Audire Volume III

AUDIRE AUD IRE IIM ABC Consulting Cons ulting Review 2010, Volume 3

Audire is a joint initiative of the student consulting clubs at IIM Ahmedabad, Bangalore & Calcutta.

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Articles on Hydro-Electricity, Hydro-Electricity, Governance, Governance, Mobile Banking, Pharma etc.

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Table of Contents Campus Thoughts

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30,000 MW of Hydro in Arunachal Pradesh Pradesh - Is Harry Potter helping?  A criticism of the State Mega Hydro Electric Policy, Policy, 2008

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Coding the Takeover Mantra  Analysis of principles which govern the take over over code

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Gearing up The Indian Public Sector for Shared Services Cost effective effective way of governance

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Customer Analysis in Indian 'Mobile Banking' Sector  Analysis of 'Mobile Banking' sector from customers' perspective perspective

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Impact of Internet on Print Media Media Integrating services with multiple delivery platforms to generate productive business models

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Indian Pharmaceuticals Industry Evolution and the road ahead

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 The Power to Disrupt Competitivee leadership in systematic innovation Competitiv innovation is shifting 'from the west to emerging markets'

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Climate change negotiations and its links with Wind Energy Incentives like renewable energy certificate trading to promote growth

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Leveraging the Power Power of NPS in B2B Markets  Action which can enhance power of marketing & sales operations

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Marketing for Tomorrow : Social Media Marketing  Validation  V alidation of 'Social Media Marketing' from a social psychology perspective

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Quo Vadis, Affiliate Marketing Determination of facts which will help it overcome its pastignominy  pastignominy 

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EDITORIAL NOTE

Dear Readers,  As we present the third issue of Audire the IIM ABC Consulting Consulting Review, Review, on behalf of the editorial team, I wish to thank the industry and the academia for their overwhelming support to our magazine. Our previous issues were well received by the readers and we would like to thank  them for their valuable feedback. feedback. We We hope to bring to you an eclectic mix of insightful articles   with this issue. The diversity of articles in this issue is a testimony to our rich pool of  contributors. Our writers have raised issues ranging from hydro-electricity to governance through their thought provoking articles.  Today, businesses are fast becoming global organizations spanning multiple geographies and disciplines.. A manager today is confronted with new technologies and business models on a daily  disciplines basis. Gone are the days when one could merely shrug our shoulders and say, “This isn't what I have been trained in.” in.” In this dynamic world, it is necessary necessar y to have a broad outlook in order to appreciate and harness the potential of a business. We We intend to stimulate this diversit diversityy of  opinion and thought with this issue of Audire Audire.. On behalf of Team Audire, Audire, I would like to extend my my heartfelt thanks to our industry partners, UAE Exchange and the students of IIM Ahmedabad, Bangalore and Calcutta who have full heartedly hearte dly supported our endeavour.  We hope to hear back from you, your suggestions  We sugg estions and feedback on this issue of Audire Audire.. Please feel free to write to us at LLPDEFDXGLUH#JPDLOFRP Happy reading !  Team  T eam Audire Audir e

EDITORIAL TEAM IIMB

IIMA 

IIMC

 Varun Saini G Venkatesh Nobal Preet Singh P Hariharan

 Amber Maheshwari Gurveen Bedi Utsav Kheria Rao Chaithanya Prabhakar

Sumit Singla  Abhishek Chopra Pankaj Chatrath  Alpesh Chadda

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30,000MW of Hydro in Arunachal Pradesh Is Harry Potter helping?  A Criticism of the State Mega Hydro Electric Policy, 2008

 Abstract  India is a country in a massive power deficit. Recognizing  this, the government has set out on an ambitious plan to  provide “Power For All by 2012”. In sync with this plan, state governments such as that of Arunachal Pradesh  have promised high capacity additions. In this article we  explore why, some of these promises are far from reality  taking the case of Arunachal Pradesh – a state that is  aiming to add a whopping 30,000 MW of power within  the next decade.

Looking at the plan of Department of Hydro Power, Arunachal Pradesh, one cannot help but be stunned by the mind-boggling installed hydro capacity that is expected from the state by the

end of the 12th 5-Year Plan. If the plans of the power ministry do take off, we might actually be close to achieving “Power for All”. But, is this really possible? How can a state, which, in the last decade has not added more than 100MW of  power, suddenly add as much capacity in 10 years that the entire country has not even added in the past 2 years? We need to dig deeper into the Hydro Policy for the state and analyze why after all, that might not be possible. India is in a huge power deficit, and there is definitely a need to add capacity. The ministry  outlines the need for India to add hydro capacity  to its portfolio, based on the argument that environmental pollution needs to be controlled.

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 The plan cites the total hydro potential of the state upwards of 57,000MW. While the plan does highlight some issues with the development of hydro power in the state, such as rehabilitation and resettlement (R'n'R) issues (Article 1.9), it glosses over most issues. Let us analyze the major deficiencies in the plan –  1. Terrain – The state is not yet connected to the national grid and transmission capacity in the state remains dismal, leading to poor evacuation of power. In fact the entire north-eastern region of India cannot evacuate more than 1,500MW  of power to other regions. Arunachal Pradesh happens to be a very mountainous region with a thick forest cover. As a result, laying lines becomes a onerous task. The plan simply  mentions the cooperation required between the government and the private players to achieve this task (Article 9.11), but fails to talk about how  this capacity addition will be achieved. 2. Insurgency – One would expect special clauses to attract investment in a zone which has had a history of insurgency from Nagaland rebels and other similar separatist organizations in the North-Eastern part of India. However, the plan contains no provision to compensate this. In fact, companies that have been allotted projects are finding it increasingly difficult to motivate employees to work due to employees' perception of the threat to their lives. 3. The China angle – Even though the McMahon line was recognized officially by the  Tibetan government in the Simla Accord, China refuses to accept the document on the argument that China now has sovereign control over Tibet and it was not party to the agreement. Every now  and then, there have been political and diplomatic flare-ups between the two nations on this issue. As expected, the government document ignores these issues, but, they are very  real for private players' participation and should be addressed in the plan. 3. Seismology – Arunachal Pradesh falls in the

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Seismic Zone V which means it is highly prone to earthquakes. The plan outlines the need for private developers to take this into account and also educate the local population about the safety of dams (Article 1.10). Considering  however, that it is very difficult to convince locals, the plan talks of no government support.   The proposed projects would also result in storage of huge amounts of water. In the event of an earthquake, the havoc that a potential 200MW dam can unleash can be very much like a tsunami in that region. There seem to be no incentives to take into account this risk. Contrast this with the fact that North Eastern parts of  India get Natural gas at a discount to encourage fuel use in those areas. 4. History of delays – The plan contains in its objectives the need to execute projects on time. In fact, the speech by the then Union Minister for Power, Mr Sushil Kumar Shinde in 2006, also outlines the need for timely completion. However, the 'flag-ship' plant of Subansiri Lower which was conceived in the 1980s and on  which the construction was revived in the early  part of the decade is scheduled for completion in 2013 after suffering numerous delays. 5. Clearances   – The plan outlines that the government will provide all possible clearances required for the projects (Article 9.10).  Arunachal Pradesh however, has an 82% forest cover. With the development of these projects, a large area of the forests will be submerged, leading to loss of flora and fauna. In the speech (referred above), the Power Minister talks about the great hydro potential of the state and of full support of the government in securing required licenses. In spite of all the help promised in getting clearances, a number of projects in the state are stalled due to land clearance issues, forest department objections etc. In fact, the plan contains a clause “The developer shall be responsible for upkeep of the ecology of the project area and its surroundings by preventing  deforestation, water pollution and defacement

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of natural landscape” (Article 12.2). This clearly  indicates that the state government will provide limited support.  The Sweeteners - The document outlines very  few sweeteners. In fact, the only “incentive” so to speak has been to lower the bar for “megapower plant” status that allows the generating  company to import capital equipment, free from custom duties. In addition, the producer has been allowed to avail the income tax holiday of  10 years (typical to most hydro projects) any time during the first 15 years of commencement of  operations (Article 6.1).

 The upfront premium (which developers pay to  win the rights to build the plant) is markedly less than some of the projects that have been allotted recently in other states (Article 9.13). However, the gradation of upfront premiums wherein a small hydro producer will be allowed to pay a lesser premium per MW seems a bit counterintuitive. In fact, the smaller the project, lesser are the risks involved, lesser are the possible delays etc. Going by this logic, the government should probably be charging a higher premium for small hydro producers and subsidizing the large hydro producers due to the quantum of  risk they are undertaking. However, considering  the number of plants that are being awarded in the state, the state government is facing flak for   what might possibly be a way of aggregating  money from projects that might not even take off. In conclusion, the hydro plan of Arunachal Pradesh appears to be just a “plan” that fails to address the basic problems faced by developers in the state. Even the incentives that seem to be mentioned in the document do not seem to be serious enough to attract participation from companies. Unless the state government demonstrates its commitment by expediting  MoUs and contracts with environment agencies rather than mentioning it in its policies, the plan of 30,000MW will remain on paper for years to

come.  About the Author

 Arpit Agrawal is a 2nd year PGP student at IIM  Bangalore. He holds a Bachelor's degree in Computer  Science & Engineering from National Institute of  Technology (NIT)   Allahabad and can be reached at  [email protected]  References

1. “State Hydro Power Policy 2008”, Government of Arunachal Pradesh http://www.arunachalhydro.org.in/ CORETED/20HYDRO/20POWER/ 20POL C/202008.pdf, (Last accessed: 4th  Jan '10) 2. Transmission Grid Map of India, Power Ministry of India http://powermin.nic.in/transmission/pdf  /powergrid_map.pdf, (Last accessed 2nd  Jan '10) 3. Transcript of the Speech by Mr. Sushil Kumar Shinde, http://www.powermin.nic.in/whats_new  pdf/Arunachal_Speech_21.09.2006.pdf, (Last accessed: 6thJan'10) 4. NHPC Annual Review, http://www.nhpcindia.com/English/ Scripts/Performance_Annualreview.aspx, (Last accessed: 6th Jan '10) 5. “India's forest cover rises to 21/”, Times of India, http://timesofindia.indiatimes.com/ india/Indias-forest-cover-rises-to-over21/articleshow/5286317.cms, (Last accessed: 6th Jan '10)

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Coding the Takeover Mantra

 Abstract   After a year of uncertainty and gloom India Inc. is on a  roll again thanks mainly to the timely stimulus initiated  by the government and the confidence in the Indian  markets shown by the foreign investors in the recent  i  months. Just as in the years before the economic slowdown, Indian companies are again keen on pursuing the strategy  of inorganic growth and are willing to tap any synergistic  opportunity that exists domestically or internationally.   As far as acquisition of listed domestic companies is  concerned, Takeover Code is a very important regulation  which companies have to comply with. This write up will  analyse some of the important principles which govern the  Takeover Code along with a few high-profile transactions  which happened in the last few months.

