Feb
27
Posted on 27-02-2011
Filed Under (BUSINESS) by Shombit

The Financial EXPRESS article

My Human Resources Manager says recruitment at MBA schools exasperates him. When he asks students if Bata can make jam, they smugly reply, “Of course! If a cigarette company can make food to cosmetics to agarbatti, why not a shoemaker?” Its scary how Indian business schools are adulterating the marketing courses they have copycatted from the West. Our License Raj heritage of unsynchronized additions to the conglomerate seems embedded in India’s business practice. Do such organisations understand what their perceived business core is?

Root_t_f

Root, trunk and fruit analogy: This is a devise I’ve defined since 1994 on how an organization can grow sustainably with high topline and bottomline. Every corporation, like every tree, has to have its root and trunk aligned to sustainably produce healthy fruits. This alignment meets the end-customer’s needs and desires in the phenomenally competitive environment. In analogy, the root is the perceived core with precedent and inherent value as practiced by the enterprise that its end-customers experience and recall. The trunk is the direction its operating systems need to be driven towards; the fruit is excellence of its delivery execution to end-customers.

End-customers will perceive a single point of an existing company as its core. Their repeat purchase from this company, instead of from its competition, makes that core evident. A start-up’s core comes from how it studied the market for at least a decade to find its unlimited potential and business viability there. You can consider the business you are trying to enter as your core only if you can match your personal expertise and competency with it, and have the stamina to encounter up and down situations there. Refine that every 3 years on how your end-customers perceive your core.

From my personal experience of working in several countries, I’ve understood that seeding and nurturing the core makes business sustainable, and differentiates it from trading business. Indian enterprises driving one brand for multiple industry opportunities will face enormous problems in establishing their perceived core. In global business that’s already in India today, not driving with perceived core focus can be a stumbling block.

Nobody prohibits an entrepreneur from entering multiple industries. When you have money, you can go wherever you want, but with a single brand its tough. Do end-customers know that L’Oreal belongs to Nestle? Or that distinguished brands Cartier, Dunhill, Van Cleef & Arpels, Piaget, Mont Blanc are all part of Richemont holding company? Each business keeps its perceived core separately. Similarly LVMH has 60 autonomous luxury brands from Louis Vuitton to Dior, Moet & Hennessy, Sephora hyperstore; while PPR drives YSL, Gucci, Puma and Fnac. It’s interesting that Swatch, the trendy low cost watch, has bought several prestige, luxury, high and middle range watch brands like Breguet, Omega, Tiffany, Longines, Rado, Tissot, Balmain while respecting its perceived core. Swatch Group is a neutral entity from their basic range Swatch, while Endura is their private label.

Traditional Indian conglomerates with huge countrywide awareness often drive the corporate brand for every category. So when competing with specialists globally, their brands will never be competent. This shortcoming is historical consequence from the protected economy. Industrialists with clout used to grab the limited business opportunities the Government licensed out, so their diversified companies became big brands bought by non-evolved domestic end-customers. To compete in today’s consumer-driven global free economy, it’s not enough to have large numbers of IIT-IIMs, youth power, skilled labour and immense opportunity in India, unless companies have sharpened their perceived core.

Here’s how the $12 billion French conglomerate BSN globalised by honing their perceived core. With acquisitions, BSN grew to have 14 verticals by 1993, but profitability was 2.5% only. Among their businesses, dairy had high operating margin and its promising promise was health. Launching Activia with bifidus actif bacteria in 1987 brought huge value to their brand Danone. So they took a strong disruptive strategy to seed their core to become global. Using “Active Health” as the perceived core, they changed the name to Groupe Danone. This allowed focus on 3 ‘head’ businesses related to health: dairy, water and biscuit. They discontinued all ‘tail’ categories, and kept biscuit upto 2007 for critical mass. To reinforce the perceived core, Active Health, they expanded inorganically into baby nutrition and medical nutrition. Today Danone is the world’s No. 1 dairy company with 2010 turnover being $22.62 billion and profit margin 10%. This is called a core loving corporation for globalization. It proves that if you do not have a perceived core, you can define it for your business now.

The Indian market is growing, but the near future will see severe global competition. When Indian companies meticulously build their core and discontinue with tail businesses, they will become winners tomorrow. With strong sustainability they can encash high profitability both locally and globally.

