IIFT Strategos Vol 2 Issue 2 by Zigu MBA

Strategos Volume II Issue II

June 2012

Strategy and Consulting Club

Strategos Volume II Issue II

June 2012

Editorial

iii

Strategy The Continuum of Business Strategy Dr. R.K. Mitra

Supply Chain Supplier Segmentation

Social Media Facebook IPO Social Media Marketing

9 13

Finance Mergers & Acquisitions

Operations Please be Optimum, Not Efficient

Entrepreneurship Succession Planning in Family Owned Businesses Startups in the Changing Industry Scenario

23 26

Education Digital Classrooms: The Next Big Thing?

Interview Mr. Mayank Sinha, Glenmark Generics, Europe

Strategy Corner Trends in International Business News From Socrates

37 39 41

Faculty Advisor Dr. R.K. Mitra Editorial Board Sachit Arora Swati Khurana For suggestions & Contribution contact us at socrates@iift.ac.in

Editor’s Note Greetings from Socrates! We are proud to present this year’s first issue of our quarterly magazine. Our cover story is about Supplier Segmentation as a means of efficient purchasing. The issue also features articles on how social media marketing is gaining momentum and how it affects any brand’s positioning. Family businesses have a lot of inherent advantages as well as problems. Hence, they need to be dealt with a lot of tact. The article on family businesses tries to resolve some of those issues. Mergers and acquisitions pose numerous challenges in terms of the changes that accompany them. The articles on mergers and acquisitions suggest some ways to deal with the challenges. Through our article on Startups we’ve made an attempt to analyze them in today’s changing industry scenario. Digital education is revolutionizing the face of the education industry at a tremendous pace. We have tried to predict the future of the education sector in the days to come. This issue also includes articles on the Facebook IPO and its implications – both for the company as well as the prospective stakeholders. We would like to express our heartfelt gratitutde to Dr. R.K. Mitra , without whose support and guidance , this magazine wouldn’t have been possible.

Happy Reading! Swati Khurana Sachit Arora

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The Continuum of Business Strategy Abstract Differentiation Vs. Cost Leadership are the two traditional positioning for the firms. Since introduction of two structural generic strategies of cost and differentiation by Michael Porter, considerable literature has been devoted as to how positioning can be source of Competitive Advantage. The Resource-based View, on the other hand, rely on certain distinct and difficultto-imitate resources. So far, the belief has been that the two approaches follow two fundamentally different routes. This paper argues that positional orientation is more of external interface or front end, while ‘capabilities’ are more of internal interface and may constitute a back end. Understanding business strategies in terms of these ends and their symbiotic relationship may help the managers to remove any possible divide in strategy formulation and implementation. ****

Often strategies being pursued by firms become difficult to identify. Even one identifies the strategy; it appears to be just broad contour or approach. Apparently, a firm is observed to pursue, say, a ‘differentiation’ strategy but what mostly remains obscure are the ‘capabilities’ support the strategy at the back. Strictly speaking, strategies ideally should have two broad ends-the front-end which will essentially encapsulates the firm’s ‘positioning’ and back end which will resemble more of a war room stuffed with an array of capabilities which will go to power the front-end. An understanding of strategies in terms of front and back end can help managers to view strategies in seamless integration. 1

Business Strategy: A Continuum Mark W. Johnson and Hari Nair (1) have recently demonstrated how the Customer Value Proposition (CVP) can be approached in two apparently different ways but elements are nonetheless highly integrated, no matter how one starts: Cost Leader Set a ‘price Decide cost structure Deploy key resources and processes Bring the product

Differentiation Set the ‘product’ Deploy key resources / processes Determine cost struc ture Set the price

The ‘starting point’ becomes the substance of front end strategies of the firm in question. The above point can be illustrated with the help of example of Business Model of Ryan Air as demonstrated by Ramon CasadesusMasane II and Joan E Ricart. (2) The firm sets a front end strategy by one or two key decisions: Low Fares and equal treatment to all passengers Once the front-end strategies are in place, then come the real challenges. No strategy, however brilliant in ideas, can come to action of its own. One needs a series of iterations of possible configuration of resources and management processes tightly coupled with front-end. This needs a very careful handling. Many a time, firms deploy costly resources to support their front-end strategies but very of-

ten ‘coupling’ turns out to be weak-either the ‘resources’ fail to turn to ‘capabilities’ or resources so deployed are unable to satisfy the algorithm conceived to create the customer value at the front end.

When ‘resources’ fail to turn to ‘capabilities’ Resources per se cannot give all the distinguished characteristics that make firms different. Rarely a resource is such that it in itself is adequate to be called a distinctive capability. Take the example of technology. Many a time, firms acquire expensive technology to support its front-end strategy of ‘differentiation’. But in order for the ‘technology’ to hit the target, it may call for some supportive ‘competencies’ in the form

of infrastructure, skill, maintenance etc. Inability of a firm to deploy all such supportive capabilities simultaneously may render the ‘technology’ sub-performing leading to subterfuge of the given ‘positioning’. An Airline may acquire expensive fleet but without commensurate skilled pilot and crew may render its acquisition of sophisticated fleet as a source of competitive disadvantage. This is what we call ‘Mis-coupling’ of resources.

Resources do not fit to algorithm of ‘operations’ leading to slacks: Resources many a time do not fit into a proposed algorithm of ‘operations’ which are laid to support a front end strategy. Let us take an example from one of the most dy-

namic battlegrounds of current time:– the Smart Phone Market. In order to compete with the likes of Apple (iOS) and Google (Android), RIM (Research In Motion – Blackberry) has been building up its team, acquiring the players it needs to fix their historic weaknesses and “future proof” the company (a term RIM’s Co-CEO Jim Balsillie used on their last Earnings Call). Some of the acquisitions were: QNX - makers of the powerful Microkernel QNX Neutrino operating system upon which the BlackBerry Tablet OS is built. Torch Mobile - WebKit browser gurus who fixed up BlackBerry’s traditionally poor web browsing experience The Astonishing Tribe - Creative geniuses and UI experts who, while arriving a little late, helped shape some of the aspects of the user experience Dataviz - While RIM didn’t buy DataViz outright, they bought a lot of their talent and assets If we look at RIM’s long list of recent acquisitions, it appears that RIM has bought the resources (inorganically) needed to have a winning team, stacking their roster with some real superstars. But turning great players into a winning team doesn’t typically happen overnight - teams need time to gel, they need practice, they need coaching and they need some experience in real games to see what’s working and fix what’s not. As for now, RIM has a 16.6 percent share in the US smartphone market and is rapidly dropping while its competitors (Apple & Google) are gaining ground. This is what we call Strategic Miscalculation.

Coupling of Front & Back: Key to Strategic Success A clear understanding of inter-relationship between ‘positional’ orientation and ‘capabilities’ will ultimately hold the key. ‘Capabilities’, before deployment, may need some

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authentication. The term ‘authentication’ is used to denote certain key management processes and practices required to exploit resources that a firm deploys to support a ‘positional’ orientation. The process of authentication takes an organization wide view and assessment before deploying ‘resources’ to support a ‘positional’ orientation that a firm decides to take. The given positioning will call for a host of back end strategies in terms of deployment of resources and also the ability of the firm to derive competitive advantage from deployment of those resources. Mere deployment without a proper process of authentication of firms’ ability to exploit the resources will result in ‘Mis-coupling’ of two ends. Let us illustrate with an example. Firm A chooses a ‘cost leader’ positioning at front end. The ‘positioning’ will call for a host of ‘resources’ and will presuppose firm’s ability to exploit them to support the front end. Resources and Ability to exploit those which will constitute backend to support a Cost Leadership positional orientation at the front can be depicted in Table 1. Here in this case, while resource endowments are deployed to support front end, a firm is required to lay down management processes/practices which will power those resources. If those abilities are not there, resource endowments will not be able to power the frond end. We can illustrate our point with the help of

a differentiation positioning as well. For the sake of understanding, we are presuming ‘product’ as a differentiator. As is the case for product differentiation, one needs to identify ‘attributes’ which can significantly explain variation in prices. In

a conceptual model of product differentiation, we first identify ‘attributes’, which at the initial stage, can be assumed to contribute to perceived differentiation. At the second stage, we need to ‘test’ if the perceived difference indeed can explain variations in prices. Using a regression model, our equation can be as follows: Pricei = b0+b1a1+b2a2 + b3a3 +…….bnan Where ai = attributes 1 to n and bi =coefficients & bo = Constant

After calculating the co-efficients of attributes, one can apply statistical tests of significance at different degrees of freedom. Table 2 is a very hypothetical table of attributes and their co-efficients and level of significance for a washing machine. By selecting those attributes which are significant in making price variations, the firm

now can deploy compatible / supportive capabilities which will be able to power those ‘attributes’ to bring home the benefit of differentiation. The coupling of ability endowment in this case can be depicted as in Table 3.