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Strategic Issues from a Regulatory Perspective

 After a year of uncertainty and gloom India Inc. is on a roll again thanks mainly to the timely  stimulus initiated by the government and the confidence in the Indian markets shown by the foreign investors in the recent months. Just as in the years before the economic slowdown, Indian companies are again keen on pursuing the strategy of inorganic growth and are willing to tap any synergistic opportunity that exists domestically or internationally. This clearly  demonstrates the role played by Mergers and   Acquisitions (M&A) in helping companies to attain size and scale required to catapult them to

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the next big league. In the last one year or so the domestic market has witnessed some high  voltage transactions involving Indian companies ii in the field of acquisitions. There can be   various reasons underlying these transactions but the most cited reason is cost savings arising  out of economies of scale. Since many of the companies who got acquired happened to be listed in the stock exchanges, the Securities & Exchange Board of India (SEBI) also played a major role in ensuring that the interests of all categories of shareholders were protected to the extent possible. For doing so, SEBI is armed with a powerful regulation called Securities and Exchange Board of India (Substantial    Acquisition of Shares and Takeovers) Regulations, 1997  popularly known as the Takeover Code. iii Interestingly the Takeover Code applies only to companies which are listed in the stock  exchanges. The Takeover Code is going to   witness some exciting changes in the days to come as the committee headed by Mr. C.   Achuthan which was appointed to suggest modifications to the existing takeover regulations submitted its report to SEBI on 19th   July 2010. It is expected that SEBI will now  consider the report in detail and take its final decision in the next few months.  The Takeover Code endeavours to give equality  of treatment to all shareholders, protection of  shareholder's interest and fair & truthful disclosure of all material information by the acquirer in all public announcements and offer documents while an acquirer attempts to takeover a target company. The Takeover Code has been amended many times since its inception in 1997. The very fact that it was changed on numerous occasions shows the complexity and uniqueness of the issues which the regulator is confronting while dealing with each case. In 2009 itself the Takeover Code   witnessed some major amendments primarily  iv  necessitated by the SATYAM scam. In 2010

 April also some minor changes were made to the  v   Takeover Code. Under the Takeover Code, certain specified threshold limits activate various disclosure and open offer requirements. Thus the obligations under the take over code are two fold, a) Disclosures to be made when the acquirer crosses a certain percentage of shares/voting  right b) Open offer to be made when the acquirer gains control or crosses a certain percentage of shares/voting rights. SEBI has tried to cover almost all possible scenarios  wherein the acquirer will try to structure the deal in such a way so that it can exercise indirect control over the target company without triggering the obligations under the Takeover Code. For this purpose the Takeover Code also defines a Person Acting in Concert (PAC), who acts for a common purpose of substantial acquisition of shares/voting rights or gaining  control of a company with the co-operation of  the acquirer. There are numerous decisions  which make it clear that even an agreement to acquire shares/ voting rights or control will trigger the obligations under the Takeover  vi. Code  The disclosure obligations mainly are reflected in Regulations 7 and 8 of the Takeover Code.   They simply state that if any acquirer is purchasing shares/voting rights more than 5 %, 10%, 14%, 54% or 74% shares or voting rights in a company, then he/she has to disclose at every stage his total shareholding to the company and to the stock exchanges where shares of the company are listed. Apart from the disclosure requirements the Takeover Code also mandates an Open- offer to be made when the acquirer gains control or crosses a certain percentage of shares/voting rights. Regulations 10, 11 and 12 of the Takeover Code reflect the concept of Open-offer. Thus any direct or indirect acquisition of shares or voting rights that entitles an acquirer to exercise 15% or more

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of the voting rights in a company will trigger the open offer clause. The consequence is that thereafter the acquirer will have to make an offer by way of public announcement to buy atleast 20% shares of the said company from the general public. The Takeover Code also deals   with circumstances when an acquirer gains control of the company even if there is no transfer of shares/ voting rights to the extent mentioned in the regulations. For example in the recent open offer under the Takeover Code made by Arcelor Mittal in Uttam Galva Steels although Arcelor Mittal had initially acquired less than 15% stake, the open offer was triggered because of the fact that an agreement was signed by Arcelor Mittal to become a co-promoter of  Uttam Galva Steels. vii  As pointed out earlier, in the year 2009 the SEBI   was forced to make certain important amendments to the Takeover Code. Some of the changes were necessitated by the SATYAM scam. In January 2009 SEBI made it mandatory  to disclose details of shares pledged by   viii promoters. Later on it also relaxed the conditions for open offer and procedures including the offer price for certain companies  whose board of directors were removed by the central/state government or any other regulatory authority and had appointed other persons to hold office as directors for orderly  conduct of the affairs of the company. This really helped the acquisition of Satyam Computers, by the Mahindra Group because the amendments relaxed some very stringent conditions with respect to the offer price to be paid to the shareholders and facilitated the acquisition and revival of company which was almost on verge of a significant collapse. Again in September 2009 SEBI took steps to amend the Takeover Code and inserted clauses which mandated that the holders of American/Global Depository Receipts should make an open offer if such receipts enabled the holders to exercise

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  voting rights in excess of the stipulated per ix centage. The amendment was made effective in November 2009.  The year 2009 also witnessed one takeover battle between two business groups which kept analysts on tender hooks. The battle over the company, Great Offshore fought between Bharti Shipyard and ABG Shipyard had all the features of an India- Pakistan thriller on the cricket field. Both Bharti and ABG were fighting  for a much bigger company than theirs and finally Bharti won the game with an open offer price of Rs. 590 per share in December 2009. Interestingly the match started in June 2009 when  ABG made a counter offer of Rs. 373 for Great Offshore's shares which was higher than Bharti's offer price of Rs. 344. This led to revision of  offer price by Bharti which was again countered by ABG which offered a price of Rs. 520. However realizing the fact that it will be unrealistic to outbid the Rs. 590 offer price made by Bharti, ABG in the first week of December 2009 sold almost its entire Great Offshore stake of 8.2% in the market and virtually signaled an end to the close race which went on for the past x five months. Another interesting twist to the tale came out in January 2010 when ABG informed the Bombay Stock Exchange that it acquired 15.2% in Great Offshore by virtue of  the open offer it made at a price of Rs. 520. Finally Bharati Shipyard was able to acquire more than 20% stake in Great Offshore through its open offer made at a price of Rs 590 and with this Bharti had effectively clinched the deal. Some news reports suggested that Bharati Shipyard might have contemplated another open offer to acquire management control of  the company, since its acquisition of 20% stake  was done under Regulations 10 and 11 of the   Takeover Code which dealt with situations  where there was no intention to take control of  xi the target company . However in April 2010 Great Offshore  passed a special resolution which

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 would allow Bharati Shipyard to acquire control in it and that effectively eliminated the need for Bharati to make a second open offer.  The above transactions involving companies like  Arcelor Mittal, Bharati etc clearly point to the buoyancy in the M&A space after the gloomy  days of 2008. This is surely going to rise in 2010   with the availability of more funds at the disposal of corporates which will open new   vistas for pursuing inorganic growth. SEBI as a regulator has to play a balanced role which will protect the interest of all stake-holders in the market. To SEBI's credit it has been doing this role in a commendable manner. The balanced approach of SEBI will be crucial in preserving  investor confidence and any initiative by the regulator on this front will help a long way in bringing stability to the capital markets which is in a state of slow and steady revival.  About the Author

Professor V. K. Unni is currently an Assistant  Professor in the Public Policy and Management  department at IIM Calcutta. He can be reached at  [email protected]  References

1. See the report titled M&A Activity in India More Than Doubled to $3 bn in Jan 2010 available at http://www.livemint.com/2010/02/08163 322/MampA-activity-in-India-more.html 2. See Assocham Report on M&A at http://www.assocham.org/arb/afp/2009/

 Trend_of_MA_in_India_April  June_2009_.pdf  3. Full text of the Takeover Code is available at http://www.sebi.gov.in/Index.jsp?content Disp=SubSection&sec_id=5&sub_sec_id= 5 4. Reg. 25 (2B) and Reg. 29 A were added in February 2009  This deals with exemptions given to merchant bankers/nominated advisors  who are in the process of market making  according to terms and conditions prescribed in the case of public issue made by Small and Medium Enterprises (SMEs) Definition of the acquirer given in Reg. 2(1)(b) makes this point clear. Full details at http://www.moneycontrol.com /news/business/uttam-galva-eyes-newsegments-post-arcelormittaldeal_414328.html 5. Reg. 8A was added in January 2009  This was added by SEBI (Substantial  Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2009. Details at http://www.hindustantimes.com /ABG-exits-Great-Offshore-takeover war/Article1-482328.aspx http://www.financialexpress.com/news/G reat-Offshore-shares-up-6--after-openoffer-from-Bharati/558371/ http://www.livemint.com/2010/04/30003 708/Great-Offshore-gets-Bharati-on.htm

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GEARING UP THE INDIAN PUBLIC SECTOR FOR SHARED SERVICES Cost Effective way of Governance

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Gearing up The Indian Public Sector for Shared Services: Cost Effective Way of Governance  Abstract 

expertise and professional best practices.

The need for cost effectiveness cannot come at a more   pronounced time than the present year. Global slowdown  and consequent reduction in available funding has left the   governments with no choice but to find smarter ways to invest in systems, resources and infrastructure to meet  their goals. Perhaps the newest challenge is to improve the  quality of services provided to public, whilst  simultaneously improving efficiency and reducing costs.

 Approach : Bottom up or Top Down ?

This article considers the case for Shared Services in the  Indian Public sector, the known opportunities and  benefits, alongside the core challenges and perceived  barriers to its adoption. The paper also proposes future    growth trajectory of Shared Services towards a more  centralized state in India. Introduction

 There is no one single overwhelming factor but rather a combination of factors that command government's attention for an immediate imperative to improve not just the quality of  service provision, but also efficiency.  There is urgent need to reduce duplication of  front end as well as back-office processes to make governmental functioning more efficient by engineering, cooperation and collaboration between local authorities in order to achieve economies of scale in delivering services. Shared services are fundamentally about optimising people and their skills, assets, time and other resources. Shared services in the public sector is a model whereby governmental bodies come together to deliver part of their business in a combined or collaborative operation by maximising the use of scarce resources and skills, and building centres of 

Shared services model can be broadly divided into two categories characterized by the relationship between partnering organizations: 1.  Joint Working : in which participants try to consolidate functions within existing  institutions. For example, Co-sourcing, Internal Centralization & Informal collaboration. 1.   Third Party: in which one organisation (private or public sector) either partly or completely assumes responsibility for running  services for others. For example, Insourcing, Outsourcing, Joint Ventures. Based on the analysis of two models (as per   Table 1)  Joint Working as a form of shared service is recommended for the Indian public system. It is more likely to get the initial buy-in of the government employees since it does not threaten their employment and also keeps the basic operations with the government.  The success of this model would depend on the state of basic infrastructure. Bearing this in mind, the model is recommended to be adopted first at local level across states before going  national. It is therefore recommended that India follow bottom-up approach, which essentially  means implementation in the urban local bodies (ULB) (comprising of Municipal Corporation, Municipal Councils). India should adopt Internal Centralization as a joint working  model which not only ensures internal centralization of all administrative and financial tasks locally before moving at higher levels but also helps in building capabilities essential for it.

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OPTIONS

DRAWBACKS

BENEFITS

 Table 1: Comparison between the sourcing strategies

Implementation of Shared Services at ULB Stage 1: Front-end Automation: Front-end  Automation aims at integrating and offering a   wide range of government to citizen (G2C) services at a single location called citizen service centres (CSC). The main aim is to change the typical department-centric approach to a more customer-centric approach. The CSCs would be a one-stop shop for a gamut of  customer services i.e: payment of public utility  bills and taxes including electricity bills, water and sewerage bills, and property taxes, etc.

Expansion Business Process Reengineering  Front-End  Automation Figure 1: Stages of proposed Shared Services at ULB

Reducing the average customer waiting time

?

Reducing the fees and charges associated  with the service

?

On basis of a number of factors which are of  immediate concern for common citizen, a number of services have been identified to be offered in the first phase of front-end automation. Minimizing the average number of  customer visits per month

?

Reducing the time spent to follow-up and track the progress of the requested service

?

Increasing the accessibility in terms of the number of centers and the average number of working hours per centre

?

Increasing the number of services availed  vis-à-vis the number of visits,

?

Reducing the lead time to avail the service

?

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 The second phase of Front-end Automation in addition to the above mentioned factors would be to reduce the number of touch points in the

specialist staff with knowledge management tools.

SERVICES

CATEGORIES

 Table 2: Services to be offered during the first phase of front-end Automation defined by the criteria identified above

system and hence the services that qualify for the second phase would be ones with more than one touch points in the system. Stage 2: Business Process Reengineering (BPR): BPR guarantees elimination of all the redundant processes in the day-to-day functioning of  government. It entails system improvement and efficiency trying to remove as many stages from the process as possible. Sharing services on this model would create savings from economies of  scale, and the ability of contact centre staff to carry out many different transactions. Integration of front office functions with back  office computer systems to create a single interface for customers is a step in the right direction. BPR aims to reduce service costs through a process of 'stripping out' from all services, including professional services, those transactional processes that can be made rulebased, and follow a pattern, and sharing those   within ULB where they can be processed by 

It is proposed to start shared services with low  risk areas, develop experience, trust and expertise and move gradually on to more challenging areas. A number of areas were identified as relatively 'low risk'. They fall into three main areas 1.

