India’s booming airline industry will see further consolidation by 2010 amid growing competition, rising costs and over-capacity along key routes, an industry body said on 13 June.
At least fourteen new airlines such as Easy Air, Trans India and Star Air are seeking government approval to launch operations.
From just three private airlines in 2003, the number has jumped to ten, including low-cost carriers such as SpiceJet, Go Air, Paramount Airways and IndiGo. “Carrier rationalisation along key routes is required, as we see over-concentration of seat capacity along main routes,” said Kapil Kaul, chief executive with responsibility for the Indian subcontinent at the Centre for Asia Pacific Aviation (CAPA) on 13 June.
“Greater consolidation is expected to continue... in the form of strategic alliances, market exits and buyouts of smaller airlines,” he said on the last day of a three-day aviation summit in India’s financial capital. India’s low-cost carriers (LCCs) captured 35% of market share in April this year, Kaul said.
These budget carriers are likely to double their market share by 2010 -- one of the highest in the world, the CAPA said in a recent report on the Indian subcontinent. The performance of two new LCCs -- Air India Express and JetLite (formerly Air Sahara) -- in the domestic market is likely to be closely watched.
“The overall picture in India for present is one of growth, but against a backdrop of extreme, and mounting, unprofitability,” the CAPA report said. India’s airline industry lost 500 million dollars in the year ending March 2007, spurring domestic players to buy rivals.
The country’s largest domestic carrier Jet Airways bought competitor Air Sahara for nearly 340 million dollars in April, followed by a deal between Kingfisher and Air Deccan airlines in May.
India’s airlines have expanded aggressively in recent years, with about 480 aircraft on order for delivery through to 2012.
Source: Wall Street Journal
Thursday, June 14, 2007
Chip industry cuts 2007 growth forecast
The Semiconductor Industry Assn. cut its forecast for the market's growth this year to 1.8% on Wednesday, citing falling prices for memory chips and microprocessors.
Sales of processors will drop 1.6% to $32.6 billion, the San Jose-based group said. Revenue from flash memory chips, used in digital cameras and music players, will be little changed, the trade association said. It had earlier forecast a 10% rise in total chip sales this year.
The SIA's revised outlook mirrors that of other forecasters, who have said that although semiconductor makers are selling more chips, too much production and competition are pulling down prices. Last month, research firm Gartner Inc. cut its growth projection for this year to 2.5%. Trade group WSTS Inc. expects a 2.3% sales gain.
"End markets continue to be strong, with consumers realizing major benefits from lower chip prices," SIA President George Scalise said. A fall in the price of processors and memory chips is "the major factor contributing to lower growth than previously projected."
The SIA expects industry sales to reach a record $252 billion this year and grow to $306 billion in 2010.
Samsung Electronics Co., the world's second-largest chip maker, and other manufacturers suffered a 33% decline in the average selling price of dynamic random access memory chips between December and April, according to the SIA. DRAM provides the main memory for personal computers.
The market for processors, the "brains" of PCs, faces increasing price competition between Intel Corp., the world's largest chip maker, and Advanced Micro Devices Inc., the SIA said. PC sales are still expected to grow 10% this year to 255 million units.
Source: Bloomberg
Sales of processors will drop 1.6% to $32.6 billion, the San Jose-based group said. Revenue from flash memory chips, used in digital cameras and music players, will be little changed, the trade association said. It had earlier forecast a 10% rise in total chip sales this year.
The SIA's revised outlook mirrors that of other forecasters, who have said that although semiconductor makers are selling more chips, too much production and competition are pulling down prices. Last month, research firm Gartner Inc. cut its growth projection for this year to 2.5%. Trade group WSTS Inc. expects a 2.3% sales gain.
"End markets continue to be strong, with consumers realizing major benefits from lower chip prices," SIA President George Scalise said. A fall in the price of processors and memory chips is "the major factor contributing to lower growth than previously projected."
The SIA expects industry sales to reach a record $252 billion this year and grow to $306 billion in 2010.
Samsung Electronics Co., the world's second-largest chip maker, and other manufacturers suffered a 33% decline in the average selling price of dynamic random access memory chips between December and April, according to the SIA. DRAM provides the main memory for personal computers.
The market for processors, the "brains" of PCs, faces increasing price competition between Intel Corp., the world's largest chip maker, and Advanced Micro Devices Inc., the SIA said. PC sales are still expected to grow 10% this year to 255 million units.
