Browse Day: May 2, 2017

Rethink your strategy

STRATEGY

strategy

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One in three public companies likely won’t be around in five years, and the spread between the highest- and low­est-performing companies has never been greater, according to new research from the Boston Consulting Group (BCG). Identifying effective corporate strategy is more important than ever before, and this is the central theme of the latest BCG book, Your Strategy Needs a Strategy. Authored by BCG senior partners Martin Reeves, Knut Haanaes, and Janmejaya Sinha, the book explores the different environments that busi­nesses currently face, identifying and matching the right stra­tegic approach to a given situation. Their framework is called

the “strategy palette”. “The book explains a simple framework that we call the strategy palette, which divides planning into four styles. Firms can chose any of these styles, according to predictability of their business environment and how much power they have to change it. Leaders play a key role in this by making sure that the strategy is vibrant, dynamic and in tune with the changing environment. With a clear under­standing of the strategic styles available and the conditions under which each is appropriate, companies can make the best out of the opportunities available to them at hand,” said Dr Janmejaya Sinha, chairman, BCG Asia Pacific.          ♦

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The                   Discovery

Channel completes 20 years in India. “Dis­covery Channel has had a life changing impact on millions of viewers in India. The tremendous affection that it enjoys in India contin­ues to fuel our passion to relentlessly push the boundaries of factual enter­tainment and uncover the finest stories from across the world. On this occa­sion of completing 20 great years in India, on behalf of the entire team, I would like to express our gratitude to the viewers and clients who have expressed their admiration through this remarkable 20-year jour­ney,” said Rahul Johri, EVP & GM – South Asia,


Honest account

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The dramatic build-up to the overnight nationalisation of 14 banks in a single legislative sweep sets the stage for No Regrets. In this book, bureau­crat extraordi­naire D.N. Ghosh offers an eyewit­ness account of perhaps the most important event in India’s banking history post-Inde­pendence, baring the manoeuvr- ings behind the enabling ordi­nance and the pickle over fair compensation for the dispos­sessed bank owners. Years later, Ghosh enters the portals of the State Bank of India as its chair­man, at a time when the stir­rings of change have just begun to be felt in the Indian economy. Anticipating the future, he goes for a paradigm shift: to rid profit of its dirty word tag and place it at the core of the bank’s operating
strategy. Gradually, he takes SBI into the capital markets, estab­lishes its credit standing glob­ally, launches India’s first mutual fund and, above all, cajoles the trade unions into accepting full com­puterisation. Post­retirement, Ghosh steps into the cor­porate world. The could-have-been- academic tills the soil for certain reputable manage­ment institutes to bloom and grow even as he sets up the credit rating agency, ICRA. Full of untold stories, No Regrets is an honest-to-goodness account of a glorious career spanning over six decades and covering some epochal events whose reverber­ations continue to be felt in the corridors of bureaucracy, bank­ing and business to this day. The book was launched in Mumbai by Arundhati Bhattacharya, chair­man, SBI, and Deepak Parekh, chairman, HDFC.

INDIAN TOURISTS ARE BEING DRAWN TO VIENNA IN EVER LARGER NUMBERS

This capital city of Austria may well attract Indians in large numbers – charmed by its magnificent cityscape, splendid hotels, wide-ranging tourist attrac­tions and the hospitality of its peo­ple. The 415 sq km city – just about the size of Mumbai’s, but with a population of 1.8 mil­lion, in contrast to Mumbai’s 22 mil­lion – is celebrat­ing 150 years of its famed Ringstrasse (or Ring Road), with an offering of year-long festivities that will make it even more worthy of a visit.

One of the most mag­nificent boulevards in the world, the Ringstrasse was inaugu­rated by Emperor Franz Joseph on 1 May 1865. It defines the character of the city with its dense concentration of architecturally stunning buildings, monumental palaces and expan­sive parks, some 850 of them. It now circles Vienna where massive ram­parts once protected its imperial cen­tre from her enemies, its construction having been the greatest municipal

planning project of the time.

