Tata Steel wins Corus with $11.3bn offer

The much awaited results are out!!

Tata Steel of India won the battle to control Anglo-Dutch steel maker Corus with a £5.75bn ($11.3bn) offer on Wednesday, after more than eight hours of head-to-head bidding against Companhia Siderúrgica Nacional of Brazil.

Tata was declared the winner with a bid of 608p a share in cash, against CSN's highest bid of 603p a share. The Tata bid valued Corus at about £6.7bn including debt, said a spokesman for the company – far above earlier analysts' and market estimates. Corus shares closed in London on Tuesday at 565p.

"This is a price that Corus shareholders will be happy with but also one that Tata is happy with," said a banker working on the Tata bid. He added that the Tata camp was "pretty excited" about the victory, especially as CSN had been seen by many as the probable winner. "We kept a very low profile but we always knew Tata was very determined," said the banker. Tata is expected to hold a press conference in Mumbai at about 10:15am local time.

The bidding went to the ninth and final round of an unusual auction process introduced by the UK Takeover Panel to ensure the Corus battle was resolved in an orderly and transparent way. One person described the process as "tense" towards the end. The Tata team including the chairman, Ratan Tata, conducted the bidding from their headquarters in Mumbai through their bankers in London.

Tata and CSN had been fighting over Corus for several months, in an effort to become the world's fifth largest steel producer. The global steel industry has been rapidly consolidating over the past year, and steel makers are under pressure to grow if they are to have a chance of competing with Arcelor Mittal, the world's largest steel group, created last year through the takeover of Arcelor by Mittal Steel.

CSN bid 515p a share in cash for Corus in December, trumping Tata's agreed offer of 500p. Tata had started the bidding in October with an offer of 455p a share.

Tata's winning bid of 608p a share represented a premium of 68 per cent to Corus's pre-bid share price, Corus said.

A person familiar with the Tata bid acknowledged the price was higher than the market expected but said Tata's net profit for the third quarter, reported on Tuesday, was sharply higher and steel prices were buoyant. "Against that backdrop, it's understandable that Tata Steel has the confidence to do what it has with Corus," he said.

Tata said the bid represented a price of nine times earnings before interest, taxation, depreciation and amortisation from continuing operations for the year ending September 2006 and a premium of 33.6 per cent to its original bid of 455p.

The deal represents the final chapter in a successful turnround story at Corus, which was on the brink of collapse four years ago. At the time, its shares were trading at less than 10p, but a boom in global steel prices and a restructuring plan pushed through by Philippe Varin, chief executive, led to a dramatic recovery in the group's fortunes.

One London-based steel analyst said earlier Tuesday that Corus was expensive even at 515p a share. "450p was where you could find a stand-alone fair value for the company. Higher than that and you have to find synergies."

CSN and Tata's bidding had been dictated by "pride" as much as value for money, said the analyst. "They are looking at global empire building."

CSN tried to merge with Corus in 2002, and had claimed to have done substantial work on the potential synergies between the two companies.

CSN refused to comment immediately Wednesday morning. Earlier it said it would launch a bid for Colombian steelmaker Acerias Paz del Rio, seen by some commentators as a plan B in the event of Tata taking Corus.

The deal is likely to boost the valuations of smaller steel companies that could get caught up in the further consolidation of the global steel industry, such as Voestalpine of Austria and Salzgitter of Germany. CSN, along with ambitious Russian steelmakers such as Severstal, who missed out on a merger with Arcelor last year when it was bought by Mittal Steel, will be looking for targets.

[Courtesy - www.ft.com]

~~
Corporate Study Team,
IMERT, Pune

The Business of Free Software - Julia Hanna

IT vendors including Oracle, IBM, and Sun that traditionally have built offerings based on proprietary technologies are now investing billions of dollars into open source software—arrangements that are transforming in some ways the fundamental nature of technology strategy development, according to recent research at Harvard Business School.

In "The Business of Free Software: Enterprise Incentives, Investment, and Motivation in the Open Source Community," the authors—HBS professor Marco Iansiti and Gregory L. Richards of Keystone Strategy—examine what drives companies with large, proprietary software portfolios to invest in open source software (OSS) projects that can sometimes seem unrelated to their core business.

"This new reality upends the classic rules of strategy," Iansiti says, "and it's changing the way technology firms approach the development process.

How much of your product do you share? Does your business model extract value from a core product or a portfolio of complementary products?"

Most academic research has focused on individual contributions to OSS, but this working paper is among the first to consider the impact of massive IT vendors like IBM and Oracle on the open source community.

Why are proprietary firms diving into open source? The answer (it's good for business) is hardly shocking. But the line from investing in OSS to profiting from a product is not as straight as one would expect.

Influencing what you don't own

"In a complex, sophisticated environment where so many products and services are connected, strategy has become, in large part, the art of influencing assets that you don't own," Iansiti observes. It's the old saw of the razor/razor blade business model, with many more options for profit. "For IBM, Linux is the razor, and WebSphere software and its related services are the razor blade," he says.

