Cons Ilium

FOREWORD

Dear Reader,

Warm greetings from the Consulting Club, Faculty of Management Studies!

As goes the famous saying, let change be the rule but not the ruler, current times amidst volatility and

concerns over slowdown call for vigilance and action. As it challenges economies and industries

globally, it also provides innumerable opportunities to accelerate growth in near future.

In light of the same, The Consulting Club presents the next edition of Consilium focused on opinion of

faculty, students across B-schools and professionals regarding the current scenario and its potential

impact on a diversity of sectors.

Looking forward to receiving your feedback and invaluable suggestions to help us make the journal

better and more informative. Feel free to write to us at [email protected].

Hope you enjoy reading it.

Dr. Jagriti Gupta

President, The Consulting Club, FMS Delhi

EXECUTIVE MEMBERS ASSOCIATE MEMBERS

K. Ashok Chakravarty Aastha Sharma

Prannay Vats Aditya Gupta

Rohit Chaudhari Aravindodar Reddy

Seher Contractor Mridul Gandhi

Naheed Shoogufan

Nikhil Nathani

Pratik Singhania

C O N S I L I U M FMS DELHI

The Rising: Part 1

Page 5

Interview with

Mr. Arsh Maini

Page 14

Rewiring HR

Page 1

Marketing in the

times of recession

Page 20

Business Strategies for

Sustainable Innovation

Page 37

How Efficacious Team-Work

in SCM can help

Organizations gain Value

Creation Advantage in

Volatile Times Page

34

FDI in Retail: Risk

or Value Creation

Page 25

Gaining a Value

Creation

Advantage in

Volatile Times-

The Banking

Sector

Page 30

Gaining A Value

Creation

Advantage in

Volatile Times

Page 11

Restructuring of the

organised industrial sector

Page 9

Changing Face of

Consumer Goods and

Retail in volatile times

Page 44

Business of climate

change

Page 17

Consilium 1 | P a g e FMS, Delhi

Smart Manager Sustained long-term growth for any organization can be achieved only by effective human capital

management strategies. However, developing effective strategies is becoming more and more

challenging given the increasing complexity of human behaviour. Fortunately, neuroscience and brain

research have started providing us great insights into the workings of the human brain.

Our brains, in computer parlance, are wired in three different ways. The hard-wiring, which is genetic

and inherited, controls to a large extent, our individual traits, preferences and dispositions. The firm-

wiring that is shaped by our childhood environment stores away social and emotional lessons from our

early years. Finally, the brain‘s soft-wiring is shaped by our formal and informal education, observations

and experiences which get continually updated thanks to the neuroplasticity of our brains.

Influencing Social Behaviour

Organizations striving to get the best out of their people can therefore obtain optimal results by

consistently fine-tuning the soft-wiring of its people. This is best done by a strong organization culture

that promotes the right kind of values, attitudes and behaviors. It is well established that good or bad

behaviour is contagious, which makes it important for all senior leaders to reinforce a cooperative,

collaborative and healthy organization culture by their exemplary display of right behaviour. That bad

behaviour begets bad behaviour is well proven by a series of experiments in Groningen in the

Netherlands designed to test the ―broken window‖ theory. The theory posits that if someone sees, say,

graffiti scrawled on a building wall, he or she will be tempted to do the same or commit some other

illegal or mischievous act.

In fact, sociologists often cite this theory to explain the substantial drop in crime experienced in New

York City in the 1990s after the city authorities took the initiative to scrub the graffiti out and clean all

buildings, trains, buses, walls etc. Similarly, observing a senior leader publicly blaming an individual in

an organization for a problem is adequate to greatly increase such practice in the organization, which

can spread with the tenacity of an epidemic, according to new research from the USC Marshall School

of Business and Stanford University.

NS Raghavan co-founded Infosys and is currently the chairman of the advisory council

of the N S Raghavan Centre for entrepreneurial learning at IIM Bangalore

REWIRING HR


Stranglehold of human bias

There is widespread acknowledgement that the coping behaviours that we all learn during our childhood

have great strength and persistence, and, more critically, we can change such behaviours only with

considerable amount of effort. What is stored in the brain‘s firmware is the subconscious cataloguing of

stratagems that did or did not work for us while we tried to cope with our environment during our

childhood. These beliefs are so strongly embedded in us that they become our subconscious behavior-

controlling programming. Let me give you an idea of the stranglehold that our internal belief systems

have on our thinking and behavior. The evidence is overwhelming that something in the way our brains‘

function causes us to be biased - and makes us respond to ideas impinging upon existing beliefs

irrationally and quite often emotionally. Further, whenever our beliefs are opposed, our biases drive us

to become polarized — to migrate to an extreme position. Bertrand Russel had the wisdom to appreciate

this behavioral underpinning when he remarked, ―It has been said that man is a rational animal. All my

life I have been searching for evidence which could support this.‖

What I need to emphasize here is that we do not rationally choose to persist in blind, one-sided views of

those things that we believe in. We also do not choose to become upset and angry when our beliefs are

challenged. Our internal programming compels us to do so without our explicit awareness. Timothy

Wilson of the University of Virginia in his book Strangers to Ourselves argues that our unconscious

minds are inaccessible to self-analysis, no matter how hard we try. Stanford professor Leon Festinger

introduced the concept of ‗cognitive dissonance‘: the more committed we are to a belief, the harder it is

for us to relinquish the same, even in the face of overwhelming contradictory evidence. This dissonance

does not permit us to acknowledge that there was an error in our judgment and therefore there is a need

for us to change our opinion. On the other hand, this cognitive dissonance encourages us to develop a

new attitude or belief that will somehow justify retaining our existing beliefs. Professor Steven

Hoffman, Buffalo University has proposed that the cognitive theory of ‗motivated reasoning‘ makes us

bypass any rational evaluation of a new or contrary belief and instead encourages us to seek out

information that supports and con firms what we already believe in. For the most part, he argues, we

will completely ignore information that does not support our beliefs.

Social needs trump rewards

All organizations strive to develop appropriate kinds of reward and incentive systems to keep their

employee motivation levels high. Brain research is questioning the basis of such reward systems. The

primitive part of our brain (called the limbic system), which we share with animals, is programmed to

respond with a ‗minimize the danger or maximize the reward‘ plan when aroused. New research is

pointing out that this neurological mechanism of ‗threat and reward‘ response is as strongly triggered in

social situations as it is in physically threatening situations. Measurements of brain activity taken

through fMRIs, EEGs or hormonal secretions demonstrate that the very same neural responses that drive

us either away from predators or towards food are equally at work when we are treated harshly by

seniors or encouraged by others in the organization. These studies suggest that the brain equates social

needs with basic survival demands, raising their importance beyond monetary and other rewards. More

critically, financial rewards and incentives are effective only when they are perceived to support social

needs. Neuroscience also suggests that organizations that try to pit people against one another on the

theory that competition will make them work harder unfortunately reinforce the notion that there can


only be some winners but many losers. Such a feeling evokes a ‗threat response‘ that completely

undermines the morale in the workplace. In his excellent article ‗Managing with the Brain in Mind‘,

David Rock says that ―[r]esearch into the social nature of the brain suggests that five particular qualities

enable employees and executives alike to minimize the threat response and, instead, enable the reward

response. These five social qualities are status, certainty, autonomy, relatedness, and fairness.‖ His

article has suggestions on positively influencing these five parameters. I will just touch upon one social

quality, ‗fairness‘, which I believe is the most impactful.

Emotion and fairness

The perception that an event has been unfair generates a strong response in our limbic system, stirring

hostility and undermining trust. The cognitive need for fairness is so strong in us that we will be willing

to ignore other negative factors. There are examples of employees staying for more than 25 years with a

company simply because they felt that their organization always did the fair thing.

Neuroeconomics, a combination of Neuroscience and Economics, demonstrates that the brain is

hardwired to handle some economic problems through emotion rather than number crunching.

Interestingly, it has been found that human brains seem to respond with special emotional vehemence to

social cheating. Let us examine what happens in our brains when we make an economic decision. We

tend to believe that we calmly weigh the alternatives available to us and try to figure out what is best in

our self-interest. Generations of economists and policymakers have relied on this very hypothesis. But

this traditional model of a rational economic man is now being severely challenged by neuroscientists.

First, let us look at what researchers call the Ultimatum Game. Two people are involved in an economic

transaction over a resource of value; let us say $1000 in cash. In this game, only one person, let us call

him the proposer, controls this cash. The structure of the game is that the proposer will offer some

portion of this cash to the other person; let us call him the responder. If the offer is accepted by the

responder, then both people get to keep their portions. On the other hand, if the offer is rejected, then

both proposer and responder get nothing. Let us analyze this game from the traditional perspective on

the rational economic man. This holds that a normal person ranks potential outcomes and takes

decisions that will ‗maximize some utility function‘—in this case, taking as much of the $1000 cash as

possible. From this economic perspective, the proposer should make the smallest offer that he believes

the responder is likely to accept, trying to maximize the amount of cash that will remain with him. The

responder should accept whatever offer he receives, because he will then at least get whatever the

proposer has offered. On the other hand, thinking that it is an unfair offer, if the responder rejects the

offer, he gets nothing. Yet, the results of this Ultimatum Game tell another story. Most often, in these

types of behavioral economics experiments, it was found that the proposer offers half the resource,

rather than a small slice of it. It was also found that if the offer was not at least half of the resource, the

responder, most of the times, rejected it, even though by doing so he ended up with nothing. Alan

Sanfey and his colleagues at Princeton University examined the Ultimatum Game with nineteen subjects

in the role of responders and used fMRI to observe their brain activity. They found that when unfair

offers, defined as those that were less than half the resource, were made, responders often rejected them.

As they did so, the area of their brains associated with negative emotional states (bilateral anterior

insula), rather than those associated with complex cognition (dorsolateral prefrontal cortex), were most

active. The more the offer deviated from what is considered fair, the more active was the emotional part

of the brain when such an offer was rejected. Anger at being treated unfairly by other players appeared


to override rational economic reasoning. Interestingly, in the minority of cases, when the unfair offer

was still accepted, the reasoning part of the brain of the responder was most active. Sanfey and his team

took their experiment one step further. They had the same subjects play the Ultimatum Game against a

computer that did exactly what the proposing human partner did. In a testament to the remarkable fine-

scale social distinctions that we humans make, the researchers found that the responders were more

likely to accept an unfair offer from a computer than from a human partner, and the activation of the

emotional area of the brain was lower when unfair offers were made by the computer. In other words,

although the monetary calculations were exactly the same in both conditions—and hence a rational

person should respond similarly in both contexts—the responders were much more likely to view an

unfair offer from another human as a violation of social norms, and hence responded emotionally.

Conclusion

Better understanding and appreciation of why people behave the way they do will help us formulate

potentially more successful strategies that address the critical social needs of people in the organization.

I would like to emphasize a time-tested principle: all HRM professionals, leaders and team managers

need to appreciate that human behavior is driven by a very complex set of variables, including genetic

influences, childhood upbringing, learning experiences in the growth period and cultural environment.

While each individual behavior needs to be understood in this context and dealt with appropriately, the

organization, nevertheless, has a very potent tool to positively influence good behavior among its entire

people by creating and nurturing a supportive organization culture.

Note: Published here with permission from The Smart Manager - India's first world-class

management magazine. For more details visit www.thesmartmanager.com

http://www.thesmartmanager.com/


Smart Manager

The line between smart thinking and gimmickry often becomes finer with growing ambition, and for a

$12.5bn tractors-to-tech company—present in over 100 countries through 137,000 people—the choices

can be frighteningly overwhelming. For the said company to then distill everything to one simple

word—‗Rise‘—is potentially a cynic‘s dream. What would be even more audacious is for the company

to issue a war cry—‘Spark the Rise‘—on the Internet, and claim that it echoes in India‘s teeming

broadband-dark homes with equal force. Part I of the story of Mahindra‘s Rise campaign talks about

how the company is keeping things real...and hoping to disappoint cynics in the process. What is Rise?

