Poverty Reduction and Creation- A new approach

Shariff and Krishna have pointed a new approach to look at poverty reduction measures through a matrix. http://economictimes.indiatimes.com/opinion/comments-analysis/Poverty-reduction-and-creation/articleshow/5496832.cms

The authors argue that poverty is a measure of escape rate (people moving out of poverty) and descent rate (people getting into poverty). At any time both factors play a role and a higher value of descent or escape determines the net rate. The authors then define a 3 by 3 matrix to display how various states rank per the study they conducted. 


The authors also argue that instead of a national level, uniformly applicable policy of poverty eradication, a more state specific policies with respect to escape and descent rate would be useful.  

Example of using web 2.0 for Marketing

Good example of how you can use web 2.0 to your advantage! ClearContext (http://www.clearcontext.com/jan2010/) has launched a new product and is using viral marketing to get the word around. See the screenshot below- 

Analyzing Bharti's acquisition of Warid' Telecom

Bharti Telecom recently acquired a 70% stake in Bangladesh' Warid Telecom. This post of mine tries to dissect the acquisition and see how the financials make up. The post also throws other strategic factors which make up for this acquisition. 

Please note that I had limited time finding out the answers and I do not have access to any paid subscription or reports  which could have thrown a more accurate results and analysis. 

Without much ado, let us start. 

1. Market Players- 
Bangladesh market is comprised of 6 big players with top 3 accounting for 88% of the market. Almost all these companies have some foreign tie up to help them out with technology and funds. The following table shows the players and their subscriber base. (Data from Bangladesh Regulatory Authority) 

From the above table, the percentage market share of Warid' Telecom appears pretty less. Now, lets add another data.

2. Average Growth
If we track when each of these mobile operators commenced their operations and combine that with number of subscribers, we should get following- 

As can be seen, the top players had a first-mover advantage but if we track the average additions per month, Warid comes second to Grameen. This shows the potential that Warid has in terms of growth rate.  

3. Betting on Bangladesh
This is interesting, as following table would show -  Bangladesh market is under-penetrated and is bound to increase going forward. If it reaches the current level of mobile penetration for India (46%) in next 4 years, it would open up 23 mn more subscribers and at 20% market share for Warid, this should be 4.6 mn subscribers.


4. Calculating whether it makes sense for Bharti
Putting down assumptions as stated below, we arrive at NPV for this aquisition-

As can be seen, since this is positive NPV, so it is right decission for Bharti. 

Most of the M&A analysis is about getting the assumptions right. Would love to hear from readers on the assumptions made.

Besides this there are multiple synergy factors which have not been taken into account in the analysis above-
1. Bangladesh' mobile market is similar to Indian market in terms of customer preference, demography etc. It would be relatively easier for an Indian company like Bharti to make a growth plan similar to the one they charted for India in Bangladesh.
2. Singtel has stake in both Bharti and Bangladesh Telecom. So there should be some synergy there as well.
3. Bharti would be able to leverage its existing set of suppliers viz Nokia, Siemens for better deals compared to existing players in Bangladesh.

Inspiring Ideas and Creativity

Wonderful video of how imagination can be put to use to create cheap working systems. Couple of ideas which would change the world going forward.
--> Pranav Mistry and Sixth Sense Technology

Using Social Marketing- Ford Example

The following blog article shows how Ford used an innovative mechanism to market its new car Fiesta in US market. -- HBR: How Ford Got Social Marketing Right

Good Example of how web 2.0 and social media can be used to bring about product awareness. Involving customers in product marketing and using their feedback is all part of what web 2.0 has been put to use. Though I am not very sure if the sales numbers as quoted in the article are directly attributable to this marketing campaign, but I believe such innovative methods are the way to selling going forward.

Entrepreneurship and Management Science

While reading "Is Entrepreneurship a Management Science?" on HBR, I came across this line --

It requires the coordination of many different people, working in concert to answer them. In other words, it requires management.

The author is right in a way that entrepreneurship is not different from other streams in requiring management of different people and intensive coordination. But to me, clearing that unknown fog of what customers ultimately will want and accept is more of an art than science.
 
Had this been a science, we could have very well invented a formula for success and there would have been no failures. End of day it is about how convinced an entrepreneur is of his idea irrespective of what market surveys or quantitative analysis might suggest.

Carbon Credit- Part 1 (Basics)

With this series on 'Carbon Credit', I am going to explore the interesting world of monetizing the carbon business. In 3 part series, I should be able to cover-
1. Basic of carbon credit- terms and terminologies
2. The Indian scene and MCX carbon trading
3. Future of carbon business and trends

Today, I would blog about part 1-
Basic of carbon credit- terms and terminologies
1. What is Carbon Credit?
In simple words, one carbon credit gives the owner the right to emit one tonne of carbon dioxide.

2. The background: Kyoto Protocol
The Kyoto Protocol set quotas on the amount of greenhouse gases countries can produce. Countries, in turn, set quotas on the emissions of businesses. Businesses that are over their quotas must buy carbon credits for their excess emissions, while businesses that are below their quotas can sell their remaining credits. Under the Kyoto Protocol, between 2008 and 2012, developed countries have to reduce emissions of greenhouse gases to an average of 5.2 per cent below the 1990 level.

3. Mechanisms for reduction
The Kyoto Protocol provides for three mechanisms that enable developed countries with quantified emission limitation and reduction commitments to acquire greenhouse gas reduction credits. These mechanisms are Joint Implementation (JI), Clean Development Mechanism (CDM) and International Emission Trading (IET).
•    Under JI, a developed country with relatively high costs of domestic greenhouse reduction would set up a project in another developed country that has a relatively low cost.
•    Under Clean Development Mechanism (CDM), a developed country can take up a greenhouse gas reduction project activity in a developing country where the cost of greenhouse gas reduction project activities is usually much lower. The developed country would be given credits for meeting its emission reduction targets, while the developing country would receive the capital and clean technology to implement the project. 
•    Under IET, countries can trade in the international carbon credit market.

4. Units of Exchange
•    Certified Emission Reduction (CER)- are climate credits (or carbon credits) issued by the Clean Development Mechanism (CDM) Executive Board for emission reductions achieved by CDM projects and verified by a DOE under the rules of the Kyoto Protocol.
•    Emission Reduction Unit (ERU)- refers to the reduction of greenhouse gases, particularly under Joint Implementation (JI), where it represents one tonne of CO2 equivalent reduced.
•    Verified Emission Reduction (VER)- projects/activities are managed according to the quality standards set out for CDM/JI projects but the certificates provided are not registered by the governments of the host countries or the Executive Board of the UNO. As such, high quality VERs can be acquired at lower costs for the same project quality. However, at present VERs can not be used in the mandatory market.

5. Is it all about making developing countries air bad?
No, the polluters cannot buy 100 per cent of the carbon credits they are required to reduce. Say, out of 100 per cent they have to induce 75 per cent locally by various means in their own country. They can buy only 25 per cent of carbon credits from developing countries.

6. Exchanges
The company/entity can create CERs and sell them through exchanges, like Chicago Climate Exchange (CCX) and European Climate Exchange (ECX). As on October 23, 2007, the CERs were trading between USD 2.00-2.10 on the Chicago Climate Exchange. A few years back, the rates were hovering between USD 4.00-6.00 per CER.

What do I plan to write?

Let me welcome myself to this blog !
I am an enthusiast in following areas and my blog would cover the following-

• IT Strategy
• Business Analysis
• Corporate Strategy
• Business Development
• Business Models
• Finance - M&A, Derivatives
• Latest in IT
• Indian Politics
• Other random thoughts !