"The question of how you invest and extract money becomes much more interesting when you consider the different layers of the software 'stack' and how they can be leveraged," Iansiti adds. As a measure of IBM's commitment to open source, the company announced its intent to invest $1 billion to the development and promotion of the Linux operating system.

    This new reality upends the classic rules of strategy and it's changing the way technology firms approach the development process.

In their paper, Iansiti and Richards divide a sampling of OSS projects into a "money-driven" or "community-driven" cluster. The former group has received over $2 billion in investment in technologies including Linux, Firefox, and OpenOffice, while support for the latter derives solely from the voluntary efforts of vendors' employees.

Not surprisingly, they find that the money-driven cluster consists mostly of high impact OSS projects that draw customers to a vendor's mainly proprietary, core businesses.

"OSS is a business tool that has been used by a variety of corporations for very logical purposes," notes Iansiti. "If you have an environment in which part of the service you provide and the product you sell can be given away for free, that changes the dynamics of the industry. As a company, you will most likely spend more time thinking about exactly what to give away and how to couple it with complementary products and services than you do anything else."

Wooing open-source developers

Another focus centers on determining how to make it easier for the open source community to work on projects that are consistent with your company's strategy.

"There are five or six million people in this space," Iansiti says of the open source community. "It's important to ensure they're doing something that helps your cause."

It makes sense to provide tools that help programmers develop applications that will make Linux more successful if it drives other aspects of your business. (And it doesn't hurt that you're also putting a stick in the eye of a competitor who makes money from the operating system layer of the software stack.)

"It changes the way we think about business development and alliances," Iansiti says. "Traditional alliances are formed between a business development executive and an individual company like IBM or Cisco. In the open source scenario, you could say that there's an alliance between IBM or HP and every Linux developer out there. And that alliance is being mediated by dynamics that are less investment-oriented than a traditional deal and more oriented toward indirect tools to make money."

The payoff

Sometimes the strategies software companies employ are so complex that it isn't immediately evident why a company is investing in a particular area, Iansiti notes. There can be a significant lag time between a company's investment and extraction of a profit.

"People can be too quick to point fingers, saying that one company is stealing while another is giving something away. In fact, the whole picture is often below the surface."

    It changes the way we think about business development and alliances.

In another ironic twist, some developers who were motivated toward open-source software development in rebellion against huge proprietary software vendors now find themselves being paid for work from those very same companies.

While research indicates a large majority of those who contribute to the open source community do so in order to learn and share new knowledge and skills, over half cite direct payment for their work or the chance to improve their employability as motivating factors.

Marco Iansiti is the David Sarnoff Professor of Business Administration at Harvard Business School.

~~
Corporate Study Team,
IMERT, Pune

Neuro Economics: Science or Science Fiction? Jim Heskett

Are you ready for "neuro everything" in management? The year 2007 will see a flood of books and articles describing findings and conclusions drawn from the growing use of MRI (magnetic resonance imaging) devices for studying decision making.

The research follows a pattern. It is based on increasing knowledge that different parts of the brain demonstrate heightened activity when subjected to challenges. Subjects are asked a series of questions (often requiring decisions) while their brains are being scanned (or while they are hooked to lie detectors). The work is being carried out at both European and U.S. universities such as Stanford, George Mason, and Amsterdam.

Among the propositions advanced from this work thus far, for example, are that risk and return are assessed in different parts of the brain, thereby questioning theories regarding expected utility on which a great deal of decision theory has been based up to now. Thus, according to this research, different qualities of, say, investment decisions are made when perceptions of risk or greed (return) prevail in terms of heightened brain activity. Another line of work involves the study of the best locus in the brain, conscious or subconscious, for making various decisions. For example, it is thought that more complex decisions involving hard-to-quantify factors are best made in the subconscious after some amount of preparation. That is, study the problem, sleep on it, and decide without further analysis. It's the type of decision making described by Malcolm Gladwell in his book, Blink. According to this line of thinking, questions involving more quantifiable, straightforward considerations are best answered in the conscious portion of the brain, presumably after considerable conscious thought. Work in neuro marketing at Ludwig-Maximilians University in Munich now claims that strong brands create more excitement in decision-influencing areas of the brain than weak brands, even for mundane products. Does this influence purchase decisions? Stay tuned.

Just how earth-shaking is this? After all, the late Milton Friedman was said to be most proud of his work with Simon Kuznets in which they concluded that people make purchasing decisions based on what they expect their incomes to be in the long-term, thereby mitigating the short-term impact on personal spending of events such as tax legislation. And Warren Buffett is fond of explaining his investment philosophy by saying, "We simply attempt to be fearful when others are greedy and to be greedy when others are fearful."