Is it a program to uplift the underprivileged? Is it a CSR program? Is it a Mahindra initiative for its BoP

(Bottom of the Pyramid) customer segment? These are some of the questions that people ask us when

we talk to them about Rise. Rise is not any of the above. It is a brand initiative. Most businesses deliver

on their promises through their products and services. For example, if we as a brand promise reliable

transportation solutions, it is the vehicles that we produce that will fulfill it. Rise, though, is not a

‗rational‘ idea; it is open to an individual‘s interpretation. It could mean anything—to succeed in life, to

come out of poverty, to grow richer, to be independent, to be empowered, etc. It is the ambition or fire

that burns within each one of us. So we had to provide an experience for people to really understand

what we mean when we say—‗we enable people to Rise‘.

To deliver on a promise such as this, we explored options other than goods and services. And when the

campaign was launched in January this year, we also realized that communication through the usual

media instruments (newspapers and magazines, and the like) would not be enough—we needed to give a

touch and feel experience. And thus the ‗Spark the Rise‘ platform/portal was born.

Why did we choose the Internet as a platform?

Our primary platform should be able to connect likeminded people; be flexible enough to allow

participants to enter details and modify those later and also allow us to store details of all the projects we

have received in the same place. A medium that satisfies all these requirements is the Internet. Now,

having said that, we have made ample and more provisions for people to participate through an offline

B Karthik is the General Manager – Corporate Brand Management and

Business Transformation at Mahindra & Mahindra Limited.

THE RISING


process as well. So, we have printed copies of the submission forms which are available at our various

touch points across the country. Let me explain how this works. Assuming that there is a Mahindra

dealership in rural India, where Internet connectivity is either poor or absent, a person wanting to

participate in this program can pick up the entry form off the shelf, fill it and then send it to us. We then

key in the details here. We have received quite a few submissions through the offline process. However,

the ultimate objective of involving the public (not just in judging but also as volunteers) necessitates that

all these projects are available in one space where they can be readily accessible by people. That is also

one of the reasons for choosing a digital backbone for this project.

Is non-English speaking, non-Facebook savvy rural India at a disadvantage?

It is a myth that rural India is at a serious disadvantage because the platform is in English. Firstly, we

have printed the offline entry forms in almost all the regional languages. We have received entries in

Tamil, Malayalam, Bengali and Hindi. We translate these entries and then upload them on to the

Internet on behalf of the project owners. Secondly, we have just started this program. We are working

on language sites that will allow the users to choose their language. Probably when Season 2 opens, the

site will be available in at least three or four languages, allowing participants to submit entries, update

projects and also follow other projects. Thirdly, we are also considering a mobile version. With

affordable mobile tariffs, the proliferation of smart phones and the increasing reach of cost-effective

broadband connectivity it would not be amiss to assume that connectivity in rural India is as good as in

other parts of the country. Google analytics tells us that the site has visits from about 100 towns and

cities in India. Even if you eliminate the top twenty, tier 1 or metro cities, the penetration is pretty

significant. We have also received entries from semi-urban/-rural areas of India such as Bagalkot in

Karnataka, Durg in Chhattisgarh, Jabalpur in MP, parts of Eastern UP, and the interiors of Jharkhand

and Bihar. Most of these are online and a few entries are offline, but by and large I would think that the

mix is pretty healthy. Further, to ensure that rural India is not left out of the program, we have enlisted

the services of our salespeople: if you consider a business like Mahindra Finance alone, they have about

6,500-7,000 people working in semi-urban and rural India. Over the last one month, we have traveled

extensively, met people and have equipped the sales force with the skills needed to spread awareness

about the program in rural India. So, at our end, we have put in place systems to ensure that the lack of

connectivity does not prove to be an obstacle. And we are hoping that when the local language and

mobile versions come up, the whole process will be further democratized.

Are the funds sufficient for a ‘spark’ to be fanned into a flame?

The core objectives of the program clearly state that this is not a business plan competition. There are

other similar programs that are sponsored by either the government or by corporates. They are all

excellent programs, but their objectives are probably different. Most of these programs have a start and a

finish date and after that the projects and the project owners are on their own. An unarticulated objective

or credo of this program is to inspire people to help others to rise. For example, let us assume that X is

planning to set up a solar energy generating facility in a large industrial township and has applied to

Spark the Rise. We understand that the project will need funding beyond the initial Rs. 400,000 that we

are giving every month or even the Rs. 4,000,000 that we give the winner. We think that winning the

grant is not the only objective. The objective should be to build a network of likeminded individuals and

through this network execute his or her plans. The money from Mahindra is just seed funding. We are


not under any false illusions, nor are we pretending to be the benefactor that will fund the entire

requirement of any project. Recently, on our Facebook wall a participant who had submitted an idea

pertaining to the use of cloud technology to offer to schools put up a post saying that he had received

several requests for partnerships and involvement and also received enquiries from different schools

about the service offered. Such developments will ensure that projects do not die. What we are hoping

for is that a combination of exposure and engaged people tracking the program (in the first month itself

we had about 200,000 unique visitors) will help in sustaining a project.

We are also working on partnering with service providers in two broad areas. Firstly, we are talking to

organizations that will guide and mentor innovators and entrepreneurs. For example, X may have the

technology but is not entrepreneurial enough. Y on the other hand will have the entrepreneurial bent of

mind needed to commercialize the project, and thus the association would be mutually beneficial. The

mentor organizations will provide their services on a voluntary basis. This platform will merely connect

them. We are not going to coerce the participants to take advice. The choice is theirs. We are attempting

to promote a culture of volunteering through this exercise. Secondly, we are also planning to partner

with agencies that provide testing and implementation-related services. This means that a participant has

a mentor and guide to advise him on the business aspects—setting up, scaling, venture capital funding,

etc—and an implementation partner to test the product and provide feedback. We are trying to build a

complete ecosystem where people who want to drive change are able to focus on their objective without

having to worry about the daily grind.

The first right of refusal?

Mahindra is just like any other member of the public that follows a project. There are no stipulations

that we should be first approached with the technology or project. In fact, we accept all entries.

Everyone with an idea can log in and submit their project. We have tied up with TiE (a non-profit

organization that fosters entrepreneurship) for the initial pre-screening process. The pre-screening is not

about judging the quality or the lack in a project. It is more to ensure that the information needed for the

public to make an informed decision is provided. The details are given to the primary jury who are listed

on the site, who then take a call. We do not get involved in the process at any stage.

The strings attached?

None at all. We have a simple verification process. Once a winner has been announced, we expect

people to come to us with proof of identity. We then verify whether the infrastructure claimed by the

person actually exists. Once this is done, the grant money is disbursed. We do not want to monitor the

progress of the project once the grant is given—the platform is built on the idea of good faith and trust.

On and off, we probably may ask our closest sales office to go have a look. We are not going to ask how

the money is going to be spent to the last decimal point—this is just an ignition grant.

We also believe that the process will become self-regulatory over a period of time. For example, if

someone who wins a grant does not continue the work after the money is given, we expect the public in

the vicinity who are following to write to us about it. However, even if it is brought to our knowledge,

we don‘t plan on suing the participant. We have factored into our plans the possibility that a certain

percentage of the projects will tank. And there could be various reasons other than the intentions of the

project owner (good or bad) for a project to not to take off. For example, he or she may have closed


down operations in one area and set up a bigger facility somewhere else. We are also aware that

sometimes, the project owner may have a different intention/agenda for the grant money. So, yes, it

would take away some of the credibility from the project. Our endeavour is to ensure that the needle is

always on the side where projects are doing well, with the entrepreneurs doing what they said they

would. So out of 48 grants, even if ten fold up, there are still 25 that will have done well. It is akin to the

pharmaceutical industry: they screen thousands of compounds, at the end of which they could get

nothing or they could get one blockbuster drug which pays for the 10,000 that failed. Secondly, we do

not have the bandwidth to monitor 48 projects this year and 200 the year after and check whether they

are fulfilling their promises. We are not going to play the role of a principal checking on students. We

think it will become a self-regulatory process. If people actually notice so much good work happening,

ten other programs could spring up, you and I would be inspired. Can this movement spread? That is

what we are really hoping for.

What are the challenges for us?

Even today the number of skeptics and cynics outnumber the number of believers (in a program such as

Spark the Rise). Most people still think of it as just another business plan contest. Some expect us to

lose interest in another six months. So the first challenge for us is to prove that this is not a passing fad

for us. The second challenge is to get on board innovators and entrepreneurs. Most innovators are

hesitant to showcase their product or idea on a platform such as this due to the fear of replication. And

the third challenge is to reach every nook and corner of this vast country. The solution to all the three

challenges is this mysterious element called time. If we are able to showcase our commitment and not

chase the next big thing within six months of launching this—we already have defined a three-year

horizon and plans—and are able to attract a fairly decent amount of projects which drive change on the

ground, and if with time we get more people hooked on the platform who start nominating and referring

projects, then we probably would have addressed all the challenges. Finally, it is a question of

motivating and exciting the vast network that we have—whether it is our employees in rural India or our

dealers, vendors or our partners in semi-urban areas—and making them evangelists. This is an on-going

process and it will take time, we have around 60,000-70,000 people in India. With all this and since we

have commitment coming from the very top, I do not see why we cannot reach the majority of the

people.

Note: Published here with permission from The Smart Manager - India's first world-class

management magazine. For more details visit www.thesmartmanager.com

Marketing in Tim

http://www.thesmartmanager.com/


Restructuring of the organised industrial sector

The economic environment created after the adoption of structural adjustment programme in 1991

took the organised industry by surprise. Since then the government has delicensed investment and

capacity creation in most industries. Delicensing removed institutional barriers to entry. The

government has reformed Monopoly and Restricted Trade Practices Act to facilitate the organised

industry to take advantage of economies of scale and specialisation. Foreign Exchange Regulation Act

has been redesigned as Foreign Exchange Management Act (FEMA) to facilitate the inflow of foreign

capital and technology. Significant reforms have been introduced to make financial and capital markets

more flexible. The government reduced tariff and non-tariff barriers and introduced policies to

encourage foreign direct investment with majority control except in certain strategic industries. These

policies on the one hand provide new opportunities for growth Indian organized sector and at the same

time, increased the vulnerability to forces of increased competition from domestic as well as global

players. These forces generated by new policy regimes are compelling the organized industrial sector

to restructure itself not only to survive but also to grow. Strategies adopted by enterprises belonging to

the organized industry have significant repercussions for demand for labour in the short run as well as

in the long run. Some scholars believe that successful restructuring of the organized industry can occur

if labour market is made flexible. Despite the pressing need for labour market reforms, the government

has not changed the functioning of labour market.

The Public sector enterprises, which are the most important component of the organized

industry in India needed maximum restructuring because they have been maintained despite the

inefficiencies, accumulated losses and waste of resources. Most of these enterprises have gone for

financial restructuring through disinvestments. Disinvestment has been preferred to privatization

because privatization is a sensitive issue for public sector trade unions. The dominant form of

restructuring in Public enterprises has been man power restructuring because most of the public

enterprises have excess manpower which may further increase if these enterprises go for technological

upgradation.

The private organized sector has adopted several modes of restructuring. Some of them closed

down and sold their assets and goodwill because they found it difficult to withstand the emerging

competition. Some of them entered into foreign collaboration to acquire new technology, brand names

or organizational structure, to equip themselves to face competition. The extent of corporate

restructuring through foreign collaboration and acquisition of technology can be seen in terms of

inflow of foreign direct investments since 1991. Foreign direct investment has been accompanied by

increased import of capital goods. There have been increased incidents of corporate mergers and

Dr. Vijay K. Seth Professor FMS Delhi


acquisitions in order to achieve economies of scale, market penetration or core competencies.

Organized sector also adopted the strategy of outsourcing and flexible manufacturing to reduce

overhead costs to achieve competitive advantages. Most of the companies in the automobile sector,

consumer durables, electrical and electronics manufacturing have adopted this strategy.

