IIFT Strategos Vol 2 Issue 2

Strategos Volume II Issue II

M

June 2012

Strategy and Consulting Club

Strategos

Editorial iii

Strategy The Continuum of Business Strategy 1Dr. R.K. Mitra

Supply ChainSupplier Segmentation 5

Social MediaFacebook IPO 9 Social Media Marketing 13

FinanceMergers & Acquisitions 17

OperationsPlease be Optimum, Not Efficient 20

EntrepreneurshipSuccession Planning in Family Owned Businesses 23Startups in the Changing Industry Scenario 26 EducationDigital Classrooms: The Next Big Thing? 30

InterviewMr. Mayank Sinha, Glenmark Generics, Europe 35

Strategy Corner 37Trends in International Business 39News From Socrates 41

Faculty Advisor Dr. R.K. Mitra

Editorial Board Sachit AroraSwati Khurana

For suggestions & Contribution contact us at [email protected]

Volume II Issue II

June 2012

Greetings from Socrates!

We are proud to present this year’s first issue of our quarterly magazine. Our cover story is about Supplier Segmentation as a means of efficient purchasing. The issue also features articles on how social media market-ing is gaining momentum and how it affects any brand’s positioning.

Family businesses have a lot of inherent advantages as well as problems. Hence, they need to be dealt with a lot of tact. The article on family busi-nesses tries to resolve some of those issues. Mergers and acquisitions pose numerous challenges in terms of the changes that accompany them. The articles on mergers and acquisitions suggest some ways to deal with the challenges.

Through our article on Startups we’ve made an attempt to analyze them in today’s changing industry scenario. Digital education is revolution-izing the face of the education industry at a tremendous pace. We have tried to predict the future of the education sector in the days to come.

This issue also includes articles on the Facebook IPO and its implications – both for the company as well as the prospective stakeholders.

We would like to express our heartfelt gratitutde to Dr. R.K. Mitra , without whose support and guidance , this magazine wouldn’t have been possible.

Happy Reading!

Swati Khurana Sachit Arora

Editor’s Note

Strategos Volume-III Issue-I

1

The Continuum of Business StrategyAbstract

Differentiation Vs. Cost Leadership are the two traditional positioning for the firms. Since introduction of two structural ge-neric strategies of cost and differentiation by Michael Porter, considerable literature has been devoted as to how positioning can be source of Competitive Advantage. The Resource-based View, on the other hand, rely on certain distinct and difficult-to-imitate resources. So far, the belief has been that the two approaches follow two fundamentally different routes. This paper argues that positional orientation is more of external interface or front end, while ‘ca-pabilities’ are more of internal interface and may constitute a back end. Understanding business strategies in terms of these ends and their symbiotic relationship may help the managers to remove any possible divide in strategy formulation and implementation. ****

Often strategies being pursued by firms be-come difficult to identify. Even one identi-fies the strategy; it appears to be just broad contour or approach. Apparently, a firm is observed to pursue, say, a ‘differentiation’ strategy but what mostly remains obscure are the ‘capabilities’ support the strategy at the back. Strictly speaking, strategies ideally should have two broad ends-the front-end which will essentially encapsulates the firm’s ‘positioning’ and back end which will resem-ble more of a war room stuffed with an ar-ray of capabilities which will go to power the front-end. An understanding of strategies in terms of front and back end can help manag-ers to view strategies in seamless integration.

Business Strategy: A Continu-um

Mark W. Johnson and Hari Nair (1) have re-cently demonstrated how the Customer Val-ue Proposition (CVP) can be approached in two apparently different ways but elements are nonetheless highly integrated, no mat-ter how one starts:

Cost Leader DifferentiationSet a ‘price Set the ‘product’Decide cost structure Deploy key resources / processesDeploy key resources Determine cost struc and processes tureBring the product Set the price

The ‘starting point’ becomes the substance of front end strategies of the firm in ques-tion.

The above point can be illustrated with the help of example of Business Model of Ryan Air as demonstrated by Ramon Casadesus- Masane II and Joan E Ricart. (2) The firm sets a front end strategy by one or two key deci-sions: Low Fares and equal treatment to all passengers

Once the front-end strategies are in place, then come the real challenges. No strategy, however brilliant in ideas, can come to ac-tion of its own. One needs a series of itera-tions of possible configuration of resources and management processes tightly coupled with front-end.

This needs a very careful handling. Many a time, firms deploy costly resources to sup-port their front-end strategies but very of-

2

ten ‘coupling’ turns out to be weak-either the ‘resources’ fail to turn to ‘capabilities’ or resources so deployed are unable to satisfy the algorithm conceived to create the cus-tomer value at the front end.

When ‘resources’ fail to turn to ‘capabilities’

Resources per se cannot give all the dis-tinguished characteristics that make firms different. Rarely a resource is such that it in itself is adequate to be called a distinc-tive capability. Take the example of technol-ogy. Many a time, firms acquire expensive technology to support its front-end strat-egy of ‘differentiation’. But in order for the ‘technology’ to hit the target, it may call for some supportive ‘competencies’ in the form

of infrastructure, skill, maintenance etc. In-ability of a firm to deploy all such support-ive capabilities simultaneously may render the ‘technology’ sub-performing leading to subterfuge of the given ‘positioning’.

An Airline may acquire expensive fleet but without commensurate skilled pilot and crew may render its acquisition of sophisti-cated fleet as a source of competitive disad-vantage. This is what we call ‘Mis-coupling’ of resources.

Resources do not fit to algo-rithm of ‘operations’ leading to slacks:

Resources many a time do not fit into a pro-posed algorithm of ‘operations’ which are laid to support a front end strategy. Let us take an example from one of the most dy-

namic battlegrounds of current time:– the Smart Phone Market. In order to compete with the likes of Apple (iOS) and Google (Android), RIM (Research In Motion – Black-berry) has been building up its team, acquir-ing the players it needs to fix their historic weaknesses and “future proof” the company (a term RIM’s Co-CEO Jim Balsillie used on their last Earnings Call). Some of the acquisi-tions were:

QNX - makers of the powerful Microkernel QNX Neutrino operating system upon which the BlackBerry Tablet OS is built.

Torch Mobile - WebKit browser gurus who fixed up BlackBerry’s traditionally poor web browsing experience

The Astonishing Tribe - Creative geniuses and UI experts who, while arriving a little late, helped shape some of the aspects of the user experience Dataviz - While RIM didn’t buy DataViz outright, they bought a lot of their talent and assets

If we look at RIM’s long list of recent ac-quisitions, it appears that RIM has bought the resources (inorganically) needed to have a winning team, stacking their roster with some real superstars. But turning great players into a winning team doesn’t typically happen overnight - teams need time to gel, they need practice, they need coaching and they need some experience in real games to see what’s working and fix what’s not. As for now, RIM has a 16.6 percent share in the US smartphone market and is rapidly dropping while its competitors (Apple & Google) are gaining ground. This is what we call Strate-gic Miscalculation.

Coupling of Front & Back: Key to Strategic Success

A clear understanding of inter-relationship between ‘positional’ orientation and ‘capa-bilities’ will ultimately hold the key. ‘Capa-bilities’, before deployment, may need some


3

authentication. The term ‘authentication’ is used to denote certain key management processes and practices required to exploit resources that a firm deploys to support a

a differentiation positioning as well. For the sake of understanding, we are presuming ‘product’ as a differentiator.

As is the case for product differentiation, one needs to identify ‘attributes’ which can significantly explain variation in prices. In ‘positional’ orientation.

The process of authentication takes an or-ganization wide view and assessment be-fore deploying ‘resources’ to support a ‘positional’ orientation that a firm decides to take. The given positioning will call for a host of back end strategies in terms of de-ployment of resources and also the ability of the firm to derive competitive advan-tage from deployment of those resources. Mere deployment without a proper process of authentication of firms’ ability to exploit the resources will result in ‘Mis-coupling’ of two ends. Let us illustrate with an example. Firm A chooses a ‘cost leader’ positioning at front end. The ‘positioning’ will call for a host of ‘resources’ and will presuppose firm’s ability to exploit them to support the front end. Resources and Ability to exploit those which will constitute backend to sup-port a Cost Leadership positional orienta-tion at the front can be depicted in Table 1. Here in this case, while resource endow-ments are deployed to support front end, a firm is required to lay down management processes/practices which will power those resources. If those abilities are not there, resource endowments will not be able to power the frond end.

