Why Satyam is a bad take?

Eyes are on Satyam these days, when it goes under the hammer. These troubled times when economy is going through a correction, Satyam scandal could be the worst timing for Indian IT industry. Lot of MNC’s from India and abroad is vying for this so called 4th largest software exporter of India, at least Raju says it. Yes, when the valuations are so attractive, why won’t you acquire it? Considering the revenue of Satyam of $2.5bn yearly, even a wild guess would indicate at a valuation of not less than $5bn, had everything been right. But, things are different now. Shares are trading low, and considering the deal is wrapped at Rs 50/share, the valuations won’t exceed $700-800 million. But, wait there is a catch. If it’s so, then why isn’t big Indian 3 i.e. TCS, Infy, Wipro vying for this so called value proposition despite having billions of cash in their kitty.
Let’s talk about who can turn around this company, if it acquires it. Signs are not good for Satyam. Majority of the firms that have applied to acquire it, are partnered by PE firms. Going to the basics, the sole motive of a PE firm is profit booking. They don’t stay invested for long. Barring few exceptions like Blackstone, I don’t believe that any PE firm can turn around this beleaguered giant. Phaneesh Murthy pulled out few days back citing fears of increasing law suits in US, which could go up to $840 million from an estimate. Rightly done by igate, as igate itself is not in a very good position these days.
Spice also pulled out citing lack of transparency in the process. I am still thinking for a reason why they tried to acquire it. Forget, about turning around a sinking ship, do they have any proper IT management experience? Rightly they realized and exited the proposition.
Why do I believe that it’s difficult to turn around Satyam? Satyam has an operating margin of 3%, when Cognizant reported an operating margin of 20%. Industry Bench strength of IT employees is around 15%, while sources say Satyam has at least 15000 extra employees. So, a company taking over Satyam first of all has to answer all these questions. How can they increase the operating margin, remember it’s a long drawn process and may require taking extreme steps.
Lack of big ticket clients, is another reason not favoring Satyam. Satyam doesn’t have clients who can give it around $100 million annually. Majority of its clients are around $40-70 mn, which makes it tough to guarantee a continuous source of income.
So, here is the take. Who can change Satyam and bring in a renaissance? Considering all the options, I believe that the best that could happen to Satyam is IBM. IBM’s track record of IT competence, coupled with vast management expertise is all that Satyam wants now. Satyam doesn’t need a novice, who will experiment with it, and then leave it in a lurch. It needs a mature player, who knows to take hard decisions and also has the capability to handle it.
Whoever takes it, the brunt has to be faced by Satyam employees only. One thing is certain, Satyam is gonna witness a larger layoff very soon. Things can be even tougher with IBM, which is known for its aggressive firing policy. Let Satyam stand for what it stood once. Satyamev Jayate.

Searching Markets For Nano

Searching Markets for Nano

Nano has created an unprecedented hype, witnessed only once when Fiat launched its UNO around 1995. UNO promised much but delivered only little. More than 300,000 bookings were done for UNO, even before its production. The results, company couldn’t cope up with the production which resulted in mass order cancellations for UNO, taking a toll on the brand.

But pundits this time believe Nano to create new landmarks. So, let’s start by studying the target market. Recently I read an article in Business Line about rural market & its growth prospects. Even when the markets are choppy, analysts expect rural market to grow at an astounding rate. After our interactions with rural marketing professor Hari Goyal, we got convinced of the potential of the rural market. No doubt, Tata believes Nano to be a hit among rural crowds. We would start by answering why a two wheeler owner in semi-urban area say Chapra buys Nano. Will Nano replace his Bike? I don’t think so. Will he travel to the Municipal office on Nano instead of Bike? I don’t think so, because of the operating expenses say petrol. So, is Nano a symbol of social status in Villages and a symbol of utility vehicle in Metros? I am Foxed. I am not denying that Nano won’t sell. It will definitely sell because it culminates lot of options, but I see a marketing problem here and not a sales problem. The biggest P of Marketing i.e. positioning can pose a difference. Definitely, I believe that it is pretty clear that Nano is not a status symbol in Metros, but a utility vehicle. Something, that provides value for money. People in metros are increasingly getting brand conscious, which explains the dwindling sales of Maruti 800. I don’t see any reason why after 2 years we won’t see Nano on the roads of Delhi as Taxis. But I believe that one of the main reasons in rural areas to buy a car is social status. So, how does a Taxi become a status symbol in villages and towns? One of the main gainers of this dissonance may be Bajaj’s small car when it’s launched in 2011. People always believe that the 2nd version of something is better and more appealing.

Now, let’s think what is Tata Motors gonna achieve with Nano? Analysts expect Nano to contribute to only 3% of top line growth of TM. Nano is expected to break even in not less than 5-6 years. Tata Motors right now, is soaked in debt. It is expected to clear not less than $2bn before September to continue its operations, forget about other debts. Nano may help Tata gain some popularity and gain more respect in the eyes of a common Indian, but I seriously doubt whether it will any way help them to make up for their controversial decisions to take over JLR & Corus. The facts above explain the increasing pledging of shares by TCS, the only cash rich subsidiary of Tata group.

