Archives for posts with tag: India

The last few days saw onions touch a price of INR 80/kg, which actually brought tears to the eyes of commoners and added enough oniony spice to the jokes spreading on all social media platforms. The most common of all commodities went out of bounds for the common man against the backdrop of a sudden plunge last month by the India Rupee (INR) to the US Dollar (USD) to about INR 69 per USD. Here, our old friend Japan became a Good Samaritan and decided to more than triple the existing bilateral currency swap agreement to USD 50 billion.

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The intent of the entire proposal was to bring stability to financial markets, and it seems somewhat successful in contributing towards the same.  India was in need, and Japan came to its rescue like a good friend. The next important task though is to tackle the underlying causes for the rupee depreciation and one of them is the current account deficit. The Economist stated in one its articles on August 24, 2013 that “the longer-term solution to the balance-of-payments problem may be to ramp up India’s manufacturing sector, and thus its industrial exports. But that will take a big improvement in the business climate, not just a cheap currency. Despite the rupee’s 27% tumble in the past three years there is scant sign of global manufacturers shifting production to India.”

The Government of India desires to increase the share of manufacturing in GDP from the current 15% to 25% by 2022. However, we have certain well recognized factors that are limiting manufacturing, viz; infrastructure, excessive bureaucracy, high cost of capital, land and labor, which are pushing even our local businessmen to go abroad rather than strengthen a manufacturing base at home.

Here again our old friend Japan is quite keen to address our infrastructure issues, where it’s Ministry of Economy Trade and Infrastructure (METI) has adopted infrastructure systems exports as a thrust area with the help of Hitachi, Toshiba and Mitsubishi, which are leading world class machinery manufacturers. The capital hurdle could also be resolved provided an acceptable Public Private Partnership policy is brought in. the Japanese banks are looking for promising projects to finance.

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I believe, India’s excessive bureaucracy and the labor issue are quite interlinked but the point is that the centuries old caste system has ingrained a preference for thinking rather than doing. Those who can, “think”, prefer not to get their hands dirty with implementation because their belief lies in the fact that getting hands dirty is for the lower castes.

Thus, the brainiest of engineers eschew production and manufacturing related work, preferring jobs in finance, consulting or even software development – work that can be done from comfortable environs. Those who can’t – get stuck in labor but because there is no pride in being at the bottom of society, the labor is just not willing. The Japan International Cooperation Agency is trying to bring in pride to India’s manufacturing and is supporting a leading management program at India’s premier Indian Institute of Management Calcutta called VLFM (Visionary Leaders for Manufacturing).

Alas, Japan cannot yet offer solutions to our land ownership and transfer complexities that perplex even the longest serving businesses such as the Tatas. Neither do they have a solution to our British inherited legacy of excessive bureaucracy. The politician and the bureaucrats – the two pillars of government need to address these. Centuries old problems cannot be swapped in a jiffy; hopefully they won’t take a century to resolve.

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We sat on the edge of our seats in the cinema theaters while watching Bhuvan’s (Aamir Khan) team play its last cricket match in the movie Lagaan, despite knowing the fact that India will win. Why did we do that? It was a plain scripted match in the movie, so why was there so much of thrill and excitement about the same. We still watch the same movie over and over again with the same fervor as the first time, even when we remember each and every move of the Ashutosh Gowarikar’s Team 11.

Half my children’s generation has grown up watching World Wrestling matches between those Hulk Hogans, Shawn Micheals and The Undertakers, regardless of knowing that every punch thrown or even those TLC (Table, Ladder and Chair) matches in the same are scripted. So, why is there so much of Gung-Ho about the spot-fixing happening in IPL, when it had and has been promoted as ‘Entertainment Ka Baap’ (= Father of Entertainment) by its airing partner, Sony Max. Why are Fast pacer S Sreesanth and spinners Ankeet Chavan and Ajit Chandila being bestowed with Life Bans for spot fixing?