Source: Bloomberg
Wednesday, June 13, 2007
Indian M&A Deals - H1 2007 update
According to data compiled by global consultancy firm Grant Thornton, 42 cross-border deals with an announced value of $4.11 billion were carried out by Corporate India in May, while 32 domestic M&As garnered just $0.26 billion to their kitty.
The total number of M&A deals announced in May was worth $4.37 billion, with United Spirits buying out Whyte & Mackay for $1.11 billion, and Suzlon Energy’s controlling stake in REpower for 1.7 billion dollars, being the most significant deals of the month, Thorton said.
The M&A deals in the month totalled 74 with announced values of $4.37 billion as against 57 deals worth $3.98 billion in April, Thornton’s Dealtracker report said.
Out of the total cross-border deals, 30 were outbound with Indian companies acquiring businesses outside the country for a value of $3.79 billion.
There were 12 inbound deals (international companies acquiring Indian businesses) with an announced value of close to $0.32 billion. Besides, the total number of private equity deals announced during the month stands at 24 with an announced value of $1.56 billion as against 23 deals with a total announced value of $0.44 billion in April.
Some top deals
Canadian steel maker Algoma’s shareholders approved the $1.74 billion sale of the company to Essar Steel Holdings, clearing the way for a deal struck in mid-April. Algoma said it expects the acquisition to be completed by June 18.
May’s largest deals were United Spirits’ acquisition of Scottish beverage maker Whyte and Mackay for $1.2 billion and Suzlon Energy’s purchase of a controlling stake in Germany’s RE Power for $1.7 billion.
According to Grant Thornton Corporate Advisory Services - The average size of acquisitions in 2007 has been about $160 million to $180 million but that number has been inflated by a few multibillion-dollar deals. Out of the 287 M&A deals reported so far this year, only about 20 have been worth more than $160 million.
Deal activity is likely to remain brisk in technology and pharmaceuticals. Telecom, which saw one of the largest inbound acquisitions of the year when British giant Vodafone agreed to buy Hutchison Telecom’s stake in Hutchison Essar for $11.1 billion, is another possible venue for more deals, but it would likely consist of fewer transactions with larger value.
India is the world’s fastest-growing cellular market, adding over 6 million subscribers a month.
World Bank’s private sector arm, International Finance Corporation (IFC) invested 30 million dollars in Kanoria Chemicals and Electrotherm India in May.
Private equity investor Sequoia Capital invested about $7 milion in IT firm Minglebox.com, while Reliance Capital picked up a stake in Precision Wires for $4.12 million, the data show.
Some of the major inbound cross-border deals include French banking major BNP Paribas’s acquisition of 45 per cent stake in financial services firm Sundaram Home Finance for $45.81 million.
Besides, Standard Chartered Bank bought 49 per cent stake for $34.19 million in UTI Securities and Interpublic Group hiked its stake in Lintas India to 100 per cent for $100 million.
In March and April, there were 111 M&A deals with a total value of about $6.12 billion. These included 62 domestic deals with a value of $0.73 billion. The number of inbound cross-border deals has been 17 with a value of $1.98 billion and the number of outbound cross border deals was 32 with a value of $3.41 billion.
The total number of M&A deals announced in May was worth $4.37 billion, with United Spirits buying out Whyte & Mackay for $1.11 billion, and Suzlon Energy’s controlling stake in REpower for 1.7 billion dollars, being the most significant deals of the month, Thorton said.
The M&A deals in the month totalled 74 with announced values of $4.37 billion as against 57 deals worth $3.98 billion in April, Thornton’s Dealtracker report said.
Out of the total cross-border deals, 30 were outbound with Indian companies acquiring businesses outside the country for a value of $3.79 billion.
There were 12 inbound deals (international companies acquiring Indian businesses) with an announced value of close to $0.32 billion. Besides, the total number of private equity deals announced during the month stands at 24 with an announced value of $1.56 billion as against 23 deals with a total announced value of $0.44 billion in April.
Some top deals
Canadian steel maker Algoma’s shareholders approved the $1.74 billion sale of the company to Essar Steel Holdings, clearing the way for a deal struck in mid-April. Algoma said it expects the acquisition to be completed by June 18.
May’s largest deals were United Spirits’ acquisition of Scottish beverage maker Whyte and Mackay for $1.2 billion and Suzlon Energy’s purchase of a controlling stake in Germany’s RE Power for $1.7 billion.
