IIPM - ARTICLE AND PUBLICATION: March 2013

Thursday, March 28, 2013

“It’s a Problem if firms cannot Grow without The Founder”

As an Academician who was also on The Corporate side, Dr. Michel Kalika, Dean, EM Strasbourg Business School, has seen The Best & Worst of both worlds. In This Exclusive interview, he discusses Contemporary Business Issues and Compares Indian Students to those overseas

In a career span of over 26 years, he has been a professor, a corporate professional, a researcher and now the Dean of EM Strasbourg Business School, University of Strasbourg, based in France. Dr. Michel Kalika resumed his new job in 2008 and under his supervision, the school has grown from 1400 to 2300 students and has become one of best B-schools in France and the second best in R&D. He has co-authored twenty books and approximately a hundred other publications. In an exclusive interview with B&E’s Bhuvnesh Talwar, Dr. Kalika talks about his affinity for Indian students and the international scenario on education and careers.

B&E: How should the academic mix be at B-schools? Specifically, how do you intermingle industry inputs and theory in your business school?
Michel Kalika (MK): In France, you have two great systems: you have the elite Grande Ecole programmes, and you have the traditional university system. While universities accept everybody, the Grande Ecole programmes – like the one at our business school – are competitive courses. In these, it’s not just about classroom teaching and creating book bugs. Industry interface comes only with enough practical teachings in the classroom. This is what happens at Strasbourg. Managerial practice and theoretical knowledge go together, because we have a strong support from the chamber of commerce. For instance, we have 170 companies who are supporting the B-school, and we have 104 faculties. Around 300 practitioners are coming and teaching during the courses. We are well known for the creation of case studies. Each week at the business school, we have one or two conferences on different topics. Practitioners are very often invited to speak at the B-school. They come and often offer the students jobs and internships. That is why our students find jobs very easily. Three to four months after the programme, 80% of the students are working. Around 40% of our students find jobs outside France.

B&E: In this era where B-schools teach their students to be founding entrepreneurs, what are the advantages and disadvantages of having the company’s founder as the CEO?
MK: The competencies of a founder are not the competencies of a CEO. When you are a founder, you focus on entrepreneurship. You are creative, imaginative, and want to grow the company. But, I feel very often, founders need the help of professional managers. It is very difficult for a founder to keep control on the company, when the company is growing more and more. So, I will say that the two functions are complementary; there’s a synergy between the two. What I say to my students is that if you start as a founder of a company, please be careful. You need to be able to understand when you will need the help of the manager. And I say to the professional managers that you must understand how the founder is thinking to be able to help him maintain the control on his company.

B&E: What is your thought on optimal timing for the exit of a founder CEO, and what factors should be counted?
MK: I don’t have a general answer. Sometimes a founder needs a strong help of the manager, after I would say 5-7 years. But, the founder can stay in the company. It would depend on the relationship between the manager and the founder. When you have served in the development of a company, you have steps. The steps are in the form of 5 year and 7 year plans. So, there is the first step after 5-7 years, and then another step after 11-12 years. It thus depends on the rate of growth of the company. If the company is only in domestic markets and another competitor is developing internationally, then you need a professional manager very soon. The founder is not always very good in understanding the culture of a different country. As the founder is focussed on his business, he may have difficulty in understanding another country’s business practices and culture.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Tuesday, March 26, 2013

B&E This Fortnight

INTERNATIONAL

ECONOMY & BUSINESS STRATEGY
Time Inc.’s CEO – Fired!

After six months on the job, Jack Griffin, who took charge as CEO of the world’s largest magazine publisher Time Inc. last August, has been shown the door. Meanwhile, the division will be temporarily run by an interim management committee comprising three Time Inc. executives – Editor-in-chief John Huey, General Counsel Maurice Edelson and CFO Howard Averill – until a new CEO is hired. This is what Jeffrey Bewkes, CEO of Time Inc.’s parent company (Time Warner) conveyed to Time Inc.’s employees through an email. Griffin’s short tenure and untimely departure comes as a shock to most, including the sacked CEO. Despite his reputation of being an extremely accomplished veteran in the industry, the company claims that his leadership style and approach at work did not gel well with the culture in place. There are rumours doing the rounds that Griffin was axed because Edelson and Averill wanted him out for personal reasons (they were apparently unhappy of having been left out of an executive summit planned for March 2011), it is no secret that this former President of Meredith Corp.’s national media group, had failed to gain the trust of his employees and the top management at Time Inc. in the many months that he had spent at the company. Therefore, his exit was perhaps necessary to prevent other key executives from leaving the company.