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Any façade that in the international business that IPL has become, cricket was more of sport than World Wrestling, came off when Ajay Jadeja, Hansie Cronje et al were caught in match fixing. My own conjecture is that the play-off slots too are pre-decided, and who will or will not make it is pre-scripted. This is similar to the laughter we hear in our favorite sit-com shows on television. Irrespective of whether the jokes are funny, the audience at home hears the laughter. Similarly, irrespective of any proven sports ability, the audiences at home or in the stadiums see what the organizers want them to see.

As we have seen over this season of IPL 6, Team Rajasthan Royals have “performed” real well and have qualified for the Play-offs, regardless of its team players involved in match fixing and “under-performing”. It might be a different matter that there are parallel organizers, the official IPL and the unofficial underworld. The problem is created because there are two conductors, whose intentions do not coincide. Hence, it is bound to become a way of making money by scripting it like a movie, when the matches are tagged as entertainment.

County cricket is tagged as a serious affair; so are ODI and other forms, hence charting out Life bans to the likes of Ajay Sharma, Danish Kaneria and Hansie Cronje were justified; ten years later when T20 has degenerated to mere entertainment, a ban on Sreesanth is not justified (perhaps it is a part of the drama). Superficially, the ban is just a way to cover the suddenly uncovered but usually ever coveted parallel conductor here. If we consider the parallel with politics – Bangaru Laxman of BJP (India’s leading opposition political party) was caught accepting a 100, 000 rupee bribe (approx USD 2,000 at current exchange rate) He was despised not because he was corrupt, but for two other reasons:

a) He got caught and

b) The amount was so small.

Now, Sreesanth is “caught” for charging Rs 60 lacs for performing badly in one over. Here, the 6 million rupees (approx. 110,000 USD) taken is a lot of money for me and most people I know. It would exceed lifetime earnings of many in India. Yet in the entertainment world of cricket, this sum being relatively small or large is still unclear to me. Should he have asked for more? Was he despised and therefore released to the police for undercutting others who charge more? There are many such questions that remain unanswered.

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To the point of MS Dhoni or Harbhajan Singh being blamed or counted responsible for his arrest is away from my area of understanding. The motive for targeting Sreesanth this time is not clear. However, I remain convinced that there are many more players, bookies or the parallel conductors that are engaging in entertaining cricket and will continue doing so.

People in our country still follow cricket as their religion and live in the state of constant denial that IPL is a scripted game. I can still understand that Sreesanth reigns the Twitter trends list, but I am amused by the seriousness offered to this by the main-stream media. Times of India and Hindustan Times make it a headline issue, while IBN Live covers it on a jungle fire scale. I don’t think it does deserve that much of news space or air-time. However, if this scheme of scripting business is followed in the world of international business, I hope it makes it as friendly and loved as the world of Cricket.

One of the perks for international businessmen, and especially their wives, in India is the comfort of having servants, something that would be a luxury they could not afford back in their home country. However, for the Indian middle class, servants or house helps are still more a “necessity”, rather than a “comfort” or “luxury”.

Sanjay Agarwal, a power industry professional, eloquently speaks about “The exploitive Indian Middle class: looking through the prism of ethics- Social commentary” (http://isanjay.in/archives/582) in his blog. Here he talks about the problems of unavailability of maidservants that are so much the talk of the best of parties in the Indian metros. Additionally, looking at the arbitrary steps taken by governmental institutions such as the police in the rural districts of East India, the problem is compounded, as it invariably is when government starts to interfere in economic activity.

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In Sanjay’s weblog, he brings up the exploitation of the underpaid maidservants in our country. Upper strata people have always hired help. In the current scenario of nuclear families and both partners working, there is a need of someone to take care of your house or children in your absence. Thus, this is not a sudden growth and this phenomenon of keeping house help has been around for ages. Getting and keeping maid servants seems to boil down to economics and supply and demand.

I am reminded about my studies of Economics 101 (and I have forgotten most of what came after that). I then read that prescribing minimum wages went against the grain of employment creation (in the case of over-supply of labor), and, unions that seem to create better employment conditions for those that got through actually erect barriers to entry for those who haven’t made it. This is for the simple reason that higher cost of employment makes it all that more difficult for the employer to justify hiring one more person.

