Wednesday, August 31, 2005

Made for India

That India is a different country is something that we all know and accept for god or for bad. Designing a product for India means taking this "difference" into account.

Many of us have cordless phones in our homes. Some of us have timers in our washing machines that promise to do the job at a delayed time. TVs also have timers, though we usually never venture on that side of the controls. My music system is an import and it is designed assuming that the system is always powered on.

So what happens when there is a power failure?

My cordless is as good as a paperweight and I run to my regular instrument. The washing machine resets the timer (incidentally Godrej says its washing machines, in the ad on the right, has a memory back up) or stops mid cycle and starts all over when the electricity is back. Digital clocks (one of those things used only in the US) lose time and go kaput when the electricity switches on and off.

Nowadays though, cordlesses are available with battery back up, as are washing machines (above). As for clocks, well, we always run them on battery!

But coming back to the point that I started off with, product designing for India often has to take such uncertainities (which are taken for granted elsewhere) into account. The Nokia 1100 is an example of a "Made for India" (it was marketed as such) brand and featured a torchlight, dust resistant keypad and an anti slip grip. With the growing importance of Indian markets and consumers perhaps we will see some more innovation coming our way.

Tuesday, August 30, 2005

Smart advertising!


On the Indian Railways website, was this cheeky ad today by Spicejet with the quote "Forget about long train journeys". I like both the cheekiness of the advertiser and the sense of humour of Indian Railways to let this be advertised on their site. Thanks Arun.

Monday, August 29, 2005

Lifebuoy, now in all colours

Lifebuoy is one of the largest selling brands of soap in India. Known once upon a time for its distinctive carbolic fragrance (its more odour than fragrance) and its chunky design, marketing legend has it that customers referred to it as just "Laal soap" (Red soap). No wonder then that it spawned a host of me-too brands each trying to mimic the red wrapper and little else. Its ad jingle "tandurusti ki raksha karta hai lifebuoy" was synonymous with radio advertising.

But HLL, instead of killing the golden goose or fattening the goose introduced silver, bronze and many other variants of the goose, I mean, Lifebuoy.

So, now there is an International Lifebuoy Plus and an Active Lifebuoy (I think this is the original in a different shape and a slightly agreeable fragrance). These are pink and red respectively both at the wrapper and at the soap level. Then theres a Lifebuoy Fresh and Lifebuoy gold which are orange and white respectively. If you are some kind of a nature freak (I guess), theres Lifebuoy Herbal, which is green. Lifebuoy also has a talcum powder variant (no, not a soap, but talcum powder).

As if all this werent enough, a Lifebuoy Clearskin, (some kind of a premium Lifebuoy) is also available to complete this mess. I think this kind of brand extension dilutes the importance of the brand and confuses the consumer rather than generate any kind of extra business except perhaps curiosity value. Why does HLL think that a consumer will buy only Lifebuoy (substitute this with any other soap name) of any colour and hence offer him an entire range of Lifebuoys?

Sunday, August 28, 2005

Harsha Bhogle, on India Empowered

Harsha Bhogle, my favourite commentator and a wonderful writer when he is not commentating, writes in Indian Express on what India Empowered means to him.

Heres the link and a snip

...But our federations do not like empowerment. It is a terrifying word for them for it conjures up ghastly images where words like excellence, accountability and passion haunt and imprison them. In this new India of freedom and achievement they are fortresses of feudalism and mediocrity. The chief of Indian hockey recently said that paying match fees to players who work very very hard to play for India is akin to bribery. That hurt. As much as it would to you if your successor enforced 98% income tax, 400% customs duty and nationalisation of Infosys and Wipro.

This is the ministry you are having to run. A man of vision, and in love with empowerment, forced to supervise an empire of darkness. But why should it be so? Would you make me your minister for defence? Would you allow me to run the All India Institute of Medical Sciences? Weren’t you an outstanding finance minister because you had a passion for it, because you were a nationalist? Asking somebody to become sports minister today, as you know, is like asking a star centre forward to become assistant baggage man. Why? Why can’t a sports minister be passionately in love with sport?...

And heres the entire series on India Empowered by Indian Express...

India, operating models and innovation

In the recent Businessweek issue on India and China, BW had a piece on some unique business operating models in India. It talks about ITC limiteds e-choupal scheme which is the name given for a VSAT linked computer terminal in a village which farmers can use to seek latest prices of crops before selling the same. It prevents the farmers from getting cheated at the hands of middlemen.

...would access the company's intranet -- dubbed e-chaupal, for electronic "town square" -- twice a day to check ITC's own offer price for produce, as well as prices in the closest village market, in the state capital, in New Delhi, and on the Chicago commodities exchange. The site relayed daily weather conditions and educated users about new farming techniques worldwide. In the evening, the local children took free lessons on the computer. In return, the farmers would usually give ITC first dibs on their crops, thus eliminating the middlemen...

The other example it provides is of Bharti Telecom which recently outsourced its entire network management operations to Ericsson.

... in February, 2004, Bharti became the largest telco in the world to try something truly radical. It outsourced its entire cellular network to its three existing equipment suppliers: Ericsson (ERICY ), Nokia (NOK ), and Siemens (SI ) -- a $725 million, three-year deal. The move to "deep outsourcing" was revolutionary. Networks are as crucial to telecom players as engines are to auto makers. But it worked, and the effect on Bharti was profound. With executives no longer focused on managing the network, Bharti has turned its attention to marketing and customer service. In a year it has added 6 million subscribers...

It also talks about ICICI bank, which it says, has turned itself into a low-cost consumer bank by building its own high-tech back office and is expanding in rural India by setting up automated teller machines in villages...

Some other innovations that I think are unique are: ICICI (and a few other banks) allow transactions where one can use an ATM to donate money to temples. (Indians donate so much temples that the Tirupati temple is second only to Vatican in terms of the money received. Some say it is the richest.) Volvo in India leases buses rather than sell them to transport corporations (both private and government). The Simputer is another innovation from India, as is the home delivery of financial instruments (drafts) by some banks. There is also Air Deccan, which, at its cheapest, is perhaps the cheapest airline in the world (some of its tickets sell at INR 1, which is well, about 1/40th of a USD). Hindustan Lever Ltd., Unilevers subsidiary in India has a Project Shakti which is a micro credit program using SHGs (self help groups)

It is not to say that these models are the best or that working in India gives answers to every problem faced by any company in India, but with its diversity and population, it is a unique place by all means. India is slowly moving onto the international corporate resume as a "must have" destination.

Saturday, August 27, 2005

KBC economics

It seems intriguing that a game show (Kaun Banega Crorepati - Who wants to be a millionaire clone in India- popularly known as KBC) should pay out something like 2 crores (.2 bn) rupees for answering about 20 questions to some participant. On the face of it, it does seem intriguing, but of course everyone (especially STAR which airs the programme) is laughing their way to the bank.

