Such a strategic investment can be universally applied to both sales and services industry incl. IT services. Post recession spend on support operations have diminished. Even large Clients with deep pockets have resorted to cutting ends and there is a downward pressure on cost of services (read billing rates for IT service industry). Customers are no longer looking at vendors but at partners who can help them save costs at the same time be reliable and ensure no drop in quality levels by virtue of cost cuts initiatives.

Locked in cut throat competitive environment service providers are going the extra distance to satiate their existing and prospective customers; however their direction of travelling the extra distance is flawed. Speaking from a purely IT perspective, vendors are providing same with less – word innovation, synergy, customization is being replaced by implementing best of breed solutions which is not always so. Additionally, IT vendors are not dropping their margin requirements as well. This mismatch has thus resulted in mediocre solutions justifying the proverb”if you pay pennies you will get monkey”.

There is a tendency for bidders to build a lot of contingency towards risk management and pad it up with a margin which takes cares of inflation in the bid price. Clients select a vendor based on its all round ability to handle deliverables and control cost and also manage risk better. Clients do not rate vendors who pass on all the risk to them and do not mitigate risk efficiently. For a high value or for that matter even a low value contract, Customers always gets multiple bids and so they have a fair estimate of a fair price so it is very easy to customers to identify who is managing risks better. Success of project or products means more to the customer than to the vendor and thus it is imperative the Customer is eventually going to select those vendors who give them the confidence that they are doing so better than their peers.

Even the most classified solutions is getting commoditized now, and in an IT service industry their hardly is a tangible differentiator amongst competitors. So no vendors no matter what the goodwill it carries it is getting increasingly difficult to command a premium. Pricing thus needs to improve to secure more orders and companies should start concentrating more on top lines rather than bottom lines. Concentrating on top lines would mean consolidation which is a good thing esp. after a recessionary business environment. If vendor starts concentrating on bottom lines – it is a recipe for disaster at this point of time. Product companies will be sitting on inventories while service industry will be facing unproductive manpower (read unbilled service personnel). Such a scenario creates ill will situation like attritions, low worker confidence and erosion of foundation.

In a nutshell vendor companies should consider leaving the following on table for a sustained growth rather than going for a boom now bust tomorrow.

1. The extra $ towards margin
2. Commanding any premium as compared its peers
3. Complicating the solution thus exposing project to large un-mitigatable risks
4. Padding lot of contingency in cost
5. Accounting of inflation in revenue accruals

The myth at the dawn of 2011:

1. The recession is over

2. The probability of double dip is over.

3. US its banking system, its overall public policy and its economy is on firm track – more importantly the job market is hot.

4. Europe is out of woods regarding its mess in the banking sector and their will not be any sovereign collapses.

5. In US – Republicans and Democrats will live in harmony.

6. US acknowledges the strength of developing world.

7. IT market is ripe again

8. Commodity cycle is on an upside thanks to demand.

9. Obama will lose second term

10. Manmohan Singh government in India will collapse under weight of corruptions.

11. Ambani brothers are bete-noire.

12. Developing economies will call the shots at GATT/WTO.

13. Oil will continue its upward journey towards $140+

The reality at the dawn of 2011:

We are on our legs as compared to 2008-2009 but definitely not on two legs. All what is mentioned above – just think the reverse is actually true – however as always the eyes are incapacitated to see those things on what light has not fallen. It does not mean that these things do not exits – it does. Just that, it is under a thin membrane right now. All the symptoms like high inflation, unemployment, downturn in realty price, cut down of IT and similar spends, global cost cutting, thinning of commodity prices (except Oil), struggle in the US banking sector, compounding problems in EU related to health of bank and sovereign issues.

What should an investor do?

Investors had a decent run in 2010, and the dawn of 2011, promises a lot. However, on the conservative side, we recommend investors not to get carried away by the pep talks and wait for concrete results to happen. Concrete results do not just mean good quarterly numbers. It’s a collective good will which we refer over here. Speaking in an Indian context, we would like to see the inflation coming down a bit, moderate fiscal imbalance, atleast a 7.5% GDP growth, a governement which is free of the corruption mess wherein it currently finds itself, a Prime Minister who has its own rather than being compelled by the compulsion of coalition drama and an overall growth track led by construction of infrastructure and state of art knowledge facilities. Now everything becoming a reality in 2011, will be a utopia, but as long as we see that we are on track leading towards these solid foundations – we have hope. This is the hope, investors, investing in India has and as always irrespective of any short term pitfalls, equity as an investment class will beat all other class over time and that too by a wide margins. So investors, should stay invested atleast 50% of the liquid portfolio they otherwise would have not cared being idling in current/saving bank deposits.

Advise for investors.