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Sanjay identifies the common complaint of the Birkined class (sometimes also referred to as the Chanel class), of maid servants that don’t return from “home leave”. That alas is on the other side of the transaction; the maid that chooses not to return from her village is simply deciding not to enter into that transaction with the “exploitative” auntie.

Additionally, it seems that now police forces prevent young women from boarding trains from their villages, lest they be exploited in faraway lands for purposes other than what their agents (read: pimps) might be promising them. This in my opinion is a matter of inability to enforce law in the faraway Delhi, resulting in checks in the interior, the legitimate being checked along with the illegitimate.

This police action in the hinterland causes an under-supply creating an upward pressure on wages. The maid servants become choosy, leaving the employing aunties aghast at demands of the working class.

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In any case, in any dealing with fellow humans, I agree with Sanjay that it is good to remember everybody’s feces stinks, including our own. Let’s be polite to our fellow humans, while not forgetting the human forces of economics. One of the attractions of Singapore for international businessmen and their families is the ready availability of maid servants. I wonder how they mange it there and in other countries.

Something to think about, by those wishing to create employment….

I can picture child labor returning. My daughter is a college sophomore hunting for internships. My high school senior son, seeking university admission is counseled that his lack of internship experience puts him at a disadvantage and he is only 17!

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I remember the time when as a returning sophomore at Williams, a freshman asked me about my summer holidays. I had spent the over 3 month vacation at home in Delhi, mostly relaxing with friends. My day started with a sumptuous breakfast that was followed by another round of sleep, wake up and meet friends, have lunch followed by an afternoon siesta and then again hang out with friends until dinner. My freshman American friend Hal was shocked. It was so unlike an American student’s summer break, often used to earn sufficiently for term-time pocket money. I was glad India was not fast paced then.

A few years ago, one of the students from Williams contacted me during her summer break, asking to meet me. When I met her at home, I learned she was already doing an internship with a leading consulting firm. What a shock! Americanization of the Indian summer break was at my doorstep.

My family has not remained untouched by this new-spreading norm and last summer I had to see my daughter spending her entire vacation as an intern in Gurgaon. It has become a norm in the current times. However, the internship is an added bonus on her resume while she sends off her cover letters. Proof of success is yet to be confirmed.

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As my son applies to study Engineering at foreign universities, he was told that many successful applicants at leading programs demonstrate their interest through internships they have held. Does that mean that 16 year olds are interning at General Electric (GE) now? If not GE, well somebody must be accepting them. What starts as a favor to a friend’s son, will well soon enough open the floodgates for survival of the fittest.

This trend of organized child labor or internships is certainly advantageous and helps the youth in making informed choices based on firsthand experience. But will they not be sacrificing their youth experience, is one concern that still rings my thoughts…

The Schumpeter column in the recent Economist, “Mammon’s new monarchs” describes the emerging world consumer as king. It seems that Western companies are interested in knowing how to appeal to emerging world consumerism and compete with home-grown domestic rivals. Consultants from Boston Consulting Group (BCG) advise companies to jump in early. I agree that going in early can be useful, but according to my observations, this is not essential nor a panacea.

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Consider the automobiles industry – Honda started early in India, in 1998. Toyota started shortly afterwards in 2000. Their early start has certainly helped. Honda’s City and Toyota’s Innova enjoy stable market leadership in their respective segments. Though many thought Renault-Nissan to be a late entrant to India (over a decade later than Honda), given that automobile ownership is still at the lower tail of the S-curve, it still has potential to emerge a winner. Renault is already doing well with its Duster shining in the market this year.  The same applies with Volkswagen, which really kicked off with the Polo in 2010. So, coming in later, even a decade later can be okay. On the other hand, in the absence of quality offerings, coming in early is not a cure-all as Fiat has failed to learn in repeat attempts at conquering the market.