A lot of this comes down to knowing yourself, with or without the benefit of MRI devices. Are we about to be subject to a number of striking conclusions based on studies involving a small number of brain scans? Will there, as my colleague Luc Wathieu suspects, turn out to be other explanations for findings, for example, that question the value of rational, conscious decision making? What are the more general implications of neuro economics? Will it have strong explanatory as well as manipulative potential for us as consumers, managers, and citizens? Will it bring medical schools, business schools, and economics departments closer together? Or is it so far ahead of its time that we can ignore it for now? What do you think?

Refer to comments http://hbswk.hbs.edu/item/5599.html

Summing Up

Neuro economics is here to stay, according to a majority of those responding to this month's column. Its promises are too great to ignore. But it may be too early to know whether the promises will be realized in practice. And in the meantime, we stand warned against the hype that will be associated with findings based on research in need of standards and more fully-developed methods. Joseph Mello points out that "these studies will produce results along two lines. First, there will be … conclusions that can impact the 'tools' or processes a person uses to make decisions." At the same time, he adds, there will be "a new set of management and pop psychology books with dubious claims …."

Among the potential benefits making it highly relevant, according to David Skinner, is that "its output might just give us some new clues about why so many of the apparently unshakeable beliefs about change management … turn out not to yield the results we expect." Victoria Pynchon looks forward to the possibility that it will, for example, "give us surprising insight into our inclination to do one another good or ill." Roger Dooley noted that "self-reporting in surveys and focus groups is a limited tool, and I have no doubt that in the future brain scans will augment … traditional research methods."

But for Mark Spellmann, research of the kind associated with neuro economics raises "many interesting questions. One is, how do we interpret research findings when neurological results conflict with self-report? … knowing how the brain is working explains very little about what the mind produces—what we think, what we believe, how we make decisions." As Mike Flanagan puts it, "it might be nice to know that the decision was made on the right side or the left side of the brain. But this will never lead to deciding by a mechanical means, nor in predicting a decision outcome." There was even concern expressed about the efficacy of MRI-based research on human health.

Several suggested that it is hard at this point to assess the impact of this work. Dick Meza said that "it will have to run the gauntlet of peer reviews and further research …." Lorenzo Ferlazzo observed that "the current lack of standardized insights into behavioral stimuli and evolutionary asynchrony across global population types would restrict the validity of findings for some time to come." Biju Dominic offered the opinion that "I strongly believe that fMRI-led research into the brain is a top-down, far-too-simplistic approach …. But a bottom-up approach that gets into understanding the functioning of the brain … will be a slow but surer approach to understanding human behavior."

Others welcomed the possibility that this work may bring together economists, management theorists, and medical researchers. As Shann Turnbull put it, "The time has come for business schools to teach how to design, introduce, and operate network-governed enterprises using the knowledge of neuro economics."

Among questions this leaves us with are whether this research is valuable primarily in the aggregate or in individual cases. If so, just how long will it take for practical results? And will the early "wins" be sufficiently significant to foster longer term development in the field? Is it too early to tell?

James Heskett is a Baker Foundation Professor at Harvard Business School.

~~
Corporate Study Team,
IMERT, Pune

India opens telecoms door to Vodafone

Britain's Vodafone is being challenged by India's Reliance Communications, the Hinduja group and Hutchison's minority partner in the venture, Indian group Essar, in the race for Hutchison Essar.

Valuation estimates for Hutchison Essar, where a 67 per cent controlling stake owned by Hong Kong conglomerate Hutchison Whampoa is on offer, have climbed to as much as $US20 billion ($A25.85 billion) from around $US13.5 billion (SA17.45 billion) as the list of suitors expands.

Winning control of Hutchison Essar would give Vodafone a strong asset and 22 million customers in a fast growing market.

India's main mobile operators now share nearly 150 million customers, but with India's population over 1.1 billion, it translates to less than two out of 100 people owning a mobile.

For Vodafone, which faces slowing growth in its key Western European markets, a strong presence in India could provide it with a vital growth engine.

Vodafone owns a 10 per cent stake in India's top mobile company Bharti Airtel, but does not stand a chance of getting control as Bharti's main shareholders don't want to sell.

[Courtesy - www.theage.com.au ]

~~
Corporate Study Circle,
IMERT, Pune

24th Jan - Sunny Side up for Breakfast News!!

Bharti beats TCS, Infy in m-cap

Bharti Airtel, India’s top mobile operator, has outperformed market expectations with a 123% jump in net profit to Rs 1,215 crore for the third quarter ended December, 2006 from Rs 545 crore in the corresponding period of the previous year. Total revenues in the same quarter rose 62% to touch Rs 4,913 crore from Rs 3,026 crore in December ’05. The growth in net profits, the highest in the last eight quarters, resulted in the company’s shares touching an all-time high of Rs 700.80, before finishing the day at Rs 689.15, up 1.89% from Monday’s close. This has also seen Bharti move ahead of TCS and Infosys and became India’s third most-valued firm on the stock exchanges.

