PRATIBIMB The Reflection of Management FINANCE | GENERAL MANAGEMENT | HUMAN RESOURCE | MARKETING | HEALTHCARE | OPERATIONS | SYSTEMS
Flash Mob An exploitable promotional strategy
By Ambili Jayachandran, University of Kerala Book Review of The Toyota Way
By Prof. Rishi Kesava Ram Velure Faculty Associate, Healthcare, TAPMI
Exclusive Interview of Mr. Prakash Dadlani
Country Head, Marketing Excellence, 3M
Neuro-marketing Can the power of the subconscious affect consumer choices?
By Pramit Das & Subhamoy Ganguly, IMT Ghaziabad
A Students’ Initiative Pratibimb | September 2012 | 1
Volume II, Issue XIII
September 2012
A Monthly e-Magazine
T. A. Pai Management Institute Manipal, Karnataka
About TAPMI T. A. Pai Management Institute (TAPMI) is a premier management institute situated in Manipal and is well known for its academic rigor & faculty-student interaction. The Institute has been recently ranked amongst top 1 per cent of B-schools in India & 4th in the South Zone by The Week Magazine. Founded by the visionary, Late Shri. T. A. Pai, TAPMI’s mission is to provide much needed impetus to the task of building professional management capability in the country. In the process, it has also played a role in strengthening the existing educational and health infrastructure of Manipal.
Our Mission We are committed to excellence in post graduate management education, research and practice by nurturing and developing global wealth creators and leaders. We shall continually benchmark ourselves against the best-in-class institutions. We shall foster continuous learning and reflection, achievement-orientation, creative interdependence, and respect for diversity with a holistic concern for ethics, environment and society.
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PRATIBIMB TAPMI’S MONTHLY e-MAGAZINE
VOLUME 2, ISSUE XIII
SEPTEMBER, 2012
TAPMI’s e-Magazine - is the conglomeration of the various specializations in MBA (Marketing, Finance, HR, Systems and Operations). It is primarily intended to provide insights into the plethora of knowledge that relate to the various departments of Management and to give an opportunity to the students of TAPMI and the best brains across country to exhibit their creative cells. The magazine also strives to bring expert inputs from industries, thereby bringing the academia and industry together. Pratibimb the e-Magazine of TAPMI had its first issue in December 2010. The issue comprised of an interview of well known writer Ms. Rashmi Bansal along with a series of articles by students and industry experts like MadhuSudan Rao (AVP-Delivery, Mahindra Satyam) & Ed Cohen who is a global leader and chief learning officer who led Booz Allen Hamilton & Satyam Computer Services to the first rank globally for learning & development . It also included a hugely successful and engrossing game for finance geeks called “Beat the Market” to bring out the application based knowledge of students by providing them the platform where they were expected to predict the stock prices of two selected stocks on a future date. The magazine is primarily intended for the development of all around management knowledge by providing unbiased critical insights into the modern developments. TAPMI believes that learning is a continuous process and is not limited to the four walls of the classroom. This viewpoint is further enhanced through Pratibimb wherein students manage and contribute to create a refreshing learning environment outside the classrooms which eventually leads to a holistic development process. The magazine provides a competitive platform and opportunity to the students where they can compete with the best brains of the country. The magazine also provides a platform for prominent industry stalwarts to communicate their views and learning about and from the recent developments from their respective fields of business which in turn helps to create a collaborative learning base for its readers. Pratibimb is committed in continuing this initiative by bringing in continuous improvement in the magazine by including quality articles related to various management issues and eventually creating a more engaging relationship with its readers by providing them a platform to showcase their talent. We invite all the best brains across country to be part of this initiative and help us take this to the next level. Pratibimb | September 2012 | 3
Director’s Message
It is always a pleasure to witness that certain efforts of the students are sustained and carried forward; Pratibimb is one such. The oft-beaten track, “We are here to learn,” ends up as a mere platitude when there are no visible actions and documentation. Whereas there is no dearth of actions at TAPMI, documentation is not something that many—other than scholars—choose to engage in; it is normally viewed as uninteresting, drab and a drudgery. TAPMIans have proved that they are equally capable of actions and of documentation without losing the intellectual flavour of it. Scholarship is too important a phenomenon to be left to scholars alone, especially in the field of management. As future practicing managers who will be engaged in rigorous action in different fields of business, TAPMIans have manifested both the penchant to produce research works and also get their counterparts in other leading business schools to contribute their thoughts to this endeavour. In this regard, TAPMIans have truly demonstrated the evidence for creative interdependence, an important aspect of TAPMI’s mission. I sincerely appreciate the students and the faculty of TAPMI who have made Pratibimb a possibility through their scholarly works, co-ordination efforts and support. I wish the team the very best. Dr. R. C. Natarajan
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Editor’s corner Dear Readers, Pratibimb has imbibed new members! With a fresh batch at our campus in TAPMI, Manipal, Team Pratibimb has seven innovative new members who now comprise the sub-editorial team. Our latest September issue has seen a colossal number of contributions. ! To aid us decide which entries really merit the cut, we have a continual rendezvous with many faculty members. I, on behalf of the entire team would like to congratulate all who have had their contributions published We at Pratibimb salute all who have contributed in any manner to augment this magazine. Our current issue carries special features such as an exclusive interview with Mr. Prakash Dadlani, 3M and another interesting interview with Mr. Ashok Bannerjee, Flipkart which was published by Yourstory.in. We also have our faculty member Prof. Rishi Kesava Ram Velure who has written a book review of the all famous management book The Toyota Way. Our association with Jaipur Rugs has now advanced a stage. Pratibimb will now partner with the Jaipur Rugs Foundation to sponsor t-shirts to contributors of published articles. Not letting too much of the cat out of the bag, let’s maintain the hint of anticipation. A second major progress is that we will brusquely be distributing certificates to winners of various contests. The approved design of tees and certificates will be also released through our page on Facebook at http://www.facebook.com/pratibimb.reflecting.management. I urge all readers to like the Facebook page to stay updated with the latest. The hub of the page is not just the content from the magazine but also trending articles from diverse sectors of management. Lastly, we would like to thank all faculty members who have provided their valuable feedback to help maintain the the standards we have strived to attain. Also, send in your valuable suggestions or feedback to pratibimb@tapmi.edu.in
Editor in Chief Sushmit Sinha Marketing Manish Mishra Design Abhishek Dubey Creative & Cover Design Namrata Mahapatra Communications Divyanshu Varun Anant Sub-Editors Abhishek Raghupungav Aditya Bhat Arun Stephen Devi Kailas Kannan Venkat Pallavi Prasad Rithwik Krishnakumar Publishing Vandna Soni Faculty Advisors Prof. Chowdari Prasad Dean (Branding and Promotions)
Prof. Vinod Madhavan Asst. Prof. , Marketing
Prof. Srivatsa H S Associate Prof. , Marketing
Prof. Vrishali N Bhat Asst. Prof. , Economics & Finance
Enjoy Reading! ~ Sushmit Sinha
Prof. Animesh Bahadur Asst. Prof. , Human Resources
Prof. Sanjay Choudhari Asst. Prof. , Operations
Prof. Mohan Kumar V Associate Prof. , Systems
Pratibimb | September 2012 | 5
Contents Functional Beverages: Industry Analysis
7
by Divya Bhatia, Welingkar, Mumbai
Flash Mob — Prospects as an Exploitable Promotion Strategy
11
by Ambili Jayachandran, University of Kerala
Below the Line Advertising and the Changing Trends in Advertising
14
by Shashank Srivastava and Sarbaswarup Mohanty, IIM Lucknow
Interview: Mr. Prakash Dadlani
17
Country Head, Marketing Excellence, 3M
Interview: Mr. Ashok Banerjee
19
VP Supply Chain and Data Platform, Flipkart
Book Review: The Toyota Way
21
Prof. Rishi Kesava Ram Velure, Faculty Associate, Healthcare, TAPMI
Riding the Technology Wave
23
by Shreesha Ramdas and Harish Reddy
Yellow Metal, Yellow Fuel causing Economy Blues
25
by Vibhu Gangal, SCMHRD
Neuromarketing: The power of the subconscious
28
by Pramit Das and Subhamoy Ganguly, IMT Ghaziabad
Indian Corporate Bond Market by Siddharth Pal, IIM Rohtak
Pratibimb | September 2012 | 6
32
Functional Beverages: Industry Analysis by Divya Bhatia, Welingkar Institute, Mumbai
INTRODUCTION The first functional beverage which was launched was to hydrate the body. But today large numbers of functional beverages are available for various lifestyle problems ranging from anxiety to sleep to weight loss etc. Coca Cola’s Shock and Red Bull were the early entrants in the industry and are the ones who give chance to late entrant to think about the industry.
market by carbonated drinks. The industrial trend is changing; the consumption of carbonated drinks is decreasing while that of functional beverages is increasing. The industry can be broadly divided into four market segments: Hydration:
Antioxidants, vitamins and fruit extracts are the
Functional beverages can be defined as ready to drink formulation with ingredients such as herbs, vitamins, minerals, amino acids and raw fruits to provide additional health benefits beyond nutrition. Various products which are categorized as functional beverages are sports drinks, energy drinks, ready to drink tea and coffees, yoghurt, fruit/ vegetable smoothies and even enhanced water. These functional beverages satisfy need of consumers of hydration, energy, enjoyment or simply having fun. The global functional beverages market grew by 3% in 2010 to reach a value of $48,186 million. In 2015, the global functional beverages market is forecast to have a value of $62,151 million, an increase of 29% since 2010. Projections for functional beverages are that market will grow by 103% in between 2010 and 2015 and total annual sales exceeding $78 billion in 2015. The Indian functional Beverage Industry was estimated to be around Rs 11,159 crores in 2010 with a CAGR of 21% in the last five years. It is expected that the industry will cross Rs 19,000 crores sales in 2015. Functional beverages are becoming popular due to their specific health benefits and are appealing to consumers because of changing lifestyles. Consumers purchase these products for both convenience and specific health benefits. FUNCTIONAL BEVERAGE INDUSTRY Functional beverages sector can be said to be subsector of non-alcoholic industry and is fastest growing sector. The faster growth of sector is also because of saturation of
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ingredients which hydrate both inner and outer side of skin. The various vitamins commonly found in energy drinks for their specific benefits are:
B vitamin: For energy metabolism
E vitamin: Has antioxidant property
C vitamin: To activate people
Gatorade is well known hydration drink for athletes. Energy and rejuvenation Red bull, Adrenaline rush, 180 and many more are highly caffeinated and high energy drinks. These drinks include stimulants such as taurine, caffeine, sugars, anti -oxidants and creatine. Although these ingredients are approved by FDA, some health experts still say that all these ingredients are not beneficial to health. Health and wellness: This segment is about the health conscious people. So they have introduced less sugar and less caloric beverages to
target this segment. Weight management Due to changing lifestyle there is an increase in obesity and consumers are looking towards fast and easy methods to reduce weight that can be easily adopted for their lifestyle. So various calorie burning beverages, metabolism boosting effect, fat burning beverages are launched by companies that go well with people convenience to reduce the weight. MAJOR PLAYERS The players in this category are divided into four types. One is non-alcoholic beverages companies including PepsiCo Inc. and Coca-Cola Co. Another type consists of major food companies such as Nestle, Kraft food, General Mills etc. The third group is small scaled companies like local companies. Other segments are traditional medicines companies products like Patanjali products, Asaram Bapu products etc. Various companies which are coming into new energy drink segment are Dabur, Amul, Britannia, Danone and Rasna. All these companies want to woo the health conscious young Indian consumer. Even traditional companies who never tried hands in such products are also trying.