Benefits of an Integrated View of Strategy The objective of this paper is not to advocate any generic strategies- the objective is to sensitize the managers about need for perfect coupling between a positional frontend and supporting backend capabilities. Front-end strategy is more of expression of strategic orientation while backend is more of endowments – endowment of resources, capabilities and abilities to couple the resources and capabilities with the front-end orientation. By creating a management process of continuous authentication of capability endowments, managers can track the firm’s capability curve. Any indication of Mis-coupling of the two ends should ordinarily serve to sound the alarm bell – capabilities which have hitherto brought home the intended positional orientation might need replacement: customers may need a new reason altogether to stay with the firm. Creating a new reason for customers to stay tune may, in turn, call for a new positional orientation and this again helps the managers to track the competitive curve. In other words, the front-end positional orientation has most interfaces with market and customers, the firm can use it for tracking competition curve while the backend, being the operational interface, can help tracking the firm’s capability curve. When both ends are seamlessly integrated and, be part or a single cycle of competitive advantage, the firm’s positional orientation can stay in tandem with its capabilities.

References:

1. New Business Models In Emerging Markets by Mark W. Johnson and Hari Nair, HBR, Jan. - Feb., 2011 (Page 79-85) 2. How to Design A Winning Business Model by Ramon Casadesus – Masanell and Joan E. Ricart, HBR, Jan. - Feb., 2011 (Page 91-97) 3. Dynamic Competitive Strategy, George S. Day, David J. Reibstein, The Wharton School, with Robert E. Gunther, John Wiley & Sons Inc.

About the Authors Dr. R K Mitra is currently the Registrar of the Indian Institute of Foreign Trade, New Delhi. Apart from a First Class First Post-graduate in Economics, he did his MBA from Indian Institute of Technology (IIT), Delhi. He also did his Ph.D from IIT, Delhi in e-Governance. . He currently teaches ‘Strategic Management’, ‘Competitive Strategy’ and Indian Economy & Trade Policy at IIFT. As Adjunct Faculty at ABV-IIITM, Gwalior, he teaches International Business and e-Governance to the MBA students of the Institute. Email: rkmitra@iift.ac.in Mr. Varun Sharma is an alumni of MBA(IB) at Indian Institute of Foreign Trade, New Delhi. After completing his B.Tech in Mechanical Engineering, he joined MBA(IB) at IIFT in 2010. He has extensive work experience in TCS in process efficiency. He is placed at Procter & Gamble at their Bangalore office .His current research interests are in strategic modeling. Email: varuns_d12@iift.ac.in This paper was presented at International Conference organised by OITM, Haryana, India

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Supply Chain Strategy Improving Purchasing Decisions “Market segmentation is a natural result of the vast differences among people” Donald Norman

Supplier Segmentation In an environment characterized by scarce resources, increased competition, higher customer expectations and faster rate of change, organizations are finding it increasingly difficult to compete effectively, generating suitable profits and at the same time providing quality products within cost limits to the consumer. The enhanced level of competition has constrained the supplier’s ability to increase prices, while at the same time increasing input costs have eroded profits. Faced with these problems corporations today are exploring different means of cost reduction. This has brought into focus an important but seldom celebrated function, i.e., Procurement, as an effective means to reduce costs while at the same time maintaining quality. “Though procurement generally accounts for nearly 60% of the total spend of an organization, it is only in recent times that it has come to be seen as

more of a control tool rather than just a support function” As organizations move towards making their procurement processes more efficient and more in line with their strategic plans, attention has also shifted towards one of the most crucial aspects in supply chain management, i.e., Supplier Relationship Management.

Supplier Relationship Management Wikipedia describes SRM as “SRM is a discipline of working collaboratively with those suppliers that are vital to the success of your organization to maximize the potential value of those relationships”. The basic motive of SRM is to develop a mutually beneficial relationship between an organization and its strategic supply partners. Organizations, across different industries, typically use a number of suppliers for raw materials and for intermediate goods. In such an arrangement, how well a company does, the quality of its products and its ability to deliver products on time to the consumers is dependent on the suppliers and thus it is necessary to have some sort of synergy between an organization and its suppliers so as to

ensure proper return for both the stakeholders in the relationship. As the production levels increase, companies will have to outsource more parts of their work to different suppliers in order to meet demand and to reduce costs, making it more important for organizations to better manage their suppliers and thus risks and vulnerabilities in their supply chains. So the question is how will supplier segmentation help companies better manage their suppliers? Organizations these days generally employ a number of suppliers, and it is a known fact that there is a different approach for different types of suppliers.

Purchase Classification

An excellent process for one relationship may be completely wrong for another. Companies that try to use the â&#x20AC;&#x153;One size fits allâ&#x20AC;? approach soon discover that this can be a source of significant problems. The kind of relationship fostered with the supplier of a customized critical component differs a lot from that with a sup-

Acquisition Routine

plier of standard equipment, and using the same tools in both situations results in a misalignment of strategic goals and wastage of corporate resources. Breaking suppliers into different groups in terms of what weâ&#x20AC;&#x2122;re looking for from them and taking the supplier-relationship management to the next level, which is to segment based on what the suppliers can do versus our objectives, and then being willing to invest in those suppliers to be able to drive value is the major goal of segmentation. In a highly competitive market situation and rising commodity costs, there is a trend towards reducing the number of suppliers an organization uses. This helps companies in consolidating their purchases and negotiating better prices. There is however only a limited amount of benefit to be derived from the above strategy and organizations have started searching for newer areas of cost reduction.

Items represent relatively low total Relatively disproportionate time to acquire Objective is to eliminate unnecessary manual processing

Multiple

Many undifferentiated suppliers available Switching costs are low Price is the main focus

Leverage

Many suppliers are available Organization wide needs are there Purchase consolidation is the key

Acquisition

Few critical and differentiated suppliers Difficult to switch Suppliers gain an upper hand

Exhibit 1 : Categories of purchases 6

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In this regard Supplier Segmentation has emerged as a highly effective means to further reduce costs and at the same time establish relationships that move beyond the transactional level.

cality of the service level needed, the supplier’s anticipated quality level and the supplier’s technological capability and compatibility with the organization’s processes.

“You can’t have deep, collaborative relationships with all your suppliers, and you need to really identify which ones are the players”

Depending upon the criterion specified above the suppliers can in general be classified into four different categories. These are defined below:

Supplier segmentation helps organizations to align allocation of limited resources with their strategic goals. It helps in clarifying roles, responsibilities, actions and expectations of both the parties at every point of contact. It helps in building preferential relationship with different suppliers and thus better allocation and utilization of limited management time resources.

Bottleneck Supplier

Criteria for Supplier Segmentation A number of factors need to be considered before an organization decides to segment its suppliers. The most obvious factors for differentiation would be the level of spend by amount, the volume of procurement, the strategic importance of the supplier, the number of units of the company being served by a particular supplier and the type and number of products or services a supplier provides. Others factors to be considered include the degree of interdependence between the supplier and client, the complexity and frequency of changes in supplier requirements, the cost and difficulty associated in switching suppliers, the criti-

Only a few suppliers are usually present in this category. Bottleneck products are those that can be acquired from only one supplier and their delivery is otherwise unreliable and these items have a low impact on the financial results. However the unavailability of these items may lead to production stoppage. The buyer-supplier relationship in case of these suppliers is usually supplier dominated with a moderate level of interdependence. Organizations should direct medium to low resources towards such suppliers.