Transactional service: that do not involve customer interaction with any local authority such as bill processing of  electricity, telephone, processing house tax, property tax, water tax.

2.

Legal services: the ones that essentially  don't change from area to area such as legal services. i.e: Issuance of certificates and permits.

3. Capital Management: services that can be provided by pooling the overheads of  services with additional capacity, for example, out of hour's services or a shared non- emergency number.

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CATEGORIES

ACTIVITY Billing and  Accounting 

 Transactional Services

Revenue, Benefits and  Taxation

Legal Services

Issuance of  certificates and permits

Capacity Management

ADVANTAGES Economies of scale with cost effective service

Out of hours emergency  services Single emergency  Number  Table 3: Classification of services for under Business Process Reengineering 

Stage 3: Expansion: Expansion of the new  efficient system to subsequent levels of  government would help move towards a more centralized state in India. Expansion of shared service model horizontally amongst different ULBs would be the last phase in the implementation of shared service in India. Expansionary phase envision setting-up of  similar shared services across India with the aim

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of establishing a centralized system in the country. The landmarks to be achieved in this phase are enlisted below: 1. 2. 3. 4.

ULBs Districts Divisions State Government

5.

Central Government

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Expansion across ULBs

Expansion across different ULBs within a state   would essentially consist of horizontally  transferring the shared service model to them so as to increase the scope for pooled budgets and integrated working across ULBs. These include greater integration between different ULBs. A more comprehensive typology for expansion  would be:

implemented custom-made e- Governance application software coupled with necessary  administrative reforms. The project entails automation of customer facing front-end and internal workflow and processes of the ULBs  with the possibility of seamless integration of    various departments like Property Tax, Water   Tax, Food License, Market License, Birth and Death Registration, Town Planning, Accounts etc. for providing services to the citizens.

Shared commissioning between two or more ULBs

?

Shared commissioning between a ULB and other local public agencies within the ULB e.g. health, police.

?

Shared delivery between two or more ULBs

?

Simple outsourcing, with several local authorities purchasing the same or similar service from a single provider

?

 A delivery partnership between a ULB and a private partner, offering services to other local authorities/public services.

?

However, the impetus for moving towards shared services must come from the local authorities themselves.   The article proposes internal centralization as the initial phase for establishment of shared services for India; however, its only time before such services would be outsourced to a third party. Such a system is already in place in developed countries and India is also gearing  towards the same nevertheless until such a change occurs, it is suggested that internal centralization be followed as the first phase of  shared services for helping the governmental bodies build such capabilities. Business Case: Kalyan Dombivali Municipal Corporation (KDMC) KDMC project undertaken by the Government of Maharashtra is a case in point which has

Presently the project is in expansion state   wherein horizontal transfer of e-governance solution at KDMC (MAINet) across all ULB in Maharashtra has been envisaged by  Government of Maharashtra (GoM). Benefits accrued to KDMC

Increase in property tax /water bill revenue

?

  Additional revenue earned through replication

?

Enhanced productivity and thus better utilization of existing manpower

?

Elimination of monotonous and repetitive  work 

?

 Accurate forecasting and effective planning  due to MIS

?

Risks and Challenges

  There are numerous risks and challenges in implementation of the proposed system in India. Decrease in headcount

 The implementation of shared services in ULBs   would result in removing routine transactions from back office and front line staff freeing  them up, which might be a cause of concern among employees. The freed staff cannot be fired and alternate options would have to be scouted for them. Schemes like VRS can be put

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in place for such staff. Alternate functions in ULBs can be pursued such as revenue improvement, identification of revenue leakage, surveying of unauthorized dealings in water, property tax etc. The freed staff can also be used in the CSC for delivery of services.

  Though there exists a lot of hurdles in its implementation, but considering successful examples it seems that they are by no means insurmountable.

ICT

  Neha Bisht was a PGP-ABM student at IIM 

ICT brings a number of challenges, new systems explicitly designed to perform specific tasks, and handle data in a uniform way, can be made far less vulnerable to failure with data back-up and disaster recovery policies having similarly  developed in a reactive and ad hoc way.

 About the Author  Ahmedabad and graduated in 2010. She holds a B.Tech  degree in Agricultural Engineering from G.B.P.U.   A&T, Pantnagar and can be reached at  [email protected]  References

1.

Accenture. The Government Executive Series. Accenture.

2.

Associate Professor John Spoehr, A. B. (2007). The shared experience. Adelaide: Public Service Association of SA.

3.

Attenda Ltd. (2007). Selective Outsourcing  for the Public sector. London: Attenda ltd.

4.

Kevin O' Donovon . (May 2008). Shared services Centres and Off-shoring: trends and jey risks and considerations. KPMG.

5.

(2006). London centre of excellenceShared services . London.

6.

Pricewaterhousecoopers. Detailed project on Horizontal Transfer of KDMC eGovernance solution . Mumbai.

7.

PricewaterhouseCoopers. White paper on e-Governance @ KDMC. Mumbai.

8.

Pricewaterhousecoopers. Shared services for even greater efficiency in local government. UK.

9.

Richard Whiter. (June 2006). Shared services: The opportunitues and issues for public sector organisation. IPF.

Governance and accountability

Elected members' concerns regarding the erosion of their responsibilities must be addressed. It is critical to ensure that the right governance models are applied to assure elected members that the right accountabilities are in place and provide confidence their responsibility  to make sure that those services are carried out effectively are protected.  Affordability

Making shared services affordable can be a challenge for the public sector. Each area resulting in cost saving has to be carefully  considered to derive maximum benefits like Staff rationalisation; Management overhead; ICT procured; basis and rationalisation of the support arrangements. Conclusions

It is possible to create service improvement and greater efficiency savings through adoption of  shared services in the Indian public system. However, for such a system to succeed active participation by local bodies is indispensible.

14

AUDIRE - IIM ABC CONSULTING REVIEW

Customer Analysis in Indian Mobile Banking Sector   Abstract  This paper analyzes the Indian mobile banking sector   from the perspective of a customer's needs. The paper also suggests a method for segmenting customers on the basis of   population density and available financial facilities. It  then understands from their behavioral tendencies what  their needs are, and proposes a method to ensure  maximum adoption. Finally, the requirements to ensure  maximum penetration into the rural area, and to serve  each segment in the best possible way, are suggested.

M

obile phones have touched the life of  more than 500 million Indians [3]. The reach of the mobile phone is wide, and the service it provides is cheap. Broadly, we can divide mobile phone users based on the population density of the locality into urban and rural. The urban users can be further divided into tiers based on the population size of the cities. Within each of these population categories, we can divide the users on the basis of demographics or customer needs. However for our analysis, it is best if we can find out what percent of the mobile users in each segment do not have access to banking facilities. While customers in such areas do not have banking  facilities in their neighborhood, they do have mobile connections. The fact that mobiles can be brought from Rs. 1000 onwards and that mbanking services cost only Rs. 2 per transaction makes it a very cheap and attractive option to these customers. M-banking is an attractive option for banks also.  According to an article in Live Mint by Gargi Banerjee, "A banking transaction in a branch costs anything between Rs. 35 and Rs. 40, and at an automated teller machine (ATM), between Rs15 and Rs30, depending on the location. In

contrast, a mobile phone transaction would cost about Rs. 2 to 5. It is said to be the cheapest alternative source of banking, cheaper than an internet banking transaction that costs Rs1015."[4]   A significant portion (49 per cent) of high interest rate borrowing in rural India is for consumption smoothing. If a person does not have a bank account, the capacity to borrow is significantly less. About 40% of the individuals that have bank accounts borrow from banks   while just 6% of people who do not have accounts borrow from banks. On the other hand, 18% of people having accounts borrow  from other sources as compared to 40% of non account holding individuals [1]. The reasons for this are quick disbursal and lack of collateral requirements while borrowing from other sources. Segmentation

Based on this information, we can segment the   various types of customers on the basis of  population density and financial backwardness as in Table 1. For instance, a grocer in a city will fall into region IV, since he will not have a credit card or internet banking, but transacts with his customers using  cash and will be willing to switch to mobile banking for the convenience that it offers. A rural migrant laborer, who keeps travelling,  would be in region IX. He lives in rural areas and has no access to any banking facility and would like to save his money in an account, preferably  in a portable option like m-banking. Based on this, we can say that people in the regions VII to IX will benefit the most from mbanking, since it will provide them much needed

15

Financial Facilities

Cities

Tier II towns

I

II

All facilities available Limited financial facilities Financially Excluded

IV

V

VII

VII

understanding of transactions, the perception is that m-banking is difficult to use. But the growth of m-banking in  African nations which are in a comparable situation to rural India shows that mbanking is easy to adapt and use by the entire spectrum of population.

Rural Areas III

VI IX  

3.

Perceived Credibility [2]: The m-banking  solutions have high levels of encryption and privacy. But the perception of people that mobiles can be easily stolen and someone could misuse their accounts creates a fear in the minds of the people.   Also sending an SMS is not considered secure by a major section of the people.

4.

Perceived Self-Efficacy [2]: Due to the lack  of education, the rural sections of the society have a fear that they will not be able to learn how to use the product.

Figure 1: Suggested framework for segmentation of various mobile banking users

access to banking services. People in IV to VI   would also want to use m-banking to reduce transaction costs and for the added convenience.  Those in I to III may not want to use m-banking  since they have other cheaper alternatives. However they might switch to m-banking once it is accepted all over and it offers low cost portable services.  To reach segments I, IV and VII is easy since mobile infrastructure is in place and the only  requirement now is to buy a mobile phone and activate m-banking. People in II, V and VII also  would find it easy to shift, but the people in III,   VI and IX may find it difficult to use these facilities unless mobile networks grow to cover most rural areas. Lack of infrastructure for distribution of mobile handsets is another barrier. Factors needed for adoption of m-banking

  This section examines the factors needed for customers to adapt to any new technology, based on a paper on customer adaptability to mobile banking by Amin, Baba and Mohammed.[2]: 1.

2.

Perceived Usefulness [2]: M-Banking has a   very high perceived usefulness when it comes to the financially excluded population. But those who have access to internet banking and credit cards see mbanking as an expensive alternate to current methods. Perceived Ease of use [2]: Given the low  literacy levels in India and the lack of 

Normative pressure [2]: One of the main reasons for the success of m-banking has been the normative pressure. When a few individuals use the service, everyone is under pressure to adapt to it. By analyzing the customers thought process, we can find out the needs of the customers on a priority basis. The most important understanding is that the services should be very  simple to use and easy to learn. Otherwise most people would not use it. This knowledge has to be factored in while designing the user interface, Usefulness Credibility 

Self  efficacy 

Ease of  use

Normative Pressure

Figure2 : Factors needed for adoption of M-Banking 

16

the options provided in m-banking services and the customer helpline.

Technology and Science (BITS) Pilani and can be reached  at [email protected] 

  The next issue is a need for high perceived security and privacy. This can be established by  providing information about security issues and ability to quickly block service in case a mobile is lost. Multiple PIN's (Personal Identification Number) may also be used but it might decrease the ease of usage. Options currently considered include use of low cost biometric scanners.

