domination october 2012

DOMINATION

OC

TO

BE

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012

NEWSLETTER FROM DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE

VOLUME-III ISSUE-05

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Editorial ………………………………………………………

02 | DOMINATION, OCTOBER 2012 DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE

- Regards

Team DoMination

Dear Readers,

Marking the end of sum-

mer and the onset of winter,

Halloween is celebrated with

feasting, bonfires and ‘trick-or-

treats’. Following in the same

spirit, we would like to treat

you to thought-provoking and

interesting articles brought

forth by investigative minds.

This edition of Domina-

tion features three entries from

the article-writing contest Ab-

hivyakti, organized by the

team. ‘Edible Oils- Procurement

Strategies in India’ compiled by

Aashwi Verma, PGP-

Agribusiness Management, IIM

Ahmedabad, details India’s

journey towards being self-

sufficient in production of oil. It

discusses with the readers the

price scenario in the sector and

how its burden is eventually

passed on to the end customer.

A similarly stimulating

article ‘The Fourth World’, au-

thored by Siddharth Jaiswal,

IMT Hyderabad, questions the

incidence and acceptance of

globalization in the vast tract of

lawlessness that many a mar-

kets are facing. While identify-

ing the most isolated and dis-

connected markets and de-

scribing the tedious journey

towards growth, the writer still

manages to leave you with a

vision of light at the end of the

tunnel. Walking you through

the evolution of consumerism,

‘The Powershift’ from IRMA,

outlines the conquering and

losing of the power over con-

sumer choices by various mar-

ket participants.

Analyzing the two sides

of the coin, ‘Social Media: A

double-edged sword’, by

Sharad Srivastava, presents

both the views and the counter

-views surrounding the utility

and need of Social media. It

takes into account the rise and

fall of social networking giants

and identifies the general trend

followed.

This edition’s Success

Story illustrates the business

acumen of the entrepreneur

and visionary, Mr. Kishore Bi-

yani, the Group CEO of Future

Group and Managing Director

of Pantaloons Retail. Treading

through innumerable struggles

and squashing all obstacles in

the path to success, he truly

has been rewriting the rules.

‘CRR: A Necessary Evil’,

co-authored by Abhay Kumar

and Sharad Srivastava, takes a

sneak peek into the controver-

sy currently broiling over the

bearing of CRR for liquidity

management by RBI. The au-

thors propose a cautious ap-

proach towards deciding the

fate of CRR as a regulatory tool.

Sharing his experiences as the

Executive (HR), BHEL

Haridwar, Mr. Varun Goel, em-

phasizes communication, posi-

tive outlook and open-

mindedness for success in any

professional undertaking.

With the motto of Work

Hard, Party Harder and a beau-

tifully written poem

‘Happiness…at Last’ by Karun

Sethi, we hope the edition in-

fuses your day with fun and

knowledge in equal measure.

Happy Reading !!

Contents

Editor

Anurag Agrawal

Team DoMination

Abhay Kumar

Aditi Joshi

Ankit Katiyar

Arun George

Ashish Agarwal

Gundeep Singh Kapoor

Manav Kaushik

Manoj Kumar

Nilaya Mitash Shanker

Pawan Upadhyay

Priyank Singhal

Rohan Krishnan

Ruchi Gupta

Saumya Dani

Saumya Verma

Saurabh Paul

Sharad Srivastava

Shibi Singh

Designing Team

Ritesh Kumar

Sabhariswaran P

Saurabh Patel

Roorkee - 247 667, India Tel: +91-1332-285014, 285617 Fax: +91-1332-285565 Email: [email protected]

DEPARTMENT OF MANAGEMENT STUDIES INDIAN INSTITUTE OF TECHNOLOGY ROORKEE

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A Double Edged Sword Cash Reserve Ratio

The Fourth World

The Powershift

Happiness..At Last..

Edible Oil: Procurement Strategies

Qutopia

DoMS da Evince

23

DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE

Success Story

26

………………………………………………………03 | DOMINATION, OCTOBER 2012

mailto:[email protected]?subject=Feedback

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The trend is clear. The

world is moving and that too at

a fast pace!! Much of it has to

be attributed to the technologi-

cal advancements. Among

them, Internet and web based

technologies are the recent

and most significant ones. The

internet has not only altered

the manner by which people

gather knowledge, communi-

cate, entertain themselves, it

has also affected how they in-

teract in this socially connected

world. Social media, the new

buzz word, is one invention

which allows individuals,

teams, communities, compa-

nies, organizations, govern-

ments, and parliamentarians to

reach large masses.

No wonder popularity of so-

cial media is increasing leaps

and bounds. The growth of the

social media is really impres-

sive. The basic purpose of so-

cial media is to connect people

and it has been quite successful

in achieving that. Today Face-

book is estimated to have more

than 900 million registered

people. In India too, social me-

dia usage is on rise. With 50+

million active social media us-

ers, Indians spend more time

on social media than on any

other activity on the Internet,

according to Nielsen.The Bar

graph below depicts the in-

crease in users of various social

networking sites in India. Ac-

cording to the data, Facebook

is the undisputed market lead-

er in India. Interestingly Orkut

which is assumed to have be-

come dormant a lont time ago,

is still alive and occupies se-

cond position. LinkedIn and

Social Media


Cover Story

Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie

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04 | DOMINATION, OCTOBER 2012

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………………………………………………………Twitter are relatively newer but

they are hot on the heels of

sites like Facebook in terms of

users. Social media has found

its acceptability in other fields

too. Social networking sites

such as LinkedIn is increasingly

being used for professional

purposes. Another social net-

working site Twitter is getting

its foothold, particularly in In-

dia. Facebook and Twitter have

also played an instrumental

role in various political move-

ments. Facebook is used by An-

na movement activists to con-

nect with masses. Likewise

Twitter is cited as an important

factor in Arab Spring move-

ment. This is a significant omen

as mainstream (conventional)

media is either censored or it

colludes with one party.

Needless to say, social

media has a profound impact

on an individual and society.

