The Economist: Weak interpretation

The current campaign lacks the wit, sarcasm and the x-factor that one would associate with the magazine’s outdoor ads

Thus far, The Economist has done what it does best: cerebral messages on hoardings, press ads and posters (some of which go over my head, which is a good thing, the mag is for the more serious types). But for their Indian edition, they have come up with TV commercials as well. Clearly an attempt to broad-base the mag and reach out to more towns in India. A super-niche status could be coming in their way of garnering ad revenues.
'Interpret the world' is The Economist's positioning. One commercial features the issue of Chinese kids migrating to India to work in factories. The students are seen learning Hindi at school. Another commercial deals with the graver subject of the civil war in Africa. In this one, two little boys are seen practicing football in the fields. We later notice machine guns are being used as goal-posts.

The observation: In Africa, children take to violence. Both commercials use surprise and contradiction as creative hooks. Namely, Chinese kids learning 'A-aa, E-ee, Aay-o'. And African kids taking up guns. Yup, that element helps the commercials get noticed. And they have resorted to the B&W documentary format to make the films almost newsy, so to speak.
Now while the commercials are nicely shot, etc, there is one significant problem: Both the ideas, particularly the one about the African kids (done to death), lack the wit, sarcasm and the x-factor one associates with The Economist outdoor ads.
I think they have played it safe in India. Probably because they are testing the desi waters. Or, they are worried about the fragile Indian sensibilities to humour and sarcasm. Or, maybe (and I hope not), they are running safe ads so that the idea doesn't go over the heads of the small townies (the segment they are likely to be targeting through the TV commercials). Any which way, the commercials water down the brand personality that has been so carefully cultivated across the world for so many years now.
I think the mag's best bet is to interpret the world in a way that shakes things up a bit, is irreverent, provokes thought, and the ads are unafraid to rock the boat. That's The Economist's famed branding, that's what we like about it, that's what will make it get noticed.
Here's what I would have done (though usually I don't give away ideas for free!): I would have dealt with the Naxal issue, and questioned the rampant mining operations as the root cause of the problem. Now that's making Indian business leaders interpret the violence correctly, right?


Prospects for the eurozone

Ultimately both Europe and the euro will recover despite the dire predictions presently making the rounds

The crisis of the eurozone has rocked markets and again brought into question the stability of the financial system and the strength of the recovery. On its surface, this new crisis would appear to be bad news for investors.
Certainly it is not good news, at least in the short term. Still if you extend the time horizons out a bit further, a different story emerges.

After the devastation of the Second World War, Europe grew at a spectacular rate. In France this period is known as the Les Trente Glorieuses ("The Glorious Thirty"). With the special interest groups swept away by the war, growth benefited all segments of society and the countries as a whole. The growth was given further impetus by the creation of the European Union.

The EU and the euro were supposed to do one thing, encourage economic growth by unifying the market. Market unification of course is a legal problem. If all of the laws, regulations and tax codes could be aligned then seamless trading across national borders would be possible along with growth.

For a time it was very successful. It should be remembered that some of the countries presently so maligned as PIIGS were once lauded for their economic growth. After Ireland and Spain entered the EU their growth rates increased dramatically. Ireland was the Celtic Tiger and Spain had the highest growth rate in the EU after years of stagnation.

But good government policies do not go unpunished. As European economies grew so did the subsidies and regulations. Governments felt that more regulations could solve economic issues and make life better for their citizens. There was no problem that the beneficent hand of government could not solve.

For example in France, in the name of protecting citizens, the French government "sets the dates that shops can hold sales; forbids hypermarkets from selling below cost; limits the number of Paris taxis; and prevents pharmacists from owning more than one pharmacy". The French government employs 8% of the population, almost twice that of the US.

These bureaucracies become self sustaining. Their goal is to protect themselves rather than the rest of the country. A French 'fonctionnaire' retires at 60 at 75% of his or her final six months' salary. The size and cost of the French bureaucracy is certainly impressive but it is not unique. Most of Europe is saddled with massive bureaucracies and of course the costs.
In France 85% of pensions come from the state. This compares with an OECD average of 61% and contrasts with the US where only 36% of pensions are state liabilities. Even worse in both Greece and France the average age of retirement is only 60 compared with 65 in the US and 70 in Japan.

