Desperados... no more!

Year 2009: the year many textile majors would prefer to let go. Year 2010: the year many thought would never come... and it did! a future check of a sector that has started showing clear signs of a strong revival... by Angshuman Paul

Desperados – that’s what you’d call players in the Indian textile industry, whose lot has stood witnessed to an extremely disappointing three-year period leading to 2008-09, post a scintillating 10.9% growth in 2006-07. When asked about the reasons behind this sad tale, industry experts have one word on their lips – slowdown! With exports dwindling and consumer spending falling, the textile giants have indeed felt the poisonous sting of the global slowdown. To give you one particular example, on our visit to the Bangalore campus of the country’s largest wholesale supplier of garments, the Blackstone Group-controlled Gokaldas Exports Ltd (GEL), during a recession-struck July 2009, we could clearly see signs of slowdown painted across the lush green landscape spread across two acres. The stretch looked more like a sylvan oasis of tranquillity, with people moving about in a sloth-embarrasing & mystifyingly unhurried pace; a sight which stood in great contrast to the maddening mid-city rush in the metropolitan. And not to forget, three of their manufacturing plants were peacefully taking a nap... That was then.

Today, five months later, as 2010 kicks off with high expectations and great optimism prevails, with Indian exports hitting a 15-month high in December 2009, the still-sprawling location seems to have been caught in the throes of a ‘wake-up’ metamorphosis. As far as developments in the boardroom is concerned, today, the company is quickly ramping up its act and crafting bold strategies to meet the rising demand of the global apparel market, which seems to have retraced the right road to prosperity. In fact, this exporter is all set to increase its production capacity to three million garments per month with plans to invest more than Rs.1 billion by 2010.

“The global market for Indian textile has started changing and matters are definitely improving now. We anticipate a rise in orders by atleast 20% during the first quarter of 2010,” explains Rajendra J. Hinduja, MD, Gokaldas Exports Ltd. However, this export house is not the only one celebrating the homecoming of overseas demand, for there are many like the Ludhiana-based Nahar Group and other leading apparel exporters and manufacturers in the country, who are also gearing up for a busier tomorrow, with recovery and better opportunities blipping on their radar.

Some industry watchers may judge the situation sceptically, labelling all hopefuls as ‘over-optimistic’, but the truth remains – currently, with demand from key export markets like US & EU having fallen to alarming levels, there is only ‘rich’ growth likely to happen over the next 3-4 quarters! Talking about one such market, US, a hopeful D. K. Nair, Secretary General, Confederation of Indian Textile Industry (CITI) exclaims, “The rise in demand will mainly come from US (and it has already started), which is still the largest apparel market for India. And even over the coming few months, we will be controlling this market like we have been doing it in the pre-recession days...” About three years back, this industry, which had generated a mind-boggling $19 billion in revenues, had persuaded rating agencies like CRISIL to project a terrific $110 billion in revenues by 2012 – a dazzling absolute growth of 479% compared to the present figure. On the other hand, precisely a year back, CITI had estimated the exports to escalate to a breathtaking $50 billion by 2010. The question therefore is – will projections be met, considering that the wounds inflicted by the slowdown have still not healed completely? When asked, Nair shoots back: “We might not achieve this target as the slowdown affected exports in a big way. But going by the growth that we achieved by the end of 2009, we can surely achieve at least 60% of the export figures forecasted for 2010.” Sounds great, but it is also not to be forgotten that there are many in the name of global competition that will scramble to capture precious parts of this pie...

Then there is another part to the tale – the slowdown has also taken its toll on India’s arch rival in the trade, China, which also registered a dip of 20% in the annual growth rate of apparel export (as per CII). But that is where the similarity ends. Unlike China, which trade analysts feel has substiantial amount of funds in its kitty to increase production capacity to fill any form of backlog, India as per CITI, falls short by around Rs.15 billion to even meet the backlogs accumulated during July-December 2009 backlog. Worse, in order to be able to comfortably meet export requirements for 2010 , the country needs an additional Rs.30 billion – in all Rs.45 billion too short of being in the comfort zone...

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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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Current Surge in Global crude Oil Prices

 The Current Surge in Global crude Oil Prices puts forth two basic Questions – what are The Underlying causes and what’s The Worst we can expect. While The Most Pessimistic Projections may prove untrue, The World is Indeed staring in The Face of another crude shock that could derail Global Recovery 

In a communiqué to B&E, credit rating firm Crisil states, “In a year when the world expects its dependence on OPEC oil supply to increase, concerns over a wider disruption of supplies from OPEC countries will fuel further oil price increase.” The dependence on OPEC stems from the fact that global oil consumption will grow by an annual average of 1.5 million barrels per day through 2012, while the growth in supply from non-OPEC countries averages less than 0.1 million barrels per day each year. At this juncture, it is important to understand the fact that in the present scenario, OPEC does have substantial spare productive capacity (approximately 5.2 million barrels per day – Saudi Arabia’s contribution being pegged at 3.2 million barrels per day), which can be used to replace reduced output in Libya or any other country in the midst of the uprising. The only viable reason for the surge in crude oil price is purely based on perception that the political upheaval could eventually spread to major oil producing countries including Saudi Arabia (in fact, a Wiki Leaks covered in The Guardian recently claimed that even Saudi reserves are overestimated). Indeed, that is not entirely a remote possibility, considering that there is a simmering discontent with the monarchy there as well.

