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http://www.asianews.ithttp://www.abb.com/cawp/seitp202/d3bd202ca3212cd8482577830024de3f.aspx

http://business-standard.com/india/story_listing.php?id=95business atandard the startegistTo stretch or not to stretch

The turmoil at Kingfisher Airlines brings us to a more fundamental question: How far can youstretch a brand before you actually start hurting it?.

Ask any marketing expert and he will say building a big,recognisable brand is simply painstaking; so once a company hitsthe elusive jackpot, it is only natural to stretch it to otherproducts/categories to reap, as they say, a second dividend from

their initial investment. But how do you cope with a situation whena much hyped extension doesnt live up to expectations? Especially

so if it is a high-profile brand like Kingfisher?

The turmoil in Kingfisher Airlines has left many wondering if the good times are over for thebrand. With the airlines business in the doldrums, will the bread and butter alcohol brand beaffected in any way?

There are different views on how the failure in the airlines business will affect the mother brand.Some experts are of the opinion that the troubles facing the airline will have no rub-off effect onthe UB Group. I think the companys valuation is not affected by what is happening to theairline, says an expert who wishes to stay anonymous. It is unlikely that the beer business willbe affected in any way as the product is in a completely different area of business. Beer also hasa strong heritage and people can differentiate between the two businesses, notes MadhukarSabnavis, country head (discovery and planning), Ogilvy & Mather.

Thus, while it may have a negative impact on the discerning investor, a lay consumer may wellbe aloof. Also, luckily for Kingfisher, being an addictive category, beer sales appear somewhatinsulated from the wide swinging cycles of some other categories. Thus if something happenedto the beer business, the airline would be impacted, but not vice versa, quips Harish Bijoor,CEO, Harish Bijoor Consults.

In fact, experts believe that the problems facing Kingfisher have brought to the limelight thepressures on the airline sector as a whole. Where have all the low-cost flights disappeared?
http://www.asianews.it/http://www.asianews.it/

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There are the so-called no-frills carriers but flight tickets are not becoming any cheaper, says anexpert. Adds Draftfcb+Ulka, executive director and CEO, MG Parameswaran, The airline hasdone the beer business some good, and allowed the brand to gain visibility in a market wherealcohol advertising is not permitted. It might have a marginal impact on the mother brand, butthis is insignificant in the larger scheme of things.

Some others are not as optimistic. If the problems last longer than expected, it will, willy-nillyaffect the equity of the mother brand as well, they say. Indeed, the Kingfisher debate brings us toa more fundamental question: how to manage brand extensions, especially when a slowingeconomy is leading marketing managers to focus on cost-savings to increase competitiveness?How far can you stretch a brand before you actually start hurting it?

The reasons for extending a brand are obvious. Many companies want to piggyback on theexisting equity of a brand to gain credibility. The effects of economies of scale in loweringcommunication costs make this option particularly attractive. The belief is that several productswill help promote each other under the same brand name, and thus result in incremental profits.For many brand managers, extending a brand is often a way to scout for additional revenues anda quick way to add to the bottom line. Diversified groups such as the Tata Group (from salt to

automobiles) and Godrej (from locks to appliances) have shown how to leverage the corporatebrand to enter new and even unrelated categories.

Globally, there are many examples of successful of brand extensions. Imagine a supermarketchain like Tesco becoming a financial services provider, or the Caterpillar brand extending itselffrom bulldozers to footwear. Compared to the West, Indian brands cottoned on to the concept ofbrand extension much later. To a large extent, extensions in India have been dominated by lineextensions, that is, extending the brand into new flavours, forms, colour or package sizes. This isa relatively low risk way to increase the potential for sales by increasing the variety of options,says an expert.

That said, some like Bijoor believe that brand extensions in general are not the best way tointroduce new products. More often than not, the equity of the core product gets affected, he

says. Marketers are often short sighted and tend to look only at the financial leverage of anextension. My belief is that in the long term any extension takes away from the core brandproposition.

