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Pratibimb | September 2012 | 1
FINANCE | GENERAL MANAGEMENT | HUMAN RESOURCE | MARKETING | HEALTHCARE | OPERATIONS | SYSTEMS
The Reflection of Management
A Students’ Initiative
Volume II, Issue XII I September 2012 A Monthly e-Magazine
PRATIBIMB
Flash Mob An exploitable promotional strategy
By Ambili Jayachandran, University of Kerala
Book Review of The Toyota Way
By Prof. Rishi Kesava Ram Velure
Faculty Associate, Healthcare, TAPMI
Exclusive Interview of Mr. Prakash Dadlani
Country Head, Marketing Excellence, 3M
Neuro-marketing Can the power of the subconscious affect consumer choices?
By Pramit Das & Subhamoy Ganguly, IMT Ghaziabad
Pratibimb | September 2012 | 2
T. A. Pai Management Institute (TAPMI) is a premier management institute situated in Manipal
and is well known for its academic rigor & faculty-student interaction. The Institute has been
recently ranked amongst top 1 per cent of B-schools in India & 4th in the South Zone by The
Week Magazine.
Founded by the visionary, Late Shri. T. A. Pai, TAPMI’s mission is to provide much needed
impetus to the task of building professional management capability in the country. In the
process, it has also played a role in strengthening the existing educational and health
infrastructure of Manipal.
We are committed to excellence in post graduate management education, research and practice
by nurturing and developing global wealth creators and leaders. We shall continually benchmark
ourselves against the best-in-class institutions. We shall foster continuous learning and
reflection, achievement-orientation, creative interdependence, and respect for diversity with a
holistic concern for ethics, environment and society.
T. A. Pai Management Institute
Manipal, Karnataka
About TAPMI
Our Mission
Pratibimb | September 2012 | 3
TAPMI’s e-Magazine - is the conglomeration of the various
specializations in MBA (Marketing, Finance, HR, Systems and
Operations). It is primarily intended to provide insights into the
plethora of knowledge that relate to the various departments of
Management and to give an opportunity to the students of TAPMI
and the best brains across country to exhibit their creative cells. The
magazine also strives to bring expert inputs from industries, thereby
bringing the academia and industry together.
Pratibimb the e-Magazine of TAPMI had its first issue in December
2010. The issue comprised of an interview of well known writer Ms.
Rashmi Bansal along with a series of articles by students and
industry experts like MadhuSudan Rao (AVP-Delivery, Mahindra Satyam) & Ed Cohen who is a
global leader and chief learning officer who led Booz Allen Hamilton & Satyam Computer
Services to the first rank globally for learning & development . It also included a hugely successful
and engrossing game for finance geeks called “Beat the Market” to bring out the application based
knowledge of students by providing them the platform where they were expected to predict the
stock prices of two selected stocks on a future date. The magazine is primarily intended for the
development of all around management knowledge by providing unbiased critical insights into the
modern developments.
TAPMI believes that learning is a continuous process and is not limited to the four walls of the
classroom. This viewpoint is further enhanced through Pratibimb wherein students manage and
contribute to create a refreshing learning environment outside the classrooms which eventually
leads to a holistic development process. The magazine provides a competitive platform and
opportunity to the students where they can compete with the best brains of the country. The
magazine also provides a platform for prominent industry stalwarts to communicate their views
and learning about and from the recent developments from their respective fields of business
which in turn helps to create a collaborative learning base for its readers.
Pratibimb is committed in continuing this initiative by bringing in continuous improvement in the
magazine by including quality articles related to various management issues and eventually
creating a more engaging relationship with its readers by providing them a platform to showcase
their talent.
We invite all the best brains across country to be part of this initiative and help us take this to the
next level.
PRATIBIMB TAPMI’S MONTHLY e-MAGAZINE VOLUME 2, ISSUE XIII SEPTEMBER, 2012
Pratibimb | September 2012 | 4
It is always a pleasure to witness that certain efforts of the students are sustained and carried forward;
Pratibimb is one such. The oft-beaten track, “We are here to learn,” ends up as a mere platitude when
there are no visible actions and documentation. Whereas there is no dearth of actions at TAPMI,
documentation is not something that many—other than scholars—choose to engage in; it is normally
viewed as uninteresting, drab and a drudgery. TAPMIans have proved that they are equally capable of
actions and of documentation without losing the intellectual flavour of it.
Scholarship is too important a phenomenon to be left to scholars alone, especially in the field of
management. As future practicing managers who will be engaged in rigorous action in different fields
of business, TAPMIans have manifested both the penchant to produce research works and also get
their counterparts in other leading business schools to contribute their thoughts to this endeavour. In
this regard, TAPMIans have truly demonstrated the evidence for creative interdependence, an
important aspect of TAPMI’s mission.
I sincerely appreciate the students and the faculty of TAPMI who have made Pratibimb a possibility
through their scholarly works, co-ordination efforts and support. I wish the team the very best.
Dr. R. C. Natarajan
Director’s
Message
Pratibimb | September 2012 | 5
Editor’s corner
Sushmit Sinha
Manish Mishra
Abhishek Dubey
Namrata Mahapatra
Divyanshu
Varun Anant
Abhishek Raghupungav
Aditya Bhat
Arun Stephen
Devi Kailas
Kannan Venkat
Pallavi Prasad
Rithwik Krishnakumar
Vandna Soni
Prof. Chowdari Prasad Dean (Branding and Promotions)
Prof. Vinod Madhavan Asst. Prof. , Marketing
Prof. Srivatsa H S
Associate Prof. , Marketing
Prof. Vrishali N Bhat Asst. Prof. , Economics & Finance
Prof. Animesh Bahadur
Asst. Prof. , Human Resources
Prof. Sanjay Choudhari Asst. Prof. , Operations
Prof. Mohan Kumar V Associate Prof. , Systems
Editor in Chief
Marketing
Design
Creative & Cover Design
Communications
Sub-Editors
Publishing
Faculty Advisors
Dear Readers,
Pratibimb has imbibed new members!
With a fresh batch at our campus in TAPMI, Manipal, Team Pratibimb has seven innovative new members who now comprise the sub-editorial team. Our latest September issue has seen a colossal number of contribu-tions. ! To aid us decide which entries really merit the cut, we have a con-tinual rendezvous with many faculty members. I, on behalf of the entire team would like to congratulate all who have had their contributions pub-lished We at Pratibimb salute all who have contributed in any manner to augment this magazine.
Our current issue carries special features such as an exclusive interview with Mr. Prakash Dadlani, 3M and another interesting interview with Mr. Ashok Bannerjee, Flipkart which was published by Yourstory.in. We also have our faculty member Prof. Rishi Kesava Ram Velure who has written a book review of the all famous management book The Toyota Way.
Our association with Jaipur Rugs has now advanced a stage. Pratibimb will now partner with the Jaipur Rugs Foundation to sponsor t-shirts to contributors of published articles. Not letting too much of the cat out of the bag, let’s maintain the hint of anticipation. A second major progress is that we will brusquely be distributing certificates to winners of various contests. The approved design of tees and certificates will be also re-leased through our page on Facebook at
http://www.facebook.com/pratibimb.reflecting.management.
I urge all readers to like the Facebook page to stay updated with the lat-est. The hub of the page is not just the content from the magazine but also trending articles from diverse sectors of management.
Lastly, we would like to thank all faculty members who have provided their valuable feedback to help maintain the the standards we have strived to attain. Also, send in your valuable suggestions or feedback to pratibimb@tapmi.edu.in
Enjoy Reading!
~ Sushmit Sinha
Pratibimb | September 2012 | 6
Contents Functional Beverages: Industry Analysis 7 by Divya Bhatia, Welingkar, Mumbai
Flash Mob — Prospects as an Exploitable Promotion Strategy 11 by Ambili Jayachandran, University of Kerala
Below the Line Advertising and the Changing Trends in Advertising 14 by Shashank Srivastava and Sarbaswarup Mohanty, IIM Lucknow
Interview: Mr. Prakash Dadlani 17 Country Head, Marketing Excellence, 3M
Interview: Mr. Ashok Banerjee 19 VP Supply Chain and Data Platform, Flipkart
Book Review: The Toyota Way 21 Prof. Rishi Kesava Ram Velure, Faculty Associate, Healthcare, TAPMI
Riding the Technology Wave 23 by Shreesha Ramdas and Harish Reddy
Yellow Metal, Yellow Fuel causing Economy Blues 25 by Vibhu Gangal, SCMHRD
Neuromarketing: The power of the subconscious 28 by Pramit Das and Subhamoy Ganguly, IMT Ghaziabad
Indian Corporate Bond Market 32 by Siddharth Pal, IIM Rohtak
Pratibimb | September 2012 | 7
Functional Beverages: Industry Analysis
by Divya Bhatia, Welingkar Institute, Mumbai
INTRODUCTION
The first functional beverage which was launched was to
hydrate the body. But today large numbers of functional
beverages are available for various lifestyle problems
ranging from anxiety to sleep to weight loss etc. Coca Cola’s
Shock and Red Bull were the early entrants in the industry
and are the ones who give chance to late entrant to think
about the industry.
Functional beverages can be defined as ready to drink
formulation with ingredients such as herbs, vitamins,
minerals, amino acids and raw fruits to provide additional
health benefits beyond nutrition. Various products which
are categorized as functional beverages are sports drinks,
energy drinks, ready to drink tea and coffees, yoghurt, fruit/
vegetable smoothies and even enhanced water. These
functional beverages satisfy need of consumers of
hydration, energy, enjoyment or simply having fun.
The global functional beverages market grew by 3% in 2010
to reach a value of $48,186 million. In 2015, the global
functional beverages market is forecast to have a value of
$62,151 million, an increase of 29% since 2010. Projections
for functional beverages are that market will grow by 103%
in between 2010 and 2015 and total annual sales exceeding
$78 billion in 2015. The Indian functional Beverage Industry
was estimated to be around Rs 11,159 crores in 2010 with a
CAGR of 21% in the last five years. It is expected that the
industry will cross Rs 19,000 crores sales in 2015.
Functional beverages are becoming popular due to their
specific health benefits and are appealing to consumers
because of changing lifestyles. Consumers purchase these
products for both convenience and specific health benefits.
FUNCTIONAL BEVERAGE INDUSTRY
Functional beverages sector can be said to be subsector of
non-alcoholic industry and is fastest growing sector. The
faster growth of sector is also because of saturation of
market by carbonated drinks. The industrial trend is
changing; the consumption of carbonated drinks is
decreasing while that of functional beverages is increasing.
The industry can be broadly divided into four market
segments:
Hydration:
Antioxidants, vitamins and fruit extracts are the
ingredients which hydrate both inner and outer side
of skin. The various vitamins commonly found in
energy drinks for their specific benefits are:
B vitamin: For energy metabolism
E vitamin: Has antioxidant property
C vitamin: To activate people
Gatorade is well known hydration drink for athletes.
