Last time I checked Walmart is still going good on its India plans! So the question becomes imprtant. Will Walmart kill all the small retailers as it did in the North America? If you ask me I dont think so. People thought the same thing when retail chains like Sam's or Food Bazaar cropped up all over India. They said now thats the end of small retailers, at least in urban India. But it turns out thats not the case.
For example, Sam's Food or the ealrier Food World opened on a road populated by middle and lower middle income groups in Pune. Its venture lasted about an year and then it had to vaccate the premises. On some other road with better income households, all the old retailers are still in business along with Sam's food.
One might argue that Walmart's model is different than the exisiting supermarket chains. Its about lower price every day and squeezing costs. However, was it not the case even with McDonalds? Did all the Vada-pav and other small time food vendors go out of the market? Definitely not.
Infact what happened was more interesting. McDonalds, which essentially caters to middle and lower income households in North America, is a fun place to be in for families, kids to collegians in India. When it opened shop in Pune, people dressed up and stood in a line to get a bite of Indianised burgers and other food stuff!
So if Walmart opens shop in India who will go there? Ofcourse people who currently shop in Supermarkets and no small retailer will go out of business.
I agree this is arguement by analogy and hence may or may not hold. However, it seems to be the most likely thing to happen, unless Walmarts revolutionizes the the whole supplty chain. For example if it decides to directly contract with farmers for vegetables and supplying food grains it might be able to lower the prices. But to the extent that families do not care about a few pebbles in the bag of rice from the retailer below the apartment building, Walmart still faces a huge challenge. The prices of Walmart will have to be sufficiently lower to lure the customers who do not value mild variations in quality or are price sensitive.
And then there is this whole issue of how people shop in different societies. Buying behavior in North America is completely different than in India. Will this have any bearing on Walmart's business prospects?
Well some more thoughts on this later! In the meanwhile if you think of some thing feel free to comment.
Saturday, December 8, 2007
Thursday, November 29, 2007
Swastika!
It was a touching and yet a clichéd moment on the latest Gray's Anatomy. A patient refused to be examined by a lady doctor and when a male doctor offers to help, again says no. So it turns out that the patient being a perfect racist refuses to be examined both by the initial female and male doctors because they were black! Finally he has to put up with the black lady doctor and while performing the surgery she makes an incision running across the 'swastika' that the guy has tattooed on his abdomen. Now thats what I am talking about. Ain't it a fabulous token gesture?
Jokes apart and though I would love to see such parochial attitudes marginalized, it is surprising to see how one man can completely twist the meaning and significance of a symbol!
'Swastika' is an Indian symbol (I am told that most of the ancient societies had some version of this symbol) and represents well being and auspiciousness in every day Hindu life. Many houses will have it placed on the threshold of their house in some from or the other. So as much as I hate what Hitler and folks did to the Jews, I hate to see the symbol of auspiciousness mutilated to represent utter disgust and hate.
What is actually more disturbing is that the pairing of Swastika with hatred in peoples mind in this part of the world is so strong, that it almost never seems to occur to anyone that believing in such association may hurt some other societies at the same time. Every time you associate Swastika with hatred you disregard the existence of a belief of almost a billion people in country called India!
So whats the solution? People need to be educated and the concerned activists and the press should refrain from stereotyping things. If you find this difficult and implausible at least call it by its German name dammit!
Jokes apart and though I would love to see such parochial attitudes marginalized, it is surprising to see how one man can completely twist the meaning and significance of a symbol!
'Swastika' is an Indian symbol (I am told that most of the ancient societies had some version of this symbol) and represents well being and auspiciousness in every day Hindu life. Many houses will have it placed on the threshold of their house in some from or the other. So as much as I hate what Hitler and folks did to the Jews, I hate to see the symbol of auspiciousness mutilated to represent utter disgust and hate.
What is actually more disturbing is that the pairing of Swastika with hatred in peoples mind in this part of the world is so strong, that it almost never seems to occur to anyone that believing in such association may hurt some other societies at the same time. Every time you associate Swastika with hatred you disregard the existence of a belief of almost a billion people in country called India!
So whats the solution? People need to be educated and the concerned activists and the press should refrain from stereotyping things. If you find this difficult and implausible at least call it by its German name dammit!
Wednesday, October 3, 2007
India & US: Some Conundrums-I
If I tell someone in Pune that you would require to pay 30% more for a bus ride to Mumbai than driving his or her own car on the beautiful expressway, I will be written off as a jerk! And here I am, doing exactly the same thing when I ride the Bonanza Lines to NY City from Storrs.
