India Govt. gives green signal to biggest-ever defence deal with US

India has formally cleared the biggest-ever Indo-US Defence deal , the $4.1 billion contract for 10 C-17 Globemaster-III giant strategic airlift aircraft. All decks for the almost Rs 19,000-crore deal, which will support over 22,000 jobs in the US as Barack Obama himself put it, were cleared last month, as was first reported by TOI. On Monday, the Cabinet Committee on Security chaired by PM Manmohan Singh gave the final go-ahead for the contract, under which the 10 Globemasters are to be delivered to IAF between 2013 and 2015.

Capable of carrying a maximum payload of 77.5 tonnes, which can include combat vehicles, artillery guns and battle-ready troops, the Boeing-manufactured Globemasters will seriously boost India's swift power projection capabilities in its "primary area of geo-strategic interest'' stretching from Persian Gulf to Malacca Strait.

The Globemaster from "Block 19'', which India will get, after all has a maximum range of 9,200 km. "They can carry twice the load of our present IL-76 `Gajraj' aircraft (IAF has around a dozen of these Russian-origin aircraft). Importantly, they can also operate from short airstrips,'' said ACM Naik. The Globemaster deal, which some have termed "exorbitant'', will assuage the US, which is still to reconcile with its F/A-18 `Super Hornet' and F-16 `Falcon' fighters losing out to European fighters in the India's $10.4 billion project to acquire 126 jets.

Arms deals in the bag

* 2002: $190 million for 12 AN/TPQ-37 firefinder weapon-locating radars

* 2005: Rs 937 crore for three VVIP Boeing Business Jets

* 2006: $92.5 million for amphibious vessel USS Trenton, with 6 UH-3H helicopters

* 2007: $1.2 billion for 6 C-130J `Super Hercules' aircraft

* 2009: $2.1 billion for 8 P-8I Poseidon maritime patrol aircraft

* 2010: $170 million for 24 Harpoon Block-II missiles to arm Jaguar fighters

* 2010: $822 million for 99 GE F-414 engines for Tejas Light Combat aircraft

* 2010: $257 million for 512 CBU-105 sensor-fuzed weapons

* 2011: $4.1 billion for 10 C-17 Globemaster-III strategic airlift aircraft
In pipeline

* Four more P-8Is for almost $1 billion

* Six more C-130Js for over $1 billion

* 145 M-777 ultra-light howitzers for $647 million

* Multi-million dollar deal for Javelin anti-tank guided missiles

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Coca Cola acquired local brand Thums Up hoping to kill competition.

The move backfired and Thums Up is still India’s largest selling cola drink. Despite MNCs and big national brands, the staying power of local flavours continues, says Savreen Gadhoke

Bombay, March 15, 1959: Seven semi-illiterate women with a borrowed capital of Rs.80 assemble at a vacant terrace to start their entrepreneurial journey in an endeavour to support their livelihoods. The sales of their product touched Rs.6,196 in the first year itself and in no time the number of workers (only women, fondly called ‘sisters’) catapulted into hundreds and thousands of sisters coming together and joining hands. In 1968, the company opened its first branch outside Mumbai in Gujarat and also added new products to its portfolio. Today, the same company has its annual sales exceeding Rs.3.5 billion with over 80 branches all over India and 45,000 women employees. The product is Lijjat Papad (yes! the same one with a toothy rabbit as its ambassador) started by Shri Mahila Griha Udyog. Lijjat Papad is perhaps the best instance of a regional brand successfully going national. In its 50-year long journey, Lijjat Papad has set precedence for countless regional brands to fulfill their dreams of going pan-India (and even overseas). But what does it take for a regional brand to spread its wings and fly in national – or even global skies?