Energy and rejuvenation
Red bull, Adrenaline rush, 180 and many more are highly
caffeinated and high energy drinks. These drinks
include stimulants such as taurine, caffeine, sugars, anti
-oxidants and creatine. Although these ingredients are
approved by FDA, some health experts still say that all
these ingredients are not beneficial to health.
Health and wellness:
This segment is about the health conscious people. So they
have introduced less sugar and less caloric beverages to
Pratibimb | September 2012 | 8
target this segment.
Weight management
Due to changing lifestyle there is an increase in obesity and
consumers are looking towards fast and easy methods
to reduce weight that can be easily adopted for their
lifestyle. So various calorie burning beverages,
metabolism boosting effect, fat burning beverages are
launched by companies that go well with people
convenience to reduce the weight.
MAJOR PLAYERS
The players in this category are divided into four types.
One is non-alcoholic beverages companies including
PepsiCo Inc. and Coca-Cola Co. Another type consists of
major food companies such as Nestle, Kraft food, General
Mills etc. The third group is small scaled companies like
local companies. Other segments are traditional medicines
companies products like Patanjali products, Asaram Bapu
products etc.
Various companies which are coming into new energy drink
segment are Dabur, Amul, Britannia, Danone and Rasna. All
these companies want to woo the health conscious young
Indian consumer. Even traditional companies who never
tried hands in such products are also trying.
Dabur will launch beverages under real brand.
Amul Company has come up with Prolife lassee and
buttermilk,
Rasna is even planning to enter into the segment
with a new subsidiary. They are looking for brand
licensing and technical collaboration.
Amway launched Amway XL energy drink which
comes in two flavors of citrus blast and tropical blast.
This product is launched as quick and healthy
solution to stress and fatigue.
ENVIRONMENT ANALYSIS
PORTER’S FIVE FORCES
PRODUCT
The functional beverages has wide range of product like
energy drinks, functional juice, juice drinks, enhanced
water, relaxation drinks, functional soy, rice and almond-
based drinks, coconut water, functional tea, functional
yogurt drinks and smoothies.
The products of functional beverages offer wide variety
targeting different health concerns. One major product is
hybrid drink with combination of vitamins and other
nutrients which has thirst quenching ability. The other is
probiotic or active drinks which have ability to enhance the
power of immune system. The other is for enhancing
memory and mental sharpness. Children are also targeted
by these energy drinks and Nestlé’s Boost is taking the lead
in this segment.
The other categorizations of the products are on the basis
of sports drinks, health drinks, beauty drinks, energy drinks,
weight-loss drinks etc. In the energy drink segment Red bull
is growing considerably fast.
Dairy products are even extending themselves to
more than flavored milk.
Various functional beverages which are available in
the market are Rhino's, Bullet, Cloud 9, Amway XL,
power house, XXX.
XXX has two variants Rejuve and Nicofix. SRK is
brand ambassador and even brand is associated with
KKR as principal sponsor. Nicofix is formulated to
decrease the urge for nicotine and Rejuve is
formulated to rejuvenate mind and body and
Pratibimb | September 2012 | 9
enhance immunity.
SoBe Adrenaline Rush which is priced at Rs 75 for a
245 ml can.
Coca Cola has a global portfolio of five energy drink
brands Vitamin Energy, Full Throttle Fury, Powerplay,
TaB Energy and burn (Shock's global avatar).
GROWTH DRIVERS
1. There are various benefits of functional beverages
which interest consumer. Consumers are interested
in natural ingredients and beverages which are free
from artificial ingredients. As a result this market has
huge attraction for people who are concerned about
health. Diet drinks are low in caloric content and
with less of sugar content. Some drinks contain anti-
oxidants. These drinks have inherent energizing
benefits of fruits and are natural sources of caffeine.
Market of functional beverages is increasing because
people have been become proactive in disease
prevention and control.
2. Energy drinks used in combination with Vodka: In
some cases energy drinks can be used to boost sales
of alcoholic drinks or vice versa. Due to high caffeine
content energy drinks are compatible with alcoholic
drinks especially like premium Vodkas. And another
important point is that both energy and Vodka are
targeted to consumers around thirty years of age.
3. Energy drinks are good source of energy without
providing excessive calories and sugar. A majority of
Indians are now becoming aware about malnutrition
and under nutrition. They are looking for convenient
source of energy and functional drinks are fulfilling
their need.
CONSUMER PROFILE
Typical consumer of functional beverages is well educated,
in between 25-45 years old, having highly disposable
income, belong to upper middle and middle class. Females
consume or try functional beverages more than males.
These consumers are willing to try something new.
Companies are trying to surprise them by coming up with
new products. Surprise can be in form of color, taste and
aroma of product. By surprising customers the purpose of
companies is that consumer won’t get a chance to compare
product with cola or juices. Large consumption of functional
beverages is due to perceived health benefits of product.
CHALLENGES BEING FACED
1. Energy drink segment still remain a new category
with only few established players such as Red Bull,
Cloud-9, Power Horse and Sobe.
2. High price of these drinks are concern for the
company.
3. Food and drug administration (FDA) regulation due
to high amount of caffeine in some of the drinks.
4. Health concerns are associated with drinks. As some
of these drinks contain large amount of sugar and
caffeine which thus increases caloric intake and
further increase the case of heart attack, blood
pressure and other heart risks. As heart rate
automatically increases after exercise, so
consumption of energy drinks may further increase
it. High sugar content increase the chance of dental
carries. Concern is there about consumption of these
drinks in large amount. Some of these drinks are
even found to contain carcinogenic substances.
Various health experts claim adverse reaction using
these energy drinks.
5. The popularity of sports drink is limited to sports
people. Sports drinks are used only by sportsman
before and after performance. Challenge is to make
its presence on casual basis.
6. Though energy drink are more famous than sports
drinks. Their popularity is among night clubbers, long
distance drivers or by people after working long
hours.
7. There is consumer distrust on the claims made by
the beverages.
8. Competition from beverages which are much lower
priced than functional beverages.
9. Some energy drinks have been reported to be
misused by college students because of high content
of caffeine in them.
FACTOR FOR SUCCESS OF FUNCTIONAL BEVERAGES
Product: Drink must taste good and have element of
something new in it. Packaging should be attractive enough
as these drinks are single serving beverages so people want
to get notice when they are consuming these drinks. User
must feel that product works. All the claims behind the
product must be proved by scientific study and have
evidence of testimonies.
Price: Product should be launch in small packs at less price.
NourishCo launched glucose-based drink “Tata Gluco Plus”
in a 200 ml cup priced at Rs 6 and launched nutrient water
under “Tata Water Plus” at Rs 16 for a 750 ml bottle.
Pratibimb | September 2012 | 10
Place: Product should be available at all retail outlets.
Some of the products launched by companies are only
available in night clubs etc.
Promotion: These drinks are promoted with benefits such
as healthy heart, improved immunity and digestion and
energy boosting. Brands need to focus on mass segment.
Product can be promoted by sampling in the modern retail
where consumers are more receptive to product.
Competition: A clear differentiation of one’s product from
the competitor’s product is there in term of ingredients and
their health benefits. As the segment is continuously
increasing the companies are exploring new areas of
industry.
WHAT’S NEW
Energy drink segment is increasing where as natural juices
segment is decreasing. The growth of energy drink segment
has increased even during the recession. What is noticed
that segment is fairly able to maintain its consumer base
but is not able to add more of consumers. More than 800
sports and energy drinks were launched in 2010 all over the
world.
Protein drinks are also much in demand. These drinks are
targeting to consumer looking for basic nutrients such as
protein and fiber. These products reduce the weight while
maintaining the general lifestyle as these is convenient on-
the-go snack. The problem with this segment growth is that
people still think that drinks cannot be good source of
protein. Protein can only be provided by bars and powder
formulation.
Traditional products with ingredients such as caffeine,
vitamins, herbs and anti-oxidants are replaced by
ingredients such as protein, omega 3 fatty acids. Range of
products has broadened to sugar free, caffeine free and
organic products.
The companies are launching products with less of caloric
contents while retaining the same taste of products.
Pepsico introduce Pepsi Next, which has same taste as of
original cola but caloric content is decreased in product.
Pepsico also launched Trop50.
Other line of extension is natural teas. These beverages are
simple with all natural ingredients. Beverages companies
are pushing their functional beverages along with increasing
consumer demand.
FAILURES
Coke came up with energy drink Shock which was
positioned as lifestyle drink in 2001 with tagline ‘unleash
your wicked side”. The product was not able to produce
good market response. Similarly PepsiCo's energy drink
SoBe, GlaxoSmithKline Consumer Healthcare's sports drink
Lucozade and Tata Global Beverages's tea-based wellness
drink T!ON are not able to generate good response in
market.
The reasons behind these failures are pricing and most of
foreign companies have launched their product as such
without any local customization. Gatorade which was
initially introduced in Indian markets at price of Rs. 150 but
now product is manufactured in India only and is available
at price of Rs. 30 only.
Other drink launched by coke is burn which is high caffeine
drink and available in three various sizes 250ml, 300ml and
500 ml cans. The product is made not to be mass
distributed through various retail channels, but product will
be available in pubs, selected modern outlets, gym etc.
FUTURE OUTLOOK/RECOMMENDATION
Relaxing drinks have to look for negative claims and FDA
regulation in this segment of beverages.The content of
caffeine, sugar, other health supplement etc in most of
drinks amount need to be regulated, as excess of everything
is bad whether it is health supplement.
References
Business wire India
Nutraceuticals World
Foodlink US, Volume 7, N0-4
Wikipedia
Good management is the art of making problems so
interesting and their solutions so constructive that everyone
wants to get to work and deal with them."
—Paul Hawken, Natural Capitalism
Pratibimb | September 2012 | 11
Flash Mob — Prospects as an
Exploitable Promotion Strategy by Ambili Jayachandran, University of Kerala
Introduction
Guerrilla Marketing was discovered in the late 1970’s. Till
then the aim of marketers was to sell the product by
creating awareness about it. Advertisements adopted the
push strategy by bombarding the customers with
information about the product, through all Medias
available. This was successful in the initial years but later on
it lost its effectiveness. Advertisements did educate the
public but failed to engage or entertain them. It was in
1984, through the publishing of his book, that Jay Conrad
Levinson gave Guerrilla Marketing its form, definition and
recognition. He describes Guerrilla Marketing thus:
"I'm referring to the soul and essence of guerrilla
marketing which remain as always -- achieving
conventional goals, such as profits and joy, with
unconventional methods, such as investing energy
instead of money.”
All that it needs is to think out of the box and have loads of
creativity. It is not preachy or educational but actually
makes the viewer surprised, entertained and even part of
the campaign. The more creative the campaign is the more
attention it captures.
Picture 1:- This is one of the simplest examples of Guerrilla
Marketing and may be the cheapest. All it would
have taken for Nestle is a can of paints, and of
course permission from the city corporation, to
market this product.
It is not necessary that Guerilla Marketing to be used only
for commercial purposes.
Picture 2:- When garbage dumping became a problem,
the Auckland City Council replaced the
regular black rubbish bag into a bushy
hedge, sending a message in itself.