Similarly, in the appliances arena, Hitachi that started early in the upper end high quality air conditioner segment, continues to enjoy aspiration status. Panasonic that is just starting its big bang could yet do well. LG may have made early inroads, but eventually quality shall become the priority of the consumer. Already, at the “non-frugal” end LG finds it difficult to attract the well-to-do. Experience with air conditioners also demonstrates that starting early is fine, but quality is perhaps more important.

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My own feeling is that when deciding market entry into emerging Asian economies, companies shall do well to concentrate on two things. Firstly, they need to get the price point right and match local tastes, while matching the quality expectations. This is where Hyundai succeeded with Santro. The second point is to focus on a core competency. So, for example, Daimler Benz did well to first start with its Mercedes E-class, a core competency yet economically right for India. It’s A-class is only now being contemplated, over a decade later (the price point is no doubt more suitable, but not what Daimler is more commonly associated with).

Many people try to bring out a single point solution, such as “start early”. This pithy advice can result in disasters as the Fiat experience in India demonstrates. Instead, international business strategy needs to concentrate on what sells (the buyer’s desires), and what can be sold (the seller’s competency), which are perhaps more important to conquer the Asian consumer.

Last week I was invited to the Embassy of Japan in Delhi for the pre-launch reception of Suraj – The Rising Star. What is that? Exactly the question I asked my wife when she told me we were invited. Now I know the answer – it is the title of a cricket based cartoon, inspired by the Japanese baseball anime hit Kyojin no Hoshi (Star of the Giants) of yesteryears.

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Many years ago when I was in Toyota, I was asked to review the Japanese program Oshin for possible sponsorship to telecast in India. Ambassador Sakutaro Tanino had been approached, because it seems that Oshin was run once, to popular acclaim, but could not finish as a series for lack of funds. Sponsorship for Oshin was never revived, but since my review work I have been convinced that quality Japanese programming could be well received by Indian audiences.

In my previous entrepreneurial business promoting Indo-Japanese cultural and business relations, I often shared opinion that it would be people to people contact that would get the two nations closer. There was talk even then, about 10 years ago of translating Japanese Manga (comics) to the vernacular. Now Kodansha, the Japanese publisher has made the localization happen, a fantastic leap for international business – who said you can’t make money out of culture.

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Indian enka singer, Sarbjit Singh Chadha who was at the embassy reception told me, “Ashok, I used to follow the original Japanese cartoon when I lived in Japan. Believe me this will have wonderful lessons for Indian youth on the importance grit when facing life’s challenges. According to Colors, which will air the program, the series will present viewers an inspiring story of a young boy who dares to chase his cricketing dream.

Newly appointed Ambassador, Takeshi Yagi, was excited about this development in cultural exchange. Talking to Itochu’s honcho in Delhi, Mr. Ichiro Shimizu, I learnt that the original series featuring the Giants was popular in his days. He is in his 50’s. Alas, contemporary Japanese youth that has moved from TV to smartphones for entertainment does not get that some education he complained. Fortunately, a vast majority of Indian youth still access television. Moreover, since it is a remake, I hope that they have additionally adapted it for smartphone viewing.

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Actress Karishma Kapoor who was at the reception said she will make sure that her son who is a budding two and a half year old cricketer shall watch from 10 AM every Sunday. I, too, plan to be in front of the box on 23rd December when it debuts. Time will tell if I am able to sacrifice my golf every Sunday. 10 AM also clashes with my son’s karate class – perhaps its time to invest in a recording device.

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I read recently in the Economic Times that Unilever finds innovations that have marked its growth in India, are now more relevant than ever, in recession hit parts of the world such as Europe.

As the Unilever CEO, Paul Polman, has rightly mentioned, “Learnings” from India such as lower price points for products in smaller packages or sachets, is gaining acceptance in the European market, poverty has returned as the local economies continue to reel under recession.”

It is transferability of such learnings that makes knowledge of international business practices so valuable. I remember my time in Toyota where we applied our learnings from implementation of kaizen principles for just-in-time (JIT) logistics across countries. Thus, Oman could benefit from learnings from Poland, and in turn teach a lesson (or two) to Australia and South Africa.