Markets are currently trading at 5700 Nifty levels which gives it’s a fair P/E valuations. Market will have its turbulence but we expect it to scale towards 7000, not exactly touching it during the course of the year. As always, we would not time the market that it will reach 6500+ levels on a particular month or quarter – however through this post would just want to re-iterate that anybody who is in today with 50% of its planned investment amount in market will eventually make profit (decent profit) sometime during the course of this year. The remaining 50% investments can be made if market dips for any other reasons whatsover like a bad budget, an imminent threat to government stability, or macroeconomic dynamics in terms of noise from global players.

Have a rewarding investment year folks and wish all the readers a happy new year

Power is a commodity which unfortunately cannot be stored and this is a paradox which makes us believe that we are not wasting it – because if we are not using it – it anyway gets wasted in terms of the famous “I” square loss. This understanding at the least is misplaced if not totally wrong. “I” square loss is an inherent loss in the power transmission and distribution value chain and to an extent is unavoidable (oh – yes I have read about superconductors which would eliminate the same – but other than simulated lab environment, the heavy weight usage of such drivers is all but ruled out at least in the forseable future).

Concept of meaningful power usage needs to established before understanding the true worth of power conservation. Lets assume that there is only one generation facility* generating 100 MW of power and there are 100 users downstream incl. industrial, agricultural and residential outfits. Adding all demands of these 100 users will be far in excess of 100 MW and thus one keep hearing that we are a power deficient Country in the first place. Now for the distribution facility to make these 100 consumers happy, is to go for load shedding. What it will do, is to divide the distribution to say 30 odd consumers in the agricultural/industrial sector in the day and 70 odd residential consumers in the night through periodic switching on/off the supply circuit to these facilities. Because, considering the load if it even try to give to 100 consumers at the same time – the grid will collapse on “high load:”. Generally a power generation facility can take as much as 5-7% load in peaking conditions and that too for a short duration. If a generation facility is subjected to peaking load more often – we are ultimately reducing the life of the facility. This basic understanding brings us to the meaningful power usage – use only what is meaningul so that the same 100 MW can be shared with majority of its consumers at the same time without needing load shediing. It would be also a big environmental boon because load shedding is the prime need for usage of fossil fuel related DG sets for stop gap arrangement which apart from its pollution hazards is a big nuisance to society.

Big office spaces are the biggest culprits of power wastage and it stems from lack of awareness and lack of commitment ( a bit of both). Some offices are lighted like a Las Vegas Casinos for better asthetic sense while some other have absolutely no control on lightings once the offices shut shop at the end of the day. Developed countries who encourage window shopping through transparent glass panes and multistoreyed manhattan buildings all lighted up in middle of night actually defies common-sense. It is knowledge bereft of actions.

Famous 80-20 rules applies for Power usage industry. 20% of the lot consumes 80% of the power if not more and statiscally, it is proven that 99% people who are not sensitized to power consumption feel that their drop of power save will never make an ocean when they see gross wastage everywhere incl. work place. Question which needs to be asked here is that who after all work and are in control of the 20% users of 80% electricity. Well, it’s the same people. An organization is by the people and no policy (even disciplinary) can ever be put in place towards power save regimens, it is the people everywhere who will have to rise to occasion and raise voice. We operate in a democratic environment – voices will be heard if presented in the appropiate forum. Bottom line of such an approach is an understanding that we individuals has an obligation to conserve power for the next generation.

Little things like below can help a long way to save lots of energy and who cares about megawatts – we can save gigawatts.

1.    Just the way, we never forget to wash our teeth in morning. Why cannot we make it hygiene to switch off all electrical devices when we leave office and/or go for bed. Why an electric operated clock kept in a room where the person visits once/day needs to powered on all the time. Why a mosquito repellent is still on when Sun is out.

2.    At office[i]s, I have seen almost all the docking stations powered on – whole of night. It is absolutely ridiculous. It takes less than 30 seconds to switch in on – next day. In a sufficiently lighted office environment – there is no need for passage lights which ideally should be remote operated and shut off.

3.    Mixer grinders, coffee machine, toaster, portable electronic devices are all left powered on for convinience. Just that we want to save ourself for few seconds next time we need them again we remain unaware of what unfavour we are doing. If a VCR or a DVD is left powered on with the power LED ON, it is still burning those tiny microwatts even though the DVD itself is not playing.

4.    One major problem is people leaving their cell and computers on charge beyond the time (much beyond) once they are fully charged. You are not only destroying the cell – you are not doing any favours to the conservation philosphy.

5.    80% of power wastage in kitchen is attributable to fact that one is cooking something and suddenly the phone rings. For the next many minutes the person is just lost – untill there is a foul smell. Kitchen and phone is both dangerous and inconvinient. One should always practice the habbit of not operating kitchen/phone together just the way some practice driving/talking.

6.    Hey those folks – listening music! switch on those devices when you really want to, Statistically, it is proven that a person switches on music and is engaged for the first few minutes only- then he is gone. He will not be able to tell what just played. He would not be knowing whether some electrically powered device is playing in first place.

