Archives for posts with tag: Singapore

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.

maid_jpg_1129897f

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.

120810083737indianwoman325

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.

open_page_maid_113093f

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….

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.

On my way back from Cambodia, I transited through Bangkok for less than 24 hours. I had enough time to marvel at the progress of the country. The huge vibrant Swarnbhoomi Airport is an immediate indicator of the golden success of the nation. By the way Swarnabhoomi is a Sanskrit word meaning Golden Land, and being Indian it is always gladdening to see our contribution to their progress. 🙂

Despite the wonderful shopping that Bangkok has to offer, over the last few weeks I have come to the conclusion that Delhi can be a good alternative to Bangkok, simply because there is much more to do in terms of business and consequently to enjoy life.India’s pathetic infrastructure got highlighted most recently last month when power cuts on successive days managed to put half the population (= 600 million persons) in darkness. That means that almost 10 times the population of Thailand needs much improved power infrastructure in India.

Statements made for power, can also be repeated for roads and water. And, this development along with auxiliary development gives an indication of the vastness of economic opportunity waiting in India. Thailand enjoys a more than double of India’s per capita GDP, again leaving less room for growth. Thus, the income opportunity is higher for me if I am in India.

With higher per capita income, disposable income is also higher in Thailand. This results in a higher cost of living. Even a visit to the international McDonald’s is more expensive in Thailand. A quick Internet based search reveals that Bangkok is at least 50% more expensive than Delhi; exceptions exist such as the cost of reasonable quality Japanese food! I would certainly like to see more international food at reasonable prices in India. Otherwise the costs are lower for me in India.

Higher revenues and lower costs translate to better profits. This is good, but what use are profits if they cannot be enjoyed? Certainly Bangkok seems to offer much higher quality entertainment as its shopping centers and variety of eateries demonstrate, but for me there is less freedom because I don’t know the local language. In Delhi, I can manage very well with English. Additionally, lesser road congestion of Delhi allows me to get around more smoothly. The rapid expansion of the Delhi Metro will make transportation even better in the years to come.

I am in international business. Bangkok certainly has its appeal, but if Delhi can work for me, it might for you too.

Singapore of course would be very different. Ideas differ though….

Just last week, I was making my travel arrangements for a trip to Mumbai. To find the right flight as per the timing of my visit, I first logged into the travel portal Yatra.com. Here, I noticed that the “budget flights” Jet Konnect, from the Jet Airways wing was priced higher than Jet Airways, the full services provider. Both Jet Konnect and Jet Airways carry the 9W code. Due to these discrepancies, my own preferences have recently has changed to Indigo (6E), and I wasn’t too perturbed about this. However, I mentioned this to my colleague and came to know that he too has been noticing this of late and has changed his preference to Indigo.

As I have been increasingly hearing about the growing preference of Indigo, this small incident got me thinking about how hard it is to stay on the top in international business. Though, Jet Airways is primarily a domestic route airline, with a few international routes, it is the main private airline whose tickets can be purchased from outside India. Thus, an international businessman in Europe planning a trip to India can make his booking conveniently on Jet as part of his British Airways or Lufthansa or other European airline itinerary.

Additionally, since the late nineties, Jet Airways has built itself as the leading brand in India’s domestic travel. It seems to me they decided to milk that brand name in the name of cost efficiency, a few years ago. Hence, they introduced their “budget” wing Jet Konnect

Pricing it essentially at the same level as the full service wing, they stripped value-adds such as blankets and newspapers and started to charge for catering services. Travelers who boarded for the Jet experience were shocked, but Jet could claim that Jet Konnect is their “budget” wing. Jet Airways still has a few flights on the full service, but instead of raising standards on Jet Konnect, they are now stripping away standards on the so called full service, removing refreshments on demand and so on.

As a result, people like my colleague and I now find airlines like Indigo more attractive. I suspect that half that battle was won by Indigo’s diligence keeping a young fleet etc. However, the remaining half was of the battle was lost by Jet, lulled by loss of competition from Kingfisher and Air India. It will be interesting to see if Indigo can remain on top; the challenge to do so will be tough.

In a similar vein, ITC Hotels that was one of three leading chains in India is also now showing signs of decline. Recently, there was a booking at one of their hotels through a travel agent. Later, when the hotel recognized the name of the expected guest, the Relationship Manager (or Sales Assistant) informed the travel agent that they would not honor the booking because the expected guest had previously stayed at the hotel at a higher rate.

This incident reminds me about roadside mango sellers in Delhi, who charge according to how they perceive the customers’ potential to pay. For example, if you approach in slippers, they may ask for Rs. 50/kg. But, if they see the potential customer stepping out of a chauffeur driven car the rate increases to Rs. 60/kg or more. They charge money according to the customer’s ability to pay. Despite the variable prices, the roadside vendor does not go back on the agreed price once the deal is struck, and this is important in the realm of international business too; honoring commitments. ITC Hotels should not compare itself to roadside mango sellers of Delhi, but, if it must, it should adopt their positive qualities too and retain commitments made.

