Professional Documents
Culture Documents
BUSINESS SERIOUSLY
M e s s ag e f ro m t h e c o - o r d i n ato r
Hello Readers, It gives our Globiz team great pleasure to launch the first edition of Business Seriously, another milestone for our club. I should take this moment to first thank all our prior club members (Super-Seniors), who guided and molded us to handle the club and take it forward. Secondly, the faculty at IMT, for graciously sharing their intellect with us. Finally, all the students in B-School fraternity, as constantly catering to their requirements has been the driving force for us. Since Ive come to IMT, Ive seen the growing importance of International Business in the present day management, day by day. Studying this vertical I realized how an economy can severely affect the others, how a merger in a nation can affect a rivals business half way across the globe, how globalization can achieve profitability. Our club aims to provide a first hand experience to all the budding managers on dealing with issues in international business world over. All our activities are designed to hone the concepts and strategies of international business. Its our goal to raise the standards and relevance of this vertical in management studies. I hope this new endeavor of ours will prove to be knowledgeable for you, apart from being fun-to-read. I also hope your appreciation will keep flowing in form of participation in henceforth editions along with our other activities. Happy Reading!
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F RO M E D I TO R S D E S K
Hello Readers, Greetings from club Globiz. In our endeavor to always bring you the best, I take the pride in introducing the very first edition of this monthly issue Business Seriously, fully loaded with useful information that you and me as managers are expected to know. To facilitate a healthy learning environment for our readers, wise selection of content is made from diverse areas and thus contains expert opinions of faculties and marketers on current trends in International Business arena, latest happenings round the world, articles, viewpoints and print ads from the readers across the Indian B-Schools. My special mention goes to Dr. Ratna Vadra, Assistant professor, IMT Ghaziabad who enlightens us with her valuable insights on the Investment opportunities in African Countries and some major learnings for the companies who are willing to enter the African markets. The market is steadily growing and thus possess huge investment opportunities besides numerous challenges for Indian companies. Two-faced view section tests the lateral thinking skills of participants where in they have to present both of their for and against views on a given topic and thus the ability to present arguments from multiple perspectives. Print ads section is a platform to see how a product can be promoted in its non-home country with globally known personalities and thus testing the creative thinking of managers as well as power of a celebrity as a brand ambassador. To conclude, I would like to thank all the stakeholders of this magazine who have contributed towards setting up a platform which will always work towards building a healthy learning environment for each one of us. We would appreciate your valuable feedback on this very first issue so that improvements can be made in forthcoming issues. Happy Learning!
CONTENTS
Cover Story- Foreign Direct Investment: Its high time for Africa : Dr. Ratna Vadra.05 Chanakya Niti: Ideas that can prevent a double dip.09 Euro Zone Crisis Major Learnings?....12 Euro zone crisiswhat went wrong?...13 Is there any other Economic Recession Knocking the doors?...15 Two faced View: View and counter view on Rural Marketing...18 North. East. West. South...20
M AG A Z I N E T E A M
Anudeep Paduru
anudeep_paduru@yahoo.co.in
9247253162
Jagadeesh Kommineni
jagadeesh.k87@gmail.com
8826890576
Bhaskar Ghildiyal
bhaskarghildiyal@yahoo.com
9453601461
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it if you turn on a TV or read a newspaper, since U.S. Increasing FDI combined with growing capital investments and the view of Africa as a future growth market indicates that Africa's outlook is positive. Strategic resources, a growing consumer base and generally positive economic prospects are all contributing to growing interest in Africa as a business and investment destination. Moreover, the FDI flows have been from developed to developed countries until recently, when it has started flowing from developed to developing countries as well. The current article highlights the shift of Investment scenario from developing to undeveloped countries with special reference to Africa. In one line we can say that its high time for Africa . Introduction Waka Waka (This Time for Africa) is a song by Colombian singer-songwriter Shakira, featuring South African band freshly ground It was the official song for the 2010 FIFA World Cup. World Cup has given the continent a chance to present a more positive image to the world. Contrary to popular opinion, the best investment bet that you can make in 2011 is in Africa. You wouldnt know and European media focus relentlessly on areas of unrest and instability, but the reports beyond the front page tell a very different story. Record GDP growth, the rise of homegrown corporations and increased foreign investment are all evidence of Africas rapid economic progress and remarkable potential. Prime Minister Manmohan Singh said that we are preparing
