GIS Business : An Overview is a peer-reviewed scholarly journal and aims to publish original articles, review articles, case reports, short communications, etc. Journal indexed in SCOPUS, papers are not indexed. Send papers to editor@gisbusiness.org

  • GIS-Business Journal is Indexed in Scopus, papers are not indexed. UGC approved journal. Send papers to editor@gisbusiness.org

Business gives way to travel

I am on my annual road trip and this blog will go to sleep for a while.

I will instead be blogging on my travel blog which is here.

Business can wait until I return !!

Screw around with Kraft

What do you call something who is passed from hand to hand ? Used goods ? Probably something worse ? Well, that is what we have to call Kraft these days.

With a touch of slight (?) exaggeration, you could say that the land of mom and apple pie, could be stretched to include Kraft too ! Read on to see the list of brands this company owned at one time or the other, and even the Professor - he of the class war against processed foods - would have had one of those some time or the other. Its a quintessentially American company. And yet the way it has been sold and bought and sold and bought again makes somewhat depressing reading.

As is usual with many of the well known companies, there is always a visionary entrepreneur in the beginning. There was a James L Kraft. He was born in Canada, but emigrated to the Chicago in 1903 and started selling cheese from a horse drawn cart. In 1916 they developed a new process for pasteurising cheese, enabling it to be shipped long distances and patented it. Then came World War I, the need to provision the army and Kraft took off. In 1928 came Philadelphia cheese. In 1930 it merged with National Dairy, then the leading ice cream company in the US and became a full fledged Dairy Products company. 1926 saw Breyers, a famous ice cream brand;  1935, Sealtest, another iconic ice cream brand.  It grew and grew and became a globally recognised company and one of the giants of the food industry.

Then came 1980 and the barbarians. Wall Street types seem to have a peculiar fascination for Kraft and it become the favourite darling of deals. In 1980 a merger was engineered with Duracell and Tupperware. Immediately thereafter it sold all the non food businesses including Tupperware, but retained Duracell. In 1988 it sold Duracell to private equity firm KKR. In that mad winter of 1988, when dizzying deals were done, Kraft itself was acquired by Philip Morris (the largest tobacco company in the world) . Philip Morris merged Kraft with its General Foods business (of Maxwell House, Jell O, Kool Aid and Tang fame ) and created Kraft General Foods.  In 1990 they bought Jacob Suchard a big European coffee company and also the owner of TobleroneIn 1993 came Shredded Wheat. In 2000, Philip Morris acquired Nabisco and merged it with Kraft. Into the fold came Oreo, Chips Ahoy, Ritz, etc. In 2001 Philip Morris IPOed Kraft and it became an independent company again. In 2009, Kraft acquired Cadbury. In 2011 it split itself into two companies - the North American Kraft and the global Mondelez. And then last week, Warren Buffett and 3G bought out Kraft and will now run it together with Heinz which they already own.

Whew. That is a dizzying pace of changing of hands. How can a business survive this level of buying, adding, stripping and selling all the time. I wonder what the suppliers, consumers and employees make of all this. Businesses need some stability. Wall Street types doing financial engineering, don't do much for the long term health of the business.

There is one saving grace. Warren Buffett is not a wheeler dealer. He holds for the long term. Maybe Kraft will get some stability now.

Agree with Red Ed

I never thought I would never agree with anything in Mr Miliband's economic policy. If you are wondering who Mr Miliband (or Red Ed as he is sometimes called) is, he is the head of the Labour Party in the UK. In case you haven't been looking, there is a general election about to happen in the UK, which nobody in the world other than the most dedicated Anglophile (this blogger is one) has even noticed. Such is the UK's relevance in the world today - how far has the Empire fallen.

Red Ed, is called so, because he is just one step short of being a Commie in economic policy. So how is it that I can agree anything at all with him ?

Well, he has just announced that he will control the infamous zero hour contracts that seems to be so popular with big employers in the UK.  I have blogged on this before and I find this practice an abomination.

Zero hour contracts are where you enter into a contract with a company which is as one sided as a contract can ever be. You are bound to the company - you have to come to work as soon as the company calls you. The company is bound to nothing - they don't have to call you even once. You sit every morning by the telephone, not knowing if you have work that day or not. If you are called, you have rush to work. They may call you to work for 1 hour, 3 or 5 or 8 - that is their choice. You have to take it and are paid by the hour. You can't work anywhere else because if you are called and you don't turn up instantly, you are fired. Obviously there are no benefits - no leave, no retirement benefits, no medical benefits, no nothing.

