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Committee for Research, Strategy, Consulting and Entrepreneurship

CREST

ISSUE 8 FEBRUARY 2010

The Committee for Research, Strategy, Consulting and Entrepreneurship (CRESCENT) is the result of the endeavor of the student community of XLRI to promote an environment of creative solution building amongst the students of the institute, while reaffirming high ethical standards and values, and fostering personal development in the pursuit of excellence. It works with the two fold agenda of creating a brand presence of XLRI among the corporate and to help nurture ideas of budding entrepreneurs by providing a platform to them to showcase their Ideas.

Inside this issue:

Strategy — A Lighter Touch

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Spl. Report — Brandbook & Adkut

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Entrepreneurship

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The E-Magazine of CRESCENT, XLRI

FROM THE EDITORS’ DESK... A new year, a new beginning, and a new CREST! Welcome to the new CREST with a newly designed layout that makes it more interesting, exciting and informative for you. This February Edition of CREST brings out the best of the year that went past. A debriefing of the hugely acclaimed National Working Conference on Social Entrepreneurship held at XLRI would remind us about the inspirational event. An interesting read from the McKinsey Quarterly talks about the post merger integration strategies in the Asian context. A special report on how companies are shaping up their marketing strategies to harness the hugely popular social networking channel would open a new dimension in your thinking. We have also covered the phenomenon of entrepreneurship that has rapidly gripped up OECD countries especially Britain post recession. And of course, don’t worry, we have still kept your favourite Newswatch and Fun-corner in our list! C-cubed carnival continues and gets more exciting as it becomes a part of CREST. Get your brain cells working as you solve the puzzle and get brownie points as you improve upon your league rankings. So sit back and enjoy while a new CREST entertains and informs you...

Editorial Team

— A National Fever

Mandar Kulkarni Manoj G. Kamath

Social Entrepreneurship Conference

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CRESCENT Reporter

5

C — Cubed Carnival

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Etcetera

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Ajanta Anindita Himanshu Saxena Miti Vaidya The Editorial Team of CREST invites articles from readers for publication in forthcoming issues. If you have articles/ experiences/ studies to share in the areas of consulting, entrepreneurship, research or strategy, please do send them in to crest.xlri@gmail.com mentioning your name and institute name.


CREST STRATEGY

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A Lighter Touch

“Asian companies are taking a different path as far as postmerger integration is concerned – they are not doing it.”

The post-merger integration strategies of a few Asian acquirers may very well give traditional organizational theory texts a run for their money. Although, western counterparts also have different strategies for post-merger integration, it is a thumb rule that the integration be quick to capture all available synergies. A recent McKinsey review of some Asian M&A’s reveals that Asian companies are taking a different path as far as post-merger integration is concerned – they are not doing it. The review consisted of a study of 120 overseas acquisitions made by diverse Asian companies from 2004 to 2008. It was found that almost half the acquisitions were not followed by the traditional post-merger integration process of capturing synergies rapidly by merging the entities as much as possible. Further, about one-third of the deals went in for only limited integration and focused on capturing benefits only in a certain area, say procurement. One would expect that for Asian companies, which are presently in developing markets, it would make most sense to integrate as soon as possible and benefit from what the western counterparts have to offer. However, if we examine the real motives for Asian companies to make acquisitions, perhaps we may come upon the reason for this seemingly counterintuitive strategy.

One of the main concerns of Asian companies once they make an acquisition is to minimize the short-term risk of outright failure of the deal. When making an overseas acquisition, the company is usually looking to expand into a certain geographical area or new product line. They are treading a completely new path and thus long-term stability and growth of the business takes priority over immediate cost reduction. In other words, the acquirers would rather let the existing management do what it does best while gaining some time for themselves to learn to manoeuvre the new environment. Another way to look at this is to examine the reason why we believe that rapid integration is the ideal way to manage post-merger activities. There is a huge pressure on western counterparts, through the kind of reporting structures and internal controls they face, to display to investors (usually capital markets) the benefits of any deal. Thus rapid integration and capturing of synergies is the only way out. On the other hand, for Asian acquirers, there is no pressure to show short-term results (maybe because of less frequent reporting or ownership being biased towards family control) and they have the liberty of choosing between maximizing returns and minimizing the risks of failure. So how are the Asian com-

panies going about their post-merger activities? A “minimalist governance structure” is usually employed, in the form of a board or supervisory committee. The core top team remains intact and even if new hires are required, they are recruited locally rather than being substituted by the acquirer company’s management. Adherence to goals is measured along a few, very select, key performance indicators. Alongside all this, often teams are formed with members from both entities to examine opportunities of mutual benefit. A doubt which may crop up is whether the acquirers eventually did have to indulge in a full blown integration activity, albeit later down the road. One may even expect that this delay might make the integration more challenging. Since the deals examined are more or less recent, it might be too early to draw conclusions. However, most of the companies studied had no immediate plans for a complete integration – they were satisfied with the present synergies, although they admitted that the upside was limited. Perhaps a review of these deals some years down the line will provide conclusive evidence about the strategy. Source: “A Lighter Touch for Post-Merger Integration”, The McKinsey Quarterly, January 2010


