Motilal Oswal Asset Management Company Ltd. (MOAMC) is a public limited company incorporated under the Companies Act, 1956 on November 14, 2008, having its Registered Office at 10th Floor, Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai - 400025.
Motilal Oswal Asset Management Company Ltd. has been appointed as the Investment Manager to Motilal Oswal Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated May 21, 2009, executed between Motilal Oswal Trustee Company Ltd. and Motilal Oswal Asset Management Company Ltd.
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Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive (G) - 10.1024Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive-Dir (G) - 10.1087Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative (G) - 10.1379Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative-Dir(G) - 10.145Motilal Oswal Dynamic Fund (Div-A) - 13.0943Motilal Oswal Dynamic Fund (Div-Q) - 11.7275Motilal Oswal Dynamic Fund (G) - 14.4488Motilal Oswal Dynamic Fund-Dir (Div-A) - 13.2306Motilal Oswal Dynamic Fund-Dir (Div-Q) - 11.8642Motilal Oswal Dynamic Fund-Dir (G) - 15.2243Motilal Oswal Equity Hybrid Fund - Direct (G) - 14.1862Motilal Oswal Equity Hybrid Fund - Regular (G) - 13.6038Motilal Oswal Flexi Cap Fund(D) - 23.0821Motilal Oswal Flexi Cap Fund(G) - 30.7067Motilal Oswal Flexi Cap Fund-Dir(D) - 23.0683Motilal Oswal Flexi Cap Fund-Dir(G) - 32.8104Motilal Oswal Focused 25 Fund - Direct (D) - 19.0408Motilal Oswal Focused 25 Fund - Direct (G) - 32.5257Motilal Oswal Focused 25 Fund (D) - 17.1571Motilal Oswal Focused 25 Fund (G) - 29.2329Motilal Oswal Large and Midcap Fund - Dir (D) - 13.3206Motilal Oswal Large and Midcap Fund - Dir (G) - 13.3206Motilal Oswal Large and Midcap Fund (D) - 12.9702Motilal Oswal Large and Midcap Fund (G) - 12.9703Motilal Oswal Liquid Fund - Direct (Div-D) RI - 10.0075Motilal Oswal Liquid Fund - Direct (Div-F) RI - 10.0155Motilal Oswal Liquid Fund - Direct (Div-M) - 10.0517Motilal Oswal Liquid Fund - Direct (Div-Q) - 10.0254Motilal Oswal Liquid Fund - Direct (Div-W) RI - 10.0104Motilal Oswal Liquid Fund - Direct (G) - 11.0558Motilal Oswal Liquid Fund - Regular (Div-D) RI - 10.0054Motilal Oswal Liquid Fund - Regular (Div-F) RI - 10.0145Motilal Oswal Liquid Fund - Regular (Div-M) - 10.0506Motilal Oswal Liquid Fund - Regular (Div-Q) - 10.0242Motilal Oswal Liquid Fund - Regular (Div-W) RI - 10.0171Motilal Oswal Liquid Fund - Regular (G) - 11.017Motilal Oswal Long Term Equity Fund (D) - 16.9782Motilal Oswal Long Term Equity Fund (G) - 21.6127Motilal Oswal Long Term Equity Fund -Dir (D) - 20.1549Motilal Oswal Long Term Equity Fund -Dir (G) - 23.5157Motilal Oswal Midcap 30 Fund (D) - 19.2141Motilal Oswal Midcap 30 Fund (G) - 31.4524Motilal Oswal Midcap 30 Fund-Dir (D) - 19.799Motilal Oswal Midcap 30 Fund-Dir (G) - 34.3758Motilal Oswal Multi Asset Fund - Direct (G) - 10.5958Motilal Oswal Multi Asset Fund (G) - 10.4804Motilal Oswal Nasdaq 100 FOF - Direct (G) - 22.0659Motilal Oswal Nasdaq 100 FOF - Regular (G) - 21.8554Motilal Oswal Nifty 50 Index Fund - Direct (G) - 11.9072Motilal Oswal Nifty 50 Index Fund (G) - 11.8437Motilal Oswal Nifty 500 Fund - Direct (G) - 13.6619Motilal Oswal Nifty 500 Fund (G) - 13.5179Motilal Oswal Nifty Bank Index Fund - Direct (G) - 11.5064Motilal Oswal Nifty Bank Index Fund (G) - 11.3859Motilal Oswal Nifty Midcap 150 Index Fund (G) - 15.5493Motilal Oswal Nifty Midcap 150 Index Fund-Dir (G) - 15.7146Motilal Oswal Nifty Next 50 Index Fund - Dir (G) - 12.0191Motilal Oswal Nifty Next 50 Index Fund (G) - 11.912Motilal Oswal Nifty Smallcap 250 Index Fund (G) - 15.374Motilal Oswal Nifty Smallcap 250 Index Fund-Dir(G) - 15.538Motilal Oswal S&P 500 Index Fund - Direct (G) - 14.1857Motilal Oswal S&P 500 Index Fund (G) - 14.0873Motilal Oswal Ultra Short Term Fund - Dir (Div-D) - 9.864Motilal Oswal Ultra Short Term Fund - Dir (Div-F) - 9.8843Motilal Oswal Ultra Short Term Fund - Dir (Div-M) - 9.871Motilal Oswal Ultra Short Term Fund - Dir (Div-Q) - 10.013Motilal Oswal Ultra Short Term Fund - Dir (Div-W) - 9.8749Motilal Oswal Ultra Short Term Fund - Dir (G) - 13.9762Motilal Oswal Ultra Short Term Fund (Div-D) - 9.8427Motilal Oswal Ultra Short Term Fund (Div-F) - 9.8532Motilal Oswal Ultra Short Term Fund (Div-M) - 9.8433Motilal Oswal Ultra Short Term Fund (Div-Q) - 9.9862Motilal Oswal Ultra Short Term Fund (Div-W) - 9.8462Motilal Oswal Ultra Short Term Fund (G) - 13.5564

