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INDIAN INSTITUTE OF MANAGEMENT ROHTAK
Faculty’s Message As IIM Rohtak is passing through an important phase in its journey toward attaining a prominent position amongst the best business schools in the country, the Strategy and Consulting (SnC) Club has a key role to play in shaping the future managers as effective problems solvers in a corporate setting. Staying true to its mission: “To skill up all aspiring consultants and strategists of IIM Rohtak,” the SnC Club has been continuously engaging with the industry through activities such as live projects, industry competitions, and case writing. Members of the club also organize activities such as case discussions and are involved in writing original industry reports in consultation with faculty and top executives from industry. Many of our students have brought laurels to the Institute by winning several competitions organized by the industry. As the management education in India is at crossroads owing to the fast-paced changes in the environment, I wish the members of SnC Club the very best in their efforts in getting young managers industry-ready. Dr. Rojers P Joseph Chairperson, Strategic Management Area
Brief Profile Dr. Rojers P Joseph is a faculty in the Strategic Management Area at IIM Rohtak. He has obtained his Ph.D. from the SJM School of Management, IIT Bombay. His research interests include Strategy and IPR, Internationalization Strategies of Asian Companies, Digital Business Strategy, and Business Models in a Knowledge/Digital Economy. Dr. Rojers has published his research in many journals and conferences of international repute. He has also published several case studies through Ivey and Emerald. His teaching interests include Strategic Management, International Business, Corporate Governance and Entrepreneurship and New Ventures.
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About Us The Strategy and Consulting Club at IIM Rohtak has four verticals: ➢ Strategy Wall: A monthly inhouse magazine published by SnC Club, publishing articles written by the students of IIM Rohtak and the latest industry trends ➢ Firm Relations: The Club believes in active engagement with the industry thus, creates ongoing relations with industry leaders inviting them for knowledge sharing sessions and consultation ➢ Internal Operations: We thrive to create a culture where students actively engage in discussions on various real-life cases and compete to be the best and close to industry ready solutions. So, we organize various events like ‘Consultant of the Year’ and ‘Zero Hour’ ➢ Original Reports: SnC writes its own reports on some cases in consultation with faculty and top executives from industry
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Articles What can sports teach us about Business Strategy? By Ankit Bhatia, IIFT Delhi “The tactician knows what to do when there is something to do; whereas the strategian knows what to do when there is nothing to do” This famous quote by Gerald Abrahams - a renowned chess player, author & barrister from United Kingdom, though directed towards chess enthusiasts, also finds application far beyond the realms of the game. It concisely encompasses the business strategies of few of the major corporate houses in existence today. One of the best example of the same would be that of Amazon Incorporation - the largest internet-based retailer in the world by market share. Amazon is an embodiment of well thought out business strategies and can undoubtedly be considered a “Grandmaster” in the technology pantheon. The company deeply strategizes, thinks multiple moves ahead across different fronts and considers each of its business units as pieces of a chess board. It is only because of its well-coordinated tactics that it has succeeded in tearing apart every aspect of the supply chain, thus establishing itself as a leader in retail, e-books and cloud services. Just like chess strategies, it also never shies away from sacrificing a piece to pursue a different strategy and gain a larger stronghold of its position. Moreover, it is one of the very few companies who has disrupted its own business, before competitors could, when it launched the Kindle in 2007.
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Another company that successfully utilized chess strategies to create a mark in the corporate world was the online retailer Zappos. It deployed the “strong squares” move where the player gains domination on certain key areas on the board which are defended by pawns and allows the player to launch attack on a different section of the board. Zappos used this when it first established a strong foothold in the footwear category through an elegant and efficient return process and then leveraged the customer reputation built in footwear to gain a leg up in the apparel category. This enabled the firm to reach $1 billion in annual sales by 2008 and become so valuable that it was later on acquired by Amazon. Not just chess, sports like football, basketball, hockey, boxing etc. can also teach the senior leadership brilliant offensive and defensive tactics to strengthen their competitive positioning in the industry. Consider the concept of “Total Football” pioneered by the Dutch football team in 1960s where any player could instantly take over the role of any other player in the team whenever necessary creating a fluid and dynamic system.
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Interestingly, the same has been applied long back by the Irish air carrier Ryanair in a bid to improve and retain its high level of customer service in face of budget and time constraints by training its “Super Service Agents” so that they can handle any incoming query irrespective of the complexity or topic area. This enabled the company to significantly enhance customer satisfaction and increase repeat customer bookings. The application of sports to business is not just limited to tactical moves but is also key in debunking widely accepted stereotypes, prejudices and myths. A decade ago, football saw the rise of a particular breed of footballers, who were tall with a well-built physique, due to the belief that such players were better suited for the sport. However, the success of players like Messi, Iniesta and Xavi have challenged this notion and demonstrated that there is still a place for comparatively diminutive but skilled sportsman. Football is a skill sport, predicated upon technique and mental acuity, therefore size is crucial, but it is not the sole criteria. The same could be said for the FMCG industry today where Patanjali Ayurveda Ltd., a relatively small Indian firm focusing solely on products manufactured from traditional herbs and minerals, has made life difficult for many billion dollar MNCs. This clearly indicates that if one has the skill needed to compete with the bigwigs of the industry, one can definitely aim to dismantle the dominance of legacy firms. Certain principles and not just offense or defense strategies from the sporting world
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are also applicable to business and corporate teams. To be able to successfully navigate the potential competitive landscape, one needs the knowledge, skill and abilities along with an in depth understanding of the market and the positioning of oneself vis-à-vis its competitors, be it in the sports field or in the business arena. For instance, consider how the golf legend Tiger Woods adapts his play based on his position on the leaderboard. He plays conservatively when he has the lead and prompts other players to play more aggressively in order to catch up with him, in turn leading them to commit mistakes. Just as a coach or a team manager of any sport worldwide knows the strength of each of his player, similarly, a CEO must also know the key characteristics of his/her businesses and top executives so that he/she can suitably target and occupy a competitive position in the industry. This is not just restricted to the selection and ordering but also the positioning in the corporate field so that there is an efficient utilization of the human and financial resources. In both sports and business, plans need to be flexible and if something isn’t working, it needs to be changed whether it’s a player or a tactic through some well-defined strategy. Continuously revamping and adjusting the plans in this dynamic environment is the only way to remain on the top of the game. To summarize, with caution and discretion, sports can be a huge playfield for learning strategies to enable businesses to defend their position and to build an empire worth billions of dollars.
