BizEdge August2012
Transcript of BizEdge August2012
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BizEdge
August 2012
INDEX
A monthly newsletter for business
owners & entrepreneurs
1. Changing Times pg 2-72. Spotlight:
a) How to professionalize familybusinesses pg 8-10
b) Evolution of the Indian shopper
pg 11-14
3. Out of Box pg 15
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1. Changing Times
News that impact your
business
NSE models SME bourses on
global peers
The National Stock Exchange (NSE) is all set
to take on the Bombay Stock Exchange
(BSE) in the small and medium enterprises
(SME) segment. The NSE, which will make its
debut in the space nearly five months after
BSE saw the listing of the first SME IPO, has
modelled the platform on the lines of
Londons Alternative Investment Market
(AIM) and the NASDAQ of the US. To ensure
higher market participation, NSE says it has
worked to create an eco-system and will
allow companies with strong fundamentals
to list on its platform. Even though grading
for SMEs is not mandatory, NSE emphasis that
SMEs opt for it, will instill confidence among
investors. NSE has a tie-up with rating
agency CRISIL. Their emphasis will not only
be on the number of IPOs but on a strict
check on quality of companies. Initially, we
are ready to hand hold SMEs and facilitate
them with means that will ensure high
investor participation. We want to ensure
that companies coming on our exchanges
are run by a professional management
team.
Source:http://www.business-standard.com/india/news/nse-models-
sme-bourseglobal-peers-/484934/
SMEs witness faster growthwith unified communication
Due to globalisation of markets and
competitive developments SMEs today face
a lot of challenges. This requires companies
investing in infrastructure which are flexible,
scalable and at the same time offer
investment protection. One of the important
aspects of SME's infrastructure is is the
communication systems which they deploy.
The company establishes its credibility,
image over a period of time and
communication works both as
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1. Business News
complimentary and supplementary to that.
The SMEs need a sound communication
platform that allows them to collaborate
with the key demographics despite
geographical distances. A platform that
would help such entities in effective
communication with associates, partners
and investors located across the globe that
would help the SMEs establish a presence
network that enables its clients and
associates to stay connected.A unified communication system can give a
competitive advantage. It will help in taking
fast decisions which will provide advantage
of new business opportunities, expanding
markets and improve the overall efficiency
of the organisation. Unified communications
ensure a common platform where voice,
data and video are integrated and treated
as a single entity and at the same time
providing the necessary flexibility of any form
of communication. This ensures that the user
does not miss out on any communication
whether it is voice or data and provides him
with a choice of getting the same in any
required format i.e., voice or data.
A classic example which comes to mind
immediately is that of sales person who
spends most of the time on field and very
little on his desk. He or she does not need to
worry on missing out on important customer
calls, orders or for that matter the sudden
change of sales targets assigned by his boss.
Having said this, the most important feature
of the communication system deployed is
storage, processing and access to the
information. An information transmission
system based on integrated information
system leads to an improved administrative
and operational efficiency. Lack of such a
system may lead to issues like low
productivity, long times in transactions
ultimately effecting the growth of the firm.
Source: http://articles.economictimes.indiatimes.com/2012-
08-31/news/33521399_1_communication-systems-smes-
medium-enterprises
Small and medium enterprises
must invest cash lying idle in
short-term plans
Given the various incentives by the
government, SME contribution to GDP are
expected to rise.However, most SMEs lack in
one particular aspect, that of efficiently
managing whatever small amount of cash
they have at their disposal. Officials at large
companies , which have grown from their
humble days, say that with their cash every
SME should keep three things in mind:
liquidity, safety and return . However, in most
cases it is found that unaware of the options
available for generating higher returns on
their cash, SMEs keep most of it in current
accounts and bank FDs. These avenues give
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them enough safety, some amount of
liquidity but sub-optimum returns on post-tax
basis. There are better investment options in
the market which can help them optimize
their returns.
Among such investments are liquid and
liquid-plus plans which offer high liquidity
and higher post-tax returns, but come at a
slightly higher risk. Back-of-the-envelope
calculations show that post-tax returns from
these funds are usually 8-12 % higher than
what bank FDs can generate. Here, the
point to remember is that like FDs, returns onliquid funds too are linked to the prevailing
market rate. As an SME money manager,
one has to keep this in mind. Another
investment option is the fixed maturity plans
(FMPs). These schemes give nearly a
guaranteed return with a high degree of
safety. However, investing in FMPs means
sacrificing liquidity since investments in these
schemes are locked-in for the duration of
the scheme. Although these schemes are
listed , there is hardly any trading in these
papers.
Source: http://articles.timesofindia.indiatimes.com/2012-08-
28/personal-finance/33449405_1_smes-investment-option-
medium-enterprises
MSME ministry may broaden
definition of small firms
The micro, small and medium enterprises
(MSME) ministry has initiated a process to
broaden the definition of such companies.
