(News collection for Management studies)

Volume: 02           Issue: 111          25-November, 2009 – Wednesday       Pages: 6

Focus : Rubber - Industry & Economy - Automobiles
Auto sector growth to push up demand for rubber - Unfavourable weather conditions could dampen production levels.

The progress achieved by the global automobile industry during the second lap of the current year gave a fresh impetus to the demand for rubber and it continues to scale further highs.

The weather changes due to global warming in most of the rubber producing countries have affected production. According to the assessment of the Association of Natural Rubber Producing Countries (ANRPC), rubber production will lower by 6 per cent this year.

Major consumers - China is the major rubber consumer and requires maximum rubber for its use now, since its stock position is very low. The US and the European countries are procuring large quantities of rubber. The industrial progress in Japan has also enhanced consumption in that country.India, which overtook Japan in rubber consumption, made a record import during the current fiscal. The untimely rains and floods that followed reduced the availability of rubber from Thailand and interrupted the movement of rubber there. Once the rains subside, winter would commence.

According to weather forecasts, winter will be severe this year. This will also adversely affect rubber production. It is estimated that annual rubber production in Thailand would be only within 2.5 million tonnes. But, in 2008, the production there was 3.1 million tonnes. In Malaysia too,tapping has been suspended due to heavy rains. Large-scale cutting down of trees intended for replanting has worsened the situation. The production loss of Malaysia during January-September was 24 per cent. Severe winter in Indonesia brought down the availability of rubber to very lower levels.

In India also, weather has curtailed production. Rubber production during the first seven months of the current fiscal was down by 9.4 per cent and reached 435,125 tonnes. Last year, the production during the same period was 480,230 tonnes. The rubber consumption shot up by 3 per cent and touched 536,100 tonnes. In the international market, where the price was ruling low during the early months, large- scale import of rubber by India brought relief to the deadlock in the market. India imported 126,472 tonnes during April-October. Compared with the former years, the increase in imports was 233 per cent. By March next, the imports would reach 1.5 lakh tonnes. The export from the country touched almost the bottom lines.

During the April-October period, a consignment of only 3,859 tonnes was exported. But, in the previous year, at the same time, the export was 34,000 tonnes. At the beginning of the current fiscal, the market commenced with a price of Rs 83.50 a kg for RSS 4 grade. The price has now shot up to Rs 118 a kg. The stock position at the end of October was 2.19 lakh tonnes. The stock last year at the same time was only 1.5 lakh tonnes. The arrival of large quantities of foreign rubber to the domestic market could, in fact, help avoid a crisis.

Auto industry growth - The severe drought at the beginning of the year and the subsequent heavy rains all over in Kerala caused a setback to rubber production. The growth achieved by the automobile industry was appreciable and it created similar repercussions in the tyre producing sector also. Some foreign tyre companies are desirous of investing in India to start new ventures. This will strengthen the demand for natural rubber. While in the domestic market, RSS 4 is traded at Rs 118 a kg, the same grade is priced at Rs 123.56 a kg at Singapore Commodity Exchange (SICOM).

Availability reduced - Though September-December is a high productive phase for rubber, this year, it was not so favourable till the end of November. The availability was reduced due to climaticvariations. In November-December, the latex flow is very high. But heavy rains succeeded in disrupting tapping. Now, rain has almost receded and the days ahead would witness intense tapping and as a result of which, the movement of rubber to the marketing centres would also gather momentum.

But, even if arrival enhances the confidence that the possibility of a price crash is very remote gives more strength to the bullish trend prevailing in the market. However, prices would continue to rule above the Rs 100 mark in the coming days as is evident from the favourable wind blowing at present with prices touching Rs 118 a kg for sheet rubber.

Focus :Rural Marketing

The rural conundrum -Tempting market, big opportunity, large masses to be tapped. Yet success in rural India has eluded several corporates. Can India Inc really make it big in rural markets? CII's recent Summit had experts introspect on the subject

IT is not a one-time act, not a marketing gimmick or a sound byte. It has been the Waterloo of many companies. It involves addressing some 700 million potential consumers, over 40 per cent of the Indian middle-class, and about half the country's disposable income. Rural marketing, a much-talked about and hotly debated subject, was once again the focus of attention of FMCG majors such as Nestle India and Coca-Cola.

Carlo Donati, Chairman and Managing Director, Nestle India, observed that `generalising the rural market can be dangerous'. "It is true that in today's congested and difficult markets, both local and global, all FMCG as well as other companies or corporations look and search for new opportunities, consumers and markets. Going rural is a question any marketing person must have reflected on many times," he said.

Drawing attention to the 700 million potential consumers in rural India, Donati pointed out that the rural market presented both an opportunity and a problem, given that this market has been characterised by unbalanced growth and infrastructural problems.

So is Nestle going rural? "Our product portfolio is essentially designed for urban consumers; but all the same we are closely monitoring the rural consumer," Donati said.