So what should a company do to increase the odds of success? It is important for a brand tounderstand its core values, which arent necessarily tied down by physical features and benefits,says Arvind Mohan, founder of culture and branding firm Religious. Companies often restricttheir values and philosophy to a particular category and find it difficult to extend beyond that.

One reason why companies like LOreal have adopted a sub-brand strategy which makes it easierto extend the brands without creating confusion. LOreal for instance has sub-brands for all itsGarnier brands: Lite for fairness, Fructis for shampoo and Color Naturals for hair colour.However, even while launching brand extensions, the company is careful. For example, we will

not introduce make-up under Garnier as it is a mass brand whereas make-up as a category ismore exclusive, says Satyaki Ghosh, director (consumer products), LOreal India. Pricing ofcourse is a consideration as a mass brand may not find consumer acceptance in a premiumextension.

It is vital that the core brand proposition becomes a competitive advantage in the new category.Keeping the core values intact, Hindustan Unilevers Dove has been able to extend into severalnew categories from shampoos to deodorants that is, if one were to discount the misfired 1965Dove dishwashing liquid meant to compete with Palmolive. As Mohan of Religious explains, the

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core of the brand is moisturising and classic beauty and its inherent DNA can be stretchedacross an entire gamut of personal care products.

Likewise, when detergent brand Nirma extended to soap, it stuck to its core proposition valuefor money. Thus Nirma bath and Nirma beauty soap were priced a notch lower than its biggestcompetitors, a reason for their big success. A similar view is echoed by Daburs marketing head

(skin care) Sanjay Singhal. When Dabur decided to extend the Gulabari rose water brand, coldcream and lotion appeared like a natural fit to the core proposition of goodness of rose. It isimportant that the brand promise supports the benefit in the category it is extending to, reasonsSinghal.

Indeed, consumers get rattled when they encounter some sort of dissonance. Take Lifebuoysfirst attempt at launching a talcum power under the same brand. The product was positioned onthe family health platform in clear dissonance with the core proposition of the talcum powdercategory beauty. The variant was quietly pulled off the shop shelves and last year, thecompany relaunched it as a prickly heat powder, which resonates better with the core values thatLifebuoy represents.

Remember do not believe the brand pull will work by itself as you extend into the new category.

And this is where the problem lies, explains Parameswaran. Companies need to invest moneyinto an extension as well, and not assume that consumers will pick up the product by itself.Again look at Dove for proof extension into shampoos has worked well as the company hasinvested relentlessly into the extension. It is wise for companies not to assume that the targetaudience for an extension will be the same as the core product. This is particularly true in fast-moving consumer goods. For example, if CloseUp decides to extend beyond toothpaste to soap,it has to keep in mind that the same consumer who bought CloseUp toothpaste might notnecessarily buy the soap.

Often the success or failure of a brand extension is driven by a category issue, notes Sabnavis.For example, the most recent extension of Horlicks into oats might appear like a logical fit. Butmarketers must remember not to have huge expectations as the category itself is relatively small.

It takes time to nurture a category and it will be wrong to write off an extension going by earlynumbers. Failure of a brand extension can often be a business issue, rather than a brand issue,points out Sabnavis. For instance, the failure of Kingfisher is nothing to do with the brand perse but with the business model and many other factors, says Sabnavis. Devanathan of Dentsuagrees. That Kingfisher Airlines is in trouble does not mean the brand Kingfisher is in troubleor that the extension itself was doomed. This just says it failed to adapt to certain economiccircumstances.

So there you have it. There is no one-best-way to go about brand extension like there are notime-tested secrets for capturing the consumers heart. Given that reasons for failure are oftenboth simple and very apparent especially with hindsight-brand managers can reduce thepossibility of failure leveraging prior experience, forethought and with effective planning.