Vienna, after all, was once the seat of the mighty Austro-Hungarian Empire ruled by the Habsburg mon­archy. Established as the Austrian Empire in 1814, it expanded into the Dual Monarchy of the Austro-Hun­garian Empire by 1867, dissolv­ing abruptly at the end of War I in 1918. The Habsburg fam­ily grew to European prominence with the marriage and adoption

treaty by Emperor Maximilian I at the First Congress of Vienna in 1515. For several generations, the family ruled nearly all of Europe from the mighty Hofburg Palace, in the heart of Vienna. The city’s history dates back much further, to the first post- Christian century when the Romans established their military camp called Vindobona. Today, Vienna is consistently ranked amongst the world’s most livable cities.

In the past five years, overnight stays, or the number of nights spent, by Indian travellers in hotels in Vienna grew at a com­pound annual growth rate of 18.4 per cent to 64,621 last year, mentions Isabella Rauter of Vienna Tourist Board. “The city is multi-di­mensional and appeals to a diverse section of Indian tourists, right from young travellers to honey-moon- ers to families,” she says. “And these are the three target segments of the Vienna Tourist Board.” The Board is looking to 100,000 overnight stays from Indian travellers by 2017.

Overall, this city of 1.8 million hosted 6.3 million tourists from around the world who spent 13.5 million overnight stays in 2014. While Germans, Austrians, Ameri­cans, Italians and Russians comprise Vienna’s top five tourist segments, India, South Korea, China and Bra­zil have shown strong growth. Use Heigerth, tourist guide with the

Vienna Tourist Board, says Vienna has something for all ages and all kinds of travellers. Recreation areas of Prater beckon children, Vienna Woods and Lobau are ideal for day trips, hikes and bicycle tours for the young tourists, while honey-mooners can opt for the many Viennese balls that happen throughout the year or even swim or go boating in the river Danube. In Vienna, the Danube is omnipresent, whether in the form of the Donau-Auen National Park or Old Danube, Danube Island or Dan­ube Canal. “For those Indians who miss home food, there are plenty of restaurants offer­ing a delightful Indian fare,” she mentions.

Curiously, Vienna is one major city that has vineyards within its boundaries. Those who like wine can head for any of the numer­ous “heurige”, or wine taverns, that are on the outskirts of the city located in secluded gardens or homely parlours. In their comfortable atmosphere, they offer their patrons entertain­ment, fine Viennese wines and the fitting culinary accompaniment. The real Viennese heurige, in which only Viennese wines are served, are iden­tified by a bunch of pine branches and by the word ‘Ausg’steckt’ written on a board, which simultaneously shows when the tavern is open.

Hailed as the world’s music capi­tal, Vienna is very much alive with

the Sound of Music. It has been the birthplace or home to some of the great­est baroque, classical and light clas­sical composers in history. Those who lived there for parts of their lives have been Joseph Haydn (1732- 1809), the son of a wheelwright who was born in lower Austria, Wolf­gang Amadeus Mozart (1756-1791), born in Salzburg, and Ludwig van Beethoven (1770-1827), who was the son of a drunken, abusive court singer in Bonn. Franz Schu­bert (1797-1828) was born in Vienna to an impoverished schoolteacher, as
also the ‘Waltz King’, Johann Strauss, (1825-99) whose father was an Aus­trian composer of light music. Strauss composed over 500 waltzes, polkas, quadrilles and other types of dance music, as well as several oper­ettas and a ballet. His two younger brothers, Josef and Eduard, wrote light music as well.

Gastronomy is an important ele­ment of Vienna. Amongst the most popular dishes of Viennese cuisine are the Wiener Schnitzel, a breaded and fried veal escalope, Tafelspitz, which is boiled beef, Fiaker goulash with Sacher sausages, and Backhendl, which is fried breaded chicken. For the vegetarians, there is Stuffed Pep­pers, Sacher style, Onion quiche, Bohemian mushroom goulash, and poppyseed noodles a la Sacher. For the sweet-toothed, there are sump­tuous Viennese desserts like the famed Sachertorte a la Sacher, Kai- serschmarren a la Sacher (pancake), and Apple Strudel a la Sacher, the ‘Sacher’ recalling their creator, Vien­na-born Franz Sacher (1816-1907), who was an Austrian-Jewish confec­tioner, best known as the inventor of the world-famous chocolate cake, the Sachertorte.

