BizEdge August2012

7/31/2019 BizEdge August2012

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BizEdge

August 2012

INDEX

A monthly newsletter for business

owners & entrepreneurs

1. Changing Times pg 2-72. Spotlight:

a) How to professionalize familybusinesses pg 8-10

b) Evolution of the Indian shopper

pg 11-14

3. Out of Box pg 15


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1. Changing Times

News that impact your

business

NSE models SME bourses on

global peers

The National Stock Exchange (NSE) is all set

to take on the Bombay Stock Exchange

(BSE) in the small and medium enterprises

(SME) segment. The NSE, which will make its

debut in the space nearly five months after

BSE saw the listing of the first SME IPO, has

modelled the platform on the lines of

Londons Alternative Investment Market

(AIM) and the NASDAQ of the US. To ensure

higher market participation, NSE says it has

worked to create an eco-system and will

allow companies with strong fundamentals

to list on its platform. Even though grading

for SMEs is not mandatory, NSE emphasis that

SMEs opt for it, will instill confidence among

investors. NSE has a tie-up with rating

agency CRISIL. Their emphasis will not only

be on the number of IPOs but on a strict

check on quality of companies. Initially, we

are ready to hand hold SMEs and facilitate

them with means that will ensure high

investor participation. We want to ensure

that companies coming on our exchanges

are run by a professional management

team.

Source:http://www.business-standard.com/india/news/nse-models-

sme-bourseglobal-peers-/484934/

SMEs witness faster growthwith unified communication

Due to globalisation of markets and

competitive developments SMEs today face

a lot of challenges. This requires companies

investing in infrastructure which are flexible,

scalable and at the same time offer

investment protection. One of the important

aspects of SME's infrastructure is is the

communication systems which they deploy.

The company establishes its credibility,

image over a period of time and

communication works both as


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1. Business News

complimentary and supplementary to that.

The SMEs need a sound communication

platform that allows them to collaborate

with the key demographics despite

geographical distances. A platform that

would help such entities in effective

communication with associates, partners

and investors located across the globe that

would help the SMEs establish a presence

network that enables its clients and

associates to stay connected.A unified communication system can give a

competitive advantage. It will help in taking

fast decisions which will provide advantage

of new business opportunities, expanding

markets and improve the overall efficiency

of the organisation. Unified communications

ensure a common platform where voice,

data and video are integrated and treated

as a single entity and at the same time

providing the necessary flexibility of any form

of communication. This ensures that the user

does not miss out on any communication

whether it is voice or data and provides him

with a choice of getting the same in any

required format i.e., voice or data.

A classic example which comes to mind

immediately is that of sales person who

spends most of the time on field and very

little on his desk. He or she does not need to

worry on missing out on important customer

calls, orders or for that matter the sudden

change of sales targets assigned by his boss.

Having said this, the most important feature

of the communication system deployed is

storage, processing and access to the

information. An information transmission

system based on integrated information

system leads to an improved administrative

and operational efficiency. Lack of such a

system may lead to issues like low

productivity, long times in transactions

ultimately effecting the growth of the firm.

Source: http://articles.economictimes.indiatimes.com/2012-

08-31/news/33521399_1_communication-systems-smes-

medium-enterprises

Small and medium enterprises

must invest cash lying idle in

short-term plans

Given the various incentives by the

government, SME contribution to GDP are

expected to rise.However, most SMEs lack in

one particular aspect, that of efficiently

managing whatever small amount of cash

they have at their disposal. Officials at large

companies , which have grown from their

humble days, say that with their cash every

SME should keep three things in mind:

liquidity, safety and return . However, in most

cases it is found that unaware of the options

available for generating higher returns on

their cash, SMEs keep most of it in current

accounts and bank FDs. These avenues give


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them enough safety, some amount of

liquidity but sub-optimum returns on post-tax

basis. There are better investment options in

the market which can help them optimize

their returns.