Organized industrial sector in India which grew primarily through import substitution and

government regulation and protection, without considering economies of scale and scope,

specialization and technological change, has experienced significant changes since the adoption of

structural adjustment programme. The process of restructuring followed all possible strategic options

available in the market economies. This process of restructuring has intensified the process of death of

old firms and birth of new firms and process of job creation and job destruction. These changes have

significant repercussions on demand for labour in the organized industrial sector.

There is a pressing need on the government for restructuring of enterprises in the organized

industry to achieve competitiveness in the labour market regulations. Changes that are expected by the

employers are related to making manpower structuring legal, less expensive and less time consuming.

Through these changes, employees want to achieve flexibility of labour market. Therefore several

labour market regulations are under attack for policy makers and employers who want to introduce

second generation economic reforms which include amendments in the Industrial Dispute Act, Trade

Union Act and Contract Labour Act. Changes in the industrial dispute act must reduce the cost of

retrenchment and layoff. Similarly amendments must be made to the Trade Union Act to make unions

less powerful so that they can stop retrenchments and layoffs.

Such changes will facilitate the employers to enter into flexible contracts with their workers.

This will convert most the workers into contractual labour. At present, the contract Labour Act, 1970

regulates the practise of Contract labour. The objective of this legislation was to abolish exploitative

working conditions of the contract workers and provide them comparable social security. However

manpower restructuring can be achieved only through contractualization. In July 2002, the second

national Labour Commission had submitted its report which dealt with possible restructuring of the

labour market institutions.

In each country, labour market institutions work within a particular social framework, with the

interest of the different stake holders are differently harmonized through social contract. Differences in

social settings are so important that it can transform visible rigidities into informal flexibilities. This

emerges when there exists a lack of commitment on part of political class to implement the existing

regulations in letter and spirit. Some scholars believe that Indian labour employers are able to close

down enterprises and retrench and layoff workers. Therefore, scholars believe that whatever

enterprises were practising informally will be formalised through labour market reforms.


Gaining Value Creation Advantage in Volatile Times

By Mr. Somnath Mitra

Renewable Energy sources have to leverages both in rural and urban India. With correct incentives to

renewal energy producer, consumer, and vendor, government can show the way towards a ―sun-rise

industry‖. Consumer should be able to produce power, thereafter consume and sell to the pan-India

grid based on pre-agreed ―feed-in-tariff‘, a common practice in Germany, and Norwegian countries.

For decades the story of technology has been dominated, in the popular mind and to a large extent in

reality, by computing and the things you can do with it. Moore‘s Law — in which the price of

computing power falls roughly 50 percent every 18 months — has powered an ever-expanding range

of applications, from faxes to Facebook.

We are, or at least we should be, on the cusp of an energy transformation, driven by the rapidly falling

cost of solar power. That‘s right, solar power. If that surprises you, if you still think of solar power as

some kind of fantasy, blame our fossilized political system, in which fossil fuel producers have both

powerful political allies and a powerful propaganda machine that denigrates alternatives.

A large part of our political class is deeply invested (in terms of time and money) in energy sector

dominated by fossil fuels, and actively hostile to alternatives. This political class will do everything it

can to ensure subsidies for the extraction and use of fossil fuels, directly with taxpayers‘ money and

indirectly by letting the industry off the hook for environmental costs, while ridiculing technologies

like solar.

The world hit seven billion people last week, and I think I met half of them on the road from New

Delhi to Agra. They were on foot, on bicycle, on motor scooters. They were in pickups, dented cars

and crammed into motorized rickshaws. They were dodging monkeys and camels and cows.

Somehow, though, without the benefit of police or stoplights, this flow of humanity that is modern

India, impossibly went about its business. But just when your mind tells you that this crush of people

will surely overwhelm all efforts to lift the mass of India out of poverty, you start to notice a pattern:

Every few miles there‘s a cell phone tower and a fresh-looking building poking out of the controlled

chaos. And the sign out front invariably says ―school‖ — engineering school, biotechnology school,

English-language school, business school, computer school or private elementary school. India is still

the only country I know where you can find a billboard advertising ―physics degrees.‖

Mr. Somnath Mitra is a Senior Process Consultant and Delivery Manager at IBM. He is

a management graduate with specialization in Service Innovation activities with over seven years of

experience in the Indian telecommunication industry and a total of more than fifteen years of work

in IT industry. He is a senior IT professional, manager & a budding researcher. He also possesses a

strong business to business experience in exceeding targets and objectives.

He is also a Doctoral Candidate at the IMT-Ghaziabad/ National Law University, India in the area

of Information Management. His research interests include Global Initiatives of IT firms¸

Innovation and Strategic Management¸ Social Entrepreneurship, and Clean Energy Technology.


All these schools, plus 600 million cell phones, plus 1.2 billion people, half of whom are under 25, are

India‘s hope — because only by leveraging technology and brains can India deliver a truly better life

for its masses. There are a million reasons why it won‘t happen, but there is one big reason that it

might. The predicted reality is happening: India‘s young techies are moving from running the back

rooms of Western companies (who outsourced work here) to inventing the front rooms of Indian

companies, which are offering creative, low-cost solutions for India‘s problems. The late C.K.

Prahalad called it ―Gandhian innovation.‖

An Indian company has built a software program that runs on the cheapest cell phones and offers

illiterate farmers a voice or text advisory program that tells them when is the best time to plant their

crops, how to mix their fertilizers and pesticides, when to dispense them and how much water to add

each day. India has to increase farm productivity, but our farms are small, and advisers from the

Agriculture Department can‘t reach many of them. So they go for hearsay methods of planting, which

leads to low productivity and soil desertification. Using cloud computing, we can tailor its advice to

each farmer‘s specific soil, crop and weather conditions. Some 12,000 farmers are already subscribing

(Rs 250 for one year), and the plan is set to grow to 15 million in five years.

A quarter of the world‘s blind people, some 12 million, are in India and more than 80 percent of those

are blind as a result of a lack of screening and a lack of ophthalmologists in rural areas. In the past,

comprehensive screening required multiple expensive diagnostic devices to check for diabetic retinas,

cataracts, glaucoma, cornea and refraction problems, all of which cause 90 percent of the avoidable

blindness in India. So an Indian company has developed a single, portable, intelligent, non-invasive,

eye pre-screening device that can identify all five of these major ailments and also provide an

automated ―Normal or Needs to See a Doctor‖ report; it can be run by a trained technician, who

through tele-medicine connects patients to a doctor. The company works with a Dutch company on

optics, and the University of Texas supports us in business development. The company is talking to a

Brazilian company that it is interested in manufacturing our technology and selling in Latin America.

Outsources are becoming outsourcers.

A travel search service can run on the cheapest cell phones and help Indians book the lowest-cost

fares, whether it is a farmer who wants to go by bus or train for a few rupees from Chennai to

Bangalore or a millionaire who wants to go by plane to Paris. The company now has one million

unique users a month and is growing. The company used free open-source software, Skype and cloud-

based office tools like Google Apps and social media marketing on Facebook to build his software

platform and grow his company. That enabled them to grow so much faster with no money.

Historians have noted that economic clusters always required access to abundant strategic inputs for

success. In the 1800s, it was access to abundant flowing water and raw materials. In the 1900s, it was

access to abundant electricity and transportation. In the 2000s, it will be accessible to abundant

bandwidth and abundant human intellectual capital.

But we need many more of these. As the world gets wired together through the Web and social

networks, and as more and more sensors run machines that are talking to other machines across the

Internet, we are witnessing the emergence of ―Big Data.‖ These are the mountains of data coming out

of all these digital interactions, which can then be collected, sifted, mined and analyzed — like raw


materials of old — to provide the raw material for new inventions in health care, education,

manufacturing and retailing.

―We‘re all aware of the approximately two billion people now on the Internet — in every part of the

planet, thanks to the explosion of mobile technology,‖ erstwhile I.B.M.‘s chairman, Samuel

Palmisano, said in a speech last September. ―But there are also upward of a trillion interconnected and

intelligent objects and organisms — what some call the Internet of Things. All of this is generating

vast stores of information. It is estimated that there will be 44 times as much data and content coming

over the next decade, reaching 35 zettabytes in 2020. A zettabyte is a 1 followed by 21 zeros. And

thanks to advanced computation and analytics, we can now make sense of that data in something like

real time.‖

The more information and trends you are able to mine and analyse, and the more talented human

capital, bandwidth and computing power you apply to that data, the more innovation you‘ll get. Those

are real Indian innovation stories for smarter solution for various consumer segments. Indian society,

business, and environment is undergoing change. So we need evolutionary strategy, and not

revolutionary strategy. As strategy (which works for the society, business and environment) we need to

have smarter cities, smarter logistics management systems, smarter tax collection, smarter law

enforcement, smarter health care, smarter skill development and education, smarter diaries, and

smarter farming (agriculture, horticulture, floriculture, fisheries and animal husbandry) to deliver more

with less. How do make a smarter and sustainable public delivery system?

This is can happen when we leverage the economies of scale. The innovation will be to transform fixed

cost to variable cost. We have to develop sustainable solution in education, health care, and

employment for ―The bottom of the pyramid‖, using clean energy sources.


INTERVIEW WITH MR. ARSH MAINI

25th

JAN, 2012

ConClub: You have an illustrious career in the field of consulting; for the benefit of the readers

could you give a summary of your professional life?

Mr Maini: I worked with two very good consulting firms - PricewaterhouseCoopers and Deloitte

Consulting; prior to which I worked in Marketing and Corporate Development. I joined PwC to work

in the area of Performance Improvement and led a practice in North India. We advised large corporate

across India, Singapore, Japan and Europe on country entry, performance improvement and risk

management.

In 2005 I was transferred to the US firm to help set up the Outsourcing and Shared Services advisory

practice out of New York. I worked for companies across Auto, Financial Services, Technology and

Consumer Services sectors – providing me with invaluable experience.

In late 2007 I came back to India to set up a consulting practice for Deloitte Consulting which was

focused on Strategy, Outsourcing and Shared services, and Post Merger Integration (PMI).

On the 1st of January 2011, I joined Serco Group plc – a FTSE 100 company that improves the quality

and efficiency of essential services that matter to millions of people around the world, as Strategy

Director for the AMEAA (Africa Middle East Asia and Australia) Division. I was inducted into the

Board of the division and to Global Management Team.

As the Strategy Director for the Division I am responsible for creating a strategic growth plan based on

both organic and inorganic levers, planning and delivering mergers and acquisitions, as well as

ensuring an optimal operating model to meet both growth and profitability targets. My focus includes

new markets and services strategy aimed at expanding the AMEAA footprint.

ConClub: You have worked in companies like PwC, Deloitte and now Serco, how has the work

culture been different in these companies?

Mr Maini: To be honest I found each of these organizations espousing a culture of meritocracy and

entrepreneurship. Each of them of course have their own unique cultures. Both PwC and Deloitte

provided me with huge global exposure and what I enjoyed most was the rich tapestry of work that one

Mr Maini at present is the Strategy Director,

AMEAA Region, Serco Group Plc. and member of

Global Management Team

He has also held illustrious posts in the past such as

Director of Deloitte Consulting and Principal

consultant/Manager at Pricewaterhouse Coopers


did. The exposure I got across sectors, geographies and functions was invaluable. They is always

something cutting edge, something new.

Serco provided an immense sense of ownership and is an organisation with very strong fundamental

values that we see and live every day. When you see that what you do every day impacts millions of

lives you have a sense of achievement and pride that is difficult to match

ConClub: Unlike in FMCG companies where marketing and advertising play an important role,

how does a consulting firm develop and maintain its brand image?

Mr Maini: Multiple things. People tend to think that brand management is somehow limited to

advertising and marketing. But that is just a minute part of building a strong brand. Ultimately brand

management is about the day to day interaction with the brand itself. For a consulting firm, whom are

we selling to? They advice other companies – small, medium and large corporate.