♦ SAROSH BANA

 

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Pune, says communication designer and artist Falguni Gokhale, is “an inter­esting city with a distinctive personality”. Gokhale, who set up and runs the award­winning design studio Design Directions with her hus­band Satish, has designed a Pune Brand logo and a heritage bus for the Pune Dar- shan tourist cir­cuit. The brief given by the

Pune Munic­ipal Corpora­tion was very abstract – “to capture the essence of the city” – she says. “I created the letter- forms for the logo in Marathi and English within a typical wada window frame,” she explains. “Though the calligraphic letters denote a sense of tradition, the rendering is

PornIiOT !

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From Genesis to Christ, and up to now, is the theme of a new book by a husband- and-wife team who run a specialised travel agency. The book, co-author Pornima Kamle points out, brings the sights of the Holy Land alive, taking the reader onto an exciting journey back through time. “The narrative is based on the holy sites in Israel, Jordan and Egypt, and their Biblical refer­ences. It also covers the festivals, cuisine and history of the Holy Land,” she says. Film and television actress Jennifer Winget, who released Walk on the footsteps of Jesus Christ modern. These are represented by various colours: green for environment, orange for culture, blue for knowledge and education, pink for celebration and youth, and grey for a sense of timelessness. The bird flying high denotes that the people of the city can achieve their dreams here. The bus, too, has tried to capture the colours of the logo joyfully in the various her­itage buildings.” A graduate of the National Insti­tute of Design, Ahmedabad, Gokhale needs to deliver effective design solutions for brand identity, pack­age design and communication strategy for corporate clients as per their timelines and budgets. “But I also fulfil my emotional and instinctive need to make things just for myself,” she says. And so, she dabbles in ‘this and that’ – painting, jewellery and miniature installations that capture her childhood memories of her grandmother’s home using traditional copper-and-brass Indian toys.

‘Capital flows would be more volatile’

We can look at this through three channels – imports, exports, and cap­ital flows. Imports have been the big­gest benefit to India, as 35 per cent of our country’s import expense com­prises crude oil and that has halved. Our import basket is commodity- heavy and most commodity prices have fallen 30 per cent, so we make massive savings on import. On the other hand, our exports, especially software services, are not likely to be hit in a major way. So, the net result is positive for India. However, certain parts of the economy – gems & jew­ellery export, agro-product exports, steel exports etc – are likely to be hit. Any production that is linked to import price is likely to slowdown. So, broadly, the winners are the gov­ernment and the consumer, while the losers are some sections of the industrial and agro production.How is the global slowdown likely to impact the Indian economy and the stock market?

The third channel – capital flows – is likely to be more volatile, owing to a weak rupee. The rupee depreciation was overdue, as it had outperformed emerging market currencies by quite an extent. Essentially, those exporting to developed countries would benefit. Even though, the Indian rupee out­performs the emerging market cur­rencies, foreign portfolio flows into the overall emerging market basket is going to get impacted and, hence, capital flows into our country will also be hit.

In the last five to six years, the Indian currency has been depreciating against the dollar. Despite that, we saw robust capital inflows. About one-third of the total foreign capital flows, that India has ever received, have come in the last three to four years…

This is true, but we must also view
the capital inflows relative to the ;ize of our GDP. In 2010, we received $29 billion because, at that time, we were close to a trillion dollar economy. Last year, despite the good election verdict we received $16 billion on a $1.7 tril­lion economy. Though $16 billion is not bad, it is considerably less than the size of the economy. Secondly, if I were to add foreign direct invest­ment to foreign institutional invest­ment and view that as a proportion to our economy, then the numbers are not big. So, India has been outper­forming emerging markets because we have benefitted in trade. Earlier we were importing $120 billion worth of crude oil and exporting software worth $80 billion. Now our crude oil expense has come down to $60 bil­lion, while our software exports have remained the same.

You said earlier that depreciation of the rupee was overdue. What level do you expect the rupee to stabilise at?

The rupee may depreciate by 3-7 per cent. If the yuan depreciates by fur­ther 5 per cent, then the rupee will weaken 7 per cent, but if both yuan and dollar are flat, then it is likely to depreciate by 3 per cent.

Do you expect further depreciation in yuan?

