ADDING PRINCIPLE

In a global perspective, any organisation which is operating in a multnational environment must take care of the ADDING FRAMEWORK

A- Add volume (if you are going across geographies, you should be able to expand the volume of business

D- Decrease cost

D- Differentiate

I- Improving industry attractiveness

N- Normalise risk

G- Generating and upgrading knowledge

SERVQUAL

Kapferer Brand identity Prism

Payback

time it takes for capital budgeting projects to recover their initial costs

BEP

BEP is a point at which a company sells enough volume to cover the fixed cost

BEP (volume)= Fixed Cost/Contribution=FC/sales-Variable cost

Fixed cost=operating FC

Payback is related to capital investment

Advertisement Evaluation Parameters

Comprehension
Credibility
Impact

Product Diffusion Process

What is the purpose of strategy?

Stategy helps a business attain competitive advantage.. PERIOD. That is everything that a business does to gain competitive advantage in the market over its competition, in terms of all its components

components of strategy are marketing, cost, value, price, customers, production, manufacturing or any other elements in the value chain like

inbound logistics
operations
outbound logistics
marketing and sales
customer service

IRR

internal rate of return

NPV

NPV must be positive for an investment decision

Business Strategy

excellent information

WACC

NOPAT

ROI

Economies of Scope

Economies of Scale

porter's five forces

The most widely used, perhaps the only one, industry analysis framework

Silicon Valley's Success Secrets

Tolerance of Failure (It's a badge of honor)

Tolerance of Treachery (No such thing as loyalty)

Pursuit of Risk (of 20 funded start ups, 4 go bankrupt, 6 lose money, 6 do okay, three do well, one hits the jackpot)

Willingness to re-invest (Cash Flows into the valley)

Enthusiasm for Change ("Obsolete ourselves or the competition will")

Promotion on Merit (Politics counts for little. Performace counts for all)

Obsession with product (Find the "cool" ideA)

Openness to collaboration (Generations last months..borrow and get going)

Variety, Variety, Variety (Mix fleeting with permanent)

Anybody can play (I can be rich)

Mistakes are not the "spice of Life". Mistakes are life

Mistakes are not to be tolerated. They are encouraged

And, the bigger, the better

Porter's Generic Strategies

Low Cost and Differentiation Strategies

Kotler Speak

In this post, I will lay down everything that I find important from Kotler, the acceptable bible of marketing.

Kotler 1

Marketing management is the art and science of choosing target markets and getting, keeping and growing customers through creating, communicating delivering and sustaining superior customer value.

The first test of sustainability is how easy it is for the competition to be able to replicate your business model.

A transaction is a trade of values between two parties.

A market place is physical, brick and mortar while a market space is digital, this is the market available on the internet. A metamarket is a cluster of complementary products and services that are closely related in the minds of customers but are spread across a diverse set of industries. The automobile metamarket consists of automobile manufacturers , new car and used car dealers, financing companies, insurance companies, mechanics, spare part dealers, service shops, auto magazines and the auto sites on the internet.

How business and marketing are changing?
Changing technology
Globalisation
Deregulation
Privatisation
Customer empowerment
Customization
Heightened competition
Industry convergence
Retail transformation
Disintermediation
Company Orientations

Business Orientations:

The production concept: It assumes that consumers will prefer products that are widely available and inexpensive.
The product concept concept believes that consumers will favour those products that offer the most quality, performance or innovative features. It orients towards the product.
The selling concept postulates that consumers and businesses will not buy the companies’ products/services if left alone. So the organisation must undertake an aggressive selling and promotional effort.
The marketing concept shifts the focus to the customer to a “sense and respond” philosophy. The job is not to find the right customers for your products but the right products for your customers.

E-mentors

I will highlight some important things that I could pick from the e-mentors sent by one of our professors here:-

Comscore recently published the growth in Internet audience for Asia Pacific region, with India registering highest growth for the first time. According to the figures, India stands 3rd after China and Japan in the total number of Internet Audience.

A.T Kearney in their report, “Growth Opportunities for Global Retailers” has ranked India at No.1 position consecutively for the second year. The report sees Indian retail Industry to grow exponentially over next few years. The ranking has been done for 30 upcoming global economies. It is based on 4 broad categories namely - Country Risk, Market Attractiveness, Market Saturation and Time pressure for a new entrant to start retail business. India, as per the report, ranks highly on Market saturation and time pressure as compared to China and Russia. The aggregated score for India stands at 92, followed by Russia at 89 and China with 86.

