Some questions...

I kind of like the philosophy Hinduism propounds ( don't ask me what it is, there are just too many, so pick up something that suits you!!!) - not that I am religious - am more as someone once told me, karmic than dharmic - but I find it interesting that a single religion can allow thoughts where you can consider yourself one with God ( Advaitha - literally meaning 'not double'), dwaitha (literally meaning - two different ) and vishistadvaitha ( a form of advaitha - where thought goes that while in human form humans and God are different, once you reach God, you become same) - most religions I have basic knowledge of do not allow such wide spectrum of thoughts ( mind you : I am probably a novice in this region , so please feel free to correct me , will be really glad to learn more here). But then what gets my goat and given the fact that these thoughts have been with us for maybe 1500 years, why did we treat a section of our society so badly? I am a Brahmin, so while I can understand the power that might have resided in the caste due to knowledge, what I fail to understand is when we could be so tolerant to religious thoughts ( remember : belief based persecution is what is most prevalent in human history) , how is it that we failed to uplift the sections of society we left behind?

Even assuming there was no higher intention, someone should have moved these sections just for the power...why did it not happen at all? Interestingly, as a caste, while maybe Brahmins excelled in knowledge and maybe that allowed them to adapt to changing conditions sooner, my guess would be that most Brahmins would be the working middle class even today...so it was not money that drove the so called 'upper caste' to this...

I am all for affirmative action, maybe even reservation, maybe priority over natural resources as our beloved 'toothless' prime minister wants us to believe... but correcting a mistake does not mean you make the same mistake...

Update on BIAL

I had an earlier post on BIAL and had noted how somehow the airport had not lived upto the expectations of many. Now that I have made a few more trips, I am beginning to see the airport come into its own... I read somewhere them claiming that a passenger will alight and be out in 20 mins... i actually timed it yesterday and i was out in 12... it helped that we used the aerobridge and and being a platinum on Jet my luggage gets priority, but yes it was impressive... in 20 Min's I was out of the airport, into a taxi and halfway to the trumpet changeover....

The toilets issue still remains, not sure what they can do about it, the check in counters is a mystery to me.... They seem to have ~65 (or was it ~50) counters, but I end up spending more time in a queue than the old airport, not sure what is happening here.... Traditional queuing theory suggests that single queues with multiple counters are more effective than multiple queues, and that has been put into practice here, but still it doesn't seem to work.... hmm I need to look at this tomorrow when I travel again..

The seating area is woefully short I think, we Indians are not too used to forming a single file line , usually 2 lines get formed, and close to the boarding counters, there is a vague formation of chairs obstructing the line formation...... somewhere I think the commercial area to seating area is sub optimal.... The number of options to eat is large, but the work flow is not well thought out of, for E.g : people collect their coffee etc outside the cafe near Gate 1 and that impacts the boarding at Gate 1 , near gate 3 there is this vague obstruction of a small bill board which impacts the movement of people ( its bang in the middle of no where!!!)

And dudes - where are the charging points for laptops ?

But bottomline, the airport seems to be improving in leaps and bounds every time I travel, hopefully, we will have one to boast of....

Bengaluru International Airport Limited - BIAL - a shame

I have traveled from the BIAL twice now and I am so thoroughly disappointed with what is the result of a >15 year wait, i think the citizens of bangalore have been cheated by government apathy, profiteering private enterprise who give a damn to the customers comfort.....here are my observations....

Good ones first :

1. The road with all the media outcry is looking good.... there is still some work left in patches but it is in place. I live in south bangalore and its about 63 kms from where I live, so it seems like a mini picnic - it took me an hour to travel this distance, not in peak traffic ofcourse, that might take sometime more
2. The look is that of a international airport.... suvarnabhumi, brussels , dubai - they look swank- this with the glass and open light looks so
3. Unlike the old HAL airport, there is some space here.... but my concern is has someone thought of future - why didnt we think of a multi level parking in one shot?
   
4. The aerobridges look cool
   

Now the cribs :

1. They have very few toilets and hello , the whole damn place is water logged.... this is a new structure damn it, why cant we have a few more toilets......
   
2. Who the hell is globe ground ? - BIAL says lufthansa has a stake and they are global partners who will provide international level ground handling - my foot - my flight landed at 12:30 yesterday night - after been delayed by an hour and then we waited for 20 mins in the plane since globe ground guys could not align the step ladder with the plane door - it took them 6 attempts. 4 guys were just pulling it back and trying to align it..... hello whatever happened to those tractors or vans which used to pull these around. Then we got down to find 2 buses for a plane full of people. Kingfisher, with its plush couches in buses has set the bar too high and here the same people were forced to pack people in as sardines. And then the heights they brought in Tempo travellers..... and then the driver gets confused and drops us off at a gate which is locked.....so here we have 4 elderly people, a lady with a bawling baby and another couple with 2 sleepy kids with other weary business travelers who probably have clocked a 18 hour day trying to catch someones attention to get the door opened.... and then trudge for 100 mts to sneak into another door... Look at what has happened - since one of the service providers messed up kingfisher and BIAL both ended up with a bad name.
   