The commerce ministry has also sought the
change in the definition to allow overseas
single-brand retailers such as Swedish
furniture retailer Ikea to meet local sourcing
rules. Indian laws define SMEs as companies
that have invested $1 million or less in plant
and machinery.
Ikea, which plans to invest as much as 1.5
billion in India after the government allowed
100% foreign investment in single-brand
retail, has asked the industry department to
change the definition of SME to allow it to
source from comparatively larger
companies. The rules mandate that foreign
retailers source 30% from small and medium
enterprises; Ikea wants to be allowed to
comply over a period of 10 years. We
would like a change. In India, the definition is
based on investment, in some parts of the
world; it is based on turnover or number of
laborers. In some countries, it is a mix of two
or three criteria, the official said. There are
many options which are possible. We will
take a final view after the standing
committee submits its report.
Source: http://www.livemint.com/2012/08/22215836/MSME-
ministry-may-broaden-defi.html?h=B
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Startup ventures are betting
big on India's small-town
boom
In places largely bypassed by the big-name
brands, enterprising businessmen are
building malls, multiplexes and retail
businesses to take the latest in shopping and
consumer trends to small-town India.
Ventures such as Promart, Stargaze
Entertainment, eDabba and Miraaya are
catering to an increasingly affluent set of
consumers living in cities and towns like
Ajmer, Kurukshetra and Tinsukia who are
demanding the same products and services
that metrodwellers have easy access to.
And, as these entrepreneurs are finding out,
small-town consumers are also willing to
spend, if not more then at least as much as
metro-consumers.
A Nielsen study late last year mentions that
Middle India, a region made up of
approximately 400 towns, each with a
population of 1-10 lakh, is home to 100
million Indians and accounts for a fifth of the
overall consumption of fast moving
consumer goods.
"The Indian economy is going to be fuelled
increasingly by the 400 million people who
live in small towns and entrepreneurs who
recognise this have an advantage." says
Justin Sargent, MD-Consumer, Nielsen India.
"These entrepreneurs are following a smart
model of meeting small town aspirations."
Source:
http://articles.economictimes.indiatimes.com/2012-08-
31/news/33521296_1_towns-justin-sargent-promart
Why India needs 1000 startup
incubators to spark mass
innovation
India needs many more entrepreneurial firms
to meet the myriad needs of its population.
There are many reasons as to why India lagsbehind in the number of startups relative to
the scale of requirements or in comparison
to other entrepreneurial nations such as
Israel or the US. Lack of early business
support and mentorship is probably one of
the most important reasons why India does
not generate sufficient startups. First-
generation entrepreneurs require extensive
mentorship, guidance on business and legal
matters, a conducive and collaborative
work environment and necessary
infrastructure.Incubators generally followthree distinct operating models: academic,
real estate oriented, or accelerators.Academic incubators are generally situated
on the campus of an academic institution.The Harvard iLab is a good example of this
model; it is based in a 30,000 square feet
facility on the Harvard Business School
campus.
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The second incubator model is real estate
oriented. Since 1999, the Cambridge
Innovation Center has leased over 155,000
square feet of space to startups of all
kinds. 500 companies are clustered over 7
floors in a mid-rise building owned by MIT but
leased out by the Cambridge Innovation
Center.
Companies range in size from 1 to 15
employees. Startups find the environment
and buzz highly attractive. As the
Cambridge Innovation Center has grown, it
has created its own ecosystem. VC, legal,
and design firms have offices in the Center
providing entrepreneurs access to high-
quality services. The third incubator model is
a mentorship-oriented model such as Y
Combinator and TechStars. These
accelerators run a selection process to bring
in 20-40 startups for a 90-day boot-camp
experience. Y Combinator has 9 partners
that provide extensive mentoring to their
start-ups and extends funding, rarely more
than $20,000, in return for 2-10% equity in the
company.
Many VCs are associated with Y Combinator
and startups are able to raise money rather
quickly. The Y Combinator partners are
experienced entrepreneurs and provide
high-quality mentorship.India needs over1000 incubators in the next decade. Out of
the existing 120 incubators almost all of them
are government sponsored and affiliated to
academic institutions. SINE, IIT Bombay,
NSRCEL, IIM Bangalore and CIIE, IIM
Ahmedabad are success stories but clearly
this is insufficient. Many incubators fail over
time.
The factors that lead to their collapse
include inability to manage the difficultchemistry of high-quality startups, extensive
mentorship and value-added
services. Given these circumstances, it is
probably best for governments not to
directly fund incubators and accelerators.
Participation of the private sector through
PPP or for-profit models is crucial. If
incubators are able to successfully support
startups then they will thrive; otherwise they
will fail the market test and shut down.
Source: http://startupcentral.in/2012/09/why-india-needs-
1000-startup-incubators-to-spark-mass-innovation/!
