(News collection for Management studies)

Volume: 02 Issue: 117                                         7-May, 2010 – Thursday                                Pages:8

Focus : Brand Line - Retailing

A matter of strategy - Store brands need not rival non-store brands but can co-exist to provide better choice in price and product..

Sach tooth paste, one of Future group's private label products

Private labels and manufactured brands don't necessarily compete with each other. Worldwide experience shows that as retailers become more powerful, they have increasingly focused on their own brands. Popular examples are Tesco and Carrefour.

In India too, retailers are focusing more and more on developing their in-house brands, but not necessarily on a competitive front. It is more about fine-tuning their mix of private labels and brands for broader range of products, depth and price points.

Also, offering private labels at different prices is a strategy that can build market share, not just bigger margins, and mixing them with brands goes with some retailers' strategies to offer a full range of merchandise in good, better and best levels of quality.

Mohit Kampani, VP, Spencer's Retail, and Future Group's Head (Private Brand), Devendra Chawla, both agree that margins are better in private labels.

Chawla notes that the private brands are an insurance on fill rates as they don't have to come from various intermediaries such as C&F agents, super stockists and distributors, and thus fill rates are generally higher.

Kampani points out that, “Another important feature of private brands is that by saving 20-25 per cent from supply and distribution costs and marketing costs, private brands can offer more value for the same quality thus inducting and recruiting more consumers in a category.”

“Typically, retailer gross margins on private labels are 25-30 per cent higher than those on manufacturers' brands. This apart, the presence of private labels in a category allows the retailer to negotiate a better margin on manufacturers' brands,” explains Kampani. He adds that consumer profitability is also higher – consumers get better deals in terms of lower pricing as compared to a manufacturer's brand.

Wal-Mart, for instance, is also looking to create a house of brands. Raj Jain, President, Wal-Mart India, and CEO of Bharti Wal-Mart India, notes that private labels will be an area of thrust of the company. Interestingly, it is a major revenue earner for the global retailer. In India, Bharti Wal-Mart has two brands — Great Value in food and grocery and Equate in household drugs and pharmaceuticals.

Despite the buzz surrounding private labels, retailers recognise that it is highly unlikely that a private label will unseat the number one player in any category.

In fact, the conventional wisdom is that when a private label enters a category, it is more likely to take away market share from the brands in the second and third place. While brand domain expert Harish Bijoor agrees that growth in private labels will gain momentum , the products from the retailers' own stable will need to be strategically positioned for them to accomplish the desired consumption level.

“It is all about building a brand. And retailers need to stick to core competencies like FMCG companies. They will have to undertake a heavy branding exercise, stick to the brand philosophy and also be consistent in service if private labels need to grow,” he elaborates.

SPECIAL FOCUS – LEGISLATION ( Collected from Front Line Volume 27 - Issue 10 :: May. 08-21, 2010)



Copyright concerns

V.VENKATESAN



The proposed amendment to the Copyright Act, 1957, suffers from a lack of empathy with the differently abled.

A visually-challenged child reading the Braille version of a book.

COPYRIGHT is an exclusive right given by law for a certain number of years to an author or creator of literary or artistic production to print, publish and sell copies of his or her original work. Publishers see it as a simple mechanism provided for the protection of rights of authors. According to this arrangement, an author owns his/her creations and therefore he/she must be free to control them.

However, the interests of users of copyright cannot be neglected; experts have pointed out that the public interest and development of arts and science also form the rationale for the system of copyright. Indeed, the system of copyright in India is not for commercialisation of works but for achieving a balance of the interests of all stakeholders – publishers, authors and users.

The Copyright (Amendment) Bill, 2010, which is intended to amend the Copyright Act, 1957, was introduced in the Rajya Sabha on April 19. It is an instance of legislation that is likely to favour one stakeholder disproportionately at the expense of others because of the shoddy manner in which it is drafted.

The Statement of Objects and Reasons of the Bill says the Copyright Act, 1957, is proposed to be amended for clarity – to remove operational difficulties and also to address certain issues that have emerged in the context of digital technologies and the Internet.

The two World Intellectual Property Organisation (WIPO) Internet Treaties, namely, the WIPO Copyright Treaty (WCT), 1996, and the WIPO Performances and Phonograms Treaty (WPPT), 1996, have set the international standards in these spheres. The WCT and the WPPT were negotiated in 1996 to address the challenges posed to the protection of copyrights and related rights by digital technology, particularly with regard to dissemination of protected material over digital networks such as the Internet.