3. Business travelers need charging points for both a laptop and phone - hello people when u built a new airport, didnt any of those bright consultants tell you about this? holy cow.... AAI does better these days
4. They have 10 gates which is good... but then hello you cant have me run around gate to gate trying to check where my flight is boarding - what happened to those tv screens which gave departure information? they have i think 2 or was it three....
5. At 1:15 in the night, we tried getting out of the parking lot and they have one counter which is being run manually - so I was stuck behind 14 vehicles - 10 mins wasted.... can someone plz think of the value of my time at 1:30 in the morning?
   

There are lots more..... since I do like 2 flights a week, I will keep posting...Hopefully for my city, they will get their act better.....

Sad part, everyone who has come back from hyderbad says the airport is magnificent.... so here we lose out again. Congrats GMR, pity a Siemens , L&T, Zurich airport cant get it right!!!

some random notes...

The 60k cr payout to the farmers led me on the same stuff I am sure you have read ad nauseum in the business press - how this will kill our banking system, about moral hazard, about how farmers will need to pay bribes to access this, how the ailing co-operative banking system will be dealt another death knell and all that. But then I also said ' if I can feel happy about the 40k tax I will save next year, and this is not life or death for me, unlike for some of those farmers I have no right to be sitting in a cozy room and spouting such crap. But I am still asking, why isnt the systemic issues not being addressed, why is there no market? when will we the middlemen who although are serving the cause of market makers are taking too high a toll on the system, about 80% of the credit in the system is unorganised - why not address it.... some questions I will not answer. For a country that votes, has a voice will we never demand these ? Will we need another 6 decades to redeem our villages....

Markets go up and down - its been a fortnight of pain for the markets - I am yet to read any report which tells people to start a SIP in a decent mutual fund and if the so called India story is intact to ride out this period of pain and volatility. If you can pick stocks, go ahead. nothing beats this time.

For what could have been - still think of those names we thought of

Some things I have been thinking of writing havent got around to - comparison of the in flight entertainment of Kingfisher and Jet, investment in public transport system, why the hell should I pay toll for roads, user development fee for airport when I pay tax - where in mighty hell is it going and so much more.....

Parting shot : to realise the value of time : everytime you are getting pained, are feel rushed... hold your breath and count down the seconds with the help of a timer in your watch or cell phone - see if you can hold it for more than a minute..... you will realise how long one minute is.... make use of it, dont rush....

So which market will I focus on…

In my last avatar as a consultant, I have done typical market entry strategy studies for industries as varied as diamond jewellery, motor cycles, auto components and trucking. One question which you would invariably grapple with and try to answer was should I enter this product/service market, if so which geography/customer segment and in what order….

Assuming that the answer to the first question was a yes, the next was to answer the geography/segment and that used to be the toughest in my mind. Markets invariably tend to follow the pareto principle, where a few large clusters (either geographical or customers) will aggregate to most of the demand. So the normal response is to hit the largest market first. I used to look at this and wonder is it the right strategy, since in my mind it always used to be the most competitive also. So my question was, when you are entering a market where rapid growth can allow you a good toehold, should you get into a headon fight? The obvious answers entrepreneurs would throw at me was, dude we will get in, wean away some share from every player or from the weakest player and voila - I have got sales since a small share in a large market might still be in absolute numbers large. I had two problems with this

• If you are so good and have a marketing team which can pull off this approach, why not go to the second rung markets and develop them and improve your hold? Why get into a competitive war, which invariably leads to pressure on margins – higher ad budgets, higher discounts…
• Execution – its very easy to say I will gain market share, but rarely do we see huge swings in market shares, how viable is it to glean away marketshare from players in a stealth mode? If it is so easy, why the heck are you not exposed to it also?

I never could convince the managements that they need to look at the second set of cities/ markets ( Salem, Nagpur, vizag…) instead of heading into Mumbai, Delhi, Kolkata, Bangalore by default…Very rarely can you come up with strategies which can make use of longtail based strategies with a low cost delivery model, or a bottom of pyramid strategy which then makes it geography independent in a country like India since the proportion of urban and rural poor is a huge number.

Yes, I heard the same stories, small town customers shop from larger towns, disposable incomes are low, market size low, people are not aware, I am a luxury/ top rung product/brand blah blah blah…but I have come to believe it’s the failure of the operational machinery and the marketing machinery which might truly not know how to work with these markets.

The reason why I got thinking about this is also very interesting in my mind. Indian IT companies are going through a trying period – slow down in the largest market, currency appreciation, cost inflation, benign tax structure change etc. And I was looking at our arm chair business analysts writing about the shift towards Europe to create headroom. Interesting today most of the large IT companies have similar sales mix – 60% US, 25-30% Europe, 10-15% Japan/Rest of Asia /Australia. I said hey, I have seen this before, the pattern is the same, domestic/ export doesn’t matter managements finally always move to the largest market, will follow herd strategy and move in the same cycle, very few take the other path to grow.