Bharat spends more than IndiaConsumption in rural areas growing faster
than in cities, towns for first time in 20 years,
Crisil report says Consumption in rural India is
growing at a faster pace than in cities and
towns for the first time in two decades, a
new report by credit rating agency Crisil Ltd
said. It attributed the growth to a rise in
household incomes due to greater non-farm
job opportunities and government-initiated
employment generation schemes. Between
2009-10 and 2011-12, additional spending in
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in rural India was Rs.3.75 trillion, significantly
higher than the Rs.2.99 trillion in urban parts
of the country.
Source:http://www.livemint.com/2012/08/29210407/Bharat-spends-more-than-India.html?atype=tp
Google launches premier SME
partner programme
Led by strong demand for digital advertising
from small and medium sized businesses
(SMBs), Google India on Wednesday
launched Premier SME Partner programme
to maximise its reach to SMEs businesses
spread across the country. The company will
provide specialised services to SMEs to grow
their businesses through digital advertising.
Googles Premier SME Partners will be trained
to offer the highest level of expertise and
proficiency in developing, launching and
managing digital campaigns for SMBs.
These partners will offer end-to-end
marketing solutions like search engine
marketing, localised marketing solutions
across Google properties and mobile
advertising platform. The company will also
invest in helping partners with dedicated
marketing and sales support that includesdirect access to Google, co branded
market collateral, market research, training,
offers, technical and operational support,
assigned account manager and joint sales
pitches.
Source: !http://www.thehindubusinessline.com/industry-and-economy/marketing/article3862333.ece?ref=wl_industry-and-
economy
India Factoring: the way to get
SME credit beyond banks
The role of a factoring business is yet to gain
ground in India wherein small and mediumenterprises (SMEs) struggle to get funding
support from banks on concern of asset
quality. At a little higher cost of funds, a
factoring company can well be the liquidity
generator to scoot the SME growth engine.
Small businesses sell their products to other
big companies, which do not immediately
release cash. Meanwhile, the former, with
limited wherewithal, require more funds to
expand their business. Banks are not so keen
to extend credit to them beyond a point.
Here comes the role of a factoring
company, which gives 80% of the
assignment money upfront at an interest cost
in the range of 14-15% per annum to the
seller (chargeable on monthly basis). The
factor will recover the money from the
product buyer after a stipulated period. If
the SME client does not repay interest, the
factor will deduct it from the rest 20% at the
time of final realization.Typically, business
entities with turnover of Rs 20-200 crore avail
this form of credit facility. For India Factoring,
ticket size is in the range of 2-18 crore.
Source:
http://www.moneycontrol.com/smementor/mentorade/fina
nce-capital/india-factoringway-to-get-sme-credit-beyond-
banks-746989.html
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An insight from Mr. Harsh
C Mariwala, Chairman &MD Marico
I joined my family business in 1971. My family, a large joint
one, owned diverse businesses collectively managed by
family members. The businesses ranged from trading to
manufacturing, but none leveraged any significant
brands. In this backdrop, I strived over the subsequent two
decades to create a distinct identity for a successful
brand-based FMCG business.
Still, in 1990, when we carved out the FMCG business into a
new company called Marico, it was a leap of faith for me
personally and a quantum jump for the business, which
then had a turnover of Rs 80 crore. The separate
corporate existence did impart a sharper focus and
enhanced the growth potential. But it also held out a
challenge how would a new, unknown company
attract talent?
We inherited about 200 employees of our parent, Bombay
Oil. But we needed fresh talent to build profitable brands.
We could not afford mass advertising. So we adopted an
innovative approach. We came out with two news-styled
recruitment ads. The first dramatically announced: '200
Employees Walk Out of Bombay Oil'. The second
screamed: 'Mass Killer Nabbed'.
2. Spotlight
a) How to
professionalize family
businesses?
Mr Harsh Mariwala, Chairman & MD
at Marico Industry shares insights on
how Marico became an FMCG
behemoth we know today by seeking
the right professional expertise.
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The campaign was fresh and unique, and fetched us the desired attention. The transition towards
professionalisation is crucial for a family business. In such an enterprise, typically, members of the
family handle virtually all key aspects. They take most decisions with or without professional
qualifications or business exposure. However, a mix-up between ownership and management
could lead to conflicts in decision-making. I have seen organisations where relationships among
owner-manager siblings get too complex.
Finally, the business wilts under emotional strain and lack of business focus. Interestingly, the seeds
of such a decline are sown during growth itself. The evolution phase is exhilarating. Owner-
managers carry limitless energy and are eager to do well.
