Wednesday, December 12, 2012

Plastered to the Wal!

Walmart has failed to replicate success everywhere

They say ‘once bitten, twice shy’; unfortunately Wal-Mart didn’t learn even after a dozen bites!!! Its failure saga began in Germany, where it couldn’t adapt to the German consumers’ culture of hunting for the cheapest products in multiple stores and their resistance to hypermarkets. Finally after incurring losses of $1 billion, Wal-Mart was compelled to sell its 85 stores in 2006 to rival Metro AG. There are also other incidents in other countries which prove how Walmart’s international plans have been smashed to smithereens. It had to invest £337 million to get a grip on its suffering business in Japan (2005), sold-off 16 stores in South Korea (2006), found existence literally impossible in Brazil and Mexico (where sluggish gains and dreadful public relations marred it all). Even Prof. Alan Rugman of Indiana University comments, “Wal-Mart is not competing globally... The first and foremost duty of any retail chain before going global is to gather local knowledge...” When will Walmart learn?


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Monday, December 10, 2012

Why we loved Rick’s trick... (Sic!!!)

32 long years did this Harvard MBA take to understand GM; one fine day it took the US Senate to fire him! No more gambles, Rick...

George Bush Jr. (the former US Prez, who else?!) and Rick Wagoner share many things in common. Both are men. Both married. Both Americans. Both Harvard MBAs. Both controlled the strongest entity in their fields (one ruled over the US Senate & the other, over the largest US automaker). Both elected in 2000. Both saw their best days in the first four years of their administration. Both reigned for eight years. Finally, 2009 saw both becoming history… And yes, before we forget, both can hold the Democrat Obama responsible for their ousting! But beyond the drama, there exists one stark difference between the two, and in the manner in which they played their final goodbye tunes. While Bush was ‘booth’ed out respectfully by Democrat Obama & his administration (as he’d run out of time), that very same Obama army, booted out Rick!

And it all happened on March 29, 2009, when Rick Wagoner (now former CEO & Chairman, GM), met up with officials from the US Senate. The Senate (under the Republican Bush administration) had previously given him a reason to raise a toast on New Year eve, showering upon him a most benevolent $18.88 billion on December 31, 2008. But matters got no better, and GM ended up burning dollars in public, reporting $52.8 billion in net losses for FY2008!

His affair with GM shareholders haven't been too cordial (See chart to note how GM shares have lost value on NYSE). But hey Rick, we're not here to criticise you... we are proud of you, and surprised we are, as to how the world's turned a blind eye to what's left in the glass... Yes, the $90 billion in GM’s Mcap that you peacefully destroyed during your reign amounts to just 98% of GM's total Mcap when you began gnawing. Rick, now what are they cribbing about? You've still saved 2% for your successors!!! What’s more, the day your resignation was announced, GM’s Mcap rose by a cool $128.2 million; did someone thank you?


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Saturday, December 08, 2012

NEWS CORPORATION: EXECUTIVE EXIT

Peter Chernin will no longer remain at News Corp. But why is he leaving? And who will be his successor?

Even experts opine that Chernin was never too pleased with the fact that he will always remain the ‘second-in-command’ at News Corp. What made matters worse was the fact that Murdoch had also previously clarified that his successor would be amongst his 3 children (Lachlan, Elisabeth and James Murdoch).

There is another school of experts which suggests that Chernin does not share a very comfortable relationship with Rupert’s children and that matter definitely would get out of hand if he waited any longer. Take Lachlan Murdoch’s example for that matter: Lachlan served as deputy to Chernin a few years ago, but there were clashes between the two and many believe that it was one of the major reasons why Lachlan handed over his resignation letter in 2005. So who will follow Murdoch? Well, Elisabeth Murdoch refused an invitation to rejoin News Corp’s board (from which she resigned in 2000), and so that leaves us with James Murdoch (the youngest of siblings and overseas New Corp’s operations in Asia & Europe) as the most ‘natural’ successor.

For now, the question remains: who will succeed Chernin? “Peter and I will work closely over the next 4 months to ensure an effective transition,” comments Rupert. And till the process is complete, Rupert will take over most of Chernin’s responsibilities. The battered stock market hasn’t treated News Corp well either of late, its price having plumetted by a painful 67% since last year! For now though, succession planning needs to click for the media empire; and sooner, the better.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Friday, December 07, 2012

Hyper-growth trajectory it currently is on

Will MCX continue to rise along the hyper-growth trajectory it currently is on? deepak patra explores...