Indian Automotive Sector: At present there are 15 manufacturers of passenger cars, 9 manufacturers of commercial vehicles, 14 of 2/3 wheelers and 14 of tractors besides 5 manufacturers of engines. The industry has an investment of more than Rs.50, 000 crore in 2002-03 which is slated to go up to Rs. 80,000 crore by this year end. The Indian automotive industry has already attained a turnover of Rs.1, 65,000 crore ($34 billion USD). The contribution of the automotive industry to GDP has risen from 2.77% in 1992- 93 to 5% in 2005-06. The auto companies have a manufacturing capacity of over 95 vehicles per annum.

Here is the Vision statement for Indian Automotive sector by Indian government
To emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion accounting for more than 10% of the GDP and providing additional employment to 25 million people by 2016

Reforms India needs to implement to achieve its 2050 vision:
o Improve governance
o Raise educational achievement
o Increase quality and quantity of universities
o Control inflation
o Introduce a credible fiscal policy
o Liberalize financial markets
o Increase trade with neighbours
o Increase agricultural productivity
o Improve infrastructure
o Improve Environmental Quality

10 facts about Indian middle class
1. An average family of 4.3 people lives typically in a 900sf apartment; 71% own properties, but only 9% have a mortgage
2. 19% own cars, 100% of households have TVs, 91% have mobile phones and 20% have credit cards
3. Household savings are low at 13% of annual income; mainly to meet emergency needs, healthcare and education costs.
4. Risk aversion is high: 84% have not taken loans, only 11% have invested in equities (this is changing fast)
5. Land and properties account for 51% of wealth, with 30% in cash and deposits
6. Half of households have seen their income rise in the past 12 months, of which one-third saw income rise more than 20%
7. 63% of respondents expect their income to increase in the next 12 months
8. Slightly more than half say governance has worsened in the past 10 years; improving the economy and reducing corruption are seen as top priorities for the government.
9. Children’s future and education a key concern and priority; other major concerns are rising prices and medical costs
10. Very high aspirations for children with 43% wanting their kids to get a master’s degree and 29% a doctorate

Indian Television Industry
The Indian entertainment Industry is bubbling. With broadband making in-roads in Indian homes, the line between a Television Set and home computer is decreasing. With launching of various Indian channels on You tube and Hindi movies getting released purely on the internet, we are taking a leap forward in every way possible. And we have not yet even seen the power of IPTV.
• First and foremost is, The Reliance – Anil Dhirubhai Ambani group (ADAG), who are widening its foray into media and entertainment sector with announcement of more than a dozen channels in Entertainment and Non-Entertainment space.
• UTV Software Communications is planning to launch a news channel soon, having launched a youth channel last month. It has plans to launch multiple channels in different languages
• INX Media will launch 12 channels in entertainment and news
• TV18 and Viacom’s joint venture Viacom18 will roll out a Hindi entertainment channel in addition to several niche channels
• BAG Films & Media is planning entertainment and lifestyle channels NDTV has announced a few non-news channels

Dairy major Amul, Life Insurance Corporation of India and mobile manufacturer Nokia have emerged as India’s top three brands according to Asia’s Top 1000 Brands, a survey conducted by Media, an advertising and marketing publication. Nokia, the global mobile handset maker as also been judged as the leading brand across Asia.

Reebok announced sometime back that they are setting up the largest retail store of Reebok Worldwide in Hyderabad, India. Taking retail to new heights, Reebok’s new store offers the finest shopping ambience to customers with products displayed by categories such as ‘Running’, ‘Walking’, ‘Aerobics’, ‘Tennis’, ‘Cricket’ and ‘Lifestyle’, to help customers make better purchase decisions. Built across 2 floors with individual customized sections for fitness, sports, lifestyle etc, the store offers a world class shopping experience. It’s the only single brand store with an escalator built inside the store with two floor high glass wall carrying footwear, built in a circular fashion around it. So it’s literally a ride through a maze of footwear, giving you a complete sense of the brand coupled with an over whelming sense of stylized shopping and delight of choice. With the focus on service and exceptional ambience paramount to Reebok’s objective to providing an experiential shopping experience, the newly opened Reebok store promises to offer a larger-than-life feel to the customers.

Maslow Need hierarchy

DUPONT ROE

Product Life Cycle

Covey's Seven Habits

Brand Asset Valuator

P/E

Free Cash Flow

EPS

Discounted Cash Flows

Activity Based Costing

Porter's Value chain

Cash Flow from Operations

Arguably a better measure than earnings because a company may be profitable and still not being able to pay its earnings.

GE-McKinsey Matrix

A business portfolio analysis framework based on the strength of an SBU

EBITDA

A widely used measure of profitability

Blue Ocean Strategy

I have no read this book completely so far but this is an excellent insight into why you we should not take competition as the benchmark and create something altogether new which pushes the competition far from you....

BCG

Growth share matrix, excellent framework to understand which products to focus on and which one to eliminate, this is the dog, they are eating out on the cash flows...just click on the link..

Ansoff's Matrix

one of the most widely used frameworks for business growth opportunities.

business cases

1. profit improvement

Profit= Revenue-Costs
The company would like to understand why the profits have declined. The understanding of concepts is critical.

The above formula could be broken:

Profits=Revenue-Costs=(price-variable cost)*quantity)-FC

Break even point:

Total contribution= Total cost

Factors affecting price:

Market Power
Price elasticity
Product Differentiation
Brand Implications*

*Indicative list

Factors that affect volume:

Competition
Substitutes/complements
Distribution channels
Logistics

Growth Strategies:

Please refer to Ansoff's matrix

Industry Analysis

Tool: Porter's Five forces Analysis

other metrics could be:

oligopoly/monopoly/monopolistic competition/imperfect competition/what?
Trends

Market Entry

Understand the size of the market
Understand the competition
Analyze customers' needs
Identify gaps in need fulfillment
Assess the company's strengths
Evaluate barriers to entry
Evaluate methods to entry (Build/acquire, partner)
Analyse past entry successes/failures

Capacity Expansion

Estimate:

Potential benefit of expansion
Means to capacity expansion

Acquisition

is 1+1=3?

Rationale for acquisition
Likely competition response

Investment

Understand the business
Do an NPV analysis

creativity and innovation

Just mentioning a few things I learnt from the creativity and innovation sessions.

The key technique learnt was first diverge and then converge. We took the example of "how to solve the traffic problem on Indian roads?" and the idea is to write anything within a time frame during divergence. This will result in scores of ideas.

The next step is to converge by grouping the ideas into different groups and selecting what will be reaosonable and feasible to implement.

sir recommended a few books:

Cracking creativity- Michael Michalko
Use both sides of your brain

Brand Building

The Samsung case we discussed in the class today makes an emphatic point about when a company should build the brand?

Samsung used to be a cheap OEM supplier since its inception and they had built up capability whey decided they were ready to build the brand.

Another Important lesson is "when do you know you have built the brand?" You know it when you have integrated your operations to live the brand and the customer knows what you stand for.

You have the resources to invest in brand building and the capability and that's when you should go for it.

IDEAS

Stages of Idea implementation

I-Insight

D- Design

E-Experimentation

A-Added Value

S-Sales Plan

The Pizza Company Thailland

We had a very interesting case in the franchising class on the pizza company thailand. PPCL is the company which runs this pizza business.

They used to be the franching partners of the Pizza Hut for 20 years when suddenly when Pepsi separated its restaurant business with 3 companies- KFC, Pizza hut and Taco bell formed a new company- Tricon and they pressurised PPCL to include a non-compete agreement to renew the franchise.

PPCI rejected the clause and started a new company on their own. As a part of the fireflighting exsercise which was constituted to form a new company when Pepsi ditched PPCL, a core team was instituted which has these resources:

The Minor Group HR manager
The general manager of the Burger King and Chicken Treat which were other businesses of Minor Group
The operations director for Pizza Hut Franschise
A purchasing/supply chain manager to ensure on time nation wide delivery
A research and development manager
Training Manager
MIS and accounting managers to ensure that the new concept contributed to economic profit
Development and Equipment representatives
The marketing manager

I have created this post to show that with people anything could be done. They formed the new company and it's up and running.

The link is to the company. It's a war out there and the fighters survive.

The paradox of choice!!

The title of this post is the title of one of the most insighful books i have read and still reading. I love it.

I share some of the insights here.

