Saturday, September 23, 2006

China, India: Difference in the details

China and India are among the fastest growing economies in the world, with growth rates much admired by developing countries desperately struggling to crawl out of the poverty trap. Their abundance of relatively skilled labor at low cost has turned them into "factories of the world", and their huge populations in turn offer lucrative consumer markets for multinationals. These two Asian giants are tipped to become the world's next economic superpowers.

Nonetheless, a closer examination reveals that they offer competing models of development, though they became modern nations at about the same time, India in 1947, China in 1949. They launched reforms from different starting points: China embarked on market reforms in 1979 - a decade earlier than India - from a centrally planned, economically backward, agrarian economy; India initiated its reforms in the early 1990s and is today a semi-socialist economy in a fledging democracy ridden with problems of corruption and bureaucratic inefficiency. Today, China is seen to be ahead of India; but there is much speculation on their respective growth trajectories.

What do the numbers tell us?

China's economic growth thus far is certainly more impressive than its South Asian cousin. China's gross domestic product (GDP) grew by an average of 9.7 percent during 1982-92, and by 9 percent during 1992-02. On the other hand, India grew by 5.6 percent and 6 percent in the same respective periods, though still impressive by most developing countries' standards. India's lagging is due to a number of reasons. The Chinese save twice as much as Indians: for every US$1 earned, the Chinese save 44 cents, compared with 24 cents by Indians. As a result, the Chinese invest more in their economy than do the Indians. The share of gross domestic investment in GDP is 41 percent in China, compared to 22.8 percent in India. The Chinese economy is also more opened to international trade, and therefore gains from greater specialization in areas where China excels. China's export share of GDP is twice that of India's.

A more compelling reason to account for India's slower growth is the flows of foreign direct investment (FDI). As shown in the diagram below, the amount of FDI into India is only a small fraction of that into China. Of course, any statistics, especially those reported by communist cadres who are rewarded for economic performance of their localities, should be taken with a grain of salt. As frequently pointed out, China's FDI figures are likely to be exaggerated by "round-tripping" - domestic capital disguised as foreign investment (passed through Hong Kong) to qualify for special investment incentives reserved for foreigners. India's FDI figures, however, may be understated because they exclude foreigners' reinvested profits, the proceeds of foreign stock market listings, intra-company loans, and so forth. This may not be a simple issue of whether India is able to attract foreign investment, since it may have as much to do with New Delhi's policy or practice for years of keep foreign investors out of the country.

Foreign vs private companies

China may boast impressive records in courting foreign investors, but it has few successful indigenous private companies on which it can pride itself. China's private companies are systematically discriminated against by the capital market and the legal system. Private property rights have only recently been recognized by the central government and given legal recognition and protection. The state-owned banking system is notorious for molly-coddling the inefficient and debt-laden state-owned enterprises, while shying away from the vibrant private sector.
The stock markets are also largely reserved for those enterprises with state backing. Ironically, foreign companies in China are granted better recognition, legal protection and market access than indigenous private companies. The internationally better known Chinese firms, such as China Telecom, and the white goods, or major appliance, maker Haier, were formerly nurtured in the state cradle. China Telecom is a state-owned enterprise, and Haier was formerly a collectively owned township and village enterprise (TVE).

In stark contrast, India's brand of internationally well-known companies, such as software giants Infosys Technologies and Wipro, and pharmaceutical and biotech start-ups Ranbaxy and Dr Reddy's Labs, are born and bred locally. "Indeed, by relying primarily on organic growth, India is making fuller use of its resources and has chosen a path that may well deliver more sustainable progress than China's FDI-driven approach," write Huang Yasheng and Tarun Khanna, dons from the Sloan School of Management at the Massachusetts Institute of Technology, MIT, and the Harvard Business School, in an article published in Foreign Policy in August, 2003.

"China's export-led manufacturing boom is largely a creation of foreign direct investment, which effectively serves as a substitute for domestic entrepreneurship," they argue.

The point about India's better use of resources is worth noting, as the numbers seem to lend support to this hypothesis. China's GDP growth rate (8 percent in 2002) is about double that of India (4.6 percent); however, China's savings ($542 billion) are four times higher than India's ($122 billion), not to mention that its FDI inflows are more than 10 times greater ($52 billion compared with $3.5 billion).