KIT: Ice-Cream Market in IndiaStrategic tools for the practising managerTechnopak Advisors / New Delh Jan 09, 2012, 00:01 IST

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The ice-cream and frozen dessert market in India is estimated at approximately $450 million in2009-10. Growing at approximately 12-15 per cent, it is expected to cross $900 million by 2014-15. The branded market is estimated at approximately $200 million and is growing at 20-25 per

cent.North and west are the highest consumption centres accounting for close to 70 per cent of themarket.

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Increasing incomes, a burgeoning middle class, buoyant economy and widening of outlookcontributes in making ice-cream more affordable and acceptable among Indian masses.

The key trends are:

Increasing presence of international brands driving consumption in metros and mini-metros.

Availability of multiple options to consumers from ice-creams to traditional kulfis to newforms such as gelatos and flavoured yoghurts.

Growing trend of going out to eat ice-cream.

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With increasing health consciousness especially among young urban population, higher focuson fat free, low sugar and pro-biotic variants.

Reducing impact of seasonality on consumption.

Many players ready to increase presence with aggressive expansion plans.

Growing focus on smaller and profitable formats.

With a per capita consumption of only 0.30 litres in a year, ice cream in India has currently notrealised its full potential.

A fresh recipeSaumya Prakash / New Delhi Jan 02, 2012, 00:59 IST

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T he new ad for Britannia Rusk by Grey India conveys a simple story of a family comingtogether over tea and a packet of crunchy and juicy Britannia Rusks, making it enjoyable andmemorable. The brand promise is signed off with Britannia Rusk Jahaan, Family wahaan.

This is the first time that Britannia is advertising this product, rusks, and the ad happens to be setin space. The minute the protagonist takes a bite of the crunchy rusk (in space), his dad, uponhearing the sound (from earth) barges into the space craft, followed by the mother, the

grandmother and finally the maid.

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We wanted to capture a real family moment, with its inherent humour and warmth, say VishnuSrivatsav and Sham Ramachandran, executive creative directors, Grey Bangalore. Its a typicalIndian scene where a guy is visited by his family. It could have been in another city, but wewanted to exaggerate the promise that Britannia Rusk brings the family together. So we set it inspace. Even with the production, we didnt want to get too carried away it was just a settingfor a real family moment.

With its new rusk, the challenge for Britannia is to break into a category that is highlyunorganised. The market is led by a variety of local brands and bakeries that offer little in termsof differentiation or innovation. According to estimates the rusk market in India stands at Rs 900

crore, and as much as 60 per cent of it is unorganised. Britannia has a 15 per cent share of therusk market.

Anuradha Narasimhan, category director, Britannia Industries, says since the rusk category isnascent it is important for the company to stimulate both trials and regular consumption. Wehad to bring alive the relevance of the consumption occasion and we chose to do this in anextremely evocative manner while staying true to warm and convivial family tea-times. Moreimportantly, families today need a bonding experience everyday moments where they cometogether to share and enjoy intimate and personal moments of joy. These are what we call familypajama moments, Narasimhan adds.

For the agency there were two challenged, says Malvika Mehra, SVP and joint national creativedirector, Grey India. The first was to do a new story around tea time snacking. The second was

to make the spacecraft look real. Honestly, a lot of brands are trying to appropriate that space. Ithink we managed to hit the right note with Britannia Rusks jahan, family wahan both in termsof messaging and execution. No pun intended, but setting tea time in space, lifted the idea evenfurther, she says.

Britannia is perhaps the first marketer to advertise its rusk brand on national television. Ourinvestment in the campaign is large and comparable with what we invest in any of our largebrands like Tiger or Mariegold, says Narasimhan.

Bubbaloo grows up

Viveat Susan Pinto / Mumbai Jan 16, 2012, 00:10 IST

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The bubble gum from Cadbury-Kraft Foods is targeting young adults as opposed to pre-teens.

The ad is bang on. The first visual shows a rather chubby adolescent, the cynosure of the eyes ofhis neighbourhood aunts. Tired of being the plump little boy, he chews Bubbaloo gum in thehope of drawing the attention of the girls. He succeeds. The girls are drawn to him.

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- Playing the right card

- MNCs keep the faith while

India Inc frets

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The new Face Ka Gym commercial for Bubbaloo bubble gum is a quirky take on the

consumption of gum, but it also summarises what Cadbury-Kraft, the maker of the

product, is attempting to do. Since 2010, the foods major has been targeting young

adults in a bid to move up the consumption curve.

Traditionally bubble gum has been identified with children. It is also the larger of the segmentswithin the Rs 1,200-crore overall gum market, occupying 64 per cent of the space. The othersegments include chewing gum, both functional and sugarised, and sugar-free gum. Their sharesare 8 per cent (chewing gum functional), 27 per cent (chewing gum sugarised) and one per cent(sugar-free gum) respectively.

But this wasnt how the market was shaped six years ago. Bubble gum in 2005-06 constituted 80per cent of the overall gum market, with the balance 20 per cent being chewing gum.

In the last few years, the chewing gum category has grown from 20 per cent to 35 per cent (bothfunctional and sugarised put together), which according to market experts is because gumconsumption is no more perceived as being a kid's pastime alone. It is slowly but steadilyevolving into an adult category.

The result is that not only the chewing gum players but also the bubble gum manufacturers arespeaking to adults.

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Narayan Sundararaman, director, powdered beverages, gum and candy, Cadbury-Kraft Foods,says We found that Bubbaloo was liked by young adults as much as by pre-teens. We thoughtthis could be leveraged.

Even a competitor like Big Babol from Perfetti Van Melle has been targeting both kids andteenagers through its advertising. Says Prasoon Joshi, executive chairman, McCann Worldgroup

India, the creative agency for Big Babol: With Babol we have focused on the obsession thatchildren and teenagers have of blowing disproportionately large bubbles. They simply love it.

According to market experts, with the chewing gum category growing at 30 per cent per annumagainst bubble gums 15 per cent, bubble gum players are gearing up for what is likely to happenin the future: chewing gum emerging as a larger category than bubble gum.

World over chewing gum is a much bigger category than bubble gum. India, say market experts,has been an exception this far. But with gum makers coming up with both indulgent and healthyproducts, the trend could change, they say.

Anand Ramanathan, associate director, KPMG, says, Chewing bubble gum has always beendissuaded by parents in India. In contrast, chewing gum as a category has benefitted on accountof the endorsement by oral care practitioners.

Chewing gum advertising itself has undergone a sea-change in the last 10 to 15 years withhumour playing a major role in most commercials.

Joshi, the architect of campaigns for Happydent and Chlormint from Perfetti, says humour ispossibly one of the best tools in a category such as gum. How else do you make it exciting?, heasks. Says Abhijit Avasthi, national creative director, Ogilvy, in charge of gum brands CenterFruit and Center Fresh from Perfetti: Since you are speaking to a youngster, it becomesimportant to find something that can make him laugh.

This thought is slowly but steadily beginning to resonate in the bubble gum category too.

While brands such as Boomer from Wrigleys continue to play up the kiddie theme, other playersare singing a different tune. Sundararaman says that the packaging of Bubbaloo has alsoundergone a change recently to reflect the new reality.

BPL's second innings

Raghuvir Badrinath / Bangalore Dec 23, 2011, 00:59 IST

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The erstwhile leader in colour television is looking to diversify in a host of areas to stay afloat.

Recently, when it was reported that BPL had failed to salvage partof its 350-acre land bank pledged with Deutsche Bank, it was a

setback for a company that used to be among the leaders in manyconsumer durable segments in the late nineties.

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Sample this: In its heyday, the brand value of BPL was valued at Rs 1,400 crore a

trend-setting parameter which many Indian companies followed later. But within the

next decade, they have almost lost it all.