"initiatives" that India is prepared to take as part of its "emerging partnership" with Africa, a region which he said was poised to become a "major growth pole for the world economy":- $5 billion for the next three years under lines of credit for Africa to help meet its development goals. The Ernst & Young 2011 Africa Attractiveness Survey reflects, first, Africa's attractiveness for foreign direct investors and, second, the perceptions of, and outlook for, Africa and its peers across a representative panel of 562 international decision makers. According to World Bank Africa could be on the brink of an economic takeoff, much like China was 30 years ago, and India 20 years ago. Africa is the world's second-largest and second mostpopulous continent, after Asia. At about 30.2 million km (11.7 million sq mi) including adjacent islands, it covers 6% of the Earth's total surface area and 20.4%
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of the total land area. With a billion people (as of 2009) in 61 territories, it accounts for about 14.72% of the World's human population. The continent is surrounded by the Mediterranean Sea to the north, both the Suez Canal and the Red Sea along the Sinai Peninsula to the northeast, the Indian Ocean to the southeast, and the Atlantic Ocean to the west. The continent has 54 states, including Madagascar, various island groups, and the Sahrawi Arab Democratic Republic, a member state of the African Union whose statehood is disputed by Morocco. It has abundant natural resources, From 1995 to 2005, Africa's rate of economic growth increased, averaging 5% in 2005. Some countries experienced still higher growth rates, notably Angola, Sudan and Equatorial Guinea, all three of which had recently begun extracting their petroleum reserves or had expanded their oil extraction capacity. The continent has 90% of the worlds cobalt, 90% of its platinum, 50% of its gold, 98% of its chromium, 70% of its tantalite, 64% of its manganese and onethird of its uranium. The DRC has 70% of the worlds coltan, and most mobile phones in the world have colane in them. The Democratic Republic of the Congo also has more than 30% of the worlds diamond reserves. Guinea is the worlds largest exporter of bauxite. In recent years, the People's Republic of China has built increasingly stronger ties with African nations. In 2007, Chinese companies invested a total of US$1 billion in Africa. Africa is seen as a frontier for energy resources
because of its massive oil and natural gas resources in mainly the Gulf of Guinea, Nigeria, Sudan and Angola. India imports about 70 per cent of its oil and sources a significant percentage its oil imports from Africa. (RBI, 2008). Efficiency and market seeking was the common purposes for Japanese firms in Africa; the Japanese subsidiaries are young and small in lower middle income region, young and large in upper middle income region and old in low income region; their performance is good with a very high exit rate in low income region, high with high exit rate in low middle income region and moderate with a low exit rate in upper middle income region. There is a significant increase in the trade and investments between Africa and its Asian partners China, India, Singapore, Malaysia, South Korea and Japan. However, its recent economic engagement with the dragon and the elephant are of particular significance because of the complimentarily of interest between the two emergent Asian partners. The Africans who are impressed with the sustained growth rates achieved by their long term, mainly ideological allies, India and China have welcomed the increased economic interactions with these two emergent Asian economic powers in particular. 2.Corporate India wades into Africa The Chinese have a head start in Africa and their government is championing their cause, but the Indians are no pushovers. They are using their private sector muscle, people-to-people contacts and a general goodwill amongst the public to penetrate the market. Indian companies' size of investment in Africa including Es-
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sar Group's $100 million investment in Essar telecom Kenya Holdings. China's push driven by its government, the Indian march to Africa has been led by the private sector. After proving themselves in fields as varied as automobiles, telecom and education in recent years, Indian businesses are gradually opening up in Africa and have become the new frontier for Indian companies . Indian companies, be they in agriculture, telecom, retail, infrastructure or pharmaceuticals, see Africa as the pot of gold at the end of the rainbow. Step out of the Kinshasa airport complex and Indian visitors are greeted by a huge hoarding bearing the familiar red-and-white signage of Bharti Airtel, India's biggest phone firm. Just that it is in French. And then driving down the Chinese built highway into the city, there are more signs of Indian business in a country that is 10 hours flying time from Mumbai: Mahindra Scorpios and Tata Motors buses, occasional but not rare. In shops across the