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Loyalty and Its Implications on Various Businesses in India By Nikita Das and Prathmesh Barshikar, IIM Lucknow Customer Loyalty means re-acquiring the services or products of a company with a certain frequency. It means to make your product/service so special that when your customers need it again they get the product from you and do not think twice of other options Importance of Customer Loyalty? Builds Trust
Repeat Purchase
Positive Word of Mouth
Eliminates Competition
Honest Feedback
Ways to improve Customer Loyalty? 1. 2. 3. 4. 5.
Create value for customers and not just products/services Monitor Customer Loyalty Marketing Activities VIP treatment to customers via discount coupons, loyalty clubs, reward points etc. Innovative Communication via page on social media, corporate magazine etc. Measure Customer Satisfaction through questionnaire on website, email etc.
Customer Loyalty across Industries 1. Telecom Industry-Reliance Jio: Disrupted the Indian telecom industry with its free voice for life and free data for initial 6 months. It charged for data from April 1 but at a cheaper rate than its rival and 63% of its customers kept it as a primary operator. It notched up 10% market share.
Loyalty Programs Prime Membership to avail of prime media annual subscription worth Rs.10000 ‘completely free’ until March 2018
JioPhone, with unlimited data and optional TV streaming, will be free for subscribers for Rs1,500 security deposit refundable after 3 years
Use of media-Jio Dhan Dhana Dhan, PM Modi’s Vision of Digital India on TOI & HT 2. Ecommerce-Amazon Amazon is one of the largest players in the ecommerce industry in India. It is more prominent in the metro cities. Amazon prime has helped to gain loyalty of the people through its differentiated product and its Rs.499 subscription fee. It is more than 2-day delivery and free shipping • Amazon prime membership is shareable with 4 different persons only condition is that they should reside in a common address • Prime member can rent e-books from the Kindle Owners Lending Library for free
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A student with a valid educational email id and amazon account can get a 6 months’ free trial for Prime
3. FMCG-Maggi At present, Nestle enjoys 57 per cent market share in the instant noodles market in India as against 75 per cent before the crisis had hit the company. After its re-launch, it partnered with Snap deal and in 5mins 60000 welcome kits of Maggi was sold. It shows the connect it had with its customers. After the ban, tweets were- "OMG Maggi banned! How would we survive in the hostel," the tweet surmises the feeling of millions who have come to see Maggi as their survival food.
Loyalty Programs Maggi is a culture, it created a bond that no other brand could First print ad after relaunch- “Your Maggi is safe, has always been”
Partnered with Amazon to sell its Nutri-Licious range. Prime members to get 33% discount Facebook had 261433 likes and twitter had 87700 tweets during relaunch
4. Retail – Big Bazaar (Future Group) Loyalty schemes at Big Bazaar have played an important role in ensuring customer retention. Wednesday Bazar- “hafte ka Sabse Sasta Din”, idea is to attract customers as turnout is quite less. Customers to save the most
PayBack Card-Multi Brand loyalty program card covering 50partner brands. It could be used both online and offline.
The Great Exchange Offer-Old goods can be exchanged for new ones. Coupons to be used at Big Bazaar Outlets 5. Consumer electronics - Apple Apple has ensured loyalty among its customers in several ways. The users of Apple's products are the affluent and devoted. These are the people who saved up for the brand, just because using Apple's products makes them feel better. •
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There is an element of exclusivity that is associated to Apple's products. Just before the launch of a new iPhone, Apple keeps its secrets under the wraps. The exclusivity and excitement never disappoints and Apple users hardly switch their preferences and switch to some other brand. Apple's positioning of its products have been right on target. It communicates to its customers that it is the experience that matters, and not megabytes. Just as their product design, their messages to customers are simple and relatable.
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Apple has shown amazing clarity in its vision. Steve Jobs once said that "The user doesn't always know what they want". This belief and vision has pushed Apple to continue coming up with innovative products. The continuous innovation in its products has glued its customers.
Coming up with differentiated products (Apple’s innovation), using predatory pricing, providing new services (R-Jio) and loyalty programs (Starbucks) ensures customer loyalty. And sometimes, an emotional connect with a brand (Example: Maggi) developed with its customers is to the extent that the product becomes a part of the culture and loyalty is inevitably built.
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The post oil geopolitics By Suhail Mahedavi, IIM Rohtak Discovery of crude oil dictated much of the twentieth century. This liquid, aptly named “black gold” not just revolutionized the industry but also shaped the geopolitical landscape of the world. From the first oil wells of Texas to the crude fuelled boom in the middle east to OPEC and shale fracking, the black gold has decided the course of the world economy. It is, however, beyond contention that the role of crude oil in the global economy is destined to diminish in the future. This is, in equal parts, due to the finite nature of this resource and the growing concerns about environmental degradation that the use and extraction of crude oil causes. The focus is shifting to clean energy with governments across the world recognising the need for sustainable development. This is evident from the commitments made at the Paris climate change summit. The thrust on clean energy has led to a pivot towards solar power, wind power and electric vehicles (EV). India, the second most populous country, has committed to develop 175 GW renewable power capacity by 2022 and generate 40% of its energy from renewables by 2030. It has also enacted legislations to phase out gas burning vehicles and have an allelectric fleet by 2030. Apart from similar moves by many other governments, private companies are also leading the EV revolution. Tesla has already developed several models of electric cars while Volvo plans to stop using internal combustion engines by 2020.