To download above article in PDF globalise your business

Financial Express link :http://www.financialexpress.com/news/globalise-your-business-with-a-perceived-core/755293/0

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Feb
20
Posted on 20-02-2011
Filed Under (BUSINESS) by Shombit

The Financial EXPRESS article

Evolution: Historically, Western management knowhow has evolved from the Caucasian gene that’s produced incredible inventions that go against nature. Light was invented to brighten up nights, clothes to cover up human bodies, aircrafts to hit the skies with, pacemakers to fix an ailing heart. Western countries also exercised immense power over several countries in the world in the last few centuries. Their commanding position emerged from their capacity to thwart, lead and rule diverse kinds of people through Royalty to slavery and colonialism.

Business management took inspiration from this socio-politico-economic control they’d assumed, and several models were innovated to scale up business. They experienced trials, tribulations, tests and failures. Then their fallacies got proven, models got established and their applications in business became successful. In business culture, the West is quite intolerant of mistakes.

Why are Western business models so good and sustainable? You may argue that there’s been a fall in the last few years. But it’s not been as disruptive as the 1930s which led to World War II, post which they returned with invention after invention that have dramatically changed the world.

Since Medieval times, European monarchs and the Church have sought power for achieving living and governing comfort. A Roman Emperor’s first priority on conquering a new state was to establish a highly efficient water supply system. Just imagine how many thinkers, engineers, constructers and workers had to work at that time to construct 220 meters high brick structures surrounding a city for water supply. Those systems are still strongly maintained today as historical monuments. They prove ingenuity in framing technological advances over different eras. The Romans constructed numerous aqueducts to supply water to cities and industrial sites and to aid in their agriculture. The city of Rome was supplied by 11 aqueducts with a combined length of 350 kilometres.

When life was becoming boring and incestuous, Europeans went in for world discovery. With a handful of people sailing the high seas, they’d land their ships in different continents and manage to somehow gain enough control to rule over native populations using skills and developed technology. Dominating different countries, they strategically plundered civilizations, became opulent, considered themselves superior and started slavery. Such experience seasoned them on how to enslave, handle or use manpower across the globe for enriching themselves. History says the Chinese explorers discovered North America 69 years before the Europeans did. But they did not invade the country, they merely observed like a tourist and left. That shows the difference between Asians and Europeans in their hunger to rule.

Church was the roadblock: But European inventors did not accept having an easy time at home. Art, science and invention had to fight the Church that disallowed activities not sanctioned by Church authorities. But thinkers defied nature and pressed science and engineering to make incredible inventions. Every century is marked by the kind of shift inventions brought about to provide better comfort for living. The 19th century is represented as the mechanical era, the 20th century brought in the electronic era which shifted to digital technology in the 21st century. Tomorrow they will reverse science to bring alternative solutions to protect the very world they are destroying with wars and environmental pollution. Why and how do they do that?

Action oriented: Western philosophy being rooted in the here-and-now is very action oriented. Every individual wants to accomplish everything in his/her short lifespan of 70 years average. They question life and existence, but in every invention they ingrain a grid metaphor to enable its future continuity. The objective is always to go against nature, disrupt what’s become acceptable, to change the human living condition in search of a new height of mental or physical comfort. They created and abolished slavery, crafted auto-mechanization and now digitalization for a new way of life. Europeans in Europe were never allied, they were parochial. Even today all European countries live their own culture, but came together with the Euro currency to protect being swamped by American and Asian economic power.

When European immigrants went to America, it is possible they created the melting pot of invention translated to business in North America, and revolutionized science and technology. This multi-blend and experienced American society created the business frameworks we use today. They devised the business culture, branding to handling large scale businesses and globalization. History says that it was very difficult to align the two Allied Army Generals, Montgomery with Eisenhower, in World War II. Their commanding styles were totally different. But as per BBC’s archives, coordination was possible only because General Eisenhower was an open-minded American.

Most of the famous American and European global brands have a strong legacy of fundamental or applied innovation or renovation drive. The reality, which I have experienced in Western society, is that renovation means “I change myself” while innovation or invention means “I change the world.” The Japanese and Koreans rigorously followed the Western business process and made a dent in the world with excellence in delivery execution. In the 1970s and 80s, Europeans used to caricature Japanese brands as copy-masters. But Japan or Korea never did present themselves as inventors or innovators; they proved they were best in the world at execution.