Routine Supplier Suppliers in this category usually provide products of standard specifications for which a number of suppliers are usually available in the market. As a result it is easy to switch suppliers. The relationship is on the whole evenly balanced.

Collaborative Supplier These constitute a high percentage of the organization’s total spend. Generally several come in this category and thus a number of alternatives are available

Relative Availability

Figure 1 : Categories of Suppliers

for the buyer. The products supplied by these suppliers are somewhat differential in specification.

Strategic Supplier These are the most important type of suppliers as they are usually critical for an organizationâ&#x20AC;&#x2122;s competitive advantage and for ensuring profitable growth and as such the highest amount of the companyâ&#x20AC;&#x2122;s resources should be directed towards these suppliers. An organization typically has a small number of such suppliers and thus these are difficult to replace. They supply non standard products with unique specifications. Such relationships are usually focused on development and driving performance to the next level. Effective supplier segmentation yields many benefits both within the procurement department and across the various business units involved. It provides orga-

Strategic Importance

nizations the opportunity to not only negotiate the best prices for the product or service being sourced, but also the ability to negotiate contracts of appropriate duration and with the appropriate level of oversight. Supplier segmentation is a multi-dimensional and dynamic process, and for it to be effective it is crucial to consider the different stakeholders involved. The same supplier may have different strategic value to different business units within the same company and thus it is necessary for organizations to constantly review whether their strategic objectives are still in alignment with their segmentation strategies.

Author(s) Nishant Shekhar is a student of 20112013 batch at at IIFT . He can be reached at nishant_d13@iift.ac.in

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Social Media : Implications Of Facebook IPO Ever since its launch in February 2004, Facebook has taken the world by storm. A website built exclusively to connect Harvard students; it has grown to be a network of 845 million users as of December 2010 with over 483 million daily users. On February 1, 2012 Facebook filed an initial public offering (IPO) application with the Securities and Exchange Commission (SEC) in Washington. Several major investment banks are involved in the IPO, with Morgan Stanley as the lead bank. Goldman Sachs, Bank of America, Merrill Lynch, Barclays Capital and JP Morgan are also included.

though, this decision might become a burden for a company known for its “coolness”, it would have access to more cash flow to increase its value or to acquire other companies.

Facebook was forced to file to go public because it ran up against the limits of the 500-shareholder rule. Private companies with more than $10 million in assets are required to file detailed financials with the Securities and Exchange Commission once they exceed 500 stockholders. The social networking giant passed those limits last year, making the timing of its IPO a widely anticipated move to meet the April 30, 2012, deadline.

Known for its engineering-driven culture, where innovation and experimentation are prized, Facebook has rolled out a steady stream of new features and capabilities, from video chat to mobile apps. Statistics show that 57% of the users interacted with the services provided by Facebook every day up from 54% last year. The users in the U.S. also seem to be spending more time on the site7 hours each day, up from last years’ 5 hours per day.

Another major reason for this decision was the realisation that the company is too big to keep its finances private. Al-

This IPO decision had been long awaited by investors, competitors and reporters alike. Facebook, however, had been using this time to establish itself as a communication hub eating into the market share of Orkut, Friendster, Myspace, Hi5 and other social networking predecessors emerging as a potential threat to the Internet’s biggest success story, Google.

Challenges Starting as a dorm room project by Harvard students Mark Zuckerberg, Eduardo Saverin, Dustin Moskovitz and Chris Hughes; Facebookâ&#x20AC;&#x2122;s annual revenue has grown 300 times from $777 million in 2009 to $3.7 billion last year. The profits keep on rising too, growing from $122 million in 2009 to $668 million last year. However, the challenge is to ensure such growth in the future as well. Although Facebook believes it will cross the 1 billion registered users mark by end of summer, it also recognises newer competitors like Google Plus, Pinterest, Twitter in the social networking domain. In its IPO filing, Facebook cited Googleâ&#x20AC;&#x2122;s ability to use its dominance in Internet search to promote its Google Plus social network. Statistics indicate Facebook generated a meagre $4.39 per user in revenues as compared to Googleâ&#x20AC;&#x2122;s $30 per user for its services. Facebook has even ac-

Exhibit 1 : The potential of the Facebook IPO [source: namesake.com]

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line content to be censored if the Chinese government considers it to be objectionable or obscene. Since Facebook already generates 44% of its revenue outside the U.S., they are also developing other sources of revenue beyond online advertising.

Exhibit 2 : Facebook in numbers

knowledged that it doesn’t derive any revenue from its smartphone app which is a huge disadvantage because Apple and Google have already established their presence in mobile ads. Facebook fares poorly in a key pricing metric called CPM, or cost per thousand impressions. It is used in the industry to measure the value of ad inventory in reaching an audience. Facebook’s value is 22 cents, less than half the industry average for the Web which is 50 cents and minuscule when compared with Google’s which runs into several dollars. Facebook also frets the possibility that regulators in Europe and the U.S. may impose tougher privacy rules that would make it more difficult for the company to stockpile information about its users. It has also listed its reliance on revenue earned from Zynga’s social games as a risk, as a disruption in cash flow from Zynga would result in a significant hurt to its revenue. Facebook has listed Brazil, Germany, India, Japan, Russia and South Korea as its most promising expansion opportunities. The company eventually hopes to make its service available in China as well, if it can navigate rules requiring on-

Advertising accounted for 85% of Facebook’s revenue last year compared to Google’s 96%. Facebook’s other revenue sources include the 30% commission charged from game makers and other external applications companies. Developers received $1.4 billion from transactions enabled by Facebook’s payment infrastructure. But it is still a small number in comparison to Apple’s iOS platform, which paid out $700 million to developers in the last quarter, and $4 billion over the App Store’s lifetime. Once Facebook figures out how to generate more revenue through its display ads and its app platform, it may actually live up to its professed $100 billion valuation. Facebook has valued its Class B common stock at $29.73 at the end of December, down slightly from $30.07 in June and September. If this IPO lives up to its hype, Facebook could sell its shares at a premium in the range of $35 to $40. Investor demand, though, ultimately will dictate the pricing. 2011, however, hasn’t been a good year for IPOs. Technology companies like FriendFinder Networks, Zipkar, Zillow, Groupon, LinkedIn lost heavily since their IPOs and are now trading at a share price lower than their first day trading prices. But Facebook is an extremely profitable business with operating margins of 50%. When compared with Google’s 24%

ability if and when problems crop up.

Author(s) Riddhi Ahuja is a student of 20112013 batch IFT. She can be reached at riddhi_d13@iift.ac.in

Exhibit 3 : Growth Prospects

when it came public, Facebook might generate heavy profits for not just its existing shareholders and employees with stocks as part of their compensation, but early investors. It remains to be seen how Facebook will trade in the stock exchange when the issue finally goes public around spring. Although Facebook is going public, it is essential to understand that the new shareholders would not be a part of decision making processes. As only a $5billion is being raised, and the current valuation of Facebook is around $75-100 billion, it means only 5-7% of the shares will be traded. Mark Zuckerberg has 57% of the voting rights at the company through his stock holdings and alliances. This gives him total control over the company and its board. Since he owns a big stake in the company, his interests will be aligned with shareholders. But this still creates doubts about account-

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Social Media : The Good, the Bad and The Untimely “Social media turns branding into a true (if often accidental) collaboration between company and customer” Alexandra Samuel, Harvard Business Review The ability of social networks to create potentially transformational change in consumer behaviour has become a global phenomenon. The concept of “Member Communities” has overtaken personal email to become the world’s fourth most popular online sector after search portals and PC software applications. According to AC Nielsen, Facebook has been leading against Google for weekly traffic in several parts of the world since 2010. Even though social media strategy just forms a part of online advertising/ media activities that business houses engage into but it has become an important media of connecting with consumers for service organisations. In the following pages, I will try and throw light on how two service organisations have leveraged on the power of social networking to cater to customers of all groups and types.

Starbucks devised an overall social media strategy arousing customer curiosity by launching different competitions and events via its Facebook/Twitter Pages. Qantas Airlines focused on its Twitter Handle to create a positive feel about the company.

Qantas Luxury Campaign gone wrong With the rapid growth of social media, most airlines have been desperate to put their mark on the social media montage. In an industry which is hyper competitive and where convenience and comfort are the key to attracting more customers, online engagement is seen as an important way to create value add-ons. In November 2011, Australian airline Qantas posted a tweet asking customers to tell the company what their idea of ‘Qantas luxury’ was. Just two weeks prior to this campaign, the failed negotiations between the airline management and the unions representing pilots,

engineers, baggage handlers and caterers had costed the company AS$20 million. Moreover, it is estimated that the grounding had affected 68,000 customers worldwide. The bad timing of the luxury campaign saw customers venting their frustration on Twitter website for all to see. Brand Qantas brand did not have best reputation lately, and as consumer frustration boiled over, the #qantasluxury hashtag was hijacked. The promotion was arguably in poor taste.

What went wrong? 1. Timing of the Luxury Contest: Qantas launched the Twitter luxury destination promotion at a time when trust in its brand could not be lower. Running a luxury campaign when a global economic downturn prevailed was not fitting. 2. Shaky Past record with social media: This is not the first time Qantas has gone wrong with its PR efforts. In August 2011 it was criticized for a competition asking Australian fans to pose as their Exhibit 1: Growth Prospects favourite rugby player and two fans posed as Fiji-born rugby player with Afro wigs and black paint. The airline had to deliver a public apology as the practice of donning black face paint, or â&#x20AC;&#x153;blacking up,â&#x20AC;? is considered racist in Australia. 3. Miscalculating the pervasiveness of Twitter: Once a Twitter trend starts, it is self-feeding; supporting tweets appear that are self-referential, about the trend itself. The social media virus spread quickly. Stories appeared in mainstream press and forums with the caustic user comments. 4. Bad Response: Critics say that the social media team at Qantas did not respond quickly enough and the responses were too wooden and had no personality. The team also resorted to deleting posts from Facebook and Twitter pages

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Starbucks’ secret to success Described by industry experts as “digital marketing worth watching,” Starbucks’ strategies have commanded a lead in the social media space. With almost 29 million facebook fans, close to 1.5 million twitter followers, and 6 million YouTube fans, it’s only second to Coca-Cola in aggregate popularity. Starbucks ventured into social media with My Starbucks Idea – its own version of a social network where customers are asked to share their ideas on anything related to Starbucks. Further, the services company also started a blog - Ideas in Action, written by various Starbucks employees that talks about what Starbucks is doing with the ideas given by users on the My Starbucks Idea site. Moreover, Starbucks painstakingly engages with customers on twitter by answering questions and retweeting what customers are saying about the brand. It frequently uploads interactive content to its facebook page and also invites people to events. Over 4800 people subscribe to Starbucks YouTube Channel. The company uploads commercials as well as informational videos explaining the origins of different coffee blends and some of their charity work videos. They also upload videos showing their history thus enabling people to relate more to the brand.

However, more important than its online popularity is that the coffee chain is beginning to see sales lift following social-media promotions. What works for Starbucks? 1.Embassy Approach to social media: Starbucks has a cohesive social media strategy. With a strong presence over all possible channels, it ensures that no consumer misses its presence on the web. 2.Power to the people: My Starbucks Idea gives the user a role in the decision making process of the company. It gives an opportunity to like minded coffee lovers to connect with each other over communities like “bring back the x beverage” group, “the soy group”. And it doesn’t stop here. Through its blog, it lets the consumers know how their ideas have been implemented. 3.Competent social media team: The team at Starbucks has shown the ability to quickly manage rumours, patiently reply to queries and keep its audience engaged. In January 2010, a story spread that Starbucks was donating its profits in Israel to fund the country’s army -- even though Starbucks doesn’t have any cafes in Israel. The rumour was confronted directly through its online channels by the team. 4.Keeping in line with the latest trends: After ceding to its usual first-to-market status to competitors, Starbucks launched two Exhibit 2 : Facebook userbase

Exhibit 3 : Awareness of social media channels

iPhone apps in September 2009, one for general cafe purposes, with store locators, detailabout specific blends and nutrition information, and the other to support its loyalty card.

media activity in isolation from the state of your brand. Qantas should have focused more on keeping its planes in the air and customers happy than the thread-count on its Twitter Profile.

Engaging customers through social media is a double edged sword. It has millions of frequent users, which means misinformation or malicious falsehoods can be spread as far and as fast as any positive publicity.

Also, a holistic strategy such as the one adopted by Starbucks spread across various social media channels such as Facebook, Twiter, Blog etc and implementation of the same cohesively can help in conquering the social media plane.

When customers use social media to turn against the organisation, the consequences hit right at the heart of a board director’s responsibilities – the bottom line, the shareholders and the company’s reputation – yet, surprisingly, few board directors include social media in their group-wide risk management strategy.

Author(s) Mahima Jain is a student of 2011-2013 batch of IIFT. She can be reached at mahima_d13@iift.ac.in

An important learning that can be derived from the Qantas disaster is to not do social

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Strategies In Business : Mergers And Acquisitions The rapidly changing global environment & demands, diversification needs, economies of scale and shortening product cycles are forcing companies to adopt Mergers and Acquisitions (M&A) as one of their strategies to expand. This expansion can be in terms of location, product, market segment, technological advancement etc. The ultimate objective of any M&A is to add value to the company i.e. to achieve an output similar to value(1)+value(2)>value(1+2). Numerous Emperical studies have shown high failure rates of M&A deals. According to a Boston Consulting Group’s analysis, about 58% of the transactions that took place between 1992 and 2006 reduced the shareholder’s returns. It is very tough to fathom why this happens when all the pros and cons had already been analyzed before going ahead with the deal by the top management of the company both strategically and financially. The answer lies in the fact that some issues are often ignored during the set-up phase of these alliances. One such major issue which can act as a deterrent is the cultural differences between the companies. Culture is implicit and resilient and it determines how a person behaves.

It is almost impossible to force on anyone someone else’s culture and change his long-run belief. For international M&A, cultural issues are all the more important as it involves integration and collaboration of entirely different entities. Some of the cultural factors are1) Disparate Management Styles 2) Leadership style 3) Loss of productivity and talent 4) Beliefs regarding personal ‘suc cess’ 5) Unplanned integration of people resources

Disparate Management Style

Differences in the management styles can make it difficult for employees to adjust post-M&A. For example, Company A might be following a centralized approach where all the decisions are taken at the head office and passed on to the regional offices, while company B might be following a decentralized approach where some decision taking powers are given to the regional managers as well. In this situation both the companies must have an honest and open discussion in advance as to how much authority will be given to the regional managers and what is going to be the decision flow in

Exhibit 1: Reasons for M&A failure

the merged organization.

Leadership Style The companies can differ in terms of how formal or informal its environment is. There are some companies in which even the person at the lowest hierarchy level can talk to the management and discuss his issues or put forward his ideas anytime he wants, while in other companies, there is a proper hierarchical structure through which an employee has to pass to make his ideas reach its desired place. If such differences exist, this needs to be resolved compulsorily before going ahead with the deal; otherwise it may lead to a lot of frustration for the employees.

Loss Of Productivity And Talent It is the employees whose performances determine the company’s growth. Therefore, they should be clearly told what are the management’s visions and business plans and what they can expect for themselves from the deal. If possible, they should also be involved in the decision making process. This is because loss

of talent and inability to manage change on the part of employees can cause a considerable amount of damage to the company in the long-run.