A consulting brand is built on the quality of the people that work for the company and their ability to

live by the values of the organisation and deliver excellence on a day to day basis. One must ensure

that the clients receive consistently high quality of output. The second point is your ability to showcase

thought leadership. Consumer goods are often ‗pushed‘ to customer. Consulting firms do well in a pull

driven model, where your clients seek you out. To create this pull you have to be able to consistently

showcase your capabilities and your thought leadership. One piece of sub standard work, and it easy to

ruin a reputation built over year. So you have to ensure that everyone in the firm lives the values, and

teams consistently deliver high quality output.

ConClub: You must have come across projects which were dull and not to your liking. What was

your approach for succeeding in such projects?

Mr. Maini: You have to ask yourself a fundamental question. How is the work we‘re doing adding

value to our client? If I am adding value then I am doing the right thing. I don‘t see one work being

more or less exciting than another. In the consulting world, if you are adding value to your clients then

they will respect you and you will enjoy your work. The work itself may vary - risk management,

performance improvement, cost reduction, functional transformations, M&A, post merger integration...

and none is more or less exciting. It‘s about staying true to the mantra of adding value. In any case

one has to enjoy what one is doing. And that enjoyment comes from what you learn every day;

working with colleagues who are intelligent, driven and share your values; from a sense of pride and

ownership... and these don‘t have any correlation to the type of work one is doing.

ConClub: How have you handled demanding clients or clients who are difficult to work with?

Mr Maini: There would always be people whom one would consider to be difficult customers, but

then that is where maturity and experience counts. Again it comes back to adding value to your

customers. First, you must set appropriate expectations and then you have to go out of your way to

exceed expectations. If you have done that then there would be very few clients in the world who

would be difficult to please. I haven‘t found anyone being difficult for just the sake of being difficult.

ConClub: Which sector do you think is difficult to get involved in and which sector has

maximum growth opportunities?


Mr. Maini: Youngsters always tend to look for one sector where there would be an easy life. But there

is no one sector which is easy to get into or excel at. For a young consultant to do well in any sector

one has to gain an in-depth understanding of the sector and how companies in that sector create value

for their stakeholders. Over a period of time you build experience in that sector and can then offer

advice and support that truly makes a difference to the client.

Technology, outsourcing and infrastructure have been the sectors that have seen huge growth in India.

Infrastructure – especially social infrastructure and citizen services- will be the next big thing.

Healthcare, education (especially vocational training), transport services... are going to see a

transformation in India.

ConClub: How do you think the consulting world has changed post the 2008 crisis?

Mr. Maini: You only get to see how much one is wearing when the water goes down. In good times

you don‘t know who is in how much trouble. The crisis showed the difference between good and not

so good organisations. The chasm was now clearly visible.

There would always be ups and downs in an economy cycle but companies that are good will come out

with glowing colours in times that are not good. In good times everyone will make money.

Many consulting firms have made fundamental shifts to how they‘re structured (both organization and

cost structures) and how they leverage talent from countries like India. While we did see offshoring

and back office support from India in consulting firms pre 2008, we now see significant scale being

built in India. These resource and talent pools are not just providing back office support, but providing

front end customer and client services.

ConClub: On a more personal note, we would like to know what do you like the most about

being a consultant and what do you like the least?

Mr. Maini: Well what I like most is the variety of work. I‘ve been exposed to such a wide variety of

organisations. I am not sure I dislike anything about consulting work. Many people say that there is a

lot of pressure and travel involved but why should these things be a megative? If I am going to

become a doctor, then I know I will have to do night shift. People won‘t get just unwell during the day

because its more convenient for the doctor.. If you‘re going to be a management consultant you have

to enjoy challenging assignments and to travel. You have to enjoy being able to be a doctor to

organization.

ConClub: It is considered that consultants have a hectic schedule and busy life, so what do you

do in the free time that you can squeeze in that busy life?

Mr. Maini: I would say reading and creative writing. Years ago I used to write the humour column for

a newspaper. I also enjoy travelling and photography. I am one of those people who want to be

informed of everything. So I have an inherent urge to read a lot and know more about as many things

as possible.

ConClub: Any message to future consultants?

Mr. Maini: One must enjoy the journey. It is the most important thing. Don‘t just be driven by end

goal – and certainly not by position and compensation. Enjoy the work. Set the very highest standards

for yourself and live up to those standards to build a good career.


The Business of Climate

Change Krishna Tiwari – XLRI Jamshedpur

Climate change promises to be a key issue of our times. This issue stands at the cross roads of a host of

other crucial areas: public policy, science and technology, industrial development, upliftment of millions

from poverty, public health and future of human life itself. For an issue as multi-faceted, the solution

needs to be addressed with an equally dynamic approach.

There are two broad ways in which businesses may create value in a volatile environment: a) by

predicting how the volatility is affecting their processes and changing accordingly and/or b) by

predicting how the volatility will affect their consumers and providing unique solutions to manage such

uncertainty. In either case the value created will benefit the consumer. Value creation in a changing

environment requires two inter-linked things: a) recognising what factors are will cause the most crucial

changes, b) understanding how those factors may be affect your value chain, c) putting into place

mechanisms to take on those challenges.

Nature of volatility due to climate change At a first glance the nature of volatility appears to be on a macro level. It is still deeply mired in policy

issues and even with numerous protocols and treaties, no clear agreements seem to be in sight. On a

macro level, the uncertainty for businesses is about how the

regulatory environment might change especially in developing

countries. Changes in regulatory environments to meet

international treaty requirement will require changes in

production technologies and logistics management. Another

uncertainty will be regarding sourcing of raw materials. This will

be an especially important driver for agri-product based

industries. Due to climate changes, shifts in cropping patterns and

intensities are to be expected. This combined with other events

like fuel price changes are likely to push up raw material prices.

This trend is already being seen in many industries like food,

paper-based industries etc. While all businesses attempt to understand the value chain to better predict

the price trends of their raw materials, the real challenge lies in understanding and isolating the effect of

climate change. This is important because in the future governments will put into place new regulations

to meet their quota of emissions (one of the core aspects of climate change management). Businesses

need to be prepared for such changes.


Public opinion Climate change is still being debated by millions across the globe. In fact, one of the biggest challenges

being faced by climate crusaders is securing positive public opinion for the battle. Various studies by

MIT and Stanford scientists have confirmed that public opinion is still divided on the issue of climate

change. In a survey conducted by Howard Herzog, senior research engineer in the MIT Energy Initiative

in 2009, it was found that Americans considered the topic of climate change less urgent than they did

three years earlier(similar survey was conducted in 2006 ). The findings though specific to USA are

relevant as they track the evolution of public and political opinion on this crucial topic. The researchers

found for the first time some correlation between political parties and views: Democrats were found to

be more serious regarding this issue than Republicans. Public awareness of technologies like carbon

capture and storage was also found to significantly higher1. However, its acceptance as a viable strategy

was also found to be low.

Public opinion is important because it will showcase the leaders and businesses a direct demand for new

policies, processes, products and eventually a new way of life. Climate change by nature is a long term

process – its effects manifesting surely but slowly over time. Therefore, asking people to change

lifestyles in short term to prevent something that would happen after their time is an especially tricky

scenario. This question is grappling

policy makers, organisations providing

renewable energy solutions and

behavioural economists. The various

wind and solar energy solutions are

expensive for individual consumers.

Thus, they are mostly not adopted

unless given enough subsidies or

mandated by governments. But populist

governments are usually grappling with

other pressing social and economic

problems. Thus, a vicious cycle is

created where for all three key players: the public, the government and businesses, investing in climate

change management is the last priority.

Many among the research community say that the blame for inadequate public support lies with the

scientists themselves2. The published matter on this issue is too technical and factual for the message to

percolate to the grassroots. According to Prof. Sterman at Sloan School of Management, telling people

facts rarely changes their beliefs. The opinions are usually at the extremes of either very flippant or too

catastrophic. This situation should be of particular concern to the marketers. It converts the issue to an

unsought good – the need for a solution exists but the consumer blocks recognition and doesn‘t wilfully

seek it. The situation is not helped by the fact that very powerful business lobbies are also at work to

create further confusion in the public sphere.

Value creation by at the fore front of climate battle Value creation in this sphere is possible on many fronts. To start with, responsible communication by

research labs and governments regarding the threat and consequences of climate change is required.

Businesses have the onus of changing processes and practices to have a meaningful impact on climate

control (whether reducing emissions, using recyclable and less packaging, sourcing fair-trade and


organic raw materials, finding sustainable substitutes). But they

should also responsibly report such initiatives to the public and

not just lip-service through CSR. It is easier for big brands to lead

in value creation. Since, consumers already have strong

affiliations and emotional connections with them, these brands can

induce responsible consumption and recognition of this issue. For

businesses involved in climate control technologies and

renewables, effective marketing is especially important.

Only education and green marketing will not lead to wide-scale

adoption of such technologies. One of the major barriers to

adoption is high price. It is necessary for businesses to understand the psychographics and demographics

of their consumers and segment them into groups based on their green intentions as well as purchasing

power. One such initiative was taken by Roper Starch Worldwide of New York City when they

published the Green Gauge Report. They classified consumers into 5 clusters and identified the market

size as well as willingness to pay a premium for green products3. Such an exercise should be undertaken

in other markets also, especially in developing countries. The global businesses must keep in mind that

value drivers for consumers of emerging markets are often very different from those of developed

markets. Hence, the products must be tailored or at least marketed uniquely across regions. The capital

markets can often play a very important role in value creation. Inadequate financing options are a big

barrier for consumers. Also the current system doesn‘t internalise the true costs of conventional energy

as well as the true benefits of renewables4. These costs and benefits must be reasonably quantified.

These might then provide ways to push green solutions to the public and governments.

However, green marketing myopia must also be avoided.

According to Ottman et al5, green marketing must serve two

provide a) improved environmental quality and b) customer

satisfaction. Misjudging either or overemphasizing the former at

the expense of the latter is called green marketing myopia. They

explain the success and failures of various green products launched

over the years. Often, the key to push wide adoption of green

products is the emphasis on non-green benefits. For eg: while CFLs

are greener than normal bulbs, it is primarily the promise of savings

in electricity bills that led to their popularity. Similarly, the success

of Toyota Prius is not only due to its ‗greener‘ nature. Despite high

prices and long waiting lines, it was successful due its quirky design and initial buzz. It offered

consumers a way to be distinctive and was adopted by famous people. Obviously, its target market was

quite niche. Value creation for such products and services usually revolves around five common benefits

efficiency and cost effectiveness; health and safety; performance; symbolism and status; and

convenience5. However, when these five consumer value propositions are not present in the green

product, to be successful, a green marketing program may bundle desirable non-green consumer values

to increase appeal and adoption.


Marketing in Times

of Recession Mayank Mahajan, Anuj Kapoor

University Business School, Chandigarh

(Recession curve-Trick lies in harnessing the trough period)

Economic Downturns are tough times, not only for individuals but for the companies on the whole.

While all the functional wings are contemplating a cut in their spending, austerity drives are seen as the

‗need of the hour‘, it‘s a catch twenty two situation for the marketing wing. Marketers often find

themselves in muddy waters because of differing nature of any two downturns. How a marketing

manager needs to react? Which marketing approach to follow-slam-on-the-brakes or Pained-but-patient

or comfortably well off or just live for today? In the following paragraphs we try and gauge into how

marketing acts as the one department which identifies recession as an opportunity to gain some more

ground at the competitive level.

McGraw-Hill Research analyzed 600 companies from 1980-1985. The results showed that ―b2b firms

which maintained or increased their advertising expenditures during the 1981-1982 recession averaged


significantly higher sales growth, both during the recession and for the following three years, than those

that eliminated or decreased advertising.‖ By 1985, sales increased over 256% for companies that

increased recession ad spend than those who slashed ad spending.