continent, the India story is playing out. Emami's 'Fair and Handsome' fairness cream for men and Dabur hair care products vie for space on shop shelves with drugs by Lupin, Dr Reddy's Laboratories and Ranbaxy. Bajaj-made bikes, NIIT training classes, Lava mobile phones and Godrej soaps are increasingly in demand in several countries in much of the continent. And even Kirloskar pumps, a brand whose name has become a generic term for pumps. ONGC Videsh has invested $2.5 billion in Sudan oil fields, the future of which seems secure now after an initial scare when Sudan split into two in a referendum earlier in 2011. Besides its coal mines in Mozambique, Tata Steel has a massive ferro-chrome facility near Durban, South Africa. Tata businesses in Africa also include telecom, hotels and others - all of which, at last count, totted up to some $600 million in revenues for the group. Africa can provide access to raw material and new markets/consumers for some of our existing busi-
nesses. Indian power and steel companies such as Coal India, Steel Authority of India, Tata Steel and JSW Steel are importing coal from both South Africa and Mozambique by shiploads to fire thermal power plants and steel blast furnaces. There are other opportunities in Africa in which Indian businesses are uniquely placed to take advantage of given that they have dealt with them back home in India.
Health, for instance. Infant mortality in countries such as Sierra Leone is as high as 123 per 1,000 births and average life expectancy elsewhere, say, in Zimbabwe, is just 45 years. For many then, Africa could be the emerging India market equivalent in pharmaceuticals in the next decade as the demand profile there transitions from retrovirals to treat HIV/AIDS and antibiotics, to drugs to treat diabetes or cardiac disorders. Paul Anley, Founder and CEO of Pharma Dynamics, majority controlled by Lupin since September 2008, estimates the market
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from $1.4 billion in 2001. Indians are stepping into infrastructure businesses they have excelled in. Wired phones and Internet connections are few and far between in sub-Saharan Africa and, although the continent has some 600 million mobile phones, companies such as
trading allies from the West, India and China, the two main Asian drivers have emerged as the major trading partners and investors since the 1990s. Conclusion Africa is a high-reward economic opportunity that can't be ignored any longer. It is the newest frontier for global business. As the continent unleashes its consumer power ,India and
nent suffers from a litany of problems and several of these are urban legends - corruption, crime, epidemics, dictatorships, tribal wars and piracy - a dogged push by companies, backed by a sustained Indian diplomatic initiative and the local Indian presence there, will help further Indian interests in Africa. China might be winning the battle but the war for Africa is far from over. Its high time for the world to realize that its the time for Africa!.
Bharti Airtel are driving in full thrust in the 16 African countries they operate in. In early 2010, when it was buying Zain's operations . Africa has resources and investment opportunities to offer and therefore in academic discourse it is called the new frontier. In addition to Africas traditional
China rush in to compete for the control of its economic future. With Africa's consumers expected to spend over $1.4 trillion by 2020, Indian firms cannot afford to miss what is often called the last frontier in global business. No matter the conti-
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There has been turmoil on both sides of the Atlantic. Arctic ice is melting heavily for Europe and hurricanes are ravaging the US. And the world economy is in much worse shape than it was only few weeks ago. Consumer confidence is decreasing constantly. However, the world seems to have forgotten the basic learning from 2008 crisis. There have been reports on lenders making more subprime auto loans again. These car loans are seen by lenders as relatively safe be-
cause they are collateralized and repossessing cars is easier than foreclosing on homes. Maybe it is the time to revisit our 300 B.C. texts and cor-
rect our basics on Economics before we look or reassess our business cycles. In 2008, there was a bold and coordinated effort to save the world economy with fiscal and monetary stimulus; however the steps have not helped a lot in recovery. Conservative methods were put into place by advance economies much before the economies could fully recover.