This makes Lithium preferred material for manufacturing batteries which are essential for storing energy not just in EVs but also in solar and wind power systems to compensate for the natural fluctuations of irradiation and wind. The emergence of Lithium as a critical resource could also mean a shift in the US – Middle East – OPEC dominated global geopolitical narrative. The highest concentration of known lithium reserves is in a region in South America known as the Lithium Triangle. This region which accounts for 60%80% of the world’s known lithium reserves is located at the tri-junction of Chile, Bolivia and Argentina.
Distribution of Lithium Resources US 14%
Others 10%
China 14%
Chile 19%
Argentin a 16% Bolivia 23%
Australia 4%
Brazil 0%
Figure 1: Distribution of known lithium resources (Source: US Geological Society survey, 2015)
The clean energy revolution certainly spells a downturn for crude oil demand, but is there some other substance that will fill the gap? It turns out there is one- Lithium. Lithium batteries have the advantage of not suffering from memory effects i.e. loss of capacity due to frequent partial charging and discharging. The Strategy and Consulting Club
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Figure 3: World lithium production in 2016 (Source: US Geological Society, Mineral Commodities Summaries, January 2017) However, the future looks promising for the South Americans. The South American reserves are salt lakes from which extracting lithium is a relatively easy process of brine concentration. The Australians and Chinese extract lithium from ore which involves a complex and expensive process. This makes South America an attractive investment destination for foreign firms should the countries decide to host them. Figure 2: Lithium Triangle Currently, Australia is the highest producer of lithium followed by China due to favourable investment climate and government push respectively. The Lithium Triangle countries have lagged due to lack of homegrown technical expertise made worse by government protectionism. Chile and Bolivia have nationalised lithium. This means foreign companies can extract lithium only by partnering with the government. Bolivia has also imposed a high mining tax of 37.5%. This explains why Bolivia, which has four times the reserves of Australia (Figure 1) and much lower labour costs is also the lowest producer of lithium.
Argentina, under reformist Mauricio Macri, is already showing signs of letting in foreign investment to exploit lithium reserves. Lithium extraction can also attract downstream industries like battery manufacturing. This can change the fortunes of a country as one ton of lithium which sells for around $9000 on the international market can be converted to batteries worth $1.5 million to $5 million. Argentinian success might encourage the other two countries to replicate its model.
As the clean energy movement and EVs gather steam, the demand for batteries and hence lithium is set to explode beyond what the currently known reserves can satisfy. This will definitely alter the global power structure and distribution of economic and political bargaining power. The OPEC may see its relevance decline. The Chinese may partner 2016 Lithium Production (MT) with the socialist Evo Morales government in Bolivia for lithium exploitation like they did with the Maduro regime in Venezuela for oil. This helps them balance the influence of the United States on the global stage. The US, through investments in the neo-liberal economies of Australia, Chile and Argentina may form a different front. It would be interesting to see how the post oil geopolitical landscape develop
16000 14000 12000 10000 8000 6000 4000 2000 0 Australia
Chile
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Argentina
China
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Internet of Things – Gold Mine of Data By Shreyans Jain, IIM Lucknow “Technology gives us such solutions, which could not be thought about until a few years ago. This is an era of Internet of Things” Shri Narendra Modi, Hon’ble Prime Minister of India
Introduction Internet of Things (IoT) may be defined as an ecosystem of interconnected devices based on existing and evolving interoperable information and communication technologies that allow exchange of processing power over a network1. It has redefined the engagement of human body with the physical world by exploiting the data capture capabilities of “things”. IoT is a leap into the future as it has created a potential for engineering a whole new set of business models that are sensory and predictive in nature2. The emergence of disruptive technologies and their integration with business processes has overwhelmed enterprises with data that requires big data analytics for rapid ingestion and processing to create critical insights. The structuring of this data along the dimensions of volume, variety, velocity, and veracity can result in huge value creation for businesses by making infrastructure automation ready, secure and energy efficient. It can reorient consumer and business behaviour and lead to a spurt in the demand for intelligent industry solutions. Globally, the IoT market is 1
Recommendation ITU-T Y.2060: Overview of the Internet of Things, International Telecommunication Union dated June 2012, (http://handle.itu.int/11.1002/1000/11559). ITU is the United Nations specialized agency for information and communication technologies – ICTs 2 Internet of Things: An Indian Context, KPMG Digital Consulting Report dated August 2016 (https://assets.kpmg.com/content/dam/kpmg/in/pdf/ 2016/09/Internet-of-things.pdf)
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expected to grow to USD 566 billion, connecting 8.7 billion devices by 2020. In India alone, the IoT market is set to grow to USD 15 billion with 2.7 billion connected devices by 20203. Exhibit 1: Economic Impact of Internet of Things4 (IoT)
IoT - Gold Mine of Data Unlike the traditional machine-to-machine communication, IoT is inherently analytical and integrated and comprises a data-driven ecosystem for the enablement of network applications. It is estimated that by 2020,
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Indian IoT market set to grow up to USD 15 billion by 2020, NASSCOM Report dated October 05, 2016 (http://www.nasscom.in/sites/default/files/media_p df/indian-iot-market-set-grow-upto-usd-15-billion2020.pdf) 4 The dawn of ubiquitous computing, Livemint dated October 19, 2015 (http://www.livemint.com/Industry/DyDrmzh0BD TCMFUy47TO3M/The-dawn-of-ubiquitouscomputing.html)
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globally, over 40,000 exabytes5 of machine-driven data will be generated through sensors built into physical objects connected to the internet6. Inadequacy of proper tools to document and manage IoT data can, therefore, lead to loss of significant amount of business value. To overcome this challenge, therefore, it is imperative for organisations to develop advanced analytical capabilities and data access technologies by integrating data from multiple sources across a common platform. IoT involves three distinct stages: (a) identification and addressing the
sensor/device, (b) collection, analysis and consolidation of data by an application and, (c) transmission of data to the decisionmaking server which may not necessarily human-driven. Gartner’s 2014 Hype Cycle Report evaluated the maturity of over 2,000 technologies grouped into 119 functional areas to identify the present and future position of an enterprise. The key objective was to “determine the amount of change expected for the enterprise and map out which combination of technologies support its progression”. Clearly, businesses are increasingly heading towards the adoption of and seeking to build competencies in managing IoT and big data.
Exhibit 2: Hype Cycle for Emerging Technologies7
Data analytics helps in organising the unstructured data generated by IoT devices into meaningful information streams and uncover huge amounts of signals from noise. These signals can play a powerful role in micro-segmenting populations based 5
The exabyte is a multiple of the unit byte for digital information. 1 EB = 1018 bytes 6 The digital universe of opportunities: Rich data and the increasing value of Internet of Things, International Data Corp.
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on preferences and characteristics. This can lead to radical personalisation of products and services and help meet an enormous spectrum of individual demands by providing differentiated value. The granular data collected by application devices can help establish relationship between (https://www.emc.com/leadership/digitaluniverse/2014iview/internet-of-things.htm) 7 Hype cycle for emerging technologies, Gartner, 2014 (https://www.gartner.com/newsroom/id/2819918)
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individual characteristics and customised offerings. Efficient signalling can thus, lead to optimum utilisation of organisational assets by minimizing the “not invented here” syndrome and maximizing crossfunctional cooperation8. IoT – The Indian Context The Government of India, in its IoT policy, has defined the vision “To develop connected and smart IoT based system for our country’s Economy, Society, Environment and global needs.” It has laid down the following key objectives9:
agriculture, health, water quality, natural disasters, transportation, security, supply chain management, smart cities, automated metering and monitoring of utilities, waste management, Oil & Gas etc. At present, start-ups comprise 60-65 per cent of the ~120 organisation strong Indian IoT ecosystem and offer solutions majorly in embedded computing and consumer services. The technology framework, network infrastructure and augmented intelligence are growing at a rapid pace with the support of accelerators and incubators. The government has proposed to build a legal framework to address issues arising due to deployment of IoT systems and devices. Additionally, it has created the Centre of Excellence10, a start-up accelerator, to build an ecosystem of startups, government, enterprises, venture capitalists and academia.
1. To undertake capacity development (Human & Technology) for IoT specific skill-sets for domestic and international markets. 2. To undertake Research & Development for all the assisting technologies. 3. To develop IoT products specific to Indian needs in the domains of Exhibit 3: IoT Market in India: An Overview11
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McAfee, A., Brynjolfsson, E. and Davenport, T.H., 2012. Big data: the management revolution, Harvard Business Review, 90(10), pp.60-68 9 Draft policy on Internet of Things, Ministry of Electronics and information Technology, Government of India
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(http://meity.gov.in/writereaddata/files/RevisedDraft-IoT-Policy_0.pdf) 10 Centre of Excellence for IoT in India (http://coeiot.com/) 11 IoT in India: The next big wave, NASSCOM Report: Strategic Review, 2017 (http://www.nasscom.in)
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Challenges to Analytics Adoption It’s important for organisations to realise that embracing IoT and analytics is not merely a business tactic of layering new technology systems on the top of existing operations. It requires mapping out of a business strategy for the development of data architecture and technology tools. To prepare better for the digital universe of tomorrow, it is necessary for organisations to equip themselves with the right skills and display a passion for continuous learning and adaptation. Some of the potential challenges that need to be conquered are12:
2. Creation of in-house talent pool that can help solve practical business problems by applying data-driven insights. This goes beyond adding a data science team or finding the right external analytics provider13. 3. Restructuring of HR policies for careful change management. Necessary training modules need to be put in place for building competencies in incorporating data and algorithms into organisational processes. 4. Development of standards and protocols for seamless exchange and security of data, homogeneous IoT market to enable scalability and managerial operational systems.
1. Identification of high return yielding projects for application of advanced data analytics to deliver tangible business value. Exhibit 4: Challenges to Analytics Adoption14
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The age of analytics: Competing in a data-driven world, McKinsey Global Institute, dated December 2016 13 The big impact from big data, Livemint dated December 19, 2016 (http://www.livemint.com/Opinion/QtWoDuIfVAk k4n4jRbjwFP/The-big-impact-from-big-data.html)
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Making predictions with Big Data, Livemint dated May 02, 2017 (http://www.livemint.com/Industry/KUE7JGODJl GgYdmQ2VX5KM/Making-predictions-with-BigData.html)
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Conclusion The integration of IoT and big data represents a paradigm shift in the way business are transforming globally. From delivering utility services to managing public policies, data analytics coupled with IoT can provide key insights about
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individual characteristics and behaviour that can be utilised to enhance the quality of decision making. It is important for developing countries like India, with few legacy systems to overhaul, to embrace this opportunity and inject transparency and efficiency into their economies.
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Financial Inclusion, Still a Hurdle for India? By Ananthu R, IMI New Delhi
When there are some efforts and lesser results, it calls for an introspection. This is the simple reason why we should look in to the matter of lesser proportionate results or improvement in financial inclusion of India despite of the colossal efforts. Since independence India is pushing itself towards financial inclusion in rural areas as the soul of India lies in rural India. There are several initiatives which includes priority sector lending, followed by, cooperative lending, lead bank scheme, service area approach, microfinance, kisan credit cards, business correspondence. Creation of National Bank for Agriculture and Rural development, introduction of regional rural banks/ local area banks and Pradhan Mantri Jan-Dhan Yojana forms some notable and extensive initiatives. Financial inclusion is our nation’s priory. It is no longer an option, but a compulsion. The state of India today, where about threefourths of the total population is surviving with under Rs 120 a day. It is probably a reflection of our collective mistake of believing all the pushing efforts would include every Indian under financial services or inclusion. If we closely observe, all these initiatives are supply driven. That is supplying of financial services to the door step of people. Finance availability is not an end to itself, but a means to an end. Our ultimate aim is to get a way for constant source of income for poor, so that there will be demand for The Strategy and Consulting Club
financial services. If banks do not take initiatives to penetrate into the rural market, there will be other players who are willing to, provided there is a demand for it. Here, supply driver financial inclusion doesn’t work. Cost factor The results of most of the earlier initiatives were on the lower side. Based on NSSO reports, the share of institutional credit to farmers declined from a peak of 69.4 per cent in 1991 to 56 per cent in 2012. That is farmers dependence on non-institutional loans has gone from 30% to 44%. The availability of finance is needed, but not sufficient enough for the reduction of poverty. High cost financial inclusions have rarely enthused rural households. According to Kamaljit Rastogi (Head of products, FINO, a key service provider in micro-banking industry), opening a bank account itself is huge challenge. It has taken around four to five years to make a noticeable impact on this respect. The biggest problem lies in sustainability of these accounts. According to available data, nearly 70% of such accounts are inoperative after opening. Banks should not just stop at opening an account for the rural people. Banks should understand their needs, create awareness among them and help in their economic upliftment. How do they recover the costs? They need to offer multiple products like savings, remittances, IIM Rohtak
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insurance, and loans over this channel to make sufficient money to make the whole network sustainable. Illiteracy In india the literacy rate is almost 73% only. If we take the states such as Bihar, Rajasthan, Utter Pradesh, Madhya Pradesh and Jharkhand, where the majority of fiancial inclusion has to be done, literacy rate is around 60% only. Even though institutions are trying to give all the informtion through mobile messages, illiterate people need the help of other to get the meaning of it. This puts them into a threat of insecurity. This will inturn keep illeterate away from financial inclusion. Here the privacy of poor people is breached. Some times BC are giving same PINs for all the customers to make his/her job easy. It is very important to note that not only big corporates are concerned about data breaches, even these people are concerned in their own way even though we estimate the cost of data loss is almost zero. Moneylender’s influence Despite of persistent efforts by institutions to implement financial inclusion, moneylenders are flourishing in the same sector. In India 30% of total banking business is accounted by moneylenders. This leads to a question, does interest rate really matter in this segment? These questions leads to need of grass root level research. That is if interest rates matters then why people are not shifting to banking rather than seeking from moneylenders. Not only banks there is a well structures financial network of cooperatives, MFIs, self-help groups. Is it The Strategy and Consulting Club
only due to ease of doing business or some other factors influence the same? Failed Business Correspondent (BC) model BC model was introduced in 2006. The aim was to provide banking services to poor at very reasonable cost. MC model played a very critical role in fetching large number of Jan-Dhan accounts. But BC model was unable to provide various basic banking services for rural poor. Reserve Bank has asked banks to open at least one branch in every village with a population of 2000 or more. But according to 2011 census, almost 96% of villages have pollution less than 1000. The compensation given for BC agents in the form of commission is very less compared to that of insurance and mutual fund agents. Lending activities of Banks through BCs are very less. The main activity of BC model is opening new accounts, but after a while this opportunity is getting exhausted (particularly after implementation of Jan-Dhan scheme)
Threat from PPI (Prepaid Issuers) Banks have been partnered with agents in creating BC networks to offer services such as remittance. Customers recognise the agent through the signage and remit money by paying legitimate fees and taxes. After each such transactions, the remitter will receive a mobile friendly receipt as a proof. PPIs can offer services such as mobile topups, railway ticket bookings, utility bill payments, etc. Now, apart from these PPIs can also provide domestic money transfer services. But now some PPIs have started IIM Rohtak
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poaching banks’ BC agents. Because of this, banks’ efforts in building wide BC network go waste. Physical branches, a solution? If we take the case of a village having a population of around 1000, if we can implement Jan-Dhan based account opening for all, there will be around 1000 accounts. Any number of accounts more than 500 cannot be served properly by BC model, instead, there is a need for Brick and mortar branch. If our system is able to open these branches in the villages, we might be able to tackle the situation. Again the difficulty is how to ensure 1000 accounts under one branch where there are various financial players with many more savings, deposits, loan instruments. There comes the need of the day, financial integration among the services and different players. Under close examination, even more than one branch of different banks or financial institutions can spoil the functioning of both of them. This type of an integration should be taken under statelevel Bankers Committee. The sustainability of the services can be ensured only through the demand-driven economy. So, the government should pool all the rural development programmes to an integrated scheme which can ensure a
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permanent source of income for poor, through the employment of the rural people. Even though variations will be there, this can ensure a demand-driven financial inclusion, which is the current need for developing India.
Need for single authority Presently, there are a number of regulatory authorities which takes the responsiblity of financial inclusion. RBI, NABARD National Bank for Agriculture and Rural Development, SEBI - Securities and Exchange Board of India, MUDRA bank are some of them. All re thinking that this much number of authorities can ensure financial inclusion of India. But the truth is that there is no fixed responsibility on a single institution or the responsibilities are not divided properly. If we take the present conditions, NABARD has a widespread presence across the country. It can be the most suitable single authority to take this responsibility. But NABARD is not well equipped to head this mammoth task. Still can give a try through phased manner, which gives further hope to Indian financial inclusion.