Market Sense compared 101 household name brands during the recessionary period 1989-1991. As per

Market Sense data, Jell-O, Crisco, Hellman's, Green Giant and Doritos saw sales drop by as much as 26-

64%. ―Jiff peanut butter increased ad spending and sales went up 57%; Kraft salad dressings saw a rise

of 70%. In the beer category, overall spending was down 1% while Bud Light and Coors Light, each

spending ahead of the category, saw sales increases of 15% and 16% respectfully. Pizza Hut sales rose

61% and Taco Bell's 40% thanks to strong advertising support, with McDonald's volume down

approximately 28%., primarily due to marketing spending cuts‖.

Still not enough food for thought that marketing serves as a saviour during the recession? Read

further…

General Motors' Chevrolet division abandoned its traditional practice of setting its advertising

expenditures as a fixed % of sales. While volume fell 10 % because of the economic slowdown,

Chevrolet maintained its ad budget and increased advertising for its fuel-saving economy

models. Ford Motor Company, on the other hand, slashed advertising by 14 % in an attempt to shore up

profits. As a result Chevrolet‘s market share increased by 2%.

0

100

200

300

400

500

19801981

18821983

19841985

100 9688

89 106 119

100 137 159 195283

375

Eliminated or Decreased Advertising in both '81 & '82

Maintained or Increased Advertising in both '81 & '82

80859095

100105

1974 1975

Industry

Chevy


(Chevrolet‘s ad) (Comparison of Chevrolet‘s growth share with Industry growth average)

During the Great Depression, both Kellogg‘s and Post were tied for market share in dominating the

breakfast cereal category in the 1920s. Post cut their ad budget while Kellogg‘s increased theirs by 1

million $. After the recession, Kellogg‘s profits improved from $4.3 million a year in the 1920s to $5.7

million in the early 1930s, beating out Post. Do we observe a particular pattern in these cases?

Let‘s not go further back into the history, putting things into perspective by looking at some recent

responses to recession by top companies. During 1990-91, Pizza Hut sales rose 61% and Taco Bell‘s

increased 40% with strong advertising, while McDonald‘s reduced advertising and their volume

decreased 28%.

In 1991, advertising in the computer hardware category was down by 17.5% over the previous year.

Apple, Digital, IBM and Tandy - category's leading spenders - all made significant spending cuts in the

range of (-25%) to (-40%). But Dell increased its marketing spending from just $1.4 mn in 1990 to $6

mn in 1991, a 346% increase. Thereby marketing cut backs by its competitors followed with its own

increased spending led Dell to be included for the first time in the Fortune 500 roster of the world's

largest companies. By 1993, the company was among the top 5 computer system makers worldwide,

and in 2001, Dell became No. 1 in global market share. Times change, but trends seldom do?

0

50

100

150

2000 2001

Industry

Dell


Similar trends followed when another FMCG giant, P&G increased spending on marketing during

recessionary times. P&G realised the importance of radio spending on ads & harnessed this potential of

this field with launch of first P&G radio soap opera "Ma Perkins," sponsored by Oxydol in 1933

followed by "Vic and Sade" for Crisco, "O'Neill's" for Ivory Soap and Forever Young" for Camay. By

1939, P&G was sponsoring 21 radio programs, and virtually doubled its radio spending every two years

during the depression. In 1935, P&G spent $2 million on radio. Its radio spending increased from $4.5

million in 1937 to $8.8 million in 1939.P&G was the only marketer among the five biggest U.S.

advertisers to increase spending in 1991 & increased sales and earnings during the late 1980s to early

1990s surpassing $30 billion mark in 1993 & thus emerged out of recession with flying colours.

Intel, made similar moves & reaped the benefit of enhanced marketing spending during recessionary

times with increased sales margin & profit.

Rosabeth Moss Kanter, Professor at Harvard Business School stresses that ‗In a recession, everyone

should be in marketing‘& suggests five basic principles, namely, Increase customer contact and

communication , Hunt for new markets, Invest in employee morale, Emphasize and reward small

wins, Stick with your values.

John Quelch, Professor, Harvard Business School also emphasizes on eight points for managers looking

to plan ahead:-


1. Focus on high potential customers’ i.e. strong relationship building with cash rich or long term

oriented customers in growth industries where pent-up demand will happen, once recession period

gets over.

2. Don’t assume a return to normal Permanency in consumer‘s attitudes & behaviours, ingrained

coping mechanisms. Thus consumers tend to look at firm‘s products & services through new lenses

indicating need for firms to revise their market segmentation assumptions

3. Assess your target customer’s trust in your brand Consumer‘s trust in financial firms decreases.

Firms need to add service support & pay more short term attention towards customers, assuming

service quality remaining unchanged.

4. Stay focused on costs Excess inventories in supply chain preventing customers from tightening

cost controls & improving productivity.

5. Know your lead indicators Firms need to be aware of lead indicators which predict demand in

next term, both at macro & micro level.e.g. if Wal-Mart‘s parking lots look less crowded, some

consumers are probably migrating back to Target & vice-versa.

6. Develop scenarios Know how you can source supplies & expand distribution in a hurry if demand

suddenly increases.

7. Don’t wait for permission Getting ahead of the crowd, focusing on your lead indicators & crafting

your recovery plan.

8. Smart hedging has outweighed smart marketing Economic recovery will bring greater

commodity price & exchange rate predictability. Marketing will be the differentiator between

successful businesses & also run outs.

In the end, it can be ascertained that although it‘s wise to contain costs, failing to support brands &

device winning strategy for marketing, or gauging customers changing needs during recessionary times

can affect firm‘s long term performance. As John A Quelch mentions ―Companies that put customer

needs under the microscope, take a scalpel rather than a cleaver to the marketing budget, & nimbly

adjust strategies, tactics & product offerings in response to shifting demand are more likely than others

to flourish both during & after a recession. i.e. While businesses are putting customers under a

microscope, their customers are, in turn, examining them more closely than ever.‖


FDI in Retail: Risk or Value Creation

Kriti Sondhi and Rohit Jain, FMS Delhi

Retail Sector – Overview

Retail is ‗A sale to the ultimate consumer‘. According to a research report named ‗Retail Sector in India‘

by Research & Markets, Indian retail sector accounts for 22% of India's GDP & contributes to 8% of the

total employment. It thus acts as a shock absorber absorbing unemployment from various sectors of

economy. The Rs 18,673 billion (US$ 401 billion) Indian retail market entails only 6% of itself as

organised retail segment as of 2010, according to Booz & Co (India) Pvt Ltd. Hence, there is a great

potential to be explored by domestic & international players.

Trends in the Retail Sector

Driven by the growth of organised retail coupled with changing consumer habits, food retail sector in

India is set to be more than double to US$ 150 billion by 2025, according to a report by KPMG.

The total retail sales in India are expected to grow from US$ 411.28 billion in 2011 to US$ 804.06

billion by 2015.

Some of the key factors behind the forecasted growth are robust economic growth, high disposable

income with the end-consumer, the rapid construction of organised retail infrastructure, the expansion in

middle & upper class consumer base, the potential in India‘s tier-II & tier-III cities as well. The greater

availability of personal credit & a growing vehicle population providing improved mobility also

contribute to a trend towards annual retail sales growth of 12.2%.


Evolution of FDI with regard to the Retail Sector

As per the Indian cabinet perspective , the FDI policy has been moving away from the license raj

mentality of protection against imagined foreign dictators towards a more open, healthy & competitive

environment. This policy will provide a window for the world class retailer chains like Carrefour, Wal-

Mart, etc. to set their foot in the booming Indian retail sector.

FDI in Retail: Why Risk?

The examples of few South East Asian countries show that after allowing FDI, the domestic retailers

were marginalized & this led to unemployment. The concerns & risks regarding FDI in Retailing are:

Retail sector employs 8% of the population, & FDI may cause underemployment when the local

retailers are displaced by organized retail. For a government aiming towards welfare, this situation

becomes complicated. Indian retailers have yet to consolidate their position as they might not be able to

survive the competition from global players as the existing retailing scenario is characterized by the

presence of a large number of fragmented family owned businesses.

Major Retailers such as Wal-Mart & Telco already have established procurement centers & significant

investment is needed in supply chain for a large scale procurement process. This is a major reason for

their keenness towards entering India. Global retailers might resort to predatory pricing. Due to their

financial clout, they often sell below cost in the new markets. Once the domestic players are wiped out

of the market foreign players enjoy a monopoly position which allows them to increase prices & earn

profits.

Since lending rates are much higher in India, Indian retailers, especially small ones, are at a

disadvantageous position compared to foreign retailers who have access to International funds at lower

interest rates. High cost of borrowing forces the domestic players to charge higher prices for the

products.

Proponents of FDI claim that organized retail would improve the incomes of small producers & farmers

by doing away with middlemen. However, American studies have shown that the retail chains are in no

way less explorative than the middlemen themselves. It can upset the import balance, as large

1991: Indian economy opened FDI up to 51% allowed under the automatic route in select priority sectors

1997: FDI up to100% allowed under the automatic route in Cash & Carry (wholesale)

2006: FDI up to 51% allowed with prior government approval in 'Single Brand Retail'

2008: Government mulled over the idea of allowing 100% FDI in single brand retail and 50% in multibrand retail

2011: Government approves 51% FDI in multibrand retail and 100% FDI in single brand retail


international retailers may prefer to source majority of their products globally rather than investing in

local products.

Globalization has opened the world for organized retailers to source from anywhere in the world. This

has shifted negotiating clout in the hands of the retailers. The producers are struggling to be up with the

retailers. The retailers can resort to cost cutting to exploit the suppliers which is borne by workers in the

form of lower wages, poorer working conditions.

FDI in retail trade would not attract large inflows of foreign investment since very little investment is

required to conduct retail business. Goods are bought on credit & sales are made on cash basis. Hence,

the working capital requirement is negligible. On the contrary; after making initial investment on basic

infrastructure, the multinational retailers may remit the higher amount of profits earned in India to their

own country. FDI in retail thus has an adverse effect on the primary & secondary sectors along with

domestic retailers. It will also affect the Manufacturing Sector as the products for which the competitive

advantage lies in countries such as China, Bangladesh etc. will be sourced by the retailers from there.

This leads to unemployment even in the secondary sector.

Too much exposure of our sectors to FDI can be dangerous in the sense that they increase the

dependence to the outside world. One of the key reasons of stability of our economy during The Great

Depression was the strong domestic economy. What is required is to lock the foreign investment such

that it is reinvested into the country itself & are not taken outside. A form of agreement should be

entered into which entails that the money generated is reinvested for say a period of 20 years.

FDI in Retail: Why Value Creation?

Retail Industry has made India, the cause of a good deal of excitement & cynosure of many foreign

eyes. FDI in retail is a welcome step in strengthening India‘s FDI regime with making it in tune with

country‘s needs. The Indian Government believes that FDI in retail & further liberalization retail trade

will facilitate greater FDI inflows providing new opportunities & benefits besides quality improvement.

At a time when declining investments have led to slower GDP growth, the entry of foreign funds would

go a long way in boosting confidence.

"It is a win-win situation for everyone. With the amount of money to be invested in back-end, supply

chain & farm sector will benefit, even the small & medium enterprises will benefit. Eventually

consumers will get a lot of choices & they will get products at better prices, "Future Group Chief

Executive Officer Kishore Biyani said.

Shoppers Stop Vice Chairman B S Nagesh said: "I welcome FDI in retail. Capital is required for the

market whether it comes from domestic or foreign investors; it will help grow the sector in the next 3-5

years. There will be no impact on the domestic industry as there is enough market. At the end of the day

the consumer will benefit."

"This would allow substantial investment in the back-end infrastructure like cold chains, warehousing,

logistics & expansion of contract farming," CII President B Muthuraman said.


The Reserve Bank Friday expressed hope that FDI in retail will help in bringing down inflation.

