont do well or

you collapse. One is regulation when you have

new laws being passed. The second one is capital

markets, third is technology, fourth is

competition, fifth is globalization and the sixth

one is customs.

This is the same phenomenon that we saw happen

when electronic engineers believed that analog

technology was superior to its digital counterpartwhich might have been true at one point in time

but not necessarily true always. The same thing

happened in the movie industry when 70mm

movies were considered superior due to their

precision but they lacked any animation. I have

seen denial of competition from emerging

markets, we laughed at the Japanese when they

were trying to compete, we laughed at the

Koreans and now we are laughing at the Indians

and the Chinese. When you deny external factors

or a new reality, we often run into this problem.

But as with the case of Microsoft, they didnt

expect that a new company like Google could

beat them in the market. Google came up with

technologies which MS could not fathom and

eventually we see these technologies dominating

the tech space. These are more of external factors

which company cant think of and cant tackle

from internal capabilities.

Due to internal competency, so I call it

competency dependence, often what you are

good at actually becomes a liability, which is

opposite to core competency. Thats the problem

with Microsoft. They are not able to do anything

outside of the Windows framework. So they

couldnt set standards for wireless technology or

for cable. They spend trillion dollars to create a

set-top box standard. They couldnt negotiatewell with Nokia which is a dominant player,

because MS would always want to control. They

missed out on wireless technology. X-box, they

tried on their own, because other players didnt

want to play with them anymore. So they have

not been successful at any access device except the

PC. To me its a core competency issue.Considering that the birth rate in China is

reducing while in Indias it is still increasing, how

would the demographics of India and China

impact world politics in the next 20 yrs?

The actual issue is that China of course is ahead

in markets but not sourcing. India has several

advantages; its not just the language we were into

legal and financial system which is more western

whereas Chinese destroyed that to putcommunism in place. So they really have to get

back to a global way of looking at the legal

contracts and financial aspect, which they are

doing, so that gives us an advantage for a long

time. Chinese diasporas is very ethnic, Taiwan

Chinese is different, they were very wide, and they

are loyal to mainland China surprisingly but I

dont see the level with which Indians have

penetrated into mainstream society.What do you think would be the major factor for

the growth of the country; would it be increasing

population or decreasing population?

It depends on the optimal points which in turn

depend on demand and supply issues. If you have

a population that is growing but you create

employment and wealth growing even more, then

its a very positive force.

The other factor is that in the longer run, with

the aging of society, it begins to create more

obligations, either on the government, as in Japan,

or with the private sector as it is true in America

where GM has as many as 7-8 retirees, for whom

they have obligations for pension plan and health,

while there is only one new employee who

contributes for them. So its the productive wages

and the demographics that are contributing

factors towards the economy. Right now we arevery worried about the baby boomers, as they will

all become 65 and above which means at that age



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23

they can trigger the pension plan from the

government over to the social security. The

number is 10000 per day for 19 years. But we

dont have enough money for that, because the

new person who is contributing to our socialsecurity is not that large. We did fantastically well

in the time of baby boomers as they became our

net producer and contributed towards the wealth

creation.

What is the view about Indian Population? Is it at

a critical level or surpassed it?

The Indian demographics used to be radically

different between rural and urban. During my

research on population control which I did on 68year funded by the Ford Foundation, I found that

if you go back to 1914, the number of children

born was about the same - 4.1 per woman and the

difference was very negligible between rural and

urban. By 1950s -60s in urban areas the birth

rate declined enormously to 2.7 only, but in rural

areas it continued. In agricultural society, the

children are assets for you but in industrializing

society they become more of a liability. What weare watching right now is whether the rural

demographics will be just like urban one with

more job opportunities, new factories being built

there, for construction work etc.

Indian Economic policies are comparatively open

when compared to China. Indian organizations

are going for mergers and acquisitions beyond the

country`s border while China still has lots of

restriction, most of the companies stillconcentrate on domestic demand. How will this

work out for India and China in Future?

Chinese started with exports by and large but now

they are encouraged to focus on internal/

domestic demand. They are going to become

global eventually because competition comes from

foreign countries. My view is that Indian

corporations would be using mergers &

acquisitions as their strategy and because the restof the world is receptive to selling to Indian

companies than to most Chinese companies as

other governments still have an uneasy

relationship, with the Chinese government. Some

governments still level them as communist

country. In the long run there wont be a long

term difference. In many industries, the Chineseand Indians are becoming dominant players,

especially raw materials. In other places, Indian

companies will sell out to somebody. In the short

run there are significant differences, the majority

of the Chinese corporations which are global are

state-enterprises, privatized.