The most visible change we see

is that it has brought people

closer to each other. The cen-

tral benefit of social media is to

connect and communicate with

people across the world. Social

media provides a platform to

share our life with whomsoever

we want. By sharing our experi-

ences through social media, we

create empathy towards oth-

ers. Someone else may have

gone through a similar situa-

tion and they can make a sug-

gestion which could help im-

prove the situation.

Social networking sites can

also help us to find people you

share interests with. Facebook,

for example, provides an op-

portunity to list our views and

thoughts and therefore may

help us to establish common

ground with others. This con-

tributes towards building an

open society. Some organiza-

tions are sensing this trend and

started using social media as an

apparatus to collect opinions to

chart out their strategies. Re-

cently, anti-corruption move-

ments in India used social me-

dia to spread its vision and to

communicate. Social media

sometimes acts as a track 2

version of conventional media

as well. It offers details and

opinions which is not available

in mainstream media. Admis-

sion processes of some of Indi-

an business schools can be tak-

en as an example. These sites

provide information which is

otherwise not available on

mainstream media.

In spite of all nice things

about social media, not every-

thing is alright. There are a lot

of young people who wake up

and the first thing they do is to

check their Facebook account.

There are cases where people

have been online on Facebook

for ages without even signing

out. This obsession is driving

frequent users to physical and

psychological stress. This addic-

tion makes one prioritize incor-

rectly and putting insignificant

things over many more vital

activities.

It is observed that social

media does only provide data

and information but not the

understanding or knowledge.

Many times personal opinions

are presented as data. And

people believe it without realis-

ing that it is purposefully done.

It has a ripple effect. Firstly,

people who spend a lot of time

on social networking sites are

flooded with incorrect infor-

mation and thus are led to in-

correct conclusions. Since their

perception is different from the

reality, the actual result is often

poles apart from what it is


Social Media



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not accountable and virtual in

nature.

The second effect is

more concerning. Those who

spend a lot of their time on so-

cial networking sites, start liv-

ing in their own world of per-

ceptions. This poses a serious

challenge to the analytical and

intellectual capability of an in-

dividual. A recent riot in Mum-

bai is a glaring example of what

such situation might lead to. It

is said that factually incorrect

data and morphed pictures

were the main reason behind

the violence. People believed

whatever was supplied to them

without any investigation.

Despite all its social rele-

vance, social media is definitely

not a substitute for meeting in

person or other such forms of

social interactions. Social me-

dia lacks the warmth and affec-

tion when compared to con-

ventional relations. In other

words, social media is alleged

to depression as well as aloof-

ness. Facebook for example, is

considered to be addictive in

nature. Due to this very nature,

an individual might talk too his

far-away friends and relatives

but he may avoid or overlook

family members or close

friends. Social media is also be-

lieved to contribute to the de-

velopment of self-centrism in

an individual. Rather than

keeping in touch and inter-

acting with folks, millennial

narcissists are more driven to

acquire as many friends as pos-

sible and use their carefully

crafted profiles to impress. This

trend is observed more among

young age group users.

Like everything else, so-

cial media has its own virtues

and vices. It is a resource which

should be exploited carefully

instead of being exploited by it.

One should remember that so-

cial media is after all a virtual

world. It should not be equated

with actual read world. Equilib-

rium should be the key, with a

sound understanding of the

difference between the virtual

and real world. Only this stabil-

ity and a mature mindset can

leverage the social media in a

positive way.

To start with, a sensitiza-

tion program can be initiated

with respect to social media

usage. Including this into aca-

demic curriculum is also a con-

siderable idea. One should be

educated about the social me-

dia contents, its validity and

relevance. As the old proverb

says, all data is not Infor-

mation, all information is not

knowledge, all knowledge is

not understanding, all under-

standing is not wisdom. Same

applies to social media as well.

An immature mind may per-

ceive and interpret the sea of

information in a wrong manner

which might lead to disastrous

consequences. People should

also be informed that excessive

use of social media hampers

other dimension of personality

development. A person, who

spends a lot of time on social

media, may fall short on out-

door activities which would re-

strict the overall personality

development.

There is a need for par-

ents and elders to keep an eye

on any behavioural changes

such as impatience, aggression,

depression etc. Parents should

open all possible communica-

tion channels so that the young

minds do not get carried away

by the mirage of social media

sites. There is a fine line here

tough between monitoring and

what youth would consider as

Social Media



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Social Media


invasion of privacy.

Parents need to under-

stand this difference and han-

dle the situation cautiously.

Sometimes it is required to sit

with the youth and make them

see the reality behind the

smokescreen.

On the whole, social me-

dia sites are helpful if used with

caution. It is only excessive us-

age which may lead to several

problems. A little chit chat with

an old friend not only refreshes

but also fulfils social needs.

Therefore an awareness pro-

gram coupled with some initial

mentorship is best possible

way to get maximum ad-

vantage and would prove to be

a win-win situation for user and

society both. Finally it is im-

portant to remember that so-

cial media can be as effective

and as disastrous as we allow it

to be. The problems in today’s

world are not caused by social

media but by people using so-

cial media.

Article By - Sharad Srivastava DoMS, IIT Roorkee [email protected]


mailto:[email protected]

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Perspective ………………………………………………………

Recently Pratip Chaudhuri,

Chairman of India’s largest

bank SBI, created a flutter by

suggesting that Cash Reserve

Ratio or CRR needs to be abol-

ished as it is not sensible in

modern times. He also called

for paying interest on CRR

funds till it is discontinued. Mr.

Chaudhuri propagated these

views at a conclave organised

by the Federation of Indian

Chambers of Commerce and

Industry, FICCI.

CRR or Cash Reserve Ra-

tio is the proportion of deposits

banks have to keep with RBI.

Currently this proportion is

4.50% which means for every

100 rupees, banks would have

to put 4.50 rupees with RBI.

Furthermore, banks do not

earn any interest which makes

this amount as good as non-

existent for banks. An estimate

says 0.25 reduction in CRR

would result in an influx of

17000 crore rupees in the mar-

ket. By this calculation, a mind

boggling sum of rupees 3.06

lakh crores is with RBI (do the

math!!).

His reasons are simple.

Banks have no control over this

money which is dumped with

reserve bank. If they were giv-

en an opportunity to utilise this

money, this huge cash will be a

growth engine for India’s eco-

nomic developments. SBI chair-

man also argued that since this

money does not yield any re-

turns, it creates an unnecessary

burden for rest of the amount.