Beliefs Regarding Personal ‘Success’ There are organizations in which employees believe in achieving goals with ‘teamwork’ and ‘cooperation’, while on the other hand there are also some organizations in which ‘individual’ performances are recognized. If a merger takes place between these two types of organizations, it would result in the degraded performances as some employees would be striving for company’s objective, while others would be indulged in improving his own standing in the company and therefore there would be lack of support for each other and inconsistency in their functioning.

Unplanned Integration Of People Resources While formulating the new teams for the merged organization, people’s competencies needs to be matched appropri-

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ately to the requirements. The integration of the work force should be done in such a way that every employee gets the role that he deserves. This would increase their trust on the management, and is likely to extract maximum productivity out of them.

the plans, and communicate continuously. If needed, using an external agency that can be seen as a neutral agency. 9. Engage employees in productive work and keep their motivation / commitment levels at the highest possible levels

Following are some strategies that need to be addressed regarding cultural issues in making the process of mergers useful in retaining the people, and thereby protecting perhaps the most valuable assets that the company has acquired-

Therefore in a nutshell, the following objectives needs to be taken care of-

1. Evolve a clear vision and business strategy during the process of negotiation, and communicate it well in advance. 2. Make culture a major component of the change management work stream.

There should be as much clarity as possible in the minds of the employees regarding the deal. They should be aware about the consequences and the changes that they are going to experience after the deal is signed. There should not be any uncertainty about their job or roles.

Competence

3. Identify the merits and demerits of both the corporate culture and integrate them to come up with a new unified culture.

The revitalized competencies of the organization must be assessed and communicated in crystal clear terms such that there is no information gap between the management and employees.

4. Implement a decision-making process that is not hampered by cultural differences.

Commitment

5. Appoint people who can understand both cultures and formulate policies to narrow the differences. 6. Create a new Organization Chart to map employeesâ&#x20AC;&#x2122; roles and responsibilities as aligned with the new chart. 7. Establish a strong communication system. Establish a single point of contact for the employees of the company to talk to and seek clarifications / answers to their queries. 8.

Clarity

Communicate to provide clarity of

The top management of the company must talk to the employees in advance and make them understand the importance of their commitment for the success of the deal.

Author(s) Prince Jain is a student of 2011-2013 batch

at IIFT. He can be reached at prince_d13@ iift.ac.in

Operations : Please Be Optimum, Not Efficient Cost Minimization Or Revenue Maximization? Productivity in the simplest terms is defined as Output by Input. To have maximum productivity, have maximum output and minimum input. In terms of value it would be Output price by Input cost (assuming only Operating expenses). Thus by reducing operating costs and increasing price, we can achieve efficiency. Pricing being a prerogative of the marketing department we stick to reducing the operating costs. In a similar manner, in terms of volume Productivity would be Output-quantity-produced by Input-quantity-used. Thus by producing more from the same amount of input or by producing same from less amount of input, we will be able to achieve higher productivity. To summarize - reduce costs and increase production to achieve productivity and be efficient. It seems quite logical, but we need to ask a question here - is this in line with the organizational goal? The goal is to make maximum profits; profits being total sales revenue minus total costs. Thus quite logically, reducing marginal costs while keeping marginal

revenues constant or vice versa should increase profits. The dichotomy may seem to be complementing but in-fact it is not. The proponents argue that reduction in operational costs can increase efficiency and hence increase profits. Unfortunately, they miss the element of risk. In todayâ&#x20AC;&#x2122;s time where unpredictability in business environment shapes our strategies, missing risk is a big mistake. The question - Are efficient operations optimal operations? (Due to limitation of space, I would restrict myself to the efficiency of Supply-chain)

Are Efficient Supply Chains Optimal Supply Chains? An efficient supply chain by definition is one that is cost-effective and fast. The proponents propose that such supply chains can be a key element of competitive advantage. However we will see that such a strategy fails under unpredictable conditions of supply and demand. To reduce costs, many companies have centralized manufacturing and distribution facilities to generate economies of

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scales. They deliver only truck load of goods to minimize transportation time, freight costs and the number of deliveries. Whenever the demand of a particular good increases without warning such organizations are unable to react, even if they have stocks in stores. This results in significant opportunity costs. On the other hand whenever the demand falls the excess inventory results in excess layered costs. I am not saying that efficient supply chains aren’t necessary, but they aren’t enough to ensure that firms achieve their goal in this unpredictable climate.

Mitigating The Risk It is no rocket science to figure out that risk cannot be eliminated but only be transferred. Transferring the risk to a partner is surely a bad idea, however sharing it is not. Efficient supply chains tend to be loss making in the long run. An optimal supply chain, as defined by Dr. Hau Lee, is a triple-A supply chain, where Agile, Adaptable and Aligned are the intrinsic characteristics of the supply chain. Agility gives the ability to react to sudden change in demand and supply. This becomes essential in today’s world, which is full of unpredictable geo-political tensions, natural disasters and product recalls. Adaptability gives an edge by aligning to the market structures and facilitating strategizing. Globalization has brought in more complex questions as well as answers. Companies need to look beyond the traditional view of supply lines. Entering into new markets is as important

as entering into new supply lines. Aligning the firm’s interest with supplier’s interest results in collaboration and sharing responsibilities. It fosters the need to collaborate further and increasing the value of the partnership.

Creating A Triple-A Supply Chain Agility 1.Facilitate flow of information across the value chain 2 Enhance relationship with the suppliers 3. Do not hesitate to maintain excess inventory for inexpensive but key components 4. Enhance relationship with the logistics partner 5. Prepare and practise a contingency plan such as disaster recovery planning Adaptability 1. Keep an eye on new supply bases and mar kets in the world 2. Evaluate the needs of the consumer and not just the customer 3. Design the production line for postponement* 4. Create flexible product design 5. Outsource more if and when possible *The concept of involving customization of products at the end of the production line. This enables standardization for most of the part of the production line. Alignment 1. Exchange information and knowledge with suppliers, vendors and customers 2. Share risks and rewards equally 3. Have clarity in division of responsibilities

Figure 1 : Triple-A Supply Chain

Simulate the scenario to forecast and perform sensitivity analysis. This provides us with a holistic view about the demand and supply limits thus enabling us to predict profitability based on the analysis. The gaps need to be filled using a production solution that takes care of the limits resulting from simulation. This requires tweaking or creating an entirely new supply chain network around the core concept of agility, adaptability and alignment. This also gives us an opportunity to configure our networks to suit the changing environment. We must make sure that we undergo a collaborative change where our partners -suppliers and vendors - profit from it too. Finally we should have continuous improvement through a control system where information flow is given prime importance. The result would be an increase in the fill

rate and inventory turns while decreasing in the overall inventory. Moreover, transportation and warehouse costs may go down too. But most importantly, the goal will be realized. Profits will be greater than ever before even if our costs increase. Success stories due to implementation of triple-A supply chain 1.7-Eleven 2.7dream.com 3.Lucent Technologies 4.Toyota

Author(s) Harleen

Singh Mann is a student of 2011-2013 batch at IIFT. He can be reached at harleen_d13@iift.ac.in

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Entrepreneurship Succession in Family Businesses Opinions. It’s dangerous to have an opinion about everything. Unfortunately, of the plethora of material and text available online that tries to find the roots of success (or failure) of a family owned enterprise, only a few hold significance. Of many such articles, one article catches attention. One such article, “Avoid the Traps That Can Destroy Family Businesses”, published in HBR, Jan-Feb issue talks about different “traps” which a family owned businesses usually fall to while doing succession planning. And it offers solutions to such traps. Let us see what traps and postulates it offers:

Postulate 1: “In contrast to publicly

owned firms, many family businesses have the same leaders for 20 or 25 years, and these extended tenures can increase the difficulties of coping with shifts in technology, business models, and consumer behavior.”

