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Saturday, November 22, 2008

Chinese Fables-The Pretty Lady

Once upon a time a big monk and a little monk were travelling together. They came to the bank of a river and found the bridge was damaged. They had to wade across the river. There was a pretty lady who was stuck at the damaged bridge and couldn't cross the river. The big monk offered to carry the pretty lady across the river on his back. The lady accepted. The little monk was shocked by the move of the big monk. "How can big disciple brother carry a lady when we are supposed to avoid all intimacy with females," thought the little monk. But he kept quiet.
The big monk carried the lady across the river and the small monk followed unhappily. When they crossed the river, the big monk let the lady down and they parted ways with her. All along the way for several miles, the little monk was very unhappy with the act of the big monk. He was making up all kinds of accusations about the big monk in his head. This got him madder and madder.
But he still kept quiet. And the big monk had no inclination to explain his situation.

Finally, at rest-point many hours later, the little monk could not stand it any further, he burst out angrily at the big monk. "How can you claim yourself a devout monk, when you seize the first opportunity to touch a female, especially when she is very pretty. All your teachings to me make you a big hypocrite." The big monk looked surprised and said, "I had put down the pretty lady at the river bank many hours ago, how come you are still carrying her along?"
[This very old Chinese zen story reflects the thinking of many people today. We encounter many unpleasant things in our life, they irritate us and they make us angry. Sometimes, they cause us a lot of hurt, sometimes they cause us to be bitter or jealous. But like the little monk, we are not willing to let them go away. We keep on carrying the baggage of the "pretty lady" with us. We let them keep on coming back to hurt us, make us angry, make us bitter and cause us a lot of agony. Why? Simply because we are not willing to put down or let go of the baggage of the "pretty lady". We should let go of the pretty lady immediately after crossing the river, immediately after the unpleasant event is over. This will immediately remove all our agonies. There is no need to be further hurt by the unpleasant event after it is over. It is just that simple.

Chinese Fables-The Turtles

A turtle family decided to go on a picnic. Turtles, being naturally slow about things, took seven years to prepare for their outing. Finally the turtle family left home looking for a suitable place for their outing. During the second year of their journey they found a place ideal for them at last! For about six months they cleaned up the area, unpacked the picnic basket, and completed the arrangements. Then they discovered they had forgotten the salt. A picnic without salt would be a disaster, they all agreed. After a lengthy discussion, the youngest turtle was chosen to retrieve the salt from home. Although he was the fastest of the slow moving turtles, the little turtle whined, cried, and wobbled in his shell. He agreed to go on one condition: that no one would eat until he returned.
The family consented and the little turtle left. Three years passed and the little turtle had not returned. Five years ... six years... then on the seventh year of his absence, the oldest turtle could no longer contain his hunger. He announced that he was going to eat and begun to unwrap a sandwich. At that point the little turtle suddenly popped out from behind a tree shouting, "SEE! I knew you wouldn't wait. Now I am not going to go get the salt."
[Some of us waste our time waiting for people to live up to our expectations. We are so concerned about what others are doing that we don't do anything ourselves.]

Chinese Fables- The Frogs

A farmer came into town and asked the owner of a restaurant if he could use a million frog legs. The restaurant owner was shocked and asked the man where he could get so many frog legs! The farmer replied, "There is a pond near my house that is full of frogs---millions of them. They all croak all night long and they are about to make me crazy!" So the restaurant owner and the farmer made an agreement that the farmer would deliver frogs to the restaurant, five hundred at a time for the next several weeks. The first week, the farmer returned to the restaurant looking rather sheepish, with two scrawny little frogs. The restaurant owner said, "Well ... where are all the frogs?" The farmer said, "I was mistaken. There were only these two frogs in the pond. But they sure were making a lot of noise!"
[Next time you hear somebody criticizing or making fun of you, remember, it's probably just a couple of noisy frogs. Also remember that problems always seem bigger in the dark. Have you ever laid in your bed at night worrying about things which seem almost overwhelming like a million frogs croaking? Chances are pretty good that when the morning comes, and you take a closer look, you'll wonder what all the fuss was about.

Sunday, November 16, 2008

Business Lesson: Know Your Enemy

There's one simple approach that isn't perfect but will tend to keep you from making mistakes. Simply stated, it is Know Your Competitors.

