Friday, April 12, 2013

Caught in The Wrong Job?

Merck Today stands at a Juncture where it Requires a Major Overhaul in its Strategic Outlook. Does Kenneth C. Frazier (its current CEO) have what it takes to Guide a Pharma Giant in times of Patent Expiry?

What if you happen to be the recently appointed CEO of a pharma giant in an era of patent expiry & dwindling healthcare policies? And what if, the blockbusters, which generate a quarter of your company’s revenues, are unfortunately poised to go off patent in the next two years? That’s exactly what Kenneth C. Frazier has been struggling since he took over as President & CEO of Merck & Co. from Richard T. Clark on January 1, 2011.

Although facing increased competition, patent losses, and a pipeline of late-stage drugs with poor chances of approval over the last few years, Merck had greatly improved its long-term outlook by acquiring Schering-Plough (for $49 billion in March 2009), but then the challenges remain for Frazier. Raison d’être: Still reeling from the patent loss on its hypertension drugs Cozaar & Hyzaar in early 2010, Merck faces the loss of its next top drug Singulair (for respiratory ailments) in terms of revenue generation in 2012. Considering Singulair represents over 10% of the combined sales of Merck & Schering, the blow will certainly make a big dent on the drugmaker’s topline. Further, Merck faces some remaining legal risk with Vioxx (its popular painkiller). While the majority of plaintiffs participated in the $4.85 billion settlement (in 2008), a few holdouts could ring up additional settlements and significantly hurt Merck’s net profit, which has already witnessed a significant fall, from $12.89 billion in 2009 to $861 million in 2010 (a pathetic 93% drop).

No doubt, indicating a shift in strategy, Frazier, on February 3, 2011, had announced an investment of $8.5 billion in R&D for 2011, but considering that Merck’s efforts to develop a reliable late-stage pipeline have yielded questionable results during the last couple of years, is it really a good bet? “Not really,” feel several critics. By doing so, Frazier has not only compromised the company’s EPS forecast for 2013, but has also offended the Wall Street, which responded back by cutting Merck’s stock price by 2-5% (from the date of announcement). Interestingly, around the same time, Merck’s competitor Pfizer had slashed its R&D budget to $6.5-7 billion from the earlier $8-8.5 billion. And investors awarded the move as the drug giant’s stock price increased by 5-7%.

Such market reaction can perhaps be decoded by expounding upon how this business is evolving. In 2010, the top 10 pharma outfits shelled out a total of $67.41 billion on R&D. In fact, according to statistics compiled by the Tufts Centre for the Study of Drug Development, spending to develop new drugs has been constantly growing over the years. But, what the data also reveals is that after the mid 1990s, new drug approvals have been falling steadily (only 16% win regulatory approval) and research pending has almost doubled in the last one year. This certainly explains the reason for the fall in Merk’s stock price.

If the issue still isn’t clear, then a little flashback might settle the remaining dust. In January 2011, Merck shutdown a study on Vorapaxar and took a $1.7 billion write-down on the drug (a blood thinner which was expected to bring in sales of upto $5 billion). Later in March, it shelved another blood thinner because competitors were way ahead of the development cycle. Further, the 8,000 patient trial of a Staph vaccine was also suspended soon after. All this clearly indicates that Frazier should now be rethinking his strategy. Even if he plans to invest heavily in R&D, it should be focused on a few drugs & executed in a better manner – if not it will continue to fail.
 

Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles
 
Posted by IIPM : Global B School in India at 2:10 PM
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Thursday, April 4, 2013

Bite This Chile, Miguel!

Chile’s Economy Grows 9.8% in Q1 2011, the most in 15 years, as The Nation rebuilds after a quake. So far, so good. However, The Government now needs to make an extra effort in fiscal adjustment in order to deactivate the risk of destabilising Imbalances that are threatening The Chilean Economy.

Chile’s economy expanded at the fastest pace in 15 years in the first quarter of 2011 (America’s fifth-largest economy expanded 9.8% in the first quarter, after an increase of 5.8% in the previous quarter and only 1.7% one year before) as consumer spending jumped and manufacturing recovered from the biggest earthquake in 50 years. Sounds astounding for an economy that had contracted 2% in March 2010 after the devastating earthquake (on February 27, 2010) made an estimated $30 billion dent in the $164 billion economy. But there lies a catch!

