Wednesday, December 12, 2012

Rick swings, GM misses

...and the shareholders get their pants walloped!

Rick Wagoner during his 8-year term as the CEO & Chairman of GM has oft been described by industry experts as a leader who lacked the “ruthless streak” needed to make the tough decisions... Well, allow us to be crude. Many do claim that he tried his best to revive the lost glory of the wounded auto-maker. Sadly, his best wasn’t enough, and today, his successor, Fritz Henderson, is fighting hard to present a viability plan before the Senate, by June 1, 2009. There is no denying that GM has proved to be Detroit’s biggest blunder in these recessionary times, and all because Wagoner behaved like the wicked kid who skipped classes at Harvard (by the way, he’s an HBS Alumni) and played baseball, trying to hit home runs every ball; but he failed [And guess what, many are blaming the recession for GM’s miserable state]. So here are the bull-headed swings that failed to deliver the so-called homies and which make up for one of the biggest business blunders in the past 100 years.

Swing & Miss #1: Being the CEO of a First World brand, his ‘American legacy’ ego prevented him from shifting units to emerging nations. Swing & Miss #2: Axing of the EV1 electric car project in 2003, which Wagoner admitted was one of his “greatest blunders.” The product, which was the world’s first electric car, could well have become the future of GM. But then again, isn’t GM all about brawns and hefty Hummers? What Wagoner forgot was that fuel-efficiency is something that leaders like Toyota and Honda have focussed on besides offering powerful engines... [Rick, you skipped your market segmentation lessons too?]


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

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Sunday, December 9, 2012

Riga regale...

Riga – the city of inspiration – is the capital of Latvia and one of the most dynamic cities of Northern Europe. Strategically located next to the Baltic Sea and amidst the famous continental European nations, Riga is the largest Baltic city and it brings with it the fascinating fusion of proud Latvian tradition and influences of the various countries that have occupied it. More than 800 years have shaped the city’s unique appearance and rich traditions. It presents an interesting blend of medieval centre and a modern city in such a manner that it caters to everyone’s taste as well as acquaints them with the charm of old times.

Riga has the finest art and architecture in Europe. It is nuzzled amidst Art Nouveau buildings and is situated on both banks of the river Daugava, which separates the city into two parts, Vecriga (Old Riga) and Pardaugava. Riga and its architecture suffered the blows during the wars. But the sheer love for art, culture and creativity is so deeply instilled that its heritage has been carefully preserved with a conscious effort. A walk in the streets of Old Town would be evidence enough to observe that. Today’s Riga would have far more to offer to its visitors, this vibrant and fast-evolving modern city has a booming nightlife with bars, clubs, live music and casinos. Riga sways to tunes of folk music as well as contemporary compositions. Melody plays an important role in everyday life, and whenever one finds the need to unwind or relax one could attend a music festival or a concert. Riga’s music festivals have an international reputation for their variety and high standards. Riga also offers cultural happenings for all age-groups! Every year Riga hosts large international cultural fests, and the most renowned and largest is the National Song and Dance Festival that is held once every four years with over 30,000 participants. Riga has experiences for every taste ranging from art, music, theatre and design to a wide range of cultural activities all year around.

Riga’s Art Nouveau centre has won accolades such as the UNESCO World Heritage Site and has given way to mass tourism. For the culture aficionado, Riga has several art galleries, drama and theatre groups such as the Latvia National Opera, Latvia Philharmonic Orchestra, many concert halls and more than 40 different museums like the popular State Museum of Fine Arts, Museum of the History of Riga and Navigation and the Latvian Museum of Nature, etc.


