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Showing posts from July, 2009

Brands deserve the CFO's attention

Over the past twenty years, it has become increasingly evident that intangibles have monetary value just as other physical assets do. Often businesses such as consulting organisations, travel firms and internet based companies do not carry large amounts of fixed assets such as land, building, plant and machinery on their balance sheets. Apart from a few computers and office furniture, their main assets are people, knowledge and delivery mechanisms. These can frequently be replicated at prices far lower than their acquisition costs and yet their valuations are usually multiples of the total worth of fixed assets. The differential comprises the value of the organisation’s brand.

This raises the question, what really constitutes monetary value of something that is essentially intangible? A brand is a covenant with a customer, a promise that a product or service will offer or conform to a set of expectations that have been created over a period of time. Without such a commitment, it is n…

Changing Values

A few years ago I asked a friend, then a Partner in a global consulting company, as to the criteria they adopted in selecting candidates to join them. Amongst other things, he explained, they looked keenly for strong middle-class values. I have often wondered what these values are and how they are acquired. Are they formed from experiences gained in everyday life or are they driven into our thinking by our parents and teachers? Integrity, commitment, hard work, dedication, perhaps even resilience – qualities embedded in individuals by virtue of their upbringing and family background. Interestingly, many leaders of several corporations in India born in the late fifties, sixties and early seventies, would slot seamlessly into having these value systems, supported by fine education and encouraging parents. But things now seem to be changing. Increased wealth and pampering parents, determined to provide to their children what they themselves may have been denied. Kids these days have a lo…

The Finance Budget - a bit early to rank

The presentation of the annual Budget by the Finance Minister, Pranab Mukherjee, seemed lacking in passion and enthusiasm. Contrary to some expectations, it refrained from making bold announcements on radical reforms or a road map, in the delivered speech, on containing the fiscal deficit. The markets were horrified by the fact that government borrowings would exceed Rs 400,000 crores with fears of crowding out private investors and pushing interest rates upwards. The disinvestment programme revealed the raising of a measly Rs 1,200 crores against Rs 25,000 crores as suggested in the Economic Survey. The budget fell short on clarity in addressing the oil subsidy mechanism. The markets construed this as lacking in conviction and almost immediately came under a severe bear hammering.

The fact is, industry, investors and the markets simply read too much into the budgeting exercise which is never intended to be the sole platform for announcing reform measures. Its primary purpose is to pre…