A tale of two cities

IIPM’s 36th Glorious Year of Academic Excellence

A similar story unfolds for India; albeit with a few differences. Given that Wall Street has sneezed and expectedly even the Indian economy has caught the proverbial cold, sales momentums have turned sluggish post January 2008. Predictably sectors like auto, consumer durables, real estate and financial services have been the most affected by the economic slowdown and many have consequently also reduced their ad spends, some by as much as 40%.

TVS has cut down on its ad expenses by 35%, while Mahindra & Mahindra has reduced by 6%; Videocon and Omaxe have brought down their ad expenses by 9.3% and 21.65% respectively. Others that have not reduced their advertising onslaught, instead upped it in the time of crisis are not faring much better either. Maruti Suzuki accelerated its ad expenses in FY08 by 10% over FY07, but its ad expenditure to sales ratio over the same period has come down by 9.66%. The same ratio for Mahindra, TVS, Videocon and Omaxe has come down by 18.24%, 22.12%, 20.79% and a whopping 58.80% respectively.

Given the tragic chain of events, even the ongoing festive season gives little reason to cheer. Reason? Most companies are already lagging behind in achieving their annual sales and revenue targets. The festival season is the only chance now before year closing that they can hope to achieve a semblance of respectability for their balance sheets.

But, it’s also a catch-22 situation. If despite high input costs, lower margins and the recent increase in ad rates, they continue with their advertising blitz as planned at the beginning of the year, they would literally be playing a gamble with their monies, given that consumers may still not buy due to inflation, high interest rates and exchange rates differentials. On the other hand, if they don’t advertise as planned, they will lose out on even the little chance of dragging up their targets. Marketers would therefore possibly be spending many additional hours closeted in their board rooms, scratching their heads over ways to balance their ad spends vis-à-vis sales (revenue) potential.

For the consumer durable sector specifically, the going is becoming increasingly tough. After all, every year more than a third of their sales happen during the festive season (October-December) and this festive season, the outlook is anything but rosy. Admits V. Ramachandran, Director (Marketing & Sales), LG Electronics India, “Profitability is hit for most of the sector. As far as LG is concerned, we’ve already crossed our budget of Rs.100 crore and will continue to increase our advertising expenses to tide over these tough times.” To make up for the fast-sinking revenues, LG (just as Samsung, Philips, et al) has decided to do away with the traditional marketing gimmicks, like discount and gifts, during this festival season. Clearly, while reallocation of assets is being done, companies will necessarily have to continue advertising to remain in the popular mindset during and after slowdown.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

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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“We believe in discounting the whole store”

IIPM : EXECUTIVE EDUCATION

R. SUBRAMANIAN, FOUNDER & MD, SUBHIKSHA

In a free-wheeling conversation with 4Ps B&M’s pawan chabra, R. Subramanian, Founder & MD, Subhiksha shares his views on the changing retail scene in India...

How is Subhiksha different from other retailers in the country?
Subhiksha has an Indian model of retailing. That means Subhiksha does not have a business model which has been copied from abroad. In fact, we don’t believe in a model in which we sell 20 items and give only two items at a discount and the rest 18 at a normal MRP like many other retailers in the country are doing. Rather, we at Subhiksha believe in discounting the whole store so it does not matter to you if you come to us today, tomorrow, or for that matter even a month later. You will always find our prices much lower than other retail chains in the neighbourhood. And this Indianised model of retailing is working very well in the country. We believe that hypermarkets are still not suitable for the Indian market and vouching the fact you can see many more retailers are now moving towards the Subhiksha way of retailing in the country. The product offering at a lower cost is the competitive edge that Subhiksha has over its competitors. We certainly offer value for money to the Indian consumers.

What is the current turnover of the company and what are your expansion plans for Subhiksha?
We currently have 1,580 stores in the country and we are planning to reach a figure of 2,200 by the end of the current financial year. This number includes both departmental and mobile stores. Well, as far as our turnover is concerned, we had clocked a figure of Rs.23 billion last year and this year we are hopeful of reaching somewhere between Rs.40-45 billion.

What about your expansion plans in the consumer durables arena?
We are planning to open 150 consumer durables stores by the end of the current financial year and we will be investing Rs.6 billion in this venture. But our competitive edge will remain the same as we will be aiming at providing goods to the consumer at the lowest price available in the market.

It’s often said that Subhiksha’s store ambience is not up to the mark when compared with others. What do you have to say on that?
I will not say that the statement is completely false but it’s our deliberate strategy. Certainly our stores are not air-conditioned but then you should understand that we are catering to the consumers at the bottom of the pyramid. Here the consumer is looking at lowest prices and not whether the store is air-conditioned. However, our stores are still clean and tidy and better than the kirana stores.

What’s your take on the power of in-house brands? Do you think in-house brands can pose a threat to external brands?
There is no denying that in-house brands are more profitable but you cannot sustain without external brands. As far as Subhiksha is concerned, in-house brands comprise 20-25% of its total turnover. We focus on doing in-store advertising for our in-house brands as it definitely influences the buying behaviour of the consumer.

