Sunday, September 29, 2013

US immediate Payment Schedules.

I have kept my article very short and just kept it in numbers format so that readers can make out their own convictions about the US economy and the world market expected behavior in the month of October. Again the time has come when the debt Ceiling level of US economy needs to be raised since payments have to be made. Bipartisan Policy Center analysis. What might happen if US fails to increase the debt ceiling within the time frame, well in that case the drama gets prolonged.  This is going to be a short of cash position which would spook the global economy into jittery system. U.S. Treasury bonds are being asked to pay higher levels of premium for their investments.
We are yet to see lot of US drama on the political as well as on the financial markets. This would keep the global markets under tight volatility followed with huge media coverage. But the real fact is that that US have to increase the debt ceiling otherwise would not be able to pay the promises. All the payments are due in the month of October 2013. Some Republicans say Pay bondholders and Social Security recipients first. Some GOP lawmakers add active-duty military to the list. If Treasury doesn't have enough money on hand to pay any of those three things on a given day, some proposals would give Treasury limited authority to borrow just enough to make up the difference. Hence a borrowing plan would be ready in the month of October 2013. Between Oct. 18 and Nov. 15, Treasury is likely to run about $106 billion short of what's owed, according to a
US economy is just struggling to find growth. Whatever Mr. Bernake expected that the economy is growing was a fatal comment which created some gains for the US treasuries. Unemployment is still high, inflation is low and that’s too seasonally adjusted. Housing statistics are just manipulated to create the borrowing consumption living pattern. The question which stands very clearly now is that how long US will print money and how stretched the debt ceiling could be made.


CHINA NUCLEAR BONDS…..The BIRTH OF NEW ALTERNATIVE ASSET CLASS


The world economy is too busy with the US FED QE tapering and about the inflow of loose capital into risky asset classes. The billions pumped into the global capital market have now turned out to be a nightmare for the capitalist community of the market. Easy money has swelled the fiscal deficit of US and also asset prices across the globe. Emerging economies made a series of returns in its asset classes from equity to debt from gold to silver every commodity made a substantial gain for the investors.

In between I came across another new class of investment where more trust and safe bet is being placed. Nuclear bonds are the new alternative asset class offered by China. Asian economy is placing more safe bets on these bonds. China General Nuclear Power announced a five-year dollar bond at 240bp over US Treasuries, to be issued through the company's uranium mining and trading subsidiary, China Uranium Development Co Ltd. On a standalone basis without government support, Moody's rated it Ba2, below investment grade. Fitch noted that: "Given limited internal cash generation and the large development capex, China Uranium's stand-alone financial profile is weak. Moody's, however, rates the company A3 and Fitch A+, based on its "strategic importance to China's nuclear energy policy. The reason behind such bonds being issued is that China has huge demand of power which needs to be met from alternative energy sources and hence nuclear based power facility is being discussed and taken into account.

Nuclear power is part of China's push toward cleaner air. The country already has 14.8 gigawatts of installed nuclear generation capacity, according to the National Development and Reform Committee. That, however, met only 1.9% of last year's power needs. The government agency recently said it plans to increase that capacity by 20% this year alone, adding 3.24 gigawatts to the grid. It also expects to approve the construction of nine new nuclear power plants and by 2020, plans to increase that nuclear capacity fourfold. All these new power plants will need uranium. China’s aggressive investments in Africa are not for the diversification of its investments neither for developing Africa. The economic reason is the exploitation and development of uranium production from the African mines. This is also the reason behind China doing investments at the back of European economy.


 The trouble is that China already has almost 20 plants in operation and has some 29 under construction. That means many more uranium mines will need to be bought and developed. The state-owned Chinese nuclear group that is in talks to invest in Britain’s new nuclear  programme. Chinese investment in UK energy and infrastructure is growing. Last year, China’s main sovereign wealth fund bought a stake in Thames Water, while Sinopec bought a 49 per cent stake in Canada-listed Talisman’s UK North Sea business for $1.5bn China is becoming a major force in nuclear power with 17 reactors in operation and 28 under construction. Its nuclear companies are also increasingly looking to expand abroad. China National Nuclear Corp. (CNNC) announced the technological breakthrough in uranium resource drilling which can help boost China's domestic uranium supplies and ensure the key energy source for developing nuclear power generation. China is hunting the world economy for uranium and that’s why so aggressive investments across the globe is being made by china. Today it looks okay but may be we are all heading for an massive threat from china’s aggressive uranium threat.

Saturday, September 28, 2013

Enterprise Risk Management and Internal Control

 In my all previous articles I have been extensively covering about the Enterprise risk management and internal control and auditor’s role within an organization. In my research I find that in US economy the  most widely used framework in the United States is the Internal Control–Integrated Framework published by COSO (Committee of Sponsoring Organizations of the Tread way Commission).

The sponsoring organizations first came together in the 1980s to address the increasing fraudulent financial reporting that was occurring at that time. COSO released the original COSO’s updated Internal Control–Integrated Framework in 1992.

The framework gained widespread acceptance following the financial failures of the early 2000s. In 2013 COSO updated, enhanced, and clarified the framework. Today, Internal Control–Integrated Framework (often referred to simply as “COSO”) is the most widely used internal control framework in the United States, and is also used throughout the world.

COSO identifies six components of internal control that support an organization in achieving its objectives.

·     Risk Assessment which involves the process for identifying and assessing the risks that may affect an organization from achieving its objectives both in the short term and long term. Risk assessment is the key factor which needs to be conducted before an organization can determine the other necessary controls.

·      Control Environment is the set of standards, processes and structures that provides the basis for carrying out internal control across the organization. If internal control does not frames the boundaries of controlling the environment of an organization then the control mechanisms would not be measured and exercised.


·    Control Activities are the actions that have been established by policies and procedures. These policies acts as a benchmark which helps the internal auditor to access the activities. Framing boundaries and creating benchmark to measure the level of control to be exercised on the activities of the organization.

·    They help ensure that management’s directives regarding internal control are carried out. Control activities occur at all levels within the organization. This is one of the key factor that should be kept in mind that control needs to be decentralized but having an reporting system to the centralized pat of the organization.

