To Negotiate or not to negotiate: is that the question?
We can give an apparently easy answer to this question: basically, it depends on the difference in terms of (perceived) value assigned to the resource to be negotiated. Consequently, we are facing negotiation situations much more often than we believe. In other words, a negotiation process exists when one party is interested in something that is possessed by another party. Therefore, we can define negotiation as a communication process between two or more parties aiming at achieving a common decision. The decision can be “ok, we got an agreement†or “ok, we can’t move forward with this negotiation as there is no room for finding a common agreementâ€. One of the most important success factors of any negotiation is the ability of negotiators to be “prepared enoughâ€. Being prepared refers mainly to: the level of information negotiators have about the context, the specific situation, the counterpart(s), the value assigned to the resource to be negotiated by each negotiator. Many negotiators typically take into consideration only the information that is immediately accessible for them. Is this enough? Sometimes, the negotiation process can be more successful when the negotiator – during the preparation phase – searches for new info that is not in her/his knowledge domain yet. Not exploring enough for useful information is one of the typical behaviors that negatively affect the negotiation effectiveness. The higher the ability of negotiators to search for and select information, the higher is her/his preparation, and consequently the more successful the negotiation process will be. Being well prepared doesn’t mean that negotiators have to necessarily follow the predefined path for managing the negotiation process. On the contrary, the well-prepared negotiator is also able to manage the uncertainty, e.g. in case the negotiator discovers a new info during the meeting with the counterpart s/he’s able to deviate from the process s/he was prepared on. So, successful negotiators must be able to manage information according to two dimensions: the ability to understand properly the set of information they already have access to; the ability to search for eventually new info useful for the negotiation process. In other words, negotiators’ ability to manage information can be represented by the expression ExE, which stands for “Exploring x Exploitingâ€: negotiators have to balance effectively the need for going in deep with the info they have, and at the same time to gather new info that can be used for the negotiation process. This ExE ability is particularly relevant in the case the negotiation is characterized by high level of uncertainty and risk, rules are not clearly defined, and the relationship between the negotiators is not consolidated yet. Following this, there are three practical recommendations for improving your negotiation skills in the short-term. The first recommendation is about the type of relationship between negotiators and the part they are representing. Typically, there is a principal-agent relationship where the agent is the negotiator and the principal is who gives the mandate. This is really important as negotiators must continuously remember who they are negotiating for (that is principals), and then pursuing the principals’ interests and preferences, not the negotiators’ ones. The second recommendation is about the kind of negotiations. Even if some negotiations are similar, actually they are different each other. Several factors make negotiations diverse. The two most significant factors are the context and the parties. Having a good understanding of these two factors helps negotiators to define the negotiation strategy, and their style for managing the negotiation process. Moreover, taking these factors in mind helps negotiators to remember that negotiations evolve during the meeting so also their either strategy or style can change consequently. The third recommendation is about the effects of the agreement. Once an agreement has been signed, it must be executed accordingly. This helps to build trust between the parties, and to reinforce your credibility as professional negotiators. To make this happen, negotiators want to be sure on what they are negotiating about. In other words, resources that are not included in the mandate are not negotiable. In case it becomes necessary to add a new resource, negotiators have to first check it out with their principals. Leonardo Caporarello July 13, 2015
“The Evolving Indian Consumer” and Adoption of Technology in Banking Services