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

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Friday, December 7, 2012

SAMSUNG INDIA: JUNG SOO SHIN

Shin brings useful capabilities to the job, but he will have to drive a change in SEIL’s positioning strategy

Analysts argue that as SEIL does not have the semiconductors business division in India, the company’s operations in this region should not be affected much. But consumer confidence needs to be revived, especially for the upcoming summer season sales. SEIL believes that Shin’s prior experience as head of Marketing for Digital Appliances would come in handy. Moreover, according to insiders, “Shin has a reputation for being a tough task master with a clear focus; that would come in handy for him in this job profile.” And one can already see some aggressive strides being made. The company has introduced as many as 18 ACs in the Indian market and has targeted a 50% growth in their AC volumes in FY ‘09 and growth in market share to 25%.

Another important segment is mobile phones. In 2008, Samsung displaced Motorola to become the number two handset manufacturer of the world. However, the company has bagged only 8% market share in India till date, in sharp contrast to Nokia’s 70% market share. Still, SEIL is confident on its handset strategy in India, with its focus on low-end market.

Till now, SEIL had deployed a strategy of premium positioning, but now it would indeed make sense for the company to focus on the masses. Moreover, Samsung must revisit its communication strategy much like the way they have changed their communication for handsets; and efficiently target different sets of customers through differentiated marketing strategies. Clearly, Shin would have to open more battlefronts to improve the company’s standing in the country.


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

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Thursday, December 6, 2012

PROFILE: KENNETH D. LEWIS, CHAIRMAN & CEO, BOFA

You can curse him a million times for emptying your pockets; you can praise him a billon for saving other companies... Call him a ‘hero’; call him the ‘Don Quixote’ who led The Bank of America!

Even Cassandra Toroian, Analyst, Bell Rock Capital feels, “They were probably one of the best banks out there, balance sheet-wise, until they did the Merrill deal.” In short, the whole feverish situation was self-inflicted! So what lesson can we learn from 61 year-old Lewis’ ‘Don Quixotic’ heroic tale?

Born in Meridian, Mississippi, Lewis has tried hands at many jobs since the age of 12, including the ones at steel mills and filling stations, and even direct-selling (of green cards). He earned a Bachelor’s degree (Finance) in 1969 from Georgia State University and holds an executive programme degree from Stanford. He split with his first wife in 1978 and two years later, his ‘present’ became his ex-boss’ ex-secretary, Donna. Today, they have two children & two grandchildren. He started his journey with BofA (then called North Carolina National Bank) in 1969 as an analyst. He steadily rose up the ranks and 30 years later, he became the COO. He won the crown of CEO in April 2001 (replacing Hugh McColl), and Chairman in 2005. Now that was quite an upward glide for Lewis; his corporate performace graph sadly, following the opposite direction. Imagine this: in 2003, BofA was the world’s 4th-most-profitable company. It slipped to 12th in 2007 and 23rd in 2008. What worst; its expected negative performance this year will see it being booted out of the profit-makers list!

And though his ‘trust-me’ act of purchasing up to 400,000 BofA shares as “an outstanding long-term investment”, is an effort on his part to infuse confidence in his company’s investors, one truth stands – he should have worked towards achieving ‘shareholder wealth maximisation’ and not ‘bailout package maximisation’. Lewis perhaps forgot that the bourses don’t reward well ‘brave CEOs, on the lookout for quick glory’ (yes, he should have left it to the government and Fed!). Perhaps, even he was left pondering over what to choose – shareholder wealth or the bravery award for financial rescue (and obviously, he made the wrong choice)!


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

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Wednesday, December 5, 2012

Another ‘Modi’s operandi

Satyam is an attractive buy, but Modi has to be careful about how he values his latest acquisition target

Did your stock broker try to assure you recently that investors at the bourses are a rational lot? And have you felt the deep urge to trust his instincts on the same? If so, you would be unaware of of the way Spice Communications’ stock soared massively by 68.9% to touch Rs.80.65! The reason was ebulience of investors with respect to Spice Corp. Chairman B. K. Modi’s latest bid to acquire 51% of Satyam Computers. Now that would be perfectly rational, barring the minor detail missed by these investors; that Modi has nothing to do with Spice Communications ever since he sold off his stake in the company to Aditya Birla owned Idea Cellular!

