My way or the highway

Hugo Chavez has all the machinery to win the election. If not by popularity, he can certainly win by manipulations!

The President of Venezuela, Hugo Chavez, looks to be facing some of his most difficult years. He is already afflicted with numerous unknown ailments as per reports and he also faces a much stronger challenge for the next Presidential election. An excited and unified opposition was seen recently on a live TV show. They talked about drug trafficking, inflation, unemployment and the plaguing lack of investment. They also talked about how they will deploy effective strategies to generate around 500,000 jobs and educational reforms. But are these rabble rousing antics enough to defeat Chavez?

Despite his misrule, Hugo Chavez’s stringent anti-American stance still has a powerful connect with the poor. Chavez also has a reputation when it comes to withdrawing funds from the state’s exchequer – as he did in 2009 by siphoning off $12 billion – for his campaign trail. Intimidating voters is also one of his favourite ways to undercut the opposition – he influenced a massive 5 million civil servants to vote for him with the politics of fear! He took rigging to a new level when he included 1 million fake electorate names. No one can dare contest them as he stonewalls all auditors (including international auditors) in the name of privacy! If, after all these measures – the opposition does win – there is every likelihood that he will debar them on some pretext. He barred Leopoldo Lopez from holding public office – when he won the post of Mayor in greater Caracas in 2008.

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Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri 
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles. 

IIPM Best B School
IndiaManagement Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting

Power above law?

Bails given out in the 2G spectrum retell the sordid saga of how the rich & the elite control power in India

As estimated by the CAG report, the second Generation (2G) spectrum allocation scam, the biggest recorded swindle ever in India, has cost the exchequer a mind boggling Rs.1.76 trillion. It revealed the ugly face of corruption in India bang in front of media and public glare. Interestingly, the recent turn of events on the legal front has further highlighted the main reason why this scourge in our society can only get worse.

The CBI had accused fourteen people in the scam but twelve of them have already been granted bail under certain conditions within a short span of time. Only former telecom minister A. Raja and former telecom secretary Sidharth Behura are still in prison pending trial. DMK chief Karunanidhi has shamelessly announced that the party will be looking forward to welcome his daughter Kanimozhi with a new position. Even R. K. Chandolia, former private secretary of A. Raja, was released from jail one day prior to the High Court bail order. These court decisions have led many to make the hopeless conclusion that punitive action towards corrupt politicians and bureaucrats & unethical corporates is really hard to come by in India.

A study by the Asian Development Bank concluded that the wealth of 50 Indian billionaires equals 20% of the country’s GDP. The doyens of Indian industry often come under scrutiny for their connections in the bureaucracy and the government and how they use them to their advantage.  

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Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri 
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles. 

IIPM Best B School
IndiaManagement Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting

Application of the FCFS principle was faulty

Rajan S Mathews, Director General, Cellular Operators Association of India (COAI)

B&E: Does the SC judgement on 2G spectrum scam reflect on how telecom players did business in India?
Rajan Mathew (RM): I do not think that is fair to say. Companies usually react to what the government puts out. Government enunciates the methodology and companies respond to it. This is not to say that companies do not act inappropriately. There have been instances when we have left the matter to courts, investigating agencies and vigilance, to determine who acted appropriately and inappropriately, legally or illegally.

B&E: The apex court’s judgement is very stern. Do you see clarity in terms of where the industry is headed?
RM: There is clarity in terms of where the industry will go. However, there is lack of clarity on some aspects of implementation of the order. The Supreme Court has said that the first-come-first-serve principle applied was faulty. The way to go forward is the auction. We support auction but FCFS, inherently, is neither good or bad. The SC says it is open to abuse. A lot of aspects of life like getting a train ticket is based on the concept of FCFS. The notion of FCFS is not flawed. What the court basically said is that when it is applied to this issue of scarce natural resources, then we have to adopt a methodology that ensures citizens’ interests and maximises value.

B&E: There are apprehensions that FDI flow will take a hit in the telecom sector after the judgement. What do you say?
RM: We have been seeing the actual impact. Those players whose licences were cancelled, their stocks took a beating and for those with licences, their stocks went up. The investors are saying, “we want clarity.”

B&E: Is that the lesson you draw from the entire judgement?
RM: There are some key factors that investors look for - predictability, clarity, certainty and transparency. If any of these canons is put to risk, investors gets nervous. In this particular instance there was no clarity. On the issue of predictability, we have an independent judiciary that will step in. That is what happened when there was lack of will to fix the problem, which is good news. Investors invariably look to the judiciary for adjudicating on matters of contractual obligations. If investors get nervous about contractual obligations, that’s a worry.

B&E: What about the telecom players whose licences have been cancelled?
RM: The Supreme Court says that the contracts itself have been one-sided. Let me illustrate. Even if you buy a stolen car in good faith, the law says you have to return it back to the rightful owner. On the issue of the 2G scam, the government itself did not repudiate the licences. The telecom players are innocent. Protect them. But if the court and investigating agencies find operators’ conduct wrong, bring them to book. But give them a hearing in the court. Don’t do things arbitrarily.

B&E: On the issue of re-auctioning of the 2G spectrum, the government expects a huge windfall . With telecom players already having paid so much for BWA and 3G, is that kind of money really available with them?
RM: I don’t think that kind of money is available with domestic players. That is why the government itself indicated that it would raise the FDI limit in the sector to 74%. Government knows that the aggregate has to come from international investors. If you look at the 12th Five Year Plan proposals for the telecom sector, the preliminary numbers put out by the Planning Commission suggest Rs. 6,500 billion as the outlay for rolling out various initiatives by government. They themselves admit that 80% of that will have to come from international sources.