But that is against the backdrop of potential conflicts on how to deal with the growth, and the
dreams and thoughts that underlie growth ideas. There could be more sparring and deadlocks on
the arrival of the next generation, armed with better education, more sophisticated exposure and
new ideas. Families could differ over the pace of growth and the investments required or
eventual aspirations. This eventful phase in the scaling up of an enterprise is crucial and needs
careful handling. A key institutional decision that needs to be taken is about the role of
professional managers. My experience with professionalisation has been excellent. Since I stressed
on professionalism, Marico's business has grown 50 times from Rs 80 crore in 1990 to Rs 4,000
crore in 2012.
Let me share with you what I learned from my own growth journey. Professional managers bring in
specialisation in general management or expert functions. They are qualified and experienced
to deal with growth. They can take decisions and run the business on sheer merit, not yielding to
undue influence. The merits are many. Therefore, the dilemma before owners is not whether to
professionalise. It is about when to do so. Scaling up business requires scaling up the
organisational apparatus and management.
Usually, there comes a point beyond which the owner family cannot meaningfully organise and
manage the business. If a family business does not professionalise in time, it could end up
restricting its growth orbit. I do, however, reckon it is natural for family businesses to be and stay
confused about the need, suitability and timing of inducting professionals.
I recommend that a family take time to get concurrence. It is also important to send out a unified
and sustainable signal to build a good brand in the talent market, to attract the best
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possible hands. This strategic clarity on recruiting professionals enables the owner family to tap
head hunters with a clear brief, precise needs and realistic targets. A family business may
have to struggle to overcome the initial challenges of the professionalisation process. My
experience is that it pays to be resourceful in this struggle. For instance, it could take time
before one starts attracting quality talent. In the mean time, growth could reveal talent gaps.I filled up such gaps resourcefully, using individual consultants.
Another challenge is presentability. The growth story may be attractive, but the physical
presentability to prospective talent could be suspect. I faced a unique challenge. Our office
was in the crowded commodity markets of Masjid Bunder, hardly a place a bright MBA would
visit, forget join! I dealt with this creatively.
I would fix the first meeting in the top-class environs of Willingdon Sports Club. That provided a
fitting ambience to "sell the Marico dream". I would, of course, take the newcomer to Masjid
Bunder. But that would be later, when the talent was sold on the Marico story.
Source: http://articles.economictimes.indiatimes.com/2012-07-14/news/32675027_1_fmcg-business-family-business-
managers
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Highlighting the
emergent breed ofIndian shoppers
Nielsen's Shopper Trends Study sheds light on the evolution
of the Indian shopper over the last seven years. The annual
study takes place across 52 countries to understand
shopper attitudes and behavior. In India, Shopper Trends isconducted in 14 cities including Mumbai, Delhi, Chennai,
Kolkata, Bangalore, Hyderabad, Ahmedabad and Pune.
Respondents include household influencers between the
ages 18 and 65 in SEC A, B and C. Over 3,300 respondents
were interviewed for the 2012 Shopper Trends Study.
2. Spotlight
b) Evolution of the
Indian Shopper
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1/5th of Urban shoppers shop at Modern Trade Indians are deal seekers as compared to their other Asian counterparts Indians are willing to try out new brands/variants as long as they are getting an
attractive promotional offer
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14 key markets (mega cities and boom towns) account for 3/4th of Indiasmodern trade sales!
Delhi NCR has seen the fastest Modern Trade growth followed by Indore,Jaipur and Pune!
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2 out of 5 consumer actively looking out for premium products! The Rural shopper is now switching to larger packs due to convenience and
value for money!
Source: http://articles.economictimes.indiatimes.com/2012-08-29/news/33476090_1_indian-shopper-evolution-deals
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Stop, Smile, Ponder,Amaze, Mull over !!
3. OUT OF BOX
READING ZONE
Top 5 Business Bestsellersfor the month:
1) Steve Jobs- Walter
Isaacson
2) The Power Of Habit-Charles Duhigg
3) Imagine-Jonah Lehrer
4) Thinking, Fast And Slow-
Daniel Kahneman
5) Mobile Wave-Michael
Saylor
Source:
http://www.nytimes.com/bes
t-sellers-books/hardcover-business-books/list.html
20 miles above Earth on a shoestring
19 year old student Adam Cudworth floated aballoon 110210 ft into the stratosphere equipped
with a 30 camera from eBay to captureincredible footage of the Earth.
http://www.telegraph.co.uk/science/space/9534401/Student-
captures-incredible-view-20-miles-above-Earth-with-30-
camera.html
Why does coffee never taste asgood as it smells?
So its got to do with 2 senses of smell not one.Read more about it.
http://www.telegraph.co.uk/science/9528936/Why-does-coffee-
never-taste-as-good-as-it-smells.html
Liver transplant makes 61-yr-old
young again
We have heard about the adage that Lifedepends on the liver. But is the liver a fountainof youth?
http://articles.timesofindia.indiatimes.com/2012-07-
13/india/32662636_1_liver-transplant-transplant-surgeon-diabetes-
drugs
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