Bharti chairman Sunil Mittal attributed the company’s performance to the strong demand for telecom services in India. “In particular, the wireless segment has seen record additions and we believe that this trend is likely to continue.” The Bharti Airtel board on Tuesday authorised the acquisition of i2i submarine network cable system (a 50:50 JV between Singtel and a Bharti Group company) for $110 million. It will pay $55 m each to both Singtel as well as to its group company. The company also said that it would transfer all its telecom towers and related passive infrastructure into a 100% subsidiary, Bharti Infratel for enhanced operational efficiencies. It has also decided to launch DTH services by the year-end.

TIMES NEWS NETWORK

Govt clears SEZing doubts

The commerce & industry ministry has allayed apprehensions of SEZ developers over the government’s decision to freeze new approvals and notification of SEZs. On Monday, the empowered group of ministers (eGoM) on SEZs had decided to keep approvals on hold till further orders.

In a statement issued on Tuesday, the ministry of commerce & industry said new approvals and notifications have been temporarily held in abeyance and final decisions would be taken on all pending issues when the eGoM meets again shortly. The statement took note of the concern among developers over the future of their investments.

TIMES NEWS NETWORK

Grasim Q3 net up 184% to Rs 555cr

Grasim Industries today reported a 184% increase in consolidated net profit at Rs 555.39 crore for the third quarter ended December 31, 2006 when compared with Rs 195.34 crore in Q3FY06.

According to a release issued to the BSE today, total income increased to Rs 3,752.83 crore from Rs 2,550.04 crore in Q3FY06.

The company, on a stand-alone basis, posted a net profit of Rs 411.58 crore for the quarter ended December 31, 2006 as against Rs 161.87 crore for the quarter ended December 31, 2005. Total Income increased to Rs 2,323.78 crore from Rs 1,675.33 crore in for the quarter ended December 31, 2005.

Business Standard

Global environment fund gives money to dirty fuel

The world's biggest fund for environmental projects is investing for the first time in a non-renewable, polluting fuel -- coal -- in what it says is a new pragmatic approach to the energy needs of the developing world. The Global Environment Facility, managed by the World Bank and United Nations agencies, said on Tuesday it was putting $45.5 million towards an overhaul of some of power-hungry India's ageing coal-fired plants to make them more efficient and less polluting. Monique Barbut, the facility's CEO, said there had been long debates about whether it should be funding a "polluting" coal project, in what would seem to be a departure from its aim of weaning the world off carbon as a fuel supply. In the end, she said, the pragmatic approach won out. "We cannot cover the planet with wind turbines," she told reporters at a New Delhi press conference. "We do argue that renewable energy is the best ... but at the same time India is clearly not going to develop for the next 20 years without coal. We have to cooperate with that."

Reuters

SRE-1 brought home

The Indian space programme today entered a new league with the Indian Space and Research Organisation (ISRO) demonstrating its ability to recover an orbiting satellite and bringing it back to earth successfully for the first time in its history.

The Tribune, Chandigarh

Now that’s a great start for a day. Wish you a brighter & a prosperous Wednesday!

~~
Corporate Study Team,
IMERT, Pune

IMERTs Flag raised yet again!

IMERTs Flag raised yet again, this time at PUMBA when IMERTians won 'MARKATTI' the negotiation game, part of Druv – PUMBAs Management Festival.

Hearty congratulations to the participants - Dhairyasheel Patil (MBA I) , Sumeet Karande (MBA I) & Jayveer Singh (MMM I)!

~~
Cultural Cell Team,
IMERT, Pune

The Apple of everyone’s eye... (Continued)

21 MILLION IPODS ADD UP TO APPLE'S BEST QUARTERLY PROFIT, REVENUE

Apple -- maker of the wildly popular iPod -- just had its best quarter ever, reporting record revenue of $7.1 billion, and record profit of $1.0 billion, or $1.14 a share, for its first fiscal quarter.

Apple said it shipped more than 21 million of the digital music and video players in the three months that ended Dec. 30, up 50 percent from a year earlier. Shipments of Macintosh computers, meanwhile, were up 28 percent to more than 1.6 million. Profit was up 78 percent from a year earlier, while sales were up 24 percent.

''We've just kicked off what is going to be a very strong new product year for Apple by launching Apple TV and the revolutionary iPhone,'' Apple Chief Executive Steve Jobs said in a statement announcing the results.

Apple's shares were falling in extended trading, after closing at $94.95, down $2.15, or 2.2 percent. However, the Cupertino company's stock is trading near its all-time high of $97.80, set this month when Jobs introduced plans for the all-in-one cell phone/iPod/pocket computer iPhone and the Apple TV device, which will allow you to use your big-screen television to watch content stored on your iPod or computer.

BUT!