Not just markets - institutions matter

Why is entrepreneurship able to flourish in India but not in China? "Blossoming entrepreneurship in India is due in part to a liberalizing financial market, which provides capital access previously exclusive to certain caste groups to the budding entrepreneurs. Capital is now available to private start-ups, through venture capitalists, the banking system, and the stock markets," says Vijay Kelkar, an advisor to the Indian Ministry of Finance, at a speech recently delivered at the Australian National University in Canberra.

Aside from a financial market that allocates resources more efficiently, India seems to have in place the institutions - democracy, a functioning judiciary, property rights and so on - conducive to economic development. Huang and Khanna, from MIT and Harvard, argue: "Democracy, a tradition of entrepreneurship, and a decent legal system have given India the underpinnings necessary for free enterprise to flourish." Of the world's top 200 small-sized companies listed by Forbes in 2002, 13 were from India; while four were China's - all of them based in Hong Kong.

Nonetheless, China's greater openness to the outside world and its ability to benefit from foreign trade and investment can be attributable to a "stronger state" (albeit authoritarian), one that is able to advocate and implement policies in the country's interests, rather than being held hostage by any vested interest groups. By contrast, India's burgeoning but unruly democracy means that in order to gain power, the Indian policy makers are often trapped in myopic vested interests and are sometimes held hostage by protectionist voices.

Friday, September 22, 2006

Asian Paints. Har ghar kuch kehta hai.”

Asian Paints adds a splash of colour to the telly, yet again!

“Life is a great big canvas, and you should throw all the paint you can on it,” said the late DanAsian Paints ny Kaye, one of America’s leading comedians. The masterminds behind the Asian Paints commercials seems to have taken his words to heart. Asian Paints, the country’s Numero Uno player in the paints market, has always been able to forge an emotional connect with the audience at large right from the days when the adorable Gattu served as their mascot to the more recent “Har Rang Kuch Kehta hai” campaign.

The latest campaign from their stable takes the ‘Har Asian PaintsRang Kuch Kehta hai’ plank forward to ‘Har Ghar Kuch Kehta hai’. Abhijit Avasthi, Group Creative Director, Ogilvy & Mather sheds light on the thought process behind the commercial: “The brief was to build upon the ‘Har Rang Kuch Kehta Hai’ campaign, which brings alive the role of colour in home decor. The aim is to tell people how colour fires the imagination.” Of course, crafting a creative for Asian Paints will forever remain a challenge for the creative brains, as “the tone and manner of the message must always remain intact, yet the communication must keep refreshing itself for Asian Paintsthe audiences each time…” points out Awasthi. More so, when the brand already has a long heritage of great advertising in its kitty.

The latest commercial sets out by focusing on two kids devising a plan to get hold of chocolates from their grandmother. The girl points towards a purple wall in the house and tells her grandmom that it’sher mom’s favourite wall: “Kyun ki mummy ko jamun bahut pasand hai!” The girl next drags the hapless octogenarian to a green wall and claims Asian Paintsthat her dad loves that wall: “Kyun ki papa ko matar bahut pasand hai.” The girl then points toward a brown wall and hopefully prods, “Yeh Chintu aur meri favorite wall hai.” The grandmother ponders the question; “brown?” to which the tot seiz- es her opportunity, “Brown nahin nani, chocolate…. Kyun ki humein chocolate bahut pasand hai!” The visibly enlightened grandmother hugs the children and the VO encapsulates: “Har rang mein chhupi ek kahani hai. Asian Paints. Har ghar kuch kehta hai.”

Shot at Kamala Mills Compound in Mumbai by Prashant Issar from Corcoise Films, the cinematographer for the commercial was Ravi K. Chandran. Abhijit also makes a quick mention of Shekhar Jha and Suresh Babu, who worked on the ad-film along with him in the creatives. Shooting with kids can be quite taxing as they are prone to travelling on their own flights of fancy and thus difficult to rein in. But Abhijit quickly pointed out that since “we had shot withAsian Paints both these kids earlier, and so getting them to do the right things was easier this time.”

“Strangely enough, the previous film on this campaign (the Cutting- Shutting ad) was shot just after July 26th last year and we waded through water to the sets. This year as well it poured like crazy and we all literally waded into the sets. Next year, when we finalize the shoot dates for the next ad we will inform the Meteorological department... it seems to be a more accurate way of predicting floods in Mumbai!” jokes Abhijeet. Yet another gem in Ogilvy’s stunning tiara, this tongue-in cheek ad stands out for its easy & poignant appeal. But then using cute kids to convey a brand message always does pay, right?