Buy Right Sit Tight Insights - February 2019

Blog Blog Details
  • February 14, 2019
  • Raamdeo Agrawal|
  • Chairman
Dear investor friends,

Competitive landscape of an industry can make or break the fortunes of incumbent players. In our investment philosophy QGLP (Quality, Growth, Longevity at reasonable Price), competitive landscape is a key determinant of one aspect of Q, Quality of business. (The other aspect of Q is Quality of management.)

In this edition of BRST Insights, I share some perspectives on Michael Porter’s highly popular Five Forces Framework to assess competitive landscape of industries.

Inter-firm rivalry – the core of Quality of Business

Porter’s Five Forces
The starting point of assessing the investment attractiveness of any stock is to assess its industry attractiveness, which in turn, is highly dependent on the industry’s competitive landscape. Conventionally, competition is deemed to exist only between rival companies. However, Michael Porter, the guru of competitive analysis and strategy, offers a different perspective. According to Porter, competing for profits involves multiple players, not just rivals. Besides rivals, companies compete for profits also with - 

•Customers, who would always want to pay less and get more,
•Suppliers, who would always want to be paid more and deliver less,
•Producers who make substitutes, and
•Potential rivals (i.e. new entrants).

Porter captured all these dimensions of competition in his highly famous Five Forces Framework depicted on the next page.

Five Forces perspectives – Inter-firm rivalry is key

In their book Playing To Win, authors A G Lafley and Roger Martin offer some interesting perspectives on the Five Forces Framework. They write – 

“The five forces can be divided into two axes. The vertical axis … determines how much value is generated by the industry (and is therefore available to be split up among industry players). If it is very difficult for new players to enter the industry and there are no substitutes to the industry’s product or services to which buyers can turn, then the industry will generate high value.”

“The horizontal axis determines which entity will capture the industry value – suppliers, producers or buyers … The degree to which there is fierce rivalry affects which group captures value too. If rivalry between competitors is high, the dynamic will facilitate the appropriation of value by suppliers or buyers. A low degree of rivalry will protect profitability for the producers.”



It is insightful to note that Inter-firm rivalry is at the centre of both axes i.e. it influences both value creation and value distribution in any industry. This is best explained by two contrasting examples.


Inter-firm rivalry – Telecom & Paints
Both Telecom and Paints are consumer-facing businesses. In India, there are only 4 major players in both. And yet the profit trend in both are in stark contrast to each other.

The profit trend of three telecom majors (Exhibit 2) reflects the impact of inter-firm rivalry. Till FY-2008, the market had only these three players, and profits were on the rise. In 2008, a slew of new telecom licenses were issued, the impact of which was felt FY-2011 onwards. Then, in FY-2012, the Supreme Court cancelled all the 2008 telecom licenses, and profits began to look up again. However, the last three years have seen the entry of Reliance Jio, and the industry has gone into losses, despite there being only 4 major players (Bharti, Vodafone, Idea and Jio). Vodafone and Idea have now merged, but there’s no respite in profits which continue to decline in the first half of FY-2019.

Contrast the above with the Paints sector (Exhibit 3). Profits here have risen consistently, suggesting benign inter-firm rivalry.
Key takeaways
•Inter-firm rivalry is the core determinant of a company’s Quality of business. Higher the inter-firm rivalry, lower the Quality of business and vice-versa.
•The number of incumbents is not that important. Inter-firm rivalry can be high even when incumbents are few.
•Businesses with intense inter-firm rivalry don’t create value for shareholders, and are best avoided.

I welcome your feedback and suggestions for improvement. Please email the same to insights@motilaloswal.com.


Raamdeo Agrawal
Chairman

Note: The source of all data used in this bulletin is MOAMC internal analysis, unless otherwise mentioned.

Disclaimer: This bulletin has been issued to explain our investment philosophy. The information/stocks mentioned in this document is for general/illustration purposes only and should not be construed as investment advice to any party. The stocks may or may not be part of our portfolio/strategy/schemes. Past performance may or may not be sustained in future. Readers shall be fully responsible/liable for any decision taken on the basis of this bulletin. Past performance may or may not be sustained in the future. This bulletin is not for circulation in general and is meant for intended recipient only. The bulletin does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.


“Reproduced from original article written for cnbctv18.com; published on June 14, 2019”


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