This piece in Financial express, gives some clues. So, heres some rough calculations from me added in. STAR has spent about 90 crores in marketing KBC. A 10 second ad spot on the programme costs about 3.4 lakh. So, advertising for a minute would cost (without discounts) a little over 20 lakh rupees. A rough estimate of 15 minutes of advertising per episode means a straight 3 crores. Also factor that there are about 8 sponsors of about 19.5 crore each. After all this, apparently STAR earns about 2.5 crore per episode (which I feel is on the lower side) and this obviously includes the anchors fees as well. At the end of 85 episodes, taking this figure at face value, STAR would have earned about 212 crores and paid out at the most about 30 crores (3 participants per show, each winning 12.5 lakh for 85 episodes - this is way on the higher side). That gives them a neat profit of about 100 crores. (give or take a few, how much does that matter?).

Then of course, it eats into other channels viewership ratings, while increasing its own ratings, leading to a (short term, atleast) increase in viewership. If some of the sudden viewership sticks on to star, and KBC works as a launchpad to move to the next level of viewership, nothing like it for STAR.

So, such big bang shows such as KBC are here to stay. Only, it does not happen everyday, so for every bang, there can be quite a few whimpers.

Dheeraj learns to work!

"So, what did you do today?" asked the boss of Dheeraj.
"Work" he replied somewhat confusedly as if he was supposed to do something else.
"Work, apart", barked the boss, "What else did you do today? Did you take up any initiative?"
Dheeraj scratched his head and blurted out what he thought was closest to the initiative he took,"I complained to Food committee about the oily Puris".
"No", replied the boss with a wave of his hand, "that does not classify as an initiative."
So saying he called his favourite employee, who will know as Child Soldier, CS.
"Soldier". CS snapped to attention almost with a military precision. "What did you do today?"

"Sir". He began. "I planned for my work in the morning, drafted my objective for the day, checked if they aligned with, among other things, the companies mission, vision, values, ethics and code. I benchmarked it with the best paradigms shifts across the globe and for every item that I thought had a mismatch with the criteria, I put the, sorry, revisited, the question and fine tuned the objective so as to realign it to the mission of our company. Having done that, I proceeded to come up with an action item list which was a granular listing of my above objectives. Until lunch, I was done with this breakdown. Post lunch, which was actually another meeting in which I had to eat, I had 23 meetings and then it was time to go home."

"Excellent" barked the boss. "It was a very productive day dor you. I like it. Keep it up"

Turning to Dheeraj, he said,"Now do you understand how you must work?" Then in a 'this-is-something-you-need-for-your-success' tone, continued,"You see, Dheeraj, work does not mean doing work. It means a lot more. Learn from CS. He is setting a very good example for the team"

"So, let me teach you another something else? What initiatives did you take today, CS?"

"I created a website and 3 excel sheets consisting of 38 parameters for my team, where each person has to update the daily work thats on her plate. Once she has to update it in the morning, then she has to update that on the hour every hour, so each of us is on the same page as another persons work."

"So when does your team work?" Dheeraj was about to ask, but stopped short even as the boss replied "Great", with a sparkle in his eyes.

Turning to Dheeraj, the boss said, "So, Mr.Not-so-ideal-employee, when can you begin?"

Friday, August 26, 2005

Win a Maruti by collecting registration numbers

Reading Rashmis post on gifts, collectibles set me thinking of the days when we used to run after collectibles. Amidst the mania of collectibles, there were rumours too which were hoaxes. Nobody knows how these things start, but they are there!

In Bombay (thats the Maharashtra board), there used to be a rumour that if someone got 35 marks in each subject during their SSC examination, the board will gift a "bicycle". We actually used to have discussions on how to acquire this cycle in case our marks fell really low. (If you going to get low marks, why not aim really low, but then how can we get exactly 35 in all subjects and so on....)

Then in 1985 or so, was the big rumour on Maruti cars. If you collect 10,000 Maruti car registration numbers ( from the number plate), it was rumoured that we could be the proud owner of a Maruti car. Nobody told us where this was to be sent or who would give it. Armed with paper and pencil, we went to every shaadi or guests house we went, we hunted down Maruti car numbers all over the city. We exchanged the same with our friends until we collected about 2500 odd numbers until one day the newspaper reported that it was a rumour.

Know any more such hoaxes?

Thursday, August 25, 2005

Bharti diversifies, yet again

One of the top stories of today is that Bharti entered the life insurance space with AXA. Bharti isnt exactly known for insurance, and is a major player in India in the mobile phone segment through its Airtel brand. Airtel, incidentally is among the largest players in the Indian mobile telephony segment and is known for quite a few innovations.

From the bharti website
...Bharti Enterprises has successfully focused its strategy on telecom while straddling diverse fields of business. From the creation of 'Airtel', one of India's finest brands, to becoming the largest manufacturer and exporter of world class telecom terminals under its 'Beetel' brand...

...While a joint venture with TeleTech Inc., USA marked Bharti’s successful foray into the Customer Management Services business, Bharti Enterprises’ dynamic diversification has continued with the company venturing into telecom software development. Recently, Bharti has successfully launched an international venture with EL Rothschild Group owned ELRO Holdings India Ltd., to export fresh Agri products exclusively to markets in Europe and USA...

It recently outsourced its network maintenance to Ericsson (a first in the world where a provider outsourced his core technology backbone), its call centers to the best set of service providers and its DR operations to IBM. On the services front, it provides micro prepaid cards through Airtel which are as low as rupees 50 (about 1.5 USD) and enables Airtel to tap the "bottom of the pyramid".

While the cellular division has been making all the news, Bharti is also into things as diverse as agriculture and infrastructure. The former is through a venture known as FieldFresh foods and the latter through BTV. And now it is into Insurance. What is the synergy between mobile telephony, airports, agriculture and insurance is something I dont know, but if a business sees a sector as sunrise, why not?

...The joint venture is expected to have a capital base of about Rs 500 crore within the next 3-4 years. Under the present laws, an insurance company has to have a minimum capital of Rs 100 crore. While Bharti will hold 74 per cent stake in the venture, AXA Asia Pacific Holdings Ltd will hold the remaining 26 per cent...

While I looked for synergy across all these sectors, one sentence caught my eye: The (new insurance) company would also seek to leverage the telecom customer base of Bharti. Thats interesting news for all the present players in the insurance sector including old hand LIC (Life Insurance Corporation)

Wednesday, August 24, 2005

Real estate prices in Bangalore, a bubble?

What makes a bubble?Businessworld(registration/subscription required) in its recent issue, "The great urban build up", argues that the recent rise in real estate (housing) market is not a bubble for a variety of reasons. It may be true in some of the cities, but to me, a person on the street in Bangalore, it appears to be a bubble. The bubble may have begun, may be at the middle or it may be about to burst (this seems unlikely in the near future), but a bubble is a bubble is a bubble. Heres why my streetside instincts say so, especially in Bangalore.

Unlike a stock market where it takes all kind to make a market so to say, a housing market is in the physical world (ha! that was intelligent). Most people own a house or want to own a house rather than live in a rented property. People who own more than one house usually give one away for rent. There are people who happen to own land/property due to various reasons mostly hereditary, so we leave them out.