I have always been fascinated by how the Indian consumer has adopted the new technologies in the space of Financial Services. I believe the driver has always been ‘convenience’ after overcoming the fear factor of ‘How do I use…†..â€Am I getting it Right? â€..â€Is it safe†In India through the early 90’s, 2000’s we witnessed the emergence of Credit Cards, ATMs, Debit Cards, Phone Banking , Dematerialisation of Shares, then Internet Banking both for information and payment. While initially the consumer was slow to adopt the usage of cards and ATMs in the 90’s, there was a sudden leap which took place and changed the scenario in the 2000’s. Then, the change was rapid and brought down the cost of the technology because of economies of scale. This comment is based on my experience within the banking industry. A lot of effort was made to educate the customer so that he/she would be comfortable with using the new technologies. That the Banks in India continued relentlessly with their education programs on the adoption of new technologies and payment systems is a pointer to the fact that the Bank Heads believed that the Indian consumer was forward looking, keen to aspire and adopt new technologies which resulted in conveniences , which saved him/her time and increased the speed of the transaction. So India witnessed a sea change in the way consumer banking was transacted. There is a new wave now with the convergence of mobile and the internet and the ownership of smartphones. We face the era of Digital Banking. Once again we are seeing several consumer banks in India gearing up and accelerating the pace of change. A move to paperless banking. In early 2015, we witnessed initiatives from Kotak Mahindra Bank-Hashtag Banking, ICICI Bank –Pockets- all these being Digital Banking Initiatives. In the last few weeks we have heard a further buzz on the launch of various mobile payment solutions from Axis Bank- launch of PingPay-using social media based payment and HDFC Bank has launched PayZapp. The leading Foreign Banks –in India – Citibank, Standard Chartered and HSBC each have their own initiatives. The initial online data that we see on downloads, reviews and ratings for the various banks indicates that Young India is adopting Digital Banking , there could be an accelerated pace depending on individual bank strategy. Consumer Education should be a pillar in the way forward. Written by- Dr Anjana Grewal (Ph.D) Senior Professor-Marketing and Corporate Governance Director-Centers of Excellence SDA Bocconi Professor of Marketing Dr. Grewal has done her Bachelors in Chemical Engineering from UDCT- University of Mumbai later she also pursued Master in Management studies from (MMS) and a Ph.D from JBIMS- University of Mumbai A well-respected sales, marketing and business professional with over three decades of corporate experience she has also done her Financial Engineering- UTI Capital Markets. For more info- http://sdabocconiasiacenter.com/prof-anjana-grewal/
When I was in Europe…
From enjoying the ethereal biblical figures embellishing the walls of mesmerizing duomo to pondering over the gravity of human emotions at ‘the wall’ that symbolized the division of the world into two; from being appreciated by a student from Peru for my imperfect Indian cooking to appreciating a English-Pakistani for helping with the studies; from sharing drinks with some of the world’s best professors to sharing a cab with three complete strangers hailing from Greece, Poland and Hungary for a 7 hour trans-national journey; from figuring out the metro system and city maps in 10 different nations to charting out new ways to the Bocconi university by bicycle in Milan, the experience of studying in Europe was in every way ‘diversely enriching’. I shared the classroom with the students of diverse nationalities (around 50), worked on group projects with the students from different backgrounds and competed with some of the best minds in the world (my batch mates are in fact among the two final teams competing for the Euro 15000 Barilla International Management Competition, final round to be held in Feb. In terms of courses I took, it was a blend of four functional and conceptual subjects out of a more than hundred or so interesting ones available for selection. I took Industrial Marketing and Sales Management to add to my functional knowledge, Business Analytics to understand how a complex decision making processes can be substantiated with data and vice versa, and International Economics and Business Dynamics to get a detailed overview of how macroeconomic forces affect governments and businesses across the globe. These courses gave me an overall perspective of managing a business and understanding a wide range of decision making complexities and ways to resolve those. Though I already had the pleasure of learning from the best professors from SDA Bocconi who were teaching us at MISB Bocconi in Mumbai, going to Europe shifted the learning curve to another level, not just in terms of concepts of management studies but also in terms of the macroeconomic, cultural and political views which, given the situation Europe currently is in, have ironically become more interesting to learn about. Now that the dream semester has ended, I have a lot of stories to tell and have a lot of amazing memories to cherish. It was definitely a lifetime experience. Gaurav Bhandari
Act of business planning is more important than the plan itself