As per the HBR (Harvard Business Review) blog piece – “Staying on Top Image

, Mancur Olson has suggested that the actions taken by Jet or ITC could lead to the classic corporate stall. Here, the companies are becoming captive to their own success and are facing vulnerability to low-cost rivals. They are probably in crunch of innovative ideas that could lead them out of it.

Lee Kuan Yew, Prime Minister of Singapore was visiting India last week. He talked about how difficult the business environment is in India. It does not help that even leading businesses such as Jet Airways and ITC Hotels do not keep up their end of the social contract. This is a primary Corporate Social Responsibility (CSR) and no amount of separate CSR programs can hide their fundamental shortcomings, as was proven in the famed Satyam scandal a few years ago.

My own former company Toyota allowed quality sag and was bashed (disproportionately, in my opinion) in American media a few years ago. This resulted in drastic drop of sales. I read recently that Toyota is now poised to gain World No. 1 spot after many years. I wish my friends and former colleagues the very best.

My message: Getting to the top is tough; staying there is tougher. Hence, maintain your social contracts to remain the leader.

India as an economy, on its way to success, has grown into one of the most famous and popular destinations in the whole world for Foreign Direct Investment (FDI). Our liberalizing trade policies and growing technology & telecommunication sectors are bringing India forth to some of the most productive, profitable and secure foreign investments. However, India still needs to fulfil several basic requisites for realizing its potential for FDI.

Array of Taxes

India has been sending mixed signals to investors by changing its tax and tariff policies without notice. The recent decision to arbitrarily impose taxes retrospectively, is also hardly confidence inspiring. The taxes levied in India are exorbitant and are segregated in various parts. Sales taxes are levied by individual states and so these taxes vary from state to state. This complex sales tax structure impedes FDI.  We need one common tax market so that the overall confusion about taxation is reduced to a larger extent. For example, a traveller to Delhi’s neighbouring state of Uttar Pradesh has to pay a state entry tax. This leads to needless queues and time wastage. If the vehicle is a goods carrier then state entry taxes are levied on the goods.  The convoluted tax laws would confuse the most intelligent of businessmen struggling with feasibility studies on market entry. We need to devise a firm and stable tax law for the country to bring in a buoyant FDI.

Age-Old Labour Laws

Antiquated labour laws also come as a big hurdle for FDI. A World Bank report titled “India Country Overview 2008” says that these laws are said to be among the most restrictive and complex in the world. India is ranked very low in the Global Competitive flexibility related to labour. This inflexibility is embedded mainly in the laws and regulation relating to disputes in change of service conditions. One of the biggest impediments to privatization in India is the lack of an exit policy, that is, a policy to govern the dismissal of redundant workers. Law reform is required for attracting foreign investments. Recently, Honda faced a hit in its production as one its key battery suppliers were facing labour issues. The company received a setback in its despatches due to these age-old labour laws. These laws have never been changed in the past 60 years and need immediate addressing in order to bring in better FDI. Foreign government leaders like Singapore’s Goh Chok Tong have been pointing this out year after year at forum after forum.

There is also lack of educated workforce and right-skilled workforce in India. The workforce needs to be educated and trained in their respective skills. The lack of skilled-labour does impose big obstacle in bringing foreign investment. More than anything, to unleash the power of human capital, basic education for all is a must. Measureable progress shall be the fundamental foundation that determines the strength of an economy.

Transparency International (TI) Ranks India 95

The Transparency International (TI) ranking placed India at 95 in its Corruption Perceptions Index (CPI). The CPI published by TI ranks countries as per the perceived levels of corruption, which are determined by expert assessments and opinion surveys. Corruption, as defined by CPI, is the misuse of public power for private benefit. CPI rankings scale from 10 (very clean) to 0 (highly corrupt). Our current ranking gives out a perception of India being a highly corrupt estate.

Before every investment, an investor intends to invest in countries that are free of corruption or at least have lesser amount of it. There should be proper regulations on all business activities to avoid negative implications of the same. Hence, in order to attract clean and stable foreign investment, our aim should be to reach in the measureable goal of top 20 of the TI ranking.

The Ease of Doing Business (2012) survey by the World Bank has ranked India on 132 among the 183 economies that are a part of its survey. The ranking has gone up (7ranks) from 139 in 2011, but it still has a long way to go. As per Wikipedia, these rankings are based on the study of laws and regulations, with the input and verification by more than 9,000 government officials, lawyers, business consultants, accountants and other professionals in 183 economies who routinely advise on or administer legal and regulatory requirements. Higher rankings indicate better, usually simpler, regulations for businesses and stronger protections of property rights.