Earnings reports are usually staid affairs, but Apple's financial update today could have a bit of drama. Among investors and analysts, there's already excitement about how the company did during the just-completed holiday season. And many are eager for Apple's take on what its new iPhone will mean for the company's earnings. But another issue of note could spice up the proceedings. The U.S. Attorney's Office announced Friday that it has launched a criminal investigation into Apple's past stock-option grants. Apple's conference call today will mark the first chance for analysts to query the company over the government's investigation and its response. Many investors would like the issue to go away. But that doesn't mean they're not thinking about it. Apple's stock is now a more risky bet thanks to the federal investigation, said Darren Chervitz, director of research at mutual-fund company Jacob Asset Management, which owns Apple shares. The risk to Apple is that the investigation could lead to Chief Executive Steve Jobs' resignation, just as similar problems at other companies have led to the resignations of their CEOs, he noted. ''Clearly, this is a small cloud,'' Chervitz said. ''Jobs is one of the few CEOs who would have a pretty significant impact on the stock price if he had to leave.''

Why is Apple not seen in Asia as much?

Every time somebody asks them why the iTunes Store won't sell songs or movies to consumers in Asia, all we hear are vague and mumbled remarks about "the issues that still need to be resolved." This is invariably followed by another sentence saying they are not authorized to say more.

Here is what your marketing director for Asia told the Agence France-Presse in Hong Kong when you launched your movie service in the United States in September.

"We cannot comment on the specifics but it is true that iTunes is not available in Asia. That goes for music and movies."

Is that any way to talk to your customers?

I asked your company's visiting fireman from Singapore—we only see him whenever Apple introduces new products here in the Philippines—how long it's been since the iTunes Store opened for business in the United States.

Five years, he said. Does that mean that a company as innovative as Apple has been unable to resolve those issues in half a decade?

So I asked the guy: Where are Asian iPod buyers supposed to get their music? Limewire? Other file-sharing sites?

"For Asia, we recommend that consumers rip their music from their audio CDs or download any of the thousands of free podcasts," he said.

So, I asked, we can do anything with our iPods except buy songs and movies from the iTunes Store? That's correct, he said.

Now Apple will not say how many of the 60 million iPods out there are in Asia, but officials have told the Mac News Network (http://www.macnn.com/) that the iPod doesn't enjoy the same market leadership here as it does in the United States, Japan or Australia. Yet in the same article, your chief financial officer, Peter Oppenheimer, is quoted as saying that Apple sees the rest of Asia as an opportunity to increase market penetration.

Here's an idea. Start treating buyers here with the same respect that you give your customers elsewhere in the world. Stop redlining Asia with vague talk about piracy. If you have a piracy problem in this region, why not at least say so and level with us?

Let's speak plainly.

Intended or not, Apple's decision to withhold the online sale of music and movies in this part of the world is an insult to people who buy its products. The red line tells us you think of us all as digital pirates, unworthy of trust. This is the stark truth that your people dance around whenever we ask them why Apple doesn't sell music here.

So, is Apple worried that piracy syndicates in this part of the world will start downloading songs for 99 cents apiece and start selling them for 10 cents or burn them on CDs to sell in Third World markets? But that's happening already, even without iTunes.

Or maybe it's the music publishers who won't let you sell their songs in Asia for the same reasons. But if this is so, why not just say so instead of taking the heat for their fears?

Let's look at some figures. Apple claims to have sold 1.5 billion songs to date through its iTunes Stores, with its online catalog of 3.5 million songs. Sales in Europe, a market Apple opened in 2004, have shot up from 50 million to 200 million songs. Not bad.

But the International Federation of the Phonographic Industry (IFPI) estimates that almost 20 billion songs were illegally downloaded in 2005 alone—and this was based on consumer research in 10 music markets including the United States, the United Kingdom and Germany, countries where the iTunes Stores already operate. Canada, where iTunes operates, was estimated to account for one billion of the songs illegally downloaded last year.

So, when your folks here tell us they can't sell us songs because of piracy, something just doesn't wash.

Ironically, by not selling to large swaths of Asia, Apple is indirectly encouraging piracy because iPod owners wouldn't be able to buy songs online even if they wanted to.

What consumer wouldn't want to own a legitimate product over a pirated one, as long as the price is right? When the prices of legitimate VCD and DVD movies dropped here, sales went up, despite the availability of cheaper pirated versions.

Oh, one more thing. Why take our word for it? Even the IFPI says one way to fight piracy is to promote legal services.

Courtesy:

www.manilastandardtoday.com, www. macworld.com, www.siliconvalley.com, www.wsj.com, www.apple.com, www.zdnetasia.com, www.ft.com, www.wordpress.com, www.cnn.com, www.tectonic.co.za, www.marketwatch.com

~~
Varun Nagpal,
Corporate Study Team,
IMERT, Pune

Apple iPhone - The Apple of everyone's eye!

Steve Jobs - CEO Apple, gave a jump start to mobile technology market in the new year when he unleashed the new iPhone by Apple. The best part - its been priced at US $ 499 only!

i.e. INR 22, 000 odd!

Check out the jaw-dropping review of the new Apple iPhone!

More on Apple's Market Strategy & Market in India, coming soon!

~~
System Cell,
IMERT, Pune

Book Review - Maverick: Ricardo Semler

Can you imagine a company where the employees decide their own salaries, the timings they would come and leave the workplace, how the surroundings around them should look like!!? Well, if whatever Ricardo Semler claims in his book "Maverick" is true, "SEMCO" in Brazil would be the only company in the world where the things said above do happen!

