Showing posts with label IIPM Info. Show all posts
Showing posts with label IIPM Info. Show all posts

Friday, October 05, 2012

TOYOTA KIRLOSKAR: THE SMALL CAR CHALLENGE

Etios can prove to be a Fortune Changer for Toyota in the Indian Market. But there are Challenges Galore that are Hell-Bent on Proving why the Jap’s Slow-Coach Small-Car Strategy may work Against It.

Today, everyone from Nissan to even Volkswagen (and Skoda), has entered the compact car fray. Toyota may have spent too much time in finalising its entry, which already has 23 models on offer in India. However, Sandeep Singh, Deputy MD, Toyota Kirloskar Motors has a justification for the delay. “We took a long time because we had to take into account the needs of the Indian consumer while finalising every detail of the Etios,” says he, while speaking to B&E. Accepted, but being a careful late mover is one thing and being the last to take the plunge is another. Therefore, carving out a comfortable space for itself may now call for some serious effort on the part of the Japanese, and even the Rs.32 billion committed by the company towards setting-up a dedicated production unit at Bidadi (near Bangalore, with an annual capacity of 100,000 units) may prove to be just half-a-leap. Considering that Toyota plans to sell 70,000 units of Etios in the first year of launch alone, with a further target of 300,000 units by 2015 (after having sold just a total of 63,843 vehicles in the Indian market in FY2009-10), the carmaker will need a far more robust distribution framework to realise the goods. Not to forget, profitability in the A2 segment (where the margins are the lowest amongst all passenger car segments) is largely dependent on dealership network. While Maruti has 850+ dealers and Hyundai has 670, Toyota only has 114 – lesser than even GM (250) and Ford (172)!


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face


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Tuesday, September 04, 2012

Lesson #1: Don’t implement Panic Price-cuts during a slowdown; It kills the brand

Travel bags and retailing have never formed quite the blend that deserved a strong mention. But then, if Louis Vuitton – a traditional suitcase maker – could make the jump, why can’t others? Brands like Samsonite are attempting that, though. B&E catches up with Samsonite’s South Asia retail head, N. P. Singh, for inputs on current conditions and strategies

The plus point of the franchisee model is that it enables the retailer to have a pan-India presence. But there is the other side to this coin too. Malpractices by any franchisee can spoil the image of the retail brand. Add to this the dangers posed by reduced consumer spending. N. P. Singh, who heads the retail operations of Samsonite in the South Asian region, talks to B&E about the franchisee model in Indian Retail, the opportunities, the challenges faced so far and his expectations from the industry.

B&E: After IT, retail was considered to be the next sunrise sector of the Indian economy. But the slowdown came down hard on the sector and wiped out many hopes and promises. Do you still claim that Indian retail will bloom?
N. P. Singh (NPS):linkages that retail has with other sectors, and the widespread impact of this sector on the economy in question. India is no exception. But organised retail still holds a miniscule portion of the overall sector in India, so it would be early to claim that a boom will occur. But then, yes, post-slowdown, there appears to be great business opportunities mushrooming in the Indian retail industry as well.

B&E: Talking about new business opportunities, there are foreign brands that are making news in the Indian retail landscape. Are we betting big here?
NPS: The franchisee model presents very strong business opportunities, be it domestic brands or international. But of course, with the global (and Indian) economy bouncing back, foreign brands are increasingly looking to tap the pots of riches that Indian consumers are willing to present. Over the coming quarters, there will be many more foreign brands that will set up shop in India through the franchisee route. Big opportunities await Indian retail in this respect.


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Friday, August 24, 2012

DLF: TURNAROUND

Slowdown had a sobering effect on DLF’s meteoric rise in the early years of this decade. With a new look and renewed vigour, the company attempts to claw its way back to its glory days. by Virat Bahri

The primary prerogative was to get rid of excess baggage – businesses as well as lands where development was not anticipated in the next 5-7 years. Out of a divestment target of Rs.55 billion for FY 2009-10, the company unlocked value of Rs.18 billion, and targets a further Rs.28 billion in the current fiscal. Hotel venture Aman Resorts is immediately on the block. Reports say that Malaysian Sovereign Wealth Fund Khazanah is expected to take it up for around $300-350 million. DT Cinemas was sold to PVR last year with a further commitment that DLF would have PVR as its exclusive multiplex anchor tenant for all its future malls. They attempted to divest the wind power business (valued at Rs.10 billion) as well, but decided to retain it, as they were unable to get the right suitor. The company also pulled back on four of its SEZ projects in West Bengal, Gujarat, Haryana & Orissa on account of the dip in commercial space demand. DLF is now planning to revive the one in West Bengal, but the other three are still denotified. But according to G. P. Savlani, Resident Director, CREDAI, “Real estate players will not talk about SEZ much after implementation of the Direct Tax Code (which would cut all income tax benefits).” DLF has also restructured its business into two business units last December. The development company is further demarcated geographically into Gurgaon, Super Metros and rest of India and the annuity company is divided into offices, malls and facilities management & utilities to better streamline businesses and ensure aggregation of returns and stable cash flows from these businesses.

As far as the devil of debt is concerned, the gross debt has increased to Rs.216.77 billion by the close of March this year as compared to a gross opening debt of Rs.163.2 billion on April 1, 2009 (due in part to the purchase of SC Asia’s stake in Caraf) and a D/E ration of around 0.75x. Interest rate has been brought down to 10.5% from 11.98% in December 2008 and period has increased from under one year to 3-9 years. Besides, the focus is on faster execution of existing projects.