Daily commercial banks deposit

Rs 3,14,000 crore with RBI. If

RBI starts paying interest on

this humungous amount at an

interest rate of say 10%, then

banking industry will get an

amount of Rs 31,000 crore per

year. Also total net profit of en-

tire banking industry last year

was nearly Rs. 70,000 crore.




Cash Reserve Ratio

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Cash Reserve Ratio ………………………………………………………

In addition to the above

views, there are other reasons

which are cited. The require-

ment of CRR is only for banks,

not for Non-Banking Financial

Corporations (NBFCs). Though

they do not operate in same

space often, it still does not

make for a level playing field.

That might be the reason why

some people are supporting

the theory of doing away with

CRR. For example, Mr. V Jagan

Mohan, MD of AP State Coop-

erative Bank Ltd. appreciated

the SBI chairman’s views. He

questions the relevance of CRR

in this information age where

RBI can get any figures by just a

click.

Though the above views

are interesting, not everybody

is ready to accept them. RBI

deputy governor K C

Chakrabarty openly came out

against SBI chairman’s opinion.

He stressed that CRR is a part

of monetary policy and banks

should work in the established

framework. He seems to imply

that CRR is a crucial liquidity

management tool which pro-

vides regulatory power to RBI.

Below diagrams show the sym-

bolic representation of how li-

quidity is affected by change in

CRR.

By eliminating CRR, RBI

would lose its power to control

or regulate the money supply.

Very few people would want a

central bank to dilute the influ-

ence. This has achieved more

significance particularly in the

wake of worldwide economic

crisis.

There are other reasons

too which are more technical in

nature. If banks are exempted

from CRR then banks would

stand as a more risky option.

Adhering to Basel norms, the

change in CRR would also alter

Capital Adequacy Ratio, a ratio

of bank’s capital to its risk. Ba-

sically banks may have to set

aside even a larger quantity of

cash (though not with RBI) for

risk management which would

prove counterproductive in the

long run. No wonder ICICI bank

chairman K V Kamath joined

RBI for continuing with the cur-

rent structure.

Lastly with a surging in-

flation rate, CRR can be a ne-

cessity for handling the money

flow. India’s GDP growth was at

5.5 percent in the second quar-

ter which is lowest in the two

decades; it is expected to be

near or less than 5.5 percent in

2012-13 as well. On the other

hand, inflation is near 8% and it

is persistently hovering in dou-

ble digits for the last 2 years.

For any government, control-

ling inflation is prime objective




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we have to do trade-off be-

tween GDP growth and Infla-

tion, However one must keep

in mind that CRR can only con-

trol inflation up to a certain ex-

tent.

Overall, it does not look

a viable choice to remove CRR

altogether. RBI has already

slashed cash reserve rates from

11% (in 1998) to 4.50% (in

2012). Similarly paying interest

on CRR defeats the very pur-

pose CRR is created for. There

is a need for discussion among

all stakeholders for such a pro-

posal. Trading some part of

CRR with an equivalent magni-

tude of another tool SLR

(statutory liquidity ratio) can be

the first step to begin with. The

result should be carefully stud-

ied and evaluated in all as-

pects. This is the time for re-

forms 2.0 but with a security

system.


Cash Reserve Ratio



Article By - Abhay Kumar Sharad Srivastava DoMS, IIT Roorkee

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Perspective ………………………………………………………

We along with many an-

alysts and economists seem to

think this convergence force of

globalization is real and univer-

sal, and that all the emerging

markets will continue to grow

rapidly, catching up with in-

come levels in the west. A clos-

er look shows that globalization

did not, in fact, resonate equal-

ly in all developing nations.

There is a broad array of coun-

tries that are not fully connect-

ed to global flows of trade and

money. These nations comprise

a chaotic Fourth World of

“frontier markets” in which po-

litical leaders have yet to buy

fully into the global market

consensus, and the economic

expansion is still more erratic

than the norm. The frontier na-

tions occupy a world where in-

sider trading can run rampant

because it’s officially tolerated,

where financial data is unrelia-

ble as authorities don’t really

demand clarity from business-

es, research here is often less

about number crunching than

about pressing one’s ear to the

walls for the latest rumors. The

state of semi-lawlessness

makes them volatile, with eco-

nomic growth from a high of 20

percent in Ghana to a low of 2

percent in Serbia compared to

big emerging markets like Chi-

na and South Africa with 9 and

3 percent respectively. The

“macro mania” that seized ob-

servers of emerging markets

over the last decade, as they

rose and fell in unison, this

phenomena did not extend to

the fourth world where every

market tends to follow its own

peculiar rhythms often at the

whim of local leaders. Combo-

dia opened its stock exchange

in July 2011 and there were no

companies ready to list, making

it the only stock exchange in

the world with zero trading and

another instance is that of

Ukraine’s “forced listing” in

2008 when the government

forced big companies and

banks to sell stock to the public

which resulted in companies




The Fourth World

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The Fourth World ………………………………………………………




selling a tiny portion to comply

with the rule which triggered

lesser free float leading to less

commitment a company has to

the basic values of a public en-

terprise i.e return to stakehold-

ers, not surprising outsiders

see the Ukraine market as

something of a joke. Frontier

markets of the fourth world

often fail the basic task of the

market, which in theory is to

match buyers and sellers in an

open forum that allows them

to agree upon a fair price.

When rumors pass as infor-

mation and rules make no

sense, neither do prices. There

is no doubt about the huge po-

tential these nations hold, but

they need to capitalize on this

potential by opening up to the

outside world and work to-

wards proper governance. They

are home to more than one

sixth of the world population,

but account for just 5 percent

of global GDP and attract only

0.5 percent of global invest-

ment. An at most universal as-

sumption holds that this gap

will close over time and the

fourth world is the place where

the world will witness most ex-

plosive growth in the coming

decades.