The main success of this marketing strategy is that it is
useful for small business enterprises with small budgets, to
market or promote their product. In the words of Jay
Conrad Levinson, “Guerrilla marketing has been proven in
action to work for small businesses around the world. It
works because it's simple to understand, easy to implement
and outrageously inexpensive. Guerrilla marketing is needed
because it gives small businesses a delightfully unfair
advantage: certainty in an uncertain world, economy in a
high-priced world, simplicity in a complicated world,
marketing awareness in a clueless world.”
Many companies, small or large have used this marketing
Pratibimb | September 2012 | 12
strategy and have achieved a great response in the form of
increased sales and market share in many countries. It is
still used widely but not as frequently, relative to other
forms of advertising or promotional strategies.
Guerrilla Marketing takes different forms such as Graffiti,
Sticker bombs, Flash Mobs and anything or everything
creative.
Flash Mob
Suppose you are in a mall and suddenly regular shoppers
(or so) come together and do something out of the blue,
don’t be shocked. You are witnessing a flash mob. They
might dance, sing, do a tableau or simply do something
together in perfect sync and disperse into different
directions once the act is complete. This is done either as an
advertisement campaign, as a social awareness act, as a
protest or for entertainment.
Picture 3:- Hundred actresses got dressed as Maria
Bello's Jane Timoney character in the
rookie NBC drama in Canada to market
this U.S. network series.
The first flash mob took place in 2003 in New York Macy’s,
where hundreds of people entered a store searching for a
“love rug”. The first flash mob in India took place in
Mumbai’s Chhatrapati Shivaji Terminus, a day after the
third anniversary of 26/11. Shonan Kothari organised this
flash mob as a tribute to the victims of the terror attack.
She was successful in getting permissions from the Mumbai
police as well as the railway authorities and most
importantly, bringing in two hundred youngsters to practise
and dance together for ten minutes. The commuters were
taken by surprise and this was what the mob wanted out of
their performance.
Even though India has gone through a lot of development,
majority of the public are very conventional and traditional.
They are new to this concept and might take some time to
accept it whole-heartedly. Still, this phenomenon has been
taken up and performed in various parts of India such as,
Noida, Vishakhapatnam, Vadodara, Kochi and Hyderabad. It
is safe to say that Flash Mobs are rapidly gaining popularity
and acceptance.
Picture 4:- Flash Mob at Mumbai’s Chhatrapati Shivaji
Terminus, a day after the third anniversary
of 26/11
“It’s the new rage. It’s fun, it’s entertainment and it’s an
effective vehicle for social messages.” This is how Neha
Malude described Flash Mobs in The Hindu’s Sunday
Supplement “Magazine”, published on June 17, 2012.
Current Market Condition
India has a highly competitive market where there are many
enterprises selling the same or similar products. Consumers
are rational and have full access to information about
products (with the advancement of technology and
Internet). So, it has become an absolute necessity for
enterprises to satisfy consumers for their survival. In such a
scenario, the only way in which a firm can have a fair
market share is by creating product preference or loyalty.
This can be done by increasing the product utility and
backing it up with heavy advertising and promotional
strategies. Almost all promotional strategies have become
common and are slowly losing its effectiveness in catching
the attention of the public.
As mentioned earlier, advertisements only educate the
consumers and fait to engage or entertain them. This is
where companies can utilise the concept of Flash Mobs,
which has already started gaining popularity among the
crowds. Flash Mobs have been successful as a social vehicle
Pratibimb | September 2012 | 13
for spreading social messages; in other words, they have
been able to draw attention. So this could be the new
promotional strategy which can be exploited by different
firms.
Prospects of Flash Mobs Being an Exploitable Promotional
Strategy
Flash Mobs seek fun and get it too. So participation can be
ensured; but the main task is to manage or coordinate
them. This of course, is not a Herculean task keeping in
view that there are people like Shonan who have been able
to gather, manage and co-ordinate a two hundred member
flash mob and turn it into a huge success.
On the flip side, Flash Mobs are performed in metros and
malls. This is comparatively a very small portion of the
target market. If a company takes up flash mob as its
marketing strategy, it may not get the coverage that a mass
communication media such as a Television or Radio would.
There might be a little amount of work to do such as getting
permissions or paying rent for the space used and even the
mob (if the concept gets wide acceptability then the mall
authorities might also try to exploit the same).
Most important of all; is its acceptability itself. It is too early
to say if “Flash Mobs” are a fashion or a fad. The difference
is that, fashion may stay for a long time but fad ends as
soon as the novelty of such a phenomenon fades.
Picture 5: - Fashion Picture 5:- Fad
Conclusion
Flash Mobs are new in India and have become the talk of
the town. It has definitely created popularity. The concern
is whether it would gain acceptability in this traditional
society. If it does, it could be the next promotional strategy
exploited by companies to market their products. Being the
most cost–effective (in comparison to other marketing
strategies), at the same time crowd-engaging phenomenon,
its ability in promoting a product is almost undisputable. It
has created positive results as a social vehicle in India, it still
needs to be seen whether it would do the same as a
promotional strategy.
References
Philip Kotler, Gary Armstrong, (2008), Principles of
Marketing, Pearson Education, Inc, Twelfth edition.
Jay Conrad Levinson, Michael W. McLaughlin, (2005),
Guerrilla Marketing for Consultants, Breakthrough
tactics for Winning Profitable Clients, John Wiley
and Sons, Inc.
Neha Malude, The Hindu’s Magazine, Weekly
Edition, Sunday, June 17, 2002 issue.
http://www.ndtv.com/video/player/news/watch-
flash-mob-in-mumbai-wows-commuters-at-
cst/217228
http://urbanpeek.com/2011/06/10/flash-mob/
http://www.hollywoodreporter.com/news/nbc-s-
prime-suspect-promoted-239161
http://weburbanist.com/2008/06/03/the-history-of-
guerrilla-marketing/
http://en.wikipedia.org
http://www.proprofs.com/flashcards/
cardshowall.php?title=ksu-marketing-400-quiz-2
"Management is efficiency in climbing the ladder of success;
leadership determines whether the ladder is leaning against the
right wall."
— Stephen R. Covey
Pratibimb | September 2012 | 14
Below the Line Advertising and
the Changing Trends in
Advertising by Shashank Srivastava & Sarbaswarup Mohanty, IIM Lucknow
In a market rapidly adjusting to changes in technology,
available information and heightened consumer demand,
traditional and brand oriented advertising is no longer the
primary driver of customer behaviour. Its reflected in the
dwindling print newspaper circulation and the stagnant
market of network television commercials, focus of
marketers has now shifted from an “above the line” focus
on reaching a broad population with emotionally oriented
appeals , to a “below the line” approach that stresses
targeted customer centric communications and concrete
returns on investment.
Below-the-line methods are very specific, memorable
activities focused on targeted groups of consumers. They
are under the control of the organisation. For example Kia
Motors uses these techniques to target clearly defined
consumer groups rather than a mass audience like its above
-the-line activity. The purpose of these activities has been
to develop the brand by creating awareness and building a
brand profile. Below-the-line methods include:
Sponsorship
Sales Promotions
Public Relations
Personal Selling
Direct Marketing.
CHANGING TRENDS IN ADVERTISING:
Consumers are faced with a barrage of advertisements
every day in their lives. People are starting to lose interest
and even despise the mass advertising being followed
through traditional channels of mass advertising like – TV,
radio, newspapers, magazines, etc. Consumers are using
technology to counter the entry of ads into their personal
lives.
TV viewers are resorting to digital video recorders
and on demand technologies to fast forward through
advertisements.
Some people use mobile devices to download
commercial free versions of popular television
shows.
Internet users are using software to block spam and
popup advertisements.
Marketers have been tempted to follow one to one
advertising or targeting niche customers. But the practice of
targeting “niche” customers can prove to be costly for
organizations.
Sometimes also the costs of advertising are more than the
costs allocated in the budget for promotional purposes.
Four specific techniques have been identified where
marketers can reach broad segments of people without
overshooting their advertising budget.
Catching people in the bottlenecks: Though people can
easily screen advertisements when they are in their homes
but people every day spend time outside their homes
where they lack the required control. The examples of
bottlenecks can be – waiting in an airport lounge , travelling
in elevator , going up in an escalator in a mall or it can be
travelling in a taxi. In these bottlenecks of life, advertisers
can reach people with acceptable messages.
The purpose of advertising on taxis for advertisers can be
many. The taxi owner gets revenues from space which
could not have been utilized for a better purpose. And the
advertiser gets better visibility since the taxi can roam from
place to place with different customers aboard. This can
prove to be beneficial for marketers than billboard ads
which are fixed and whose effectiveness depends on the
billboard location.
Also on elevators, companies have installed a wireless
digital screen which broadcasts short news and
entertainment programs. The recall rate increases with
frequent travel. Mastercard provided complimentary
Pratibimb | September 2012 | 15
snacks, movie headphones , puzzles and games to travellers
on American Airlines and the flight attendants publicized
the benefits. Even seats on aircrafts and taxis in developed
countries are fitted with small screens which displays ads
and for consumers using the means of transport, they can’t
avoid it altogether. Companies have also advertised in
public restrooms and toilets.
Using
a
Trojan Horse: The concept of “sneaking” ads is familiar with
product placement in films, television programs and even
in video games today. Considering the example of “coffee
cups”, Millions of office goers use insulated coffee cups
everyday during office hours at their desks or in board room
meetings, etc. Normally the companies won’t allow
advertisers to advertise to people inside the office, but the
concept of placing small ads in the coffee cups helps in
gaining visibility for marketers without burning a hole in
their pocket.
Other unique ways can include advertising on pizza boxes,
or advertising on pay checks in restaurants and deposit
slips in banks or on the rear of an airlines ticket.
Also recently garbage truck advertising has come to the
fore. The municipalities can get revenues from unused
spaces on trucks and companies on their parts get huge
unused places to advertise.
Advertising on Garbage Trucks
FedEx Ads on Coffee Cup
Use of Mahindra Flyte in 3 Idiots
Pratibimb | September 2012 | 16
Omega watches in Bond Movies
Targeting People at play: People generally don’t like to be
bothered when they are vacationing or doing some leisure
activity like playing golf. But advertisers have realized that
giving people something they can use is a more thoughtful
approach to brand building than the tactic of pushing more
and more messages when people are glued to the television
or computer. Since this kind of advertising doesn’t disrupt
the people’s activities it is seen as less intrusive for people.
For Example: Golf Carts are being fitted with GPS systems.
Ads can be placed and shown in the GPS system when
player is moving from one hole to another hole. In Hotels,
People can be given trial kits of Razors, toothbrushes or
body wash of some reputed company like Gillette or Oral B.
Getting people to play interactive games:
New technologies help marketers to interact with
consumers in public spaces without employing massive
sales teams. For example: Nokia when it launched its 3300
model contributed a quarter of its advertising budget on
interactive posters. An Adidas Ad replicated a virtual
football field wherein customers could play by passing a
virtual ball to each other.