The reasons are numerous. The company bled heavily due to backward integration anddiversification. Then, the Koreans and Japanese consumer electronic majors entered the Indianspace. The brand, now, is trying to be visible by giving rights of the BPL brand to a relativelynew company, Reach Distributors, started by an ex-employee.

Leasing out the brand may be a short-term way of milking the remaining equity in the brand. Inthe past, BPL has been a big brand with consumer acceptance, franchise and has enjoyed a fairbit of consumer loyalty. It still does enjoy credibility and affection. What was once a consumerdurable brand became a telecom brand, as well. This gave the brand a wider band-width ofappreciation, feels Harish Bijoor, brand consultant.

But the question is whether offering rights of the brand could have been avoided because it is asacred thing for a company and founding family? Brand analysts feel that BPL does not havemuch choice. Its businesses, though, growing but have a small presence in the healthcareequipment market and energy efficient lighting products.

Ramanujam Sridhar, CEO, Brand-Comm, an integrated brand strategies company said that it wasan interesting strategy to offer rights to another company as there are still more than 1.5 millionhouseholds who use some BPL products. If the new company brings in good quality products atan affordable price point in smaller towns, it may just work. The aspect of spreading awarenessis not required as BPL has a good recall, added Sridhar. He should know. Sridhar has beenassociated with BPL brand right from 1983 onwards, handling the advertising account of BPLwith various agencies.

Brand analysts are of the view that there are several companies like BPL which have failed totake the consumers demand into account, leading to a dent in both market share and image overthe years.

I think the greatest problem that successful companies face is living in denial. It can't happento us is something most leaders of successful companies believe in. As a result, they are the lastones to recognise the problem, and often it can be too late, noted Sridhar.
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BPL, originally known as British Physical Laboratories, started out with medical equipment andlater tied up with Sanyo for its electronics products. The flagship product was the colourtelevision which took off with the Asian Games in Delhi, followed by the Olympics in 1984.

The company benefited from investing in technology and brand. It outspent the competition,came out with superior products, built an extensive dealer network and became the leading brand

of colour television in the country, Sridhar recalled.So what went wrong? Experts feel that its biggest fallacy lay in not recognising the possiblethreat from the Korean brands Samsung and LG. As Sridhar put it, BPL believed that Japanesewere the only threat, leading to a sense of complacency that hurt it quite bad.

Meanwhile, the company is quietly putting in place a strategy. Ajit Nambiar, son of the patriarchfounder T P G Nambiar, and the chairman and managing director of BPL said, We believe thepredominantly young customers of tomorrow would impatiently demand products that not onlymeet their rising aspirations but bring a real change in their lives. Looking at the future, as acompany and brand, BPL will strive to make a difference in its customers lives, be it withaffordable yet reliable LED lighting system for homes at the bottom of the pyramid or medicalequipment for the growing need for primary healthcare, or even with lifestyle products.

Consequently, the company has refashioned their brand promise to - Happier Living Everyday. Itis a promise that the company plans to keep with its technology, products, service and thecommitment of its well-knit team. We want BPL to be a brand associated with the happiness ofour people. We want our brand to grow by making people happier. We value trust and willcontinue to build this through our products and services, Nambiar said.

Havells goes off the beaten track

Bhupesh Bhandari / New Delhi Dec 05, 2011, 00:58 IST

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The electrical equipment maker is betting big on consumer appliances.

