Category: Business

Global merger mania has just begun

First IBM-Lenova, then Maytag-Haier and now Unocal-CNOOC (wonder why India’s’ ONGC didn’t bid on this?). Suddenly, you have a hue and cry from all corners of the US, fears of security and what not. I think these large global mergers are just beginning.

With globalization and the current US Govt’s obsession with the spread of freedom and democracy and its pre-occupation with Iraq, the US economy has been sinking steadily. As companies continue to under perform (like Unocal) and their values drop, such mergers and acquisitions are bound to happen. Rather than get into protectionist mode and prevent such mergers, I think these mergers should be encouraged. Its just the inevitable result of globalization and the growth of Asian economies. So “let’s bring’m on”

Prof. C.K Prahalad’s talk at Stanford

Attended a talk by CK Prahalad yesterday at Stanford University. “Changing Lifestyles in Asian Countries: Opportunities for Entrepreneurs” presentation and discussion by:

  • C.K. Prahalad, Professor, Business School, University of Michigan
  • Jonathan Barker, Managing Principal, Center Street Advisors
  • Moderated by Richard Dasher, Director, US-ASIA Technology Management Center

The talk was about growth in India and China and opportunities for entrepreneurs that arise from it. While Jonathan Barker focused on China, Prof. Prahalad spoke about India.

Prof. Prahalad is an interesting and extremely articulate speaker. He spewed plenty of facts, figures, quotes and statistics like most B-school Profs. Some catchy ones:

  • 20M people travel by train everyday in India.
  • The cell phone is more reliable than the watch to keep track of time. A whole generation of people in India and China might growing not ever owning a watch but using the cell phone instead to serve the same purpose in addition to acting as a cell phone, of course.
  • Its easier to teach someone something totally new when they don’t have to unlearn what they have learned.
  • NGOs do very good work in India but they are never good at “scalability”.
  • A small town in Tamil Nadu is developing into a mostly cash less town (all transactions are done via credit card!).

He plugged the benefits of focusing on the “bottom of the pyramid” (which is the basis of his recent book “Fortune at the Bottom of the Pyramid”). According to him there is great opportunity for entrepreneurs in focusing on the bottom of the pyramid since it is a huge market. The challenge is to provide innovative products at a low cost (meaning: affordable to people in developing countries). He identified a bunch of potential sectors but given the shortage of time discussed only a couple of case studies – one from Hospitality sector and the another from Adult Education.

Hospitality: With 20M people traveling everyday in India by railways there has to be an opportunity for providing hotels at affordable prices. Most people can’t afford the conventional hotels. He was a consultant for a study that resulted in the new Indione hotels. These hotels apparently provide excellent quality rooms with internet access etc at an affordable price of around Rs. 900 ($20) per day. They studied the existing hotels and optimized resources to ensure that they can achieve high quality at a low cost. For example, the average Hotel employee per room is about 2.4, but in the IndiOne it is 0.8.

Adult Education: Next he discussed the example of adult education in Tamil Nadu and Andhra. Apparently, most adult education programs require proficiency in the 3Rs (Reading, Writing and Arithmetic). This requires some 400 hours (I think this was the number he mentioned) to achieve an acceptable level of proficiency, and most adults can’t and won’t make the time for it. So they said, “Why bother with all three aspects, lets just focus on Reading”. Then instead of following the conventional — learn alphabets, learn words, then learn reading” approach they developed a different strategy of seeing, hearing, then learning words and finally the alphabets”. All this learning involves computerized content so adults can learn at their own pace as well. TCS and NIIT have embarked on these programs and achieved great success in spreading literacy. However, the business impact of these programs were not discussed.

Audience Question: With all the opportunity being overseas and all jobs going overseas what does the future hold for the middle class here in the US? (there were other questions but this one stood out)

Jonathan Barker in response to this, said that a lot depended on leadership. The US needs to actively invest and explore new fields (like stem cell research) to continue its leadership position.

Prof. Prahalad, agreed with the challenge posed by “the 50 year old who needs to be re-trained” (Tom Friedman’s book apparently refers to it too). However, he said he is not too worried about the future of industry here in the US. He compared the present to the times in 80s when manufacturing was headed overseas. The naysayers said the US was doomed, though that never happened.

Questions like this one raised by this member in the audience are very common these days. But I am yet to hear a convincing answer from any of the experts to questions such as these.

The Irony: Both case studies were very interesting and helped re-reinforce Prof. Prahalad’s view that innovation and creativity can help take advantage of the large available market. Ironically both case studies were the result of efforts by large conglomerates like the Tatas. This is understandable, given that Prof. Prahalad’s “core competency” lies in consulting for large corporations.

In what way does this growth in developing countries translate to opportunities for entrepreneurs?The average Joe on the street with a cool idea will still have to struggle, can’t get very far and could eventually drown to the bottom of the pyramid! In theory yes there is opportunity whenever there is a large market, but in reality how can the small guy with the idea get ahead? The talk and discussion that followed didn’t quite address this issue. There is no question that the Tatas and Birlas will milk the bottom of the pyramid as more cars, cell phones, TV, refridgerators etc are consumed. It would have been far more helpful had there been some specific examples from one of these developing countries, of up and coming new companies/products that have combined innovation, smart business and bottom up growth to achieve success of a significant scale despite stiff competition from the big guys.

Man, All these browsers!