What strategy should Indian Companies adopt to

gain a global brand image?

There are three aspects to gain a global brandimage:

i) Brand as an asset: A brand should have good

reputation in the rest of the world. In the

garment, fashion and FMCG industry, we have

seen that Indian companies are buying companies

for the brand assets.

ii) Many western companies have a lot more

technology on the shelf. When you dont want toimitate and you want to innovate, acquisition

becomes a good strategy. Technology invented

there has more commercial potential in emerging

markets like India.

iii) These companies have organized processes

and human capitals, so you can learn from them

on how to manage businesses on a global level.

Indians are trying to create brands on a global

basis, especially in the B2B market for examplenames like Infosys, Tata etc. Wherever the

profession is the brand name, it is relatively easy

to go global. When you have a product brand

name, you have to decide whether you shall take

the product brand name or the company. Usually

when you are a lower income economy, you begin

at the lower end of the price quality ratio. Its a

very reverse brand cycle compared to the

Europeans and Americans where you invent

something, brand it, charge premium prices.

These are two different approaches.



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24

OPPORTUNITY RECOGNITION AND PROJECT SELECTION:

SOME APPROACHES FOR SMALL ENTERPRISES

Prof. A. S. Vasudev Rao, Senior Professor and Dean (Admin) at TAPMI

Profits are not made by differential clever-

ness, but by differential stupidity

(Attributed to David Ricardo, Economist, by

Peter Drucker)

Introduction

Opportunity is a situation in which a person can

exploit a new business idea that has the potential

to generate profit.There are several opportunities behind various

problems and issues faced in the business, manu-

facturing, services and generally in the society and

living conditions of people. The entrepreneur has

to generate ideas using his creativity and innova-

tive approach to recognize the opportunities that

lie ahead of him. The bigger the problem, the

bigger the opportunity. Ideas that have been

through a sieve of analysis, by asking the rightquestions on market, technical and financial vi-

abilities, hold up as opportunities.

It is to be noted that the information resource an

entrepreneur possesses, helps recognize opportu-

nities when compared to a person having no or

low level of information. Opportunities arise be-

cause of technological changes taking place, po-

litical and regulatory as well as social and demo-

graphic changes. They can result in not only newproducts / services, but also new methods of pro-

duction, new markets, new ways of organizing

business and new materials. It is important for the

entrepreneurs to recognize the right opportunity

that fits their background experience, knowl-

edge, skills and the uniqueness of the product /

service. Level of competition and market and cus-

tomer need assessment are also important. New

venture strategies is a frame work of old markets,

new markets Vs old products and new products.

Timmons model of the entrepreneurial process

identifies these key factors i.e., opportunity, re-

sources and the entrepreneurial team, which result

in preparation of a business plan for the project

finally selected.

It may be noted that there are countless strategies

for creating new ventures, but most of them have

not yet been well conceived. Selection of a profit-

able and sustainable project idea is a very critical

aspect in the venture launching stage for an entre-preneur. Some guidelines and approaches are

available for new entrepreneurs to help them in

identifying and selecting suitable projects, de-

pending on their background, investment capacity

and experience / qualifications. Many entrepre-

neurs have their dream projects too.

For selection of a suitable project, the market,

technical and financial viabilities are most impor-

tant factors. The project outlay in terms of capi-

tal cost, sources of finances, long term prospects

of the project, associated business and financial

risks are to be carefully considered. It is also very

important to consider own preferences, attitudes

and the family support available to the entrepre-

neur. Ultimately, project selection is a search and

select process. The methods and procedure are

partly structured and partly unstructured; partly

subjective and partly objective.

Some Approaches for Project Se-

lection

A survey of small enterprises located in industrial

areas and estate in coastal Karnataka revealed a

few specific approaches adopted by some of the

entrepreneurs. Using these approaches, the entre-

preneurs had launched their projects and later

tasted success. But a few of them also had to facefailures. The learning from these incidences is

useful. The approaches studied are as follows:

HR BuzzPratibimb | Feb. 2011

24


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25

I) A few entrepreneurs selected and launched pro-

jects in which they had extensive marketing ex-

perience. This was observed in case of an alumin-

ium vessel manufacturing unit, as well as in an

Ayurvedic drug manufacturing unit. In both the

cases, the owners did not have relevant technicalbackground in the production area. One unit is

highly successful, whereas the Ayurvedic unit is

making a turnaround. Branding of the medicine

also was helpful in this case.

The learning from this is that backward integra-

tion i.e., from marketing to production works well

for small enterprises. Extensive knowledge of

market and its finer details helped the owners to

manage through the start up period which is nor-mally a critical period for survival. The product

may not be spectacular and innovative, but the

market potential and / or niche were identified in

these cases.