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Annexures:
References: 1) https://www.rbi.org.in/scripts/PublicationsView.aspx?id=17412 2) http://www.india-opportunities.es/archivos/publicaciones/IBEF-Dec-2016-Jan2017.pdf 3) https://www.bloombergquint.com/opinion/2017/10/23/indias-bq-financial-inclusionno-more-a-dream-its-a-reality-now 4) https://rbi.org.in/scripts/PublicationReportDetails.aspx?ID=836#CH1
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Nail Price Before Product. Period. By Nisarg Pandya, SCMHRD Johnny Carson on his show once asked renowned salesman and legendary motivational speaker Zig Zigler to sell an ashtray to him. “People say you are the world’s greatest salesman. How about you sell me something - say this ashtray?” asked Johnny Carson. Looking at the ashtray, replied Ziglar, “I’d have to know the reason as to why you want it.” “Well it’s well-made, it looks pretty great, and it’s a fine ashtray,” replied Johnny. “Alright,” responded Ziglar, “but you’ll have to tell me what you think its worth to you.” “I don’t know,” thought Carson, “I guess $20 would be just about right.” “Sold” Ziglar finished, smiling *like a boss*. The above famous encounter explains a lot about the interactive approach any business entity can adopt about pricing its product. Missing out on this vital base can mean customers throwing you out right at threshold. Former CEO of J.C. Penny, Ron Johnson once said, "Pricing is actually pretty simple. Customers will not pay literally a penny more than the true value of the product." Perfect pricing is all about understanding out how much your customers value your product. It is more of a science than an art. The sports car maker Porsche imbibed this learning when it introduced Porsche The Strategy and Consulting Club
Cayenne, its first of its kind SUV instead of some sports luxury sedan such as Porsche 911 and the experiment dug out gold for the company as it was able to sell 1 lakh model in only a year. It also helped Porsche is paying down its long pending debt along with generating highest profit for any car in the history of automobile market. The reason why luxury sports car maker went on the unusual path of its policy and yet became successful was how it designed the car that customer wanted, keeping in mind the value desired and willingness to pay i.e. price. All items that customers didn’t prioritize in terms of pricing were thrown away from the SUV such as famous six speed racing transmission. On the other hand, Fiat’s Chrysler in 2009 were undergoing rough patch and hence focused their energy in building up a product without keeping monetary value in consideration. They even tried to advertise it as “throwing out finance guys” from the manufacturing process. It showed the auto giant making prototype one after another to get the right product. The result turned out a disaster for Fiat. It performed so poorly that company had to issue temporary layoffs. All this is because company put product before the price. One can argue that there may be other reasons of failure. I totally agree that new products fail for many reasons but root of all evils of innovation is failure on the company’s part to understand customer’s Willingness to Pay for a new product at very base of development process. Most IIM Rohtak
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companies keep the pricing procedure up until product is developed. They go on designing the perfect product without realizing the cost it is adding up to the company and stay optimistic that they will get the right mix instead of being bang on confident about success. Slapping on a price just before going to market is a recipe for failure. But many commit this crime. The companies can drill down to see what customers are actually willing to pay for their demand of valued product. They should talk to customers right at the development phase. This will not only make your product stay alive in cut throat competition but will also thrive as compared to your rivals. The odds of your success will increase drastically if you follow this approach. The companies should try restricting innovations more than they can afford. Instead of putting many features into a single product, it should try and fulfil actual consumer needs. Separating customers based on their values, WTP, and needs hence it should stand tallest in company’s to do list. Sometimes the company might get successful in creating right product for market it serves but fails to charge right price and hence the nearly perfect product stays under monetised. This is a case of minivation. The best example could be computer manufacturer Asus. It launched a mini notebook priced at €299 and demand of the product rose to 900%. Asus couldn’t manufacture with pace and lost major chunk of revenue. They could have priced a
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lot higher and served to market that would be willing to pay for the premium product. The pricing of new developed product weighs heavily on “willingness to pay” talk along with the company knowing how to charge to customer as much as what to charge. The method of charging should be sensible and appealing to customers. For instance, Michelin charged fleet managers to pay for truck tires based on mileage it drove and not on number of tires. The company gained highest profitability in season of high demand for this approach. Last approach can be deciding on different versions of company’s products citing the fact that there can never be one size which fits all. The GPS device manufacturer Garmin, created different products for user of the product. To cut the long story short, pricing is one of its kind strategy which will take you furthest and stronger as compared to your competitors. The reason being that pricing will allow you to concentrate on customer values and need as early as it can be and hence you can design what features and benefits can be given with the product which will maximise its success. Without a price, you can never have the product. Make price as centre of locus of your company’s innovation process and you can make the transition from hoping to be successful to actually become one. After all, money is what matters!
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Subprime Crisis: USA to INDIA By Shivangi Wadhwa, MANAGE Moneylenders, borrowers, brokers, mortgages, recession of December2007- June 2009, housing bubble, mortgage backed securities, collateralized debt obligations, subprime mortgages, frozen credit markets, credit default swaps are just a few splashes of water from the overloaded bucket of the great “ UNITED STATES SUBPRIME MORTGAGE CRISIS” that hail my brain, where the today’s smearing worldwide sensation “GAMES OF THRONE” actually set stage on fire years ago and “ARROWS” of dwindling household prices, 1% interest by US FEDERAL RESERVE “FLASH”ed on “EVERYONE” , making banks go crazy with leverage and WALL STREET plummeting with high profits, and not just this it further intruded into the world of “HOUSEHOLD AND MORTGAGES.” It started when a Bermuda triangle was formed between banking institutions, investors, people desiring for a home as the three points of a triangle and Wall Street as a centroid. Be it anyway, if a vertex of a triangle is disturbed, it distorts the whole figure. The time came when the Bermuda triangle was about to swallow all. Defaulters number started to increase rapidly. There were more houses on sale. Supply of houses increased whereas demand was less. Housing and credit bubbles that were created, started to burst. This lead to a bumper loss to the lenders, banking institutions, investors etc. leading to bankruptcy, a situation today known as ‘Subprime Crisis’ which shook US economy and had effects on India too.