7.    Effective work. How many of us know that using an electrical device effectively can save a lot of electricity. Savings can be detrimental here. Those using electrical cooking methods – prepare all activties first before you switch on the oven. Why to burn for 2-4 minutes just to dry the water therein – dry it alternatively. Effective using the press for doing clothes is also encouraged. Do not just dump too much water on the cloth that it takes 5 minutes to just dry it up.

8.    At office, take care of the xerox machine, the fax machine and the printer as your own. As long as you treat them as personal you cannot do justice to their requirement. Remember how well you take care of your home printer/fax machine. Be kind to them at office. Power off – when you are messing with it and shoot a print only when it is in-despensable. On second thought 8 out of 10 printouts will not be desirable. No manages would like to see a 100 page presentation as long as you are able to tell him in 4 minutes the synopsis of what there is in the presentation. If you are not able to tell what is there in the presentation in 4 minutes (at max) forget about your printouts – they are anyway useless. Studying for certification/examination – best way is to make notes is the notepad. On a very long thinking – next time you want to boot the machine and send an e-greeting, think about sending a post card through the postman. No matter how fast we have grown technologically, the joy of receiving a letter from a loved one remains unparalleled- may be equivalent only to a kid watching a moving train

9.    Next time when we are organizing a cultural/social event- lets do it with sufficient lighting and not extraordinary lighting. Isn’t a dull dinner light just about ideal.Lets keep the decibel levels low – no one likes very loud music anyway (it hurts your eardrum). Diwali is also a festival of “diyas” and “candles:” – it is not for fluroscent halogen lamps all over.

10.  All those AC loving folks – it is much better healthwise to jog for heat and take a dip for cool. Next time you feel cold – take a rachet or a club with your toddler and play, you have no idea how efficient a method this would be. A toddler can make you run so much in such short time – no technology available to mankind would match that.

I can go endless writing bullet points regarding ways and means available to us to save power, pain of which I felt sitting in a distribution facility trying to manage loads from various consumers. By saving power at home and work we are doing favour to ourself because extra power saved at home will be power receipt at office and vice versa. Next time you switch off an inactive electrical/electronic device think about the distribution engineer sitting in a distribution center pulling his hairs of how to distribute the load – that distribution person can be a near/dear one. You might as well doing him a favour. Those living in big cities like Mumbai and Delhi who would say where is the power cut?– I do not see the load shedding – you are using somebody’s else’s power which tantamouts to stealing.

It’s a Megawatt Challenge – Choice is always ours – we want more of it today and none tommorrow or we want to share it between today and tommorrow.

Indian companies though much glorified then their historic days, are still a step behind their global peers in terms of taking risk and thus going for the big leap. Days of diversification and organic growths are numbered and debt after all is not a bad word. Best form of diversification can happen inorganically, in sectors you are either not present or weak. Critics will argue that it can also happen if you are already good in that particular sector – you can just explode if you take another major player within your scheme of things.

I see few opportunities which were globally missed – Lehmann Brothers is one of them. Problem was the asset it was holding which led to its bankruptcy – their was not much of an issue with the fundamentals of business. Lehmann was the fallen child in which every body else got bailouts to ease out while being the first one to report leveraged subprime exposure – Lehmann lost it out as it was the envious kid. Makes me belive everyone wanted it to fail. The opportunity, was there for Tata or Ambanis or similar to bail it out and then grow it from there. It was not a compulsion to buy – it never will be. However, these are signature moments of demostrationg rise from mediocricity. Lehmann, after all was no push over organization. It was the poster boy of global financial market. A bailout of this powerhouse by a developing/third world Country, would have been a befitting signal to the global market to look beyond US, Japan and Co. Many, Indian giants had cash at their disposal to claim this prized possession available for pennies. However, they all choosed to “err” on the safer side of risk. Any investment is a combination of risk and reward. How less we were willing to take the former resulted in this missed opportunity which would have otherwise catapulted the house taking over Lehmann and India at large on a different orbit.

Satyam, fiasco was other such clandestine misadventure. Federal interventions are bad – esp. if it challenges the basic foundation of corporate locus standi. Satyam, was a case in which the father disowned his son. Some 7000 crores INR, never existed but was previously claimed. The problem here was was that nobody believed 7000 crore and nobody was sure what the extent of actual damage was- the opportunity was lost as India started its pathetic slow investigation into the scam and setting up the book right and restating the accounts. The process was so slow, that even at dawn of ’11 we are still not sure and that has resulted in an employee/customer exodus out of Satyam and market giving it a surreal valuation on the downside. The extent of damage which this slow investigation has done is far greater than the extent of actual damage. For a flagship, IT company like Satyam of the hay days – it was easy to get the 7000 Crore back in a few quarters, but we allowed it to decay and lose even more. Everybody wanted to buy Satyam cheap- Mahindra, eventually got it not because it deserved it but because no body was otherwise interested.The opportunity was lost, when some aggressive house failed to remember the goods of Satyam, and not stepped to fill in its moment of despair- a house of repute taking over Satyam at face value and taking circumstances head on would not have recovered the 7000 crore back, but atleast would have limited the loss to 7000 only. Today, Satyam is still looking at an uncertain future and no body knows what swap ratio will eventually decide the fate of Satyam shareholders once it eventually merges with Mahindra. Overall, handling of Satyam by authorities also casted a shadow on India.inc, who is very eager to be counted amongst G5 – These telling incidents were the opportunity lost by Country, at large.