It is not only government employment that clogs the economic system. Most countries in Europe have a two-tiered labour market. There are union workers who have guaranteed jobs, retirements, and healthcare. Then there are the rest, usually the young who suffer from high rates of structural unemployment. As the result of the US recession, America presently has an unemployment rate of 9.9%. This contrasts with Europe where the rate is 10%. But in 2007 the US unemployment rate was 4.4% while Europe's was 7.3%.

The euro crisis then is a symptom of a much deeper disease that has been plaguing Europe long before the present crisis. The use of government and law to solve any problem or to control all segments of the economy has many costs. Not the least of which is that law, any law, any regulation has vast unknown and unintended consequences.

Why then is the present crisis something to celebrate? Laws don't get passed on their own. Certain groups within a political system stand to benefit from a particular legal regime. For example in France there are 35 different groups representing farmers, sailors, teachers and even notaries. Each has an economic stake in the present system and is willing to fight tooth and nail to preserve its rights under that system regardless of any detrimental effect on the general economy. These groups are also not unique to Europe. They exist in varying degrees in all countries. In the US the American Association of Retired People (AARP) is particularly ferocious despite the infirmity of many of its members.

Crises, though, are exceptionally useful. What was considered politically impossible a few weeks ago may actually be feasible today. Real reform invariably removes advantages of a privileged group, which is always difficult and painful. As such, it is invariably put off until there are no other alternatives. Still, over time, once accomplished, the results can be beneficial. The austerity packages making their way through various European parliaments are not only necessary to satisfy the short-term requirements of bond vigilantes; they also will eventually be exceptionally helpful in stimulating economic growth. Not tomorrow certainly. The medicine will be painful as government spending retreats, but what doesn't kill economies can make them stronger. So ultimately both Europe and the euro will recover despite the dire predictions presently making the rounds.
(The writer is president of Emerging Market Strategies and can be contacted at [email protected] or [email protected]).




7 years ago

In short subsidy is the vilian. Who will bell the cat? HUGE PERKS our politicians squeeze from the masses -what they pocket secretely is another a/c- which we, ordinery citizen, pays by way high prices n rising taxes. It is said rupee has improved in its strength,still we pay more n more for the same item of daily necessities. This puzzle is difficult to solve - Arthachakra

Shopper’s Stop claims to have developed a recession-proof model

Targets EBIDTA margin of 7.5%-8% in the current fiscal

Shopper's Stop, whose net profit rose 197% quarter-on-quarter in the March 2010 quarter to Rs16.43crore, claims to have developed a recession-proof model. Last year, (FY09-10), its EBIDTA (earnings before interest, depreciation and tax) margin was 7.3% and the company expects to increase it to 7.5% -8% in the current fiscal.

The company is targeting to increase its same-store sales growth from the current level of 16% and also ramp up margins. It has brought down its operating cost by 280 basis points and expects to see a further reduction in response to a slew of cost-control measures initiated in the previous fiscal. Moneylife had earlier reported on how the company is controlling its expenses. (see:

"We are yet to see the full benefit of our measures to control operating costs. We saw some impact in the last quarter, and we should be able to see its full impact in the current fiscal. We are targeting an EBIDTA (margin) of between 7.5% -8% (in the current fiscal)," said Govind Shrikhande , executive director and CEO of Shopper's Stop.

The company, however, expects manpower costs to increase, as it is giving a lot of incentives to its employees. The company is adding new stores, but mostly on a revenue-share model, which will help reduce costs by 20-30 basis points. Mr Shrikhande said 12 out of the 18 new stores that will be opened in the next 30 months would operate on a revenue-share basis. The remaining stores will operate on a pure rental basis, but at 15%-20% lower rentals than the current rates.
"A combination of all these measures has made our model much more recession proof and we will be able to see good profitability, irrespective of the market conditions," said Mr Shrikhande.


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