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Well, rather going overseas and doing data crunching of what happened in a story called “ONCE UPON A TIME” lets come back to Indian Corporate sector which is grappling with severe bad debts making banks saddled with non-performing assets rather I would call it “opening doors to subprime crisis in INDIA.” 2011-2015 is the period during which this “UFO” intruded the nation, and there was a “SUPERMAN” Mr. Raghuram Rajan who flagged this issue initially but we all were busy watching “TWILIGHT SAGA” when the actual “BREAK DOWN” was enthralled on public sector banks and the share of stressed loans, which is the sum of non-performing loans and restructured loans, as a percentage of total advances made has been skyrocketing for public sector banks, while the banks themselves invited the current position, the real “VOLDEMORT” are the big borrowers and promoters who are not paying up as promised and the government, instead of being strict on the defaulters, is expecting the central bank to inject liquidity into the banking system to write off these bad loans. It would be travesty of justice if this were allowed to be done. It would just give a fillip to the habitual defaulters to default with impunity since the central bank will always be made to come in as “HARRY POTTER” playing the role of the lender of the last resort. So it is better to be cautious now itself and formulate strict regulations to check bad corporate debt in the nation rather than standing and watching INDIA transform form the tag of “NOT YET” to “EUREKA
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Low Cost Labour vs Automation By Avik Mandal and Mehali Biswas, IIM Lucknow
INTRODUCTION In this rapidly transforming world where every organization aspires to become reach the pinnacle of success and become an integral part of economic progress, easy access to raw materials, capital investment, availability of cheap and abundant labour or manpower and cutting edge technology is essential. This has triggered an unending debate on the trade-off between low cost labour and automation to improve the health of the organisational financial statements. The issue has been discussed as follows.
PRESENTATION Low cost labour is a strategic way to procure resources and people from a country with lower economic condition in order to reduce the operating expense by the country hiring human labour. Automation, on the other hand, is defined as the Creation and application of modern tools and technology to create, monitor, and control the production and delivery process for any product or company Advantages of Low Cost Labour❖ Reduced Costs: The availability of cheap labour from developing countries is one of the advantages for many contract manufacturers. ❖ Educated and Expert Workforce: Often the labour from different countries who are ready to work in the MNCs for a part of the US salaries are educated, skilled and multilingual workers. ❖ Time Utilization: Low cost labour works for any hour of the day as a part The Strategy and Consulting Club
of the project they are involved or in the factories, in return of the small amount of money they earn thus reducing companies’ expenditure and increasing profits. Countries like India, China, Indonesia, Malaysia, Mexico, etc. provides with the low cost labours to big players like USA, Russia, UK, Canada, Australia, etc. Advantages of Automation❖ Increase in Production- With increase in demand, it is required for productivity to go hand in hand. Therefore, the automated software helps to increase the growth in office as well as in IT environments. ❖ Better ways to manage problemsSoftware for job scheduling used increases batch throughput by automating the production schedule. ❖ Easy Availability- The world today rotates and revolves around automation. From ATM to online banking to everyday business process all is routinely conducted with the help of online systems. Without these automated software, business lags and suffers. ❖ Reliability and PerformanceAutomated software with predefined parameters and conditions can easily handle tasks given to them.
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INDUSTRY WISE ISSUES OF LOW COST LABOUR VS AUTOMATION
which brings real connection innovation, wages and wealth.
For different industry has different requirement and based on that it required finding out of the two options, which can work better- low cost labour or automation.
In the Confectionary industry, since 2010, there has been a move towards more automation due to advancement in technology, increase of demands and the sharp competition. The four major contenders of candy industry are now Mars, Hershey, Nestle and Mondelez. These players of candy industry uses robots to manage from raw materials handling to production to packaging their sweets. Robots can work better as compared to human, as they can be programed to mould chocolate to any shape at speed more than 120 picks per minute, moreover there will be also less chance of contamination and spread of diseases.
Sometime automating a job instead of creating unemployment, increases the number of jobs as a company that saves the money on workers or labours usually follow the steps of – ➢ Lowering the prices of products which in turn shifts the demand curve to right thereby increasing demand and this turn shifts the supply cure to right too thus increasing the supply of the products. This creates need for more workers.
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➢ Payment of higher wages, which lead to higher production as it, also causes higher investment, gradually takes place more consumption and employment. Example- Amazon nowadays has increased its robots in warehouses to 45,000 from earlier number of 14,000. This has not changed its number of workers hiring. It goes for clothing industry where weaving technology creates more jobs for weavers, The Strategy and Consulting Club
among
There are good and bad of merging technology in our day-to-day life. But the main factor is to make the “ups” maximum and “downs” minimum. Self-serving / touchscreen Kiosks can replace the front counter attendants or traditional old days ticket counters at railway stations or metro railway stations thus making human life easier in metropolitan cities specially as people no longer need to stand in queue for hours for tickets. About 7,900 outlets of McDonald (especially in European cities) are using self-service kiosks through which people can themselves place their order and pay easily. Such kiosks are also present in US, which numbers to be 14,000. With full automation, business uses technology to make human more productive. Several research and studies have shown that employees who work remotely saves an average of $11,000 businesses per employee per year. Moreover, such employees who works remotely are healthier, happier, have better retention rates and are more productive.
