Tuesday 11 November 2014

Be Ready to Beat the Best: FreeFall Of Oil Prices

Be Ready to Beat the Best: FreeFall Of Oil Prices:     Most Spoken/Written words in Pink Newspapers for the last one or two months are Freefall of OIL PRICES. Oil prices have been fallen ...

FreeFall Of Oil Prices



    Most Spoken/Written words in Pink Newspapers for the last one or two months are Freefall of OIL PRICES. Oil prices have been fallen more than 25% in tha last four months are so, lowest ever since June 2012. It was $150 per barrel in 2008 and now it is $85 per barrel.It could affect Global as well as Indian Economy in many ways. Here I would like to mention the facorts which could affect the oil prices.

  The first and foremost thing is OPEC, it is a consortium of 13 countries, is the single largets entity impacting the world's oil supplies. OPEC countries contribution to the world production is 40% and the remaining is from non-OPEC countries. Even though they have less than 50% of production share, they are able to control the oil prices backed by reserves. OPEC contries have lot of reserves compare non-OPEC coutries. Supply and Demand is the next factor which would affect the oil prices, it follows law of demand-cetiras paribus. Next and most contemparory factor is political unrest, Mostly of the oil producing countries' revenue comes from exporting oil only and the oil producing companies are mostly run by respective goverments only. So whenever there is a political unrest, production will get affected as we are seeing in the case of Iraq and Iran. Many countries will have their own tax margin on exports which will also affect the oil prices, quotas in exports also depends on the agreements among the countries. Financial markets also will affect the price changes. In financial markets, Traders and Speculators are the main influencers of oil prices. Traders will not affect the oil prices as much as done by Speculators. Speculators will enter into FUTURES contracts by speculating the prices, if there is an homogenious expectation among speculators, then there will be a bad affect on oil prices. It's like moving all the people in the boat to one side, which would tips over the boat. Natural calamities also will affect the price changes, when there are advers condition for production, then supply will be less which will lead to rise in the oil prices. Seasons like winter will have more demand compare to summer. USD value also will affect the oil prices. Oil prices will be denominated in USD across the globe, so whenever there is a change in the dollar value it will affect the oil prices also. Appreciation will decrease the demand and vice-versa.

   Now we will see what all are the factors which are affected for freefall in oil prices. First one is the U.S shale boom, which is one kind of extraction of oil. The U.S domestic production of oil has been increased due to shale boom. The U.S is the largest importer of oil in the world, now their demand has come down to nearly half due to domestic production. The below chart will provide you the history of both oil production and oil Imports of the U.S.


Their production has reached peak in 2014 in the last 25 years and imports have touched the lowest in the last 20 years. The U.S will be going to produce more than Suadi and Russia by 2016. Production in the most OPEC countries will reach at full as their political and internal issues looks to settle down like Iran nuclear issue, Libya's country revolution and so.
    OPEC's limited ability to boost prices by cutting production. Most of the OPEC countries are having huge fiscal deficit and under currency stress. These countries revenue is mostly from exports, so these countries accepting the market determined rate. Demand for the oil across the globe has decreased, especially China and Europe. China's economy has slowdown and manufacturing sector has pilled-up inventory which is not letting them for the further production. Manufacturing sector in China is the major consumer of oil imports.
The above chart will give us the clear picture about demand pattern across OPEC and non-OPEC nations.

     USD will also affect the oil prices, since USD has been strong the oil prices have been affected.

  To conclude this, We will see the affect on Indian Economy. I would say Mr. Modi took over the supreme chair, everything is going in his favour. Indian economy's main problems are fiscal and current account defisits. Oil imports are contributing around 45% of total imports and 85% of total oil consumption in the country. Now we can say how much it will affect the current account. India Govt's one third subsidy is going to oil imports only, when there is a freefall in the prices it would directly affect the economy in three folds. Govt will left will money which would directly invest in public infrastructure. The govt target of 4.1% of fiscal defisit is now achievable. Inflation also will be decreased as oil prices have 8.9% of share in the WPI. By taking all these factors into consideration, Indian economy will have more chances to revive soon.

As a final point, Since the supply has been increased in the world and demand has been decreased as a whole, Oil prices have been decreasing. To see it from the long-term perspective it may not be the case, Geopolitical risks like war between Russian and Ukraine, Middleeast unrest, Inflation risks and The U.S QE3 will halt the freefall.

charts taken from Bloomberg website.

Saturday 12 July 2014

Not an aggressive one but some innovative and creative

Finally the Modi budget has arrived, which had lot of expectations from common man to industries, it is not the best one but I would say this would give lot of thoughts and creative work which has been done by Modi and his team. Budget 2014 is neigher having any aggressive reforms to push forward the growth nor aggressive cuts in subsidies to decrease the expenditure. The good things about this budget is again having Modi mark of improving efficiency and transferency in the system. I would really appreciate the innovative thought of 100 Cr club plans/projects. It would really make sure to reach maximum benefits to poor, because it doesnt have so much of amount, where lot of corruption happend a minimum amount of 100Cr, and the projects which are coming under 100Cr are easily understandable by common-man whether corruption is going on or not, such as metro project, riverside developments. Now anybody can access to the information about any government schemes or projects fund flow, thanks to the UPA for RTI act and to the YUVARAJ for insisting and telling the nation that RTI is such an important tool which can be used by common people to question the public representatives in any law of court, infact they can show their opinion on the representative, as showed in recent election by the whole nation.

    Now we will look as some of the smart things that have done by Modi and his team in this budget.
First we should appreciate his thought of building 100 smart cities. Yes, it is a big innovative and thoughtful idea. Every year India producing more than 10 lakhs engineers, more than 50 thousand doctors and lot of graduates. Who will accomidates them, Bangalore or Delhi or Mumbai or Chennai, infact all the cities put together can't and it will make the graduates life more miserable. when everybody is earning obviously demand for the limited items will soar. Suppose we will take rent for a 1000-1500 sqft house in any metro, it would be in the range of Rs 8,000-15,000. The present Indian economic condition can't offer that much of freedom for the employeed. Infact limited number of cities are one of the reasons for inflation, Yes what i'm telling is true. Number of people living in cities having increased around 12% in 2001 to 29% in 2011, more than doubled. Competetion for the limited items from cities has been increased because everyone has money and everyone wants same item infact basic items, which are consumed by everyone irrespective of income. Bad infrastructure also contributing to it as transporting costs includes fuels and storage costs. The 100 cities concept will obviously help India in accomadating the nextgeneration and technology will also contribute in fast developing of cities and interconnecting the people. As far as economic activities concers and for the present conditions, it would help infrastructure industry, cement industry, auto mobile industry, banking industry primarily and lot of other industries which will be benefited by it are like retail food chains, commodities.

  Now we will come to Skill India program, I dont know how far they can take it to the targeted group. They were lot of progammes by UPA too like JKC. As far as my opinion concern I would say it will be implemented better than UPA and will be effectively utilised by target people. As Our PM told how many degrees you have is nothing but how you apply the knowledge u gained in that degrees practically. This would be a small thing to see one the paper or to hear but it will have lot of impact on the total economy provided that it will be reached to the target group and properly utilised by the group. The next big thing in this budget promised by Modi and his team is 24*7 power supply to the households. To fulfill the given promise, the Govt is depending on the renewable energy sources, mostly on solar and wind. He already showed his intension towards power suuply to the households in his state. Most talked disinvestment by UPA and now NDA, I would say it is the right time for disinvestment, markets are at life time high. Govt should focus on developing the assets as well. Actually as far as present economic status, disinvestment is one of the options left with the Govt. to reduce the fisical deficit and it is the right time to so also.

  Modi's brand team again done their job perfectly with two things. First one is Satue of Unity, which has been promoted by Modi before elections itself and will come one of the symbol of India in the future where they score more and where UPA or Yuvaraj never thought of it. They have allocated 200 Cr for this project. Second one is cleaning of river Ganga, it's absolute advantage for BJP and Modi and nobody else can score here. Here we have nothing to talk about subsidies and infact Modi is going to put maximum efforts to take out all the subsidies and Govt should change the subsidies to different sectors like sunrising sectors and technology not like traditional fuel, farm and all. It will mostly depends upon the use of and fast development of renewable energy sources.

 Other than this there are some populist reforms like Tax limit increase from Rs.2 to 2.5Lakhs, 80C limit increase PPF and Housing loan rebates. These all will make the individual leave with more money in thier hands, which will obviously make economic activity to run and in this situation its more important too. And next thing is taking out infrastructure project loans for CRR/SLR of banks. As usual deficit target of 4.1% which may not be possible for current year and for near term but hope for the best. New IIMs, IITs and AIIMs but nothing great has given for education sector and health sector too.