A bubble is set in motion, when people in the hope of making a killing, book homes, sell it when the prices move up and then move onto another property. When a few people do it, it does not make an impact. When many people do it, it sets a trend in motion. As a speculator all it takes to buy land is a booking amount (which can be as low as a lakh of rupees). When everybody looks forward to doing this, what do we have but a bubble in the making. Add a booming stock market, cheap loans and the cauldron begins to simmer, nay boil. Where there is demand, there is supply.

Any land is today converted to layouts (by greasing the development authorities at worst and by legitimate means at best) and sold, since there are takers for anything and everything.

A standard argument trotted out for high prices in Bangalore is that in a city like Bombay prices have risen to 5000 per sq ft in some locations. Therefore in Bangalore, prices are still low by that standard. The average price of a new property would still be in the low 2000 per sq ft. So, the average Mumbaikar would feel that the rate here is low as would the builder justifying his price. But in terms of the facilities offered, would a 2000 per sq ft location in Bangalore offer as much as a similar priced property in Mumbai? Unlikely. In Mumbai properties in New Bombay cost about 2000 per sq ft and as far as quality of living goes, they are far better than a place (in terms of access to medical facilities, public transport, reliability of power and water supply, security, roads etc.) in Bangalore. So using that argument to justify higher prices in Bangalore is ridiculous. By that logic, why stop at Mumbai, why not take Manhattan as a frame of reference. Therefore, prices and their relevance have a frame of reference, which are not the same for two cities.

When the rates of property are pushed by speculation beyond what they should be ideally priced, it is the starting point of a bubble. When the whole business of property becomes one of only buying and selling and not buying and living, it is the start of a bubble.

Yes the metro might be built, roads may get widened and the international airport may get set up (That incidentally has been happening for 17 years). If that is the basis for the hype in prices, think about it. Will industry wait for all this? Already there are signs of movement of industry to better cities and India and there is no dearth of people in any big city in India. Also remember that much of the IT crowd in Bangalore (who are the major customers in this real estate party) are non localites who would shift to their home cities or cities up north/west/south if offered a sufficiently good job.

BW maintains that about 30-40 percent of the Bangalore market is held by speculators. So, this is a bubble, meaning prices are inflated, artificially, one way or another. Whether it will burst today or tomorrow is a different point. It may well continue for a period of time. It may also not cause a crash, but there would be a period of stagnation of house prices and not necessarily result in a crash.

Therefore, caveat emptor!

Monday, August 22, 2005

One way - globalization

There has been a flurry of writings in the blogosphere on how capitalism has not helped some segments of society. One, that part is true. Second, it needs more time (how much more? perhaps a generation, perhaps two) to roll back the effects of about 40 odd years of failed socialism and then some. In the meantime hasnt our population burgeoned? Has corruption reduced one bit?

Despite all that haven't we made progress in the world? True it is a certain segment of people who are at the forefront of getting the benefits out of it (and I mean the educated class), but thats just the start. By no means are the benefits restricted to the educated class. The trickle down theory is at work and working well.

If the 80s was likened to a traffic jam, then the liberalization of the 90s is a green signal. Those who are ahead will move ahead first. Therefore the educated will move ahead first. Slowly but surely, these benefits will pass on to the less privileged classes (and I mean in terms of education). But thats not a rule, like it is never a rule in Indian traffic, anybody can move ahead. There can be enterprising drivers who earn more than techies and own 5 cars (I know some of them myself). There can be enterprising car wash boys ( a set of underprivileged students who clean cars before they leave for college) who earn about 5000 rupees per month. Apart from them globalization has thrown open the doors to a huge segment of society which is not educated. Maids, gardeners, drivers, cooks (see the number of Oriyas in Bangalore who cook at techies houses), caterers and many others. To the thousands of graduates employed in call centers, think of where they would be without globalization? At the end of a long line in an employment exchange at best. Is that what we want?

Consider again, what is the alternative? Should Globalization be rolled back in favour of our licence raj? Should people here sit and envy the lifestyles of those abroad (today most of the tech guys enjoy a lifestyle comparable to what they would enjoy abroad and probably better because of maids, drivers, washermen and other cheap services)? Should India to go back to 5 year plans? Hindu rate of growth? Behemoth PSU's?

India is progressing. Argue as much as you like, real poverty has declined ever since liberalization happened. Private enterprise has shot up and Indian industry is making strides the world over. A lot of it is being passed onto the villages by these companies. Indians are generating more wealth, with the high end guys making as much money in India as they would earning in dollars in the US. With wealth comes a desire to live a better life (translate that to malls, multiplexes, housing complexes) and why not?

Lets not lament about the benefits not being passed onto some section(s) sitting in front of an unlimited broadband computer in an airconditioned home and hence argue for the reversal of globalization and liberalization.

Instead if we tried to upgrade the skills of these guys, we would be better off, India would be better off. They themselves will do it in any case. Todays drivers and maids (my maids grand daughter studies in an English medium school in Krishnagiri in TN) will educate their offspring. Todays call center graduates will pass on the benefits of higher education to their children, like our parents (mostly less qualified than us) passed on to us.

Over a generation or two, if this can be sustained, India will really progress with, without or inspite of our politicians. Rolling back globalization, will only roll back our progress.

Sunday, August 21, 2005

Teleserials and cricket

What teleserials can learn from cricket:

Teleserials are as stretchable as the best gymnast or a politicians wish to remain seated on his chair. But theres still a few things they could do to stretch their runs for ever:

Use slow motion of certain sequences. Bollywood uses slow mo for action scenes and "one tight slap" scenes, teleserials could use this technique for prolonging their episodes. Especially useful for showing marriages, and family events.

Use a third camera, a camera which can used to show the entire set at one time. Like cameras mounted on blimps, they could use these cameras for telecasting recap episodes that repeat entire past episodes (from a different angle).

Introduce an expert team that discusses and debates actions of each of the actors in the teleserial.

Like man of the match and series, have an actor of the day or week and include entire presentation sequences as part of the episode.

Since the entire country is used to six ball bursts punctuated by an ad break, keep all serial timings restricted to the average length of a cricket over and punctuate it with similar breaks(or more).

As if they werent boring enough...

Indian firms grow abroad

Indian IT (and other) companies are spreading their footprint all over the world. Indian IT is a major reason for India to move in the eyes of the world from a land of serpents and saints to a land of mice and techie gurus.

Indian IT first made their mark thanks to the Y2K problem. With their lean army of techies (really it is a battalion, since the biggies IBM, EDS have more people) they gained a foothold in the doors of the Fortune 500. From Y2K, they spent a longish time as bodyshoppers (sending people from India to the US to work as contractors and little else). Then someone (some of them actually) tried to take up projects, work on a 24 hour model taking advantage of the perfect 12 hour time gap of India and the US and built first a company, then an industry and then a whole strategy on it. What started off as maintenance projects slowly became small development projects which enlarged into bigger development projects and went into end to end projects.

All this helped them grow upto a certain point. As they developed a footprint, it was important to acquire local capabilities to move to the next level. Many of the biggies have offices all over the world and local people lead them in most of the overseas offices, but a quick way to jumpstart brand recall is to acquire a local company with local workforce and local knowledge.