The products of functional beverages offer wide variety targeting different health concerns. One major product is hybrid drink with combination of vitamins and other nutrients which has thirst quenching ability. The other is probiotic or active drinks which have ability to enhance the power of immune system. The other is for enhancing memory and mental sharpness. Children are also targeted by these energy drinks and Nestlé’s Boost is taking the lead in this segment.
Dabur will launch beverages under real brand.
The other categorizations of the products are on the basis of sports drinks, health drinks, beauty drinks, energy drinks, weight-loss drinks etc. In the energy drink segment Red bull is growing considerably fast.
Amul Company has come up with Prolife lassee and buttermilk,
Rasna is even planning to enter into the segment with a new subsidiary. They are looking for brand licensing and technical collaboration.
Dairy products are even extending themselves to more than flavored milk.
Various functional beverages which are available in the market are Rhino's, Bullet, Cloud 9, Amway XL,
Amway launched Amway XL energy drink which comes in two flavors of citrus blast and tropical blast. This product is launched as quick and healthy solution to stress and fatigue.
ENVIRONMENT ANALYSIS PORTER’S FIVE FORCES PRODUCT The functional beverages has wide range of product like energy drinks, functional juice, juice drinks, enhanced water, relaxation drinks, functional soy, rice and almondbased drinks, coconut water, functional tea, functional yogurt drinks and smoothies.
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power house, XXX.
XXX has two variants Rejuve and Nicofix. SRK is brand ambassador and even brand is associated with KKR as principal sponsor. Nicofix is formulated to decrease the urge for nicotine and Rejuve is formulated to rejuvenate mind and body and
enhance immunity.
1.
SoBe Adrenaline Rush which is priced at Rs 75 for a 245 ml can.
Coca Cola has a global portfolio of five energy drink brands Vitamin Energy, Full Throttle Fury, Powerplay, TaB Energy and burn (Shock's global avatar).
GROWTH DRIVERS 1.
2.
3.
There are various benefits of functional beverages which interest consumer. Consumers are interested in natural ingredients and beverages which are free from artificial ingredients. As a result this market has huge attraction for people who are concerned about health. Diet drinks are low in caloric content and with less of sugar content. Some drinks contain antioxidants. These drinks have inherent energizing benefits of fruits and are natural sources of caffeine. Market of functional beverages is increasing because people have been become proactive in disease prevention and control. Energy drinks used in combination with Vodka: In some cases energy drinks can be used to boost sales of alcoholic drinks or vice versa. Due to high caffeine content energy drinks are compatible with alcoholic drinks especially like premium Vodkas. And another important point is that both energy and Vodka are targeted to consumers around thirty years of age. Energy drinks are good source of energy without providing excessive calories and sugar. A majority of Indians are now becoming aware about malnutrition and under nutrition. They are looking for convenient source of energy and functional drinks are fulfilling their need.
CONSUMER PROFILE Typical consumer of functional beverages is well educated, in between 25-45 years old, having highly disposable income, belong to upper middle and middle class. Females consume or try functional beverages more than males. These consumers are willing to try something new. Companies are trying to surprise them by coming up with new products. Surprise can be in form of color, taste and aroma of product. By surprising customers the purpose of companies is that consumer won’t get a chance to compare product with cola or juices. Large consumption of functional beverages is due to perceived health benefits of product. CHALLENGES BEING FACED
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2. 3. 4.
5.
6.
7. 8. 9.
Energy drink segment still remain a new category with only few established players such as Red Bull, Cloud-9, Power Horse and Sobe. High price of these drinks are concern for the company. Food and drug administration (FDA) regulation due to high amount of caffeine in some of the drinks. Health concerns are associated with drinks. As some of these drinks contain large amount of sugar and caffeine which thus increases caloric intake and further increase the case of heart attack, blood pressure and other heart risks. As heart rate automatically increases after exercise, so consumption of energy drinks may further increase it. High sugar content increase the chance of dental carries. Concern is there about consumption of these drinks in large amount. Some of these drinks are even found to contain carcinogenic substances. Various health experts claim adverse reaction using these energy drinks. The popularity of sports drink is limited to sports people. Sports drinks are used only by sportsman before and after performance. Challenge is to make its presence on casual basis. Though energy drink are more famous than sports drinks. Their popularity is among night clubbers, long distance drivers or by people after working long hours. There is consumer distrust on the claims made by the beverages. Competition from beverages which are much lower priced than functional beverages. Some energy drinks have been reported to be misused by college students because of high content of caffeine in them.
FACTOR FOR SUCCESS OF FUNCTIONAL BEVERAGES Product: Drink must taste good and have element of something new in it. Packaging should be attractive enough as these drinks are single serving beverages so people want to get notice when they are consuming these drinks. User must feel that product works. All the claims behind the product must be proved by scientific study and have evidence of testimonies. Price: Product should be launch in small packs at less price. NourishCo launched glucose-based drink “Tata Gluco Plus” in a 200 ml cup priced at Rs 6 and launched nutrient water under “Tata Water Plus” at Rs 16 for a 750 ml bottle.
Place: Product should be available at all retail outlets. Some of the products launched by companies are only available in night clubs etc. Promotion: These drinks are promoted with benefits such as healthy heart, improved immunity and digestion and energy boosting. Brands need to focus on mass segment. Product can be promoted by sampling in the modern retail where consumers are more receptive to product. Competition: A clear differentiation of one’s product from the competitor’s product is there in term of ingredients and their health benefits. As the segment is continuously increasing the companies are exploring new areas of industry. WHAT’S NEW Energy drink segment is increasing where as natural juices segment is decreasing. The growth of energy drink segment has increased even during the recession. What is noticed that segment is fairly able to maintain its consumer base but is not able to add more of consumers. More than 800 sports and energy drinks were launched in 2010 all over the world. Protein drinks are also much in demand. These drinks are targeting to consumer looking for basic nutrients such as protein and fiber. These products reduce the weight while maintaining the general lifestyle as these is convenient onthe-go snack. The problem with this segment growth is that people still think that drinks cannot be good source of protein. Protein can only be provided by bars and powder formulation. Traditional products with ingredients such as caffeine, vitamins, herbs and anti-oxidants are replaced by ingredients such as protein, omega 3 fatty acids. Range of products has broadened to sugar free, caffeine free and organic products.
FAILURES Coke came up with energy drink Shock which was positioned as lifestyle drink in 2001 with tagline ‘unleash your wicked side”. The product was not able to produce good market response. Similarly PepsiCo's energy drink SoBe, GlaxoSmithKline Consumer Healthcare's sports drink Lucozade and Tata Global Beverages's tea-based wellness drink T!ON are not able to generate good response in market. The reasons behind these failures are pricing and most of foreign companies have launched their product as such without any local customization. Gatorade which was initially introduced in Indian markets at price of Rs. 150 but now product is manufactured in India only and is available at price of Rs. 30 only. Other drink launched by coke is burn which is high caffeine drink and available in three various sizes 250ml, 300ml and 500 ml cans. The product is made not to be mass distributed through various retail channels, but product will be available in pubs, selected modern outlets, gym etc. FUTURE OUTLOOK/RECOMMENDATION Relaxing drinks have to look for negative claims and FDA regulation in this segment of beverages.The content of caffeine, sugar, other health supplement etc in most of drinks amount need to be regulated, as excess of everything is bad whether it is health supplement. References
Business wire India Nutraceuticals World Foodlink US, Volume 7, N0-4 Wikipedia
The companies are launching products with less of caloric contents while retaining the same taste of products. Pepsico introduce Pepsi Next, which has same taste as of original cola but caloric content is decreased in product. Pepsico also launched Trop50. Other line of extension is natural teas. These beverages are simple with all natural ingredients. Beverages companies are pushing their functional beverages along with increasing consumer demand.
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Good management is the art of making problems so interesting and their solutions so constructive that everyone wants to get to work and deal with them." —Paul Hawken, Natural Capitalism
Flash Mob — Prospects as an Exploitable Promotion Strategy by Ambili Jayachandran, University of Kerala
Introduction Guerrilla Marketing was discovered in the late 1970’s. Till then the aim of marketers was to sell the product by creating awareness about it. Advertisements adopted the push strategy by bombarding the customers with information about the product, through all Medias available. This was successful in the initial years but later on it lost its effectiveness. Advertisements did educate the public but failed to engage or entertain them. It was in 1984, through the publishing of his book, that Jay Conrad Levinson gave Guerrilla Marketing its form, definition and recognition. He describes Guerrilla Marketing thus:
Marketing and may be the cheapest. All it would have taken for Nestle is a can of paints, and of course permission from the city corporation, to market this product. It is not necessary that Guerilla Marketing to be used only for commercial purposes.