When you compare Indian origin enterprises with such references, are there any gaps that need addressing? You often hear of enterprises restructuring or rebranding, but very often this is a feel good exercise, not quite driven for global business requirement. When multi-conglomerate corporations in particular say they are getting ready for globalization, how is it possible to do so without first defining their core? They try expanding into new verticals without having that core competency to grab the emerging opportunity. It’s not always possible for any business to run and sustain merely by investing money and hiring professionals. Till today, leading corporations in the world who drive the trend are all uni-focused on their core, whether it’s Microsoft, Google, Wal-Mart, Apple, Toyota, IBM or Accenture among others. Will unsynchronized Indian conglomerates be able to sustain the effect of being a conglomerate in front of global specialists in each domain? Will their next generation of the business family have the capacity to run a conglomerate, or want to do so?

To download above article in PDF How the West has won

Financial Express link : http://www.financialexpress.com/news/how-did-the-western-countries-win/752246/0

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Feb
13
Posted on 13-02-2011
Filed Under (PARADOX) by Shombit

The Financial EXPRESS article

When digital technology is commoditizing the world, the only way for a brand or corporation to survive is with the pull of seny rauxa. While working in the Spanish market with my business associate, I understood the content of two opposites embedded in Spanish art; on one side is seny which means rational, and on the other is rauxa which amounts to crazy energy. This fascinating seny rauxa culture is alive in Spain’s incredible 20th century paintings, architecture, music and films. It’s a combine that’s unleashed new schools of thought like Cubism, Surrealism, Gaudi-ism from a troubled Spanish society.

From growing political instability, Spain was plunged into a bloody civil war in 1936. The war ended in a nationalist dictatorship led by General Francisco Franco with the support of Nazi Germany and Fascist Italy. Over 500,000 lives were lost and half a million citizens fled the country, mainly to Latin America. Franco remained neutral but sympathetic to the Axis powers in World War II, and controlled Spain until his death in 1975.

Among those fleeing Spain were artists Pablo Picasso (1881-1973), Joan Miró (1893-1983) and Salvador Dalí (1904-1989). Their revolt against the Spanish political situation was so strong a friction that it let loose very high rauxa (crazy energy) from them. That rauxa created a phenomenal pull factor in the world, raising high their name branding as painters. At the same time the command they had over their craftsmanship and the cause they espoused were extremely seny (rational). Picasso, among history’s most prolific artists, worked in France. His most famous painting, Guernica, was inspired by his revulsion at the bombing of the Basque town in Spain’s Civil War. Versatile Miró created a distinctive, witty style blending Surrealism and abstraction. Salvador Dali, a flamboyant painter, sometime writer, sculptor and experimental film-maker, is probably the greatest Surrealist artist who worked from France and the US. He used bizarre rauxa dream imagery to create unforgettable landscapes of his inner world. The unmistakable seny rauxa balance in these Spanish artists’ works was so powerful that they continue to create waves across cultures, helping people see things differently even today.

Spaniard Antonio Gaudi’s architecture was totally rauxa. He translated human flesh into brick and mortar, but his architectural plan was seeped in seny. The fanatical virtuoso Spanish flamenco guitarist Paco de Lucía brought rauxa in his guitar stroke and sound, but was totally seny in Western music’s scientific grammar. Spanish filmmaker Luis Bunuel founded Surrealism in films with totally rauxa attitude based on seny film techniques. In his famous 1967 film Belle de Jour (Daytime Beauty) he illustrated rauxa in France’s sophisticated but incestuous high society. It was the story of a woman who does not sleep with her husband as she feels frigid and sexually unfulfilled. One day she overhears a friend talking about a chic Parisian brothel. This triggers her, quite uncharacteristically, to want to experience prostitution to satisfy different kinds of people with sex. She decides to spend her midweek afternoons as a prostitute, so she was Belle de Jour. The film depicts how the brothel’s well-to-do middle-aged clients do not like her bourgeoisie, and how she fell in love with an ugly young underground crook with artificial teeth. The film exposed the power of women much ahead of time as the first Women’s Liberation Conference was held later in 1969 at Ruskin College, UK. It can be argued that Belle de Jour, totally disturbing society, was the departure for the women’s liberation movement, but it certainly represented Surrealism in films.