Disconnected in Middle:

The most isolated region

from the global market and its

trend is the Middle East, Iran

and Iraq. The key frontier mar-

kets in the Middle East are the

petro-monarchies of the gulf

region, and the largest among

these by far is Saudi Arabia

which is the only country which

is open for investors, but only

from within the gulf. This re-

sulted in a spectacular stock

market bubble in 2005, with

Saudi Arabia’s stock market be-

coming the biggest among the

developing world, larger than

that of China and India, solely

based on oil-rich locals and

neighbors. The quantum of this

bubble was a good deal crazier

than the dotcom insanity that

gripped the United States at

the turn of the millennium, and

it pooped soon enough. But

when a bubble pops in the gulf

it does not make any sound as

no one pays much attention as

foreigners are not allowed in.

Hence, it would be good idea

for the middle east to open the

gates to its economy and gear

up for a diversified growth

model.

Promising Road:

Few among the Fourth

world nations have already

started showing ability to grow

and grow quick. They are in line

to be called the next emerging

markets of the world. Few of

such economies are Sri Lanka,

Vietnam etc which could prove

to be the next growth miracle.

Sri Lanka’s Peace Dividend:

n the 1960’s Sri Lanka

was billed as the next Asian

growth miracle, only to be sty-

mied by tryst with socialism

that played a direct role in ig-

niting the civil war which de-

railed Sri Lanka’s development

for 30 years. Today after the

civil war, it seems that Sri

Lanka’s time has finally come.

Though the growth dipped

sharply during the war, the

economy continued to grow at

an average pace of 5 percent.

The only reason for this was

the young educated population

situated in the western prov-

ince that produced strong

growth in service industry. The

north and east province that

account for 30 percent of land

and 15 percent population was

mostly war zone. With the na-

tion whole again, achieving 7 to

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The Fourth World ………………………………………………………




8 percent of growth in the next

decade could be well within

reach. With government keen

on growth and the aim to raise

the country from 102nd position

to 30th in the world bank’s

rankings by business climate by

2014. But the path doesn’t

promise to be easy as the so-

cialist experiment of 1970 had

lead to high taxes and govern-

ment debt which still equals to

80 percent of GDP. However, it

is bringing the vast swaths of

formerly rebel-held territory

back into play and exploit the

country’s long-standing

strength of highly literate pop-

ulation and its geographical lo-

cation between the two key

shipping routes of India and

China. Markets are especially

bad at foreseeing the financial

implications of war, the most

famous example is World War

1, which took the investors by

complete surprise, leaving with

huge losses. Conversely, mar-

kets are also quite week at rec-

ognizing the financial benefits

from peace, well studied by

agencies such as world bank

and UN, the peace dividend is

real and Sri Lanka is poised to

be a big beneficiary

Vietnam’s Port to Nowhere:

Vietnam offers a classic

case of a small country that

had greatness thrust upon it.

By middle of the last decade

investors were not only hyping

Vietnam as the next China but,

also throwing more money at it

than it could absorb. In 2007

the investment produced a net

inflow of $17 billion in a $80

billion economy, a ratio four

times than China ever

achieved. The leadership simp-

ly lost control of the economy

and in 2008 the bubble went

bust. Vietnam always followed

the footsteps of China, but it

lacked the volume and scale

which China held as its biggest

strength. Additionally the oper-

ating cost in China was much

lesser than in Vietnam, it is

very difficult to connect with

international shipping ports as

most of its 54 ports were built

for river routes which in-

creased the logistics cost. It has

to get back to the basics of eco-

nomics by building roads, com-

munications and infrastructure

to connect business. The lead-

ership is investing into educa-

tion at a high pace than China

and focus on high skill labor de-

velopment. It’s a good time for

the government to deep dive

into fundamental issues and

concerns of the economy and

plan a path ahead, hence a

huge potential to regain its

charm as the next China.

Article by: Siddarth Jaiswal IMT Hyderabad [email protected]


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Perspective ………………………………………………………

Once upon a time, the

storekeeper had power over

the consumer’s purchasing

choices. Then over the past cen-

tury, this power was stripped

from the merchant. It became

prized territory and was fought

over in the battle for market

dominance. The trophy was

wrested from the hands of the

vanquished and held briefly by

successive victors – the con-

sumer, the manufacturer, the

brand, the retailer and now...?

Since more than five

decades now, the consumer

habits and procurements have

been modelled by environmen-

tal engineers. Cultural and

physical environments have

manipulated and been manipu-

lated by evolving consumerism.

The Generic Shopping List of

the Fifties

During the fifties, daily

visits to corner mom and pop

store were the order of the

day. This frequent household

chore was a matter of personal

contact between the consumer

and the storekeeper. The con-

sumer would stand in front of

the counter with his bag in his

hand, while the grocer would

preside over his domain behind

the till. He would take your or-

der and fetch every item for

you. The shopping list would

also have been a generic one –

sugar, flour, salt, spices, etc.

With time, these generic de-

scriptions became brand ori-

ented. So the soap became Lux,

toothpaste became Colgate

and washing powder became

Surf. But the power of making

choices still remained with the

grocer. It was he who collected

the comestibles from the

shelves and gave it you. Gradu-

ally, he came to know your pur-

chase patterns as well as you

knew them yourself!

The Powershift—The Shopping Evaluation




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The Powershift—The Shopping Evaluation ………………………………………………………




Product Retailer Consumer

The Birth of Choice in Sixties

and Seventies

Now the grocer’s dominion be-

gan disappearing. The super-

markets had arrived and the

world of shopping changed and

the retailer’s power over con-

sumer choices shifted to the

consumers themselves. Now

shopping became the domain

of individual choice. Now the

grocer did not decide what you

wanted and what you did not.

This was the first time that the

consumer got an opportunity

to establish a relationship with

the FMCGs. The retail price

maintenance systems also

changed. Originally the retailer

would charge a price different

from the one recommended by

the manufacturer, and this

compromised the consumer’s

perception of a brand and even

risked diluting the brand’s val-

ue. The Maximum Retail Price

(MRP) arose in this era. This

practice guaranteed profit mar-

gins, forced retailers into obei-

sance and removed the prime

motivator in the consumer’s

choice of one retailer over the

other (apart from the geo-

graphic location). The price and

selection in all stores now be-

came uniform. Consumer loyal-

ty to retailer dissolved and

gave way to brand loyalty. Now

it was up to the brands to keep

promises – not only of price,

but of consistent quality and

reliability. In this process,

brands built platforms on

which to establish consumer

trust.