We can illustrate our point with the help of

a conceptual model of product differen-tiation, we first identify ‘attributes’, which at the initial stage, can be assumed to contrib-ute to perceived differentiation. At the sec-ond stage, we need to ‘test’ if the perceived difference indeed can explain variations in prices. Using a regression model, our equa-tion can be as follows:

Pricei = b0+b1a1+b2a2 + b3a3 +…….bnan Where ai = attributes 1 to n and bi =coefficients & bo = Constant

After calculating the co-efficients of at-tributes, one can apply statistical tests of significance at different degrees of free-dom. Table 2 is a very hypothetical table of attributes and their co-efficients and level of significance for a washing machine. By selecting those attributes which are sig-nificant in making price variations, the firm

4

now can deploy compatible / supportive ca-pabilities which will be able to power those ‘attributes’ to bring home the benefit of dif-ferentiation. The coupling of ability endow-ment in this case can be depicted as in Table 3.

Benefits of an Integrated View of Strategy

The objective of this paper is not to advo-cate any generic strategies- the objective is to sensitize the managers about need for perfect coupling between a positional front-end and supporting backend capabilities. Front-end strategy is more of expression of strategic orientation while backend is more of endowments – endowment of resources, capabilities and abilities to couple the re-sources and capabilities with the front-end orientation.

By creating a management process of con-tinuous authentication of capability endow-ments, managers can track the firm’s capa-bility curve. Any indication of Mis-coupling of the two ends should ordinarily serve to sound the alarm bell – capabilities which have hitherto brought home the intended positional orientation might need replace-ment: customers may need a new reason altogether to stay with the firm. Creating a new reason for customers to stay tune may, in turn, call for a new positional orientation and this again helps the managers to track the competitive curve. In other words, the front-end positional orientation has most interfaces with market and customers, the firm can use it for tracking competition curve while the backend, being the opera-tional interface, can help tracking the firm’s capability curve.

When both ends are seamlessly integrated and, be part or a single cycle of competitive advantage, the firm’s positional orientation can stay in tandem with its capabilities.

References:1. New Business Models In Emerging Markets by Mark W. Johnson and Hari Nair, HBR, Jan. - Feb., 2011 (Page 79-85) 2. How to Design A Winning Business Model by Ramon Casadesus – Masanell and Joan E. Ricart, HBR, Jan. - Feb., 2011 (Page 91-97)3. Dynamic Competitive Strategy, George S. Day, David J. Reibstein, The Wharton School, with Robert E. Gunther, John Wi-ley & Sons Inc.

About the Authors

Dr. R K Mitra is currently the Registrar of the Indian Institute of Foreign Trade, New Delhi.Apart from a First Class First Post-graduate in Economics, he did his MBA from Indian Institute of Technology (IIT), Delhi. He also did his Ph.D from IIT, Delhi in e-Governance. . He currently teaches ‘Strategic Manage-ment’, ‘Competitive Strategy’ and Indian Economy & Trade Policy at IIFT. As Adjunct Faculty at ABV-IIITM, Gwalior, he teaches In-ternational Business and e-Governance to the MBA students of the Institute. Email: [email protected]

Mr. Varun Sharma is an alumni of MBA(IB) at Indian Institute of Foreign Trade, New Del-hi. After completing his B.Tech in Mechani-cal Engineering, he joined MBA(IB) at IIFT in 2010. He has extensive work experience in TCS in process efficiency. He is placed at Procter & Gamble at their Bangalore office .His current research interests are in strate-gic modeling.Email: [email protected]

This paper was presented at International Conference organised by OITM, Haryana, India


5

Supply Chain StrategyImproving Purchasing Decisions

more of a control tool rather than just a support function”

As organizations move towards making their procurement processes more effi-cient and more in line with their strategic plans, attention has also shifted towards one of the most crucial aspects in supply chain management, i.e., Supplier Rela-tionship Management.

Supplier Relationship Management

Wikipedia describes SRM as “SRM is a discipline of working collaboratively with those suppliers that are vital to the suc-cess of your organization to maximize the potential value of those relation-ships”. The basic motive of SRM is to de-velop a mutually beneficial relationship between an organization and its strate-gic supply partners.

Organizations, across different indus-tries, typically use a number of suppliers for raw materials and for intermediate goods. In such an arrangement, how well a company does, the quality of its prod-ucts and its ability to deliver products on time to the consumers is dependent on the suppliers and thus it is necessary to have some sort of synergy between an organization and its suppliers so as to

In an environment characterized by scarce resources, increased competition, higher customer expectations and faster rate of change, organizations are finding it increasingly difficult to compete effec-tively, generating suitable profits and at the same time providing quality prod-ucts within cost limits to the consumer.

The enhanced level of competition has constrained the supplier’s ability to in-crease prices, while at the same time in-creasing input costs have eroded profits. Faced with these problems corporations today are exploring different means of cost reduction.

This has brought into focus an impor-tant but seldom celebrated function, i.e., Procurement, as an effective means to reduce costs while at the same time maintaining quality.

“Though procurement generally ac-counts for nearly 60% of the total spend of an organization, it is only in recent times that it has come to be seen as

“Market segmentation is a natu-ral result of the vast differences among people”Donald Norman

Supplier Segmentation

6

ensure proper return for both the stake-holders in the relationship. As the pro-duction levels increase, companies will have to outsource more parts of their work to different suppliers in order to meet demand and to reduce costs, mak-ing it more important for organizations to better manage their suppliers and thus risks and vulnerabilities in their sup-ply chains.

So the question is how will supplier seg-mentation help companies better man-age their suppliers? Organizations these days generally employ a number of sup-pliers, and it is a known fact that there is a different approach for different types of suppliers.

An excellent process for one relationship may be completely wrong for another. Companies that try to use the “One size fits all” approach soon discover that this can be a source of significant problems. The kind of relationship fostered with the supplier of a customized critical compo-nent differs a lot from that with a sup-

plier of standard equipment, and using the same tools in both situations results in a misalignment of strategic goals and wastage of corporate resources.

Breaking suppliers into different groups in terms of what we’re looking for from them and taking the supplier-relation-ship management to the next level, which is to segment based on what the suppliers can do versus our objectives, and then being willing to invest in those suppliers to be able to drive value is the major goal of segmentation. In a highly competitive market situa-tion and rising commodity costs, there is a trend towards reducing the number of suppliers an organization uses. This helps companies in consolidating their purchases and negotiating better prices. There is however only a limited amount of benefit to be derived from the above strategy and organizations have started searching for newer areas of cost reduc-tion.

Purc

hase

Clas

sifica

tion Acquisition Items represent relatively low total

Relatively disproportionate time to acquire

Objective is to eliminate unnecessary manual processing

Multiple Many undifferentiated suppliers available

Switching costs are low

Price is the main focus

Leverage Many suppliers are available

Organization wide needs are there

Purchase consolidation is the key

Acquisition Few critical and differentiated suppliers

Difficult to switch

Suppliers gain an upper hand

Exhibit 1 : Categories of purchases

Routine


7

In this regard Supplier Segmentation has emerged as a highly effective means to further reduce costs and at the same time establish relationships that move beyond the transactional level.

“You can’t have deep, collaborative relationships with all your suppliers, and you need to really identify which ones are the players”

Supplier segmentation helps organiza-tions to align allocation of limited re-sources with their strategic goals. It helps in clarifying roles, responsibilities, actions and expectations of both the parties at every point of contact. It helps in build-ing preferential relationship with differ-ent suppliers and thus better allocation and utilization of limited management time resources.

Criteria for Supplier Segmentation

A number of factors need to be consid-ered before an organization decides to segment its suppliers. The most obvious factors for differentiation would be the level of spend by amount, the volume of procurement, the strategic importance of the supplier, the number of units of the company being served by a particu-lar supplier and the type and number of products or services a supplier provides.

Others factors to be considered include the degree of interdependence between the supplier and client, the complexity and frequency of changes in supplier requirements, the cost and difficulty as-sociated in switching suppliers, the criti-

cality of the service level needed, the supplier’s anticipated quality level and the supplier’s technological capability and compatibility with the organization’s processes.