This seny rauxa paradox from artists, cinema, music or architecture was highly recognized by the masses. In their day-to-day social context, the public may only have seny without the occasion to express rauxa, but the seny rauxa contradiction provokes and stimulates them, creating a huge pull factor. Digital technology is making today’s world seny, that is, logical. So you may miss the blend of seny rauxa in business areas such as building leaders, how you treat your brand or how end-customers look at your organization. If they are indifferent to your brand, it means your market value will be very low, so you can imagine how this impact can drain your bottomline.

Brands of any category, or corporations in any industry, are totally framed around the end-customer’s 5 sensorial facets of seeing, smelling, tasting, hearing, and touching. These 5 senses ignite purchase behaviour and bring business to all companies. But these senses touch every end-customer’s mental chord differently. If you are only seny you will not be perceived, being only rauxa, people will consider you mad. But your seny rauxa blend can create the pull that converts to the act of purchase. Take Apple’s devices, their look and application procedure are totally seny. But Apple encourages customers to experience their own rauxa by what’s inside the product or service. That’s why, Apple’s brand pull, admiration, bottomline and market cap are all so seny.

McDonald’s is another seny rauxa balance. In the heart of the world’s most expensive, classy boulevard, Champs Elysses in Paris, McDonald’s mesmerizes masses who cannot afford any other restaurant in this up-market place, to enjoy dinner or celebrate a birthday at Euro 5 per person. Crossing Nashik, Maharashtra, five years ago, I found McDonald’s here too. The outlet’s young PR person from a nearby village took me on a tour of their backend. He said the first thing employees are required to do every morning is clean their hands upto their armpits with soap and water in a separate sink in the kitchen. He explained how they don’t mix vegetarian and non-vegetarian food. He then opened a dustbin with fresh-looking hamburgers. These were fried but not consumed within a certain period of time, so McDonald’s required that they be trashed. Such processes are all part of seny, including selling a Rs. 20 hamburger in a sophisticated McDonald’s in India. But end-customers visit an American McDo anywhere in the world to experience oversize rauxa energy. They feel crazily rauxa clicking photographs with McDonald sitting on a bench. This crazy energy (rauxa) is McDo’s familiarity.

India’s below 30 Zapper generation is wrapped up in seny rauxa, as I’ve explained in my earlier piece, BUG mania; they love the Bad, Ugly and Good combine. In their psychology, good is the seny, and bad and ugly the rauxa. If you’re not in tune with the seny rauxa balance from the end-customer’s perspective, stagnancy may prevent your way forward. So bring in the seny rauxa pull into your corporation and brand.

To download above article in PDF Seny Rauxa Pull For business

Financial Express link : http://www.financialexpress.com/news/The-seny-rauxa-pull-for-business/749280/0

 

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Feb
07
Posted on 07-02-2011
Filed Under (BUSINESS) by Shombit

The Financial EXPRESS article

Organized grocery retails in India are not driven by traditional social and shopping habits. Is that why, in spite of hypermarkets, super-markets mushrooming in urban areas, quick ROI is missing? High rentals and heavy discounting culture have made profitability tough.

As shoppers, what do we love in organized grocery retails? Good ambience, hygienic, AC-cooled, self-help, everything under one roof. Offers are galore, and you get the right bill. But what we hate are long billing counter queues, no bargaining, no credit, inconsistency of merchandize availability, especially when you expect that corn you buy to be of the same size and colour every time. Also, you’re forced to buy more as groceries are pre-packed.

Compare that with shopping at your local mom&pop kirana store. The shopkeeper knows you, your household members, and makes home deliveries on a phone call. Greeting you with a smile, he gives you credit and you can bargain. When the exact merchandize you need is not available, his advice on where to find it is genuine, or he offers a substitute with his assurance. You choose any small amount you want to buy, he’ll even oblige with a single piece from an offer pack. Of course there’s downside too. The loose merchandize is open to the elements, so hygiene is doubtful. Small stores don’t stock dairy and fresh vegetables, and you have to wait for the retailer to serve you.