·         Decentralized process would help the internal auditor to access the risk involved in every departments and its risk affects on the enterprise as a whole. As organizations are becoming more prunes to variety of risk hence it is better to have an decentralized risk measurement and boundaries of policies and strategies for the organization.  Decentralized risk measurement would help the organization to frame better polices and strategies which would mitigate the risk of business as well as financial.

·   Information and Communication recognizes that information is necessary for an organization to carry out its internal control responsibilities. Information can come from internal and external sources. Communication is the process of providing, sharing, and obtaining necessary information. Information and communication help all relevant parties understand internal control responsibilities and how internal controls are related to achieving objectives.

·         Monitoring the risk and reporting the same at the appropriate time should be the key part of the internal auditor.

The guidance issued by COSO in 2013 recognizes that each of the five internal control components includes principles representing the fundamental concepts associated with the component. Further, supporting the 17 principles are points of focus, representing important characteristics typically associated with principles. While the COSO framework provides examples of points of focus, management needs to determine suitable and relevant points of focus that reflect the organization’s unique industry, operations, and regulatory environment.

Friday, September 27, 2013

CHINA AT RISK.......PLEADS TO U.S ECONOMY

The story of rag to rioches is known by every one but the story of the safety of securities andf urges for that is less known. China is the biggest holder of US treasuries is an old fact but now the same china is very much conservative in its dealing with US economy. Concerned over the safety of its US bonds worth USD 1.2 trillion, Beijing, has  asked Washington to take decisive steps to end the debt crisis and protect its investments. China, which has foreign exchange reserves of over USD 3.2 trillion, the largest in the world, invested about USD 1.2 trillion in US bonds and currency, making it Washington s largest creditor.

 Well the story doesn’t end here. It just the beginning of the US grand childrens to be the future servent of China. Since an economy like US has no plans for its revival busy at the back of cookinh numbers of employment and spooking only political war fare with other economies for the sake of its own security is bound get an future of an servant life. In my reseach US is not creating much genius and is now fully dependent on low wage cheap labour of different nations. US ctizens have been exploited so much that they cannot adjust to the same pay pacakage of the overseas citizens. They have been taught ove rthe several years that borrow and leave extravagently. Now one fine morning the decade old startegy of living life cannot be changed. The social shutdown is less in the air of the US streets and more on the media page.
 On the other side chinese economy becoming an super power within a very short span of time has lead to an massive asset bubble across the globe through its investments. It sounds pretty much aggressive when an economy does investments duirng an global turmoil but when the investments chases too many assets with less option then that’s becomes a threat. China would be the next destination of bubble to get burst. China government’s $586 billion stimulus package entered the economy post-2008 created the mess which is quite atomic in nature to get blown off.

The above graph suggests that the level of investment as a percentage of GDP relative to consumption as a percentage of GDP may have become excessive. In particular, the resurgence in China’s investment post-2008 crisis, bringing investment to post-1982 highs as a percentage of GDP, is cause for concern. Plus, fixed investment continues to grow as a percentage of GDP, while consumption as a percentage of GDP continues to wane. While growth in fixed investment has been responsible for the rapid growth in China’s economy, rising from around $1 trillion in the year 2000 to over $8 trillion today, the continuation of such high levels of investment relative to slowing consumption is disconcerting. This is the place where the entire drag down of the world economy from Asian perspective is going to happen. I prefer to stay away from wild guess but it can be like Japan economy which is struggling decade old for its growth. Inventory-to-revenue ratios have reached record highs in the first quarter of 2013—rising from nearly 70% in 2007 to nearly 140% today—essentially doubling. Low cost productivity have already created unemployment accross the globe now the same products would be consumed by China is an hard call. From export  to Consumption driven economy might be an dream but hard to be  realistic.    Skeptical consumption pattern is a the ground rule of every economy after the 2008 debacle.


Chinese investments in other economies are mainly for the natural resources and food for power/electricty. Singapore state investment giant Temasek and Chinese oil group Sinopec aim to snap up a multi-billion-euro stake in Spain's Gas Natural. They are interested in buying its 4.7-billion-euro ($6.4 billion) stake in Gas Natural. Well this is just a small piece of the their shopping bag. Please read my last article to find the larger space of their shopping itemshttp://ianalysis.blogspot.in/2013/10/china-aggressive-investor.html.

FROM CMO TO CCO (CHIEF CUSTOMER OFFICER)

The role of the chief marketing officer are quickly getting dissolved with each day moving ahead. Chief Customer officer is the new position demanded and required by every companies. As organisations are becoming more customer driven and csutomer orineted the role of CMO position being replaced with CCO. Big data analysis and poistioning the product within the customer and recahing to the customer has been replaced with social websites like Facebook,Linkdin and other social sites to reach to clinets. We already see that there is tremendous linking being dveloped through social webistes to spook the sales and promotion aspect of products and services.

 Traditional strategies are no longer being used to get the customer around your door. CCO are more focused towards creating value proposition and extendes beyond branding and PR, marketing’s. Now is the time when consumer insights are easily available and hence develping the customer centric bond is the key startegy to beta acompeteion through judicious use of technology.In my rsearch I find that measure return on marketing invsrments (ROMI) is the key factor which is being taken into account. CMO often focuses on CMO—to meet the signifi cant challenges of the new era of marketing and increase revenue but not on the customer centric segments. I know many CMO wont agree to this point but that is the prime reason behind the birth of CMO. There is an outrageous proliferation of data, and part of what we have to do as marketers is to use data not to analyse the past, but to be more predictive about what people are interested in doing next.

E-mail and corporate website   would soon be replaced with social webistes where data sharing and data capturing and multiple sales would be the new trend. Markets like india and china are going to the fastest part of this segment of the media. An increasing emphasis on digital marketing requires a broader combination of quantitative and qualitative skills across the entire marketing organisation which can only be added through CCO channles only. Upcoming decade is going to be the land on line salesr which has already replaced the fixed cost component of shops and establishments. Only transportation and efficinet payment gateways and social media gatherings arrnaged through sale of online products are going to be game changers Hence more one thinks about customer and customer cnetric issues the more gain the compnay would achieve in the long term. Chief marketing officers roles ahev been replaced with social media hence now is the time when customer data analystics needs to be implemented.