Many people interviewed after these experiences were
enthusiastic about the whole process which included fun
events and planned to tell others about it.
Hence in the above examples we have seen how the focus
of marketers is shifting from the traditional modes of
advertising to the other newer modes of advertising. Also
direct mails, print response ads and telemarketing are
coming up in a big way to open up new avenues in
advertising and leading to heightened competition among
companies.
REFERENCES:
Nunes Paul F. & Merrihue Jeffrey, “The Continuing
power of mass advertising”, M.I.T. Sloan
Management Review
Paper on – “Tracking the trends : A comparison of
Above the line and Below the line Expenditure
trends, V12 group & Winterberry Group, 2006
http://businesscasestudies.co.uk/kia-motors/using-
sports-marketing-to-engage-with-consumers/above-
the-line-and-below-the-line-promotion.html
http://www.business-standard.com/india/news/
belowline-advertising-onroll/339587/
Pratibimb | September 2012 | 17
Mr. Prakash Dadlani
Country Head, Marketing Excellence, 3M
TAPMI had an opportunity to interact with Mr. Prakash
Dadlani, Country Head, Marketing Excellence at 3M. In an
exclusive interview with Sushmit Sinha and Aditya Niyogi
for Pratibimb, Mr. Dadlani shares valuable insights on
Branding which would strike a chord with any Marketing
student. Excerpts: [The views expressed are his personal and
not the views of 3M or any other organization he has
worked for]
In the balance between master brands and sub brands –
what are the key factors that a manager must take into
consideration while coming up with new products? What
are the associated risks and advantages?
A very important question that should be asked by any
Brand Manager to his Marketing Head at a very early stage
of branding a new product. The call needs to be taken in
sync with the values of the Master Brand and the upside or
downside the product positioning can cause to the
Masterbrand and indeed to the product itself.
In most cases the Masterbrand and Product would benefit
from an association, but the degree of association
should vary depending on the exact current positioning as
understood by customer research and not the 'feelings' of
the brand team.
How does Asian and Indian style of innovation differ from
the western trends? How are products tiered as A, B and
C?
The basics remain the same as to the process of innovation,
which begins at the customer and ends with the customer.
Sometimes macro trends play a huge role in identifying
trends which the customer may not relate to today, but
these are picked by sharp observers of Consumer Behavior
and Tech experts who begin preliminary work on them and
then check with consumers.
Traditionally Asian and Indian techniques and methods
would follow the West, but now the trend of 'frugal
innovation" seems to be originating in India and then going
back to other countries including some Western ones. Here
the traditional Bottom of the Pyramid approach has worked
well for some companies. Here too, however, the entire
mix, i.e., manufacturing, route to market, marketing and
sales support have to be in line with the tier under
discussion to make it a viable and sustainable option.
Let’s say a gap has been identified to launch a prospective
product, what are the basic criteria that we should
evaluate be we go ahead with the development?
The capability of the organization to make ROI is primary.
Hence, it needs to fit the criteria of the support required in
all the above aspects important for the product to reach
and sustain in the market.
What are the challenges involved in sustaining a highly
innovative culture?
Not easy to give a single answer, but allowing a certain time
for people to devote to a project of their own choice,
promoting diversity in terms of educational background and
qualification, interaction with other industries, institutions
and a meaningful reward and recognition platform.
How can a brand strategy be aligned with a company’s
business strategy?
There’s is no option but to make the brand strategy a
INTERVIEW
Pratibimb | September 2012 | 18
driving force for business strategy. For that the definition of
'Brand' has to expand to include all the touch points of
business, Brand is something all functions, HR, Finance,
Sales, Supply Chain, all help build and hence they need to
analyze which of their actions impact Brand and hence
business and work on those actions
What is the test of a successful brand awareness
campaign? Are there relevant metrics that can reflect its
performance to help in brand strategy?
Traditionally we have limited this discussion to Brand
awareness only, however the better measures are the
quality of brand recall, whether the relevant and desired
attributes have set targets and how they fare over a period
of time, setting targets to those attributes in sync with the
brand positioning and measuring them in conjunction with
the sales performance can help understand the impact of
Brand on sales over a period of time. Along the period of
time, mapping of ad campaigns, sales promos and external
factors will help clarify the impact of brand vs. other factors
How can B-school grads maintain a competitive edge in
marketing when they step into the industry?
Interaction with Industry in a proactive basis is the only way
to achieve this. At such interactions both industry and the B
school both get the benefit. Summer Internship is another
good area where students can come in touch with reality.
In many companies technical team, production team and
finance team/purchase team are given individual targets.
Often the goals are conflicting, with production team
wanting a better product and purchase team aiming to
reduce cost. Under such conditions what approach do you
suggest a sales person take?
There are various mechanisms to tackle it. The most
common one is creating of cross functional teams. Over a
period of time the teams understand each other’s pain
points and evolve into a close knit unit. Having a cross
linked goal sheet like a Balance Score Card or a Hoshen
Kaniri System also helps.
In today's market, innovation obsolescence is high
compared to previous decades. How can companies make
buyers adopt their product at a premium on a sustained
basis?
The basis of any product has to be the satisfaction of a
genuine need of a customer. This need may be a felt need
or otherwise. Till the time this is the case a company can
get a decent ROI.
Often new technology in not adopted either because
people do not wish to re-train or they are uncomfortable
with new technology. Does "Client Education programs"
yield benefits?
Client education is an important element of the Value
Selling concept and there is no way this can be avoided. In
fact this is a service many clients seek form their suppliers
as a given. The real benefit is actually when some
companies pay their suppliers to train their larger
organization.
Pratibimb | September 2012 | 19
Mr. Ashok Banerjee VP, Supply Chain and Data Platform, Flipkart
(Courtesy Yourstory.in)
It’s not often that you come across a person who’s had
experience working with the biggest and hottest companies
across the globe – Oracle, BEA Systems, Google, Twitter and
now Flipkart. Meet
Ashok Banerjee, a data scientist who is currently the VP of
data platform and supply chain at Flipkart. More of a
personal decision of moving back to India from the bay
area, Ashok had offers aplenty but he chose Flipkart
primarily because it is the most promising company in India
that is on an exponential growth curve. We got in touch
with Ashok to learn more about what excites him as a data
scientist and the cultural differences of working with great
companies across the world.
YS: Hello Ashok, you have a very interesting profile! A
mechanical engineer who did his masters in Computer
Science and went on to become a data scientist; how did
that happen?
AB: Yes, it has been an amazing ride. Doing my graduation
in mechanical, I realized that I liked the mechanics part of
what I was studying but not the part which involved being
on the shop floor and putting in muscular power doing
Smithy, Carpentry and the likes. Mechanical engineering is
definitely much more than that but Computer Science had
always intrigued me. Even for my post-graduation, I had a
very memorable incident. I had to get a research
assistantship for paying my tuition fees. Having a different
background, it was going to be an uphill task for me but I
did everything in my capacity to get that place. I took a CS
subject as an elective which I topped and for the place of
RA, I chased the professor like anything! I waited for him for
hours and made sure my resume reached him anyhow; I
even flew in a paper plane version of my resume, through
his open office window to make sure he notices my
application.. And eventually I did land the role. Persistence
pays off.
YS: Wow, that’s quite a story in itself! After your post-
graduation, you went to Oracle and subsequently Google
and Twitter. How was the transition?
AB: Well, Oracle was a prestigious job at that time and it is
what makes me proud. They wanted someone proficient in
CORBA and that is how I landed up there. Oracle is a large
organization and is very well structured. BEA Systems which
was a smaller company taught me a lot. It had a much
stronger coordination and communication. Here I saw and
learned a lot from a really strong Management team.
Moving to Google was a very pleasant surprise! I was
amazed at how disruptive Google was and is. Some of the
best innovations in the modern age have come from Google
and it shows! The culture is just phenomenal but one thing
that I can point out as a bit of a negative from a personal
point of view is that Google has a complete stack of its own.
In my 4 years Google changed and felt much more
structured and a larger company feel to it. Twitter was
different as a smaller company. It was still much more of a
startup and involved more pragmatic decision making
around costs/constraints and tradeoffs. Twitter is what
made me think about social networks, growth and
exponential growth. As a company grows exponentially
INTERVIEW
Pratibimb | September 2012 | 20
culture changes dramatically. Employees joining at $2
billion valuation is very different from someone joining it at
$8 billion valuation. As a company grows, communication
models change, the room for misinterpretation increases as
people know each other less. The growth phase at Twitter
was very exhilarating.
YS: Your role at Twitter was very interesting indeed; “User
Growth Initiative”. Tell us about it.
AB: User growth is all about experimentation and
recommendations specially for the new user. Where should
you place an element on the page, what colour it should be
and all such details are a part of it; and these factors have
importance to the customer. A user may never return after
the first interaction so if we cannot connect the new user to
interesting personalized content he may never come back.
The first visit may well be the last. For example, take in very
few details from the user but make the most of it. The first
name, Last name and IP can tell you a lot! First name gives
the gender, last name gives the place of origin and the IP
gives the current location. Clubbing these, a lot can be
known. These helps you make targeted recommendations
and helps you know what a user might want. This is a
glimpse about how the “User Growth Initiative” goes on.
YS: Data is huge. And so is the hype behind it. Is this
validated?
AB: I think it is. The rate at which the amount of information
is growing in unimaginable; traditional databases will be
found lacking. Taking an example, number of pages are
increasing , number of queries are increasing but a person
searching on google would expect a result in less than 0.5
seconds. Similarly on Flipkart the number of items we sell is
increasing the number of customers is increasing but site
must be equally performant and more performant. The
technologies start to become NoSQL and custom systems.
YS: Okay. So, why Flipkart? Why did you decide to make a
move to India?
AB: There were multiple reasons for this. I had personal
reasons and desire to be closer to my mother. I had heard a
lot about the growth story back in India and it excited me. I
wanted to see a growth curve and an even earlier stage
than Twitter. Looking at India, Flipkart satisfies the
exponential growth great technology and culture. This
growth story is what has lured me into Flipkart. I could have
joined any other company but I also wanted to be present
at the Headquarters because for any company, the HQ is
where the core work happens.
YS: So, how has it been at Flipkart?
AB: Oh absolutely fantastic. I was skeptic as to how the
work culture would be because this is the first time I was
going to work from outside the Bay Area but it has panned
out very well. Culturally, I think Google, Twitter and Flipkart
are very similar.
YS: What are your views on the startup ecosystem in
India?
AB: The ecosystem is still maturing and US has more senior
people.However the scarcity of senior talent also opens up
bigger, bolder opportunities for those who are ready and
willing to step up.
We at Yourstory.in would like to thank the organizers at the
Fifth Elephant Conference where we first met Ashok. We
wish Ashok all the best for his new stint with the poster boy
of India’s startup ecosystem, Flipkart and hope for many
good things to come.