So I ask myself for the IT companies– isn’t there a market in the gulf countries? Why isn’t anyone focusing on South America? What about the African countries? Why not Vietnam? I agree these markets will not be ready to accept the Indian tag, might be lower on realization, might be difficult terrain to operate due to language issues – but did large competitive organizations get built following a standard recipe?

Doing this needs a different enabler structure in the organization – a HR which can manage issues which will arise, an operations team which can manage widely different operating models, a front end which sells very differently, a strategy setup which can identify these opportunities and can build sustainable advantage around such ‘discovered markets’. Competing on price, incremental changes are far easier and failure on building the eco system forces to follow the set path.

Maybe, I should run this test and see if investors reward different behavior ? and what time the market takes to accept a company is different and the results are sustainable….

My view on Indian Manuacturing and why you should invest there....

My basic degree is in commerce, professional training in Company law and my post graduation in management..... so its surprising I have spent so much time in manufacturing plants... I might have been a good engineer, I will never get to know, but I still love the look and feel of a manufacturing setup....

Most people who track the stock markets and keep track of that beast called the IIP will notice that the Decemeber number is lower, the last quarter has seen some slowing in the corporate earnings and I have started to hear how maybe the earnings growth will come down from the mighty numbers that drove the stock market frenzy to a large extent... But wait I have a theory about this....

A few quarters ago when the media and the so called protectors of "common man" were in a frenzy about inflation and the big daddies in the government were saying how some of this is supply led and how monetary measures would be ineffective, what they were saying was, we were heading up a capacity constraint in most of the agriculture related and manufacturing related sectors. So what was being done - the government/ RBI took measures to cool down the economy ( about which I have huge issues about how they went about it, but thats for a different post) , but what were industries upto during this phase? My guess (and here I am risking to make a statement without much analysis on data) is that corporates are building capacity. Manufacturing capacity is lumpy, takes time to come on tap and usually comes with a lag.... people who have analysed cyclical industries will see patterns of boom and bust driven by a cycle of - system inventory going down - capacity shortage - huge capacity addition - system inventory going up - price war - bam Bust ! - something similar is happening in India, capacity is coming up. But unlike the cyclicality, i think the Indian manufacturing industry will use this to improve their margins...How?

Most Indian manufacturing units are small compared to global standards, and although the best part of the last decade has been the improvement in efficiency , most of it I believe are work practice led efficiency gains, not technology led. So you had relatively small units with high shop floor efficiency driving profit improvement. Now the scale of operations for Indian units is changing, so people driven partly by tax breaks, are moving to places like Baddi, Rudrapur, Haridwar etc and setting up larger units and invariably with better technology. So the next wave of improvement is set to be driven by technology led efficiency ( and the assumption here is that the efficiency gains from work practice led improvement will not be lost ). Larger better technology led factories with scale economies slightly offset by additional logistics costs will keep the manufacturing margins high. So I would suggest look closely at those schedules in the Balance sheet and profit and loss, see Q-o-Q profitability improvement, remove seasonality and bet on Indian manufacturing for the next 3-5 years. ( Red Flag : Keep away from industries like Two wheelers, paper - where I think the segment might not be viable due to market dynamics for sometime). And you know what is the hidden zing you might get from all this - a one time bonanza since most Indian manufacturing is on the outskirts of cities (Peenya in Bangalore, Ambattur in chennai?, Mumbai) where land from the smaller factories will be freed up since manufacturing will become difficult to carry on since they will become closer and closer to prime residential areas.... so they will setup SPV/ spinoff companies, develop this real estate and push more of the production to the larger factories.

There is still one more wave after this where efficiency will come into play and that is the logistics improvement in factory gate - to intermediate distribution- to last mile distribution. Efficiency in terms of road infrastructure, de-bottlenecking out check posts ( remove the damn things you guys!!!!), warehousing, professional distributors etc. But these require fiscal measures and process improvement in this country..... and with what I think is the most inefficient goverment in the last decade at helm I dont see anything happening.

So bottomline - spend time on research, buy good Indian manufacturing companies and make some money.


There is an SEZ angle, outbound M&A angle and domestic market development angle to all this.... that might be part II to this post....

Happy new year

Dear readers,

Wish you and your loved ones a very happy new year. May this period bring joy, happiness and put you closer to what you seek in life.

I know a lot of you are regular, I dont know who you are or what specifically I write you like, but keep visiting. When I started to write about 6 months ago, I barely had a hit in few days, now a days I clock about 3-4 a day. Some of you comment and others mail me. I thank you.

I have been very tied up with my new job, so have come down to one post in a week, so here is my new year resolution - I will try to post atleast 6 times in a month.

Thanks for all the support, do write to me or leave a comment.