According to my opinion, business plans may become outdated the very day they are finished, but the process of planning is very important as it prepares entrepreneur to face the future. Dwight D. Eisenhower, the past US president and a five-star general in the US Army during World War II, once said, ‘Plans are worthless, but planning is everything’. What he meant was that one cannot make full proof plan to offer ready-made solution for an emergency (which, in any case, is an ‘unexpected’ event), but the act of planning can prepare the individual to face any situation as it is a useful learning tool. This statement is highly relevant for today’s entrepreneur who is preparing to chart a plan for his/her new business in a market which is highly volatile and uncertain. There is no perfect business plan, but the process of planning can provide useful simulation tool, which can help entrepreneur to convert business ideas into reality. In my book ‘Business Planning’ (2011) that describes in detail the stages of starting a business project and offers useful tips to transform good ideas into a sustainable business – believes that business plans may become outdated the very day they are finished, but the process of planning is very important as it prepares entrepreneur to face the future. I here share my insights into entrepreneurship, emerging markets and how to develop a coherent business plan as I always have worked on entrepreneurship and business planning and have recently developed an interest in emerging markets from entrepreneur’s point of view to know more about innovation, new business models, etc. I have worked closely with Italian firms who have ventured into the emerging markets and, hence, I can share my observations based on my experience with western companies. The differences are astonishing in emerging markets, and this provides an interesting topic of research for business schools. It is important for western companies to be present in emerging markets as it gives them new ideas (which can be emulated in developed markets). For example, today price sensitivity is not just relevant for emerging markets, but also for customers from developed countries. So strategies adopted to solve price sensitivity challenge in the developing countries can be put to good use by western companies in developed markets such as Europe, where people are scouting for cost-effective products with economy increasingly becoming topsy-turvy. There are lots of things that companies from developed countries can learn from emerging economies as the market conditions and consumer preferences are different. Hence, one has to adopt new strategy to gain market share and customer’s loyalty in the highly competitive developing markets. This also forces companies to be innovative not just in terms of product, but also with respect to business processes. This can provide immense help to companies in handling the uncertainty in the new market. If we see from different types of companies’ perspective, Yes. It is not just the big companies, but also small and medium scale companies (having expertise in niche product categories) who are spreading their wings in emerging markets such as China, India, Brazil, etc as these companies know that the future growth is going to come from developing countries. It is important to understand that in order to grow and survive companies have to be present in emerging markets, which offer high growth prospects. As the demand for products is growing in the developing and emerging markets, most of western companies follow their customers in these markets. Take the example of Almax, an Italian manufacturer & supplier of mannequins (dummies used by dressmakers to display or fit clothing). The company ventured into China as majority of its customers – i.e. European fashion houses – shifted their focus to China. And today Almax has more employees in China, than in Italy. Every emerging market is different with their unique challenges. Hence, for the company, which is planning to enter the market, it is important to understand the way business is conducted in that country and be aware of market & customer preferences. It is essential to hire employees with experience of local market condition. Business plan is written when you launch new product, company, or enter a new market. Some people say it is useless to prepare business plan, since the plan becomes old the time you finish writing it as market conditions are changing so fast. While this may be true, writing a business plan still helps the entrepreneur to have clarity of the business, to be organized, bring in coherency in the thoughts, etc. Business plan can be a learning tool to clarify the idea or to present the idea to somebody else (may be to potential investors). It is said that value of the business plan is in the understanding about your products, customers, and markets. It is a learning tool that helps you to understand your strengths and weaknesses, opportunities and threats. It should be used as simulation tool and should include ‘what-if’ scenario planning, which is based on thorough on-the-field study and data. The answer to that is you do not have to forecast, you have to simulate. One has to have simulation model, which can help entrepreneur to better understand changes in the business environment and enables him/her for scenario planning. Hence, business plan should essentially be a learning tool and used for simulation. In addition, one has to be prepared to make changes in it, if required. Plan should be dynamic which can be altered to suit the external environment. In case of Nokia, I think it was unlucky as the technologies in the telecommunication sector changed rapidly with hardly any time for reaction. The company was not fully prepared for the market which saw the convergence of computing technology with mobile phones. This change was driven by companies from the IT industry. No wonder today the smart phone market is ruled by companies who were connected to the computer industry, and not by companies who were