Among such investments are liquid and

liquid-plus plans which offer high liquidity

and higher post-tax returns, but come at a

slightly higher risk. Back-of-the-envelope

calculations show that post-tax returns from

these funds are usually 8-12 % higher than

what bank FDs can generate. Here, the

point to remember is that like FDs, returns onliquid funds too are linked to the prevailing

market rate. As an SME money manager,

one has to keep this in mind. Another

investment option is the fixed maturity plans

(FMPs). These schemes give nearly a

guaranteed return with a high degree of

safety. However, investing in FMPs means

sacrificing liquidity since investments in these

schemes are locked-in for the duration of

the scheme. Although these schemes are

listed , there is hardly any trading in these

papers.

Source: http://articles.timesofindia.indiatimes.com/2012-08-

28/personal-finance/33449405_1_smes-investment-option-

medium-enterprises

MSME ministry may broaden

definition of small firms

The micro, small and medium enterprises

(MSME) ministry has initiated a process to

broaden the definition of such companies.

The commerce ministry has also sought the

change in the definition to allow overseas

single-brand retailers such as Swedish

furniture retailer Ikea to meet local sourcing

rules. Indian laws define SMEs as companies

that have invested $1 million or less in plant

and machinery.

Ikea, which plans to invest as much as 1.5

billion in India after the government allowed

100% foreign investment in single-brand

retail, has asked the industry department to

change the definition of SME to allow it to

source from comparatively larger

companies. The rules mandate that foreign

retailers source 30% from small and medium

enterprises; Ikea wants to be allowed to

comply over a period of 10 years. We

would like a change. In India, the definition is

based on investment, in some parts of the

world; it is based on turnover or number of

laborers. In some countries, it is a mix of two

or three criteria, the official said. There are

many options which are possible. We will

take a final view after the standing

committee submits its report.

Source: http://www.livemint.com/2012/08/22215836/MSME-

ministry-may-broaden-defi.html?h=B


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Startup ventures are betting

big on India's small-town

boom

In places largely bypassed by the big-name

brands, enterprising businessmen are

building malls, multiplexes and retail

businesses to take the latest in shopping and

consumer trends to small-town India.

Ventures such as Promart, Stargaze

Entertainment, eDabba and Miraaya are

catering to an increasingly affluent set of

consumers living in cities and towns like

Ajmer, Kurukshetra and Tinsukia who are

demanding the same products and services

that metrodwellers have easy access to.

And, as these entrepreneurs are finding out,

small-town consumers are also willing to

spend, if not more then at least as much as

metro-consumers.

A Nielsen study late last year mentions that

Middle India, a region made up of

approximately 400 towns, each with a

population of 1-10 lakh, is home to 100

million Indians and accounts for a fifth of the

overall consumption of fast moving

consumer goods.

"The Indian economy is going to be fuelled

increasingly by the 400 million people who

live in small towns and entrepreneurs who

recognise this have an advantage." says

Justin Sargent, MD-Consumer, Nielsen India.

"These entrepreneurs are following a smart

model of meeting small town aspirations."

Source:

http://articles.economictimes.indiatimes.com/2012-08-

31/news/33521296_1_towns-justin-sargent-promart

Why India needs 1000 startup

incubators to spark mass

innovation

India needs many more entrepreneurial firms

to meet the myriad needs of its population.

There are many reasons as to why India lagsbehind in the number of startups relative to

the scale of requirements or in comparison

to other entrepreneurial nations such as

Israel or the US. Lack of early business

support and mentorship is probably one of

the most important reasons why India does

not generate sufficient startups. First-

generation entrepreneurs require extensive

mentorship, guidance on business and legal

matters, a conducive and collaborative

work environment and necessary

infrastructure.Incubators generally followthree distinct operating models: academic,

real estate oriented, or accelerators.Academic incubators are generally situated

on the campus of an academic institution.The Harvard iLab is a good example of this

model; it is based in a 30,000 square feet

facility on the Harvard Business School

campus.