Ricardo Semler took over the reigns of "SEMCO" from his father. Till then, SEMCO was just another old fashioned manufacturing company with strict shift times, cribbing workers, etc. Handing over the papers to Ricardo, Semler Sr. said, "Do whatever you want as long as I'm alive to correct your mistakes" But Ricardo had his own ways of doing things that made sure that his father won't have anything to complain about in the first place and even if there was, he (father) won't be able to do much!

After stabilizing the company through the turbulent periods of change of management, Ricardo started acquiring companies to enhance business. I won't go into the details of how he went on to acquire companies or the timelines but I would surely like to share the philosophy behind this world's most unusual workplace.

The premise that Ricardo runs his company on is that "All the people working are adults and they know what needs to be done. It's no use policing them and having strict rules about what to do and what not to. If the employees are satisfied with work they are doing, a lot of problems won't arise in the first place." Ricardo proclaims that the policy of his company is not to have policy at all!

Some of the interesting initiatives that were implemented at SEMCO are:

• When recruiting a new team member, he / she would be interviewed by the team with whom he / she is going to work. That way, the team members would find out if they would be happy working with the new member.

• For some days, the company had started an initiative where everybody had to put a tag on the peg named after the employee. If someone is in a really bad mood at the start of the day, he/she would put a red tag at the entrance, "Stay away from me!" If someone is in OKish mood, he/she would put a yellow tag, "It's just another day for me..." and if someone is in really good mood, he/she would put a green tag, "What a wonderful day this is!" This initiative gave a clear indication to the management whether the employees are happy coming to work. But I believe it served another bigger purpose: to identify emotions to a certain extent. To control an emotion one needs to identify it first! I think, most of the employees would have certainly spared a few moments wondering why they feel what they feel.
  
  

• Headline Memo: Earlier, shelves after shelves were filled with documents and memos. It was tedious to maintain and find the required document from the piles. Ricardo used a simple criterion to get rid of the excess documents, "What worst can happen if I throw this piece of paper?" and he could manage to reduce his 6 cupboards full inventory of documents to just 3 shelves! Similarly, employees used to write pages for a simple memo. Ricardo suggested an effective way. He asked the employees to write the memo just like reporters write the news. They manage to catch the attraction of the reader and deliver important information through the Headline. The headline memo concept was used throughout the company. It reduced the documentation drastically and still, managed to convey the important information effectively.

• As stated earlier, Semler believed in employees being mature. He asked the employees to decide how much salary they'd need. It's hard to believe but employees did really rate themselves appropriately and asked for the salaries they really deserved. Some even asked for a less salary that they were getting!... And believe me, the company is still running.

• In spite of the fact that SEMCO is a manufacturing company and has to work in Shifts, the workers decided themselves when they would come to the plant. They were keen to adjust the timings of other shifts and schedule according to the business requirement.

• Workers coloured the walls of the surroundings the way they wanted. Some grew plants between adjacent cubicles.

• And last but not the least, Semler scrapped the age – old hierarchy of CEO – Middle Managers – workers. Instead, he proposed a new systems of 3 concentric Circles wherein the innermost circle is that of Partners, the middle one being Coordinators and the outermost being the Associates. Any associate could move into the inner circles of respective departments. This way every employee has an opportunity to move around in the company.

Ricardo has also pondered upon the growth of the company and "How big is big enough?"

These are just some of the astonishing things. The whole book is filled up with such out – of – the – world initiatives. It's really hard to believe that a company can survive with such processes (in fact, no processes!) and with adverse government policies, let alone prospering. But today the company is making exceptional progress!

One important thing: SEMCO has a total count of 3000 – 4000. So I think, it is manageable to implement the initiatives effectively in a small company and difficult to implement in big companies like ours. Also, it needs maturity and commitment of the employees to appreciate such initiatives. But then, as the clichéd saying goes, "Where there is a will…There is a way!"

~~
Varun Nagpal,
Corporate Study Circle,
IMERT, Pune

Market Watch - Jan 2007

Retail major Shoppers' Stop, part of the K Raheja Corp, is consolidating its luxury retail business by roping in over 40 global brands and has lined up Rs 500 crore worth of investments for this purpose.
Nike India has found an unusual display space to promote its apparel, footwear and accessories among women. The company has partnered with fitness centres Gold's Gym and Chisel to showcase its products.

After making its presence felt in eastern and northern India, Blackberrys, a premium men's clothing brand, is embarking on its southern foray through an aggressive expansion and marketing plan in Chennai, Bangalore and Hyderabad.

Madura Garments, textile and apparel division of Aditya Birla Nuvo, is foraying into retail in Sri Lanka.

Infosys Technologies and its chief executive, Nandan Nilekani, have lately taken a couple of steps which offer a glimpse into how the two are evolving on their journey towards a single goal – becoming a "globally respected" brand.