One should save money sacrifice of his wife and against hard riche s.times; save his Chanakya wife at the sac- One should save money against hard rifice of his times; save his wife at the sacrifice of T h e riches; but inabove variably one his riches; but invariably one should l i n e s should save his save his soul; even at sacrifice of his point to soul; even at the re-
forms at microeconomics level for individuals. In the current world, most of people in advance countries follow deficit saving approach to an extent that they forget the value of money and burden of debts. Investments at individual level, however
small drives the economic growth, but before investing one should ponder on what Chanakya said, Before you start some work, ask yourself three questions- Why am I doing it, what are the results might be and will I be successful. Only when you have
given deep thought and found satisfactory answers to these questions, go ahead. According Chanakya, happiness to the and
Caption describing picture or graphic.
peace attained by those satisfied by the nectar of spiritual tranquility is not attained by greedy persons restlessly moving here and there. As the individual debt invariably leads to
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countrys debt and this in turn leads to world debts. There are many folds to the economic problems that we are facing today. According to Chanakya, the enemies we deal with are different and so the strategies we require are to be different. He advocated free trade but not at the cost of Nationals interest. According to him, nation should pay as much importance to imports as it should pay to the exports. Goods imported from other nations may cre-
ate a market that could not be assimilated in the psychology of people of our nation. This philosophy for trade policies around the world is important. This links microeconomics decisions impact on macroeconomic. This also links psychology of individuals to the goods they are exposed to. Moving towards the monetary policies, US Federal Reserve opted to flood the system with cheap money but lowering the interest rates in order to restart the economy
that was in recession post technology bubble and terrorist attack (6% in 2001- 1% in 2004). Similarly for 2008 recession the fed rate has dipped from 2.25% in March 2008, to 0.25 in august 2011. This policy has a major impact towards people response to money. Money started losing its asset value. At individual level, people started thinking of maximizing their utility of money. As we have came much ahead on that policy now, the best way out is what
GDP in advanced econostart to work on something, mies. The GDP without infladont be afraid of failure and tion adjustment has raised dont abandon it. People both public and private debt who work burdens, since the sincerely are ability of houseLearn from the mistakes of holds and firms to the happiest. We others. You cannot live long service their debts have to tar- enough to make them all depends on nomiget nominal yourselves. nal incomes and
revenues. Monetary policy will then react as of now, easing when NGDP grow and tightening when it is slowing. Targeting NGDP may come with a price, the price will be inflation or deflation but that would take some time. As of now to tackle the enemy at the gate
we have to live in present and not on real GDPs that are based on pre-recession data. For emerging economies, they have to keep in mind the words of Chanakya, Learn from the mistakes of others. You cannot live
long enough to make them all yourselves. The developing countries which are not so much affected by recession need to keep an eye on
both real GDP and Nominal GDP for their monetary policies. Chanakya said a lot about Government control over prices
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out world should address these concerns. Adjusting fiscal policy does not mean only stimulus, it also means reforms that will improve the public nances over time. To overcome the double dip, we need to change the course. First, the fiscal policies and in some country the monetary policy need to look at long run reforms. Second, FED rate of US From Jan 2001 to 2006 a great effort is required on the supply side reforms. Even falling back to 300 B.C. Jun Sep Jan Mar Oct Dec Jun Dec Jun Dec May Aug knowledge will not be en06 07 08 08 08 08 09 09 10 10 11 11 sure an easy path, the recovFed 5.2 4.75 3.00 2.25 1.50 0.25 0.25 0.25 0.25 0.25 0.25 0.25 ery will be fragile and slow. Rate However, this will lead to change in psychology at the FED rate of US From June 2006 to 2011 individual and firm level that will avoid business cycles to in market economy and equilibrium of demand and supply. . happen so quick, so fast and Governments at macro level throughout the world should try so devastating. to handle the issue at the budget level. Union budget is simply a statement of income and expenditure of Government. The source of income and the quality of expenditure decides the health of budget. The fiscal policies of Governments through-
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E U RO Z O N E C R I S I S M A J O R L E A R N I N G s
Varun Salwan, NARSEE MONJEE INSTITUTE STUDIES OF MANAGEMENT The financial crisis of the Euro Zone has brought with it a plentiful of lessons to be learnt by the policymakers. Strong Institutional Framework & Policies are Important It is of utmost importance in todays scenario to have the good financial policies laid down strongly in the system. It is distinctly understood from the current crisis that the countries which had the unstable fiscal policies were undermined by the economic turmoil before any other nations. One example of the unsustainable policies was exhibited when the finanAlthough the topic is highly contencially strong nations were burdened with the financial obligations of the weaker nations. This further weakened the whole of the Euro Zone by weakWith the Euro zone being on the verge of a crash in its economy, the paralysed banking systems of the European Union nations have been disclosed to rest of the world. The financial crisis of European Union has brought in front the underlying problems and the erroneous tendencies of the various countries of Europe. It also exhibited the weaknesses that occurred in the structure of the monetary union which was the prime reason behind worsening the situation. ening the financially strong nations as well in spite of easing out the situation by balancing the debts. Also, the policies once set should be consistently kept under the check. The expenditures should be monitored on a constant basis even if it is a boom time for the economy. Foreign Owned Banks Come to a Rescue