Consumer Brand Retailer

The Branding Power of the

Eighties

Now the power of the brands

and the weight of reputation

they carried grew. Procter and

Gamble, an emerging name

then, paved the way for brand-

ing and fashioned the consum-

er experience. Consumer items

began existing as icons and

metaphors for their own func-

tions. In the late eighties, the

power of consumer choice

shifted again. The retailers be-

gan creating their own brands.

So, the retailer’s own products

began to compete with the

other brands, leading to lot

many established brands losing

out on significant sales volumes

and revenue.

The Rise of the Retail Power in

the Ninties

The retailers began realizing

that they accounted for a sizea-

ble portion of a manufacturer’s

business. Brands were then

forced to create points of

differentiation that were based

on client-store needs. This

turned the tables on the con-

sumer’s prime loyalty to the

brand and resurrected consum-

er loyalty towards the retailer.

Retailers increasingly began

coming up with their own pri-

vate labels the way the Future

Group has “Golden Harvest”,

Tata Group has “Star”, etc. The-

se sub-brands sold at lower or

competitive prices and market-

ed under the umbrella of the

………………………………………………………

………………………………………………………


retailer’s name. This put the

retailer in-charge of the con-

sumer product choice once

again. Loyalty was no more

connected to FMCG brands but

also to store’s own private la-

bels. But the resurgence of re-

tailer power over consumer

choice didn’t stop there. The

retailer and its brand suddenly

became the small player in the

big competition for consumer

attention. Consumer loyalty

followed the options it was

offered and shifted from indi-

vidual brands to retail identi-

ties. These retailers now

offered warrantees, price re-

duction, handy locations and

often private label brands. This

was the time when the DNA

governing consumer behaviour

was mapped. As a result,

brands not only had to offer

discounts but also pay extra fee

to guarantee preferred shelf

position. Eventually retailers

conceived and introduced loy-

alty programs. And while the

retailer was focussed on keep-

ing the enemy, the brand, at

bay; the internet crept up on

the adversaries’ flanks. A pow-

ershift was about to occur, this

time moving the power over

consumer choice away from

both brands and retailers to e-

tailers.

The Story of the Millenium

The advent of internet

gave manufacturers an oppor-

tunity to bypass the stores,

which was traditionally their

link to the consumer. By using

the consumer data acquired

from research companies, from

the loyalty programs; the com-

panies could interact directly

with the consumers and pro-

mote their brands through di-

rect marketing campaigns. The

manufacturer thus regained

some control over the consum-

er’s choice and also to control

consumer flow in a low profile

fashion. The internet thwarted

the retailer’s ability to inter-




………………………………………………………

………………………………………………………





Brand Wholesaler Retailer Consumer

cept consumers as they previ-

ously used to. The dialogue

now became one-to-one basis.

The internet prevented com-

petitors from obtaining the full

picture of what went on be-

tween the competition brands

and their consumers. The man-

ufacturer now acts as a retail-

er. The internet turned the

battle for power over consum-

er choice upside down one

more time, creating a new and

unexpected retailer enemy.

Internet shopping and mar-

keting offered what retail had

failed to offer – no queues, no

geographic barriers, low prices

and unlimited selection. A con-

sumer dream world had ap-

peared.

This way the world has

changed from the fifties to

now. Today, e-tailers like flip-

kart, myntra, fashionandyou,

indiatimes, eBay, Amazon, etc.

have established themselves.

Everything from groceries to

home appliances, apparel to

books, everything can be

bought online and delivered

home in no time. And the pow-

ershift keeps going...

Article by Bhavi Patel IRMA [email protected]


………………………………………………………

A smile may dwell on my face for a moment or more, I may appear to be in the high skies, waiting to soar,

I may be radiating with the joy of someone’s presence, But what I feel from inside is all that makes sense. My heart is wailing with the pain of the unknown, It seems to have hardened into nothing but stone.

The spark in my life seems to have faded, All ethics and morals seem to have degraded,

Even inspiring stuff now seems nothing but words, The eye-filling thoughts are flying away like birds.

The joy, the splendour - everything is missing, All the inner turmoils seem to be shouting and hissing,

All hopes appear bleak and out of sight, A warm, sunny day looks like a pitch black night.

To cut it short, I don’t feel happy anymore, Every cramped passage leads to a closed door. But, it’s at this moment that I remember God,

The saviour of my life - guarding me with a sword. I know He’s watching, knowing I can withstand,

Throwing subtle hints about a world that is grand, Failures will haunt us on every step we take,

Problems will surface, but remember they are fake. This is the time to enjoy and to rejoice.

Building our destiny is a matter of our choice. Life is not only about miseries and pains,

To see rainbows, we have to go through the rains. And this feeling brings the smile back on my face.

My world seems to be filled once more with grace. So there’s happiness…at last, in the recesses of my mind.

A panorama of emotions which are soothing and kind. I may not get someone, but love never dies.

Maybe God has chosen someone else for me guys. So I will always remain cool and that’s a promise,

Because I have learnt one thing which goes like this, “Life is really beautiful, beyond any measure,

And living it fully is the ultimate treasure.”

Chlorophyll ………………………………………………………

Poem By - Karun Sethi DoMS, IIT Roorkee [email protected]

Happiness …… At Last Its wise to learn, its GOD like to create





………………………………………………………

Qutopia ………………………………………………………

It‖s Exquizite, Kills your Quriosity and adds to your Quizdom. Need we say more? ―Qutopia‖ – A Utopia of the best Biz Quiz Tidbits to wreck your brains! Rush in your answers to [email protected] before 31st October, 2012. The winner will have their names published in the next issue. Also, person getting the highest score in the current quarter (Jul-Dec 2012) will get a gift voucher. Answers in the next issue of DoMi-nation.

Section A (1 Point for each correct answer)




1) The Titanic, with 2,200 people on board, departed from which of the following British ports

on 10 April 1912, for its fateful voyage from Europe to the US?

2) 'Mini Countryman' is a SUV car launched by _________.