  Murali Krishnan Nair is a second year PGP 

 The next factor needed for wide spread adoption is the normative pressure. By encouraging a few  citizens in the society to use m-banking, acceptance can be guaranteed.  Another huge factor that will increase the use of  mobile banking in India is the easing of  regulations to enable use of mobile to make real time payment. Tying up m-banking with the unique ID scheme is also on the cards [5]. Ideally, a rural laborer should be able to buy his daily  provisions using a simple m-banking transfer to the shop keeper. While this will require a high degree of adoption, this will ensure the empowerment of the lowest strata of society as has been observed in several African countries. Conclusion

Based on the understanding of the customer, we can suggest that some of the values that should be included in the final offering are ease of use, ubiquity, security, and global acceptance.  Another important factor which shall drive the growth of m-banking is the penetration into the rural parts, where it can serve a latent need for banking services. Targeting the right customer segments and working closely with service providers and mobile phone manufacturers shall dictate the future of m-banking services in India.  About the Authors

  Ayshwarya R. Vikram is a second year PGP  student at the Indian Institute of Management,  Ahmedabad. She holds a Bachelor of Engineering degree  in Electrical and Electronics from Birla Institute of 

student at the Indian Institute of Management,  Ahmedabad. He holds a Bachelor of Engineering degree  in Electrical and Electronics from Birla Institute of  Technology and Science (BITS) Pilani and can be reached  at [email protected]  References  Articles in Journals:

1. Shubhashis Gangopadhayay, 2009, 'How  Can Technology Facilitate Financial Inclusion in India?' Review of Market Integration 2009; 1; 223 2. Hanudin Amin, Ricardo Baba, Mohd Zulkifli Muhammad, 2007, “An Analysis of Mobile Banking Acceptance by  Malaysian Customers”, Sunway Academic  Journal, Vol. 4, Jan 2007.  Websites:

3. N. Sundaresha Subramanian and Anirudh Laskar, 2010, “Banks, telcos set to push m-banking, share revenue”, Corporate News, Jan 12 2010, http://www.livemint.com/2010/01/ 11235610/Banks-telcos-set-to-pushmba.html (Last accessed on: Jan 17, 2010) 4. Gargi Banerjee, 2008, "Banking on mobile phones for cost as well as 24x7 convenience", Mar 31 2008, Money  Matters, Live Mint, http://www.livemint.com/2008/03/31235 541/Banking-on-mobile-phones-forc.html (Last accessed on Jan 17, 2010) 5. UID project will help banking needs of  poor, Andhra Pradesh, Oct 22 2009,http://www.thehindu.com/2009/10 /22/stories/2009102254070400. htm (Last accessed on: Jan 17, 2010)

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Impact of Internet on Print Media  Abstract  Since 1780, the Indian print industry has worked at the  dissemination of information. The Indian print industry  has learnt from the detrimental impact that the Internet  had on the foreign print industries. This has seen the rise  of many specialty magazines and regional language  newsletters in Rural India which have helped maintain  the industry's market share. However, over a long term  the print industry should look at integrating its services  with multiple delivery platforms to generate productive  and sustainable business models in the future. Introduction

In its own imitable way, the Internet has redefined the boundaries of every professional sector in the world and reshaped the way each of  these industries work. The concern that this report aims to address is the anticipated outcome of the massive footprint which the internet has made on print media. Print Media Industry

 We can define print media (Business Dictionary, n.d., Definition, para. 1) as the “industry  associated with the printing and distribution of  news through newspapers and magazines”. Indian print media finds its roots in the Bengal Gazette, which was started in the year 1780. Fast forward 230 years, and print media has become one of the largest industries in India, currently  standing at Rs.161.8 billion, having grown at 13.3% in the last four years (PwC, 2009, p.51).   The revenue generated from advertising  depends heavily on circulation volume, which is the second most important source of revenue, and is based on the number of copies sold and subscription rate charged. As circulation drops,

18

advertising revenue also falls. Thus, any decrease in circulation volume can have a magnified impact on a newspaper company's total revenues (refer Exhibit 1). Exhibits 2 and 3 show how the industry growth is distributed between these drivers. One important thing to note here is that there is a steadily widening gap between the revenues from circulation and advertising. The market is also highly fragmented in nature, as can be seen in Exhibit 4; there are a number of dailies with a circulation over one lakh. Industry Trends

Faster growth in non-metros: The rise in disposable income has led to increased circulation in smaller cities, while growth rate in metros has slowly become stagnant. Refer Exhibit 5 for detailed statistics. Impact of global economic downturn: As can be seen in Exhibits 2 and 3, industry growth was affected by the global economic slowdown. The upward rising growth in sales suddenly took a downward turn in 2007-08, especially since most of the companies began to cut down on their advertising expenses.  The reduction in ad revenues has led to offices and editions of certain newspapers being shut down. PwC (2009, p.52) cites the examples of  Business Standard shutting down its Gujarati edition and Jagran putting off expansion plans. Most publications have done away with free supplements and also reduced the number of  pages. Rising newsprint costs have added to the existing pressures.

AUDIRE - IIM ABC CONSULTING REVIEW

Internet as the Trigger

Despite significant start-up and fixed costs involved in the newspaper industry, once a newspaper establishes its brand, it can recover these costs aided by large circulation volumes. However, over the last decade several large newspaper companies across US and Europe have melted down, primarily because they  ignored the threat from growing Internet penetration. Several newspapers have shut down operations or are already looking for a buyer (refer Exhibit 6).  Although there is a debate raging in the Western   world regarding the value proposition of the outdated newspaper model, the Indian newspaper industry has been doing relatively    well. Even then, the disparity in growth of  revenues through advertising and circulation is a  worrying trend for the industry beginning from the years 2003-04, when the Internet gained prominence in India (refer Exhibit 7). Ease of archiving and searching makes Internet a more attractive medium for retrieving  information. Furthermore, online news sites also have the advantage of being able to show    videos, giving the consumer a favoured television-like experience. Also, adoption of the Internet has led to the creation of a new market for mobile devices (like Kindle) which can be used for instant access to breaking news and information, at your fingertips. Internet has also transformed a one-to-many  industry into a many-to-many industry as most of online media is interactive, and the consumer can also become a provider of information. For instance, writing comments and reviews on online news sites, or blogging for news channels like CNN-IBN. Marginal, though increasing, internet penetration is one of the important reasons why  the Indian newspaper industry has not yet come across stiff competition from this medium. As

of November 2008, there were 81 million internet users with a penetration rate of 7.1% (http://www.internetworldstats.com) and 5.28 million broadband connections as of June 2009.   Akamai (2009) reported that India “has an average internet connection speed of just 895 Kbps compared with the global average of 1.5 Mbps” (as cited by CIOL, 2009). These numbers are relatively small when compared to the   western world, but in a country where the economy, income levels and middle class are growing fast, widespread broadband adoption seems inevitable.  The Ambivalent Picture

 As cited by The Viewspaper (2009), the Indian Readership Survey (IRS 2009) inferred that almost all of the English dailies are losing  readership at a rate much faster than the rate of  their growth. Many of them, including the biggies such as Times of India and HT, have reported a slump in readership as compared to the findings of IRS 2008, mainly attributed to free news available on the Internet. On the other hand, a large number of regional newspapers have been expanding their circulation and geographical presence (Exhibits 8 and 9 reveal that regional publications are the leading newspapers and magazines of India).   The main reason for this ambivalence could possibly be explained by the fact that the language of the Internet in India is primarily  English and hence the impact of internet on local language newspapers has been minimal. Print media and Internet: A source of  strategic advantage

 There is an immediate urge to think that internet is a threat to the print media industry as it eats into readership, thereby making print media attract fewer advertisements and hence reduce profitability of the print media players and industry. The other perspective can be to look at the synergy that internet brings to the print

19

media. And it is this synergy that the pro-active players in the industry are looking to harness to gain a competitive advantage. The idea is to link  your services with online medium by  establishing strong websites. The synergy  provides following advantages:  These online versions of the newspaper and magazines can reach more readers, generate more talk, and lead to more hits.

?

  These websites can be used to generate revenues through advertisements, subscription fees, archival access charge, and Internet-related services, thereby  covering at least the Web publishing costs.

?

 The website can be used as a promotional tool to create a better image, thereby  attracting greater readership in a long run.

?

 The offering (newspapers and magazines) gets protected from competitors who have not yet forayed into online services. The  website also prevents the customers, who   want to shift to online medium for news, from shifting to other online players.

?

If the operations can be aligned properly, this synergy can reap huge strategic advantage for the early movers. Hence, instead of competing with internet, print media industry might want to look  at online services as an opportunity to expand and reach more people. Print Industry Response

 While the Internet triggered a drop in circulation and advertising revenues in the print media, the Indian print media has still managed to hold its own. The year 2007 saw an advertising revenue of around Rs. 9,300 crores, 18% growth compared to 2006 according to Indian Media Industry – Print and TV Grows, Internet sulks (2008, para. 5).The print media is the most open to attack by the Internet medium but it still continues to garner a large share of advertising  spends.

20

 This is largely due to lessons that the Indian print medium seems to have learnt by looking at the issues raised by the entry of the Internet medium in various overseas markets like UK and U.S.A. There has been a shift of the print media towards tabloids and regional newspapers. This model is further helped by natural factors such as the existence of multiple regional languages leading to a consumer's ease of obtaining local information in the language he is most comfortable in.   Another lesson that the Indian print media seems to have gained from looking at their counterparts in the foreign industry is the importance of the 'niche' magazines. Recent times have seen the launch of quite a few such magazines, specific to segments such as News, Fashion, Travel and Health, etc. Some of the popular foreign magazines that have been successfully launched recently are Forbes, Inc., Entrepreneur, Stuff (India's version of Stuff, UK), Lex WITNESS- first Magazine on Legal and Corporate affairs, Feature and current affairs weekly magazine- Open, Seed Today, Sports Illustrated India, Harper's Bazaar, Food and Nightlife. In fact 60 new magazines have been launched in the last 12 months in spite of  the recent recession causing the revenues to drop by almost 30% in 1 year. Media Monday: 60 new Magazines launched in India in past 12 months (2009, para. 2).  The Indian media laws have aided this trend by  making the specialty magazine segment attractive to foreign publishers. Currently, Indian media laws restrict foreign equity to only  26% in the news segment, but allow full 100% foreign equity in other specialty magazines of  other segments. Indian Media Industry – Print and TV Grows, Internet sulks (2008, para. 7). One lesson the Indian print industry has not yet learnt is that of pricing. The Indian print industry, like its foreign counterparts, has been consistently increasing the price of advertising.

 While, this appears to be a faster way to improve advertising revenues, it has to be kept in mind that online advertising reaches a lot more people for longer periods of time at a lesser price.  Therefore, constant hikes in advertising prices  will only cause the print industry's major revenue sources to move away towards the online medium. Industry Evolution: The Next Decade

 The print media industry is facing a structural challenge. In metros, the paid titles have seen a long-term decline in circulation volume. These trends are forecast to continue as the reach of  internet expands. Comparing past trends in the industry with projected trends (Exhibits 10 and 11), it can be seen that a slower growth of the Indian print industry is anticipated for the coming years. The industry needs to successfully  address these challenges and make use of the tremendous opportunities that India as a country (due to its size and growth) presents.  The future, in short term, may lead to entry of  regional players to cater to the un-served rural population. In the long run, though, as the profitability reduces due to competition arising  by substitutes (digitization), the industry may see consolidation and diversification by big players as a strategic response to the challenges. The revenues for India's newspaper market are generated from advertising and circulation and this business model would continue at least for the next decade. With more demanding  customers, the focus of the industry will shift to provide better content, optimize distribution and cost reduction by shifting to newer technologies.  The Way Ahead

India is said to live in its villages with nearly 75% of the population being concentrated in rural areas. Literacy rates are growing at a rapid rate in the rural areas. Internet adoption in the rural and semi-urban areas would be gradual. Thus Rural

India provides a huge potential for the print industry.   Another possible revenue model would be to increase the cover prices of the magazines and thereby increase the share of revenue from subscriptions. This would also ensure that the print industry's dependence on advertising  revenues for survival will reduce.  With advancement of technology, much of the industry's activities can be mechanized. There are also better monitoring and tracking  capabilities. Therefore, costs can be reduced substantially. Industry players who can come up   with effective and innovative cost reduction measures will have a significant business advantage. Also, India is known for its “English” resource. The Indian print industry should look  to leverage this natural advantage that it has by  looking into outsourcing opportunities be it in business processing or in content writing.   This will ensure cost reduction for foreign publishers while serving as a revenue source for Indian publishers and also increase their resource utilization. Finally, the print industry should look to embrace technology rather than compete against it. It should look into diversifying into multiple platforms to ensure that they have access to customers at both ends of the spectrum, i.e., technology savvy to the technologically challenged, Urban India to Rural India, Youth to Mature. As a long term strategy  this will ensure that the print industry has integrated itself across different delivery  platforms thus blurring the line between the print and online medium. Magazine brands that can provide access to customers across both mediums will attract more advertisers.  About the Authors