Infosys acquired Expert systems in Australia. Expert systems is almost an "Infosys" in Australia, in terms of the work they did. Infosys created its own high profile consulting wing in the US by a slightly unconventional route.Wipro Technologies acquired Nervewire, a fairly high end consulting firm in the Financial services space. Cognizant Tech acquired Aces International, Infopulse, Fathom and Ygyan as part of their strategy. In fact i-flex a product major in India, also acquired a company known as Super Solutions until being taken over by Oracle recently.

The strategy of local presence for growth has been replicated in other, non tech, sectors too like Bharat Forge (in forgings), VSNL and Reliance Infocomm in telecom, Reliance Industries in polyester, Tata Motors in Trucks and so on. The latest being INCATs acquisition by Tata Technologies ltd. The reasons for these acquisitions are various. In the telecom sector it is for cheap bandwidth, in polyester and forgings for scale and proximity to market.Apart from a foothold in these respective markets, it also helps these firms gain a sizeable set of customers to whom they can sell their entire panoply of offering.

So, is this a better to grow or is the Chinese strategy of picking big brands a better idea?

Friday, August 19, 2005

India post, more opportunity

It feels great to read news such as this. The Indian Postal services department, known for postmen, letters until email and courier services took over the limelight is discovering synery of its amazing footprint across the length and breadth of India. The hub of activity once upon a time, the post office may well recover some of its past glory and standing as the "town hall".

... India Post has struck major outsourcing deals with Citibank, GE Money, Reliance Infocomm and Tata Indicom to verify the addresses of their potential customers. The deals are estimated to fetch Rs 3,000 crore for India Post. The outsourcing activities that postmen will now perform include address verification of credit card applicants and customers of post-paid telecom services, besides direct mailing services to target customers in select areas...

and who can beat this

...
The companies would be able to make use of the vast experience and contacts of the local postman. That’s a unique and individual database. India Post network has postmen on every beat. One beat comprises around 250 households. On an average, a post office serves an area of 21.4 sq km and a population of 5,502. Each postman is expected to know sufficient details about every family in his beat.

Add to that his easy access to these households, and you know why he is the most credible source of information for companies that can’t afford to go wrong, say officials in India Post.

This is just the tip of the iceberg for the Indian Postal department and there is lot of potential for perhaps the only service that touches perhaps all households in every nook and corner of India.

Tata motors acquires INCAT

Tata motors has made a cash offer to acquire INCAT, a UK based engineering technology concern. Financial express reports that it is a design firm ...Tata Motors’ bid to acquire Incat is in line with the trend among global car majors to design their cars inhouse....

The INCAT website says

"We build long term relationships with clients, helping them apply technology creatively and use information to optimize their product realization process. Founded in 1989, and headquartered in London and Detroit, INCAT has more than 600 employees working with Fortune 500 and other organizations in North America, Europe and the Pacific Rim."

Businessline seems to have got it better
...According to it, the offshore capabilities of TTL in the field of engineering automation services combined with the high-end onshore strengths of INCAT was expected to offer a strong and seamless onshore/offshore delivery capability to customers...

It is worth noting that this acquisition is being done by and for Tata Motors and not by a technology major (yes, the subsidiary is a technology company). INCAT seems to be more of technology focussed company and not design, and there is Product Lifecycle Management expertise too.

These sort of deals seem to be next step in offshoring. Indian entities create bases in other countries (Infosys - Expert systems Australia, Wipro -Nervewire and others) to take their operations closer to the clients they serve. This is a space worth watching.

Thursday, August 18, 2005

i ticket, e ticket, Indian Railways

Indian Railways ticket booking website now offers e-ticketing facility. According to the website, the older method of booking a ticket which meant online booking and physical delivery of tickets, is called i-ticket. The new e-ticket is an online booking which lets you print and carry the ticket. A proof of identification has to be carried while travel though.

The best part of the e-ticket is online cancellation (i-tickets have to cancelled physically at a booking centre) upto 4-6 hours prior to train departure. Not sure if it has been extended to all trains though.

Update 18 Aug: It looks like the e-ticket has not caught on in a big way yet from this report.

A minimum level of deterrence

On a recent drive in Bangalore, we wondered why the police in Bangalore doesnt invoke a sense of fear (in the absence of a better word) in the average motorist. For perhaps the most educated of all cities in India, traffic sense is perhaps among the lowest. Traffic sense all over India is abysmal and it goes progressively downwards. The best traffic sense is perhaps exhibited in Mumbai (which is where I spent a good part of my life).

Once a rule is established, it is enforced and followed. After the Mumbai terrorist blasts, a regulation was brought in that cars shouldnt have dark glasses beyond a cerain tint. Ditto for the seat belt rule. Autos cannot have more than 3 passengers, taxis more than 5. Each of these has been enforced. By who? By Mumbais favourite slang "Pandu", the (traffic) cop.

He can be found hiding in pan shops or just metres away from where a rule is usually broken or at a sufficient distance inside a one way so that the driver can never feign ignorance. He can stand in front of a signal or behind a tree. He can catch you for not wearing a seat belt, for going straight from the extreme right of the signal or if you change lanes. He can tear a receipt or you can bribe him, or depending on your luck, he will stop at nothing less than confiscating your licence.

But bribe or receipt, getting caught by a "Pandu" does two things. One he will not let you off in 5 minutes and two your wallet will be lighter. So, as a private car owner, you are better off not breaking a rule. As a taxi or a rickshaw driver, you are better off not being harassed. If you are a truck driver and you are caught, then it gets worse. The "Pandu", by his very sight is a deterrence. At a signal in Bangalore, my brother, also from Mumbai saw a "Pandu" and stopped, even as we made a mistake on a right turn. But the Bangalore cop doesnt bother, he is too timid (all of them arent, but on an average, he doesnt instill a sense of fear as much as the Pandu does). Therefore, when the signal turns red, people still try and beat it, rather than stop at a yellow. If it says U turn prohibited, there will be people who take a U. People even drive in the opposite direction, American style on these roads.

This works at all levels. People buy tickets for trains in Mumbai and not in Bihar because there is no enforcement. The reason rules are followed in the US (and other places abroad) and in Mumbai is because of the "deterrence" factor. Once a rule is established and enforced time and again, it reaches a tipping point, where breaking a rule no longer has a sufficient incentive. If you get caught 3 out of 4 times or better still, 4 out of 4 times, it just isnt worth trying to break it.

This is applicable at the policy level for government or at a micro level at home. Any rule well enforced initially for a sufficient length of time will ensure that the rule is then enforced by a bare minimum presence.

Wednesday, August 17, 2005

Cheap ketchup

For all the good food they serve, why is it that many restaurants serve cheap tomato ketchup? Margins, is the obvious answer and the fact that consumption can be pretty high if the ketchup is good. But considering that this is an important component of their entire service experience, why dont they serve good tomato ketchup? The food can be on the expensive side, so why doesnt it subsidise for good tomato ketchup? Why does ketchup have to be the garishly red-yellow, artificial, tasteless mess made out of kaddu(gourd)?

Coffee day express outlets are a case in point.