"Certainly FDI in retail would help improve supply chain & we hope it should also contribute to

reducing inflation, It is a visible measure (taken by the Centre) that will bring in right capital in the

country " RBI Governor D Subbarao said.

FDI in retailing is favored on following grounds:

The entry of foreign retailers can have optimistic results on the economy initiating momentum in the

long run leading to greater quality, efficiency & improved standards of living.

Big companies can‘t set up shop & drive out smaller players overnight – they have advantages in some

areas but that doesn‘t mean that the smaller players are completely at their mercy.

FDI flows are a lot more stable than FII flows.

Even now, organized domestic retail players are present in the market, but local stores are not going out

of business because of them. I think this will hold true in the future as well, & allowing FDI will be a

big net positive for everyone.

Getting efficient supply chains & eliminating middle men is good for both consumers & farmers as this

will give both parties a better price.

Getting more of the retail sector under the organized sector is also good because it leads to more

employment & also of a better quality.

The global retailers have advanced management know how in merchandising & inventory management

& have adopted new technologies which can significantly improve productivity & efficiency in

retailing.

Joint ventures would ease capital constraints of existing organised retailers

Entry of large low-cost retailers & adoption of integrated supply chain management by them is likely to

lower down the prices. FDI in retailing can easily assure the quality of product, better shopping

experience & customer services.

As multinational players are spreading their operation, regional players are also developing their supply

chain differentiating their strategies & improving their operations to counter the size of international

players. This will encourage the investment & employment in supply chain management.

FDI would lead to development of different retail formats & modernisation of the sector · They promote

the linkage of local suppliers, farmers & manufacturers, no doubt only those who can meet the quality &

safety standards, to global market & this will ensure a reliable & profitable market to these local players.


As shown in the above graph, we still have extensible opportunity for organized retail sector compared

to other countries & FDI is a welcome step for it. Moreover, India is not the first one to do this, & what

it has done is not unique either. Many developing countries have much more liberal policies than India.

These countries include China, Brazil, Mexico, Thailand, Russia, Singapore, Argentina & Indonesia

among others. In fact China started out in much the same way as India allowing 51% foreign equity &

confining them to large cities. They only removed these restrictions in 2005 after having them in place

for more than 10 years. They gave the domestic players enough to time to get up to speed with the

western model & then allowed free competition. It has turned out quite well for them as most of the top

10 retail companies in China are local & not foreign. This clearly shows that Chinese companies didn‘t

let much bigger foreign players compete them out of the market, & the Indian experience shows the

same thing in areas like telecom where foreign & local players co-exist. What‘s even more fascinating is

that the number of Chinese equivalent of Kirana stores rose from 1.9 million to 2.5 million after the

liberalization of its retail sector!

This is because of economic growth & also because big players don‘t have a magic wand that they can

use to ouster other smaller players as soon as they enter any market. Many of their strengths in their

home countries are based on factors that are totally absent in other countries. Wal-Mart is able to drive

costs down because of its incredible logistics & supply chains which are absent in India as they were

absent in China. Then there is the question of physical infrastructure like roads & ports that are not to

the same level as they are in the US & they simply won‘t have the kind of scale that they have in the US

to negotiate & bargain with the suppliers & drive down the cost.

In nutshell, allowing FDI in retail can bring about Supply Chain Improvement, Investment in

Technology, Manpower & Skill development, Tourism Development, Greater Sourcing From India, up-

gradation in Agriculture, Efficient Small & Medium Scale Industries, Growth in market size & Benefits

to government through greater GDP, tax income & employment generation.

Conclusion

Like each coin have two sides, so does this. While there is risk of unemployment, import imbalance,

predatory pricing by global retailers, threat to the domestic retailers, too much exposure of the retail

sector to foreign markets etc. There is also value creation in terms of greater quality, efficiency &

improved standards of living, efficient supply chains & elimination of middle men, lower prices,

improved productivity, modernization of the retail sector etc.

Thus, though it poses risks in the short term, it will create value in the long term.


Gaining a Value Creation Advantage in

Volatile Times: The Banking Sector

Sudhanshu Suman- FMS, Delhi

Background:

Gaining a value creation advantage in volatile times has become a need for companies in current

economic context. Since 2008 recession, the statics and dynamics of world economy have changed. The

economies of developed nations are growing at a minimal rate. The government and the central bank of

respective nations have to resort to expansionary monetary policy and a series of quantitative easing.

The governments of the countries had spent close to $6 trillion to take their economy out of the

recessionary mire. Therefore, they are highly indebted and are bare exposed to sovereign risk. In fact,

whole Europe is juggling to save their unified common currency. Developing economies have displayed

a greater degree of resilience and registered average annual growth rate of 5.5% combined. However,

the inflation in these nations are touching sky. In India, central bank has hiked borrowing and lending

rates 13 times since March 2010 and by cumulative 475 basis points. Summarily, it can be said that the

world economy is at the brink of another long slow down.

In such volatile times, the companies are facing challenges in creating value for all stakeholders.

Shareholders have not got their due return on their investment post recession. There is downward trend

in the stock market and dividend given by the company has not been as much as it were prior to

economic recession. Customers are marred by the huge price increase of goods and services and they are

facing decrease in their wealth. Suppliers and vendors too are having tough time negotiating a profitable

deal with companies.

Value Creation in a past couple of years in Indian Banking Sector

Shareholders: The value created by Indian Banks for shareholders can be depicted through the capital

gain, dividend payout and Earning per share.


From 2007 to 2011

Banks % Capital Gain Sales: %

Change

EPS: %

Change

Dividend: %

Change

SBI 33.16% 19.69% 7.69% 20.99%

Canara Bank 32.92% 19.08% 27.26% 11.96%

PNB 24.79% 24.15% 30.10% 21.79%

ICICI Bank 7.55% 2.51% 6.64% 8.78%

Axis Bank 32.11% 37.43% 28.86% 32.81%

HDFC Bank 26.61% 30.50% 18.16% 23.91%

Despite 2008 economic recession, banks have been able to give shareholders an aggregate positive

return. In recent times, due to hike of repo and reverse repo rates by RBI, the banks have registered

decent net profit margin (NIM) in the range of 2.5-3%.

Risk Exposure: Gaining return for Shareholders taking high-risk exposure does not augur well for

shareholders in this highly volatile condition. A few state run banks are facing increased Nonperforming

assets (NPAs) on their Balance Sheet. SBI‘s gross NPA increased to 4.19 percent of total assets at the

end of September, from 3.38 percent a year ago. The highest percent of NPAs come from real estate

sector and unfortunately it accounts for 17% of the group‘s total loans. For other state-owned banks, real

estate accounts for 13.2% of the loan book. This is high time for banks to rejig their policies related to

loan portfolio and maintain a balanced loan portfolio.

Services to Customers: Easy loan policy, high interest rates on deposits, good services, wide network of

ATMs, online banking facility, and regular updates about new financial innovations are what a customer

desire from the banks.

How Banks can create advantageous value for stakeholders:

Investment Challenge: How to invest a company‘s capital are always difficult. Generally, decisions

regarding this are taken using suboptimal compromise rather than a strategically sound consensus.

Managing asset and liability to keep interest rate risk under control even during high volatile situations

like India is facing right now. RBI has hiked interest rates 13 times since March, 2010 and rupee has

depreciated to very low Rs 54. FIIs are fleeing from India. Therefore, how to invest deposits to get high

return for shareholders is of high challenge to Banks.

Wide outreach to new banking customers: RBI‘s appointed Khan Commission report, 2005 clearly

says that India lags behind by a huge margin when it comes to financial inclusion. Nearly 70% of the

population do not have bank account and close to 90% are not in position to avail bank loans.

Unfortunately, this is the scenario when 40 years have passed after nationalization of banks in 1969.

KYC norms have been subsequently relaxed and Government has passed new regulations for

microfinance, which has helped farmers and small businessmen to avail easy bank loans.


It will be of great value to banking sector to outreach the untapped market. It may not be very much

profitable in the short run but in the coming years, it is going to be of great value given that every year 5

crore people move into middle class segment. Microfinance has helped farmers, small businessmen, and

women to set up small shops and so will Micro insurance be a game changer.

SBI, largest bank of India, has helped people in opening up no-frills account and currently it has 2.5

million such accounts. These banks are adopting ―correspondent banking system‖ which is the

intermediary between banks and farmers. This has helped SBI to increase its presence in 12000 villages

in 2008 to 50000 villages. Migratory labour can be targeted as they sent huge chunks of money back

home and currently it occurs majorly through informal channels.

Financial Innovations: Financial innovation is one major thing, which can be leveraged to gain first

mover advantage. As Indian is moving towards cashless money transaction, developing transaction

system with which transaction can be done easily will attract the customers, will boost customer base,

add up in revenue and will strengthen its brand image.

Using technology, banking sector can streamline its processes and adds value to the services provided to

the customer.

New Financial Products: We have diverse kind of people with diversity in their income, variation in the

income schedule, and different financial obligations and necessities at different time. Making the

banking system much more flexible than what it is today, focusing on innovative financial product can

give a company an advantage. Providing special type of savings solution to the daily wage earners can

give bank to the access of new customer base, which may not be very much profitable initially but given

the rate of growth of middle class population, it can be beneficial in the long run.

Banks have come up with diverse and sophisticated products. SBI brought a product in the market

where in a customer deposits up to $21 at any time for one to five years and will earn an interest rate of

6% to 8%. SBI has also come up with new innovative insurance policy ―Grameen Shakti‖, a dual benefit

Breeze, a mobile application was

developed by Monetise for Standard

Chartered Bank.

This has been brought into specifically for

Indian market.

It helps in tracking bank and credit card

accounts, transferring funds, pay utility

bills, locate nearest bank branches and

ATMs.


life insurance product. Chota SIP (Systematic Investment Plan), an equity-based mutual fund plan with

minimum monthly investment of $2 over at least five years, is another instance of innovation for

financial inclusion. The bottom line is that India is a land of diversity be it socially or financially.

Innovation in financial product to meet special demands of each and every corner of the society can help

gaining a value advantage.

Rejig Loan portfolio: Less exposure to long term and high risk lending

Given the high exposure of Banks to infrastructure, telecom and loss-making aviation industry, banks

are exposed to high default risk. For national banks like SBI, it is mandatory to have 40% of their loan

portfolio for agriculture sector and SMEs. According to the fact published by SBI, NPAs of the bank in

the farm loan segment rose nearly four fold to Rs 13,545 crore in the first six months of this fiscal.

In the recent times, due to hike in interest rates and economic slowdown, chances of default of home

loans have increased. The SBI‘s group exposure to realty has grown by 43.4% int he last fiscal year to

$1.7 trillion from $1.17 trillion. However, the industry‘s average growth rate to exposure to real estate

sector for the same financial year was 23.2%.

The bottom line is that it will be of prudence to overhaul the loan policy for the banks. Proper scrutiny

of the project and the borrower will be of great value especially in default prone sectors- Real estate,

Telecom, etc. It will help banks to keep their balance sheet neat and clean, no provisioning, and easy

adherence to the rules and regulations regarding capital adequacy. The extra load on other borrowers

due to high NPAs will be minimal. Altogether, this is the one of the best ways to create value for

customers and shareholders of the bank alike.

Adherence to Basel Norms:

Adherence to Basel-2 norms was made mandatory by RBI for Indian banks. In the near future, now it

will be turn of Basel-3 norms. These banking regulations have been made to keep the banking sector

safe from volatile and tough economic situations. Strict adherence to it will help banks insulating itself

from economic turmoil and creating value to depositors and shareholders alike.

Conclusions: Gaining value creation in current volatile times is on every company‘s mind. The requirement is to,

prudently, chart a map for that and then strictly follow it. Banking sector, in India, has huge potential for

growth, but at the same time, it needs to take every single stride cautiously. Thus, it will be able to

create value to customers, employees, shareholders, government and the whole economy.


How Efficacious Team Work in Supply Chain

Management can help Organizations gain

Value Creation Advantage in Volatile Times

Saumya Jain, MICA

We may have all come on different ships, but we're in the same boat now- Martin Luther King Jr.