“Basically,” says Neeta Wali, Director, Brand Talk, “it is the theory of 4Ps only that has to be extended wisely and smartly when a regional brand plans to roll out its offering nationally.” Here, the most important is, of course, the product itself. What products are on offer and are they enough to satisfy or meet the demands of a national audience? Although Lijjat Papad started its business with a single product offering (papad), it subsequently added new stuff to its portfolio like masalas, flour and bakery products. As net income grew, the sisters diversified into other areas like matches, agarbattis and leather products as well. Besides, Shri Mahila Griha Udyog also started producing a detergent powder by the name of Sasa, which became an instant hit. Although papad by itself did appeal to a national audience; but it was also the diversification and addition of new product offerings that added economies of scale to the business, which eventually allowed it to catapult into a strong national brand to reckon with.

Pricing too has played an important role in the journey of regional brands charting a national roadmap. A classic example of a price-warrior has been Nirma, launched by a small time chemist at the Gujarat Government’s Department of Mining and Geology, Karsanbhai Patel in 1969. Priced at a lowly Rs.3 per kg, Nirma gave HLL (now HUL) many sleepless nights, giving tough competition to Surf priced at Rs.15 per kg. Nirma was established as a home-grown regional player with a unique consumer proposition and a special focus on rural as well as low-income groups. “Knowing your target audience is very essential. Even when you roll out nationally, your customer does not change. So, your pricing should be such that it appeals to a pan-India audience,” says Anand Ramanathan, Advisory Service Manager, KPMG. Even when Nirma spread its wings across the country, it maintained its consumer proposition and continued to focus on its target audience only.

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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I don’t have a philosophical disagreement with global collaboration

Exclusive In chat with Society Magazine - Prof. Arindam Chaudhuri

He’s living in the same house for the last 40 years; and claims that even his food habits, friends and hours of work have remained mostly unchanged. The only changes that excite Sam are the ones he’s implementing at Madison. Excerpts from our interview:

4Ps: You once believed that a good agency is one that is small with a select clientele. Looking at Madison’s billings today, we assume that you’ve changed your mind about that?
SB: (shrugs) I always wanted to be a craftsman, not a manager. Today, I have inadvertently become a manager. I left Mudra because Mudra wanted to become the largest and the best agency and I did not relate to the agency’s objective. I believed that a good agency should be small with a few large clients.

4Ps: Today, however, is different?
SB: (laughs) Consistency is the virtue of fools! I started Madison with just two clients – Godrej and Nelco. For the first 5 years, I did not even look at any other client because I was so afraid of letting down existing clients. Today, I view things differently as I am certainly better resourced than in 1988.

4Ps: The Ambani flavour had spread in Mudra during your stint there? Your key takeaway from there?
SB: I learnt a lot from the Ambani’s – especially that every job must be done and done on time. I’ll narrate one incident of more than 26 years ago when remote phones had just about started appearing. One weekend I was away on vacation. I was in a swimming pool in this resort and Anil Ambani managed to reach me even there over some urgent matter that he wanted to discuss. This really told me that the word impossible did not exist in the Ambani dictionary.

4Ps: And TV as an advertising media became your passion during those years at Mudra.
SB: In the early days there was simply no television content available. So we not only had to think of advertising but also in terms of organising relevant programming. Remember, I’m talking about the time when only DD was there. So unlike today, when channels like Star and Zee look after their own viewership, back then we had to slog to create viewership.

4Ps: And you carried that learning to Madison...
SB: In Madison, I was involved in creating Shanti on DD during the afternoon slot. It was a risk. At a time when advertising was mostly restricted between 8:30-10:30pm, we had the nerve to ask DD to give us 325 afternoon slots between Monday and Friday. Nobody bothered to watch TV on weekdays and that too in the afternoon. We changed that with Shanti and brought in P&G and Godrej as advertisers. The clients were happy because we bought them air time at cost effective rates. Most people make the mistake of not fully understanding that clients/ advertisers actually hate advertising. It is only media owners and ad agencies who love advertising. Our search at Madison therefore has always been to find cost effective solutions for clients that help build brands.

4Ps: Are you saying that cost effective solutions are a prerequisite to brand building?
SB: Absolutely! Advertising per se has become so expensive that most brands have to do big time jugglery to have affordable and workable plans. But to get to that elusive El Dorado of a perfect fit one needs cost effective solutions. We are standing on shifting stands. We have to keep doing new and different things to catch attention and grab consumer’s mind.