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The second incubator model is real estate

oriented. Since 1999, the Cambridge

Innovation Center has leased over 155,000

square feet of space to startups of all

kinds. 500 companies are clustered over 7

floors in a mid-rise building owned by MIT but

leased out by the Cambridge Innovation

Center.

Companies range in size from 1 to 15

employees. Startups find the environment

and buzz highly attractive. As the

Cambridge Innovation Center has grown, it

has created its own ecosystem. VC, legal,

and design firms have offices in the Center

providing entrepreneurs access to high-

quality services. The third incubator model is

a mentorship-oriented model such as Y

Combinator and TechStars. These

accelerators run a selection process to bring

in 20-40 startups for a 90-day boot-camp

experience. Y Combinator has 9 partners

that provide extensive mentoring to their

start-ups and extends funding, rarely more

than $20,000, in return for 2-10% equity in the

company.

Many VCs are associated with Y Combinator

and startups are able to raise money rather

quickly. The Y Combinator partners are

experienced entrepreneurs and provide

high-quality mentorship.India needs over1000 incubators in the next decade. Out of

the existing 120 incubators almost all of them

are government sponsored and affiliated to

academic institutions. SINE, IIT Bombay,

NSRCEL, IIM Bangalore and CIIE, IIM

Ahmedabad are success stories but clearly

this is insufficient. Many incubators fail over

time.

The factors that lead to their collapse

include inability to manage the difficultchemistry of high-quality startups, extensive

mentorship and value-added

services. Given these circumstances, it is

probably best for governments not to

directly fund incubators and accelerators.

Participation of the private sector through

PPP or for-profit models is crucial. If

incubators are able to successfully support

startups then they will thrive; otherwise they

will fail the market test and shut down.

Source: http://startupcentral.in/2012/09/why-india-needs-

1000-startup-incubators-to-spark-mass-innovation/!

Bharat spends more than IndiaConsumption in rural areas growing faster

than in cities, towns for first time in 20 years,

Crisil report says Consumption in rural India is

growing at a faster pace than in cities and

towns for the first time in two decades, a

new report by credit rating agency Crisil Ltd

said. It attributed the growth to a rise in

household incomes due to greater non-farm

job opportunities and government-initiated

employment generation schemes. Between

2009-10 and 2011-12, additional spending in


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in rural India was Rs.3.75 trillion, significantly

higher than the Rs.2.99 trillion in urban parts

of the country.

Source:http://www.livemint.com/2012/08/29210407/Bharat-spends-more-than-India.html?atype=tp

Google launches premier SME

partner programme

Led by strong demand for digital advertising

from small and medium sized businesses

(SMBs), Google India on Wednesday

launched Premier SME Partner programme

to maximise its reach to SMEs businesses

spread across the country. The company will

provide specialised services to SMEs to grow

their businesses through digital advertising.

Googles Premier SME Partners will be trained

to offer the highest level of expertise and

proficiency in developing, launching and

managing digital campaigns for SMBs.

These partners will offer end-to-end

marketing solutions like search engine

marketing, localised marketing solutions

across Google properties and mobile

advertising platform. The company will also

invest in helping partners with dedicated

marketing and sales support that includesdirect access to Google, co branded

market collateral, market research, training,

offers, technical and operational support,

assigned account manager and joint sales

pitches.

Source: !http://www.thehindubusinessline.com/industry-and-economy/marketing/article3862333.ece?ref=wl_industry-and-

economy

India Factoring: the way to get

SME credit beyond banks

The role of a factoring business is yet to gain

ground in India wherein small and mediumenterprises (SMEs) struggle to get funding

support from banks on concern of asset

quality. At a little higher cost of funds, a

factoring company can well be the liquidity

generator to scoot the SME growth engine.