tious in many emerging markets, the foreign banks help in creating a more efficient financial sector. This enhances the competition in the market which lays the foundation for fortifying the domestic banks. For example, PKO BP and Sberbank, the domestically owned banks of Poland and Russia respectively, braved
out the crisis outstandingly because of the copiousness of the foreign banks in these countries. On the other hand, the domestic banks of countries like Parex in Latvia and OTP in Hungary could not cope up with the trouble because of the absence of the sustainable and strong business model.
An Increase in Savings Ratio Is Required There has been a remarkable hike in the personal debts of the people living in Europe and US. This culture has proved out to be extremely dangerous for the economies of these nations as it further enhances the current ac-
count deficit and creates more imbalances in the economy. Also the Western nations usually do not have the tendency of saving. However, the crisis calls for the increase in the saving ratio of the nations. The savings ratio has been very low for the European countries as the saving ratio of UK sank down below 0% in mid 2008.
Conclusion The current crisis requires fundamental decision making by the leaders of the European Union. The learning from this financial crisis can be taken ahead to bring out the breakthrough changes in the current financial systems and improvise the situation. In
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E u ro z o n e c r i s i s w h at w e n t w ro n g ?
On 1st January 1999, the world saw uprising of a major power Euro Zone an economic & monetary Union of 17 European nations, with the GDP size bigger than the United States. It promised to change the global landscape forever. With a common currency Euro- the Eurozone was ready to take on the world. It was expected that soon Euro would become
the currency of the world, dethroning USD and Eurozone would become the superpower. But 12 years hence, and the existence of the zone is itself in danger. 17 is believed to be a very unlucky number and so did it prove to be. The Euro Zone was struggling to get on its feet post-2008 when 2011 happened! The union which believed that it could overthrow US as the world superpower is struggling for its existence. So what did go wrong with such a strong
union? Countries are blaming countries like Greece, Portugal, Italy and Spain (PIGS) for their lack of proper Governance which increased their borrowings to such an extent that now the whole Eurozone is unable to cope up with it. But how correct is it to blame these small countries? There is no denying that these countries are sucking up money from the IMF and other Eurozone nations as bailout funds, but the startling Question is why the
other nations as Germany and France are bailing these countries? Are they doing a philanthropic act or trying to save their own skin? When we delve deeper into the topic, the fuzzy picture gets clearer. Eurozone was mistake. It was the mistake of
the bigger economies as Germany, France etc. who had the notion that if they develop a consortium of European Nations they can overpower US as the world superpower, because essentially they would be adopting the same structure as of
the United States of America. But this was their cardinal sin. They did very well to do monetary consolidation, bringing in a new common currency, a central Banker European Central Bank and strict monetary policies to adhere to. But what they
tact- but because the approach taken by the 17 governments the fiscal policieswere different. As there was no fiscal consolidation & hence no fiscal obligation towards the union, countries as Greece & Spain adopted their own policy of providing
fiscal stimulus to recover their economies quickly and they did manage to do so! But when the crisis revisited (in another form though) in 2011, they were not ready for it. The same fiscal stimulus was now acting like a Frankenstein monster-ready
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to eat the economy which it had revived, & they had to go for austerity to avoid Government default, which consequently slowed down their Economy. (The GDP growth for Greece in FY2010 was negative 4.5% & Spain negative 1%) The 2011 Eurozone crisis exposed to us the never seen effect of consolidation. It revealed to us the traps of an improper consolidation. The Eurozone was missing a fiscal link, & having a central monetary policy when the fiscal policies are not aligned doesnt make much sense. Had the 17 Governments had a fiscal consolidation too they would not have met this fate, & surely the exis-
tence of the zone wouldnt have been crisis. But, that would have meant surrendering ones democratic rights to one central authority which no country would have wanted to. A dilemma was there whether to go for the partial-consolidation or not- if we can call it so, but the policy-makers thought to take the risk, because the rewards were quite lucrative. They did take a calculated risk, but the Value-at-risk (a financial concept of measuring risk) was quite high for the event and as we saw, the event did happen. And the consequences well a recession is larking ahead!
