Monday, March 10, 2014
Wednesday, March 5, 2014
Tuesday, February 25, 2014
Tuesday, January 28, 2014
South East Asia is heading towards a crash in 2014 !
Decades of prosperity in South East Asia have created the conditions for political transformation – for better and for worse !
Cracks have begun to emerge in the foundations of the Southeast Asian boom.
- Thailand's internal political clashes, mainly between traditionalism and new money may echo throughout the region.
- Myanmar has only recently begun an 'opening up' process.
- Malaysia's one-party state is combating a threatening opposition movement by reviving ethnic Malay nationalism.
- Cambodia faces a growing trend of opposition unrest;
- In Vietnam, the Vietnamese Communist party is wrestling with embracing Chinese capitalism without losing power
- Indonesia, with 2014 elections is trying to maintain its strategic balance between the United States and China.
Despite all the political problems, South East Asia continues to be a bright spot in an otherwise dim global economy. As the US continues to limp out of recession, and the EU continues to deteriorate, SEA is a rising star of the global economy. The ASEAN countries merit both new and increased attention of MNCs.
But a correction is in the offing!
Most of the ASEAN countries have learned from the past. Having undergone the Asian financial crisis of 1997/98, instigated by booming property markets, asset bubbles, lax financial regulation, large current account deficits, and high foreign debt-to-GDP ratios, ASEAN nations have tried their best to avoid the financial crisis that began in the US and spread and intensified in the EU. But they are not insulated and China's slowdown and non-availability of hot-money has started to show its effects!
Political crisis is hammering the economy and the Economic crisis is pushing it deeper.
Rapid growth and then collapse.....will it be rapid growth and fall again? Probability is very high!
Thursday, January 23, 2014
Say hello to Strategic Imitation !
Imitators are so successful is because their costs are lower than that of innovators.
- The first credit card was issued by Diner's Club and not Visa or Master Card which are the most popular now.
- Scores of Indian pharma companies survived and thrived by copying drugs produced by multinational companies, when the process patent regime was in place.
- Facebook, has also been accused of copying the idea of a social networking site from the twins, Cameron and Tyler Winklevoss.
- The business model, which led to the success of Google, was copied from a company called Overture, a paid search specialist company, based in South California.
- EMI created CAT scans but the market today is dominated by General Electric
- Apple and the South Korean company Samsung went to war for copying "the look and feel" of its iPad tablet and iPhone smartphone.
Imitation is actually a form of intelligence!
There is no need to reinvent the wheel everytime. If someone has figured out a better way to do something or deliver something, its better to just go on and use the method!
Companies, rather than just imitate, should combine creativity and imitation, and come up with their own competitive advantage. Once stigmatized, imitation is now acceptable.
The economic returns for innovation is quite meager and that it has been progressively declining over time. Hence companies should learn to imitate and innovate at the same time.
- Companies that do imitate but do it the wrong way end up with negative results, leading to the erroneous conclusion that imitation is not a road to profits but, at best, a temporary fix and an eventual path to oblivion.
- Pioneering advantage of innovation lumps together “early movers”, where in reality only the first mover is a pioneer/innovator, while the other members of this group are actually fast imitators.
- The cost and risk associated with innovation is very high, leading to a gross overestimation of economic return.
- There is a divine value attached to innovation in our society versus the stigma associated with imitation. Apparently many of us cannot overcome the potential dissonance associated with admitting that imitation can, and often does produce a more positive outcome than innovation.
Imitation is a critical capability for any strategically agile firm.
In a global age where innovations can and do sprout anywhere, it is unrealistic for any firm to innovate anywhere, anytime. To stay in the game and not fall behind, firms must imitate; however executives must do so with the understanding that imitation is as rare and valuable as innovation, and that imitation can and should be strategically conceived and systematically executed.
Say hello to Strategic Imitation !
Wednesday, January 22, 2014
Made in India needs a push and shove !
Today, India does not figure
on the list of the fastest growing economic engines of the world.
It
remains stuck in the cliché of being a “very promising emerging market”. Just
by comparing of various simple parameters it can be seen that India has been
the biggest disappointment amongst the growth stories of the BRIC economies.
Need for another
revolution
As one of the worlds most
crowded countries, India has seen its two decades of economic reforms from 1990
to 2010. The current decade is the most critical to sustain the momentum and
overcome the daunting challenges of its populace and infrastructure upheaval.