ISSUE 8 SPECIAL REPORT

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BRANDbook & ADkut Perhaps these are more relevant names for Facebook and Orkut, the two out of the many social networking websites on the internet. During bizarre times like these, when entire browsers are programmed to integrate sites like MySpace, a relationship status change on Facebook is enough to spark crimes of passion, and the possibility that terrorists may use Twitter is at large, it’s even stranger to think of the number of companies that still feel social media sites aren’t influential enough. A recent twittering by Shashi Tharoor that sparked off a political row or blogging sessions by Aamir Khan and Amitabh Bachchan are testimonial to the growing reach of social media. News channels and dailies leave no stone unturned to report any un-commonplace happening on the network. This is why Chelsi Nakano from Rubicon Consulting says that ignoring social media is a bad move. A recent study by Rubicon Consulting reports that 80-90% of the content on any given social media site is produced by less than 10% of its users. That percentage, however tiny, is also likely to carry more weight when it comes to influence over buyers’ decisions than anything else. Maybe measly but definitely not powerless. The branding of our campus events like Ensemble and conferences like the National

Working Conference on Social Entrepreneurship uses the social networking media quite effectively. The target audience is a savvy student or working professional who has at least one account on any of the popular social networking sites greatly helps the cause. It is possible that the reason various companies choose not to participate in social media sites is because the sites do not help them in the way they expect them to. Perhaps it is true that online discussion is a poor way to communicate with the average customer, because the average customer doesn’t participate. But it’s an excellent way to communicate to them, because average customers watch and listen. It’s because of this that Rubicon claims most content and discussion sites should be viewed by companies as “online performances” (did anyone else think of the ridiculousness of YouTube comments just then?). The site’s organizers interact with a relatively small number of users; thereby educating, persuading and entertaining everyone else. This, of course, means it is critical that companies understand who the Most Frequent Contributors (MFCs) are, as they are the companies’ fellow actors in a theatrical online performance.

According to Rubicon, MFCs are more ethnically diverse, more technically skilled, more likely to be single, generally Democrats, and, probably, 22 years old or younger. As they are mostly writers of online reviews, the words of these young people are second only to word of mouth as a purchase driver for all Web users. And as personal reviewers, they are understandably far more influential than official reviews or information from a manufacturer. Take the popular Web site Yelp, for example. If a review of a Indian restaurant you’ve been meaning to try was poorly blocked, misspelled and had too many exclamation points, it would be hard to take it seriously. But upon further inspection, if it was clear that the author of the review stated that the food was bathed in oil, rancid and full of stray hairs, would you still feel inclined to see for yourself, or would you hit up the nearest Panda Express instead? Or, take into consideration the fact that the communitybased Web site Wikipedia c o m p l e t e l y eclipses ESPN.com, CNN.com and NYTimes.com in Web value. That kind of thing definitely speaks volumes about where people are choosing to get their information, and who they trust to provide it.

“80-90% of the content on any given social media site is produced by less than 10% of its users.”


CREST ENTREPRENEURSHIP

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“Firms employing less than 10 people make up about 75% of the firms and account for 30% of all jobs. “

Entrepreneurship - A national fever A nation generally strives to create an army of doctors, lawyers, engineers and scientists to move its march forward to progress. But critics point out that there is one kind of a soldier that most of the countries forget, and it is this soldier that is the supreme commander- an entrepreneur. Britain is one of the first nations to realize this and has gone on a strong offensive to fulfill the void. An ‘Enterprise Week’ started by Britain on a national scale has been adopted by 86 other countries. There are as many as

3,000 events designed to inspire and educate young and aspiring entrepreneurs, , from a workshop on “Growing Your Business” in Ipswich to a “Could You Be A Million Maker?” contest in Blackpool, in which school and college students create their own mini-enterprises. OECD has come out with a compendium of statistics on the state of entrepreneurship, which covers the entrepreneurship activities in as many as 23 countries. Across the sample, micro firms employing less than 10 people make up about

75% of the firms and account for 30% of all jobs. The recession was a boon in disguise for this phenomenon, encouraging many to follow their self designed path. The best feature of this phenomenon is its spirit, which believes in cooperative creation of job and wealth, rather than competitive squabble with others. (The above is an abstract from The Economist)

National Working Conference on Social Entrepreneurship The 2nd National Working Conference on Social Entrepreneurship perhaps one of the largest events on XLRI campus, both in terms of quality of delegates as well as the depth of ideas discussed. The best thing about the conference was its unique format that improved its overall effectiveness. Instead of sequentially arranged seminar sessions, this ‘working conference’ shifted focus from being speaker centered to being participant centered, enabling a healthy discussion and development of

ideas rather than mere dissemination of them. This helped in leveraging the rich experience of participants and cooperative solution of problems. The conference gave an opportunity to participants to attend only interest based working groups that helped in assembling focused group of individuals who are trying to solve a particular social problem. The themes included healthcare, financial inclusion, innovations for social sector, education, employ-

ment and access to technology. Stalwarts from many NGOs and CSR wings of corporate like ITC attended the event. This was a special platform for social entrepreneurs to showcase their idea and discuss its economic viability and effectiveness to solve solutions. Students also found this conference inspirational and enlightened them on an alternative career path, a path which may be more difficult than the usual but which surely be more intrinsically satisfying.