Author’s opinion: The difficulties

such long tenures present are almost every time negated by the several advantages these “long” tenure offer. The longer tenure means a longer “transition” period in leadership roles. In a mega firm, where a CEO holds tenure of 5 -7 years,

the transition period is of few months to a couple of years. In family managed businesses, this period can extend even across a decade. The longer the transition period, the longer time and opportunity it offers for development of leadership ability for the next-in-line. Although hard to believe, for a family managed business, the transition period starts as soon as next generation starts gaining cognizance of things around. Business problems are discussed over dining table every evening; kids contribute in counting the arriving and outgoing payments, the next-in- line starts going to banks even before they join university, even pocket money varies as per cash flow/profits/loss in business and such is the involvement, that the person develops the understanding of his family business, even before he actually takes the reins over. “

Postulate 2: “It’s best for a business if

the family members specialize in the different aspect of business.” Experts have opinions. It’s good to have Author’s opinion: It is indeed best for the members of family not to spe-

commitment is only possible if you “worship” and not just “practice” your business. That is where the difference is. It is not about work culture, but about work religion. Family members don’t look at their business as job. Work is considered worship, literally.

cialize and be generalists instead. Family members keep substituting in place of each other in case a member has to miss his role due to some reason. Such adaptability is rarely seen in case of a mega firm, where the substitution (or stepping into a role temporarily) can only happen once the compensation and benefits for the additional responsibility have been decided and the necessary paperwork has been completed. A smooth cross departmental substitution is easy if the family member is a generalist, and not a specialist.

Family Businesses In India All the frameworks developed for mega firms are useful if you are trying to develop a business family. But, when you tend to understand a family business, the dynamics change. In India, family businesses don’t revolve around work culture. Instead, they revolve around work-religion instead. Where else do the family members worship the machines on festivals? Sometimes, the business owner is the one to unlock the office in morning and still is the last one to leave. Sometimes, the business owner is the sweeper as well as the accountant. Such high degree of

The real problem a family business faces is actually very unique. It is not about how you integrate family members into your business, but how you integrate non family members into the business. Generally, a person joining a family managed business has a pre-conceived notion that since it is a family managed business, it would be next-to-impossible to suggest something that goes against the thought process of one of a family member who is in a decision making role. The person thinks that all family members would defend each other’s thought process and views, and it would be impossible to suggest something different. The reality however is completely the opposite. Since the business is considered “religion”, the interest of business is considered supreme and it com pletely overshadows relationships. It takes time for an external person to realize this. Obviously, the time taken for this understanding to develop is “non productive” and it harms the business. Another problem that a family business faces is in developing a proper and smooth exit plan for the retiring family members. Since there is no set retiring age, the senior members of family may continue to hold positions in business for long. As discussed, this offers a good transition time for the next-in-line

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Author(s) Puneet Garg is a student of 2011-2013 batch at IIFT. He can be reached at puneet_d13@iift.ac.in

religion, remember?) which he has nurtured and for which he has worked for so long. Even after retiring, he may like to keep contributing to the company in some way or other. These contributions may come in form of unsolicited advices. However, the suggestions which a person offers after he has retired are probably the most important part of the transition period and knowledge transfer. The post retirement period gives the retired person time and space to ponder and evaluate the critical decisions he took for his business over his entire tenure. This critical evaluation couldnâ&#x20AC;&#x2122;t have happened while he was working his heart out. This analysis happens only in retrospect. The analysis results in observations and learnings that get transferred to the next-in-line in the form of advice. These contributions should not be ignored, and they should be taken as the â&#x20AC;&#x153;extensionâ&#x20AC;? of the transition period. It is hard to learn skydiving by watching it on HBO. It is even harder to comment on succession planning of family business by people who have not been a part of it. A person, having not even an iota of experience in industry, but who has been raised in a business family is in a better position to comment. Incidentally, I happen to be one of them. 25

Entrepreneurship : Startups In The Challenging Industry Scenario In todayâ&#x20AC;&#x2122;s ever changing world with old technologies becoming obsolete and new techniques and methods coming into use at a rapid pace, startups have started playing a major role in the progress of industry. These companies are growing at a very fast rate and are associated with higher risk and high potential return on investments. These small businesses and enterprises form the backbone of the US economy. It is believed that these startups are the major job creators in todayâ&#x20AC;&#x2122;s scenario and some of the best innovations have come out of these companies. There are a lot of pros and cons associated with startups or venturing into business all on your own. These people are highly motivated and bustling with a plethora of creative ideas. They have the plans and the capabilities to revolutionize any domain they wish to enter but there a lot of challenges and hindrances on their way. Most of them have to deal with a lot of decision making from the very beginning. Also, there are very few people they can consult for the most important decisions concerning their businesses. This can lead to problems very early in their venture if not dealt with properly.

These startups also face the challenge of scaling up. As the company grows, more people start getting involved. It becomes very important for all the people to be on the same page regarding the vision of the venture. Sometimes, this poses problems as there is a lack of communication between the owners and the people entering into the company. Moreover, when the unit is small, most of the things are taken care of by a small set of people who are fully aware of the workings. However, as it becomes important to delegate responsibility to new members there is a need for better and efficient management practices and a formal system of administration. Infact Apple, Hersheyâ&#x20AC;&#x2122;s and Ford Motor Company were all started as small enterprises and achieved stupendous success. History shows that great companies are often built during bad times. Hewlett Packard was started by two engineers in a garage at the tail of the Great Depression. Silicon Valley itself was created after the recession on the 1970s. These small companies have again received some setback due to the recent recession but there are certain sectors that seem more promising in the coming years with re-

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spect to startups, or age-zero companies as these are popularly known.

Emerging Sectors During the recession laid off employees went back to school. Clearly, this shows that with the economy showing growth signs, the boom in this sector is expected to continue. Students and even employees who do not find viable opportunities in their domain of expertise are likely to turn to the education sector in anticipation of increased scope. This suggests that this sector will experience a boom in terms of the number and the variety of institutions providing training and certification courses in areas such as IT and medical staffing. Moreover, this is an area where the barriers to entry and the startup costs are very low. Secondly, the internet and the technologies sector is one area where growth is expected to increase over the coming years. With the boom in internet technologies and the tendency of users to experiment with the type of technologies and gadgets that they use, this is one area which has immense potential in the coming time.This also includes the E-commerce and online auctions industries which are registering a growth rate of 9.4 % per year on an average. Thirdly, the green sector is one sector that is set to see enormous growth in the future because of the focus on sustainable development and the consumerâ&#x20AC;&#x2122;s increasing awareness and concern about environmental issues. Shoppers have become more conscious about what they pick and in this scenario businesses are

implementing more eco-friendly practices to provide them with more opportunities to buy and consume healthy. Solar and wind energy have benefited from this green technology and the revenue from the solar energy sector has jumped an average of 34.8 % every year. Also, with increased focus on green technology, green consulting is another domain that has huge possibilities of development in the near future. The environmental consulting industry is expected to grow at an average pace of 9.4 % while the environmental cleanup industry is forecasted to grow at a rate of 4.8 % each year. Another area that is set to get back the growth rate it had before the recession is the construction business. Housing demand is expected to rise on the pretext of rising consumer confidence and higher disposable income. The estimate is that residential construction will rise 12.5 annually upto 2016 and the value of private non-residential construction will increase about 13 % per year. This industry has scope for establishment of startups

because of the increasing demand for contractors and subcontractors. To add to this, the real estate asset management and consulting industry is expected to clock a growth rate of 6.8 % per year. Startups also have a huge scope for growth in the healthcare and wellness sector. The landmark 2010 Patient Protection and Affordable Health Care Act includes provisions supporting alternate healthcare and community wellness programs. Elderly and Disabled services will grow at a rate of 6.2 % per year as disposable incomes grow with the recovering economy.