Be it distribution strategy or inventory management or maintaining healthy relationships with customers

as well as suppliers, all fall under the purview of supply chain management. This labyrinthine network

indeed needs a well-managed system, wherein all the elements function together in unison. It is also

known that the feeling to work closely with everybody and in favor of them as well as the organization

should come from within. Besides, the environment should be amicable enough to boost that co-

operative feeling. Else every attempt to make an employee work whole-heartedly will go in vain.

Valuing and acknowledging your colleagues‘ hard work and contribution is important not only in

formulation of congenial terms, but also in providing a nudge to that person to substantiate himself in a

more promising way. This indirectly is beneficial for an organization‘s sustained growth. I used the

word ‗sustained‘, because in today‘s competitive scenario, it is very easy to dissuade any employee

involved at any stage of the production of a product, starting from development to marketing to sales,

into a completely different territory. For any company, its employees are its assets. Thus, it becomes

very necessary to hold them back, either by favorable company policies or by providing enough

lucrative.

Cohesiveness of the entire team should be the mantra of the day. But, egotism is the thirst which is way

too difficult to quench. Appreciating the efforts of one‘s co-workers is a situation rarely witnessed these

days. Admittance of other‘s accomplishments is the seed which has to be incepted in all the people

associated with the organization. It should not be overlooked that a person‘s maximum potential can be

extracted when he feels at home at his workplace and where his confidence is boosted by a dose of

admiration at regular intervals. Thus, the feeling of integrity should be leveraged amongst the employees

for a satisfactory output.


Nowadays, dependence on your team mate or any person working up-the-line or bottom-of-the-line is

looked down upon and poses a question on your abilities. It is mandatory to do away with this prejudice

amongst every correlated section in the company for it to prosper. Today, it is not only the role of

marketers to create brand differentiation or specialization, but also the function of distributors, sellers,

retailers, advertising agencies, information technology department, human resources department,

logistics and inventory section to create a relevant brand perception. All have something or the other to

offer to.

Let us take the examples of specific product categories. Say, for instance, soaps and detergents. They

need considerable product visualization and shelf space for marking their presence amongst the gamut

of products available. Here, the role of advertising agencies and retailers is emphasized. If they do not

perform well, due to personal grudges with the marketer or the logistic head, the visible range of the

product becomes like a flash in the pan. Now, when we move over to the automobile sector, here we

find that there is no role of a retailer. It is taken over by the distribution and service sector. More

satisfied and spirited are the employees, higher is their efficiency, better is their convincing power, and

more is the increment in the sales.

Another important component in the supply chain management is the business partners. They mould the

structure of the entire system in a well-disposed manner. They are influential stakeholders of the

company, and thus maintaining consonant relationship with them assumes prominence. Also, at times

the company wishes to widen its range of products by collaborating with other companies and running

the organization as one. This calls for respecting each other‘s decision, while acknowledging them and

giving each other sufficient space to contribute properly. The concept of single partner has now given

way to multiple partners. And if all of them are beneficial, the task becomes more strenuous.

Building up of a strong relationship is dependent on maintaining transparency by the authorities. This

helps in imparting trust throughout the chain, and thus acquiring loyalty from them in return. Initially,

thrust was on to creating and enhancing customer value. It is still there, but now the focus has also

shifted onto how to keep every employee in the supply chain and logistics elated and contented. This is

backed by a tacit understanding amongst all of them, regarding the task each one has to manage and the

area of the other subdivision where one is not supposed to intervene.

Nobody can survive alone. Dependency always comes into the picture. Same applies with the

functionalities of any organization. If this concept is understood by all, it becomes very easy for it to

operate. It should be noted that, if any single element doesn‘t perform up to the mark, the entire unit

suffers. Whatever hard work is put in by the others, it all goes unnoticed and wasted, and lethargic

attitude of one section creates nuisance for all. In the competitive scenario of today, where no domain

can afford to dawdle, optimization is the key to success. And this level can be achieved only by

incorporating the feeling of oneness in all the elements of a growth-oriented organization. Esprit-de-

corps stance of one and all will help in going a long way and in achieving the desired profitability.

To fetch that number one position, every management tries to gain competitive advantage. If it is able to

strike a difference from what its competitors have to offer, it then hits the bull‘s eye. Offering an

exemplary supply chain can be one of the factors to demarcate its position in the market. For this, the


authorities should continuously do a performance analysis of each element in the chain, to find out the

loop hole and rectify it accordingly and at the earliest.

Imagine a scenario, when the advertisements of your products promise and claim to fulfill your needs,

whenever you desire, but the actuality is far from what is projected. In this festive season of Diwali,

customers were asked to wait for months for purchase of things like refrigerators, automobiles, RO

water purifiers due to limited stock. Why was this ambiguity between the promotional campaigns and

the product delivery? Was it the fault of the logistics team or the material management team? What

attributes did BASF impart in its structure for it to be glorified with the award of the Best Supply Chain

Management in April 2011? And what will you have to say on $1 billion loss of Boeing 747 and 737

airplanes, due to delay in providing specific parts from the supplier side? As per your product demand,

the company should either follow just-in-time [JIT] methodology or keep sufficient stockfor inevitable

circumstances.

Supply chain executives should understand the business strategy in order to deliver value and stand

intact in the sea of competitors. For this, a sound communication process is needed. The policy, the new

strategy to be implemented should be communicated properly and well-in-advance to everybody in the

chain, so that synchronization is observed in the product development and delivery. Outsourcing has

become a common trend these days. It becomes very necessary for external division to interlink well

with the internal ones; else severe repercussions ought to be followed. The gap has to be bridged

effectively for smooth transactions to occur. The appraisal of one should not be at the cost of

undermining the efforts of the other. Be it tracking of orders or provision of an expert for support

services or research and development, all has to be collaborated efficaciously.

Other aspect which cannot be overlooked is the globalization of firms. When the business crosses

national boundaries, it becomes more constrained environment and the sync of each one becomes too

demanding. Language is not the only barrier. The regulations differ, the approach differs. And if the

manufacturer and seller happen to be in different countries, proper co-ordination pushes its way through

a lot of pressure.

The click is to get connected! This connection itself improves quality and ultimately, profitability. It is

all about respecting others‘ capabilities and not hesitating to render your services in other departments

when needed. At the end of the day, it is not the individual work, but what the organization has to offer

as a whole which matters. The administrative department should understand that the relationships within

the supply chain tend to fade soon, so their consolidation is required from time to time.

Misunderstandings ought to be resolved instantly to prevent them from assuming immense proportions.

The managers and the planners at the authoritative level should be pragmatic in decision making and

should reciprocate what its employees have offered it for its prosperousness. This is what is the essence

and bottom line of a successful business entity, with a successful supply chain management.


INTRODUCTION

Implementing sustainable business models necessitated the initiation of corporate strategic change and

the development of sustainable innovations. The current business instabilities are the result of

unsustainable strategy making processes along with under regulated economy built on an ideology of

free market capitalism and unlimited economic growth. Since the onset of industrialization and

conceptualization of strategic theories various externalities are not considered a part of preview. They

were assumed to be relatively small and solvable. The consequences that declare a strategic model

unsustainable always followed with a lag and unpredictably. Gradually the planning and decision

making on various fronts has always considered an incomplete picture.

But considering various strategy failures in the new context, we have to remember that the goal of the

business-strategy designing is to sustainably improve human well-being and quality of life. Ultimately

we have to follow innovative approaches while designing new models that consider various outcomes in

entirety. The indisputable truth is that for economic growth we have to juggle among various scarce

resources, but final aim is to reach for new strategies, which help us to conceptualize sustainable

business scenarios.

According to Brundtland Report sustainable strategic development means ―meeting the needs of the

present without undermining the ability of future generations to meet their needs‖. For such a

sustainable model to exist various financial practices, human cost factors, and existing economic models

need to be considered collectively. The strategy making practices that are useful today may become

sustainable by supplementing them with new innovations.

Various Structural Innovations Highlighting Sustainability-Oriented Business

Strategies

Sustainability-oriented strategic change embraces the strategy content along with a strategy formation

process. This process encompasses proactively spearheading a transition in strategy building processes.

The conditions for the emergence of proactive strategy formation process and those containing a high

sustainability impact are a conceptual framework, considering factors encompassing various fields.

Business Strategies for Sustainable Innovation

Gurkirat Singh- NITIE Mumbai


Companies where ‘sustainability-oriented strategies’ were initiated and carried out

At ‗Philips‘, the life cycle concept,

reinforces in the production

concepts, was integrated with the

Eco Vision-Program as a specific

program to mitigate the far reaching

effects of anthropogenic activities.

At ‗Novamont‘ the strategic renewal

is based on the principle of circular

flow economy and its pioneer role is

located in the area of using

renewable resources.

‗Bedminster‘ focuses on zero

emission concepts.


Let us understand the way the businesses can integrate sustainable oriented content in its strategy

formation process by generating models considering factors for the occurrence of sustainable strategic

change process.

An Indicator based improved approach to monitor progress towards sustainable strategy is required.

United Nations CSD (Commission on Sustainable Development) indicators of sustainable development

can be used to understand scope of innovations.

Strategy formation encompassing ‘Economic development’

Strategic Indicator Factors Scope for Innovation in strategy

Macroeconomic

Performance

Per-Capita GDP Developing models that can balance the impact of social &

environment cost of production and consumption.

Impediments to the Reform of National Economic Indicators

Innovative and holistic approach to internalize environment cost in a company‘s accounts is required. It

will apply environmentally adjusted economic indicators to the strategy making processes.

Doing so would mean a major reduction in the level of margins, which few businesses would want as it

will present a poor grade report. Also, the lack of regulatory coordination hampers the development of

an across-industry comparable framework for internalization, which prompts many strategists to take a

wait and see attitude. So to internalised environmental cost into existing system of business indicators

innovative rollouts require systematic implementation at industry/sector level. This will provide an

appropriate valuation of natural resources and will make business considerations more comprehensive.

Even when the existing SNA (System of National Accounts) remains in place across various business

environments, efforts to internalize environment costs in business indicators can at least provide

information on the real costs of a strategy‘s rollout which is not available now.

Japan’s experience at reforming SNA Net National welfare was calculated as an adjusted GNP. Actual pollution abatement costs were

identified and deducted from GNP, so were the potential costs of meeting environmental standards for

specific pollution problems. The value of non-market activities was added to GNP. This approach

helped in determining the level of sustainability of the business strategies.

Strategy formation encompassing ‘Governance’

Strategic Indicator Factor Scope for Innovation in strategy

Effectiveness and

Technological

Provisions

Higher Tele density,

Internet connectivity, and

Resilient Cyber Security

Innovative technological implementations

provide critical support for sustained

strategic development.


Innovating network security models ensures

controlling any vulnerability and maintains

sustainability of ecommerce, and monetary scenarios.

Absence of secure systems leads to improper decisions

and undetected risks during rollout of strategy.

In today‘s globalized market, defences at the physical

borders are not enough to achieve sustainability. The

flow of transactions and critical information needs high

level

of

defenc

e settings. This calls for continuous innovation in

technology so as to guard off any threat on cyber

frontiers.

Strategy formation encompassing

‘Environmental health’

Environment provides various resources required for

economic development. Unsustainable strategies often

results out of improper planning and forecasting due to

ignorance of certain factors that are not directly related

to production. Hence scope for innovation lies while

designing the simulation models which can bring

together various departments to act in unison to gauge the impact of any strategic change. This can

uncover a huge scope to reduce load on resources and to promote long term unbeaten strategy.

Industrial society must innovate better production processes that are energy and material efficient. This

approach must avoid wasteful consumption and consumerism. The supply chain of goods must include

parallel running reverse salvation chain to collect the discarded material. This can be done by innovating

and organizing the model for scrap industry.

How innovation can solve economic issues at micro level.