  Over all the budget has Modi effect on it and will definetly give the pathway to the Govt, I would say this is the good starting point for the Modi Govt and to the economy to revive and mansoon may affect the flow. 

Monday 13 August 2012

Will Indian economy gain the momentum in short-term?:

Sorry for delay in posting, here we goes with economy topic.

Will Indian economy gain the momentum in term?:

The slowdown in the Indian economy has raised the concern regarding whether is it due to business-cycle or changes in the fundamentals. So we will look at what are the main drivers of economy for the last decade.

1. Investments
2. Consumption
3. Growth in service sector
4. Growth in Rural economy

Investment could be done in manufacturing, service and infrastructure sectors. It is mainly depends upon supply and demand factors, as of now demand side there is no shortfall. demand in all the sectors is robust and increase in household income also adding to it. Another factor which is contributing to demand side it efficiency of the industry in setting up the projects in short time. Setting up 50000 MW power plants in five years is one example for this. When everything is fine, then how would it slowdown? yes there is one reason for this. Main factors are issues in environmental clearances, land acquisitions and shortage of power supply. One more reason could be interest rate, which is actually short-term in nature.This is the area where supply and demand are not matching. Government should take some actions in these areas to improve the situation and market sentiments.

The very next factor is consumption. As we all know about it, it is very strong. Increase in domestic per capita income, urbanization and easy access of rural markets. Rising in affluence has spurred the consumption of good and services. So far as good as it is, but here comes the enemy to halt the consumption. Main factors are inflation and availability of finance  to get the goods and services. Since inflation hovering at top, everyone will ask for cut in interest rates, in my opinion it would be a big mistake. Because, increase in availability of credit will again make inflation to look at sky. Rate cut and availability of finance are inter dependents. That is why recently RBI cut the SLR by 100 basis points to increase the liquidity, which is actually useful for really profitability projects. I guess you understood what i mean. Here is one more area where government should address, Agriculture. It is badly effected by poor monsoon and shortage in power supply. But govt. can't do with monsoon, which doesn't have any control over it but it should address power shortage, which is major concern across all the sectors.

Next factor, Service sector which has more than half pie in Indian GDP. It has been growing very strongly. It has been growing at 7-8% Y-O-Y growth. It is the back bone of Indian economy. employment generation capability of service sector is very well known to every one especially to engineers. Because diversification in the sector it hasn't effected that much by EURO zone crisis. As far as it concern for indian growth perspective it is will contribute its part.

Last factor which has been the most changed area, rural economy. Since more than 70% of Indian population is living in rural India, it will affect growth. Communication technology, road transportation, SCMs (supply chain management), financial services at low interest rates and NREG scheme, which is the major factor in boosting the rural economy, are made the rural economy to increase in fast phase. And one more main factor is diversification of rural employment. In the past it was one agriculture, now it has changed totally and made not sensitive to monsoon.

 As far as my opinion, all the fundamentals are strong which would look other way. But here are some factors which made them to look other way are lack of clarity in policies (GAAR, environmental, mining and ect). Business cycle and global factors are also affecting the growth. In the other day FM approved selling of ownership in PSUs, which will kill two birds (Slowdown and inflation) with one stone.

So the final conclusion is that, since the Indian economy fundamentals are strong it can be reached to 8% growth in the very next year and more than 7% in current FY with with Govt. policy reform and i hope PC is more positive in taking actions to boost the economy.

What do you say...?

Thursday 8 March 2012

India's first hair "CLINIC"


In India, you can find the families who don't have voter card and who didn't see polling stations, but you can't find the families who are not using HUL product. Actually it owned by a Anglo-Dutch company called UNILEVER, which is having 52% stake in HUL. Can you believe Indian were used soaps in 1888?. Yes, they were used, which were made by this successful company called UNILEVER and they were shipped the soaps to Kolkata harbor. It was started as HUL in India in 1933 by Lever Brothers India ltd. In 1956 it became as Hindustan lever Ltd by merger of Lever Ltd, Hindustan Vanaspati Mfg and united traders Ltd. It is a Mumbai based company.It is the leader of FMCG segment in India and it has most efficient and effective distribution channels. it has around 20 lack outlets.