Rachel Ziemba, an analyst with Roubini Global Economics, gives another reason why the risks to price seem to be tilted to the upside in the near term. Rachel put the onus on the fact that oil companies are putting on hold their current operations and explorations in Libya, “fearing political risks, and sabotage of energy infrastructure.” Further escalation would probably lead to decades of underinvestment, which eventually will increase future supply risks. It is worth pondering over the fact that unlike in 2008, when the spike in oil prices was primarily because of booming demand and speculative frenzy, the $150+ oil price today stems from a potentially major supply shock. Analysts like Kent Moors of Money Morning feel that the Middle East crisis represents an unsettling reality and the recent oil price march is just the beginning.

But is the new magic figure going to be $220 per barrel? Although it is not clear as to how long the impasse will continue, global oil reserves and actions taken up by OPEC members have ensured that prices come down. The estimates of prices reaching $220 a barrel or more are purely based on a simplistic assumption that both Libya and Algeria would halt their production – which is an unlikely scenario so far. Yet, even this dose of optimism doesn’t discount the importance of bringing stability to the MENA region. Thanks to its underground resources, the region is just too critical to be left to fend for itself.

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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

Cover Story - B-SCHOOL SPECIAL

The European Venture Capital Association data says that while US and UK had the “broadest and most developed PE markets in the world (ranked at number 1 and 2),” such investments had also led to dramatic innovation and stunning economic growth too! Let’s view India’s situation. The Economist Intelligence Unit’s 2005-06 worldwide survey shows that India is “second from bottom” in promoting environment for private equity. Apax Partners add in their Future Trends in Private Equity Investment Worldwide report, “India has the second worst environment for private equity,” as India is globally last in terms of ‘Market Opportunities’ (for Private Equity).

Says Nathan Kievman, Founder & CEO of DemingHill, a US based corporate social media consulting & marketing firm, “In my opinion, business schools should have entrepreneurship as a subject. In my MBA experience, I had a great deal of traditional book work coupled with hands on business plan development. Though I found a great deal of value from this later as I started my own firms, the experience left a huge void in practical knowledge of what really matters in a business.”

Indian B-schools definitely need to have a national economic view on entrepreneurship encouragement than a myopic view about simply being management educators. Newer programmes need to be introduced that are not rated as traditional MBA courses, but purely as entrepreneurship programmes – similar to how Babson College is rated globally. When Indian B-schools learn to do that, would be the time when India will truly have educators who are transformational rather than just being inspirational. Till then, the B in the B-schools will connote much more than the grade.

Amir Moin

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Source : IIPM Editorial, 2010.

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

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The on-going Rin versus Tide public spat has taken ‘comparative’ advertising to a newer, more dangerous level.

IIPM’s Management Consulting Arm - Planman Consulting

Some label it ethical & cool, while many use adjectives like outrageous & unethical to explain this shift. what’s with this new trend of combative and in-your-face name-calling? a check-out.

In the beginning came innocence. The grass was green, the sky was blue and God above sat smiling at his blissfully contented creations… man, beast, nature, products. But over time, frown-lines replaced the divine smile, and the pleasant sounds gave way to cacophony! Life below was getting complicated at a fast pace, and peace was fast becoming a word of the past, as more and more mortals were earning the ‘consumer’ tag! Worse, for sellers, the tool of ‘slander’ remained the only one to project their offerings in a better light that their counterparts’; and thus comparative advertising was born.

The basic thrust of this genre was to highlight product differentiations in an exciting, entertaining and imaginative manner, designed to impact the prospect’s mindset (no matter how marginally) towards a shift in perspective, triggering-off a purchase intent. Today, champions of this mode of advertising believe that differentiation is indeed the foundation of good marketing and compelling differentiation, the hallmark of a great brand. But when eccentricity seeps in, it becomes a double-edged sword. Why? Because, it tends to undermine both, the confidence and appeal of the brand in question – so handle with care!

Critics however lambast this form of communication, branding it a pathetic example of poorly done advertising, symptomatic of “lazy creativity and lazy creative thinking. If it is blindly pursued, it only goes to prove that the company wanted to make its way round the process of seeking unique consumer insights, the foundation of a great brand idea and a solid consumer proposition. Finally’ in these silly, childish, exhibitionistic skirmishes played out in full public glare, one tends to forget who started the spat, who ended it and what the fight was all about! Besides, in these sensation-seeking times, public memory is woefully short and before long, it only becomes the next big “tamasha”!

Ad-watchers believe that this genre really took shape and impacted popular imagination with the well-recalled Coke v/s Pepsi face-off in US, during the 1970s. The audacious and hugely innovative Pepsi, achieved a startling breakthrough in the world of comparative advertising, when it had the guts to re-position the much-loved, iconic and established family beverage Coke as “My Father’s drink” and Pepsi as “The choice of youth…a new generation! Years later, Pepsi India threw a credible punch back at Coke, welcoming Coke to India in a masterstroke of a creative line: “Coke & Coca-cola are trademarks of the Coca-Cola Company. Pepsi is the choice of a new generation!” Point taken.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2010.

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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Social Networking Sites have become advertising shops