Global (Economic) Meltdown 2008

The global economic downturn made 2008 a forgettable year. It had its usual share of ups and downs for India Inc. Here’s a look at some of the events that shaped the year:
10 Jan: Sensex hits its all time high of 21,206.77 points. ‘Nano´ is born. The world’s cheapest car costing Rs100,000 unveiled at 9th Auto Expo in Delhi by Ratan Tata.
15 Jan: India’s largest IPO by Reliance Power to raise Rs11,000 crore opens. The issue closed on 18 January but was hammered in the market on debut. The company issued bonus shares to retain investor confidence.
21 Jan : The Sensex saw its highest ever loss of 1,408 points at the end of the session.
26 Mar: Tata Motors announces agreement with Ford Motor to acquire Jaguar Land Rover for $2.3 billion.
11 June: Japanese drug firm Daiichi Sankyo acquires control of Ranbaxy for over Rs22,000 crore - essays biggest Indian pharma industry deal.
25 June: Idea Cellular acquires 40.8% stake in a smaller rival Spice Communications for about Rs2700 crore.
8 Aug: South Korean steel giant Posco gets approval from Supreme Court to go ahead with its Rs51,000 crore steel project in Orissa after getting environmental clearance.
11 Aug: Low-cost airline Spicejet secures $100 million investment from Goldman Sachs and WL Ross.
16 Sep: US Foods and Drug Administration bans 30 drugs manufactured by Ranbaxy Laboratories at its two facilities in Dewas and Poanta Sahib.
26 Sep: HCL Technologies makes a cash offer of 650 pence a share for acquiring UK-based SAP consulting firm Axon Group.
3 Oct: Tata Motors pulls out of Singur, where it planned to set up the mother plant for Nano at an investment of Rs1,500 crore.
7 Oct: Tata Motors announces new Nano plant will come up at Sanand in Gujarat at an investment of Rs2000 crore.
Oct 8: TCS acquires 96.3% stake in Citigroup Global Services Ltd, the BPO outfit of the American bank, for $505 million.
13 Oct: Jet Airways and Kingfisher Airlines form operational alliance to cut costs.
15 Oct: Jet Airways lays off 1900 of its employees in various work profiles. Two days later, company Chairman Naresh Goyal orders reinstatement of all the sacked employees.
21 Nov: Dabur India acquires 72.15% stake in women’s skin-care company Fem Care Pharma (FCPL) for Rs203.7 crore.
16 Dec: India’s fourth largest IT firm Satyam Computer announces acquisition of Maytas Properties and Mytas Infra for $1.6 billion dollars.
17 Dec: Satyam calls off acquisition after angry shareholders response. Since then, four of the company’s independent directors have quit.
23 Dec: Country’s third-largest software services provider Wipro agrees to buy Citi Technology Services Ltd from Citigroup for about $127 million.
25 Dec: World Bank says Satyam barred from doing business with it for eight years; Reliance Petroleum commissions its 580,000 barrels per day refinery ar Jamnagar.
31 Dec: Stock market benchmark Sensex closes trading for the year down 69 points at 9,647.31. It had peaked to 21,206.77 points in January.
IT sector:
· The sector, which has been charting a growth of over 30%, had to settle for a growth rate of 20%, as the global slowdown plunged the industry into unpredictable times.
· The Indian firms and employees continue to struggle with the ‘pink slip’ showing more every day.Satyam recently announced they will be laying off 400 people (Satyam fires 400 people), Wipro let go of under 2000 people for non performance (Wipro to remove staff for non-performance), other IT vendors including Patni (Patni hands pink slips to non performers), Convergys (Convergsys shuts down Mumbai facility) have been laying off people under the non performance umbrella.
· In the year filled with economic disasters, the failed attempt of country’s fourth largest software exporter Satyam to botch up two family-promoted firms for $1.6 billion not only resulted in loss of face but also hit the reputation nurtured by the Indian IT sector over the years.
· HCL pipped rival country’s second largest IT giant Infosys to bag UK-based SAP consulting firm Axon for $658 million.
Currency Values:
Dollar was broadly higher while oil fell below $39 a barrel, a 60% loss for the year. · The euro has fallen by around 3.4% against the dollar over the year. However, it recovered towards the end of the year, jumping by over 10% during December.
U.S:
Job unemployment rates are highest ever in the US. Here are some harsh facts for the US markets:
• 84,000 jobs lost in August 2008
• Unemployment rate a five-year peak of 6.1%
• 2.2 million Americans lost their jobs in the past 12 months
• Firms laid of 605, 000 workers in 2008 with an average of 76,000 a month
Global Meltdown:
· Scientists have long agreed that climate change could have a profound impact on the planet; from melting ice sheets and withering rainforests, to flash floods and droughts.
· The most likely rise, of 4C by the end of the century, would cause droughts across Africa, and a fall in harvests of 15% to 35%. Globally, crop yields would fall 10%.
· Sea levels would rise by up to 59cm, with Bangladesh and Vietnam among the worst hit, along with coastal cities such as New York, London, Tokyo, Kolkata and Karachi.