Now, that might sound very simplistic. Of course you have to want to know your competitor. What big company doesn't? Well, this might come as a shock but many of those troubled brands of which I've written, either didn't recognize or badly underestimated their most important enemy in the marketplace.

Consider the following:

  • General Motors never saw the German or the Japanese small cars as threats. Instead they ended up competing with their own brands. By the time they got around to the Saturn, it was too late.
  • Xerox thought IBM was their enemy, when it was Hewlett-Packard and the laser printer that did them in. Digital Equipment never saw the desktop computer as having the potential to undermine their mini-computer franchise. Once IBM's PC was established, DEC's days were numbered.
  • AT&T never saw MCI and Sprint as the legitimate competitors they became. They never exploited the technological differences.
  • Levi's never saw cheaper, me-too jeans as something that could overwhelm them in a category they invented.

I could go on, but you probably get the idea. While each case has its extenuating circumstances, the one thing that could have kept these companies out of trouble would have been a clearer perspective on the enemy. Because with this, you know what to do before you get into trouble. Here are a few more competitive guidelines to follow.

  1. Avoid a competitor's strength. Exploit their weakness.

    When a competitor is known for one thing, you have to be known for something else. Quite often, that something else is a built-in weakness that can be exploited. If McDonald's strength is that of being a little kids' place, Burger King can exploit that by being a grown-up kids place.

    IBM is known for large proprietary computer systems. Hewlett-Packard can exploit that by offering open, distributed computer systems. But remember, we're talking strength and weakness in the minds of the marketplace. Marketing is a battle of perceptions. What you're really doing is exploiting perceptions.

  2. Always be a little bit paranoid about competition.

    Remember, we're living in a world where everyone is after everyone's business. You have to realize that one of your competitors is probably in a meeting figuring out how to nail you in some way or another. You must constantly be gathering information on what your competitors are planning.
    This can come from an astute sales force or a friendly customer or from some research. Never underestimate your competitor. In fact, you're safer if you overestimate them. AT&T, DEC and Levi's are testimony to underestimating the kind of damage competitors can do even to market leaders.

  3. Competitors will usually get better, if pushed.

    Companies that figure they can exploit a sloppy competitor make big mistakes. They ridicule their product or service and say they can do things better. Then, lo and behold, their big competitor suddenly improves and that so-called advantage melts away.
    No 2 Avis did indeed try harder but Hertz quickly improved their efforts. Then one day they ran a devastating ad with the headline, "For years, Avis has been telling you they are No 2. Now we're going to tell you why." Then they went on to lay out all their improvements. Avis never quite recovered. Never build your program around your competitor's mistakes. They will be corrected in short order.

  4. Squash your smaller competitors as quickly as possible.

    In war, the generals have an important maxim about being attacked. Here's how they put it: The best place to deal with an invading force is to get them in the water where they have the least manoeuvrability. Next, attack them on the beaches where they have limited manoeuvrability. But most of all don't let them get inland where they can develop momentum.

    So it is in business, you must move against your smaller competitors as soon as possible, so as to not let them develop legitimacy and momentum. General Motors hung back when the Germans and Japanese invaded the US market with small cars. They felt they couldn't make any money on this type of car, so they quickly rationalized their position by convincing themselves that Americans wanted big comfortable cars. Wrong.

    Gillette on the other hand countered BIC's disposable razors with the twin-bladed disposable called Good News. I suspect they don't make much money on these razors (They love to get us by the blades) but today they dominate this category as well as the traditional and more profitable category of cartridge razors.

  5. If you've got a bigger competitor, avoid being squashed.

    Here's the other side of the coin. How do you avoid a big competitor that has just taken my advice? In two words, be careful.
    The best strategy is to sneak up on a bigger competitor early on and never appear to be threatening. Slowly build your business and momentum in places where you're less visible. After you've got some size and momentum, you can step up and better deal with the bigger players.

    Wal-Mart really got their start in the small C and D counties of America where their main competitors were only mom-and-pop retailers. Only after they built size and momentum did they move into the larger A and B counties, where they confronted the other big-mass merchandisers.

    Southwest Airlines pursued a similar strategy of slowly building their route structure in non-hub airports and limited routes. They started in Texas, moved to the West Coast, then spread up into the Mid-West and now are working their way around the East. By the time the big airlines took them on, Southwest had real momentum.

    And Herb Kelleher maintained some real differences from his bigger competitors that kept his costs down: no food, no reservations, no hubs and just one kind of place.

  6. If you're losing the battle, shift the battlefield.

    A company that takes a licking will not keep ticking. (Only a Timex watch does that.) Even companies with deep pockets will suffer in this very competitive world. A better approach is to shift your efforts to a place where you can better take advantage of your strengths.

    By manufacturing in the US, Levi's couldn't compete on price with the me-too jeans manufacturers. By shifting to an authentic or original strategy, they were playing to their strength while making the case of paying a little more for the jeans. And it also gave them some time to shift manufacturing offshore.

    You want to move the marketplace to a point where you can use your point of difference against your competitor instead of being hammered by your competitor's point of difference.

  7. If a bigger competitor is about to attack, you should attack first.

    Finally, you must face reality about size and force. As in war, the bigger armies generally tend to overwhelm smaller armies. More people shooting at fewer people almost always results in a victory for the side with more people.

    So if you're faced with a major attack, you must find a way to attack first if for no other reason than to keep your competitor distracted and off balance. If you don't, you will be over-run quickly and decisively.

    That was exactly what faced DEC as IBM was readying its small computer attack with the PC. An early launch of a more powerful, mini-computer based desktop machine would have dramatically slowed down IBM's penetration into the business market. It would have raised questions about whether the IBM PC was powerful and serious enough.

    Instead, by not attacking, it gave IBM time to improve the power and performance of these machines by introducing new generations (the XT and the AT). In short order, DEC's decline was set in place.

Source: Unknown

Thursday, November 13, 2008

CreditCard & SavingA/c with the same bank? BEWARE!

The advertisement for a bank uses the following punchline:Hum Hai Na (we are there for you). This bank also offers a credit card. And apparently, it's pretty easy to get one.

Shiju Joseph, 31, an engineer with a private firm in Delhi, was enticed and ended up with XYZ Bank's preferred credit card in April 2007.

He signed the credit card application form without bothering to read the terms and conditions.

Big mistake.

What happened next:

Shiju defaulted on his payment from October 2007 to March 2008. He made a part payment but due to some miscommunication, the amount was not recorded in his bill. In April 2008, the bank debited the outstanding amount from Shiju's savings account without informing him!

Shiju was left wondering how the bank could do this as his savings account was in no way connected to his credit card. So, he e-mailed the bank asking who gave them the authority to deduct the money. I reproduce below, in verbatim, the bank's reply:

In addition to the general right to set off or other right conferred by law or under any other agreement, XYZ Bank may, without notice, combine or consolidate the standing balance on the Card Account with any other account(s) which the Card-Member maintains with XYZ Bank and its Group Companies, and set-off or transfer money standing to the credit of such other account(s) in or towards the satisfaction of the card-member's liability to XYZ Bank under his/her Card Account. Hence the amount has been marked as lien in your savings account.

I expected the T&C to be mentioned in the credit card application form. So, I hopped across to a branch and got a copy of the form. I read it but to my surprise there was no such clause.

I was about to give up and look for another explanation, when the very first point (of 54 points in the T&C) caught my eye: To get the complete version of the credit card terms and conditions, please visit the web site.

The title of the page that I was reading was 'the most important Terms & Conditions' and not 'complete terms and conditions'. To get the complete T&C, I had to visit the bank web site. And to get to this page, I had to apply for a preferred credit card online!

I filled up personal details such as my educational qualifications, residential status, etc. Once I finished filling up the forms, I found a link to the T&C at the bottom of the page.

T&C went into 23 pages!

After spending much time mulling over some vague clauses, I came across the relevant clause on Page 17. So, when Shiju signed the credit card application form, he had agreed to all these 23 pages of T&C!

I spoke to lawyer Sunil Ramani to find out if Shiju has a legal recourse. Ramani explained that Shiju could try and file a complaint with the Consumer Guidance Society of India (CGSI). 'But I am not sure if there is much they can do,' he added. MV Kamath of the CGSI also confirmed the same.

You may argue that banks can't fool you by inserting such clauses in long and winding documents, but they are on the right side of the law. Your only recourse is to be cautious.

The basics before getting a card:

1. Don't ignore the fine print. Even if it's a tedious job but it can save you a lot of trouble, not to mention, money.

2. Whatever the reason, don't default on credit card dues because credit cards are nothing but unsecured loans and banks use every method to recover their money, while being legally correct at the same time.

So, do not be enticed by catchy punchlines!

Disclaimer: While efforts have been made to ensure the accuracy of the information provided in the content, the web site or the author shall not be held responsible for any loss caused to any person whatsoever who accesses or uses or is supplied with the content (consisting of articles and information).


The New World Economies-India and China

It may not top the must-see list of many tourists. But to appreciate Shanghai's ambitious view of its future, there is no better place than the Urban Planning Exhibition Hall, a glass-and-metal structure across from People's Square. The highlight is a scale model bigger than a basketball court of the entire metropolis -- every skyscraper, house, lane, factory, dock, and patch of green space -- in the year 2020.

There are white plastic showpiece towers designed by architects such as I.M. Pei and Sir Norman Foster. There are immense new industrial parks for autos and petrochemicals, along with new subway lines, airport runways, ribbons of expressway, and an elaborate riverfront development, site of the 2010 World Expo. Nine futuristic planned communities for 800,000 residents each, with generous parks, retail districts, man-made lakes, and nearby college campuses, rise in the suburbs. The message is clear. Shanghai already is looking well past its industrial age to its expected emergence as a global mecca of knowledge workers. "In an information economy, it is very important to have urban space with a better natural and social environment," explains Architectural Society of Shanghai President Zheng Shiling, a key city adviser.

It is easy to dismiss such dreams as bubble-economy hubris -- until you take into account the audacious goals Shanghai already has achieved. Since 1990, when the city still seemed caught in a socialist time warp, Shanghai has erected enough high-rises to fill Manhattan. The once-rundown Pudong district boasts a space-age skyline, some of the world's biggest industrial zones, dozens of research centers, and a bullet train. This is the story of China, where an extraordinary ability to mobilize workers and capital has tripled per capita income in a generation, and has eased 300 million out of poverty. Leaders now are frenetically laying the groundwork for decades of new growth.

Now hop a plane to India. It is hard to tell this is the world's other emerging superpower. Jolting sights of extreme poverty abound even in the business capitals. A lack of subways and a dearth of expressways result in nightmarish traffic.

But visit the office towers and research and development centers sprouting everywhere, and you see the miracle. Here, Indians are playing invaluable roles in the global innovation chain. Motorola, (MOT ) Hewlett-Packard (HPQ ), Cisco Systems (CSCO ), and other tech giants now rely on their Indian teams to devise software platforms and dazzling multimedia features for next-generation devices. Google (GOOG ) principal scientist Krishna Bharat is setting up a Bangalore lab complete with colorful furniture, exercise balls, and a Yamaha organ -- like Google's Mountain View (Calif.) headquarters -- to work on core search-engine technology. Indian engineering houses use 3-D computer simulations to tweak designs of everything from car engines and forklifts to aircraft wings for such clients as General Motors Corp. (GM ) and Boeing Co (BA ). Financial and market-research experts at outfits like B2K, OfficeTiger, and Iris crunch the latest disclosures of blue-chip companies for Wall Street. By 2010 such outsourcing work is expected to quadruple, to $56 billion a year.

Even more exhilarating is the pace of innovation, as tech hubs like Bangalore spawn companies producing their own chip designs, software, and pharmaceuticals. "I find Bangalore to be one of the most exciting places in the world," says Dan Scheinman, Cisco Systems Inc.'s senior vice-president for corporate development. "It is Silicon Valley in 1999." Beyond Bangalore, Indian companies are showing a flair for producing high-quality goods and services at ridiculously low prices, from $50 air flights and crystal-clear 2 cents-a-minute cell-phone service to $2,200 cars and cardiac operations by top surgeons at a fraction of U.S. costs. Some analysts see the beginnings of hypercompetitive multinationals. "Once they learn to sell at Indian prices with world quality, they can compete anywhere," predicts University of Michigan management guru C.K. Prahalad. Adds A. T. Kearney high-tech consultant John Ciacchella: "I don't think U.S. companies realize India is building next-generation service companies."

China and India. Rarely has the economic ascent of two still relatively poor nations been watched with such a mixture of awe, opportunism, and trepidation. The postwar era witnessed economic miracles in Japan and South Korea. But neither was populous enough to power worldwide growth or change the game in a complete spectrum of industries. China and India, by contrast, possess the weight and dynamism to transform the 21st-century global economy. The closest parallel to their emergence is the saga of 19th-century America, a huge continental economy with a young, driven workforce that grabbed the lead in agriculture, apparel, and the high technologies of the era, such as steam engines, the telegraph, and electric lights.

But in a way, even America's rise falls short in comparison to what's happening now. Never has the world seen the simultaneous, sustained takeoffs of two nations that together account for one-third of the planet's population. For the past two decades, China has been growing at an astounding 9.5% a year, and India by 6%. Given their young populations, high savings, and the sheer amount of catching up they still have to do, most economists figure China and India possess the fundamentals to keep growing in the 7%-to-8% range for decades.

Barring cataclysm, within three decades India should have vaulted over Germany as the world's third-biggest economy. By mid-century, China should have overtaken the U.S. as No. 1. By then, China and India could account for half of global output. Indeed, the troika of China, India, and the U.S. -- the only industrialized nation with significant population growth -- by most projections will dwarf every other economy.

What makes the two giants especially powerful is that they complement each other's strengths. An accelerating trend is that technical and managerial skills in both China and India are becoming more important than cheap assembly labor. China will stay dominant in mass manufacturing, and is one of the few nations building multibillion-dollar electronics and heavy industrial plants. India is a rising power in software, design, services, and precision industry. This raises a provocative question: What if the two nations merge into one giant "Chindia?" Rival political and economic ambitions make that unlikely. But if their industries truly collaborate, "they would take over the world tech industry," predicts Forrester Research Inc (FORR ). analyst Navi Radjou.

In a practical sense, the yin and yang of these immense workforces already are converging. True, annual trade between the two economies is just $14 billion. But thanks to the Internet and plunging telecom costs, multinationals are having their goods built in China with software and circuitry designed in India. As interactive design technology makes it easier to perfect virtual 3-D prototypes of everything from telecom routers to turbine generators on PCs, the distance between India's low-cost laboratories and China's low-cost factories shrinks by the month. Managers in the vanguard of globalization's new wave say the impact will be nothing less than explosive. "In a few years you'll see most companies unleashing this massive productivity surge," predicts Infosys Technologies (INFY ) CEO Nandan M. Nilekani.

To globalization's skeptics, however, what's good for Corporate America translates into layoffs and lower pay for workers. Little wonder the West is suffering from future shock. Each new Chinese corporate takeover bid or revelation of a major Indian outsourcing deal elicits howls of protest by U.S. politicians. Washington think tanks are publishing thick white papers charting China's rapid progress in microelectronics, nanotech, and aerospace -- and painting dark scenarios about what it means for America's global leadership.

Such alarmism is understandable. But the U.S. and other established powers will have to learn to make room for China and India. For in almost every dimension -- as consumer markets, investors, producers, and users of energy and commodities -- they will be 21st-century heavyweights. The growing economic might will carry into geopolitics as well. China and India are more assertively pressing their interests in the Middle East and Africa, and China's military will likely challenge U.S. dominance in the Pacific.

One implication is that the balance of power in many technologies will likely move from West to East. An obvious reason is that China and India graduate a combined half a million engineers and scientists a year, vs. 60,000 in the U.S. In life sciences, projects the McKinsey Global Institute, the total number of young researchers in both nations will rise by 35%, to 1.6 million by 2008. The U.S. supply will drop by 11%, to 760,000. As most Western scientists will tell you, China and India already are making important contributions in medicine and materials that will help everyone. Because these nations can throw more brains at technical problems at a fraction of the cost, their contributions to innovation will grow.

American business isn't just shifting research work because Indian and Chinese brains are young, cheap, and plentiful. In many cases, these engineers combine skills -- mastery of the latest software tools, a knack for complex mathematical algorithms, and fluency in new multimedia technologies -- that often surpass those of their American counterparts. As Cisco's Scheinman puts it: "We came to India for the costs, we stayed for the quality, and we're now investing for the innovation."

A rising consumer class also will drive innovation. This year, China's passenger car market is expected to reach 3 million, No. 3 in the world. China already has the world's biggest base of cell-phone subscribers -- 350 million -- and that is expected to near 600 million by 2009. In two years, China should overtake the U.S. in homes connected to broadband. Less noticed is that India's consumer market is on the same explosive trajectory as China five years ago. Since 2000, the number of cellular subscribers has rocketed from 5.6 million to 55 million.

What's more, Chinese and Indian consumers and companies now demand the latest technologies and features. Studies show the attitudes and aspirations of today's young Chinese and Indians resemble those of Americans a few decades ago. Surveys of thousands of young adults in both nations by marketing firm Grey Global Group found they are overwhelmingly optimistic about the future, believe success is in their hands, and view products as status symbols. In China, it's fashionable for the upwardly mobile to switch high-end cell phones every three months, says Josh Li, managing director of Grey's Beijing office, because an old model suggests "you are not getting ahead and updated." That means these nations will be huge proving grounds for next-generation multimedia gizmos, networking equipment, and wireless Web services, and will play a greater role in setting global standards. In consumer electronics, "we will see China in a few years going from being a follower to a leader in defining consumer-electronics trends," predicts Philips Semiconductors (PHG ) Executive Vice-President Leon Husson.

For all the huge advantages they now enjoy, India and China cannot assume their role as new superpowers is assured. Today, China and India account for a mere 6% of global gross domestic product -- half that of Japan. They must keep growing rapidly just to provide jobs for tens of millions entering the workforce annually, and to keep many millions more from crashing back into poverty. Both nations must confront ecological degradation that's as obvious as the smog shrouding Shanghai and Bombay, and face real risks of social strife, war, and financial crisis.

Increasingly, such problems will be the world's problems. Also, with wages rising fast, especially in many skilled areas, the cheap labor edge won't last forever. Both nations will go through many boom and harrowing bust cycles. And neither country is yet producing companies like Samsung, Nokia (NOK ), or Toyota (TM ) that put it all together, developing, making, and marketing world-beating products.

Both countries, however, have survived earlier crises and possess immense untapped potential. In China, serious development only now is reaching the 800 million people in rural areas, where per capita annual income is just $354. In areas outside major cities, wages are as little as 45 cents an hour. "This is why China can have another 20 years of high-speed growth," contends Beijing University economist Hai Wen.

Very impressive. But India's long-term potential may be even higher. Due to its one-child policy, China's working-age population will peak at 1 billion in 2015 and then shrink steadily. China then will have to provide for a graying population that has limited retirement benefits. India has nearly 500 million people under age 19 and higher fertility rates. By mid-century, India is expected to have 1.6 billion people -- and 220 million more workers than China. That could be a source for instability, but a great advantage for growth if the government can provide education and opportunity for India's masses. New Delhi just now is pushing to open its power, telecom, commercial real estate and retail sectors to foreigners. These industries could lure big capital inflows. "The pace of institutional changes and industries being liberalized is phenomenal," says Chief Economist William T. Wilson of consultancy Keystone Business Intelligence India. "I believe India has a better model than China, and over time will surpass it in growth."

For its part, China has yet to prove it can go beyond forced-march industrialization. China directs massive investment into public works and factories, a wildly successful formula for rapid growth and job creation. But considering its massive manufacturing output, China is surprisingly weak in innovation. A full 57% of exports are from foreign-invested factories, and China underachieves in software, even with 35 software colleges and plans to graduate 200,000 software engineers a year. It's not for lack of genius. Microsoft Corp.'s (MSFT ) 180-engineer R&D lab in Beijing, for example, is one of the world's most productive sources of innovation in computer graphics and language simulation.

While China's big state-run R&D institutes are close to the cutting edge at the theoretical level, they have yet to yield many commercial breakthroughs. "China has a lot of capability," says Microsoft Chief Technology Officer Craig Mundie. "But when you look under the covers, there is not a lot of collaboration with industry." The lack of intellectual property protection, and Beijing's heavy role in building up its own tech companies, make many other multinationals leery of doing serious R&D in China.

China also is hugely wasteful. Its 9.5% growth rate in 2004 is less impressive when you consider that $850 billion -- half of GDP -- was plowed into already-glutted sectors like crude steel, vehicles, and office buildings. Its factories burn fuel five times less efficiently than in the West, and more than 20% of bank loans are bad. Two-thirds of China's 1,300 listed companies don't earn back their true cost of capital, estimates Beijing National Accounting Institute President Chen Xiaoyue. "We build the roads and industrial parks, but we sacrifice a lot," Chen says.

India, by contrast, has had to develop with scarcity. It gets scant foreign investment, and has no room to waste fuel and materials like China. India also has Western legal institutions, a modern stock market, and private banks and corporations. As a result, it is far more capital-efficient. A BusinessWeek analysis of Standard & Poor's (MHP ) Compustat data on 346 top listed companies in both nations shows Indian corporations have achieved higher returns on equity and invested capital in the past five years in industries from autos to food products. The average Indian company posted a 16.7% return on capital in 2004, vs. 12.8% in China.

The burning question is whether India can replicate China's mass manufacturing achievement. India's info-tech services industry, successful as it is, employs fewer than 1 million people. But 200 million Indians subsist on $1 a day or less. Export manufacturing is one of India's best hopes of generating millions of new jobs.

India has sophisticated manufacturing knowhow. Tata Steel is among the world's most-efficient producers. The country boasts several top precision auto parts companies, such as Bharat Forge Ltd. The world's biggest supplier of chassis parts to major auto makers, it employs 1,200 engineers at its heavily automated Pune plant. India's forte is small-batch production of high-value goods requiring lots of engineering, such as power generators for Cummins Inc. (CMI ) and core components for General Electric Co. (GE ) CAT scanners.

What holds India back are bureaucratic red tape, rigid labor laws, and its inability to build infrastructure fast enough. There are hopeful signs. Nokia Corp. is building a major campus to make cell phones in Madras, and South Korea's Pohang Iron & Steel Co. plans a $12 billion complex by 2016 in Orissa state. But it will take India many years to build the highways, power plants, and airports needed to rival China in mass manufacturing. With Beijing now pushing software and pledging intellectual property rights protection, some Indians fret design work will shift to China to be closer to factories. "The question is whether China can move from manufacturing to services faster than we can solve our infrastructure bottlenecks," says President Aravind Melligeri of Bangalore-based QuEST, whose 700 engineers design gas turbines, aircraft engines, and medical gear for GE and other clients.

However the race plays out, Corporate America has little choice but to be engaged -- heavily. Motorola illustrates the value of leveraging both nations to lower costs and speed up development. Most of its hardware is assembled and partly designed in China. Its R&D center in Bangalore devises about 40% of the software in its new phones. The Bangalore team developed the multimedia software and user interfaces in the hot Razr cell phone. Now, they are working on phones that display and send live video, stream movies from the Web, or route incoming calls to voicemail when you are shifting gears in a car. "This is a very, very critical, state-of-the-art resource for Motorola," says Motorola South Asia President Amit Sharma.

Companies like Motorola realize they must succeed in China and India at many levels simultaneously to stay competitive. That requires strategies for winning consumers, recruiting and managing R&D and professional talent, and skillfully sourcing from factories. "Over the next few years, you will see a dramatic gap opening between companies," predicts Jim Hemerling, who runs Boston Consulting Group's Shanghai practice. "It will be between those who get it and are fully mobilized in China and India, and those that are still pondering."

In the coming decades, China and India will disrupt workforces, industries, companies, and markets in ways that we can barely begin to imagine. The upheaval will test America's commitment to the global trade system, and shake its confidence. In the 19th century, Europe went through a similar trauma when it realized a new giant -- the U.S. -- had arrived. "It is up to America to manage its own expectation of China and India as either a threat or opportunity," says corporate strategist Kenichi Ohmae. "America should be as open-minded as Europe was 100 years ago." How these Asian giants integrate with the rest of the world will largely shape the 21st-century global economy.

Source : Pagelink-http://www.businessweek.com/magazine/content/05_34/b3948401.htm