Pratibimb | September 2012 | 21
The Toyota Way by Prof. Rishi Kesava Ram Velure, TAPMI
The Toyota Way unleashes the exclusive 14 Management
Principles followed in the world’s largest automobile
manufacturing company, TOYOTA. Liker has succeeded in
describing the blue print of Toyota’s management
philosophy in a well defined manner. The author
acknowledges his 20 years of companionship with Toyota to
authenticate his work. He elaborated the understanding of
cross cultural management learning and openness of
Toyota to share its source of competitive advantage with
the rest of the world, which is highly laudable. It highlights
the holistic approach of considering all the elements as a
part of system and consistent practice of organizational
principles across the company irrespective of the
geographic location. The author was successful enough to
present the practical application of lean thinking and lean
production along with various workplace systems.
The book is divided into three major parts in which, the first
part deals with the uniqueness of the Toyota Way. In this
part, the author explained how the Toyoda family
succeeded in differentiating themselves from the rest of the
world through their Toyota Production System (TPS). The
second part is critical, dealing with the basic principles of
the Toyota Way. In this part, the author has divided all the
14 principles into four sections and explained them in
detail. Finally, in the concluding third part the author
elucidates the application of the Toyota Way in an
organization in making it a lean learning enterprise. Here,
he describes building and transforming a service
organization by burrowing the Toyota Way.
Part I: Using Operational Excellence as a Strategic Weapon
To simplify, the author has classified all the 14 principles in
to 4 categories, namely Philosophy, Process, People/
Partners and Problem solving (constitutes the “4P” model
of the Toyota Way) correlating to the Toyota’s terminology
of Challenge, Kaizen, Respect, Teamwork and Genchi
Genbutsu. This is the foundation for the Toyota Production
System (TPS) founded by Taichi Ohno, is often known as
“Lean” or “Lean Production”, the core principles being
jidoka and One-piece flow. Asking the question “what does
the customer want?” is the way TPS gets started. And,
eliminating the eight wastes is the heart of the TPS, which
are Over-production, Waiting (Time on hand), Unnecessary
transport or conveyance, Over processing or incorrect
processing, Excess inventory, Unnecessary movement,
Defects and Unused employee creativity.
Fujio Cho, a disciple of Taichi Ohno developed a simple
representation of TPS in the form of “TPS House” which
depicts the two pillars of Just-in-Time (JIT) and Jidoka with a
strong foundation of Visual Management, Stable and
Standardized Processes, Leveled Production (heijunka). And,
the roof is made of Best Quality, Lowest Cost, Shortest Lead
Time, Best Safety and High Morale. Waste Reduction,
Continuous Improvement, People and Teamwork are
integral part of the house which runs the entire system,
implying TPS is not just a tool kit but management
philosophy. And, former President, Shoichiro Toyoda gives
the three C’s of Toyota company as Creativity, Challenge
and Courage, in the development path-breaking model
‘Prius’ in 15 months time, which is an industry record.
Part II: The Business Principles of the Toyota Way
The first section is about Long-term philosophy (principle 1)
highlighting the guiding principles of Toyota Motor
Corporation, which include Honor, Respect, Dedicate,
Create, Foster, Pursue and Work. The author has brought
out the uniqueness in the mission of the company to create
constancy of purpose and place in history with three
exclusive elements of contributing to the economic growth
of the country, contributing to the stability and well-being
BOOK REVIEW
Pratibimb | September 2012 | 22
of team members (internal stakeholders) and contributing
to the overall growth of Toyota.
The second section enumerates how right processes will
lead to producing the right results through creating
continuous process flow to bring problems to the surface
(principle 2), where the author explains takt time and One-
piece flow. Using “pull” systems to avoid over-production
(principle 3) elaborates on Kanban system. Leveling out the
workload- heijunka (principle 4) discusses the three M’s
(Muda- waste, Mura- Unevenness, Muri- Overburden).
Building a culture of stopping to fix problems, to get quality
right the first time (principle 5) deliberates on jidoka.
Standardizing tasks are the foundation for continuous
improvement and employee empowerment (principle 6)
emphasizing the need for enabling bureaucracy and
standardization as ‘Enabler’. Using visual control so no
problems are hidden (principle 7) describes application of
five S’s (sort, straighten, shine, standardize and sustain)
and A3 reporting. Using only reliable, thoroughly tested
technology that serves your people and processes (principle
8) signifies how a new technology must support people,
process and values on adoption.
The third section is about adding value to the organization
by developing your people and partners. Growing leaders
who thoroughly understand the work, live the philosophy,
and teach it to others (principle 9) impressing on the
leader’s view of TPS with people through Technical,
Management and Philosophical dimensions and the
interesting Toyota leadership model. Developing
exceptional people and teams who follow your company’s
philosophy (principle 10) explains typical Toyota assembly
operation and holistic approach towards employee
motivation. Respecting your extended network of partners
and suppliers by challenging them and helping them to
improve (principle 11), demonstrates mutual learning and
supply chain hierarchy at Toyota.
The last section of part two, discusses continuous solving of
root problems driving organizational learning, by going and
seeing yourself (principle 12) to thoroughly understand the
situation (Genchi Genbutsu). Making decisions slowly by
consensus, thoroughly considering all options, implement
rapidly (principle 13) describes, empowering junior
employees to take decisions slowly by consensus and
implement rapidly (Nemawashi), Deming cycle, and
alternative Toyota decision making methods. Becoming a
learning organization through relentless reflection (Hansei)
and continuous improvement (Kaizen) (principle 14),
explains about application of five Why’s to identify the root
cause for a problem at the workplace and typical Toyota’s
seven step practical problem-solving process. It emphasizes
on Process vs. results orientation: the role of metrics and
directing and motivating organizational learning (Hoshin
Kanri) - the Toyota’s policy deployment process. Thus, it
concludes how the Deming cycle can be applied at all levels
of the enterprise.
Part III: Applying the Toyota Way in Your Organization
This explains how to understand the reactions for lean
change and identifying problems in the flow of service
organizations. The author illustrates the success of Canada
Post Corporation (CPC) with repetitive service operations.
He further describes developing and improving value
stream maps through Kaizen workshops with key indicators
like the task time (TT), time in system (TIS), and the value
ratio of value added to total lead time (VR). And, concludes
with real time examples of Northrop Grumman Ship
Systems Service Process Kaizen event and Visual Control of
Engineering at Genie Industries.
In the concluding chapter, build your own lean learning
enterprise, borrowing from the Toyota Way, the author
explains the importance and factors influencing leadership
“commitment to lean” journey. He clarifies the myths and
reality of TPS and the difficulties in changing culture. Thus,
the book ends with 13 tips for transitioning your company
to a Lean Enterprise.
Book The Toyota Way
Author Jeffrey Liker
Publishing Date 2004
Publisher Tata Mcgraw Hill
Education Private Limited
Number of Pages 352
Language English
Pratibimb | September 2012 | 23
Riding the Technology Wave by Shreesha Ramdas and Harish Reddy
When we started our company LeadFormix, we resolved to
not seek venture funding for product development.
However, we were open to the idea, particularly for
expanding sales and marketing at a later stage. So, we
started as a services company and named it Outerjoin.
Using the revenue that Outerjoin generated, we evolved to
become a product company. Companies that have evolved
from a similar path include Rhapsody Networks which was
sold to Brocade, as well as Tibco. We started as Outerjoin in
2007 with three co-founders. By 2008, we started to talk
with Outerjoin customers to first test their acceptance of a
social media monitoring solution; then we tried B2B
analytics.
From B2B analytics, we created what’s now known as the
Daily Leads Report. Our early success was an indication that
our business model could scale. Hence, we sought angel
funding. We were fortunate to get early backing from the
founder of Brocade (Kumar Malavalli-http://
en.wikipedia.org/wiki/Kumar_Malavalli) who believed our
‘intent algorithm based’ analytics had a strong value
proposition. Once angel funding was secured, we then
focused on building a customer base.
Soon, our customers asked us to add email and workflow
automation which made our platform useful to marketers.
Before we knew it, we backed our way into what’s now
known as a “marketing automation” solution and
transformed it from a mere analytics tool. We worked on
developing our marketing automation solution and
launched it at the end of 2009.
It took until spring of 2010 before we were sure that we
were competing in the marketing automation space. By
March of 2010, we started to run into marketing
automation competitors, and we started to talk with CRM
companies in order to integrate our solution with theirs.
Having transitioned from a start-up, we set our sights on
expanding our footprint and moving towards establishing a
market leadership. We realized that it was time to seek
venture funding in order to expand marketing and sales and
taking our brand to the next level. Before long,
CallidusCloud swept us away. (http://
techcrunch.com/2012/01/03/calliduscloud-acquires-
leadformix/)
Pratibimb | September 2012 | 24
Shreesha Ramdas
VP of Enablement, CallidusCloud
Currently VP of Enablement at CallidusCloud, Shreesha
Ramdas was the co-founder & COO at LeadFormix, a
marketing automation 2.0 platform, where he raised the
initial funding, built the company and contributed to the
successful acquisition by Callidus in January 2012. Prior to
LeadFormix, Shreesha was a co-founder at OuterJoin, an
online marketing services company that helped B2B and
B2C customers develop and execute effective online
marketing. Before that, Shreesha drove new business
development at Catalytic Software, where he was
instrumental in developing key accounts including Viacom,
Countrywide and Orange. He has also held key
management positions at MW2 Consulting and Yodlee,
where he held the role of General Manager of Yodlee’s
center.
Harish Reddy,
VP – India Operations, CallidusCloud
Harish has a specialisation in Strategic Marketing, Paid
marketing, Media Planning, Search Engine Marketing,
Product Management, Channel management, Affiliate
Networking and Brand Management. Harish has more than
a decade of experience in brand and marketing
management, as well as a background in sales. Prior to
joining LeadFormix, he worked with the Saud Bahwan
Group as their marketing director and before that held a
key marketing position with Tata Motors and was
responsible for Tata’s entry into the branded public
transportation sector. He holds a Post Graduate Diploma in
Business Administration, and a Bachelor's degree in
Engineering.
AUTHOR PROFILES
Pratibimb | September 2012 | 25
Yellow Metal, Yellow Fuel causing
Economy Blues
by Vibhu Gangal, SCMHRD
The demand equation states that the aggregate demand
(and the national income at equilibrium) is an algebraic sum
of consumption demand, investment demand, government
expenditure and net exports. The moment we say
'demand', it is backed by money and indicates a destination
where people roll out the money they possess. If this
money is spent to fulfill any of these demands which add up
to the national income, it’s a positive sign. The more this
happens, the more the country grows economically, the
more is the national income, the stronger is the home
currency. One scenario, where possession of money with
individuals of a nation can harm the economy, is when the
money possessed gets expended big time towards imports,
which makes net exports and overall national income
negative, leaving the investment demand of the nation
unquenchable. A similar thing seems to have happened in
India. Let’s take a closer look at its causes and implications.