Depending upon the criterion specified above the suppliers can in general be classified into four different categories. These are defined below:

Bottleneck Supplier

Only a few suppliers are usually present in this category. Bottleneck products are those that can be acquired from only one supplier and their delivery is otherwise unreliable and these items have a low impact on the financial results. However the unavailability of these items may lead to production stoppage. The buyer-sup-plier relationship in case of these suppli-ers is usually supplier dominated with a moderate level of interdependence. Or-ganizations should direct medium to low resources towards such suppliers.

Routine Supplier

Suppliers in this category usually provide products of standard specifications for which a number of suppliers are usually available in the market. As a result it is easy to switch suppliers. The relationship is on the whole evenly balanced.

Collaborative Supplier

These constitute a high percentage of the organization’s total spend. Generally several come in this category and thus a number of alternatives are available

8

for the buyer. The products supplied by these suppliers are somewhat differen-tial in specification.

Strategic Supplier

These are the most important type of suppliers as they are usually critical for an organization’s competitive advan-tage and for ensuring profitable growth and as such the highest amount of the company’s resources should be directed towards these suppliers. An organiza-tion typically has a small number of such suppliers and thus these are difficult to replace. They supply non standard prod-ucts with unique specifications. Such re-lationships are usually focused on devel-opment and driving performance to the next level.

Effective supplier segmentation yields many benefits both within the procure-ment department and across the various business units involved. It provides orga-

nizations the opportunity to not only ne-gotiate the best prices for the product or service being sourced, but also the abil-ity to negotiate contracts of appropriate duration and with the appropriate level of oversight.

Supplier segmentation is a multi-dimen-sional and dynamic process, and for it to be effective it is crucial to consider the different stakeholders involved. The same supplier may have different stra-tegic value to different business units within the same company and thus it is necessary for organizations to constantly review whether their strategic objectives are still in alignment with their segmen-tation strategies.

Author(s)Nishant Shekhar is a student of 2011-2013 batch at at IIFT . He can be reached at [email protected]

Rela

tive

Avai

labi

lity

Strategic Importance Figure 1 : Categories of Suppliers


9

though, this decision might become a burden for a company known for its “coolness”, it would have access to more cash flow to increase its value or to ac-quire other companies.

This IPO decision had been long awaited by investors, competitors and reporters alike. Facebook, however, had been us-ing this time to establish itself as a com-munication hub eating into the market share of Orkut, Friendster, Myspace, Hi5 and other social networking predeces-sors emerging as a potential threat to the Internet’s biggest success story, Google.

Known for its engineering-driven culture, where innovation and experimentation are prized, Facebook has rolled out a steady stream of new features and capa-bilities, from video chat to mobile apps. Statistics show that 57% of the users in-teracted with the services provided by Facebook every day up from 54% last year. The users in the U.S. also seem to be spending more time on the site-7 hours each day, up from last years’ 5 hours per day.

Ever since its launch in February 2004, Facebook has taken the world by storm. A website built exclusively to connect Harvard students; it has grown to be a network of 845 million users as of De-cember 2010 with over 483 million daily users. On February 1, 2012 Facebook filed an initial public offering (IPO) appli-cation with the Securities and Exchange Commission (SEC) in Washington. Several major investment banks are involved in the IPO, with Morgan Stanley as the lead bank. Goldman Sachs, Bank of America, Merrill Lynch, Barclays Capital and JP Morgan are also included.

Facebook was forced to file to go public because it ran up against the limits of the 500-shareholder rule. Private companies with more than $10 million in assets are required to file detailed financials with the Securities and Exchange Commission once they exceed 500 stockholders. The social networking giant passed those limits last year, making the timing of its IPO a widely anticipated move to meet the April 30, 2012, deadline.

Another major reason for this decision was the realisation that the company is too big to keep its finances private. Al-

Social Media : Implications Of Facebook IPO

10

Challenges

Starting as a dorm room project by Harvard students Mark Zuck-erberg, Eduardo Saverin, Dustin Moskovitz and Chris Hughes; Facebook’s annual revenue has grown 300 times from $777 mil-lion in 2009 to $3.7 billion last year. The profits keep on rising too, growing from $122 million in 2009 to $668 million last year.

However, the challenge is to en-sure such growth in the future as well. Although Facebook be-lieves it will cross the 1 billion registered users mark by end of summer, it also recognises new-er competitors like Google Plus, Pinterest, Twitter in the social networking domain. In its IPO filing, Facebook cited Google’s ability to use its dominance in Internet search to promote its Google Plus social network.

Statistics indicate Facebook generated a meagre $4.39 per user in revenues as compared to Google’s $30 per user for its services. Facebook has even ac- Exhibit 1 : The potential of the Facebook IPO [source: namesake.com]


11

knowledged that it doesn’t derive any revenue from its smartphone app which is a huge disadvantage because Apple and Google have already established their presence in mobile ads. Facebook fares poorly in a key pricing metric called CPM, or cost per thousand impressions. It is used in the industry to measure the value of ad inventory in reaching an au-dience. Facebook’s value is 22 cents, less than half the industry average for the Web which is 50 cents and minuscule when compared with Google’s which runs into several dollars.

Facebook also frets the possibility that regulators in Europe and the U.S. may impose tougher privacy rules that would make it more difficult for the company to stockpile information about its users. It has also listed its reliance on revenue earned from Zynga’s social games as a risk, as a disruption in cash flow from Zynga would result in a significant hurt to its revenue.

Facebook has listed Brazil, Germany, In-dia, Japan, Russia and South Korea as its most promising expansion opportu-nities. The company eventually hopes to make its service available in China as well, if it can navigate rules requiring on-

line content to be censored if the Chi-nese government considers it to be ob-jectionable or obscene. Since Facebook already generates 44% of its revenue outside the U.S., they are also develop-ing other sources of revenue beyond on-line advertising.

Advertising accounted for 85% of Face-book’s revenue last year compared to Google’s 96%. Facebook’s other revenue sources include the 30% commission charged from game makers and other external applications companies. Devel-opers received $1.4 billion from transac-tions enabled by Facebook’s payment in-frastructure. But it is still a small number in comparison to Apple’s iOS platform, which paid out $700 million to develop-ers in the last quarter, and $4 billion over the App Store’s lifetime. Once Facebook figures out how to generate more rev-enue through its display ads and its app platform, it may actually live up to its professed $100 billion valuation.

Facebook has valued its Class B common stock at $29.73 at the end of December, down slightly from $30.07 in June and September. If this IPO lives up to its hype, Facebook could sell its shares at a pre-mium in the range of $35 to $40. Investor demand, though, ultimately will dictate the pricing. 2011, however, hasn’t been a good year for IPOs. Technology compa-nies like FriendFinder Networks, Zipkar, Zillow, Groupon, LinkedIn lost heavily since their IPOs and are now trading at a share price lower than their first day trading prices.

But Facebook is an extremely profitable business with operating margins of 50%. When compared with Google’s 24%

Exhibit 2 : Facebook in numbers

12

when it came public, Facebook might generate heavy profits for not just its ex-isting shareholders and employees with stocks as part of their compensation, but early investors. It remains to be seen how Facebook will trade in the stock ex-change when the issue finally goes pub-lic around spring.

Although Facebook is going public, it is essential to understand that the new shareholders would not be a part of decision making processes. As only a $5billion is being raised, and the current valuation of Facebook is around $75-100 billion, it means only 5-7% of the shares will be traded. Mark Zuckerberg has 57% of the voting rights at the company through his stock holdings and allianc-es. This gives him total control over the company and its board. Since he owns a big stake in the company, his interests will be aligned with shareholders. But this still creates doubts about account-

ability if and when problems crop up.Author(s)Riddhi Ahuja is a student of 2011-2013 batch IFT. She can be reached at [email protected]

Exhibit 3 : Growth Prospects


13

Social Media : The Good, the Bad and The Untimely

Starbucks devised an overall social me-dia strategy arousing customer curiosity by launching different competitions and events via its Facebook/Twitter Pages. Qantas Airlines focused on its Twitter Handle to create a positive feel about the company.