 In my research I came across some market players according to him Customer insight, data-driven analytical capabilities and social media expertise are among the CMO skills are becoming increasingly important. Chief customer officer would focus extensively on the big data analysis where product designing and product positioning would take a new step. The rise of web, social and mobile channels has increased the complexity of customer engagement. The chief marketing officer is going to be key player for the upcoming customer centric growth.

Saturday, September 21, 2013

Strategy Implementation Linking with Competitors (The best motivational strategy) Series 1

Formulation of strategy might be an tough work but implementation of the same is no less than that in comparison. Implementation process of strategy faces many hurdles and one of the prime is shift of the responsibility, especially if strategy-formulation decisions come as a surprise to middle- and lower-level managers. This place where and why it is essential that divisional and functional managers be involved as much as possible in strategy-formulation activities. In my research I have found that following are the few strategy implementation hurdles being faced across organization across the globe:

·         Establish annual objectives
·         Devise policies
·         Allocate resources
·         Alter an existing organizational structure
·         Restructure and reengineer
·         Revise reward and incentive plans
·         Minimize resistance to change
·         Match managers with strategy
·         Develop a strategy-supportive culture
·         Adapt production/operations processes
·         Develop an effective human resources function
·         Downsize and furlough as needed
·         Link performance and pay to strategies

Well from the above list it can be well found that the entire management changes are extensive while implementation of strategy. In my research I find that through gap analysis that failure of implementation of strategy is lack of interest is detrimental to organizational success. The organizational changes not only needs to be communicated but needs to be open space culture where mid level management and lower level management needs to be included within the change. It communication process should not be tuned like an order flow since in that case the probability of miss representation of the same becomes a key point. It’s being often being found that changes are being communicated just like an order which creates negative impact on the performance for the short term where employees often treat the changes as unsecured which impacts the strategy implementation. Top down flow of communication is essential for developing bottom-up support.

In my research I have developed a complex but simple process where employees can be motivated to be a part of the implementation of the strategy. Strategies are developed keeping in mind the competition analysis of the competitors. Now if the employees of the organization are benchmarked with the competitor analysis then the process of implementation of strategy could achieve the desired objectives. Firms need to develop a competitor focus at all hierarchical levels by gathering and widely distributing competitive intelligence; every employee should be able to benchmark her or his efforts against best-in-class competitors so that the challenge becomes personal.

Only just creating benchmark of implementation among the employees would not be a wise process since motivation are required more while implementation of the strategy. Hence benchmarking the performance with the competitors is the key to motivation which would lead to an auto process of growth for the successful implementation of the strategy. Objectives should state quantity, quality, cost, and time—and also be verifiable.  This is only possible when they are best linked with competitors. Terms and phrases such as maximize, minimize, as soon as possible, and adequate should be avoided. These are the steps through which organizations faces the hurdles of growth. It is being found that after 2008 the business process has taken a new shape where awards and compensation are no longer being used as the motivational aspect of implementing strategy. Hence linking the performance and driving the performance from the mid level and lower level management is link it with the competitor benchmark theory is the best motivational key. Through this process one company develops its future management employees. It also helps to keep an tab and link between the competitor and developing its future level management.

Tuesday, September 17, 2013

Indian Economy Heading Where?

The global economy is now divided in several issues where the emerging economies are struggling to find growth and on the other side developing economies are looking for raising the interest rates. Indian economy is currently surrounded by political war followed with macro economic factors. The political war between Mr.Rahul Gandhi and Mr. Modi would create lot of betting opportunity which would be visualized on the capital market barometer. In my research I find and continue with my earlier note that sensex and nifty would be on a roller coaster ride in the next 9 months. In between the US economy is in desperate minds to create some historic revival of the economy and that’s too seems to be cooked one or unrealistic economic projection or result based.

The reason behind US QE tapering is that all the bonds are now being bought by China and now China is asking higher premium for the bonds which is not possible for the US economy to provide. Moreover US is threatened by chemical weapons which might become significant threat in the near term. Hence the war is important the world speculators would get significant opportunity for the betting. Inflation devil is another one which is going to spoil the economic growth of emerging economies. China and Brazil both are currently reeling under the slowdown and with a significant threat of asset bubbles. The decade and the year 2013-14 is going to be a roller coaster for the world economy. Indian economy on the other side is focusing more to make itself more attractive to get investments. In fact I find its is more keen to keep the previous hot money intact within its system, that’s why petrol and diesel prices are being hiked.

The hike is also to back up the foreign ratings which India is keenly awaiting. Crude prices on the other side are going to be a key problem for the world economy followed with currency depreciation. Global investors have been making money from all angles which include currency, gold, equity and debt. Global investors have made money well from churning and building short and long position taking simple arithmetic of negative and positive correlated asset behavior. Well the print media might have been fooled to print that global investors lost money but I find they made billions out of millions. Crude gave a fantastic return from the levels of below 90 to above 105 levels. Gold in Indian currency gave returns from 24000 levels to 35000 levels and now again back. Equity markets kept a roller ride and debt market gave Indian investors healthy returns during Jan-May 2013. Altogether I find the next 9 months would be a game of asset based investment strategy where asset allocation would play a sensitive role for printing money.

Sunday, September 15, 2013

Supply Chain Management Balanced Score Card…Working Capital Series 2

The current economic condition has spooked up the cost burden on the companies particularly for the SME. The slowdown in demand has lead to significant affect on production cut down but the levels of inventory has been on the higher side which has turned out to be a burden on the income statement of the SME segment and other  companies too. In my research I found that companies are running with high level of inventory. The inventory levels have soared up over the last couple of years on expectation that the economic turnaround would lead to a substantial built up of inventory. Moreover in my research I find that organization made a wild mistake of having decentralized inventory/logistic system which had lead to an significant cost built up. In between Mergers and takeovers have changed the shape of many markets higher levels of service and quality is the demand where Just in Time operation models would be implemented. Moreover the level of customer satisfaction has went into such extension that just in time mechanism needs to be the demand for the now.