No. If they let their currency depre­ciate further, their macro-economic stability comes under question. Sec­ondly, the Chinese government has to maintain the holy trinity of capital flows, exchange rate and interest rate. I believe that the yuan depreciation was not only for economic growth. There were capital outflows from China in the last two months, and they were trying to prevent that and at the same time ease monetary pol­icy as well, and they had a fixed cur­rency. So, they had to let something
go. It is more of prioritising some­thing rather than aggressively saying we need export growth.

As the rupee has taken a beating against the dollar, there is a theory in the market that it makes more sense to invest in information technology and pharmaceutical stocks. Would you buy that argument as you too expect the rupee to depreciate further?

Today, we are positive on IT because of valuations and exposure to devel­oped market currencies. We are also heavyweight on pharmaceutical sec­tor. We increased our weightage in pharmaceutical sector from 6 to 8 per cent in the last two months. We are more positive on IT, as some of the pharmaceutical companies do have exposure to emerging markets and some have higher valuations. Within the defensive basket, we are relatively heavy on IT and pharma as compared to consumer staples. Generally, as a house, we believed that the rupee was too strong.

Suppose you had to start a new fund today, which sectors would be your top picks?

We believe that the structural story is in market trends, rather than indus­trial growth, because, in a growth-less world, it is difficult to make a premise on which industry would grow fast. I would prefer retail banks, information technology and insurance sector. ♦
Zee Media Corporation Limited (ZMCL) announced its intention to enter into English News Broadcast­ing with the appointment of Rohit Gandhi as editor-in-chief – english news broadcast and related con­tent. He will be heading the opera­tions of all initiatives in this space, working closely with the busi­ness head and revenue resources. He will report to Punit Goenka. ZMCL has not announced the exact date of launch of the chan­nel. Gandhi comes with over 23 years of experience across 40 coun­tries. He has managed the complete gamut of the news business and won many international awards including the Edward R. Murrow, Dupont Award, Emmy, Golden Cine Eagle, Grade Award and the Headliner Award.
English editor

Other interests

After a distinguished career of 16 years with Castrol India Limited, six of which were on the Board of Direc­tors, initially as chief operating offi­cer and subsequently as managing director, Ravi Kirpalani will be leav­ing the company to pursue other interests. Kirpalani will step down as managing director with effect from 30 September 2015 but will continue as director and whole-time direc­tor from 1 October 2015 up to 31 December 2015 to ensure a robust management of change and facili­tate a smooth transition. He will be succeeded by Omer Dormen, who has been with Castrol/BP for over 30 years in various positions globally and is currently sales director of BP Lubricants for CIS, Turkey and Cen­tral Asia. Dormen will be appointed as an additional director and managing director of Castrol India Limited with effect from 1 Octo­ber 2015, subject to obtaining all necessary approvals.

Creative offering

Lowe Lintas has named Shayond- eep Pal, executive creative direc­tor, to head the creative offering of
its New Delhi office. Pal takes over from Shriram Iyer, who was recently named NCD, Mullen Lintas. Pal will report to Arun Iyer, chief creative officer, Lowe Lintas. Pal has been part of the creative team in Delhi for more than six years and is involved in the creative execution of a number of notable campaigns for prominent clients in the region, including OLX, Micromax, Hindustan Times, Maruti Suzuki, Google, and Pernod Ricard.

Assuming charge

Kishor Piraji Kharat has recently assumed charge as managing direc­tor and CEO of IDBI Bank. Prior to the current assignment, Kharat was posted as executive director, Union Bank of India. Kharat has to his credit the honour of establish­ing a foreign subsidiary of Bank of Baroda in Trinidad & Tobago, West Indies, and headed the same as managing director for more than three years. He was also a founding member of India Trinidad & Tobago Chambers of Commerce & Indus­try, which fostered trade between the two countries. He has been a key driver for implementation of major financial inclusion initiatives and has worked closely with the RBI as well as the government of India in this regard.