Qantas Luxury Campaign gone wrong

With the rapid growth of social media, most airlines have been desperate to put their mark on the social media montage. In an industry which is hyper competitive and where convenience and comfort are the key to attracting more customers, online engagement is seen as an impor-tant way to create value add-ons. In November 2011, Australian airline Qa-ntas posted a tweet asking customers to tell the company what their idea of ‘Qa-ntas luxury’ was. Just two weeks prior to this campaign, the failed negotiations between the airline management and the unions representing pilots,

“Social media turns branding into a true (if often accidental) collabora-tion between company and customer” Alexandra Samuel, Harvard Business Re-view

The ability of social networks to create potentially transformational change in consumer behaviour has become a glob-al phenomenon. The concept of “Mem-ber Communities” has overtaken per-sonal email to become the world’s fourth most popular online sector after search portals and PC software applications.

According to AC Nielsen, Facebook has been leading against Google for weekly traffic in several parts of the world since 2010. Even though social media strategy just forms a part of online advertising/media activities that business houses en-gage into but it has become an impor-tant media of connecting with consum-ers for service organisations.

In the following pages, I will try and throw light on how two service organ-isations have leveraged on the power of social networking to cater to customers of all groups and types.

14

engineers, baggage handlers and cater-ers had costed the company AS$20 mil-lion.

Moreover, it is estimated that the grounding had affected 68,000 custom-ers worldwide. The bad timing of the luxury campaign saw customers venting their frustration on Twitter website for all to see.

Brand Qantas brand did not have best reputation lately, and as consumer frus-tration boiled over, the #qantasluxury hashtag was hijacked. The promotion was arguably in poor taste.

What went wrong?

1. Timing of the Luxury Contest: Qa-ntas launched the Twitter luxury destina-tion promotion at a time when trust in its brand could not be lower. Running a luxury campaign when a global econom-ic downturn prevailed was not fitting.2. Shaky Past record with social me-dia: This is not the first time Qantas has gone wrong with its PR efforts. In August 2011 it was criticized for a competition asking Australian fans to pose as their favourite rugby player and two fans posed as Fiji-born rugby player with Afro wigs and black paint. The airline had to deliver a public apology as the practice of donning black face paint, or “blacking up,” is considered racist in Australia.

3. Miscalculating the pervasiveness of Twitter: Once a Twitter trend starts, it is self-feeding; supporting tweets appear that are self-referential, about the trend itself. The social media virus spread quickly. Stories appeared in mainstream press and forums with the caustic user com-ments.

4. Bad Response: Critics say that the social media team at Qantas did not respond quickly enough and the responses were too wooden and had no personality. The team also resorted to deleting posts from Facebook and Twitter pages

Exhibit 1: Growth Prospects


15

Described by industry experts as “digital marketing worth watching,” Starbucks’ strategies have com-manded a lead in the social media space. With almost 29 million face-book fans, close to 1.5 million twit-ter followers, and 6 million YouTube fans, it’s only second to Coca-Cola in aggregate popularity.

Starbucks ventured into social me-dia with My Starbucks Idea – its own version of a social network where customers are asked to share their ideas on anything related to Star-bucks.

Further, the services company also started a blog - Ideas in Action, written by various Starbucks em-ployees that talks about what Star-bucks is doing with the ideas given by users on the My Starbucks Idea site. Moreover, Starbucks pains-takingly engages with customers on twitter by answering questions and retweeting what customers are saying about the brand. It fre-quently uploads interactive content to its facebook page and also in-vites people to events.

Over 4800 people subscribe to Starbucks YouTube Channel. The company uploads commercials as well as informational videos ex-plaining the origins of different cof-fee blends and some of their char-ity work videos. They also upload videos showing their history thus enabling people to relate more to the brand.

Starbucks’ secret to successHowever, more important than its online popularity is that the coffee chain is beginning to see sales lift following social-media promotions. What works for Starbucks?

1.Embassy Approach to social me-dia: Starbucks has a cohesive social media strategy. With a strong pres-ence over all possible channels, it ensures that no consumer misses its presence on the web.

2.Power to the people: My Star-bucks Idea gives the user a role in the decision making process of the company. It gives an opportu-nity to like minded coffee lovers to connect with each other over communities like “bring back the x beverage” group, “the soy group”. And it doesn’t stop here. Through its blog, it lets the consumers know how their ideas have been imple-mented.

3.Competent social media team: The team at Starbucks has shown the ability to quickly manage ru-mours, patiently reply to queries and keep its audience engaged. In January 2010, a story spread that Starbucks was donating its profits in Israel to fund the country’s army -- even though Starbucks doesn’t have any cafes in Israel. The rumour was confronted directly through its online channels by the team. 4.Keeping in line with the latest trends: After ceding to its usual first-to-market status to com-petitors, Starbucks launched two

Exhibit 2 : Facebook userbase

16

iPhone apps in September 2009, one for general cafe purposes, with store locators, detailabout specific blends and nutrition in-formation, and the other to support its loy-alty card.

Engaging customers through social media is a double edged sword. It has millions of frequent users, which means misinformation or malicious falsehoods can be spread as far and as fast as any positive publicity.

When customers use social media to turn against the organisation, the consequences hit right at the heart of a board director’s responsibilities – the bottom line, the share-holders and the company’s reputation – yet, surprisingly, few board directors include so-cial media in their group-wide risk manage-ment strategy.

An important learning that can be derived from the Qantas disaster is to not do social

media activity in isolation from the state of your brand. Qantas should have focused more on keeping its planes in the air and customers happy than the thread-count on its Twitter Profile. Also, a holistic strategy such as the one ad-opted by Starbucks spread across various social media channels such as Facebook, Twiter, Blog etc and implementation of the same cohesively can help in conquering the social media plane.

Author(s)Mahima Jain is a student of 2011-2013 batch of IIFT. She can be reached at [email protected]

Exhibit 3 : Awareness of social media channels


17

Strategies In Business :Mergers And Acquisitions

It is almost impossible to force on anyone someone else’s culture and change his long-run belief. For international M&A, cultural issues are all the more important as it involves integration and collabora-tion of entirely different entities.

Some of the cultural factors are-1) Disparate Management Styles2) Leadership style3) Loss of productivity and talent4) Beliefs regarding personal ‘suc cess’5) Unplanned integration of people resources Disparate Management Style

Differences in the management styles can make it difficult for employees to ad-just post-M&A. For example, Company A might be following a centralized ap-proach where all the decisions are taken at the head office and passed on to the regional offices, while company B might be following a decentralized approach where some decision taking powers are given to the regional managers as well. In this situation both the companies must have an honest and open discussion in advance as to how much authority will be given to the regional managers and what is going to be the decision flow in

The rapidly changing global environment & demands, diversification needs, econ-omies of scale and shortening product cycles are forcing companies to adopt Mergers and Acquisitions (M&A) as one of their strategies to expand. This expan-sion can be in terms of location, product, market segment, technological advance-ment etc.

The ultimate objective of any M&A is to add value to the company i.e. to achieve an output similar to value(1)+value(2)>value(1+2). Numer-ous Emperical studies have shown high failure rates of M&A deals. According to a Boston Consulting Group’s analysis, about 58% of the transactions that took place between 1992 and 2006 reduced the shareholder’s returns.

It is very tough to fathom why this hap-pens when all the pros and cons had al-ready been analyzed before going ahead with the deal by the top management of the company both strategically and fi-nancially.

The answer lies in the fact that some is-sues are often ignored during the set-up phase of these alliances. One such major issue which can act as a deterrent is the cultural differences between the compa-nies. Culture is implicit and resilient and it determines how a person behaves.

18

the merged organization.

Leadership Style

The companies can differ in terms of how formal or informal its environment is. There are some companies in which even the person at the lowest hierar-chy level can talk to the management and discuss his issues or put forward his ideas anytime he wants, while in other companies, there is a proper hierarchical structure through which an employee has to pass to make his ideas reach its desired place. If such differences exist, this needs to be resolved compulsorily before going ahead with the deal; other-wise it may lead to a lot of frustration for the employees.

Loss Of Productivity And Tal-ent

It is the employees whose performanc-es determine the company’s growth. Therefore, they should be clearly told what are the management’s visions and business plans and what they can expect for themselves from the deal. If possible, they should also be involved in the deci-sion making process. This is because loss

of talent and inability to manage change on the part of employees can cause a considerable amount of damage to the company in the long-run.