Let me back up with some figures. NY City is around 145 miles from Storrs. On an average I would have to pay $60 for a round trip ticket on a bus. Whereas if I drive a car with 30 mpg yield I require 10 gallons of gas costing around $30. Add a toll of $5 and the total comes to $35. If the mileage drops then the cost will go up. However, I am assuming that by now we are sane enough to realize that the Japanese are better at making cars! So there it is. I actually pay more than 30% for a bus ride than a ride in a car. In India, a bus ride will cost me less than half of what it would cost to drive a car for the given distance.
This is one of the many conundrums that intrigue me when I compare things back home with that in US. So the million dollar question is how de we reason out this seeming anomaly. Riding a public or a shared vehicle should cost me less than the fancy ride in ones own air-conditioned car. There are economies of scale when it comes to public transport and hence should be cheaper. At least in India that’s hard nosed common sense. But it turns out that common sense is after all indeed not common. It is context specific.
One needs to pry a bit deeper to see the contextual reason in this. An important factor is of course competition. If I take the case of market for travel from Pune to Mumbai (approximately 110 miles apart form each other) there is much more competition than in the market for travel between Storrs to NY city. You have the State rail and road transport, a multitude of private bus operators, cab service and so on. There is a range of service available depending on how deep you want to go in your pockets. This is certainly not the case here. You have a lone Bonanza or Greyhound providing public intercity transportation or you are on your own.
Is this monopoly enough to generate such opposing differentials? May or may not be. However, one can certainly think of some additional factors.
For e.g. owning a car is a much common thing in US than it is in India. People can also afford to place much more value on time and convenience. So a person riding a bus constitutes an anomaly in US. He or she will be charged more exactly for being that and constituting an inelastic demand. This is certainly not the case in India.
For a variety of reasons owning a car is not as common as in US and driving longer distances is even less so. Hence a person choosing to ride a bus is not an anomaly. He is not relatively disadvantaged because he does not have an access to a car ride. It’s a common way of travelling and being relatively poor, people tend to place a lower value on time and convenience.
The cheaper state transport in India also works well to keep the market competitively priced. The presence of the state probably works as in the contestable markets theory.
Can think of any more factors? As they say, take your pick!
Let me back up with some figures. NY City is around 145 miles from Storrs. On an average I would have to pay $60 for a round trip ticket on a bus. Whereas if I drive a car with 30 mpg yield I require 10 gallons of gas costing around $30. Add a toll of $5 and the total comes to $35. If the mileage drops then the cost will go up. However, I am assuming that by now we are sane enough to realize that the Japanese are better at making cars! So there it is. I actually pay more than 30% for a bus ride than a ride in a car. In India, a bus ride will cost me less than half of what it would cost to drive a car for the given distance.
This is one of the many conundrums that intrigue me when I compare things back home with that in US. So the million dollar question is how de we reason out this seeming anomaly. Riding a public or a shared vehicle should cost me less than the fancy ride in ones own air-conditioned car. There are economies of scale when it comes to public transport and hence should be cheaper. At least in India that’s hard nosed common sense. But it turns out that common sense is after all indeed not common. It is context specific.
One needs to pry a bit deeper to see the contextual reason in this. An important factor is of course competition. If I take the case of market for travel from Pune to Mumbai (approximately 110 miles apart form each other) there is much more competition than in the market for travel between Storrs to NY city. You have the State rail and road transport, a multitude of private bus operators, cab service and so on. There is a range of service available depending on how deep you want to go in your pockets. This is certainly not the case here. You have a lone Bonanza or Greyhound providing public intercity transportation or you are on your own.
Is this monopoly enough to generate such opposing differentials? May or may not be. However, one can certainly think of some additional factors.
For e.g. owning a car is a much common thing in US than it is in India. People can also afford to place much more value on time and convenience. So a person riding a bus constitutes an anomaly in US. He or she will be charged more exactly for being that and constituting an inelastic demand. This is certainly not the case in India.
For a variety of reasons owning a car is not as common as in US and driving longer distances is even less so. Hence a person choosing to ride a bus is not an anomaly. He is not relatively disadvantaged because he does not have an access to a car ride. It’s a common way of travelling and being relatively poor, people tend to place a lower value on time and convenience.
The cheaper state transport in India also works well to keep the market competitively priced. The presence of the state probably works as in the contestable markets theory.
Can think of any more factors? As they say, take your pick!