According to the newspaper, Paulman, also highlighted the success of the affordable water purifying product, Pureit.The product entirely developed in India, is now being sold by Unilever in at least 15 other countries, where according to him, it has become a popular brand. “

This reminded me of the concept of “reverse innovation” that was popularized by GE. Why is it called reverse? Previously, innovation occurred in developed markets, and products were sold across the globe. However, those markets are now saturated, or even in decline as Unilever is discovering. Undiscovered markets lie in populous emerging markets like, China, India and Indonesia. Thus, there is profit to be made by innovating for these markets. And, what sells here can also be sold in the fast-becoming-poor markets of the developed world. Learning frugal engineering has become so important that Carlos Ghosn of Nissan Renault invested USD 1 billion for starting a greenfield factory in India.

I suspect, eventually, as this becomes the mainstream model, the “reverse” will then be dropped from the nomenclature.

Most of my writings to date have recommended a course of action on a general basis that challenges the status quo of International business in the current scenario. However, earlier today, when I read The Economist’s recent article on Hitachi, I was gladdened to see that President Hiroaki Nakanishi is following my prescriptions, points that I made repeatedly to my then boss Mr. Yasunori Taga, the Chief Executive for Asia (CEA).

When I had joined Hitachi India, the sub-continent subsidiary was controlled by Hitachi Asia in Singapore. Despite my strong desire to relocate to Singapore, I remember telling Mr. Taga (against my personal interest) that it would be difficult to control an emerging economy like India from a developed city-state Singapore. President Nakanishi, finally upgraded Hitachi India to a regional Head Office in 2011.

I also agree with Nakanishi’s reported goal of attracting the best talent and allowing them the freedom to move around across business units. Other MNCs would do well to adopt this strategy. I often see foreign companies preferring to do things “their original global way”.  It takes some longer than others but eventually they have to adapt to local ways. It is either adapt or accept losses.

What can be true about human talent is also true about products. International business giant McDonald’s is good at this. It adopted vegetarian menu for India right from the start, and additionally was quick to give up the mutton offerings, substituting them by the more popular chicken. It has taken longer for America’s Kentucky Fried Chicken, or more lovingly known as KFC, to abandon its “original recipe”; they now serve only “Indianized” versions: spicy chicken or fiery grill chicken. The choice is between “hot” and “very hot”.  Hitachi’s appliances business unit has its own development center outside Ahmedabad, in the rapidly industrializing state of Gujarat. GE, Denso, Bosch etc. are leading global companies that are going native and understanding India better.

As European, especially German, companies look to Asia to grow business they would do well to heed these points about local talent and local products. Remember Brand India is noted for affordable products and superior global managers. Hitachi took over 50 years to learn such important lessons for doing business in India. Fortunately for European followers, they have a visible short-cut.

It was interesting to read recently that Honda is planning to review its product strategies for the Indian market. Though third-placed in the Japanese car market, as a global player it is actually second to Toyota in the Japanese manufacturers rankings. However, in India Honda as a brand has been at a distant seventh, despite being here for nearly 17 years.

Even as of now, Honda is considering only a revamp of its product line-up, which does not seem enough as a survival/winning strategy in the Indian context. A recent McKinsey Quarterly reports that to succeed in the complete Indian market and not merely its niches, international companies will have to learn to do business the Indian way, rather than simply imposing global business models and practices on the local market. The scorecard suggesting techniques to win in India, gives out seven pointers that need to be taken care of. Alas, Honda as a brand has failed to live up to the scorecard.

In international business, Brand India is associated with affordable products and good global managers. According to the newspaper report, Honda is just now delving into affordable products in the form of the smaller diesel options, but what they really need to address is the “scaled down in terms of function but even more aggressively lower priced” cars. Honda requires an understanding of the needs of Indian consumers and should customize itself accordingly.