Author(s) Swati Khurana is a student of 20112013 batch at IIFT Delhi.She can be reached at swatik_d13@iift.ac.in

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Education : Digital Classrooms The Open High School of Utah (OHSU) is a fully online charter school that has traded chalk and blackboards for digital tools that foster collaboration and interactive education. The school has fully integrated Google Docs and uses open course management system Moodle. Students create more than 150 presentations per year using SlideRocket; often collaborating remotely in teams to share and organize data. In this new model of educational thinking, educators and students tap into the cloud to build, collaborate, share and manage media rich lessons and curriculum. The OHSU model is an example of how to employ real world technologies which focus on collaboration. The return on investment is not a result of the technology, but how that technology is effectively implemented in education. Now compare this with the educational standards in India that have been deteriorating in recent times. Assessments of Indian school students by two different entities are indeed discomfiting. In the Programme for International Student Assessment (PISA) test held by the Organisation for Economic Cooperation

and Development (OECD) for South and South-East Asia, India was second last — barely nosing out Kyrgyzstan. Incidentally, China topped the assessment. If that seems like some consolation – wait. The ‘Annual Status of Education Report, 2011’ (ASER) released in January 2012 by NGO Pratham revealed that reading scores across India have declined by 5 per cent over 2010. Worse, only 30 per cent children in Class 3 and two-thirds in Class 5 could solve simple two-digit problems – a 6 per cent decline over 2010.

Rote Learning’s Limitations Barely two years after the Right to Education Act was cleared, what ails Indian education? The problem: the wrong focus. Presently, authorities are simply seized with ensuring that all children are educated. While there’s nothing apparently wrong with this, it simply reduces education to statistics. The responsibility for ensuring that students learn and imbibe what’s taught is missing. Rote learning only works up to a point. In today’s hyper-competitive environ-

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ment, rote learning without comprehension won’t take students far. For example, rote learning only works with standard questions. Re-frame the same questions from another angle and students schooled in rote learning cannot comprehend them and respond appropriately. Fortunately, solutions to surmount such learning problems exist. Simply pinpoint the actual problem and then choose the right solution. Instead of rote methods used in traditional teaching, schools should use modern means such as introducing interaction and personalisation in education. In this regard, Digital Learning and Interactive Education methodologies can provide solutions. Digital Learning uses modern gadgets such as computers and tablet PCs — something today’s generation is most comfortable with.

Digital Learning Revolution The truth about the digital learning transformation is gradually becoming evident as schools slowly adopt interactive classroom teaching and virtual learning systems by using information and communication technology. Of course, the transition from traditional teaching methodologies to modern modules has had hiccups at some stages. The reservations, paradoxically, were voiced by teachers and parents, not students. But as more schools embraced technology, the sceptics realised the value of what

they’ve been missing. Modern education transcends the brick walls of classrooms, as well as the borders and boundaries of nations. As education becomes an interactive voyage of discovery on colourful computer screens, students of all ages discover exciting prospects in studies. Digital teaching modules offer integrated solutions that assist teachers in classrooms via the use of software, hardware and school support services. Once considered just a ‘job’ by teachers and ‘dull and dreary’ by students, interactive learning has now become an enriching experience. Moreover, interactive learning promotes critical thinking among students, too. Students no longer accept what the teacher says at face value. They are unafraid to pose unconventional questions that cannot be answered via stereotyped responses. Students would earlier think twice before replying.

Today, teachers need to marshal their facts before answering offbeat que-

ries. Such interactions fuel the creative thought processes of not just the students but the teachers too. Educomp, till a few years ago, was the only player in the digital classroom segment, but today the market has over half-a-dozen players – like Everonn Education, EdServe Softsystem, Core Projects and Technologies, NIIT and Manipal K-12 Education – who have made learning easy through IT-enabled systems. There’s no denying the fact that schools and educational institutions are waking up to the opportunity of IT-based solutions and service providers are reckoning its potential. Chennai-based Everonn Education, at present has its presence in 1,370 schools and plans to take that number to 5,000 schools over the next three years. Edu-

comp has 5,534 schools – including Delhi Public School and Bal Bharti in New Delhi – and 3.9 million students using its Smartclass solution.The digital classroom services include: setting up of infrastructure and technology in schools; providing digitised course-ware and maintenance support to teachers; educating teachers and the management on technology usage and conducting special interactive sessions, sometimes through VSAT. The market has evolved with the Central government’s move to fund Sarva Siksha Abhiyaan for ICT@Schools programme with a Rs 15 lakh per district per year budget. Under the government’s Technology in Education Initiative, out of a total 10,00,000 schools in the country, the programme will cover 6,42,600 schools at the primary, upper primary and secondary levels. Every school will have a server, five PCs, printer and inter-

Figure 1 : Digital learning ecosystem [source: dell.

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net connectivity. State governments will outsource installation and maintenance of hardware, content and training to a private party. The information and communication technology (ICT) business is tender-based. It functions under the build/own/operate/transfer model. Many service providers are using the powerful channel of 3D animation videos to explain concepts like formation of block-mountains or volcanic formation. And, schools are using the available technology to explain and simplify concepts in subjects like Chemistry, Physics, History, Biology and Science. According to analysts, visually improved presentations through use of graphics increases studentsâ&#x20AC;&#x2122; interests in classrooms. With more and more companies realising the potential, analysts expect the market to grow ten times in the next five years. ICT inflows to privatesector players is pegged at around Rs 4,500 crore by March 2012.

Personalised Education With technology and activity based modules, digital learning tools make teaching easier for teachers, while facilitating faster learning by students. Interactive teaching is immediately followed by practice sessions. Consequently, comprehension and retention capacities of students soar, unlike traditional teaching, where monotonous lectures lead to low information-retention capacity. Besides being user-friendly, many digital teaching modulesâ&#x20AC;&#x2122; control functions allow teachers to monitor each studentâ&#x20AC;&#x2122;s real-time performance. Although students have personalised consoles, teachers hold administrative rights to make classes fully functional. The teachers can then allocate personalised lessons to each student, as per their specific learning levels. Exhibit 1 : Technology in learning 33

After the lessons are submitted, teachers are well placed to assess the performance levels of each student. Assessment is an important cog in the learning process, since it evaluates learning outcomes, provides remedial inputs and offers a powerful set of solutions towards consistent development of students. Implementing assessment programmes assists teachers in ascertaining students’ strengths and weakness, thereby planning future lessons in sync with the pace of students.

And it will always be people. The new collaboration revolution in education technology places people squarely at the center of the equation, making it easier to connect and produce solid results. Author(s) Sahil Saini is a student of 2011-2013 batch at IIFT. He can be reached at sahil_k13@iift. ac.in.

Besides taking a great burden off teachers, user-friendly teaching modules make topics simpler for students to understand. Furthermore, interaction aids help in concentrating for longer periods. All this ensures students termed laggards in class can now deliver above-average performances. Given the element of fun and interaction that digital learning programmes bring into classrooms, teachers may find it difficult to label students as slow learners. Students taught in this manner possess an array of creative, problem-solving, communication and analytical skills — the best means to succeed in the 21st century’s ultra-competitive environment. With most modern schools in Indian cities and towns introducing computers and computer education, the time is right to adopt digital learning technologies across classrooms. The real value of education is not really what we learn; it’s how we learn it– which involves the effort and process that goes into the act of learning itself. No matter how many new digital tools come out, the common denominator is still people. 34

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Industry Insights: Pharmaceuticals An Interview with Mr. Mayank Sinha Head of Business Development Glenmark Generics Europe Q: How is the basic work culture at Glenmark? How does your normal day look like? A: There are variations according to

the geography one is working in, so this would be a very Europe centric answer. In the European business environment there is a lot of focus on discipline, punctuality and honesty. For e.g. If you are working in Sales and Marketing and you have run out of stock, you really donâ&#x20AC;&#x2122;t need to make excuses. You can say that you wonâ&#x20AC;&#x2122;t have it for three months and people really appreciate your honesty if you tell the truth (off course this certainly cannot be a regular occurrence!!). This is reflected in the internal work environment where people are very direct; there is limited hierarchy and an emphasis on trust and straightforwardness. At Glenmark Europe, there is a good focus on work life balance. No work on weekend and holidays is the general rule and this is respected both by external customers and internal colleagues. However as Glenmark is a fast growing business and we are very much in an en-

trepreneurial mode, being flexible with attitudes and time allocation is necessary and work is geared towards the international business requirements where the above is not necessarily always followed.