Small businesses sell their products to other

big companies, which do not immediately

release cash. Meanwhile, the former, with

limited wherewithal, require more funds to

expand their business. Banks are not so keen

to extend credit to them beyond a point.

Here comes the role of a factoring

company, which gives 80% of the

assignment money upfront at an interest cost

in the range of 14-15% per annum to the

seller (chargeable on monthly basis). The

factor will recover the money from the

product buyer after a stipulated period. If

the SME client does not repay interest, the

factor will deduct it from the rest 20% at the

time of final realization.Typically, business

entities with turnover of Rs 20-200 crore avail

this form of credit facility. For India Factoring,

ticket size is in the range of 2-18 crore.

Source:

http://www.moneycontrol.com/smementor/mentorade/fina

nce-capital/india-factoringway-to-get-sme-credit-beyond-

banks-746989.html


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An insight from Mr. Harsh

C Mariwala, Chairman &MD Marico

I joined my family business in 1971. My family, a large joint

one, owned diverse businesses collectively managed by

family members. The businesses ranged from trading to

manufacturing, but none leveraged any significant

brands. In this backdrop, I strived over the subsequent two

decades to create a distinct identity for a successful

brand-based FMCG business.

Still, in 1990, when we carved out the FMCG business into a

new company called Marico, it was a leap of faith for me

personally and a quantum jump for the business, which

then had a turnover of Rs 80 crore. The separate

corporate existence did impart a sharper focus and

enhanced the growth potential. But it also held out a

challenge how would a new, unknown company

attract talent?

We inherited about 200 employees of our parent, Bombay

Oil. But we needed fresh talent to build profitable brands.

We could not afford mass advertising. So we adopted an

innovative approach. We came out with two news-styled

recruitment ads. The first dramatically announced: '200

Employees Walk Out of Bombay Oil'. The second

screamed: 'Mass Killer Nabbed'.

2. Spotlight

a) How to

professionalize family

businesses?

Mr Harsh Mariwala, Chairman & MD

at Marico Industry shares insights on

how Marico became an FMCG

behemoth we know today by seeking

the right professional expertise.


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The campaign was fresh and unique, and fetched us the desired attention. The transition towards

professionalisation is crucial for a family business. In such an enterprise, typically, members of the

family handle virtually all key aspects. They take most decisions with or without professional

qualifications or business exposure. However, a mix-up between ownership and management

could lead to conflicts in decision-making. I have seen organisations where relationships among

owner-manager siblings get too complex.

Finally, the business wilts under emotional strain and lack of business focus. Interestingly, the seeds

of such a decline are sown during growth itself. The evolution phase is exhilarating. Owner-

managers carry limitless energy and are eager to do well.

But that is against the backdrop of potential conflicts on how to deal with the growth, and the

dreams and thoughts that underlie growth ideas. There could be more sparring and deadlocks on

the arrival of the next generation, armed with better education, more sophisticated exposure and

new ideas. Families could differ over the pace of growth and the investments required or

eventual aspirations. This eventful phase in the scaling up of an enterprise is crucial and needs

careful handling. A key institutional decision that needs to be taken is about the role of

professional managers. My experience with professionalisation has been excellent. Since I stressed

on professionalism, Marico's business has grown 50 times from Rs 80 crore in 1990 to Rs 4,000

crore in 2012.

Let me share with you what I learned from my own growth journey. Professional managers bring in

specialisation in general management or expert functions. They are qualified and experienced

to deal with growth. They can take decisions and run the business on sheer merit, not yielding to

undue influence. The merits are many. Therefore, the dilemma before owners is not whether to

professionalise. It is about when to do so. Scaling up business requires scaling up the

organisational apparatus and management.

Usually, there comes a point beyond which the owner family cannot meaningfully organise and

manage the business. If a family business does not professionalise in time, it could end up

restricting its growth orbit. I do, however, reckon it is natural for family businesses to be and stay

confused about the need, suitability and timing of inducting professionals.