A month before Diwali this year, Havells India, best known for electrical equipment likeswitches, cables, fans and bulbs, launched its range of home appliances irons, mixer and

grinders, juicers, toasters, electric kettles, and blenders et cetera under the Havells brand. Theprice tags were premium above rivals like Philips and Bajaj and in the same bracket as MorphyRichards and Oster. The products are yet to roll out nationally. Still, home appliances arefetching Havells India around Rs 15 crore a month.
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Also Read

- Havells India Q2 net up 20%

to Rs 70 cr

- Havells bets big on smallhome appliances biz

- Electrical equipment sector

grows 16.6%

- Havells to focus on

expanding switchgear arm

- Havells aims to double

revenue to Rs 1,800 cr in 3

yrs

- Mid-caps: Expect 30%-plus

returns over the next year

Also Read





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More

Till some years ago, the home appliances market was extremely fragmented. There

were a few national players like Philips and Bajaj, but there were powerful regionaland local brands. Production was in the small-scale sector and tax evasion by

factories was rampant. Local players sold at rock-bottom prices. In the last few

years, production has moved to the hill states of Uttarakhand and Himachal

Pradesh, where huge tax concessions are on offer. This has almost killed the small

and local price warriors.

The market, according to Havells India Joint Managing Director Anil Gupta, is about Rs 5,000crore and is growing at 10-12 per cent annually. The premium end of the market is worth almostRs 500 crore. What perhaps gave Havells the confidence to launch home appliances was thecompanys performance in other consumer categories. In switches, it has cornered almost 20 per

cent of the market, 15 per cent in fans, 20 per cent in cables and 12-13 per cent in lights andfixtures. Internal research has shown that people now consider Havells a household brand andnot an industrial or backend brand.

Havells strategy has been to leverage its distribution network to launch new products. Thus, itused the channel for switches to launch fans, lights and cables. Most companies that sellelectrical equipment also stock home appliances. Last year, Havells had launched geysers which70 per cent of its retailers sell. And now, almost 70 per cent of the retailers will stock the homeappliances also. Gupta is also hopeful of getting into modern trade and is eyeing good volumesfrom the 120 Havells Galaxy stores.

Gupta knows that the home appliances market is tough. Apart from national players like Philipsand Bajaj Electricals, there is Inalsa in the east, Maharaja in the north and Preeti in the south.

Havells premium price tags may be fine, but the products need to be properly differentiated. Helets in that work started on the range almost two years back. Havells had acquired Sylvania inApril 2007 for 227 million Euros from a clutch of financial investors. The acquisition came witha design centre at Guangzhou in China. We have since expanded it to about 100 engineers,says he. The entire home appliances range has been designed here, keeping in mind the demandsand needs of an Indian housewife. Since Indians do a lot of wet grinding, the Havells grindershave been fitted with a 900-watt motor. The toaster comes with a lid so that cockroaches dontget inside when it is not in use.

Almost 60 per cent of the range is being manufactured under contract by five companies inUttarakhand and Himachal Pradesh. The rest, says Gupta, is being imported from China. Thecompany plans to set up a factory at Hardwar to make some of the appliances.

Legend has it that the name Havells derives from the founder of the company, Haveli RamGandhi (fashion designer Rohit Gandhis grandfather). The company, as well as the brand, wasbought over by Qimat Rai Gupta, a cable dealer in 1971. Gupta, Qimat Rai Guptas son, says thecompany had a German association, and thus the Havells brand could have come from there.Whatever be the origins, the brand has expanded in the last few years. Of its annual turnover ofRs 3,000 crore or so, the company sells almost 90 per cent, or close to Rs 2,700 crore, under theHavells brand. The other brands in its portfolio are Crabtree (Rs 2000 crore per annum) andStandard (Rs 100 crore).
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The company also owns the Sylvania brand. Gupta says it wasnt chosen for the foray into homeappliances because of its strong association with lighting. Thus, when the company launchedswitchgear in the UK recently, it did so under the Havells brand. The Havells prefix, of course,has been added to Sylvania. That association also led to a change in the brand. Earlier it wasHavells. So, Havells Sylvania gave the impression that Sylvania had become a sub-brand. Toremove that perception, the apostrophe was dropped and Havells became Havells.

The campaign for the home appliances range has been created by Lowe Lintas. Some like theShock laga campaign worked, some like the one that showed a flood of sweat (because Havellsfan hadnt been switched on) didnt. This time, its a simple campaign that shows the entirerange. Almost 30 per cent of the companys ad budget has been set aside for home appliances.