II) In one or two cases, the entrepreneurs having

succeeded in their first ventures set up outside

their home States, tried their best to establish the

second unit nearer to their home town / home

district of D.K. and Udupi.

This could be to foster a linkage to their home

towns or villages and contribute to the socio-

economic development of the area. Their ethnic

value and love for doing something worthwhile in

their own soil was a strong driving force. One of

the units, established in a rural area, is a nationally

known lighting luminaire design and manufactur-

ing company. It manufactures word-class products

and probably is the number one company in Indiain lighting and luminaire design and manufactur-

ing. The unit had employed local rural persons,

trained them and made out of them a productive

group of employees turning out quality products.

In similar other cases, there were failures also, be-

cause the home town location were totally out of

fit for the projects, considering the market or raw

material availability.

Yet another hi-tech product, the flame proofswitch gears, was also set up at Udupi district, by

a promoter, who belonged to a village near Udupi.

He had set up his first unit for manufacturing of

the same product at Mumbai a few years back.

Looking at the market potential based on likely

demand from the mega projects of MRPL, BASF,

proposed Power Company and Steel complex, theproject was selected for establishing in Udupi dis-

trict in an Industrial Area. During the operational

phase, the unit did not get adequate market as

anticipated for its products from local industries.

But the unit still exists operating at low capacity

for the reason best known to the promoter at

Mumbai. It may be his desire to continue to have

a unit near his hometown. The strategy has not

been very successful in this instance. Possibly,

such a unit needs a wider market and industrialcustomer base.

III) Another significant factor, which helped en-

trepreneurs decide about the product, particularly

in case of Gulf-returned NRIs, is the skills they

possessed or the commercial experience they had

gained in their Gulf jobs. In a specific case, where

the promoter was highly experienced in tool and

die designing and manufacturing, this strength

was used to develop medical disposables, particu-

larly for Urology applications. The manufactur-

ing of these items required basic die designing and

manufacturing capabilities using special stainless

steel materials and extruding special polymer ma-

terials.

In this case, the promoter networked extensively

with professional doctors, overseas material sup-

pliers for procuring critical materials such asstainless steel wires, tubes, teflon and PVC re-

quired to develop the products, using his die mak-

ing capability as base strength.

IV) Similarly another entrepreneur, Gulf returned,

took over a sick unit for manufacturing of pilfer

proof caps (P P caps). The reason was again the

resource he had for getting the key item of pro-

duction, the precision die. Good quality P P cap

manufacturing requires precision die, to punchand form out of printed aluminium sheets. In this

case the entrepreneurs family member at Mumbai


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26

was a reputed die maker, who knew complexities of

manufacturing. This valuable resource was the key

factor in decision making to take over the sick unit

and achieve a complete turnaround. The unit is

very successfully operating at present, achieving

much higher capacity utilization.V) Some of the entrepreneurs have taken innova-

tive products / services that they have seen or ob-

served abroad for their projects in the coastal dis-

tricts. Examples is the first unit set up in Udupi

district for manufacturing of concrete interlock

paving blocks, hitherto manufactured abroad.

Though initially the product acceptability in the

market was slow, later on it was overwhelmingly

recognized as a good material suitable for pavingapplication works, requiring faster completion and

curing. Concept marketing was effectively em-

ployed by the entrepreneur.

VI) In small enterprises, it may be difficult to de-

velop a brand and niche in the early years of its op-

eration. One of the entrepreneurs narrated that be-

fore launching his present unit which is now very

successful, he had toyed with the idea of manufac-

turing an electronic component. This product how-ever had new /

replacement demand,

requiring concept

selling. The

market

growth was

rather slow.

His main

criterion

therefore was

to identify and

select a product

which sells in a

larger market

area and is

supported by

adequate marketing

effort. Having identified the

product, he systematically examined the

viability of the project, and meticulously planned

and implemented the same. Over the last 7-8 years

the venture manufacturing electrodes for welding

works has grown to be one of the leading units in

the State in its category of products.

VII) Highly innovative nature backed by the longyears of work experience acquired as well as varying

skills in operation, maintenance and machinery de-

sign and development has been the prime mover for

a successful entrepreneur to launch a project for

manufacturing of plastic twin head extruder. This

new product was his invention and the outcome of

his innovative design work. This new twin die head

plastic extrusion machine, as reported by him, de-

livers nearly 2.5 times the output of a conventionalsingle die head machine. It also conserves electric

energy, reducing unit power consumption by nearly

60 percent.

