FDI in retail offers something to all

I was amazed at the ruckus created after the Union Cabinet decided to allow 51 percent foreign direct investment (FDI) in the retail sector. An objective, non-ideological and apolitical view will surely show how hollow the arguments of the opposing parties are. Everyone talks of front-end or kirana outlets in the entire chain of retail business. How about the back-end operations? We are poorly organised in procurement, storage and supply chain. Inventories pile up but distribution does not happen on time and thousands of tonnes of food grains and other eatables rot because of ill-equipped storage facilities, especially those run by the government. We do not have enough capital or technology in these areas. That is a fact. Small to medium farmers are generally squeezed in price by middlemen. There is no drive for quality of the produce. FDI can not only bring capital but also the knowhow and processes to address these issues.

A bogey is being raised by many that FDI would damage or kill millions of small and medium traders. Similar noise was heard when business houses were allowed to enter the retail segment. The reality is that the traders continue to thrive. They have also grown in numbers. A big retail store in Pune was recently selling a kg potato, tomato and onion at just Rs24! This was happening at a time when food inflation was still running high. The kirana shops will always survive and thrive. This is because of our habit of buying smaller quantities, albeit more frequently. We believe that anything we buy now is fresher than what we would store in our home refrigerators.

Also, we have a big population in the small income group. These families will always go to the small traders in the neighbourhood, as the owner give them a credit up to 30 days, although by charging a higher price and making additional margin from such credits. FDI in retail will trigger a fall in food prices. That will not only benefit consumers but also kirana stores.

About a decade back, nobody wanted to buy a house in the fringe areas like Hinjewadi. Now, such areas are hot destinations. New companies and educational institutions have come up in these areas. But what has made these a happening place is the presence of big retail stores and malls. Thus the FDI will also help in the development of peripheral or suburban areas of cities and rural areas.

Originally printed in www.SakaalTimes.com (December 22, 2011)

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Airlines in trouble

When Vijay Mallya took over Air Deccan, he had not seen the writing on the wall. We tend to do what we are. However, this may not work well in managing businesses efficiently. Yet, many are not able to resist such temptation. The operation and management of Kingfisher Airlines have borne the imprints of Vijay Mallya’s style — flashy and frills. Its in-flight services are on par with some of the top international airlines. Most passengers give it a high rating; but that does not guarantee sustainable economics and survival.

Airline industry has shown exponential growth in recent years. This is likely to continue. Many airlines have exploited the opportunities. Kingfisher went wrong with its understanding of market dynamics and consumer behaviour. The percentage of people willing to pay for the luxury provided by such airlines, is small, maybe not 8 percent to 10 percent of passengers. Airline business growth is being fuelled by lower medium class and emerging upper medium class. They like luxuries and frills, but at no extra cost. That is where Indigo Airlines has done a good job.

High aviation fuel cost and taxes have had adverse effect on Kingfisher. But it is a reality for its peers too. Toe more factors have added to the woes of Kingfisher. Most consumers have not yet matured enough to recognise the true value of quality and services. There is obvious reluctance to pay for them. The only option for low-cost airlines is to provide the basic level of quality and services but no frills. Kingfisher, known to have a good degree of sensitiveness for customers, must continue the policy, it does not cost money but increases loyalty.

Another damaging factor is the reckless price war unleashed on Air India. They do not mind pushing peer industry in red, even if that worsens their own position. The consumer has the last laugh in such a price war. But only in the short run. In the longer run, when non-viable organisations start falling apart, flights are cancelled, safety gets compromised and so on. One does not know who has the last laugh. There is a strong need for representatives of airliners and the government to sit together and bring an element of sobriety in the policies governing pricing, minimum service and safety standards. Competition must always be there. But it must be healthy. This is true for other sectors like telecom too, where public interest is involved. Failing this, we can hurt both, consumers and industrial growth.

Originally printed in www.SakaalTimes.com (December 08, 2011)

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Measures to improve quality of students

There was quite a media buzz after Infosys chairman emeritus N.R. Narayana Murthy’s recent observation on the quality of IIT students. One of main reasons cited for the downslide in quality is the shortage of faculty. Such a qualitative downslide over the years has been experienced by the industry even in colleges, which did nor face any such shortage of faculty. There are a number of reasons for this.

Efforts by students to secure high percentage have taken precedent over fundamental learning of the subjects. Competition and the desire to get a placement in major organisations have accentuated this tendency. Is the percentage of marks in examinations not an automatic consequence of fundamentally strong knowledge? Ultimately, what helps you succeed in the career is in-depth knowledge and some other qualities.

There is a crucial aspect that merits immediate attention. Even if a student is a topper and knows the discipline well, if s/he is weak in communication skills, s/he is most likely to be rated poor in quality by an interviewer. Do not be surprised, if 80 percent of the impact, which a student creates on interviewers, is by his/ her communication skills and how s/he presents self. Even interviewers often are not aware of how their own decisions are influenced by these qualities.

Barring some, most educational institutions do not do a good job to develop the communication qualities in students. A student may have all the knowledge about the discipline, s/he is qualified; but that by itself will have no meaning in practical life, unless s/he is able to demonstrate it effectively during the hiring process and then during actual employment. We may blame the faculty, external coaching classes and so on; however, what we need is to make learning of communication skills and personal grooming a part of college curriculum. The faculty members need to know this and they have to have these qualities to begin with.

Then there is a paramount need for students to imbibe ethics and quality. There is literally no emphasis in academia on these. Here quality means “doing it right the first time.” There is a false notion that a quality system is necessary only in industries and quality costs more efforts, time and money. Actually, it is exactly the opposite. If we can make faculty and students conscious of ethics and quality, in due time, we will have quality manpower needed by the industry.

Originally printed in www.SakaalTimes.com (November 16, 2011)

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