 Aviral Jain is a PGP2 student at IIM Ahmedabad  and can be reached at [email protected] 

21

 Ajay Sampath is a second year PGP student at IIM    Ahmedabad and can be reached at  [email protected] 

Shantanu Shekhar  is a second year PGP  student at IIM Ahmedabad and can be reached at  [email protected] 

Srikanteaswaran T K  is a second year PGP  student at IIM Ahmedabad and can be reached at  [email protected]  References

1. Business Dictionary. (n.d.) Retrieved  January 15, 2010, from http://www.businessdictionary. com/definition/print-media.html 2. CIOL News. (March 03, 2007). Readers prefer online newspapers – Study. Retrieved on January 15, 2010, from http://www.ciol.com/content /news/2007/107030304.asp 3. CIOL News. (October 16, 2009). India ranked #107 for average connections speed. Retrieved on January 15, 2010, from

http://www.ciol.com /Technology/NewsReports/India-ranked-107-for-avgconnections-speed/161009126443 /0/ 4. Indian Media Industry – Print and TV  Grows, Internet sulks. (June 17, 2008). Retrieved January 15, 2010, from http://www.pluggd.in/indiabusiness/indian-advertising-mediaindustry-print-and-tv-grows-internet-sulks1742/ 5. India Today. (November 5, 2009). Magazines bucked recession: Pride. Retrieved January 15, 2010, from http://indiatoday.intoday.in /site/Story/69490/LATEST/20NEWS/ Magazines+bucked+recession:+Purie.html 6. Media Monday: 60 new Magazines launched in India in past 12 months. (November 9 2009). 7. PricewaterhouseCoopers. (2009). Indian Entertainment and Media Outlook, 2009. 8. The Viewspaper. (December 12, 2009). Is Indian Newspaper Industry flourishing or floundering?

Exhibits Exhibit 1: Newspaper circulation in India in the last three decades a

1976 1986 1996 d 2006 Notes :

b

Newspaper No. of titles

Circulation No. of copies

Languages No.

13 320 23 616 42 388 62 483

34 075 000 64 051 000 89 434 000 180 728 611

68 92 100 123

c

a Newspapers are printed (including cyclostyled) period works containing public news or comments on public news, as at 32 Match. Their periodicity can be daily, tri and bi-weekly, weekly, fortnightly, monthly and other. b. Circulation is average number of copies sold and distributed free per publishing day. The circulation numbers may be understimates because not all newspapers submit their repor ts by due dates. c. Includes English, main languages recognised in the Constitution of Republic India and other languages and dialects of India. d. The year ending 31 March. Other years are calendar years.

Source : Registrar of Newspapers for India (2007)

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Exhibit 2 : Growth of Indian Print Media Industry (newspapers and magazines) 2004-2008 In Rs. billion

2004

Newspaper Publishing % Change Magazine Publishing % Change Total % Change

86.5 11.8 98.3

2005

2006

2007

2008

94.6

112.1

131.5

140.7

9.4%

18.5%

17.3%

7.0%

13.5

16.6

19.0

21.0

14.5#

23.0%

14.9%

10.6%

108.1

128.7

150.5

161.8

10.0%

19.1%

17.0%

7.5%

CAGR   2004-08 12.9% 15.7% 13.3%

Exhibit 3: Growth of Indian Print Media Industry (advertising and circulation) 2004-2008 In Rs. billion

2004

2005

2006

2007

2008

Print Industry Advertising % Change Print Industry Circulation % Change Total % Change

54.4

62.7

78.0

94.0

103.5

15.3%

24.4%

20.5%

10.1%

45.4

50.7

56.5

58.3

3.4%

11.7%

11.5%

3.1%

43.9 98.3

108.1

128.7

150.5

161.8

10.0%

19.1%

17.0%

7.5%

CAGR   2004-08 17.4% 7.4% 13.3%

Source(for Exhibit 2 and 3): PricewaterhouseCoopers. (2009, p.51). Indian Entertainment and Media Outlook, 2009. Retrieved January  15, 2010, from http://www.pwc.com/en_IN/in/assets/pdfs/PwC-Indian-Entertainment-and-Media-Outlook-2009.pdf 

Exhibit 4: A list of dailies with over one lakh circulation in India List of Dailies Claiming more than One Lakh Circulation in India (2005-2006) Title Languages City Circulation Ananda Bazar Patrika Bengali Kolkata 1234122 The Hindu* (P F12 DPP) English Chennai 1168042 Hindustan Times English Delhi 113664 The Times of India English Delhi 1102521 The Times of India English Mumbai 626568 Gujarat Samachar Gujarati Ahmedabad 561402 Divya Bhaskar Gujarati Ahmedabad 553164 Punjab Kesri Daily Hindi Jalandhar 519684 Mumbai Mirror English Mumbai 512374 Dainik Jagran Hindi Delhi 493748 Hindustan Times Hindi Patna 468186 The Telegraph English Kolkata 418813 Bartaman Bengali Kolkata 408759 Bhaskar Dainik Hindi Jaipur 407144 Sakal Marathi Pune 358158 Malayala Manorama Bilingual Kottayam 352659 Navbharat Times Hindi Delhi 340740

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Sandesh Times of India Punjab Kesri Deccan Chronicle Ajit Sangbad Pratidin Maharashtra Times Pudhari Daliy Jag Bani The Tribune Jagran Dainik Jagran Dainik Eenadu Gujarat Vaibhav Deccan Chronicle Mumbai Chaufer Prajavani Bhaskar Dainik The Thanthi Daily DNA (Daliy News Analysis) Rajasthan Patrika Lokmat Dainik Hindustan Times Samaj Jagran Dainik Bhaskar Dainik Loksatta Malayala Manorama Gujarat Samachar Jagran Dainik Vijaya Karnataka Aaj Navakal State Times Jagran Dainik Divya Bhaskar Times of India Divya Bhaskar

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Gujarati Ahmedabad English Bangalore Hindi Delhi English Secunderabad Punjabi Jalandhar Bengali Kolkata Marathi Mumbai Marathi Kolhapur Punjabi Jalandhar English Ambala Hindi Patna Hindi Kanpur Telugu Hyderabad Hindi Ahmedabad English Chennai Marathi Mumbai Kannada Bangalore Hindi Indore Tamil Chennai English Mumbai Hindi Jaipur Marathi Mumbai Hindi Delhi Oriya Sambalpur Hindi Varanasi Hindi Bhopal Marathi Mumbai Malayalam Ernakulam Gujarati Mumbai Hindi Lucknow Kannada Bangalore Hindi Varanasi Marathi Mumbai English Jammu Hindi Meerut Gujarati Vadodara English Pune Gujarati Surat

AUDIRE - IIM ABC CONSULTING REVIEW

335593 328346 328124 324570 320245 294815 280446 274838 268825 265794 265609 263592 254911 251670 246275 245139 244681 242609 238954 236678 227017 223082 219601 218969 218729 215908 215005 210621 206484 202415 202371 201898 198367 198292 193418 193213 188155 185773

Gujarat Samachar Ganashakti The Aj Dharitri Jagran Dainik The Statesman Kashmir Times Gujarat Samachar Sandesh Rajasthan Patrika Udayavani Sandhyanand Lokmat Jagran Dainik Amar Ujala Nava Bharat Economic Times Bhaskar Dainik Navbharat Times Amar Ujala Samaya Lokmat Gujarat Samachar Mid Day Herald Young Leader Hindustan The Times of India Hindustan (Dainik) Times of India Pragativadi Mathrubhumi Mahanagar Sandhya Ishaan Samachar Jagat Bhaskar Dainik Malayala Manorama Sandesh (Baroda Edition) Prabhat Khabar Tarun Bharat

Gujarati Surat 185717 Bengali Kolkata 185634 Hindi Kanpur 183071 Oriya Puri 176925 Hindi Jalandhar 176223 English Kolkata 172366 English Jammu 172183 Gujarati Rajkot 166128 Gujarati Surat 166078 Hindi Jodhpur 161288 Kannada Manipal 159626 Marathi Pune 158907 Marathi Nagpur 158680 Hindi Agra 158450 Hindi Delhi 157893 Hindi Raipur 156946 English Delhi 156446 Hindi Raipur 155141 Hindi Mumbai 154919 Hindi Meerut 154004 Oriya Bhubaneshwar 153335 Marathi Pune 153289 Gujarati Baroda 152798 English Mumbai 152603 Hindi Ahmedabad 151200 Hindi Ranchi 150025 English Ahmedabad 149998 Hindi Lucknow 147388 English Hyderabad 146487 Oriya Cuttack 145629 Malayalam Ernakulam 145058 Hindi Ghaziabad 145000 Hindi Jaipur 144862 Hindi Panipat 144458 Malayalam Thiruvananthapuram 144033 Gujarati Baroda 142943 Hindi Ranchi 139454 Marathi Belgaum 139034

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 Telugu Jaatiya Dina Patrika Vaartha Telugu

Mathrubhumi Herald Young Leader Deccan Chronicle Sandesh Uttar Banga Sambad Raj Express Aaj Malayala Manorama Herald Young Leader Jagran Dainik Economic Times Hindustan Times Bhairao Times Mathrubhoomi Eswar Lokmat (Dainik) Bhaskar Dainik Jagran Dainik Matru Bhasa Bhaskar Dainik Mathrubhumi Mathrubhumi Mathrubhumi Malayala Manorama Aaj Kall Nav Jyoti Sakal Amar Ujala Bhaskar Dainik Ratnagiri Times Siraj  The Hindu Business Line * (PF 13 DPP)

Malayala Manorama Rashtra Doot Ajit Samachar Sanmarg Nyayadheesh

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Hyderabad Malayalam Thrissur Hindi Mehsana English Bangalore Gujarati Rajkot Bengali Darjeeling Hindi Bhopal Hindi Patna Malayalam Trichur Hindi Surat Hindi Ranchi English Mumbai English Mumbai Marathi Ratnagiri Malayalam Kozhikode Oriya Bhubaneshwar Marathi Thane Hindi Jodhpur Hindi Dehradun Oriya Cuttack Hindi Chandigarh Malayalam  Thiruvananthapuram Malayalam Calicut Malayalam Kottayam Malayalam Kollam Bengali Kolkata Hindi Ajmer Marathi Kolhapur Hindi Kanpur Hindi Hissar Marathi Ratnagiri Malayalam Kozhikode English Chennai Malayalam Calicut Hindi Jaipur Hindi Jalandhar Hindi Kolkata Hindi Allahabad

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137621 137606 136125 136048 135892 135354 135142 135126 133526 133000 131190 130814 130751 130349 128687 128000 127864 127852 127310 127222 126131 124467 122502 122380 122055 121340 119255 118870 118867 118177 117863 115808 115249 114926 113608 113545 113318 112802

Jagran Dainik Sandhya Kal Vijay Times Anupam Bharat Pratahkal Yeshobhumi Dina Malar Nava Bharat Prajatantra Nav Jyoti Sambad Kalika Mahka Bharat Jagran Mangalam Nava Bharat Kholadwar Jaipur Mahanagar Times Pratan Kaal Amar Ujala Utkal Mail Vir Arjun Daily Rajasthan Patrika Bhaskar Dainik Samyuktra Karnatak Malayala Manorama

Hindi Gorakhpur Marathi Mumbai English Bangalore Oriya Chhatarpur Hindi Mumbai Hindi Dharavi Tamil Chennai Hindi Nagpur Oriya Cuttack Hindi Kota Oriya Bhubaneshwar Hindi Jaipur Hindi Bareilly Malayalam Kottayam Hindi Mumbai Oriya Phulbana Hindi Jaipur Hindi Udaipur Hindi Dehradun Oriya Rourkela Hindi Delhi Hindi Udaipur Hindi Jabalpur Kannada Hubli Malayalam Palakkad

112720 112673 109897 108200 107948 107855 106342 106149 105959 105630 105005 104825 104713 104589 104523 103858 102841 102683 102277 102181 101514 101440 101137 100721 100569

Source: Ministry of Information and Broadcasting, Govt. of India. (10388) (As retrieved via access on 15 January 2010, from http://www.indiastat.com) Exhibit 5: Circulation of Newspapers in India Centre-wise Circulation of Newspapers in India (2000 and 2002-2003 to 2006-2007) Centre of  Publication

Dailies, Tri & Bi-weeklies

Weeklies

Others

Total

No. Circulation

No. Circulation

No. Circulation

No.