AMAZON’s free deal?
Amazon, in an open war with Netfix (which offers online streaming service) unveiled its “free”, instant movie and TV show streaming option for those who are willing to pay (or are already paying) for its $79 Amazon Prime service. The company announced this on February 22, 2011. When news of this became public, shares of its competitor – Netflix, dropped by nearly 6%. Interestingly, even investors of the Amazon stock did not find the news too amusing as its shares fell by 3.2%. The move puts Amazon on a collision course with Netflix, which aims to dominate the online streaming market. The giant has claimed that it will make 5,000 films and TV shows available for “free”, just 25% in count of that offered by Netflix. Also, Amazon’s claims are not finding many buyers as its “free” selection is only a mere proportion of the 90,000 titles and shows that are mentioned in its catalog. Sample this: Actually, Amazon currently offers five of this year’s 10 Best Picture Oscar nominees, but none are included in the free offer. So, if you want to watch The Social Network, it will still cost you $3.99 for a 24-hour rental or $14.99 to buy permanent viewing rights, whether you are subscribed to its Prime service or not.

Sanofi’s $20 bn bet
French drug giant Sanofi-Aventis announced on February 16, 2011, that it is all set to buy the $4.5 billion-a-year profit-making Genzyme in an all-cash deal worth $20.1 billion. This represents a premium of 4.4% on the share price of the target (as on October 4, 2010, the first day of offer). This second biggest deal in the biotech space will give Sanofi a foothold in the market of diseases with small patient populations. Genzyme, which produces expensive medicines for disorders such as Fabry, Gaucher, and Pompe diseases, will help Sanofi compensate for declining revenue from drugs that it is set to lose patent rights.

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Monday, March 18, 2013

Can it Manage a Repeat this Year?

Maruti’s Adoption of a New Three-Pronged Strategy fuelled its Topline Growth in FY2009-10. Can it Manage a Repeat this Year?

Talking about his rural drive, Mayank Pareek, Head of Marketing at Maruti, tells B&E, “The rural fairs that we conducted helped attract many new buyers in unexplored markets. They are the lot which prefers a 100% down-payment mode of transaction than visiting dealerships.” By the end of FY2009-10, Maruti had increased its contribution to topline from rural markets to 18% from under 2% a year ago, and had appointed 4,000 Rural Resident Dealer Sales Executives. But this is not to say that the company diverted focus away from metropolitan locations. “We also increased our marketing drives in the Tier I locations, where our offerings did enough to entice consumers, who were excited about purchases post-a-slowdown.”

So what do we expect from the market leader this financial year? It has been much criticised with Maruti registering a 7.80% y-o-y fall in half-year profits (during H1, FY2010-11, primarily due to rising royalty to Suzuki Japan). Despite this, the 22.77% y-o-y growth in unit sales (441,948 units) during H1, FY2010-11 and the 26.14% appreciation in topline (touching Rs.176.88 billion) during a “criticised” six month period, should make all at Maruti proud. There are challenges, yes. It comes in the form of rising competition, with new manufacturers entering the small car market. But as auto expert Tutu Dhawan tells B&E, “Maruti has no threat to its leadership position in the near-term...”

Even if the carmaker maintains the current rate of topline growth, which is extremely unlikely considering that Q3 & Q4 are always the best for any carmaker, it will end FY2010-11, with a turnover of Rs.373.66 – a y-o-y increase of Rs.82.68 billion. Enough chance of making it to the next year’s edition of B&E’s India’s Fastest Growing Companies rankings.

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Tuesday, March 12, 2013

Eva Divorces Her 'Player' Husband

After seven years of marriage, Eva Longoria was devastated when she found hundreds of text messages on her husband Tony Parker’s phone from the wife of one of his teammates. The 28-year-old NBA basketball player has apparently been cheating on the 35-year-old Eva. While the identity of the other lady has not been divulged, Eva has revealed that this was not the first incidence of Tony’s infidelity. This Latino lass has had enough and has filed for divorce.

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Thursday, March 07, 2013

And could also be where you Rediscover Yourself and Your Spirit

The Tip of Our Country was where Swami Vivekananda reached the tipping point, And could also be where you Rediscover Yourself and Your Spirit

Life at Kanyakumari some decades ago was often disturbed by communal tensions. Even the proposal for the building of Vivekananda Memorial in the early 60s faced much opposition from the Christian fishermen, who were perhaps afraid of being robbed of their means of a livelihood, as the dredging operations would cause soil erosion. They even went on to damage the Memorial tablet placed on the rock and installed a wooden cross in its place! Eventually, the issues were amicably settled. “Now, most of the tourists come here to see this Memorial. Those fishermen who protested earlier are the boatmen now who take the tourists to this rock,” says Ignacius Tagore, a senior journalist in Kanyakumari.