Netscape, IE, Firefox, Safari etc etc. and each of their versions, extensions and what not! Testing websites and applications on each of these has become quite a task. Check out Rediff (a pretty popular site) on Firefox. The home page is pretty messed up. It has been so for quite a few months now. Or maybe its something unique to my PC.

Its about time someone (Microsoft, huh??) came out with a master browsers (Netscape seems to be trying this with its new release) and destroyed all other browsers once and for all. It will make everyone’s life so much easier on the net. There was an article some years back in Time magazine (I think) where the writer suggested that we give all the software business on the planet to Microsoft, then the next time we have trouble we’ll have only one company to blame! (Of course, it could be a hardware issue!).

p.s: Btw, can someone tell me how to prevent pop-ups from this site! I use Firefox for the most part and sometimes IE.

A VC calls it quits

Check out this article by a VC who has decided to quit the VC business. Interesting analysis — can no longer make insane amounts of money from investments, so its not worth it, the dynamics of the VC business has changed etc. Maybe its about time more VCs quit the business. The world will be then be left with less greedy VCs who are ok with the idea of making smaller returns over a longer period of time. Entrepreneurs will have true partners in building companies. There will be fewer VCs but hopefully genuine, quality ones, who won’t have to claim that “their money is different”. With the economic downturn every industry has seen changes, its about time the VC industry did. After all, the business of “making money without doing any work” (quote from a well known veteran VC, Bill Draper I think) can’t last forever!

Flying Autos are here

The airline industry in India is poised to take off in a big way. The rapid economic growth, a growing middle class, plenty of multinational companies, all combined has driven a huge demand for airlines. Quite understandably a number new airlines have enterted the fray: Jet,Sahara, Deccan, Kingfisher, Magic, Spicejet to name a few. Jet Airways, the leading and most established among these, is eyeing the international market. It has just started flights to Singapore and Middle East. The market in India is clearly huge. Airlines can be hugely profitable provided they can find the right routes and maintain affordable price levels.

Deccan airlines uses RK Laxman’s “common man” as its logo/symbol signifying that its aspiring to reach the masses. They have launched a price war by announcing a limited number of seats at Re. 1 per ticket (requires 90 days advanced purchase plus some other requirements). Other airlines are threatening to follow suit. I hope these airlines survive and don’t compromise on quality, safety and other bare essentials associated with air travel.

A friend of mine, aptly described his flying experience in one of these low cost airlines, “It was like a flying auto!!”.

Adobe-Macromedia acquisition

I think this is a smart move on the part of both companies. Macromedia is reaching a point were an imminent threat from Microsoft is inevitable. Adobe on the other hand has always seen Microsoft as a threat. Coming together of these two companies gives Adobe a solid installed base of users and whole bunch of new products. Macromedia on the other hand can develop a more comprehensive strategy to counter the threat from Microsoft by being part of Adobe’s suite of products. Besides, Macromedia has so many products now accumulated from so many acquisitions over the years, that its a good time to evaluate its long list of products. The only downside in my opinion is that historically large mergers have never worked. And of course, some users will suffer because Adobe is sure to end of life some Macromedia products. While Microsoft is all focused on IE and Search, its nice to see parts of the software industry joining forces to beat them in other areas.

What’s all this fuss about iPod?

The media is full of news about iPod and its various incarnations. I guess its a fad that’s catching on real fast. What’s all this fuss about? I find that most people who buy iPods do it because of the craze and thinking that they can use it during their work out, and of course because it looks “cool”. Interestingly, I find that many who purchased it with this intent pretty soon lose interest and let it lie around with minimal usage. It remains to be seen how long can Apple sustain this craze. In any case, hats of to Apple for continuing to bring such cool products to the market.

As for myself, in the car, I am quite happy with the car stereo. At home, I listen to a conventional CD player and on the web I listen to desi music on Raaga. (btw, if you want a large desi collection of songs that you can listen to via the web, this is a great site). I never really felt the need for a gadget that can hold more songs. I never ever used a walkman, so I am not sure I’ll ever buy an iPod.

The Elusive “Good” Indian Travel Agent

Travel to India from the US means purchasing tickets from travel agencies run by people of Indian origin in the US.  These folks clearly give you the best deals for whatever reason. The flip side though, is that customer service is virtually non-existent. Its almost impossible to get a call back from these folks.  I suspect this situation also has a lot to do with us, the customers.  Many of us are ruthless bargain hunters and would contact so many travel agents for quotes and haggle till the cows come home before deciding  on a deal. So these folks are eternally suspicious that you are about to dump them in favor of the next travel agent who is willing to give a tenny-weeny break on the price.  So its an interesting tussle, with the agent on the one hand, aggresively going for the close, while the buyer on the other, desperately heading for the door so they can evaluate “all” options before they can make the call.   The result is that the agent calls you back maybe once or twice before they determine if you are a good prospect for their business.  If you make the cut, then you might receive another call or two, else you are out of luck until you decide you want to make an actual purchase and call and explicitly express your sincere intentions.  

 
I suspect that the money in this business is in volumes. This means, you are likely to get a little more attention if you are purchasing tickets for a family rather than the one off ticket.  So single ticket buyers are certain to be at the bottom of the rung for already pathetic service. Of late, some travel agents have started to communicate via email. While this certainly helps, there is no doubt that the poor customer service in this business is unparalleled and almost endemic, and unlikely to change until market monopoly of these outfits is challenged by some newcomers. After over a decade of experience in dealing with these outfits, my self-learned conclusion is as follows:  They are all equally bad, stick with one agent and your loyalty is likely to be rewarded with some reasonably decent customer service!