NO FRILLS DOESN'T MEAN COMPROMISING ON BRANDS

Low Cost Airlines Shouldn't Compromise On Brand Image To Trim Costs

By Nitin Kalani

Mumbai, India

Recently I read an article on what low-cost airlines are doing to trim costs. What I read was highly astonishing. Can you imagine you travelling by a low-cost airline and being charged for using the washrooms while on the flight or you being charged extra for being overweight? Doesn't that sound disgusting to you?

This is not a far reality. Hit by losses y-o-y, no frills airlines are resorting to such tactics to bring their costs down or we would rather say to expand more sources  of  revenues.

So, in other words we can say that the objective of this strategy can be two-fold. 

1. Trimming costs

2. Revenue generation

In any case the ultimate thing that will suffer would be the brand image. They should look at other cost centres where they can control the costs. For isntance, they can control their ad spends by looking at emerging media platforms in lieu of traditional ones. This will help them to save considerable costs. Any attempt to save costs at touchpoints like customer service or customer experience can be a big blow to brand image.

If that happens their entire branding exercise would be futile.

Now that was cost cutting, lets now tlak about revenue generation. Low-cost airlines balance sheets have always shown red lines due to surging fuel prices and undercapacity. They can't alone rely on ticket sales to run the show. They can tap more sources of revenues like offering on-board and offboard value added services. Media Space-selling on the flights  can be a great source of revenues.

What does global recession means for the Indian outsourcing industry?

By Nitin Kalani

Mumbai, India
The global meltdown has affected the health of many sectors and outsourcing is no exception. Tough the BPOs offering non-technical services are still hiring in large numbers, the average salary offer has gone down. The IT outsourcing is the place where the heat is being felt with companies triming discretionary IT spends.

The IT industry is forced to go slow on their hiring, infact some of them have axed their headcount. However, the IT infrasrtucture management and maintainance services have remain unaffected. That's because it is a compulsory cost centre. It can't be avoided.

Do you think these happy days will last for long? Not really. High labour attrition, global recession, poor infrastructure and lack of data protection laws could derail India's booming outsourcing industry. However, lets look at this from recession point of view.

The state of the economy in India is far better than other global economies. The US and UK are the major outsourcing countries. However, there's major unemployment in these countries. There could be a major backlash in these countries. Its very difficult to pass a law to stop outsourcing. However, the governments in these countries might resort to fiscal policies discouraging outsourcing and thereby creating an environment for companies to generate opportunities for localites. Atleast thats what has been on the agenda of the newly elected Barack Obama. So, inspite of the cost and other advantages, we might see jobs being diverted back to respective countries.

If that happens there could be major unempoyment in India as IT and ITES are the major employers after real estate and retail. The GDP may fall due to fall in purchasing power. It would be a grave situation especially if the meltdown continues. Lets hope that doesn't happen. Lets have a wait and watch approach.

Real estate companies need to bring down prices to boost demand.

Nov 24. Mumbai

By Nitin Kalani

Real estate companies that are currently going through liquidity crisis owing to fall in demand, need to correct prices they offer. Most of them are slowing down their construction and expansion activities. While some have freezed their hiring, and others like Lodha group for instance have downsized thier manpower.

The blood bath in the real estate sector is now clearly getting reflected in the balance sheet of leading developers. The recent results of major real estate companies have revealed that bottomlines have indeed been hit badly. While DLF’s earnings in Q2 Financial Year 2009 came down by 4% as compared to the same quarter last year, Unitech’s earnings came down by 12% as compared to last time. Ditto is the case with other real estate companies such as Parsvnath, Ansals and Omaxe.

To boost demand, real estate companies are trying to lure buyers by offering fancy incentives like fully furnished homes, free car, buy one flat get one free etc. However, these tactics won't be of any help. Buyers are aware that real estate prices are artificially steep.

A quick correction in prices is the need of the hour. Buyers have put on hold their purchase plans as they are expecting the prices to come down by 40-50%. The recessionary climate further compounds the situation. Fear of umemployment, and due to lack of jobs in the market, the salaried class have resorted to freezing their discretionary spends adding fuel to fire.

Prices have started to come down and they are already down by 40% in some places. However a further correction is expected as the marginal price correction has failed to boost demand.

What can realty players do?

Many real players are changing their focus and business strategies. Even real estate major Unitech has changed its product portfolio and included more mid-income housing projects to push up sales. Infact, the property markets around the world, particularly Asian markets have been affected by slowing economic growth and unsettled capital markets.

What can government do?

Government needs to understand that various other sectors thrive on real estate like cement, steel, and other ancilliary industries. Real estate is the largest employer for skilled, semi-skilled and unskilled workers. The government should consider offering tax breaks to this industry. It can also offer stamp duty and registration. This will encourage demand and provide relief to cash-ridden real estate companies.

As far as real estate is concerned, the home loan rates need to be reduced. Also this sector should be treated as urban infrastructure on par with other sectors. Financing real estate liberally is also needed. The correction in repo rate and CRR by RBI is definitely a welcome move.

How to tackle the recessionary storm??

November 24, Mumbai
By Nitin Kalani

Recession is coming... make your own judgment, don't panic!
Do what is wise.The recession looks very eminent. It is really time to take pro active steps to avoid a painful time in the next two years which is how long the recession is expected to last.

Suggestions:

1. Don't take any loans; buy homes, properties with loans, or even cash. Keep as much cash as possible.

2. Pay off as much of personal loans, private loans, as debt collection will be hastened.

3. Sell any stocks you can even at lower prices.

4. Take money off from Trust Funds.

5. Don't believe in huge sales forecast from customers, be extremely prudent, lowest inventories, reduce liabilities.

6. Don't invest in new capital.

7. If you are selling homes/ properties/ cars, do it now, when you can get good prices, they are going to fall.

8. Don't invest in new business proposals.
9. Cancel holiday plans using credit cards.
10. Don't change jobs, as companies will retrench based on 'last in first out'.Stay cool, wait, and if you took all of the above actions and more, you probably will be better off then many. This is not a rumor.


Bear Stearns is the first of many banking and financial institutions that will start falling in the not too future. If Bear Stearns can fall, so can JP Morgan, Citibank, HSBC, and the whole world. If US economy falls, the rest will crumble.India and all those self economies will be the most protected, but not gullible.Europe may be a little stronger, but not China, another giant place!Malaysia will see significant impact.Be alert!!

nitinkalani@gmail.com
feedback.spicychutney@gmail.com