The ecosystem is not helping the cause. Population growth stabilization is not
on the agenda and as the human mass accumulates new challenges in managing the
scarce environmental resources and providing sustainable living looms ahead. An
Economist Intelligence Unit in its “where-to-be-born index” ranks India very
low at number 66 by analyzing factors based on a child born this year reaching
adulthood in 2030. So a child born in India today will not have a very bright
future and this inspite of today’s India having more than 50% of its population under 25 years of
age. So despite the feeling of dynamism and the buoyancy, of high growth in
disposable incomes and expanding cityscapes, there are warning signs glaring in
the face. Today, national infrastructure is stretched to its limits, the need
of the hour is a radical revolution to make cities more livable, upgrade the
rural economies and cater to the future energy and water needs. The growing population
of the future will demand education, job opportunities, vocational skilling,
and health facilities. Is India doing enough today? Maybe not!
A frozen
economic model
Post-independence and moving away from the agrarian
economy, India chose to base its new model on the services sector and this has
definitely paid rich dividends. With the first-mover advantage, the highly-skilled
talent pool and of course lower costs, India became the world’s favourite back office. Today, smaller Asian countries like
Philippines, Malaysia, Indonesia and Vietnam are challenging India’s might and
drawing away the services sector business. India’s development as a knowledge
hub with a huge talent pool and business in the export of services is complete.
This decade needs to quickly focus on a concerted effort to move the growth
model from the services sector to the manufacturing sector just as it happened
from the agrarian to the services sector between in the fifty years from 1960.
Think more local or “Swadeshi”
The “Swadeshi” movement in India during the
independence struggle with the British was an economic strategy focused on
self-sufficiency by boycotting British products simultaneously reviving
manufacturing and consumption of domestic products. In a globalized world, it is
undoubtedly selfish to revert to these techniques. But as the adage goes “what
goes around comes around”. The Indian market is large, growing and in many ways
unsaturated. To insulate it from global economic variations, and currency
fluctuations it is time to think “swadeshi”. Impetus on manufacturing locally
and creating of more industries in every domain should be encouraged and this
should be the mantra for this decade and leading to the next one. The political
class and the corporate world are echoing this sentiment but talk needs to move
to action. The National
Manufacturing Policy with the objective of enhancing the share of manufacturing
in GDP to 25 percent within a decade and creating 100 million jobs should be imperatively
achieved. In this rapidly globalizing world and highly competitive economic
scenario, there will be no second chances.
Driving forward
It is critical that a rapid urbanization drive
should be the starting point. Of course this combines infrastructure
development, provisioning education, health and energy requirements of the
growing population. This should be complemented by a pro-reform agenda with a
key focus towards policy, institutional and governance reforms. These reforms
would help convert India into a global platform for labor-intensive
manufacturing production which is essential for the next decade of growth.
The
India story is intact and this intermediate phase is what characterizes the
deceleration in its growth cycle. Surely India can and will continue to grow at
high rates of economic growth which can be far more inclusive than what it has
been over the last few decades.
Show me the money! Why salary is not going up as much as the cost of living is!
The world is stuck between inflation, deflation and disinflation. In simple words, a global economic crisis that refuses to give up!
Disinflation is reduction in the inflation rate. Prices are still rising during disinflation, but at a lower rate. The general price level still rises, but at a slower rate resulting in a lower rate of real value destruction in money and other monetary items. Although disinflation is – at present – a real risk, cumulative inflation is still drastically reducing the consumer’s purchasing power.
There is no absolute and objective gauge of inflation. Any particular measure is simply one way of making the calculation is based on a host of assumptions. Today, most of the costs that middle-class households face are going up considerably faster than the Consumer Price Index or CPI.
Inflation today is caused by the rising cost of raw materials is being offset by below-normal increases in wages. Simply put, my salary is not going up as much as the cost of living is!
Gasoline never goes down. Food prices never go down. Taxes on homes and vehicles and everything imagineable. Not going down. Unemployment. Going up !
There is a strong relation between disinflation, inflation and unemployment. Simply speaking, the rate of inflation can be slowed by increasing the rate of unemployment at a smaller rate which is spread over many years; or disinflation can be achieved quickly by increasing the rate of unemployment at a higher rate which is spread over a few years.
Real after-tax household income is down and economies today are sluggish worldwide. For sustained inflation to get going, workers have to be able to demand higher pay to make up for increases in their cost of living.
Economic crisis and recession is definitely not good for the economy. Everyone thinks that a recession is good to clean the "fat" out of the system, mop up excess, and pave the way for the next expansion. Until that process is complete, there isn't much from which a legitimate expansion can arise.
In theory Recessions put weak companies out of business and in so doing, resources (skilled workers, capital) are freed up to be deployed more efficiently elsewhere. Stronger businesses use the contraction to firm up their bottom lines and grow more efficient are able to take advantage of resources during the ensuing expansion.
In practical, Wealth – in the form of real assets such as real estate, money, businesses, stocks, and bonds - is being transferred from the poor and the middle class to the rich. As prices inflate, the rich get richer. This allows them to purchase even more assets. At the same time, the poor and middle class become worse off because they have fewer assets and more debt.
So effectively, the prolonged crisis will simply help the rich get richer.
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