Now that we have pulled the ‘rational’ carpet under your feet, allow us to analyse the rationale of Modi’s new found interest in the disgraced Satyam. Spice’s current investments in Multi Screen Media, Spice Cinemas and mobile retail wing HotSpots do not offer much synergy with Satyam. At the most, they have a BPO, which would get a massive shot in the arm! Speaking exclusively to B&E, Modi reveals, “Yes, we are interested in taking charge of Satyam and have presented a formal bid to acquire 51% stake and would name the new company Spice Innovations.” In June 2008, Modi had sold off his stake in Spice Telecom for Rs.22 billion and was looking at acquiring a company with global scale.


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

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Monday, December 3, 2012

From aviation to telecom

from nano to sezs; from aviation to telecom, india inc. is a tale of state patronage

For some things never do change in India and for India Inc.!

When it comes to covering India Inc., the media has clear perceptions about entrepreneurs and business houses. It is taken for granted that the Ambanis are unmatched when it comes to ‘managing’ the environment in North and South Block. Of course, the Ambanis are also admired for the ‘wealth creating’ skills; but there is always that touch of cynicism when one mentions their name in the list of India’s top business houses. But no such sniggers are heard when it comes to discussing ‘clean companies’ like Infosys and business houses like the Tatas.

Unfortunately, like most perceptions, these pre-conceived notions are merely manufactured myths. The reality is: everybody takes advantage of ‘State’ patronage to create an aura of entrepreneurship and innovation. Take India’s most respected business house Tata. When Ratan Tata unveiled the dream car Nano in January, 2008 in New Delhi, the media went simply hysterical. Even the foreign media, which is usually condescending towards most things Indian, lauded the Nano as a modern day marvel. So hyped was the coverage that you would think Ratan Tata might get the Nobel Prize for leading a team of innovators that could make a car for less than Rs.1 lakh.

Amidst all this, someone like Mamta Banerjee was branded a spoilsport as she was protesting the acquisition of land in Singur in West Bengal for the Nano factory. Bristling when some media outlets gathered the guts to say that the manner in which Tata Motors was acquiring land would sully the good name of Tatas, Ratan Tata made a melodramatic statement to a TV channel: “ If I believe that we were doing something wrong, then I will be the first one to pull out… You put a gun on my head and pull the trigger or take the gun away, I won’t move my head.” Move he did. Both his head and Tata Motors’ factory moved lock stock and barrel from West Bengal to Gujarat. But even as it was shifting base, Tata Motors approached the Calcutta High Court requesting an order to stop the Right to Information Commission from revealing details about the tacit agreement it signed with the West Bengal government.


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

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Sunday, December 2, 2012

Why GM still holds many promises?

Fritz Henderson, COO & President (Global), General Motors Corp. writes in B&E on why GM still holds many promises, despite criticisms and obstacles galore!

B&E: What are the reasons behind GM’s falling sales and what has the company done to ensure a sustainable future?
FH: The market is quite challenging. What we see is volatility in the market, and therefore you cannot have workable future strategies. The doubling of crude oil price in the last nine months, the housing market crash, all such factors have affected the American consumers and we will respond to this. We are already building a fuel efficient 1.4L engine for the American market.

B&E: On which alternative fuel system will you put your money? How feasible is such a system in the long term?
FH: Our strategy is based on multiple energy avenues as we are frankly not sure in which direction the market will move. We think that ‘electrics’ are more feasible in the future at this time.

B&E: What seems to be the real problem at GM right now?
FH: The problem that we face right now is that some of our products are extremely profitable and some are not. We want all our products in the portfolio to contribute to our profits and bottom lines.

B&E: Despite the fact that SUVs are no longer a feasible option, GM continues to be dependent on its SUV strategy. Why?
FH: The SUV segment continues to be one of the biggest segments in the American market. And I think sales of SUVs are affected by and are directly related to the housing market condition more than by rising fuel prices..


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

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