In this case intense development work, continuous

effort to modify and improve the design of compo-

nents and parts, as well as process parameters

helped the entrepreneur to realize his dream of be-

coming a successful small enterprise owner-

manager. He started his humble career as a shopfloor worker in a plastic factory in his school going

age. In this case, the product

selection was a true reflection

of his latent dreams

invention in plastic processing.

VIII) The last case observed is

yet another one of innovation

and new product development.

This time, it was the decision ofa technocrat-entrepreneur

(engineer), who had previous train-

ing and work experience of 2-3

years in an engineering

workshop. He decided to

leave the job and develop a micro-

processor based color sort

machine for grains and coffee beans

which were being imported till then. This


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MARVIN BOWER, THE MANAGEMENT THINKER

Prof. Vijaya | TAPMI

McKinsey consulting is a name that spells pride

with anyone who is associated with it, includingthe clients. We would like to present this piece on

a man who helped build McKinsey, the man

behind the mystical magic of this company

Marvin Bower his visionary thoughts and

perspectives on management.

He was born in August 1903 and grew up in

Cleveland. He graduated from Brown University,

completed the degree of Law from Harvard Law

School and also did his MBA from HarvardBusiness School. In 1933, Marvin joined a young

firm of accountants and engineers founded by

former University of Chicago professor, James O.

McKinsey. He was associated with McKinsey for

much more than half a century. He built it and

nurtured it to the status of a well-acclaimed

consulting firm, with engagements with a huge list

of clients. In 1989, Marvin Bower got elected into

the Business Hall of fame by Fortune, the other

recipient being Thomas Alva Edison. Marvin wasmodest enough to say, It is a mistake, I am not a

business man, but a professional. His book,The

Will to Manage, in the 1960s, was cited as one of

the worlds best business reference books in,Business: The Ultimate Resource. He was

awarded the Harvard medal and also named

fellow of the International Academy of

Management. The Marvin Bower professor of

Leadership development was introduced at theHarvard Business School in 1995. He passed

away in January 2003, leaving behind him, a

legacy of leaders and perspectives.

Marvin believed leadership can be learnt, but not

taught. If there is one strong thing that he can be

noted for, it is about translating strong basic

values into management consulting; a strong

commitment to anybody on the other side. He

believed that a great institution was built on theskills and experience of its people and as much

through their behaviors and conduct which was

even more important to his success. And succeed,

he did.

THE PRACTICE:

The nurturing of McKinsey & Company:My vision is to provide advice on managing to

top executives and to do it with professional

standards of a leading law firm. In all successful

professional groups, regard for the individual is

based not on title but on competence, stature and

leadership claimed Marvin Bower, when he took

over McKinsey consulting in 1933 , when

McKinsey passed away at the age of 48 yrs. At a

time, when management consulting was stillequated with management engineering, he

introduced a different methodology to expertise

young well trained minds ready to be analytical

problem solvers as against only experienced

executives lending their high charging consultancy

services. These young consultants were associates

in engagements in practice and not just jobs in

business consulting. These had to be people who

could work together within the context of the

firms personality and work well with clients. Hevalued imagination and analysis more than

experience. He fostered a culture that encouraged

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rigorous debate over the right approach or answer,

steering it as a necessary process independent of

personal criticism. To act with integrity, inside

and outside, Marvin called it professionalism.

Being professional and leading to good wok

increases the firm-level confidence. This has apositive influence and adds tone to the office.

Further, making decisions on whether assignments

can be properly executed and then acting

accordingly helps build the firm level confidence

and also morale. In anything that was within the

scope of Marvins thought or action, he had a

compulsion of professionalism.

Marvin believed that the personality of a

professional firm, is similar to that of anindividual, roughly defined as: the total

impression that the firm makes on those, who

come in contact with it or who hear or read about

it. The total impression depends on the collective

personal impressions made by each individual

employee and the firms objectives, policies and

working approaches that guide how the people in

the firm carry on activities, what they do, what

they write etc. There was a conscious effort each

time, to check whether, what the firm engaged in

and how it engaged in, was consistent to the

firms principles. In one instance, one of the best

performing associates at McKinsey was shown the

door in 30 minutes flat because he violated the

fundamental organizational principles. This was

because Marvin wanted to communicate the

importance of adhering to the fundamental

principles of the organization. Marvin would say

I want them to be pulling out the McKinseyreport, something to look at, and think about.

They should understand the care we have given to

the quality of work that we do. That is our

signature.

He launched the McKinsey foundation for

management research in 1955. One of the

objectives of doing this was to bring together the

knowledge of business leaders, academics and

expert business consultants, to connect thetheoretical with the practical.