According to Grant Thornton Corporate Advisory Services - The average size of acquisitions in 2007 has been about $160 million to $180 million but that number has been inflated by a few multibillion-dollar deals. Out of the 287 M&A deals reported so far this year, only about 20 have been worth more than $160 million.
Deal activity is likely to remain brisk in technology and pharmaceuticals. Telecom, which saw one of the largest inbound acquisitions of the year when British giant Vodafone agreed to buy Hutchison Telecom’s stake in Hutchison Essar for $11.1 billion, is another possible venue for more deals, but it would likely consist of fewer transactions with larger value.
India is the world’s fastest-growing cellular market, adding over 6 million subscribers a month.
World Bank’s private sector arm, International Finance Corporation (IFC) invested 30 million dollars in Kanoria Chemicals and Electrotherm India in May.
Private equity investor Sequoia Capital invested about $7 milion in IT firm Minglebox.com, while Reliance Capital picked up a stake in Precision Wires for $4.12 million, the data show.
Some of the major inbound cross-border deals include French banking major BNP Paribas’s acquisition of 45 per cent stake in financial services firm Sundaram Home Finance for $45.81 million.
Besides, Standard Chartered Bank bought 49 per cent stake for $34.19 million in UTI Securities and Interpublic Group hiked its stake in Lintas India to 100 per cent for $100 million.
In March and April, there were 111 M&A deals with a total value of about $6.12 billion. These included 62 domestic deals with a value of $0.73 billion. The number of inbound cross-border deals has been 17 with a value of $1.98 billion and the number of outbound cross border deals was 32 with a value of $3.41 billion.
Multi-national 3PLs not getting returns in China
According to a recent publication by China Supply Chain Council (CSCC) and Global Supply Chain Council, many multi-national 3PLs in China, despite the initial euphoria of having acquired or entering into JVs with successful Chinese counterparts, have yet to show an equitable return on their investments in China.
In fact, despite the initial promise of having door-to-door capabilities stretching from sourcing of raw materials and manufacturing of goods in China all the way to delivering finished products to the hands of consumers in the developed world have yet to reap justifiable returns. It seems that many of these multi-national 3PLs are still offering their services as if they were mere freight forwarders, and are having serious problems in getting their new offerings to the consciousness of shippers.
In fact, despite the initial promise of having door-to-door capabilities stretching from sourcing of raw materials and manufacturing of goods in China all the way to delivering finished products to the hands of consumers in the developed world have yet to reap justifiable returns. It seems that many of these multi-national 3PLs are still offering their services as if they were mere freight forwarders, and are having serious problems in getting their new offerings to the consciousness of shippers.
Tuesday, June 5, 2007
Global Logistics: Thinking beyond BRIC
Business dialogue around low-cost-country sourcing and emerging markets has become almost ubiquitous. But many of those conversations are limited to the BRIC countries: Brazil, Russia, India, and China. That’s unfortunate, since a great many opportunities also exist in Central and Eastern Europe (CEE).
In fact, Accenture’s recent research initiative on global operations found that emerging CEE markets are coveted by more companies than those of any country with the exception of China and India. Among European executives, Central and Eastern Europe was cited as the second most important emerging market next to China.
Why Central and Eastern Europe? One good reason is that most CEE countries are now part of the European Union. Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia joined in 2004. Bulgaria and Rumania were admitted in early 2007 and admittance of Turkey is pending. For companies outside the region, EU accession means new market and offshoring opportunities—as well as more freedom to conduct barrier-free business.
Central and Eastern European companies are also working hard to update their facilities, seeking to match Western levels of unit cost, quality and product availability, and thus make their businesses more sustainable and attractive to Western buyers. Even with these upgrades, CEE wages remain far lower than in Western Europe, and it could be 20 years before the gap closes completely.
Other potential advantages for non-CEE companies include more potential transportation modes and fewer problems with language and culture. Distance-related savings can also be a factor since, compared to Asia, the back-and-forth movement of parts and finished goods between CEE and Western Europe involves about one-tenth the distance. However, distance-related cost differences are not always as significant as one might suppose. Careful study is critical.
