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
Consilium 2 | P a g e FMS, Delhi
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
Consilium 3 | P a g e FMS, Delhi
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
Consilium 4 | P a g e FMS, Delhi
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
Consilium 5 | P a g e FMS, Delhi
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
Consilium 6 | P a g e FMS, Delhi
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
Consilium 7 | P a g e FMS, Delhi
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
Consilium 8 | P a g e FMS, Delhi
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
Consilium 9 | P a g e FMS, Delhi
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
Consilium 10 | P a g e 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.
Consilium 11 | P a g e FMS, Delhi
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.
Consilium 12 | P a g e FMS, Delhi
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
Consilium 13 | P a g e FMS, Delhi
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.
Consilium 14 | P a g e FMS, Delhi
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
Consilium 15 | P a g e FMS, Delhi
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?
Consilium 16 | P a g e FMS, Delhi
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.
Consilium 17 | P a g e FMS, Delhi
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.
Consilium 18 | P a g e FMS, Delhi
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
Consilium 19 | P a g e FMS, Delhi
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.
Consilium 20 | P a g e FMS, Delhi
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
Consilium 21 | P a g e FMS, Delhi
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
Consilium 22 | P a g e FMS, Delhi
(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
Consilium 23 | P a g e FMS, Delhi
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:-
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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.‖
Consilium 25 | P a g e FMS, Delhi
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%.
Consilium 26 | P a g e FMS, Delhi
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
Consilium 27 | P a g e FMS, Delhi
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.
Consilium 28 | P a g e FMS, Delhi
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.
Consilium 29 | P a g e FMS, Delhi
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.
Consilium 30 | P a g e FMS, Delhi
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.
Consilium 31 | P a g e FMS, Delhi
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.
Consilium 32 | P a g e FMS, Delhi
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.
Consilium 33 | P a g e FMS, Delhi
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.
Consilium 34 | P a g e FMS, Delhi
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.
Consilium 35 | P a g e FMS, Delhi
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
Consilium 36 | P a g e FMS, Delhi
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.
Consilium 37 | P a g e FMS, Delhi
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
Consilium 38 | P a g e FMS, Delhi
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.
Consilium 39 | P a g e FMS, Delhi
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.
Consilium 40 | P a g e FMS, Delhi
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.
Strategic Indicator Factor Scope for Innovation in strategy
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)
Consilium 41 | P a g e FMS, Delhi
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
Consilium 42 | P a g e FMS, Delhi
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’
Strategic Indicator Factor Scope for Innovation in strategy
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
Strategic Indicator Factor Scope for Innovation in strategy
Sustainable Public Inflation rate Creating provisions for cushioning high and
Consilium 43 | P a g e FMS, Delhi
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.
Consilium 44 | P a g e FMS, Delhi
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
Consilium 45 | P a g e FMS, Delhi
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.
Consilium 46 | P a g e FMS, Delhi
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 47 | P a g e FMS, Delhi
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