The comex has acquired a big stake in Middle East’s largest commodity bourse – the Dubai Gold and Commodities Exchange (DGCX), and is running exchange platforms in Mauritius through Financial Technologies India Limited (FTIL).

It is also gearing up for a new venture, Singapore Mercantile Exchange (SMEX), under the Monetary Authority of Singapore. Talking about future ventures and entry into unexplored lands, Jignesh Shah, Chairman, FTIL and Founder, MCX avers, “There is a huge potential lying unlocked in the emerging economies. In Africa, there are 53 countries, with economic growth rates of around 6% annually for the past several years. In addition, we have India and China registering robust growth rates.” It therefore becomes clear that the setting up of exchanges in Asia, Middle East and Africa are a critical part of FTIL’s strategy to harness the enormous growth on organised market platforms. So does this mean that MCX’s focus on the Indian market thus gets diluted? Certainly not, as the various alliances it has forged in the domestic arena stands testimony.

So what’s the real gain out of the tie-ups, international and national? As per Messy, “Tie-ups with other comexes help MCX share experiences and grow by learning from them. They are not only to develop our markets but also to gain last-mile benefits. In addition, potential products can also be launched on the MCX platform, that would help our market seamlessly integrate with global markets...” The biggest advantage however remains that of the opportunity that the partnerships give in the form of risk-hedging, when it comes to currency exchange rate and product-price fluctuations. As it stands today, MCX’s timings and product portfolio proves how the comex exists to maximise benefits on both the timing and portfolio parameters. On the timing parameter, MCX closes just before midnight to gain European and US time advantage, and in terms of diverse offerings, it goes miles ahead of simply offering traditional commodities, and provides many non-traditional commodities like electricity, ATF, weather derivatives et al on board.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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AVIATION: PRICE INCREASE

Indian aviation players must follow a selective pricing policy in order to maximise their revenues

However, Prakash Mirpuri, spokesperson for the UB Group (which owns Kingfisher Airlines) told B&E, “Kingfisher Airlines follows a dynamic pricing policy for each flight depending on demand. For flights that can sustain higher revenue, we’ve closed low fare buckets and are concentrating on selling higher fare buckets.”

On the other hand, chances that Indian air carriers have formed a cartel (as all & sundry have raised their respective air fares at the same time) is also not being ruled out as Civil Aviation Minister Praful Patel recently warned all air carriers against following such practice. The earlier strategy of low fares was in tune with the fall in the ATF prices (which accounts for more than 45% of the airline costs). But the players overlooked the fact that cut in airfares could easily negate the advantages of the fall in ATF prices, thereby hurting revenue generation and further aggravating operating losses. Binit Somaia, Regional Director, CAPA, professes, “With the fall in oil prices, airlines took the opportunity to introduce promotional pricing to stimulate traffic. However, rather than applying promotional pricing selectively, airlines offered their entire inventory at discounted levels, which resulted in significant dilution of revenues.” Bottom lines of all major players have already been painted red for quarter ended December 2008. Jet Airways, Kingfisher Airlines & Spice Jet have recorded losses to the tune of Rs.2.14 billion, Rs.6.26 billion & Rs.180 million respectively. Experts are expecting an accumulated loss of $2 billion in aviation 2008-09, further forcing players to raise fares to balm their bleeding bottom lines.

Sweeping price cuts or raises will not help. They have to stoop selectively, and carefully analyse which routes would respond positively to price changes and which would not so they can maximise revenues. They will need every rupee they can lay their hands on to repair their bleeding balance sheet.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Thursday, December 06, 2012

LIC: INVESTMENT

LIC’s market investments are well timed, apart from IRDA norms

The investment may seem to be huge, but considering the Rs.8.06 trillion asset portfolio of LIC, out of which it is entitled by IRDA norms to invest 35% in equity along with mutual funds, corporate loans, FD, et al, the investment amount is reasonable enough.

A simple evaluation shows that out of the 35% allowed in equity et al, even after Rs.170 billion investment in the equity market, LIC would still have a surplus of Rs.2.6 odd trillion, which it can utilise for corporate loans and fixed deposits. In addition, LIC is all set to raise its fresh premium income by around 40% in FY ‘10 from the current Rs.110 billion (thanks to PSUs, which are expected to raise gratuity liability cover from Rs.0.35 million to Rs.1 million). Of the promised investment amount, Rs.40 billion would be infused by the end of March 2009. LIC has equity investment of about Rs.2 trillion in listed entities.