Barriers and challenges
While the reasons above are promising for those looking to the region as a source of new sales and sourcing opportunities, the road to Central and Eastern Europe can still be a bumpy ride. In fact, many companies may find that the time is not yet right to factor this region into their global strategies. They may, for example, discover that the advantages of EU accession, lower wages, and shorter distances are offset by lingering problems with intra-country transport. Cabotage is still prohibited for the 12 recently joined EU countries. This limits outsiders’ ability to formulate pan-European Union strategies now—when opportunities to secure competitive advantage are greatest.
To make their CEE programs work, most companies will need the help of third-party services providers. Unfortunately, the availability and performance of third parties in Central and Eastern Europe is inconsistent. In a recent survey, only 25 percent of Western European respondents characterized the performance of their offshored logistics services as high or very high in terms of reliability, quality, lead times, and customer service. And only 29 percent stated that their 3PL-related savings exceeded 10 percent.
It’s also worth noting that the CEE remains an agglomeration of a dozen countries, most with their own taxation system, regulations, language, and socio-cultural idiosyncrasies. There are even variations in their receptiveness to outside business. For example, companies in Slovakia, Romania, and Slovenia tend to be more interested in sourcing partnerships with Western Europe than those in Hungary and the Czech Republic. Accenture also has observed that state-owned enterprises (holdovers from the communist epoch) are less hungry for trade than public or privately held corporations. Fortunately, the number of state-owned enterprises is falling rapidly.
Making the choice
Deciding to source parts from, or expand sales, into Central and Eastern Europe is no less complicated than it is for any extra-national region. First and foremost, the choice must be made in light of a larger global operations strategy that integrates product development, sourcing, manufacturing, transportation, storage, sales and operations planning, and provision of after-sale services. Key components of the strategy will be formal programs for analyzing and redesigning supply chain networks, aligning (and potentially flattening or centralizing) the organization, and assessing the need for, and potential value of third parties.
Most important, however, is the recalculation of each affected item’s total cost of ownership. Like any such expansion, penetration of Central and Eastern Europe could result in supply chain cost increases that negate anticipated savings. In order of impact, the supply chain cost categories most affected by an offshoring decision tend to be:
- Aligning logistics, manufacturing, and assembly.
- Redesigning and maintaining the extended network over time.
- Compensating for changes in lead times and higher raw-material inventories.
- Transportation/distribution network restructuring and optimization.
- Exception handling.
- Ensuring supply chain flexibility to accommodate shifts in demand.
Given these factors, any sound global strategy should include a detailed total cost of ownership analysis that goes beyond calculating the acquired cost of materials and components..
An exceptional global strategy will also acknowledge Central and Eastern Europe’s potential to help meet an organization’s changing sourcing needs, provide new markets for its products and services, and widen its path in the race to high performance.
Reference: Article originally published in Logisticsmanagement written by Patrick M. Byrne, the managing partner of the Accenture Supply Chain Management practice, which helps clients improve their performance through supply chain strategy, sourcing and procurement, supply chain planning, manufacturing and design, fulfillment, and service management. Based in Reston, Va., he can be reached at pat.byrne@accenture.com
In fact, Accenture’s recent research initiative on global operations found that emerging CEE markets are coveted by more companies than those of any country with the exception of China and India. Among European executives, Central and Eastern Europe was cited as the second most important emerging market next to China.
Why Central and Eastern Europe? One good reason is that most CEE countries are now part of the European Union. Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia joined in 2004. Bulgaria and Rumania were admitted in early 2007 and admittance of Turkey is pending. For companies outside the region, EU accession means new market and offshoring opportunities—as well as more freedom to conduct barrier-free business.
Central and Eastern European companies are also working hard to update their facilities, seeking to match Western levels of unit cost, quality and product availability, and thus make their businesses more sustainable and attractive to Western buyers. Even with these upgrades, CEE wages remain far lower than in Western Europe, and it could be 20 years before the gap closes completely.
Other potential advantages for non-CEE companies include more potential transportation modes and fewer problems with language and culture. Distance-related savings can also be a factor since, compared to Asia, the back-and-forth movement of parts and finished goods between CEE and Western Europe involves about one-tenth the distance. However, distance-related cost differences are not always as significant as one might suppose. Careful study is critical.
Barriers and challenges
While the reasons above are promising for those looking to the region as a source of new sales and sourcing opportunities, the road to Central and Eastern Europe can still be a bumpy ride. In fact, many companies may find that the time is not yet right to factor this region into their global strategies. They may, for example, discover that the advantages of EU accession, lower wages, and shorter distances are offset by lingering problems with intra-country transport. Cabotage is still prohibited for the 12 recently joined EU countries. This limits outsiders’ ability to formulate pan-European Union strategies now—when opportunities to secure competitive advantage are greatest.