From home appliances, consumer electronics sounds like the next logical step. Gupta says thatcould happen in the future, but in collaboration with a partner. Unlike what the company has soldtill now, consumer electronics is a technology-intensive market. The collaboration will perhapsplug that gap. Gupta says that last year Havells had seriously looked at airconditioners. But thehitch was that only 25 per cent of its retailers could have stocked airconditioners. The proposalwas thus given up.

Swiss watch maker plans exclusive outlets with new FDI policy

Press Trust of India / New Delhi Jan 13, 2012, 14:13 IST

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As India opens its doors to foreign single brand retailers completely, Swiss watch maker Carl FBucherer (CFB) is contemplating exclusive stores in the country apart from planning to sellcustomised products.

The CFB mono-brand stores would be set up jointly with its exclusive retailing partner in India,'Ethos' -- a chain of multi-brand watch stores.

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- Consumer bodies for tough

riders on FDI in retail

- Rupee rebounds 3 paise

after opening lower

- India Inc welcomes 100% in

single-brand retail

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single-brand retail

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"We are considering setting up of mono-brand stores for CFB in India for which talksare currently on. To begin with, a couple of outlets would be opened," Ethos SwissWatch Studios CEO Yashovardhan Saboo told PTI.

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He said CFB that sells about 15,000 watches across the globe every year would alsooffer 'on demand' customised pieces to customers, which "will not have copiesanywhere else in the world".

According to Saboo, starting price tag for a CFB watch is around Rs 1 lakh and cango up to Rs 80 lakh.

"The average selling price in India for a CFB is Rs 2-3 lakh," he added.

Ethos is also considering opening exclusive stores for other watch brands that itcurrently sells under one roof.

With 30 watch boutiques across 10 cities in the country, Ethos is an authorisedretailer of over 50 luxury watch brands such as Omega, Tag Heuer, Rolex, Cartier,Breitling, Rado and Longines.

Besides opening mono-brand stores, Ethos is also expanding the network of itsmulti-brand outlets.

"By the end of next fiscal, we plan to have around 50 stores across India," Saboosaid.

According to a recent CII-AT Kearney report, the luxury watch market in India isestimated at $54 million (about Rs 240 crore) at retail prices.

The government has formally notified its decision to allow 100% foreign directinvestment in single-brand retail, with a 30% local sourcing clause.

Top management DNA

Subir Sen / Nov 09, 2011, 00:49 IST

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onslaught of British colonialism, partition, and modernisation to remain at the forefront ofeconomic activity. But however glorious their past, they are confronted by a disturbinglyuncertain future. Accustomed to competing only for the favour of the state, to extractprotectionism in return for political donations; the very notion of competing for the customer wasan alien one. However, with LPG the trauma of many third generation families being forced tosee their businesses losing ground is fast becoming a palpable reality. After surviving many atrial by fire, they stand poised to face the sternest threat to their existence. Will they be able tostand up against global competition? Will they be able to survive this onslaught? A few havebeen reasonable enough to exit early; those who refuse to opt out are trying hard to shift theirbusinesses to a new growth trajectory. The result is a complete paradigm shift; from survival ofthe fittest to survivable of the most adaptable to survival of the most innovative. The mostwrenching of these changes that they are experiencing involves coping with a suitable strategy tocompete in a flat and boundary-less world.

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The achievers

Two decades of economic liberalisation has changed the very face of how business

is done in India. Companies can no longer expect to sell what they produce; they

must produce what the customers are willing to buy. An inevitable outcome of this

exposition is a complete overhauling of businesses. Sure, this is not easy; but the

top management of most diversified families knows very well that traditional brick

and mortar businesses that helped them sail in the past are unlikely to wheeze

them to the future. The Tatas, for instance, witnessed a dramatic shift from core

and infrastructural businesses to focusing on brands and services and also thinkingglobal. Consider this: Its brand business fetched about a 20 per cent of its sales and

profits in 1990; but in 2004 it accounted for 50 per cent of its revenues and 58 per

cent of its bottom lines. The Ambanis, who were revered for their vertical chain

globally, upgraded from textiles to naphtha cracking and ultimately to oil and gas

exploration. Subsequently, they jumped to a relatively unknown domain telecom.