Although the economy is re-accelerating this year (mainly boosted by expansionary policies to support post-earthquake reconstruction), growth has now reached an overheating speed. As per Banco Central de Chile (Chile’s central bank), the economy expanded 5.2% last year, the fastest pace in five years, and could expand 5.5% to 6.5% in 2011. Even, according to projections made (in January 2011) by the Economic Commission for Latin America and the Caribbean (CEPAL), and the World Bank, Chile is one of the three countries (the other two countries are Peru and Colombia) in Latin America that will lead in growth in the region for 2011. This certainly indicates that the country’s policymakers are bound to a have a tough time going forward, reining in the uncontrolled Chilean growth.

It’s not that the policymakers are not aware of the situation. In fact, to neutralise the overheating economy, Chile’s central bank has increased interest rates in 11 of its past 12 monthly meetings, from a record low of 0.5% in May 2010 to 5.25% at present, but all in vain. What’s more? Chile’s economy is firing on all cylinders. The economic activity in this Latin American nation continues to advance faster than potential, keeping the economy in overheating territory. In fact, in May 2011, the index of economic activity reported an annual growth of 7.3%, after an increase of 6.3% in April 2011, advancing at an average rate of 6.8% in the first two months of Q2, 2011.

Further, excess demand, the upward inflationary trend, and increasing imports are some prominent signs that indicate Chile is overheating. For instance, excess demand in Chile is hovering at about 16% of GDP at present, after reaching 20% in December 2010. This clearly shows that strong domestic demand is not fully satisfied by national production, and as such is finding accommodation in increased imports and higher consumer prices. Although inflation (at 3.44% in June 2011) remains just above the 3% target at present, an increasing trend in headline and core components is clearly visible (annual inflation reached 3.44% in June 2011 from 3.26% in May 2011 and 3.21% in April 2011 respectively), which makes the situation more worrisome. In fact, the relatively controlled inflation is mainly the result of excess demand mostly accommodated in imports rather than in prices, as well as domestic prices benefiting from lower international prices. Also driving strong demand for imports (which have grown by 36.8%, 26% and 20.6% in Q3 2010, Q4 2010 and Q1 2011 respectively) is a strong peso that has appreciated 8% against the US dollar since the beginning of the year, and robust private consumption (private consumption has grown 12.6% in Q1 2011), which is the result of credit growth and low unemployment (unemployment rate in Chile has come down from 8.8% in June 2010 to 7.3% in July 2011).


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles
Posted by IIPM : Global B School in India at 12:40 PM
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Monday, April 1, 2013

B&E This Fortnight

INTERNATIONAL
BUSINESS, ECONOMY & FINANCE
Osama Dead Bringing the 10 years worldwide efforts to hunt down Osama Bin Laden, the infamous leader of al-Qaeda, to an end, the US government in a covert military operation gunned down the most wanted fugitive on the planet. Osama’s hideout was a conspicuous, three-storied structure with high boundary walls in the Pakistani city of Abbottabad, just 61 Kms north of Islamabad. In an operation that according to the US officials was unknown to the Pakistan government, the Navy SEALS of the US military shot down Bin Laden after some resistance from him. Reportedly, Osama was hiding at the Abbottabad mansion for the last five years and the Pakistani army was unaware of his whereabouts even though Pakistan’s top military academy is within 800 yards. As the rest of the world celebrated the death of the father of terrorism, Islamic fundamental groups like the Hamas, Hezbollah and al-Tufayli have been mourning and honouring him in the Middle East where the reaction to his death has mostly been ambivalent and even indifferent. To prevent his dead body from becoming an object of deification by his supporters, he was buried in the sea. But his presence in Pakistan has obviously led to the speculation about possible connivance by Pakistani army officials regarding Bin Laden’s hideout all these years.

GM posts Q1 Profits
General Motors reported Q1 profits, which more than tripled from a year ago to $3.15 billion due to strong demand for fuel efficient vehicles. The results are all the more striking considering that GM had less than two years ago declared bankruptcy and had to be bailed out by the US federal government. This is the fifth consecutive profitable quarter for GM, which goes to show the impressive turnaround managed by the Detroit-based automaker. But, despite the company’s revenue rising to $36.2 billion from $31.2 billion last year, its shares have stalled around the $33 level due to investors’ concerns over rising gas prices and higher costs for launching and selling new cars. The company has also faced recent glitches over steering and transmission problems across its popular Chevrolet Cruze model and had to recall more than 154,000 Chevrolet Cruze cars from the huge North American market.