No one knows how soon another opportunity will knock and whether their would be any takers.

PMBOK, educates to run a project no matter what the size is a firm in itself. In SAP implementation terminologies it helps make a project at a “Company code” level where each project by virtue of its unique status, is a balance sheet and P&L in itself. Each project runs like an independent corporate. Here, lies a miss – Project as an independent structure by itself wherein a project team and onwards processes are so uniquely determined, it fails to capture the advantages of synergies. Lots of time and effort is lost in preparing repetitive documentation which are needed as per PMBOK methodology and planning window is very expansive. A project manager virtually starts from scratch on individual blueprints. On top of this there is a review and approval process which encompass these documentation deligue.

Need of the hour is for each company to develop, prototypes – not just template. PMI on its part needs to develop a best practice prototype which should be available to users for a licencing fee. What actually, is a prototype? Lets take it up with a case study:

Case Study: 250 MW Green Field Combined Cycle Gas Power Project.

PMI with its best practice and inputs from corporate like GE, Siemens, ALSTOM, BHEL etc who have proven track records towards successful development of such a project over decades, should sit together and make a blue print. Let this blue print package constitute of all the documents which are required from a project management prospective towards delivering such a project which takes anywher between 18-24 months. The standard document will include not just templates but actual data and these documents should be developed in such a way that, subsequent user just changes the master data, and the document is created in current context. Such a document, will have a shorter lead time in terms of development, review and approval and it will be full proof – devoid of manual errors. Risk, costs, procurement, revenue, schedule sheets – yes, everything can be standardised from top to bottom. Such a blueprint would be customizable, to include very specific project doctorines and regimens. Once such blueprints are created they should be patented under owners and become PMI repositories. Such repositories then becomes a commodity to be used, thereby cutting down significant on delivery lead times and when we are talking about a mamoth project – a day saved can mean an extra day of 250 MW generation. Imagine the savings – and calculate the numbers.

Similar case studies from other types of project, from a building construction, bridge construction, IT implementation project, an M&A acquisition and a retail set up can be standardised and stockpiled. PMI has to expand to include these inovations in order to become an engine of standardisation. Time is ripe to standardised even unique deliverables.

Customers, need to understand that all savings cannot be passed onto them on day 1 and same hold good for contractors. Such a blueprint prototype development will be a high cost/highly skilled project in first place and returns will be sequential to time. PMI, today has a junta of highly experienced and talented members and it is backed up by almost all the leading companies who value its knowledge and methodologies. Need of the hour to start pilot projects through work shops at various places and make a reposititory which is “reused” for maximum savings in future.

Time has come for PMI to expand behind text book teaching and become a “new product development”  (NPD) company in itself – There can be 1000’s of projects and each of these projects is an IP commodity- let above case study be ran for a North American, Europe, Asian, African and Australian geography independenly and see how many valuable assets can be developed.

(As applicable for EPC Contractors and Subcontractors in Power Projects)

The Director General of Foreign Trade (DGFT) is the competent authority to issue such a certificate which is aimed at making the domestic bidder competitive. A PAC allows a domestic importer to procure goods through imports at concessional rates. General applications and requirements are:

A. for Import of Capital Goods and Spares directly by Project Authority.

Application along with list of items of import with their brief technical specification, quantity and CIF value of individual items (individual items breakup is necessary and lump sum price is not allowed).Copy of Industrial Approval accompanied by copy of Performa Invoices for items of import along with a brief Technical justification is required in the application

 B. for Import of Raw Material, Components and Spares by indigenous vendors on whom Orders placed by Project Authority for supply of Capital Goods.

Application along with lists of items of import with their brief technical specification, quantity and CIF value of individual items and a copy of confirmed order placed by Project Authority on Vendor. Copy of Industrial Approval for the Project along with copy of Industrial Approval obtained by the vendor for the manufacture of Capital goods under reference is also a pre-requisite. Other than this; Essentiality Certificate from Project Authority containing brief details of project and order placed on vendor and a declaration to the effect that concessional duty benefits have been passed on to them by the vendor and Declaration from vendor to the effect that concessional duty benefits accrued will be passed on to Project Authority is also required. Standard requirement of a copy of Performa invoice for the items proposed for import and brief technical justification for the items applied for import is a must. In respect of supply of capital goods the supplier shall produce a certificate from the respective Assistant Commissioner of Customs and Central Excise having jurisdiction over the factory as evidence of having supplied/received the manufactured capital goods and shall produce documentary evidence substantiating the realization of proceeds from the EPCG license holder through the normal banking channel. The supply of capital goods alone to the power projects shall be entitled for deemed export benefits provided the same is certified by the Central Electricity Authority and the International Competitive Bidding procedures have been followed for supply of such capital goods to the power projects. The domestic supplier shall be eligible for the benefits. 