Now our topic is about a shampoo which is having largest market share, Clinic Plus. before that we will see about some stats about shampoo industry.It is 2500-3000 Cr. business in India.Mostly 3 types of shampoos, cosmetic, herbal and anti-dandruff. Before introduction of this shampoos in India 100%( my opinion) of the people were using their toilet soaps for their hair also and now also 50% of the people are using toilet soaps .In this segment major players are HUL and P&G only. Products are Sunsilk, Clinicplus, Dove, Pantene and H&S. In this industry a storm came when P&G introduction of Pantene in Indian market.
My first shampoo is Clinic Plus only, because HUL only having the distribution channels that can give their products to the rural people in 1990's.It was introduced in 1971 as family health shampoo( for mother and daughters) Now first we will discuss about STP of this product.


STP:
       When they introduced the product, they have consider women and their daughters. It was purely a female concentrated product. it was released in only one type of cosmetic which cleans hair and give shining. That time people couldn't differentiated the product and that's why men also used this product.It had been continued to rural market until almost 2000. Even i am also not an exception from this group.
      They were mainly concentrated upper middle class and urban people( SEC A, B, C &D) and that too younger people. Now it is shifted to upper class in rural( SEC R1, R2 and R3) and middle class also and this happened because of increase in customer knowledge about products and availability of products.Since it is having the largest distribution network, it is easily reaching rural market also.
    It positioned itself as a family shampoo and cost-benefit product.For rural people it the only name they know in shampoos and it is the big advantage for them. it has some drawbacks like when ever they ask for shampoo shopkeeper will give what ever is there in his shop and customers also take whatever they give. they won't insist on the particular product.

4Ps:



     First P, we will take price, this is one of the product which is available at large range of price from 50ps-90rupee bottle. Actually its pricing strategy was one of the key factor of success, especially in the rural market
because rural people can't spend so much of their pocket share to shampoo. It is available from 25ml pack -200ml pack.
   Product is our next P. When you come to the product it is absolutely good and it is available in 4-5 types and it has distinctive features of 5 in 1: Strengthen weak hair, prevent hair breakage, softens rough dry hair, shine for thick and healthy hair, and contains anti-dandruff ingredient. No other product is providing this kind of features in one pack.
  Our next p is promotion. When it comes to the promotions, this was their first commercial



They were aired a cartoon commercial with a tune called chulbuli. In that ad you can see a girl(kid) with long hair and they were showing a village king of thing with cows and bulls. she was playing with dust and finnaly she came to home her mother asked her to take bath and clean hair.it was targeted their TG and it was specified their key features in it( my opinion). The tune was so attractive and it was attractive many housewives and their children. It was succeed. 


But when it comes to the latest ads:http://www.youtube.com/watch?v=Vh2KtN_kr1A
If you watch the both commercials. both were concentrated on households and their daughters and they specified the key features by mentioning about their strong and long hair and now they have anti-dandruff also they were mentioned about types also. But it has been not changing and people, especially forgot about this product because it was not come up with new generation tastes and their needs.they have been using discount strategies like buy one get one free and bubble pack.
  Last P is place. it is available in all kinds of retail shops and it has the advantage of effective and efficient distribution channel.

SWOT:
    The strengths of the product is mainly the awareness. In India almost for every 5 people 3 people will tell the CLINICPLUS name when you the question "which shampoo did you use first time in your life". That much of awareness this product is having. Distribution network it is having and variability of the product in prices and features.
    The main weakness of the product is its traditional looking. It is the main drawback because whenever we see the CLINICPLUS we feel that it is old fashioned shampoo. Package is also weakness or drawback. It has been having same kind of package which is having mother and daughter(family).
   Since it is having great awareness among rural market it can hold the market by offering different kind of product varieties and new fashioned package which can attract upper middle class in urban areas also.
   Threats are mainly coming from the competitors and their distribution networks and their variety of product features. More specific on their segments which will divide the family into men and women, and young and old. this is the major threat posed by the competitors. Anyhow still it is the market leader in its segment but its market share is not increasing as its competitors'(chik from cavincar). When you take BCG matrix it comes under cows for HUL.

In my way if it won't come out of traditional way of package and promotions, it will no more a market leader in its segment.   what do you say?

-Bharath 

Sunday 26 February 2012

Be Ready to Beat the Best: Fair and Handsome fairness

Be Ready to Beat the Best: Fair and Handsome fairness: When i was in childhood, i have observed lot of male people applying FAIR&LOVELY on their faces. Even i was also applied once, when...