 
But I find that decentralized systems where different functions of the organizations who are having different budgets and these budgets are nothing but rivalry between the cost savings competition. It is a competition of input cost where the competition should be for output cost.

If individual functions are encouraged to optimize their own costs because of the budgeting system then this will often be at the expense of substantially increased inventory across the system as a whole. Minimization of cost of production in different function has resulted to an increase of logistic levels talking advantage of the weak economy. Likewise building inventory taking advantage of low levels of prices in expectation prices would increases in the long term has now turned out to be a nightmare for the huge built up positions. Likewise, if purchasing management seeks low material costs through bulk purchases then again the inventory of raw materials ahead of production will often be excessive. This leads to excessive working capital getting blocked up which cannot be converted into immediate cash. This type of situation gives births to wrong strategies for maintaining logistics which finally damage supply chain management. I find that there is a high requirement of logistic or supply chain management vision statement which would guide the organization to provide efficient support to the customer as well as to the company in different economic phases.

In my research I find that one of the key management theories that is being understood is that flows of information and material between source and user should be co-ordinate and should be managed well but this hardly implemented. If this would have been implemented then companies should not have run out of cash and should not have to pile up huge debt for working capital financing. Traditional costing system needs to be revised aligning with the global uncertainty currently ruling the world economy. Satisfaction of the consumer demand should be aligned with information flow which would result to the creation of the exact demand based product. Sales mix needs to be more data driven where big data analysis should be carried out so that working capital management becomes efficient. Efficient communication system in supply chain management would result to less working capital blockage for the same. Despite of having different functions certain aspects of the organization needs to be defined in terms of the overall goal of the organization.

Over here I find the following balance score card steps needs to implement which would help the measure the logistic segment. I have kept balanced score card limited to the functions of better, cheaper, faster and closer based system of logistic supply chain. As I have been discussing many time about balanced score card I find that by designing the metrics mentioned below would help the supply chain management from customer perspective to financial from process perspective to learning perspective. Learning perspective is based upon the efficient utilization of technology into the system.



Globalization of industry, has created a complex flows of materials and information from a multitude of offshore sources and manufacturing plants to a diversified markets, has sharply highlighted the inappropriateness of existing structures within organization after the debacle of 2008 recession. Logistics-oriented organization is the demand of the time since global imbalances needs to be well captured within the system.  There has to be nothing less than a shift from a functional focus to a process focus. Balanced score card would work wonders to control the aspect as well balance the working capital requirements with efficient information supply.

In my research I find that one order management system architecture that links order entry, order management and factory order/shipment processing needs to be provide more attention in the coming days. This core process is supported by a common information system that provides sufficient logistic supply without carrying the burden over the books of accounts in term of working capital. Judicious mixture of technology into the system would help SME to overcome the problem of excess working capital getting blocked to logistics. In this article the  review of the challenges facing the organization in a changed environment I have emphasized the need to break down the ‘walls’ that traditionally have fragmented the organization and impeded the cost-effective achievement of customer service requirements.

Over here I find the following balance score card steps needs to implement which would help the measure the logistic segment. I have kept balanced score card limited to the functions of better, cheaper, faster and closer based system of logistic supply chain. As I have been discussing many time about balanced score card I find that by designing the metrics mentioned below would help the supply chain management from customer perspective to financial from process perspective to learning perspective. Learning perspective is based upon the efficient utilization of technology into the system.

Monday, September 9, 2013

Supply Chain Management Basics….Series 1

Seeking a sustainable and defensible competitive advantage has become the concern of every manager who is alert to the realities of the marketplace. Logistic and supply chain management plays a key role of an organization both in terms of revenue as well as cost management. Logistic and supply chain management could leads to the source of competitive advantage is found firstly in the ability of the organization to differentiate itself, in the eyes of the customer, from its competition, and secondly by operating at a lower cost and hence at greater profit. This competitive advantage is being lead by marinating the superiority over competitors in terms of customer preference. Markets like Indian and china where markets are fragmented and yet to be explored proper and efficient logistic and supply chain management plays a pivotal role.

Successful companies either have a cost advantage or they have a value advantage, or even better a combination of the two. Customers in all industries are seeking greater responsiveness and reliability from suppliers; they are looking for reduced lead times, just-in-time delivery and value-added services that enable them to do a better job of serving their customers. Value chain or Supply chain activities can be categorized into two types –primary activities (inbound logistics, operations, outbound logistics, marketing and sales, and service) and support activities (infrastructure, human resource management, technology development and procurement). After the recession of 2008 the logistic supply chain management has taken a radical change. In order to keep the profitability numbers in tight range more focus has been deployed on efficient supply management both in term of inbound and outbound segment.

Efficient flow of information and timely supply is the key to success process in emerging markets for supply chain management. In the last decade we have seen the introduction of flexible manufacturing systems (FMS), of new approaches to inventory based on materials requirements planning (MRP) and just-in-time (JIT) methods and, perhaps most important of all, a sustained emphasis on total quality management (TQM). In the last decade we have witnessed that cost of purchased materials and supplies a significant part of total costs in most organizations, but there is a major opportunity for leveraging the capabilities and competencies of suppliers through closer integration of the buyers’ and suppliers’ logistics processes. Supply chain management is an integral part of business process. The power in the distribution channel continues to shift from supplier to buyer, there is also a trend for customers to reduce their supplier base. In other words they want to do business with fewer suppliers and often on a longer-term basis. While I have been discussing about product innovation now it’s the time of process innovation also going to be included in the growth of an long term business. In simple terms it is: Competitive advantage = Product excellence × Process excellence

Product life cycles are becoming short with the rapid increase of innovation. Shortening of life cycles creates substantial problems for logistics and supply chain management. Few of the problems which would be discussed later on in the next series are shorter lead times. Lead times are traditionally defined as the elapsed period from receipt of customer order to delivery. The real lead time is the time taken from the drawing board, through procurement, manufacture and assembly to the end market. This is the concept of strategic lead time and the management of this time span is the key to success in managing logistics operations. Managing the following segments are critical challenges for the logistic and supply chain management 1) shorter lead time and efficient supply.2) Demand driven supply strategy rather than forecast driven.3) Reliability of supply of stocks 4). Partnership sourcing is getting developed.