Predictably, Britain's companies are shouting down Red Ed.  They must be ashamed of their two facedness. Why don't the bosses be on zero hour contracts. On the days, when they are goofing around doing nothing, they shouldn't get paid. Not one senior manager in the UK is on zero hours contract. Frankly, they should all be - if they turn up for work only every alternate day, the company would actually do better. In the television interviews that are part of the election campaign, David Cameron, UK's Prime Minister and the leader of the Conservative Party had to admit that he himself could not live on a zero hours contracts. Red Ed has gleefully said that if something is not good enough for UK's Prime Minister, its not good enough for the people !

Both ends of the spectrum relating to employment are wrong. In the Red corner is France - with guaranteed life time employment, a million benefits and no obligation to work (in the public sector, at least). In the Blue corner is the UK where an employee is treated as a piece of shit and not a human being.  Both these systems deserve to be thrown into the dustbin.

The problem with being an uncle

This blogger is of an age when being called an uncle is rather a compliment. He is precariously close to being called a grandpa. So much so that he cannot understand the brouhaha that the term "uncle" has caused.

The Air India flight from Jaipur to Delhi , a few days back, should have been an uneventful one. Incidentally, I am not sure why Air India is running a flight from Jaipur to Delhi .  The distance is short and tourists usually drive. Perhaps the appalling state of NH8 in that stretch  is giving Air India an opportunity.

Be that as it may, it should have been a short smooth flight. Passengers had boarded and the crew were doing their pre flight checks. It so happened that the Captain was a young guy and the Co pilot was, ahem,  a rather older guy. Reportedly, the Captain said "Uncle please fill in the card".

It is well known that men of a certain age are rather touchy about being reminded of that fact. That is why Viagra is the blockbuster it is ! Our co pilot took immediate umbrage to being called an uncle (I suppose he would have been tickled pink if the Captain had instead said - "Bachche isko fill kar" !!). He decided to show the young upstart that his physical prowess had not waned. Up he stood and it appears some sort of a confrontation took place. I speculate that the altercation was more verbal than physical - an sudden attempt by men of advanced years to stand erect is usually not successful. Well, whatever happened, the crew decided in the best of Air India's tradition, that passengers must get from Point A to Point B and the flight took off.

Now young straplings who are chastised by "uncles" often howl in outrage. That's exactly what happened. The Captain reported the incident at the end of the flight. Obviously an enquiry has been ordered and pending the outcome, both the "bachcha" and "uncle" have been derostered.

The enquiry proceedings will undoubtedly make interesting reading. Leading counsel shall submit the chronological qualifications for being called an uncle. To the best of my knowledge, the term uncle has not been defined in the constitution as an unparliamentary word. The trouble is that for a certain portion of a male's life it is a deeply offensive word and at a later portion in the same man's life it is a deeply complimentary word.  I am looking forward to the enquiry findings which shall conclusively prove that I am not of that age when it has become compliment. I shall use this evidence to bash the next idiot in my building who calls me that.

But, thank God for the fact that women pilots are relatively, rarer. Imagine the consequences if the copilot was a lady, of ahem, matronly disposition and the young man had said "Aunty, please fill in the card" ! We just escaped a nuclear Armageddon !

Borrow at negative interest rates ? What has the world come to

Sometimes the world of finance is utterly incomprehensible to , well, even finance guys. Take for instance what has been happening in Europe.

A few governments in Europe have been issuing short term bonds carrying negative interest rates. That means you pay for the privilege of lending to the government ! Even Spain (the country tottering on a default a couple of years ago) has done this. But these worthies, which include Germany, Austria and Finland as well,  issued only short term debt like this. 

Switzerland has this week taken it to a different level.  It has issued 10 years bonds at negative interest rates. TEN YEAR BONDS. The first country in the world to do so.  And it was handsomely oversubscribed.

So what is happening ? Why would any idiot pay to lend money.  Doesn't it turn everything we know about finance upside down ?

We are in completely uncharted territory and nobody knows what the implications are. Borrowing binges are likely. Will banks now start to charge you for depositing money into your account ?

Part of the  "logic"  of the people buying these negative interest bonds is as follows

  • When interest rates fall, bond prices go up (Its too technical to explain in layman terms, but take this for a fact)
  • They are expecting interest rates in Europe to fall further
  • When that happens the prices of these bonds will rise. They will sell and make a profit !

Of course, in the long run some idiot will be left holding a pile of worthless shit. But finance is all about the short term (alas, becoming extremely short term). Who cares for the sucker in the long run.

Very clever. If only all the fantastic brains who are thinking up incomprehensible ideas in finance were to turn their minds to solving some of the world's more real problems ...........