Sony CEO’s apology
Sony Chief Executive Officer Howard Stringer apologised to users of its PlayStation Network and Qriocity as hackers had compromised the data of more than 100 million accounts used for accessing games and music over the Internet. In a letter posted on the PlayStation Blog, Stringer also said Sony has put in place a $1 million identity theft insurance policy to cover affected users. Stringer’s comments come after he faced criticism of his leadership since Sony revealed hackers had compromised the data of more than 100 million accounts.


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
Posted by IIPM : Global B School in India at 4:27 PM
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Thursday, March 28, 2013

A No-Fly Zone for Libya

John F. Kerry, US Senator and Chairman, Senate Foreign Relations Committee, takes a view on The Implications of a no-fly zone Over Libya in The Prevailing Situation in The Country

Leaders around the world are vigorously debating the advisability of establishing a no-fly zone to stop the violence unfolding in Libya. Some cite Bosnia, where NATO took too long to protect civilian populations in the mid-1990’s, as a reason to act. Others remember Rwanda, where President Bill Clinton later expressed regret for not acting to save innocent lives. But the stakes in Libya today are more appropriately underscored by the tragedy in southern Iraq in the waning days of the Persian Gulf War twenty years ago.

As coalition forces were routing the Iraqi army in February 1991, President George H. W. Bush encouraged the Iraqi people to “take matters into their hands to force Saddam Hussein, the Dictator, to step aside.” When Iraqi Shiites, Kurds, and Marsh Arabs rebelled against Hussein, they believed that American forces would protect them against their brutal dictator’s superior firepower.

Instead, when Iraqi attacked helicopters and elite troops began butchering their own people, coalition forces were ordered to stand down. The world watched as thousands of Iraqis were slaughtered.

The situation in Libya today is not identical. Inspired by events in Tunisia and Egypt, the Libyan people rose up spontaneously against four decades of repression by Col. Muammar el-Qaddafi. Still, the specter that haunts me is the same – ordinary people facing off against an autocrat’s airpower and well-armed soldiers, counting on the free world to protect them against massacre after we have applauded and bolstered their bravery with our words.

So far, Qaddafi’s forces have relied on airpower selectively. But Qaddafi is shrewd. My fear is that he is either choosing to bleed the opposition to death, rather than invite global action with a broad massacre, or waiting for the world to prove itself unwilling to act – at which point he might well begin killing civilians in large numbers.

We cannot wait for that to happen. We need to take concrete steps now so that we are prepared to implement a no-fly zone immediately if Qaddafi starts using his airpower to kill large numbers of civilians. Diplomacy is urgently needed to build broad support for a no-fly zone.

The most important imprimatur should come madman from the United Nations (UN), where debate should begin immediately over a resolution authorising a no-fly zone. China and Russia have expressed reservations. If the Security Council fails to authorise action, those of us determined to protect Libyan civilians will face a more difficult choice should the violence escalate.

So, our diplomatic efforts must extend beyond the UN. The support of NATO and the African Union are important. To avoid the perception of NATO or the US attacking another Muslim country, the backing of the Arab world is also needed.


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

Posted by IIPM : Global B School in India at 11:18 AM
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Tuesday, March 12, 2013

Seven Sins by Nielsen in India

The Agency was Supposed to be among the Top Recalled Names in the Indian MR Landscape. Then Why is it being given Such a Unanimous Thumbs Down by Clients?

Where did they exactly go wrong? Well, there is no single answer to that; rather there are seven. Nielsen India has no problems in terms of recall, where it is among the top 3. Even in terms of quality of analysis, network and tools and techniques used, the research agency came out tops, being ranked at 4, 2 and 3 respectively. The trouble comes in the other factors that are so crucial for sustainability where Nielsen got a shocking thumbs down in terms of ranks, which are as follows – reliability and authenticity of data (14), cost effectiveness (15), time duration (19), transparency (14), favouritism (14), impact (17) and associations (14). The net result is that Nielsen gets the horribly unlucky rank of 13.

When you look closely at the parameters, one undercurrent that’s clearly visible is the lack of confidence in the research agency. This undercurrent was expected due to the flak that some of Nielsen’s surveys in the past have generated, but what was surprising was the degree. It would still be fresh in the minds of the industry how FMCG giants Dabur and Perfetti Van Melle India had taken up the cudgels against Nielsen for underreporting their sales numbers last year. It was also reported that they terminated the services of the agency. Dabur officials confirmed their displeasure when contacted by 4Ps B&M. In fact, another official from a research agency we contacted revealed that the list of clients exiting Nielsen’s services is not restricted to these two companies.