Online business and shopping business has taken a radical change hence the demand of efficient logistic and supply chain management comes into play. With the current economic situation of the global economy uncertainty is more which has resulted less working capital to be blocked for stocks. Companies are looking for efficient ways through which less stock of products can be made so as to free up the capital requirements. One of the main reasons why any company carries safety stock is because of uncertainty. But the reliability factors still rules the market and hence companies are entering into agreements or partnerships include improved quality, innovation sharing, reduced costs and integrated scheduling of production and deliveries. Underlying all of this is the idea that buyer/supplier relationships should be based upon partnership. Lead time supply has come down where products and services need to be supplied with efficient and prompt communication model. From the suppliers’ point of view, such partnerships can prove formidable barriers to entry for competitors. The more that processes are linked between the supplier and the customer the more the mutual dependencies Increase and hence the more difficult it is for competitors to break in. It is another process of barrier to competition to grow which would help the suppliers to hold a long term relations.

Demand driven supply process is being focused replacing the traditional forecast driven supply methods since after 2008 recession there is more turbulent economic conditions. In order to improve the supply chain methods companies are entering into partnership sourcing model too. These types of model leads to less working capital requirements and linking the same with demand driven rather forecast based hence efficient cost management and working capital financing is being developed.

Multi Brand Multi Product ....Shareholders Value

In my research I find that there are multi products and multi brand management which leads to an complex process for the brand management. Gone are the days when one company used to deal with only one product. Each brand fights for its existence and that’s too simultaneously. Brand extension is a common phenomenon where numbers of products are launched under the same company. Even merger and acquisition leads to multiple brands having presence in multiple geography.

In my research I have found that the question of how many brands should be kept in each market has become a primary concern of all senior marketing managers. Now after 2008 recession products are being reduced and core values are being concentrated in developed economies where as in emerging economies product baskets are being widened. Industrial production has also become concentrated. International competition has put the emphasis on high productivity and low costs and has led to the regrouping of production units and research and development activities.  In emerging economies like India and China where huge population is yet to cover with minimum living means multi product business classified aligning with the per capita buying consumer works wonderfully.

 Multi brands success depends upon the geography where economic factors need to be accounted before getting the brand launch. Recession of 2008 have turned the market upside down and hence brand managers needs to do little amount of research before exploring into markets. The luxury goods industry has long been targeting the world market, as indeed have most industrial companies. It quite hard to decide how many brands to be kept on the shelves and how many to be removed. Every market can be segmented, by product, customer expectation or type of clientele.


In my research I find that often brands gets destroyed when reverse engineering is being executed and copy of the similar branded products are being replaced with duplicates. This is one of the common practices across world and India might be the leader. Hence protecting the intellectual properties is an prime activity of brand managers. Where innovation is the mother of the brand management their we need extensive intellectual property protection. For example in mobile market of India we find extensive replicated products of different brands which raises the voice of intellectual property rights. Achieving super profits from a branded strategy is one of the key roles of the brand managers. We often find mistake of pricing our products over the non branded products just to catch and figure out that the price of branded product is the premium which the buyers pay. 

But the right strategy for achieving super profits and growth in countries like India where price is the value decision maker. The best strategy is to sell the branded products below the unbranded products and derive super profits riding on the wheels of volume. This type of strategy is best suited for countries like India and China or emerging economies. Extensive brand related to strategy should be executed to decide the optimal pricing and volume mix of each brand where multi brand products are being dealt.  Selling equal to the price of branded products can only work wonders where volume and value proposition is decided based on price and the market is fragmented. This is how the brand managers can be able to increase the shareholders value through multi brand products. 

Sunday, September 8, 2013

The challenge of growth in mature markets-Series 4 (Less Advertisement and Direct Relation)

Identification of customer loyalty is a key game in matured markets for the brand values. Banks are the best examples of creating customer loyalty. But India we found radical changes of banking segment where private banks came and changed the culture of customer servicing and created a new brand concept for the customers. PSU banks were compelled to make and adapt to the changing culture later on. Loyalties of customers are now being created through online shopping portals where price competition and discounts or freebies are the key factors behind the customer loyalty segment. Brand has taken a new shape where social networking sites play critical role. In my research I have found the hotel should give some coupon of discounts to its prime clients so that next time they come they get an advance booking followed with an discount being generated from their first visits coupons.

This would create a fixed number of consumers to come to the hotel in case of their visit. They would also help the consumers to plan accordingly to avail the discount of the hotel. This plan would get a wide value in those hotels that have a chain of such hotels present in various geographies. This strategy would lead to significant growth of loyal customers across the board. Loyalty clients need to be recognized and this is one of the best ways of adding value to them. This increases the brand value followed with a significant growth in customer loyalty. Discounts and coupons if used judiciously would create extreme revenue growth in term of brand equity valuation. These are the ways through which direct relationships are being created with the consumers and the relationships are being strengthened. Customer relations increase the effectiveness of brand promotion. Provide direct purchasing and repeat purchasing incentives. However, this last approach has meaning only if it creates long term value: that is, if behavior initially motivated by the lure of an incentive is subsequently transferred to the brand and its products or services. Repeat purchasing is the customer’s way of giving the brand a unique chance to prove itself.


Treating clients as friends rather than just accounts is the long lasting key process of creating brand valuation. One should focus on brand usage which would finally lead to brand multiplication. Loyalty may be a consequence of attachment, but it can also be generated by means of bonuses and so-called ‘loyalty cards’. In my research I have found that if proper data analysis is being made about the consumer then the strategy of discounts and coupons would work extensively. Promotional activities could be designed aligning with the consumers categories and also creating brand valuation. In my research I find that brands needs to strategies where it provides satisfaction to the consumers. Satisfaction and attachment are two different concepts where attachment can be ruled out by any external competition where as satisfaction is the responsibility of the company to provide.

Saturday, September 7, 2013

Challenge of growth in mature markets-Series 3 (Advertisements & Communication)

Advertisements of an product may turn out to be barrier for growth if the process of communication is not clear or to the point of using the product brand. For example there is an advertisement of a Jam then the communication should be to consume more of the jam which would spook up the demand of the brand and consumption. In an research it has been found that spending more on innovation rather than advertisements would lead to growth. In mature markets innovation and communication plays a significant role for a product to find a growth. In mature markets value proposition plays vital role. Price competition is based upon proper cost bench marking.