Metropolitan Cities

219

14042175

298

11197123

685

16134142

1202 41373440

State Capital

264

9013830

425

6428026

235

2414915

924 17856771

Circulation

2000

27

Union Territory Big Cities Small Towns Total 2002-03 Big Cities Metropolitan Cities State Capital Small Towns Union Territory Total 2003-04 Big City Metropolitan City State Capital Smaller Towns Union Territory Total 2004-05 Big City Metropolitan City State Capital Smaller Towns Union Territory Total 2005-06 Big City Metropolitan City State Capital Smaller Towns Union Territory Total 2006-07 Big City Metropolitan City State Capital Smaller Towns Union Territory Total

17 950 73 1523

912776 33973098 1971448 59913327

15 1553 96 2387

163664 18691482 802700 37282995

30 974 81 2005

88752 10713310 416322 29767441

62 1165192 3477 63377890 250 3190470 5915 126963763

1249 42215878 1894 19360296 1133 10343676 4276 71919850 223 14443053 317 12976639 825 13759903 1365 41179595 417 15748776 544 8304807 394 3227576 1355 27281159 13 156542 38 123673 15 73191 66 353406 29 922099 15 213824 50 135610 94 1271533 1931 73486348 2808 40979239 2417 27539956 7156 142005543 1102 42172219 1295 14759096 735 7852564 3132 64783879 232 15290835 303 11839374 652 13022432 1187 40152641 379 16027227 477 7680788 316 2866423 1172 26574438 17 406873 25 172538 13 37917 55 617328 19 816733 8 90297 18 52272 45 959302 1749 74713887 2108 34542093 1734 23831608 5591 133087588 1109 42394632 1568 17800537 1181 12120195 276 17238364 373 14490343 986 16657320 429 17788021 639 9380897 495 6170937 38 922416 37 364836 38 287509 22 899706 10 127381 24 76115 1874 79243139 2627 42163994 2724 35312076

3858 72315364 1635 48386027 1563 33339855 113 1574761 56 1103202 7225 156719209

1321 49062792 2102 22883548 1395 14862184 314 20186375 432 15876088 974 20770766 479 18609320 842 11363987 492 4885796 30 674164 41 270374 43 173882 25 896595 11 186651 11 36089 2169 89429246 3428 50580648 2915 40728717

4818 86808524 1720 56833229 1813 34859103 114 1118420 47 1119335 8512 180738611

1402 350 568 29 25 2374

4601 91317564 1915 56445068 1994 41237859 119 1596192 46 1480711 8675 192077394

53208873 1796 22720476 1403 15388215 20873206 478 16645455 1087 18926407 23217786 872 12096657 554 5923416 1023472 53 419814 37 152906 1251483 11 199689 10 29539 99574820 3210 52082091 3091 40420483

Source: Ministry of Information and Broadcasting, Govt. of India. (10388) (As retrieved via access on 15 January 2010, from http://www.indiastat.com).

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Source: Rocky Mountain News. (February 2009). Goodbye Colorado. Retrieved on 16 January  2009, from http://www.rockymountainnews.com/news/2009/feb/27/goodbye-colorado/

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Exhibit 7: Number of newspapers in circulation

Year

Dailies

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 1.1.2002 to 31.3.2003 2003-04 2004-05 2005-06 2006-07

3229 3502 3740 4043 4236 4453 4719 4890 5157 5364 5638

Number of Newspapers in India (1991 to 2001, 2002-2003 to 2006-2007) Tri/BiWeeklies Others Total % Growth weeklies over previous years 257 9621 17107 30214 6.04 271 10375 17809 31957 5.77 275 11136 18461 33612 5.18 294 11973 19291 35601 5.91 316 12695 20007 37254 4.64 317 13624 20755 39149 5.09 325 14743 21918 41705 6.53 331 15645 22962 43828 5.09 337 16872 24289 46655 6.45 339 17749 25693 49145 5.34 348 18582 27392 51960 5.73

5966 6287 6530 6800 7131

358 361 364 368 374

19631 20329 20831 22008 22113

29825 31492 32688 33307 35380

55780 58469 60413 62483 64998

7.35 4.82 3.33 3.43 3.86

Source: Ministry of Information and Broadcasting, Govt. of India. (10388) (As retrieved via access on 15 January 2010, from http://www.indiastat.com).

Exhibit 8: Top Ten English and Top Ten Hindi Newspapers (readership figures in lacs) Publication

2008 R1

2009 R1

The Times of India

136.41

133.47

63.46

63.41

Hindustan Times

Publication

2008 R1

2009 R1

Dainik Jagaran

565.57

545.83

Dainik Bhaskar

319.37

335.50

The Hindu

55.51

53.73

Amar Ujala

The Telegraph

30.38

28.18

Hindustan

251.65

267.69

Deccan Chronicle

30.28

27.68

Rajasthan Patrika

136.57

140.51

The Economic Times

20.11

19.17

Punjab Kesri

111.39

106.45

Mid-Day (Eng)

17.64

15.83

Aj

74.14

 The New Indian Express

19.77

15.66

Mumbai Mirror

15.91

15.67

Navbharat Times Prabhat Khabar

61.84 49.70

59.05 54.02

DNA

13.11

14.89

Nava Bharat (Mah/Chh)

51.83

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AUDIRE - IIM ABC CONSULTING REVIEW

296.13

286.74

46.71 44.77

Exhibit 9: Top Ten Magazines (readership figures in lacs) Periodicity Magazines Readership 2208R1 2009 R1

language

Fortnightlies

Saras Sali

97.77

73.65

Hindi

Weeklies

Kumudam

74.45

66.58

Tamil

Weeklies

Kungumam

73.75

60.96

Tamil

Fortnightly

Vanitha

59.82

59.97

Malayalam

66.61

54.56

Hindi

-

53.69

Hindi

Weeklies

India Today

Fornightly

Grih Shobha

Monthly

Meri Saheli

59.15

49.15

Hindi

Weeklies

Ananda Vikatan

56.36

49.43

Tamil

Monthly

Cricket Samrat

52.01

44.19

Hindi

Exhibit 10: Forecasted growth for Indian Print Media (newspapers and magazines) In Rs. billion

2008

2009 f

2010 f

2011 f

2012 f

2013 f

Newspaper Publishing

140.7

146.4

154.8

166.5

178.1

184.8

% Change

7.0%

4.0%

5.8%

7.5%

7.0%

3.7%

Magazine Publishing

21.0

22.1

23.4

24.9

27.0

28.8

10.6 %

5.1%

5.7%

6.5%

8.3%

6.8%

Total

161.8

168.5

178.2

191.4

205.1

213.6

% Change

7.5%

4.2%

5.8%

7.4%

7.2%

4.1%

% Change

CAGR   2009-13 5.6%

6.5% 5.7%

Exhibit 11: Forecasted growth for Indian Print Media (circulation and advertising) In Rs. billion

2008

2009 f

2010 f

2011 f

2012 f

2013 f

CAGR   2009-13

Print Industry Advertising

103.5

111.5

122.5

133.8

145.5

152.0

8.0%

% Change

10.1%

7.7%

9.9%

9.2%

8.8%

4.5%

Print Industry Circulation

58.3

57.0

55.7

57.6

59.6

61.6

% Change

3.1%

-2.2%

-2.3%

3.4%

3.4%

3.3%

Total

161.8

168.5

178.2

191.4

205.1

213.6

% Change

7.5%

4.2%

5.8%

7.4%

7.2%

4.1%

1.1% 5.7%

Source: PricewaterhouseCoopers. (2009, p.60). Indian Entertainment and Media Outlook, 2009. Retrieved January 15, 2010, from http://www.pwc.com/en_IN/in/assets/pdfs/PwC-IndianEntertainment-and-Media-Outlook-2009.pdf 

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Indian Pharmaceuticals Industry: Evolution And The Road Ahead one of sparse patent protection and sizeable drug manufacturing infrastructure.

 Abstract  This article takes a look at the way the Indian   pharmaceuticals industry has evolved and challenges faced  by the generics strategy. We examine the various emerging  opportunities and recommend strategies to capitalize on  these opportunities for sustainable future growth. Introduction

India, in the last two decades, has like several other emerging economies been the subject of  much global interest courtesy its strong  economic fundamentals, a healthy growth despite severe business cycles and more specifically due to sweeping reforms in most sectors. The pharmaceutical sector is worth around $9 billion now and according to a McKinsey report is slated to touch $ 20 billion by  2015!   The foreign giants have already started competing on Indian turf for a slice of the generics pie. Indian companies which have always had the home advantage will now be up against a stiff challenge, to say the least.  The Journey So Far

 The story of Indian generics had for long been

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Before the patent protection came into effect, India was almost the emancipator of the developing and the underdeveloped nations providing the poor singlehandedly with a large share of their drug requirements. The choice always obviously was between curing the poor man's whooping cough and letting the MNC mint huge profits. This is how the Indian companies' developed diverse production capabilities ranging not just from generic production of a vast array of molecules but also Research and Development. This ability is still holding them in good stead as this gives a clear stronghold on not just Indian turf but also an enviable share in the American generics business.   The slow but steady transition of the Indian pharmaceutical industry has been well documented by Kale and Little (Figure 1 below).  The pre-1970s era was an era when most, if not all, medicines on your prescription would be imported or at least MNC-made. Thereafter ensued, the age of duplicative imitation with the legalization of reverse engineering via Indian Patents Act, 1970. It was then that the Indian firms were ramping up their basic R&D as well as mass production abilities. This led to the aggregation of a robust knowledge base with Indian firms. However, the patent laws were failing to create any long-lasting value in the absence of any effective expertise-protection.  With the pharmaceutical markets opening up in mid-1990s, India moved to the stage of 'creative imitation' where the focus was on developing  molecules equally effective as the patented one through a process which doesnot infringe on the patent. This was the age of generics. Companies

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like Dr. Reddy's Laboratories and Ranbaxy made the most of the opportunity. However, this stage has now seamlessly merged into the stage of  collaborative R&D where India is making the entire world sit up and take notice of it as a potential R&D partner due to the inherent cost advantages and technological capabilities. Now that the industry is tightly regulated and patent protection is in place, although still not

rather than to open up new frontiers. All this   while still retaining a strong focus on developing-economies generics market which has so long been an indefatigable revenueearner. New Challenges   The successful strategies the Indian pharmaceutical companies were following so far are faced with a need to rethinking and Innovative R&D NCE research

Advance Capability

Analogue research NDDS

Generation

Improvement

Intermediate capability

Assimilation Generics R&D Acquistion Improvement

Collaborative R&D

Assimilation

Acquisition

Creative Imitation

Improvement Assimilation

Basic capability

Duplicative Imitation

Acquisitio Reverse engineering R&D

Basic Knowledge Base

Complex Knowledge Base

Figure 1 : Transition of the Indian Pharmaceutical Industry 

quite as much as in several other emerging  economies like Brazil, Korea etc, the dynamics of the industry have changed completely. In fact, one of the pointers to the slew of change has been the conquest of US generics market led by Ranbaxy and followed suit by others. This was but a natural outcome of  the capabilities that Indian firms were coming up  with over the years. However, when caught in the   whirlwinds of tightening regulations and opening domestic competition, an indigenous industry's survival strategy can either be to innovate rapidly to create a competitive advantage or do more of the same in more efficient ways. The Indian giants chose to innovate, albeit in an innovative fashion! The model adopted has been an 'imitation to innovation' model whereby the aim is to come at equal terms with foreign R&D-based companies

reformulation in the light of several emerging  factors which complicate the business environment for the Indian pharmaceutical companies and place significant challenges in their path.   The winning strategy that was based on the successful formulation of generics is threatened by the fact that the big pharmaceutical companies are trying to beat the Indian manufacturers at this game. Foreign pharmaceuticals companies have attempted to enter the generics space by introducing  'authorised generics'. They have also adopted the strategy of selling 'branded' (but not patented)  versions of their original formulations at higher prices. This has led to brutal pricing pressures in the US markets. Foreign pharma giants' strategy to enter new  markets is also another cause for concern. Faced