Q : What according to you are the current primary challenges in the pharmaceutical industry? A : There are a lot of challenges in the

pharmaceutical industry especially in the emerging economies because of the recessionary conditions existing in the Europe and US markets. Companies are not able to grow as per their expectations and for our industry per se, it has been a bad phase for the last few years. Also in terms of innovations, I feel that fewer new drugs are being introduced into the market and even the existing drugs are being squeezed by tighter government budgets. In addition there have been rapid changes happening in the pharmaceutical sector. For instance, I was in Greece two weeks back and in a matter of days the pharmaceutical spending by the government (in Europe almost all healthcare costs are paid by

the state) has been slashed by a couple of billion and prices reduced sharply. This has had a severe effect on both topline and bottom line of companies within a week. Growth and expansion in China and India are also vital drivers, where incomes have been increasing steadily and there is a much greater demand for good healthcare. Gradual shifts are taking place in the industry and there is a trend by the established players to focus on these markets. However if one were to see the trends in healthcare spending and ageing population â&#x20AC;&#x201C; Europe, US and Japan would continue to remain the major pharmaceutical markets. As far as Glenmark is concerned, we are very strong in generics as well as building a name as an innovator company for new drugs. It is an interesting sector to be in, because Indian companies are considered strong competitors by the local industry and in general well respected.

Q : How is marketing in the pharmaceutical sector different from the FMCG sector? A : The marketing environment in the

pharmaceutical sector is completely changing. Innovation and spending is diminishing as the industry is getting stretched and there is a lot of consolidation taking place in terms of the buyers. For instance, in the UK there is a single national health service that does all the buying and provision of healthcare. There are limited insurance providers and limited products. Marketing in such a scenario is not of the traditional sense as in FMCG companies. It is increasingly moving towards a key account manage-

ment approach. In the emerging markets however, it is more or less the same in both the sectors. In fact it becomes more challenging in the Pharma sector because the product needs to be sold on its efficacy and the Pharma sector in India is highly competitive and fragmented.

Q : How were your days in IIFT and how do you perceive the role of IIFT in your career? A : At IIFT, I was always interested in the

Sales and Marketing function. I had my summers in HLL (now HUL) and I got a pre-placement offer from the company. Glenmark was at that time setting up its operations in Europe and they had an interesting opportunity in their European set-up which was at that time at its inception stage. IIFT was a logical port of call due to its MBA in International business. I bit the bullet and took on the challenge of being part of a potentially very exciting but unchartered future. It has been an exciting 6 years since, as Glenmark now operate in more than 7 European countries with a direct presence established through a mix of organic and inorganic growth. At a personal level it has been a very stimulating and challenging experience as in short span of a few years my responsibility has increased from being part of the Business Development team to currently as the Head of Business DeMr. Mayank Sinha is an IIFT alumnus(Class of 2005). He heads Business Development for Europe at Glenmark Pharmaceuticals.

Strategos Volume-III Issue-I

Strategy Corner THE AVON COTY STORY Takeovers have always been a very delicate legal dance. The recent loss of the global beauty products firm - Avon Products Inc. of a $10.7bn takeover bid from smaller cosmetics rival has left shareholders hoping that new chief Executive Sherilyn McCoy has a great turnaround plan in place. But with issues of falling sales, rising labor costs and in international markets like Brazil and a shrinking army of salesmen, the future of the company looks bleak. Coty raised its unsolicited bid, which had the financial backing of Warren Buffet’s Berkshire Hathaway and others from an earlier $23.25 per share to $24.75 per share but due to repeated delays in the process from Avon’s side, Coty pulled back the offer. Analysts say that this lack of communication might be a message from Avon that the company is not up for sale. Nevertheless, considering Avon’s urgent need for a sustainable fix, we feel they missed out on a good opportunity. Coty is known for fragrances for celebrities like Beyonce and Madonna whereas Avon is the fifth largest beauty company in the world with its products being across 140 countries.

FACEBOOK’S ACQUISITION OF INSTAGRAM Facebook’s $ 1billion acquisition of instagram, a free photo sharing application, which was voted as iPhone app of the year and has around 30 million registered users in iOS and was able, to attract more than 1 million subscribers in 24 hours of its android launch, has been in news since it was announced this April. Apart from the business implications for Facebook, what is generating greater interest in the deal is the fact that Instagram is a 2 year old start up with around 30 employees and no revenue. However what is lacks in financial metrics, it makes up with far important business metrics like a 30 million strong user base, only for iOS and now that the android version of the application has been launched the user base for android alone is expected to touch 50 million. So what do these numbers mean for Facebook? The motive for the acquisition becomes much clearer if we consider the fact that Facebook is really about photos, and photo sharing and tagging are what made Facebook. Instagram is evolving into more than just a photo sharing app, with rapidly increasing user base; it is becoming a new social platform, which is

what made it lucrative to Facebook and others like Twitter which were also in the fray to acquire the start up. The acquisition will allow Facebook to not only integrate the photo sharing services with Instagram, but will also allow firming up its presence on mobility devices. Facebook, in its IPO filing has admitted that its smart phone app’s inability to show ads or contribute any meaningful revenue continues to a cause of concern, and the company’s acquisition of Instagram could be a move to monetize an incredible driver of growth like mobile.

connections and gain the insights they need to become more productive and successful in their careers, aligning perfectly with LinkedIn’s mission and helping us deliver even more value for our members. We’re very excited to welcome the SlideShare team to LinkedIn.”

Linkedin’s Acquisition of Slideshare Professional social network LinkedIn has decided to acquire presentation sharing startup SlideSharefor $118.75 million in cash and stock.The deal was made with 45 percent cash and approximately 55 percent stock in the transaction. Slideshare was founded in 2006 by Rashmi Sinha, Jonathan Boutelle and Amit Ranjan. The website gets an estimated 58 million unique visitors a month,and has about 16 million registered users. SlideShare was voted amongst by the World’s Top 10 tools for education & e-learning in 2010. LinkedIn CEO Jeff Weiner said in a statement “Presentations are one of the main ways in which professionals capture and share their experiences and knowledge, which in turn helps shape their professional identity, These presentations also enable professionals to discover new

Strategos Volume-III Issue-I

Trends In International Business

Strategos Volume-III Issue-I

News From Socrates: Religare Strategy Head Visits The Campus Mr. Somesh Chandra (EVP & Head O&T Strategy and Shared Services, Religare Enterprises) visited the campus on 9th Feb 2012 to express his thoughts on the integral elements of an successful strategy with the students. He had some interesting observations and experiences to share from his diverse experience. He emphasized the importance of Articulating a compelling strategy, Linking competencies to strategy and setting measurable goals while formulating or overhauling any strategy of any organization. He tried to explain how to implement a strategy successfully in any organisation with the help of interesting examples and real instances. The session was followed by an interaction with the students where the students raised some thought provoking questions and got insightful answers from the guest. Consulting according to him was a contact based business. A good consultant takes time to hone his skills and it is definitely not an easy job.

When asked what do consulting companies look for during interviews, Mr Chandra answered that interviewers normally look for 20% content, 40% attitude, 1015% flexibility and 15% communication. He also mentioned that job interviews are always about how you want to portray yourself to the panel. It turned out to be a very good learning opportunity for the students providing them with a lot of practical knowledge about the world of strategy.â&#x20AC;? The speaker also praised IIFT students for being hardworking and grounded. He believed that IIFTians possess good managerial skills which helps them succeed in varied domains.

Strategos

Socrates Strategy and Consulting Club

Volume II Issue II June 2012

Indian Institute of Foreign Trade IIFT Bhawan B-21 Qutub Institutional Area New Delhi 110016

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