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Though automation comes up with more production, but it has its own shortcoming too. Humans may not be as efficient as robot, but they with dynamic set of skills are more versatile. Robots can be good only at one specific thing. There can be complication when matters like managing a small team spread in different countries is required. In this case remote communication becomes more difficult as compared to face-to-face communication as it becomes syncing up meeting schedules with clients or co-workers living in different time zones. In case of customer care service, if no human workforce is present, then again, the total system dependant on robots can actually reduce customer –business relationship as customer cannot rely on the buying or problem
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solving process because of lower human involvement. CONCLUSION Thus, we can conclude that automation is not actually a means to eliminate people from the processes. Instead, it gives the concept of “work smarter�. Here the automated devices manage the tedious tasks and let human do the intellectual jobs. Off course, advanced technology will make some traditional ways obsolete. Earlier there were lamplighters for streets, now streetlights are automatically lightening up using electricity in place of oil. Thus, it shows that rather than resisting advancement in technology we should try to use technology in better and wise manner. This will actually make people more productive, society happier and educated; and country more economically and scientifically advanced.
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Current News Amazon Go Store-The Future of RETAIL??? On January 22nd, the stocks of Amazon rose by 2.5% which is slightly higher than the 2.4% rise that was followed when Amazon had announced the Whole Foods acquisition. This slightest of difference got many analysts excited about the possibility of smartphone apps and virtual carts replacing checkouts in grocery stores………… But, in came the experts shouting WAIT, for the following reasons: 1) Retail has been littered with promising technologies which have always been introduced with great fanfare. 2) These technologies more often than not are not enough for retailers to earn or save more to cover the costs of these new technologies 3) Also, many a time too many customers do not like it (frankly speaking, what’s not to like in an automated checkout shop- but there are people who are not great fans)] 4) Also, to become a new normal the tech needs to be friendly with the less tech-savvy people and needs to go beyond the early adopters (typically 10-15% of retail shoppers) A recent survey on 1500 British nationals revealed that 19% consider an app that tracked their purchases an invasion of privacy. These are some of the few challenges that Amazon Go, and others will have to come through to be called a success.
The Broadcom-Qualcomm saga. Deal or no deal? On November 3rd, news reports suggested a possible bid that Broadcom, the Irvine based semiconductor giant was planning to acquire its near rival both in terms of business and distance (The headquarters of the two firms are just 85 miles apart); Qualcomm. It has been over 3 months since then, but no deal has been signed so far. The last bid that Broadcom had put forward was for a revised offer of $121 billion. The offer was rejected by Qualcomm senior managers. Broadcom is mainly a manufacturer whose connectivity chips are used in products ranging from mobile phones to servers. San Diego-based Qualcomm primarily outsources the manufacturing of its chips which are used for the delivery of broadband and data, a business that would significantly benefit from the rollout of 5G wireless technology. But, on February 14th the men in-charge for the deal met each other to discuss on the offer further. Qualcomm managers needless to say rejected the current deal on the table but were ready to hear a revised offer. Qualcomm’s response raises the stakes in a battle over what would be the technology sector’s largest-ever acquisition. The two companies have less than three weeks to negotiate a potential deal until Qualcomm shareholders are asked to vote on a challenge by Broadcom to Qualcomm’s board of directors.
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Qualcomm has been seeking to walk a fine line between resisting Broadcom’s acquisition approach, which it says undervalues it and is fraught with regulatory risks and demonstrating to its shareholders and proxy advisory firms that it is willing to engage to secure a better deal if possible. As part of the takeover battle, Broadcom is asking Qualcomm shareholders to back its effort to replace a majority of Qualcomm’s board of directors in a vote scheduled for March 6. It has called its latest bid its best and final offer. The time is running for both sets of managers before the shareholders come into action.
Gopinath set for another Aviation Venture Gopinath, having sold his maiden airline, Air Deccan to Kingfisher in 2007 and then burned his fingers with a cargo venture with around Rs 100 crore investment from Mukesh Ambani, has entered into another joint venture with Air Deccan being sold to the Adani kin now. The Ahmedabad-based GSEC Aviation and Monarch Networth Capital have bought over the GR Gopinath-promoted Air Deccan, besides jointly acquiring majority stake in Air Odisha. Under the new structure, both the airlines will be owned by a new company called GSEC Monarch Aviation in which Gopinath's Air Deccan will hold 50 per cent stake while the rest will be held by GSEC Aviation and Monarch Networth. The JV will hold 100 per cent of Air Deccan and 60 per cent of Air Odisha. Interestingly, Air Deccan which had ceased to exist after being acquired by the now-defunct Kingfisher Airlines in 2007, was revived last year with the Bengaluru-based carrier bagging 34 routes to fly under Udan scheme in the first round of bidding in March 2017. The areas of cooperation cover aircraft procurement, leasing of aircraft, maintenance, IT systems, pilot and engineer training and flight operations, inventory, among others. The two carriers together plan to operate 108 daily flights from across 67 airports over the next threefour months, with fleet of 12 Beechcraft 1900D planes, which offer a seating capacity for 18 passengers each.
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The Strategy and Consulting Club Indian Institute of Management Rohtak Team Members Batch 2016-18
Batch 2017-19
Aditya Kumar
Ijas MC
Anuj Shakarani
Lavesh Bhadada
Mayank Jain
Mayank Banka
Pushkar Roy
Nishant Garg Varun Parvathaneni Taslish Chadha
Disclaimer: The views and opinions expressed in this magazine are those of the authors and do not necessarily reflect the opinion of the stakeholders of IIM Rohtak
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