The member-countries of WIPO agreed on the utility of having Internet treaties in the changed global technical situation and adopted them by consensus. In order to extend the protection of copyrighted material in India over digital networks such as the Internet and other computer networks in respect of literary, dramatic, musical and artistic works, cinematograph films and sound recordings of works of performers, the government proposed to amend the Act so that it harmonises with the provisions of the two WIPO Internet treaties, to the extent considered necessary and desirable.

The WCT deals with copyright protection for the authors of literary and artistic works such as writings, computer programs, original databases, musical works, audiovisual works, works of fine art and photographs. The WPPT protects certain “related rights” which are the rights of performers and producers of phonograms.

Although India has not yet signed these two treaties, its voluntary decision to make its domestic laws comply with these treaty provisions is seen as a demonstration of its respect for international law and institutions. The Bill declares that amendments to the Act were necessary because in the knowledge society in which we live today, it is imperative to encourage creativity for the promotion of the culture of enterprise and innovation.

However, a close look at two proposed amendments in the Act shows that this avowed purpose is influenced by the concerns of one stakeholder only, that is, publishers. These amendments seek to allow persons with disabilities to access copyright material in specialised formats.

Exceptions

In particular, the Bill seeks to amend Section 52 of the Act, which provides certain exceptions which are not to be construed as infringement of copyright. Legally, the use of a copyrighted work by any person other than the owner of the copyright is an infringement. The Act recognises certain acts which, though done by a person other than the owner of copyright, would not amount to infringement. At present, there are as many as 30 specific exceptions listed under Section 52(1).

The Act allows reproduction of a copyrighted work for “private use, including research” under Section 52(1) (a) (i). Such an exception does not make provision for printed works to be converted into accessible formats on a large scale for purposes other than research, including recreational purposes or use in the normal course of any work by print-impaired individuals on a par with persons without such impairment. A book or a novel published on a commercial scale cannot be converted into an accessible format for the use of persons with print impairment under this exception.

Moreover, this exception does not cover a whole book and only allows the use of small portions of the book, even if it is for research or for educational purposes.

Section 52(1)(h) allows for the reproduction of a copyrighted work by a teacher or a pupil “in the course of instruction”. The scope of the term “in the course of instruction” is ambiguous. Further, it does not allow for reproduction in all formats accessible by print-impaired pupils, including Braille, large text, e-text and talking books. It does not allow intermediary organisations, such as not-for-profit organisations working for providing access to print-impaired persons, to convert copyrighted works.

There are other concerns as well. The Act does not provide for the import of already converted copies of copyrighted works from other countries. This adds an additional burden of converting works that have already been converted and amounts to duplication of work and unnecessary expense.

According to an estimate, almost 7 per cent of India’s population is print-impaired. It is important that this section is able to exercise fully and freely its right to the freedom of speech and expression, right to information, right to read and write, right to education, and, most critically, right to live with dignity.

Even as these concerns remain unaddressed, two provisions of the Bill have dismayed activist groups striving to promote the interests of differently abled persons.

The Bill seeks to insert Section 52 (1) (zb) which reads as follows:

“The adaptation, reproduction, issue of copies or communication to the public of any work in a format, including sign language, specially designed only for the use of persons suffering from a visual, aural or other disability that prevents their enjoyment of such work in their normal format.”

Activists associated with the National Access Alliance, a coalition of non-governmental organisations (NGOs) representing differently abled persons, have expressed extreme dissatisfaction with the drafting of this provision. According to them, the exception only permits conversion of printed material to “specially designed” formats such as Braille and sign language and does not benefit millions of persons affected by cerebral palsy, dyslexia and low vision and the millions of visually challenged persons who do not know Braille and who require mainstream formats such as audio, reading material with large fonts and electronic texts.

Further, even regular Braille users complement Braille with other mainstream formats. Given that audio, reading material with large fonts and electronic texts are mainstream formats and not “specially designed” formats aimed at persons with disabilities, the proposed exception excludes them.

Activists also point out that in modern-day Braille production, the material has to be first converted into mainstream electronic formats such as Microsoft Word because Braille translation software requires input in such formats. Therefore, they say that the exception in favour of “specially designed” formats is entirely limiting and counterproductive.