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Friday, August 5- a day every single person would remember. It is no less than a Black Friday which people would remember for the wealth Effect of the downgrading on the they lost and for damage on the foreign market: global economy. United States, the Japan: super power and the most developed economy of the Friday, August 5- a day every single person would world, lost its crown remember. It is no less than a Black Friday which people of top tier AAA rating would remember for the wealth they lost and for damage by Standard & Poors, on the global economy. which showed a serious impact on the Japans Nikkei index was down by global economy post which econ2.2 percent to 9,097.56 where as omy of almost all the major nations current Nikkei is 16.5 percent down across the world were affected. from a pre-earthquake high on FebStandard & Poor, S&P as it is ruary 11. Starting the day with a known commonly which is the bigpositive notion Asian government gest credit rating agency in the officials tried to reassure investors world, cut the long term US credit that problems in the US shouldnt rating by one notch to AA-Plus prompt a market panic. Apart from (AA+) with the concern of rising this the Japanese Finance Minister debt and governments budget defiYoshihiko Noda said "our conficit. The downgrade came days after dence in US Treasury isn't shaken the US government seemed to deand we still see it as an attractive fault on its debt obligations as a instrument." result of its ballooning debt and a Shanghai and Hong Kong: refusal by the Congress to raise the debt limit. This is the first time ever The Shanghai Composite Index, US lost its AAA rating which was which serves as a benchmark for the given to it in the year 1941. region, closed down 3.8 percent and is down to an extent of 20 percent August 2011 proved to be a bad from its November 8 high thus pushmonth as far as the global economy ing it into official bear territory. is concerned. A string of economic indicators released earlier in the Seeing the market trend Goldman month suggested of a world eco-
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slowdown and the euro zone crisis. In India, investors lost Rs 2,682.58 billion as key indices fell to their lowest levels in 14 months. Experts believe that the downgrade of the US credit rating will have a shortterm impact on the Indian market.