Client relationships:

Marvin with considerable intuition sensed that

getting clients to adopt recommendations requires

client ownership. This led to a model of

partnership with the clients.

In client studies, James McKinsey, the founder,

used to be always sensitive to the situations and

view-points of the people in the client

organization. He realized that recommendations

are neither accepted nor implemented on the basis

of rational factors alone. He was also independent

with the client; spoke the truth, even though it

risked discontinuance of the relationship. Marvin

learnt these principles and continued the same. He

never told clients what he thought they would liketo hear and consciously ignored fads and fashions.

He insisted on collecting every possible fact and

view while he delved into any problem-solving

context.

He was always known for his tendency to ask

questions; about how the problem fit into the

bigger picture, not to leave out concrete action

plans, for he believed that implementability of

actions was the test to the effectiveness of

problem solving through any study. When

management consulting was still an evolving field,

Marvin learnt the importance of industry trends,

competitive positioning and the need to

understand external economic factors- essentially

defining the top management approach.

THE PERSPECTIVE:

Management decision making:

Marvin held that, management decisions differ

from personal decisions. They should involve a

logical process - a deliberate choice of means to

ends. The test of a decision is in the meaningful

action that can be taken through it. Through his

vast experience in consulting and guiding

company partners through problem resolution,

here are a few steps that his wisdom has to offerus.


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Decide whether to decide

1. Is the question pertinent now - does it fit in

with management objectives, plans and

streams of events?

2. Can the decision be made now? Will itdisrupt present plans? Are subordinates

capable of carrying it out? Is enough

information available to decide?

3. Have you the responsibility and the authority

to decide?

4. Should higher authority decide/ should a

subordinate decide? Should some other

executive decide?

5. If decision is not to decide now, let those

concerned know-and the reasons why.

Size up the situation

1. Get all available facts bearing on problem or

question- what, why, when, where, how and

who.

2. Get opinions and judgments of persons

concerned with questions or problems if at

all feasible.

3. Go to the heart of the matter. Determine

which factor or factors limit or prevent

achievement of the purpose with which

decision is concerned. Subordinate parts to

the whole.

4. Reject from consideration all events, objects,

details and circumstances not pertinent to

action nowwith means now available.Think the problem through

1. Develop alternative solutions.

2. Test alternative solutions for advantages and

disadvantages from the standpoint of

Underlying purpose (e.g. more profits in the

long run through better service to customers),

immediate objectives & policies, cost, effect

on personnel and moral codes (Rightness andreasonableness in light of own and stores

codes).

Determine procedures for carrying out decisions

1. Break required action into simple parts,

putting first things first.

2. Get ideas from those concerned, especially

subordinates. Millions are lost throughdiscouraging subordinates from expressing

ideas. Use consultative management. Admit

things you do not know and mistakes made.

3. Set a completion time or date and work

backwards to get starting dates and proper

timing.

Fix responsibilities

1. See that every individual understands what heis to do and whyand that he is capable of

doing it.

2. Establish reasonable criteria for satisfactory

performance.

Follow up

1. Follow up to eliminate difficulties and see

that the decision is carried out.

2. Review performance with subordinatesconcerned, so that they know how well they

did. Be sure to emphasize points that will be

helpful guidelines for future actions.

On People management:

Marvin was against the concept of hierarchy.

Hierarchy, he stated, led to a perception of

authority that each superior has over subordinates.

The subordinates perceive certain constraints like,the reluctance to disagree with the boss, reluctance

to provide information or offer opinions unless

asked for and also the unwillingness to take

independent initiatives. It is important to create a

non-hierarchical work atmosphere throughout the

firm so that anybody can talk freely to anybody

else and disagree with anybody, without having to

worry about any consequence. It is important for

the leader to respond to anything told or written,

never to be silent on those. These would earnpositive outcomes.



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It is important for the leader to treat all the

constituents, the owners and others with respect.

Developing the constituents self-confidence and

self-esteem is of utmost importance. When there

is loss of confidence, there is a feeling of defeat,

failure, helplessness and even self contempt. Sucha person is not able to take up purposeful effort,

risks and cannot make use of opportunities within

the organization. In order to develop the

constituents in organizations, genuine praise for

good work helps. Involving them in decision

making and delegating responsibilities and

following up is also important. Converting them

into stakeholders creates a higher sense of

ownership.

On leadership and leading:

Marvin had to offer us a lot on some important

attributes or qualities of leading. They are

Trustworthiness - To get into detail, to be

accurate about small things, even correcting

smaller details that may not matter. This is

called high precision truthfulness.

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