What are your plans for the IPO? Can we expect it by the end of this financial year?
We are not coming out with an IPO; rather we would be merging with a company called Blue Green Constructions, which is a listed entity on the Madras Stock Exchange. Following that the company will be renamed as Subhiksha India. We have already bought a majority stake in the company earlier this year. For the financing part, FIIs are more than willing to invest in our company. So as such there is no problem of cash crunch.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

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

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Programme :- SUPERIOR COURSE CONTENTS
Now IIPM's World-Class Education... for everybody!!
IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA
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IIPM, GURGAON
IIPM’s 36th Glorious Year of Academic Excellence
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At the cost of running out of adjectives to collectively define them, we’ll sum them up in three words - dynamic, intelligent and masterful

4Ps Power Brand Awards 2007

More often than not, they are jet setting round the world. When in town, they are hopping from The Renaissance to The Taj to JW Mariott for close door meetings. They are closing deals worth billions of dollars every week. Cameras and news-hungry journos swarm whenever they make public appearances. They are Anil Dhirubhai Ambani’s key guys, giving shape to his dream of straddling virtually every media and entertainment outlet conceivable, and then some more. At a time, when businesses are betting on outsourcing their supply chains, in a clear departure from established paradigms, Anil Ambani (and his deep pockets) wants to own and run the entire value chain of India’s entertainment agglomerate. And helping him do excatly that are his band of BIG men!

Rajesh Sawhney: Ask Rajesh Sawhney, CEO, Reliance Big Entertainment, who believes that the last three years with Ambani junior have been the best years of his life, and he quickly rattles off the underlying ADA vision behind all the caffeine induced late nights, cross globe flights and starry-eyed investments in India and abroad. “We are trying to build the biggest entertainment brand not only in India but across the globe,” he says. And Sawhney knows a thing or two about building big brands. After all, with his 14 year stint with The Times of India Group – where he created successful businesses across publishing, radio & TV, retailing, e-commerce and more – Sawhney has a proven track record behind him. An alumnus of Harvard Business School, over the last two years, Sawhney has successfully transformed the nascent BIG Entertainment into a brand that spans content and distribution channels across cinema (Bollywood & Hollywood), television (channels, animation, DTH services), music and home videos, to radio (FM stations), Internet (social networking) and value-added services on mobile.

“Many of the pieces that we have been working on for the last two years, like Zapak, BIGAdda, BIGflicks and BIG 92.7FM are now connecting together. The next three years will be very significant for Reliance BIG Entertainment’s revolution in the media industry,” shares Sawhney. India’s entertainment industry is worth Rs.225.9 billion and expected to grow at 22% to touch Rs.600 billion by 2012. And BIG “would like to capture 15-20% of the new value that the industry creates,” says Sawhney. To achieve this ambition, Ambani perhaps could not have found a better man than Sawhney, a perfect team leader, who over time has roped in an army of ambitious men from the corporate world to head Big Entertainment’s various forays into media, entertainment and online verticals.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

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

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Programme :- SUPERIOR COURSE CONTENTS
Now IIPM's World-Class Education... for everybody!!
IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA
IIPM - Admission Procedure
IIPM, GURGAON
IIPM : EXECUTIVE EDUCATION
IIPM’s 36th Glorious Year of Academic Excellence
When IIPM comes to education, never compromise
Why Study Abroad When IIPM Gives You 3 global Advantages!
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‘Fly’ing with mobility!

IIPM’s 36th Glorious Year of Academic Excellence

The unique marketing strategies of the company have played a key role in knocking the minds of many Indian consumers. Fly is intelligently targeting the youth and other sets of progressive consumers and there is still a lot of scope for the company to enhance its offerings. The growth in the retail sector has worked favourable for the company as well, as Fly has tied up with players like Subhiksha, The Mobile Store, RPG Cellucom and many more for its in-store advertising strategies. When asked about the company’s plans for a TVC, Sougat Chatterjee, Chief Marketing Officer, Fly Mobile opines to 4Ps B&M, “We have no plans to come up with a TVC right now as there is no point in coming out with a TVC before we can expand our reach.” Fly is currently present in 10,000 retail counters and plans to expand its reach rapidly by the end of this fiscal. The company’s marketing budget is around Rs.30-40 crore and the figure is expected to reach a Rs.100 crore by the end of this fiscal year.

In the current scenario, where the market has become mature and does not accept brands at face value, Fly is able to make a mark in the minds of the Indian consumer. All this has been achieved despite the cut-throat competition in the industry, where majors like Nokia, Sony Ericsson and Motorola are in a better position to meet market requirements faster. Some innovative strategies have done wonders for the company and Fly has been successful in establishing its brand credibility to a certain extant. The company grabbed many eyeballs when it came out with a handset called ‘Hummer’, as many Indians were enticed by the legendry American brand. Also, the handsets with dual sim card capability are making a lot of waves in the Indian handset market. “When we came out with ‘Hummer’ we knew we will have a different set of customers’ altogether,” adds Chetterjee. Even the co-branded phones with Reliance Communications have done well for the company which is now planning to roll out many more such handsets by the end of this fiscal year. However, the company will have to be extra careful while rolling out co-branded handsets as this can very rapidly take the brand equity of the company in any direction. “We are very choosy when it comes to co-branded handsets, as in this category, if the product is good it can reach huge number without the strong brand power,” says Khanna.

Looking at all the developments and diligent strategies at work, Fly as a brand has defiantly come a long way. The competition is however well versed with the Indian terrain and cannot be taken lightly. It therefore remains to be seen how being innovative work in the long terms as compared to the plain old concept of brand equity.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

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

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Programme :- SUPERIOR COURSE CONTENTS
Now IIPM's World-Class Education... for everybody!!
IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA
IIPM - Admission Procedure
IIPM, GURGAON
IIPM : EXECUTIVE EDUCATION
4Ps Power Brand Awards 2007
When IIPM comes to education, never compromise
Why Study Abroad When IIPM Gives You 3 global Advantages!
IIPM Ranked No. 1 B-School In Global Exposre - Zee...