The most critical aspect for DLF’s revival will be the pick up in demand. The Lower Parel project gives indications that the exuberance is back. But Savlani says that it is unique to the Mumbai market only, where Lodha Developers won the contract for the 101-storey tower project recently for Rs.40.5 billion. But residential is definitely on the revival mode in different parts of the country as consumer sentiment improves with booming economy, lower interest rates and more economically priced projects. Param Desai, Analyst – Real Estate, Angel Broking, quotes, “FY 2011 (for DLF) will be largely driven by residential sales, both middle income and luxury.” Ministry of Housing & Urban Poverty Alleviation projects a shortfall of 26.53 million dwelling units in urban areas by 2012. Absorption rate of residential units has increased to 21% in Q1 2010 from 15% in the previous quarter, according to a report by Jones Lang LaSalle Meghraj (JLLM). DLF anticipates bookings of 1-1.5 msf for FY 2010-11 in the luxury segment (Mumbai & Delhi), 2-3 msf in city centres/high end (Gurgaon, Chennai & Cochin) & 12-14 msf in the mid-income/value housing segment.




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Thursday, July 26, 2012

Stratagem-MICROSOFT: SKYPE ACQUISITION

However, compared to prior target companies,   (apart from being cool and a verb for online voice and video calling) looks a lot more lucrative. As of 2010, the popular service has 663 million registered users out of which 170 million are connected. Impressively, Skype users made 207 billion minutes of voice and video calls in 2010. So far so good! But unfortunately the rosy picture just ends here – only 8.8 million of these users actually pay. That roughly boils down to 1.32% of the entire user base. Further, Skype incurred a loss of $7 million on revenues of $860 million in 2010. In short, the company still hasn’t figured out a way to make profits. What’s more? If one were to calculate Skype’s revenue per user, it would round up to just $1.3.

If these facts weren’t enough, then Microsoft should have at least learned a lesson or two from eBay’s Skype misadventure before taking the plunge. In 2005, the online auction portal paid $2.6 billion to acquire Skype. The idea was to integrate voice and video calling features into the auction process. But, after close to three years of failed attempts to derive synergies, eBay wrote off $1.4 billion from the value of Skype. It’s not that Skype is not growing, it’s growing; but only in terms of numbers that really don’t matter to Microsoft. Last year, its monthly users stood at 145 million implying an increase of 38%. Paid users were also up by 19%. However, if Microsoft wants a 10% annual ROI, paid users will have to grow 40 folds, which seems unlikely anytime soon.

Further, with the acquisition, Microsoft plans to embed Skype’s services across its offering. Potential combinations include linking the service to Outlook e-mail, Xbox game console, Windows mobile phone and corporate suite Lync. But, except for the Xbox and Outlook combinations, Skype’s services don’t fit anywhere else. Moreover, Skype significantly overlaps with Microsoft’s video chat, instant messaging and web conferencing tools. This could turn out to be a major hindrance in integrating Skype services with Windows Phone 7, a mobile operating system which is being developed by Microsoft in collaboration with Finnish telecom giant Nokia.

No doubt, Microsoft is sitting on $40 billion in cash, and that does make the Skype acquisition affordable. But this does not mean that it should be spending irrationally. The fate of all major M&A rests on execution and Microsoft is not an exception. Agrees Michael Hodel, the US based CFA at Morningstar as he tells B&E, “Microsoft will need flawless strategic and tactical execution over the coming months and years to keep its shareholders from losing money on this transaction.” However, the challenge in this case is to leverage the 663 million users without destroying what attracted so many people in the first place (the service is free). Well, we still wonder how Ballmer and team will pull this one off!

Read more.....

Source : IIPM Editorial, 2012.

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

For More IIPM Info, Visit below mentioned IIPM articles.

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Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management


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Friday, January 18, 2008

Indian Automobile

Back to some months before this quarter. In what followed as a rapprochement, Rajiv was given the mantle to manage Bajaj Auto’s manufacturing division while younger Sanjiv was given the financial Indian Automobileportfolio. Creeping out of nowhere, their younger cousin Kushagra Bajaj (son of Shishir Bajaj & Rahul Bajaj’s nephew) suddenly alleged that his uncle Rahul Bajaj wanted to take control of Bajaj Hindustan, a company which, according to Kushagra, grew manifold under his capacity as Joint MD. Though this was rubbished by Rahul, the eventual media hype ensured miles of bad PR. This fiasco made one thing apparent to the company watchers – the fact that Rahul and his two sons were getting to manage the flagship company had become a source of discomfort among other brothers!

Stunning was the news of the much hyped demerger of Bajaj Auto into three separate companies (announced just two months back), and of the creation of five separate business units within these companies (announced just two weeks back, with one of them going into the four wheeler business), as this all but vindicates the infighting storyline. The three way demerger will create three entities with a $1.2 billion holding company owned 100% by current Bajaj ownership. This entity will hold 30% each in both the $330 million BajajIndian Automobile Auto (engineering) and the $180 million Bajaj Finserv (finance).

Though the demerger has been branded as a value unlocking exercise for shareholders, it is believed that this is to ensure that technically, only fragmented parts of the company are actually controlled by Rahul’s sons. The funny part is, all these disputes seem to be helping the shareholders! Bajaj Auto’s share price has grown 182% in the past three years (as on July 26, 2007); Bajaj Electricals by 1154%; Bajaj Hindustan by 198%; Bajaj Auto Finance by 347%. So where does this all lead the Wild Hogs party to?

For Complete IIPM Article, Click here

Source: IIPM Editorial, 2008

An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
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