3) Which of the following countries is India’s second largest supplier of crude oil - against

which western countries have imposed sanctions?

4) First African woman to win a Nobel prize?

5) Who are Bretton Woods Sisters?

6) Picture—What is the event that is described?


………………………………………………………

Qutopia ………………………………………………………

Winner of Qutopia (August 2012)

1. Sowmiya V—SDM IMD, Mysore

2. Varun Sharma— DoMS, IIT Roorkee


Answers to Aug’12 Qutopia

Section A: -

1. Videocon

2. Jet

3. Gujarat

Section C: -

1. Solar-powered lamp/Danish(Iceland origin)/Olafaur Eliasson

2. Partha Chatterjee/Maruti Suzuki/RC Bhargava

Section D: -

1. Advertising Standards council of India/HUL/Kwality Walls/Amul.

2. Pakistan/Bangladesh/Srilanka/2007



Section B (2 Point for each correct answer)

ID the Logos

A) B)

C) D)

Section B: -

1. Mr. Sushil Kumar shinde/Mr. pranab Mukher-jee

2. Royal Artillery Barracks/1716

………………………………………………………

DoMS-da-Evince

Varun Goel is 2011 batch pass out of DoMS, IIt Roorkee and presently working as Executive (HR) at BHEL, Haridwar

1. What are your roles and re-

sponsibilities with BHEL?

I am working in HR department

as Executive (HR). Within HR

department, there are different

sections like Recruitment, Poli-

cy, Industrial Relations, and Es-

tablishment etc. There are two

establishments here in BHEL

Haridwar – Executive Establish-

ment and Non-Executive Estab-

lishment. I am in Executive Es-

tablishment where I take care

of the requirements of the em-

ployees in officer cadre from

the time they join till the time

they retire. Our team in Execu-

tive Establishment takes care of

the annual appraisals, promo-

tions, transfer requests, pay

fixation/anomalies, disciplinary

cases, absorption of trainees,

probation clearance etc.

Apart from these, there

are some routine activities like

issuing medical cards, giving

reply to RTI Queries, getting

the different nomination forms

filled up by employees etc.

2. How was your experience

working with INFOSYS and

how it is different from BHEL?

First of all, there is a lot of

difference in working pattern of

a PSU and that of a private

MNC. Second, industries are

totally different. While in IT in-

dustry everybody is at least an

Engineer, where people work

in a multicultural environment

round the clock; in manufactur-

ing set-up, people come with

different educational back-

grounds ranging from Engineer

to simple graduates to just

10th pass with I.T.I. working in

strict shift patterns. Then, my

profile is completely different.

The work in Infosys was pure

technical (sitting all day and

coding complex algorithms)

whereas in BHEL, the work is

totally related to HR

(Interacting with people, e-

mailing, preparing reports, Or-

ganising meetings). At Infosys,

we were pampered a lot, were

given a lot of training before

going to production. At BHEL, a

lot more maturity is expected

from us. It is expected that we

the youngsters will lead the

team from the front solving all

the problems that might come

in our way. We had an induc-

tion programme of just 15 days

after which we were allotted

our sections. However, the

training provided by Infosys is

being put in use from the day

one in BHEL. It helped me in

picking up the local legacy sys-

tem quickly and contributing in

implementation of SAP - HR in

BHEL Haridwar.

3. What has been the most

challenging role in your career

so far?

It is tough to answer that. Defi-

nitely there are times when

you don't know how to go




………………………………………………………

………………………………………………………


when you don't know how to

go about things coming in your

way but that happens for a

short time as I believe every

problem has a solution. You

take help of your colleagues

and seniors, learn from the

past experiences, even do

some new experiments but

come out of the problem. I also

believe that I am yet to face a

situation in which I feel com-

pletely helpless. Few essentials

that I would mention here that

will help in dealing with chal-

lenges:

- A positive never-say-die atti-

tude.

- Communication - communi-

cate, communicate, communi-

cate!!! upwards, downwards

and within your team.

- Accurate, Brief and Clear (the

ABC

- Open Mindedness.

- Keep patience.

4. How has DoMS, IIT Roorkee

contributed to your success?

It has helped me in every way. I

am a much better person now.

Apart from immensely contrib-

uting to my knowledge from

the respected teachers and

friends, it has also helped me in

developing my soft skills. Extra-

curricular activities made sure

that we did everything to be-

come a good manager. Apart

from that, I have made friends

for life.

5. Any message for the read-

ers, especially the current

batches of DoMS?

Utilize the most of your time

while you are there. Keep on

improving, be it in what-ever

field. Interact with your peers,

seniors, juniors, professors,

PhD students, B.Tech students,

M.Tech students. (Remember

Rancho of 3 idiots!). There is lot

to know and learn in this world.

Take part in extracurricular ac-

tivities. This will make sure you

are corporate ready when you

passout and join some compa-

ny. Go on trips. Some of you

may never get chance to be in

uttarakhand for so long.

Believe in Work Hard, Part

Hard. Cheers !!!

DoMS-da-Evince



Success Story ………………………………………………………

………………………………………………………

A true Indian retail czar,

Kishore Biyani is the Group CEO

of Future Group and Managing

Director of Pantaloon Retail.

The man who triggered the

concept of retail supermarkets

in India like Big Bazaar, Panta-

loon, Mega Mart and Banga-

lore Central is popularly known

as KB. With his sheer ‘guts and

instincts’ he created Future

Group, a USD 1 billion enter-

prise and spearheaded the

emergence of Pantaloon Retail

as the leading retailer in the

country.

Born on August 9, 1961 into a

small trading family, right from

childhood, he was rational and

insisted on logical explainations

to his questions. He strongly

believed in himself and never

gave up. He did his college in

Mumbai and did a commerce

degree. He did a course in im-

port and export of garments,

studied advertisements,

attended marketing seminars

and did a course in marketing.

Biyani started his first business

enter selling stonewash fabric

to small shops in Mumbai. Fa-

mous for his unconventional

style of running the business he

was initially written off by the

media. His stores were referred

as 'dirty’ and he was never

called for any trade body

meetings or investors confer-

ence. Biyani defied the status

quo and challenged the con-

ventional mindset by signifi-

cantly thinking big. He tried his

hands in various other busi-

nesses, some failed, some were

moderately successful contrib-

uting to his greater under-

standing of customers and the

foundation of organization.

A staunch believer in the

group’s corporate credo,

‘Rewrite Rules, Retain Values,’

Biyani considers indianness as

the core value driving the

group. He registered his brand

name with a American name

John Miller with a tagline ‘A

shirt Inspired by America’. He

was the first person to intro-

duce exchange offers. Led by

its flagship enterprise Panta-

loon Retail, today operates

around 16 million square feet

of retail space in over 85 cities

and towns and 65 rural loca-

tions across India. Headquar-

tered in Mumbai it employs

around 35,000 people and is

listed on the Indian stock ex-

changes. Manufacturing appar-

els at their own factories and

utilizing Economies of scale has

helped in providing low priced

goods.

Biyani designed his outlets to

Kishore Biyani CEO of Future Group & MD of Pantaloon Retail


DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE 23 | DOMINATION, OCTOBER 2012

Success Story

………………………………………………………Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie


………………………………………………………suit the need of Indian custom-

er, who were most important

to him. Future Group’s retail

arm follows a multi-format re-

tail strategy and some of its

leading formats include Big Ba-

zaar, Central Food Bazaar, Pan-

taloons, Ezone, Home Town

and Planet Sports. It also oper-

ates popular shopping portal,

futurebazaar.com and rural re-

tail chain, Aadhar. Future

Group’s other businesses in-

clude financial services, insur-

ance, brand development and

logistics.

Biyani faced many com-

plaint from investors for rolling

out retail stores which ate

more money than it could gen-

erate. But he always thought in

terms of “Mass Customers”

and what would fire their imag-

ination. he was a firm believer

in reaching out to the public

and making emotional connec-

tion with them. He had lots of

passion and values like simplici-

ty, humility and willingness to

learn. He had the leadership

qualities of a keen observer in

choosing right location and ide-

al people, own vision of deliv-

ering everything, everywhere

to every customers in most

profitable manner.

Biyani has been follow-

ing the ideals of Sam Walton

and Dhirubhai Ambani since his

late teens. He has never met

them, but would read about

them, their books and follow

them pretty closely. They have

helped him hone his leadership

skills on how to dream big, how

to build a business and how to

create an organisation that is

able to scale up. Two of his fa-

vourite quotes from Sam Wal-

ton are, “Capital isn’t scarce;

vision is.” And “There is only

one boss, the customer. And he

can fire everybody in the com-

pany from the chairman down,

simply by spending his money

somewhere else.”

The 49-year-old maver-

ick received the Ernst & Young

Entrepreneur of the Year

Awards. In year 2006 he was

awarded ‘The First Generation

Entrepreneur of the Year’ by

CNBC Indian Business Leaders.

The same year he was awarded

the ‘Young Business Leader’

conferred by the IIM Lucknow

National Leadership.

He recently authored

the book, ‘It Happened In In-

dia.’ which traces his struggle,

failures, restlessness, and sheer

grit. The book has sold some

100,000 copies, more than any

other business book published

in India so far. Often been

called ‘the Sam Walton of In-

dia,’ Biyani’s success is a classic

example of how deep insights

can create an impregnable

differentiator among your com-

petition which are purely led by

observations and theoretical

market research reports.

Though most of KB’s

deep understanding is attribut-

ed to his ‘marwari trading fami-

ly upbringings and his interest

in observing people and under-

standing their behaviour he

jokes as a child he has always

been a big source of irritation

for his family as he used to

question every damn thing in

the world.

Though he would never consid-

er collaborating with Wal-Mart

he asserts, “We are investing a

lot in food through future ven-

tures in food processing cen-

tres, FMCG products and so on.

In the next three to four years

we want to be the largest food

and FMCG Company in the

country. What makes our inno-

vations different is that we try


Success Story

………………………………………………………Perspective | Chlorophyll | Qutopia | DoMS da Evince | Success Story | Regardez I’economie


………………………………………………………to sell by people and not to

people.”

We can learn from him

simplicity in ideas, speed in the

essence of everything, learning

while execution and liking

thrift. His belief in himself and

the customers he served along

with the core values of Indian-

ness has made him an optimist

leader among all. He also

showed us the importance of

building and nurturing relation-

ships while rewriting rules and

most importantly retaining val-

ues.


Article by: - Priya Adhikary DoMS, IIT Roorkee [email protected]


………………………………………………………

Regardez I‖economie ………………………………………………………

The edible oil sector in

India is huge. It forms a large

part of consumption of Indian

consumers in households ei-

ther directly as a cooking medi-

um or indirectly in the form of

foodstuffs or cosmetics. India

produces less than 50% of its

domestic oil consumption and

meets the rest of its demand

by imports. It is the largest im-

porter of oils in the world. To-

tal edible oil consumption in

the year 2010-11 was approxi-

mately 16 million tons and only

7 million tons was produced

domestically. India imported

around 9 million tons of oil out

of which 80% was Palm Oil.

Palm Oil is mixed with other

oils and used in the food indus-

try on a large scale due to its

low cost. Soybean Oil, Rape-

seed Oil and Groundnut Oil are

few of the other major oils

used in India.

The oilseed production

in India was enhanced by Tech-

nology Mission on Oilseeds

(TMO), an initiative of Ministry

of Agriculture in 1986. This was

started to make India self-

sufficient in oil production.

Even though the Oilseed pro-

duction in India has increased

with time owing to high Mini-

mum Support Price (MSP) pro-

vided by the Government, India

is unable to meet the growing

demand of its consumers. The

increase in demand is mainly

attributed to increasing popula-

tion of the country as well as

changing investment patterns

and improving living standards.

Edible oils category

mainly consists of 8 major Oils:

Palm Oil, Soybean Oil, Rape-

seed Oil, Groundnut Oil, Sun-

flower seed Oil, Palm kernel

Oil, Cottonseed Oil and Coco-

nut Oil. The consumption of all

the oils is region specific. The

major factor responsible for

Edible Oil-Procurement Strategy in India




………………………………………………………

Edible Oil—Procurement Strategy in India ………………………………………………………

the region-specific consump-

tion trend in oils is the produc-

tion of different oilseeds in

different areas of India. For ex-

ample, Groundnut Oil is major-

ly used as a cooking medium in

Western and Southern India

due to large scale groundnut

production in Gujarat, parts of

Andhra Pradesh, Tamil Nadu

and Karnataka. All the edible

oils are also utilized by FMCG

industry as ingredients in

different products along with

their use as a cooking medium.

The price of the Oils also varies

region-wise but it is usually

close to the price at which it is

traded on a commodity ex-

change. The category (oils) has

experienced high volatility in




prices since past few years. In

the past one year, prices have

increased by double digits.

Whenever the price of any oil

increases, the price burden

doesn’t stay limited to the oil

manufacturer or FMCG Compa-

ny that is using it as a raw ma-

terial. But it is also passed on to

consumers who buy the end

products from the market.

From the graph, we can

notice that these Oils operate

at a certain premium to each

other. Also, we observe that

Groundnut Oil has always been

the most expensive and Palm

Oil has been the cheapest in

the Edible oils category. The

graph also tells us that the Oil

market moves together i.e. the

whole basket of edible oils

shows the same price trend at

one point of time.

There are various rea-

sons for fluctuation in prices.

The most important factor is

the Supply-Demand mismatch.

Apart from that, other factors

are: Exchange rate fluctuation,

availability and price of respec-

tive oilseed, proportion of

oilseeds crushed to produce oil,

………………………………………………………


price of other oils as well as

overall economy.

Major Players:

The major players in the

industry are companies like

Adani Wilmar (largest producer

of edible oils in India), Marico,

Cargill India and Ruchi Soya

which have edible oil as their

major business and other

FMCG companies like Hindu-

stan Unilever, Proctor and

Gamble, PepsiCo, ITC, Kraft

foods, Heinz, etc which use

these edible oils in manufactur-

ing various products.

Oil manufacturers:

Edible Oil suppliers can

be categorized as:

Millers are manufacturers who

crush oilseeds to expel oil or

use solvent extraction methods

to extract oil. The oil that is ob-

tained by crushing of oilseeds is

known as Expelled Oil whereas

the oil that is obtained by sol-

vent extraction technique is

known as Solvent-extracted Oil.

These millers not only sell the

Oil after it is obtained from the

oilseed but also sell the Oil

cake i.e. the by-product of

crushing. Oil cakes obtained

from different oilseeds are

traded on Bombay Commodity

Exchange. These oil cakes are

majorly used as cattle feed be-

cause of their high protein con-

tent.

Refiners are manufac-

turers who chemically refine

the oil to purify it and remove

all contaminants and impurities

if any. Many oil companies ob-

tain expelled oil, refine it and

supply to their clients or sell in

the market.

There are also manufac-

turers who do both milling and

refining. Suppliers are also cat-

egorized as Traders or Brokers

who act as a third party and

help the FMCG companies

meet the vendors and assure

the companies of a regular sup-

ply.

Commodity Exchange

Oils are traded on Com-

modity exchanges either in the

form of Spot trading or Future

contracts. Spot trading is buy-

ing and selling of commodities

on the spot i.e. at the current

price whereas Future contract

involves a contract made at the

current price but the delivery

and payment is made at a later

stage. There are a number of

risks associated with the com-

modities. So as to mitigate the

risks, Hedging is done. Hedging

is making an investment to

mitigate the risk associated

with price fluctuations. Two

concerned parties i.e. buyer

and seller decide to exchange a

certain quantity of commodity

at a future date at the price de-

cided today. This is done by in-

volving a third party i.e. a fu-

tures exchange. In this way,




………………………………………………………


both the parties hedge against

the risk.

Procurement of Edible Oils:

FMCG companies have

various business verticals: Mar-

keting, Human Resource, Fi-

nance, IT, Sales and Distribu-

tion and Supply Chain. All the

business verticals are im-

portant but a robust upstream

definitely gives the company an

edge over others. It is very im-

portant to have an efficient

Supply chain as it has a direct

impact on finished product’s

quality as well as price. Both

the parameters are very im-

portant for any FMCG compa-

ny. High quality and Low priced

products are what the consum-

ers demand. In order to deliver

high quality finished products,

the company needs to procure

high quality raw materials. Pro-

curing these raw materials is a

function of the Procurement

division of Supply Chain. Also, it

is expected from the procure-

ment team to procure these

high quality raw materials at

minimum possible prices. This

can be done by tracking price

of commodity on an exchange

or in the local market and then

negotiating the price with ven-

dors so that it is procured at

least possible price. Apart from

price and quality, the team is

also held responsible of the

timely delivery of the raw ma-

terials at the manufacturing

plant i.e. Availability. Generally,

the vendor/ supplier should be

located in the region close to

the plant for timely delivery of

oils as well as low freight charg-

es. Therefore, the procurement

team must ensure quality, price

and availability of raw materi-

als.

In order to ensure the

above, the procurement team

forms various purchasing strat-

egies like developing vendors in

the region close to their plant,

in regions where the availabil-

ity of raw material is high or

inplaces where there is a com-

petitive market i.e. where man-

ufacturers are concentrated.

Other strategies include track-

ing commodity exchanges to

negotiate prices and develop-

ing other cost cutting models.

For example, recently

Groundnut Oil prices were very

high as compared to other

commodities. This was mainly

due to diminishing availability

of the oil in Indian market. Due

to the reduced availability and

high prices, procurement

teams of all the companies that

use Groundnut Oil as an ingre-

dient would have developed a

strategy to mitigate these is-

sues. The strategy could have

included getting into long term

contracts for groundnut oil,

buying oil at spot price and

storing it for a long period of

time, buying and storing

groundnuts and processing

nuts when required, backward

integration or in extreme cases

switching to a different oil alto-

gether. Surprisingly many com-

panies in India did use the last

option and switched to other

oils such as Rice bran oil,

Cottonseed oil and Soybean

Oil!




Article by Aashwi Verma PGP-Agribusiness Management, IIM Ahemdabad [email protected]


Department of Management Studies, IIT Roorkee

Roorkee - 247667, INDIA

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domination october 2012

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