The Financial Markets and The Rest of the US Economy

IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA

The Federal Reserve stepped in to prevent the bankruptcy of Bear Stearns and thereby protect both the financial markets and the rest of the US economy from what it thought could have been massive collateral damage. For the first time in its 85-year-old history, Bear Stearns reported losses in the last quarter of 2007; and amidst fears that the next to hit the wall would be Lehman Brothers, the Fed opted for the $30 billion bail out. The bailout, often termed as a ‘third line of defence,’ is a part of the package, which includes interest rates and tax cuts (now Fed rate is at 2.25%). Many argue that since Q4 results were bad for banking, then post the Q1 results, firms will be begging investors for fresh capital. If forecasts are to be relied upon, then there are another $50 billion of write-downs in the waiting. Marcel Theiliant (Analyst Global Economics, CREDIT SUISSE) avers, “If you think that the worst was over in Q4, then Q1 results will be a rude awakening.” In such a scenario, it will be a real challenge for the ilk’s of Lehman Brothers to raise capital. Nevertheless, the bailout package of $30 billion, followed by the rate cuts, infused in some degree of confidence in the markets.

Days later, when Lehman Brothers and Goldman announced their Q1 profit estimates, it turned out to be quite a relief. The profit estimates have been questioned; some claim that Lehman must have tinkered with the accounting method to suit its ends. The recent developments can be closely compared to the 2001 recession, wherein the S&P indices had gained close to 18% in March and April on the view that rate cuts announced by Fed would stave off a recession. Interestingly, the happiness was short lived and eventually the S&P plumetted, dropping by a whopping 42%.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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ROHIT SHARMA - Another lil’ master?!

IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA

ROHIT SHARMA
Another lil’ master?!

It was one of those nail-biting situations again. The finals of the T20 series, India vs Pakistan. Limited overs, young blood and arch rivals... it was India’s chance to wash away the World Cup 2007 debacle. And indeed, they did! Winning the Twenty20 World Cup 2007 answered many questions, one of them being the selection of young players in the team. And among those young stars was Rohit Sharma whose splendid performance in the series (remember that swashbuckling knock of 50 on a tricky Durban wicket) and especially the unbeaten 30-run knock against Pakistan played a pivotal role in India’s historical win.

“I grew up during a time when India saw Sachin Tendulkar as the biggest icon in cricket. Everyone idolised him and many players still look up to him. And being from the same place as him, it had a huge impact on me,” recalled Rohit when asked for his inspiration for choosing a profession which is almost considered a religion in India... and his inspiration was none other than the God of this very religion. “Every time I watched Sachin play, I got inspired to try harder to find a place in the Indian cricket team,” mused Rohit. If we trace some big names in the world who have created historical records, one would not come across many who’ve had a glorious beginning. And Rohit is another name in the league. With a sluggish start in the early years of domestic cricket, Rohit did not give reasons enough to predict his upcoming accomplishments. But his performance in the U-19 World Cup (where he was one of the top scorers) grabbed the attention of many, which then lead to his selection in the Twenty20 World Cup. And after the triumph in T20, there has been no looking back. Rohit also turned out to be a reliable pick in the CB series in Australia, where he made a significant contribution, especially with his match-winning score of 66 in partnership with Sachin Tendulkar in the first final. And with this, he has also proved to be amongst the most sought after players in the Indian Premier League.

With a cool and composed temperament and cavalier batting technique, this exciting young right-hand middle order batsman has just the desired combination to make him an able replacement for ‘the big three’. Indeed, for reasons obvious, Rohit Sharma, today, is being pegged as one of those whose footing on the pitch is going to be long and strong.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
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Not so mellifluous is the flow...

IIPM - Admission Procedure

...of oil money for the common man in Gulf nations, who is struggling to make both ends meet

Are high oil prices ($102/barrel) good or bad for the mid-east population? On the face of it, a layman would say that an economy, which revolves around crude oil must reap in huge profits; observe a surge in the general well-being and see the state coffers overflow with petrol dollars. Beyond doubt, the political and business leadership in the oil exporting Gulf nations is experiencing the mellifluous flow of dollars into their chests, the common man and the middle classes are however, beginning to feel the pinch. “I have been a resident in the Gulf for past 12 years now. We had never known what inflation was for so many years, but now we are beginning to feel the brunt of high food prices and essential commodities.” Toufail Ahmed told B&E from Dubai.

Saudi Arabia, where the inflation rate for the past decade had been well-nigh nil, the current level of 6.5% is certainly alarming according to experts. In Jordan the government has been forced to withdraw fuel subsidies, pushing the fuel prices up by almost 76%. Such a steep hike has certainly led to a cascading effect on foodgrain prices. In Bharain, where according to the Oil and Gas Affairs Minister Dr. Abdulhussain Mirza, “the oil industry is on the threshold of a golden era.” The rising prices are however perplexing, “..consumer price index was 104.64 points at the end of January compared with 104.07 points in December. Food, beverage and tobacco costs climbed 2.1% in January from December while housing costs were steady,” says the Bahrain government’s Central Informatics Organisation (CIO) .

The soaring prices in the Gulf are certainly an outcome of the spurt in the global commodities prices; the dwindling agricultural production; the slump in the dollar and of course, the now infamous sub-prime crisis in the US. All these factors are contributing in exacerbating the common man’s plight in the mid-east region, which according to the reports emerging from the region indicate towards a simmering discontent among the masses, leading to protests marches.

For all these years, the ruling classes in the mid-east region have adopted the carrot and stick policy to manage the masses. Both religion and strong arm tactics have been relentlessly used to keep a tight lid over all forms of discontent. The questions which many analyst are now asking- is the credibility of Gulf ruling classes coming under strain? Are the political risk management strategies of the Gulf ruler failing? And will a global economic downturn eventually lead to democracy taking roots in the region? One only wishes that the benefits accruing from an oil economy are fairly passed on to the poor in the Gulf.

B&E edit bureau: Atul Bharadwaj

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
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Bottoms up approach...

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...to building India and making it look beautiful

Nano has shown to the auto industry that “there exists a fortune at the bottom of the pyramid.” But why aren’t others taking a cue from management guru C. K. Prahalad’s wisdom & of course, the inspirational work of the British born Indian architect late Laurie Baker? “ I don’t think that the real estate sector is thinking of any low cost housing projects. This is mainly because the land & construction costs are too high for any builder to venture into this arena. The problem can be met by greater public-private participation only,” says Alok Agrrawal, Principal Sun Apollo, a private equity fund, with expertise in reality sector. More importantly, “The homeless or poor have to be involved in the process that leads to their having homes,” says Pratima Joshi, Director of Shelter Associates, an NGO into housing homeless. She adds, “Occupants of government’s housing scheme for the poor, Valmiki Ambedkar Awas Yojana, weren’t satisfied with the dwellings given to them. If dwelling schemes served to them, doesn’t suit them, they will slide back to slums.” Perhaps, it is the jaded mindset in the industry, which prevents them from looking at the bottom of the pyramid. Otherwise, what stops the reality sector from building low cost houses for India’s 170 million slum dwellers? The companies should not totally leave the un-glamorous jobs to the government. Such efforts will only add sheen to their corporate face; and make them better corporate citizens.

B&E edit bureau: Rajeev K. Singh

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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The disruptive Ram Charan!

IIPM : EXECUTIVE EDUCATION

Management magnate Ram Charan shares his insight on disruption exclusively with B&E

Ask this 67-year-old Harvard doctoral graduate over dinner about why he never married and this preeminent global strategy guru dismissively parries our query off like a celebrity would. Recently, Forbes magazine quoted a global survey ranking him amongst the world’s top 25 business thinkers. GE’s Jack Welch consulted him for over three decades. When Jeffrey Immelt took over GE, Ram Charan was the first person he called. Ram serves on the boards of innumerable Fortune 500 companies. With his books having sold millions of copies, Ram Charan makes a meteoric impact. B&E caught up with this magnate over two days to understand his views on disruption. Some excerpts:

B&E: Why has the phenomenon of disruption become prominent in recent times?

Ans: At a critical top level, disruption is a phenomenon with the capacity to not only make companies disappear, but even industries. The voice based telecom industry will disappear one day due to internet telephony. The key point for a CEO hit by such disruption is to understand that whatever he’s doing needs to be radically changed. At a second level, well entrenched companies are themselves creating disruption by introducing new business models. The reason why this has become more prominent is because industry/company/product life cycles are becoming much shorter.

B&E: How can (or should) well entrenched players prevent such disruption?

Ans: Some changes are continuous, some disruptive. The leaders who succeed are vigilant about changes, anticipate changes, and are themselves confident about creating changes. For a well entrenched CEO, complacency is never good. In any industry, many innovative technologies exist with the capacity to cause disruption. But well entrenched CEOs should realise none of these can really cause disruption till some entrepreneur converts a technology into one that’s customer oriented, something big enough. Steve Jobs is one CEO whose biggest plus is his capability to marry incisive consumer insight with his product offering.

B&E: What strategic points are required to change the rules of the game in a sector?

Ans: First of all, a leader needs to have the courage to make strategic bets. Beyond that, the leader should: a. Define precisely what the ‘specific’ opportunity is, not just the broad category. A telecom player entering the insurance sector cannot just generally think of ‘insurance’, but rather specific segments.
b. Understand what capabilities you need to capitalise on the opportunity – both internal and external.
c. Find out what leadership/leaders you need to implement the plan in action.
d. Finally, do you have enough financial resources – can you move with speed and become profitable? B&E: Which companies/leaders have been most successful in enabling disruption?

Ans: Apple (Steve Jobs) in various products. The iPod completely disrupted the music industry. In the same way, Rupert Murdoch buying The Wall Street Journal is another classic example.

B&E: Could you also cite examples of companies that missed the disruption bus?

Ans: Sony, Philips... and AOL too.

B&E: Any ground rules on implementation for players riding the disruption wave?

Ans: My book, The Discipline of Getting Things Done gives a clear idea. In short: a. Have laser sharp dominant priorities very clear. CEOs have many ‘general’ priorities. Have defined specific priorities!
b. Ensure that key performance indicators are aligned to the overall strategy.
c. Realign your financial resources to the new gain, new opportunity.
d. Align the rewards to the new gain.
e. Have right people for the right job.

B&E: But how important are ‘people’ in this whole framework?

Ans: Most! A leader cannot succeed without other leaders. Jack Welch once told me, “Ram, people before strategy!” Ratan Tata succeeds because he gets the right leaders to run his companies.

B&E: Any final words on disruption?

Ans: Disruption doesn’t happen everyday. Change happens everyday. CEOs should not go one-minded into creating or implementing disruption forcefully within their companies. Rather, understand and appreciate the constant change occurring in your company, industry, and align yourself to that.

B&E: Your all-time favourite management books?

Practice of Management, Peter F. Drucker. I still love going back to it and reading it again. So many of the principles still apply so perfectly. And My Years With GM, Alfred Sloan. Did you know GM actually attempted to stop the publishing of this book?

B&E: Your personal objectives in life?

None whatsoever (smiles!). If you try to find out what you love to do, and keep doing that, you don’t need any objective in life to get peace...

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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