If cost bench marking is not made then innovation cost and other relevant cost would turn out to be an burden for the product which might lead the product open to the price war. In other words the product gets exposed to the price competition. Markets like India we need price to be designed based on target costing since loyalty of the customers changes with price competition. But in India I find that consumer behavior changes from place to place (example villages and cities) hence product pricing are so fragmented followed with content size. Advertisements have also taken a radical change where most of the concepts of advertisements are being focused towards getting them placed in to the consumption pattern of common people of India or classified across the client segment. During years of economic growth we find prices to scale up in India since consumption takes new height and same price comes down with different sets of content size during economic down turn in India. This is mainly being done to save the brand and its addicted consumers in India. Price reductions show that the brand has to stay within the core of the market if it wants to continue.

 Across product segments and geographies segment we find these type of differences. This was discovered by European car manufacturers after first the Japanese and now the Korean invasion: they forced all car OEM (original equipment manufacturers) suppliers to reduce their prices by 20 per cent. Portable computer manufacturers also know that they must both innovate and reduce their prices. Indeed, the price premium that pays for the superior added value is a differential concept. In various markets it has been found that price helps to categories and classifies the products in matured markets. But once the price rises above the average consumer consumption pattern then the volume start declining and product rediscovers its brand value and then battles for getting into the niche product segment. Price is also a type of communication which creates brand value for the product and classifies the same into consumer market segment.  To save the brand of an product it is prudent to make the product economically impossible for them to enter the market. 

The cost of the factors of production is the most important, which leads to a long lasting competitive advantage. Hence I was repeatedly marking that cost bench marking is the key to success of an brand. Innovation and Domination through image and communication is the another key pillar which creates entry barriers. Another segment which helps to create barriers to entry of new players is Controlling distribution is also a major handicap for new entrants.  In a market like India where basic infrastructure is of very weak an efficient distribution system would provide in my research I have found that when a product launching planning is being made simultaneously entry of competitors should be designed and the same should be communicated to every angles of the company. This is a reverse engineering process through which the competitor analysis and strategies the same is being executed. This is the practical way of communicating of the market and competition analysis.

US EMPLOYMENT AND WAR

Fight a war and create a GDP growth. Well this has been the game strategy of US economy over the last 3 decades. It’s a blessing in disguise for the economy which is struggling to find its GDP growth followed with an stable macroeconomic numbers. If its airstrikes against Syria then its would push up the international cost of crude which would become a blessing for the US economy which is itself producing the same.US would be able to sell bonds at an higher price since war funding would be made and moreover the US economy would finds some growth from the war.

Recently I made a quick study about its unemployment numbers and its growth numbers where I find that is should come up with the hard facts in the presence of all of you. The U.S. created a modest 169,000 jobs in August. In August, you see, the number of people working part-time (under 35 hours a week) fell by 234,000, while the number working full-time rose by 118,000. Manipulation of numbers happens in terms of unemployment number coming down to below 7% is an fatal story. Over the past year, the BLS estimates that full-time jobs have increased by 1.7 million, while part-time workers have increased by 288,000. Full-time work has increased by about 1.5%, while part-time work has increased by about 1%. Hence the economic stability of US is far yet to come. At the same time, the labor force participation rate fell to 63.2%, the lowest level since the summer of 1978, as some 312,000 people stopped looking for work. The participation rate measures how many healthy, working-age people 16 and older are looking for jobs.

I went for further research to find the fact more where I found that In August, the number of long-term unemployed (those jobless for 27 weeks or more) was about unchanged at 4.3 million. These individuals accounted for 37.9 percent of the unemployed. Over the past 12 months, the number of long-term unemployed has declined by 733,000. Full time job is a distant dream for the American citizens. The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) declined by 334,000 to 7.9 million in August. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
Fighting a war and creating demand for employment since ancillary industries would find a growth in US economy is the key trigger for US. If war happen then it would damage the oil pipelines and sources of Syria which would be replaced later on by the same US and at the same time it would be able to sell its own crude at an higher valuation which would help the US treasuries later on.

INTERNAL AUDITORS...ENTERPRISE RISK MANAGEMENT

Risk management and risk mitigation is now the prime objectives of the internal control departments of an organization. In my research I have found that internal auditors particularly in the Indian context have been kept far away from being a part of internal auditors. 

Examples of objectives include achieving profitability, ensuring efficiency of operations, manufacturing high-quality products or providing high-quality service, adhering to governmental and regulatory requirements, providing users with reliable financial information, and conducting operations and employee relations in a socially responsible manner. But in Indian context I find internal auditors are less being asked to get into the day to day activities and more often being taken into the system as an outsider who will conduct and prepare for the statutory audit.

A organization face many risks of not achieving reliable financial reporting and this the place where internal auditor comes into an active play. The role of the internal auditor can be viewed from the below mentioned examples where, a salesperson may overstate sales to improve the likelihood of receiving a bonus. Employees in the receiving area may be too busy to accurately record inventory when it is received. Hence enterprise risk arises from number of segments within an organization. Management needs to identify the risks to their organization of not achieving reliable financial reporting.

Once these risks to reliable financial reporting are identified, management implements controls to provide reasonable assurance that material misstatements do not occur in the financial statements. Management gets internal auditor into other day to day activities and dislocates them from their prime responsibilities. In much organization I have found that internal auditors are kept for the sake of management regulations but they are given the work of back office end. Management needs to identify the risks to their organization of not achieving reliable financial reporting. Once these risks to reliable financial reporting are identified, management implements controls to provide reasonable assurance that material misstatements do not occur in the financial statements.

Management forgets that for every decision making there is a significant demand for quality information. This information should be accurate and precise so that decision making process gets close to the process development. Effective internal control improves the quality of information, thereby allowing for more informed decisions by internal and external users of the financial information. The seed of the problem is that internal auditors are given less importance and value within an organization which leads to a significant threat for the organization itself in the long term.