On campuses

A visit to the IISc Campus in Bangalore can be energizing. The verdant campus, (from wikipedia) is a treat for sore eyes, mind and body. The campus is packed with shade giving trees, flowering bushes and wildlife that thrives within them. The IISc campus, seems to exude a natural exuberance. There can be dry leaves lying around, a stray bush that grew someplace all by itself. Signboards indicate routes, names of trees and thats it. The campus seems loosely managed. So, is this a place where talent can flower, is unshackled ? (I am only extending the feel of the campus).

Cut to the modern IT campus. The modern campus (and anybody who has visited any of the modern software campuses in India will agree) is all that the IISc campus is not. There are well manicured lawns, bushes trimmed to the right size, there are golf carts to ferry visitors around, there is fancy lighting all over the place. There is not a single stray bush anywhere and if there are dry leaves on the ground, they are there because they are meant to be. There are cameras, sentries and signboards and what not.

Now my question. Do these campuses reflect the way of working of these respective places? Are these a way of projecting an image to the outside world?

Tuesday, August 16, 2005

Bangalore real estate, speculators paradise

Bangalore real estate is fast turning into a gamblers den. Genuine buyers find the prices being pushed higher and higher, while speculators have a field day.

This is how it works. Every project has a pre launch and a launch. Before a project is "launched" (which can vary from a simple Bhoomi Pooja to a massive advert in the papers), it is spread by word of mouth or a website or sold to the "regulars" at a discounted price. The launch is about 50 to 500 rupees per sq ft higher. Some speculators cash in here itself. Like the circular transactions in share markets, these flats can potentially change hands within a group before it is finally sold, at a much higher price, to an outsider.

Heres where the second set of speculators move in. They book one apartment, some book multiple apartments and as the builder keeps increasing the asking price sell out one by one. Gains can be as much as 300 rupees per sq ft in a space of 3 months (calculate for an average of 1200 sq ft per apartment). Some end up keeping one apartment, but most just make money in the transaction itself without actually taking "delivery" of the house.

There is a third set which just purchases apartments and sells them on delivery. These, were, the only class of speculators until the above two categories moved in. To me, this is a classic bubble fuelled by speculators. There is a lot of real demand, but some of it is inflated by speculative purchases. Is there a better way. Sure, but who is really bothered? So, if you have the money and the risk appetite, book an apartment today (and sell it tomorrow). Keep your fingers crossed though, for this sand castle will crumble some time.

Tantra t shirts

I have been a fan of Tantra t-shirts for a while now. They are a welcome departure from "Born in the USA" and "Wild West" wannabe slogans or the routine "Just do it" slogans on tees. With wild wacky humour themed on India, value for money and durability, tantra tees spell "Attitude".

They are also the only thing India has, on the lines of the themed t-shirts that one sees at almost every teeny weeny tourist spot abroad, so I guess they would be on the must buy
list of tourists, if sold at the right places. On a recent visit to Shoppers stop, I saw another brand that looks like a Tantra lookalike. The tees are called indi-visual and come in the same bold colours and similar messages themed on India, a la Tantra. Are they a me too brand or a brand extension of tantra or what? Shoppers stop also does not help matters by keeping the two brands close to each other (In fact, I realised much later that they are not the same)

If they are not the latter, they could well be the former since these ideas are easy to replicate (one can argue that they are different, but to me, as a customer, I could hardly spot the difference). It is probably an acknowledgement and indication of Tantras success.

Monday, August 15, 2005

Online share trading in India

Share trading in India, until the arrival of online brokerages in about 2000 or so, was like driving on Indian roads. It was a familiar story of might is right, big trucks (brokers) ruled the market and there were potholes and pitfalls in the shape of bad deliveries, dishonoured contracts, fakes and what not. Unlike the highways, which have remained out of the reach of the aam aadmi, the share market has changed. Somewhere in the nineties there was a whole move to make shares electronic and fungible (like currency notes, a share is a share) and move them to the dematerialised (demat) form. Slowly, from the physical world, shares moved into the digital world at the NSDL. Then, trading became electronic. First it was a few of the blue chips, then it was most of the blue chips and slowly it has taken over most of the market. New issues are today, exclusively electronic. If digitisation took care of the back end, it has also made life easy at the front end.

In the physical delivery world, one had to talk to a broker who told you the quotes. There was no way of knowing if the quote was right. There was no way of knowing if your trade was made, especially if you made a good call (Bad calls, almost inevitably got made). The broker could say, that this was the best price I got and nobody would be wiser. You would not know if the shares came from his account or from the market. You would not know if the shares were fake or unsigned, as it happened sometimes. All this and more were true for the small investor. Odd lots (which were inevitably awarded during splits, mergers were as good as stocks which would never got sold or the broker would purchase them at a price way below the market price.

Now with HDFC, ICICIdirect, Sharekhan and the other brokers, share trading in India has gone online. Starting at about 2 pct, online trading forms about 10 pct in terms of volume (I think the figure is higher than 10 pct in the retail segment). Some of these have gone on to become the biggest "brokers" in India. It has opened the market to a whole segment of people. Earlier, investing in shares was done by a limited few most of whom applied in an IPO and stuck with the shares till they wanted money. Now, not only has online trading made life easier for these people, it has opened up investing and trading to segments that never before participated in it. By my rough estimates during my experience in Indias tech industry about 70% of employees are have online active trading accounts, many of which were opened in the ESOP era (seems like a long while back). More than 80% of these investors are active traders; the number of day traders are less. But a small chunk of these also dabble in the futures and options market. Besides this obvious segment which is connected to the online world all day long from their cubicles, there are other segments which have shown interest in trading due to its ease. Housewives, retired professionals and even small businessmen. What was hitherto a male dominated sphere also has quite a few women into trading. The regional stock exchanges which were the way to route trades in the olden days, are now almost defunct with BSE and NSE ( NSE more than BSE) holding sway. Earlier investors were mostly from the bigger cities. With online trading, it has opened avenues for investors from all parts of the country with an internet connection. A few months ago, Businessworld (Registration/subscription reqd) India reported that:
46 pct of the trades were done by the top 100 brokers in 1996-97. Today it is about 64 pct. 90% of online trades are by the top five in the business ICICI Web Trade (owner of ICICIdirect.com), HDFC Securities, Sharekhan, Indiabulls Securities, Karvy Consultants, IL&FS Investsmart and Motilal Oswal.

Going online via these professional services driven by technology is a great way to cut the uncertainities caused by the middleman out of the business of share trading and make lives easier for the investor. There will be more competition in this space as brokers try to take over accounts of other brokers. More specialised and personalised services will be in the offing as the market expands and as smaller brokers try to survive and evolve into niche players.

Update 17Aug: ICICIdirect, one of the biggest online brokerages has been pathetic over the last few days. In fact today, it did not let many of its users trade. Whats the point in having an online account if you cannot trade on a day when the market closed at its lifetime high?

