Wednesday, October 19, 2005

India Post is considering a foray into banking into Insurance and Banking.

If a company doesn’t have the management will to expand its own market even if they have the money, they often diversify. But lack of will might not be the only reason but I believe it is a common reason. When the management becomes sure that, further pumping in of the funds would not necessarily translate into revenue growth, the company looks for diversification. Some does it for various other reasons like backward or forward integration. Or that a new venture might give a better Return on Investment than the existing ones. For the later case, if that be the case why not sell out the whole business and start the new venture all together. But then, there is the security of an existing company that is doing well, so sell out and start something that is totally new and apparently with no prior expertise. But diversifying into a purely Unrelated field have often proved painful unless you are a conglomerate like GE, or tats and Reliance or a Chaebol like Hyundai and Samsung where you have ready pool of talented managers and experts to draw the talent from. Even Chaebols have failed, read Daewoo, but it wasn’t due to diversification per se. Another good reason for diversification might be for the same reason you diversify your investments. If this industry suddenly gets expired, gets extinct Like Video tape player, Snail mail.

Oh yeah, I was writing about the snail mail. India post. India post is planning to foray into banking and Insurance,read.. Will Email be the death knell for Snail mail. A topic often debated about ever since Email became free. It is not whether Email will kill snail mail or not, at lest in India. Millions of Labourers from Bihar toiling in the construction sites of Gurgaon, Mumbai, Guwahati will not write emails. They still use the post. Another Million of Jawans still write Chithi. The core business of India Post still has a good chunk left in the life Cycle Curve. But foresight is never bad and it’s a very welcome thought that India post wants to diversify. But why Banking? Is reach Reach the only key for a Bank to succeed ( India Post has the Reach). Why can’t India post diversify and expand into the Courier Business. Logistics and Courier service is a Huge Industry ( I don’t want to google just now to find the market size) and India post can very well leverage to become a modern Courier company. Why US post and Deutsche Post have done extremely well by foraying into the Couriers delivery business. That is what India post is good at. Why not leverage? Leave banking to SBI with its reaches.
Read about deutsche post

First it was epost, now it is banks. I guess India post is already into insurance for Central Govt. Employees. For the uninitiated, epost is a hybrid mail where you send an email to India post and India post print and delivers it. Well, won’t it be a one way communication? Whoever will receive an epost will have no access to an email. To reply the mail do he/she go to a post office and dictate a mail or does he/she go directly to a cybercafé. In which case won’t he be better off having an email account in that post office. No hassle for printing?

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Blogger Hul said...

hey. nice blog you hve here. will read every the end of this week

19/10/05 7:03 PM  
Blogger Soumyadip said...

India Post was already into the business of banking with their Post Office Savings Bank Accounts, which is very popular with the lower middle class. Yes, now they are giving the whole business the 'banking' look. The money transfer thing with ICICI will be really helpful. Especially for the people in the villages who have earning members in the big cities. But I believe that a tie-up with SBI would have been better.

SBI definitely has its reach. But the post office has reached places, which no banks in their right minds will even think about. Here again instead of being bankers themselves, the post office could have become extension counters for the nation's largest bank.

The courier angle is definitely one that should be thought about. Their 'Speed Post' service is a good one, not for local delivery but for distant destinations. My parcel to my hometown (2000 kms away) reaches in 48 hours, something which any courier company in spite of their tall claims couldn't achieve (one didn't ever get delivered).

20/10/05 8:51 AM  
Blogger anthony said...

Yeah i have thought about their banking connection already. I didn't want to make the post any longer. My point was what they should put limited resources into. If they have resources go into banking a well as courier and make them Big, i have no qualms.. if they could, they could even go for Retailing or into the money transfer themselves. But Resources are never unlimietd and they should look at which form of diversification or expansion would give them the best leverage. From banking angle, with the kind of reach they have, micro finance shouldn't be a bad option.

20/10/05 9:37 AM  

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