Consider an analogy, where we have a dam constructed
with an aim to irrigate fields. It has some water collected in
the reservoir. This water flows to the fields through
channels. Thus, it’s the channels which ensure that the
water in the dam gets utilized for growing crops and not for
domestic purposes of farmers' households. Had the
channels being broken and had the water been routed to
households instead of fields, crops could never have grown
due to lack of water and the production of the territory
could have taken a severe hit. The water is equivalent to
liquid rupee with the Indians, crops to the GDP, and
channels to the government regulations and policies. In
India, a major part of money (water) is spent in buying
volumes of gold by families (household demand). If gold
was available in India, the tendency of buying gold would
have created better circulation of money and the multiplier
effect would have done well to the economy.
Unfortunately, out of 902 tones of domestic annual gold
demand, India produces only two tones and the rest 900
tones is imported.
More the demand for gold, more are its imports, more is
the payment in dollars, more is the influx of rupee in forex
market, more is the outflow of dollars from forex market,
more depreciates the rupee, more expensive becomes any
imported item including gold. This self-feeding spiral
continues and raises ringing-alarm-bells when it reaches a
stage where RBI cannot save the rupee by ad hoc
workarounds like selling dollars and "trying" (rather
struggling) to induce more FII participation.
Indians have imported gold worth $61.5 billion (or around
Rs 341,000 crore) in 2011-12, recording a growth of 44.4
per cent during 2011-12. Same is the case with petrol. A
consistent surge in demand eventually causes the same
vicious circle of events. Together, gold and petrol are the
biggest burden on trade deficit and have worsened current
account deficit badly, causing the sharp decline in value of
rupee vis-a-vis dollar. The trade deficit during 2011-12 was
recorded at $184.9 billion than $118.7 billion during 2010-
11 mainly on account of large imports of fuel, gold & silver
accounting for 44.4 per cent of India’s imports. Reports
suggest that gold imports contributed to almost one third of
the incremental rise in Current Account Deficit over the
2008-2011 period.
Directly, gold contributes 0.36% to inflation index.
Indirectly, it makes all imports including crude oil costlier
fuelling input costs for all industries ranging from plastics to
Pratibimb | September 2012 | 26
automobiles. If the input costs rise, so have to be the prices
of finished products. Eventually it’s the inflation which kicks
off. The time lags between rise in gold demand, rise in
import prices and rise in end product prices make the three
events appear disconnected to the general public and as
the "safest" option, we end up blaming the government
without any knowledge of ground level proceedings.
Arithmetically, every dollar reduction in international oil
prices translates into a cut in product price by 33 paisa. But
every time the rupee depreciates against the US dollar by
one rupee, it translates into a requirement to raise prices by
77 paisa.
Another aspect is, with booming inflation, with industrial
products being costlier than earlier, why would a buyer in
international market prefer buying Indian expensive goods
when the same is available at a lower price in other
countries? Together, with imports already being
discouraged due to sharp depreciation of rupee, this fall in
exports due to inflation exacerbates the trade deficit
causing further decline in rupee value. It all gets again into
the self-feeding loop discussed above.
So, where do we break this infinite-loop of events where
every step, every action has a well justified reason behind
it? But somewhere, somehow you need to break this to get
things in place. Weakening or breaking one block might give
a temporary relief to figures, but in long run, this would
cease growth. Instead, if every link in the chain is made to
melt down in terms of its prominence, it’s just a matter of
time; the whole chain shall cease to be prominent. What I
wish to convey is instead of unplanned adhoc and short-
term steps like giving subsidies on fuel prices and making
efforts to attract hot money sources, this nation needs to
plan for a durable strategy which would 'subtly' and
'indirectly' bring about relatively stiff and lasting changes in
the economy. Here’s what I mean to say…
Whenever individuals hold disposable rupee, government
should ensure that substantial part of rupee gets either
invested into banks, corporate bonds, government
securities and the share market or it gets to quench
'domestic' consumption demand of goods and services.
Let’s remember in a dam, it’s the channels which ensure the
usage of water in desired way and ultimately govern the
production. Whenever it’s expected to have an enhanced
liquidity among individuals, it should be THE time for
government to make capital investment attractive. This
would trigger the multiplier to take effect and eventually
translate liquidity into growth. As far as demand for gold is
concerned, it can be discouraged by raising customs duty
exorbitantly. Buying gold should be made at least half as
tough as buying a scooter was in late 1980s... Even if the
demand for gold reduces partially, this would mellow down
dollar appreciation and prevent further damage.
On the other hand, the consumer which demands gold and
oil so excessively needs to understand that if he chooses
deliberately to intensify imports, he is fuelling inflation to
such an extent that he himself is going to get in trouble. A
major reason for S&P indicating to downgrade India in
terms of its investment-grade rating was a drought of
investment opportunities in India. With Indian businesses
borrowing big-time from foreign sources, with other events
increasing imports and causing rupee to depreciate, Indian
borrowers will now pay more for every dollar borrowed.
With every firm borrowing millions of dollars, the rupee loss
is going to be phenomenally huge and shall reflect on a cost
-cutting approach by companies' management which shall
also include a cut in salaries. Eventually, a self-check on
surge of gold demand can help prevent a number of
significant things.
Recently, after a lot of hue and cry on oil price hike, the
government declared a subsidy on petrol price. I say why?
As a long term plan, the government should let the petrol
price rise so that vehicular usage takes a hit, even though
the hit is marginal. Towns, where bikes and cars are
favorites for personal transport, should be picked up and
transformed into towns with a quality mass public
transport, quality in terms of speed, frequency, availability,
ambience, approachability, grievance handling mechanisms
and any and every aspect which makes mass transport well-
preferred and equal in status vis-a-vis individual vehicles.
This shall help in fading the rise in demand for crude oil and
so shall prevent the rest of the spiral.
One may say that it’s the gold which facilitates loans and so
fosters investment. But one misses to note that at the time
of repaying the same loan taken against gold, the value of
the money repaid plummets so much that the good done by
the investment gets offset substantially by severe inflation,
the root cause for the good and the bad being the same.
One may say that if investment in India is on a backseat,
why doesn't the government invest? But one misses to note
that it would be dumb on the government's front to do so,
as it is already burdened under a budget deficit of 5.19
percent and any further disbursement of money would
widen it more. One may say that subsidies on fuel shall be
continued for some more years as the inflation is cost-
pushed and not demand-driven. But one misses to note
that it’s the demand which drives the entire spiral discussed
Pratibimb | September 2012 | 27
above and it’s the drive of this demand which ultimately
coverts into a cost-push inflation. Thus, it’s high time now
that the administration of the nation gets into a patient and
consistent mission of correcting the fundamentals of
economy at a macro-level with an aim to bring about a long
-term change.
References:
Analogy of dam and liquidity (quoted in second paragraph
of article) referred from knowledge sessions of a mutual
fund firm.
"If you are the master be sometimes blind, if
you are the servant be sometimes deaf."
— R Buckminster Fuller
Pratibimb | September 2012 | 28
Neuromarketing:
The power of the
subconscious
by Pramit Das & Subhamoy Ganguly, IMT Ghaziabad
“Now, my experience is that most of the time, people have
no idea why they are doing what they are doing”
—Clotaire Rapaille, Market Researcher and author of
“The Culture Code: 7 Secrets of Marketing in a
Multi-Cultural world”
Well, he is not alone. Malcolm Gladwell in his celebrated
book “Blink: The Power of Thinking Without Thinking”(2005)
draws on examples from fields of science, sales, advertising,
medicine and music to accentuate his idea of “thin-slicing”-
a concept that some mental processes work rapidly and
automatically from relatively little information. Author and
marketing guru Martin Lindstorm’s bestselling book
“Buyology - Truth and Lies About Why We Buy” (2008)
claims from his experimental studies that subconscious
mind plays a major role in people’s buying decisions.
Psychologist Daniel Kahneman, 2002 Nobel Prize winner for
Economics, in his book “Thinking, Fast and Slow”(2011)
throws light on the ways in which we make choices—most
often, automatically and not necessarily in line with our
best intentions. The authors seem to be mystified while the
marketers still try to unravel the gap between the consumer
intention and action.
As said in a Forbes article, neuromarketing is about making
the intent-action gap visible in a consumer, showing how
different parts of the brain are made to take part by cues
such as branding (for example, Coke vs. Pepsi) or by facing
a spend-or-save choice between whether to indulge for
pleasure now or delay gratification for some later date.
While neuroscience has been around for decades, it is only
recently that it became part of the marketing parlance.
Neuromarketing involves application of cognitive
neurosciences in the field of marketing and marketing
research. It uses a brain mapping medical technology
known as fMRI (Functional Magnetic Resonance Imaging) to
study blood flow and blood oxygenation in the neuron
activity of consumers at the time of selecting and buying a
product. Though it started with the application of
neurosciences, over the years it gained entry into the
traditional methods of doing marketing research. As
research proceeded, it was applied to promote sales and
research organizations such as BrightHouse Institute was
set up to serve corporations eager to reap the nascent
developments in the field.
The term “neuromarketing” was coined by Ale Smidts in
2002, a marketing professor at Erasmus University in
Rotterdam, the Netherlands. But there is a more interesting
story about the public attention to the term. Throughout
the 70’s and 80’s blind taste tests had shown that Pepsi was
the winner when consumers were told to choose between
Pepsi and Coke without knowing which one they were
consuming. Dr. Read Montague, a neuroscientist, was
however intrigued by the fact that in spite of these results,
Coke dominated the market. Montague decided to repeat
the tests with fMRI in what was known as The Pepsi
Challenge, 2003. The results were astonishing. He found
that when blind folded, consumers liked the taste of Pepsi
but when the names were revealed three fourth of them
switched loyalty to Coke. It was observed that the
knowledge that they were drinking Coke increased activity
in the medial prefrontal cortex, an area of the brain
associated with thinking and judging. The experiment
showed that while people liked something in their
subconscious brain they express something else. The
example became a classic to be used later on in marketing
case studies worldwide.
From The Pepsi Challenge, 2003 it was brought out that
brand and image could affect the customer’s choices more
than the product. This encouraged neuromarketers to use
the neuroimaging techniques to identify decision making
triggers among shoppers to help companies directly click
the “buy button” on the customer’s brain to boost sales.
On 17th Feb, 2010 an article in the Wall Street Journal
carried the caption “The Emotional Quotient of Soup
Shopping”. It dealt with how the Campbell soup company
had applied neuromarketing techniques in a two years
Pratibimb | September 2012 | 29
study, intending to get consumers to buy more soup. It
drew a lot of public attention at that time and encouraged
debates on whether the studies on skin moisture, heart-
beat and biometric by Campbell soup company was really
worth it. In the process, more than 1,500 subjects were
interviewed and tested using multiple methodologies—
ranging from traditional consumer feedback to
neuromarketing techniques. The same subjects also
participated in a deep interview process called ZMET (The
Zaltman Metaphor Elicitation Technique) which helped the
Campbell's team to contextualize the biometric measures
that were used. According to the company itself, the end
results of the expensive neuromarketing efforts offered
many insights that the company needed to work on and
which traditional methods could only partially arrive at. The
alterations which, among others, included different colour
packaging for different lines of soup and a new logo proved
beneficial for the company as it went to increase its bottom
line.