Nestle's rural initiatives have largely been based on price-led initiatives. Brands such as Maggi noodles and KitKat chocolates have been priced at Rs 5, and few other candy and chocolate brands are priced at Rs 2 per unit. These price points not only help Nestle reach more retail formats in urban markets, but also help in making inroads into rural markets. Currently, rural markets account for below 10 per cent of the food major's revenues.

Coca-Cola, on the other hand, which has been investing heavily in tapping the rural market, has pegged its rural strategy on three factors - availability, affordability and acceptability. "The rural market is tempting, but tapping it has been fraught with challenges," pointed out Sanjiv Gupta, President, Coca-Cola India.

"Take availability. It involves a trade-off between the cost of distribution and incremental penetration. Issues such as poor infrastructure and bad roads drive up servicing costs. Then there's the affordability factor - disposable incomes are low, and largely dependent on the vagaries of the monsoon. In the case of acceptability, the trade-off is always between customisation and standardisation of the consumer proposition. Most branded products are considered a luxury, media consumption is limited, and general product consumption is highly seasonal and skewed towards the harvest and festival time. Here, the question of customisation versus standardisation of the consumer proposition also arises. In the case of our thanda commercial, for example, we could connect both with the rural and urban consumer so that the campaign did not need customisation," Gupta said.

Drawing comparisons between the urban and rural consumers, Gupta pointed out that while movies, music, social interactions and identifying the family as a key unit were the common attributes exhibited by both, expressions of these activities varied between the two sets of consumers. The rural consumer, for example, sought outings through local fairs,melas and haats, social gatherings such as card sessions, television viewing which was by and large confined to Doordarshan and DD Metro with limited influence of cable and satellite television, besides inter-village competitions.

While emphasising the flexibility of the supply chain the rural market offers, Gupta added that "the buying pattern of the rural consumer is different from the urban consumer; purchase behaviour is occasion-driven by events such as weddings and harvests".

Donati elaborated on the differentiated purchasing patterns of the urban and rural consumer. "The urban consumer has adapted much faster than his rural counterpart. The reasons probably range from higher exposure to media, to changing lifestyles, to increased pressure on time. On the other hand, the key feature of the Indian consumer - his restraint towards consumption - is more visible in the rural, more traditional environment. Hence, the cost of conversion of rural consumers (to the product) is higher," he said.

Cautioning marketers against plunging headlong into the rural market, Donati added, "This does not mean that the rural consumer is not or should not be a target. There are a number of success stories that contradict my statement. I'm just raising a word of caution looking at the large numbers out there. Going rural without first assessing the profitability of such a move can be dangerous. Too much attention on the rural consumer might cause a company to lose focus on its core business. Therefore, attempts to generalise the concept of rural marketing tend to be wrong. I believe one should focus on high GDP areas - whether the population is urban, semi-urban or rural."  

Cracking the market, Gupta reiterated, was not only about grappling with issues such as availability, affordability and acceptability. It was about reinforcing them over and over again.

One of the examples Gupta touched upon was to do with issues involving the rural retailer. To counter negligible or erratic supply of electricity, for example, ice-boxes were offered for chilling. For rural retailers preferring high-margin local brands, pricing competitive to that offered by local players and creation of consumer pull have been attempted.

The Summit concluded with a reality check - that rural marketing isn't the fad of the decade. Ingredients for success here include long-term commitment, cost re-engineering and sustained innovation. To put it as a cliché - it is the survival of the fittest.

DAY FOCUS:  Focused by J.Deepthi, 1-Sem MBA (09D61E0011)

Corporate - CIL eyes overseas acquisitions

Coal minister, Mr Sriprakash Jaiswal, on Wednesday said state-run coal major Coal India is looking to acquire coal blocks in the US and other countries to meet the rising energy need of the country.

"Coal India Ltd (CIL) is pursuing its foreign venture initiatives with various countries, including the US, to acquire coal mines/ blocks abroad, develop and produce coal from such mines in order to import coal, with a view to securing the energy needs o f the country,'' Mr Jaiswal informed the Lok Sabha in a written reply.

The largest coal producer, which had floated a global expression of interest (EoI) in August, has shortlisted 12 global mining firms for possible partnerships and is mulling floating a tender soon to choose a partner from them. Global mining giants like the Anglo-Australian Rio Tinto, the US-based Peabody Energy and the Indonesian Buma Resources are understood to be among the shortlisted companies, which were filtered out of about over 50 firms that had shown interest in partnering with CIL. "As part of this initiative, CIL has floated a global EoI for selecting strategic partners with the objective of, inter alia, taking stakes in operating mines or greenfield projects of the strategic partners and jointly exploring opportunities for acquir ing coal resources in various countries, including the US,'' Mr Jaiwal added.

RCF project registered -Rashtriya Chemicals & Fertilizers Ltd (RCF) has informed BSE that it has been informed by UNFCCC (United Nations Framework Convention on Climate Change) that the company’s CDM (clean development mechanism) project “N20 abatment in HP Nitric Acid Plants’’ has been registered. 