 We read in many books about various roles of internal auditors but the prime part which is never practiced that they are the pillars of the decision making process. The internal auditor  understand a company’s internal controls in order to anticipate the types of material misstatements that may occur and then develop appropriate audit procedures to determine whether those misstatements exist in the financial statements. Hence internal auditors are the pillars for enterprise risk management.

Thursday, September 5, 2013

Sovereign Investments

In my recent research I came across few of the investments climates across the globe. Flow of fund has increased and different asset classes and segments are being chosen for investments. We all know that European economy is struggling currently with its austerity measures but at the same time it is now one of hottest land on earth for investments. Sovereign wealth funds are finding various segments of investments into Europe. At the end of 2011, sovereign-wealth funds’ assets under management amounted to $3 trillion, following 237 direct investments worth $81 billion that year. Some experts even estimate SWFs’ assets to be worth $6 trillion. In fact, of the seven SWFs that control more than two-thirds of all SWFs’ assets, three are from Asia (one from China and two from Singapore) and three are from the Middle East (Abu Dhabi, Kuwait, and Qatar). European countries rank first among hosts for SWF investments, which accounts for 40 percent of the total value of deals in 2011. The United States, accounts for less than 10 percent.   

There have been a significant drop in SWF after the debacle of 2008 but faced more problems after the debacle of Euro zone economy. The Chinese Investment Corporation’s biggest investment last year was a 30 percent ($3.2 billion) stake in the gas and oil exploration and production sector of the French energy giant GDF Suez. Furthermore, SWFs have comparative advantages over other kinds of institutional investors. Unlike insurance companies and pension funds, they have no long-term debt or future payment obligations. And, as public investors, they are likely to have a better understanding of investment projects that depend on public policy. Given these advantages, SWFs play a large – and growing – role in infrastructure finance. Well after a down-slide of an economy if proper investments and new alternatives are not being taken up then that economy hardly finds any growth over the long term. Opportunities created in recession times needs to be nurtured for the long term growth. It like just a replacement of old assets with new ones. In 2011, SWFs invested $35.2 billion in financial services, $13.4 billion in property, $13.2 billion in fossil-fuel resources (mainly oil and gas), $6.5 billion in infrastructure and utilities, and $3.4 billion in aircraft, car, ship, and train manufacturers. Given that SWFs’ primary objective is to transfer wealth to future generations.

Well GIC Asset Management, an arm of Singapore's more than $100 billion sovereign wealth fund is aggressively inclined towards investments in Europe. In the same lines Queensland Investment Corp., Brisbane the A$70 billion (US$65.8 billion) is looking aggressively for investments in europe.  Private equity fundraising is on the move backed by recovering of the financial markets followed with healthy business growth for long term. Globally, fundraising hit $122 billion in the second quarter, the highest quarterly level since 2008. European fundraising – among the hardest hit by the crisis – reached €12.7 billion in the second quarter, more than twice the quarterly average of 2012.



Source: Invesco Global Sovereign Asset Management Study 2013
This shows clearly the appetite for investments in euro zone economy. Demand from the likes of California Public Employees’ Retirement System, California State Teachers’ Retirement System and Teacher Retirement System of Texas, which manage pension fund money for workers in two of the US’s largest and richest states, is offering evidence of more optimism about the economic outlook in Europe and the future of the euro zone.

 In other parts of the world we find that the Pension Fund Global, funded by the country's oil and gas sector, is worth some NOK4.55trn (€577bn) are looking aggressively for investments. The fund has been branching out into property assets. Yesterday it announced a $684m deal to buy 45% of Times Square Tower in New York from Boston Properties. Sovereign investors were increasingly interested in private equity and property, although their preference is often for in-house or co-investment, rather than via funds.  In my research I find that their have been a dramatic change in the investment pattern in sovereign funds. Alternative assets and core assets investments  like private equity, real estate, infrastructure, hedge funds and commodities, Core asset classes - as equities, fixed income and cash their have been a change in pattern. The investment climate is changing and similarly the SWF segment. Today Some SWFs in the Middle East and Asia seem to understand the risks associated with carbon-heavy investment portfolios, and are ready to work together to create a platform to finance resource-efficient, low-carbon, environmentally friendly infrastructure projects

Wednesday, September 4, 2013

BALANCED SCORE CARD OVER TQM: SME

In my research I find that there is a miss conception that management principles and policies can only be adopted by large organization since they are too big for failing. But I hold an opposite thought where SME who are the biggest future leaders should adopt the principles. These management principles would help the SME to grow his business. Bankers and stake holders always prefer companies with the highest principles and standards. In my research I find that most of the companies thrive to get ISO 9000 certification.

Well ISO 9000 is the family of standards is related to quality management systems and designed to help organizations ensure that they meet the needs of customers and other stakeholders, while meeting statutory and regulatory requirements related to the product. The standards are published by ISO, the International Organization for Standardization, and available through National standards bodies. ISO 9000 deals with the fundamentals of quality management systems, including the eight management principles on which the family of standards is based. ISO 9001 deals with the requirements that organizations wishing to meet the standard have to fulfill.

In my research I find that SME business segment needs to go for ISO 9000 certification levels. But I find very few companies are in the race for the same. I find the implementation of balance score card in SME business segment linking it through total quality management would leads to a stupendous growth in the long term. In my research I find that there are couples of similarities between TQM and Balance score card.TQM looks for growth opportunities which will provide an end result to stakeholders of the organization. This one perfectly matches with the ‘Financial Perspective’ of the balance score card. TQM focuses on customer satisfaction employee empowerment which reflects the management style. In Balance score card we find that customer and employee perspective deals with advanced level of expertise which is linked with the internal control process.

Overall TQM focuses to improve poor company performance if the company is not doing well. Balance score card designs a metric which would help to measure the same TQM principles but links them with advanced expertise of BS score board numbers. SME looks for better quality and better financial perspective which can be achieved if the SME adopts the balance score card metrics. TQM fails to identify the changing customer expectations even for organizations seen to be doing well. Balanced score card works to be a genius in these terms.