So how is neuromarketing implemented in real life? Starting
with, say the fMRI scanners(other technologies are used
too), the consumer’s brain is scanned which help the
neuromarketers to find out how consumers react
subconsciously to advertising, brand and products. This will
tell the neuromarketers what the consumer reacts to,
whether it was the shape of the packaging, the colour of
the packet, the sound the box makes when shaken, and so
on. This rare ability to watch inside the mind of consumers
and noting how sensory inputs like image, smell and touch
culminate to reach decisions enables the advertisers and
marketers to optimise their advertisement, campaigns and
product or service features to make them more acceptable.
fMRI is not the only technology that is used. While fMRI is
chiefly used for refining the product attributes,
Electroencephalography (EEG) measures fluctuations in
response to advertisements, Magnetoencephalography
(MEG) measures the fluctuations but with greater accuracy
than EEG and Transcranial Magnetic Stimulation (TMS) is
used to measure causal roles.
EEG frequency
It should be noted that neuromarketing is not exactly the
same as subliminal marketing. The latter is only a subset of
the former and focussed on the application part as
implemented by the marketers. Neuromarketing involves
much more such as involving the test subjects, using the
biometric and physiological sensors to carry out
experiments, studying the brain’s reaction (sometimes also
heart rate, breathing, and skin response) to the social
triggers and so on. Application in the real world to boost
sales or acceptability (say, of presidential speech) is the end
result of neuromarketing. An important part of
neuromarketing which is more related to subliminal
messaging is "priming" which refers to subtle suggestions
made deliberately to the subconscious mind, without the
subject's knowing, which could influence his/her
subsequent behaviour.
Various companies had adopted the services of
neuromarketing research organizations successfully in the
last decade. They include, among others:
Proctor & Gamble (in launching of Febreze room
freshener)
Motorola (in product positioning)
Hyundai (in changing exterior appearance of a car)
Paypal (in identifying what turns people on more in e
-shopping: speed or security)
Microsoft (in knowing the engagement of Xbox
users)
PepsiCo’s Frito-Lay (in testing packaging in the U.S.
and overseas)
Buick Motors (in enhancing dealers’ experience with
customers and increase in sales)
Yahoo’s 60-second television commercial which shows
Pratibimb | September 2012 | 30
happy and dancing people around the world was pre-tested
with neuromarketing. Before rolling it out and spending
money to air the advertisement on television and online,
Yahoo had run it on EEG-cap-wearing consumers. The brain
waves from them showed stimulation in the limbic system
and frontal cortices of their brains, where memory and
emotional thought occurs. The advertisement surfaced in
September 2009 to attract more users to its search engine.
More recent inductees such as Kimberly-Clark, Johnson &
Johnson and Unilever are using three-dimensional
computer simulations of both designs and store layouts
along with eye-tracking technology to deduce how to
improve sales.
In March 2011, world’s largest world's largest
neuromarketing research firm Neurofocus (now part of
Nielsen) had launched Mynd, a full-brain
wireless EEG sensor headset. Using this market researchers
would be able to capture data on consumers’ subconscious
responses in real time wirelessly thus opening up new
testing environments beyond the lab such as home. The
data would be streamed to platforms such as iPad, iPhone
and other smart devices. Another recent article
“Neuromarketing Proof? UCLA Brain Scans Predict Ad
Success.”(2012) voices that scientists using UCLA fMRI
facility for the prediction of 3 anti-smoking advertisements’
found the prediction from brain mapping more correct than
the self-reports given by the subjects. The researchers
focused on a seeing activity in the region of brain called
medial prefrontal cortex (MPFC) while showing the 3 ads
and found that the ad campaign which created the greatest
activity in that region generated significantly more calls to a
stop-smoking hotline. The below figure illustrates it.
With this rate of development and participation by the
corporate giants, it is hard to call neuromarketing a flash-in-
the-pan and the future could be beyond traditional focus
groups, dominated by mind-reading technology for
understanding the consumers.
However neuromarketing is not without its share of
criticisms. While some groups claims that the research
institutes are exploiting the corporate clients, some non-
profit organizations and customer advocacy groups
maintained that the concept was unethical, being
intervening with the customer’s privacy when practiced
without their knowledge. These groups have coined a new
term for this practice carried out by corporations, calling it
“brandwashing”- from branding and brain washing.
Many research papers hold that the findings of fMRI are not
revelatory and only reconfirmed some rules that marketers
had known intuitively. As for example, co-author Michael
Deppe in his paper “Bias-Specific Activity in the
Ventromedial Prefrontal Cortex during Credibility
Judgments" (2005) says that when consumers faces
credibility doubts, brand information played a major role in
decision making as seen by increasing activity in the area of
brain where attraction occurs. But brand loyalty was
traditionally always a factor on such occasions. Other
concerns include that the benefits received might not
outweigh the cost incurred and the accuracy of the findings.
Regarding the latter, critics assert that it is inexact science
as body movements such as breathing could distort or
disrupt images and there are multiple interpretations of a
mapped image unless assumptions are taken.
References:
Gladwell, M. (2005). Blink: The Power of Thinking
Without Thinking. Little Brown and Company.
Kahneman, D. (2011). Thinking, Fast and Slow.
Pratibimb | September 2012 | 31
Farrar, Straus and Giroux
Lindstorm, M. (2008). Buyology - Truth and Lies
About Why We Buy. Doubleday.
Vidyasagar, T.P., & Babu, S.S. (2012).
Neuromarketing: Is Campbell in Soup? IUP Journal of
Marketing Management
Owano, N. (2012, July 16). Consumer product giants'
eye-trackers size up shoppers. Physorg. Retrieved
from http://phys.org/news/2012-07-consumer-
product-giants-eye-trackers-size.html
Shayon, S. (2012, July 17). Eye-tracking helping
marketers boost shelf awareness. Brandchannel.
Retrieved from http://www.brandchannel.com/
home/post /2012/07/17/Eye-Tracking-CPG-
071712.aspx
Williams, J. (2010, Feb. 22). Campbell's Soup
Neuromarketing Redux: There's Chunks of Real
Science in That Recipe. FastCompany. Retrieved from
http://www.fastcompany.com/article/rebuttal-
pseudo-science-in-campbells-soup-not-so-fast
Burkitt, L. (2009, Nov. 16). Neuromarketing:
Companies Use Neuroscience for Consumer Insights.
Forbes. Retrieved from http://www.forbes.com/
forbes /2009/1116/marketing-hyundai-neurofocus-
brain-waves-battle-for-the-brain.html
Troni, N. (2012, July 17). Marketing the gap between
intention and action. Forbes. Retrieved from http://
www.forbes.com/sites/onmarketing/2012/07/17/
marketing-the-gap-between-intention-and-action/
Dooley, R. (2006, Apr. 6). Priming the customer.
Neurosciencemarketing. Retrieved from http://
www.neurosciencemarketing.com/blog/articles/
priming-the-customer.htm
Dooley, R. (2010, Feb. 23). Neuromarketing: From
Soup to Nuts. Neurosciencemarketing. Retrieved
from http://www.neurosciencemarketing.com/blog /
articles/neuromarketing-soup-nuts.htm
Olenski, S. (2011, Sep. 21). Is Neuromarketing The
Future Of Marketing? BusinessInsider. Retrieved
from http://articles.businessinsider.com/2011-09-
21/tech/30183631_1_campbell-s-soup-soup-cans-
neuromarketing
Geisweiller, B. (2010, Sep. 10). Healthy Manhattan:
This Is Your Brain on Coke or Pepsi. NewYorkPress.
Retrieved from http://nypress.com/healthy-
manhattan-this-is-your-brain-on-coke-or-pepsi/
Veronica, B. (2009, Nov. 15). Brief history of
neuromarketing. The International Conference on
Administration and Business. Retrieved from http://
www.itchannel.ro /
faa /119_pdfsam_ICEA_FAA_2009.pdf
NeuroFocus reveals Mynd™ the first wireless full-
brain EEG headset. Neurogadget. Retrieved Mar. 21,
2011 from http://neurogadget.com /2011/03/21/
neurofocus-reveals-mynd%E2%84%A2-the-first-
wireless-full-brain-eeg-headset/1416
Deppe, M., Schwindt, W., Krämer, J., Kugel,
H., Plassmann, H., Kenning, P., Ringelstein, E.B.
(2005, Jul. 25). Evidence for a neural correlate of a
framing effect: Bias-specific activity in the
ventromedial prefrontal cortex during credibility
judgments. Brain Research Bulletin. Retrieved from
http://www.mydelphi.gr /uploads/bias-specific%
20activity%20during%20credibility%
20judgements.pdf
Singer, N. (2010, Nov. 13). Making ads that whisper
to the brain. The New York Times. Retrieved from
http://www.nytimes.com/2010/11/14/
business/14stream.html
Neuromarketing Proof? UCLA Brain Scans Predict Ad
Success. SCN Lab: Papers - UCLA. Retrieved Apr. 27,
2012 from http://www.scn.ucla.edu/pdf/
Neuromarketing_April_2012.pdf
Pratibimb | September 2012 | 32
Indian Corporate Bond Market by Siddharth Pal, IIM Rohtak
India is a bank-dominated market and the relative
importance of bank assets as a percentage of GDP has
continued to grow—partly as banking penetration has
deepened with financial liberalization, and partly as a result
of the ongoing need for deficit financing. The Indian bond
market is, however, less well-developed. While having seen
rapid development and growth in size, the government
bond market remains largely illiquid. Its corporate bond
market remains restricted in regards to participants, largely
arbitrage-driven (as opposed to driven by strategic needs of
issuers) and also highly illiquid. The article will analyze the
challenges faced by corporate bond market and suggest
reforms for the same.
Indian Debt Market
Let us compare the debt market of India with other
countries.
Source: RBI (as on Dec, 2011)
Indian Debt Market is only 34% of GDP which is very less
compared to other nations. India’s government bond
market has grown steadily—largely due to the need to
finance the fiscal deficit—and is comparable to many
government bond markets in the world with around 30% of
GDP. The major investors in G-Sec are Commercial Banks
and Insurance companies. But the corporate bond market is
relatively underdeveloped with only 4% of GDP. The
presence of corporate bond market in India is barely
perceptible as compared to other economies.
Need for Corporate Bond Market?
The role of a healthy corporate debt market as a channel
that links society’s savings into investment opportunities is
of vital importance for several reasons. For the issuer it
provides low cost funds by bypassing the intermediary role
of a bank. Presence of bond funds gives the corporations an
alternative means of raising debt capital and thus
ameliorates any potential adverse effect that a bank credit
crunch may have on the economy. For the investor, there
exists a yield premium opportunity in comparison to
traditional deposits at banking institutions. It also increases
the investment opportunities in different type of
instruments and tailors risk reward profile according to his/
her preferences. The basic philosophy of developing a
diversified financial system with banks and non-banks
operating in equity market and debt market is that it
enhances risk pooling and risk sharing opportunities for
investors and borrowers. Given the huge funding
requirements, especially for long-term infrastructure
projects, the private corporate debt market has a crucial
role to play and needs to be nurtured. From the perspective
of developing countries, a liquid corporate bond market can
play a critical role in supporting economic development as it
supplements the banking system to meet the requirements
of the corporate sector for long-term capital investment
and asset creation.