In fact, their total investment in telecom to the tune of Rs 25,000 crore, was double

the amount of the then existing capital deployments. The Aditya Birlas, who were

predominantly a textiles and cement major, dramatically shifted focus to non-

ferrous metals. In 2003, of their total investment plan of Rs 20,000 crore, they were

close to allocating around Rs 16,000 crore for their aluminum business alone. While

in the above cases, their blue-print for success is well mapped, for many it leftbehind plenty of agony and anguish.

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The laggardsThe GP-CK Birla Group, which was lured into the automobile business with licences, growthand sustainability, was assured as long as the market was protected. Once the important pieces of

paper were in place, it could simply sit back and relax in a market driven by shortages. It did notmarket, but simply allocated. With the entry of Maruti-Suzuki, it faced a severe challenge interms of its skill-sets and emerging demands made by the sector. Not familiar with the practiceof churning out a new model every three-five years, it had no option but to enter into merelicencing agreements with global majors (for example, Mitsubishi, General Motors), as exit isoften driven by classic ego coupled with a fear of societal reclusion. In most of the otherbusinesses it had failed to crank up capacities; providing itself neither the advantages of size norprofitability. The Mafatlals failed to realise that it is no longer enough to walk around theweaving shed observing knowledgably the thread count (sans quality).

Top corporate managers need to assemble the pieces of the corporate jigsaw puzzle into the bigpicture to take their company to the next level. With outdated power-loom technologies,

uncompetitive cost structure and lack of scales, the fate of the family was sealed when importduties on textiles started coming down. Only seven of the first 50 Indian business families of1947 were in business by the turn of this century, and 32 of the countrys largest businessfamilies of 1969 are no longer among the top 50 today. Why do some companies succeed whilesome atrophy, especially when market conditions change? The lesson is quite clear: Family-owned businesses have high mortality rates.

Survival challengesEven globally, less than 10 per cent of the Fortune 500 companies as first published in 1955 stillexisted as on 2005. Therefore, what we are witnessing in India is not entirely a newphenomenon. In this context, management gurus like CK Prahalad advised companies to focuson their core-competencies; Sumantra Ghoshal stressed on organisational reforms as the road to

successful internationalisation; Porter exemplified the concept of value chain to become world-class companies. While these mantras are talked about globally, they have left many topmanagers baffled and disillusioned when it comes to real-life applications. For instance, manyIndian family-heads glorify in the press that they have identified their core competence; whenunknowingly they are talking about their core businesses. Others talk about recreatingindependent SBUs (strategic business units) and giving considerable latitude to their businessheads; at the same time following the age-old parta system. Therefore, the future road-map formost business families, at best, appears very nascent and fuzzy. We offer insights based on a

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concept we call top management DNA. It is grounded in reality and can supplement existingpractices of Indian business families to enable them to move on to the next level.

About top management DNAOur interaction with heads of various business families led to the understanding that topmanagers most often decide on the basis of past experience or what worked before and not on

the basis of some best strategy or optimising procedure. We observed that repeatedreinforcements about how the environment acts and reacts leads to the development of variousthumb rules. While positive reinforcements are rewarded, negative reinforcements arepunished. Top managers of diversified families operate on multiple thumb rules which act andinteract among themselves to form the top management DNA. The figure below reveals theDNA structure of a typical manager:

This concept is somewhat akin to the DNA that forms the human genome. While the DNA islargely responsible for human attitude and behaviour (among other things); on a similar scale thetop management DNA guides how they take key decisions and untangle comp

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