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Telecom has been thrown open and there is healthy competition among the
service providers. Competition ultimately benefits the consumer and that is
the case in telecom too. A price war is on and rates are falling, almost every
day.
Bharati has started offering basic and cellular services. Cellular services
under the brand Airtel and basic services provider, right now. In just a couple
of months Reliance Infocom and Tata Tele too will be launching their basic
telecom services.
Mr. K. Krishnan the CEO, operations, of Bharati, explains that Our USP is
quality and since we focus on this aspect of our service, most, we wont have
any problems. We are in a position to provide quality service to the customer,
since we have created a new network. Connections terminate within 2 km.
from the service exchanges and hence voice quality is very good. In the case of
BSNL, each exchange services up to a distance of 3 km and due to this clarity
can suffer.
Since we have a Optic Fibre Cable (OFC) network, the problem of Network
Busy is eliminated. We have plans for 26 types of value added services.
Customer complaints will be serviced immediately since we have a pool of well
qualified personnel to attend to the complaints.
24 x 7 Service support,
mover advantage is with us. We have clear plans for retaining the customers
we acquire.
Bharati plans to target customers who do not have a telephone connection.
Mr. K. Krishnan the CEO, says, Our first customers will be from this section.
It will take some time for us to wean BSNL customers. We are confident,
customers currently with BSNL, will migrate to Bharati, if we provide quality
service. We are looking at a 60% market share and we are pretty confident of
achieving this.
BSNL the incumbent national player may force a price war in the market.
The Tatas are doing an aggressive pre-launch publicity, through different
media. In contrast Bharati is maintaining a low profile despite launching its
services as it is nor confident of being ready for a huge influx of customers,
resulting from an aggressive campaign. They are going slow on advertising
since they do not want to disappoint customers. In terms of absolute numbers,
India is way behind China, but in terms of trajectory, it is on the same lines as
China. Analysts believe that We are exactly where China was in 1997 and if
you plot the trajectory we are moving up the same way, perhaps faster for
India now. Chain went up to 4-5 million new phones a month. We are
touching 2 million now. The fact is that china is now coming down to about 3
million now. The fact is that china is now coming down to about 3 million
phones a month, while India is slowly rising to that number. India would be
about 200 million phones in five years maybe and China will be 400 million,
but the difference will be half and not one tenth like it is now.
Bharati has also applied for licenses for new circles that will establish it as a
pan India player and has its finger in almost every part of the telecom pie
today: from cellular to basic telephony to international telephony and
bandwidth services.
The competitive intensity in the industry has been very high. Sunil Bharati
Mittal, Bharatis Chairman and Managing Director feels that some smaller
companies are bound to get consolidated or just hurt if they dont get
consolidated. The regulatory movements in this sector have been legendary
this year to the extent that it looks horrifying if you look at it from outside
India. At times the regulatory changes have been quite baffling. On the one
hand theres been a lot of competitive pressure. Unified licensing has also
ushered in.
Mr. Mittal adds, We try to work ahead of the policy that the government lays
out. Sometime we are dealt a good hand and most of the times we are dealt a
bad one. And the idea is to be very nimble and flexible to adapt to the
changing environment.
endeavor to launch new products at a brisk pace and has been quite successful in its
launches.
Nestle India is the third largest FMCG company in India after Hindustan
Lever and ITC. Nestle dominates the culinary (Maggie) and the hot beverages
(coffee Nescafe) segments in India. It has also a significant presence in baby foods
and has merged as a strong No. 2 in dairy segment (after Amul) and chocolates
(after Cadburys). In each of the segments, the company has been growing through
new product launches and new price point presence. In the last couple of years it
has emerged as the fastest growing food FMCG company. In the past 5 year, Nestles
topline and net profits have recorded a CAGR of 15% and 24% respectively.
Processed food major, Nestle India, has reported and encouraging 8 % topline
growth during the December quarter ended 2004. Easing of some of the commodity
prices in the last quarter of 2004 and improved control over costs led to improved
operating margins.
picked up. Also, export performance continues to be inconsistent owing to the shift
to bulk exports of coffee.
The companys exports stood at Rs. 2,571 m at the end of 2003 (11% of
revenues) and continue to grow at a decent pace. But a major portion of this
comprises of coffee ( around 67% of the exports were that of Nescafe instant to
Russia). This constitutes a big chunk of the total exports to a single location.
Historically, Russia has been a very volatile market for Nestle, and its overall
performance takes a hit often due to this factor.