Mandatory auditor rotation can improve reporting standards
Globally we have witnessed quite a few large accounting frauds, Enron, WorldCom, and Satyam closer to us. These have resulted in shareholder value erosion and loss of investors’ confidence. Pursuant to this many steps were taken to avert such situations. Mandatory rotation of auditors was one such measure used to end the cosy relationship a company shares with its auditors. In India, the Companies Act, 2013 – which came into effect on 1 April 2014 – makes it mandatory for companies to rotate their auditors every few years. So, is this measure enough to curtail frauds? And does effective corporate governance means good corporate performance? I belong to Italy, one of the countries where rotation of auditors after a fixed tenure is a mandatory. Associated with SDA Bocconi since 2008 as full time faculty, my research interests include links between corporate governance and firm performance, earnings management, and auditing & related issues. Before beginning my career in the academia, I have worked as consultant in auditing firms, I believe mandatory auditor rotation is effective, but it is not the only solution to prevent accounting frauds. According to me, regulatory framework has to be in sync with the time and help regulators identify frauds and take preventive steps. Though auditing industry is resistant to changes, three trends are quite evident. • First, IT tools are being widely used in the auditing processes. • Second, firms are focusing on specialization in terms of practices (experts in accounting standards) or sector-wise. • Third, they are increasing the number of offices in multiple locations to be closer to the clients. The approach of regulators, not just in the accounting industry but in general, is more often reactive rather than being proactive. Changes take place in the regulatory framework more as a response to an event. In respect to accounting, it can be said that standards have not kept pace with the evolution in the economy. If, we look at it in isolation, the changes in accounting standards between 2008 and today seem extensive. The key question though is, are these enough? To site an example, globally, in spite of all the modifications and improved standards, there are still several financial instruments in accompany which are not properly managed by accounting standards. The economy obviously is evolving much faster than the norms laid down by the regulators. Regulators appeared to me are quite often detached from the market, this could be a key reason why accounting standards have failed to keep pace with the trends in the real economy. Having said that, there are countries where the entire accounting world has transformed after 2008. For example, all countries in Europe have shifted from local GAAP (Generally Accepted Accounting Principles) to IFR (International Financial Reporting) standards. Considering the approach to accounting in IFR is distinct from the traditional cost-based GAAP standards, shift to IFR is quite radical and implies large changes in culture, organization and financial market functioning. This is something new, and is being adopted by many organizations across the globe. Even India is moving towards IFR standards. The 2002 fraud was related to one company and its implication was restricted to a few companies. Hence, it was easy to identify the problem and fix it. The 2008 financial crisis impacted banks, financial institutions (FIs), Companies amongst others which in turn had an impact on the GDPs of large economies. Hence, it is taking a longer time to understand and find solutions to these problems because we are not in a position to fathom the extent of involvement of these organizations in the crisis and its implication on the global economy. Now, the sparkling market has indeed helped auditing firms to improve their financial performances as it has opened up new areas of opportunities, which was not earlier available to them. Enactment of Sarbanes-Oxley Act of 2002 (SOX Act) in the US, rise in adoption of IFR standards, etc are few of the factors driving growth of the auditing firms. The SOX Act – enacted as a reaction to a number of major corporate and accounting frauds, including Enron and WorldCom – has raised the accounting standards for all US public company boards, management and public accounting firms. Basically, the Act forced the companies to audit their financial statements with external auditors, thus offering additional source of revenues for the auditing firm. For companies who want to globalize and attract overseas investors, it is important (though not mandatory) for them to either adopt the two commonly used accounting standards (i.e, IFR or US GAAP) or get listed on the renowned stock exchanges such as New York, London, etc. With the number of companies adopting IFR