Beliefs Regarding Personal ‘Success’

There are organizations in which em-ployees believe in achieving goals with ‘teamwork’ and ‘cooperation’, while on the other hand there are also some or-ganizations in which ‘individual’ perfor-mances are recognized. If a merger takes place between these two types of orga-nizations, it would result in the degraded performances as some employees would be striving for company’s objective, while others would be indulged in improving his own standing in the company and therefore there would be lack of support for each other and inconsistency in their functioning.

Unplanned Integration Of Peo-ple Resources

While formulating the new teams for the merged organization, people’s compe-tencies needs to be matched appropri-

Exhibit 1: Reasons for M&A failure


19

ately to the requirements. The integra-tion of the work force should be done in such a way that every employee gets the role that he deserves. This would in-crease their trust on the management, and is likely to extract maximum produc-tivity out of them.

Following are some strategies that need to be addressed regarding cultural issues in making the process of mergers useful in retaining the people, and thereby pro-tecting perhaps the most valuable assets that the company has acquired-

1. Evolve a clear vision and business strategy during the process of negotia-tion, and communicate it well in advance.

2. Make culture a major component of the change management work stream.

3. Identify the merits and demerits of both the corporate culture and inte-grate them to come up with a new uni-fied culture.

4. Implement a decision-making process that is not hampered by cultural differences.

5. Appoint people who can under-stand both cultures and formulate poli-cies to narrow the differences.

6. Create a new Organization Chart to map employees’ roles and responsi-bilities as aligned with the new chart.

7. Establish a strong communication system. Establish a single point of con-tact for the employees of the company to talk to and seek clarifications / an-swers to their queries.

8. Communicate to provide clarity of

the plans, and communicate continuous-ly. If needed, using an external agency that can be seen as a neutral agency.9. Engage employees in productive work and keep their motivation / com-mitment levels at the highest possible levels

Therefore in a nutshell, the following ob-jectives needs to be taken care of-

Clarity There should be as much clarity as pos-sible in the minds of the employees re-garding the deal. They should be aware about the consequences and the chang-es that they are going to experience after the deal is signed. There should not be any uncertainty about their job or roles.

Competence The revitalized competencies of the or-ganization must be assessed and com-municated in crystal clear terms such that there is no information gap between the management and employees.

Commitment The top management of the company must talk to the employees in advance and make them understand the impor-tance of their commitment for the suc-cess of the deal.

Author(s)Prince Jain is a student of 2011-2013 batch at IIFT. He can be reached at [email protected]

20

Operations :Please Be Optimum, Not Efficient

revenues constant or vice versa should increase profits. The dichotomy may seem to be complementing but in-fact it is not. The proponents argue that re-duction in operational costs can increase efficiency and hence increase profits.

Unfortunately, they miss the element of risk. In today’s time where unpredictabil-ity in business environment shapes our strategies, missing risk is a big mistake. The question - Are efficient operations optimal operations? (Due to limitation of space, I would restrict myself to the ef-ficiency of Supply-chain)

Are Efficient Supply Chains Optimal Supply Chains?

An efficient supply chain by definition is one that is cost-effective and fast. The proponents propose that such supply chains can be a key element of competi-tive advantage. However we will see that such a strategy fails under unpredictable conditions of supply and demand.

To reduce costs, many companies have centralized manufacturing and distribu-tion facilities to generate economies of

Cost Minimization Or Revenue Maximization?

Productivity in the simplest terms is defined as Output by Input. To have maximum productivity, have maximum output and minimum input. In terms of value it would be Output price by Input cost (assuming only Operating expens-es). Thus by reducing operating costs and increasing price, we can achieve ef-ficiency. Pricing being a prerogative of the marketing department we stick to reducing the operating costs. In a similar manner, in terms of volume Productivity would be Output-quantity-produced by Input-quantity-used. Thus by producing more from the same amount of input or by producing same from less amount of input, we will be able to achieve higher productivity.

To summarize - reduce costs and in-crease production to achieve productivi-ty and be efficient. It seems quite logical, but we need to ask a question here - is this in line with the organizational goal?The goal is to make maximum profits; profits being total sales revenue minus total costs. Thus quite logically, reducing marginal costs while keeping marginal


21

scales. They deliver only truck load of goods to minimize transportation time, freight costs and the number of deliver-ies. Whenever the demand of a particu-lar good increases without warning such organizations are unable to react, even if they have stocks in stores. This results in significant opportunity costs. On the other hand whenever the demand falls the excess inventory results in excess layered costs. I am not saying that effi-cient supply chains aren’t necessary, but they aren’t enough to ensure that firms achieve their goal in this unpredictable climate.

Mitigating The Risk

It is no rocket science to figure out that risk cannot be eliminated but only be transferred. Transferring the risk to a partner is surely a bad idea, however sharing it is not.Efficient supply chains tend to be loss making in the long run. An optimal sup-ply chain, as defined by Dr. Hau Lee, is a triple-A supply chain, where Agile, Adaptable and Aligned are the intrinsic characteristics of the supply chain.

Agility gives the ability to react to sudden change in demand and supply. This be-comes essential in today’s world, which is full of unpredictable geo-political ten-sions, natural disasters and product re-calls.

Adaptability gives an edge by aligning to the market structures and facilitating strategizing. Globalization has brought in more complex questions as well as an-swers. Companies need to look beyond the traditional view of supply lines. En-tering into new markets is as important

as entering into new supply lines.Aligning the firm’s interest with supplier’s interest results in collaboration and shar-ing responsibilities. It fosters the need to collaborate further and increasing the value of the partnership.

Creating A Triple-A Supply Chain

Agility

1.Facilitate flow of information across the value chain2 Enhance relationship with the suppliers3. Do not hesitate to maintain excess in-ventory for inexpensive but key compo-nents4. Enhance relationship with the logistics partner5. Prepare and practise a contingency plan such as disaster recovery planning

Adaptability

1. Keep an eye on new supply bases and mar kets in the world2. Evaluate the needs of the consumer and not just the customer3. Design the production line for post-ponement*4. Create flexible product design5. Outsource more if and when possible*The concept of involving customization of products at the end of the production line. This enables standardization for most of the part of the production line.

Alignment

1. Exchange information and knowledge with suppliers, vendors and customers2. Share risks and rewards equally3. Have clarity in division of responsibili-ties

22

Simulate the scenario to forecast and perform sensitivity analysis. This pro-vides us with a holistic view about the demand and supply limits thus enabling us to predict profitability based on the analysis. The gaps need to be filled using a production solution that takes care of the limits resulting from simulation. This requires tweaking or creating an entirely new supply chain network around the core concept of agility, adaptability and alignment.

This also gives us an opportunity to con-figure our networks to suit the chang-ing environment. We must make sure that we undergo a collaborative change where our partners -suppliers and ven-dors - profit from it too. Finally we should have continuous improvement through a control system where information flow is given prime importance.

The result would be an increase in the fill

rate and inventory turns while decreas-ing in the overall inventory. Moreover, transportation and warehouse costs may go down too. But most importantly, the goal will be realized. Profits will be great-er than ever before even if our costs in-crease.

Success stories due to implemen-tation of triple-A supply chain

1.7-Eleven2.7dream.com3.Lucent Technologies4.Toyota

Author(s)

Harleen Singh Mann is a stu-dent of 2011-2013 batch at IIFT. He can be reached at [email protected]

Figure 1 : Triple-A Supply Chain


23

the transition period is of few months to a couple of years. In family managed businesses, this period can extend even across a decade. The longer the transi-tion period, the longer time and oppor-tunity it offers for development of lead-ership ability for the next-in-line.

Although hard to believe, for a family managed business, the transition period starts as soon as next generation starts gaining cognizance of things around. Business problems are discussed over dining table every evening; kids contrib-ute in counting the arriving and outgoing payments, the next-in- line starts going to banks even before they join universi-ty, even pocket money varies as per cash flow/profits/loss in business and such is the involvement, that the person devel-ops the understanding of his family busi-ness, even before he actually takes the reins over. “

Postulate 2: “It’s best for a business if the family members specialize in the dif-ferent aspect of business.”Experts have opinions. It’s good to have Author’s opinion: It is indeed best for the members of family not to spe-

Opinions. It’s dangerous to have an opin-ion about everything. Unfortunately, of the plethora of material and text avail-able online that tries to find the roots of success (or failure) of a family owned enterprise, only a few hold significance. Of many such articles, one article catch-es attention. One such article, “Avoid the Traps That Can Destroy Family Busi-nesses”, published in HBR, Jan-Feb issue talks about different “traps” which a fam-ily owned businesses usually fall to while doing succession planning. And it offers solutions to such traps. Let us see what traps and postulates it offers:

Postulate 1: “In contrast to publicly owned firms, many family businesses have the same leaders for 20 or 25 years, and these extended tenures can increase the difficulties of coping with shifts in technology, business models, and con-sumer behavior.”