Research &

development

Efficiency levels of energy

consumption

Expanding knowledge base and developing

new and improved products.

New product innovations can reduce the cost burden from a strategic model by decreasing the demand

for energy. This is explained in the below cases:

Case 1: Innovating efficient lighting systems (Refer Table-1)

Case 2: Innovating Architecture designs for self sustained cities.

Growth in the number of financial institutions whose clients were

targeted using malicious programs designed to steal data

Source: Kaspersky Lab

Table 2: Alliance to save energy(India Fact Sheet)


Centralized development model has led to rise of mega cities at the expense of rural areas. This resulted

in high levels of unemployment and poor quality of life in rural India and large scale migration of the

population to big cities. This migration is a result of lack of sustainable agriculture in rural area. Hence

we need to look for decentralized model of development successful strategies.

A sustainable city can feed itself with minimal reliance on the surrounding countryside, and power itself

with renewable sources of energy. It involves a city designed with consideration of environmental

impact, inhabited by people dedicated to minimization of required inputs of energy, water and food, and

waste output of heat, air pollution - CO2, methane, and water pollution.

Examples from around the globe

United States: Coyote Springs Nevada largest planned city in

the United States.

Denmark: The industrial park in Kalundborg is often cited as

a model for industrial ecology.

India: Manimekala is Hightec Eco city projected in Karaikal.

It will be first of its kind in South India.

Case 3: Alliance to Save Energy (India Watergy-Program)

(Watergy =Water+Energy)

This innovative strategy led to the creation of an Alliance to

Save Energy, in partnership with the U.S. Agency for

International Development. The alliance is designing

sustainable Watergy solutions for municipalities to take

advantage of opportunities that reduce energy use, water waste and costs, while at the same time

improving water services. The approach is to enter into partnerships with state-level urban development

agencies, in parallel with interventions on the municipal level. (Refer Table-2)

Strategy formation encompassing ‘Global Trade partnership: Demand and supply patterns’

Huge scope of innovation in Supply Chains is feasible to optimize the transportation of goods and to

collect & salvage the scrap. Efficient trade partnerships do contribute to strategy and make it sustainable

by reducing inflation and fluctuation in prices by ensuring timely supply of commodities.

Example: ITC’s e-Choupal agri-business strategy for rural communities

ITC‘s Agri-Business Division, has conceived e-Choupal as an innovative and efficient supply chain

strategy aimed at delivering value to its customers around the world on a sustainable basis. It leverages

an innovative IT model to virtually cluster all the value chain participants. It unshackles the potential of

Indian farmer who has been trapped in a vicious cycle of low risk taking ability - low investment - low

productivity - weak market orientation. Such a market-led business strategy can enhance the

competitiveness of Indian agriculture and trigger a virtuous cycle of higher productivity, higher

incomes, and enlarged capacity for farmer risk management, larger investments and higher quality and

productivity. This sustainable trade model has led to a growth in rural incomes and will also unleash the

Table 3


latent demand for industrial. This will propel the economy into a higher growth trajectory.

Strategy formation encompassing ‘Education and Human Resource Development’

Education for Sustainable economic Development (ESD) is the practice of teaching for sustainability.

UN‘s Agenda-21 was the first international document that identified education as an essential tool for

achieving sustainable development. On similar guideline a country can innovate its education system to

design macroeconomic strategies as per the changing social and economic needs. Few methods that

have undergone strategic innovations are:

Liberalise and deregulate the education system to encourage promotion of new schools, colleges,

vocational and other institutions of higher education.

Central and state government should change their roles within the education system, reinventing

themselves as facilitating and supervisory organisations.

Devising a common schooling system and updating teacher training curriculums.

Using computers and technology - India‘s Rs. 3 K tablet, is such an innovative concept.

Innovation in education

For capacity building (i.e. creating awareness) in the young generation, MOEF has designed a strategy

called a National Green Corps (NGC). This provides opportunities to children to understand the

environmental issues through school eco-clubs. During the tenth plan, 50,000 schools are expected to

participate in NGC related activities. Moreover, 3000 eco-clubs have been set-up in schools in MOEF

assistance.

Strategy formation encompassing ‘Tourism’


Tourism Number of domestic and

international tourists

Relevant contributor in an economy.

Tourism model can be innovated to

increase the revenue out of this sector.

Example: French Agency for Tourism Engineering (AFIT)

The French tourist industry has followed an innovative strategy by redesigning the model and

developing the infrastructure to support this sector. The AFIT undertakes several dozen new initiatives a

year. These initiatives are organised according to several main lines of approach:

Understanding of customer bases and activities.

Public management of tourism.

Development of tourism projects.

Marketing of tourism supply.

General perspective


Sustainable Public Inflation rate Creating provisions for cushioning high and


Finance unanticipated inflation. This includes innovating

warehousing and cold storage infrastructure.

Employment Debt to GNI ratio,

Labour productivity

and unit labour costs

High debt ratio is an indication of unsustainable

public finance and a rise in labour cost decreases

international competitiveness. Innovation can be

done in the manufacturing processes to reduce the

production cost and hence achieving sustenance.

Lopsided strategies in industrialisation have created significant challenges for managing pressures on

resources. An example of unsustainable strategy of economic development is the green revolution,

which made a beginning in 1966 and by 1985 it had reached saturation level and has been seeking a new

direction. Water depletion in the tube well irrigated lands and water logging in the canal irrigated ones

have emerged as serious problems. Later this was followed by providing free electricity to farm sector.

It was expected that it would increase the development of the agriculture sector, but this unsustainable

strategy disrupted the entire economy at the state level and the consequences have spilled over to other

sectors.

Recognizing these challenges the government of India has articulated the National Environmental Policy

(2006) which calls for a fundamental shift in the priority given to the environment and the regulatory

approach to environmental management.

Sustainable agricultural strategies have led to the innovation of practices under the organic farming.

Various innovations in this sector are:

Breakthroughs in Irrigation Technology (Sprinklers, Drip, Microdrip methods)

Breakthroughs in Food Processing and Handling industry.

Conclusion

The long term solution to the unsustainable strategies is therefore to move beyond the "growth at all

costs" model to a model that recognizes the real costs and benefits of growth/change. Hence innovation

on various fronts to develop sustainable strategic models is the way ahead. This ensures to the degree

possible that present and future generations can attain a high degree of economic security and achieve

democracy while maintaining the integrity of the ecological systems upon which all life and production

depends.


Changing face of Consumer goods and Retail in volatile times

The year 2008, marked with the financial crisis not only has shaken the consumer confidence in the

Governments, businesses and economy but has also shown a change in the consumer behavior which

has thrown up challenging expectations in front of the consumer goods and retail business. Although

we have surpassed the crisis, we are left with huge debts, sluggish growth and a fundamentally

weakened financial sector. The impact of these changes on how the consumer companies will create

value and by how much they create will be paramount.

Such turbulences only make the companies revisit their business strategies for value creation, rethink

their targets and revise their strategic planning to contain the risk. The following are the major after

effects of financial crisis on the investors or promoters:

- Increased sensitivity to risk

- Emphasis on value

- Focus on Value- based investment strategy

From the perspective of the consumer, the companies should work on the following dimensions:

Shorter cycle times for innovation and imitation: Considering the changing consumer behavior,

retailers are cutting on the SKUs and reducing the merchandise on shelf, in such a scenario brands

should invest on packaging, price points and customer touch points to increase the brand recall.

Different strategies for different markets/ geographies: In the developed markets, due to the drastic

slump in the growth, the markets have become saturated; capturing the market share should be the point

of focus. This can be achieved by reducing the costs through efficient supply chain, changing the layout

and working on different promotional schemes. While on the other hand, in the emerging markets, the

demand is still rising, so the companies should focus on creating a pull factor in the business by playing

Esha Sharma- MDI Gurgaon

Changing face of Consumer goods and

Retail in volatile times


with the 4Ps of marketing efficiently. The bundling of the products, freebies, discounts and promotional

schemes can play a major role in emerging markets which have become more oriented towards value for

money.

Use of IT in value creation: Considering the abundance of options in front of the customers together

with sluggish demand, it becomes really challenging to target the right segment, convert the prospects

into customers and finally customers into loyal clients. In such a scenario, IT plays a very important role

in creating numerous touch points through mail, newsletter, SMS and targeted campaigns. The use of

business analytics can equip the retailers in a fluid and rapidly evolving environment, the ability to

analyze and adapt quickly can be competitive edge to the retailers.

Gear up for competition against innovative business models: The post crisis period is donned with

increased use of Internet, Social media, Reviews and Online Advocacy marketing. This has led to new

business models followed by companies like Amazon which is increasingly able to deliver orders

without charging the shipping charges, FlipKart offering pay on delivery; this poses serious challenges

to the brick mortar companies. Furthermore, retailers have a chance to make the experience of the

customer pleasing by increasing customer touch points in order to improve the brand recall.

Advocacy marketing in the Virtual world: With the widespread prevalence of digital revolution,

companies can manage its relationships with suppliers and customer very well. The influence of

advocacy is playing an instrumental role in any and every purchase of products. Now, it is at the

disposal of the company whether it uses the power of advocacy in creating long- lasting competitive

edge by transforming recommendations and reviews into rich and fruitful relationships. The most

attractive point about advocacy marketing is advocates increase in geometric progression. The role of

advocacy is not just confined to writing reviews about the products but also promoting the products,

rescuing the inferior products or services, generating ongoing conversations between companies and

customers. But advocates can continue with their conversations only when the companies come up with

new deals, new product lines, brand extensions or may be new campaigns. This implies companies need

to keep feeding meat to the infotainment hungry customers.

Investment challenge: I think a public consumer company also has aspiration for the kind of

shareholder returns that they hope to deliver. They have a certain amount of capital, in the form of

company‘s cash flow, cash on hand and access to debt, to invest in order to generate returns. In order to

grow the economic value of the business, they can invest in business units, functions or other operating

units.

Leadership by example: In the turbulent times when the foundations of the consumers trust are shaken,

we need to look beyond the negative connotations, predictions and fads. It is crucial for any organization

to understand the initiative taking and risk taking attitude of its leaders in restoring confidence and

revitalizing organizations. I think leadership by example has the biggest impact on the people‘s

performance. One can‘t change people‘s behavior by just telling them, they need to be shown in

practice. Moreover, a lot has been said and done regarding the organizational values, but very little on

personal values which have a much more direct impact on the employees. The leaders in any

organization should get clarity on their own values and principles so that they can show full

commitment towards organizations during times of crisis.


Measuring and Analyzing: Apart from the benchmarks set by the companies, the consumer goods and

retails firms can also set their own metrics like sales turnover per employee, lead conversion per

salesperson, performer of the month etc. in order to boost the motivation level of employees and also to

help the management keep an eagle‘s eye on the market dynamics. KPIs arranged in a Balanced

Scorecard can help the business in managing its performance during a financial crunch.

Personnel cost management and innovative pay models: Whether the companies will be adopting

flexible or a restructuring approach, they can definitely take steps like postponing tenure based hikes

depending on the market conditions.

Sustainable implementation: Culture becomes the most important thing during turbulent times. It can

act as glue that can hold company together and they should focus on honesty, loyalty and collegiality

and soliciting the support of employees and unions.

The times to come will reveal the fruits of the efforts put in by the consumer goods and retail

companies.


CONSILIUM Consulting Club: Grooming "The future consultants" at FMS

The Consulting Club is a student-run organization with the agenda of liaising with

Global Consults to increase their presence at FMS, while working towards

preparing the students for a career in consulting. In addition to providing practical

experience through workshops, guest lectures facilitation, the Club serves as the

nucleus for pioneering strategy games and consulting projects and has developed

a reputation for unmatched innovation, with activities spanning several spheres

like Management Consulting, Risk Advisory, Process/Operations Consulting, IT

Consulting, Benchmarking Advisory.

THE

CONSULTING

CLUB Email: [email protected]

http://www.fmsconclub.com/index.html

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