Fair and Handsome fairness

         When i was in childhood, i have observed lot of male people applying FAIR&LOVELY on their faces. Even i was also applied once, when one of friend was applying (he is having black skin). This type of situation might have experienced by Mr. R.S. Agarwal and Mr. R.S. Goenka. That's why they were introduced a bran for male skin (rough) called FAIR&HANDSOME, which is our topic here going to discuss. Let me tell you something interesting about Founders of Fair and Handsome parent Emami group. "Great people always try to create opportunities for them by taking risks" this is true in the case of these friends also. Actually there were working for Birla group and they were earning good amount of money. In 1974, they came out of the company and they were started KEMCO Chemicals with 20,000 rupees, where they were producing Ayurvedic and cosmetics in Kolkata. Initially they were only distributed their products to the dealers and pulled rickshaws while they were distributing the products to different parts of Kolkata. In 1978 they bought Himani Ltd, which is 100 years old company and based in Kolkata itself when it was not performing well. Actually it was the turning point for them to change their fate. After this they didn't look back, now it is almost 3000 Cr. worth company. Their flagship brand is Boro plus antiseptic cream and second one is Navratna oil. they did promotions through radio and TV campaigns, in that Emani tune was very successful and favorite tune for middle class Indians. In 2005, they found a wonderful opportunity in the fairness creams, which made them to introduce FAIR&HANDSOME, which is the worlds first mens' fairness cream.






STP of FNH:
            Segment for this product is men.Their targeted at middle class people who comes under age of 15-35. And in that mainly college students, who are very concern about their fairness. After introducing of the product this age group was turned to 15-50 years. By this you can easily imagine the need for this kind of products, which are targeting men in cosmetics. They positioned themselves as specialized in men fairness cream, makes girls to attract and cost-benefit product.
4P's of FNH:
           First P is product, which is absolutely good one and it was the first one in this segment.Actually this is the big advantage for them and it is also one of the reason for why they are leaders in this segment.This is actually made for rough and black skin, this is my view. In this P they are succeeded.In their product they have five unique features which are named as unique 5 power system.
1.Double Strength Peptide complex which was developed in collaboration with Activor Corp. USA.
2.Sunguard: Prevent sunburn
3.Stress Busters: prevent wrinkles
4.Anti Bacplus : anti bacterial
5.Herbo Cool : herbal ingredients.
          Now they have six varieties in the same brand name, after shave, face mask, face scrub, face wash, whitening moisture and fairness cream.
          Next P is Price. Actually they were introduced the product in the price range of 15- 50. In that time it was good because they didn't had competitors in this segment. But now lot of players are there in the market, who are targeting same segment, with different products and with different price ranges starting from 5/- rupees onwards. In 2010 they were started offering the product in the price of 5/- rupees for 12 grm.
         Next one is promotion. This is brand having SRK as brand-ambassador and TVC have been very attractive and they were targeting their segment. when you see their first TVC
link:http://www.youtube.com/watch?v=eqtWUezP8VA
         In this TVC only two persons are there, SRK and a youngster. In the start of the ad you can see the boy steeling the women fairness cream and in the middle, when he was running from girls hostel, SRK catch him and he will explain about his skin and the cream what he steel to him. And after this he takes FAIR&HANDSOME and after 4 weeks his village will gather around him. In this TVC they are clearly targeting their segment by telling the difference between men skin and women skin. In this add SRK is the big asset in conveying the message exactly and straightly with his skin color. One more thing in this TVC is, the boy steel the women fairness cream which will convey the message to the people who are applying women fairness cream to their face. Actaully this is the crucial part of ad in conveying message to the targeted segment. This is having a boy with less self esteem and confident, Actually they have it in their website also why you should choose FNH.
      In the latest TVC also they didn't change main theme of message they want to convey.
AD link:http://www.youtube.com/watch?v=hE4AoQCxmis 
      Last but not the least one is Place. They have been very successful in south India and first actually they had major share of their sales from cities, now it is change to towns and rural areas, which is having large market.
    Indian cosmetics have been growing at the rate of 16% annually and the data is also showing is 150-300cr market segment. Actually main competitor for this product FAIR&LOVELY MENZ ACTIVE, which is product from the parent of leader in the opposite gender in the fairness creams, HUL. Vaseline is also one of competitor, who are promoting their products in facebook also with an application which can change your profile pic (actually your skin color). Now a days people are attracted by costly products and they have a perception of higher price means higher quality product and they are attracting towards foreign brand. Emami FNH, being an Indian product it should focus on these two things carefully.
     What do you think?
Bharath