"I'm referring to the soul and essence of guerrilla marketing which remain as always -- achieving conventional goals, such as profits and joy, with unconventional methods, such as investing energy instead of money.” All that it needs is to think out of the box and have loads of creativity. It is not preachy or educational but actually makes the viewer surprised, entertained and even part of the campaign. The more creative the campaign is the more attention it captures. Picture 1:- This is one of the simplest examples of Guerrilla
Picture 2:- When garbage dumping became a problem, the Auckland City Council replaced the regular black rubbish bag into a bushy hedge, sending a message in itself. The main success of this marketing strategy is that it is useful for small business enterprises with small budgets, to market or promote their product. In the words of Jay Conrad Levinson, “Guerrilla marketing has been proven in action to work for small businesses around the world. It works because it's simple to understand, easy to implement and outrageously inexpensive. Guerrilla marketing is needed because it gives small businesses a delightfully unfair advantage: certainty in an uncertain world, economy in a high-priced world, simplicity in a complicated world, marketing awareness in a clueless world.” Many companies, small or large have used this marketing
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strategy and have achieved a great response in the form of increased sales and market share in many countries. It is still used widely but not as frequently, relative to other forms of advertising or promotional strategies. Guerrilla Marketing takes different forms such as Graffiti, Sticker bombs, Flash Mobs and anything or everything creative. Flash Mob
accept it whole-heartedly. Still, this phenomenon has been taken up and performed in various parts of India such as, Noida, Vishakhapatnam, Vadodara, Kochi and Hyderabad. It is safe to say that Flash Mobs are rapidly gaining popularity and acceptance. Picture 4:- Flash Mob at Mumbai’s Chhatrapati Shivaji Terminus, a day after the third anniversary of 26/11
Suppose you are in a mall and suddenly regular shoppers (or so) come together and do something out of the blue, don’t be shocked. You are witnessing a flash mob. They might dance, sing, do a tableau or simply do something together in perfect sync and disperse into different directions once the act is complete. This is done either as an advertisement campaign, as a social awareness act, as a protest or for entertainment.
Picture 3:- Hundred actresses got dressed as Maria Bello's Jane Timoney character in the rookie NBC drama in Canada to market
“It’s the new rage. It’s fun, it’s entertainment and it’s an effective vehicle for social messages.” This is how Neha Malude described Flash Mobs in The Hindu’s Sunday Supplement “Magazine”, published on June 17, 2012. Current Market Condition
this U.S. network series. The first flash mob took place in 2003 in New York Macy’s, where hundreds of people entered a store searching for a “love rug”. The first flash mob in India took place in Mumbai’s Chhatrapati Shivaji Terminus, a day after the third anniversary of 26/11. Shonan Kothari organised this flash mob as a tribute to the victims of the terror attack. She was successful in getting permissions from the Mumbai police as well as the railway authorities and most importantly, bringing in two hundred youngsters to practise and dance together for ten minutes. The commuters were taken by surprise and this was what the mob wanted out of their performance. Even though India has gone through a lot of development, majority of the public are very conventional and traditional. They are new to this concept and might take some time to
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India has a highly competitive market where there are many enterprises selling the same or similar products. Consumers are rational and have full access to information about products (with the advancement of technology and Internet). So, it has become an absolute necessity for enterprises to satisfy consumers for their survival. In such a scenario, the only way in which a firm can have a fair market share is by creating product preference or loyalty. This can be done by increasing the product utility and backing it up with heavy advertising and promotional strategies. Almost all promotional strategies have become common and are slowly losing its effectiveness in catching the attention of the public. As mentioned earlier, advertisements only educate the consumers and fait to engage or entertain them. This is where companies can utilise the concept of Flash Mobs, which has already started gaining popularity among the crowds. Flash Mobs have been successful as a social vehicle
for spreading social messages; in other words, they have been able to draw attention. So this could be the new promotional strategy which can be exploited by different firms. Prospects of Flash Mobs Being an Exploitable Promotional Strategy Flash Mobs seek fun and get it too. So participation can be ensured; but the main task is to manage or coordinate them. This of course, is not a Herculean task keeping in view that there are people like Shonan who have been able to gather, manage and co-ordinate a two hundred member flash mob and turn it into a huge success. On the flip side, Flash Mobs are performed in metros and malls. This is comparatively a very small portion of the target market. If a company takes up flash mob as its marketing strategy, it may not get the coverage that a mass communication media such as a Television or Radio would. There might be a little amount of work to do such as getting permissions or paying rent for the space used and even the mob (if the concept gets wide acceptability then the mall authorities might also try to exploit the same). Most important of all; is its acceptability itself. It is too early to say if “Flash Mobs” are a fashion or a fad. The difference is that, fashion may stay for a long time but fad ends as soon as the novelty of such a phenomenon fades.
has created positive results as a social vehicle in India, it still needs to be seen whether it would do the same as a promotional strategy.
References
Philip Kotler, Gary Armstrong, (2008), Principles of Marketing, Pearson Education, Inc, Twelfth edition.
Jay Conrad Levinson, Michael W. McLaughlin, (2005), Guerrilla Marketing for Consultants, Breakthrough tactics for Winning Profitable Clients, John Wiley and Sons, Inc.
Neha Malude, The Hindu’s Magazine, Weekly Edition, Sunday, June 17, 2002 issue.
http://www.ndtv.com/video/player/news/watchflash-mob-in-mumbai-wows-commuters-atcst/217228
http://urbanpeek.com/2011/06/10/flash-mob/
http://www.hollywoodreporter.com/news/nbc-sprime-suspect-promoted-239161
http://weburbanist.com/2008/06/03/the-history-ofguerrilla-marketing/
http://en.wikipedia.org
http://www.proprofs.com/flashcards/ cardshowall.php?title=ksu-marketing-400-quiz-2
Picture 5: - Fashion
Picture 5:- Fad
Conclusion Flash Mobs are new in India and have become the talk of the town. It has definitely created popularity. The concern is whether it would gain acceptability in this traditional society. If it does, it could be the next promotional strategy exploited by companies to market their products. Being the most cost–effective (in comparison to other marketing strategies), at the same time crowd-engaging phenomenon, its ability in promoting a product is almost undisputable. It
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"Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall." — Stephen R. Covey
Below the Line Advertising and the Changing Trends in Advertising by Shashank Srivastava & Sarbaswarup Mohanty, IIM Lucknow
In a market rapidly adjusting to changes in technology, available information and heightened consumer demand, traditional and brand oriented advertising is no longer the primary driver of customer behaviour. Its reflected in the dwindling print newspaper circulation and the stagnant market of network television commercials, focus of marketers has now shifted from an “above the line” focus on reaching a broad population with emotionally oriented appeals , to a “below the line” approach that stresses targeted customer centric communications and concrete returns on investment. Below-the-line methods are very specific, memorable activities focused on targeted groups of consumers. They are under the control of the organisation. For example Kia Motors uses these techniques to target clearly defined consumer groups rather than a mass audience like its above -the-line activity. The purpose of these activities has been to develop the brand by creating awareness and building a brand profile. Below-the-line methods include:
Sponsorship Sales Promotions Public Relations Personal Selling Direct Marketing.
CHANGING TRENDS IN ADVERTISING: Consumers are faced with a barrage of advertisements every day in their lives. People are starting to lose interest and even despise the mass advertising being followed through traditional channels of mass advertising like – TV, radio, newspapers, magazines, etc. Consumers are using technology to counter the entry of ads into their personal lives.
TV viewers are resorting to digital video recorders and on demand technologies to fast forward through advertisements.
Some people use mobile devices to download
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commercial free versions of popular television shows.
Internet users are using software to block spam and popup advertisements.
Marketers have been tempted to follow one to one advertising or targeting niche customers. But the practice of targeting “niche” customers can prove to be costly for organizations. Sometimes also the costs of advertising are more than the costs allocated in the budget for promotional purposes. Four specific techniques have been identified where marketers can reach broad segments of people without overshooting their advertising budget. Catching people in the bottlenecks: Though people can easily screen advertisements when they are in their homes but people every day spend time outside their homes where they lack the required control. The examples of bottlenecks can be – waiting in an airport lounge , travelling in elevator , going up in an escalator in a mall or it can be travelling in a taxi. In these bottlenecks of life, advertisers can reach people with acceptable messages. The purpose of advertising on taxis for advertisers can be many. The taxi owner gets revenues from space which could not have been utilized for a better purpose. And the advertiser gets better visibility since the taxi can roam from place to place with different customers aboard. This can prove to be beneficial for marketers than billboard ads which are fixed and whose effectiveness depends on the billboard location. Also on elevators, companies have installed a wireless digital screen which broadcasts short news and entertainment programs. The recall rate increases with frequent travel. Mastercard provided complimentary
snacks, movie headphones , puzzles and games to travellers on American Airlines and the flight attendants publicized
cups”, Millions of office goers use insulated coffee cups everyday during office hours at their desks or in board room meetings, etc. Normally the companies won’t allow advertisers to advertise to people inside the office, but the concept of placing small ads in the coffee cups helps in gaining visibility for marketers without burning a hole in their pocket. Other unique ways can include advertising on pizza boxes, or advertising on pay checks in restaurants and deposit slips in banks or on the rear of an airlines ticket. Also recently garbage truck advertising has come to the fore. The municipalities can get revenues from unused spaces on trucks and companies on their parts get huge unused places to advertise. Advertising on Garbage Trucks
the benefits. Even seats on aircrafts and taxis in developed countries are fitted with small screens which displays ads and for consumers using the means of transport, they can’t avoid it altogether. Companies have also advertised in public restrooms and toilets. Using a FedEx Ads on Coffee Cup
Trojan Horse: The concept of “sneaking” ads is familiar with product placement in films, television programs and even in video games today. Considering the example of “coffee
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Use of Mahindra Flyte in 3 Idiots
New technologies help marketers to interact with consumers in public spaces without employing massive sales teams. For example: Nokia when it launched its 3300 model contributed a quarter of its advertising budget on interactive posters. An Adidas Ad replicated a virtual football field wherein customers could play by passing a virtual ball to each other. Many people interviewed after these experiences were enthusiastic about the whole process which included fun events and planned to tell others about it.
