Strategic tools for the practising manager

KIT

THIS WEEK: HOME IMPROVEMENT, FURNITURE AND FURNISHINGS

India's furniture and furnishings market is worth $11 billion and growing at 10-12 per cent a year. In contrast, the building materials market is $8 billion, growing at 15 per cent a year.

The key driver for this market is the rising ownership of homes "" some 5 million homes are bought every year, of which 1.5 million are in urban areas.

Demographic inversion is also being witnessed in housing finance with the average age of an Indian homeowner falling from 40 to 29 years in the last decade.

As per Technopak estimates, overall, 7 to 10 million housing units are needed a year and 600 new malls by 2010 to fill the demand-supply gap.

Despite this there are very few players in the organised segment offering one-stop destination for home needs. The ones that are present are mostly concentrated in metros and mini metros.

Quality, designs, depth and width of product range, value-added services such as custom designs, free home delivery and installation, financing schemes, interior design consultancy, repair services will be the key differentiators in this segment.

Selections from management journals
NUGGETS

When your company is doing well, and money is pouring in, how do you know if it could be doing better? How can you tell which management practices are making the difference "" and which are merely not doing obvious harm?

Professor Stadler and a team at Innsbruck University's business school conducted a massive benchmarking study comparing nine pairs of European companies over 50 years.

Each pair was from the same industry and included one exceptional performer and one less impressive, but solid performer.

The project yielded four main findings, which Stadler calls the principles of enduring success: Exploit before you explore: Great companies don't innovate their way to growth "" they grow by efficiently exploiting the fullest potential of existing innovations; Diversify your business portfolio: The great companies know when to diversify, and they remain resilient by maintaining a wide range of suppliers and a broad base of customers; Remember your mistakes: Good companies tell stories of success, but great companies also tell stories of past failures to avoid repeating them; Be conservative about change: Great companies very seldom make radical changes "" and take great care in their planning and implementation.

The four principles of enduring success
By Christian Stadler
Harvard Business Review,
July-August, 2007
Subscribe to the article at www.hbr.com

Brands are on the wane. Many consumer-goods companies blame the big-box discount retailers, but the Wharton School's Leonard Lodish and the Fuqua School's Carl Mela have a different explanation. Their research suggests that companies have damaged their brands by investing too much in short-term price promotions and too little in long-term brand building.

To rescue their brands and increase profitability, corporate managers must arm themselves with long-term measures of brand performance and use them to make smarter marketing decisions.

Several factors explain the short-sightedness of brand management: the increased availability of weekly, or even hourly, scanner data, which show a clear link between discounts and immediate boosts in sales; the relative difficulty of measuring the effects of advertising, new-product development, and distribution "" all of which can contribute to a brand's long-term health and the short tenure of most brand managers.

Although discounts do increase sales in the short term, they ultimately lower profit margins. If a product is often discounted, consumers learn to buy it only when it's on sale. Moreover, when one firm increases its discounts, others usually follow suit, lowering everyone's margins.

Executives can monitor a brand's long-term performance by watching a dashboard of measures. Only after examining such measures, for instance, did managers at Clorox discover that the company's heavy discounting and decreased advertising had caused a steady decline in overall sales. In response, Clorox reduced discounting and increased television advertising, moves that ultimately strengthened the brand.

If brands are built over years, why are they managed over quarters?
By Leonard M Lodish and Carl F Mela
Harvard Business Review,
July-August, 2007
Subscribe to the article at www.hbr.com

Top 10 business bestsellers
BOOKWORM

Naked Economics
Author: Charles Wheelan
Publisher: W W Norton & Company
Price: Rs 748.06
ISBN: 0393324869

Fooled by Randomness
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Publisher: Thomson Learning College
Price: Rs 1,100.11
ISBN: 158799190X

Managing the NonProfit Organization
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Publisher: HarperCollins Publishers
Price: Rs 282.69
ISBN: 0060851149

Punk Marketing
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Price: Rs 460.51
ISBN: 0061151106

Free Prize Inside: The Next Big Marketing Idea
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The Black Swan
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Publisher: Allen Lane
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ISBN: 0713999952

Selling to Big Companies
Author: Jill Konrath
Publisher: Kaplan Business
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India: Redeeming the Economic Pledge
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Publisher: Academic Foundation
Price: Rs 307.40
ISBN: 8171883486

Privatising Power Cuts?
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Economic Freedom of the World 2006
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List by www.bsbazaar.com/books