Supplies made by an Indian sub-contractor of an Indian or foreign main contractor, shall also be eligible for deemed export benefits provided the name of the sub- contractor is indicated in the contract, and payment certificate is issued by the Project Authority in the name of the sub-contractor in the appropriate form. In respect of supplies made by sub-contractor to the main contract, the main contractor may make payment to the sub-contractor and issue payment certificate. In such cases, main contractor shall be eligible for deemed exports benefits only to the extent of goods manufactured and supplied by him as indicated in the main contract and the project authority certificate. Similarly, the deemed exports benefits to the sub-contractor would be available to the extent of goods that are manufactured and supplied by him for the value as indicated in hand book of DGFT.

While entertaining the claim of sub-contractor, the sub-contractor would be required to submit a copy of payment certificate issued by project authority to the main contractor for entire supplies as well as payment certified from the main contractor indicating receipt of payment from main contractor to the extent supplies affected by sub-contractor through banking channel, in addition to other prescribed documents in accordance with the provisions of the Policy, deemed exporters shall be entitled to claim Special Import Licence at the rate of 6% of FOR value (excluding all taxes and levies) in accordance with the procedure laid. No Excise duty and sales tax is applicable on such goods which are imported under PAC.

Generations have thrived on this great art and some have mastered more than the others. Today, the success in this art is a guarantee to power and wealth. No Counrty is bereft of talent pool in this subject – just that few are better (read better reported) than the rest. Corruption of similar maginitude is prevalent everywhere. If you happen to read too much of a news related to corruption from a particular region- bravado to the press in that region and also to those practicing this art in that region telling them they are “novices” right now and needs to ramp up their skills. They are pretty much high school standards while their other peers might have already secured Doctorates and masters – at the least a bachelors.

Lets focus to Asia, and India in particular. Everyone in an enviable position of power and influence is qualified corrupt. Few are PHD holders while everyone else is growing up the ladder. Any opprotunity they get to empty the government (public) coffers have thoroughly made it count. Even a few month in office (Chandrasekhar Govt formed with 36 old MPs)

 is good enough to make savings for generations.Offlate a series of scams ranging from IPL Modi, Commonwealth Kalmadi, to Adarsh Chavan to Telecom Raja et.al have given these folks their share of fame. In past Fodder Laloo scam was made to look like a huge one – considering what is happening offlate, fodder scam is not more than a pickpocket. That Laloo had to lose Chief Ministership and spent time in jail for a pickpocket makes him look like a novice still in kindergarten school of this art. Invariably most of the policians and bureaurcrat holds realty and other assets to the tune of million of dollars and many more have swiss accounts. Hats off to these folks – they have mustered this art well. They will continue to walk free and enjoy life kingsize. CBI, CVC and justice system of India are invigilators of this art exam course and they have awared diplomas and degrees to these otherwise history sheaters – one reason because they themseleves are in the process of learning this education. Author, just wants to ask one question – why haven’t been a single meaningful conviction to a top honcho. A system cannot be so clean that every one chargesheeted in past came out clean after a bail. Author believes Asatya Raju will eventually be proved innocent. As a food for thought to its readers author wants a proper justification as to why – An adarsh apartment complex was plannned by someone in Colaba, (South Mumbai) for Kargil war heroes (widows). It is too good to be true. War widows struggle to get a mere 2000 pension once their bread earner lose life saving this country – out of all the available places in India, why Colaba? And what those widows will get living beside the Ambanis and whoes who of Indian corporate and politics in hustle bustle of South Mumbai – they would be better off in peaceful countryside. A clear cut case of a bigger corruption is their in which the real motive was to get the army land clearance for comemrical/residential facilities which otherwise would have never happened. The motive was to secure flat for the rich and mighty on pretext of a noble cause.

Destination America, US has punished few like Enron and Globalcomm leaders but the biggest economy of planet cannot just have these few corrupts individuals. It is better than a utopian thought at best. So much money is thrown in election (even primary) campaigns that it is hard to believe that the one who is spending is not doing for any personal motives. Corruption has one name but many forms – in US it is more likely that the hidden forms are more prevalent than those blatant daylight robbery type. Insurance and banking industry are skewed and the legal system is absolutely ridiculous. A day light road accident by virtue of an attorney involvement gets reduced to a non-moving violation.No one wants to punish the guilty – they just want the money!!!!!!!!! An insider information from the healthcare system states that Doctors recommend unwanted tests on a patient through multiple other healthcare shops (for pathological/electrical test) because of a strong network of sharing the revenues. In a starkling revealation it also was quite a thing to note that eventual difference in payments between a gold insurance covered woman and an un-insured woman in terms of her labor/birth of child was almost comparable (both delivery procedure was C with no other complications and patient in both case discharged after 72 hours). The other part was that the gold insurance woman’s Insurance provider had to pay up around $40k. These are hard facts based on evidence in real life – so please do not say that developed countries are saints. No one is – the system has reached a state of equilibrium is what we otherwise chose to call.

