tudbulent times

TURBULENT TIMES - HOW TO WIN – A METHOD BY HARISH MANWANI, CHAIRMAN OF HINDUSTAN UNILEVER SPELT OUT ON JULY 3, 2009 – A LESSON TO BE LEARNT BY MOST INDUSTRY AND BUSINESS AND GOVERNMENT-MEN AND MINISTERS IN ALL FORMS OF POLITICAL HEWS!
(BY DR. BALAKRISHNAN)

I was extremely impressed in the AGM ‘s chairman’s speech and no doubt his company is indeed the most admired company in India for last about SEVERAL decades and in fact produced best business strategists in the country.

He properly cited brains of the world – Albert Einstein, and Peter Drucker, as to how to address turbulent times.

Einstein once said ‘ In the middle of every difficulty lies opportunity…the definition of insanity is doing the same thing over and over again and expecting different results.’

Peter Drucker said ‘ several decades ago. ‘For it is character through which leadership is exercised, it is character that sets the example and is initiated in turn. What will be decisive, in the future even above all in the future even more than in the past is neither education nor skill, it is integrity of character’.


Harish Manwani quotes William Hesketh Lever’s statement ‘I believe that nothing can be greater than business, however small it may be, that is governed by CONSCIENCE, and nothing can be meaner or more petty than a business, however large, governed without honesty and without brotherhood.’

Manwani on difference between Winning and Losing in the long run is Leadership and integrity. After all, it not just what you do or what you achieve that will ultimately stand the test of time’, BUT CHARACTER.


Manwani quoted the founder of Lever Lord Lever Hume on return on marketing investment (ROMI), remarked,’ I know half my advertising wasted, I just do not know ‘which half’ in an uncertain environment, it is critical to determine with a high degree of science which 50% really works.’ MANWANI added, ‘we have identified media elasticity of every brand and continue to drive for superior ROMI in addition, we have developed advanced marketing mix modeling techniques that allow us to assess of all the marketing levers to drive for growth and superior yields from marketing investments’, when he was addressing War on Waste’.







This is a story of Boom to bust. Manwani agrees an unprecedented global crisis struck the world on March 16, 2008, when Bear Sterns acquired for $.2 a share against its 52-week high of 134 dollars a share. July 14, Oil hits $145 dollars a barrel and then collapsed to $34 in six months. September 15, Lehman Brothers collapses, November 20, Dow Jones recorded low of 7449 points; June 2009, General Motors files bankruptcy.

But this fact Indians did not accept except a few.

Distant winds have a way of moving in faster than we imagine. Less than a year later, the collapse of several leading financial institutions has caused a global chain effect that has caused a global chain effect of collapses that has shaken governments, investors and the common public alike

Profound impact of this is since had been felt deeply in the real economy. Total write-downs on global exposures on global exposures now estimated about $4 trillions.

World output is projected to decline by 1.3 % in 2009.

IMF estimates the decline as sharp as 6,2%in Japan, 5.6% in Germany, 4.1% in UK and 2.8% in US.

Social cost of down turn in many economies around the world has been particularly DEVASTATING.

Rising numbers of those who have lost their jobs, homes, and pension savings is leading to PUBLIC ANGER.

QUESTIONS are raised about leadership, hubris, and regulation.

Markets seem to stabilize in the second quarter of 2009 after concerted and coordinated intervention by various governments, the green shoots of global recovery have still to look convincing and CONSUMER CONFIDENCE is FAR CRY from the levels seen before downturn.

INDIA IMPACT

Global down turn spread with ferocity all over. Even in India it surprised everyone. This has debunked the MYTH Indian economy is de-linked!

RBI governor Dr. D. Subbarao pointed out in a recent speech said ‘ Contrary to the
‘De-coupling hypothesis’ emerging economies too have been hit by the crisis…In a rapidly globalizing world, the ‘de-coupling hypothesis’ was never totally persuasive.’

Crisis underscores interdependence of the global economy. Impact of global crisis in India has been not so severe.

Fact is India was more efficiently regulated. And better managed, not necessarily best managed.

Domestic consumption continues to be a critical driver of growth.

GDP is expected to grow between 6.5% and 7%, this year 2009. Indeed certainly slower than close to 9% we had seen over the proceeding five years.

Yes, India growth story is indeed somewhat better than other economies of the world.


CRISIS IS AN OPPORTUNITY:

Look at Indonesia of later part of nineties (1998), economic melt down effect was Rupiah
Plunged to 15,540. - Level to per USD, a devaluation of 675%. Indonesian businesses global and local just collapsed Unilever Lever (Indonesia) drove down costs, raising engagement with employees and customers to an even higher level, by prudent management of market shares, cash margins, says Manwani


To be able to execute strategy, ‘ we developed even sharper understanding of rapidly changing consumer needs and to respond to this, introduced affordable brands – economy packs of soaps and detergents, introduced new formats of existing brands. Otherwise consumers might punish if quality was compromised’, says Manwani

Cash generation and cost savings are key. HL achieved this by single mindedly reducing complexity in HL operations. This is an opportunity provided by crisis. Crisis revealed new truths. It also moved decisively to do away not relevant SKUs, in their portfolios.

Moved out obsolete inventories sitting in distributors warehouses and thus released hold up cash. Made available trade capital to fund purchases of our products increased.

Committed to employee development by investing in training and entry-level recruitments, – a clear sign of HL confidence that NO CRISIS LASTS FOR EVER and that thing would pick up again. – A modern management lesson learnt.

A principle, touted by Robert H. Schuller, ‘TOUGH TIMES NEVER LAST BUT TOUGH PEOPLE DO.’

In tough times only relationships are of great benefit, touted Unilever (Indonesia). Banks rationed foreign exchange. Suppliers rationed supplies due to shortages. Many stood with Unilevers confident of Unilevers, solidly like a rock. This was one of the most successful operations in tough times. Enjoyed market leadership and unmatched corporate reputation – this is how a period of crisis can be turned into great opportunity; Manwani speaks to his company shareholders, in AGM held on July 3rd, 2009.
Recently, The Wall Street Journal in Asia 200 Survey has again recognized Unilever in Indonesia as the most admired company in Indonesia.


CRISIS PRESENTS TREMENDOUS OPPORTUNITIES TO FOCUS ON A GROWTH AGENDA, TRANSFORMING COST STRUCTURES –

Growth is the oxygen, every business needs.

‘India is a diverse country with millions of consumers, at every level of socio-economic pyramid. So Levers understands, accepts, needs of each and every segment. So every consumer has same hopes, the same aspirations and same dreams for a better life. This inspires us to serve the needs of all consumers in a manner that is relevant to them –‘ Our strategy of straddling pyramid’. HL have a portfolio powerful brands, packs, and product formats at varying prices points to make their offerings affordable and accessible to 700 million Indian consumers, proclaims Manwani.

Rapidly developing country like India, economic uncertainties results in simultaneous movements of consumers of consumers to up trade and increase consumption, as others cut back consumption or indeed down size, Manwani sees opportunities.

Rural India consumption is increasing due to growing incomes led by NREGS (National Rural Employment Guarantee Schemes). Some signs of down trading in fixed income homes – a more direct impact that such consumers have experienced due to downturn.


Consumer understanding will continue to be at the heart of HL business. It is crucial to understand and respond to changing consumer and shopping behavior. Huge differences in the way consumers are responding to uncertainties across segments and geographies. Consumers in larger cities are shopping less often. They are stretching the consumption of brands just a little bit to cope with inflation and uncertainty. Small packs and currency are important in such situation. There are others indeed buying very large packs given the intrinsic value they offer.

Some developed markets, rising demand for high-end food products as consumers eat out less, but compensate by better eating at home. Understanding across markets help build competitive advantage. Consumers become more careful about discretionary purchases, innovations.


Delivery of stronger functionality and value has always been important. Leveraging science and technology to deliver even better values and create stronger differentiation become absolutely vital at a time of UNCERTAINTIES.

HL sees explosive growth in some of their brands.

In difficult times, consumers tend to go for trusted bands. Brands renew their contacts with consumers. Understand the consumer better. Provide them at affordable prices. Offer solutions to them, that are accessible, continuously deliver superior value through leverage of science and technology.

BUSINESS UNUSUAL ON COSTS.


Growth must continue to be on focus. Recognize volatility of these turbulent times. Responsible business must ensure while it continues to invest in growth. Simultaneously, reshape the cost structure, for the worst scenarios that is business unusual costs. Implies a fundamental re-engineering of many processes to make company nimbler and fitter to compete difficult times.

Roll out Go-To-Market model. This reduces complexity at the front end by directly integrating the distributors supply chains with the company – so that managing for efficiencies across one extended supply chain. Means larger sized distributors, superior talent in the field-making sale to the customers, more efficient order fulfillment, lead to considerable reduction in costs.

Create better connectivity with consumer and back end. Make supply chain far more efficient. Make win win situations of partnership with customers. Reduce working capital at a time when liquidity is at a premium.

Important part of driving efficiencies in turbulent times is that is war against wastages. Cross-functional teams identify and put in place actions to eliminate waste from business. Simplify and harmonize the product specifications. Bring in significant specifications.


HL uses ROMI – return on marketing investment techniques as a war on waste, to give benefit to the customer to see their customers to trust them, as they are committed to customers, that is their vision and main mission.

This is how you will be winning in turbulent times says chairman of HL Manwani. Will the businesses and industrialists so governmental authorities learn from experience of Unilever men, is a trillion dollar question!(ENDS)