The only relief in this dismal condition is that the US has recently fallen from its status of India's biggest export destination, where in the credit being given to the Middle East nations. India's export industry has been growing at a break-neck speed of around 45% for the first six months of the year where in to the US alone, India exported $11.85 billion worth of goods during the first six months of this year. Murli Deora the Union Minister of Corporate Affairs said, The down grading will lead to further appreciation of rupee against dollar, thereby blunting our competitive edge. More im-
more than a minor blip in its confident trajectory. Finance Minister Pranab Mukherjee while consoling the investors at a conference said Our institutions are strong and (we) are prepared to address any concern that may arise on account of the present situation. So at last, in a nutshell it should be noted that it is not a financial crisis but the political crisis which has shown its adverse affect on the economy of developed nations and thus is affecting the economy and market of developing nations as Globalization is what we follow in every sphere of life these days. Nothing much is in our hands and could be done if there is slow global growth or a borderline recession. Being an open economy there will be impact on exports and FDI, and portfolio inflows into stock markets may be affected but the intensity of impact is the point of concern. Where in for the internal i.e., the intra-terrestrial issues the apex bank RBI has been tightening monetary policy so as to get rid of the biggest enemy of the economy as of now, inflation. (This is a detailed analysis done by Mr Niraj Satnalika of IMT Ghaziabad (2011-13). He can be reached at
nirajsatnalika@gmail.com )
Besides the never-ending crisis in Europe, the fear of a second recession within half a decade was a reason for this despondency. The news from almost all sources was disconcerting. Recovery from the recession was still sluggish in the US. Japan, another developed economy and a member nation of G-7, has been exOur institutions are strong and (we) are prepared to periencing long-term address any concern that may arise on account of the stagnation, and has present situation. - Pranab Mukherjee been devastated by wholly unexpected natural calamities which ruined the life and economy portantly, the US government will to a great extent. Adding to the ecohave to increase taxes to bring in nomic problem, France also anmore people under the tax net to nounced that it had experienced curtail its deficit which will further virtually no growth in the quarter. shrink their disposable incomes and The real dampener came when the may have an impact on India's exevidence that the strongest econports to North America. omy in the rich nation's club The US economy grew at a mere Germany was released which indirate of just 1 percent in the second cated it was losing all momentum, quarter, a slowdown that leaves the and registered a mere growth rate of nation at risk of entering into reces0.1 per cent in the second quarter. sion. For India, which is now more Thus the real economy crisis had integrated with the world economy, penetrated Europe's core, pointing this has to be bad news. But if the to the possibility of a return to reGovernment of India is to be becession in the Eurozone as a whole lieved, the Indian economy is not (which registered 0.2 per cent likely to be very adversely affected growth). by the current round of global volaImpact on Indian Market and tility. Finance Ministry sources arEconomy gue that the Indian economic growth story is so robust that the Due to the credit rating downgradcurrent uncertainty will cause no ing of US the export market in India
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Business Crosswords
DOWN
2. proof of payment 3. put money into a company or business 5. money paid to owner of copyright or patent 7. part of the capital of a company 8. where shares are bought and sold 9. money lent 11. amount of money spent 14. neither cheque nor credit card 15. money returned
Across 1. rate and efficiency of work 4. ask the bank to advance money 6. money paid for a loan Business Kakuro
12. promise to repair or replace 13. amalgamation of two companies 14. legal agreement 16. total sales of a company 17. share of profits paid to shareholders Business Sudoku
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Cons: Income fluctuations-Majority of the household income in rural areas comes from agriculture. The other income avenues are forestry and fisheries. The farmer may be self funding but most of the workers are paid daily, monthly or weekly wages. Their income levels are greatly dependent on seasonal fluctuations. Heavy rains may kill the crop or a drought may lead to famished conditions. Farmer suicides have been a concern for the government and NGOs for many years now. Financial institutions think twice before lending a sum to a farmer as the risks of default are very high. Inflation tends to considerably reduce the purchasing power of the consumers in the rural segment. With price rises of the order of 5-25%, the spending is definitely going to shrink while the disposable income remains the same. Cons: Caste, gender, cultural differences
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Pros: Haats and melas to reach out to Rural India Most consumers like to touch and feel the objects that they would like to buy. This also applies to rural consumers. Haats, mandis and melas are places where trade and exchange of goods take place. It is one of the easiest and cost-effective ways to gain access to a large rural audience and even study their choices, behavior and sentiment associated with the product. They also serve as the centers for cultural congregation. A single haat can cover 20-50 villages and is visited by over 5000 people at its 300+ contact points. Also a company like HUL, which entered the rural market before its competitors has a significant advantage in creating its brand monopoly and also its distribution network. Such a brand has greater recognition amongst masses which is not easily replaceable. This loyalty sentiment becomes dominant when a company is seen as someone participating for uplifting the living conditions of the community people like the SBI Tiny deposit scheme, the ITC eChoupal or HULs Project Shakti which focused on giving flexible saving options (as low as Rs. 10 deposits), a better consumer experience and women empowerment respectively. Pros: Gives impetus to product innovation