Why Indian Corporate Bond Market Lags?
Now that we have established there is a need for a vibrant
and liquid corporate bond market in India. Let us analyze
the reasons that impede its growth. Major factors inhibiting
its development are:
Regulatory restriction on institutional investors.
Non Uniform stamp duty
Majority Issues being Private Placements and not
Public Issues
TDS in Corporate Bonds
Pratibimb | September 2012 | 33
Absence of sub-investment grade securities
Low Retail Participation
Absence of Market Makers
1. Regulatory restriction on institutional investors
Banks:
Statutory Liquidity Requirement (SLR) requires
banks to hold one quarter of their assets in public
sector bonds primarily government securities. Only
holdings in excess of the SLR requirement can be
traded and repurchased.
They are prevented from investing in unrated debt
instrument.
They are also restricted to invest only 10% of their
total non - SLR investments in unlisted debt papers.
Further only investment grade securities are
eligible for subscription by banks. This prevents
banks from investing in bonds of lower rated
corporations which may include infrastructure
companies.
Insurance Companies and Pension Funds:
Internationally institutional investors like insurance
companies and pension funds play an important
role in the corporate bond market as the
investment time horizon for these institutional
investors and the bonds are long. In developed
economies, huge amounts of stable, long-term
funds were channeled into capital markets by
pension funds and the insurance sector and these
funds facilitated the emergence of very liquid bond
markets in those economies. In India, the
involvement of insurance companies in corporate
debt market so far has been limited. Insurance
companies and pension funds have huge potential
to play a bigger role and contribute to the
sophistication and deepening of the bond market in
India.
Chicken And Egg Problem: There is a lack of supply of
suitable long term bonds which suit the need of
insurance and pension firms. Also there is lack of
demand due to regulatory restrictions on
investment in corporate bonds.
Infrastructure Debt Funds: The Reserve Bank of
India allowed banks, non-banking finance
companies and mutual funds to set up IDF in
September 2011.The existing guidelines of IRDA
and PFRDA does not permit insurance and pension
funds to invest in the proposed Debt Fund.
2. Non Uniform stamp duty: Stamp duties are typically
0.375% for debentures and, as they are strictly ad-
valorem, there is no volume discount. The rate of duty
varies depending upon location (various states have set
their own rates). Currently, if the bond is being sold in
one (state) jurisdiction, but the asset has to be
securitized in another, then the stamp duty as
applicable in the latter is levied.
3. Majority Issues being Private Placements and not Public
Issues: Public issues are bonds offered to a wide range
of investors and which conform to the regulatory
standards required of public issues of bonds. They
require a prospectus approved by SEBI, and have to be
open at a fixed price for a month to allow investors
particularly retail investors to subscribe. Private
placements can be made to a maximum of 50
“Qualified Institutional Buyers” (professional investors).
SEBI in its Annual Report 2010-11 said “Although the
year has seen a number of public issues, private
placements have also remained as one of the preferred
modes of raising debt funds. The rise in funds mobilized
could also be possibly attributed to issuers preferring
the domestic debt markets as a primary source of
corporate debt. The issuers raised an amount of
2,18,785 crore by way of private placement during
2010-11 as compared to 2,12,635 crore in 2009-10.”
4. TDS in Corporate Bonds: In case of corporate bonds, TDS
is deducted at source for resident and on non-resident
investors as per prevalent tax laws.
5. Absence of sub-investment grade securities: In
developed markets like USA, UK, Japan there is a
vibrant market for sub investment grade securities.
While in India regulatory restrictions prevent
institutional investors from investing in such securities.
This limits issuance of lower rated bonds.
6. Low Retail Participation: Indian retail investors have not
shown interest in the corporate bond market. This may
be due an illiquid secondary market and the low
confidence (low risk appetite) in the corporate world.
Retail investors prefer PF and Post Office schemes and
other alternate investment avenues. Less investor
knowledge and awareness about such products may be
one of the reasons for their low participation.
Pratibimb | September 2012 | 34
7. Absence of Market Makers: There is a need for general
market for corporate bonds to be developed for the
market participants. Market Makers can address the
issues of price discovery and liquidity in the corporate
debt segment.
How it can be improved?
There is a need for developing an efficient and vibrant
corporate bond market. To meet the needs of firms and
investors, the bond market must therefore evolve. The
policy recommendations should focus on designing a self-
sustaining ecosystem for investors, issuers and market
makers. The following reforms are recommended:
1. Life Insurance Co.’s: Minimum investment required in
respect of approved securities (GOI, State Government
& Securities granted by either GOI or State
Government) should be reduced. Minimum investment
requirement should be investment grade only i.e. BBB
-. It may be stated that in United Kingdom BBB- is the
cut off for investment by insurance or pension fund.
IRDA (Insurance Regulatory And Development
Authority) should allow insurance funds to trade in
Govt. securities (currently they are required to hold
until maturity) to improve liquidity and depth to
secondary bond market. IRDA should allow insurance
firms to invest in IDF by declaring such investments as
eligible investments.
2. Pension Firms: In order to accelerate the flow of
pension funds into infrastructure, Upper limit for
investment in Government securities or Government
guaranteed securities or gilt funds be reduced. PFRDA
(Pension Fund Regulatory and Development Authority)
should allow pension firms to invest in IDF by declaring
such investments as eligible investments. PFRDA
should allow pension funds to trade in Govt. securities
(currently they are required to hold until maturity) to
improve liquidity and depth to secondary bond market.
3. Foreign Institutional Investors: Income Tax
Department, Ministry of Finance should do away with
or decrease withholding tax rate to encourage
investments in bonds. Same has been done to attract
off-shore funds into IDFs by reducing withholding tax
on interest payments on the borrowings from 20% to
5%. Republic of Korea had also scrapped this tax
leading to threefold increase in FII investment.
4. Rationalizing Stamp Duty: There should be a uniform
low rate across all states and that the maximum
amount payable should be capped. Fix stamp duties
based on tenor and issuance value to encourage public
offerings of corporate debt. Department of Revenue
(DOR) and State Govts need to act on it.
5. Removal of TDS on Corporate Bonds: TDS was viewed
as a major impediment to the development of the
Government securities market and was abolished
when the RBI pointed out to the Government how TDS
was making Government securities trading inefficient
and cumbersome. Same could be done for corporate
bonds as also been suggested by CII.
6. Creation of Market Makers in Corporate Bond Market:
There is a need to set up institutions that will perform
the function of buying/ selling bonds. (By creating a
network of dealers which provide two-way quotes). As
India already has an established system of Primary
Dealers, it should utilize the same for good corporate
bond. As a pilot project some PSU debt paper could be
assigned to the existing PDs for market making. Once
this gets established the list could be expanded. Dr. C.
Rangarajan, Chairman PMEAC has also suggested that
there is need to set up dedicated institutions like DFHI
and Securities Trading Corporation for the purpose of
development of corporate bond market needs
consideration.
7. Risk Mitigation Steps: To address the risks associated
with investment in corporate bonds, GOI had
introduced CDS (Credit Default Swaps), IRF (Interest
Rate Futures) and Repos on corporate bonds but they
have not taken off. Initiatives should be taken to
popularize these instruments.
Conclusion
A vibrant bond market can ease financing constraints both
in terms of cost of funds as well as ease of access to funds.
Considering the size of Indian market, India’s proportion of
corporate bonds is insignificant. Policy and regulatory
measures need to be taken to increase the breadth and
depth of corporate bond market in India. Measures need to
be taken for domestic insurance and pension firms and
foreign Institutional investors to invest in corporate bonds.
There should be uniformity in the stamp duty levied across
the states. Initiatives should be taken to encourage public
Pratibimb | September 2012 | 35
issues and not private placements. Govt. of India had
introduced different risk management tools like Interest
rate Futures, Credit Default Swap and Repo in Corporate
bonds to encourage the investors to invest in corporate
bonds. But these tools have not taken off and very few
transactions have taken place. The issues need to be
identified and initiatives should be taken to popularize
them.
References
The Patil Report. 2005. The Report of the High Level Expert
Committee on Corporate Bonds and Securitization. Delhi. 23
December.
The World Bank, South Asia Region. 2006 Developing India's
Corporate Bond Market.
Reserve Bank of India. Annual and Monthly Reports.
Securities and Exchange Board of India. Annual and Monthly
Reports
IRDA, Annual and Monthly Reports
"If you pick the right people and give them the opportunity to spread their wings—and put compensation as a carrier behind it—you almost don't have to manage them." —Jack Welch
Pratibimb | September 2012 | 36
Introduction
`Does the stock market overreact?' De Bondt and Thaler in 1985 gave start to a new wave of thinking
known as behavioural finance. Weak form inefficiency of the stock market was discovered by them after
analysing how people are systematically overreacting to unexpected and dramatic news events which were
surprising and profound. The Efficient Market Hypothesis as proposed by Fama (1970) asserts that the
stock prices reflect the relevant information. The asset prices follow a random walk path i.e. they are
merely random numbers. The study conducted by Caginalp G. and H. Laurent (1998) by the predictive
power of price patterns finds patterns and confirms that they are statistically significant even in out-of-
sample testing and report.
The pattern of the stock index might help in predicting some of the effects of the various events. The
calendar anomalies tends to exist which goes against the efficient market hypothesis. The researchers have
used Gregorian calendar to investigate the calendar anomalies. There are various countries and societies
which follow their own calendar on the basis of their religion. For example, the Hebrew calendar is
followed by the Jewish society, which is strictly based on luni-solar, the Christian society follows the
Gregorian, which is based on solar, and similarly Hindu and Chinese follow their own.
The Hindu calendar is called “Panchanga” and it is based on both movements of the sun and the moon.
The festival of “Diwali” is typically occurs at the end of October and beginning of November.
The special ritual called “Mahurat Trading” can be observed on major stock exchanges like NSE, BSE,
NCDEX to name a few lasts for about an hour. It is performed as a symbolic ritual since many years. It
marks a link with the rich past and brokers look at it on a positive note. It marks an auspicious beginning to
the Hindu New Year. The investors place token orders and buy stocks for their children, which are
sometimes never sold and intraday profits are booked, however small they may be. Thus, it is widely
believed that trading on this day will bring wealth and prosperity throughout the year.
It is interesting to observe the behaviour of trading activities during the period preceding and succeeding
Mahurat Trading. The purpose of this study is to know the effect of the festival prior and post diwali on the
the returns.
Econometric methodology
I have measured stock return as the continuously compounded daily percentage change in the share price
index (S&P CNX NIFTY) as shown below:
Rt = (lnPt – lnPt-1) x 100 …………………… (1)
Where, Rt = return at time t
Pt, Pt-1 = closing value of the stock price index at time t, t-1.
I have used S&P CNX Nifty as it has got the most liquid stocks in its portfolio. Further, the National
Stock Exchange is largest in terms of Market capitalisation and Volume. I have used the data of the
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