Activists have also expressed other concerns. Section 31 of the Act deals with the grant of compulsory licence to a complainant in works withheld from the public by the owner of a copyright on unreasonable grounds. Section 31A deals with grant of compulsory licence in unpublished Indian works, where the copyright owner is either dead or untraceable.

For conversion to non-specialised formats, the Bill proposes to insert a new provision – Section 31B – for introducing a licensing system that will permit only organisations working primarily for the benefit of the disabled to undertake conversion and distribution. The activists are apprehensive that this proposed provision, if enacted, will prevent educational institutions, self-help groups, NGOs and print-disabled individuals themselves from undertaking conversion and distribution.

The licensing system, they fear, will also require approaching the Copyright Board with regard to each work. This will be extremely time-consuming and cumbersome. They apprehend that the waiting period for obtaining permissions and subsequent conversion will result in students losing academic years and amount to a clear violation of their right to education. The Copyright Board, under this proposed provision, has to dispose of an application from such an organisation within a period of two months.

These two provisions, the activists claim, violate the constitutional guarantee of equality under Article 14 since it discriminates between those visually challenged persons who know Braille and those print-disabled persons who do not. Even otherwise, by failing to institute a meaningful copyright exception that would enable access to educational material by the print-disabled, the state has failed in its duty to guarantee a meaningful right to life guaranteed under Article 21 of the Constitution, they allege.

A study by the National Access Alliance (NAA) has found that over 50 countries around the world have copyright exceptions for the benefit of persons with disabilities. In about half these countries, there are no limitations on who may undertake the permitted activity and about 20 countries, including Australia, France and Germany, permit conversion to non-specialised formats.

The NAA has suggested that amendment to Section 52 should be format neutral. Every day new formats are created and specifying the format will mean that persons with disability will not be able to use emerging technologies for their benefit, says Rahul Cherian of Inclusive Planet, Chennai, one of the NGOs that constitute the NAA.

The activists say they met Human Resource Development Minister Kapil Sibal in November last year and conveyed their concerns over the draft Bill. Sibal, according to them, assured them that their concerns would be taken care of. However, the activists found to their dismay that the HRD Minister chose to keep not only Section 52(1) (zb) as it was drafted, but inserted Section 31B into the draft when he introduced it as a Bill in the Rajya Sabha.

Publishers’ lobby

The activists allege that the HRD Ministry is reluctant to withdraw these amendments, under pressure from the publishers’ lobby. The publishers, the activists claim, are opposed to widening exceptions under Section 52 because they believe that the Ministry might come under pressure to include exceptions for educational purposes at a later point of time. Many domestic intellectual property rights regimes create exceptions and limitations on copyright used in the educational sector.

The controversial drafting of the Bill has given rise to misgivings that the HRD Ministry perhaps subscribes to the publishers’ perspective on copyright, ignoring the interests of copyright users. An exception to the reproduction right of a copyright owner for the benefit of print-impaired persons is undoubtedly in the public interest and in furtherance of the cause of dissemination of information. It is important that such an exception satisfies its beneficiaries.

India ratified the United Nations Convention on Rights of Persons with Disabilities on October 1, 2007. Article 30(3) of this Convention says, “State parties shall take all appropriate steps, in accordance with international law, to ensure that laws protecting intellectual property rights do not constitute an unreasonable or discriminatory barrier to access by persons with disabilities to cultural materials.” Indian courts have held that international conventions that India has ratified can be read into Indian law even without express legislation. With the controversial Bill having been referred to a Standing Committee of Parliament for its consideration, the HRD Ministry should use this opportunity to review the Bill in the light of concerns expressed by the activists.

DAY FOCUS:

Steel - Corporate – Outlook

SAIL close to sealing deal with POSCO - Joint venture likely to build 1.5-million tonnes steel plant.



The proposed joint venture between state-owned Steel Authority of India Ltd (SAIL) and the South Korean steelmaker POSCO is likely to be finalised by the month-end.

According to sources close to the development, a team of SAIL officials led by the Chairman, Mr S.K. Roongta, and the Steel Secretary, Mr Atul Chaturvedi, is set to visit South Korea to take forward the joint venture negotiations. “The deal between SAIL and POSCO is likely to be finalised within this month. There had been Government-level discussions as well when the South Korean President had visited India in January. Next week, a team of SAIL officials, Mr Roongta and the Steel Secretary are also going to South Korea to take the negotiations forward,” said an official close to the development.

