Will all the small shops in India simply disappear under the onslaught of Wal-Mart and the other giant merchants who are sure to follow? Will the Indian consumers abandon their small-shop owners for a broader selection of goods at lower prices?

These are some of the questions that Robert H. Bloom raises in The Inside Advantage: The strategy that unlocks the hidden growth in your business’ (www.tatamcgrawhill.com). Conceding that the answers to these questions may well emerge over time, Bloom is of the view that if what’s happened in developed nations around the globe is any indicator, many small Indian shops will perish, while still others will look deep inside their small business for an ‘inside advantage’ that they can use to survive and thrive.

“These more nimble and creative shop owners will discover their hidden potential, and they will turn their small size into a big customer benefit. They will identify an uncommon offering – a specialisation they can own.”

An example given in the book is of a publisher of financial data, who brings out a comprehensive annual survey describing subscribers’ views of financial industry trends in considerable detail. “The publisher will release the survey with great fanfare on the opening day of its most important industry convention in order to dominate the show’s news and press. This relevant, topical, and reliable data will celebrate the firm’s uncommon offering – its authoritative position in the financial publishing industry.”

The five hallmarks of a good persuasive strategy, as explained in the book, are: 1) It must be action-oriented, not just a vague promise or sincere commitment. 2) It must define the specific action right up front; the first word must always be an active verb. 3) It must be strategic, not tactical – it must state ‘what’ your product will actually do, not ‘how’ the product will do it. 4) It must be honest and achievable, not imagined and unaffordable. 5) It must be tightly integrated with your definition of the core customer and the reality of your uncommon offering.

For instance, a wealth management firm may define the ‘who’ as a prospective client with assets of $15+ million to invest plus an intense desire for special services and attention, Bloom explains. And the ‘what’ statement can be: ‘An expert financial advisor who delivers an unrivalled portfolio of customised services and exceptional investment results.’

Insights of value.

Limitations of financial analysis

Despite the significance of analysis and interpretation of financial statements, financial analysis suffers from limitations that analysts and investors should keep in view, cautions Paresh Shah in ‘Financial Management,’ second edition (www.biztantra.in). “Assets are disclosed in the balance sheet at historical cost which is different from current cost… Personal judgments also affect the figures of balance sheet,” he adds.

Among the limitations that Shah lists is the absence of universally accepted standard terminology, considering that accounting is not an exact science. “Depreciation is provided by different methods and interest is charged at varied rates. In this way, there are a lot of chances of manipulation. As a result, financial analysis proves to be defective.” To a great extent, however, this problem gets mitigated when Accounting Standards are adopted widely.

Another drawback, according to the author, is the ignoring of the qualitative aspects such as the skill, technical know-how, and the efficiency of employees and managers. He rues that financial statement analysis measures only the business performance, completely ignoring the human aspect.

The results disclosed by financial statements may be misleading if the price level changes are not taken into consideration, Shah notes. “The gross profit ratio may improve with the increase in prices, whereas actual efficiency may not improve. If prices of commodities differ, the ratios of two years will not be meaningful for comparison.”

He concludes by observing that financial analysis can at best spot the symptoms of inefficiency. “A final decision in this regard will require further investigation and thorough diagnosis.”

Starter material.


One of the chapters in ‘The House of Dimon’ by Patricia Crisafulli (www.wiley.com) is ‘The turnaround of Bank One,’ where you get to read about the huge challenge of waste disposal. “With $1.5 billion in expenses to be reduced at Bank One, Jamie Dimon was on a search-and-destroy mission when it came to wasteful spending. Gone were the pagers, cell phones, multiple subscriptions to the <i>Wall Street Journal</i>, and other perks. In aggregate, they added up, but more important was the symbolic impact of the cutbacks.”

If anyone doubted that there was a new boss in control and he meant business, then the cancellation of a gym membership or a magazine that had previously been paid for by the company was a noticeable sign, the author describes.

Interestingly, Dimon refused to sacrifice quality of customer service even in the midst of a firmwide cost-reduction campaign, as this quote shows: “One call centre was answering 80 per cent of their calls in 40 seconds. That was their standard. I said, ‘You’re kidding me. Change it right away – today.’ They said, ‘We’re going to have to hire a hundred people.’ I said, ‘I don’t care. Hire a hundred people.’… Can you imagine waiting on a phone for 40 seconds before someone answers it? Who waits that long?”

Engaging account.


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