New elevations

In order to elevate the integrated offering to clients and to ensure effi­ciencies and effectiveness centered around great ideas, three senior mem­bers have been added to strengthen the activation, OOH and media team at the Gurgaon office of DDB Mudra- Max. Puspendra Singh who comes in as senior VP, DDB MudraMax- OOH & Experiential will be respon­sible for client delight, while Arijit Chakrabarti, general man­ager, will be responsible for data, insights & strategy for entire DDB MudraMax including their media/ digital offerings. Bhuwan Pan- dey, general manager, will focus on driving efficiencies and partner relationships.     ♦

 

China’s pain, India’s gain

Chinas move to devalue the yuan by 2 per cent to support its export-driven economy has stoked concern amongst investors on the state of its economy. Since this announcement, yuan has fallen in excess of 3.2 per cent. Inves­tors fear this could be the beginning of a long­term depreciating trend, which could create a spiral effect in other emerging market (EM) curren­cies. The Chinese slowdown is likely to have reper­cussions across the globe, resulting in exodus of funds from a riskier asset class to a safer asset class.

Chinese economy is slowing down. The Chinas manufacturing PMI came in at 47.1 in August, con­tracting at the fastest pace in more than six years.

Stock markets across the globe have corrected sharply. Commodity prices are on a downward spiral. Crude oil has fallen to a six-and-a-half year low. Currencies across the EMs are weakening due to ongoing risk-off trades happening globally.

The fall is more dramatic for emerging economies dependent on commodities.

Since the end of 2014, China has been loosening its monetary policy to revive its slowing economy. But the liquidity generated through loosening has made way into Chinese stocks instead of going into real economy, creating bubbles in the Chinese stock markets. The Shanghai Composite Index had gained 108 per cent between 1 November 2014 and 15 June 2015, despite slowing economy. Regulators had Hang Seng to take urgent steps to restrict inflow of Taiwan Weighted hot money into its stock markets.                                                                               KOSPI

Investors fear the Chinese slowdown BOVESPA could be more severe than what is durm910_2S August reflected by government data. Chinese markets have fallen 43 per cent between 12 June and 25 August and by over 24 per cent since China devalued its currency on 10th August. Even after this correction, the Shenzen Composite Index is still quoting at a P/E of over 40 times (see table).

The exodus of foreign investors from Chinese markets is an opportunity for India to attract foreign investments. The Indian economy is on the mend and the government is determined to resolve structural issues. Earnings of companies are likely to pick up going forward. The fall in global commodities has improved Indias fiscal position and has lowered inflation. This has helped companies improve gross margins as is reflected in the June 2015 quarter results. Fundamentals of India are much stronger than most EM peers.

China is undergoing a difficult transition phase wiljr a slowing economy and high fiscal deficit. Strong multi-decadal growth funded through excessive bank credit has created bubbles in various asset classes. China lags far behind India in the robustness of its banking sector. Chinas domestic credit to private sector stood at 141 per cent of GDP, as against 51 per cent in India in 2014. As China slows down, there is a risk of rising NPAs, which will put pressure on the already fragile banking sector. This could have systemic repercussions on their economy. Indias banking system is extremely robust under rbis vigil.

As the economy slows, foreign companies with a presence in China are looking for alterna­tive investment avenues as a part of their de-risk- ing strategy. This will attract more FDI to India. The government of India is actively working to improve the investment climate in the country. India, which ranks 142nd out of 189 countries on the Ease of doing business scale, now aims to be among the top 30 on this list.

DIPP has released a framework to assess and rank states in terms of ease of doing business to encourage competition among states. The government wants to improve transparency by promoting digitalisation and cutting red-tapism. For instance, the MSME has recently replaced a 20-page long registration form with just a one-page Udyog Aadhar form.

The government is closely monitoring ongoing turbulence in the global markets. Over the past eighteen months the RBI has accumulated huge Forex reserves to face any eventualities arising from global factors. Indias Forex reserves as of 14 August stood at $354 billion, as compared to $292 billion in January 2014. The RBI is ready to intervene in the Forex markets to curb volatility as and when required. $/? closed at two-year low of 66.28, after hitting an intraday low of 67.06 on 25 August 2015.

Indian markets have fared much bet­ter than other EMs in the recent correction. The rupee has remained fairly resilient and has been one of the best performing curren­cies among EMs over last one year, booking at Indias fundamentals, once the clouds of global uncertainty disperse, India will rebound from the steep correction and come out stronger. Chinas pain could turn out to be Indias gain. ♦