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 with meager growth rates of 3-4% in their own markets (global pharmaceuticals market is worth about $800 billion, US, $300 billion), they are aggressively entering India (a market worth $8billion but growing rapidly at around 14%).   The global multinationals with deep pockets have the ability to indulge in predatory pricing to gain footholds in these attractive growing  markets and hence pose serious threats.   Also the generics business is becoming  increasingly competitive with challenges from other generics players like TEVA and Watson  who compete at the higher end of the generics market.  The Road Ahead

 The Indian generics industry is at such a crucial juncture where there are as many opportunities as challenges. It is quite simple to comprehend that a patent-protected industry can well be a blessing in disguise if the concerted R&D efforts of these companies were to bear fruit.  The stakes are high as post patent-protection the market now resembles a winner-takes-it-all game.   With an estimated $60 billion of drugs going  off-patents by 2013, there is undoubtedly  opportunities for profit in the generics business and Indian pharmaceutical companies are expected to continue to play well the game they  have mastered over so many years. However, the emerging challenges also necessitate the adoption of forward-looking  strategies which will place the Indian pharma companies on the path of sustainability and future growth. Little and Kale, through the use of the capability  creation model have displayed that the Indian pharmaceutical companies have sequentially  built increasingly more valuable and sophisticated research and development capability through the stages of reverseengineering, duplicative imitation and creative imitation. One major strength that has resulted

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for them from this process of sequential move up the value-chain is that they have developed strong capabilities for manufacturing process innovations. This is of strategic importance to them at the present situation. This is so because as the predominant innovation model so far followed by major global pharma companies, the 'Blockbuster Drug-Development' model is showing signs of maturity with increasingly  lower chances of ensuring superior profitability, global pharma majors are looking to partner  with Indian companies in the R&D space to gain insights into process innovations. The fact that India promises high-quality research manpower at low costs (resulting in the cost of a drug   –development in India being about one-tenth of  that in the US) and immense opportunities for inexpensive clinical trials are also making Indian companies attractive targets for research partnering and outsourcing. This opportunity is to be taken by the Indian companies as partnering will provide them with the scope to build the competencies that the global majors have built up, namely, expertise in original drugdiscovery. Most Indian companies are hence,  willing to enter into these partnerships with the understanding that they will, in future embark  independently on the path of original drugdiscovery once they learn the relevant skills from their foreign partners. Hence the preferred mode of partnering is marketing-cummanufacturing alliances to sell drugs in emerging  markets. However, the fact that the prevalent 'blockbuster drug discovery' model is already facing pressures of maturity makes it imperative that Indian firms also look at alternate innovation models. The fact that they have mastered low cost production makes two strategies particularly attractive –  these are those of focusing on neglected diseases and the PPP (Public Private Partnership) model.  The so called 90/10 rule in the pharmaceutical industry refers to the fact that about 90% of  pharmaceutical research funding is directed

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towards the diseases which typically affect about 10% of the global population. This essentially  means that the diseases afflicting the people in poor countries are neglected in terms of drugdevelopment research. Indian firms have already  taken advantage of this need-supply gap by  being active in the field of vaccine development (neglected as a low profit opportunity by global majors). Indian companies need to focus more on this avenue as their low-cost production abilities make them particularly suitable as manufacturers of drugs for poor people.  The research in neglected drugs is also attractive as these drugs can be developed through the novel organizational framework of PPPs, essentially by partnering with governments, national health systems and international humanitarian agencies. Such partnerships already exist around diseases like HIV, Malaria and TB and funding is available through organizations like the Gates Foundation etc. Indian companies need to explore this avenue more. Such partnerships have clear advantages. These give firms an opportunity to be parts of global coalitions and benefit from knowledge sharing   with other organizations and the academia. Also, partnering with governments surely promise greater opportunities for advocacy and hence advantages with regard to regulation.   The growth of biotech has matched or surpassed that of pharmaceuticals every year since 2000 and herein lies another opportunity  for the Indian companies- biogenerics. Indian entities like Matrix Laboratories, Dr. Reddy's laboratories and several more are not just establishing research and production capabilities for biogenerics (through collaborations, takeovers or in-house) but are also engaging in establishing frontends on foreign soil so as to be able to expedite and lubricate the marketing  chain in no time.

Conclusion

Indian pharmaceutical companies have built critical competencies through the various stages of different innovation models that they have employed. The future requires them to evolve  with new strategies and innovation systems. The key to success will be to leverage on one's acquired strengths and competencies and adopt strategies which are best suited to those abilities. Hence, we expect that in future Indian pharma companies will increasingly evolve from being  generics competitors to being research-partners , research-outsourcing service providers, clinical trial outsourcing service providers, biogenerics players , manufacturers of drugs for neglected diseases and partners in PPPs.  About the Authors

 Abhirup Ganguly is a 2nd year PGP student at  IIM Bangalore. He holds a Bachelors degree in Chemical    Engineering from Jadavpur University and can be  reached at abhirup.ganguly09@iimb. ernet.in 

Chinmaya Kumar Sharma is a 2nd year PGP  student at IIM Bangalore. He holds a Bachelors degree in   Aeronautical Engineering from IIT Kharagpur and can  be reached at [email protected] 

 Kunal Deep Bhagat is a 2nd year PGP student at  IIM Bangalore. He holds a Bachelors degree in    Electronics and Communications Engineering from  Vellore Institute of Technology and can be reached at  [email protected]  References

1. Chataway, Joanna, Tait, Joyce and Weld, David, September 2007, “Frameworks for Pharma- ceutical Innovation in Developing  Countries— The Case of Indian Pharma”,  Technology Analysis and Strategic Management, Vol.19, No.5, 697-708

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The Power to Disrupt  Abstract  The world of business innovation is at a major  crossroads. Among the 50 most innovative companies in  the world today, the majority are Asian- up from just 5 in  2006. This article takes a look at how competitive  leadership in systematic innovation is gradually shifting    from the West to the emerging markets. Emerging  economies are not merely challenging the lead in  innovation; they are using concepts like reverse innovation  to game-changing effects- like unlocking the 'bottom-of-  the-pyramid' fortune. It's time we rethink innovation  How emerging markets are driving global innovation

In the world of business innovation, a paradigm shift is underway. In the 2010 Bloomberg  Business Week's annual ranking of the 50 most innovative companies in the world, 15 are Asianup from just five in 2006. In fact, for the first time in the history of the rankings, the majority  of corporations in the Top 25 are based outside the US. In another equally interesting report published by the OECD, the corporate funding  of R&D in China has reached the levels found in the West. Fortune 500 companies now have 98 R&D facilities in China and 63 in India. General Electric's healthcare arm has spent more than $50 million to build a R&D centre in Bangalore, its biggest anywhere in the world. Microsoft's R&D centre in Beijing is its largest outside its   American headquarters in Redmond. These developments are a testimony to a major GLOBALIZATION/GLOCALIZATION

inflection point in the history of innovation.   The realm of competitive leadership through ingenuity in process and design which has so far been the exclusive province of the West is shifting to the emerging markets. Emerging  economies are not merely challenging the lead in innovation; they are unleashing a wave of  disruptive breakthroughs that are, as they spread to the rich world, shaking many industries to its foundations. It's time we rethink innovation.  There's a marked difference in the concept of  innovation in the West and in emerging markets.   When the US thinks innovation, it typically  focuses more on products than on processes and mostly on big bang breakthroughs than incremental changes. Supercomputers, blockbuster pharmaceuticals, nanotechnologyinnovations like these capture popular imagination in the West. Yet very few companies can create significant shareholder value through breakthrough product innovations; most economic wealth comes from more modest ones that accumulate over time. Even more important are process innovations, which help a company  sustain its competitive advantage. Dell and WalMart, for instance, have used process innovations to game-changing effects. The developing countries on the other hand have taken a more holistic view towards innovation that values incremental changes. Companies that start out with limited capabilities can rapidly  build them over time through a series of modest product and process innovations. Ultimately, individual innovations may matter less than the institutional capacity to sustain a series of  REVERSE INNOVATION

Phase 1

Phase 2

Phase 3

Phase 4

U.S. products defeatured, made in U.S. for EM

U.S. product defeatured, made in EM to EM

Local Design, made in EM for EM

Local design, made in EM for the world

Figure 1 : Paradigm shift in Business Innovation

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from just two countries, India and China. Emerging market consumers have been outspending the Americans since 2007; by last year their share of global consumption had gone up to 34% against America's 27%.

Getting richer faster GDP, % change on previous year 10 F'CAST 

8

Emerging markets

 Yet even these figures understate the change that is taking place within. While it is true that developing countries are becoming the new  epicentres of innovation, there is something  refreshingly different about the nature of this change. Companies are starting with the needs of some of the world's poorest people and redesigning not just products but entire processes to meet those needs profitably. This has been called 'frugal' or 'reverse' innovation for it begins with not the consumer but the nonconsumer at the 'bottom of the pyramid'(BOP) population. And it pushes the two familiar ideaseconomies of scale and self-reinforcement beyond their previously existing limits.

6 4 2 + 0

United States

-

2

Advanced economies

4

1980 85 90 95 2000 05 10 14 Exhibit 1 : GDP, % change on previous year Source: IMF

improvements and the pace at which they are developed and disseminated through the network. The earliest to adopt this paradigm successfully were the Japanese in the 1970s. Dubbed 'lean manufacturing', it helped Japanese carmakers displace American giants Ford and GM as the world's leading car producer. Soon every factory around the world was lean- or a ruin.

 A reverse innovation is any innovation likely to be adopted first in the developing world. The fundamental driver of reverse innovation is the income gap that exists between the emerging  markets and the rich countries. In the case of  local markets with idiosyncratic preferences, it is often difficult to successfully introduce a product tailored for US mass consumption. Buyers in poor countries demand solutions on an entirely different price-performance curve.  They want new, high tech solutions that deliver ultra-low costs and 'good enough' quality. This

 Today it's hardly news that the world's centre of  economic gravity is shifting to the emerging  markets. The emerging world is enjoying the most spectacular growth in history. Its share of  global GDP at purchasing power parity  increased from 36% in 1980 to 45% in 2008 and looks set to reach 51% in 2014. About 70% of  the world's growth in the next few years will come from these markets with 40% coming  6,000

 Africa & Middle East Rest of Asia Pacific Indian Sub-Continent Far East & China Eastern Europe Western Europe South America North America

5,000 4,000 3,000 2,000 1,000 0 2008

2009

2010

2011

2012

2013

Figure 2 : Total service provider mobile money transfer revenue opportunity per annum in $ million (Regional Forecast 2008 - 2013)

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makes it necessary to cut costs to the bone and eliminate all but the most essential features of a product or a service. The evolutionary process of reverse innovation can be seen in four distinct phasesi) Globalization- Companies build unprecedented economies of scale by selling  products and services to markets all around the   world. Innovation happens at home, and then the new offerings are distributed everywhere through vast channels. (ii) Glocalization- However, most companies soon realize that while globalization has minimized costs, they are not as competitive in local markets as they need to be. It therefore becomes necessary to adapt global offerings to local needs. Innovation still originates with home-country needs, but products and services are modified to win in each market. (iii) Local Innovation- In this phase the focus is on developing products in-country tailored to local needs. Companies take a 'market-back'  perspective, starting with a zero-based assessment of customer needs and delving  further into product and design. As teams develop products for the local market the company enables them to remain connected to and benefit from the global resource base. (iv) Reverse Innovation- Once tested and proven locally, products developed in-country  are scaled up for worldwide use which involves pioneering radically new applications, establishing lower price points, and even cannibalizing higher-margin products. Developing countries are becoming hotbeds of  reverse innovation in much the same way as   Japan pioneered lean manufacturing in the 1980s. Emerging markets are replete with frugal products and services that have generated significant economic value from the bottom of  the pyramid. Tata Motors has developed the