If you are an organized retailer, your store will never be successful if you do 3 things: imitate successful Western model without localization, hire FMCG professionals to run the business (of course exceptions are always there), and not make the shop indispensible to shoppers. Here are the reasons why:

FMCG professionals are not cut out for the retail’s catchment, sourcing, footfall to conversion: FMCG professionals do not have the merchant’s mentality, nor the capacity to manage ultra-diverse product categories. That’s because their expertise is different. It’s on raw materials purchase, how to innovate new product lines, sales and marketing of focused product segments and line extensions, and sometimes the manufacturing process if its not outsourced. Taking MBAs is a big mistake too; they dream of joining big corporations. Grocery retail is an everyday, nitty-gritty, painstaking, hard working job. People perfect for grocery development is the huge graduate population waiting to prove their competency. You may require senior procurement and supply chain professionals, and a few MBAs to help understand the shopper’s psycho-socio-economic and family conditions and anticipate their needs and desires as retail marketing process. Converting mom&pop store people into organized retail salespersons is the real answer. They have real experience in supply chain, stocks, offtake and relationships with shoppers.

Benchmarking Western organized retail model is hara-kiri: The logic in the West was that all product categories are already branded so retails can give self-experience to shoppers. To increase income, retailers started the private label concept that mirrors national brands but gives shoppers about 30% discount. In developed countries, as organized retailers are the only outlet for manufacturer brands, they command 30% margin. In contrast, Indian organized retailers have no power as they represent only 5 to 6% of the manufacturer brands’ business. So they barely get 15% margin.

Misinterpretation of private label: Private labels that Western retailers created get 50% margin. Fresh counters selling non-packaged fruits, vegetables, meat, fish and seafood fetch about 50% margin. In Europe, fresh products were not available on streets as they are in India even today. Misinterpreting its meaning, Indian organized retails sell commodities as private label that have no brand significance in the market. In every area, from private label to manufacturer’s brands and fresh counter, their margins are very low. Without solving these issues, it’s a grave mistake for organized retail to spend on high cost real estate, and expensive foreign and Indian professionals. In such immature markets, those who invested in retail like Bollywood film betting to make box-office hits within 5 weeks, could never bring in ROI. Applications like this in emerging markets create no business model. Its unclear whether their business is genuine or merely to create valuation.

Commodity products cannot drive organized retail: The first disconnect is competing with unbranded commodities that do not justify the earning per square foot value. Are organized retailers providing extra benefit to shoppers here? Or able to prove added value in their brinjals and potatoes beyond vegetables sold by the cart-seller just outside the retail? How many of the majority of urban shoppers below Rs 25,000 income per month know or consume that rare avocado or broccoli you introduced?

Mom&pop store owners are the genuine, shopper-sensitive retail merchants: Retail business is very different from running a manufacturing or service industry. Retails require understanding of the catchment area, procurement of multiple categories and brands, techniques of acquiring shopper footfall and the alchemy of conversion in the store by frequently creating eye-catching activities. So it is a waste of money for retail owners to hire highly educated professionals when only an intelligent merchant mentality is required.

New thinking for a viable retail model: Seriously reduce real estate cost by creating a hypermarket outside the city and arranging transportation for shoppers. The low cost will benefit shoppers, inviting them to come regularly. Divide the store in one floor as under: (1) sell commodity through high tech dispensers like those used for boiled candy where the product is visible but not touchable. A touch-and-feel sample can be exposed. (2) Surround three walls with fresh fruits, vegetables and bakery. An aromatic bakery is big income to compensate the loss from wastage of fruits and vegetables. (3) In the centre put FMCG branded category products with general merchandize. (4) Put hypermarket lifestyle products, from garments to consumer electronics and entertainment, in another part of the store. These require huge marketing of believable factor, so it would be better to market need-based rather than exhibitionist lifestyle and consumer electronics products. (5) Divide the store-named private label into 3 layers, basic, superior and premium, and do marketing that’s credible to shoppers. Sell national brand alternatives without copying them, and avoid innovative categories. (6) Promote the retail brand and private label as a value proposition that’s aspirational, not as discount store. Any discount should reflect as store transaction from low production cost only. (7) Create outstanding retail marketing, with fast movement of national brands. (8) Organize the merchandise into a planogram that respects entry, mid and premium price.

If you are a retailer, ask your shoppers what they think of these points. You’ll definitely get “This is the way to go” as the answer.

To download above article in PDF viable retail model

Financial Express link :http://www.financialexpress.com/news/a-viable-retail-model-breathes-shoppers/746550/0

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