The company has a complex supply chain management and the main issue for
Nestle India is traceability. The food industry requires high standards of hygiene,
quality of edible inputs and personnel. The fragmented nature of the Indian market
place complicates things more.
The company has the potential to expand to smaller towns and other
geographies. Existing markets are not fully tapped and the company can changing
in favour of the consuming class, the per capita consumption of most FMCG
products is likely to grow. Nestle will have the inherent advantage of this trend.
The company has the option to expand its product folio by introducing more brands
which its parents are famed for like breakfast cereals, Smarties Chocolates
Carnation, etc.
Since manufacturing of some products is cheaper in India than in other South
East Asian countries, Nestle India could become an export hub for the parent in
certain product categories.
The company faces immense competition from the organized as well as the
unorganized sectors. Off late, to liberalize its trade and investment policies to
enable the country to better function in the globalised economy, the Indian
Government has reduced the import duty of food segments thus intensifying the
battle.
ii
CASE STUDY
NICHOLAS PIRAMAL
In 02 when Indias homegrown pharma majors were making steady gains at
fighting the multinational companies on their own turf, one major domestic
company stayed away-Nicholas Piramal. But today as many Indian companies
report a dip in generic revenues, the core team at the Rs. 1,321 core company
is convinced that their strategy is beginning to pay off. The companys stock
has appreciated 61% to Rs. 255 since January 04. The company says that
by 2010 it will earn as much 50% of its estimated $1 Billion revenues from
1
2
3
a result, in
1994, 12% of the people in Scandinavia owned cell phones as compared
to 6% in USA.
Case ;
In 1962, Sam Walton & his brother opened the first Wal-Mart store in
Rogers' (Arkansas), USA; & generateq $ 1 million in sales in the first year
itself. In a span of 5 years it notched up sales of $ 12.6 million. .
In 1969, Wal-Mart was incorporated as a company under the name WalMart Stores Inc. Since then, the company has grown multifold to be
ranked as # I in the Fortune's 500 list in 2002. It is the world's largest
retailer and has spread in foreign markets too.
Wal-Mart has been facing stiff competition from K-mart, Tesco, Target etc.
and realising its inability to compete alone has globally entered into tie-ups
with various local firms in the foreign markets. By 2003, Wal-Mart was the
largest retailer in Mexico, Argentina, Canada, Puerto Rico & amongst the
top 3 in U.K. It followed the joint Venture, Acquisition or Greenfield
,operations route to achieve this 'status.
"However, all was not rosy for Wal-Mart. With its excessive focus on cost,
it earned a reputation for being not a good employer. It also earned bad
name for pressurising suppliers beyond limits. Wal-Mart's German
strategy was floundering. It could not make any significant impact on the
retail industry & was running into losses.
In 2006, Wal-Mart ventured into the Indian market as a JV partner of
Bharati, the Indian Telecom giant. Riding on the euphoria' of over 9%
GDP growth rate, booming stock markets, rising disposable incomes,
changing lifestyles, of the IT, ITES led industries, and a general feel-good
feeling India has caught the attention of many local & global firms. With
organised retail amounting to a meagre 2% of retail industry, analysts
believe that sky is the limit for retail.
However, there remain certain grey areas. Real estate prices are skyrocketing every day. The national government has slapped taxes on lending
of commercial space. Being critically supported by the left parties, the
Central Government cannot afford to overlook their opposition to
organised retail in general & foreign firms in particular. The Indian
consumer is notoriously, hard to satisfy and is both very traditional and
global in outlook at the same time.
Other organised players like Tatas, Reliance, lTC, Godrej, etc. are also
sprucing up their efforts to attract the Indian custom,er. Some are even
occupying the 'every day-low prices' positioning right away.
Social concerns about the impact of organised retail on traditional stores,
small shops, farmers, suppliers, commodity prices & the society at large
are increasing. The voices are getting shriller by the day.
Bharati, is believed to have entered into the tie-up with Wal-Mart on an
equal footing & Wal-Mart has to extend its expertise in the supply-chain
management domain and Bharati is to take care of the front end. It is not
very clear whether the Wal-Mart brand name will be used.
Questions:
l) Carry out an ETOP for the Bharati:- Wal-Mart joint venture.
2) Do you think Wal-Mart will succeed in India? Why or Why not?