ISSUE 8 CRESCENT REPORTER

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Coming Soon... Hit upon the idea-of-the-decade but unsure how to convert it into a promising business? Crescent is working on providing mentorship to all you budding entrepreneurs through an Entrepreneurship Advisory Board. Comprising representatives from among industrialists, venture capitalists, entrepreneurs and professors, the Board will aim to provide guidance to any student interested in starting out on his/her own. Watch this space for more details...

C-Cubed Carnival The Crescent Consulting Club made its presence felt on campus this month by launching the first event of the C-Cubed Carnival, and following it up with another event soon after!

ticipants collect points by winning/organising events and the individual with maximum points at the end of the Carnival wins a grand cash prize and certificate.

The C3 Carnival is an initiative which is in furtherance of C-Cubed’s commitment to encourage exchange of ideas and resources amongst XLers. The main idea behind the C3 Carnival is to 'share and learn', while making a few bucks along the way. Conducted in the league format, par-

The first event conducted by Abhinav Mehta, consisted of two rounds – Round 1 was a Consulting/ Strategy Quiz. This was followed by Round 2, where participating teams had to solve a guesstimatebased case. The next event, conducted

by Nishant Agarwal, boasted of a unique format. Participating teams acted as consultants, and handled queries from hypothetical clients in quick succession. The queries from “clients” were from diverse areas and tested participants’ logical reasoning as well as quick thinking. The Carnival will come up with its next event soon, and also invites aspiring organizers to get in touch with a Crescent member right away!

Get Ahead in the Carnival! Here’s a chance to stack up a few more of those points. The first 3 all-correct answers to the crossword will receive 10 points each in the Carnival and a special mention in the next issue of CREST. Please email your answers to us at crest.xlri@gmail.com with “Carnival Puzzle” in the subject line. The answers may be written against the respective clues in the list alongside and should be sent in the body of the email itself. In other words kindly do not send any attachments, and the crossword grid

itself is not required.

1

Across:

1. Decoded the pyramid, more so the base. 2. Corporate; Business; Functional 4. Definitely not one of the animals made famous by a consulting major. 5. Markets v/s Products; New v/s Old

2

3

4

Down:

1. Analyze what’s all around. Don’t forget the laws of nature, though. 3. Positively good for business. Also, a girl’s name. 4. In strategy jargon, as unlikely as a black ____.

5


ETCETERA NEWSWATCH On M&A activity in 2009 FACULTY ADVISOR PROF. MUNISH THAKUR

Secretary Vishal Agarwal Senior Executive Members Abhinav Singhal Ankit R. Agarwal Anwar Syed Mandar Kulkarni Manoj G. Kamath Sandip Shinde Junior Executive Members Aalok Sanghvi Ajanta Anindita Himanshu Saxena Indrajit Yadav Miti Vaidya Mohammed Quraishi Siddhesh Ajgaonkar

Contrary to what is expected by finance or economics gurus across the world, M&A activity among corporations was stable in 2009 and fundamentals point towards continued strength in 2010. Many reviews during the past year focused on the significant decline in volumes from 2007 and 2008. Indeed, with 5,800 deals totalling $2.3 trillion announced in 2009, M&A volumes were at their lowest level since 2004. However, a report by McKinsey shows that most of the reduction during the past two years came about because of a 29 percent decline in market capitalization, leading to smaller absolute deal sizes, as well as a sharp decline in private equity activity as a result of weak credit markets. When adjusted for market capitalization, the level of deals by corporations in 2009 was on par with that of 2008, only slightly lower than that of 2007, and significantly higher than it was after the dotcom crisis at the beginning of the decade. The pattern of M&A changed in other ways during the past year. The long-term trend of an increasing number of cross-border deals ended, though in one respect the M&A marketplace turned increasingly global as Asian companies increased their share of international M&A. On a sector-by-sector basis, M&A activity was busier in strong sectors, such as energy, utilities, health care, and pharma, than in more troubled ones, like financial services, real estate, construction, and basic materials. Source: The McKinsey Quarterly, January 2010 CRESCENT E-MAIL

FUN CORNER :) Top Five Things You Top Five Ways to Know Shouldn't Say at a Con- You've Got the Consulting Bug sulting Interview 1) I'm a t-shirt and jeans kind 1) Use so much jargon in conversation, friends think you're of person. speaking a foreign language. 2) Do you pay overtime? 2) Constant urge to give ad3) I hate flying and I'm useless vice on subjects you know without ten hours of sleep a nothing about. night. 3) Keep seeing bullet points 4) I think three letter acro- everywhere. nyms are for people too stupid 4) Can fit the thematic underto remember whole phrases. currents of "War and Peace" 5)Call it what you want, it still into a two-by-two matrix. means firing people. 5) Tired of having a social life beyond work.

crescent@xlri.ac.in


CREST February 2010