By the way, if you are in IT, here's a golden opportunity, not unlike Y2K. Bank's IT systems are not tailored to deal with a minus sign in the interest column.  Have to rewrite millions of lines of code ........

On Friday, the world shook

Last Friday, the world shook. You can be forgiven for not noticing, for, it was the business world that shook. GE announced it was going to virtually sell all of GE Capital. 

GE is one of the, if not THE greatest company on earth. It is the old fashioned industrial conglomerate making everything from aircraft engines to medical equipment. It is known for its legendary business leaders, Reginald Jones, then Jack Welch and then Jeff Immelt. It is known for its excellence in management - it is really the business school where America's future CEOs are produced.  It is the leader of many management trends of the future - Six Sigma, Outsourcing to India ....... you name it and GE was probably the first mover.

All that is fine, but in reality, GE was what it was because of GE Capital. For a long time it contributed 50% of the group profits. Although technically not a bank, GE Capital is one of America's largest "banks". Just before the financial crisis, you would have had to question whether GE was really an industrial company - a full 60% of its profits came from GE Capital.

And then the financial crisis hit. GE, yes even GE, had to resort to a government "bailout" in form of $130 bn of loan guarantees. Suddenly, being a big financial institution was bad news. GE's share price tanked and it lost its coveted AAA rating which it had had for 40 years. The jewel in the crown was sudenly turned into a lump of coal.

GE Capital turned around. Of course it would, given the outstanding management talent at its disposal. It is back to being very profitable and last year contributed more than 40% to GE's profits.  But there are two lasting legacies - one is that GE became a SIFI" , the dreaded tag of a "Systematically Important Financial Institution" , which essentially is a sticker from the US government that it was too big to fail. SIFIs are subject to incredibly strict government requirements,  tight regulation and surveillance post the financial crisis. The second legacy was GE's share price. In 2007 it was $42. Today, despite the resurrection of GE Capital, it is $25 or so. The market is simply scared of large financial institutions and the risks they pose.

GE did what it does best - take a hard decision. It has been announcing its intention to trim down GE Capital for quite a while. It had started to spin off bits and pieces. But on Friday, it announced a virtual disposal of GE Capital. It would sell off almost everything over two years and hold only the parts of GE Capital that were intimately tied to its industrial business - like aircraft leasing. The mighty GE is shrinking. It will become a smaller conglomerate. And it will become an industrial group once again.

This is a big big move in the world of business and finance. But you may not have read about it at all in the papers. Its not as exciting as Justin Bieber's latest antics, or if you live in my country, Anushka Sharma !!

    Really Walmart ? Plumbing ??

    Walmart closed down five stores in the US. What's new ? This happens all the time - stores are closed and stores are opened. So what ? What is strange is the reason it was done and the manner in which it was done.

    Walmart announced to its employees two hours before store closing time on Monday last week that the stores were closing from the next day.  The reason stated was plumbing problems !! That is the most unusual reason you might have heard for stores to close.

    Walmart has a history of treating its workers, shall we say, a little less generously than most other businesses. But , even by their standards, this closure is curious. One of the stores that was closed was at the forefront of a strike a couple of years ago.  The whiff, that this was retaliation against the workers is strong. But the other four stores weren't the leaders of the strike - so why these five ? Where the four simply lumped together to deflect the real intention to get at those b%^&*s who dared go on strike ?

    Telling people two hours before shift ends that they don't have to come tomorrow does not appear to be a humanly good thing to do. But there is no place for human feelings  in the business world it seems, at least in Walmart. To be fair Walmart is saying that all employees would be paid two months paid leave when they can apply for jobs in other Walmart stores and that if they didn't succeed in two months, the permanent employees would be paid some severance pay.

    The ostensible logic for the short notice to employees is that apparently if you give them a longer notice, they would all steal the store blind ! A more "acceptable" reason is  that they don't have to legally do any better.  Is this what employee relations in Walmart have come to ?

    The stated reason for closure is urgent and pressing plumbing problems that have to be fixed. Really ??? Nobody the city or amongst the employees seem to have heard of the "ongoing and pervasive" sewer problems before. No permissions have been sought from city councils for any repairs. Its difficult to believe that the emergency closure of stores is really because the loo is leaking.

    Even the most charitable view of the issue has to concede that Walmart could have handled the whole thing better. But this is probably a symptom of the real problem - Walmart management does not rank handling employees with care and concern very highly amongst its business priorities. That's a sad commentary on the business world. If one of the largest corporations and employers in the world, treats its employees as impersonally as a pallet of stock, then it is no wonder that they are hated as viciously as they are. The very word corporation has become a four letter word. And by their actions,  corporations are doing their very best to justify that tag.

    What a stink !

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