B&E: Will companies like to go for bidding when the incumbents already have sufficient spectrum?
RM: First of all, people should not expect the kind of prices that came from 3G. 3G had artificial scarcity built into it. The 750 MHz is coming out by the end of the year. This was not the case in the first round of auction. So the whole scarcity and time frame of spectrum has been made clear. Given all these issues, I don’t expect to see sky-high prices. Will it be more than Rs. 10.65 billion? Probably, because new entrants will come. So you will see robust but reasonable bidding.

B&E: TRAI, the sectoral regulator has invited comments from stakeholders on the issue spectrum allocation. What are your expectations on the same?


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Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri 
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles. 

IIPM Best B School
IndiaManagement Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting

A new frontier with China?

As it is already being speculated that the Chinese space program may not entirely be for peaceful purposes, India has to take urgent action

Stoic China’s ambition of rising as a space age superpower is evident from its future plans including building space stations, manned space vessels and space laboratories. China has hauled up its space programs out of Third World mediocrity to successfully complete a spacewalk in 2008, and it earlier sent a human to space in 2003; thus becoming the third country after US & Russia to do so.

One would otherwise hope that China’s endeavours in this area only better our understanding of the world beyond us. But the catch here is that China’s space programs are run by the People’s Liberation Army (PLA), which raises doubts over its claim of being a program for peaceful purposes. This became a subject of debate when it fired missiles and destroyed a dead satellite in 2007. This raised the heckles of the US as a nervous Pentagon talked about Chinese “disruptive technologies.” But the country that’s really nervous is India.

The Ministry of Defence, ISRO and DRDO have expressed concern and feel that India’s space assets are under threat from China. India’s concerns are further reinstated with China’s possession of emerging anti-satellite weaponry and new classes of heavy lift off boosters.

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Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting

Big Mac gets the format right

McDonald’s success in India started with its very careful & calibrated approach and its adaptive ability. As it faces new challenges two decades hence, Ronald braces itself for another round of change.

“If I had a brick for every time I’ve repeated the phrase Quality, Service, Cleanliness and Value, I think I’d probably be able to bridge the Atlantic Ocean with them.” — Ray Kroc

It’s hard to match the kind of brand penetration that McDonald’s has managed globally. And the most interesting part of McDonald’s brand success has been its core value proposition – consistency in terms of products (with intelligent localisation to suit specific markets), quality, store design, amenities, services et al – multiplied several times over across around 32000 restaurants globally. Their consistency proposition even extended to price points to a large extent, which is why The Economist came out with the Big Mac Index – basically a seat-of-the-pants measure of calculating the purchasing power parity between two currencies by comparing the prices of the Big Mac burger (which is made globally using exactly the same process and material) in the nations whose currencies have to be compared.

As pointed out several times in the book Behind the Arches by journalist John F. Love, McDonald’s initially wasn’t the customer-centric company we know it today, and neither was it as growth-centric. Ray Kroc was the person who not only developed the blockbuster franchise model (by purchasing the original eatery model from brothers Roger and Maurice McDonald) to multiply restaurants at a huge pace, but also institutionalised processes to the extent that they became gospels. By the time investigative journalist Eric Schlosser brought out his bestseller Fast Food Nation (where he pointed out that wherever America’s fast food chains go, waistlines inevitably start expanding), McDonald’s had traversed a journey of more than six decades in US of A and also taken its business global at an astonishing pace. Over time, it has tackled numerous challenges and heartbreaks (the recent one in Iceland) in its global expansions, and proved resilient and resolute enough to move on.

In the same league, McDonald’s in India managed to combat the challenges, particularly the ‘beefy’ ones, and competition in this country. But unlike what it did in most other markets, McDonald’s forayed into India with a lot of focus on desi consumers. Promoters Vikram Bakshi and Amit Jatia, the JV partners of McDonald’s in India (north & east and west & south respectively) knew that catching the imagination of the Indian public, which was just getting acquainted to global brands & concepts was tough. When its contemporaries were going aggressive, McDonald’s followed a slow strategy. Yum Brands came to this country in 1996 and opened its store in the same year. But not McDonald’s! It launched the first outlet in same year with Pizza Hut but its initial entry was six years ago in 1990. With a steady approach, it tapped the Indian market and waited six long years. “The first challenge that McDonald’s faced was the lack of a cold chain facility. The initial years went into setting up a successful cold chain. It has immensely benefited farmers at one end and also enabled customers to get the highest quality food products,” says MD Amit Jatia.

Slowly and steadily, the Mac succeeded in building a cold chain around the country without facing the multifarious problems faced by its other American counterparts and stalwarts. The result is that today, all suppliers are an integral part of the McDonald’s cold chain. For instance, Trikaya Agriculture, a major supplier of iceberg lettuce to McDonald’s India, is one such enterprise that is an intrinsic part of the cold chain. Exposure to better agricultural management practices by McDonald’s has made Trikaya Agriculture extremely conscious of delivering its products with utmost care. Trikaya, with the help of McDonald’s, cultivates this winter vegetable throughout the year in Talegaon, Maharashtra. McDonald’s has provided assistance in the selection of high quality seeds and exposed several farms to advanced drip-irrigation technology, allowing small agri-business suppliers in Maharashtra to provide fresh, high-quality lettuce to its restaurant locations thousands of kilometers away.

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Source : IIPM Editorial, 2012

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

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Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
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