Saturday, August 13, 2005

Creak creak

Bombay has got a swanky new terminal while Bangalore has an apology for an airport (actually its inter state bus depot at Majestic is pretty good and almost better than the airport, if it were not for the airconditioning). Parking is insufficient, people break rules (alighting 90 seconds, it says, but there are people who have almost made it their home) and its wayyyyy too small.

But if you thought our international airport is going to take off soon, it will take a good length of time (measured in decades). Bangalores most loved politician also known as the grandfather of the soil expressed regret that the airport project envisages a lot of space to be occupied by things other than runways. Now that is a lot of land wastage. Why would an airport need anything other than runways?

The road to the proposed airport (and beyond) has been in the same condition for a few years now. It seems to be in some state of perpetual construction. There is a competition as to which will get delayed more, the airport or the road and as of now, competition is close.

Thursday, August 11, 2005

Korean takeover of Indias FMCG market

Welcome to the long running Korean hit show in the FMCG industry of India. In what has been an impressive performance in the Indian market over the last few years, they are at the top of the rankings. This one is from Business standard (with figures from ORG-MARG).

LG and Whirlpool lead the pack in refrigerators with 29.4 and 23.2 pct respectively. Godrej is the third with 16.3 pct.
LG and Videocon lead the pack in washing machines with 35.1 and 13.9 pct respectively. Samsung is third with 13.4 pct.
LG and Samsung lead the pack in televisions with 26.7 and 14.4 pct respectively. Onida is third with 11 pct.

They came in at the right time and to an entire country fed on Government TV's (remember Keltron, Meltron, Uptron - which were Kerala, Maharashtra, UP government owned) and two (or three) brands of refrigeratos showed them the promise of technology, design and good value for money.

They are where they deserve to be, right at the top.

Chennai heats up

Am no lover of Chennai and have had to visit it only thrice for very very short visits yet, but Chennai is booming. Chennai has three seasons, hot, hotter and hottest, but this time around Chennai is heating up because of IT. Sambharmafia had put up a post recently and here is Business-standard on it this time.

...Chennai may have lagged behind Bangalore and Hyderabad in hopping on to the bandwagon of information technology boom a few years ago. But it is fast catching up. The city has absorbed over 2 million sq ft lease space in the first six months of 2005, outstripping the total space leased in all of last year.

The reason for the pick up is the requirement of good quality real estate space by IT companies, points out Thirumal Govindraj, head of Chennai operations with real estate consultant CB Richard Ellis. Many IT companies looking to expand outside Bangalore, including mutlinational companies, are taking up space in Chennai...

Of course Chennai has its problems water being one of the many, autorickshaws another one, but Chennai can serve as a gateway to the Far East markets not just for IT, but for industries too. Hope our politicians realise the enormous potential of this city.

Wednesday, August 10, 2005

On Best Garage...

India, an offshoring and outsourcing hub, is home to a unique model of business in the shape of the IT service industry. Of course, neither is India home to the largest IT services company (thats EDS, if I am not mistaken) nor was it the place where it was first invented (that is the US withEDS?). But India is home to a large number of IT service companies (Infosys, Wipro, TCS, Satyam).

Comparing it to the automobile industry gives an amazing perspective of the work that these guys do. Imagine that software industry is the automobile industry. The ones who produce cars, the manufacturers (like Microsoft, SAP, Oracle, IBM) are the ones who produce software products. Let us for a moment assume that the service industry in software is the equivalent of a garage, say "Best Garage" in the physical, automobile world.

The motto of Best garage is "to be the best garage in the world", while steadfastly refusing to build a car. They can service everything from a vintage Ford T ( say, a mainframe) to a new sleek Rolls Royce (well, not a straightforward comparison, but say, Windows Vista). But they will not produce a car of their own.

Why will car owners take their car to "Best Garage", when the manufacturers can do it themselves? One obvious reason is cost. Second less obvious reason is the fact that Best garage can service Model T's (and a sleek Ferrari) even though they are long out of production without as much as a whimper. They also service cars from multiple manufacturers without a complaint. Will a GM service center touch a Ford or a Toyota that you added as your fleet expanded? But Best garage will. A third reason is that some manufacturers have awarded Best garage a partnership as well, so he is as good as an authorised service center in some cases. What if you opened your car and souped it up (customized your software?)? Will your authorised service center help you with your souped up car? Best garage will do it , for a price, of course. Best garages, have also, in course of time built a reputation that they have the best mechanics in town. So, folks flock to Best Garage, demand that they build a car, but they dont!

Criticism still remains in Bests country that Best will never come out with a Best car of its own, which is really the high end market where Best can make more money. Criticism also remains that people bring their cars to Best because Best charges lesser than authorised service centers (but also does a lot of work that they wouldnt). They also say that this cost advantage is because Best pays less to mechanics, many of whom can be engineers. Theoretically, Best can make any car, but he wont, he simply wont take the risk. Some of the Best cars actually produce a vehicle or two, but they service niche markets.

Best still doesnt produce cars, but some of the garages have opened automobile design consultancy centers, so they span the design stage and the service stage without touching the manufacturing stage. Best is so competitive that some of the big names of the design consultancy centers (Accenturs, Cap Gemini) have opened their own service units and they also dont touch the manufacturing aspect.

The more I think about this, this model seems to be applicable only to the virtual world, not in the physical world at all. Is it so? Would a Best garage really have survived in an automobile industry?

On School for CEOs

I came across an interesting advert in the Economic Times 2 days back. It was about the XYZ CEO school, apparently the best kept secret in business (some copywriter in a moment of brilliance, I guess). Its a 15 month modular program for high potential executives (who decides that?) with career paths leading to CXO positions (every career path leads there, who reaches is a different point altogether). It is open for executives with a minimum of 8 years experience and independent responsibility. Company recommendation is essential to get into this program. (Thats a neat way of ensuring that there is no headache of placements.)

But my point is that, do high potential executives have to be trained for 15 months to move up? Sabbaticals are rare in Indian industry, unlike say in America and Europe. Will this course guarantee that these execs are now good for life? How many of these high potentials already have an MBA? IMHO, a sizeable percentage. To me, it appears as if the program is clever marketing aimed at corporates who want to (re)(a)ward an MBA to some experienced employee. In an already crowded market of one year MBAs, this is one of the ways of differentiation. I wish the differentiation were more on some solid basis like research rather than marketing fluff like this.

Before I forget, the tagline is "We will redefine your leadership skills". If I am a high potential exec, would my leadership skills need to be redefined or honed?

Tuesday, August 09, 2005

Slight change in Air India logo

Air India to change its logo. The hyphen between Air and India will go and the centaur logo will point upwards. Thankfully this time they are only tweaking the logo, not playing havoc with it.

..."The dropping of the hyphen means AI moves up in the alphabetical list of airlines and will be displayed much earlier in the computerised reservation systems and Web pages than before. This will lead to more visibility for the airline," a senior AI official said.

In addition, after decades of being in a titled(sic) position, the airlines' trademark Centaur logo has been readjusted to point upwards, showing the progressive growth the airline has made. The latest initiatives come even as AI has improved its ranking to the 48th position among 150 global airlines in terms of revenue generated and 16th in the Asia-Pacific region, ahead of Indian Airlines and Jet Airways. The survey was carried out by international agency Airline Business....