Author’s opinion: The difficulties such long tenures present are almost ev-ery time negated by the several advan-tages these “long” tenure offer. The lon-ger tenure means a longer “transition” period in leadership roles. In a mega firm, where a CEO holds tenure of 5 -7 years,

EntrepreneurshipSuccession in Family Businesses

24

cialize and be generalists instead. Family members keep substituting in place of each other in case a member has to miss his role due to some reason. Such adapt-ability is rarely seen in case of a mega firm, where the substitution (or stepping into a role temporarily) can only happen once the compensation and benefits for the additional responsibility have been decided and the necessary paperwork has been completed. A smooth cross departmental substitution is easy if the family member is a generalist, and not a specialist.

Family Businesses In India

All the frameworks developed for mega firms are useful if you are trying to devel-op a business family. But, when you tend to understand a family business, the dy-namics change. In India, family business-es don’t revolve around work culture. In-stead, they revolve around work-religion instead. Where else do the family mem-bers worship the machines on festivals?

Sometimes, the business owner is the one to unlock the office in morning and still is the last one to leave. Sometimes, the business owner is the sweeper as well as the accountant. Such high degree of

commitment is only possible if you “wor-ship” and not just “practice” your busi-ness. That is where the difference is. It is not about work culture, but about work religion. Family members don’t look at their business as job. Work is considered worship, literally. The real problem a family business faces is actually very unique. It is not about how you integrate family members into your business, but how you integrate non family members into the business.

Generally, a person joining a family man-aged business has a pre-conceived no-tion that since it is a family managed business, it would be next-to-impossible to suggest something that goes against the thought process of one of a fam-ily member who is in a decision mak-ing role. The person thinks that all fam-ily members would defend each other’s thought process and views, and it would be impossible to suggest something dif-ferent. The reality however is completely the opposite. Since the business is con-sidered “religion”, the interest of busi-ness is considered supreme and it com

pletely overshadows relationships. It takes time for an external person to real-ize this. Obviously, the time taken for this understanding to develop is “non pro-ductive” and it harms the business.

Another problem that a family busi-ness faces is in developing a proper and smooth exit plan for the retiring fam-ily members. Since there is no set retir-ing age, the senior members of family may continue to hold positions in busi-ness for long. As discussed, this offers a good transition time for the next-in-line


25

religion, remember?) which he has nur-tured and for which he has worked for so long.

Even after retiring, he may like to keep contributing to the company in some way or other. These contributions may come in form of unsolicited advices. However, the suggestions which a person offers af-ter he has retired are probably the most important part of the transition period and knowledge transfer. The post retire-ment period gives the retired person time and space to ponder and evaluate the critical decisions he took for his busi-ness over his entire tenure. This critical evaluation couldn’t have happened while he was working his heart out. This analy-sis happens only in retrospect. The anal-ysis results in observations and learnings that get transferred to the next-in-line in the form of advice. These contributions should not be ig-nored, and they should be taken as the “extension” of the transition period.

It is hard to learn skydiving by watching it on HBO. It is even harder to comment on succession planning of family busi-ness by people who have not been a part of it. A person, having not even an iota of experience in industry, but who has been raised in a business family is in a better position to comment. Incidentally, I hap-pen to be one of them.

Author(s)Puneet Garg is a student of 2011-2013 batch at IIFT. He can be reached at [email protected]

26

Entrepreneurship :Startups In The Challeng-ing Industry Scenario

These startups also face the challenge of scaling up. As the company grows, more people start getting involved. It becomes very important for all the peo-ple to be on the same page regarding the vision of the venture. Sometimes, this poses problems as there is a lack of communication between the owners and the people entering into the com-pany. Moreover, when the unit is small, most of the things are taken care of by a small set of people who are fully aware of the workings. However, as it becomes important to delegate responsibility to new members there is a need for better and efficient management practices and a formal system of administration.

Infact Apple, Hershey’s and Ford Motor Company were all started as small enter-prises and achieved stupendous success. History shows that great companies are often built during bad times. Hewlett Packard was started by two engineers in a garage at the tail of the Great Depres-sion. Silicon Valley itself was created after the recession on the 1970s. These small companies have again received some setback due to the recent recession but there are certain sectors that seem more promising in the coming years with re-

In today’s ever changing world with old technologies becoming obsolete and new techniques and methods coming into use at a rapid pace, startups have started playing a major role in the prog-ress of industry. These companies are growing at a very fast rate and are asso-ciated with higher risk and high potential return on investments. These small busi-nesses and enterprises form the back-bone of the US economy.

It is believed that these startups are the major job creators in today’s scenario and some of the best innovations have come out of these companies. There are a lot of pros and cons associated with startups or venturing into business all on your own. These people are highly mo-tivated and bustling with a plethora of creative ideas. They have the plans and the capabilities to revolutionize any do-main they wish to enter but there a lot of challenges and hindrances on their way. Most of them have to deal with a lot of decision making from the very be-ginning. Also, there are very few people they can consult for the most important decisions concerning their businesses. This can lead to problems very early in their venture if not dealt with properly.


27

spect to startups, or age-zero companies as these are popularly known.

Emerging Sectors

During the recession laid off employees went back to school. Clearly, this shows that with the economy showing growth signs, the boom in this sector is expected to continue. Students and even employ-ees who do not find viable opportunities in their domain of expertise are likely to turn to the education sector in anticipa-tion of increased scope. This suggests that this sector will experience a boom in terms of the number and the variety of institutions providing training and certification courses in areas such as IT and medical staffing. Moreover, this is an area where the barriers to entry and the startup costs are very low.

Secondly, the internet and the technolo-gies sector is one area where growth is expected to increase over the coming years. With the boom in internet tech-nologies and the tendency of users to experiment with the type of technolo-gies and gadgets that they use, this is one area which has immense potential in the coming time.This also includes the E-commerce and online auctions indus-tries which are registering a growth rate of 9.4 % per year on an average.

Thirdly, the green sector is one sector that is set to see enormous growth in the future because of the focus on sustain-able development and the consumer’s increasing awareness and concern about environmental issues. Shoppers have be-come more conscious about what they pick and in this scenario businesses are

implementing more eco-friendly practic-es to provide them with more opportu-nities to buy and consume healthy. Solar and wind energy have benefited from this green technology and the revenue from the solar energy sector has jumped an average of 34.8 % every year. Also, with increased focus on green technology, green consulting is another domain that has huge possibilities of development in the near future. The environmental con-sulting industry is expected to grow at an average pace of 9.4 % while the envi-ronmental cleanup industry is forecasted to grow at a rate of 4.8 % each year.

Another area that is set to get back the growth rate it had before the recession is the construction business. Housing de-mand is expected to rise on the pretext of rising consumer confidence and high-er disposable income. The estimate is that residential construction will rise 12.5 annually upto 2016 and the value of pri-vate non-residential construction will in-crease about 13 % per year. This industry has scope for establishment of startups

28

because of the increasing demand for contractors and subcontractors. To add to this, the real estate asset management and consulting industry is expected to clock a growth rate of 6.8 % per year.

Startups also have a huge scope for growth in the healthcare and wellness sector. The landmark 2010 Patient Pro-tection and Affordable Health Care Act includes provisions supporting alternate healthcare and community wellness pro-grams. Elderly and Disabled services will grow at a rate of 6.2 % per year as dis-posable incomes grow with the recover-ing economy.

Author(s)Swati Khurana is a student of 2011-2013 batch at IIFT Delhi.She can be reached at [email protected]


29

30

and Development (OECD) for South and South-East Asia, India was second last — barely nosing out Kyrgyzstan. Incidentally, China topped the assess-ment.