Tuesday, September 12, 2006

Donald to roll the wheels

Motorcycle giant Harley-Davidson Inc. has agreed to acquire a major portion of the assets of Australia-based Castalloy. Castalloy has been the sole supplier of cast motorcycle wheels and hubs to Harley- Davidson for the past 20 years. Post the acquisition of assets, a new wing will be formed in Adelaide called New Castalloy. This new wing will be a wholly owned operation of Harley- Davidson and will primarily focus on manufacturing. Donald Gogan, who has been with the Milwaukee- based motorcycle manufacturer since 1992, has been appointed as the Managing Director of this new venture.

Monday, September 11, 2006

‘Park’ your savings!

“...cue blue birdsa-tweeting and turtledoves a-cooing!!”

Cape Town capers
Capetonians form an enviable lot. Peopling one of the most likeable cities of Africa, they most certainly had divine decree going for them to have been placed in the midst of some of the most panoramic precincts in the world. And a walk inside the Kirstenbosch National Botanical Garden in Cape Town is just what you need to find that out for yourself. Lush landscapes lolling in the shadows of the eastern slopes of the Table Mountain, the 528-hectare spread of Kirstenbosch is an awesome microcosm of indigenous South African flora, typically the fynbos and the proteas. While exotic bird calls enrapture, find your way to the Fragrance Garden, Medicine Garden, Society Conservatory etc. or simply marvel at the 346-year old Van Riebeeck’s Hedge! A hiker’s paradise, the cobbled walkways meandering as though leading right into the ever-beckoning Table Mountain are perfect for that introspective retreat when you’ve tired yourself out with Cape Town beach-hopping or Waterfront shopping. Go, find peace... under the Table!

A fun Danish den!
In the Tivoli Gardens of Copenhagen, there is nothing that remotely brings to mind the terror tradition of the Vikings of medieval Denmark, once the Nordic nemesis feared for their fierce sea raids along the European coastline. Open for just five months in a year (April to September), Tivoli nevertheless remains one of the most popular parks of the world, and founded in 1843, also one of the oldest. A centrally located unique park littered with amazing miniature theme gardens, it can be reached by a short bike ride from any part of a city that doesn’t consider cyclists a nuisance! It’s also an amusement park; one you could walk in to without necessarily escorting a kid. Apart from old(est) and new rides – in fact even supposed to have been inspiration to Walt Disney’s amusement arcade – the Gardens are also constantly abuzz with activity around its scenic flower gardens, pantomime theatre, concert hall, and then with some incredible pyrotechnics at night! Feel like a part of a fairytale…

Bliss in bloom
They look like what we might’ve regarded were there no idol worship, they feel like that reassuring touch when despairing with all-is-lost, they smell like that first breath after a stint underwater… flowers represent a sublime confluence of divinity and love. For those who stopped to smell the roses as a matter of ritual, Buchart Gardens is one place not to be missed. A lush 50-acre spread in Victoria, Canada, the place, in no corner, reminds of the cement quarry site that it was before it was taken over in 1904 by the Butcharts, who transformed it into the paradise that it is now. Though any season is the right season to behold the fl oral flourish here, it makes real good sense to wade through roses, tulips, dahlias, azaleas, rhododendrons and a whole burst of blossoms now. Will turn on the poet in you…

‘Still’ in Singapore...?
The land looks no bigger than the arrow tip pointing to its location at the tip of the Malay Peninsula on political world maps. And yet there isn’t a greater draw in the region of South East Asia to meet every criterion in the travel book so exhaustively that one could claim to have gone Around the World in a lot lesser number of days than Jules Verne took about it! Roads so clean you could lick off dropped jelly (and you better – pick, if not lick – or you’ll be fined!), malls so plush you could shop yourself poor and food so great you’d pause the calorie count... it’s a joy anywhere in Singapore! But a 52-hectare delight awaits nature fiends in the Singapore Botanic Gardens, a magnificent expanse of green that transports you closest to a walk in the woods, short of the perils of predators. Divided into the Tanglin, Central and Bukit Timah cores, the Gardens’ biggest attraction besides the Swan Lake, Swiss Ball Fountain, Sun Rockery, Ginger Garden etc is the National Orchid Garden with some of those splendid blooms named after dignitaries like Princess Di and Nelson Mandela. Not that you’d miss any but there are even music concerts at the Symphony Lake. Sounds like Rhythm Divine already…

