Back to focus, focus, focus!

Sitting in New Delhi airport waiting for my flight to Bangalore my thoughts moved to the recent turmoil in Vijay Mallya’s business empire. United Distillers, one of the pieces of the puzzle, and the world’s biggest distiller by volume, had to sell a majority stake to DIAGEO for a much needed infusion of some $2 billion! In the words of the great bard, William Shakespeare, for Vijay Mallya, “Oh, what a fall was there, my countrymen!” Losses in its Kingfisher Airline business have had the flamboyant Indian tycoon on the ropes for a while, and a solution along the lines of that inked with DIAGEO was all but inevitable.

What remains interesting to me is the lack of understanding of the need for focus among entrepreneurs and business leaders. Strong businesses are focused. Having a portfolio of businesses spanning distilling, brewing, airlines, and sports (Bangalore Royal Challengers T20 team) doesn’t allow for the depth of understanding of either the target consumers or business models to serve them, to compete in a sustainable and successful way. We see the same across markets. Consider China’s BYD, BYD’s shares have plummeted as they moved from the battery business in to automobiles and the firm has gone from being the darling of the stock market to pariah status in short order.

One hopes that businesses will take the lesson of focus to heart. Focus helps target a firms resources and cement a clear brand identity in consumer’s minds. Thus, for instance, Coca Cola has …

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Global Consumers–Still Coming of Age in India

Standing inside the Palladium Mall which is the posh part of the Phoenix Mall in Mumbai, at the site of the old Phoenix Mill—a textile mill that became defunct a long time ago, one sees how the retail landscape in India has changed in the short course of 20 years, since liberalization was ushered in 1991 under the Narasimha Rao government. Emporio Armani, Boss, Canali, Chanel, Zegna, Gucci, DKNY, Diesel, Swarovski, Rosenthal, Tag Heuer and other names synonymous with luxury jostle for space as a pianist strikes up relaxed tunes on a grand piano under the soaring ceiling.

At the same time the youth of the transformation is visible. Right next to Chanel and across the aisle from Burberry, right next to the main entrance sits Zara, the fast fashion giant that while hugely successful can hardly be called “luxury”. Wander a little more and you see a Giordano outlet! This is even lower end than Zara and hails from Hong Kong where I remember buying cheap clothes when I lived in Hong Kong some 16 years ago! Clearly, the mystique of luxury and the mystique of “foreign” have become confounded in the burgeoning consumer culture in India. In time, with maturity, perhaps such oddities will disappear. Or, perhaps, in India, Zara and Giordano will become “luxury”. Now that’s a thought.


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Brand Fit: Mahindra & Mahindra and Aston Martin!

I am surprised at the reports that M&M is considering a 50% stake in Aston Martin, the iconic and legendary British sports car brand long favored by no less than 007. Why am I surprised? After all, this is one hell of a brand!

The reason is that Aston Martin simply does not fit with what M&M is all about. M&M is a powerhouse in SUVs and UVs. It has a brilliant portfolio, having just launched the Rexton from its SsangYong stables. The year-old XUV-500 is a runaway bestseller with a continuing 5-month waitlist, even as M&M has ramped production to 5000 of these vehicles monthly. Not to mention its other successful brands like Xylo, Scorpio, Bolero, and others. A sports car, particularly a super-luxury sports car like Aston Martin simply does not fit with M&M’s portfolio.

And I am not saying this out of thin air. In many conversations with top executives (see our book The New Emerging Market Multinationals), I have been told that M&M is all about making “honest” UVs and SUVs. This is why it backed out of the bidding for JLR in 2008, according to these same executives, as it was primarily interested in the Land Rover brand, and not Jaguar. Indeed, M&M’s forays in to regular automobiles, starting with its JV with Ford over two decades ago, have never been terribly successful. So, moving even further away from its core business—honest, reliable, durable, and value-for-money UVs and SUVs—by buying a super-luxury sports car brand …

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Why it is wrong to expect the government to treat Kingfisher Airlines and Air India the same! (by Amitava Chattopadhyay)

“Bail out Kingfisher like Air India” reads the headline of an article in Business Line today (November 27, 2012; p. 4). The article goes on to say that Assocham has asked the government to “provide a similar kind of financial help to Kingfisher Airlines, as extended to state-owned Air India” since independent of whether an organization is public or private, the “resources belong to the nation and should not be allowed to go down the drain.” I am shocked at the ridiculousness of the argument! The public sector exists to serve the nation, the private sector to serve the shareholders. Those shareholders, as far as Kingfisher Airlines is concerned is hardly the “nation”.

Importantly, why does the government bailout Air India? Or for that matter other public institutions. Perhaps the most significant reason is to control the private sector for the greater good of the nation. Having Air India and its lower than private sector fares, creates a ceiling on consumers’ willingness to pay for air travel by creating a perceptual anchor for what airfares should be. Without Air India, we would have much higher air fares in India, and the additional profits would flow in to the pockets of the promoters and other shareholders, not in to the pockets of the citizens, as it does now, through the lower prices that prevail. One wonders, what drives Assocham to make the statement it apparently has according to today’s Business Line.…

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B-School Research in India

A report in the latest issue of Business Today (BT) highlights the sad state of affairs in India’s b-schools. The 4000 plus b-schools in India have collectively produced 36 articles between 2009 and 2012, in the 24 journals tracked by UT Dallas as the leading journals in management. Compare this to the 276 articles produced in the same period by the Wharton School. The BT article made several observations about why this sorry state of affairs: shortage of funds for research, shortage of staff leading to higher teaching workloads, lack of data, lack of appraisal systems that incentivize research, and the lack of ability of faculty members to conduct research.

While these reasons are all valid, the government today is providing funding for research and the b-schools have begun to incentivize research in their appraisal systems. At a recent conference a couple of months ago in Bengaluru, I spoke to several academics from the IIMs which suggested that, today, funding is available and the IIMs are emphasizing and incentivizing research. I believe that what is holding back research output is the capability issue.

Why do many of the members the b-school faculty in India lack the capability for research? One key reason is the salary structure set by the Government of India, which has resulted in a flight of talent from academia. A salary structure, which at the top of the scale gives a senior faculty member a salary of roughly Rs. 100,000/month (US$ 1,800), is well below that offered …

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