Académique Documents
Professionnel Documents
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MARCH 2006
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COVER STORY
Brand strategies
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George W Bush President of the United States, at the Atrium of the ISBs Academic Centre
E D I T O R
From the
T H E
editors desk
F R O M
I
Dear Reader,
This issue of the ISBInsight has interesting opinions on the hot topic of Branding.
The markets are abuzz with the news of the tremendous growth potential and the
huge opportunities that emerging markets present. Professors of Marketing, Marketers,
Consultants all of them see a bright future when they peek into the crystal ball, and
all of them agree that the new markets need creative approaches to branding. Brands
have the power to change peoples lives and to change the world.
The BRIC countries featured again in the speech of Lloyd Blankfein, the President
& COO of Goldman Sachs Inc., during his maiden visit to India and the ISB. He talked
about the irreversible progress of wealth creation in them. His visit and contribution
of $1 million to the Centre for Analytical Finance was the high point for the ISB this
last quarter.
It appears that India is on a winning spree all around. With the cricket season in
full swing, we were fortunate to get Harsha Bhogle and Professor Bob Stewart, who
teaches Sports Management at the ISBs Executive Programmes, together for a chat on
the challenges of encouraging excellence in sports in developing countries.
It was the season for the annual student led events - the ILS, Solstice, Poseidon and
some unusual topics such as Youth Particpation in Politics were discussed. The mood
at the ISB has been upbeat with the entire community feeling that we in India are on
ISBInsight team
Bhuvana Ramalingam the verge of something really big. The ISBInsight reflects this mood.
Sreedevi Yadavalli We share the brief and exciting encounter with President George W Bush, when
Mrinal Kanti Ray he visited the ISB on March 3, 2006. The world needs India, he said and added, I
Varshaa Ratnaparke
Madhavilatha G
am honoured to be at the ISB, almost endorsing Brand India and Brand ISB. It was
a memorable visit in which the faculty, students, staff, and entrepreneurs participated.
Design: Trapeze The Insight Special captures the visit and the reactions.
Cover Illustration: Anupa Jayakrishnan
Resources: Learning Resource Centre at
It will be great if you could share your opinions on what we think. As always please
the ISB email us at editor_insight@isb.edu
Printed at Kala Jyothi Process Pvt. Ltd.
19 Shouting Over the Fray: An Academic 34 The Current Status of Indian Economic
Perspective on Measuring the Impact of Sector Reforms
Advertising in a Cluttered Environment A report on the proceedings of a unique
Professor Seshan Ramaswami on how conference organised by the Stanford
academic research can contribute to a Center for International Development
greater understanding of the effects of (SCID) and the Centre for Analytical
advertising in a cluttered environment. Finance (CAF), ISB.
38 The Erosion of Categorical Boundaries: Tejendra Khanna Chairman, Ranbaxy Laboratories Ltd.
Interview with Professor Hayagreeva Rao
Three students interview Professor
Hayagreeva Rao on the blurring of
categorical boundaries in organisational
structures.
42 ISB Happenings
There was plenty happening at the ISB,
as always, with eminent visitors and
guest speakers, student competitions,
and colourful events that had the
campus buzzing with activity.
C
ountries such as China, India, markets. Developing and implementing
Brazil, Mexico, Russia, South these solutions often demands
Korea, South Africa, Egypt, innovation, and an inexhaustible drive to
and several others, are currently overcome obstacles in adapting to local
experiencing a heightened consumerism conditions. This is because emerging
owing to a boom in their economies. markets have some characteristics
These countries comprise a whopping common with the more mature markets;
86 percent of the worlds market, a they also exhibit features that are
term used by Vijay Mahajan, former unique, and regional. Time tested
Dean of the ISB, and current holder brand strategies that worked very well
of the Harbin Centennial Chair in in the developed world, sometimes fail in
Business at the University of Texas emerging markets, causing companies
in Austin. Marketing successfully to incur losses, and lose great marketing
to the 86 percent is imperative opportunities.
for companies that want to remain Some characteristics that are
globally competitive. common to customers in both the
On the one hand, the heightened developed and the developing
consumerism, and rapid globalisation, economies are an enormous appetite
is presenting global marketers with for devouring television entertainment
immense opportunities. On the other while displaying a marked tendency
hand, these opportunities are riddled to avoid commercials, the Net savvy
with some unique challenges for market consumer preferring to seek brand
solutions for emerging markets are information through word-of-mouse
different from those for the developed sources rather than the conventional
In US dollar terms, China could overtake and a half, many multinationals have rushed
Germany in the next four years, Japan by 2015, into emerging markets, eager to claim the
and the US by 2039. Indias economy could millions of prospective consumers newly
be larger than all but the US and China in liberated from planned economies and
30 years. protectionist barriers. Many of them burnt
Dreaming with BRICs: The path to 2050 their fingers as a result.
Goldman Sachs report, dated October What makes these markets tough to
1, 2003 crack? Emerging economies have several
things in common. As K Ramachandran,
T
he report quoted above has radically Executive Vice Chairman and Managing
changed the way the world perceives Director, Philips India Ltd, points out,
emerging economies. Yesterdays All of them are heterogeneous in nature.
low-cost, low-value contract manufacturers In contrast, most developed markets are
have become todays high-potential far more homogeneous. Thus, given the
markets, and will soon be tomorrows income disparities, cultural and ethical
boom economies. Small wonder, then, that diversities, it is important to understand
these economies have become the cynosure the subsets within the emerging markets.
of every multinational company from Besides, these economies see more
manufacturers of beer or cola, cosmetics or economic, political and regulatory
washing powder, cars or credit cards. changes than the developed world.
One common problem The numbers show why. The BRIC Poor development of infrastructure,
(short for Brazil, Russia, India and China) logistics inefficiencies, and ever-changing
is that multinationals,
economies are growing at a rapid pace regulations increase operational costs and
eager to gain a first- of between 8 to 10 %, and are poised pose huge risks for global corporations,
mover advantage in to overtake the G6 countries within 35 Ramachandran adds.
these El Dorado to 40 years in terms of their collective In this regard, India is quite
markets, simply GDP. Of these, India and China alone, representative of the emerging economies,
which account for over 30% of the world and multinational experiences here, are
duplicate the models population, are slated to be major buyers typical of the problems faced in comparable
that worked for them of the worlds goods and services on the markets elsewhere. One common problem
in developed markets. strength of the growing prosperity of their is that multinationals, eager to gain a first-
consuming classes. The big brands already mover advantage in these El Dorado
have a strong presence in these markets and markets, simply duplicate the models that
many more are crowding in. worked for them in developed markets.
Growing markets, however, do not A case in point is that of the US cereals
mean easy markets. Over the past decade giant Kelloggs. It entered the Indian
the country. So had most foreign bankers. fluorescent lamps come with a lifespan of
This is where Citibank saw an opportunity. 10,000 hours. In India, their lifespan is
Citibanks Asian retail business head 3,000 to 3,500 hours. In Europe, people
flew down from the Singapore office and leave their lights on through the day,
kept cash machines and electronic payment whereas in India, people use bulbs for four
systems operating. Citi staffers greeted to five hours only, says Ramachandran. So,
Indonesian refugees at the Singapore a 10,000-hour bulb will have a life of 10
airport with placards that read, Citibank years in India, and thats not required. The
will help you. Come here. Needless to 3,000-hour bulb costs a fifth of its 10,000-
say, many Indonesians opened accounts hour counterpart. So, Philips had to design
with Citibank. a bulb keeping the save electricity habit
Later, taking advantage of liberal new (driven by high power tariffs) in mind.
bank rules, Citibank opened 61 branches. The developed world laps up labour-
The number of accounts rose 300 per cent saving concepts such as ultra-powered
from 1998 to 1999. In the first 12 months dishwashing detergents, ready-made meals,
of operations, Citi earned a 100 percent washing machines, etc. In emerging markets,
return on its $10 million investment in the however, labour is cheap, and consumers
new branches. are willing to forego convenience or time
Cultural issues are another risk savings in favour of low price.
multinationals need to keep in mind while According to Ramachandran, this can
devising their branding strategies. For be dealt with by addressing the perceived
instance, the Chinese are fiercely patriotic. value in the eyes of the consumer. If
They want to buy Chinese goods, except consumers are told that clothes washed in
in categories where the brands appeal is their washing machine are cleaner, softer,
specifically its Western origin. So dining and have enhanced lives, they will buy it,
out at McDonalds with family members he says. This is why the penetration of
is not perceived as appropriate due to the washing machines is on the rise.
foreignness of the food and the brand. But The means of knowing a market are
young men love to take their girlfriends plenty market research reports, selective
to McDonalds on dates since it offers an consumer testing, seeking views from
opportunity to experience Western food experts and consultancies, seeking a local
and concepts. This is how McDonalds is partner who understands the market and
positioned in China. so on. It helps to have a local management
Habits and market situations also play since they best understand the business
a big role in the success of a brand. For environment and the regulatory norms.
instance, internationally, Philips compact In fact, it is widely believed that Korean
C O V E R
dishwashing detergents, ready-made
meals, washing machines, etc. In emerging
markets, however, labour is cheap, and
I
consumers are willing to forego convenience
or time savings in favour of low price.
Fiat tried to sell the Uno in 1997 Desai points out that it is vital not to growth in saturated developed country
on the platform of a secure and reliable overestimate a market. In the nineties, the markets, emerging economies India and
workhorse. Fiat sold a product that was Indian middle-class was pegged at 200 China in particular are being viewed as
C O V E R
inferior to the product they sold elsewhere, million. Soon, foreign investors realised the next Big Thing. Those that learn to
says Goodman. So the taxi and jalopy that the middle-class had actually been understand the needs of these consumers
brand perceptions were reinforced. As over-estimated by a whopping 170 million. could well have found their El Dorado.
I
C O V E R
Harnessing Local Brands
I
iven the complexities of branding period of time. HSBCs approach can be
G
This article is an excerpt from the
for developing markets, how can contrasted to Citibank, which created a
book The 86 Percent Solution: How
companies best leverage their more homogeneous culture and retained its
to Succeed in the Biggest Market local and global brands to create identity as a U.S. bank.
Opportunity of the 21st Century by opportunities? The following sections Mehta said that this global brand was
discuss some strategies. not established overnight. In most of the
Vijay Mahajan and Kamini Banga.
geographies in which we operate, we have
Vijay Mahajan is a former Dean Strategy #1: Make Your Global Brands been working there for a very long time,
of the ISB, and current holder of Local often 100 to 150 years, he said. We
the Harbin Centennial Chair in Companies such as MTV and HSBC adopted a global brand strategy only when we
have shown the power of creating a were quite sure it would be more powerful
Business at the University of Texas global, recognized brand that is tailored than local brands. When HSBC decided to
in Austin, and Kamini Banga is an to individual markets. HSBC uses a use a global brand, intense debates resulted.
independent marketing consultant. decentralized management structure to One of the brands in the UK, Midland, had
ensure that local brands are responsive to been in use since the 17th century. But the
their markets, a strategy reflected in its global brand with a local strategy prevailed.
tagline of the worlds local bank. As an This was not done lightly, he said.
indication of the breadth of its reputation, In a speech in May 2004, HSBC
in 2004 HSBC was named Global Bank Holding Group Chairman Sir John Bond
of the Year by The Banker magazine, the noted that the same telecommunications
Most Admired Corporate Brand by and other technologies that have brought
Asiamoney magazine, and the Worlds developing market outsourcing firms to the
Best Bank by Euromoney. Five years after developed world are bringing global brands
the launch of the global brand in the late back home to the developing world. The
1990s, HSBC was already rated among the value of branding in a globalized world is
top 50 global brands. enormous, he said, adding that brand
The HSBC logo may look the same value will be more profitable than the value
around the world, but this similarity masks gained through offshoring service jobs.
the fact that it is seen as a local brand across Recognizing the diverse languages
more than 90 countries. In most countries of different parts of the world (see the
in which we operate, we are perceived to following sidebar), MTV has localized its
be a local brand, said Aman Mehta, former brand around the world, as discussed in
CEO, in an interview. It has been a great more detail in Chapter 5, Think Young.
success story in branding. MTV India broadcasts primarily in Hindi,
For the strategy to be successful, HSBC the dominant language of India, but it faces
has to have a superior product behind the competitors broadcasting in Tamil, Telugu,
brand, and operations really have to be and Punjabi. The company is considering
local. The main point in talking about a launching or acquiring stations to reach
local bank is demonstrating to the customer listeners who dont speak Hindi, which is
that you are totally steeped in the local the primary tongue of only 30 percent of
economy, Mehta said. Even if a company the population.
talks about being local, it cannot wave a Microsoft created a platform for
magic wand and become local. People have localizing the language of its Windows
to be convinced of that over a very long XP software. Through its Local Language
language of Amharic and Ukrainian and Coca-Cola offers water and tea products
other languages. The company announced under its locally developed Tian Yu Di
plans in November 2004 to roll out software (Heaven and Earth) brand, a successful
C O V E R
S T O R Y
Strategy #3: Grow Your Own Local Brands KFC are considered upscale in developing
When Possible markets. Their Western image raises the
As Anheuser-Busch found with Harbin, level of their brand among customers
C O V E R
acquiring local brands can be an expensive who want to be connected to the global
strategy. While some local brands are based village. This is contrary to their image and
on century-old local dynasties, it is possible reputation in the developed world, where Kamini Banga Marketing Consultant
to create new local brands that pay close they are near the bottom of the food chain
I
attention to market needs. In India, the in luxury dining.
detergent brand Nirma was created in the Because of these differences in how
1960s by Karsan Patel, a chemist who made brands are interpreted, companies need
detergents in his backyard and sold them on to take care in rolling out brands in the
a bicycle. Today, the brand has 15 percent developing world. Managers need to
of the Indian detergent market. In response carefully assess what the brands mean in
to the success of Nirma and other brands, different regions.
Hindustan Lever established its own low-
priced local brand, Wheel, in the 1980s. Strategy #5: Address the Liabilities of Global
This new brand allowed the company Brands
to meet the needs of price-sensitive While global brands appear to have many
consumers without eroding the position of advantages such as developed-world cachet
its established brands. Wheel, with a free- and broad recognition they also suffer
standing organization, became one of the from liabilities. Multinational companies
dominant brands in the country. need to address these liabilities, while local
Nirma built its brand by recognizing an rivals may be able to benefit from them. For
opportunity in the consumer shift from low- example, anti-American sentiments helped
cost laundry soap to more expensive washing Mecca Cola challenge Coke and Pepsi
powder in the 1970s. Hindustan Lever and among Muslim customers in Paris and other
other major global firms concentrated on parts of the world. As well as aiding Quibla
the high-income segment that was already Cola in the UK and Zamzam Cola in Iran.
using washing powder while most Indians These products are purchased by customers
still used economical laundry soaps. The who like the appeal of cola but object to
laundry soap market was large and growing, Coca-Colonization.
but no one was making an effort to convert The complexity of global and local
users to washing powder. Nirma moved into branding can be seen in the success of Cola
this local vacuum. Turka in the Turkish soft drink market. This
brand was launched in 2003 with advertising
Strategy #4: Recognize That Brands May Mean featuring U.S. actor Chevy Chase (popular in
Something Completely Different Turkey for his National Lampoon movies).
Global brands may lose something (or gain It was a decidedly nationalistic brand
something) in translation. Brands that may promoted by an American celebrity who sang
stand for certain qualities in the developed a traditional Turkish Boy Scout song and a
world may have a completely different Turkish-language version of Take Me Out to
meaning in the developing world. Companies the Ballgame in advertising spots. This odd
often expect their established brands to mix of local and global positioning led to a
be greeted with open arms as a sign of highly successful launch, provoking significant
development and sometimes they are. But price cuts by Coca-Cola and Pepsi.
global brands may be virtually unknown in Global brands also have to be
rural areas, conveying little advantage. careful about attacks on local rivals
In many cases, the value added by a and sensibilities. When a Toyota ad in a
global brand is homogenized to one key Chinese magazine showed a Toyota truck
value proposition its foreignness. To the towing a Chinese rival up a muddy hill,
extent that this foreignness may add value, Chinese customers were not amused by
Nike television ad showing U.S. basketball positions Coke as a sophisticated drink for
player LeBron James defeating a cartoon the rising middle class. While Pepsi has
kung fu master and a pair of dragons was focused more on the cities, Coke holds a
C O V E R
banned by the government for offending 55 percent share of Chinese sodas overall,
the national dignity. compared to 27 percent for Pepsi. But will
Local brands sometimes are helped its more countrified image in rural areas
by local distribution networks and erode the brand among urban customers?
I
regulators, who favor local players. Procter & Gamble was able to navigate
Government regulators often side with this brand-stretching successfully in China.
the local brands over large foreign rivals. It moved its Crest toothpaste brand,
For example, Chinese courts in Beijing which held more than half of the high-end
ruled against Toyota when it charged that segment by 2000, into the middle and low
local competitor Geely had ripped off the ends of the market. The company launched
Japanese car companys marquee. The a cheaper, rural offering under the same
court ruled that the logos were not that brand, using cheaper ingredients, priced
much alike and that consumers were not 30 percent below its premium brand. Its
dumb enough to confuse Geely cars with marketing emphasized cavity protection
pricier Japanese models. over the whiter teeth that were important
Although it is important to recognize in the premium segment. Crests share of
the impact of anti-global and anti-American the middle market in China more than
sentiments on the value of brands, this doubled from 5 percent to 12 percent
impact should not be overestimated. As from 2000 to 2002 while its premium
protesters are throwing rocks at American products also increased market share from
fast-food restaurants, their compatriots 5 to 8 percent.
are continuing to purchase dinner there. A Surrogate brands can also be used
12-country study of 1,500 consumers by to stretch brands. Because of constraints
Douglas Holt, John Quelch, and Earl Taylor on liquor and cigarette advertising in
found that the antiglobal segment (not many parts of the world, companies have
anti-American) constituted just 13 percent launched surrogate brands. The company
of the market. Global citizens, who can market soda or distilled water under
believe global brands, signal high quality, the same brand as the alcohol. This builds
made up 55 percent. Global dreamers, awareness of the brand without violating
who see global brands as a way to connect rules against liquor advertising.
with the global village, accounted for 23 Religious restrictions often require
percent of the market. This means that creative solutions to branding. In Islamic
nearly 80 percent of the market continues countries, womens apparel, jewelry,
to find value in global brands. and fashion accessories are advertised
without using models because a womans
Strategy #6: Stretch Brands Without Breaking face cannot be shown. Advertisers work
Them around this by showing silhouettes or
Companies also need to be able to stretch women with their faces turned to the side,
their brands without breaking them. In or they use Western models, because the
2004, Coke moved out of the major cities restrictions dont apply to them. These ads
in China and India to push deeper into can be creative and effective. While typical
the smaller cities and towns, offering small Western advertising focuses on diamonds
bottles and low prices of about 12 U.S. and other jewelry as a sign of caring, such
cents per serving. The challenge was to emotional appeals do not work in Islamic
address these markets without eroding its markets. Instead, jewelry is positioned as
urban image. One Coca-Cola advertisement an expression of wealth, prosperity, and
for rural Chinese markets shows a popular security. Dubais Emirates Airline, using
comic actor drinking Coca-Cola and closing its central location to become one of the
S T O R Y
Muslim women as flight attendants by apparent on the websites of companies with
relying primarily on foreigners. sophisticated global branding strategies,
such as LG Electronics and Sony. They
C O V E R
Strategy #7: Put the Brand on Wheels offer diverse home pages tailored to
(or Legs) different countries showing different
To develop brands in rural villages, languages, customers, and products based
companies have used banner advertisements on the countrys specific needs. While LG
I
on elephants and video vans to build brand Electronics overall tagline Lifes good
awareness. Colgate-Palmolive, for example, is the same, what a good life means is
drives vans into rural villages to build brand interpreted market by market. In contrast
and product category awareness. These vans, to this extensive tailoring, some companies
designed to introduce villagers in India to the merely translate language or have only a
concept of brushing teeth, show half-hour local identity online.
infomercials on the benefits of toothpaste The portfolio of global and local
and then distribute free samples. brands should be shaped by the
Whereas the company might fight for a companys brands and the demands and
share of the supermarket shelves in cities or characteristics of specific markets within a
developed markets, in these rural villages, given country. Companies need to become
competition comes from local preparations skilled at managing and balancing these
made from charcoal powder and the neem complex portfolios based on insights
tree. These local rivals have a significant from specific parts of the market. One
advantage in distribution because their key is to understand the roots of success
products can be found in the surrounding for products and brands that are already
countryside. Companies also team up with successful in each market and to recognize
nongovernmental organizations (NGOs) to that brands may have different meanings in
promote toothbrushing or other aspects these markets. What makes these brands
of personal hygiene by combining product attractive to this specific segment?
promotion with social action. In media-
deprived areas of the world, brands may rely
much more on word of mouth and village
leaders to develop the brand.
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The Emerging
Consumer
t has been ten years since the revolution So what really changed? Did the
I
The author of this article,
Professor Sridhar Moorthy, began. I am referring, of course, to the Internet have any impact?
Internet. I browsed the Net for the I want to argue here that the answer is
is Professor of Marketing at first time in 1994. The browser was called yes to those questions. The Internet has had
the ISB, and Manny Rotman Mosaic. There were a handful of websites a big impact, and the impact is continuing.
Professor of Marketing at the then, and search engines with names like But away from the media headlights, it is a
Archie, Veronica, Gopher, and Jughead quiet revolution. The revolution is in The
University of Toronto.
none of which exist now. Emerging Consumer. Its impact in the
Back then everyone was proclaiming Indian context is perhaps years away, but
how our lives would be changed forever the developed markets already present a
by this new invention called the Internet. case study of what to expect.
Traditional bricks-and-mortar stores would As advertised, the Internet has reduced
disappear. So would the differences between the costs of searching for information.
television and computers. Everything would Some people have interpreted this to
converge. We would all be shopping for mean that the role of product and service
groceries on the Net and watching television differentiation has disappeared, that
on cell phones. branding is dead. Neither is correct. Both
Even business paradigms changed. of those concepts remain important, and
Investment in online enterprises didnt arguably even more important than before.
require profits to justify. Price-earnings What has changed is the nature of branding.
ratios didnt matter either. What was How you differentiate, rather than whether
important was that the start-up had you differentiate. How you brand, rather
eyeballs: page views for its website. than whether you brand.
The fight for market share became a fight for Take online retailing. Retailing can
eyeballs. Both revenues and profits would be described on several dimensions:
eventually come. How? From stickiness product assortment, own brands,
and network externalities. Such were the shopping convenience, ambience, and
assumptions behind the dot-com boom of service pre-sale and post-sale. All these
the late nineties. dimensions are available to the online
Well, the dot-com boom came and retailer for differentiating itself. The
went. Investors realized that profits and ambience of the website takes over from
price-earnings ratios were important after the ambience of the bricks-and-mortar
all. Business schools, which went into a tizzy store. Shopping convenience and pre-
creating Internet-based curricula, suddenly sales service take the form of how easy or
found that these courses had few takers. It hard it is to navigate the website, to find
was back to the basics. the information you want as a shopper.
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Of course, what is missing is the hands is that not only can the viewer time-
on touch-and-feel experience, and shift his/her viewing, she/he can avoid
the instant gratification of the real store, the commercials while watching her
but this can be seen as a problem or as an favourite shows.
opportunity. What the consumer is looking Take away television, and imagery-
for is assurance that she will get what based branding has become almost
she desires, at the time it was promised. impossible. The advertising possibilities
A reputation for accurate product made possible by the Internet banner
descriptions and a reputation for on-time ads, pop-up ads, and spam are a poor
delivery provide these assurances. They substitute. They dont have the richness of
also provide avenues for differentiation TV advertising a requirement if you are
and branding. But note well that the online trying to differentiate via imagery. Plus,
retailer has to earn this differentiation. It they have a bad reputation. In a recent
cannot be done through advertising. The survey by Forrester, spam and pop-up ads
retailer has to provide good service in were the least trusted advertising media.
order to develop a reputation for good They were also the most annoying. The
service. While advertising might get you consumer on the Internet doesnt seem to Professor Sridhar Moorthy
the first order, how you perform on that be open to be marketed to.
first order will determine whether you get The second reason branding has become
repeat business and good word-of-mouth. more challenging is that advertising is not
For the manufacturer I would argue the only source of influence for consumers.
that branding and differentiation have They are talking to other consumers. Word-
become harder. The reasons are two- of-mouth is not a new concept, of course, but
fold. First, a primary means of branding what has changed is its scale and scope, its
is losing effectiveness. I am referring to speed, and its effectiveness as an alternative
television, the mainstay of branding for channel. The new word-of-mouth doesnt
consumer goods for a millennium, which look like the old word-of-mouth. In fact, it
is rapidly losing its importance with the doesnt involve talk at all, but rather reading
growth of the Internet. Consumer media and writing in blogs, discussion forums,
habits are changing. Instead of watching news groups, and review sites (like Epinion).
television, the consumer is browsing the And you dont need to know someone to
Net. And when she watches television she disseminate your opinions or access theirs.
is increasingly skipping the commercials. Just enter the name of the product you are
TiVo-type personal video recorders are seeking information about into a search
booming in North America. One of engine like Google and dozens of word-of-
the chief attractions of these devices mouth sites pop up. There is even a name
The bottom line is that for this new generation of word-of-mouth: the consumer is becoming more elusive,
the consumer is becoming Consumer Generated Media (CGM). Or and hard to reach. Integrated marketing on
you could call it word-of-mouse. multiple media is a necessity now.
more elusive, and hard How does word-of-mouse differ The nature of brand-building changes as
to reach. Integrated from word-of-mouth? First, it is more a result. For high-ticket items, the consumer
marketing on multiple organised. Second, it is faster. Third, its will research the Internet and find out what
media is a necessity now. reach is wider you are not limited to your reviewers and other consumers are saying.
friends, relatives and neighbours. Put it all If you provide good value, then you have
together, and you have a potent new means nothing to fear. That value becomes your
of communication. Put it in conjunction brand. If you dont provide good value,
with the decreasing power of television, then you need to quickly find the means
and as a marketer, you have big branding to become competitive or else For low-
problems. ticket items, where the differentiation has
What to do if you are a marketer? One traditionally been on imagery, the point
the one hand, you may find solace in the of decision-making shifts to the store.
fact that while fewer eyeballs are watching Here the retailer is king. Instead of media
advertising on television, the ones who do, advertising, merchandising at the point of
may be more responsive to it. But these sale becomes important. This is the reason
may not be your most desirable targets trade promotion spending has exceeded
in terms of revenue potential. Research advertising spending in the U.S. for many
indicates that they are likely to be the lower years now (56% versus 19% of total
socio-economic groups. What other means spending in 2004 according to ACNielsen).
of communication can you access to reach The movement towards retailer-branded
the more promising targets? Print magazine products, i.e., private-labels, will continue
readership, apparently, is holding its own as well. Already, in many countries in
in the face of the Internet. That remains Europe and North America, private-label
an avenue for developing awareness of shares exceed 50% in some categories.
new products and services and for brand- Aldi, a German retailer, generates over 85%
building, but as is well-known, the kind of its sales in private-labels.
of branding you do in the print media The Indian marketing environment is
has to be more factual and performance- different, of course. Broadband penetration
based than imagery-based. The retail is still in its nascent stage (only 3 million
environment is increasingly seeing the subscribers in 2005 versus 40 million in
invasion of television, and that arena may be China); the neighbourhood kirana store
ripe for more advertising. But will TV ads still dominates retailing; and personal
work as well in the noisy environment of a video recorders are virtually non-existent.
store? The movie theatre may be a more Together with rising disposable incomes,
congenial environment. Two-thirds of the it would seem that the power of media
respondents in a recent Arbitron study said advertising to create brands and move
they wouldnt mind more advertising in the products has never been stronger. But going
movie theatre. Speaking of movies, product forward, it would be hard to argue that The
placement in movies is growing, and will Emerging Consumer will not emerge here.
continue to grow. The bottom line is that
C O V E R
An Academic Perspective on Measuring the Impact
of Advertising in a Cluttered Environment
I
seemingly permanent characteristic X to consumer segment Y in country Z.
A
The author, Professor Seshan
of management buzz on various Instead, the focus is on understanding how
Ramaswami, is Associate
fora is a focus on change and trend- various kinds of sales promotions work,
Professor of Marketing at the spotting. Themes such as The Future of X, how advertising affects consumer memory,
ISB, and Associate Professor New Y Paradigms for the New Decade, or how companies should respond to price
Strategic Marketing, Singapore where the X or Y could be advertising, or cuts amidst rapid technological innovation.
marketing, or supply chain management, I recently heard a prominent American
Management University. This article or retailing, or inventory control, abound newspaper association spokesperson talk
is based on his talk at the Diamond in these fora. As do themes like How Z about how the newspaper industry had
Jubilee Symposium Future of Will Transform Your World, where the Z changed completely all over the world.
could be the internet, or discount airlines, He also shared many examples of how
Advertising organised by the or the WTO implementation, or September newspapers were doing many different
Advertising Agencies Association 11. Somehow, it seems inevitable to all of things to combat competition from other
of India (AAAI). us, that the future will be very different news sources. Yet, he continued to define
in fundamental ways. And that every new his business throughout as the printed
phenomenon will change the world forever. broadsheet that the printing presses put out
A corollary of that is, that if we do not do each morning! He spoke about all the other
something drastic right now in anticipation things that the newspaper companies were
of the future, then we will be crippled, or doing to combat the changes, but continued
worse, cease to exist. to see the print newspaper as his business.
However, the obsession to consistently An advertising agency leader recently
worry about the future can also lead to spoke to my students here at the ISB
ignoring the need to continue to improve about how ad-agencies do not see creating
our understanding of the basic principles television advertising spots as their main
of sound marketing today. Surely, the product anymore, and are moving to many
specifics of the marketing challenges of other innovative media like music videos,
a particular space and time, matter to a organising flash mobs, sponsorships, events,
product or brand manager. On the other etc. These are important trends, and they
hand, we still have a lot to learn about the are triggered by changes in technology and
fundamental nature of competitive and by how consumers seek information as
consumer response, regardless of whether well as get entertained. However, the basic
the environment is the emerging economies nature of these businesses has not changed,
or the more advanced ones, and whether in and perhaps never will. Not if they think of
the year 1975 or 2025. Academic research, their businesses as not the printed word or
often derided for ivory tower mentalities, the TV spot, but meeting the information
focuses almost exclusively on that kind of and communication needs of the audience/
basic research developing new theories clients. And when business is defined in
as well as methods. Academic research in these fundamental ways, theory-building
marketing is a fairly young phenomenon, research that asks fundamental questions
most major academic journals in marketing about the nature of competitive and
being just 2-3 decades old. The focus of consumer response, becomes a powerful
this research is not on selling product source of knowledge.
where many brands compete viciously the clip is shown. The explicit recall of
for market share in a saturated industry. brand names, let alone brand associations
But increasingly, emerging economies are and advertising messages, is almost never
beginning to face this problem as well. more than 5-6 out of the 12-13 brands
In the emerging economies, growth in that get exposure in these clips. And this is
industries is often accompanied by the a highly concentrated and quiet classroom
rapid growth in the media businesses too. environment which should maximise the
For example, there have been two major possibility of accurate and full recall relative
newspaper launches in Mumbai in just to the regular noisy television viewing
the last few months, and new television environment. There is plenty of money
channels and internet websites continue to being spent on outdoors advertising, on
proliferate on a daily basis. More and more transit modes including innovative uses
brands are fighting to grab the attention of such as Air Deccans use of the media of
Professor Seshan Ramaswami
the consumer, whose availability in terms plane exteriors, luggage hold doors on
of advertising processing time or space has aircraft interiors, luggage tags etc. It is very
not increased. difficult to measure the impact of these
In my Advertising course, I forced yes, media spends on the long term equity of
it is a tough course! my students to watch the brands being advertised. Conventional
twenty minutes of live cricket programming measures of sales and market share are
during the recently concluded India Pakistan unlikely to reflect the unique effects of the
cricket Test series. Their assignment was to advertising spend, un-confounded by other
track every single brand name that they marketing activity such as trade promotions,
were exposed to during that time on distribution changes, etc. The effects on
players clothing, bats, the umpires coats, building memory links of the brand with
the scoreboard, the various pop-ups and the category, or of the brand with positive
clip-art videos celebrating boundaries and associations, as a consequence of these
wickets, the brands advertised around expenditures, will not show up in the sales
the boundary, in signs that the stadium figures, or even in the conventional day
audience was holding up, etc. They had after recall measures.
to observe the placement of the various This is where academic researchers
brands and comment about which brands in marketing can contribute. Academic
were getting the greatest value for money. researchers begin with a theoretical
Armed with the rich base The students listed anywhere between 12 base, which is not dependent on either
to 40 brands in all. My own study during a the product or the locational context
of theory and methods,
Test match a couple of years ago in Chennai (whether emerging markets or advanced
academic researchers are resulted in noting some 37 brands in a 30 ones) or even on consumer segment.
able to unearth effects of minute period. It is interesting that even They are endowed with a rich set of
marketing expenditure under conditions of concentration, there methodological tools, experiment designs,
is such variance in the number of brands and economic and statistical models of how
which would be missed by listed. What is even more certain is that both competitors and consumers respond
the conventional commercial not more than a few of those brand names to marketing activity. This background
market research measures will be consciously recalled by even the of theory and methods allows them to
most avid cricket viewer. contribute to a greater understanding
of unaided and aided recall I routinely show clips of television of the effects of advertising even in a
and sales figures. programming interspersed with one pod cluttered environment.
I
they describe how the fluency or ease Their summary of multiple experiments
of processing a brand name (or a logo or in many categories reveals interesting
packaging) can lead to greater liking for results about the effects of advertising. One
the brand name. Thus, someone exposed illustrative finding is that concentrating
to a lot of cricket broadcast may have little TV advertising versus spreading it across
or no conscious recall of the multitude of a longer time period results in larger
brands that she/he was exposed to. Yet, the brand sales.
repeated exposure of the brand name in the Armed with the rich base of theory and
background of the game in progress could methods, academic researchers are able to
lead to greater familiarity with, and also unearth effects of marketing expenditure
greater ease of processing that brand name which would be missed by the conventional
in a competitive set. When someone enters commercial market research measures of
a self service outlet like a supermarket or unaided and aided recall and sales figures.
some of the modern self service retailers Getting a more sophisticated understanding
of shoes, electronic items, etc., certain of how the marketplace operates at a
brand names, models, packages may grab fundamental level can lead to rich rewards in
your attention and also evoke your liking the long run to companies that help to foster
spontaneously. Thus advertising exposures and fund such research. Research focused
may affect your preferences even while schools like the Indian School of Business,
you have little conscious awareness of which attract many leading scholars of
that exposure. marketing to teach as well as to participate
There is significant risk in evaluating in academic and industry research, can be
advertising expenditure only in the short a great source for professional marketers to
run. A stream of research by Marnik tap into to improve their arsenal, and for
Dekimpe and Dominique Hanssens uses the use of their arsenal of marketing tools.
data from the pharmaceutical industry.
They evaluate the impact of advertising in
medical journals using sophisticated time
series analyses of data on ad spend and
sales over a long period. They are able to
isolate, with some precision, the effects of When someone enters a self service outlet like
such advertising. Heres a sample result
from their work: each $1000 advertising a supermarket or some of the modern self
shock generates immediate prescription service retailers of shoes, electronic items, etc.,
increases of 70, which amplify to 83 in the certain brand names, models, packages may
long run.
A third stream of work by Leonard grab your attention and also evoke your liking
Lodish and his colleagues, is based on spontaneously.
a series of advertising field experiments
using split cable technology. These
experiments are enabled by split cable
technology which allows the broadcast of a
differentiated level of ad spend to different
sets of consumers on a random basis. For
example, every second household can be
or the faculty and students of the During his address, President Bush
Indias large population of young people who social enterprise club with a lot of help
are contributing to this transition through from the faculty, the Entrepreneurship
sheer dint of their creative energies, he Centre, and the student body of the ISB.
adds. She also talked to the President about
In many ways, the ISB itself embodies compassionate capitalism consisting
the very essence of the entrepreneurial of providing venture capital funding to
spirit. In just four years, it has gone from small businesses and social entrepreneurs
strength to strength in providing world-class so that they can sustain themselves. Such
business management education through projects use a market based model rather
its innovative initiatives. The schools many than a traditional aid-based model,
achievements have ensured that it is on she explained.
the radar of important institutions of the Dishan Kamdar. Assistant Professor in
world, the White House included, says the area of Organisational Behaviour at the
Rajesh Mani. ISB, adds his perspective to the Presidents
One of the innovative initiatives visit. As the faculty representative from
that the ISB has undertaken involves the ISB who greeted President Bush on his
the curriculum for its post graduate arrival here, I think that the visit endorses
programme in business management. It the ISBs focus on cutting-edge research
is mandatory for all students to undergo especially relevant to emerging economies.
a core course in entrepreneurship Not many business schools in this part of
irrespective of what they opt for in the the world envision a research-oriented
advanced elective courses. The course thrust that is so essential for global business
goes a long way in giving shape to the schools. It is here that the ISB scores in
creativity and idealism in students. terms of attracting expatriates who either
Anjali Patel, a student from the come back to join school to augment a
ISB Class of 2006 was part of the career shift, or to work here as resident
Roundtable for entrepreneurs addressed or visiting faculty, he says. Its a pleasure
by the President. She is the President to be here at the ISB, and to have visiting
of the Net Impact Club at the ISB, and dignitaries such as the President of the US,
told the President that she runs the he adds.
Harsha: You were once an ace footballer. I organisations around the world have a
know that active Sportsmen dont care too strong brand name is an important issue
much for researchers or academicians. Its for analysis.
interesting that you made the transition.
Bob: Yes, but with some difficulty, because India is largely a single sport nation; we
in academia, sports isnt often treated very are full of what people might loosely call
seriously. Ive had to convince people that low demand sports where there isnt
sport is a serious area of study. I have taken enough funding, nor enough professional
a while to carve a strong economic niche. sportspersons, and therefore there isnt
I use my sporting background to say that adequate viewer or spectator interest. In
its important to have that link between the your experience, do we seek government
practice of sports and the study of it. help in managing low demand sports, or
focus only on managing high demand
Brand management is a subject of study in all sports like cricket in India, and football
B-Schools. I wonder if sport requires brand across Europe?
management across the world, particularly In Australia, we have targeted a number of
because of increased commercialisation sports, some of which arent necessarily the
and globalisation of sport. most popular, or the most visible sports,
Its beginning to become a major area of such as cycling. We have driven them
interest. A number of sporting organisations with support, giving them facilities, and
around the world, and some of the more student scholarships etc. We have ensured
commercially driven popular clubs, are overseas exposure to improve the profile of
now seeing themselves as an important the sport, and for bettering performances
brand. The idea that well known sporting at international competitions. This has
I
One other dilemma in developing countries low demand sports where
like India is that while a certain sport like there isnt enough funding,
cricket generates huge interest and money,
nor enough professional
for other sports where the government is
providing infrastructure, the government sportspersons, and therefore
tends to take its job further, and run the there isnt adequate viewer or
sport as well. I have first-hand experience spectator interest.
of seeing this happen in India.I dont
know whether other developing countries
Harsha Bhogle at the ISB
experience this. Maybe, the government
should provide the infrastructure, and leave
the running of the sport to somebody else?
While government funding is crucial, its
also important that you have advisors from
the private sector that provide additional
funding and facilities, and also assist in
brought in regular attendance from the the running of major events. In Australia,
crowds. Today, Australia stands next to we have quite a good balance in three
Great Britain as the world champions in fundamental sectors: the government
track cycling. The government has a critical provides the large physical infrastructure,
role to play in all this. the civil society or the volunteer sector
provides enormous amount of labour
But Australia has the advantages of a lot of and the human resource for sport, and
space, and a lot of opportunity because of lastly, the private sector provides funds,
low population. How can the promotion manages events, and also the training of
of sports work in developing nations professional managers.
where sport has to constantly compete While we have been fortunate in having
with other overriding requirements such a good balance of the three sectors, for
as education? others, if you have one of those bleeding,
Australia has always valued sports as part then the other two develop weaknesses.
of our popular culture. It has also been
a part of our history, from the days of Another problem that we currently face
colonialism. with being so cricket-centric in India is
Certainly, with developing countries that there is cynicism about the kind of
its hard to convince government officials media attention and corporate assistance
that money should be put into sports, when that cricket gets, while the other sports are
it could be taken away from education, not cared for. The government believes in
health policy etc. In some respects its a funding and running these other sports in
chicken-or-egg situation. Do you really have a bureaucratic manner, and that leads to a
economic development first, before we can lack of accountability. There is a reasonable
I
out of the allied business generated? little left at the end of their sporting careers.
Yes, I can see that happen for the commercial Thats a very good question. But, we need Professional player management is now an
sports like the Aussie Rules, the Tennis and to see what making money really means important part of sport management. It is a
the Rugby League, where theres a consumer here. Actually, the government didnt make specialised and growing area.
pull anyway. What about media coverage for too much money. It didnt cover all its
the non-commercial sports that the state is costs, but the city of Melbourne benefited What is your view on how sport is evolving
trying to promote? majorly by attracting tourists. In fact, in Asia based on the delegates youve met
There isnt any coverage for those. Most this is a great way of putting a city on the at the ISB?
of them would die for the amount of world map. The Commonwealth Games India has huge potential. You have a huge
coverage that football and some other coming up in Delhi in 2010 could provide population. You have got an enormous
sports get. But its a fact of life. They tremendous development to Delhi, and to growth in general economic activity. As a
accept the fact that they will always be India in general. result, as you become more materially well
seconded, and will have a smaller share of off, your sports will also take off, particularly
the resources. The governments limited To some extent, that happened during the at the professional level. I predict that the
funding ensures that they have a strong Asian Games in India in 82 83. It led new hub of global sport will be the Asia-
base, and they even achieve some level of to a huge television boom because they had Pacific region, 15 - 20 years from now.
international success. to showcase India. But soon after that, we
almost did a Montreal where the facilities I hope that happens, but currently we are far
Even a high profile sport like Tennis in were hardly being used for a long time. The too dependent on the government, which is
Australia wasnt producing top players flagship stadium the Jawaharlal Nehru focusing on more foreign investment into
for almost 10 years, but now there Stadium is in a sad state now. Indian industry, or on the issue of terrorism,
has been a resurgence. The Australian Yes, there seems to be no point in having and has little time, or the inclination to
Open has now regained its importance white elephants. Perhaps, we can make promote sport. I hope that it changes.
as a Grand Slam event. How has it been sure that once the infrastructure is Let me remind you of one important
possible? created, it is actually used, and can pay for point. One requirement for sports
We have always had a tradition of tennis in itself in 10 20 years. At Melbourne, we development is a stable political and
Australia. Every small country town has a did a 450 million dollar redevelopment economic environment, and when you have
tennis court thats part of the sporting where we created a multifunctional park got that, you will have a sporting structure
fabric of the country. So, a lot of people play that is now mainly used for football and on a large scale. The other requirement
tennis at least casually, even though there cricket events. remains the balance of government, private,
may not be international success. But apart and civil society for the development
from Lleyton Hewitt, we havent produced How do we deal with the other more visible of sport.
world champions like we did 20 or 30 years part of sport management the management
ago. And that is one of the weaknesses in of sports players liaising with networks, Actually, my suggestion is that the
the system. big money athletes requiring individual government gets itself out of sports after
The resurgence is due to the management, etc.? Is player management a two-year notice period, and offer the job
government pitching in with investing largely entrepreneurial, or is it a glorified to leading Indian corporate houses. The
millions into the infrastructure called the one-man shop? Indian corporates are growing to global
Melbourne Park for the Australian Open, Several athletes and sports persons have competence. They can be asked to adopt a
which has got the Australian Open back as managers to look after their financial and sport each, and be given tax incentives for it.
a big event. personal affairs. Its becoming very important I hope that it happens!
(From the left): Dr Jayaprakash Narayan National Co-ordinator, Loksatta; Dr Chandan Mitra MP, Rajya Sabha; and Sandeep Dikshit MP, Lok Sabha
L E A D E R S H I P
ISB Leadership Summit (ILS) 2006 was hat does it mean to be in politics? and it could be considerably dark and
a conclave of political and business
leaders, providing a unique platform
W What would motivate young
Indians to join politics? What are
the downsides of being in politics?
secretive. He had experienced all these
difficulties even though he belonged to a
political family. Yet, he found it necessary to
for inspiring thought leadership on Six eminent panellists avidly debated engage in politics in some way or the other,
the theme India Next. The speakers these questions in the discussion Youth as the profession empowered one to make
were all eminent leaders and young Participation in Politics scheduled for the desirable changes.
forenoon programme of ILS 2006. The The afternoon discussion had more
achievers. The highlight of the
panellists were: practical issues to discuss in The Synergy
event was the presence of active Sandeep Dikshit, Member of Parliament, between Government and Business. The
politicians one from the Lok Sabha, East Delhi Constituency panellists were:
and another from the Rajya Sabha Chandan Mitra, Member of Parliament, Satish Reddy, MD & COO, Dr. Reddy's
- and a former bureaucrat turned Rajya Sabha Laboratories Ltd.
Jayaprakash Narayan, Social Activist GK Sood, CEO, Louis Dreyfus India
social activist, who collectively lent Mudit Kapoor, Assistant Professor, Pvt Ltd.
important insights to the agenda. Economics and Public Policy, ISB Vijay Parthasarathy, Managing Director,
Gemplus India Pvt Ltd.
Tejendra Khanna, Chairman, Ranbaxy
Laboratories Ltd., delivered the keynote Madhav Mehra, President, World
address, while Rajendra S Pawar, Chairman, Council for Corporate Governance,
NIIT, moderated the discussion. Chandan delivered the keynote, and Govind Ethiraj,
Mitra was concerned about the declining Ex-Chief Corporate Editor, CNBC TV18,
number of youth (aged between 25 and was the Moderator. The panel debated
40) getting elected as MPs. The figure had upon Corporate Social Responsibility, with
declined from 162 in the 2nd Lok Sabha, to active participation from the audience.
60 in the current one. Jayaprakash Narayan What lingered in students memories
said that politics, despite its disrepute, long after ILS 2006 concluded, was
provided the only platform to the nation the curious vulnerability of the elected
on which diverse and conflicting issues politician, and the inspiring words of the
could be resolved. The only antidote social activist who stood up for greater
to politics is more politics, and better youth participation in politics. In the
politics, he said. Sandeep Dikshit gave a words of Jayaprakash Narayan, Though
first-hand account of the difficulties of an everybody loves to hate politics, apathy is
elected politician. He said that there were detrimental to Indias cause. Be a part of
several entry barriers to politics, there the solution. Not a part of the problem.
was no defined process for getting into
the profession, no clear or specific path,
F R O M
India on a
I
High Growth Trajectory
Lloyd Blankfein, President & COO, Goldman Sachs Group Inc.
Phani Tej Adidam, Professor, ost companies in the Indian camera. It had also lost about three billion
Executive Management Education,
Department of Marketing and
Management, University of Nebraska
M marketplace are obsessed about
their customers, but they need to
focus on Competitive Intelligence (CI) as
dollars in law suits to Polaroid in the
instant camera market, where Polaroid
had several patents. But Kodak managed
well. Predicting your competitors moves, to gain some ground despite its losses by
at Omaha, spoke on Competitive six months to two years from now, calls for upstaging Fuji in gaining first entry into
Intelligence at the ISB. His talk some sophisticated knowledge. This could the disposable camera market thats worth
dealt with the subject of tracking be with regard to the competitors entering around 14 - 15 billion dollars globally.
competitors moves in the market, new markets, cutting prices, or offering Kodaks CI regarding Fujis intended
anticipating their actions, and basing new products or services on the Internet, forays into the disposable camera business
any of which could completely undermine prompted Kodak to revive its own
ones own reactions accordingly,
your existing strategy. research on disposable cameras that it had
for a successful marketing strategy. In the fifties, the three big automakers shelved because it had earlier thought that
Adidam quoted several interesting in the American market, GM, Ford the model would not sell. Thus Kodak,
cases involving leading companies to and Chrysler, were selling huge cars an American company, made headway in
explain how Competitive Intelligence that guzzled tonnes of petrol. But the Japan, which was Fujis home country, by
(CI) analyses have made them what Japanese foresaw that there would be gaining valuable first-mover advantage.
they currently are. We present a fuel crisis. The Japanese, considering Today, Kodak has the larger share of the
their geography, already had small cars market, worldwide, followed by Fuji.
excerpts form his talk.
that were fuel efficient to some extent. In the Indian context, Asian Paints
They now invested money in developing has vanquished other companies in the
their distribution channels, and in fuel paint industry such as ICI Dulux, Jenson
efficiency research. By 1968, Toyota, and Nicholson, Berger etc., because of its
Honda, and Datsun now Nissan came strategy to allow the customer to walk into a
in. The demand suddenly increased. They retail outlet, and find paint of the shade that
had a ready channel of distribution in they want, and in the size that they want. So,
place, as well as the right product. They if you wanted a particular saffron shade in a
were able to cater to approximately 30 small size, you could get it at Asian Paints,
33% of the market within four years, and not compromise on either the shade or
i.e., between 1970 and 1974. This caught the size as you would have to elsewhere. Asian
the American automakers completely off- Paints has gone on to build a huge customer
guard. Their philosophy was completely base, and lead the market for the paint
product oriented, whereas the Japanese industry in India. No doubt, Asian Paints CI
had a market oriented philosophy. Thats analyses made them aware of the customers
the kind of amazing success story that CI predicament in either compromising on the
analyses can bring. shade or the size, while buying paint from a
There is also the example of Kodak competitors retail outlet.
and Fuji. Kodak had lost out on its film Theres also this interesting case
rolls market after the arrival of the digital of guitar manufacturers. The worlds
I
The Stanford Center for International s the glass half full or half empty with were improvements in the government
Development (SCID) recently invited regard to the current status of the securities market in terms of market size,
Indian economic sector reforms? With lower yields, and longer maturities and
the Centre for Analytical Finance six eminent speakers presenting their trade volumes. Despite these achievements,
(CAF), ISB, to be its partner in respective expert opinions at the recent the mechanisms for risk assessment and
organising the economic sector CAF-SCID Joint Conference on Indian management in banks have not yet achieved
reform part of its famous semi-annual Economic Sector Reforms: Current global standards. According to him, Indias
Status, there was ample food for thought is a Good News and a Bad News story. In
conferences on India. Typically, SCID
for the audience. terms of growing from where we once were,
organises one such conference in the The proceedings began with T N we have Good News. But in comparison to
summer at Stanford, and the other Srinivasan, Senior Fellow, Stanford Center what we could have been, and particularly
in the winter in India. This year, the for International Development (SCID), and in comparison to the achievements of
Samuel C Park Jr. Professor of Economics, countries like China, we have Bad News.
economic sector session of the winter
Yale University, making his presentation He concluded that the reforms process had
conference was jointly hosted by Status of Indian Economic Reforms: A Hiatus either stalled, or was crawling since the
CAF and SCID, in collaboration with or a Pause before Acceleration? He agreed that 1990s, and an acceleration of the process
Satyam Ltd, and with funding support India was presently in an enviable position was absolutely essential. He questioned both
from Karvy Consultants. among developing countries owing to its the direction of policy and the efficiency of
growth rate. But he was critical about the implementation in the reforms process.
lack of effort in sustaining the momentum Rakesh Mohan, Deputy Governor,
of growth achieved in the initial post- Reserve Bank of India (RBI), stoically
reform years, when growth rate peaked at defended the reforms process. Regardless
7.8 % a record yet to be regained. of any perceived lapse in policy or in
The banking sector came in for some implementation, he maintained that India
praise by Srinivasan, with initiatives such is on the move. He quoted statistics of
as introduction of prudential measures, 40% plus corporate profit after tax for
greater competition to public sector eleven quarters, the success of Value Added
banks, deregulation of interest rates, Tax (VAT) and the growing number of
delivery versus payment system etc. Other states that have accepted it, the growing
praiseworthy achievements mentioned rates of savings in both household and
A N A L Y T I C A L
and particularly in comparison to the
achievements of countries like China, we
have Bad News.
F O R
corporate sectors, and even the addition of and corporate governance practices
2 - 3 million cell phone users each month would enable India gain recognition as a
C E N T R E
as indicators of the buoyancy of the Indian success story on a global scale. Shubhashis
economy. He also noted, with pride, that Gangopadhyay, Founder-Director of India
while there had been banking sector collapses Development Foundation (IDF), focused
in about a hundred countries around the on the need to develop the commodity
I
world, the Indian banking sector continues futures market, which had the potential to
to remain stable. This must, to a large be a USD 600 billion market.
extent, be attributed to our more efficient Sankar De, Executive Director, Centre
use of resources compared to several other for Analytical Finance (CAF), ISB, presented
growing economies. He acknowledged that a detailed paper on the impact of reforms
there had been slowdowns in the growth rate on corporate sector financing. He also
both in 1997 and in 2000, but the major moderated the panel discussion that followed
resurgence after 2002 had been making up the individual speeches. The panel discussion
for the earlier slowdown. saw some enthusiastic participation from T N Srinivasan, Senior Fellow, Stanford Center for
International Development (SCID); and Samuel C Park
S Narayan, former Economic Advisor the audience, which was a reflection of the Jr. Professor of Economics, Yale University
to the Prime Minister of India and former overall success of the conference in providing
Finance Secretary, Government of India, some interesting perspectives to the
decided to tread the middle path by assessment of the current status on Indias
focusing on the governments perspective economic reforms.
on reforms. He highlighted the fact that the And the conclusion? Whether half full,
entire world was now looking towards India or half empty, the fact remains that India
for trade opportunities. He quoted the has just about reached the half-way mark in
crossing of the $100 billion mark in exports, the economic sector reforms.
and the recruitment of 5,00,000 people in
the IT sector in the city of Chennai alone, as
landmark achievements. The problems, he
felt, were in the implementation of policy.
Several policies such as the ones relating to
development of infrastructure, for instance, Speaker Topic
were formulated quite some time back, but
had not yet seen implementation. We have
run out of the easier things to do. We now T N Srinivasan Semi-annual update on state of reforms
need to work on the more difficult ones, Rakesh Mohan Comment on semi-annual update by TNS
he said.
S Narayan Governments perspective on reform
G N Bajpai, former Chairman of
Securities and Exchange Board of India G N Bajpai Capital markets reform
(SEBI) and former Chairman, LIC, felt that Shubhashis Gangopadhyay Commodities and derivatives markets reform
the regulatory structure of capital markets
was fragmented. Indias implementation of Sankar De Impact on reform on corporate sector financing
accounting policies, disclosure standards,
GSVC
Social Ventures that Look
Beyond the Bottom Line
The Wadhwani Centre for ara Olsen was packing to leave after to showcase their business plans, and
Entrepreneurship Development
(WCED) at the ISB recently hosted
the first-ever Asia Semi Final
S her extended weekend stay at the ISB
in her capacity as a judge at the Global
Social Venture Competition (GSVC). She
for investors to support groundbreaking
social ventures.
After graduating from Haas, Sara
had been a participant at the GSVC ever launched her own company, SVT
of the prestigious Global Social since its launch, and had obviously enjoyed Consulting, to help companies evaluate
Venture Competition (GSVC). the opportunity of judging the creativity of and quantify their environmental and
Sixteen teams were shortlisted social ventures from young businessmen social impacts. Did she think that the
from among 66 Asian registrations and businesswomen. idealism embodied by socially responsible
after a preliminary evaluation by The ISB had hosted the Asia Semi businesses get somewhat diluted as
Finals of the GSVC in keeping with its one graduates from being a student, and
the judges. At the Semi Finals, ten
responsibility as GSVCs International moves on to more tangible businesses?
of these teams were selected to Affiliate. The Wadhwani Centre for No, of course not, she said. Personally,
go through to the next round of Entrepreneurship Development (WCED) I have remained very much committed
the competition by a distinguished at the ISB promoted the competition about ventures that make money for
panel of judges. in all the Asian countries such as the their investors, while providing tangible
Philippines, Hong Kong, China, Australia, social benefits. One criterion for entry
Thailand, and India, in the run-up to the in the competition is that each team have
event. The event had interesting sidelights at least one actively participating MBA
to it such as a handicrafts exhibition and student. Some of the participating teams
sale, a welcome function, and a cultural the world over are already in business, and
programme organised by the Spouses and seek expansion capital; others exist only
Families Association (SFA), of the ISB, all on paper. So, often, there is a mix of
of which Sara had thoroughly enjoyed in experience and idealism, remarked Sara.
the company of the other judges Kim Of the ten teams selected to go to the
Alter (Virtue Ventures), Alice Lin (IFC, next level of the Global Semi Final, four were
Washinton), Lakshmi Venkatesan (BYST), from the ISB, one each from S P Jain, MDI,
Professor K Ramachandran (ISB), and IIM-Indore, Asian Institute of Management
Professor V Chandrasekar (ISB). Manila, De La Salle University Manila,
The GSVC was started in 1999 as a and Mahidol University Bangkok. The
student-led initiative by Sara Olsen, who projects were evaluated based on two
was a Haas student at that time, along with important criteria:
four others. The partners who now run
GSVC are the Haas School of Business, the Clear and quantifiable social
Columbia Business School, the London objectives and impact
Business School, and the Goldman Sachs Financial sustainability, i.e., being
Foundation. The competition aims to profitable and self-supporting through
provide a global forum for entrepreneurs revenue generation
Professor V Chandrasekar, Executive by these varied B-plans that panned the financial, social, and environmental
Director WCED summed up the selection countries and even continents, had a lot bottom lines, is part of a growing trend of
as: We want to create a new generation in common. I find that the plans address a few other similar initiatives that combine
of social entrepreneurs. We want these much the same kind of opportunities mission with strategy for the new breed of
chosen leaders to understand that a social and problems. The problems may var y in social entrepreneurs. Initiatives such as the
enterprise can benefit society, and be severity, but the nature of the problems Net Impact a network of MBA students
professionally and personally rewarding as addressed remains ver y much the same and professionals committed to using the
well. The plans developed by the selected all across the globe, she said. At the power of business to create a better world,
teams addressed rural electrification, the GSVC, these plans are assessed for a and World Resources Institute (WRI)s
use of ICT to empower rural Indians, quantifiable social return on investment Beyond Grey Pinstripes a guide to
services to MFIs, empowerment of with the aim of getting the maximum environmentally and socially progressive
handicraft artisans, a TV channel for social and environmental bang for the B-Schools are pointers towards this
differently abled persons, electronic waste buck, i.e., measurable public benefits in growing trend.
management, and setting up a knowledge financial terms. Non-profit and philanthropy are
network to help farmers. The WCED at It is this innovative aspect of the terms that now seem almost pass. What
the ISB carried forward its responsibility competition that sets it apart from other currently excites B-School academicians
by providing mentoring support to the B-plan competitions, which focus solely on is finding innovative entrepreneurial
selected 10 teams to prepare them for the maximising financial return. The GSVCs solutions to social problems. A welcome
Global Semi Final. encouragement for ventures that address trend, by all means.
The WCEDs mentoring effort has
earned rich rewards, as a team from the
ISB Annie Mathew (ISB Class of 2006),
Charan Chintakandi (ISB Class of 2005),
Asia Semi Finalists at the GSVC
and Ravi Kumar (non-student partner from
Satyam) has made it to the GSVC finals
scheduled at Columbia Business School on
April 6, 2006. In fact, of the nine finalists,
three came through the Asian Semi Finals
held at the ISB. The three teams to make
it to the finals ISB, IIM (Indore), and
Mahidol University (Bangkok) were
all mentored by the specialist team at
the WCED.
In her experience as a judge at the
GSVC, Sara saw a wide variety of B-
plans developed by teams from various
countries across the world. Surprisingly,
she found that the issues addressed
Categorical Boundaries
Interview with Professor Hayagreeva Rao
F A C U L T Y
French gastronomy during the period 1970 1997, when classical and nouvelle cuisines
were rival categories competing for the allegiance of chefs, is the research setting for
I
Professor Hayagreeva (Huggy) Raos recent work. The paper Border Crossing: Bricolage
and the Erosion of Categorical Boundaries in French Gastronomy, is co-authored
with Philippe Monin and Rodolphe Durand, and has been published in the American
Sociological Review.
Bharanidharan, Praveen Gonabal, and Ravi Viswanathan from the Class of 2006, talk to
the Professor on the interesting implications of his research, and other equally interesting
topics.
Professor Hayagreeva Rao is a member of the Faculty Advisory Board (FAB) on
Organisational Behaviour at the ISB, and Professor of Organisational Behaviour at
Stanford Graduate School of Business. He has published widely on the subject of social
and cultural causes of organisational change. The students caught up with him at an
Executive Education Programme at the ISB.
Your research on French gastronomy deals or eastern companies. Let me give you a
with the erosion of categorical boundaries, quick example. Infosys is thought of as an
resulting in new styles from the blurring of Indian company. But they are hiring a lot
boundaries. Can we see examples of these of people in the US markets. So, does that
in todays organisational structures? In the make it a North American company?
global and multicultural contexts, can we I am not suggesting that boundaries are
see western companies emulating Japanese going to go away. They are going to erode
practices, or Indian companies emulating under certain conditions, and all of this
western ones? has interesting implications. For example,
Ravi Viswanathan, Bharanidharan and Pravin Gonabal from We can certainly see that. I like to study under what conditions is it better for firms
the Class of 2006 categories in markets and in professions. to be able to offer products that straddle
I choose research settings that everybody two categories? Is a bike, which is actually
can easily identify with and relate to, such a combination of a cruiser and a road bike,
as food. The issue of categories how better than a bike that exclusively belongs
they are created, and how they combine to only one of those categories, especially if
happens in markets and in organisations. the combination bike is offered at the same
I showed how it happened in the French price point as the individual ones?
gastronomical market. You could also
consider other areas such as machinima, Will you lose out on purists by straddling
where animation and computer game-based categories?
techniques are combined to make films. You will, in some instances. For instance,
You see game developers using animation the micro brewing industry rose as a
technologies for making films, thats the reaction to the big industrial breweries.
film worlds equivalent of blogs. So, the The industrial beer guys thought they
definition of whats a game, animation, or should straddle, and introduced micro-
film assumes blurred boundaries. brew like products. The micro brewery
A similar kind of blurring is happening guys policed that, and called the new
in organisations, though not just in western products fake. The boundary problem is
I N T E R V I E W
phone that combines camera and phone Visibility makes you a role model. The
functions is an example. interesting question is what sort of
companies will imitate Indian companies,
Is it possible that the hitherto trend-setting and what sort of companies will out-
organisations around the world are under manoeuvre the Indian companies.
F A C U L T Y
pressure to constantly innovate, regardless Prominence is a double-edged sword; you
of whether the innovation is really needed, get the benefits, but you will also have your
just to maintain their status? Do you think share of bad news.
that this could be causing wasteful or
I
gratuitous innovations? How are organisational structures around
Professor Hayagreeva Rao Member, Faculty Advisory
What you are asking is, do firms engage the world changing with increasing Board (FAB), ISB, and Professor of Organisatonal
in cosmetic innovations? The answer is globalisation? Behaviour, Stanford Graduate School of Business
somewhat complicated. Hospitals engage We are already beginning to see the outlines
in prestige competitions wherein if one of the future organisations. They are virtual,
hospital bought a big machine that does geographically dispersed, multicultural, flat,
CAT scan, the other also gets one. But does and they constantly reassemble. Its really
the neighbourhood need both? Its not clear not the structure that you worry about, but
that prestige competition is a good idea. the culture and the attitudes. Structures are
In the case of companies like Apple, they going to change fast; they are going to be
are not only under pressure to innovate, cellular, and have networks. You are already
but also to be the best, which is altogether seeing a lot of this.
different, because they are not going to have
innovation for the sake of innovation. The relationship between an organisation
I would be mischievous enough to and its workers is changing fast. People
suggest that the problem you are alluding now freelance for organisations, and they
to, is most visible in the area of B-School move between organisations. Technology
rankings. The rankings give you some is enabling people to network very widely.
information, but not a whole lot. They Does this affect the relationship between
are noisy, but nevertheless, they compel the organisation and the workforce?
schools to allocate resources towards a lot Definitely. The entire nature of the
of cosmetic innovations. B-Schools could employee-employer contract has changed.
go to ridiculous lengths to earn points for You can see the controversy on pensions
their rankings. pretty soon this is going to become a hot
political issue, at least in the United States.
India and Indian businesses are getting a lot In general, people see themselves as a free
of positive attention in the global media. agent in an economic system. You reap the
What opportunities does this prominence fruits of what you sow. If you dont develop
present to Indian companies, and to India? long term relationships with your employees,
In many ways, the impact is enormous. youre going to have lots of free agents, and
For instance, it is reflected in the growing thats going to make organisations a lot
number of Stanford students who want more complicated.
to come to India for internships. And Attrition is a huge problem. Martin I am not suggesting that
thats part of a blurring the beginning of Kenny and Rafiq Dossani have written a
boundaries are going to go
a process. book on Indian outsourcing entities. One of
Indian companies especially in the things they say is that these entities are away. They are going to erode
software and biosciences are being going to be out of business soon, one good under certain conditions,
recognised as power houses, while the others reason being the inability to recoup training and all of this has interesting
are also establishing themselves. These are costs. Sometimes, I wonder if whether what implications.
actually world class organisations, so the is needed is more downsizing and right
opportunities are many. The challenge now sizing, particularly in the senior levels of the
is to go global. organisation, than in the operating core.