Omega watches in Bond Movies Targeting People at play: People generally don’t like to be bothered when they are vacationing or doing some leisure activity like playing golf. But advertisers have realized that giving people something they can use is a more thoughtful approach to brand building than the tactic of pushing more and more messages when people are glued to the television or computer. Since this kind of advertising doesn’t disrupt the people’s activities it is seen as less intrusive for people. For Example: Golf Carts are being fitted with GPS systems. Ads can be placed and shown in the GPS system when player is moving from one hole to another hole. In Hotels, People can be given trial kits of Razors, toothbrushes or body wash of some reputed company like Gillette or Oral B.
Hence in the above examples we have seen how the focus of marketers is shifting from the traditional modes of advertising to the other newer modes of advertising. Also direct mails, print response ads and telemarketing are coming up in a big way to open up new avenues in advertising and leading to heightened competition among companies.
REFERENCES:
Nunes Paul F. & Merrihue Jeffrey, “The Continuing power of mass advertising”, M.I.T. Sloan Management Review
Paper on – “Tracking the trends : A comparison of Above the line and Below the line Expenditure trends, V12 group & Winterberry Group, 2006
http://businesscasestudies.co.uk/kia-motors/usingsports-marketing-to-engage-with-consumers/abovethe-line-and-below-the-line-promotion.html
Getting people to play interactive games:
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http://www.business-standard.com/india/news/ belowline-advertising-onroll/339587/
INTERVIEW Mr. Prakash Dadlani Country Head, Marketing Excellence, 3M
TAPMI had an opportunity to interact with Mr. Prakash Dadlani, Country Head, Marketing Excellence at 3M. In an exclusive interview with Sushmit Sinha and Aditya Niyogi for Pratibimb, Mr. Dadlani shares valuable insights on Branding which would strike a chord with any Marketing student. Excerpts: [The views expressed are his personal and not the views of 3M or any other organization he has worked for]
In the balance between master brands and sub brands – what are the key factors that a manager must take into consideration while coming up with new products? What are the associated risks and advantages? A very important question that should be asked by any Brand Manager to his Marketing Head at a very early stage of branding a new product. The call needs to be taken in sync with the values of the Master Brand and the upside or downside the product positioning can cause to the Masterbrand and indeed to the product itself. In most cases the Masterbrand and Product would benefit from an association, but the degree of association should vary depending on the exact current positioning as understood by customer research and not the 'feelings' of the brand team. How does Asian and Indian style of innovation differ from the western trends? How are products tiered as A, B and C?
The basics remain the same as to the process of innovation, which begins at the customer and ends with the customer. Sometimes macro trends play a huge role in identifying trends which the customer may not relate to today, but these are picked by sharp observers of Consumer Behavior and Tech experts who begin preliminary work on them and then check with consumers. Traditionally Asian and Indian techniques and methods would follow the West, but now the trend of 'frugal innovation" seems to be originating in India and then going back to other countries including some Western ones. Here the traditional Bottom of the Pyramid approach has worked well for some companies. Here too, however, the entire mix, i.e., manufacturing, route to market, marketing and sales support have to be in line with the tier under discussion to make it a viable and sustainable option. Let’s say a gap has been identified to launch a prospective product, what are the basic criteria that we should evaluate be we go ahead with the development? The capability of the organization to make ROI is primary. Hence, it needs to fit the criteria of the support required in all the above aspects important for the product to reach and sustain in the market. What are the challenges involved in sustaining a highly innovative culture? Not easy to give a single answer, but allowing a certain time for people to devote to a project of their own choice, promoting diversity in terms of educational background and qualification, interaction with other industries, institutions and a meaningful reward and recognition platform.
How can a brand strategy be aligned with a company’s business strategy? There’s is no option but to make the brand strategy a
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driving force for business strategy. For that the definition of 'Brand' has to expand to include all the touch points of business, Brand is something all functions, HR, Finance, Sales, Supply Chain, all help build and hence they need to analyze which of their actions impact Brand and hence business and work on those actions
linked goal sheet like a Balance Score Card or a Hoshen Kaniri System also helps. In today's market, innovation obsolescence is high compared to previous decades. How can companies make buyers adopt their product at a premium on a sustained basis? The basis of any product has to be the satisfaction of a genuine need of a customer. This need may be a felt need or otherwise. Till the time this is the case a company can get a decent ROI. Often new technology in not adopted either because people do not wish to re-train or they are uncomfortable with new technology. Does "Client Education programs" yield benefits?
What is the test of a successful brand awareness campaign? Are there relevant metrics that can reflect its performance to help in brand strategy? Traditionally we have limited this discussion to Brand awareness only, however the better measures are the quality of brand recall, whether the relevant and desired attributes have set targets and how they fare over a period of time, setting targets to those attributes in sync with the brand positioning and measuring them in conjunction with the sales performance can help understand the impact of Brand on sales over a period of time. Along the period of time, mapping of ad campaigns, sales promos and external factors will help clarify the impact of brand vs. other factors How can B-school grads maintain a competitive edge in marketing when they step into the industry? Interaction with Industry in a proactive basis is the only way to achieve this. At such interactions both industry and the B school both get the benefit. Summer Internship is another good area where students can come in touch with reality. In many companies technical team, production team and finance team/purchase team are given individual targets. Often the goals are conflicting, with production team wanting a better product and purchase team aiming to reduce cost. Under such conditions what approach do you suggest a sales person take? There are various mechanisms to tackle it. The most common one is creating of cross functional teams. Over a period of time the teams understand each other’s pain points and evolve into a close knit unit. Having a cross
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Client education is an important element of the Value Selling concept and there is no way this can be avoided. In fact this is a service many clients seek form their suppliers as a given. The real benefit is actually when some companies pay their suppliers to train their larger organization.
INTERVIEW Mr. Ashok Banerjee VP, Supply Chain and Data Platform, Flipkart (Courtesy Yourstory.in) It’s not often that you come across a person who’s had experience working with the biggest and hottest companies across the globe – Oracle, BEA Systems, Google, Twitter and now Flipkart. Meet Ashok Banerjee, a data scientist who is currently the VP of data platform and supply chain at Flipkart. More of a personal decision of moving back to India from the bay area, Ashok had offers aplenty but he chose Flipkart primarily because it is the most promising company in India that is on an exponential growth curve. We got in touch with Ashok to learn more about what excites him as a data scientist and the cultural differences of working with great companies across the world.
YS: Hello Ashok, you have a very interesting profile! A mechanical engineer who did his masters in Computer Science and went on to become a data scientist; how did that happen? AB: Yes, it has been an amazing ride. Doing my graduation in mechanical, I realized that I liked the mechanics part of what I was studying but not the part which involved being on the shop floor and putting in muscular power doing Smithy, Carpentry and the likes. Mechanical engineering is definitely much more than that but Computer Science had
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always intrigued me. Even for my post-graduation, I had a very memorable incident. I had to get a research assistantship for paying my tuition fees. Having a different background, it was going to be an uphill task for me but I did everything in my capacity to get that place. I took a CS subject as an elective which I topped and for the place of RA, I chased the professor like anything! I waited for him for hours and made sure my resume reached him anyhow; I even flew in a paper plane version of my resume, through his open office window to make sure he notices my application.. And eventually I did land the role. Persistence pays off. YS: Wow, that’s quite a story in itself! After your postgraduation, you went to Oracle and subsequently Google and Twitter. How was the transition? AB: Well, Oracle was a prestigious job at that time and it is what makes me proud. They wanted someone proficient in CORBA and that is how I landed up there. Oracle is a large organization and is very well structured. BEA Systems which was a smaller company taught me a lot. It had a much stronger coordination and communication. Here I saw and learned a lot from a really strong Management team. Moving to Google was a very pleasant surprise! I was amazed at how disruptive Google was and is. Some of the best innovations in the modern age have come from Google and it shows! The culture is just phenomenal but one thing that I can point out as a bit of a negative from a personal point of view is that Google has a complete stack of its own. In my 4 years Google changed and felt much more structured and a larger company feel to it. Twitter was different as a smaller company. It was still much more of a startup and involved more pragmatic decision making around costs/constraints and tradeoffs. Twitter is what made me think about social networks, growth and exponential growth. As a company grows exponentially
culture changes dramatically. Employees joining at $2 billion valuation is very different from someone joining it at $8 billion valuation. As a company grows, communication models change, the room for misinterpretation increases as people know each other less. The growth phase at Twitter was very exhilarating.
YS: Your role at Twitter was very interesting indeed; “User Growth Initiative”. Tell us about it. AB: User growth is all about experimentation and recommendations specially for the new user. Where should you place an element on the page, what colour it should be and all such details are a part of it; and these factors have importance to the customer. A user may never return after the first interaction so if we cannot connect the new user to interesting personalized content he may never come back. The first visit may well be the last. For example, take in very few details from the user but make the most of it. The first name, Last name and IP can tell you a lot! First name gives the gender, last name gives the place of origin and the IP gives the current location. Clubbing these, a lot can be known. These helps you make targeted recommendations and helps you know what a user might want. This is a glimpse about how the “User Growth Initiative” goes on. YS: Data is huge. And so is the hype behind it. Is this validated? AB: I think it is. The rate at which the amount of information is growing in unimaginable; traditional databases will be found lacking. Taking an example, number of pages are increasing , number of queries are increasing but a person searching on google would expect a result in less than 0.5 seconds. Similarly on Flipkart the number of items we sell is increasing the number of customers is increasing but site must be equally performant and more performant. The technologies start to become NoSQL and custom systems. YS: Okay. So, why Flipkart? Why did you decide to make a move to India? AB: There were multiple reasons for this. I had personal reasons and desire to be closer to my mother. I had heard a lot about the growth story back in India and it excited me. I wanted to see a growth curve and an even earlier stage than Twitter. Looking at India, Flipkart satisfies the exponential growth great technology and culture. This growth story is what has lured me into Flipkart. I could have joined any other company but I also wanted to be present
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at the Headquarters because for any company, the HQ is where the core work happens. YS: So, how has it been at Flipkart? AB: Oh absolutely fantastic. I was skeptic as to how the work culture would be because this is the first time I was going to work from outside the Bay Area but it has panned out very well. Culturally, I think Google, Twitter and Flipkart are very similar. YS: What are your views on the startup ecosystem in India? AB: The ecosystem is still maturing and US has more senior people.However the scarcity of senior talent also opens up bigger, bolder opportunities for those who are ready and willing to step up. We at Yourstory.in would like to thank the organizers at the Fifth Elephant Conference where we first met Ashok. We wish Ashok all the best for his new stint with the poster boy of India’s startup ecosystem, Flipkart and hope for many good things to come.
BOOK REVIEW The Toyota Way by Prof. Rishi Kesava Ram Velure, TAPMI
The Toyota Way unleashes the exclusive 14 Management Principles followed in the world’s largest automobile manufacturing company, TOYOTA. Liker has succeeded in describing the blue print of Toyota’s management philosophy in a well defined manner. The author acknowledges his 20 years of companionship with Toyota to authenticate his work. He elaborated the understanding of cross cultural management learning and openness of Toyota to share its source of competitive advantage with the rest of the world, which is highly laudable. It highlights the holistic approach of considering all the elements as a part of system and consistent practice of organizational principles across the company irrespective of the geographic location. The author was successful enough to present the practical application of lean thinking and lean production along with various workplace systems. The book is divided into three major parts in which, the first part deals with the uniqueness of the Toyota Way. In this part, the author explained how the Toyoda family succeeded in differentiating themselves from the rest of the world through their Toyota Production System (TPS). The second part is critical, dealing with the basic principles of the Toyota Way. In this part, the author has divided all the 14 principles into four sections and explained them in detail. Finally, in the concluding third part the author elucidates the application of the Toyota Way in an organization in making it a lean learning enterprise. Here, he describes building and transforming a service organization by burrowing the Toyota Way. Part I: Using Operational Excellence as a Strategic Weapon To simplify, the author has classified all the 14 principles in to 4 categories, namely Philosophy, Process, People/ Partners and Problem solving (constitutes the “4P” model of the Toyota Way) correlating to the Toyota’s terminology
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of Challenge, Kaizen, Respect, Teamwork and Genchi Genbutsu. This is the foundation for the Toyota Production System (TPS) founded by Taichi Ohno, is often known as “Lean” or “Lean Production”, the core principles being jidoka and One-piece flow. Asking the question “what does the customer want?” is the way TPS gets started. And, eliminating the eight wastes is the heart of the TPS, which are Over-production, Waiting (Time on hand), Unnecessary transport or conveyance, Over processing or incorrect processing, Excess inventory, Unnecessary movement, Defects and Unused employee creativity. Fujio Cho, a disciple of Taichi Ohno developed a simple representation of TPS in the form of “TPS House” which depicts the two pillars of Just-in-Time (JIT) and Jidoka with a strong foundation of Visual Management, Stable and Standardized Processes, Leveled Production (heijunka). And, the roof is made of Best Quality, Lowest Cost, Shortest Lead Time, Best Safety and High Morale. Waste Reduction, Continuous Improvement, People and Teamwork are integral part of the house which runs the entire system, implying TPS is not just a tool kit but management philosophy. And, former President, Shoichiro Toyoda gives the three C’s of Toyota company as Creativity, Challenge and Courage, in the development path-breaking model ‘Prius’ in 15 months time, which is an industry record. Part II: The Business Principles of the Toyota Way The first section is about Long-term philosophy (principle 1) highlighting the guiding principles of Toyota Motor Corporation, which include Honor, Respect, Dedicate, Create, Foster, Pursue and Work. The author has brought out the uniqueness in the mission of the company to create constancy of purpose and place in history with three exclusive elements of contributing to the economic growth of the country, contributing to the stability and well-being
of team members (internal stakeholders) and contributing to the overall growth of Toyota. The second section enumerates how right processes will lead to producing the right results through creating continuous process flow to bring problems to the surface (principle 2), where the author explains takt time and Onepiece flow. Using “pull” systems to avoid over-production (principle 3) elaborates on Kanban system. Leveling out the workload- heijunka (principle 4) discusses the three M’s (Muda- waste, Mura- Unevenness, Muri- Overburden). Building a culture of stopping to fix problems, to get quality right the first time (principle 5) deliberates on jidoka. Standardizing tasks are the foundation for continuous improvement and employee empowerment (principle 6) emphasizing the need for enabling bureaucracy and standardization as ‘Enabler’. Using visual control so no problems are hidden (principle 7) describes application of five S’s (sort, straighten, shine, standardize and sustain) and A3 reporting. Using only reliable, thoroughly tested technology that serves your people and processes (principle 8) signifies how a new technology must support people, process and values on adoption. The third section is about adding value to the organization by developing your people and partners. Growing leaders who thoroughly understand the work, live the philosophy, and teach it to others (principle 9) impressing on the leader’s view of TPS with people through Technical, Management and Philosophical dimensions and the interesting Toyota leadership model. Developing exceptional people and teams who follow your company’s philosophy (principle 10) explains typical Toyota assembly operation and holistic approach towards employee motivation. Respecting your extended network of partners and suppliers by challenging them and helping them to improve (principle 11), demonstrates mutual learning and supply chain hierarchy at Toyota. The last section of part two, discusses continuous solving of root problems driving organizational learning, by going and seeing yourself (principle 12) to thoroughly understand the situation (Genchi Genbutsu). Making decisions slowly by consensus, thoroughly considering all options, implement rapidly (principle 13) describes, empowering junior employees to take decisions slowly by consensus and implement rapidly (Nemawashi), Deming cycle, and alternative Toyota decision making methods. Becoming a learning organization through relentless reflection (Hansei) and continuous improvement (Kaizen) (principle 14), explains about application of five Why’s to identify the root
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cause for a problem at the workplace and typical Toyota’s seven step practical problem-solving process. It emphasizes on Process vs. results orientation: the role of metrics and directing and motivating organizational learning (Hoshin Kanri) - the Toyota’s policy deployment process. Thus, it concludes how the Deming cycle can be applied at all levels of the enterprise. Part III: Applying the Toyota Way in Your Organization This explains how to understand the reactions for lean change and identifying problems in the flow of service organizations. The author illustrates the success of Canada Post Corporation (CPC) with repetitive service operations. He further describes developing and improving value stream maps through Kaizen workshops with key indicators like the task time (TT), time in system (TIS), and the value ratio of value added to total lead time (VR). And, concludes with real time examples of Northrop Grumman Ship Systems Service Process Kaizen event and Visual Control of Engineering at Genie Industries. In the concluding chapter, build your own lean learning enterprise, borrowing from the Toyota Way, the author explains the importance and factors influencing leadership “commitment to lean” journey. He clarifies the myths and reality of TPS and the difficulties in changing culture. Thus, the book ends with 13 tips for transitioning your company to a Lean Enterprise.
Book
The Toyota Way
Author
Jeffrey Liker
Publishing Date
2004
Publisher
Tata Mcgraw Hill Education Private Limited
Number of Pages
352
Language
English
Riding the Technology Wave by Shreesha Ramdas and Harish Reddy
When we started our company LeadFormix, we resolved to not seek venture funding for product development. However, we were open to the idea, particularly for expanding sales and marketing at a later stage. So, we started as a services company and named it Outerjoin. Using the revenue that Outerjoin generated, we evolved to become a product company. Companies that have evolved from a similar path include Rhapsody Networks which was sold to Brocade, as well as Tibco. We started as Outerjoin in 2007 with three co-founders. By 2008, we started to talk with Outerjoin customers to first test their acceptance of a social media monitoring solution; then we tried B2B analytics. From B2B analytics, we created what’s now known as the Daily Leads Report. Our early success was an indication that our business model could scale. Hence, we sought angel funding. We were fortunate to get early backing from the founder of Brocade (Kumar Malavalli-http:// en.wikipedia.org/wiki/Kumar_Malavalli) who believed our ‘intent algorithm based’ analytics had a strong value proposition. Once angel funding was secured, we then focused on building a customer base. Soon, our customers asked us to add email and workflow automation which made our platform useful to marketers. Before we knew it, we backed our way into what’s now known as a “marketing automation” solution and transformed it from a mere analytics tool. We worked on developing our marketing automation solution and launched it at the end of 2009. It took until spring of 2010 before we were sure that we were competing in the marketing automation space. By March of 2010, we started to run into marketing automation competitors, and we started to talk with CRM companies in order to integrate our solution with theirs. Having transitioned from a start-up, we set our sights on
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expanding our footprint and moving towards establishing a market leadership. We realized that it was time to seek venture funding in order to expand marketing and sales and taking our brand to the next level. Before long, CallidusCloud swept us away. (http:// techcrunch.com/2012/01/03/calliduscloud-acquiresleadformix/)
AUTHOR PROFILES
Shreesha Ramdas VP of Enablement, CallidusCloud
Harish Reddy,
Currently VP of Enablement at CallidusCloud, Shreesha Ramdas was the co-founder & COO at LeadFormix, a marketing automation 2.0 platform, where he raised the initial funding, built the company and contributed to the successful acquisition by Callidus in January 2012. Prior to LeadFormix, Shreesha was a co-founder at OuterJoin, an online marketing services company that helped B2B and B2C customers develop and execute effective online marketing. Before that, Shreesha drove new business development at Catalytic Software, where he was instrumental in developing key accounts including Viacom, Countrywide and Orange. He has also held key management positions at MW2 Consulting and Yodlee, where he held the role of General Manager of Yodlee’s center.
VP – India Operations, CallidusCloud
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Harish has a specialisation in Strategic Marketing, Paid marketing, Media Planning, Search Engine Marketing, Product Management, Channel management, Affiliate Networking and Brand Management. Harish has more than a decade of experience in brand and marketing management, as well as a background in sales. Prior to joining LeadFormix, he worked with the Saud Bahwan Group as their marketing director and before that held a key marketing position with Tata Motors and was responsible for Tata’s entry into the branded public transportation sector. He holds a Post Graduate Diploma in Business Administration, and a Bachelor's degree in Engineering.