40

 world's cheapest car Nano for $2000; GE has designed a hand-held ECG which reduces monitoring costs to just $1 a patient; ITC has created a new market ecosystem for rural Indian farmers through its 'E-Choupal' platform. Evidently, there is more to this than simply  cutting costs to the bone. Frugal innovation is not just about redesigning products at dramatically lower costs; it involves rethinking  entire production processes and business models. Companies need to squeeze costs while maintaining quality and accept thin margins to gain volume. One way to do this is to apply mass production techniques to sophisticated services.  This had started with India's outsourcing firms,   which demonstrated that economies of scale and scope could be reaped from services that are Tata NANO - Innovation through a small car  (Saving Details)

Low Vehicle Content 0% 1% 3%

16%

17% Low cost designs Low Cost Labor  Co-location of Suppliers

63%

Utilization of non-traditional Suppliers (starting from lower  cost base)

Figure 3 : Tata Nano - Innovation through a small car (saving details)

highly fragmented and geographically rooted. Now, the same paradigm is being pushed to include specialized areas like banking and healthcare. The results have been far reaching. Not only has it helped companies gain access to a much larger market but also created entirely  new categories of services through technical and business model innovations. Africa, for example, is the world's leading market in mobile money. Perhaps we should take a closer look at some of  these products along with their supporting 

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ecosystem innovations. Consider the Tata Nano.   The Nano's business model is aimed towards new market disruption at the bottom of the pyramid. It had identified tremendous opportunities in the existing price gap between cars and two-wheelers and positioned itself to address this void. Its value proposition is offering a safe, four-wheeled vehicle to a BOP customer at marginal costs. The Nano did not start with the were withal to develop the world's cheapest car; it instead focused on a reverse exploratory process. It took the cheapest available incumbent in the market Maruti 800 as the base model and worked backwards to reduce costs using lean principles and non-traditional resources. And in the process it improvised not just the product but its entire value chain to become the most competitive low-cost car manufacturer. A better example still would be the portable ultra-cheap electrocardiogram developed by General Electric's R&D centre at Bangalore. The device, called Mac 400, is a masterpiece in frugal innovation. It is driven by a state-of-the-art algorithm but excludes all the associted frills. The multiple buttons on conventional ECGs have been reduced to just four. The bulky printer has been replaced by tiny  gadgets used in portable ticket machines. The   whole thing is small enough to fit into a backpack and can run on batteries as well as on the mains. It sells for $800 compared to $2000 for a conventional ECG and reduces the cost of  ECG to just $1 per patient. The healthcare industry is rife with frugal innovations of similar kinds. Mass production techniques are being  applied in new and unexpected ways with surprising results. The Narayana Hrudayalaya Hospital in Bangalore, founded by India's most celebrated heart surgeon Dr. Devi Shetty, has drastically reduced the cost of heart surgery  through economies of scale and specialization. Dr. Shetty and his team perform about 600 operations a week. The sheer number of  patients allows surgeons to acquire world-class expertise in particular operations and the

generous back-up facilities allow them to concentrate on their speciality instead of    wasting time on administration. The hospital charges about $2000 for open-heart surgery  against $20000-$50000 in America with equal success record. The entire enterprise is surprisingly profitable given the number of poor people it treats. It records a profit of 7.7% per year compared to 6.9% in the best American private hospitals. However, the most remarkable instances of reverse innovation are coming not from automobile or healthcare but from the communications and high tech industry. There are now over 4 billion mobile phone users around the world, a critical mass that gives rise to endless opportunities. As the developed markets become more saturated, telecoms are increasingly looking at emerging economies as their next growth drivers. As a result the mobility  industry is seeing frugal innovations in the form of low cost $15 handsets, sharedphones, ultracheap call rates and mobile financial services. Cell phones also serve as a platform for social innovation in emerging markets. The Grameen Foundation has launched the 'Village Phone' business in rural Bangladesh, setting up microfinance loans to villagers without any access to telecommunications. In 2009, the Bill Gates Foundation in partnership with a worldwide consortium of mobile industries announced the 'Mobile Money for the Unbanked' (MMU) initiative with a goal of supplying 20 million people with mobile financial services by 2012.  The ability to use a mobile device for financial activities- banking as well as payments is of  immense value in underdeveloped markets  where traditional financial services are absent. Mobile payments are poised for a viral effect in these markets for it allows for smalldenominated and frequent top-ups that fit the need of a cash-starved population. Mobile money has successfully disrupted traditional banking in African markets. Reverse innovation is already making its presence felt in the West. From automobiles to

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healthcare emerging market companies are moving up the value chain. The Tata Nano plans to introduce its no-frills European version in 2011. GE's $800 ultrasound device, originally  developed for Chinese markets, has become the basis of a global business. This year around 6 million Americans are expected to travel to developing countries for affordable healthcare.  The West is also ripe for frugal innovation. As the US and European markets emerge from recession, profligacy is giving way to austerity. Governments are increasing taxes and cutting  back on debt-fuelled consumer spending. Frugal innovation will encourage, rather than undermine consumer innovation in the rich 1

Count your consumers

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 About the author

Riddhiman Kundu is a 2nd year PGP student at 

Asia

IIM Calcutta. He holds a Bachelor's degree in  Instrumentation and Electronics Engineering from    Jadavpur University, Calcutta and can be reached at  [email protected].

Africa

Europe Latin America North America

2010 2030 2050

Figure 4 : Count your consumers Source: United Nations Population Division

  world. Cheaper goods and services will be a blessing for the West which faces increasing  deficits and a rapidly ageing population. Frugal innovations may well prevent America's health-

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Emerging markets on the other hand will continue to hold the lead in innovation at least for another decade. The potential market is huge, populations are enormous and hundreds of millions of people are expected to enter the middle class in the coming years. By 2018 China  will produce 10 million graduates per year and India around 6 million, adding to the already  formidable repository of cheap and abundant brainpower. And companies which once found their fortunes at the bottom of the pyramid will move significantly upwards as the emerging   world would have fully emerged. The dreams for the future "are not just colourful but steroidal". † † Quoted by Anand Mahindra, Chairman M&M

Population forecasts, bn 0

care system (which consumes 17% of its GDP) from swamping the rest of the economy.

Climate change negotiations and its links with Wind Energy  Abstract 

es_by_carbon_dioxide_emissions, 2010)

Global climate change negotiations and India's position  therein have paved the way for the formulation and  implementation of a national policy framework for wind  energy. The adoption of the National Action Plan on  Climate Change and the provisions for a National  Renewable Portfolio Standard contained therein would    further strengthen the Clean Development Mechanism  and facilitate technology transfer.

 The Copenhagen Summit

 Along with other initiatives such as inter-state renewable  energy certificates trading and incentivizing generation of  wind power as opposed to merely capacity installation, the  above developments would facilitate growth in the Indian  wind energy sector in the near future.  The Kyoto Protocol (http://en.wikipedia.org/wiki/ Kyoto_protocol)

  The most significant treaty to emerge out of  climate change negotiations was the Kyoto Protocol of 1992 which set the tone for dealing    with the issue for the next two decades. The Kyoto Protocol laid the key principle of  common but differentiated responsibility, which imposes binding emission cuts on developed nations which have been the primary source of  global warming since the mid-19th century while developing nations remain outside the ambit of  legally binding emission cuts. However, as some of the developing nations' economies have expanded, notably those of  China and India, wherein China has already  overtaken the US to become the largest emitter of greenhouse gases in the world, there are ever more vociferous calls from the developed country bloc that these countries be made accountable for their emissions too. (http://en.wikipedia.org/wiki/List_of_countri

  The Copenhagen Conference was held in Denmark in December 2009. Crucially, even as no binding agreement or even the framework of  a possible agreement emerged from the conference, some developing nations, led by  China and India, were seen to have moved away  significantly from their oft stated position on climate change mitigation by committing to non-binding emissions reductions for the first time. India, for instance, declared its commitment to cut its carbon emissions by 20 to 25% by 2020 over 2005 levels (Pasricha, December 2009), while China asserted that it  will cut the carbon intensity of its economy by  40-45% on 2005 levels by 2020. At the same time, no legally binding emissions cuts were decided on for the developed nations, a development leading to many environmentalists labeling the meet as an abject failure. (news.bbc.co.uk/2/hi/8426835.stm, 2009) In this context of the much awaited summit being perceived as having failed in its objectives of fueling a new climate change treaty, let us examine the role wind energy may have played, and may play in the future, in leading to a more concrete outcome as far as climate change negotiations are concerned.  The Copenhagen Summit and Wind Energy

Copenhagen saw the emergence of a distinct sense of optimism as far the potential of wind energy towards combating climate change is concerned.   The Global Wind Energy Council (GWEC)

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estimates that emissions reductions of at least 25-40% below 1990 levels are required to avoid the worst impacts of climate change. With wind energy technologies that are available now, global wind energy alone could contribute 34% of a 25% emissions reduction and 21% of a 40% emissions reduction. GWEC further goes on to add that the wind energy sector stands ready to contribute a total of 10 billion tons of CO2 reductions by 2020 and asserts that industrialized countries can and must review their pledges for reduction targets and raise them very substantially, as well as assist developing countries' often ambitious programs to decarbonize their electricity systems with both public finance and private investment through the carbon markets. (http://www.windpowerworks.net, 2010) Based on our reading of their views and analyses, the GWEC stresses on the following  points as regards wind energy's use in combating  climate change: ·

·

·

The potential for reduction of emissions by  developed nations is much greater than claimed by them if wind energy is harnessed. The view of wind energy as being a sustainable substitute for fossil-fuel based energy has grown significantly in the last two years due to significant additions to   wind power potential worldwide and marked improvements in technology. In fact, the remarkable growth in wind energy  capacity is implied by the fact it stood at 121 GW at the end of 2008, out of which 47 GW was added in 2007 and 2008 alone. (Ishan Purohit and Pallav Purohit, 2009) The failure to harness the full potential of   wind energy can be attributed to the glaring  absence of a legally binding international treaty for emissions reductions. The resulting ambiguity and lack of national

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policies has led to absence of investor interest in the industry.  Thus, it seems clear that the goal of securing a legally binding treaty on climate change and emissions reductions, an ambitious though notably elusive goal, is consistent to a remarkable degree with the aim of establishing a global wind energy-led renewable energy  renaissance. Our view is that climate change negotiations provide a significant window of opportunity to use the potential of wind energy to push for more meaningful talks on climate change addressing the issue of emissions cuts, while promoting the use of this renewable resource by  means of formulating clear policy directives, adopting national frameworks for implementation, diffusing complex technology  and enhancing investor interest. Revisiting the Copenhagen Summit

  Various implications can be attached to these recent developments on climate change as regards developments in the wind energy sector in India: ·

Quite apart from not receiving much by way  of reciprocation by the developed nation bloc, India's declaration regarding voluntary  emissions cut (albeit not subject to international verification) can be seen as signaling India's intent to combat climate change and may in fact be the catalyst for a new thrust to wind energy generation in the country 

·

As pointed out by the GWEC in the Copenhagen Summit, the major barriers to successful and large-scale exploitation of   wind energy in the world consist of lack of  all encompassing national policies and technology. The barrier stated herein stands to be overcome by this announcement.

 Thus, the change in India's stance complements

its commitments to build a national policy  framework to combat climate change, provoke result-oriented dialogue and, concomitantly, address issues of harnessing renewable sources of energy.

Even as India has developed a strong domestic manufacturing base for wind energy (led by  Suzlon), its development has mainly been driven by progressive state level legislation. At the moment, there is no coherent national renewable energy policy to drive the development of wind energy. This is urgently  needed to realize the country's full potential and reap the benefits for both the environment and the economy. (Pullen et. al., 2009) It is our belief 

Impact on India's Wind Energy sector: Government, Climate Change and Wind Energy

 Table 1:Renewable energy capacity additions during 10th/11th Five Year Plan Technology

Target 2003-07 (MW)

Actual 2003-07 (MW)

Target 2008-12 (MW)

 Windpower

2200

5426

10500

Small Hydro (