The transaction is a part of strategic alliance between DoCoMo and the Tata
group, DoCoMo will also make a joint open offer with Tata Sons to acquire
upto 20% of outstanding equity shares of Tata Tele Services Maharashtra
(TTML), the listed subsidiary of TTSL. At the ruling market rate - the TTML
stock rose 7.6% to close at Rs. 17.99 on Wednesday(l2-11-2008) - a 20% stake
is valued ,at 683 crore. Tata Sons, the main holding fir~ of the Tata group,
holds 45% stake in the unlisted TTSL, which, in turn has 38% equity in
TTML,' a mobile service provider in Mumbai and rest of Maharashtra and
Goa.
Here are some of facts of the deal: 1. DoCoMo to get 3 board seats in TTSL.
2. DoCoMo, Tata Sons plan joint open offer for 20% in TTML.
3. TTSL holds 38% equity stake in TTML.
4. TTML NTT DoCoMo has 53 million users over half of Japan's market.
5. Subscriber base : Over 30 million.
6. Per - subscriber valuation - 346.6 dollars.
7. JP Morgan advised DoCoMo, Lazard advised Tatas.
8. 6% buy from existing shareholders.
The transaction will require approval from the Foreign Investment Promotion
Board (FIPB).
In addition to Tata Son's A5% holding in TTSL, Tata-Communications hold
15% in the company. Singapore - based Temasek and Chennai - based
investor C. Sivasankaran hold around 9.9% and around 8% respectively in
TTSL. The rest is held by various Tata group companies.
As on 12-11-2008, Bharati Air Tel, largest Indian telecom player, had a market
cap of 24.3 billion dollars. Air Tel had 80.1 million subscribers at October end 2008.
The Japanese giant had over 53 million customers in September 2008, over
half of that country's market. Of these, 46.4 million subscribe to FOMA,
Meanwhile, in a related development, state-owned oil firms once again cut jet
fuel prices by upto Rs. 2,1 00 per kilolitre. Another cut in A TF prices is likely
to come on 15th November, 2008. Thus, there has been a 20% reduction in jet
fuel prices in three days.
Interestingly, these three Air Lines (Spice Jet, IndiGo & Go Air) control onefourth of the domestic market. Sources said these three airlines plan to
announce the decision on the same day to get maximum mileage against fullfledged carriers-the Jet-Kingfisher alliance and Air India - which no plans to
cut fares.
Post the proposed cut, a Mumbai - Delhi ticket by Spice Jet, IndiGo and Go
Air would cost around Rs. 3,800 including taxes, during non-peak hours as
compared to Rs. 4,475 at present. In comparision, Jet, King Fisher and Air
India's fares in the sector are around Rs. 7,237, Rs. 5,838 and Rs. 6,594
respectively.
Currently, fuel constitutes 50% of the overall cost of airlines. Analyst say that
A TF price cuts would help loss making air lines to reduce their operating
costs. Besides, air line executives expect that a reduction in airfares would
help increase the load factor, which has fallen from 75% a year ago to 45%
now.
Questions
1. Jet - King Fisher alliance and Air India have no plans to cut fares where as
Spice Jet, IndiGo & Go Air are likely to slash fares between 10% to 15%
from
15-11-2008. Is it a right strategy for Jet - King Fisher alliance and Air India?
Comment.
2. Carry out SWOT analysis for Jet-King Fisher alliance.
been widely acknowledged in India and abroad, will be one of the bright spots
in a bleak landscape for the global automobile industry.
Sales have plunged by double-digit percentages, or worse, in market across
the world from US to China. In India, Nano's entry might lead to growth in
the domestic market.
The car may also find a niche abroad, a cash-strapped consumers are likely to
look for bargains.
In 2008, Tata Motors displayed the Nano at the Geneva Motor show and plans
to present the European version at the show in March, 2009. It plans to sell
Nano in Europe at 5000 Euros.
Tata Motors will roll out 60,000 - 80,000 units of the Nano from another plant
in pantnagar in Uttarkhand till the sanand unit is geared upto produce
2.5lakh units a year.
Tata Motors has began aggressively gearing up its distribution network to sell
a car, which will primarily focus on semi-urban and rural areas.
The base version of the Nano, which will be without an A.C. will be priced at
around Rs. one lakh while the A.C. model will carry a higher price tag.
It is learnt that Tata Motors Finance is working on various packages through
SBI and HDFC Bank, to offer competitive interest rates.
Dealer of Tat a Motors said that company might take full payment for
booking. Sona Koyo steering systems executive chairman said. "Nano is the
most
awaited car, and, therefore, its launch is welcomed by the world".
Questions:
1) Carry out an Environment Analysis for Tata Motors.
2) With the launch of Nano Car, will Tata Motors have Sustainable
Competitive Advantage (SCA)? Justify your answer.