I recommend that a family take time to get concurrence. It is also important to send out a unified

and sustainable signal to build a good brand in the talent market, to attract the best


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possible hands. This strategic clarity on recruiting professionals enables the owner family to tap

head hunters with a clear brief, precise needs and realistic targets. A family business may

have to struggle to overcome the initial challenges of the professionalisation process. My

experience is that it pays to be resourceful in this struggle. For instance, it could take time

before one starts attracting quality talent. In the mean time, growth could reveal talent gaps.I filled up such gaps resourcefully, using individual consultants.

Another challenge is presentability. The growth story may be attractive, but the physical

presentability to prospective talent could be suspect. I faced a unique challenge. Our office

was in the crowded commodity markets of Masjid Bunder, hardly a place a bright MBA would

visit, forget join! I dealt with this creatively.

I would fix the first meeting in the top-class environs of Willingdon Sports Club. That provided a

fitting ambience to "sell the Marico dream". I would, of course, take the newcomer to Masjid

Bunder. But that would be later, when the talent was sold on the Marico story.

Source: http://articles.economictimes.indiatimes.com/2012-07-14/news/32675027_1_fmcg-business-family-business-

managers


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Highlighting the

emergent breed ofIndian shoppers

Nielsen's Shopper Trends Study sheds light on the evolution

of the Indian shopper over the last seven years. The annual

study takes place across 52 countries to understand

shopper attitudes and behavior. In India, Shopper Trends isconducted in 14 cities including Mumbai, Delhi, Chennai,

Kolkata, Bangalore, Hyderabad, Ahmedabad and Pune.

Respondents include household influencers between the

ages 18 and 65 in SEC A, B and C. Over 3,300 respondents

were interviewed for the 2012 Shopper Trends Study.

2. Spotlight

b) Evolution of the

Indian Shopper


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1/5th of Urban shoppers shop at Modern Trade Indians are deal seekers as compared to their other Asian counterparts Indians are willing to try out new brands/variants as long as they are getting an

attractive promotional offer


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14 key markets (mega cities and boom towns) account for 3/4th of Indiasmodern trade sales!

Delhi NCR has seen the fastest Modern Trade growth followed by Indore,Jaipur and Pune!


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2 out of 5 consumer actively looking out for premium products! The Rural shopper is now switching to larger packs due to convenience and

value for money!

Source: http://articles.economictimes.indiatimes.com/2012-08-29/news/33476090_1_indian-shopper-evolution-deals


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Stop, Smile, Ponder,Amaze, Mull over !!

3. OUT OF BOX

READING ZONE

Top 5 Business Bestsellersfor the month:

1) Steve Jobs- Walter

Isaacson

2) The Power Of Habit-Charles Duhigg

3) Imagine-Jonah Lehrer

4) Thinking, Fast And Slow-

Daniel Kahneman

5) Mobile Wave-Michael

Saylor

Source:

http://www.nytimes.com/bes

t-sellers-books/hardcover-business-books/list.html

20 miles above Earth on a shoestring

19 year old student Adam Cudworth floated aballoon 110210 ft into the stratosphere equipped

with a 30 camera from eBay to captureincredible footage of the Earth.

http://www.telegraph.co.uk/science/space/9534401/Student-

captures-incredible-view-20-miles-above-Earth-with-30-

camera.html

Why does coffee never taste asgood as it smells?

So its got to do with 2 senses of smell not one.Read more about it.

http://www.telegraph.co.uk/science/9528936/Why-does-coffee-

never-taste-as-good-as-it-smells.html

Liver transplant makes 61-yr-old

young again

We have heard about the adage that Lifedepends on the liver. But is the liver a fountainof youth?

http://articles.timesofindia.indiatimes.com/2012-07-

13/india/32662636_1_liver-transplant-transplant-surgeon-diabetes-

drugs


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