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
Posted by IIPM : Global B School in India at 4:58 PM
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Wednesday, March 6, 2013

The strategies that have worked for them in India

Gaurang Pandya, the newly appointed MD of Carrier India, reveals to B&E the strategies that have worked for them in India

B&E: But doesn’t this at times act as a hindrance to the company’s growth?

GP: You can talk about long term, short term benefits and hindrances. But a corporation like Carrier that has been in the business for almost 100 years, believes in sustainable growth. Therefore, our practices are governed by policies which are sustainable in the long run.

B&E: Which segment contributes more to your topline in India – residential or commercial?

GP: Actually both are almost at parity with each other. Further we have got the entire product range which gives us an edge over the competition. From packaged units to ducted units, from small chillers to huge chillers with a capacity of 2,500 tonnes, we can boast of almost anything when it comes to ACs. This gives us the power to cater to anyone.

B&E: Carrier has been betting big when it comes to green initiatives. What is the biggest hurdle that you come across in this area?

GP: No doubt there is a lot of work going on in this field, but the problem is that we are not the only manufacturer involved in such initiatives. There are others too that have been participating in such drives. Moreover, there is a huge cost involved in it. But we believe that if you move in the right direction then people will automatically follow you and that’s the reason we have been working closely with Bureau of Energy Efficiency. In fact, it’s been a healthy relationship with the government where we keep them pushing on various issues.


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



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

Posted by IIPM : Global B School in India at 12:02 PM
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Monday, March 4, 2013

It’s time to take nuclear disarmament seriously

Else, the whole world may soon succumb to some irreparable damage

People sometimes forget that the boy who cried wolf ended up being eaten. True, nobody has been killed by a nuclear weapon since the attacks on Hiroshima and Nagasaki, 65 years ago this month. And, with Cold War tensions long past, it is all too easy for policymakers and publics to resist the doomsayers, be complacent about the threats that these weapons continue to pose, and to regard attempts to eliminate them, or contain their spread, as well-meaning but futile.

But the truth is that it is sheer dumb luck – not statesmanship, good professional management, or anything inherently stable about the world’s nuclear weapon systems – that has let us survive so long without catastrophe. With 23,000 nuclear weapons (equivalent to 150,000 Hiroshimas) still in existence, more than 7,000 of them actively deployed, and more than 2,000 still on dangerously high launch-on-warning alert, we cannot assume that our luck will hold indefinitely.

We know now – with multiple revelations about human error and system breakdown on both the American and Russian sides during the Cold War years and since – that even the most sophisticated command and control systems are not foolproof. We know that some of the newer nuclear-armed states start with systems much less sophisticated than these. And we know that, across the spectrum of sophistication, the risk of destabilising cyber attack beating cyber defense is getting ever higher. So it should be obvious that maintaining the status quo is intolerable. Moreover, there is the real risk of proliferation, especially in the Middle East, multiplying the dangers that nuclear weapons will be used by accident or miscalculation as well as design.

There is also the sometimes exaggerated but unquestionably non-negligible risk of non-state terrorist actors getting their hands on insufficiently secured weapons or fissile material and exploding a bomb in a major population center. And there is the disconcerting prospect that new civil nuclear-energy players will insist on building uranium-enrichment or plutonium-reprocessing plants of their own, rightly described as “bomb starter kits.”


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.

Posted by IIPM : Global B School in India at 1:08 PM
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Saturday, February 9, 2013

Back to the drawing boards

DTH players were on a dream flight in India so far, but the delay in rollout of Phase II of CAS has dampened expectations. Vareen Gadhoke Ray & Surbhi Chawla discuss the upcoming trends and how DTH players can make them count

When Direct-to-Home (DTH) first came along, it brought the promise of streamlining the highly fragmented pay-TV market in the country, which had hitherto been the stranglehold of local cable operators (LCOs). All that the players really had to do was conquer, which they continue to do, through mud-slinging, comparative advertising and even some cheap ground level tactics. DTH was a very welcome platform for broadcasters and media houses, which were fighting these LCOs on the grounds that they were not declaring their total subscriber base. The launch of the first phase of Conditional Access System (CAS) brought more transparency, thereby aiding higher yield in subscription revenues. But the launch of the second phase of DTH, which was to make CAS mandatory in more areas of the country, has been delayed quite unexpectedly. This has stymied their dream run, and slowed down their onward march quite considerably. In such a scenario, what does the future portend for these players in India?