China- well no body really knows what is going on here, but democratic regime needs to be restored first to have better and uncontroled reporting. Other parts of world from Europe to Africa, have various names for this institution of art called corruption – it is present in various forms- but sure it is.

As it is said, an individual is innocent untill proven guilty and as this piece of write-up goes to press, millions of cases against the rich are mighly are subjudice (incl, the names of individuals who figures in this writeup). They are all innocent – without any doubt. Legal system is doing its work – it will continue to……..while we are thinking of recommending a “noble prize” for Corruption.

Caveat: You are accountable for corruption even when you behave oblivion to it or chose to look other side.

Statutory warning: Corruption is a disgusting sin and a punishable action in all courts of law, and author portrayal of it as an art has an intention towards pun. It is something which needs to be abhored and punished.

 America, for long has preached and practice democratic norms based on freedom and liberty. Modern day America finds itself stuck between its ideologies and alternatives. The Country is just isn’t flexible to the changed global equations. Once it was a bi-polar world, then for a short time after the demise of Soviet Union it kind of became a uni-polar world – now it is more of a flat world. Lot of forces have assumed significance and no force is stronger than the other. America still is the strongest of all, but by no means indispensable – either economically or polically then its peers. America today needs others just the way others needs a strong America. Here lie the paradox – America isn’t really very strong fundamentally now. Militarily it still is. Economically, it is questionable.

Reasons for America’s current state of affairs is attributable to its lack of flexibility and adaptable to change. As China spread its wings, America still stuck to its import (of consumer goods) heavy policy. Manufacturing boomed elsewhere – whereas it lagged considerably in US – leading to widening of trade deficit. Today’s America CAD (Current account deficit) has risen to “proportions” which would have collapsed any other global economy but America. America over dependency on exporting fighter jets and militarily goods are not a sought after commodities and the premium from these goods have just vanished and there is a global cut on defense budgets. Many Countries (even warring neighbours) have for decades learnt to live in a state of suspended animations wherein there are discmofort signs but no one is too eager to pull the trigger on the other anytime soon. Demand thus for American products have fallen considerably.

Global economy have added outsourcing to their product portfoli – an industry which has siphoned a huge American jobs overseas. This is not because the global players have stole any job – prima facie reason is that global players have provided more value for the buck. Movement of technology today has no barriers, America because of its reluctance to change, has actually aided the global economy – because American wage is still way too high. It actually supports an American standard of living which by and large is non-compromisable. Owning multiple cars in a household is a necessity and not a luxury here and these are the small but meanigful change which needs to happen here to be more competitive. Somethings needs to be curtailed to encourage an American to accept lesser paid jobs for similar skills – America has no choice but to travel this route to be competitive. It is a tough ask to change the way of living – but for a sustained growth of America, sacrifices have to be made by current generations.

Insurance is one sick subject in America. Virtually everything from a freak electronic gadget to a potential auto accident is insured. Lot of money out of almost all household in America is payable to host of insurance providers and insurance payments are arguably the biggest expense of any American household. It is high time, people learn to live with calculated risks – it is not imperative to ensure every damm thing of your house, neither it is in your long term best insurance to budget for a car accident every year or a parking ticket or a minor violation. Practice like car pools and safe driving and drive below speed limits has to be resorted to. If extra safety of driving at posted limits comes with savings of $ in terms of avoiding a speeding ticket – then why not? Laptops and digicams are getting ensured – there is no reason why they should be ensured. Its not austerity which is being preached but misuse of hard earned money. House and auto are the two things which must be ensured apart from health and everything else can wait.  

Health insurance cost has to come down. A tap on legal suits against healthcare industry in general and medical practictioner in particular has to be sorted to. This alone is the single largest reason for high healthcare cost in the Country leading to extraordinary medical insurance premiums.

Cost of higher education has to come down. It will take out bunch of young population who begin their first career job laden with education debt. Only if cost of higher education is cheap can the service provided by these scholoars graduating from these schools be cheaper. It’s a way to control inflation in education. Not all inflations are bad – but an inflation which does not aid growth is definetely bad.

No one is taking jobs out of America, America is giving it to others. Make most of the stuff which you can at home. Best entrepreneurs are in America where there is no reason why industrialisation in small scale industries cannot grow in each and every corner of vast geographical borders and not just restricted to east and west coast. Settlement this way will have a better spread across America reducing real estate prices in inflated geographical location which is the reason for expensive deals in these regions.

American money needs to stay in America and stimulate growth. Banking reform must happen. FII money borrows money at low interest rates in America and move it to developing economies for better yield. It makes economic sense to do this – but a Country cannot be allowed to suffer on account of that – America has indeed suffered from flight of capital out of this Country.