Many multinational companies have hired Indians visibly into their executive board, not only to gain goodwill among the Indian market but also have understanding of natives and the exact market pulse. They are the people who have grown up in India and have better experience about the market. In the auto industry, market leader Suzuki of Japan has Indian R C Bhargava as its Chairman. Japanese giant Toyota has hired veteran Sandeep Singh and others on their board. Deputy Managing Director Sandeep has been with Toyota for years leaving briefly for stints with Mahindra and later JCB. He has helped the company get a better insight of the market and has helped Toyota place them better in the market. Newer vehicles will have only a limited impact on Honda’s business here, until the company manages to get a grip on the consumer pulse.

My own limited experience about Honda leads me to believe they are arrogant. There are two types of foreign companies that try and win in India. The Honda-type believe that they can conquer using their global strategies and global experience by “teaching the natives”, while the others are companies that try and learn from the natives and address the needs of the natives. They get the idea that Brand India (or any market different from the highly developed countries) has to be dealt in a separate way than the global market. Again contrast with Toyota: While Honda is severing relations with the local partners it entered the market with, Toyota have retained Vikram Kirloskar as Vice Chairman even though Kirloskar group has now only about one per cent share in Toyota Kirloskar Motor. While Honda is keen to remove vestiges of its local flavor, Toyota chooses to accentuate its belonging to society. What a contrast!

Arrogant companies will not succeed in India. Adaptation to the Indian consumer’s demand for innovative, low-cost delivery systems and high value for money products is a “must”. Invading companies learn this over time – some sooner than others. Of course, some just remain unsuccessful and have good basis to complain about corruption and difficulty of doing business in India 🙂

While going through my daily dose of news, I came across this article “Japan keen on nuclear cooperation with India: Montek Ahluwalia”that talked about the ongoing talks on civil nuclear cooperation. There are a lot of nitty-gritty’s involved in the whole of nuclear power cooperation, however my main concern is simple – “Is Nuclear Energy as important for India as it is portrayed to be?”

Prior to the Fukushima disaster, Japan got about 30% of its electric power from nuclear sources. However, since the Fukushima Daiichi nuclear disaster, Japan has not been able to avail energy from all its reactors till date and earlier this year it survived well with even zero nuclear power. If a developed and advanced nation like Japan can survive without nuclear power, certainly it becomes very apparent that nuclear power is not “essential” for India.

Recently, the Japanese government has made a proposal for demonstrating alternative energy solutions such as solar power for industrial parks in India. This government-to-government technical aid offer has been approved by the Ministry of New and Renewable Energy (MNRE), yet it lies mired in bureaucracy at Department of Economic Affairs of Ministry of Finance. In my opinion, the current need of the hour is to take the alternative route rather than simply taking what corporate Japan is offering us in a platter. I believe the alternatives to nuclear power should be investigated first lest we invite disasters such as the Bhopal gas tragedy or Chernobyl in our country. Our track record with road and railroad safety is ample indication of the low priority assigned to safety in our country. India has even started wearing the “jugaad” mentality as a symbol of pride!

Japanese government’s Energy and Environment Council has set a 28-year target for a nuclear-free Japan. Not only Japan, even Germany is also getting rid of nuclear and is venturing into the realms of wind and solar energy without even having sunshine like India.

It’s very similar to the scenario of Europe’s Airbus trying to convince us to buy airplanes because that is what they make. There is nothing wrong with the seller’s attitude. Is Japan trying to sell us its nuclear technology or is it merely their business lobby pressurizing our leaders to go ahead with it? The onus right now lies on the purchasing side to make the right decision. Indian leaders have been questioned a lot too many times for their weak decisions, be it the Bofors scandal,the Air Force land scam or even recently the Coalgate scandal.

Taking cue from countries like Germany and Japan itself, Government of India (GoI) must avoid rushing to accept big business’s proposals. They should well research all the available options or else there will be strong suspicion of a corruption once again. Irrespective of the money involved in the deal, we should consider alternatives of renewable energy in a better way rather than simply rushing into something that the whole world is getting rid of.

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