THE PHOENIX PERFORMERS

With low penetration levels coupled with climbing growth rates, the Indian mutual Fund industry is all set to unleash its true potential. by Manish K. Pandey

But then one should not forget the MF industry is poised to face tough competition from the insurance sector in the near future. Raison d’etre: Insurance companies in India have developed innovative products which link mutual funds and insurance, like unit linked insurance plans. Thus, innovation in terms of product offerings customised for these new target segments will be essential if MFs want to compete with these innovative insurance offerings. For instance, UTI’s plan to sell products through the postal channel targeting the retired population is a move in that direction. No doubt, the recent turmoil in stock markets has shaken investor confidence, and investors are apprehensive about investing in equity or instruments linked to equity but then niche products linked to infrastructure and real estate funds providing superior returns are likely to appeal to urban investors. Similarly, new products like daily savings plans are likely to become popular among the rural micro-saving segment.

As per Waqar Naqvi, CEO, Taurus Mutual Fund, “Owing to the change in regulations, we may soon see slight changes in the way [AMC] business happens today.” It will actually be distribution that will continue to hold a lot of value for the AMCs in 2010. Most importantly, with banks, independent financial advisors and national distributors all playing their roles, AMCs have to be very careful in choosing their distribution partners. Because those partners will actually be the vehicles riding whom the AMCs can penetrate deeper into the retail segment.



IT’S A TEAM!

While aggregate global MF proceeds are still below normal levels, inflows accelerated through 2009, creating a solid foundation for 2010. As per ICI, MF assets worldwide increased 12% to $20.34 trillion as of June 2009. Net cash flow to all funds was $81 billion in Q2 ‘09, up from $47 billion in Q1. Even net inflows to long-term funds were $293 billion in Q2, after experiencing a cumulative outflow of $607 billion over the prior three quarters. “After a strong market revival last year, fund managers are optimistic about the prospects of 2010,” says Annabel Brodie-Smith, Communications Director, Association of Investment Companies. Now that’s what you call a smart recovery! 

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Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri 
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Can he upset The Japanese?

Volkswagen has Renewed the term of its CEO, and all Eyes are on The Company as it Seeks to do to Toyota what Toyota did to GM by 2018. Can Winterkorn Indeed win his Most Coveted Prize?

2010 was surely one of the most relieving years for many companies who were browbeaten by recessionary winds over the past few years; and the largest German auto major Volkswagen is no exception. In fact, the company made all sorts of noises as the calendar year touched the end. For the less informed, even after the company had sold more than seven million vehicles for the first time in its history in a calendar year, the spotlight was on the term renewal of its CEO Martin Winterkorn. The board wholeheartedly voted in favour of extending Winterkorn’s term for another five years for its own set of reasons. Needless to mention, completing the merger with sports carmaker Porsche will be the second most important agenda of his renewed term. Second, because the first one is to displace Toyota as the world’s #1 auto major by 2018 in profitability and unit sales. Notably, the CEO now has the benefit of job security through 2016 for a term that would have expired by the end of 2011. As he is the architect of Volkswagen’s so-called Strategy 2018, the board feels that it makes a lot of logical sense if he captains the ship to that harbour. But is he indeed good enough to run the course?

Before taking control of the reins at Volkswagen AG in 2007, Winterkorn was the Chairman of the Board of Management of Audi and Porsche Automobile Holding SE. The last few years have been nothing but dynamic for this German engineer. Still, even critics accept that the appointment of the new global design chief (Walter de’Silva) is one of the most important decisions he has taken so far. For the uninitiated, de’Silva had previously overseen design at Audi, where he conceptualised the current R8 sports car and A6 sedan. And considering that Toyota has been dealing with an ageing product line-up, Volkswagen’s bet on design may prove to be a gold mine in the years to come. Even the CEO of Toyota Motor Corporation, Akio Toyoda, recently admitted at the North American International Auto Show in Detroit that the company will now be looking at making its cars look better.

Moving towards its goal to become the world’s largest auto major, Volkswagen will be doubling its capacity in China to three million units a year with two new plants. Moreover, the company will also be opening another plant in Tennessee to increase both sales and margins in North America. Even if Volkswagen is able to overtake Toyota in unit sales, profitability still remains one of the biggest challenges. While Volkswagen has been operating with an average net profit margin of 2.42% over the past five years, against the industry average of 3.46%, Toyota, on the other hand, has a net profit margin of 3.61% that beats the industry average. “Volkswagen is now trying to reduce costs and increase profit by removing many of its premium traits and also by building a US plant. They are doing this to increase volume but it could backfire because many US buyers won’t want to buy a Volkswagen if it doesn’t feel like a more up-scale option compared to Honda or Toyota,” said Karl Brauer, senior analyst, Edmunds. He also adds that it was in fact the drop in perceived quality for the Japanese automakers that has opened up opportunities for Volkswagen. A compromise on that front would not be a very good idea.

Read more.....

Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri 
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles. 

IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting