Be focussd, because that is what ultimately pays.
It is not enough if you are knowledgeable; you need to be an expert in any field.
It is not luxary but a neccessity. This is not just true for individuals but also for organisations.
HDFC is a classic example for how successful focus could bring into organisation; it was started as house financing comapany and it has remained so. Not that, there were no innovations; but, all of them were concentrated and focused on improving house financing business of the company. Now, it is one of the highly professional organisation and consequently highly rated - nationally and internationally.
Another shining example is Sundaram Finance Limited. They remained a vehicle finance company and largely a truck finance company. They certainly have all the nuances of this trade. That stood them during the crisis of 2000. They have been the true leaders in this field, undisputedly. Though they tried to focus also on car finance , that remained largely restricted to promote sales of their car dealerships.
Shriram transport was highly rumoured to go belly up about 15 years back for a lot of reasons; all of them might not have been fully true. They did not go belly up; on the contrary, they are big and beautiful today. Their share prices are one of the highest for any NBFC. The reason could be that they remain focussed on doing truck finance and more in sub-prime segment. They appeared to have developed an expertise in sub-prime truck financing pan india and they excell, I believe, in that segment.
More examples are from latest entrants; gold loan companies - Muthoot & Manapuram. They are focussed on gold loan and the author expects them to be successful if they stuck to pawn broking.
Lot of finance companies (NBFCs in India) , and even big ones cannot call themselves leaders in any segment. They are not focussed; they want to be in all segments to be fashionably called multi-product company, big company or diversified company, etc. The risk is added not diversified, as one would think.
One of the promoters had a policy: " emerge as a leader in a choosen category or exit". True to his statement, he exited his NBFC business. Once, his companies were leaders in car finance. He diversified into truck financing and merchant banking including corproate funding; his companies got into problem. He exited. He continues, I believe, with this policy even today.
In case of captive companies, they must remain not only focussed but also restricted to thier role to promote captive products. GMAC was brought into India as a captive finance company to promote sales of General Motors' chevy cars. Some smart CEO ( when GM was sturuggling to start in India) convinced higher-ups to diversify into financing all brands of cars and also used cars in India. This strategic deviation, which has never been done in other parts of the world, cost GMAC India's operations many millions. The focus / the purpose for which GMAC arrived in India is lost; so was the support to General Motors at a time when they desparetly needed their finance arm to help stabilise. GMAC survived for a decade; because they remained focussed on car finance. But, they have lost their relavance in India; General Motors learnt to live without GMAC. Newer bosses found the truth and pulled the plug. GMAC is gone; closure of the operation cost the company, I have heard, about $ 20 million. It certainly did not earn as much in a decade of its existance in India. While the top brasses tried their level best to bring GMAC's focus on GM in the later years, local leaders could not succeed, partly because General Motors learnt to ignore GMAC. So, the penultimate Managing Director of GMAC went to the extreme to convince his immediate Spain boss to allow financing three wheelers in India. Obviously, nothing helped.
With more products, even CEO's attention span does not remain focussed; consequently, some products earnings would subsidise others. This may turn chronic and will lead to a serious crisis. There is a huge market for financing each product segment; select & stick to one.
And, be focussed. This minimises the loss and subsequent closure of the company.
It is not enough if you are knowledgeable; you need to be an expert in any field.
It is not luxary but a neccessity. This is not just true for individuals but also for organisations.
HDFC is a classic example for how successful focus could bring into organisation; it was started as house financing comapany and it has remained so. Not that, there were no innovations; but, all of them were concentrated and focused on improving house financing business of the company. Now, it is one of the highly professional organisation and consequently highly rated - nationally and internationally.
Another shining example is Sundaram Finance Limited. They remained a vehicle finance company and largely a truck finance company. They certainly have all the nuances of this trade. That stood them during the crisis of 2000. They have been the true leaders in this field, undisputedly. Though they tried to focus also on car finance , that remained largely restricted to promote sales of their car dealerships.
Shriram transport was highly rumoured to go belly up about 15 years back for a lot of reasons; all of them might not have been fully true. They did not go belly up; on the contrary, they are big and beautiful today. Their share prices are one of the highest for any NBFC. The reason could be that they remain focussed on doing truck finance and more in sub-prime segment. They appeared to have developed an expertise in sub-prime truck financing pan india and they excell, I believe, in that segment.
More examples are from latest entrants; gold loan companies - Muthoot & Manapuram. They are focussed on gold loan and the author expects them to be successful if they stuck to pawn broking.
Lot of finance companies (NBFCs in India) , and even big ones cannot call themselves leaders in any segment. They are not focussed; they want to be in all segments to be fashionably called multi-product company, big company or diversified company, etc. The risk is added not diversified, as one would think.
One of the promoters had a policy: " emerge as a leader in a choosen category or exit". True to his statement, he exited his NBFC business. Once, his companies were leaders in car finance. He diversified into truck financing and merchant banking including corproate funding; his companies got into problem. He exited. He continues, I believe, with this policy even today.
In case of captive companies, they must remain not only focussed but also restricted to thier role to promote captive products. GMAC was brought into India as a captive finance company to promote sales of General Motors' chevy cars. Some smart CEO ( when GM was sturuggling to start in India) convinced higher-ups to diversify into financing all brands of cars and also used cars in India. This strategic deviation, which has never been done in other parts of the world, cost GMAC India's operations many millions. The focus / the purpose for which GMAC arrived in India is lost; so was the support to General Motors at a time when they desparetly needed their finance arm to help stabilise. GMAC survived for a decade; because they remained focussed on car finance. But, they have lost their relavance in India; General Motors learnt to live without GMAC. Newer bosses found the truth and pulled the plug. GMAC is gone; closure of the operation cost the company, I have heard, about $ 20 million. It certainly did not earn as much in a decade of its existance in India. While the top brasses tried their level best to bring GMAC's focus on GM in the later years, local leaders could not succeed, partly because General Motors learnt to ignore GMAC. So, the penultimate Managing Director of GMAC went to the extreme to convince his immediate Spain boss to allow financing three wheelers in India. Obviously, nothing helped.
With more products, even CEO's attention span does not remain focussed; consequently, some products earnings would subsidise others. This may turn chronic and will lead to a serious crisis. There is a huge market for financing each product segment; select & stick to one.
And, be focussed. This minimises the loss and subsequent closure of the company.