The only hurdle which LIC could face is from the IRDA (Insurance Regulatory & Development Authority), which caps the firm’s exposure in individual firms at 10% (LIC’s stake in several companies exceed the limit) earlier the limit was 20% (down from 30%). LIC has exceeded the limit and it will have to lobby with the IRDA to relax investment norms (as it has done for infrastructure companies). Apart from this bolt from the regulator, LIC’s aggressive investment in the bourses seems logical and well timed. That should be a boon for policy holders who have gone for equity linked plans.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Tuesday, December 04, 2012

Where the hell?

Tell us please, where is recession?

On the eve of February 2009, we can’t help but wonder where the hell [or, ‘in heavens’, for those light listeners] is the damn recession we were told to watch out for like crazy by the US, in specific, by the National Bureau of Economic Research [NBER]! The NBER is, according to their own words, “the nation’s leading nonprofit economic research organization; sixteen of the 31 American Nobel Prize winners in Economics and six of the past Chairmen of the President’s Council of Economic Advisers have been researchers at the NBER.” The NBER claims they are “dedicated to promoting a greater understanding of how the economy works.” Allow us to exemplify how well they’ve worked towards the same in the past few quarters.

Before you decide we’re insensible, allow us to clarify. Is the world under a slowdown? Yes. But a recession? Umm... We stuck to the standard seat-of-the-pants thumb rule used by economists for defining recession, which states that a recession ‘happens’ when there persists two quarters running of negative growth [in real GDP] from the previous quarterly figure.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Monday, December 03, 2012

The shocking reality!

Two, maximum three months, and a majority of Indians will quite easily forget their ‘unbelievable’ anger of now... In fact, much faster than they’ll forget the daily issues that affect their lives...

Leaving our acerbic sides for a moment, we do accept that on the creditable side, the recent carnage at Mumbai exemplified a feeling which is so very unique to India. When Ratan Tata was inspecting the loss inflicted to the century old building of The Taj Mahal Hotel, not far away from there, two year old Moshe’s cries for his mother were echoing in one of the synagogues in Mumbai during the prayer for his slain parents. Its resonance literally permeated the notional distance and reached every house of Israel, and brought tears in the eyes of every inhabitant. Ratan Tata might be an Indian of Persian origin (present day Iran) while Moshe might be a Jew, but grief and loss saw them both as participants, rather recipients, of a most unfortunate terror attack.

Amidst the mayhem, at one stroke, what anything else could not, grief did. Indians, for once, kept aside their petty differences and were united. Starting from the lower middle class Mumbaikars who commute in local trains – and were sprayed with bullets in the CST station – to some of the richest echelons of this country who were dining at Taj, from the Hindus who didn’t claim they were shot at because they were Hindus to Muslims who shared the sentiment, from the extremely heroic policemen who died despite wearing lowest quality bullet proof jackets provided by the State, to the NSG commandos who died despite wearing highest quality bullet proof jackets provided by the same State... for once, those were humans who died, not Indians, not Israelis, not British, but humans.

But seriously speaking, this terror attack awakened this country to a higher degree than had other attacks in the past. Honestly, for long many of those staying in metropolitan cities never cared two hoots about terrorism in Jammu & Kashmir, North-East or the Naxal problem in the hinterlands. But today, things have changed. Realisation is dawning that it’s the common man who stands perpetually victimised. And to save them, came no one but the common man himself.


Source : IIPM Editorial, 2012.An Initiative of IIPM, Malay Chaudhuri

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Saturday, December 01, 2012

Our role ‘city’ model – Dhaka!

Don’t be surprised, there’s Karachi too! Read on... this is an eye-opener

Since time immemorial, India has been planning to improve the operational standards of its metros and make it at par with cities like Paris and Shanghai. And as citizens, we all do expect that city planners are leaving no stone unturned to make Delhi and Mumbai the next Shanghai and Paris of the world. Right?! Why? Aren’t they working hard to put the metro-rail lines in place? Haven’t we yet seen that brand new international-standard bus zipping past? Aren’t better malls sprouting up in different parts of our cities? Well, yes! All this is happening... but sadly, they’re not indicators of efforts on the part of the authorities to improve the standards of the metros. And we’re not saying this; blame AT Kearney if you find this an unfair comment. The consulting firm, alongwith Foreign Policy magazine recently released ‘The 2008 Global Cities Index’. Let’s give to you what the report states straight on when it comes to Indian cities. Aha! don’t be disappointed, Indians cities do figure on this list... but in the bottom half! And our role models Shanghai and Paris? They’re happily sitting on top of the list!


Source : IIPM Editorial, 2012.

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