Logistics -World Bank likely to sanction $3-b for road development

India may get $3-billion loan from the World Bank for development of roads in the next 3-6 months, a senior Transport Ministry official said . “The Department of Economic Affairs has forwarded the request for the loan to the World Bank and we can expect to get it in 3-6 months’ time, after the institution completes its due diligence,’’ the official told PTI.

The Government has sought loan for converting 6,372-km of 1-lane highways to 2-lane out of the total 19,702-km single lane highways in the country under the National Highways Development Project (NHDP) Phase IV. However, the mode of repayment of this lo an has not been finalised yet.

“One of the ways to pay the World Bank loan is through budgetary resources as we would have used this money anyway for the same purpose of building 2-lane roads,’’ the official said. Another method of loan repayment can also be levying toll on these 2-lane roads but it has never been done before on concerns whether people would accept it, the official added.

Banking & Finance -Lending rates still sticky, says RBI Chief

The Reserve Bank on Wednesday the banks to slash operating costs and bring in more flexibility as well as transparency in lending rates.

“Although overall efficiency and productivity have improved, resources are not being utilised in the most efficient manner. There is a degree of stickiness and non-transparency in bank lending rates,” the RBI Governor Mr D Subbarao said.

Mr Subbarao, had earlier pointed out that banks were not proportionately cutting lending rates, even after the apex bank had slashed its signalling rates to increase liquidity in the system. Addressing a conference on Banking-Crisis and Beyond, Mr Subbarao said banks need to reduce costs and pass on the benefits to both depositors and lenders.

“The intermediation cost in India is still high, largely due to high operating costs... The challenge for Indian banks, therefore, is to reduce costs and pass on the benefits to both depositors and lenders,” the RBI Governor, Mr D Subbarao said here.

Mr Subbarao said banks funding costs will rise due to proposals at the global level to mandate higher capital standards and cautious approach in the wake of the global financial crisis. “This means Indian banks will need to improve efficiency even as their costs of business go up. This is a challenge that will test ingenuity, perseverance, ability to learn and adapt and management skills,” he said.

Marketing -Honda launches New Aviator two-wheeler

Honda Motorcycle and Scooter India Private Limited (HMSI), 100 per cent owned two-wheeler subsidiary of the Honda Motors Japan would invest Rs 360-crore this year for increasing the present manufacturing capacity of their two-wheelers from 12. 5 lakh units to 15 lakh units per annum.

Speaking to media persons here today on the occasion of launch of the New Aviator with the tagline “Live Your Style” bound for the mature Indian males, Mr Y S Guleria, National Sales Head, HMSI said that they plan to enhance the manufacturing capacity fr om one lakh scooter units to 1.25 lakh units in this financial year. Presently the company share in scooter segment is 50 per cent which they are targeting 70 per cent by 2010, Mr Guleria said.

The New Aviator comes with a host of new features which enhance the style and premium element. It is ideal vehicle for males who seek a premium-class product and have a flair for style, Mr Guleria said adding that the introduction of New Aviator is a ste p ahead in the company's commitment to expand the scooter market in India.

Banking & Finance -Time for banking sector consolidation not yet: RBI

The Reserve Bank Deputy Governor, Mr K C Chakrabarty, on Wednesday said the Indian banking system is not ready for consolidation yet, instead there is a need to focus more on financial inclusion.

“The time for consolidation has not come. We have a problem. There are a few dominant players. If we are consolidating, there will be a problem. Financial inclusion is more important than consolidation at this stage,” Mr Chakrabarty said on the sidelines of a conference at Mumbai. In a recent meeting with bankers in Delhi, the finance ministry had asked bigger public sector banks to look at consolidation in the public sector by acquiring smaller banks.

 

MANAGEMENT TIPS: BODY LANGUAGE

Like it or not, your body speaks volumes, even when you are silent. Here's how to express an attitude that's appropriate for a leader.

Stand tall. Keeping your shoulders back and holding yourself up to your full height will give you an air of confidence.

Take your hands out of your pockets. Putting your hands in your pockets is often seen as a sign that you have something to hide.

Stand with your arms crossed behind your back. This will help you adjust your posture, and it leaves your hands in a position that is open and not intimidating.

Make eye contact. Always look directly into the eyes of the people you are speaking with. This shows you're interested and also gives you a sense of confidence.

Sit up straight. Even if you're at an 8 a.m.meeting and feeling tired, it's important to sit up straight in your chair. Slouching makes you look disinterested and can give off an unwanted air of laziness.

Face the person you're talking to. This shows you are interested and engaged in the conversation.

Shake hands firmly. For many, a handshake is a reflection of the person you're shaking hands with. You don't want to come across as unsure or overbearing, so make sure yours is professional and confident.

Always smile. Smiles are contagious and will make others feel positive when you're around.

Look your best. You don't have to be model perfect every day, but you should dress appropriately and neatly. Clothes can have a big impact on the way you're perceived.

Walk confidently. Keep your head up and take even strides.

Focus – Day Tip Contentment is the hallmark of true education.