To make their CEE programs work, most companies will need the help of third-party services providers. Unfortunately, the availability and performance of third parties in Central and Eastern Europe is inconsistent. In a recent survey, only 25 percent of Western European respondents characterized the performance of their offshored logistics services as high or very high in terms of reliability, quality, lead times, and customer service. And only 29 percent stated that their 3PL-related savings exceeded 10 percent.
It’s also worth noting that the CEE remains an agglomeration of a dozen countries, most with their own taxation system, regulations, language, and socio-cultural idiosyncrasies. There are even variations in their receptiveness to outside business. For example, companies in Slovakia, Romania, and Slovenia tend to be more interested in sourcing partnerships with Western Europe than those in Hungary and the Czech Republic. Accenture also has observed that state-owned enterprises (holdovers from the communist epoch) are less hungry for trade than public or privately held corporations. Fortunately, the number of state-owned enterprises is falling rapidly.
Making the choice
Deciding to source parts from, or expand sales, into Central and Eastern Europe is no less complicated than it is for any extra-national region. First and foremost, the choice must be made in light of a larger global operations strategy that integrates product development, sourcing, manufacturing, transportation, storage, sales and operations planning, and provision of after-sale services. Key components of the strategy will be formal programs for analyzing and redesigning supply chain networks, aligning (and potentially flattening or centralizing) the organization, and assessing the need for, and potential value of third parties.
Most important, however, is the recalculation of each affected item’s total cost of ownership. Like any such expansion, penetration of Central and Eastern Europe could result in supply chain cost increases that negate anticipated savings. In order of impact, the supply chain cost categories most affected by an offshoring decision tend to be:
- Aligning logistics, manufacturing, and assembly.
- Redesigning and maintaining the extended network over time.
- Compensating for changes in lead times and higher raw-material inventories.
- Transportation/distribution network restructuring and optimization.
- Exception handling.
- Ensuring supply chain flexibility to accommodate shifts in demand.
Given these factors, any sound global strategy should include a detailed total cost of ownership analysis that goes beyond calculating the acquired cost of materials and components..
An exceptional global strategy will also acknowledge Central and Eastern Europe’s potential to help meet an organization’s changing sourcing needs, provide new markets for its products and services, and widen its path in the race to high performance.
Reference: Article originally published in Logisticsmanagement written by Patrick M. Byrne, the managing partner of the Accenture Supply Chain Management practice, which helps clients improve their performance through supply chain strategy, sourcing and procurement, supply chain planning, manufacturing and design, fulfillment, and service management. Based in Reston, Va., he can be reached at pat.byrne@accenture.com
Retail revolution in Russia - Driving factor for Supply Chain Market
The retail sector is driving supply chain development in Russia, says a study by global consultancy Capgemini. The retail market, actively expanding from Moscow and the Central Region deeper into the country, is responsible for churning logistics development in Siberian cities. Novosibirsk and Yekaterinburg, Siberia’s two largest cities, are rapidly developing their logistics and transport infrastructure to accommodate the growing needs of retail chains. Russia’s logistics development goal: to become a gateway to Europe for product flowing from Asia.
Top 25 Supply Chain Models
AMR Research released its annual Supply Chain Top 25 report. The report identifies the top 25 manufacturers and retailers that exhibit superior supply chain capabilities and performance. The companies in this report demonstrate excellence across basic metrics related to execution - return on assets, revenue growth, and inventory turns - and are recognized by their peers and AMR Research as supply chain leaders. In this year's list, Nokia, Apple and P&G are at the top three of the list. Others in the list of top 25 include Motorola (12), Johnson & Johnson (14), Nike (18), GSK (20) and HP (21). AMR Research analysis also shows that supply chain leadership translates into stronger market performance. Consistently, the Supply Chain Top 25 as a whole has outperformed the Dow Jones Industrial Average, the S&P 500, and the NASDAQ.
Following is the list of Top 25 Companies with Best Supply Chain Models:
To read the entire article, please visit:
http://www.amrresearch.com/Content/View.asp?pmillid=20450
Following is the list of Top 25 Companies with Best Supply Chain Models:
To read the entire article, please visit:
http://www.amrresearch.com/Content/View.asp?pmillid=20450
Subscribe to:
Posts (Atom)