Ten Deadly Sins of marketing

Philip Kotler:
1. The company is not sufficiently market focused and customer driven.
2. The company does not fully understand its target customers.
3. The company needs to better define and monitor its competitors.
4. The company has not properly managed its relationships with its stakeholders.
5. The company is not good at finding new opportunities.
6. The company’s marketing plans and planning process are deficient.
7. The company’s product and service policies need tightening.
8. The company’s brand building and communications skill are weak.
9. The company is not well organized to carry on effective and efficient marketing.
10. The company has not made maximum use of technology.

MT-01, A Bike from Yamaha

FZ16- Lord of the Streets, The Yamaha Creation

If you've seen the Hindi film "Rab ne bana di jodi" you would have probably noticed Shah Rukh Khan riding a bike that is not entirely familiar on Indian roads. As usual one would have come to a conclusion that the bike is probably an imported vehicle. I personally loved the refreshing new look Yamaha has brought into India. This new release from Yamaha is called “FZ16 – Lord of the Streets”.
The bike was launched on September 14th,2008 and was displayed at the Auto Expo 2008. Why has it chosen a movie as its advertisement platform? Will its apperance in the movie “Rab ne Bana di Jodi” make it popular?Movie happens to be a popular and economical medium to advertise. Movies as a means, facilitates mass communication in a very effective manner . It helps in launching trendy items, products related to fashion and style etc.. It creates awareness and has an impact on most audience.

BAJAJ PLATINA INTO DTS-I FAMILY

Bajaj platina is the lowcost motorcycle from bajaj, which crossed sales of 500,000 units within eight months of its launch in April 2006. Bajaj platina sales reduced by 16% in 2007, which is followed by further reduction of 11% in 2008. Bajaj is the first company to intoduce DTS-I technology in India in 2003. DTS-I (Digital Twin Spark-ignition) became a special attraction to the customers .
With the slow growth in the 100cc motorcycle market, bajaj introduced a 125cc engine model in september 2007 with a new technology DTS-SI (Digital Twin Spark-Swirl induction), named as Bajaj XCD 125 DTS-SI. DTSI is the parent technology to the DTS-SI. Bajaj has a dominant market share of almost 50 per cent in the 125 cc + segment. Bajaj XCD 125 alone contributes 13 per cent of the 125 cc + segment, a feat not achieved by other 125cc products after years of existence.

To capture the growth in the 125cc sector, bajaj has to introduce another model in 125cc. If bajaj goes for a new brand creation, it has to spend more in creating a brand. So, bajaj went for brandline extension of Bajaj Platina from 100cc to 125cc using the new DTS-Si technology.

Risks Involved in Brand Endorsement

Do you think the Brand Ambassadors will be paid more after the new Companies Bill 2008. The new law says that “Celebrities will be subjected to legal action, if they use misleading claims to induce consumers to buy a product and the companies shall be charged a penalty”. The law makes Brand Ambassadors to be careful, cautious and ensure the authenticity of the claims while they endorse a brand.
Is there anything in the law about the post endorsement actions?, i.e. A celebrity endorses for a brand and after few months if the claims about the product prove to be wrong, is there any action taken against the Celebrity? Don’t you think the law is biased towards celebrities. Is this the risk taken by the celebrities? Will this make the celebrities demand more remuneration because of the risk involved?

Advertisements in Recession

Do you think expenditure on advertisements has to be reduced during Recession? Such a period is plagued by lay-offs, non availability of funds and so on. But yes, companies should not stop promoting their brands just because of recession.

Research on marketing during a recession showed that cutting TV spending is damaging. The argument is irrefutable, but the reasons that some advertisers still reduce spending are often based on short termism and shareholder ignorance of how marketing works. Sometimes this is induced by the City, because cutting the marketing budget is an obvious way to reduce over-heads, but it costs a fortune to recover afterwards.

Smart businesses recognize that this is no way to manage a brand. Maintaining advertising expenditure gives huge benefit during a down-turn, and pays off when in an upturn. If you have to cut any marketing budget, choose anything but TV, as TV is the best medium for building brands.

When the other brands are opting for reducing their marketing expenditures, smart companies can take advantage of this by taking steps to increase brand visibility through keeping with their expenditure with respect to marketing the brand. This would be true only if companies are sure to survive the recession period.

ALL ABOUT IIPM

IIPM (Indian Institute of Planning and Management) is a well known Indian B-school due to a variety of reasons. The Institution is not recognized by All India Council for Technical Education (AICTE), hence it does not have the right to use the words "Indian Institute" in its name without central government approval (http://www.moneycontrol.com/mccode/news/article/news_article.php?autono=186908).
It mentions this in its advertisements, though in very small font. There are as many as 1000 B-schools in India, but how many B-schools follow rigorous print based advertisements?, IIPM does that. Is advertising necessary for B-Schools in line with commercial items like various products? Running a B-school is a business (but people pretend it’s not true), which needs marketing to let people know more about it. Rs 31.62crore, it’s not the amount that IIPM has received from its students but rather its the amount spent on the advertisements in 2004-06. (http://www.expressindia.com/news/fullstory.php?newsid=86527)

Advertising Strategy :

IIPM is reputed to be one of the largest spenders on advertising in India. According to the Economic Times, the institute was the seventh highest print advertiser for the month of September 2005 spending Rs. 3crore. It buys full-page print ads in The Times of India as well as the Hindustan Times, the Telegraph and the Hindu. It increases the frequency of advertising in the May to July period when universities begin admissions for their academic programs. In May 2005, the institute had an ad spend of Rs. 5crore making it the largest advertiser in the print media for that month.
It usually runs full-page advertisements. These advertisements are notable for:
Large amounts of detailed text: IIPM advertisements typically include a large amount of text and many tables. Some advertisements also include an essay by Arindam Chaudhuri or Dr. Malay Chaudhuri on economic or social topics. These essays have covered topics such as the existence of an 'MBA Mafia', corruption among politicians, and prescriptions for economic and social reform.
Rankings: Mentions IIPM's rankings on various parameters of various B-school ranking surveys. In the fine print of its advertisements, it mentions that the institute believes that it is #1 in India in terms of course content, global linkages and industry interface and It prints it is ranked no. 1 in global exposure.
Caption: with the caption “DARE to think beyond the IIMS”
Global Faculty: it provides readers, the names of the global Faculty from Columbia, Wharton, Oxford, Cambridge.
Rigorous Advertising is not a problem as long as the information provided is correct. The information provided by IIPM in printed ads is proved to be incorrect.

Flaws provided by the IIPM:

1. The Outlook C-Fore B-School survey had ranked IIPM's Delhi campus in the top 10 among several parameters in 2003, but IIPM advertisements generalized these rankings for all IIPM campuses. After complaints made by IIPM students and alumni, C-Fore issued a clarification removing IIPM from its survey, stating that it had "received serious complaints about the veracity of information given by them". IIPM continued to advertise rankings even after C-Fore had removed it from its survey
2. Outlook Magazine has twice published caution notices in 2005 informing students and all related parties about the withdrawal of the rankings. Outlook also stated that they have also "come across instances, where the institute doesn't disclose facts truly and correctly". (http://www.outlookindia.com/full.asp?fodname=20050718&fname=IIPM&sid=1 registration compulsory)
3. Faculty from the names that IIPM advertises so heavily - Harvard, Columbia, Wharton, Oxford, Cambridge, Stanford et al - do not actually 'teach' at IIPM. Instead of picking a subject and teaching it over some weeks, as is the practice at the Indian School of Business, they just collect students at an auditorium and give a one-time lecture.

So, Do you think IIPM is really providing any healthy information for the students before apting for it?

DOES BRAND ENDORSEMENTS HELP DURING RECESSION

We know that the major cause for the global economic melt down is the sub prime crisis in U.S. It had its effect on the global economy, including India. In India, many of the banks like ICICI, SBI had its exposure in the U.S FII’s. State Bank of India (SBI) has $5 million exposure to Lehman Brothers against its global balance sheet of $250 billion. ICICI UK subsidiary has 18% exposure to US market i.e. 375cr and people started withdrawing this amount from the bank which resulted in a drastic reduction in ICICI Bank share price on the BSE by around 26%. The drop in share price has its reasons like decline in confidence of the customers because of its
exposure in US FIIS. In this situation it had to regain its brand value by sending a message of trust.



For this it had chosen Shahrukh khan, the biggest bollywood star, for promoting the message of trust to the customers. The strategy actually has helped ICICI control the panic selling. This actually cannot be viewed and cannot be represented in any form, because the stock prices were still going down even after the ad. The decrease in the stock prices is because of macroeconomic reasons, i.e. recession in U.S. The entire bank industry was being affected. The ad only helped build confidence in customers and therefore preventing them from withdrawing their amount from the bank.

DNA in Bangalore!!

Guys, DNA has arrived in Bangalore. Wondering if i'm talking about a new biological phenomenon? No! It’s not Deoxyribonucleic Acid but its Daily News & Analysis. A new newspaper that is making its entry in Bangalore with highly competitive strategies. Do you think it can suceed in the highly competitive Bangalorean News Paper market dominated by TOI?
Lets look at a few business strategies followed by DNA to enter into the market:
i. First bringing awareness among people about the arrival of DNA in the city. For this it is following a poster appearance with a catch line of “IBELIEVE IN BANGALORE BECAUSE BANGALORE IS IN MY DNA”. This creates an emotional interaction and relationship between the customers and DNA. It also shows the belief DNA has in Bangaloreans.
ii. After raising awareness with respect to its brand name, DNA, It is following a penetration policy into the market by offering the paper at low price. This would help in attracting the consumers who aren't particular about their daily dose of news, in other words, the undiscovered market.
iii. A complete package of DNA, DNA MONEY, and DNA AFTER HRS are provided in one paper. Times of India had actually gone for niche marketing by dividing the segments into general and business consumers. For both these segments it is providing Times of India and ET. DNA has identified the need for both services in a single paper. So, DNA has actually gone for a mass marketing by supplying the entire array of information in the same edition targeted to all the segments. This helps in attracting the competitors’ customers and thus enhancing their market share.
iv. It provides Privilege card for the founder members. Special offers like subscription for rs.301/year, chance to be a Millionaire and various prizes are offered apart from the privilege card to the founder members. The privilege card can be used to avail 10-30% discounts from various outlets. This helps in attracting the customers and maintaining a track of customers with the privilege cards issued and building loyalty.
v. It is issuing a Bangalore Guide on subscription and providing weekend nirvana, a special weekend newspaper.
vi. Taking feedbacks from customers in understanding their needs and problems, this helps in making an ideal newspaper to the customers.
These are the marketing strategies used by DNA for its launch in Bangalore. Do you think with these strategies DNA can succeed in Bangalore, Lets see!!

Flaw in SBI advertisement

SBI (State Bank of India) is one of the biggest banks in India. SBI is well recognized Brand and it uses Mass advertising for increasing its brand visibility. Do you think there is a commonality between what it has set out to show and what it has shown? See the Advertisement published in ET and Business Line on Dec 1s 2008. The two employees in conversation are represented as SBI customers and the other workers sitting down are not represented as customers of SBI but the caption used is “Banker to Every Indian”. Caption reflects that the services are provided to all Indians. The ad has completely ignored the presence of two more individuals, may be it considered the two workers as Foreigners! Anyway truly it missed its Main theme in targeting its customers. Hope it corrects it next time.
Another issue here is the theme, “Pure Banking. Nothing else.” Makes sense? Not really. I wonder how they came up with this one. The meaning of the theme is that it provides banking services and nothing else. In the current market situation companies are increasing their services and target area to increase its profits, but SBI has restricted itself to a limited target area. Dmat services, Bihar Flood Donation,
SBI e-tax etc. These services provided are considered as the pure banking by SBI.