increasing, more opportunities have emerged for auditing firms as they are much better prepared for the new assignments. On one hand, the auditing firms are improving their revenues by offering multiple services in a complex working environment. On the other hand, in a sparkling marketing environment, their activities have become riskier. Good governance is a tool that can help performance get better. But, there is no proof that good governance automatically results in good performance. Historically, there has been companies known for their corporate governance, but could not last long as their performance was abysmal. It can be said that companies with good performances over a long period of time, normally also have high standards for corporate governance. However, good corporate governance alone cannot lead to increase in profitability and sales. Corporate governance can provide basic ground work (or guidelines) for creating good companies to perform over a longer period of time. Good performance, especially in uncertain conditions, comes with good ideas and innovations, and corporate governance should facilitate these ideas to generate better performance for the company in an ethically acceptable manner. An auditor’s role is to protect shareholder’s value by doing his/her job impartially, irrespective of who is paying. At present, the company hires an external auditor to check its financial statement, which some view as a
You can sing Piaf when you are 18 but you will interpret it better if you have a certain life experience
The news of Bocconi coming to India was enough for my neurons to start working extra hours. I still remember that day when I called up Ms. Nidhi Rawool (Admissions Team at MISB Bocconi) and asked her if it was the same Bocconi that I knew of. The very second day I planned a visit. I had a very animated conversation with Mr. Bruno Mariani (COO, MISB Bocconi) during my visit and I was convinced that the turn I am about to take would lead me to where I wanted to go. I was already considering a foreign MBA degree. I researched on the US universities and some European and British Universities. Somehow even then, Bocconi always managed to find a place in my shortlist. So I wasted no time and did my best to submit my application at the earliest with Bocconi India. I was interviewed by Mr. Stefano Caselli, the Vice Rector of Bocconi University, Milan, Italy. A week later I found a place in Post Graduate Program in Business (PGPB1) in Mumbai. What I like about the program is that it is well structured and every area of business has been given due importance. It even includes study of new economy subjects such asvaluation of e-commerce and start-up companies in corporate finance and study of digital market and customer engagement through social media analytics in marketing. The professors at MISB Bocconi- I must confess are truly world class. I studied Macro Economics from someone who was advising European Central Bank on European bailout. Rob Grant’s classes on strategy were thoroughly enjoyable (for those who don’t know he is considered next to Michael Porter in the world of strategy) The one thing that I learnt and that I think is above all (academics, placements and salaries etc) is to build a positive attitude. It is of utmost importance to build a formidable attitude that would help you to become a successful manager. Please understand the businesses have become dynamic, complicated and competitive. Companies are struggling to maintain margins, to increase market share and facing stiff competition to explore newer value trajectories. Please read why companies like GE had to shut down its financial services business. Understand why net neutrality has suddenly become talk of the town. In this ever become complex world, your right attitude only would take you ahead (and not a discussion on who is getting 12 lac p.a or 15 lac p.a…. Don’t even waste time thinking about your placements). According to me life is the biggest average. Only rights skills and attitude would keep you ahead in the game. Bocconi would give you both. So good luck! What I wrote at the top must have intrigued a few and I am sure you would like to know what I meant. In my context, the way I thought, the value systems I believed back in 2012 have vastly changed and I believe I am a completely different person now. An MBA would have helped but PGPB at Bocconi India helped me to explore the new ‘me’. Most of the time I have been asked by aspirants, friends and relatives that what has Bocconi given me. Here is my answer – In history I read how great rivers (The River Nile and The Ganges) gave birth to the greatest civilizations. I had somewhat similar experience at Bocconi ☺ I wish all the future students best of luck and I wish Bocconi to continue to enrich our lives. Written by Manish Kumar Pathak Current: Generali Investments Asia Ltd, Hong Kong (part of Assicurazioni Generali). Manish is a part of Portfolio Management Team that manages Fixed Income Investments in Asia (Rates, Currencies and Credits) Prior to PGPB From MISB Bocconi in 2014, Manish worked with boutique Investment Bank as Equity Sales Manager (Foreign Institutional Investors Group) and managed clients from Hong Kong and Singapore.