Direct to Hell or Heaven

The future of pay-TV in India is being driven by media owners and distributors, which are expanding market share with an eye on profits, rather than at the expense of profits. The major concern for this sector was that at a very nascent stage, seven major players (Dish TV, Tata Sky, BIG TV, Airtel Digital, Sun Direct, DD Direct and the newly launched Videocon d2h) along with organised CAS operators (like Hathaway and Sify) were slugging it out to get the maximum share of this growing pie. As a result, the first phase of growth saw the basic DTH box being offered at a subsidy, and at times, even virtually free of cost to catch hold of the early adopters and get them to experience this new wave of technology. The plus point of this can be seen from the fact that the Indian pay-TV sector generated sales to the tune of $6.5 billion for financial year ending March 2010 [Media Partners Asia (MPA)].

Thanks to the continously intensifying tussle among the players, the sector is facing the same fate as the telecom operators. DTH players too are unable to garner as much in ARPUs. The tempering of their enthusiasm due to delay in Phase 2 rollout make it worse. EBITDA profits for the sector reached $800 million for the financial year ending March 2010, implying a modest profit margin of around 13%.


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.
Posted by IIPM : Global B School in India at 10:02 AM
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Friday, February 8, 2013

Satisfied with the performance of Sushma Swaraj?

The current Leader of the Opposition in the Lok Sabha has failed to take the Congress to task in the Lower House. Factionalism within the party as well as a lack of charisma on part of the tallest leaders have made Swaraj's task harder. She will need to make a deep impression if the BJP's image and future poll prospects are to brighten.


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.
Posted by IIPM : Global B School in India at 4:30 PM
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Wednesday, February 6, 2013

Has Barack Obama shot himself?

When Obama took office in 2009, the projected US 10-year deficits stood at $8 trillion. In one year, the figure’s jumped to $16.2 trillion. Is Obama on a fatal track?

Is Uncle Sam attempting a fiscal suicide? Or is US pushing itself to redefine the very levels of sanity that a budget can present? Far-fetched thoughts, but quite possible too! These are precisely the questions that several economists are asking today, keeping in mind the federal budget for FY2011 announced on February 1, 2010, by the US President Barack Obama. So what makes this budgetary document read more like a financial exotica menu? One element, and one only – it foresees colossal budgetary deficits till 2020! What more? The pandemic starts this very fiscal, with budgetary estimates pegging the federal deficit for FY2010 at a mind boggling $1.6 trillion, adding to Uncle Sam’s already gigantic heap of debts. This figure of $1.6 trillion is way above the ‘combined’ budgets of advanced European countries like Switzerland, Belgium & Norway put together. And as far as US is concerned, the danger is that this shortfall represents almost 10.6% of its total annual output – the highest levels the nation has reached since World War II.

In a communiqué to B&E, sources at the US Department of the Treasury accept that, “Deficit trends of this level are not sustainable. Beginning to correct them will require cutting deficits enough to stabilise the debt-to-GDP ratio at a manageable level so it is no longer rising.” Several economists have already raised the danger flag of unsustainable deficits. They feel that US can only sustain a deficit of 3% of total output if it is to remain healthy. However, considering the proposed budgetary allocations made by Obama, the projected deficits don’t seem to fall any lower than 3.6% over the next 10 years! This grim forecast certainly adds to the challenges faced by Obama, who is not only emphasising a message of fiscal discipline, but is also seeking stimulus measures to boost the struggling economy in the short term. In fact, on the day President Obama took charge, the budget deficit (for 2009) stood at $1.3 trillion (9.2% of GDP) and the projected deficits for the following 10 years were $8 trillion. Today, the total deficit for the next decade (till 2020) stands at $16.2 trillion – 100% more than the figure forecasted last year. Can one man achieve so much in so short a time? As per experts, the Bush Administration’s decision to enact large tax cuts and a prescription drug bill will add up to $5.8 trillion to the total deficit over the next 10 years. Then there is the administration’s spending on safety net programmes, including the controversial TARP, which will increase deficit figures by about $2.4 trillion by 2020.


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.
Posted by IIPM : Global B School in India at 12:12 PM
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