~~
Corporate Study Circle,
IMERT, Pune

The ART of marketing

Lessons marketers could borrow from The Art of Living Foundation.

Anyone who can persuade a corporate executive to ignore the insistent buzzing of his BlackBerry on a weekday has to be a great marketer. Multiply that 12,000 times, get the the executives to sit cross-legged on the mud-packed ground and practise breathing exercises — and you are in the presence of a virtual marketing wizard.

But Sri Sri Ravishankar would not like to be considered that — he is a guru who teaches Sudarshan Kriya Pranayam and New Age spirituality to people across the world. About 2.4 million of those students turned up in August for the 25th anniversary of the Art of Living Foundation, the non-profit organisation Sri Sri began in 1981.

Event managers in Mumbai agree those are eye-popping numbers, especially considering the celebrations were held in a remote airfield outside Bangalore.

Art of Living's success is a recent phenomenon; it is only in the past six or seven years that the movement has spread across more than 144 countries and now has an estimated 20 million followers.

Still, can its success provide marketers insights on low-cost brand-building techniques? Tips on how to create a loyal band of followers who can be converted into a captive market for brand variants and extensions? The Strategist takes a look at the possible lessons.

Lead from the front

It is not as if the movement started off as a runaway success. "There was a lot of prejudice," agrees Sri Sri. "The fundamentalists did not like our approach. Nor did the communists and the traditionalists accept us. We were excommunicated by many."

One way out would have been to cater to Western audiences thirsting for Eastern thinking and spirituality. But there were already several entrenched players — while the serious truth-seekers turned to Jiddu Krishnamurti, and the Iskcon movement was still active in the early 1980s, Osho Rajneesh was at the peak of his popularity.

Or should it be notoriety? Both Hare Rama and Osho had as many detractors as devotees. Juxtaposed between the extremes of the Jiddu and Osho "brands", Sri Sri's Art of Living couldn't but be considered a lightweight.

But it couldn't back out. Making it in the US would mean instant global recognition. Not to mention, much better acceptance back in India. So how did Sri Sri pull it off? The Foundation took full advantage of its USP: a charismatic, eloquent and camera-friendly leader. The "face" of the Art of Living Foundation, at the peak, Sri Sri was flying to 175 cities a year, working 21 hours a day.

Equally important, the Foundation kept its product offering simple, if not exactly inexpensive. Essentially a crash course on breathing exercises and yogasanas, a basic course of six sessions could set you back around $250 in the US, and about Rs 1,500 in India. The idea was simple: urban consumers were looking out for a stressbuster that would enhance productivity and sustain energy levels.

Believe in the buzz

Enough word-of-mouth publicity for the Foundation was generated for it to enter 144 countries, including war-torn regions such as Kosovo and Iraq. In India, NRI cousins coming home from the US would talk about Art of Living, leading affluent families in the country to gain interest.

Celebrity endorsements did their bit to further the Foundation's cause. While Sri Sri is, naturally, Art of Living's biggest ambassador, over the years, seals of approval from public figures have also helped: businessmen Vijay Mallya and Venugopal Dhoot, and models Rhea Pillai and Lara Dutta have been associated with the Foundation. US Congressman Joseph Crowley has even nominated Sri Sri for the Nobel Peace Prize!

As followers increased, they unleashed a viral marketing campaign. For instance, Mumbai alone has an estimated 100,000 active Art of Living volunteers. They operate in their neighbourhood, acting as opinion leaders and encouraging others in the locality to enrol for the courses.

Of course, there's some formal advertising, too. Take any pre-event campaign and you will find Sri Sri's face on posters across town, in prominent places like flyovers, outside railway stations and so on.

Recently, a leading business news channel tied up with the Foundation for a series on how business and spirituality come together, further proof — if it was ever needed — that businessmen and corporate executives are demonstrating increasing interest in spirituality.

Interestingly, though, insiders say the publicity blitzkreig costs the Foundation virtually nothing — most of the ad material, like posters, vinyl prints for billboards, leaflets and flyers and so on are sponsored by followers.

Apply that to the context of everyday business. "Brands can get customers to create online communication, some of which become successful viral campaigns and form communities of loyalists," says a Mumbai-based marketing consultant.

He cites two examples — the Joga Bonito online site created by sportswear brand Nike on the eve of the soccer World Cup in summer 2006 and consumer goods giant Procter & Gamble's online initiative when it launched its new deodorant brand Secret. An example closer home is the Sunsilk gangofgirls community.

A consuming class

Having a substantial volunteer (loyalist) base isn't an asset only when in canvassing support. They also help the organisation keep operating costs really low.

For instance, the administrative costs, including wages for Art of Living employees, is estimated at just 3-4 per cent of income. "The only paid employees are the accountants," says a member of the Foundation. He adds that volunteers are also self-motivated and hence are far more committed.

Not just that, they also become a huge test market or even a captive consuming class when Foundation expands its scope of activities. For instance, in 2002, when the Foundation launched a range of Ayurvedic products — everything from medicines to personal care products, under the Sri Sri Ayurveda brandname — volunteers across the world formed an informal direct selling network.

In many cases, they acted as living advertisements for the products, by using them in front of prospective buyers. The products now account for less than 5 per cent of the Foundation's annual income. It is now in scaling up production to tap an even larger market. Clearly, correct breathing techniques is just one of the many lessons smart executives can pick up from the Foundation. - Prasad Sangameshwaran [Courtesy - Business Standard] ~~ Varun Nagpal, Corporate Study Team, IMERT, Pune

Mainland China!

We always ask one question: ' How do the Chinese have a booming economy?' and we compare ourselves with the 'giant' on all parameters including 'defense' sometimes.

Or it is the title of this article which hits our mind straight after that, if the initial is too intellectual for us.

The most common observation is about the FDI in India.

In a year-end review released this week, Kamal Nath, India's minister of commerce and industry, said FDI inflows were expected to surpass $11bn in 2006-07, compared with $5.5bn the previous year.

Wait! don't get excited so soon, please have look at the Chinese figures: - A report from the Economist Intelligence Unit this autumn projected that FDI in China would exceed $80bn in 2006.

I recall book I had read in my first year titled ' A Bridge Too Far ', i think it aptly applies in this case too. Just when are we going to bridge that gap? or is it really possible for us to do so?

If we feel that communism which brought in centralized authority and quasi-dictatorship in China post cultural revolution is the key, then have a look at this: -

LENOVO is arguably China's most important company, rising from obscurity 20 years ago to become the world's third-largest manufacturer of personal computers. Its purchase, for $1.25 billion in late 2004, of IBM's PC division, which boasted four times its own volume of sales, still ranks as one of the most daring overseas acquisitions by a Chinese company.

Yet there was nothing inevitable about Lenovo's ascent. Its founder Liu Chuanzhi was determined and politically shrewd. But as Ling Zhijun, a respected Chinese journalist, chronicles in this exhaustive new account, Mr. Liu and his colleagues—most of whom started in business in their 40s—had no experience of running a private company, no idea about modern computers (the first mainframes had to be cooled with ice cubes and a fan) and a formal education that had been cut short by the Cultural Revolution. As they built Lenovo, whose Chinese name is Lianxiang, they had to teach not just themselves, but a generation of Chinese bureaucrats how to run and regulate a private corporation.

Mr. Ling's impeccably sourced, fly-on-the-wall account of the company's struggles is fascinating. Lenovo depended on the protection and goodwill of the Chinese Academy of Sciences, which also became its biggest shareholder. However, despite Lenovo's subsequent stock market listing in Hong Kong and its skill in sidestepping ludicrous government rules against everything from differential pay and bonuses to control of the supply chain. Ownership of private assets is highly sensitive in China, and previous attempts by the government to reclaim ownership of effectively private companies have often proved disastrous—bankrupting Kelon, a fridge-maker, for example. With luck, Lenovo will escape this fate.

Mr. Ling gives most of the credit for Lenovo's success to Mr. Liu, who pushed boundaries while staying just the right side of the ideological line—and by doing so, changed the way China does business. Mr Liu launched incentive schemes and share options to motivate Lenovo's staff—handing out suitcases of cash and risking imprisonment to sidestep the government's 300% tax on bonus payments. The tax was subsequently scrapped. He pushed for a handful of employees to own their own homes—a revolutionary initiative in 1992—prompting China Construction Bank to announce the nation's first- ever personal loans and newspaper headlines to cry: "How can young people live in three whole rooms?" Lenovo was the first Chinese company to create advertisements that did more than just name a product and its price—so introducing brand building to China. And Mr. Liu accepted China's limits. Though politicians and his own engineers urged him to develop a "Chinese chip" and fight Western competitors on quality, Mr. Liu resisted. Seeing that Chinese science lagged behind, he focused instead on cutting prices and copying Western technology and sales methods.

Most mergers between Chinese and Western companies stumble. Insiders suggest this one may be faring better than most under William Amelio, the former head of Dell's Asia-Pacific division. It is too early to know for sure and Lenovo's history may be a poor guide to its future.

If Lenovo's rise in China has been haphazard, Microsoft's feels pre-programmed. Opening a research laboratory in China in 1998, a pioneering move for a foreign company was a calculated decision intended to help Microsoft attract fresh, cheap talent. That, combined with an investment of more than $100m, helped repair relations with Beijing that had been damaged by the group's heavy-handed commercial dealings in China.

This is just one of the many success stories in China, I picked this story as we all know Lenovo.

Resilience is not something that we inherit but it is something we acquire by perseverance, efforts and faith.

The best thing on the blog would have been a warm note of good luck for the new year, kindly excuse me for being curt, but if we want to be the best then i think we should prepare to beat the best.

So pull up your socks fellows we still have long way to go.

[Courtesy www.economist.com]

~~
Dhairyasheel Patil - MBA I,
Corporate Study Circle,
IMERT, Pune