4Ps: Is that why you are diversifying your offerings? Given the quicksand world of advertising, where you yourself have sometimes suffered big lows, what’s your risk assessment on this expansion?
SB: Madison’s lowest point till date was in 1998, when our partnership with DMB&B broke. They were a huge billion dollar enterprise and we were the size of a pin compared to them. They were asking for something that we did not agree with. So we parted ways with them and also some big accounts (like P&G and Phillips) in creatives. Almost 60-70% of our revenues vanished overnight. I was disheartened but even then I knew that I’ll never give up.

4Ps: Where does Lara fit into the picture? Are you grooming her to step into your shoes?
SB: Yes. I think that today the person who runs Madison World needs to have skill sets that go beyond advertising and its craft. You need specialist managerial skills and Lara fits in beautifully. She is not as dogmatic as I can be and so both of us are able to look at newer opportunities, identify gaps and fill them.

4Ps: But are you not expanding too fast? I mean, from 5-6 units in 2004, you’ve almost 20 units today.
SB: See, we are constantly making some successful and some not so successful attempts at predicting the future. Remember, advertisers do not come to us because they like advertising. They come because they want a solution to a marketing problem. Our specialist units in entertainment, outdoor, rural and mobile marketing will help us do just that. My dream is to be the agency of choice for every large client, not every client.

4Ps: But these other units are not really doing much to enhance the Madison bottomline yet?
SB: Madison World’s billings have today crossed Rs.2,000 crores and most of it is brought in by Media and MOMS (outdoor unit). My dream is that every unit should be as highly regarded as media is. In terms of billings – Media will obviously remain the highest because it’s a Rs.20,000 crore market. In comparison, the other units cater to still nascent markets. Outdoor and PR are doing rather well, but they can never match up to media billings.

4Ps: What about selling out to a global player. The industry is constantly speculating along that lines?
SB: I do not have any philosophical disagreement with global collaboration or partnership. But the partner must respect what we bring to the table. It must be a win-win partnership and serve the interests of our clients, employees and shareholders – in that order.

4Ps: For now, what do the challenges ahead look like?
SB: Decline in profits, not enough money and cash flow problems – but we can make that sacrifice to deliver to our clients. Following that model, if we have survived for 22 years, I know we have a viable business model. Besides, one of these days, I’ll prove the industry wrong about MC2’s ability to churn out great creatives.

4Ps: Madison World’s billings today stand at Rs.2,700 crore. How soon do you hope to reach Rs.5,000 crore?
SB: I don’t dream of becoming a Rs.5,000 crore company. That’s not a part of our DNA. But if tomorrow there is an opportunity, we will not let go. Our primary purpose is to improve our ability to provide cost effective solutions to advertisers. If we do that honestly, Madison World’s growth will be a by-product. If we focus only on Madison’s growth, we will lose the plot!

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Is the glass half full or...

IIPM fights meltdown, places 2300 students By Education Mail Bureau

Slowing economic activity in India has had a ripple effect on loan portfolios of banks, says a report by Credit Analysis and Research (CARE). The report states that the total number of Non-Performing Assets (NPAs) with banks in India will triple from 1% of total advances in FY08 to 2.7-3% by FY11. Retail loans are expected to be most affected due to the job losses and salary cuts that are defining the mood of India Inc. The total rise in credit card and personal loan NPAs will be the highest touching 10-12% according to the report. The report pegs the growth in banks’ advances to 15-17% in 2009-10, and 19-21% in 2010-11, with infrastructure sector driving growth.

But there is a twist in this tale given the recent bullishness in the economy, thanks to a stable government, the manna of 6.8% quarterly growth and rapid stock market recovery. According to V. Krishnan of Ambit Capital, “a three-fold increase in the gross NPAs (as indicated in the CARE report) seems a little far-fetched. There is far more bullishness in the economy today (in terms of business confidence) which conversely generates confidence in lending. Frankly, we do not foresee deterioration in asset quality to that extent.” Are the pessimists listening?

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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