For those who remember it, the last change in Air Indias logo was a mega event (or a flop show depending on how you look at it). Heres the piece

...One is also transported back to a similar event many years ago when an Air India jumbo circled the skies above what was known as the Queen's Necklace to show off its new livery. It
was a great way to unveil the new sun logo and colour scheme Air India had opted for...

...Anyway, the new corporate identity was as long lasting as the Boeing's little flight around Marine Drive. The Maharaja (to be read as the maharajas in New Delhi) decided that he didn't like his new look and that old was gold after all. Someone should tell the mandarins at Air India that the sentiment was reserved only for the old corporate identity, not for its aircraft...

Air India needs so much more than a logo change!

Monday, August 08, 2005

A great piece on the Indo US deal

Swaminomics, one of the few reasons for the TOI to hit my home on Sundays, run by Swaminathan S. Anklesaria Aiyar, has analysed the Indo US deal brilliantly in yesterdays column.

Titled, from Junior beggar to junior partner, it blows a few holes in our tutored chest thumping of self sufficiency during the Nehruvian era till about the 90s and argues that the Indo US deal is a good thing after all. I agree.

No snips, just read the full piece here.

Raining lifetime free credit cards

The credit card industry in India seems to have picked up something from international markets. Credit cards are now "free for a lifetime". Up until now, credit cards usually had an annual service fee associated with them, which could be waived/reduced by a simple telephone call or at times, a threat of giving up the card. There were also many who paid up the service charge.

The Indian credit card user has not lost his conservative moorings yet. On an average, most card holders rarely use the credit card as a "credit" card. They just use it as an alternative to cash and as a means of delayed payment. So most repayments happen nearabout the due date. Atrocious interest rates ( upto 24%) charged by the providers do not help their cause either. It is not so in the US, where credit is a way of life. Since credit card holders enable the card merchants to earn money, there is no annual fee in the US on credit cards. Since card merchants dont earn (as much as card merchants in the US do), there has been an annual fee in India for a while (my logic).

But now, almost simultaneously, there are offers of lifetime free cards. That means, no service charge. However, some of them have a "non usage charge" which comes into play if you dont use the card for, say, 6 months. Why the simultaneous raining of free cards? Perhaps it is a good idea to snare credit worthy holders and keep them for life. Perhaps one of the reasons people switch cards in India is because of lower annual service charge (and I know this to be true). Perhaps its the RBI. Perhaps the cost of collecting annual fees isnt worth it.

Anywhich way, it is a good thing.

Saturday, August 06, 2005

Medical tourism destination India

India, by now, is known as one of the foremost centers of outsourcing. Alongwith traditional sources of outsourcing like IT (technology) outsourcing, Business Process outsourcing and Call Center outsourcing, there are other lesser known outsourcing happening out of India. Some amount of automobile design work is outsourced, as is a small amount of manufacturing, teaching is being outsourced; indeed some kids in America are taught by someone in India over the web.

An emerging trend over the past few years, medical tourism has become a flow from a trickle. There have been talks of promoting India as a global health destination, while others estimate that this can earn a huge amount of dollars for India.

A recent Businessworld (registration/subscription required) issue focussed on medical tourism to India. Six hospitals in India are on their way to acquire what is known as a "Gold seal of Quality", an international accreditation. (Incidentally, international accreditation of any kind is a craze in India. The largest number of CMMI certified software companies are in India. I am sure there are many others). This Gold seal is issued by Joint Commission International (JCI) of the US. As in other spheres, there is competition here also in the shape of the Far East nations like Singapore, Thailand, China obviously and some others.

...The rush for JCI accreditation has actually spread across Asia - from Turkey and Jordan to China and Singapore. Seventeen hospitals across the continent have bagged the coveted seal in the last three years and at least 25 are in different stages of preparation for it. (In all, some 57 hospitals across 15 countries are accredited by JCI.) For all these hospitals, the seal is nothing less than a business imperative....

...The underlying expectation around the JCI seal is that it would attract some of those, who, daunted by the soaring costs in the largest healthcare market in the world, are looking out for cheaper treatment elsewhere. Whereas the costs were always much lower in Asia - as low as a fifth of that in the US for a lasik eye surgery - a JCI seal would ensure that the hospitals also measure up to the best in the US in terms of patient care and safety. It would make it easier for these hospitals to be eligible for cover by US insurers (though the decision would be the insurer's). All this, in turn, would attract more health travellers from the rest of the world too...

...Back in 2002, McKinsey reckoned that the opportunity for India, a country that has for long 'exported' successful doctors and nurses, could be as large as $1 billion-2 billion by 2012. That's the pie the corporate hospitals in India are after...

No doubt, while it is good for India as a whole economically, it would be ironic that the country where a huge number of people do not have access to basic healthcare facilities would feature high on the list of international health tourism.

The spinoffs of health tourism for a nation like India are enormous. The IT expertise, if channelised by the hospitals could take hospitals to the next level in terms of technology. Health tourism could mean a boom for recreational health tourism. Kerala, the state that is Indias foremost tourist destination, for instance is famous for its ayurvedic (ayurveda) massages as for its scenic beauty. Increased inflow of health tourists would also mean that hospitals could, in theory, subsidise poor patients by charging visitors a higher fee (which would still be significantly lower than what they would have paid in their country). Health tourism could also improve the "real" tourism sector in due course. Overall its an incentive for medical facilities to upgrade themselves to international standards, if only to attract patients from abroad, which in the long run is beneficial for everyone.

Umeed se dugna

Whats the power of a brand? The ability to sell anything under its name.
Whats the power of a branded store? The ability to sell anything even if its a non brand.

Big Bazaar seems to have mastered this art. That Big Bazaar sells cheap is known to everybody. It is Walmart here before walmart arrives and perhaps (we wont know until Walmart arrives), a localised model better suited to India as well. Todays paper has an "umeed se dugna" (yup, thats what KBC2 says too) offer. A simple strategy. Buy a pair of bedsheets for 500 rupees and buy a second pair at 99. Thats 20% of the first pair. Buy a knife for 12, buy the second for an unbelievable 3 rupees.

Certain items are said to be branded as per the newspaper advert, but those "brands" are not the brands you would have heard of. The bedsheet wont be a Bombay Dyeing nor would the knife be a Fiskar. It would have some name stuck on it. But Big Bazaar has its takers. This, to me, goes against conventional marketing wisdom, but I guess Big Bazaar knows what it is doing and does it well.

50% off anyone

Its raining discounts in Bangalore these days. Theres a sale on in almost every major store in Bangalore. So, whats new? Is it a season of sales to clear the stocks just before the festival season or it is just a method to increase footfalls?

Sample this. Family Mart has a 50% (of course, upto) off under what is called a cool monsoon offer. Globus has another 50% off, on its entire apparel range and it also says today "Fresh stocks added daily". Even a recently opened Marks and Spencer has an end of season sale. Big Bazaar has an "Umeed se double" (more on this later) offer. Bangalore Central has another 50% off sale on.