The joint venture is likely to be for building a Rs 15,000-crore, 1.5-million-tonnes per annum steel plant on the land available in SAIL's Bokaro Steel Plant. POSCO is likely to hold 74 per cent of the equity in the venture.

The proposed plant will utilise POSCO's patented FINEX technology. This will enable the use of iron ore fines and thermal coal for the production of high-grade steel.

The SAIL Chairman, however, declined to fix a timeframe on the conclusion of the deal, but said things were moving ahead. “There are several things to be discussed and sorted out so I can't really fix a timeline, but we are moving ahead. I'm sure it would be a win-win deal for both companies. POSCO has very good technology and operational practices and the joint venture would also help us bring those practices to our other plants. But, those details are yet to be negotiated,” Mr Roongta said.

Industry

‘Recession will impact life sciences industry in long term’

The life sciences industry is likely to bear the impact of the global economic downturn in the long term, with one-third of the executives forecasting a reduction in research & development spending in the future.

As per the report by global consultancy Deloitte in collaboration with The Economist Intelligence Unit, curbing of costs in response to the financial slowdown and the continuing capital crunch is likely to have an impact on the life sciences industry in the years to come.

“Nearly one-third of the executives surveyed see a reduction of R&D spend in the future and nearly half believe that up to 40 per cent of biotech companies will cease to exist in five years,” the report added.

The recession has caused companies to downsize R&D, as 43 per cent of the respondents are focusing on products to provide a more immediate return and 32 per cent are reducing R&D spend.

However, 30 per cent of executives surveyed said that developing a robust R&D pipeline and focusing on innovation are important to their longer-term success.

“While the immediate hit of recession has been largely absorbed, the life sciences industry may look back at this time as a turning point,” Deloitte Touche Tohmatsu industry Leader (Global Life Sciences and Health Care) Mr Robert Go said.

“Health plans driving out costs, expiring patents, evolving generics legislation — all of these trends were in play before the economic downturn, but the downturn is now accelerating their impact,” Mr Go added.

While the near-collapse of global capital markets had immediate implications for even the largest competitors in the industry, the impact on biotech may be staggering.

The survey revealed 68 per cent of biotech executives surveyed believe that between 20 and 40 per cent of biotech companies would not exist in five years as a result of the global economic downturn.

The survey is based on online responses from of 281 senior industry executives from across the globe.

Agri-Business

Tea production, exports up in March

The country’s tea production rose by nine per cent to 49 million kg in March 2010 against 45 mkg in the corresponding month last year.

According to the Tea Board, exports increased to 17.96 mkg in March this year from 14.22 mkg in the same period of 2009.

“Production has started picking up in the northeastern region from March. We expect good output in the coming months, as small growers are focusing on plantation,” an official with the Tea Board said on Friday.

There has been a slight increase in output both in North and South India, he said.

According to official data, tea production in the plains of West Bengal and Assam, which harvest the best quality tea leaves in the world, increased to 29.82 mkg in March from 27.34 mkg in the same month last year.

Output in Tamil Nadu, Kerala and Karnataka also improved to 19.17 mkg from 17.69 mkg in the review period, it said.

Cumulative production in the first three months of 2010 rose by 16 per cent to 94 mkg from 81 mkg a year ago, it added.





MANAGEMENT TIPS: KEEP UP WITH CHANGE

There is no way to stop the world from changing, so follow these tips to keep up and ahead of the game.

1. Don't fight change. You can't stop markets, trends and technology from changing, so learn to go with the flow.



2. Adopt a predictive managerial style. Don't wait for things to happen to make a move. Anticipate problems and provide contingency plans.



3. Test your contingency plans. Waiting for disaster to strike is a dangerous way to find out if your emergency plans will hold. Test them out from time to time to fine-tune them and make sure they're still relevant.



4. Identify the positives. Even the most negative changes can have positive aspects to them. Being able to identify and maximize them can help make adapting less painful.



5. Be quick to adapt. Learn to adapt to changing situations quickly and be able to change plans on the spur of the moment if the situation requires it.



6. Stay tuned to external factors. Your business is affected in many ways by outside factors. Keep abreast of these so you can anticipate any sudden market changes that would affect how you need to manage.



7. Put in place a Research and Development plan. Encourage innovation and creativity to stay ahead of the demand for newer and better products and services.



8. Keep an eye on the competition. Don't let the competition get the best of you. Keep up-to-date with what they're doing and use it to your advantage in managing your business.

Focus – Day Tip

Education gains significance only when it is tested on the touchstone of practice...