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Catering to a heterogeneous rural market demands innovative mix of product, advertising and distribution. It requires a thorough understanding of the consumer requirements which should necessarily match with a companys vision, mission and long term strategy. Chotukool is one of the best examples that can be cited here. A compact size refrigerator which does not have a compressor, runs on battery, weighs only 7.8kgs, can stay cool for long hours without power and costs less than half of what conventional refrigerators cost, is a panacea for rural consumers electricity and cost troubles. To gain a stronghold in the rural markets, a company needs to constantly differentiate. This can be done by redesigning the product or changing its packaging to make it more appealing. Coke could create magic with their idea of Thanda going rural. Making Amir Khan enact in the villagers get-up, making available an illustrious beverage like Coke at Rs. 5 garnered instant recognition amongst the consumers. The villagers could relate to Amir Khan who looked like one amongst the masses and felt immensely satisfied because they would have to pay a small amount to drink the Cola that even Amir Khan drinks! Using red and yellow, the festive colors also makes for an effective ad campaign for the rural areas. Hence, the Thanda ad had all the ingredients in it: the perfect price, perfect size and perfect colors. Post this campaign, rural markets accounted for 80% of new coke drinkers and 30% of the sales volumes. The rural market grew 37% against 24% in the urban market in the year 2004-05 over the previous year. Cons: Fake products and losing brand equity Low literacy and education levels in many villages have resulted in consumers identifying brands based on their logos or colors. This has given scope for spurious products to flood the markets. The look-alike, spelt-alike and exact replicas are the types of fake products that easily make way into the haats and melas.The existence of fakes has the potential to topple the entire branding and imaging exercise undertaken by the company. At the end of a huge campaign, it can be more than just disappointing if the cheap fakes sell and not the real goods. A bad experience using a fake product can turn away a potential customer forever. This kind of a sentiment can be particularly strong amongst the rural consumers who tend to be loyalists and judgmental both. Such an occurrence will seriously affect the brand equity. The company has to take measures to use holograms to secure their products and educate the consumers of the same. This would again increase the advertising spend and increase the selling costs of the company, thereby affecting the bottom line.
(pgp11.priya@spjimr.org
Cons: Infrastructure issues Although rural areas offer attractive opportunities, over 68% of these markets are still untapped. This is primarily due to the restricted reach that they offer to participating companies. The load and goods have to move large distances to reach the rural areas. This can be done using a hub & spoke model wherein large distributors are supplied at a higher frequency (hub) and from there the goods move at lower frequencies to the designated areas (spokes). This model though cost effective in the long run requires a substantial investment to create an extensive and all-encompassing network. The supply chain innovation issues become more complex if there is an established network developed by a competitor. In such areas, it is very difficult for a company to be visible and accessible to its potential consumers. At the same time, direct selling companies like Oriflame and Amway have tasted great success in the north eastern states with their business model. The evolving middle class and women consumers have shown eagerness and intent to be a part of the modern growth story of India. Hence, although the infrastructure remains a worry for the rural India, original thinking on the part of the companies will only find a way out.
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mortgage rates at superlow levels. The Fed had previously reinvested the interest and principal into Treasury purchases. Stocks fell immediately after the announcement. The Dow Jones industrial average dropped 100 points. The yield on the 10-year Treasury note tumbled, and its price rose. In its statement, the Fed noted that the economy is growing slowley, unemployment is high and housing remains in a prolonged slump. As a result, the Fed has directed the New York Fed to
purchase Treasuries with remaining maturities of six to 30 years, and to sell an equal amount of securities with maturities of three years or less. In June, the Fed completed a $600 billion bond-buying programme that may have
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BUSINESS SERIOUSLY
The company unveiled a computer with a processor running on a postage stampsize cell powered by solar energy.
Though both companies have not disclosed the financials of the deal, sources said Applabs was valued above $300 million.
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BUSINESS SERIOUSLY
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BUSINESS SERIOUSLY
Guinness in India
Abhishek Sandu Prin. L. N. Welingkar Institute of Management Development & Research
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BUSINESS SERIOUSLY