An outdoor opera
Into the Great Outdoors, that’s where a trip Down Under leads you. And like a continental prĂ©cis, there comes alive in the oldest city of Sydney all imaginable elements of recreation from this grand landmass in the Southern Hemisphere. Now, even if your ideas of the same were a private chat with a flower or making friends with squirrels, there are enough venues for vent. The Royal Botanic Gardens, cheek by jowl with the Sydney Harbor, provide in its many theme gardens of rose, begonia, palm, succulents etc, an exquisite haven for flying foxes and Pearl White butterflies apart from thousands of other species of flora and fauna. Bushwalk around some beautiful sculptures and statues, or simply sit back on the grass to behold the mosaic of colours behind the Harbour at sundown.

Friday, September 08, 2006


Venezuela holds Venezuelatremendous potential to possess a highly developed power sector, thanks to its proven oil and mineral reserves. What is making things better is the fact that it has been privatized after 1998. After that, there has been a gamut of foreign companies that have tried to tap this potential. Besides this, a long list of rivers and upcoming hydro power plants within the country also provide resources for alternative sources of electricity, contributing around 68% of the total power generation. It’s no wonder that Venezuela has capacity to produce 21.5 gigawatts (GW) of power, which is one of the highest in the Latin American region.

Wednesday, September 06, 2006

Charles Babbage and Ada Lovelace

He wasAda Lovelace the father of computing. And she was his devoted assistant. Charles Babbage, born to a London banker on December 26, 1791 met Ada Lovelace (nee Bryon) when she was just 17. Both of them shared a passion for mathematics that defied normal. Babbage as a young scholar worked on Newton’s mathematical concepts, toyed with calculus, even founded the Royal Astronomical Society. But by 1820, he was involved in engineering a calculating machine – the Difference Engine – that would change history. The machine compiled multiplication tables – marking him the world’s first programmer. His thoughts then struck upon on what is based the modern day computer – the Analytical Engine – which could perform several numerical functions. Unfortunately, few believed in it enough to invest, and it exceeded the technological prowess required then.

Ada Lovelace had, however, become a dear friend over the years. Born in 1815, she was the daughter of a romantic poet Lord Bryon, who left his wife Anne Isabelle Milbanke within a year of marriage to bring up Ada alone. Anne fought deliriously to ensure the young girl didn’t become a poet and pushed Charles Babbageher into mathematics. Her inborn creativity, however, was hard to contain and burst in the form of a design for flying machine in 1828. However, such pursuits by women in her age weren’t welcome, but her friendship with Babbage gave her the much needed intellectual stimuli. Married to the Earl of Lovelace, Ada understood Babbage’s work intimately.

When an Italian mathematician wrote about Babbage’s Analytical Engine, she was entrusted by Babbage to translate and fine tune it. She articulated Charles Babbage’s work better than anyone else, and saw it as an everyday computer. She described “the engine [is] the material expression of any indefinite function of any degree of generality and complexity” and even foresaw digital music! The disciple died of cancer at a ripe age of 37, much before Charles, but his work lived through and her notes founded the computing era.

One for the King and cheers for the Countess!

Tuesday, September 05, 2006

Got my mojo working, aha!!!

With all eyes set on her, Nooyi should focus her efforts at getting more fruitful acquisitions

So Indra Nooyiwhat if Indra Nooyi earned derision from the Americans after her (in)famous ‘Long Middle Finger’ speech at the Columbia Business School? She could still boast about the unstinted support she has received from the top brass at PepsiCo. No wonder she is now the new CEO at Pepsi. That’s quite a journey for the lady from Madras Christian College who is now set to become arguably the most powerful woman CEO in the world. After all, she will lead a company that tops the list (in revenues) among 11 Fortune 500 companies led by women CEOs. And yet, the accolades also conceal challenges Indra Nooyithat Nooyi faces. The most significant would be matching the track record set by her predecessor Steve Reinumund, who led the $32.6 billion conglomerate since the year 2001. Reinumund has masterminded a net earnings growth of 70% and an 80% rise in Earnings Per Share (EPS) since 2001, not to forget an m-cap crossing the magic mark of $100 billion. His enduring legacy will be the fact that Pepsi’s market capitalisation raced ahead of Coke’s once when he was leading the Pepsi troops. Can Nooyi better that?