Higher ranking simply boost the morale of an investor about the country and the way of doing business there. So, to bring in healthy and stable foreign investment, India needs to gear up to bring ourselves in the Top 20. Government needs to set up an attainable goal of moving up 10 ranks per year so that a more progressive future becomes visible.

Based on mentioned parameters for CPI and Ease of Doing Business ranking evaluation, India needs to draw the basic sitemap for bringing in better FDI and better growth for the country. These are some of the most important parameters that India has to work on. If these pointers are taken care of, India will be on a faster road to progress and will gain more investments.

In my opinion, should a single barometer be needed, it is perhaps the Ease of Doing Business ranking that is most important to judge how effective India is in attracting FDI.

Asian strategy for many businesses is pillared around Japan, the cash cow, China, the star and India, the next rising star. These are three huge continent sized markets –either in geographical or economic size. As a result, successful Asian teams need powerful central leadership, high decentralization and strong awareness of the field.

First, let’s talk about decentralization. Located in Asia, Japanese multinational companies are quickest to understand that Asia has several distinct markets. Leaders like Toyota have long had a separate China Department. Last year, Hitachi too delinked India into a separate regional Head Office, at par with its American or European Head Office.

When I looked after Toyota’s India project based out of Japan, I realised that Japanese have poor understanding of Indian business methods and the Indians too felt the same frustration. Coordination between Japanese and Indian teams became an important subtext of my job.  In terms of ease of doing business, in global rankings Singapore places in the top 10, Japan in the top 20, but alas India with its unhygienic conditions, pot holed roads and poor infrastructure doesn’t figure even in the first 100. Indian managers are therefore toughened to deal with adversity and are more likely to succeed in globally than the Japanese. It would seem that the Chinese would lie somewhere in between. This was confirmed recently when I asked Chinese visitors to an exhibition in India. They were shocked by India’s backwardness, just as Indian businessmen are surprised by China’s advanced infrastructure when they visit there.

For international business, fortunately common Asian values such as the hierarchical nature of society persist. This is where strong leadership becomes important. Fortunately for Toyota, its Head Office in Japan had a lot of know-how on global best practices, because they know what has been successful where. For example, in the area of just-in-time logistics I could explain to team members of South Africa, based on hands on experiencein Australia, Oman and Poland. Team members in other geographies, from China to Thailand to India could look up to Nagoya for advice on problem solving.

Adding strength to know-how, awareness of the field is imperative to team leadership. Hitachi’s Asia Head Office could not serve India sufficiently because of its inability to understand the field. Managers from cosmopolitan Singapore resisted visiting India with its heat, dust, poverty and disease. The same problem exists with other companies. An Australian manager working based in Singapore for the regional Head Office of a European company told me, “Ashok, it is difficult for me to travel in India. My customers visit me at my hotel. I cannot handle India beyond the local Hyatt, Hilton or Sheraton.” The same manager had problems with the raw fish of Japan. China was not yet a major market, fortunately. Another Englishman stationed in Singapore told me, “I can’t imagine living in India”.  I have seen only failure in all cases of armchair management of India, China and Japan from cosmopolitan comforts of Singapore and Hong Kong. I repeat, failure.

Successful team management in Asia requires a solid grasp of business fundamentals that establishes authority, and secondly a strong stomach to go out and get hands dirty in the field. 

The other day I was talking to some business counterparts who were protesting that international best practices cannot be applied in the Indian environment.

Those statements were nostalgic of my early days when I had just joined Toyota, implementing kaizen at its overseas distributors. I share now a real experience that demonstrates how world class companies implement best practices across the globe, with local adjustments.

My company was just introducing just-in-time (JIT) logistics in overseas markets and the development of related information systems. The major challenge that we faced during the introduction was that the change in operations style necessitated a change in warehouse design.

The challenged I faced was to build up these new operations under optimum design for which overseas distributors turned to us in Japan for help. Another challenge that our team in the Nagoya Head Office faced was – they had to start each design project from scratch which meant that they could deal only with a limited number of requests. This eventually led to two more problems of maintaining capacity and consistency.

So, I convinced my Manager about the need to standardize the design process. We went ahead with the development of a New Warehouse Planning Manual, with his nod, leveraging work that I was doing for new warehouses in Australia and Bahrain. This manual became bible for our overseas distributors such as in Poland and empowered them to plan their designs by themselves. The only concerns that reached Japan Head Office after this were important local issues that could not be tackled at the standardized level.

The manual developed by me was still in use 15 years later!

Through the process of delivering this solution, I learned about both, the possibility and limitation of standardization in international business. Most importantly, I started appreciating the value of local empowerment, as well as, the value of standardization to improve efficiency and quality.

Though there were people who doubted whether a common manual could be used in business environments as different as Singapore, Thailand, Bahrain and Italy, this is proof that it can be done. I continue to implement international best practices in India!

%d bloggers like this: