Wednesday, March 27, 2013

Elementary, my Dear Watson!

Over Seven years have Passed since IBM Decided to get into growth markets with a Missionary Zeal. Has Big Blue’s Strategic Planning with respect to these Markets been Vindicated?

For IBM Chairman, CEO & President Samuel J. Palmisano, his best career advice ever was to never view a career as a linear progression, and to thrive in uncertainty (as quoted to Fortune in 2008). Perhaps that’s one reason why he is so eager to restructure IBM’s business every now and then, navigate a new direction, redefine where future revenues are going to come from and spend billions towards inorganic growth as well as R&D. Coincidentally (or maybe not), even his paycheck in 2010 is away from the ordinary at $31.7 million, a growth of 30% yoy. His non-stock compensation almost doubled over the previous year to reach $9 million. Sam’s commitment to uncertainty and taking up unstructured situations seems to just about define the character at IBM in the current era. His lieutenant Mike Daniels, head of IBM’s global services division and a likely successor to Sam, is a case in point. In an interaction with Financial Times on March 11, he challenged HP, saying that the company could not hope to match IBM’s integrated strategy because of its (HP’s) division oriented focus. Between the lines, it means that any strategy by HP would not work. The interesting part is that he said that before Léo Apotheker, HP’s new CEO, was going to announce his strategy for the company!

When we think IBM, we think product and service innovation in myriad ways (in 2009, IBM won 4,914 patents, making it the world leader for 17 consecutive years). But while Big Blue looks confident enough to throw down the gauntlet at any opposition, it’s biggest future challenge is one that could befuddle even Watson (its much acclaimed supercomputer). The challenge, which it took up way back in 2003, was to go where the growth is, which meant that they had to look at all those markets that were traditionally underserved, but hold future potential; especially now, in the context of the recession hit and maturing developed world. One of the first steps was to consolidate its back office operations all over the world with shared services, which cut costs by around $6.2 billion between 2005 and 2010. Besides, its executives are on a consistent exploration spree; seeking opportunities to expand to relatively virgin markets across Asia Pacific excluding Japan (APeJ), Middle East, Eastern Europe, Africa & Latin America. A separate division called the growth markets division was set up. In 2000, IBM had operations in 42 countries other than North America, Western Europe and Japan with 95 branches. This had increased to 53 growth markets, with 218 branches by 2010, and the company expects to take it to 78 countries and 451 branches by 2015. India has 12 branches currently (3 in 2000) and IBM expects to increase it to 49 by 2015, while the China figure should grow from 28 to 70 in the same period. But is IBM’s early surge, much before Lehman put the Third World at the very centre of global economy and business, really helping? How is Big Blue actually adapting its business model to these companies? 


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Monday, March 18, 2013

Good Riddance to Rahm Rubbish!

The mass exodus from the White House has several reasons: arduously severe working hours, round-the-clock pressure, disruption of work-life balance, ego clashes and salaries, which in most cases, are far below the private sector – but none of these quite seem worse than Rahm Emanuel, ex-White House Chief of Staff. Whatever be the reason for the resignation (or sacking) of White House’s most visible and controversial Chief of Staff, he’s good riddance, says a miffed

Whenever Rahm Emanuel starts sounding reasonable, I realise it’s time for me to increase my medication. Since he ‘assumed’ office (and I mean the double entendre), Rahm has seemed to me a conflux of all dodgy and cheesy limericks I’ve heard since childhood (the “No, my powers can only be used for killing Vulcans” varieties). Scott Adams, creator of Dilbert, once said, “You can’t motivate people to do things, you can only demotivate them. The primary job of the manager is not to empower but to remove obstacles.” For Rahm Emanuel, people were the obstacles who had to be removed. And any reality that went against it, impracticable idealism. Thus, in June 2010, when news was rife that Rahm Emanuel was planning to call it a day as the White House Chief of Staff (the first aide the President sees in the morning and the last he sees in the night – supposedly the toughest job in the White House besides that of the President) as he was tired of the ‘idealism’ of Barack Obama’s inner circle, the White House was quick to term the reports as ‘ludicrous.’ However, close to three months after thus a terming, on October 1, 2010, in the East Room of the White House, the US President himself made the “least suspenseful announcement of all” and officially announced the resignation of the hard-hitting Rahm Emanuel. Staff shake-ups are nothing new; it is very common in the White House e.g. Lawrence Summers, Head of National Economic Council, Christina Romer, Chairperson Council of Economic Advisors, Peter Orszag, Head of the Office of Management and Budget and James Jones, National Security Advisor have all quit or are in the process of quitting. But as far as Rahm Emanuel, better known for his caustic tongue and political toughness, is concerned, the reasoning that is being propagated – that Rahm has quit to pursue his political dream of contesting for the Chicago mayoral position – is clearly balderdash being fronted to the media as a last twig of respect for Emanuel, quite similar to what Rick Wagoner experienced from Obama.

The 5 and a half feet Rahm, known for his profanity and his penchant for having created enough acrimonious tension inside the Democratic party and the White House, was initially hailed by supporters as a hardball politician and was expected to help the President get things done in the Congress. As a centrist of the Bill Clinton era, party activists believed his presence would help President Obama cut deals with centrists and conservatives. It is ironical that the same set of that supported Rahm rabidly has now vouched for his ouster, thanks to his very own abrasive personality and his mystical ability to inflate his enemy count. The Progressives and the Liberals have not been kind either and they have their own share of legitimate grievances – the Progressives claim that Rahm compromised too many of their principles on health-care reform and some Liberals called for his ouster citing his political instincts.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Tuesday, March 12, 2013

TECHNOLOGY WARS: APPLE VS BLACKBERRY

With RIM’s Traditional Stronghold Under Attack, Balsillie is hoping to do a Counter Attack in the Tablet Space. But it would be much more Important to Ensure that the Smartphone Battle is not Lost Forever

When you look at the war on the ground, Jobs does have some degree of logic, and numbers on his side. Apple posted record analyst estimate beating revenues of $20.34 billion in its quarter ending September 25, 2010 (66.6% growth y-o-y) and net profit of $4.31 billion (growth of 70.35% y-o-y). RIM has posted revenues of $4.62 billion, a relatively modest growth of 31% y-o-y (considering its smaller base) for the quarter ended August 28, 2010, and a net income of $796.7 million, a much better growth of 67.7% y-o-y (buoyed by a larger services revenue mix). Yet, analysts pick Apple overwhelmingly. Apple has overtaken Blackberry in the latter’s stronghold – the smartphone market in the quarter ending September, with iOS sales reaching 13.5 million units while RIM could only manage 11.9 million. The other real worry for both players is Android, as it sold 20.5 million units in the quarter. Symbian continues to sell the most due to Nokia’s traditional dominance (29.4 million), but that is fading fast as rivals catch up. Joseph Beaulieu, analyst at Morning Star, opines, “RIM has spent several years benefiting from strong tailwinds, but we are now concerned that those winds are reversing.” The enterprise market was RIM’s stronghold, but it is facing intense competition there. It has made a successful foray into the consumer market, since it now accounts for half of its subscribers compared to around 25% 3 years back. But Joseph feels that the traditional strength of e-mail services isn’t enough. RIM needs more bite for the consumer market – in terms of hardware as well as attractive apps (for which it has to attract the developer community). Blackberry was a dominant force in networks like Sprint, Verizon and T-Mobile earlier in America, but is facing competition there as well, particularly from Android-based phones. Apple’s iPhone, meanwhile, has the momentum going for it in a big way, and is in fact Apple’s ‘star’ product (BCG matrix wise) with around 60 million units sold till mid-November 2010. Toan Tran, Associate Director, Morning Star believes that Apple’s soup-to-nuts model, wherein it provides hardware software and applications has allowed it to unleash a terrific customer experience, which has given it the momentum to now attract even more customers as well as developers.

While Blackberry is considering upgrading its OS to Blackberry 6 and QNX for its tablet; there are words of criticism for the shift, and not from Jobs alone. Shaw Wu, IT Hardware & Storage Analyst, Kaufman Bros., comments, “We agree with Steve Jobs in that it isn’t clear there is room for a third software platform besides iOS and Android.” Analysts are in fact of the view that RIM should consider having a few Android-based smartphones in its portfolio. Moreover, as iPhone and Android go low end, they are threatening the dominance of the Blackberry Bold and Curve portfolios, which would further threaten market share. Another major threat is to its margins, as average selling prices of Blackberry phones have already come down to $304 in the recent quarter from $345 a year ago.


Source : IIPM Editorial, 2012.
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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Tuesday, March 5, 2013

“Quality Matters”

Krishnan Sachdev
Director, Marketing & Strategy, Carrier India

B&E: While Samsung, LG, Panasonic operate in the mass market, Hitachi focuses on the premium segment. So where does Carrier position itself?

KS: We have always believed in giving value to our customers, both in terms of the life cycle cost as well as product features. In fact, we have always pushed ourselves in this respect and that too in different areas. For instance, we have brands like Toshiba (residential) which are high on technology and operate in a specific segment.

B&E: What kind of research do you conduct before launching a product in the market?

KS: We believe in continuous feedback from our customers apart from taking advice from consultants and architects. In fact, this process continues through all the stages of a product development. If they feel there is a problem in our product, we go back to the drawing board and look for areas of improvement because we believe that at the end of the day it’s the quality that matters and nothing else.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Sunday, March 3, 2013

It's enough of treaty shopping

Having lost billions in treaty shopping while honouring the clauses of the DTAA signed with other nations, India is now on a renegotiation spree. But as the government signs new treaties with other tax havens it must ascertain that the clauses are foolproof so that shell companies are prevented from taking undue advantage of the tax provisions. by Gyanendra Kumar Kashyap

Date: August 2, 2010. Venue: Bombay High Court. The prolonged tussle between Vodafone Plc and the income tax department, which dates back to 2007, started all over once again with Vodafone holding on to its ground about not being liable to pay the $2 billion tax demanded by the Indian government and the government toeing the line that it is the location of the assets and not the jurisdiction of transaction that is the primary issue.

For the uninitiated, the argument of Vodafone is based on the logic that as Vodafone International Holdings BV (a company registered in the Netherlands), CGP Investments (a Cayman Islands based company) and Hutchison International (HTIL) are all foreign companies and that the transaction was structured through Mauritius, capital gains cannot have been accumulated within India. What probably works in the favour of Vodafone is the fact that India and Mauritius have a double taxation avoidance agreement (DTAA) between them and hence it would not be possible for the Indian government to apply capital gains tax on transactions that are already taxed within Mauritius.

Consider yet another case wherein the Mumbai Income Tax Appellate Tribunal in July 2010 gave its verdict on a 15-year-old pending case whereby Linklaters (a UK based law firm) has been asked to pay tax to the tune of `230 million on its India related services after having debated for years whether the law firm was eligible for the Indo-UK DTAA or not.

The catchwords in the above cases are DTAA and tax havens like Mauritius. DTAA is an agreement between two nations based on the philosophy that corporates or individuals with businesses in two countries do not end up paying tax on the same income twice i.e. in the country of their origin as well as in the country where they are operating in. And tax havens are places or states where certain taxes are levied at low rates (Mauritius, Cyprus, Luxemburg, et al, are tax havens).


Source : IIPM Editorial, 2012.
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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