If that seems like some consolation – wait. The ‘Annual Status of Education Report, 2011’ (ASER) released in Janu-ary 2012 by NGO Pratham revealed that reading scores across India have de-clined by 5 per cent over 2010. Worse, only 30 per cent children in Class 3 and two-thirds in Class 5 could solve simple two-digit problems – a 6 per cent decline over 2010.

Rote Learning’s Limitations

Barely two years after the Right to Edu-cation Act was cleared, what ails Indian education? The problem: the wrong fo-cus. Presently, authorities are simply seized with ensuring that all children are educated. While there’s nothing appar-ently wrong with this, it simply reduces education to statistics. The responsibility for ensuring that students learn and im-bibe what’s taught is missing. Rote learn-ing only works up to a point.In today’s hyper-competitive environ-

The Open High School of Utah (OHSU) is a fully online charter school that has traded chalk and blackboards for digital tools that foster collaboration and inter-active education. The school has fully integrated Google Docs and uses open course management system Moodle. Students create more than 150 presen-tations per year using SlideRocket; often collaborating remotely in teams to share and organize data.

In this new model of educational think-ing, educators and students tap into the cloud to build, collaborate, share and manage media rich lessons and curricu-lum. The OHSU model is an example of how to employ real world technologies which focus on collaboration. The return on investment is not a result of the tech-nology, but how that technology is ef-fectively implemented in education.

Now compare this with the educational standards in India that have been dete-riorating in recent times. Assessments of Indian school students by two different entities are indeed discomfiting. In the Programme for International Student Assessment (PISA) test held by the Or-ganisation for Economic Cooperation

Education : Digital Classrooms


31

ment, rote learning without compre-hension won’t take students far. For example, rote learning only works with standard questions. Re-frame the same questions from another angle and stu-dents schooled in rote learning cannot comprehend them and respond appro-priately.

Fortunately, solutions to surmount such learning problems exist. Simply pinpoint the actual problem and then choose the right solution. Instead of rote methods used in traditional teaching, schools should use modern means such as intro-ducing interaction and personalisation in education.

In this regard, Digital Learning and In-teractive Education methodologies can provide solutions. Digital Learning uses modern gadgets such as computers and tablet PCs — something today’s genera-tion is most comfortable with.

Digital Learning Revolution

The truth about the digital learning trans-formation is gradually becoming evident as schools slowly adopt interactive class-room teaching and virtual learning sys-tems by using information and commu-nication technology.

Of course, the transition from tradition-al teaching methodologies to modern modules has had hiccups at some stag-es. The reservations, paradoxically, were voiced by teachers and parents, not stu-dents.

But as more schools embraced technolo-gy, the sceptics realised the value of what

they’ve been missing. Modern education transcends the brick walls of classrooms, as well as the borders and boundaries of nations.

As education becomes an interactive voy-age of discovery on colourful computer screens, students of all ages discover ex-citing prospects in studies. Digital teach-ing modules offer integrated solutions that assist teachers in classrooms via the use of software, hardware and school support services. Once considered just a ‘job’ by teachers and ‘dull and dreary’ by students, interactive learning has now become an enriching experience.

Moreover, interactive learning promotes critical thinking among students, too. Students no longer accept what the teacher says at face value. They are un-afraid to pose unconventional questions that cannot be answered via stereotyped responses. Students would earlier think twice before replying.

Today, teachers need to marshal their facts before answering offbeat que-

32

ries. Such interactions fuel the creative thought processes of not just the stu-dents but the teachers too.

Educomp, till a few years ago, was the only player in the digital classroom seg-ment, but today the market has over half-a-dozen players – like Everonn Edu-cation, EdServe Softsystem, Core Proj-ects and Technologies, NIIT and Manipal K-12 Education – who have made learn-ing easy through IT-enabled systems. There’s no denying the fact that schools and educational institutions are waking up to the opportunity of IT-based solu-tions and service providers are reckon-ing its potential.

Chennai-based Everonn Education, at present has its presence in 1,370 schools and plans to take that number to 5,000 schools over the next three years. Edu-

comp has 5,534 schools – including Delhi Public School and Bal Bharti in New Delhi – and 3.9 million students using its Smart-class solution.The digital classroom servic-es include: setting up of infrastructure and technology in schools; providing digitised course-ware and maintenance support to teachers; educating teachers and the man-agement on technology usage and con-ducting special interactive sessions, some-times through VSAT.

The market has evolved with the Central government’s move to fund Sarva Siksha Abhiyaan for ICT@Schools programme with a Rs 15 lakh per district per year bud-get. Under the government’s Technology in Education Initiative, out of a total 10,00,000 schools in the country, the programme will cover 6,42,600 schools at the primary, upper primary and secondary levels. Every school will have a server, five PCs, printer and inter-

Figure 1 : Digital learning ecosystem [source: dell.


33

net connectivity. State governments will out-source installation and maintenance of hard-ware, content and training to a private party. The information and communication technol-ogy (ICT) business is tender-based. It functions under the build/own/operate/transfer model.

Many service providers are using the power-ful channel of 3D animation videos to explain concepts like formation of block-mountains or volcanic formation. And, schools are using the available technology to explain and simplify concepts in subjects like Chemistry, Physics, History, Biology and Science.

According to analysts, visually improved pre-sentations through use of graphics increases students’ interests in classrooms. With more and more companies realising the potential, analysts expect the market to grow ten times in the next five years. ICT inflows to private-sector players is pegged at around Rs 4,500 crore by March 2012.

Personalised Education

With technology and activity based modules, digital learning tools make teaching easier for teachers, while facilitating faster learning by students. Interactive teaching is immediately followed by practice sessions. Consequent-ly, comprehension and retention capacities of students soar, unlike traditional teaching, where monotonous lectures lead to low infor-mation-retention capacity.

Besides being user-friendly, many digital teach-ing modules’ control functions allow teachers to monitor each student’s real-time perfor-mance. Although students have personalised consoles, teachers hold administrative rights to make classes fully functional. The teachers can then allocate personalised lessons to each student, as per their specific learning levels.

Exhibit 1 : Technology in learning

34

After the lessons are submitted, teach-ers are well placed to assess the perfor-mance levels of each student.

Assessment is an important cog in the learning process, since it evaluates learn-ing outcomes, provides remedial inputs and offers a powerful set of solutions towards consistent development of stu-dents. Implementing assessment pro-grammes assists teachers in ascertaining students’ strengths and weakness, there-by planning future lessons in sync with the pace of students.

Besides taking a great burden off teach-ers, user-friendly teaching modules make topics simpler for students to under-stand. Furthermore, interaction aids help in concentrating for longer periods. All this ensures students termed laggards in class can now deliver above-average performances. Given the element of fun and interaction that digital learning pro-grammes bring into classrooms, teachers may find it difficult to label students as slow learners.

Students taught in this manner possess an array of creative, problem-solving, communication and analytical skills — the best means to succeed in the 21st century’s ultra-competitive environment. With most modern schools in Indian cities and towns introducing comput-ers and computer education, the time is right to adopt digital learning technolo-gies across classrooms.

The real value of education is not really what we learn; it’s how we learn it– which involves the effort and process that goes into the act of learning itself. No matter how many new digital tools come out, the common denominator is still people.

And it will always be people. The new col-laboration revolution in education technol-ogy places people squarely at the center of the equation, making it easier to connect and produce solid results.

Author(s)

Sahil Saini is a student of 2011-2013 batch at IIFT. He can be reached at [email protected].


35

Industry Insights: Pharmaceuticals An Interview with Mr. Mayank SinhaHead of Business DevelopmentGlenmark Generics Europe

trepreneurial mode, being flexible with attitudes and time allocation is necessary and work is geared towards the interna-tional business requirements where the above is not necessarily always followed.

Q : What according to you are the current primary challenges in the pharmaceutical industry?

A : There are a lot of challenges in the pharmaceutical industry especially in the emerging economies because of the re-cessionary conditions existing in the Eu-rope and US markets. Companies are not able to grow as per their expectations and for our industry per se, it has been a bad phase for the last few years.Also in terms of innovations, I feel that fewer new drugs are being introduced into the market and even the existing drugs are being squeezed by tighter government budgets. In addition there have been rapid changes happening in the pharmaceutical sector. For instance, I was in Greece two weeks back and in a matter of days the pharmaceutical spending by the government (in Europe almost all healthcare costs are paid by

Q: How is the basic work culture at Glen-mark? How does your normal day look like?