Having served at global giants like Boston Consulting Group, Johnson & Johnson, Asea Brown Boveri Inc. and Motorola Inc., Nooyi, no doubt, has the pedigree to improve upon Reinumund’s legacy. Reinmund asserted, “Indra’s record of transforming PepsiCo speaks for itself, she’s been an invaluable partner and ally throughout my time as CEO. I am convinced she’s more than qualified and clearly ready for her new role.”

But what about the critics who doubt that her success story will run smoothly for long? Well, she has certainly silenced critics in the past. A typical instance was in 2001, when she successfully reduced the asking price for Quaker Oats. Wall Street applauded the manner in which the then CFO of Pepsi saved ‘billions’ on the $14 billion deal. The icing on the cake was the health drink Gatorade that has helped Pepsi dominate the rapidly growing sports drinks market. Nooyi has engineered over a dozen acquisitions in 12 years at PepsiCo including the $3.3 billion takeover of Tropicana. Nooyi also worked on the restructuring that created YUM, the umbrella brand now controlling KFC, Taco Bell & Pizza Hut.

Mariah Carey with PEPSI brandThe task that lies ahead of Nooyi is to ensure that Pepsico’s principal businesses (Frito-Lay, Pepsi-Cola, Gatorade, Tropicana & Quaker foods) perform to potential with a special attention on PepsiCo’s market share of carbonated soft drinks, which has fallen by 0.3% in 2005 to 31.4% (a Beverage Digest survey). She must also spearhead more and more acquisitions for Pepsi to remain ahead. Also, expansion of businesses in African and Asian markets (with revenue growth of 14% & 11% respectively) are the key. And speaking of Asia, Nooyi faces an immediate dilemma with the pesticides controversy in India, resolving which would need more than mere financial wizardry.

Nooyi’s ascent to the upper echelons of power in America Inc. has been through sheer hard work and determination. Although the challenges are enormous, the fact that Nooyi has seen Pepsi through some of its toughest years (as colas have declined in popularity ratings) makes her the right person for the job. Only, pointing fingers is bad manners, a lesson she must not forget.

Friday, September 01, 2006


A single ad can change your destiny. Don’t take our word for it... ask Airtel!

While Reliance may be catching up in the race for number of subscribers, Airtel is clearly far ahead, so far as strong positioning and poignant advertising communication is concerned.

But then Airtel has a legacy of churning out rock-solid advertisements since the very beginning. And April 2006 saw the mother of them all making a debut on your telly tube: The blockbuster ad evoking strong emotions from momentous occasions! The visuals transcend from Mahatma Gandhi’s Quit India Movement to Winston Churchill showing the victory sign after the allied forces defeated the fascist one; from Sachin Tendulkar’s dismissal by umpire Shephard to Martin Luther King delivering his famous ‘I have a dream speech’, and so on... The typed graphics are equally moving – ‘two words can bring down a regime’, ‘two can win a world war’. The ad ends with ‘That’s the power of human expression – Express Yourself.’

“Airtel has long been a clear leader in the telecom business, and has behaved as a leader should,” beams K. S. Chakravarthy, National Creative Director of Rediffusion DY&R, who along with his team created the ad. The commercial evoked a million goosebumps, tugging at heartstrings with the overwhelming images of emotions it showcased. Dubbed the ‘Madras Mozart’, maestro A. R. Rahman composed the distinctive music for Airtel, which is by now a household jingle.

No file footage, mind you!

And if you thought that the creative brains relied only on file footage to produce this masterpiece, you’re dead wrong! “Except for four shots (Sachin, Churchill, Martin Luther King and Lata Mangeshkar), the film painstakingly recreates historic moments that changed the course of history,” says Chakravarthy. Visualise the recreated images of Gandhi’s Salt March, the tranquility of the monastery, the formation of the peace sign with numerous candles, and you realize the painstaking craftsmanship that has gone into this one.

The TVC is years of sweat and blood reaching fruition for Chakravarthy and his team, many of whom were also responsible for the original Express Yourself commercials from Airtel.

Chakravarthy elaborates on the tornado of tangles he had to face while shooting this ad: “The really difficult part was not the actual shoot, which in any case was spread over many days and locations, with stills being shot simultaneously. The tricky part was getting permissions and clear ances from the celebrities,” he explains. Airtel’s Express Yourself plank has really served it well in the past too, and this campaign has managed to elevate its positioning way above other competitors. More power to Mittal!