It would help an SME to present his business and financial in a more constructive manner followed with better management principles. Bankers and stake holders would find more value based proposition of doing business when an SME adopts balanced score card strategies. Serious problems faced by the small business manager when trying to implement TQM 1) reduced training budget 2) owner/manager's lack of business experience and knowledge, and the shortage of financial and human resources required. Balanced score card helps to overcome both hindrances and design management road map followed with measurement metrics which would help the SME to grow his business in the initial days. SME should make a clear planning that at the least possible time they should go for the ISO 9000 certification. Since this hunger would lead them to focus more on sound business principles and practices which can be measured internationally by any one. Balanced score card is one of the such international standard which can be measured.

Tuesday, September 3, 2013

The challenge of growth in mature markets-Series 2

Innovation in sales is a key metric for the success of the product brand in the long term. It is well known that markets grow by the reduction of unit prices: this is how the computer became a household necessity, mobile phone sales skyrocketed, and so on. In mature markets, the goal is no longer to increase the market in volume, but to increase it in value. Well India still remains 3 digit revenue earning market where as other emerging economies are in the 2 digit category. Coming back to the topic I find that increasing the value proposition in matured markets remains key challenge.

Volume growth is different ball game which is being played by reducing the prices but value proposition, innovation remains the key player. The similar type of story can be found in mobile markets in India where companies like MicroMax, Samsung, LG, Sony etc came with different varieties of products category to different perspective of users. They removed the barriers to consumption and enhanced the value proposition of the mobile market in India. In fact in my research I find that Indian mobile market has changed and served every angle of the brand management. It is one of the best examples that can be taken by the B-school segments. Innovation leads to reduce the generation gap between product life cycles. With time, the brand becomes less narrow-minded, and acknowledging differentiated expectations, decides to respond to them. Hence innovation keeps the brand alive where as the product dies over the time.

In my research I have found the companies in other industries seldom withdraws their old products from the markets. I find that companies needs to implement a new philosophy where product withdrawals are not only accepted but encouraged. This will keep the brand alive and will get entangled with generation gap theory. In my research I have found that some companies only launch an extension after having cancelled another with a low turnover. Well they follow the theory of cash cow and other management metrics. But the product life cycle comes to an end even before the calculation of its death is being derived. This withdrawal does not have to be brutal, but can be done gradually so that clients turn to other products within the range. This leads to successful implementation of new lines of products without losing the brand valuation. This process can be termed as cleaning of products from shelves.

One of the interesting aspect I came across is that new products brings in new consumer to the existing brand and simultaneously the new product gets a new set of consumers. Every new product draws in new consumers distinct from those already consuming the established products. In so doing, they re-evaluate their overall perception of the brand gets a clear analyzed data about consumer market. Value proposition have been increased so that products gathers more brand with changing life cycle of an product.


For example Virgin airlines offered the service of pickup of its passengers at their offices by chauffeurs in Volvo cars and driven to the airport. In addition they were offered access to a shower room after landing, to get ready for their business day. This not only attracted new clients but stimulated a higher frequency rate among all clients. Hence innovation in products helps to increase the sale proposition as well as the brand image. Well the series would continue in my next article. The reason for putting everything separately is that my readers gets a clear understanding of my words and thoughts in the brand management segment.

Monday, September 2, 2013

Challenge of growth in mature markets-Series 1

When products get matured and markets gets matured creating brand valuation becomes a struggling activity. In my research I have come across where certain steps were taken by some companies across the globe that made a remarkable foot mark on matured markets in brand creation. The first steps which I have witnessed are that to move from a pattern of low-volume use to a pattern of potentially higher-volume user segment. Building per capita volume of consumption. Understanding the consumption pattern and its bottle necks are the primary part of the research for launching products into the market. We have found that products are now being sold in supplementary format rather than single format so that sales and brand valuation grows mutually and exclusively together.

For example coca-cola, Pepsi and other soft drinks are sold in KFC, McDonald, and Pizza Hut etc. The benefit of selling soft drinks with these channels is that each food outlet has its own preference and choices of customers but while coming to drinks it remains the same despite of different culture of foods. This leads to increase in per capita brand consumption. Coca-cola or Pepsi is being sold as an ancillary product which is consumed with different types of food items being sold at different outlets. Over here the customer don’t have to go for an second thought for consumption of soft drinks, it becomes a supplementary product. People are compelled to go for the soft drinks and hence the brands of the drinks get a constant loyal customer automatically generated from the food shops. Well this part of the story is being termed as micro marketing which is the second part of increasing brand valuation. Moreover specific marketing plans are devoted to specific situations such as lunch and dinner, breakfast and evenings.

Another way which I have come across is by identification of the barriers to consumption of brand. Identifying the barriers of consumption and relieving them was a service not only to clients but also to profitability. But it is first necessary to understand the very specific circumstances and motivations of consumers in each cell. To increase a specific type of behavior requires behavioral segmentation, then an in-depth understanding of those in each of these behavioral segments. Geographical differences and cultural differences needs to figure out so that products gets proper brand valuation. For example Pizza Hut, KFC may not be famous in a remote village but plain simple foods like Dosa, Sambar, Dal Rice etc could be of great importance. Now if coca-coal or Pepsi is available over their also then calculate the brand valuation which is being available even in Pizza hut and in a small shop in a remote village. Brands helps to bridge the cultural gaps and also segments the market and creates value in different market segments. Further I find that one needs to identify the barriers of consumption of brand by analyzing who are they? Why don’t they consume more? Is it a taste problem, a satiety problem, a price problem, a format problem, a packaging problem, an insufficient variety of line extensions distribution problem?


Advertising companies plays a significant role while designing the brand valuation of an product. In today’s globalised world we consume a particular situation and it is this situation that defines the brand’s competitiveness. Today we already find stupendous growth and changed advertisements where specific situations are created so that the consumer can have a better understanding of the product usage and its brand value. 

The situation is the brand’s true battleground. Each situation is associated not only with a different subset of competitors, but also with expectations, needs, volumes, and growth and profitability rates. For example the advertisement of Horlicks which caters to every segment of the society is an wonderful brand value creation advertisement followed with product diversification. Whether it’s a matured market or an underdeveloped market judicious mix of strategies would create the brand value which finally leads to the success of an product life cycle. In my next article I will depict the story of product life cycle death and how it can be revived or saved.

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