Friday, August 24, 2007
Freakonomics
For those bedazzled by the wit and word of Steven Levitt, please read this equally entertaining and illuminating review by none other than Ariel Rubinstein.
Thursday, August 23, 2007
Puzzles or Anomalies!
Economics is sometimes weird and economists weirder. Here is how the story goes. The world is too complicated to analyze completely. So what do we do? We could write and write and fill up volumes about nothing and everything and still obviously be far away from understanding anything. But Smith was smart and Marshall smarter. They modeled! Culled away unnecessary details and built a fabulous, frictionless and benchmark world where everything happened instantaneously. The curious breed of smart economists (read macro-economists!) decided to go further and knock themselves out by fine tuning this idealized world to the maximum extent possible. What did you say? You might break your finger on Aug. 24, 2020. No problem. Assume there is a insurance policy you can buy now to cover this exigency! This is how we got complete markets.
What will prices be in with these complete markets? Simulate and there you go- you have prices of goods, assets and what not. You name it and we tell you how much it should cost! Wait a minute, what did you say? The price seems to low than what you would have set given a free reign? Thats not good. Then my theory is useless! Oh my God! I just got a Nobel!.
What happened next was the economist wrote another paper telling how his earlier theory under predicts the actual returns in the economy and therefore we have a puzzle to deal with.
Now being an amateur economist (remember, I am supposed to be more dangerous than an economist!) I cannot come to terms with this idea of calling something a puzzle when all it is a self full filing anomaly. It is obvious that when you abstract from so many details which by some criteria deem unnecessary, the implications are ought to be at odds with reality. So the original theory itself came with the anomalous implication. What was new and unexpected about it to call it a puzzle?
No one has time for this semantics, though. As I write this post there is probably one more paper being written about a claim to a solution to this puzzle. And mind well, there are too many proposed solutions around already. Therefore, we need some more papers to suggest some criteria to choose among them. Sift and refine them, till only a generally acceptable one remains.
Sometimes it gets tough to get going with this seemingly nonsensical way of doing things. But then one realizes thats what progress is about. Dig and fine tune till you get to the truth. The ever elusive but constantly beckoning truth.
I guess it is far more easier to engage in this kind of intellectual exercise if we do it for the sake of fun of doing it. Its akin to saying you like solving and designing new puzzles. Anomalies masquerading as puzzles! Or is it the other way round?
hmm......let me see......here is how the story goes.......
you know I can go on like this right! I told you I am an amateur economist ;).
What will prices be in with these complete markets? Simulate and there you go- you have prices of goods, assets and what not. You name it and we tell you how much it should cost! Wait a minute, what did you say? The price seems to low than what you would have set given a free reign? Thats not good. Then my theory is useless! Oh my God! I just got a Nobel!.
What happened next was the economist wrote another paper telling how his earlier theory under predicts the actual returns in the economy and therefore we have a puzzle to deal with.
Now being an amateur economist (remember, I am supposed to be more dangerous than an economist!) I cannot come to terms with this idea of calling something a puzzle when all it is a self full filing anomaly. It is obvious that when you abstract from so many details which by some criteria deem unnecessary, the implications are ought to be at odds with reality. So the original theory itself came with the anomalous implication. What was new and unexpected about it to call it a puzzle?
No one has time for this semantics, though. As I write this post there is probably one more paper being written about a claim to a solution to this puzzle. And mind well, there are too many proposed solutions around already. Therefore, we need some more papers to suggest some criteria to choose among them. Sift and refine them, till only a generally acceptable one remains.
Sometimes it gets tough to get going with this seemingly nonsensical way of doing things. But then one realizes thats what progress is about. Dig and fine tune till you get to the truth. The ever elusive but constantly beckoning truth.
I guess it is far more easier to engage in this kind of intellectual exercise if we do it for the sake of fun of doing it. Its akin to saying you like solving and designing new puzzles. Anomalies masquerading as puzzles! Or is it the other way round?
hmm......let me see......here is how the story goes.......
you know I can go on like this right! I told you I am an amateur economist ;).
Why Blog?
It seems intellectually fashionable to have one nowadays, I suppose or at least hope! It is more like a slate for me. Jot down random thoughts on random topics and see if someone else has given any thought to it. It is an excursion in randomness with a lingering, now and then, on the intangible but ever present sign posts of who we are. It is this intellectual connection that presents itself as a motivation to go on in an otherwise pretty routine and insipid life. The feeling, or some may choose to call it a semblance, of being wiser after every word written down or read is what I am craving for.
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