Every year 19 lakh people come to see this Memorial. The ferry service starts in the morning at 8 am and ends at 4 pm. “December to January, April to May are the two peak seasons. 10 lakh tourists come here then,” says Sornapandian, the Manager of the Boat transport here.

Kanyakumari district was earlier with the state of Travancore. After a long struggle by the local people, when states were formed on the basis of the language, Kanyakumari and adjacent places came to Tamil Nadu. You can still find people here speaking Tamil with a hint of Malayalam accent.

In 1982, there was a huge religious clash in Mandaikadu, a hamlet near Kanyakumari. “This clash happened due to a rumour,” says Dr. S.Padmanathan, a historian. “Those days the Hindus and Christians were friendly. There was a Hindu Bhagwati Amman temple and a Christian Mary Church. During a festival season, rumour spread that a woman was molested and so a clash erupted between the two sections. Police came to control the violence, and they resorted to firing in which six people were killed. But the situation has changed today. Both communities visit each other’s places of worship,” informs Padmanathan.

On the shore stands Kumari Amman temple. The virgin Goddess here is the incarnation of Parvati, who is believed to have stood in penance for Lord Shiva. It is one of the important Shakti Peeths in Tamil legends. One has to stand in a long queue to catch a glimpse of the beautiful Goddess here. The famous diamond nose-stud that she wears, has many stories behind it. The light from the diamond is believed to have caused many to be shipwrecked in the sea, as they would mistake it to be a lighthouse and come towards the shore. I was told that this was the reason why the east door of the temple was kept closed.

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Wednesday, March 06, 2013

Fast developing luxury automobile segment in India

In an Exclusive Interview with Sanchit Verma, Dr. Wilfried Aulbur, the outgoing MD and CEO of Mercedes-Benz India reveals his insights into the Indian luxury Auto segment, making Mercedez the No. 1 luxury auto brand in India and the general dynamics of the fast developing luxury automobile segment in India

B&E: What role does India play in Mercedes- Benz’s global strategy?
WA: Currently we are not even 1%, but if we look at the future, we will definitely grow in size over the next ten years or so. But at the end of day, the market share we are talking about is in very small volumes; we are talking about a difference of just a few hundred cars. So, what is more important for us is the brand leadership, value for money for our customers, and definitely profitable growth. It’s not that we don’t care about volume, but volume and profits has to go hand in hand.

B&E: You have spearheaded the company’s growth in India for around 5 years. What were the challenges you came across during these years?
WA: In these 5 years we had several challenges to address. We surely witnessed the transition from monopolistic environment into an environment of intense competition, where we not only have the German players, but also the Jaguars and other global players. At the same time, we have also seen the market growing dramatically, providing great opportunities to us. That’s the reason, for which we are set to end the current fiscal with sale of 5,000 units and also to grow at a CAGR of about 30% over the next 5 years.

B&E: You just mentioned that Indian luxury car segment have now become a lot more competitive. Keeping that in mind, how are you planning to beat the heat of competition?
WA: What I have always focused on is value for money. We have not gone into overtly aggressive discounting because at the end of the day we believe that the luxury car customers wants an experience and is willing to pay the money for that value. At present, we have a very good bottom line and as we go forward we are going to continue along these lines.

B&E: You started the truck business right from scratch in India. How tough or easy was it for you?
WA: Yes, we entered the truck business from scratch wherein we established ourselves very successfully and maintained our philosophy of giving the best to our customers. We launched products, which were best in performance while we also ensured that our overall business system made sense. Business at the end of the day is a volume game, which in return gives you operating profit. In the truck business, we turned cash flow positive in our second year of our operations itself.

B&E: So, is this the end of your association with Mercedes-Benz?
WA: Of course not. I am not going to go away from Mercedes-Benz India. Along with my team, I have been a part of tremendous development for the company over the last five years and we are sure that we will see similar development in the next five years as well. But, at this juncture of life, this opportunity was very interesting for me. That is why I have decided to part my way. It’s purely a professional decision that happens in one’s life sooner or later.

B&E: What are the developments that you see today as compared to the time when you came to India?
WA: Luckily, I have had the privilege of watching India over the last 16 years and this is a very important part of my decision to continue in India. If you look at the same and my assessment, I am extremely excited to see myself for the next 15 years in India too.

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