Yellow Metal, Yellow Fuel causing Economy Blues by Vibhu Gangal, SCMHRD
The demand equation states that the aggregate demand (and the national income at equilibrium) is an algebraic sum of consumption demand, investment demand, government expenditure and net exports. The moment we say 'demand', it is backed by money and indicates a destination where people roll out the money they possess. If this money is spent to fulfill any of these demands which add up to the national income, it’s a positive sign. The more this happens, the more the country grows economically, the more is the national income, the stronger is the home currency. One scenario, where possession of money with individuals of a nation can harm the economy, is when the money possessed gets expended big time towards imports, which makes net exports and overall national income negative, leaving the investment demand of the nation unquenchable. A similar thing seems to have happened in India. Let’s take a closer look at its causes and implications. Consider an analogy, where we have a dam constructed with an aim to irrigate fields. It has some water collected in the reservoir. This water flows to the fields through channels. Thus, it’s the channels which ensure that the water in the dam gets utilized for growing crops and not for domestic purposes of farmers' households. Had the channels being broken and had the water been routed to households instead of fields, crops could never have grown due to lack of water and the production of the territory could have taken a severe hit. The water is equivalent to liquid rupee with the Indians, crops to the GDP, and channels to the government regulations and policies. In India, a major part of money (water) is spent in buying volumes of gold by families (household demand). If gold was available in India, the tendency of buying gold would have created better circulation of money and the multiplier effect would have done well to the economy. Unfortunately, out of 902 tones of domestic annual gold demand, India produces only two tones and the rest 900 tones is imported. More the demand for gold, more are its imports, more is
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the payment in dollars, more is the influx of rupee in forex market, more is the outflow of dollars from forex market, more depreciates the rupee, more expensive becomes any imported item including gold. This self-feeding spiral continues and raises ringing-alarm-bells when it reaches a stage where RBI cannot save the rupee by ad hoc workarounds like selling dollars and "trying" (rather struggling) to induce more FII participation. Indians have imported gold worth $61.5 billion (or around Rs 341,000 crore) in 2011-12, recording a growth of 44.4 per cent during 2011-12. Same is the case with petrol. A consistent surge in demand eventually causes the same vicious circle of events. Together, gold and petrol are the biggest burden on trade deficit and have worsened current account deficit badly, causing the sharp decline in value of rupee vis-a-vis dollar. The trade deficit during 2011-12 was recorded at $184.9 billion than $118.7 billion during 201011 mainly on account of large imports of fuel, gold & silver accounting for 44.4 per cent of India’s imports. Reports suggest that gold imports contributed to almost one third of the incremental rise in Current Account Deficit over the 2008-2011 period. Directly, gold contributes 0.36% to inflation index. Indirectly, it makes all imports including crude oil costlier fuelling input costs for all industries ranging from plastics to
automobiles. If the input costs rise, so have to be the prices of finished products. Eventually it’s the inflation which kicks off. The time lags between rise in gold demand, rise in import prices and rise in end product prices make the three events appear disconnected to the general public and as the "safest" option, we end up blaming the government without any knowledge of ground level proceedings. Arithmetically, every dollar reduction in international oil prices translates into a cut in product price by 33 paisa. But every time the rupee depreciates against the US dollar by one rupee, it translates into a requirement to raise prices by 77 paisa. Another aspect is, with booming inflation, with industrial products being costlier than earlier, why would a buyer in international market prefer buying Indian expensive goods when the same is available at a lower price in other countries? Together, with imports already being discouraged due to sharp depreciation of rupee, this fall in exports due to inflation exacerbates the trade deficit causing further decline in rupee value. It all gets again into the self-feeding loop discussed above. So, where do we break this infinite-loop of events where every step, every action has a well justified reason behind it? But somewhere, somehow you need to break this to get things in place. Weakening or breaking one block might give a temporary relief to figures, but in long run, this would cease growth. Instead, if every link in the chain is made to melt down in terms of its prominence, it’s just a matter of time; the whole chain shall cease to be prominent. What I wish to convey is instead of unplanned adhoc and shortterm steps like giving subsidies on fuel prices and making efforts to attract hot money sources, this nation needs to plan for a durable strategy which would 'subtly' and 'indirectly' bring about relatively stiff and lasting changes in the economy. Here’s what I mean to say… Whenever individuals hold disposable rupee, government should ensure that substantial part of rupee gets either invested into banks, corporate bonds, government securities and the share market or it gets to quench 'domestic' consumption demand of goods and services. Let’s remember in a dam, it’s the channels which ensure the usage of water in desired way and ultimately govern the production. Whenever it’s expected to have an enhanced liquidity among individuals, it should be THE time for government to make capital investment attractive. This would trigger the multiplier to take effect and eventually translate liquidity into growth. As far as demand for gold is concerned, it can be discouraged by raising customs duty
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exorbitantly. Buying gold should be made at least half as tough as buying a scooter was in late 1980s... Even if the demand for gold reduces partially, this would mellow down dollar appreciation and prevent further damage. On the other hand, the consumer which demands gold and oil so excessively needs to understand that if he chooses deliberately to intensify imports, he is fuelling inflation to such an extent that he himself is going to get in trouble. A major reason for S&P indicating to downgrade India in terms of its investment-grade rating was a drought of investment opportunities in India. With Indian businesses borrowing big-time from foreign sources, with other events increasing imports and causing rupee to depreciate, Indian borrowers will now pay more for every dollar borrowed. With every firm borrowing millions of dollars, the rupee loss is going to be phenomenally huge and shall reflect on a cost -cutting approach by companies' management which shall also include a cut in salaries. Eventually, a self-check on surge of gold demand can help prevent a number of significant things. Recently, after a lot of hue and cry on oil price hike, the government declared a subsidy on petrol price. I say why? As a long term plan, the government should let the petrol price rise so that vehicular usage takes a hit, even though the hit is marginal. Towns, where bikes and cars are favorites for personal transport, should be picked up and transformed into towns with a quality mass public transport, quality in terms of speed, frequency, availability, ambience, approachability, grievance handling mechanisms and any and every aspect which makes mass transport wellpreferred and equal in status vis-a-vis individual vehicles. This shall help in fading the rise in demand for crude oil and so shall prevent the rest of the spiral. One may say that it’s the gold which facilitates loans and so fosters investment. But one misses to note that at the time of repaying the same loan taken against gold, the value of the money repaid plummets so much that the good done by the investment gets offset substantially by severe inflation, the root cause for the good and the bad being the same. One may say that if investment in India is on a backseat, why doesn't the government invest? But one misses to note that it would be dumb on the government's front to do so, as it is already burdened under a budget deficit of 5.19 percent and any further disbursement of money would widen it more. One may say that subsidies on fuel shall be continued for some more years as the inflation is costpushed and not demand-driven. But one misses to note that it’s the demand which drives the entire spiral discussed
above and it’s the drive of this demand which ultimately coverts into a cost-push inflation. Thus, it’s high time now that the administration of the nation gets into a patient and consistent mission of correcting the fundamentals of economy at a macro-level with an aim to bring about a long -term change. References: Analogy of dam and liquidity (quoted in second paragraph of article) referred from knowledge sessions of a mutual fund firm.
"If you are the master be sometimes blind, if you are the servant be sometimes deaf." — R Buckminster Fuller
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Neuromarketing: The power of the subconscious by Pramit Das & Subhamoy Ganguly, IMT Ghaziabad “Now, my experience is that most of the time, people have no idea why they are doing what they are doing” —Clotaire Rapaille, Market Researcher and author of “The Culture Code: 7 Secrets of Marketing in a Multi-Cultural world” Well, he is not alone. Malcolm Gladwell in his celebrated book “Blink: The Power of Thinking Without Thinking”(2005) draws on examples from fields of science, sales, advertising, medicine and music to accentuate his idea of “thin-slicing”a concept that some mental processes work rapidly and automatically from relatively little information. Author and marketing guru Martin Lindstorm’s bestselling book “Buyology - Truth and Lies About Why We Buy” (2008) claims from his experimental studies that subconscious mind plays a major role in people’s buying decisions. Psychologist Daniel Kahneman, 2002 Nobel Prize winner for Economics, in his book “Thinking, Fast and Slow”(2011) throws light on the ways in which we make choices—most often, automatically and not necessarily in line with our best intentions. The authors seem to be mystified while the marketers still try to unravel the gap between the consumer intention and action. As said in a Forbes article, neuromarketing is about making the intent-action gap visible in a consumer, showing how different parts of the brain are made to take part by cues such as branding (for example, Coke vs. Pepsi) or by facing a spend-or-save choice between whether to indulge for pleasure now or delay gratification for some later date. While neuroscience has been around for decades, it is only recently that it became part of the marketing parlance. Neuromarketing involves application of cognitive neurosciences in the field of marketing and marketing research. It uses a brain mapping medical technology known as fMRI (Functional Magnetic Resonance Imaging) to study blood flow and blood oxygenation in the neuron activity of consumers at the time of selecting and buying a product. Though it started with the application of neurosciences, over the years it gained entry into the traditional methods of doing marketing research. As
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research proceeded, it was applied to promote sales and research organizations such as BrightHouse Institute was set up to serve corporations eager to reap the nascent developments in the field. The term “neuromarketing” was coined by Ale Smidts in 2002, a marketing professor at Erasmus University in Rotterdam, the Netherlands. But there is a more interesting story about the public attention to the term. Throughout the 70’s and 80’s blind taste tests had shown that Pepsi was the winner when consumers were told to choose between Pepsi and Coke without knowing which one they were consuming. Dr. Read Montague, a neuroscientist, was however intrigued by the fact that in spite of these results, Coke dominated the market. Montague decided to repeat the tests with fMRI in what was known as The Pepsi Challenge, 2003. The results were astonishing. He found that when blind folded, consumers liked the taste of Pepsi but when the names were revealed three fourth of them switched loyalty to Coke. It was observed that the knowledge that they were drinking Coke increased activity in the medial prefrontal cortex, an area of the brain associated with thinking and judging. The experiment showed that while people liked something in their subconscious brain they express something else. The example became a classic to be used later on in marketing case studies worldwide.
From The Pepsi Challenge, 2003 it was brought out that brand and image could affect the customer’s choices more than the product. This encouraged neuromarketers to use the neuroimaging techniques to identify decision making triggers among shoppers to help companies directly click the “buy button” on the customer’s brain to boost sales. On 17th Feb, 2010 an article in the Wall Street Journal carried the caption “The Emotional Quotient of Soup Shopping”. It dealt with how the Campbell soup company had applied neuromarketing techniques in a two years
study, intending to get consumers to buy more soup. It drew a lot of public attention at that time and encouraged debates on whether the studies on skin moisture, heartbeat and biometric by Campbell soup company was really worth it. In the process, more than 1,500 subjects were interviewed and tested using multiple methodologies— ranging from traditional consumer feedback to neuromarketing techniques. The same subjects also participated in a deep interview process called ZMET (The Zaltman Metaphor Elicitation Technique) which helped the Campbell's team to contextualize the biometric measures that were used. According to the company itself, the end results of the expensive neuromarketing efforts offered many insights that the company needed to work on and which traditional methods could only partially arrive at. The alterations which, among others, included different colour packaging for different lines of soup and a new logo proved beneficial for the company as it went to increase its bottom line. So how is neuromarketing implemented in real life? Starting with, say the fMRI scanners(other technologies are used too), the consumer’s brain is scanned which help the neuromarketers to find out how consumers react subconsciously to advertising, brand and products. This will tell the neuromarketers what the consumer reacts to, whether it was the shape of the packaging, the colour of the packet, the sound the box makes when shaken, and so on. This rare ability to watch inside the mind of consumers and noting how sensory inputs like image, smell and touch culminate to reach decisions enables the advertisers and marketers to optimise their advertisement, campaigns and product or service features to make them more acceptable. fMRI is not the only technology that is used. While fMRI is chiefly used for refining the product attributes, Electroencephalography (EEG) measures fluctuations in response to advertisements, Magnetoencephalography (MEG) measures the fluctuations but with greater accuracy than EEG and Transcranial Magnetic Stimulation (TMS) is used to measure causal roles.
It should be noted that neuromarketing is not exactly the same as subliminal marketing. The latter is only a subset of the former and focussed on the application part as implemented by the marketers. Neuromarketing involves much more such as involving the test subjects, using the biometric and physiological sensors to carry out experiments, studying the brain’s reaction (sometimes also heart rate, breathing, and skin response) to the social triggers and so on. Application in the real world to boost sales or acceptability (say, of presidential speech) is the end result of neuromarketing. An important part of neuromarketing which is more related to subliminal messaging is "priming" which refers to subtle suggestions made deliberately to the subconscious mind, without the subject's knowing, which could influence his/her subsequent behaviour. Various companies had adopted the services of neuromarketing research organizations successfully in the last decade. They include, among others:
Proctor & Gamble (in launching of Febreze room freshener)
Motorola (in product positioning)
Hyundai (in changing exterior appearance of a car)
Paypal (in identifying what turns people on more in e -shopping: speed or security)
Microsoft (in knowing the engagement of Xbox users)
PepsiCo’s Frito-Lay (in testing packaging in the U.S. and overseas)
Buick Motors (in enhancing dealers’ experience with customers and increase in sales)
EEG frequency
Yahoo’s 60-second television commercial which shows
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happy and dancing people around the world was pre-tested with neuromarketing. Before rolling it out and spending money to air the advertisement on television and online, Yahoo had run it on EEG-cap-wearing consumers. The brain waves from them showed stimulation in the limbic system and frontal cortices of their brains, where memory and emotional thought occurs. The advertisement surfaced in September 2009 to attract more users to its search engine. More recent inductees such as Kimberly-Clark, Johnson & Johnson and Unilever are using three-dimensional computer simulations of both designs and store layouts along with eye-tracking technology to deduce how to improve sales.
In March 2011, world’s largest world's largest neuromarketing research firm Neurofocus (now part of Nielsen) had launched Mynd, a full-brain wireless EEG sensor headset. Using this market researchers would be able to capture data on consumers’ subconscious responses in real time wirelessly thus opening up new testing environments beyond the lab such as home. The data would be streamed to platforms such as iPad, iPhone and other smart devices. Another recent article “Neuromarketing Proof? UCLA Brain Scans Predict Ad Success.”(2012) voices that scientists using UCLA fMRI facility for the prediction of 3 anti-smoking advertisements’ found the prediction from brain mapping more correct than the self-reports given by the subjects. The researchers focused on a seeing activity in the region of brain called medial prefrontal cortex (MPFC) while showing the 3 ads and found that the ad campaign which created the greatest activity in that region generated significantly more calls to a stop-smoking hotline. The below figure illustrates it.
understanding the consumers. However neuromarketing is not without its share of criticisms. While some groups claims that the research institutes are exploiting the corporate clients, some nonprofit organizations and customer advocacy groups maintained that the concept was unethical, being intervening with the customer’s privacy when practiced without their knowledge. These groups have coined a new term for this practice carried out by corporations, calling it “brandwashing”- from branding and brain washing.
Many research papers hold that the findings of fMRI are not revelatory and only reconfirmed some rules that marketers had known intuitively. As for example, co-author Michael Deppe in his paper “Bias-Specific Activity in the Ventromedial Prefrontal Cortex during Credibility Judgments" (2005) says that when consumers faces credibility doubts, brand information played a major role in decision making as seen by increasing activity in the area of brain where attraction occurs. But brand loyalty was traditionally always a factor on such occasions. Other concerns include that the benefits received might not outweigh the cost incurred and the accuracy of the findings. Regarding the latter, critics assert that it is inexact science as body movements such as breathing could distort or disrupt images and there are multiple interpretations of a mapped image unless assumptions are taken.
References: With this rate of development and participation by the corporate giants, it is hard to call neuromarketing a flash-inthe-pan and the future could be beyond traditional focus groups, dominated by mind-reading technology for
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Gladwell, M. (2005). Blink: The Power of Thinking Without Thinking. Little Brown and Company.
Kahneman, D. (2011). Thinking, Fast and Slow.
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neuromarketing. The International Conference on Administration and Business. Retrieved from http:// www.itchannel.ro / faa /119_pdfsam_ICEA_FAA_2009.pdf
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Dooley, R. (2006, Apr. 6). Priming the customer. Neurosciencemarketing. Retrieved from http:// www.neurosciencemarketing.com/blog/articles/ priming-the-customer.htm
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Olenski, S. (2011, Sep. 21). Is Neuromarketing The Future Of Marketing? BusinessInsider. Retrieved from http://articles.businessinsider.com/2011-0921/tech/30183631_1_campbell-s-soup-soup-cansneuromarketing
Geisweiller, B. (2010, Sep. 10). Healthy Manhattan: This Is Your Brain on Coke or Pepsi. NewYorkPress. Retrieved from http://nypress.com/healthymanhattan-this-is-your-brain-on-coke-or-pepsi/
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Singer, N. (2010, Nov. 13). Making ads that whisper to the brain. The New York Times. Retrieved from http://www.nytimes.com/2010/11/14/ business/14stream.html
Neuromarketing Proof? UCLA Brain Scans Predict Ad Success. SCN Lab: Papers - UCLA. Retrieved Apr. 27, 2012 from http://www.scn.ucla.edu/pdf/ Neuromarketing_April_2012.pdf
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Companies Use Neuroscience for Consumer Insights. Forbes. Retrieved from http://www.forbes.com/ forbes /2009/1116/marketing-hyundai-neurofocusbrain-waves-battle-for-the-brain.html
Deppe, M., Schwindt, W., Krämer, J., Kugel, H., Plassmann, H., Kenning, P., Ringelstein, E.B. (2005, Jul. 25). Evidence for a neural correlate of a framing effect: Bias-specific activity in the ventromedial prefrontal cortex during credibility judgments. Brain Research Bulletin. Retrieved from http://www.mydelphi.gr /uploads/bias-specific% 20activity%20during%20credibility% 20judgements.pdf
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Indian Corporate Bond Market by Siddharth Pal, IIM Rohtak
India is a bank-dominated market and the relative importance of bank assets as a percentage of GDP has continued to grow—partly as banking penetration has deepened with financial liberalization, and partly as a result of the ongoing need for deficit financing. The Indian bond market is, however, less well-developed. While having seen rapid development and growth in size, the government bond market remains largely illiquid. Its corporate bond market remains restricted in regards to participants, largely arbitrage-driven (as opposed to driven by strategic needs of issuers) and also highly illiquid. The article will analyze the challenges faced by corporate bond market and suggest reforms for the same. Indian Debt Market Let us compare the debt market of India with other countries.
Source: RBI (as on Dec, 2011) Indian Debt Market is only 34% of GDP which is very less compared to other nations. India’s government bond market has grown steadily—largely due to the need to finance the fiscal deficit—and is comparable to many government bond markets in the world with around 30% of GDP. The major investors in G-Sec are Commercial Banks and Insurance companies. But the corporate bond market is relatively underdeveloped with only 4% of GDP. The presence of corporate bond market in India is barely perceptible as compared to other economies.
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Need for Corporate Bond Market? The role of a healthy corporate debt market as a channel that links society’s savings into investment opportunities is of vital importance for several reasons. For the issuer it provides low cost funds by bypassing the intermediary role of a bank. Presence of bond funds gives the corporations an alternative means of raising debt capital and thus ameliorates any potential adverse effect that a bank credit crunch may have on the economy. For the investor, there exists a yield premium opportunity in comparison to traditional deposits at banking institutions. It also increases the investment opportunities in different type of instruments and tailors risk reward profile according to his/ her preferences. The basic philosophy of developing a diversified financial system with banks and non-banks operating in equity market and debt market is that it enhances risk pooling and risk sharing opportunities for investors and borrowers. Given the huge funding requirements, especially for long-term infrastructure projects, the private corporate debt market has a crucial role to play and needs to be nurtured. From the perspective of developing countries, a liquid corporate bond market can play a critical role in supporting economic development as it supplements the banking system to meet the requirements of the corporate sector for long-term capital investment and asset creation. Why Indian Corporate Bond Market Lags? Now that we have established there is a need for a vibrant and liquid corporate bond market in India. Let us analyze the reasons that impede its growth. Major factors inhibiting its development are:
Regulatory restriction on institutional investors.
Non Uniform stamp duty
Majority Issues being Private Placements and not Public Issues
TDS in Corporate Bonds
Absence of sub-investment grade securities
Low Retail Participation
Absence of Market Makers
1. Regulatory restriction on institutional investors Banks:
Statutory Liquidity Requirement (SLR) requires banks to hold one quarter of their assets in public sector bonds primarily government securities. Only holdings in excess of the SLR requirement can be traded and repurchased.
They are prevented from investing in unrated debt instrument.
They are also restricted to invest only 10% of their total non - SLR investments in unlisted debt papers.
Further only investment grade securities are eligible for subscription by banks. This prevents banks from investing in bonds of lower rated corporations which may include infrastructure companies.
Insurance Companies and Pension Funds: Internationally institutional investors like insurance companies and pension funds play an important role in the corporate bond market as the investment time horizon for these institutional investors and the bonds are long. In developed economies, huge amounts of stable, long-term funds were channeled into capital markets by pension funds and the insurance sector and these funds facilitated the emergence of very liquid bond markets in those economies. In India, the involvement of insurance companies in corporate debt market so far has been limited. Insurance companies and pension funds have huge potential to play a bigger role and contribute to the sophistication and deepening of the bond market in India. Chicken And Egg Problem: There is a lack of supply of suitable long term bonds which suit the need of insurance and pension firms. Also there is lack of demand due to regulatory restrictions on investment in corporate bonds. Infrastructure Debt Funds: The Reserve Bank of India allowed banks, non-banking finance companies and mutual funds to set up IDF in September 2011.The existing guidelines of IRDA
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and PFRDA does not permit insurance and pension funds to invest in the proposed Debt Fund. 2. Non Uniform stamp duty: Stamp duties are typically 0.375% for debentures and, as they are strictly advalorem, there is no volume discount. The rate of duty varies depending upon location (various states have set their own rates). Currently, if the bond is being sold in one (state) jurisdiction, but the asset has to be securitized in another, then the stamp duty as applicable in the latter is levied. 3. Majority Issues being Private Placements and not Public Issues: Public issues are bonds offered to a wide range of investors and which conform to the regulatory standards required of public issues of bonds. They require a prospectus approved by SEBI, and have to be open at a fixed price for a month to allow investors particularly retail investors to subscribe. Private placements can be made to a maximum of 50 “Qualified Institutional Buyers” (professional investors). SEBI in its Annual Report 2010-11 said “Although the year has seen a number of public issues, private placements have also remained as one of the preferred modes of raising debt funds. The rise in funds mobilized could also be possibly attributed to issuers preferring the domestic debt markets as a primary source of corporate debt. The issuers raised an amount of 2,18,785 crore by way of private placement during 2010-11 as compared to 2,12,635 crore in 2009-10.” 4. TDS in Corporate Bonds: In case of corporate bonds, TDS is deducted at source for resident and on non-resident investors as per prevalent tax laws. 5. Absence of sub-investment grade securities: In developed markets like USA, UK, Japan there is a vibrant market for sub investment grade securities. While in India regulatory restrictions prevent institutional investors from investing in such securities. This limits issuance of lower rated bonds. 6. Low Retail Participation: Indian retail investors have not shown interest in the corporate bond market. This may be due an illiquid secondary market and the low confidence (low risk appetite) in the corporate world. Retail investors prefer PF and Post Office schemes and other alternate investment avenues. Less investor knowledge and awareness about such products may be one of the reasons for their low participation.
7. Absence of Market Makers: There is a need for general market for corporate bonds to be developed for the market participants. Market Makers can address the issues of price discovery and liquidity in the corporate debt segment.
4. Rationalizing Stamp Duty: There should be a uniform low rate across all states and that the maximum amount payable should be capped. Fix stamp duties based on tenor and issuance value to encourage public offerings of corporate debt. Department of Revenue (DOR) and State Govts need to act on it.
How it can be improved? There is a need for developing an efficient and vibrant corporate bond market. To meet the needs of firms and investors, the bond market must therefore evolve. The policy recommendations should focus on designing a selfsustaining ecosystem for investors, issuers and market makers. The following reforms are recommended:
5. Removal of TDS on Corporate Bonds: TDS was viewed as a major impediment to the development of the Government securities market and was abolished when the RBI pointed out to the Government how TDS was making Government securities trading inefficient and cumbersome. Same could be done for corporate bonds as also been suggested by CII.
1. Life Insurance Co.’s: Minimum investment required in respect of approved securities (GOI, State Government & Securities granted by either GOI or State Government) should be reduced. Minimum investment requirement should be investment grade only i.e. BBB -. It may be stated that in United Kingdom BBB- is the cut off for investment by insurance or pension fund. IRDA (Insurance Regulatory And Development Authority) should allow insurance funds to trade in Govt. securities (currently they are required to hold until maturity) to improve liquidity and depth to secondary bond market. IRDA should allow insurance firms to invest in IDF by declaring such investments as eligible investments.
6. Creation of Market Makers in Corporate Bond Market: There is a need to set up institutions that will perform the function of buying/ selling bonds. (By creating a network of dealers which provide two-way quotes). As India already has an established system of Primary Dealers, it should utilize the same for good corporate bond. As a pilot project some PSU debt paper could be assigned to the existing PDs for market making. Once this gets established the list could be expanded. Dr. C. Rangarajan, Chairman PMEAC has also suggested that there is need to set up dedicated institutions like DFHI and Securities Trading Corporation for the purpose of development of corporate bond market needs consideration.
2. Pension Firms: In order to accelerate the flow of pension funds into infrastructure, Upper limit for investment in Government securities or Government guaranteed securities or gilt funds be reduced. PFRDA (Pension Fund Regulatory and Development Authority) should allow pension firms to invest in IDF by declaring such investments as eligible investments. PFRDA should allow pension funds to trade in Govt. securities (currently they are required to hold until maturity) to improve liquidity and depth to secondary bond market.
7. Risk Mitigation Steps: To address the risks associated with investment in corporate bonds, GOI had introduced CDS (Credit Default Swaps), IRF (Interest Rate Futures) and Repos on corporate bonds but they have not taken off. Initiatives should be taken to popularize these instruments.
3.
Foreign Institutional Investors: Income Tax Department, Ministry of Finance should do away with or decrease withholding tax rate to encourage investments in bonds. Same has been done to attract off-shore funds into IDFs by reducing withholding tax on interest payments on the borrowings from 20% to 5%. Republic of Korea had also scrapped this tax leading to threefold increase in FII investment.
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Conclusion A vibrant bond market can ease financing constraints both in terms of cost of funds as well as ease of access to funds. Considering the size of Indian market, India’s proportion of corporate bonds is insignificant. Policy and regulatory measures need to be taken to increase the breadth and depth of corporate bond market in India. Measures need to be taken for domestic insurance and pension firms and foreign Institutional investors to invest in corporate bonds. There should be uniformity in the stamp duty levied across the states. Initiatives should be taken to encourage public
issues and not private placements. Govt. of India had introduced different risk management tools like Interest rate Futures, Credit Default Swap and Repo in Corporate bonds to encourage the investors to invest in corporate bonds. But these tools have not taken off and very few transactions have taken place. The issues need to be identified and initiatives should be taken to popularize them. References
The Patil Report. 2005. The Report of the High Level Expert Committee on Corporate Bonds and Securitization. Delhi. 23 December.
The World Bank, South Asia Region. 2006 Developing India's Corporate Bond Market.
Reserve Bank of India. Annual and Monthly Reports. Securities and Exchange Board of India. Annual and Monthly Reports
IRDA, Annual and Monthly Reports
"If you pick the right people and give them the opportunity to spread their wings—and put compensation as a carrier behind it—you almost don't have to manage them." —Jack Welch
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Introduction `Does the stock market overreact?' De Bondt and Thaler in 1985 gave start to a new wave of thinking known as behavioural finance. Weak form inefficiency of the stock market was discovered by them after analysing how people are systematically overreacting to unexpected and dramatic news events which were surprising and profound. The Efficient Market Hypothesis as proposed by Fama (1970) asserts that the stock prices reflect the relevant information. The asset prices follow a random walk path i.e. they are merely random numbers. The study conducted by Caginalp G. and H. Laurent (1998) by the predictive power of price patterns finds patterns and confirms that they are statistically significant even in out-ofsample testing and report. The pattern of the stock index might help in predicting some of the effects of the various events. The calendar anomalies tends to exist which goes against the efficient market hypothesis. The researchers have used Gregorian calendar to investigate the calendar anomalies. There are various countries and societies which follow their own calendar on the basis of their religion. For example, the Hebrew calendar is followed by the Jewish society, which is strictly based on luni-solar, the Christian society follows the Gregorian, which is based on solar, and similarly Hindu and Chinese follow their own. The Hindu calendar is called “Panchanga” and it is based on both movements of the sun and the moon. The festival of “Diwali” is typically occurs at the end of October and beginning of November. The special ritual called “Mahurat Trading” can be observed on major stock exchanges like NSE, BSE, NCDEX to name a few lasts for about an hour. It is performed as a symbolic ritual since many years. It marks a link with the rich past and brokers look at it on a positive note. It marks an auspicious beginning to the Hindu New Year. The investors place token orders and buy stocks for their children, which are sometimes never sold and intraday profits are booked, however small they may be. Thus, it is widely believed that trading on this day will bring wealth and prosperity throughout the year. It is interesting to observe the behaviour of trading activities during the period preceding and succeeding Mahurat Trading. The purpose of this study is to know the effect of the festival prior and post diwali on the the returns.
Econometric methodology us on: compounded daily percentage change in the share price I have measured stock return as theJoin continuously index (S&P CNX NIFTY) as shown below: pratibimb@tapmi.edu.in Rt = (lnPt – lnPt-1) xVisit: 100 …………………… (1) http://www.tapmi.edu.in/student-life/pratibimb/overview/ Where, Rt = return at time t Pt, Pt-1 = closing value of the stock price index at time t, t-1. Team Pratibimb I have used S&P CNX Nifty as it has got the most liquid stocks in its portfolio. Further, the National TAPMI Stock Pratibimb Exchange | September is largest 2012in| 36 terms of Market capitalisation and Volume. I have used the data of the P. B. No: 9, Manipal - 576104, Karnataka