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D V E R T I S I N G
Dressing Up The Dot.Com Generation
Park Avenue attempts to grab the brand-space for start-up couture.
It had always been the complete man's incomplete cousin. While Raymond's eponymous brand built a strong, albeit enigmatic, equity around the premise of the complete man, the Park Avenue brand--owned by Raymond's subsidiary,
jk--floundered from one positioning statement to another. Now, in an effort to cash in on the dot.com fever gripping India's educated elite, the company has launched a 4-ad Start Something New campaign.
The ads, which show a young man chucking up a steady job and setting up his own dot.com venture, is targeted at the brand's core audience: 25-30-year-old males, who work in the corporate sector. Says Manpreet Sodhi-Somehswar, 31, Account Group Head, Ammirati Puris Lintas, the agency behind the campaign: "We had to establish a link between the changes careers were going through, and the aspirational persona of the brand: a young, trail-blazing executive." Reaching out to customers in the right age-group was the primary aim of this communications strategy.
Research conducted by the company indicated that the bulk of Park Avenue regulars were people over 35. The country's largest ready-to-wear men's brand (1998-99 turnover: Rs 150 crore) perceived this concentration as a deterrent to future sales. Seconds Jagdeep Kapoor, 42, Managing Director, Samsika Marketing Consultants: "Brands like ColorPlus and, to some extent, Allen Solly are perceived to be much more contemporary than Park Avenue, which is seen to be more of a traditional yesteryear kind of brand."
In today's market, any loss of contemporariness means an immediate loss of marketshare. And revenues. To preclude such a possibility, the campaign strives to connect, at a visceral level, with the start-up spirit that is pervading the country. Given the topical context, the ad is certain to score in terms of eyeballs, but it will require a consistent brand-building blitzkreig from the company to make Park Avenue the de rigeur dress-code for start-ups.
-Nita Jatar Kulkarni
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I S T R I B U T I O N
This Baron Wants To Be King
Baron's Mulchandani hopes to become India's distribution sultan.
The baron is carving up his domain. The CEO of Baron International, Kabir Mulchandani, is in the midst of a restructuring drive that will, formally, separate the management of the 3 brands his company manages: AIWA, TCL, and Hitachi. Thus, he is in the process of forming a joint venture with the Chinese consumer electronics giant, TCL, where the latter will hold the majority stake. Baron International itself, meanwhile, will dedicate itself to the AIWA brand.
Although Mulchandani reserved comment on the issue, Baron's alliance with Hitachi could well be over: promotional activity for the brand has all but come to a standstill, and between April, 1999, and November, 1999, compared to a target of 180,000 units, the brand managed to sell a mere 5,300 CTVS.
Opines Ravinder Zutshi, 43, Vice-President (Marketing), Samsung India Electronics: "To me, it does not look like Baron is serious about Hitachi. The company seems keen to cash in on AIWA's growth and, at the same time, run a parallel marketing operation with TCL." Which could be indicative of Mulchandani's real strategy.
The demarcation will allow Baron to push an already successful brand, AIWA, while hedging its bets with TCL. The logic: if Baron's relationship with AIWA sours , Mulchandani can fall back on TCL. The Chinese brand can be used to combat competition from other Chinese brands like Konka and Haire, whose entry seems imminent; and TCL's real strength, mobile phones and telephone instruments, could come in handy.
At present, though, all's well on the AIWA front. The brand registered sales of Rs 850 crore in calendar 1999, and bagged a 50 per cent share of the Rs 376-crore CD mini hi-fi audio market, and a 10 per cent share of the Rs 4,500-crore market for CTVS. The result: the Japanese major has picked up a 5 per cent equity-stake in Baron International, and extended its marketing agreement with it, due to expire in 2003, till 2007.
Mulchandani, 28, hopes to use the value-for-money proposition to build AIWA into a Rs 6,000-crore brand, with products ranging from mobile phones and car-audio systems to Net-access devices and plasma TVS by then. "We have built our business on technology that is affordable, and we will continue to do that."
Brands, or technologies have never been the real issue for Baron, which believes it can provide the optimal distribution network--3,000 dealers and 47 exclusive Baron Sales-Points, which will be increased to 300 by end-2000--for any consumer electronics company that wishes to enter the Indian market. Thus, while the segregation of the businesses will avoid the overlaps at the brand-management level, all the brands marketed by Baron will continue to share a distribution network.
The real reason behind this restructuring, then, may be Mulchandani's desire to clean his stables before raising capital through an IPO or private placement. Baron proposes to raise Rs 100 crore by diluting 25 per cent of its stake at a price of Rs 200 per share--a 33 per cent premium over the Rs 150 per share AIWA paid--and use the money to expand its channel network. But will investors be keen to buy into a company that owns no brands or facilities? Even the re-organisation, which is targeted at displaying the company's ability to manage multiple conflicting relationships, may not induce them to do so. But then, Mulchandani could well prove everyone wrong thrice over.
-Ranju Sarkar
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A L U A T I O N
Virtual Companies, Real Profits
The new millennium will witness more real value migrating virtually.
The New Economy rules. One look at the markets is all it takes to prove this. Wipro, the infotech company which also has a small, but profitable consumer products division, achieved a market cap of Rs 2,00,252 crore in February, 2000. In the process, Wipro made its chairman, Azim Premji--who owns 75 per cent of the company's equity--the third-richest person in the world, with personal wealth of $38 billion (Rs 1,65,680 crore), which is next only to Microsoft's Bill Gates and Berkshire Hathaway's Warren Buffett.
Wipro and Infosys Technologies have wrestled the first and second positions in India's Value Club, pushing Hindustan Lever to the third spot. In 1999, several Indian companies found the prices of their stocks plummeting as investors deserted smoke-stack stocks in favour of New Age stocks: technology, telecommunications, and media and entertainment.
Nor is the interactive stock-fever restricted to Dalal Street alone. Across the world, (market) value is migrating from traditional companies to tech start-ups. Indeed, on any of the world's markets, the most valuable company is either an infotech one, or a communications one. Explains R. Sreesankar, 39, Chief Investment Officer, DSP Merrill Lynch Asset Management: "The value inherent in convergence is making these stocks popular among investors." That holds true for India too.
The competitive advantage that Indian software companies have built through the 1990s holds the promise of higher revenue-streams in the future. Not surprisingly, therefore, the market ascribes a high valuation to software scrips. However, with the telecom sector just opening up, and with the 2 largest companies operating in this sector being PSUS, MTNL and VSNL, there are not too many telecom scrips doing the rounds.
However, there are similarities among companies which are the most valuable on bourses across the world. Knowledge-intensive sectors--like pharmaceuticals, Net, telecom, software, and technology--are the unanimous favourites among investors across geographies. There are, however, a few significant exceptions to this trend. In the US, UK, and Latin America, oil and petroleum companies continue to be the leaders in terms of market value. The reason: the demand for crude and its derivatives seems unlikely to come down in the first few decades of this millennium. And some of these countries have huge reserves of the resource, which translates into a factor advantage.
India, and most Asian countries, cannot boast of such factor advantages. Thus, scrips of knowledge-intensive sectors dominate the value listings in these countries. However, even in the US and the UK, the top 3 positions in the listings will, eventually, be captured by hi-tech firms. The bottomline for the global investor: pick technology stocks--and you can't go wrong.
-Roshni Jayakar
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A R K E T I N G
Is There Life Beyond Cars?
Bridgestone becomes the market-leader in car radials. But buses and trucks will be another ride altogether.
It's a dual-drive success. First, Bridgestone India focused its attention on the Original Equipment (OE) segment of the passenger car radials market. Then, after establishing a dominant position there, the company set its sight on the replacement market. And Bridgestone has now emerged as the market-leader in that market too.
In 1999, the Japanese major cornered a 27 per cent share of the replacement market for passenger-radials, displacing long-time market-leader MRF(23 per cent). Coupled with its almost 43 per cent share of the OE business, this makes it the undisputed leader in the Rs 300-crore passenger-radials mart.
In the OE market, Bridgestone's homologation-strategy with the global auto-majors--like General Motors, Daewoo Motors, and Hyundai Motors--has resulted in it emerging as their preferred supplier in India too. And the company seems to have leveraged its OE presence to make a go of it in the replacement market.
Says S.K. Chatterji, 43, Senior Vice-President (Sales & Marketing), Bridgestone: "We strongly believe that OE manufacturers will drive our share in the replacement market as it is believed that the OE -fitment, generally, comes back to the car." Which basically means that a high share in the OE market will, automatically, translate into a high share in the replacement market with a suitable time-lag. This is now beginning to deliver some results for Bridgestone.
However, the company's OE -first, replacement-next strategy may have been driven by the fact that it did not have access to a distribution network when it started off. Even as it signed up a slew of OE deals, the company was forging relationships with independent dealers. By November, 1998, it had 550 dealers (labelled First Family Members); today, it has close to 850.
Competing in the replacement market requires a tyre-company to project a public face. Bridgestone's has been created by bursts of TV advertising during special telecasts, and large billboards. In an effort to position itself as a premium company, the company has priced its offerings between 5 and 12 per cent higher than the radials that are on offer from the domestic tyre majors.
However, the fact that Bridgestone does not supply tyres to the largest-selling passenger car models in the country, the Maruti 800 and the Zen, may pose problems. For, the 30-lakh, Rs 300-crore passenger-car radials market is much too small for Bridgestone's operations to become economically viable.
That will happen only if the company enters the truck- and bus-tyres segment, which account for 75 per cent of the Rs 10,000-crore market. And not with radials alone. For, almost 98 per cent of the sales to this segment still take the form of cross-ply tyres. Agrees D. Ravindran, 54, Director-General, All India Tyre Manufacturers Association: "Bridgestone needs to have a wider range. The company needs to get into the truck- and bus-tyres segment." But the company itself claims that it is only in the process of studying this segment.
However, with Michelin planning to set up a manufacturing-facility near Bangalore, and Continental getting its act, albeit through 3 collaborators, together, Bridgestone cannot afford to procrastinate any longer. If it does, the competition could seize the initiative--and puncture its radial leadership.
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