A: There are variations according to the geography one is working in, so this would be a very Europe centric answer. In the European business environment there is a lot of focus on discipline, punc-tuality and honesty. For e.g. If you are working in Sales and Marketing and you have run out of stock, you really don’t need to make excuses. You can say that you won’t have it for three months and people really appreciate your honesty if you tell the truth (off course this certainly cannot be a regular occurrence!!). This is reflected in the internal work environ-ment where people are very direct; there is limited hierarchy and an emphasis on trust and straightforwardness.

At Glenmark Europe, there is a good focus on work life balance. No work on weekend and holidays is the general rule and this is respected both by exter-nal customers and internal colleagues. However as Glenmark is a fast growing business and we are very much in an en-

36

the state) has been slashed by a couple of billion and prices reduced sharply. This has had a severe effect on both topline and bottom line of companies within a week. Growth and expansion in China and In-dia are also vital drivers, where incomes have been increasing steadily and there is a much greater demand for good healthcare. Gradual shifts are taking place in the industry and there is a trend by the established players to focus on these markets. However if one were to see the trends in healthcare spending and ageing population – Europe, US and Japan would continue to remain the ma-jor pharmaceutical markets. As far as Glenmark is concerned, we are very strong in generics as well as build-ing a name as an innovator company for new drugs. It is an interesting sector to be in, because Indian companies are con-sidered strong competitors by the local industry and in general well respected.

Q : How is marketing in the phar-maceutical sector different from the FMCG sector?

A : The marketing environment in the pharmaceutical sector is completely changing. Innovation and spending is diminishing as the industry is getting stretched and there is a lot of consolida-tion taking place in terms of the buyers. For instance, in the UK there is a single national health service that does all the buying and provision of healthcare. There are limited insurance providers and limited products. Marketing in such a scenario is not of the traditional sense as in FMCG companies. It is increasingly moving towards a key account manage-

ment approach. In the emerging markets however, it is more or less the same in both the sectors. In fact it becomes more challenging in the Pharma sector be-cause the product needs to be sold on its efficacy and the Pharma sector in India is highly competitive and fragmented.

Q : How were your days in IIFT and how do you perceive the role of IIFT in your career?

A : At IIFT, I was always interested in the Sales and Marketing function. I had my summers in HLL (now HUL) and I got a pre-placement offer from the company. Glenmark was at that time setting up its operations in Europe and they had an in-teresting opportunity in their European set-up which was at that time at its incep-tion stage. IIFT was a logical port of call due to its MBA in International business. I bit the bullet and took on the challenge of being part of a potentially very excit-ing but unchartered future. It has been an exciting 6 years since, as Glenmark now operate in more than 7 European coun-tries with a direct presence established through a mix of organic and inorganic growth. At a personal level it has been a very stimulating and challenging experi-ence as in short span of a few years my responsibility has increased from being part of the Business Development team to currently as the Head of Business De-

Mr. Mayank Sinha is an IIFT alumnus(Class of 2005). He heads Business Development for Europe at Glenmark Pharmaceuticals.


37

Strategy Corner THE AVON COTY STORY

Takeovers have always been a very deli-cate legal dance. The recent loss of the global beauty products firm - Avon Prod-ucts Inc. of a $10.7bn takeover bid from smaller cosmetics rival has left share-holders hoping that new chief Executive Sherilyn McCoy has a great turnaround plan in place. But with issues of falling sales, rising labor costs and in interna-tional markets like Brazil and a shrinking army of salesmen, the future of the com-pany looks bleak.

Coty raised its unsolicited bid, which had the financial backing of Warren Buffet’s Berkshire Hathaway and others from an earlier $23.25 per share to $24.75 per share but due to repeated delays in the process from Avon’s side, Coty pulled back the offer. Analysts say that this lack of communication might be a message from Avon that the company is not up for sale. Nevertheless, considering Avon’s urgent need for a sustainable fix, we feel they missed out on a good opportunity. Coty is known for fragrances for celebri-ties like Beyonce and Madonna whereas Avon is the fifth largest beauty compa-ny in the world with its products being across 140 countries.

FACEBOOK’S ACQUISITION OF INSTAGRAM

Facebook’s $ 1billion acquisition of in-stagram, a free photo sharing applica-tion, which was voted as iPhone app of the year and has around 30 million reg-istered users in iOS and was able, to at-tract more than 1 million subscribers in 24 hours of its android launch, has been in news since it was announced this April.

Apart from the business implications for Facebook, what is generating greater in-terest in the deal is the fact that Insta-gram is a 2 year old start up with around 30 employees and no revenue. However what is lacks in financial metrics, it makes up with far important business metrics like a 30 million strong user base, only for iOS and now that the android version of the application has been launched the user base for android alone is expected to touch 50 million.

So what do these numbers mean for Facebook? The motive for the acquisition becomes much clearer if we consider the fact that Facebook is really about photos, and photo sharing and tagging are what made Facebook. Instagram is evolving into more than just a photo sharing app, with rapidly increasing user base; it is be-coming a new social platform, which is

38

what made it lucrative to Facebook and others like Twitter which were also in the fray to acquire the start up.

The acquisition will allow Facebook to not only integrate the photo sharing services with Instagram, but will also allow firming up its presence on mobility devices. Face-book, in its IPO filing has admitted that its smart phone app’s inability to show ads or contribute any meaningful reve-nue continues to a cause of concern, and the company’s acquisition of Instagram could be a move to monetize an incred-ible driver of growth like mobile.

Linkedin’s Acquisition of Slide-share

Professional social network LinkedIn has decided to acquire presentation sharing startup SlideSharefor $118.75 million in cash and stock.The deal was made with 45 percent cash and approximately 55 per-cent stock in the transaction. Slideshare was founded in 2006 by Rashmi Sinha, Jonathan Boutelle and Amit Ranjan.

The website gets an estimated 58 million unique visitors a month,and has about 16 million registered users. SlideShare was voted amongst by the World’s Top 10 tools for education & e-learning in 2010.

LinkedIn CEO Jeff Weiner said in a state-ment “Presentations are one of the main ways in which professionals capture and share their experiences and knowledge, which in turn helps shape their profes-sional identity, These presentations also enable professionals to discover new

connections and gain the insights they need to become more productive and successful in their careers, aligning per-fectly with LinkedIn’s mission and help-ing us deliver even more value for our members. We’re very excited to welcome the SlideShare team to LinkedIn.”


39

Trends In International Business

40


41

News From Socrates: Religare Strategy Head Visits The Campus

When asked what do consulting compa-nies look for during interviews, Mr Chan-dra answered that interviewers normally look for 20% content, 40% attitude, 10-15% flexibility and 15% communication. He also mentioned that job interviews are always about how you want to por-tray yourself to the panel. It turned out to be a very good learning opportunity for the students providing them with a lot of practical knowledge about the world of strategy.” The speaker also praised IIFT students for being hardworking and grounded. He believed that IIFTians possess good managerial skills which helps them suc-ceed in varied domains.

Mr. Somesh Chandra (EVP & Head O&T Strat-egy and Shared Services, Religare Enterprises) vis-ited the campus on 9th Feb 2012 to express his

thoughts on the integral elements of an successful strategy with the students. He had some interesting observations and experiences to share from his diverse experience. He emphasized the impor-tance of Articulating a compelling strate-gy, Linking competencies to strategy and setting measurable goals while formu-lating or overhauling any strategy of any organization. He tried to explain how to implement a strategy successfully in any organisation with the help of interesting examples and real instances.

The session was followed by an interac-tion with the students where the stu-dents raised some thought provoking questions and got insightful answers from the guest. Consulting according to him was a contact based business. A good consultant takes time to hone his skills and it is definitely not an easy job.

42

StrategosVolume II Issue II

June 2012

Indian Institute of Foreign Trade IIFT BhawanB-21 Qutub Institutional Area New Delhi 110016

SocratesStrategy and Consulting Club

www.socrates-iift.comwww.dare2compete.com/blog/socrates

[email protected]@gmail.com

Documents

IIFT Strategos Vol 2 Issue 2