America needs to learn to conserve energy – it wastes precious oils like water. Electricity waste is also pervasive. All these savings will actually bring the cost of living in this country. Only when this happens – America can be competitive to global players in terms of wages.

Visa rules are already tight for this Country. There is no reasons to make it tighter – however let the visa have a better spread across Industries and let more professionals who can help grow America other than Software professional also come. Today vast quota of visa are exhausted by software professional. It is not that Software professional do not add value – they do. However, America needs more professional with an SSI mindset to come –artisans and craftsman.  America, can however look towards changing its citizenship rules. It should come with proven record and commitment of individual seeking one – not just the convinience of those seeking for his/her own personal gains.

Last but not the least – If cutting down on expenses is the buzz, bring the ticket prices down for various ballparks and there is no need to pay millions and trillions to support single player. They deserve because they are entertainers but let clubs like yankees have a salary “cap”. It looks ugly and has the potential to make league “uncompetitive”.

America the way it lives right now – It appears there is no alternatives. Some of the alternatives are narrated above, which at best are indicative and neither exhaustive nor inclusive. America can continue to be at centerstage if it adapts to the changing world rather than sit on its laurel past.

Festival seasons follow immediately after monsoon. For an arid country like India, monsoon means more than rainfall. It means a choice between survival and extinction for few unprivileged in rural area while it becomes a reason for food inflation to jack up or remain stable. In India, even monsoon needs a precision of a compass, a drop less and we are staring at drought like situation and a drop more and we confront flood. Under these uncertaininties the stock market is generally watchful during the months of July and August. It wants to see the extent of drops, measure of shortage or excess and then once all is said and done it takes a decisive step.

Historically, monsoons are 80-110% normal in India, and that is kind of accounted for in stock and commodity prices. The euphoria is dependent on whether it is in range of +/-5% to 100 marks or is in 80-90 range. These percentage points would be of little consequence for an exam marks but for monsoon it can be detrimental. FMCG stocks tends to react positively for a good monsoon – although there is no worthwhile reason stating why they should or shouldn’t react – but it has more to do with seasonality observed by charters over decades rather than anything simply economics.

Pharma stocks esp. those related to water borne diseases rise during monsoon esp. if there are flood situations and cholera/dengue and such diseases take big proportions. Navratri seasons leading upto Diwali is a chase of auto, realty and Gold. Retail is generally found waiting for these auspicious times to buy these precious assets ignoring the all time high prices in these asset class during these time – but they liquidity always has the final say in demand and supply rather than rationale.

Good weather in northern hemisphere coincides with the festival season and in general tourism, airline and hotel industry are hot. Same goes for retail industry esp. the apparel and electronic goods version of the same. These sectoral movement gives us the semblance of seen that – been there syndrome. Markets hit all time year highs generally during these times and yet the buyers queue up at the slightest opportunities.

Typically this year in an Indian context monsoon has been good barring the states of Bihar/Jharkhand and few others. It has been too much in states like Haryana and Western UP incl. Delhi. Delhi received flood warnings and semi flood like situation for close to 2-3 weeks. As always Navratri saw Gold making all time highs (>20k per 10grams) and auto giants Maruti and similar reporting all time high sales volume. Generally these are good times for the market and IPO storyline Coal India leveraged it to stack up a 24x subscription.

Let’s say – the Hype is built.

Here lies the catch – there is just too much of FII buying over the last 2-3 months and there is hardly any exception of a trading day when FII have been sellers – DII though have been sellers on each of these days when FIIs have been buying. Here lies the paradox – why is FII buying aggressively while DII is selling. Reason is simple – FII pack is getting easy cash overseas at 1-3% APR and it is huge potential for them to invest in a Country destined for a GDP growth in excess of 7%. DII on the other hand are close to realty and believe that India is getting overheated. They want to hold cash should there is a flight of capital in case FII rushes back or redeems its profit. They want to go fishing should the water level falls below threshold.

Q3 is generally a realty check after the euphoria has died down and slowdown because of bad weather, budget freeze on account of year ending in US takes center stage and generally markets goes into a tailspin during these times. Market will always be smart and it will not give everyone their expectations in terms of rewards – market will shake them up before taking any definitive directions.

Advice for readers is simple – we are at slightly stretched valuations on Nifty stocks though the midcaps and small caps have not really participated but then these stretched valuations will eventually get a shake up and investors will get a wake up call. It is better to exit and hold in cash. Leave the compulsion of an opportunity to make few 100 bucks in case markets rise by another 100-200 points on the Nifty. The reward amplitude has shrunk appreciably and a possible bearing hug looms large –it’s no point thinking about a potential small gain for a moderate upside left in market but for every rise the chance of a deeper cut is getting amplified.

FII are known to exit without giving notice and investors are advised to exercise caution. Exit after reading this post rather than holding on till the time FII press the mayhem button. There will be not much to exit now.

If readers wants a number from me – then I am looking at an at least 500 points cut in Nifty from existing levels before we see 2011.

Marketing management has grown from its traditional theories. Kotler, still rules and has accomodated all business transformations with regards growth in e-marketplace and online shopping. Products ranging from safety pins to a luxury car and host of service is available for online shopping and all the retailers like walmart, kohls. Macys,. JCPenny, kmart, target etc have a 100% capable retail store and a 100% capable online store.

Advertising has changed – from billboards to television and print media, the message by promters has reached to laptops and palmtops and the ipads of the gen-next. Not that the ancient versions have gone into oblivion but they have been supplemented. Companies have realized that it is not a huge return for their $ spent if they keep carpeting the television between popular soap operas in prime time. We live an era of remote control and channel surf where no one actually is looking in between the program intervals.

The best method retailers have adopted is to bring the customer to store is by shooting retail coupons into the mail box of their customers and offering promotions which are wrapped in such a way that it is very difficult to refuse. Customers are getting enrolled in these promotions by virtue of a free purchase as well in the first instant. $10 gift card for every $50 purchase by Kohls is very popular in America. Everyone wants to buy clothes for family ad $50 is kind of base expenditure if one is looking for a one purchase for a 3 member family. Now because of the $10 tag – people go to Kohls and not anywhere else and then in-order to redeem the $10 they visit again and they end up buying some more – it is a recurring compulsion which makes you buy things which you can ideally live without.

Demand v/s Supply – is a model of economics which everyone knows – but what to do in absence of demand. Retailers are wise – they generate demand by bringing you to the store first – they then play with your resilience to refuse a great purchase at the store – same is valid for retail sites. If people come – he/she is more likely to buy one. Airline industry offers a 25% base price off scheme. There is a buy 1- get 1 free offer. By this virtue airline wants you to travel again. They might end up making some money in the extra luggage or otherwise next time and do not forget – airlines do run empty seats at times. Whats harm in patronising a frequent flyer to your airline by giving him such freebies – he will actually be sitting on one of the seats which otherwise would have gone empty. Customer loyalty and retention is key – as the age old mantra say, it is 10 times more difficult to get a new customer then retain an existing –why not? Do the later. Invest less in first.

Fan following is a big thing. Some celebrity can take a fortune to do an advertisement which lead to a mark up in the product price – making it niche. People today wants niche but at a lesser cost. If you wont give it – your competitor will give it. Under this Climate, recent statistics have revealed that chase for celebrity has receded and the quantun of their check is also cut down. There are a few exceptions – but then they are for positioning vis-à-vis the competitor rather than for want of sale opportunities. Eg,.Coke and Pepsi will both sell at similar volume but if Coke has hired a celebrity for an ad campaign the other is constraint to accommodate the bitter rival of the hired ceberity as their mascot – this is the strategy to keep it on same level playing ground. The goodwill part of it – not just for the sales.

Service marketing now has finally evolved. Yes – it has. Lawyers, Doctors, Consultants, architecture, designers, programmer everyone is availble online competiting for space. Even organized sector in form of real estate agents, passport/visa consultants, tax consultants can be googed and dialed in matter of seconds. Marketing and advertising cannot be done for these services based on Keynesian model. It is beyond – STP (segmentation, target and positoning). STP has expanded – it has accomodated customizing. Today service providers are willing to customize an engineer to order based on customer preferences. A customer job is to just give specifications – service will be done just like that. Service, marketing also has a distict factor – it has the best quality of retention. A person who hired a tax consultant to do his gigantum tax calculation in US, if 90%+ probably to go again to the same consultant next year and along with him, bring few more through VOC (voice of customer). A word of advise is given to all those in service marketing – “Do whatever you can – to get your first customer – it will be a “self sustained” robot henceforth. Take it or leave this suggestion – but the caveat is “leave at your own peril”.

Advsertising is prevalent – no one today is untouched. A person who speaks highly about a service he took or a product he bought is as good as an advertiser as a IIM grad with advertising major. Television channels have no way out but chase TRP’s. No TRP’s – no gain. What is the use of broadcasting a program if no one watches it. TV channels are cutting ends on cost of production by preparing programs and operas with lesser known faces and are spending less on news researc. However, they are spending on methods to gain TRPs. In India for instance a launch of a soap opera or a realty program is invariable preceded by a controvery created around the cast or crew or the contents of program itself. This brings audience to the channel. There are 1000 of channels these days and don’t tell me that mediastar do not have to resort to all these to bring viewers in front of their channels. It’s the same “airline” concept “What is the use of flying an empty seat – let it be given free to a loyal customer. He is sitting free but through VOC he has already brough few who are occupying free seats – and not to forget, next time he will also pay – so’ its actually buy-1 get 1 free – thereby increasing the chain.

You have a buck in your hand – hold it tight. There are host of ways, it is being chased upon. Your gradfather will call it stealing – We call it “Advertising”.