Predictably, some of these stores are so crowded that there is no place to stand. The others, well, I guess evoke some curiosity footfalls as people walk along.

My question is one, why upto 50%? My experience with 50% sales is that anything that is being sold at 50% is usually some stuff that nobody wants. The other, pricier things, are sold with a 15% off at the max. So, calling it a 50% (with 50% written in big bold) and fine print upto is, well fooling customers. I have stopped going into these 50% discounters long time ago. What I want, I will buy anyway. These discounts though, make people pick up stuff on impulse ("its so cheaply priced yaar") and add to the junk at home.

Second, these are 50% of what? Definitely not 50% of the cost. Definitely not 50% of the stores profit. Perhaps 50% of a mark up?

And, then again, everybody knows this. Yet, there is a beeline for every sale!

Thursday, August 04, 2005

Tobacco conundrum

Glancing through ITC's annual report, got me thinking of something that I had never given a thought to. ITC earns its revenues through the sale of Cigarettes, cash which it has used to smartly diversify into sunrise industries over time. Today ITC is not just about cigarettes. It is a broad conglomerate with interests in ready to eat food, snacks, biscuits, paper and packaging, candy and hotels. The report talks in detail about taxation on cigarettes vis-a-vis other tobacco products. Here are some excerpts and thoughts (interim..., obviously). (Disclaimer: I am not a user of tobacco and this post is purely about the economics of tobacco in India)

The Cigarette and Other Tobacco Products (Prohibition of advertisement and regulation of trade and commerce, production, supply and distribution) Act 2003 (COTPA) is in effect from 1st May 2004. India is also a signatory to the Framework Convention on Tobacco Control (which covers a whole host of issues).

Anyway, the point is not about these acts. In budget after budget in India, the finance ministry hikes the duties and taxes on cigarettes ostensibly to discourage the consumption of tobacco (which is detrimental to the health of the people). It is a given that in every budget, the prices of cigarettes will increase. But cigarettes are not the only tobacco related thing sold in India. There are bidis (which are tobacco wrapped in leaves), chewable tobacco among others. Cigarettes, incidentally form a smaller share of the tobacco market than the others, bidis, pan masala and raw tobacco. Yet, cigarettes bear 8 times more taxes than bidis and 30 times more than other tobacco products.

So, is the government, by way of increasing duties on cigarettes encouraging consumption of other forms of tobacco? Wouldn't a cigarette smoker switch to the lower end bidis, if he doesnt get his fix (and these are usually the poor, since the rich dont bother with such things)? Or would he quit nicotine just because the government increased duties. The government loses revenue on tobacco consumed by the other, 'revenue inefficient', products. If the government reduces the taxes on cigarettes or brings all other products on par with cigarettes (which is what it should do, if it is truly concerned with the health of the population), both of these will be opposed by other parties, ignorant of the economics of the issue. The implicit assumption is that bidis are manufactured by poor people while cigarettes are manufactured by big bad companies. Bidi manufacturers range from old semi feudal enterprises to the Communist Party of India, which owns Dinesh beedi.

In a developing country like India where the livehihood of millions is linked to growing tobacco, a viable strategy is required to maximise the economic value per unit of tobacco in a shrinking basket of overall tobacco consumption. A holistic tax policy would do the trick, but that wont happen.

So, on the one hand a cigarette smoker who finds cigarette expensive switches to bidis or other tobacco products which causes the government to lose revenue. (the argument on health is another topic altogether)

The rich smoker who would perhaps buy a premium Indian brand, now switches to smuggled foreign brands. The report says "liberal import of under priced international brands into India at prices significantly lower than those that prevail for these brands at duty free trade, gives contraband a highly unfair advantage in both the origin and destination economies by way of tax evasion....As a result, contraband is the fastest growing segment in the Indian market.

Either way the government loses revenue. What is the way out?

Wednesday, August 03, 2005

Adios 99.95

Immortalized in marketing legends as "psychological pricing", Bata, reports Businessline, is about to give up its pricing strategy. Bata footwear was always priced at x rupees 95 paise. The 5 paise change was never asked nor given, except if you paid by credit card. And anyway in an era where 25 paisa coins are out of favour, 5 paisa is a long way off.

But the beauty of this pricing was at the hundreds. Something that cost 99.95, was "psychologically" less than 100 and I have not seen a greater feel good that can happen for 5 paise. And at 999.95, it was even more.

Some interesting tidbits

...There is also an unconfirmed theory that Bata, then headquartered in Kolkata, came up with a price of Rs 124.95 to avoid an entry tax, which was levied on products priced at Rs 125 and above.

For decades, it was a price tag that drew instant jokes, sarcastic comments and sometimes even arguments over consumer rights, but ending it all, Bata India has withdrawn its famous 95 paise pricing.

Read the full piece here.

Tuesday, August 02, 2005

ICICI Homesearch

From home loans to homes, seems to be ICICIs facility named homesearch. (The funny thing is that it seems to exist on the website since 2001, but its only now that I have seen it in Bangalore in one of ICICIs branches). In the overheated (or well, high demand) Bangalore real estate market, it is often difficult to search for homes in a market that places a premium on the big names in the local market like Prestige, Puravankara, Mantri and Sobha. ICICI homesearch is a facility that helps potential loan seekers identify property within their budget.

ICICI homesearch is almost brokerage for new properties. It helps get smaller builders visibility while widening the market for ICICI's loans simultaneously. There is no service charge for new properties, but they charge a 2% for transactions on existing properties (second sale). If ICICI reduced this rate to a percent or less, they could well eat into the home brokerage market which is highly fragmented and unprofessional. The time is ripe for a professional brokerage firm to enter the market. ICICI homesearch in 2005 is perhaps a new beginning.

Monday, August 01, 2005

Kitchens of India

The ready to eat ( or heat and eat) market seems crowded these days. In this market, ITC has launched its Kitchens of India range. One aspect of this a heat and segment of some exotic vegetable curries and biriyanis. I tried a Mirch ka Salan and there was nothing so exotic about it. All these heat and eats (across brands) have an ever so slight peculiar taste that I guess comes perhaps from the packing (why it should be so, I have no idea) or the preparation technique. This brand has not been spared either. So, its not worth the premium price ( a little extra, yes, but double, no) that it charges as compared to other brands.

What is promising from this stable is its exotic chutneys and preserves. The chutneys start from simple tamarind and dates to mango and garlic (which I tried and it is differently good). The packaging is nice with an upmarket image to it. The preserves, which have exotic sounding names (Pineapple/Pepper, Apple/Cinnamon, Plum/Anise) sound exotic, but I havent tried them yet. Lets see how it fares.

One interesting aspect of this is that more than one producer has got into the heat and eat segment with DRDO technology. Its good to see organisations such as DRDO bring out such technology into the mainstream and make money out of it.

Nature - India

Abi has already linked a piece to one of the stories, but here, at Nature magazine is a whole set of artices on India this time. Take a look at it. Its all free, btw, so dont miss it, if you want any gyan on biotech, vaccines, drug tests, rewriting the rules of research and the like.

Nature, for those who came in late (ye old Phantom) is one of the most prestigious international scientific journals.