Gaining Foothold

HOW TO GAIN A FOOTHOLD- Part 1

The only thing that puts marketing apart is its inexact nature. It’s neither a science nor an art. The process of ideation has undergone a sea change over the years. Laureates even quantify it as 50% science & 50% art. I would rather say marketing as a perfect blend of perspiration & inspiration.

Now, let us see how?

Suppose, you are the brand manager of a new beverage company, and you are asked to come up with an idea for positioning a new brand of beer, that is to be launched soon. How will you go about it? There are two options for you. 1st and 2nd, which one would you, choose?

1) You gather data about existing brands. You analyze on what people want, then come to a conclusion by finding a gap in the market & try to fill the gap by positioning your

product in that segment. In short, find some key needs that are not being currently met.

2) Go to the nearest pub with some friends. Try out some brands, start thinking something weird, bounce around ideas & try to come up with something new, exciting & funny.

Now, what you think, which of the two ideas will sell? Probably both can. No one can

undermine the power of intellectual solution i.e. 1st one, but can you really restrict yourself to the abstract data. If so, then how will you come across people needs which they have not yet articulated?

Had Sony analyzed only the abstract data, they would have made bigger & better sound

boxes, but they went a step ahead, & looked beyond data & came up with the revolutionary device like walkman. No doubt, why Steve Jobs says, I don’t know what marketing research is.

Today Apple doesn’t serve markets, it rather creates markets. In short, the take home point is keeping one self open to inspiration.

Having decided the positioning, you will launch your product but how will you tackle

your competitor? Can you survive the onslaught of Big Brother? The gut reaction of a marketer working on a large, established brand, when faced with a frontal attack by a small competitor, is to crush it before it becomes a bigger threat. The trick is not to try to “out shout” it, but rather find a segment of customers with a higher appeal for you, or to find some benefits that you can offer that it does not, and then focus all of your marketing on this segment. The crux is, ruthless focus is the best way to stay alive against a much larger competitor. Take the gaming console wars where Sony PlayStation and Xbox are gathering much of the headlines. However, this open battle by Sony has some other angles too. What is not known is that Sony has very successfully launched PSP handheld gaming device. The PSP device taps into a niche segment, where Microsoft doesn’t address a very basic need – mobile gaming. So, now after doing all the hard work of identifying your target customers & positioning, how do you ensure that people come and buy your product? Just because you know whom you want to sell and what you want to sell does not actually mean that they will buy. This is when you need to understand and anticipate barriers that may prevent your targeted customers from trying your brand, and develop a plan to crack those barriers. Barriers differ from category to category and market to market. Barriers may be physical, emotional or monetary.

Increasing number of Teaser ads these days address these concerns. Remember the teaser

of Reliagre Insurance few days back “kya aap KILB ke shikar hain” somehow induce you to break the shackles. A great example of the brand busting barriers is Dove. In beauty care, a common barrier is consumer cynicism (“everybody looks beautiful in advertising, but how do I know this product really works). In its advertisements Dove used successful combinations of “women like you” testimonial campaign and showing before your eyes proof by using simple techniques like litmus test.

Though increasing number of people, have lot of complaints with cable TV, yet they live

with it & don’t switch to DTH. Apart from some other factors, researches show that a normal inertial resistance exists which prevents people from switching & they postpone it every day. Now, say if you are the brand manager of a DTH company how will you overcome this barrier. You might improve your distribution, reduce the subscription fee & bundle all the charges (set top box & subscription) in one & give them one good bargain thus reducing the monetary barrier.

Great. Things must be going well & fine now. You are well positioned & have fought it

out with your competitors & your product is selling well. But, how can you grow continuously? Among some of the tricks, the other trick to continue growing is to define success as finding new users. Geographical expansion is a ploy, but what if I have to operate in only one market. Means, I have to find a new set of people who are not using my brand today, to which I could expand my appeal. One of the most successful examples of this in recent times has been the expansion of a shaving brand into the female segment. No, it’s not Nivea or Fa which have very recently launched the men version now, but it is Gillete. Gillete identified a potential growth opportunity among females. Gillete found out that while the functional need was similar (hair removal), the

basic emotional need was very different among men & women. For men, shaving is one of the integral parts of their grooming routine & a key part of feeling masculine. For women, shaving is the removal of something unwanted that comes in the way of their femininity. So, Gillete came up with a revolutionary design to appeal to this new target customer. And guess, what was the name of the brand? No, it was not Gillete for women, but they came out with an entirely new brand named “Venus”, unlike other companies say Nivea, Fa etc. They successfully expanded their territory without hurting the parent brand. So, the take home point is a brand has to continuously seek new horizons.

To be contd... In next part

Tushar Anand