Some people are maximisers and some are satisficers. I am talking from the population of people who have some standards for their lives. Now, satisficers are happy with "good enough" choices and maximisers seek to maximise everything. This is where the problem is. Every time they make a decision, they think of all the better alternatives they have had to give up.

For example, a maximiser buys a motorbike after much search. Now that he has the motorbike, there is a possibility of "postpurchase regret" Maximers cannot escape this because they will keep thinking about all the alternatives that he has given up and which could have been better.

It's not that satisficers do not have standards. They have standards but once they make a decision, they are happy with their decision which enables them to enjoy their decisions. They do not have to keep thinking about options they have left out.

There is nothing called a perfect world. A perfect world is a hypothetical reality where we do not have to make trade offs and get everything we want. This is an imaginary situation.

We all want to have choices. But what do these choices do to us? Does it help out lives? Does it help the way we make decisions?

unfortunately, the more choices we have, the more frustrated we are. We cannot decide what is good for us. I mean, think of buying a car. Which car should you purchase? Which category? Which design? Which company? Lets sa you boil down to a company. Maruti.

Now Maruti zen, versa, 800, Baleno, SX4, Lx, Px or Gx???? Ofcourse, I have not covered the entire range here. The opportunity costs of making one decision over all the others!!! Think about the opportunity costs of marriage!!!!

Counterfactual thinking has been the reason for the growth of the human society. If only we did not think about something that does not exist and could be a possibility, how would we evolve?? However, it is also the reason for regrets, both anticipative regrets and buyer's remorse.

More and more choices do not quite serve us all the time. We would ideally want to be left alone and not look at opportunity costs at all. e can help ourselves by being satisficers. The problem in keeping options open is that we are never quite done with the decision.

People do things which they do not have reasons for. "Why" does not always precede reality. Choice is supposed to benefit us, isn't it? But does it?

The opportunity costs of one choice over another present the paradox of choice!!

Financial Services

Session with Prof Arindam Bannerjee

The financial services sector comprises of Merchant Banks, NBFCs, regulators, Asset Management Companies, Investment Banks, Wealth Managers,
Insurance companies.

How do the banks make money?

Merchant Banking or consumer banking is about accepting deposits and issuing loans. Now the idea is to give lesser rate of interests on the deposits and charge a higher rate of interest on the loan and make money in "the spread of the interest". It's called,"the spread"

Mutual Fund Companies like Fidelity are called Asset Management Companies (AMCs). In US, they are called Asset Managers. Banks can be sponsors to the mutual fund operators but they cannot operate a mutual fund. Similarly, investment banks cannot operate mutual funds. Sponsoring can be for the initial investment and protection money.

Mutual funds could be sectoral funds, diversifies funds among myriad categories.

Other financial servicec are Systematic Investment Plans, electroically traded funds etc.

Sovereign papers like kisan vikas patra and NSCs are guaranteeed by the government.

There is a category called derivatives. These are products within products. A derivative would always be linked to some product, like equity. For example, a reliance derivative product would be linked to reliance equity, debt instrument.

Derivatives can be:

Futures: You agree to buy or sell at a pre-determined price at a future date which is generally 3 months.
Options: You have the option to exercise the choice. You have oil futures and not oil options.
Swaps: 2 banks are involved in raising funds for their clients in different geographies.

There are index funds representing the entire stock index on a BSE for example and there are sectoral indexes. For example, index representing the infrastructure stocks.

Shorting strategy refers to a contrarian outlook of the market based on business fundaentals. George Soros has followed this strategy to make a lot of money. Please find out who that guy is. They have a bearish outlook to the market if the market is bullish and otherwise depending on their analysis of the situation.

Investment decisions.

Why are you investing?

Now it depends on the purpose of your investment. For example, you may need 10 lacs 10 years down the line for your son's education. You want a product that will give you return without risk. You would not want to take risks here.

Do you understand whwere you are investing? I forgot to ask the third question, he said there are 3

Okay, what do the investment banks do?

Investment banks provide advisory, underwriting services in case of IPOs, advisory of HNWIs, get banks together to fund M&As, sell securitised products. There are no investment banks recongnised in India. RBI has not even given a definition.

Lehmann Brothers, Meryll Lynch feel because of the sub prime crisis. AIG is an insurance company and not allowed to invest in mortgaged securities but they did and landed in this rut.