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Journal of Master of International Business
Volume 4 Issue 1
A New World Economic Order: Survival of the Fittest?
Master Of International Business
Department Of Commerce Delhi School Of Economics University Of Delhi
UD A Y
Journal of Master of International Business
The stage is set for the decisive spectacle. crossed in a Their they paths are have
engaged at a
scale unprecedented. The course has bent. The grand finale has commenced. History decides to
repeat once more… severe than ever, unrelenting, vicious! It is the clash between sense and greed, merit and and mediocrity, prudence and
The bugle calls echo once more. The worthy are sought. Only the worthy are sought!
The search is on. Crowns await their prince! Revaluation Begins!
UD A Y
Journal of Master of International Business
deny the obvious fact that no such dress exists so that when the king parades before his subjects ‘wearing’ the new dress. expression and experience speaks! Also take a look at the articles by Professor S K Jain and Professor Sumati Varma. economy and more. K. rich in experience and idea. we can hear voices talking about everything in every possible way”.Editorial From the Editor’s Desk Stepping Up he iconic fairytale ‘The Emperor’s New Clothes’ by Hans Christian Anderson is a classic metaphor for collective denial: Two swindling weavers find a cunning way of making merriment by promising to make the emperor a dress ‘invisible’ to those unfit for their positions. Bhanu Murthy gets to the core of the debate. This issue of Uday is a manifestation of priceless voices breaking through the secrecy of their own heads! And it’s all yours to devour. including the king. To add to our treasure. Deptt. V. The story closely mirrors our experience by the end of the first decade of the new millennium. laying the foundations and then raising them brick by brick until an overpowering structure eclipsed us almost completely! In this issue of Uday. to share their views and explain the dynamics of their respective industries. an underlying commonalty binds them all: these crises were not supposed to happen! In some sense.com. hospitality industry. Also featured is Ms. all of them laud the absolute beauty of the creation. Issue 1 MIB. albeit of a rarer assortment. Happy reading! T -Jayeeta Bhattacharya Editor-in-Chief UDAY 2012. Eventually it takes the honesty of a child. Professor Varma too dwells on internationalization. of Commerce. Gunjan Veda’s “case for e-commerce”. if you follow some key principles. And while the nuances differ. food industry. He argues that the financial industry innovated itself into a nasty mess over the years. And we can no longer deny. brand management. None. research. from almost day one. who cries out “But he isn’t wearing anything at all!” to expose the obvious reality. The master story-teller Salman Rushdie tells us that “within the secrecy of our own heads. for fear of being regarded unworthy and stupid. The former draws a layout for foreign market selection. gain a competitive edge. The last decade (and counting) is an era of crises. Vol. Dr. for. they were created. and that’s not an exaggeration. 4. DSE . claiming that there might be bumps along the road of internationalization. knowledge. but you can anticipate them and. Read on to get in-depth outlooks on a range of topics spanning sectors of insurance. The CEO of INDIAreads. the facts lay exposed. Why did we innovate tears? What are those warning signs that stare at us blatantly while we refuse to recognize? The Big Idea feature of this issue deliberates upon all this while attempting to bring out the tell-tale signs of looming crises. a pan-India online bookstore. she is talking about the born-global firms adept at leap-frogging the traditional stages of progression to enter the global markets instead. we have called on some of the best corporate minds the nation over. the assemblage of ideas. brings forth interesting arguments making an enriching read.
Department of Commerce. Faculty of Commerce. Bhanu Murthy UDAY 2012. DSE . K. Head. The theme also becomes relevant in the perspective of India. is all poised to come. Growth sans equity and stability is no growth at all. Delhi School of Economics. Vol. She has to think hard about new business models and practices. V.Message Message from the Dean I t is with immense delight that I present to you all Uday 2012. the annual journal of the Master of International Business programme. Deptt. While it is essential for India to maintain its growth momentum. I would like to convey my best wishes to the editorial team of Uday and I hope that the journal would be able to achieve its intended objective of furthering knowledge in the domains of business management and economics. especially in the economic world. as the world is in a state of dilemma: to resurrect the old or invent the view. University of Delhi -Prof. Issue 1 MIB. What would be the dynamics of the business and economic environment in future hence becomes an important aspect to ponder on. The theme for the current edition of Uday is ‘A New World Economic Order: Survival of the Fittest?’ It is an appropriate theme as the world is now in a state of flux and a new world order. Dean. of Commerce. India will have to prepare a new plan for its journey ahead. As the focus point of the world’s power is gradually shifting from US and Europe. 4. it should also be concerned to ensure greater equity among its masses and creating an environment that would facilitate India’s growth in times to come.
We are seeing new chapters being written in the history of mankind in all spheres of society. a state of transition is being observed as centres of economic power are shifting and age old business practices are being questioned. the current edition of the annual business journal of the Master of International Business programme (MIB).Department of Commerce. Uday. Delhi School of Economics. Vol. Especially in the world of economics and business management. students and academicians of international business to express their insights on key issues pertaining to the business and economic world. Issue 1 MIB. it becomes important to deliberate on what strategies will ensure the survival of nations and who. University of Delhi -Dr.Message Message from the Course Coordinator O ur world is undergoing a revolution these days. 4. 2012. In this light. Deptt. In a time when so much is happening all around the business and economic world. Kavita Sharma UDAY 2012. Course Coordinator .be it politics. it becomes pertinent for us to understand what would be the structure and architecture of our economic world tomorrow so that we are better prepared in meeting the challenges and opportunities which the world would offer to us then. of Commerce. will emerge victorious and at the top. Based on the theme ‘A New Economic World Order: Survival of the Fittest?’ the journal is aimed at bringing in an analytical discussion on the expected future trends of our business world. is an initiative to encourage a discussion on the changing aspect of our business and economic world. DSE . economics or science. at the end. I extend my best wishes to Uday and hope that it would provide a platform to professionals.
Deptt. McCann Erickson.) Revenue Management In Hospitality Industry -Arunangshu Bhattacharya (Director. World Bank.Contents Contents 5 7 9 11 13 17 22 25 29 33 36 38 41 The Looming Challenge to the World: Decoding the Warning Signs -Prof. DU) Indian Economy: Undergoing Turmoil? -Aayam Banerjee (Sr. Dept. Associate at Milestone Religare Investment Advisors) India’s Next Big Export: Capitalism Version 2 -Subrata Barman (Sr. Delhi) Food Industry In India: Challenges and Opportunities -Ayan Bhattacharya (Category Manager – B2B at Cargill Inc. South Asia. Sanjay K. Consultant. Gurgaon (NCR)) Decoding Visiting Cards: Reading Big Changes in Small Print -Kishore Chakraborti (Vice President. of Commerce. Vol. DSE . of Commerce. DU) Why we need to Think about New Ways of Building Brands? -Soumick Nag (Planning Director. K. 4. Issue 1 MIB. Delhi University. Risk Management Solutions India) Identifying and Selecting Foreign Markets: A Strategic Perspective -Dr. V. DSE.com) A Perspective on Global Insurance Market:Trends & Growth Drivers -Kanchana V (Senior Marketing Analyst. Jain (Professor of Marketing and International Business. IIM Lucknow) UDAY 2012. IIME School of Hospitality. World Bank Group) The Indian E-commerce Story: Boom or Doom? -Ms. Gunjan Veda (CEO. IFC. Advisor. of Commerce. Bhanu Murthy (Dean. India) The Changing Dynamics of Business -Abhishek Agarwal (Student. IIFT. Dept. Ogilvy & Mather) Accelerated Internationalisation Experiences: Lessons from the Indian Born Global Firm -Dr Sumati Varma (Associate Professor. INDIAreads. DSE.) Implications of Agriculture Based Negotiations on Developing Countries in Doha Development Agenda -Parshant Atkaan (Research Associate. Faculty of Commerce. Consumer Insight & HFD. Head.
virtually every decade and every location has witnessed some or the other kind of it. accompanied by slashed taxes. regularly breaking the 3% annual borrowing limit. collapse of house prices. One wonders the IMF response to these figures had it been any nation but America. Germany. From then on. in Afghanistan and Iraq. however. would probably plunge the world into a second recession. Portugal. It’s only in the best interests of the Americans in particular and the world in general that they put things into right perspective before it gets too late. the American debt ceiling was raised by more than two trillion dollars. and slowdown to around 2% since the crisis of 2008. continuing to soar. they agreed on the exact 3% borrowing limit. of Commerce. EU leaders agreed on a new “fiscal compact” for Eurozone: to limit governments’ structural borrowing to just 0. but the other big nation flouting the rules was. to pretend that the predicament would simply go away. DSE . and slowdown to around 2% since the crisis of 2008. The markets. half the world’s steel and one in every two cars. credit booms. poor output. Faculty of Commerce. For now. Deptt. we had already been heading to a housing bubble en route to further crises featuring almost all the causal factors. Italy. So. without surprise. inexperience with new financial instruments. V. show Germany to be the safe haven while nations like -Prof. Two back to back wars. poor output. credit downgrades. it produced a quarter of the world’s exports. “can’t pay its own bills”. Department of Commerce. was the worst offender. stood at $13. Vol. off-balance sheet operations by bank. meant the US government. meant the US government. The US economic turmoil Questions regarding a possible end of America’s economic supremacy have started doing rounds. rapid outflow of capital from a country. staying within limit from the euro’s creation in 1997 to at least till 2007. in President Obama’s words. surprisingly. who actually conducted themselves like squabbling schoolchildren. wait. it enveloped the Eurozone nations of Ireland. Bhanu Murthy inancial crisis is not a new term. as was surprisingly within sniffing distance when the Congress couldn’t reach to a consensus on America’s debt ceiling. unsustainable macroeconomic policies. they prefer Two back to back wars. started to appear in the 1980s with Ronald Reagan winning power by promising to cut taxes and increase defence spending – thus beginning the trend of borrowing billions. Doesn’t this sound familiar. While it’s premature to make predictions. in President Obama’s words. 4. In fact. what started it all? On 9th December 2011. these crises have been generated by factors such as overheating of markets. Italy. But. the crisis has clearly underscored the flaws in the common currency. K. collapse of house prices. began in late 2009 when a new government in Greece revealed that its predecessors had concealed enormous deficits. By the time the dot com bubble burst in the beginning of the previous decade. Thanks to a last minute deal between President Obama and his Republican opponents. protests against austerity demands. it chose to manipulate statistics while never actually going by the rule. falling governments. In general.5% of their economies’ output each year. accompanied by slashed taxes. soaring unemployment in Europe coupled with stubbornly high deficits. thus allowing the US to keep borrowing money to fund the nation’s operations. Issue 1 5 MIB. But how did it come to this? The decade after the WW II saw the heydays of US power and prosperity and in the Fifties. Greece was in a class of its own though. 3%? Way back in 1997 when the euro was being set up. Debt. both Ireland and Spain ran budget surpluses. Threatening the continent’s 60 years’ progress towards UDAY 2012. The pact.Keynote Ar ticle F The Looming Challenge to the World: Decoding the Warning Signs Dean. however. The first cracks. president of European Central Bank (ECB) says he would do “whatever it takes” to protect the euro. The crisis. which will come to force once 12 out of 17 Eurozone member states ratify it. albeit in hushed undertones. The Americans have two simple options: cut spending or raise taxes. spelling disaster for thousands the world over. in Afghanistan and Iraq. revised bailout packages. and deregulation without sufficient market monitoring and oversight. the American debt crisis is over. excessive leveraging of debt. “can’t pay its own bills”. What went wrong was a non-adherence to this rule. Euro Crisis Even before the world could regain footing after the unprecedented financial slowdown of 2008. putting it far ahead of competitors such as Britain. austerity measures. the Eurozone crisis hit the global economy. will also limit their total borrowing to 3%. as recognized today. Japan and West Germany. miscalculations of risk.5 Trillion last year and by 2021 is predicted to reach an eye-watering $26 Trillion. University of Delhi gradual unification by hinting a possible breakup even while Mario Draghi. Spain and even Germany and France and rest of the world amidst bailout packages. For now. fear of contagion and predictions of Greece’s fallout from the Eurozone. Head. A default by the world’s largest economy. borrowing more than the limit for four years from 2003. the last couple of years have certainly served to raise eyebrows as to complacency settling in this hegemony. Delhi School of Economics.
companies and mortgage borrowers – who were taking loans encouraging a debt-fuelled boom in the backdrop of very low interest rates in southern European countries when they joined euro. 4.no one in the southern Eurozone nations wants to spend. Department of Commerce. Social Science Research Network Library (SSRN) has rated thirteen of his papers in the TOP TEN LIST in the world.5% y-o-y. Hence the nasty dilemma. Issue 1 6 MIB. He has authored more than 60 research papers in national and international journals. exports are uncompetitive. the lowest level since 2009 and well below the 8.1% generated in the first quarter. agricultural market efficiency. during the boom years. in an article titled “Innovating our way to financial crisis” wrote: “The policy makers left the financial industry free to innovate — and what it did was to innovate itself. international business social responsibility and business ethics. Delhi University. In a nutshell. China’s economic problems are greater In times of global economic than reported. So. Prof. at 9. and the rest of us. the decisions made and actions taken in the last couple of years have seriously undermined our credibility to handle major crisis situations. Murthy is a Ph. Delhi School of Economics.D. China. Depending on state-directed subsidization to make investment in certain sectors more attractive and less risky. 2) guide the whole process with the hand of the state. availability of cheap credit. K. This model.. But prices can’t stay wrong indefinitely. although capable of generating quick economic growths for a while. A recipient of various international and national awards for research and outstanding contribution to education. Faculty of Commerce & Head. Ireland and even France. is susceptible to crashes. Industrial production was also much lower than expected. Deptt. nasty mess. It is very difficult to tell certainty. and more advanced sectors. of Commerce. no one in the southern Eurozone nations wants to spend. the model mainly thrives on “manipulating prices”.V. Prof. exports are uncompetitive. cutting spending would almost certainly deepen the recession and not doing so risks a financial collapse! China and its economic imbalances China’s official GDP growth rate has fallen sharply – last month Beijing announced that GDP growth for the second quarter of 2012 was a lower-than-expected 7. Lessons to learn are Notorious for its inaccuracy of econo. let’s get down to the real cause of the crisis: not the government but private sector. AllExperts. is Dean. Vol.Bhanu Murthy. 3) employ industrial policies and state-directed finance to progress into more evidenced by the Japanese or the Korean experience of the 90’s. while Germany became an export powerhouse. recession has well begun. in the area of Industrialization Strategy. Notorious for its inaccuracy of economic statistics.aplenty and reasons to bemic statistics. We .com (the largest and oldest experts’ website in the world) has rated him as the best expert in Economics (in the world).” The mess has been there all along. as have made grave mistakes. DSE . control of the exchange rate to spur exports. some experts believe that lieve that we would scarce.Keynote Ar ticle Spain and Ireland are termed risky. Data is sparse or unreliable. some experts believe that China’s economic problems are greater than reported. thus rendering the Spanish or Italian worker uncompetitive making it harder for them to export. econometrics. Delhi School of Economics. It is very difficult to tell what is really going on in the Chinese economy. let’s hope that betwhat is really going on in the Chinese ter sense prevails! economy. and thus creating astronomical growth.6% y-o-y. in November 2000. wages rose in south and in France.. But the learning still needs to be imbibed! Paul Krugman. Prof. adopting a state capitalism model mainly functions thus: 1) capitalize on low wages to spark growth through exports and industrialize quickly with hefty amounts of investment. UDAY 2012. environmental economics. it’s just too evident to look away now. into a big. Murthy’s recent research interests are in the areas of banking and finance. in Economics from Department of Economics. non-commercially oriented banks acting as a tool of governmentdevelopment policy. All that debt enabled more and more imports by Spain. while the German Unions held wages. of which 6 are in the All Time Top Ten List. recession has well begun. companies and mortgage borrowers are busy repaying debts. To add to the bad news for Southern Europe. companies and mortgage borrowers are busy repaying debts.
While the Meteorology Department is projecting normal monsoons going forward. if they actually occur. The last few days have also seen two rating agencies – Fitch and S&P . like Punjab and Haryana. have the potential to adversely impact the Indian economy by reducing or reversing capital inflows.5%% in FY13. has predicted that the global economy will see a perfect storm in 2013. is less than 35% of their historical average. Nouriel Roubini. The deceleration in Q4FY12.5% range: Based on the continuing inaction on the policy front and the resultant execution related challenges. However. Such unfavourable global developments. due to the overall challenging macroeconomic environment. The rise in the CAD was mainly a consequence of excessive oil and gold imports.2% in FY12 has been the primary catalyst in the depreciation of the INR.9% to 8.5% or higher for this year.3% on a YoY basis – the lowest quarterly reading in a long time.2% of the GDP in FY12. the quarterly GDP had bottomed out at 5. These projections are based on three major factors: 1. 2.0% to 6. However. India’s Q4FY12 GDP was a meagre 5.a truly unfavourable outcome for a capital-scarce economy like ours. a famous global India now a gasping elephant . In spite of the reduced contribution of agriculture to our GDP and stabilising factors like NREGA. equivalent to 5. Deptt.place India on their negative watchlist.0%-8.7% and expenditure growth of 13. caused the trade deficit to expand to 10. 3. These commodities. However. monsoons remain an unpredictable factor. Even in the global financial crisis of 2008–09.Indian Economy: Undergoing Turmoil? Corporate Ar ticle Sr. to 7. has resulted in the government lowering its FY12 GDP estimate from 6. Our budget deficit for FY13. says HSBC economist and someone who predicted the collapse of United States housing market in 2008. for the week ended July 18. which on a net basis are our two largest import items. 4. Taken in conjunction with the recent RBI statement stressing about the need to tackle supply-side constraints. most economists expect our CAD to reduce to 3. of Commerce. leading to strong correlations between rainfall levels with agricultural growth and consumption levels. While the UDAY 2012. the ball is back in the government’s court for creating an environment which is conducive for investment.5% or higher for this year.8% in FY11. Most economists are now predicting similarly lacklustre growth of 6.6% and inflation of 6. Vol. most economists feel that the economic growth rate will be lower and the expenditure growth will be substantially higher this year leading to a fiscal deficit of 5. they also mentioned the slowing economic growth coupled with the political logjam as the driving factors for the revision in their outlook. on the back of lower crude oil prices and moderating gold demand. there are also reports of an increasing probability of El Nino. There by our balance of payments is expected to be marginally in the red or show a modest surplus for FY13. We have had a bad start to the monsoon this year.1% of the GDP. Industrial growth in the 4 to 4.9% to 6. with the total rains to date being only 78% of normal.5%. The sudden worsening in our Current Account Deficit (CAD) from 2. is underpinned by three major assumptions: nominal GDP growth of 14% (Real GDP of 7. Rainfall in some of the key agricultural states. Agricultural growth based on the historical average of 3%: However. The global economic environment also remains volatile. economists are projecting industrial activity to remain subdued for the coming year. which was provocatively titled “Will India become the first ‘fallen angel’ among the BRIC nations?” Apart from the concerns related to the fiscal deficit and the current account deficit that were raised earlier. there is now increasing concern among investors that this increase in fiscal deficit is structural and not cyclical. Associate at Milestone Religare Investment Advisors -Aayam Banerjee W e are indeed passing through some challenging times. Issue 1 7 MIB.5%).4% of the GDP.6%. DSE . Unfavourable monsoons can substantially affect the agricultural sector and drag the economic growth rate to below 6%. There was a lot of media discussion on the same. along with revisions to earlier data. Deceleration in services growth from 8. our economy is still dependent on a good monsoon as a large proportion of our workforce continues to be engaged in agriculture and the low proportion of irrigated land area. most economists feel that the economic growth rate will be lower and the expenditure growth will be substantially higher this year leading to a fiscal deficit of 5. compared However.5%. 2012.1%. revenue growth of 22. especially about the S&P report.7% of GDP in FY11 to 4. Global growth forecasts have been slashed over the last few months.
Regardless. education and infrastructure ancillaries. especially on fuel subsidies. pension reforms. M&A advisory and equity-linked products space. could lead to some reforms like fuel price hikes. In light of the recent concerns about global growth. Food inflation: A below-average monsoon could impact food production and drive food prices and consequently the headline inflation number. drive growth and consolidate fiscal balance. However. FDI in retail. the RBI adopted a hawkish posture and stated that the high levels of inflation indicated “serious supply bottlenecks and sticky inflagovernment is critical to counter recent economic deceleration. where he handled multiple mandates in leveraged lending. As for the past couple of years. etc. 4. He has also worked in the business consulting arm of KPMG and the Strategic Marketing team of Piramal Healthcare (now Abbott Healthcare).in keeping with the recent past. 3. The recent increases in the Minimum Support Prices of food grains are also expected to influence an upward trend in inflation levels. In addition. inflation levels remained elevated. measured using both the WPI and the CPI benchmarks. he was a part of the Structured Finance Group of ICICI Bank. He graduated in mechanical engineering from Mumbai University and followed it up with an MBA from IIM Calcutta. In its previous monetary policy. Investment: Efforts to address delays in specific projects on a case-bycase basis. definitive steps are the order of the day to restore confidence. like populist allies and the dual leadership structure of the government. such as: 1. fertilisers and power. Telecom: Removing ambiguity on spectrum pricing norms 3. Issue 1 8 MIB. policy support from the Aayam is a part of the investments team of Milestone Religare Investment Advisors – a private equity fund focusing on growth capital investments in healthcare. Taxation: Clarifying concerns on retrospective taxation and GAAR 5. which was provocatively titled “Will India become the first ‘fallen angel’ among the BRIC nations?” tion expectations”. RBI has been demanding a reduction in ‘suppressed inflation’. DSE . Moves to reduce suppressed inflation: In its various statements. the RBI feels that the interest rates are a minor factor in the investment slowdown (and a major factor being inaction by the government in pushing through key reforms). In light of this. The inflation rate going forward is expected to be influenced by the following factors: 1. Any such move. The manufactured non-food product inflation. while beneficial from a broader perspective. The change of guard at the finance ministry. especially land acquisition and environmental clearances 4. International commodity prices and the INR exchange rate: Any increase in the global commodity prices as calculated in INR. Mining: Transparency on regulations. hence. some believe.place India on their negative watchlist. Prior to this.) seem rather unlikely during the continuance of the basic causes for the lack of policy decisiveness.Corporate Ar ticle probability of a downgrade seems low. may also lead to a renewed surge in inflation levels. debt markets. The last few days have also seen two rating agencies – Fitch and S&P . Vol. is expected to further fuel the headline inflation. Deptt. a rate cut at this stage is likely to exacerbate inflationary pressures. which is primarily an outcome of subsidies on fuels. Fiscal Reforms: Introduction of GST and DTC 6. investment sentiments could definitely improve along with a reduction in the hackles of a dysfunctional political situation through the implementation of a number of measures that are relatively noncontroversial from a political perspective. There was a lot of media discussion on the same. especially about the S&P report. of Commerce. the probability of substantial unpopular reforms (like railway tariff hikes. either by way of a rise in the USD price of the commodities (possibly driven by an unconventional stimulus like QE) or a renewed depreciation of the INR. which is used by the RBI as a proxy for core inflation turned out to be 4.89%. Power: Tackling apprehensions on availability of coal and losses/debts of SEBs 2. 2. most economists do not expect RBI to cut interest rates in the near future. UDAY 2012.
Central to their busi. the world’s most complex problem requires the best brains and. has played a significant role to serve the needs of the top 3 billion. the best hearts to address this challenge i. To expect that the demonstrate the legitimate role of private poor of this country (who earn less than $ sector in development. one would not only need to be innoing that private sector invative. examples that follow the CV2 model and this is where India comes into the pictu- UDAY 2012. but also display a strong passion deed has a legitimate role to serve the poor. the best hearts to address this challenge i. if I may say so. And what link does this have on ex1. This is a rare breed and perhaps this could explain why we have not yet been able to resolve this problem. These are the served. As a development professional. And elements of private and public benefit in the good news is that India is indeed becarrying out their core operations. constantly inPrivate sector can act as an engine to eradicate novating and trying to make poverty basic goods and services affordable and within reach of the under. I feel India is at the cusp of safe drinking water sells at Rs 15 in urban this revolution. This is where the new form of Capitalism – let’s call it Capitalism Version 2 (CV2) becomes relevant. IFC. Deptt. So what does the poor dia’s IT-BPO exports are valued at USD person do. World Bank Group Addressing the problem of poverty is perhaps the biggest challenge that the modern world faces. affordable houses and so on .25 per day) can afford to spend almost 20% of their daily income on a bottle of ports? Let’s look at some numbers. As a country with the largest number served consumers. One the one hand. It could be a start-up with this philosophy or an old organization Corporate Ar ticle Sr. people with high IQ and EQ.ping 58% market share of the global sourter? Can the rare breed of entrepreneurs cing industry. combines elements of we have a solution that is fundamentally private and public benefit different from the traditional model and in carrying out their core we have a huge untapped market to be operations. There are numerous to play in development. while on the other hand. that has woken up to this new paradigm. the world’s most complex problem requires the best brains and. One obvious theory could be that the solutions that helped serve the top 3 billion might not work for the bottom 4 billion. These coming the hotbed of these innovations. They are being called by various names – social enterprises.e. inclusive businesses. it looks rather easy and simple – what forces can really stop the supply of basic services to poor people. These are the companies that believe in the principle of sharing wealth as it gets created with not only its shareholders but also its other stakeholders.of poor people in the world.70 billion in FY12 and comprise a whoption (or the basic need) to drink safe wa. To crack a solution of this natucompanies that are provre. As per the IFC-WRI pusupply the same water at a fraction of this cost in a financially sustainable manner Central to their business model is a structure that that is affordable by the poor? If yes.tapped market. It was a contradiction – how could this be true? Little did I realize that I would face this at many stages in my life. In other words. people with high IQ and EQ. In other words. At a fundamental level. companies that create ‘Shared Value’ and so on. regular electricity. if I may say so. when I first read the book – a tale of 2 cities by Charles Dickens. It would not be unfair to claim that Capitalism. However the same principles of capitalism do not seem to be working for the bottom 4 billion. irrespective of the size and age of the organization. in its many forms and shapes. with a huge unto play in development. if they have the same aspira. Issue 1 9 MIB. Inwater is a far cry. reliable health. Addressing the problem of poverty is perhaps the biggest challenge that the modern world faces. India cannot ness model is a structure that combines help but promote such solutions. South Asia. It is a new way of doing business.re. it is becoming increasingly clear that private sector holds a significant part of the solution to eradicating world poverty. it was the worst of times”. are the companies that are proving that When private sector finds a solution that private sector indeed has a legitimate role is financially sustainable. Vol. there is increasing cynicism of what role (if at all!) private sector has played in development.A India’s Next Big Export: Capitalism Version 2 -Subrata Barman s a child. good education. This new version is being pioneered by the ‘rare breed’ – people with high IQ and EQ. They are highly focused on delivering value to their clients.e. 4.something that the top 3 billion population of this world takes for granted. it pulls all stops to capture trate this through an example – a bottle of the market. be it safe drinking water. a revolution that can truly areas in India today. Advisor. DSE . of Commerce. Let me demons. I never quite understood the meaning of the opener – “It was the best of times. I can’t help but wonder how true this is when one considers the role of private sector in development.
health. Enough not one”. beggars none.Corporate Ar ticle blication “The Next 4 Billion”. DSE . private sector arm of the World Bank group. In conclusion. This is a huge market waiting to be served with affordable products and services. Even if Indian companies were to garner only 2% of the market share. Issue 1 10 MIB. It’s high time the private sector steers the ship of Capitalism where we have Enough for Everyone. Subrata is an engineer from ISM Dhanbad and a post graduate in management from IIM Ahmedabad. A key aspect of his work is to increase the development impact of private sector interventions through design and delivery of sustainable business models. (The views expressed are personal) Mr. education. 4. housing. etc) is USD 5 trillion. I am reminded of what Benjamin Franklin once said. of Commerce. ICT. Latin America and Eastern Europe. The rich too much. Subrata Barman works for the International Finance Corporation. the BoP market size for basic services (food. besides Asia – indeed a big export market waiting to be tapped. Vol. He is responsible for designing and managing inclusive development projects for IFC. UDAY 2012. infrastructure and waste management. Deptt. you have a USD 100 billion market to be tapped in markets such as Africa. a significant part of which can be tapped by sustainable private sector solutions following the CV2 model. primarily in the areas of agribusiness. “The poor have little. water.
With 40 million people logging in from work.000 crore in 2011 . Perhaps. According to digital marketing research firm comScore Inc. albeit with a few vital course corrections. India is expected to have at least 376 million internet users by 2015 with a broadband household penetration of 15. Dana’s excitement on the delivery of her package would seem like an over-reaction. the number of online transactors is expected to go up to 38 million. Her local bookstore stocked a couple of new titles – the quintessential bestsellers . Yet. These figures are expected to go up dramatically with the rapid increase in internet penetration in rural India and the government’s plan to connect all gram panchayats with high speed broadband by 2014. covering areas as diverse as fashion. we seem to have come a full circle.com With the growth of nuclear families and a highly competitive corporate culture. By 2015. 10 million people were sold on the idea of a 3G connection. more and more people are indulging in smart browsing on their smart phones. Since the introduction of internet in India in 1995. we have achieved an internet penetration rate of 10. real estate. what is forgotten in these debates are people like Dana for whom e-commerce is a way of finally being at par with their peers across the country. 50% of our orders are from tier II and III cities. clothes and jewellery – top brands which cannot be found in the markets bordering Burma . Within 6 months of the services being announced. Choice and convenience. of Commerce. till you translate it into actual numbers (yes. The value of transactions is expected to reach anything between $70 billion or $260 billion by 2024-25. sites are competing to increase their customer base by offering unrealistic discounts and dang- UDAY 2012. and 11 million from home based broadband connections. real estate prices are sky-rocketing. and e-tailing. the last few years have seen a mushrooming of e-ventures. To a reader living in Delhi. who carried out e-commerce transactions worth rupees 45. the new urban mantra. The Case for E-commerce: Let’s hear the numbers The Little Prince (Antoine de Saint-Exupéry’s masterpiece. not to mention the ubiquitous children selling pirated copies at every intersection. Rural connectivity has generated awareness and a demand for greater access to goods and services hitherto restricted to the metros. i.35 The Indian E-commerce Story: Boom or Doom? year old Dana Sema from Dimapur (Nagaland) just received her copy of Toni Morrison’s Home. but still she feels empowered. Indian cities are choking. Dana had to wait for her bi-annual visit to Kolkata to update her library and to purchase reading material for the next six months. are in great demand. Gunjan Veda CEO.a month or so after their release but Dana never got “quality reads” – the literary equivalent of art movies . In other words. this penetration is expected to reach 22% by 2015. 38% in China and 32% globally (source: Internet World Stats – 2011 estimates)). Her not-so-crazy-aboutbooks friends are happy too.2% (as against almost 80% in Japan & United States. The book was released in India 3 days back. So instead of focusing on the dual benefits of choice and convenience.6%. an average Indian is online for approximately 16. This has generated 10 million online shoppers in the country. are in great demand. 30 million from cafes. time has become a scarce commodity and doorstep delivery services. Now let us examine another aspect of our development story. Further. for the uninitiated – a must read) said that grownups love numbers. where there is a bookshop in almost every locality. being the second most populous country in the world does have some advantages!). So let me adopt the vocabulary of numbers to show why e-commerce is here to stay. So. They can now get gadgets and accessories. is here to stay.e. Issue 1 11 MIB. Deptt. But consider this: till last year. And that is important because the speed of your internet connection has a direct co-relation to your propensity to carry out online transactions. A seemingly dismal figure. DSE . the e-commerce industry is following the “go fast or get lost” model wherein companies operate on sustained net loss basis to capture market share in the hope that once hooked their customers will continue to avail their services despite a hike in rates. As of December 2011. 4. time that he or she spends watching TV in a week. With rapid urbanization.in Dimapur. over 121 million. the two cornerstones of e-commerce. with the growth of nuclear families and a highly competitive corporate culture. As the mobile revolution carries 3G services to the countryside. Vol. And that essentially is why e-commerce.sitting in their homes. In India. True. In numeric terms. In recent times there has been a spurt of articles on the future of e-commerce in India. the new urban mantra. From the euphoric this-is-theplace-to-be-in conviction three years ago to the doom and gloom and the-dotcombubble-is-about-to-burst prediction. Their “shopping and stocking trips” to Kolkata have declined consistently. time has become a scarce commodity and doorstep delivery services. INDIAreads. Further. choice and convenience. India has the third largest number of internet users in the world. With dozens of sites selling books online. she is today a happy reader. the two cornerstones of e-commerce. From Dotcoms to Dotbombs: Cause for worry The numbers tell the story of an e-commerce boom but industry pundits are worried and with good reason. At INDIAreads. now you will understand why investors put in $392 million in 38 e-commerce deals in 2011.5 hours a month– that’s the same Corporate Ar ticle -Ms. there were 1877 online retailers in India by May 2012. her internet connection is slow and often breaks down. matrimony and travel. this is especially true of grownups in economics and business. as in the US of the1990s. Traffic is horrendous. people are no longer just connected through computers.
creating inventory issues and “dead stock.the fastest in the Asia Pacific region (source: Asia Pacific Online Retail Forecast.5000 per user – it has Gunjan Veda is the Founder CEO of INDIAreads. which currently accounts for almost 80% of our e-commerce transactions. Deptt.companies are finding it increasingly difficult to stay in business. adopted to circumvent credit card wariness has compounded costs. E-commerce is here to stay. Nonetheless. and willingly pay. All this has resulted in a slowdown in VC and PE funding. Issue 1 12 MIB.in fact the number of cards issued has declined. UDAY 2012. will the Indian customer deliver on the hopes that these e-commerce ventures have pinned on them? That remains to be seen. created logistical difficulties and resulted in a significant number of returns. worked with an NGO in north-east India. there were 7. So if you.as against the carrot of a 365 day sale. because currently. 2011 To 2016 by Forrester Research Inc). migrating to new sites that offer bigger discounts. In fact as many as 28% of the travel bookings in India are carried out online. The latest report by global research and advisory firm. e-tailers have to either rely on a struggling and unprofessional logistics industry for ensuring timely delivery of their products or establish their own delivery network. he or she will be willing to spend on services that make life easier. groceries or books – as the manufacturer/vendor too is willing to pay a premium for capturing the online market. albeit with a few course. focus is shifting to e-servi- The cash on delivery model. Also given the fact that as of February 2011. But will the companies currently driving the industry survive? Not if the current let’s-spendfreely-and-revenues-will-follow trend continues. While it is true that the Indian customer is currently wary of using credit cards in general. created logistical difficulties and resulted in a significant number of returns. companies need to start evolving strategies that encourage the consumer to pay online. adopted to circumvent credit card wariness has compounded costs. don’t worry. Cash acquired through generous VC funding is being burnt without any traces of profitability suddenly raised questions vis-à-vis the sustainability and direction of India’s ecommerce boom. Coupled with the inflated valuation of many bigger players – a valuation based on market share acquired at unjustifiable costs. speaks for itself. There is a need for companies to revert to the basics of e-commerce. 117 million transactions are carried out through the portal. Hence the advent of sites likeeasyfix. bookmyshow and deliveryoncall. Will they deliver and most importantly.Corporate Ar ticle ling carrots like free shipping.57million credit cards and 273. This is particularly significant. a convenience fee.” Estimates of failed CoD purchases vary from 10 to 40%. As most discounts that were offered to attract consumers were unviable to begin with – 45% where industry margins are barely 20-25% . Before she started INDIAreads. sometimes as high as Rs. closures and acquisitions have started. Plus. where instead of getting discounts customers are charged. Moreover. This is important for long-term viability. Vol. are reading this. profitability is easy in segments where servicing includes delivery of third party products – be they movie tickets. 4. in the long run e-commerce works through the use of online payment facilities. Ms. E-Services: The new mantra? Even as the quest for sustainable models of e-tailing that address issues of delivery and inventory management continues. an online library cum bookstore with a pan-India presence.65 million debit cards in India.” ces. This has been done to some extent in the travel segment. DSE . online purchases and transactions will continue. Many companies feel that while the customer might be hunting for discounts online in the products category. or should we say. she was officer on special duty with the Planning Commission. to trumpet its real advantages –choice and convenience. and as the Indian consumer has demonstrated a remarkable canniness. my dear customer. which coupled with inventory management is an extremely expensive proposition. Given the reality of the Indian urban landscape and the problem of the peripheries. The cash on delivery model. She enjoys travelling. Carrots versus Convenience: The need for course correction Nobody doubts that e-commerce is here to stay. 50-60 % of online transactions are CoD. In countries like China and Russia.and specially for online transactions where they have to pay in advance for a product they have neither seen nor examined. She is the co-author of Beautiful Country: Stories from Another India published by HarperCollins India. writing and photography. predicts a compound annual growth rate of 57% for the e-commerce market in India between 2012 and 2016 . However what is evident is that irrespective of the fate of the companies. The recent proliferation of deal sites has admittedly attracted a lot of customers. for e-tailers. these customers have demonstrated the fidelity of a fickle minded Casanova. According to Adventus. Only then will sustainable models be developed. This is despite the fact that IRCTC does not offer Cash on Delivery. creating inventory issues and “dead stock. 4 lakh tickets are sold every day making it India’s largest e-commerce portal. Forrester. The success of the IRCTC model.com. who were initially reluctant to transact online. They go where the best offers are. of Commerce. price corrections. where CoD was used to address similar issues of trust. Veda began her career as a journalist with the Indian Express and given her specialization in conflict studies. the future of e-commerce and even e-tailing in India remains bright. it has been established that profitability is severely affected. and that too with an increasing tempo.
prompted by high 2011 catastrophe losses and subsequent hikes in reinsurance premiums. In personal lines. the insurance and reinsurance markets have been largely hit. the economic impact of natural disasters in 2011 was the highest in history— costing at least $380 billion. while others imposed additional sub-limits. re-evaluating their distribution systems. with the U. Low interest rates in the U. As a result. Issue 1 13 MIB. 4.A Perspective on Global Insurance Market:Trends & Growth Drivers Corporate Ar ticle I nsurers are facing extraordinarily difficult times. As we head into 2012. of Commerce. contingent business interruption and supply chain risk. Changes to risk models especially those of Risk Management Solutions’ Version 11 implemented in late 2011 also contributed to rate increases in the first half UDAY 2012. there are opportunities to generate profitable growth by attracting new customers as well as taking market share away from competitors. Although capacity remained plentiful in the second quarter of 2012. Global Trends in Insurance In the Property & Casualty (P&C) sector. auto and homeowners. persistently high unemployment is putting a crimp in disposable income. while the soft market in commercial lines appears to have bottomed out. with major geographies experiencing increases. the insurance market appears to be moving in fragmented directions. saw the most costly single flood event in history. while variable annuity sales are growing and more consumers are seeking retirement income Insurers need to innovate new products and tweak existing ones. insurers are reducing or eliminating sub-limits for this type of cover. 2011 was the second most costly year for overall insured losses. are making it difficult for life insurance and annuity (L&A) writers to deliver attractive returns to prospects. According to the United Nations. While the insured loss for these events will be minimal compared to the total economic loss. In the L&A sector. some insurers reduced their exposure to natural catastrophe risk and a small number stopped writing new business altogether. At the same time. which is covered through contingent business interruption insurance. reconsider their marketing strategies and reinvent their customer experience. -Kanchana V Yet even in such uncertain economic times. and Europe struggling to cope with their economies and a double-dip recession still around. carriers have a large uninsured and underinsured population to target and hence develop right products and marketing mix strategy for this untapped segment. As a result. On the life side. The disasters have also put the focus on business interruption. Insurance companies across the industry will have to overcome significant hurdles as they look to bolster their top and bottom-lines in 2012. and. in Thailand.S. The losses from these large-scale events have largely stemmed from the knock-on effects to the supply chain. products with structured guarantees are likely to continue to struggle in this low interest rate environment. Risk Management Solutions India options. Deptt. re-evaluate their distribution systems. the price for natural catastrophe insurance is rising with underwriters labelling regions “nat cat zones” or Natural Catastrophe Zones that were not previously considered as such. Some underwriters are pulling out of geographies or lines of business completely to stabilise their portfolios and address profitability issues. particularly those that experienced large losses in 2011. Key Trends in Insurance Market: • Rising Global Property Catastrophe Rates Property catastrophe rates continue to rise in the second quarter of 2012. insurer top lines will benefit from rising prices. reconsidering their marketing strategies and reinventing their customer experience. Senior Marketing Analyst. had the highest-ever level of insured earthquake losses.S. No new capacity entered the market. Some European insurers began restricting the capacity offered in certain critical catastrophe zones. with carriers and brokers reporting significant premium increases on renewals. Insurers can achieve this by innovating new products and tweaking existing ones.. Capacity has reduced and underwriters are putting a heavy emphasis on technical pricing. Vol. which could make it harder to expand sales of financial products such as individual life insurance or an annuity for retirement. DSE . carriers have consistently seen higher rates.
insurers are seeking greener pastures in emerging markets such as China. • Energy Insurance Market Competition and high capacity levels have buoyed the energy insurance market in Asia and the Middle East in the first quarter of 2012. In addition to being the biggest economy in the APAC region. cya failure of computer security.3% growth in industrialised economies. and Western European economies failing to deliver consistent. of Commerce. Deptt. Insurers are increasingly examining issues that impact companies’ risk profiles. up from 12% in fiscal year 2010. Growing in a Challenging Economy Emerging Destinations for Insurance Carriers With the U. large-scale growth. Potentially tougher insurance market conditions are expected for the rest of this year in the onshore.S. Asia witnessed an increase in demand by up to 60%. wages in China have been rising. Insurance premiums in emerging markets have expanded robustly by 11. India. and control of well areas of the energy market. • Liability Markets Firming Up The multiyear slide in liability insurance rates showed signs of moderation as general liability and professional liability insurance rates were typically stable at renewal in most major geographies. rising insurance awareness and greater infrastructure spending have made India and China the two most promising markets in Asia compared to Europe and the Americas. Taiwan and Brazil. which are relatively mature insurance markets. tax considerations as well as cultural differences in such countries — the need for insurance coverage to meet the financial security demands of a growing middle class could provide significant growth opportunities for insurance players with the right resources and capabilities. and insurable exposures — both commercial and personal — have been expanding among a growing middle class. The low insurance penetration rates in these relatively untapped markets provide plenty of room for new insurers to set up and acquire a market share. This trend is expected to continue and is attracting the attention of global insurers looking to move beyond saturated markets. ber security has become a key operational risk for insurers. DSE . primarily due to competition from new insurers entering the market. upstream property segments. the good news is that many international insurers remain well capitalised and are keen to write new business in geographies and classes that were unaffected by the natural catastrophes at competitive rates. 4. • Cyber Insurance With the advancement in technology. Chinese economy is coping with inflationary pressure and an aging population and therefore poses Rate reductions were less common and renewals were flat in most global liability insurance markets. Despite the obstacles like stringent local regulations. Also. • Trade Credit Insurance Demand for trade credit insurance increased across all geographies in the first quarter of 2012 as buyers’ unease about creditworthiness in the Eurozone drove demand higher. Vol. and Western European economies failing to deliver consistent. compared with 1. Infringement of intellectual property is also a risk asso- With the U. ciated with the use of social media. However. without the requirement of UDAY 2012. However. Taiwan and Brazil. accounting for 23% of global M&A insurance activity in the first half of 2011. The Asia-Pacific region is already an attractive target for carriers. • Social Media and Employment Practices Liability The growing use of social media by companies has implications for the employment practices liability market. insurers are seeking greener pastures in emerging markets such as China. Pricing in the global cyber insurance market remained flat last year.Corporate Ar ticle of 2012. largescale growth. One of the latest innovations from insurers is a broadened business interruption trigger that may provide coverage for loss of income where an insured’s system suffers an outage due to a failure of technology. India. Emerging Asia and Latin America have contributed the most to emerging market insurance premium growth. like balancing employees’ personal and work-related activities and computer and internet usage policies. the growth of cloud computing means that many companies now have increased dependence on liability from a vendor or trading partner. infrastructure and distribution challenges. Coverage for risks associated with cloud computing is now available for losses suffered from the failure of an insured’s cloud provider.0% per annum in real terms over the last 10 years.S. The growing consumer class. Issue 1 14 MIB.
India’s burgeoning middle class. with buyers adding new product lines and distribution channels.4% in Asia in 2010. however. for instance. development of bancassurance) by private sector players since the opening up of the sector in 2000. Health insurance premiums are expected to increase to INR 300 billion by 2015. of Commerce. LIC continues to be the leader in the life segment with a perhaps set for bimarket share of around 81% in terms of new business policies and 71. the stage is product offerings like ULIPs and aggressive distribution strategies (e. There is immense potential as the working population (25–60 years) is expected to reach 795. due to its inadequate penetration (only 10% of the working population is covered) offers tremendous potential for insurance companies to be more innovative. as well as expanding their geographic reach into emerging markets internationally. The demand for insurance products is expected to increase in light of the increase in purchasing power. driven by innovation in of late. With more carriers undergoing India – A Lucrative Destination for Insurers strategic reviews for potential M&As The Indian life insurance sector has witnessed exponential growth during the last decade. Implementaterm. distribution strategies must be customized. is that the Indian government limits foreign direct investment in cross-border M&A.online. over mobile phones and in person. has seen strong economic growth. which is indicative of rising disposable incomes. issuance of e-policies and e-payment are the latest developments happening in this sector.5 million by 2026. applications. The insurance industry is expected to be a major contributor to the country’s economic growth. but the Insurers are trying to fully integrate sales recent “Arab Spring” may not allow for leads. rise in disposable income and younger demographic profile are attractive factors for insurers seeking growth. analytical considerations to objectively assess their sales force while delivering a multi-channel experience for consumers will likely be more successful in achieving long-term growth & retention. Deals tended to be strategic acquisitions in 2011. Regulations in India thereby limit direct investment opportunities for foreign carriers. on the other hand. some challenges for new market entrants. meaning foreign insurer participation in joint-ventures with domestic firms is capped at 26%. insurers looking to expand internationally will be challenged to tailor their product offerings. Also.680 in FY26.Corporate Ar ticle India’s burgeoning middle class. among the key Asian markets. underwriting and poinsurer business to bloom in the short licy issuance electronically. Issue 1 15 MIB. an area ability to be accessible 24/7 by offering in which many Western carriers lack ex- pertise.Current state of distribution across geographies pularity of ULIPs. shored up their bottom lines by divesting non-core or underperforming business and subsidiaries. Sellers. Similarly. insurers can expand by merging with or buying other carriers. driven mainly by the immense po.g. E-governance. Vol.3% in terms of new business premium during gger deals in 2012. both in the United States with the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and in the European Union UDAY 2012. Deptt. and sizable prospect base to tap. as political instability is likely to tion of advanced predictive analytics is discourage investment while new goveralready producing reliable underwriting nments are established. Because emerging markets have their own characteristics to contend with. Operational Excellence One major uncertainty in terms of cost is the impact of regulatory reform. The pension sector. but several other critical sectors of the economy. Taiwan is another Asian market that shares similar characteristics. has more of an aging population. an insurer’s to be Takaful (Islamic) compliant. and different regulatory compliance demands must be met by ca- multiple contact options. is becoming a very important consideration when making a purchase decision. Those carriers that are able to better integrate data-based. while India and other emerging markets skew far younger. Mergers & Acquisitions Despite tough economic conditions. while withdrawing from foreign markets where they lacked sufficient scale. Markets in the Middle East transformational change when it comes and North Africa region also offer a rich to modernizing its distribution system. Insurers might with decisions delivered within minutes also need to tailor their product offerings to finish a transaction. One obstacle. According to Swiss Re. 2011-12. fuelled partly by a young population that is inDistribution Options creasingly in need of financial products The life insurance sector is ready for a and services. China. Taiwan had the highest insurance penetration of 18. the liberalization of FDI norms for insurance would not only benefit the sector. 4. Brazil rriers looking to enter these markets. A move to increase that ceiling was recently tabled in Parliament. rise in disposable income and younger demographic profile are attractive factors for insurers seeking growth. DSE . India is likely to have the fastest-growing life insurance market. with life premium poised to grow at a CAGR of 15% for the next decade. Local joint ventures will have to be established. Therefore. The insurance sector is best placed to channelize long-term funds toward the productive sectors of the economy. The projected per capita GDP is expected to touch INR 100.
and the rules are expected to go into effect early in 2012. Although slower economic growth will affect demand for life and non-life insurance. Social computing is being used more regularly within insurance companies to improve collaboration. emerging exposures are prompting coverage for cyber-liability. The ICPs. insurers can capitalize on the rapid growth of smart phones. even in economic conditions as challenging as these. Some are outsourcing entire business processes. strategic investments in emerging economies to secure growth and expand sales. predictive analytics can play a major role not just in exposing hard-core cheating but also “Softer” fraud—such as inflating legitimate claims to cover deductibles. DSE . Others allow Kanchana is an expert in marketing communications with experience in diverse industries and organizations like Bank of America. On the life insurance and annuity side. Content and Tonality Analysis and Strategy and Change Management. Anyone can be a high-impact critic or investigative “journalist” given the viral nature of Web communication. Competitor Intelligence. There are no easy answers for insurers looking to grow their business in this volatile environment. while others are replacing their legacy systems by outsourcing their platform and even staff to third parties rather than building and maintaining such programs internally. more hybrid products such as incorporating a long-term care benefit into a life or annuity product and new retirement plans are coming up. premium growth is expected to revive in emerging markets. Business Standard and Risk Management Solutions Inc. However. Deptt. Kanchana is also an avid writer and is a regular contributor to various web media on topics of industry interest. with the potential to sway the perception of a carrier among clients. Improving the quality of an insurer’s decision-making process by taking enterprise risk management to the next level has become essential. The Financial Stability Oversight Council (FSOC) has issued revised proposed criteria for comment. Technology Transformation There are a number of technology trends on which insurers can capitalize to improve customer experience as well as the efficiency of their operations. Some insurers have enabled claims reporting and documentation to be filed from the site of a loss over a smart phone. In addition. Insurers can benefit by making the ERM discipline part of their operations system. Others are more prospective and educational—assisting prospects in determining how much life insurance they might need. Vol. nanotechnology. Use of Predictive Analytics Predictive analytics for better claims management and underwriting. a devastating cyber-attack or another major terrorist attack. particularly as carriers expand domestically and globally. certain insurers may face increased regulatory burdens if they are designated as a systemically important financial institution (SIFI). The implementation of European Solvency II initiative continent-wide is expected to be delayed until the beginning of 2014. with shortages anticipated in claims and sales. UDAY 2012. and form the basis of the evaluations of national or other regulators by the International Monetary Fund (IMF). In commercial lines. green construction. Anyone can be a high-impact critic or investigative “journalist” given the viral nature of Web communication. achieve operational excellence and drive innovations. Issue 1 16 MIB. Impact Evaluation and Analysis. innovations in different product lines are being considered by insurers. make payments or track claims progress. trade and social media and timely respond to negative publicity or misinformation. She has been a leading participant in several business forums both in India and abroad.Corporate Ar ticle with Solvency II capitalization requirements and new accounting standards under development. actuaries. delivering service capabilities while adding computing and storage capacity for insurers more quickly and less expensively than if they tried to launch the same applications inhouse. In addition. check their coverage. Employee retention should be given importance before the employees shift jobs to competitor companies. with the potential to sway the perception of a carrier among clients. Social media is being increasingly used by many insurers. sound ERM practices will better prepare companies for worst-case scenarios such as “black swan” events including collapse of a government. financial managers and systems analysts. one potential innovation would be to proactively track mainstream. Some insurers are moving their systems into virtual cloud computing facilities. insurers can make a positive impact through sound. 4. Reputational Risk Management Since insurers often grapple with reputational risk and negative perceptions. In personal lines. In addition. of Commerce. In terms of fighting fraud. Regulatory Changes The unanimous adoption by the International Association of Insurance Supervisors (IAIS) in October 2011 of revised Insurance Core Principles (ICPs) will have a long-term effect on the industry. Many insurers are actively using metrics to determine whether social media is helping in attracting and retaining customers and benchmark against what their competitors are doing in the same public space. Improving the quality of an insurer’s decision-making process by taking enterprise risk management to the next level has become essential. tablets and other Web connected devices. the IAIS is on track to issue its definitions for Global SIFIs by early next year. assessing distributors and recruiting talent are making significant impact for insurers. Many carriers are experimenting with QR codes in their advertising and marketing materials. Capability clouds are also on the rise. political risk and the professional liability of meeting new regulatory demands. prospects to get quotes. Internationally. Analytics can also be used to gather more insights on buyer needs for better cross-selling. such as claims administration. are the “best practices” of regulation and supervision. Another threat to operational excellence is the aging of the insurance workforce. Product Innovations Apart from revamping existing products. Her forte lies in Business Research. new products are being launched to offer private unemployment insurance. Such data could serve as an advanced form of customer relationship management (CRM). spreading ownership of risk across the operation and improving risk disclosure and governance.
Entering into foreign markets and building a base in the selected markets entails huge financial as well as manpower outlays that have to be incurred for undertaking market research studies. Approaches to Foreign Market Selection Various approaches used by the firms for foreign market selection can for the sake of better comprehension be classified into two broad categories (Albaum et al. It is. A proactive approach. The same holds true for the foreign market selection decision. Out of a total of more than 195 countries in the world. but also during the post-entry expansion or contraction stages for effecting changes in the market portfolio. As against the use of ad hoc or reactive approaches in vogue in many companies. Foreign market selection is a key and strategic decision in the sense that it defines and shapes the company’s future growth charts (or its reverse). Issue 1 17 MIB. selecting one or few market(s) is a daunting task. of Commerce. Unsolicited order means that orders come to the firm without it having made any direct attempt in the direction. setting up logistics and administrative support centres. 2005): • Reactive approach • Proactive approach A reactive approach is more of an unplanned approach to foreign market selection. When a firm decides to go international. moreover. the firm does not make efforts on its own to actively search for the overseas markets.. on the other hand. it is quite possible that some other more profitable export markets for the given UDAY 2012. locating and negotiating with overseas intermediaries. University of Delhi In the highly competitive markets in the world today. Deptt. Under this approach. faced by the companies not only at the initial foreign market entry stage. Foreign market selection decision is. Douglas and Craig. import agents. this is a risky approach as the firm might have to drop this market later on when repeat orders stop coming to it or when the firm desires to withdraw from the chosen market because it finds some other countries as more lucrative markets in terms of both the growth and profit potentials for its products. the paper outlines procedure that companies can use for objectively and proactively deciding about the foreign markets. 3. It is a crucial decision having long term and profound implications for the firm’s future operations and profitability. electing foreign market is the first and foremost step in the international marketing planning process. The supplier firm thus is able to bag an export order even not having made any effort in that direction. Jain Out of a total of more than 195 countries in the world. it faces the first and foremost task of identifying potential foreign markets and selecting one or few of them as its target markets. During journeys or conferences. unplanned and ad hoc ways of decision-making can prove to be a costly mistake that no fund-starved business firm can afford. 1993. A foreign market thus gets selection without having made a detailed and systematic exploration and investigation. it sometimes happens that foreign buyers come into contact with the executives of the supplier firm and finding that the supplier firm manufactures or trades in products of interest to them. Apart from being a critical issue faced by the firms at the initial market entry stage. Delhi School of Economics. It rather acts passively waiting for the -Sanjay K. foreign market selection decision continues as a major concern even during the post foreign market entry stages when due to changes in the environment of poor company performance the company has to consider divestment from some markets and/or making inroads into other emerging markets. is a deliberate and more market-oriented approach that involves active participation the part of the firms desirous of entering into international markets. Department of Commerce. Vol. etc. selecting one or few market(s) is a daunting task. Secondly. 1989 and 1992). The proactive approach can be of two types: informal and formal. cursorily discuss about the possible markets and select one or few of them without having undertaken a detailed and systematic investigation. A few executives sitting together over a cup of tea. DSE . not an ideal approach. however. This approach is in general used by small firms. thus warding off pitfalls of unwise and poor market selection decisions. As against the use of ad hoc or reactive approaches in vogue in many companies.. but all this is done in an informal and casual manner. As against adoption of a reactive and informal approach as in vogue in many companies. adoption of a systematic and strategic approach to the resolution of this crucial issue can go a long way in arriving at a relatively more objective and predictably profitable decision product might be there in the world that the firm has not explored. adoption of a systematic and strategic approach to the resolution of this crucial issue can go a long way in arriving at a relatively more objective and predictably profitable decision (Kumar et al. First. building brand/ company name and generating customer patronage in the international markets. they make further enquiries and place order with the supplier firm. A proactive but informal approach is when the management of a firm makes deliberate efforts to identify and select foreign markets. The other way can be talking inquiries or unsolicited orders to come from foreign buyers. for example.Identifying and Selecting Foreign Markets: A Strategic Perspective Academic Ar ticle S Professor of Marketing and International Business.
survey of foreign markets is moreover not required at this stage. they entail varying marketing ramifications. Hence. Due to being more objective and systematic. while a definition of market piece of wooden craft as ‘consumer product market’ would result in overestimation of market size and improper identification of competitors and distributional channels. Depending upon how the company desires to market the product. Issue 1 18 MIB. The purpose at this stage is just to identify high potential markets based on select macro factors such as local production. Daniels and Radebaugh. however. Differences in competition as well as other environmental factors in these two markets require different positioning and marketing mix strategies. counties in the world can be classified into three broad types of markets: existing.. i. for example. DSE . As will to acquaintances that might have been having past experience of exporting to select countries. say the product in question is a hand-crafted wooden piece of some animal. demand and/or consumption of the product (Cavusgil. Since the cost of undertaking foreign market surveys for collecting primary data is exorbitant. While defining the market. defining the market as ‘wooden proceeds for preparing a list of countries that seem to be having good market potential for the company’s product. a correct market definition is a crucial step in foreign market selection process and needs to be undertaken with great precaution. are the markets/ countries UDAY 2012. Various published and online sources are used for gauzing the current demand or consumption of the given product. Although seemingly A proactive approach and formal approach in contrast is based on a systematic process of identifying potential markets and undertaking a detailed investigation in each one of such markets before selecting finally one or few of them as the firm’s target markets. Marketing the wooden craft in the handicrafts market would involve competing with suppliers mostly from the developing countries. but the same markets may turn out to be highly lucrative markets if certain other aspects such as growth prospects or profitability of operations are taken into account. Major steps in sequential proactive foreign market selection process are outlined below. 2. on the other hand. This informal approach to international market selection runs the risk of missing finer points. imports. Steps in Proactive Formal Approach to Market Selection Proactive formal approach follows a sequential process. Last three or four year statistics in respect of these parameters for various countries in the world can easily be compiled from published and online sources. Some markets might not appear appropriate markets for being currently of small size. latent and incipient markets. market definition for many products in today’s complex and ever changing markets is actually a tricky affair. be discussed shortly. one can think of two possible major markets to which this product can be destined: handicraft market and toys market. 1985. Primary data collection at this stage is avoided as it can turn out to be quite expensive and time consuming process in surveying each of more than 195 countries in the world. this approach is preferable to informal approach. 1994. Latent markets. Vol. Deptt. 1987. 1989. Connolly. Initially a list of high potential markets is developed based on desk research. and hence can be construed as potential markets for the given product. Proactive and formal market selection approach and steps involved in this approach are discussed in the following section. 1.. Wooden Crafted Pieces of Camels: Do These Constitute Handicraft or Toys Market? handicrafts market’ would severely restrict the firm’s entry into other types of handicraft markets such as metal handicrafts if the firm decides in future to enter into such markets. In the case of woodcraft piece mentioned above. Papadoupoulos and Jansen. of Commerce. 1993. Defining market It is necessary that the firm clearly defines its market.Academic Ar ticle elementary and straightforward. one Based on current and potential consumption and demand.e. say camel (see Figure 1). higher are considered to be market potentials for that product in that country. Larger the imports of the product into a country. elimination of the less promising markets in the earliest possible stages of the sequential proactive market selection process greatly helps the firm save time and money. To illustrate. Rahman 2001). Young et al. using secondary data. Then a detailed evaluation of each of the shortlisted markets is undertaken with the help of the primary data to drop the countries that are not that much lucrative. Identifying High Potential Foreign Markets Once the market has been defined. whereas it can face competition from both the developed and developing countries in the latter market. High potential foreign market identification is done on the basis of desk research. 3. A proactive approach and formal approach in contrast is based on a systematic process of identifying potential markets and undertaking a detailed investigation in each one of such markets before selecting finally one or few of them as the firm’s target markets. Ball and McCulloch. Existing markets are the markets which are already meeting the local demand by importing the product under consideration. one should be wary of using either a too narrow or too broad market definition. Since the two markets differ in terms of market structure as well as potentials. 1998.
Although there is no demand for the product right now.e.Academic Ar ticle where though there is a felt need for the product.Sources of import . Incipient markets are comprised of markets/ countries where there is currently no felt need for the product.Import volumes . design or price competitiveness. the need is currently being met through consumption or use of substitutes or alternate products. para-tariff measures etc. physical distance between the locations of two countries) alone. feeling of uncertainty because of unfamiliarity with the foreign market. import values. the high potential markets are identified through desk research. And these are the select countries which undergo further evaluation outlined in succeeding steps. Preliminary Foreign Market Screening The shortlisted high potential markets in step 2 undergo further screening so as to eliminate countries which are out rightly unapproachable or servable. There is no or little direct demand for the given product in those market right now. but also includes cultural distance (host country differing culturally from the home country and hence difficulty perceived in using a similar marketing approach there) and psychic distance (i.small as well as medium and large enterprises. and hence there is no demand for that kind of product or its substitutes.Importing countries . Other reasons for eliminating some countries from the shortlisted list include market proximity here does not refer to geographic distance (i. While the existing markets are point of attraction for all types of firms . the relevant SITC (Rev. the firm selects top few countries that appear to be major markets for the product. Owing to absence of demand and consumption for the product in question in the latter countries. Data relating to production and consumption of substitute products are analysed and demand for the product is estimated by taking into account other factors such as likely changes in income or life style in future in these countries. these corporations emerge as the market leader by capitalizing upon their first mover advantage. Bans on exports/ imports can be either product specific (e. the same does not hold true for estimating market potential in the latent and incipient markets. is estimated and subtracted from the demand forecasts so as to arrive at future import potentials. of Commerce. Issue 1 19 MIB. The counties can be ranked on the basis of any one or a combination of parameters such as import volumes. 4) code is 057. It may not be out of place to mention here that while it is easier to identify and rank the existing markets. The corresponding code number for this product as per Indian trade classification is ITC-HS 080300. these firms even proactively enter into these markets and invest heavily to build awareness and demand for the product.3. One needs to correctly ascertain the export product code number so as to be able to look at relevant places or tables in the published sources for collecting information about foreign trade in that product. 3. Many countries have their own codes too for compiling foreign trade data such as India Trade Classification . technical standards.Rates of import growth/decline . The major steps involved in desk research are as follow: • Identifying product code numbers: Internationally accepted codes are SITC (Standard International Trade Classification). one proceeds one proceeds with data collection task so as to be able to assess as to which countries in the world are currently importing and how much. ban on exports of uranium to Iran. Per unit import price is calculated by dividing the total import value by total import quantity/volume in a given year. it is not possible to rank the latent and incipient markets in the same manner as is done in the case of existing markets.g. It is called desk research as one does not visit foreign markets to survey intermediaries and final consumers of the product. latent and incipient markets are ranked and shortlisted for more rigorous screening in the subsequent stages. Commodity Trade Statistics (UN Publication) and publications of export promotion councils (EPCs) and commodity boards in the exporting countries. • Gathering information: Having identified the product code. Instead sitting on a desk.. but demand can emerge over time as the people become aware of the given product and develop a preference for it for being superior in quality. Field research is undertaken at latter stages when already a few high potential markets have been identified and more detailed and micro level information is needed to identify the most promising ones. For a firm interested in exports banana exports. per unit import price. for instance. ve mentioned information include: UN International Trade Statistics Yearbook. • Ranking importing countries: Based on the collected information. As mentioned earlier. Vol.Import values . the latent and incipient markets are of great interest to large size multinational corporations. Local production of the product.. • Short listing select high potential markets: Once various countries have been ranked on the basis of various im- UDAY 2012. one analyses secondary data compiled from various published and online sources. Rather one has to resort to indirect methods to estimate the demand for the product in these countries. and hence absence of imports and import statistics. bans imposed on imports of poultry items from certain Asian nations due to the reasons that these items were suspected to be infested with swine flu virus) or even in the form of total bans on foreign trade with select countries such as the ones imposed during the situations of wars. Once the demand for the product picks up. With changes in the socio-economic environments in these countries. these countries can emerge as important markets in future. and hence perception of greater risks in dealing with people and firms in the foreign country). and hence need to be dropped.. DSE . Based on these estimates. growth in import values or volumes over time.e. Among possible reasons responsible for an outright rejection of some of the identified markets could be embargoes imposed (either unilaterally or as a part of decision of a regional grouping or international alliance of which the home country is a member) on exports to some of the shortlisted countries by the home country government. countries currently importing the concerned product are ranked so as to be able to shortlist the high potential markets. if any. formidable tariff and other non-tariff barriers such as quota restrictions. BTN (Brussels Tariff Nomenclature) or CCCN (Customs Commodity Code Number). Instead of waiting for the demand for the products to come up in future.Harmonised System (ITC – HS) code prevalent in India. Deptt. consumers can start demanding the given product in some distant future. import embargoes imposed by the host country government. Some of the information that needs to be collected in this respect is as follows: . 3.Import prices Major sources for collecting the aboport parameters.
. DSE . Deptt. in contrast. • Price competitiveness • Customer’s buying behaviour and servicing requirements such as tastes and preferences of customers. however. political and legal conditions prevailing in the market and their impact on product acceptability and sales profitability. 1985. achieve greater market coverage and have greater control over its market operations.Academic Ar ticle various operational hurdles like lack of shipping links. Both the strategies have their own sets of advantages and limitations. economic. Companies employing this strategy also enjoy greater flexibility in their operations and stabilization of sales and profits for being less dependent on particular market(s). the company has to decide the total number of countries that it will like to venture into. By putting all the eggs into one basket. Market spreading strategy is. but the companies do take into account other considerations even if these are less objective. of course subject to the availability of funds and manpower. however. availability of product servicing infrastructure. concentrating on one or a few market raises the stakes a bit too high. Up-to-date and detailed market information about various micro and other macro indicators is. and (b) market proximity.e. but also the sales potential (i. firms in general have a preference for countries or markets that are closer to them. the company exposes itself to greater uncertainty and risks. one needs to conduct overseas market research studies to collect the primary data. but also the future market potential and growth prospects in the shortlisted countries.. physical distance between the locations of two countries) alone. 3. Issue 1 20 MIB.e. 5. Countries that are not proximate to the home country are generally avoided. and hence perception of greater risks in dealing with people and firms in the foreign country). quality. But the option is not without its share of disadvantages. • Market size and sales potential • Physical distribution infrastructure and cost: Availability and cost of warehousing. Vol. Observation of products on sale in retail stores and their prices. delivery schedule norms. Walvoord. Furthermore. It should. the firm has to decide whether it would like to operate in the entire market or would focus on one or few segments UDAY 2012.. Choosing specific countries as firm’s foreign markets: The next logical step is identifying particular country/countries. represents the situation when a firm decides to extend its operations to as many countries as feasible. a more secured way of diversifying market risks. high costs of product adaptation and difficulties envisaged in providing after-sale services or conforming to technical standards in vogue in some of the shortlisted countries. In order to inch closer to the most promising markets. Firms prefer operating in markets which are compatible with their objectives and resources. market size for the product class as a whole). on the other hand. • Macro-environmental characteristics: Geographical. two additional factors emerge to be especially of crucial importance: (a) compatibility with company’s objectives. Within the chosen market(s). socio-cultural. Additionally. No doubt market potential plays an important role.. 1980). Market proximity is an important consideration in foreign market selection. colour and design which have a direct bearing on their acceptability in foreign markets. it is sometimes a better idea to gain smaller market shares in many countries than going in for a relatively a high share in a single or select markets because the former can be gained at lower costs without the risks of retaliation from competitors as well as without compromising upon the total sales revenues as the sum total the shares in different markets might turn out be as big as a large share(s) in one or few markets. it is imperative to take into account not only the present market size or past growth. 4. it is possible that some of shortlisted countries might not turn out to be quite promising ones if a more detailed investigation of these countries is undertaken considering micro as well as other macro level factors (Cavusgil. selecting specific segments as firm’s target markets Determining number of countries a firm should enter into: While going international. resources and skills.e. if any. The number is decided keeping in view the company’s market coverage strategy: market concentration vs. Market concentration strategy involves concentrating concentrate on one or few foreign markets. but also includes cultural distance (host country differing culturally from the home country and hence difficulty perceived in using a similar marketing approach there) and psychic distance (i. The choice between the two strategies discussed above is a function of many factors listed in Table 1. feeling of uncertainty because of unfamiliarity with the foreign market. customer approachability. exorbitant transportation costs. Target Market Selection This is the final stage in the proactive foreign market selection process and involves resolution of following three issues: • Determining number of countries a firm should enter into • Choosing specific countries as firm’s foreign markets • Within the chosen market(s). potentially vulnerable enough in the worst case scenario to altogether throw the company out of business. Some of the factors that need to be taken into account at this stage for undertaking market attractiveness analysis and estimating sales potential are as follows: • Product acceptability: Products vary in features like size. of Commerce. • Market competition: Nature (i. holding discussions with intermediaries and officials of trade and industry associations or conducting a survey of final consumers to understand their buying and consumption behaviour are some of the techniques that the firms use for collecting the firsthand information about these markets.e. Apart from lower risks and greater stability of sales and income. Since the analysis has been done on the basis of select macro indicators alone. foreign exchange rate and controls. the share that a given company’s product or brand can acquire in the total market). Hence.. market spreading strategy. The analysis up to the preliminary foreign market screening stage primarily involves use of secondary data.e. etc. generally not available in the secondary sources. one needs to be concerned with not only the total market potential (i. Market Attractiveness Analysis The preliminary screening leaves us with markets which have high potentials based on select macro indicators and are also approachable. In selecting the most attractive market(s). Given many uncertainties that are characteristic of markets these days. be kept in mind that market proximity here does not refer to geographic distance (i. quota and other non-tariff measures. Concentrating on only one or a few select markets enables the export firm to gain over time the in-depth market knowledge. Market spreading strategy. deciding specific segments as firm’s target markets: Having selected one or few specific countries as the markets for the product. transport and insurance services • Foreign trade policy and regulations: Custom duties.. whether it is price based or non-price based) and extent of market competition.
N. Delhi... business ethics and corporate social responsibility. and McCulloch.. S. Hamill. International Market Entry and Development. business firms need to adopt a proactive and formal approach. C. (ed. Vol. 73-86. 56-67. Different segments entail different expression of needs. University of Delhi. S. Deptt. NJ. Delhi. Earlier he has been Professor and Dean (Training and Placement) at School of Management Studies. (1992). 291-318. Company Factors • Low management risk consciousness • Growth through market penetration • Ability to pick up best markets B. (1989). 9. Englewood Cliffs. Daniels. Global Trade Magazine. 27-33 Connolly. S. The given market may not be a homogenous one. Scope and Synergy”. W. Englewood Cliffs. and Joachimsthaler. S. International Journal of Research in Marketing.. S. He has also served as expert member of various course curriculum development committees set up by state and national organizations such as PSSIVE. His work has been published in various national and international journals including Journal of Global Marketing (USA).. J. Export Strategy: Concentration on Key Markets vs Market Spreading”. Journal of International Marketing. International Marketing and Export Management. Homewood. etc. Jain is currently a Professor in Department of Commerce. Jr. S. NJ. 5th ed.) Dimensions of International Business. (1994). D. (1987). Vol. 47-59 Douglas. (1998). 2(1). E. S. thus demanding use of a differentiated approach to marketing strategy formulation. and Strandskov. The International Business Study Group.. 56-67. Company Factors • High management risk consciousness • Growth through market development • Limited market knowledge B. J. and Craig. and Craig. thus enabling the management to fruitfully devote their time and money to identification and selection of most promising markets. 6 (2). R. Pearson Education Ltd. Professor Jain is alumnus of Shri Ram College of Commerce and Delhi School of Economics. Entering and Succeeding in a Foreign Market. G. Market Factors • Small markets – small volume due to specialized product uses • Unstable markets • Many similar markets • New or declining • Low source loyalty • High competition D. Other Factors • High communication costs for additional markets • High handling costs for additional markets • High physical distribution costs for additional markets Select References Albaum. Depending on its objectives.. Prentice Hall. S. to be segmented in groups of customers who have identical needs and behaviour. Other Factors • Low communication costs for additional markets • Low handling costs for additional markets • Low physical distribution costs for additional markets Factors favouring market concentration A. and Jansen. May. R. he has also served as a senior faculty at the Indian Institute of Foreign Trade (IIFT). Issue 1 21 MIB. Nov-Dec. J. and Davis. “Country Method-of-Entry Selection for International Expansion: International Distributive Arrangements Revisited” in Papadopoulos.. “Guidelines for Export Market Research”. (1981). C. Table 1: Factors influencing international market spreading and concentration Concluding Observations Foreign market selection is a key decision for firms desirous of entering into international markets. 1(1). Rahman. (2006). 1(1). H. S. P.. A. Journal of International Marketing and Exporting. (1989). N. P.. D. 31-52. Ball. Carleton University. “Advances in International Marketing”.. Ltd. Columbia Journal of World Business. “Export Market Research”. Delhi. Product Factors • Generalized uses • High volume • Repeat purchase • Middle of PLC • Product requires adaptation • Low service contents C. Kumar.. and Dorling Kindersley (India) Pvt. DSE . Journal of International Business Research. Product Factors • Specialized uses • Low volume • Non-repeat purchase • Early or late stage in PLC • Standard product • Low service contents C. NCERT and UGC. Journal of International Marketing. (2005). He has been actively engaged in post-graduate teaching and researches in these areas for about three decades.. 11. Export Strategy: Concentration on Key Markets vs Market Spreading”. the firm can choose one or two segments that best serve its interests and evolve marketing mix strategies as appropriate for reaching the customers in the selected target market segment(s). E. Addison Wesley Douglas. 29-54 Papadopoulos. C. L. Business Horizon. pp. J. therein. “An Interactive Multicriteria Approach to Identifying Potential Foreign Markets”. a given market may be divided into different segments on the basis of buyers’ demographic and psychographic characteristics. Journal of International Marketing. Delhi School of Economics. Dr. (1993). of Commerce.H. G. T. Rahman. 83 Young. To avoid pitfalls arising from wrong selection of foreign markets. UDAY 2012. IL. (1985). Market Factors • Large markets – high volume due to general product uses • Stable markets • Limited number of comparable markets • Mature markets • High source loyalty • Low competition D. N. International Business: Environments and Operations. 5th ed. GGS Indraprastha University. International Business Introduction and Essentials.Academic Ar ticle Factors favouring market spreading A.. Richard D. S. “Evaluation of Global Marketing Strategy: Scale. Duerr. It is a strategic decision as setting up business in a foreign country is an expensive proposition and has a significant bearing on the firms’ operations and performance in the long run. Prof. (1980). G. K. H.. therefore needs. Prentice Hall. Adoption of a sequential approach outlined in this paper can greatly help the firms dropping the less desirable markets in the initial stages of the process. Besides geographic location of the customers. (1993). Jain specializes in the areas of marketing and international business. “International Market Selection Process: An Investigation of the Relevance of Business Operating Environment”. Wheeler. W. Stam. (1981). 5(1). V. and it. 150-160. Cavusgil. Walvoord. Source: Piercy. Finding. N. (2001). A. Piercy.He is the author of the book “Export Marketing Strategy and Performance: A Study of Indian Textiles”. Delhi and Shri Ram College of Commerce. The Economic Times. Fall. resources and also compatibility with its present line of product. He is member of various Academic institutions and associations. Before that... & Radebaugh.. Ottawa. 3. A. Irwin. Economics and Political Weekly. “The International Market Selection Process: A Study of Successful Australian International Firms”.
-Everybody is busy in archiving life. The burgeoning popularity of ‘sameness’ today is the code for brand building initiatives. taking a lot of detours. Like electrons. no practice of unnecessary hypes. There is no attempt to create any meaning and do anything exciting. no slaves to research. So brand builders are forced to embrace ‘short cuts’ of brand building. tried & tested’ path to achieve natural growth of the brand. There is nothing wrong with it but the usage of ‘Synonym and Antonym’ (Synonym – copy the competitor’s idea and create a semblance.. The kernel of the disease is ‘Intellectual Recession’ in thinking. 4. The pleasure of text is missing – good content is becoming obsolete. The rigor and precision is missing in the process of building brands.create a polar opposite meaning for the brand. and no meaningless. and while similar parallels can be drawn in case of brands too. The same holds true for brands. Vol.Corporate Ar ticle Why we need to Think about New Ways of Building Brands? Planning Director. Everybody is looking for a formula! Brand builders are chasing the ‘safe. one has to admit that everybody is too busy managing the historical variables of building brands while ignoring the ‘new source’ of influences. -The surviving instincts are overshadowing ‘the creator’ mindset! 3. There is no inquest! 2. And welcome to the new cultural moment! The world today is one of big media companies where the bottom line looms larger than ever. successful magazine can do every month”. no use of unnecessary jargons. The kernel of the disease is ‘Intellectual Recession’ in thinking. The ‘big idea’ is missing. In the Harvard Business Review article UDAY 2012. clever ideology! We are against the validation (read risk averse) mindset of brand builders. social values have started travelling in a zigzag manner. Ogilvy & Mather -Soumick Nag T “We are living in an age where millions of colors became 256. Unambitious! The sorry state of magazine covers talk a lot about the diminishing aesthetic sense of our society. A large critical mass is happy watching than reading. Category after category. As a result it’s impossible to describe the difference between ‘Brand A’ and ‘Brand B’ in a single word. But the trillion-dollar question is: How can this idea be applied to business today? Our Manifesto: We welcome: no copy/paste. Difference is the enemy. Everybody is interested in ‘what’s the breaking news of the hour?’ Celebrity has intruded almost everywhere. New means upgrade. Brands are trying hard to become relevant and meaningful. there is no time to examine it. Risk is obsolete” -Neville Brody What’s a brand? Nothing but words and images. here is a striking similarity between news-stands and brand shelves– what could be more uninteresting than Magazine Covers? Mechanical. The pressure to ‘sell more’ is the The burgeoning popularity of ‘sameness’ today is the code for brand building initiatives. Even while David Ganger. In a world increasingly divided between right-brainers and left-brainers. even when it’s not required) as a tool of brand building is a disastrous endeavor in the process of building brands. English Speaking urban India is shifting towards ‘Low-context Culture’.. one and only mandate. Antonym. Danger is replaced by fear. They are all slowly but steadily moving towards an unceremonious demise. of Commerce. Half of the brands (occupying retail shelves) have no intentions to create a meaning. And this probably accounts for the missing ‘big idea’ in brands. Generic culture hypnotizes us all into generic patterns. it’s important to create a meaningful fusion between words and images to create an ever lasting impact. tried & tested’ path to achieve natural growth of the brand. Commercial pressure too squashes ideas. brands are talking the same thing in different languages. DSE . New media choices whoosh towards you every hour. Everybody is looking for a formula! Brand builders are chasing the ‘safe. Issue 1 22 MIB. Our Hypothesis: 1. Deptt. where control is visibly invisible. Esquire’s editor-in-chief since 1997 says the big idea cover “is not something a mature.
‘the act of observing changes the thing observed’! Real life Case Is there any relation between ‘menu boards’ (of quick serve restaurants) and ‘urban working class’? We believe a menu board is a reflection of the daily life of the urban working class. which actually challenged anything? Our Approach: 1. Time and again we do talk about (name-dropping)…Semiotics. Our idea is simple. “No. which is generic. a faster horse!” We are not against research but we are against the way research is done . ‘the act of observing changes the thing observed’! (April 2012) titled ‘The Real leadership lessons of Steve Jobs’.” remarked Sherlock Holmes. Our idea is to encourage brand builders to see things differently. occupy your seat … And the gridiron helps brands to organize space too. both online and offline.stand in the queue. They are filled with unquenchable ambition in their occupations and know that answering work related e-mails and texts are 24x7 responsibilities. restaurants are designed on a fixed. DSE . Home décor. Social stories (gossip.50 years have gone by since Vance Packard wrote the ‘Hidden Persuaders’. People look for role models c. gridded field that allows for easy navigation. official mails. lift. most of the researchers don’t know how to apply the theories of Curl G Jung and Ronald Barthes in real life situations. struggling for approval .a conversation with Inspector Gregory in “Silver Blaze” 2. We are telling them to get rid of the ‘theory of marketing’ and overhaul ‘managerial mindset’. NGO workers. Zero confusion (key-word is the buzz word!) 5. we believe the only way to overcome ‘intellectual recession’ is to change the flight of thinking –as Heisenberg’s theory of uncertainty stated. apparel.where habits are being replaced by cultural surplus and values are being questioned by capitalist hypothesis. 60 years since Ernst Ditcher talked about the importance of motivational research! The truth is even in 2012. Ethnography … but the ‘intellectual recession’ in thinking limit the scope of research into two old Q’s – Qualitative and Quantitative research. the average English speaking Delhiites spend around 4 hours consuming information (Google search. People have layers of identity d. to sell at a discounted price (40% to 80%). watches to name a few.getting the right clothes. Walter Isaacson has stated an interesting story.). We are talking about the consumer class that forced all premium international brands across categories. wait for your turn. Yoga therapists.” “That was the curious incident. People are comfortable with expressing greed b. We have found 4 streaming values of the Society: a. social media etc. They are adept at managing lifestyle status.” “The dog did nothing in the night time. nutritionists. ATM counter) 4. They are exuberant explorer – neutralizing preconceived perceptions about brands and starting to experience new brands (if you are interesting and relevant to my need –I am game!) We need to concentrate our focus into “What they are buying into” not “what they are buying” Change the Focus They (Delhi’s English speaking urban UDAY 2012. it’s important to understand its vectors. scandals and drama) Why do marketers of the QSR’s need to study ‘the movements of the crowd’ to build the brand aura? Like modern cities. . People do follow the ‘invisible map’ of the restaurant: everything is programmed .from a T-shirt to new business/ job offer . Deptt. We believe the best book on ‘Consumer Insight’ is not written by marketing whiz kid of a global brand but By Sir Arthur Conan Doyle: “Is there any other point to which you would wish to draw my attention?” “To the curious incident of the dog in the night time.) Change the source of Inspiration Brand lives in a society. People want to express themselves fully (The findings have emerged from discussion with specialists in several fieldsclinical psychologists. Here we have defined consumers as ‘Chromosome’ and focused on three things – the language they speak. Vol. parking. 4. The brand managers of QSR’s must try to get inspiration from Gary Hustwit (the director of the documentary ‘Urbanized’) to create new kind of appeal to the consumers. Reclaimed ‘time’ ( on an average a person spends at least an hour a day waiting in queues – metro. of Commerce.) Change the nomenclature of consumers and understand what they are buying into We have said no to the typical profiling of consumers. interactions with media and interaction with global brands (a recent experience in India).” jobs replied “because customers don’t know what they want until we have shown them”. Convenience 2. the right haircut. we believe the only way to overcome ‘intellectual recession’ is to change the flight of thinking –as Heisenberg’s theory of uncertainty stated.Corporate Ar ticle Though we are optimistic that someday brand managers will be able to see past unwarranted debates on morality of brands (stop weighing what’s right and wrong for brands). sociologists. That reminds me of Henry Ford’s line “If I would have asked customers what they wanted. Issue 1 23 MIB. QSRs are the sign of India’s (urban) cultural shift . healthy diet. Actionable information (don’t want to miss the latest cool thing) 3. shops. Introducing Chromosome D – Delhi’s English speaking people: Each day.when Jobs took his original Macintosh team on its first retreat. When the society acts like streaming particles. The bedrock of our idea is based on connecting the unconnected dots. We have observed that most of the quick serve restaurant’s menu boards are passive and confusing. one member asked whether they should do some market research to see what customers wanted. When was the last time you encountered any thinking culture (in any marketing organization) that inspired shock and awe.They are not going to settle for any kind of stereotyped consumer community. they would have told me.among peers and friends. What does the urban working class seek? 1. Behavioral Economics. business consultants and policecrime bunch) The big question is –how brands can use social insights to connect a chord with urban people? Why can’t a brand have several identities in several mediums? Why can’t a brand stand for ‘greed’ only? Though we are optimistic that someday brand managers will be able to see past unwarranted debates on morality of brands (stop weighing what’s right and wrong for brands).
care about privacy. He has a keen interest in typography and linguistics. task centered. very condensed sansserif type • Application of info-graphics will always be a plus (Times of India. 70’s marketing wisdom says creating a brand is about differentiating your offerings (product/ service). the highest in four years: source: HT Business). Natuzzi). of India) data has Be Younique Inner Force shown that Indians Be Stupid are lavishly spending The English Bag through credit cards Wake Up New Delhi (credit card spending Space For Your Style by Indians rose 28% French Fashion Wear Open Minded Design to Rs. 4. what are the things forming the new choice architecture? 3. We believe the so called ‘liquid’ culture is looming over the Indian sky making it imperative to understand what kind of behavioral pattern is forming. They are weaving cultural connections with countries like Germany (Bosch. in 2012. Rolf Benz. to bond with different culture and to create a distance from mass society. Denmark (Bo Concept. are flooded as never before by materialistic culture: look at the malls. Nag has authored several pieces on strategy and branding in Business Standard and is the founder of Goldilocks: a monthly magazine on linguistics UDAY 2012. Independent People 75.embracing global goods. More materialism is the order of the day. As a result of economic success the individual has taken center stage and the demand for new desire is more popular in India today than it was a decade back. They are creating a new kind of brand aura and encasing an already intensified trend in India. micro and social? 2. Jack & Jones). These people are no more interested in building long – term relationship with brands (a reflection of low-context culture). Global brands (now ‘available in India’) have been started connecting with English speaking urban consumers in an appropriate fashion.e. Brands Bosch Police Graham Diesel Carlton Hastens Alcott Elle Italsofa Veromoda Sisley Boconcept Country of origin Germany Italy UK Italy UK Sweden Spain France Italy Denmark France Denmark Category Music System Eye Gear Watch Apparel Bag Bed Apparel Apparel Sofa Apparel Apparel Home Decor mine what these brands are saying: These brands are the flag bearer of ‘low-context culture’. with the urban Indians’ focus on personal success: access to global brands provide both individual pleasure and signs of success.Corporate Ar ticle class) are buying into cultural surplus – new wants are replacing the old ones. English magazines. DSE .Police: Be Younique. Italsofa. and the logos people wear. Welcome to the birth of new greed and want. and Hacker). Soumick Nag is Planning Director at Ogilvy & Mather. Their languages are crafted and crisp (a reflection of lowcontext culture) . Mr. Think again. We are introducing our model titled as ‘Liquid brand culture’ explained with the In 2012 January. of Commerce. Spain (Zara) and France (Sisley) to name a few. Materialism is predicted to be steady. the lifestyle displays on television and newspapers. People buy global brands to express their identities. 96.a term popularized by the anthropologist Edward T Hall to describe cultures in which people are individual oriented. People buy global brands to express their identities. example of Chromosome D: Four questions emerge: 1. It’s important to exaadvertised “My new year resolution is to shop more”. Issue 1 24 MIB. Police. signboards on malls heavily use sans-serif condensed typography). Reserve Bank We Are German. In 2012 January. Conclusion Urban Indians.000 crore in the Urban Design previous fiscal year. Vol.000 crore Refresh Your Wardrobe in 2011-12 from Rs. What are the new reference factors i. and tend to have more interpersonal connections of shorter duration. Sisley Mr. What are the influences –macro. Sweden (Hastens). What are the new desires to adapt? To connect a chord with new age consumers (Chromosome D): • Use illustration • Try and use very . Ducati. Brand Language Latest RBI (14th may 2012. Deptt. These brands are busy on explaining ‘the geography of thought’ to the new breed of Chromosome D. What are the tempting elements to emulate or bond with? 4. Italy (Gas. to bond with different culture and to create a distance from mass society. Sisley advertised “My new year resolution is to shop more”. HT use info-graphics.
including those of the founder/entrepreneur who starts internationalizing the firm early (Knight and Cavusgil. Consultant. 2000). Prior to this. 1996). Since then Indian outbound FDI has undergone long term transformations in its character covering industrial structure. The traditional MNE (Caves 1971) is characterised as being a large. Deptt. 1992). its emergence in the context of the Indian IT sector and implications in the context of a changing business environment. entry modes. and reliance on international networks and strategic alliances as a substitute for the firm’s own assets (Coviello & Munro. 3. outbound FDI from India was insignificant due to the inward looking protectionist regime. This study focuses on Indian firms from the information technology sector that have used acquisition as their mode of first global entry. born global firms almost bypass internationalization as a process. 1993). transportation and communication areas. Delhi University. The establishment of the National Innovation System (NIS) framework also explains how strategic government intervention and related institutional support contributed to skill formation and development of an entrepreneurial orientation. Characterized by features of accelerated internationalization these firms are increasingly active in the international economy leading to changes in the dynamics of international competition. uses an internationalisation strategy that is seen to contradict the stage model of internationalization (Knight & Cavusgil. World Bank. The increasing incidence of outward FDI from the emerging markets like India in the period 2000-07. 1996). geogra- Innovations in manufacturing. 2000). the ability to raise capital externally (Bonacorsi. as they start operating from day one in global markets as global players. motivations. entrepreneurial vision and capabilities (Knight. Shorter product life cycles are another factor causing born global firms to adopt an international perspective regardless of their age and size (Oviatt and McDougall. 1997). Issue 1 25 MIB. from inception. information and communication technology and increasing liberalization in the emerging markets have enabled the birth of this new class of start-ups that view the global market as their natural home. wholly-owned subsidiaries or franchising networks have also been used as the mode of entry. Other important factors triggering the emergence of Born Global firms are significant advances in the production. 1994). led by M&A activity by firms in the IT and pharmaceutical sectors witnessed the emergence of the born global firm in the Indian context as well (Varma 2010). but subsequently other complex forms of venturing such as joint ventures. making its global presence in incremental internationalizing steps (Johanson & Vahlne 1977). information and communication technology and increasing liberalization in the emerging markets have enabled the birth of this new class of start-ups that view the global market as their natural home. This causes a predominance of Born Global firms in technology and knowledge intensive industries where short product life cycles force firms to internationalise in order to be able to amortize their R& D expenses (Rennie. Innovations in manufacturing.T Accelerated Internationalisation Experiences: Lessons from the Indian Born Global Firm Academic Ar ticle Associate Professor. In the Indian case for example. ‘born globals’. or ‘international new ventures’. but outward investment activity became significant only since the onset of economic reforms in 1991. In this context. These include explanations for its rapid internationalization: global niche strategies (Almor. or an ‘international new venture’ “is a business organization that. ownership controls. Vol. The Born Global Firm The Born Global Firm. The born global firm in contrast. the increased importance of global networks and alliances. Variously described as ‘global start-ups’. and sources of financing. servicing their customers wherever they are to be found. A few Indian enterprises were investing abroad in the mid-1960s (Lall 1986). of Commerce. Notable among these are young firms that come into existence with a geocentric orientation and are characterized by important foreign operations at the time of founding or shortly afterwards. this paper examines the characteristic features of the Born Global firm. leading to UDAY 2012. Studies on the phenomenon of the born global firms have been based on a variety of theoretical dimensions and have focused on several different issues. also known as a ‘global start-up’. and more elaborate capabilities of people. changes in outward FDI policies such as raising the permissible outward investment limit for Indian business served as an impetus to a sudden burst of M&A activity (Varma 2009). In the emerging economy context the role of institutional support including policy changes is also a significant explanatory factor for the emergence of the born global firm. The term was originally coined for a group of Australian manufacturers who began exporting just two years after coming into existence (Rennie 1993). -Dr Sumati Varma he last two decades have witnessed radical changes in the global competitive landscape led by the emergence of firms from the developing and emerging economies. 1995). seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries” (Oviatt and McDougall. DSE . phical composition. as it takes decisive and firm steps in the global market almost from inception. The first such young firms chronicled in the literature were exporters from Australia. well established firm servicing multiple markets. including some BGAs (Varma 2011).
consisting of critical competencies and embedded routines developed during the era of dominance of the computer hardware industry. This became the basis of the competitive environment in which the software industry subsequently flourished. while other players relied on the acquisition of products to move in the hierarchy of capability maturity. The fourth discernable wave . 12% of these acquisitions were made by firms which were only five years into corporate existence (Varma 2009).K Mathews. Some of its notable alliances were with Oracle Corporations. which led to the birth of some of India’s premier IT firms. The Indian IT Industry: A Profile There have been four discernable waves of development of the Indian IT industry. while existing linkages and learning enabled it to leverage existing capabilities towards international forays. Avient Technologies. Indian Born Global Acquirers This paper briefly discusses the internationalization experiences of five born global firms from the Indian IT sector. The study also examined published firm-specific information and media coverage (including their websites) to assemble a final data base. Issue 1 26 MIB. manufactured in Taiwan and sold through its offices in USA. This included development of productive apparatus for manufacturing hardware. It has used a strategic mix of alliances and acquisitions to emerge as a leading international player in the travel space. driven predominantly by market seeking motives. Sun Microsystems and BEA Systems in UDAY 2012.Academic Ar ticle the emergence of MNEs from the Indian IT industry. It has used a variety of modes of international entry and has a global presence in 10 countries. Its global character was evidenced by an Indian CEO. Increased competition because of foreign MNCs forced the domestic IT firm to look towards foreign markets. It enhanced its technological capability through both domestic and overseas acquisition cum alliances based strategy. and honing programming skills accumulated from the necessity for developing custom software for the machines. the company owes its existence to the government’s EOU/STP scheme and has moved up the technological capability ladder by obtaining various ISO and SEI-CMMI certifications. seems to be focusing on the development of software products. Initially promoted as a private limited company by technocrat Palem Srikanth whose global experience includes both his education at Stanford and prior global work experience in supply chain management. of Commerce. Its founder V. The second wave in the 1990s built up the BPO business. IBS Software Services IBS was incorporated in 1997 in response to the global need for a software solutions company in the fast growing travel. The story of the IT industry began with the establishment of linkages through exports. The selection is based on reported M&A activity of the Indian IT industry during January 2001 to March 2007 using secondary reported firm-level data from studies by consulting firms such as UBS. which in turn was acquired by HP in 2008. Starting merely as providers of manpower to be expatriated to firms elsewhere. it subsequently moved into telecom and health industries as well. a Dutch president and more than a dozen subsidiaries in Europe. The third wave from 2000–2006 witnessed an unprecedented spree of acquisitions abroad. an aeronautical engineer from IIT Kanpur. This was facilitated by an enabling policy regime that included establishing software technology parks and allowing increased inflows of FDI. outbound FDI from India began to assume proportions of a major phenomenon. It is significant to note that it was led by a spate of M&As targeting firms across continents. Since 2000. 3. Four Soft Limited Four Soft Limited is the world’s largest transportation and logistics software products company. The growth of the Indian IT industry is rooted in organizational capabilities. The company was founded by Jerry Rao and Jeroen Tas. spreading computer awareness and education. time and cost arbitrage ensured that the IT industry sector was to be characterized by off-shore centers where efficiency mattered. Starting out as a BPO and application services outsourcer in the BFSI segment. with OFDI from IT comprising the single largest sector investing abroad. skilled English-speaking workforce willing to turn its work day around became the genesis of the offshoring model. And subsequently it grew vertically toward product development. A firm with a geocentric orientation.’ the Centre for Monitoring Indian Economy (CMIE) database. Deptt. MphasiS MphasiS Limited (then MphasiS BFL Limited) was formed in June 2000 after the merger of the US-based IT consulting company MphasiS Corporation (founded in 1998) and the Indian IT services company BFL Software Limited (founded in 1993). with OFDI from IT comprising the single largest sector investing abroad. tourism and logistics industry. Vol. Moschip made its first acquisition in 2001. making it among the top software exporters of the country within a couple of years of coming into existence. It was acquired by software services firm EDS in 2006. had a presence in three different geographies by 2001 and made its first overseas acquisition in 2002. its chips are designed in India. Accenture and MAPE.2006 onwards. The Since 2000. Discovery Travel Systems and VISaer Inc. Both of these enhanced organizational learning leading to the development of an enhanced set of skills and capabilities for the IT firm. has varied global experience in the travel industry. 2001 and with Cendant Corporation USA in 2004 and important acquisitions were TopAir. Moschip Semiconductors Founded in 1991. outbound FDI from India began to assume proportions of a major phenomenon. It began global operations in 1998. but the majority of these were in the USA and Europe. followed by the search for products and increased efficiency. The first wave in the 1970s and 1980s created the offshoring model. as well as ‘Prowess. the US and Asia. The abundance of a low-cost. Firms enriched in cash by providing manpower and in-sourcing found in customer acquisition the sustainability of revenues and profitability. both former Citibank employees. DSE .
REFERENCES Almor.J. ostensibly contradicting the classic stage theory of expansion into the global market after a few years of domestic success. Vol. since they came into existence with the geocentric orientation that helped them consider the global market as their natural home. Vmoksha Technologies Vmoksha Technologies is an IT Services Company headquartered in Bangalore. Israel: The College of Management. India as a private limited company. prior networks and technological expertise which make them aware of new international opportunities that others remain unaware of. which represent a widespread. regardless of age. which were later enhanced into personal networks of valuable reputations based on quality and productivity and got utilized for aggressive outward venturing. Hashai (Eds. Coviello. N. Private equity funds also emerged as a major source of money for Indian acquirers of overseas companies. (1995) Unlike most international M&A transactions that typically feature stock swaps in the financing arithmetic. (1992). It contributes to the literature by highlighting the emergence of the Born Global Acquirer. institutional policy change as a result of liberalization of the domestic economy facilitated aggressive venturing into global markets through the acquisition route. The born global firm may be considered the harbinger of be a more diverse international business system in which any firm can hope to find a place. Academic Studies Division Bonacorsi. Reddy has several start ups to his credit. Israeli firms. Analysis and Discussion This paper has profiled five firms that may be categorized as Born Global Acquirers. Deptt. ongoing trend. All firms profiled in the study have been led by individuals with prior international experience of both the IT industry and also other domains. which led to the growth of “thousands of small software companies in the country…. A. experience. & Munro. using opportunities in prior networks and the tacit knowledge vested in these leaders for rapid internationalization. helped by a combination of internal resources and borrowings. Issue 1 27 MIB.increasing export as well as local development”. leading to the enactment of policies aimed at ensuring India’s inclusion in the global software boom. T. The linkages developed by entrepreneurs through prior experience in the IT industry and other domains enabled them to take the decision to acquire. A serial entrepreneur. USA. Europe and the Asia Pacific region (development centres in Bangalore and Singapore). It is the first company in the world to directly go for CMMI Level 5 assessment without being assessed at intermediate levels and the 16th IT company in the world to achieve CMMI Level 5. The 1980s witnessed the earliest cautious efforts to employment. assisted by government policy which focused on investment in technical education leading to the development of a pool of English speaking trained manpower In the current context. On the relationship between firm size and export intensity. emerged as a key player in the global IT outsourcing space.” These competencies are derived from previous UDAY 2012. can be an active international business participant. Born Global firms are emerging in substantial numbers worldwide.. 23(4). Almor. a species that was not visible earlier. Supplier Sourcing and Integrated Process and Product Development. Vmoksha currently has operations in the US. It is the second company in the world to be assessed for all the four disciplines of CMMI – Software Engineering. the born-global phenomenon is heartening because it implies the emergence of an international exchange system in which any firm. and tangible resources. Using a “flood in flood out” feature. facilitating leapfrogging and springboarding behaviour to be able to leverage their resources for acquisition purposes in the global market. The company was included among SMEs from India poised to succeed on account of the strong offshoring model and included among the top 100 outshorers of the world in terms of revenue. Future research should aim at deepening our understanding of early adopters of internationalization. This is consistent with Keeble et al (1998) that competencies embodied in the founder/entrepreneur often relate to “a new and specialised technological niche which provides the opportunity for internationalisation. The acquisition experience of these firms has also been the result of innovation springing from internal R&D drawn from its own accumulated knowledge of the IT industry and domain experience gathered elsewhere. (Dataquest. Rishon LeZion. (2000). 1987:87) marked the beginning of networks of learning for the industry.). Indian acquirers have for the most part paid cash for their targets. international trade and the economics of peacemaking. Unlike most international M&A transactions that typically feature stock swaps in the financing arithmetic. DSE .E. H. of Commerce. and reflect an emergent paradigm. helped by a combination of internal resources and borrowings. Journal of International Business Studies. with the potential to become a leading species in the ecosystem of international business. System Engineering. Indian acquirers have for the most part paid cash for their targets. In T. FDI. The industry has rapidly moved up the value chain from body shoppers to customised pro- liberalize private investment and trade. knowledge-intensive. besides having the credit for designing the world’s first DSP chip. 605–625.Academic Ar ticle firm’s CEO K Ramchandra Reddy is an electronics engineer with a global vision acquired through both his education at Winconsin and work in Silicon Valley. The firms profiled here belong to the IT industry which is the most globalised and internationalised sector of the Indian economy. 3. Since its inception in May 2001. The firm has a global presence in all the continents. & N. He also has extensive experience in sub contracting and manufacture of semi conductors. Born global: the case of small and medium sized. Indian companies were also creating new international financial vehicles such as special purpose vehicles (SPVs) and setting up subsidiaries to route payments and take advantage of favourable tax regimes in countries like Mauritius. Conclusion This paper is a pioneering study on the Born Global phenomenon in the Indian context. Vmoksha has duct development. In this sense.
Sumati (2011) Born Global Acquirers from Indian IT – an Exploratory Case Study. 11. Madsen (Eds.T.org/ojs/index. P. Oviatt. Johanson.327 –342.php/working_ papers/article/view/24/11. Dr. S. M. Advances in International Marketing. Sumati Varma is an Associate Professor of Commerce at Sri Aurobindo College (Eve). Pp. B Moore and F Wilkinson (1998) Internationalisation Processes. 6 (4): 351 -368.-E.. (1977) The internationalization process of the firm: A model of knowledge development and increasing foreign market commitments. awarded by the US government. 11-26 in T. UDAY 2012. icainstitute. The McKinsey Quarterly. International Venturing by IT Firms: A motive analysis. and curriculum expert in Business and Economics for the first ever interdisciplinary program in American Studies for Indian Universities at the American Centre. Small Business Economics. Emerald Publications. Keeble. 25(1): 45-64 Rennie. 29(7): 49-61. Delhi University.W.).. of Commerce. Journal Of Emerging Knowledge On Emerging Markets. Vol. (2009). European Journal of Marketing. Journal of International Business Studies. J. Deptt. DSE . http://www. Vol. Knight. She has three books and numerous papers in national and international journals to her credit. 8(1): 23-32. Nayyar D (2008) Internationalisation of Firms from India : Investment. 3.Academic Ar ticle Growing the entrepreneurial firm. New Delhi. Networking and local embeddedness in technology intensive small firms. G. Journal of International Business Studies. 3: 45-52. 8. & Vahlne.M. J. Amsterdam: JAI Press. Global competitiveness: Born global. H Lawton Smith. Varma. C Lawson. & McDougall. The born global firm: A challenge to traditional internationalization theory.P. & Cavusgil. Oxford University Press. Issue 1 28 MIB. (1994) Towards a theory of international new ventures. International Journal of Emerging Markets.A. D. Dr Varma is also the recipient of the prestigious IVLP fellowship for 2011. Sumati. Varma. Mergers and Acqusiitions.K. She is a consultant with the World Bank. B. 1(1). (1996). (1993). in Trade and Globalisation..
In this way. with cotton farmers in USA because of Since the advent of International Trade the subsidies USA provides. If the round is to succeed. Envisaged development is oriented and supposed to benefit the developing and least developed countries. quota-free market access for open economy breeds quality and elimiproducts originating from LDCs”.4 1. thanks to biased policy approach adopted by the developed countries e. it often becomes predatory in ns of LDCs which is perhaps not an overt nature.pdf): tural commodities becomes wholly bia• Reduce all forms of tariffs and export sed towards developed countries. Under the increasingly globalized world.03 Subsidy Per Farmer(USD) 30 28. the disparities are stark. agenda and assigns priority to the concerin reality.5 2. Majority of large countries the developed countries which is clear which happen to be major producers and from the expectations of the developed exporters of agricultural commodities are countries. developed countries need to pay heed to the valid and natural apprehensions of the DCs and LDCs. The paper also shows that the subFor example. The five commodities shown in the list are the staple commodities for any country. 4. the negotiations on tariffs have been critical 2. By taRound king a step by step measure to reduce taAlthough WTO is a multilateral organiriffs. The analysis provided in the appendix portrays a picture of current scenario of the fact that the developed countries are capitalizing on the trade of agriculture owing to advanced technology which they use in agriculture. Introduction he fourth ministerial conference which started at Doha and popularly known as Doha round (the round herein after) is based on the agenda of development. Developed countries propose (source: With the add-on advantage of technologihttp://fpc. The Expectations under Doha in making the trade freer with time. A few Table-1 Subsidies provided by USA to its cotton farmers. it is ingenuous to demand reciprocity by the developed countries. out of their privileged position. Subsidy. This paper is an analysis of concerns of developing countries in agriculture negations in Doha round and implications which may surface. agriculture is the source of sustenance and from developed ones’ view it is a source of additional income. apparent in trade of agricultural objective of the proposals submitted by commodities. Key Words: Agriculture. Developing Countries.2 500 0. other. The mechanism nefit mutually where the LDCs and DCs of free trade. With liberalization of trade. nates inefficiencies. Tariff. GATT and WTO. Organization (ITO).state.2 4 3.23 10000 UDAY 2012. Negotiations Research Paper Research Associate. the Doha round has become a moto lower the relative costs for increasing nologue where developed countries uniavenues of trade. Vol. member countries of the WTO tend zation. either developed or developing countries. as advocated by WTO. The trade liberalization has diverted the share of trade in favour of affluent and developed states. every country wants to maintain the momentum of growth to be competitive.g. of Commerce. It is seemingly the only issue out of 19 others on which the negotiations are hanging since 2001. are posing a hindrance to the conclusion of the round. it is hoped laterally want to enforce their mandate. However.26 27. This is the theoretiFrom the above declaration. Deptt. Developed Countries. From the developing countries’ perspective.8 . Under the propaganda of development.5 1 115 3 Farmers (Mn) 14 14 7 9. words: the costs come down and goods become “We commit ourselves to the objective more affordable.27 23. must develop equitably. that exchange of commodities through The proclaimed intent of the round is to export and import would lead to producopen trade in agriculture and reap the betion becoming efficient. Delhi T 1. it can be cal rationale of multilateral trade agreeseen that the round has a developmental ments under the aegis of WTO.gov/documents/organizacal competitiveness.57 50 25. Country Burkina Faso Mali Benin Chad Togo CAR India US Subsidy (USD Bn) 4.5 4. Issue 1 29 MIB. the trade in agricultion/61057. The declaration works on the principle of efficiency and of the round commits it in following productivity. Developed countries. they find it difficult to compete the DCs are exorbitant and unjust. of the DCs and LDCs are also significant special safeguard mechanism and non-tacontributors to trade in agricultural comriff barriers are prominently used by the modities but when compared to the devedeveloped countries in one way or the loped countries.5 5. The competition in an of duty-free. although the LDCs in Afrisidies and tariff imposed by the develocan continent are significant producers of ped countries on the agriculture trade of cotton.Implications of Agriculture Based Negotiations on Developing Countries in Doha Development Agenda -Parshant Atkaan ABSTRACT Agriculture is perhaps the pivotal point of Doha negotiations. DSE . Priorities in mutual cooperation are sidelined at multilateral level and everyone fights and justifies its own interest which makes the aftermath of delay in cooperation equally alarming as the loss otherwise may be. IIFT.
e. The dilemma of Subsidy. 4. E. DCs but also a burden on the taxpayers of the developed countries as the graph shows in Fig. The advantage of tariffs reductions would go to those countries which are Fig. Fig. The figure below shows that tariff is the main factor of the price distortion in the agricultural trade. of Agriculture). Thus.1. • Schedule of the tariff reductions. Subsidies are comparatively less observable and difficult to challenge as there is no mandatory obligation on the WTO members to formally articulate their type and extent. The agricultural subsidies in the developed countries increase their export of agricultural products to the level of Q2. always practiced to be reduced under the framework of WTO. India’s agriculture provides employment to 53% of its 93% unskilled labour. and DCs and LDCs would produce from Q1 to Q3. US Deptt. it is natural that developing countries like India.Research Paper subsidies • Ambitious market access to the developing countries market • SSM for selected agricultural commodities • Reduction in the list of sensitive products and tariff related quotas to only those products What developing countries want out of the round? • Tariff cuts in differential manner favouring DCs and LDC • Non-tariff barriers to be addressed • Export and domestic subsidies by developed countries to be eliminated or substantially restricted • Longer implementation timeframe for developing countries • Preferential access to developed country market The key agriculture negations in Doha round are based on: • reducing agricultural subsidies • the access to global markets and • liberalization in global trade and sustainable economic growth in developing countries The major issues of conflict are: • Special safeguard mechanism: Developing countries insist on taking safeguard mechanism if trade causes injury. A welfare program for farmers can also be interpreted as subsidy. Table in Appendix-1 shows that net gainer of the liberalization of trade in agriculture are only developed countries as they maintain the highest rate of tariffs on agricultural commodities which is evident from the table below (source: Global Agriculture and the Doha Round: Market Access Is the Key:US Deptt. Developed countries are reluctant to do so because they want to protect their market from the under-quality agricultural goods from the LDCs and DCs. Developed countries would produce Q1 of the world’s agricultural commodities. the world price of agricultural products would be at the level of P2. A is the amount of subsidy paid by taxpayers in developed countries. Various discounts and facilities are offered to LDCs and DCs in terms of time and special safeguard mechanisms (SSM). In reality. • Formula for designing tariffs: Developed countries want mixed formula (a mix of the Uruguay Round formula. of Commerce. Applied Tariff Bound D e v e l o p e d 54% Countries Developing 36% countries World Avg. Swiss formula and duty free for a minimum percentage of tariff lines for tariff reduction). Table 2: Rate of tariff’s by developed and developing countries. Tariffs are the converging point in 3. Issue 1 30 MIB. B is the damage to the DCs and LDCs. Developed states decline it on the basis of offering scope of protectionism. X3 X2 P2 Price A P1 X1 B Q1 Q2 Quantity Q3 W W: Overall world trade X1: Trade of DCs and LDCs X2: Export of developed countries with subsidy X3: Export of developed countries without subsidy A: Burden on tax payers of developed countries B: Loss of DCs and LDCs DCs and LDCs demand from the developed countries to lower the tariffs below the common minimum rate. If developed countries did not subsidize their agriculture. DCs prefer Uruguay Round formula which favours them. the trade share of India has faced unique set of challenges which include looming vulnerability to its poor people and emerging gender issues. DCs and LDCs export is squeezed from Q2 to Q3. Although SSM are for LDCs and DCs but developed countries have widely exploited the SSM to protect its own trade while LDCs and DCs could not make the most of the provision owing to their UDAY 2012. Theoretical Perspective agriculture based negotiations where A theoretical analysis shows that subsithe members seek incentive to capitadies provided by the developed countries lize on the new bound tariffs which are are not only the challenge to LDCs and Fig-1: Effect of subsidies provided by developed countries. The green portion i. DSE . Tariff Reduction and SSG Subsidies and tariffs are major pet peeves in agriculture based negotiations. The yellow one i. Since the liberalization of trade in textiles. China or Brazil would not compromise the livelihood of their more than 75% of their populace directly or indirectly surviving on the agriculture and allied products. of Agriculture) net exporters of agricultural commodities. Textile majorly employs women labourers.e. Deptt. the negative effect on the livelihood of the population on DCs and LDCs are comparatively wider.3 and 4 show the proposed phase wise reduction in the tariffs by developed and developing countries respectively.-3: Proposed phase wise reduction of tariffs under Doha Round for Developed countries (source: Economic Research Services. 19% 0-100% 0-150% 62% 4.g.. Vol.
Apart from this. ADB Chief Economist Changyong Rhee said (source: Inflation may push millions from developing countries to poverty: ADB Report).-3: Proposed phase wise reduction of tariffs under Doha Round for Developed countries. LDCs and DCs should avoid the delays by focusing on a common tariff rate over domestic subsidies and developed states need to offer market access to products from other countries. Concluding remarks The delay in conclusion of the round is a net loss for both developed and developing countries where LDCs and DCs would suffer more in the long-term. 2008 2. of Commerce. “The Potential Cost of a Failed Doha Round”. Developing countries cannot afford to eliminate the subsidies as there exist major concerns about food security. Estimates show that the quantum of loss could be up to US$809 billion in world trade volume and US$184 billion in real income by 2025 which would endanger DCs and LDCs particularly. higher food prices further reduce their ability to pay for medical care and their children’s education. Deptt. In this regard. Developmental aspects of the Doha Round of negotiations . increased productivity and investment which in turn can stimulate the activities of both forward and backward channels of the value chain in agriculture.Research Paper Fig. The tariffs remain the cause of concern for concluding the who already spend more than 60% of their income on food.By WTO Secretariat. The DCs and LDCs would suffer from the increasing protectionism by the developed countries. In- Fig-5 Effect of Doha round on Agriculture Tariffs (source: OECD. and protecting small-scale and subsistence farmers. 2011). rural development. 5.2010). DSE . low standard agricultural goods (source: Doha round of multilateral trade negotiations-critical issues in trade development pertaining to India-RBI Staff Studies: Monika Kathuria. SSM can only be employed if the products are equally competitive or there is an evidence of injury caused to domestic products. LDCs of Africa too are largely dependent on agriculture for their economic growth where 40% of exports and 35% of the GDP come from agriculture alone and it employs 64 tantly severe. Antoine Bouet and David Laborde. The level of protectionism in-fact is predicted to double from the current level (source: International Food Policy Research Institute). December 2008. % of the population. the loss may be unrepen- UDAY 2012. “For poor families in developing Asia. the onus should be on the developed states to offer tariff preferences to the LDCs without seeking reciprocity. 4. Opening up of trade in agriculture may provide a much awaited remedy. 6. Agriculture is more than a necessity for the livelihood of the poor states and therefore there is a need that values of equitable development is enforced via trade.” Not only for DCs of Asia. the DCs need to be proactive to reach a consensus for negotiations and break the status quo by avoiding defensive approach. Considering agriculture. Consequences of not concluding the round Various international think tanks and organizations have predicted a huge loss as a result of the round remaining inconclusive. Bibliography 1. Issue 1 31 MIB. Inflation in India or China has been even severe. round. poverty eradication.-4: Proposed phase wise reduction of tariffs under Doha Round for Developing countries. Vol. PSE/CSE database. World Bank has already concluded that the damage of delaying the conclusion of Doha Negotiations may run into hundreds of billions of dollars. Opening of trade in agriculture could pave the way for low prices. Fig. DCs and LDCs are facing a chronic challenge of inflation which mainly accounts to the food prices and oil (source: Headline inflation in developing countries has accelerated recently: World Bank 2011). which is a subjective topic.
South Korea. Malaysia. Nigeria. Global Agriculture and the Doha Round: Market Access is the Key: Economic research Services-US Deptt. Multilateral Trade Agreements – WTO 12. China . South Africa. The Heritage Foundation. Riedl. Pakistan. Algeria.Indi a Brazil. Mali. SAR Economist. Cotton Greece. Brazil. US. Pakistan. Mr. Spain Maximum world average tariff exist on these commodities Subsidy is high in case of Dairy Products. South Korea EU. Turkey. India. Russia. Russia. Mali US. EU. Japan • Sugar Mr. Prior to working at IIFT. Uzbekistan. Developing countries agriculture is mainly for domestic consumption oriented and less dependent on other economies Dairy Products Australia. Doha Round of Multilateral Trade Negotiations-Critical Issues in Trade Development Pertaining to India-RBI Staff Studies. Russia. Canada. Sep. “The development dimension of the Doha Development 6. China. New Zealand. US. The Doha Round Briefing Series-International Institute of Sustainable Development China. Australia. “Farm Subsidies. Other publications by the Author include: 1) Geo-Economic Strategy and Reflectivist Institutionalism: A Situational Analysis of International Seabed Authority’S Role Vis-À-Vis Strategic Pursuits of China and India in the Indian Ocean . US. Thailand. Philippines. Burkina Faso. Japan. Project Firefly.Gallen. Deptt. Turkey Brazil. Mexico. 5.Khazakhstan. Mexico. Vol. India. Bangladesh. Parshant Atkaan is a Research Associate-International Projects Division at Indian Institute of Foreign Trade. Belgium. Cote d\'Ivoire. Indonesia. Japan. EU • Rice China. Iraq. UK. Turkey Top Exporters US. 3. Previously he was associated with Confederation of Indian Industry. Australia. South Africa. China and India for example. Doha Round”. Indonesia. GoI. Michael Ferendinos. India. Mexico. France. Philippines China. New Zealand. The Doha Text: WTO 11. 7. Thailand.Argentina . SSRN NewYork.russia. He is currently working on an International Project between Government of India and African Union for setting up India-Africa Institute of Foreign Trade and facilitation of other areas of co-operation. France. WTO Doha Round: Agricultural Negotiating Proposals: congressional Research Services of the USA 10. France. 2012 2) Will the 2012 US presidential election affect US foreign policy? . EU. US. Turkey. Oct 2010 UDAY 2012. Cuba Philippines. Vietnam. Rice. UNESCAP and UNCTAD-India for various projects. Malaysia. and the 4. Australia. He is a mechanical engineer from NIT Kurukshetra and post graduate in Master of International Business from Delhi School of Economics. Delhi. India • • EU. Mar 2012 3) Inclusive Growth: Capacity Vs. Brazil • • Wheat China. Apart from his research interests. Vietnam. Zimbabwe. of Agriculture 8. China. US. Willingness. Saudi Arabia. of Commerce. China United States. Indonesia. Brazil. Indonesia. Saudi Arabia. India. Brazil. Thailand Myanmar. Canada. Egypt.Research Paper ternational Food Policy Research Institute. EU. he has had stints in the corporate sector at Hero Honda Motors and HCL. DSE . Germany. Pakistan. Iran. Australia. Germany. Issue 1 32 MIB. India. Netherlands.Canada. Australia China. Thailand. Russia.France. Japan.e. CII in their executive innovation division. Atkaan is also a certified technology consultant certified by the Ministry of Science. He was also associated with United Nations Economic and Social Commission for Asia and Pacific.Germany. Round and its impact on developing countries”.2010 Appendix-1 Goods Top Producers China.U K. India. Indonesia. United Kingdom. Gurgaon. Syria. Brazil. UAE. Daniella Markheim and Brian M. Greece. 4. October 2007. Indonesia.Australi a. South Africa. US. Tajikistan Top Importers Net Agriculture Exporters Remarks 9. Free Trade. Korea. Bangladesh. Germany. February 2007. Mexico. India. France. St. Wheat and cotton Developed countries have maintained a high tariff rate in addition to subsidies There has been a continuous increase in the global prices from 20-40% in these commodities Inflation is hitting the top developing countries i. Italy. Egypt.
Spray dried products. infrastructure development. pulses to fruits and vegetables all round the year. The processed category primarily comprises of packed liquid milk. That is why the food industry has been accorded a high priority status by the government which is facilitating its growth by providing policy frameworks and initiatives at various levels. thus providing an unbeatable competitive edge in the global market place. India has the advantage of low cost of production. dairy products. drinks. A huge potential lies in this subsector for the food processing industry. the total expenditure on foods has increased across all the classes. exposure. The huge coastline of India offers plenty of opportunities for the growth of the marine industry. Therefore. affluent and middle class. While we are moving towards becoming a services-led economy. juices. which offer tremendous growth potential and investment opportunities. Increased mobility. have also contributed to shifts in spending orientation. Apart from the huge production base. alcoholic and non alcoholic beverages.Food Industry In India: Challenges and Opportunities -Ayan Bhattacharya table competitive edge in the global market place. Deptt. higher disposable income have resulted in greater spending and consumption among consumers. beer and wine. packaged foods. • The Indian Food Industry is highly fragmented and is dominated by the unorganized sector. • The organized food retailing and food services are other emerging areas growing with the annual growth rate of 25 percent. of which the food processing industry accounts for about US $ 85 billion. battered and breaded fish and fish-paste based products are being demanded by customers. it offers tremendous opportunities for all stakeholders in the areas of production. staples. agriculture still contributes 17 percent to the total GDP and employs about 60 percent of the population. technology up gradation and education. • Marine & Fish – The total market size of the marine and fish industry is estimated to grow upto US $ 12 billion from the current US $ 10 billion. non-carbonated drinks and hot beverages such as tea and coffee. processing. Vol. 4. In the Corporate Ar ticle Category Manager – B2B at Cargill Inc. About 25% of the total production is exported. Investments in packaged marine processing plants are seen as ideal investment options due to the vast untapped marine resources and export potential. and sugar. • Food Processing being the major sector in the Indian Food Industry stands at US $ 85 billion and gives direct employment to about 3 million workers. • Dairy – The total market size of the dairy industry is estimated to grow upto US $ 85 billion in 2015 from the current US $ 65 billion. there is now an inclusion of fruits & vegetables. thus providing an unbea- UDAY 2012. increased aspirations and availability of a wider range and products. khoya and skimmed milk. Increased income levels. confectionary and packaged foods are the key sub-sectors in the industry. marketing. The major value in the dairy industry comes from the processed category which is 73% in value terms and about 35% in volume terms. breads and bakery. The non-carbonated drinks contain fruit juices and fruit-based drinks. The income enhancement of such a large section of society is possible only through adding value and removing inefficiencies in the food value chain. cheese. the percentage share of food expenditure vis-à-vis other products/ categories has dropped. energy enhancing beverages (like sports drinks and energy drinks) and packaged drinking water. ble oils. marine and fish. In the year 2010-11. pickles & chutney. beverages and processed food in their repertoire – contributed both by increased availability and affordability. its contribution to the food processing industry is only 4% with the primary processed items being fruits pulp. DSE . meat. edi- ndia is one of the fastest growing economies in the world. fish protein concentrate. The non-carbonated drinks account for more than US $ 2 billion and I Apart from the huge production base. India has the advantage of low cost of production. the size of the food industry in India was estimated at around US $ 225 billion. packaged paneer. • Non-alcoholic beverages – This category is broadly classified into carbonated drinks. Issue 1 33 MIB. supply chain. cheap credit facilities. • Fruits & Vegetables – The total market size of fruits and vegetables is estimated to grow upto US $ 75 billion in 2015 from the current US $ 60 billion. jams. • Fruits and vegetables. eggs. of Commerce. squash. There is an increasing trend of a shift from food security to nutritional security and convenience shopping. Indian food processing industry is growing at the rate of 13 percent per annum and it has higher potential to explore particularly in the sectors such as fruits and vegetables. Conventional “cleaning & cooking” fish is slowly giving way to convenient products. vegetable oils. meat and poultry. Though fruits and vegetables contribute about 23% of the entire food industry. Initially food expenditure was concentrated around basic food items like food grains. Overview of the Food Industry in India • The size of the Indian Food Industry is estimated at US $ 225 billion in 201011 and is slated to reach US $ 300 billion) by 2015 with the increasing share of processed food (in value terms) from 43 percent to 50 percent. At present. The diverse agro-climatic conditions in India offer huge potential for production of a wide variety of crops from cereals.
4.2 billion. flavoured milk and fruit juices are growing very fast. will attract global consumers. health drinks. aspirations and availability of a substantially wider range and products have also contributed to shifts in spending orienand government support • Augmented investment inflows Growth Opportunities The integrated development of the entire food value chain offers many opportunities at every level. packaged and marketed properly. fruits and vegetables. it is processed and targeted for exports. Higher disposable incomes have resulted in greater spending and past decade. • In addition. consumption among consumers. Challenges and Potential Stumbling Blocks To unleash the growth potential of the Indian Food industry certain challenges need to be overcome. Promotion of Indian food items at international level by the government and the industry is essential. mass media and exposure to lifestyle in developed countries. • Export demand is increasing for the food products like pickles. concentrated pulps and juices. • Alcoholic beverages – Beer and wine are two emerging sectors in the alcoholic beverages category. Issue 1 34 MIB. confectionary and poultry. openness to experimenting with processed and convenience food and the increased phenomenon of organized food retailing have also led to reorientation of the entire food business. wine. packaged meat and marine products. fruits and vegetables (canned. The proliferation of organized retailing in India is also altering food consumption patterns.5 billion from the existing US $ 3. • Organized food retailing and food services are the other fastest emerging opportunities. exposure. opportunity lies in strengthening the backend of the food supply chain by investing in modernization of agricultural technologies. The organized form of food retail accounts for hardly one percent of the food consumed in India. of Commerce. chips. Organized food retailing has grown by almost 25 percent per annum over the last three years and the momentum is likely to increase with the entry of large multinational corporates and possible relaxation of the Foreign Direct Investment policy. chutneys. industry and farmers. promoting imported foods. functional foods.) • Grains and staples (like rice. Vol. • Due to the rising need for quality and value added products. • Other important drivers behind industry growth are: • Huge production base • Increased export opportunities • Favourable regulatory environment % 51 15 15 15 5 5 Eat less often at roadside eating joints or carts Eat more food now Eat out at hotels more often now Eat western cuisine more often now Table : Shift in food habits over the past decade UDAY 2012. • Tremendous potential for investment exists in setting up agricultural infrastructure – cold chain logistics. Change in food habits has been brought about due to the boom in internet. Since cattle meat is not consumed on a large scale in India. research & development and quality testing laboratories. wheat. branded foods and processed foods. frozen and dehydrated). snacks etc. sugar and edible oil) • Bakery and biscuit sector • Confectionary sector • Functional foods (like health and energy drinks) Key Growth Drivers • With changing needs and lifestyles of consumers. global as well as Indian food consumption patterns are rapidly evolving. • Other major industries – The other categories of the food industry in India include: • Packaged foods (like ready-to-eat foods. training and capacity building. • Increase in food retail is a massive driver for the food industry in India. organized food retail is expected to grow to US $ 50 billion by 2015. Deptt.Corporate Ar ticle the carbonated drinks about US $ 1. • Increased mobility.5 billion. • Cattle Meat & Poultry – The total size of cattle meat and poultry products is estimated to be about US $ 12 billion from the current US $ 7. The following data shows the shift in food habits over the Change in food habits More health conscious now Eat more junk food now tation.8 billion. farm machineries. • Change in food habits has been brought about due to the boom in internet. promotion and branding are important areas where investment needs to be made. supply chain management. • Indian farm produce offers a unique aroma. convenience foods. mass media and exposure to lifestyle in developed countries. Thus. flavour and taste and if processed. • Key segments with the largest growth potential for processing are dairy. food parks and wholesale markets as well as up gradation of the existing market infrastructure. India is the largest producer of tea in the world with a total turnover of about US $ 2 billion. DSE . These challenges include addressing current gaps in the value chain as well as leveraging on various advantages that the country provides. • An additional opportunity of US $ 100 billion can be realized by 2015 with coordinated efforts among the government. The total market size of the beer and wine industry is expected to grow to about US $ 5. • The demand for segments like readyto-eat.
• Global Quality Standards • Meeting global standards of quality with up-scaled production remains a big challenge. Due to the rising need for quality and value added products. Ayan has done a significant amount of work in the food and agribusiness space in India and also featured as an expert in several media outlets like the Financial Times. of Commerce. • The issues of traceability in fresh produce and poor hygiene in packaged foods also remain a concern. Though some initiatives have already been taken by the government. distribution and market infrastructure. smoothening tariff barriers and transparent merchandizing for price discovery of food products. research & development and quality testing laboratories. Efficient price discovery mechanism should be evolved to safeguard the interest of different stakeholders for agricultural produce such as web based spot exchanges will help in fair price discovery. • The amendment of the APMC should be implemented in the original spirit to reduce the malfunctioning of the Indian marketing system. • Systematic efforts should be made to brand Indian fresh and processed food products in the international market. UDAY 2012. Deptt. • This gap needs to be bridged by finding the right balance between applied research. DSE . • There is an urgent need to create and augment strong at production infrastructure. NDTV and the Economic Times. capacity building and ensuring strong public – private partnerships. Way Forward • Policy level efforts should be initiated by the government in consultation with farmer groups and the industry to minimize the prevailing gaps amongst various stakeholders. opportunity lies in strengthening the backend of the food supply chain by investing in modernization of agricultural technologies. training and capacity building. • Food regulations and taxation issues • The Food Safety & Standards Act that has been recently implemented as one law governing the entire food industry in India is still in its infancy and awareness about the law across the food chain remains a big concern. The increased investment needs to be seeking from the private sector for infrastructure development. • In India there is no uniformity in the taxation system across states and the lack of political will in this matter has only made matters worse.Corporate Ar ticle • Research and Technological Development • Weak research and development on latest technologies in food technologies like nanotechnology. • Lack of processable produce and irregular supply due to Indian agriculture being dominated by production driven market supply rather than market driven production. This leads to inconsistency in supply and quality of produce. • Skill Gap • At each level in the value chain there are strong deficiencies in technical knowhow and support with gaps in the transference of research from the laboratory to the industry. • Poor market linkages • The food value chain in India is highly fragmented and dominated by a large number of middlemen. processing infrastructure. processing and marketing of produce suffers from under investment. along with emphasis on augmenting support infrastructure at the same time. • Improvement in market infrastructure and identification of new export markets remain as key challenges. This leads to increased inefficiencies in the marketing system due to which production. • Sincere efforts should be made by the government to help the Indian players to meet the global quality standards. Ayan Bhattacharya is a specialist in food and agribusiness with a rich industry experience in the food & beverages and FMCG sectors. There is further scope in lifting restrictions on exports and imports. • Institutional mechanisms such as reforms in agricultural marketing and warehousing facilities coupled with increased participation from banks and extension agencies would go a long way in reducing problems faced by the agriculture and food sector. farm machineries. • The enabling regulatory environment through the initiatives like Food Safely and Standard Authority will continue to boost the pace of change in this sector. Issue 1 35 MIB. 4. harmonization of the taxation system. novel food concepts like functional foods and innovative packaging. He has worked with companies like Dabur and AgriWatch in the past and is currently working with Cargill India. Vol. still there is urgent need to harmonize and standardize Indian quality standards to commonly accepted standards in the global markets.
first initiated by commercial airline companies. hostels and camps). naturally. Clubs (service clubs and sporting clubs). We can clearly see that though the resources lie with the business.” Oxford Dictionary defines hospitality with a much wider domain. Melbourne. 1. Private catering firms (dinner parties. IIME School of Hospitality. 4. cafes and milk bars). you’ll never make it. actually.. large parties. Reception centres (weddings and conventions). Hospital (public. 9. after which they cease to be of value (for the customer) • Different customers are willing to pay different prices for using the same amount of resources (as per their perceived needs). travel. beverages. However. international and specialist cuisines). Hospitality industry is formally defined as “An industry that provides food. Revenue management is a technique to optimize the revenue earned from a fixed. Revenue manage- UDAY 2012. to be involved in a profitable hospitality business. the founder of McDonalds had once said. Gurgaon (NCR) ment implements the basic principles of supply and demand economics in a tactical way to generate optimum profit at the same time ensuring that the customer feels delighted. Introduction to Catering. 10. 6. 11. five-star restaurants. Institutions (live-in colleges. but if you love what you’re doing and you always put the customer first. It differs from revenue management on the basic premise that it is aimed towards “ maximizing” profit which is in direct contrast with the main objective of revenue management that aims to “optimize” profit. wine bars and brasseries). Distribution Channel Management Forecasting Demand: To create accurate demand forecasts. It seeks to maximize income via manipulation of selling prices. Here lies the competence of a successful revenue manager. ship and airline). This however is a very crude form of defining revenue management. In modern times this industry encompasses the following business establishments. t all started many hundreds of years ago when man started to venture out of his native home/village to far off places. inevitably go out of business eventually because it will lose out to organizations that know enough not to focus on maximizing profitability alone. viz. “If you work just for money. against monetary consideration. revenue managers evaluate their establishments’ past performance over the corresponding period as well as the current buyer demand for their products and service. 3. Issue 1 36 MIB. Defence force (army. Fast-food outlets 7. business lunches and conventions). of Commerce. 1. 3. gourmet delicatessens. 1989) If one wants to be in the hospitality business. their value in the eye of the customer changes with time and it is this value that a revenue manager keeps track of. • Resources are perishable. The process of Revenue Management has 3 basic steps. Restaurants (classical. The revenue manager’s definition however will be different and it would read “profit is the net value achieved by a seller and a buyer in a business transaction. Deptt. it is important to recognize that if an organization’s primary focus is maximizing profits. Transport catering (train. Hotels and motels (bistros. Then they analyze these data to estimate future demand. Hospitality Press. in search of better opportunities. The traditional definition of profit is “the excess of revenue over expenses”. rather want Customers transact keeping in mind their perception of “value” of the goods and / or services and NOT what the business evaluates as its worth. The true value of a product or service is equal to what a buyer will willingly pay for it. Inventory and Price Management 3. navy and air force). This means that there is a time limit to selling the resources. That would be a logical choice because. private and nursing homes). (List taken from Magris & McCreery. in the long run. Ray Croc. Let me try to get you a more formal way of explaining what revenue management is. DSE . only profitable organizations stay in business. Short-order snack bars (coffee shops. The challenge is to sell the right resources to the right customer at the right time. it will. perishable resource. 5.I Revenue Management In Hospitality Industry -Arunangshu Bhattacharya Academic Ar ticle Director. Forecasting demand 2. or entertainment services to people away from their homes. he would. lodging. 8.” In simpler terms revenue managers consider a business transaction as ideal in which the customer feels that he has got more than what he has paid for and at the same time the establishment makes an optimum profit. There are three requisites for revenue management to be applicable: • Limited amount of resources available for sale. People opened their homes and kitchens to these weary travellers and an industry was born. success will be yours” Sometimes the term “Yield Management” is interchangeably used for “Revenue Management” but this usage is improper. Vol. 12. “friendly and liberal reception of guests or strangers” Over the years “Hospitality” has emerged as the single largest industry the world over and has come to encompass all such businesses where “Service” is extended to a “Guest” (this is how the customers are referred to) with a smile. boarding schools. Self-serve outlets (cafeterias and canteens). He often had to travel overnight and had to stay somewhere for the night “en route” his destination. 2. Yield management is described as a demand-based management strategy.
Radio. It is a very powerful message sent to a potential buyer from the seller. Arunangshu Bhattacharya started his career in hospitality industry trained as a chef with Oberoi School of Management (OSM) (Oberoi Centre of Learning & Development now) and is currently the Director of IIME School of Hospitality. Revenue management implements the basic principles of supply and demand economics in a tactical way to generate optimum profit at the same time ensuring that the customer feels delighted. Deptt. He judiciously juggles with 2 parameters – price and volume of business . 2. His core competencies are food & beverage. A revenue manager’s efficiency is maximized when he ensures the following steps: • Calculate the total revenue generated by each channel on a periodic basis • Ensure that each channel is operating at maximum effectiveness and efficiency • Offer rate discounts through these channels • Evaluate each channel during every team meeting To sum up I give below the 10 commandments of Revenue Management. Product quality is important but equally important is the quality of service in the hospitality world. 9. Ministry of HR. 8. It is primarily of 2 types: Electronic and Non-electronic. The true value of a product or service is equal to what a buyer will willingly pay for it. He is a certified hospitality trainer from Robert Gordon University. his hospitality academic career spans over 20 years. 7. Among his other distinctions include being awarded “Rashtriya Vidya Saraswati Puraskar” by Indian Solidarity Council. 3. Inventory & Price Management: A competent revenue manager’s main tool is differential pricing. and as a result are willing to pay different prices for them. Aberdeen.Academic Ar ticle The challenge is to sell the right resources to the right customer at the right time. Strategic and flexible pricing of goods and services keeping in mind the perceived value of the same in the minds of potential customers is imperative 10. Distribution Channel Management: Distribution channels are the media through which business comes the way of an establishment. Purpose of business is to delight the customer. 2. Different buyers place different values on the same products or services. GoI. 5. service quality. 1. Successful businessmen focus externally on their customers’ needs and NOT internally on their own needs. Internet (a well-known distribution channel as many potential customers make use of it to garner information about an establishment. UK and Food & Beverage trainer. Mr. 3. front office operations and management.) 2. 6. resulting in a win – win situation. Issue 1 37 MIB. UDAY 2012. New Delhi. Television channels 3. Customers transact keeping in mind their perception of “value” of the goods and / or services and NOT what the business evaluates as its worth. A certified “trainer of trainers” by the DoPT. certified by the Educational Institute of American Hotel & Lodging association (AHLA-EI). These are being increasingly believed in and applied the world over to survive and flourish as a business in the fiercely competitive world of hospitality. Any change in product quality. 4. The local government agency responsible for promoting travel and tourism in the area in which the establishment is located. DSE . Revenue management team’s raison d’etre is to OPTIMIZE and not MAXIMIZE profits. of Commerce. Staff responding to telephonic enquiries. 3.and arrives at the right combination that yields optimum profit to the establishment at the same time ensuring that the customer is delighted as he thinks that he has received more than he has paid for. Vol. Price is not just a number. The staff that greet and serve the customer in person on the premise. and soft skill. Non-electronic channels could be the following: 1. or price will have a direct impact on buyers’ perceptions of value. The electronic channels are mainly – 1.
It gives an opportunity to script a plaque for oneself. McCann Erickson. X of Hospitality Team. In terms of hierarchy.and here the corporate and business houses play the introducer and issue parichaypatra (identity) to their employees. Consider the following statements: “I looked at my first visiting card. the introducer needs to introduce himself first. “I wrote a complaint letter to the head of the marketing department and attached a card of mine. There is an identity we are born with. It is almost as if human resources are also to be inventoried and grouped and stocked in batches. That. DSE . visiting cards follow an inverted pyramid model. Consumer Insight & HFD. At a deeper level it is a printed identity to introduce oneself to the world. only then he attains the so-called gazette status to in- signation. Ms. There is an almost deliberate effort to tone down individual code. an instrument that offers access and introduction. That. Sonar. both for the social and commercial transaction.” Conspicuous by absence in these types of visiting cards are individual de- Corporate Ar ticle Vice President.the role of the card here is that of a highlighter. Kshtriya. It gives an opportunity to script a plaque for oneself. Topiwala. Glorification of the corporate is done. double-sided business cards in Japanese and English are a must. Engineer. probably. Why? They show potential partners that you are serious and that you understand and respect their culture. 4. The individual. Advice and instructions about card etiquette become part of the corporate training.here it acts as an evaluation card. Sometimes it is considered in the caste– Brahmin. the company manual prescribes exact point size to be used and ratio to be maintained in relation to the company name. Issue 1 38 MIB. My name looked so beautiful”. “Can you get me a card of the doctor? I will tell you how good he is” .this is probably a feeling which is universal in nature. It is an instrument that turns nobody into somebody. Y of Customer Services.“Keep my card and meet me in my office” is a destiny changing dialogue. India visiting card communicates at multiple levels. Deptt. but before any introduction takes place. Those less privileged still need an introduction . and maximizes your opportunity for excellent results. of Commerce. Visiting cards continuously play this dual task of establishing the identities of the introducer and introduced. the Indian executives on how to approach Japanese clients: “If you are visiting Japan on business. Below is an extract from an instruction manual for Visiting cards continuously play this dual task of establishing the identities of the introducer and introduced. Chandra Vansha. Will the vagabond hero meet his disguised mentor or will he lose the card to a pick pocket and will plunge into deeper depths of depressing struggle for the next three hours? A visiting card stands at a kindred point of tragedy and comedy. It is like a dialogue with self. It is an instrument that turns nobody into somebody. Thakur Khandan. When specific designations are to be printed. Daruwala. is the reason why companies agony over the nitty-gritty of printing a visiting card. much beyond its functional capacity. troduce others working or associated with him. if he is there. takes either a back seat or does not take any permanent seat at all. XYZ. Contractor.still revolve round the age old parameters of qualification and experience (goon & karm). the ratio between the name and the address panel. then the color code and patch are also given.A Decoding Visiting Cards: Reading Big Changes in Small Print -Kishore Chakraborti Visiting card is a printed identity to introduce oneself to the world. Globalization saw cards being printed in multiple languages. One is born with these invisible cards. Vaishya etc. for example – Mr. . it is the family background –Surya Vansha. probably. in small print. Corporate manuals specifically give guidelines what font is to be used. It is best to stand up when exchanging cards with those of The twain shall never meet Living together Hum kisse se kam nehi UDAY 2012. What lies at the core of a card? At a first glance it is a rectangular piece of paper. comes “represented by Mr. Essentials of introduction. the reply came within a few days”. At a glance the card flaunts the company name and then. make sure you have enough available for everyone. sometimes through inclusion of mission and vision statement in the cards. Vol. Once the antecedents of the introducer have been established.sometimes.Lohar. This small effort on your part establishes trust. is the reason why companies agony over the nitty-gritty of printing a visiting card. Ancestral profession is a strong even today . Business Card Exchanges Guidelines: • Cards are exchanged at the beginning of a meeting. Hindi films are full of stories where visiting cards play the role of destiny . an instrument that offers access and introduction. Palkiwala and so on still work as the sire name and define where we come from. what specific place the company logo should be positioned. If corporate colors are to be used. The corporate takes the front seat with the logo color scheme and brand.
Look at it often during the meeting and the desire to grow faster are contiseem to have taken a leaf from the kirain order to refer correctly to your counnuously putting pressure on small busina guy. Today’s corporate too you. They have gone from simple • Facing your counterpart. His card is a sum total of logos and they give him a cumulative identity. it would not &light Titles disappear. shop owners and roadside vendors are nothing short of a silent revolution. but the changes that came about in the case of small traders. The packaged water – passing.Corporate Ar ticle In his visiting card. place Why has the card acquired sudden sigce with a smile. Deptt. received multiple cards. If a person’s hurt to ask for an explanation. Viday. DSE . he violates all the rigid company codes laid down in the mother company’s communication manual. man is now weaThis classic corporate code undergoes ring multiple hats. bow slightblack and white to two colour line jobs ly and hand your card (with the Japanese to four colour half tone covering a jourside pointing up!) either with your right ney from words to picture. More and more corporate houses terpart’s name and position. the best introduction is through the brands he stocks. A third party ble operation. His retail power lies in brand proliferation. the corporatraditional– he te identity as reflected in cards becomes ventures into cafar more remote and distant. tent mes are clubbed together. If the meaning Lateral business show. “Honey”. Their sole marketing mantra is servi• If you are seated at a meeting. vegetable vendors. tailors. The more you pronunciation. mergers and acquisitions. the • Make time to review your counterphotographs of products. You might want to appear they appear as the representatives of the consumers. primarily. For a trader. all-important business tool for them. Anybody flashing one could even risk being ridiculed by his own customers. of cards. identity and designation is born – a creaThe card features ture called DSA (Direct Selling Agent). Card is speak his/her name and poan extension of their showsition to be sure of correct case window. A new breed of usersmilkmen. ghlighted with colors. Today. barbers. masons. Issue 1 39 MIB. The same rule apreplicate in cards is their idea of 5x2 adplies when receiving a card from someovertisement released in the newspaper. Card continuously card communication-from “who I am” to reminds the target group that your milk “how you relate to me”. the card was an accessory too fancy for their business. of Commerce. hinotebook. there is Basically. If you are ness men and traders to venture into areas are using the happy faces of customers meeting more than one person and have hitherto unrelated to their own traditional on their cards as a proof of their success. What they hand or both hands. carpenters. The pictures featured are. kirana shop owners. Even lateral expansion needs Thus. it is an Growing inflation and the desire to grow faster are continuously putting pressure on small business men and traders to venture into areas hitherto unrelated to their own traditional businesses. Even lateral expansion needs to be communicated. washer men. These are all significant changes. owner decides As outsourcing becomes the order of to toe the line of managing today’s business. Naof his/her job position is in extensioncatering. ne else.big and bold.” to be communicated. Vol. Thirty years ago. any way unclear. One has to make • DO NOT shove the card an effort to locate the name into your back trouser poGrocery to cket! If you are meeting in of even the proprietor. both the ventures on opposite sides and life goes on. then you may just protagonists in these cards lateral extension carefully place the card in a are the “free home delivery” shirt pocket or in a wallet or messages. nickname is popular. however. corCard bridges the porate rivalries go through phases of tradition and totakeovers.“Mera customer khush the card gently on the table in front of nificance for them? Growing inflation to main khush”.have become major users of visiting cards. The son of a siting cards of these phases reflect the sweet meat shop history of this battle for survival. Globalization has its down-side too. changes as the market forces clash. 4. a paradigm shift is seen in visiting atly in front of you. There is a significant change in the look higher rank. arrange them nebusinesses. you want to show no effort to hide it. “Goldie” interest in and respect to the features in parenthesis with other party. UDAY 2012. If human faces part’s card carefully. the more you sell.
A graduate in English Literature and Law. 4. Kishore Chakraborti. McCann Erickson has been involved with advertising for more than 25 years in different capacities – client servicing. If he remembers. Make the best use of either side of the card. he will come. Pizza on line Report card Clever use of both sides menu card and in some cases even a report card. Shubh Labh. Cards will metamorphose in codes.Corporate Ar ticle More and more corporate houses are using the happy faces of customers on their cards as a proof of their success.no one cares. Grammar and punctuation take a backseat. of Commerce. What could be the future of visiting cards in the digital era? Digital technology is fast invading every communication domain. Language is no bar either– English is fine. another word will become obsolete in the digital era. Communicate at any cost. guru kripa.SreeGaneshayonamo. Consumer Insight & HFD. shop mera mandir. a The heroes are the products and free home delivery. Issue 1 40 MIB. mixture of Hindi and English. never mind if the product featured by their side is sanitary ware. The ritual of printing holy and auspicious messages and pictures at the top of the card is imported from the traditional Indian format of writing letters. a paradigm shift is seen in visiting card communication-from “who I am” to “how you relate to me”. Pictures of deities are also added. strategic planning and managing brands & branches. If he keeps he will remember. Tomorrow handsets will probably feature compact scanner. he did his post graduate diploma in advertising and public relations. Deptt. Vice President. Who cares for English &grammar Mr. UDAY 2012. Property dealers boldly declare “Flats hi Flats”. He is a part of the McCann Worldgroup Global Training Team and runs training programmes for McCann Erickson India across all its discipline. A visiting card is also a guarantee card and cash memo. Visiting cards have also started doubling up as invitation letters. Swipe the code in your mobile you have the card in your handset.grahak mera devta. Compel him to keep it as an important document. Mobile handsets already feature digital transfer facility of business cards from existing contact details. He has attended professional courses on Strategic Brand Management at IIM-C and the MCA Asia Pacific advance course on communication and brand management. Hindi is ok. Sabji on call. Smart business people will exchange bar codes instead of cards. copyrighting. Vol. a tailor promises in Hindi “Ladies and gents free home delivery”. Trade merges seamlessly with religion. Add more consumer value to the visiting card. DSE . apart from being a visiting lecturer at a number of B-schools in India and abroad. Thus.
People versed in more than language are well educated and affluent with lots of disposable money. Their continued monitoring and assessment helps in recognizing gaps and talents and also helps in weeding out those who are not up to the mark. The political implications are also of severe significance. Reaching out to the customer is gaining greater importance in today’s businesses. people buy an idea served well. Businesses are willing to invest in lots of diverse businesses. Brazil has low environmental constraints and they allow even risky industry practices without imposing safety measures as high as those Consumer buying behaviour has undergone significant changes. Kodak. Take the example of IBM which has survived 90’s downturn with divesting in unrelated businesses. Another interesting observation is about developing core competencies. environment conscious and rely more than ever on non-market controlled promotional sources. This is in sharp contrast to earlier approaches by companies.The Changing Dynamics of Business Academic Ar ticle T he world. Kodak is a sad example of this. First is the innovator whose main concerns are to identify new ideas and develop them into viable opportunities. Internet as a promotional tool is becoming more effective by facilitating targeted advertising.This is more apparent in case of a service company. intent at acquiring the same with the help of advance technologies like eye movement recognition. Consumer buying behaviour has undergone significant changes. This was rightly recognized by western countries and it gave birth to BPO service industry which was fuelled by the so called 4M culture of “Mall. Changing travel needs. targets and substantial autonomy in ways to achieve the same. Asian populace of 68. We see a shift from asking questions to observing customer behaviour though the former is still an important part of market research. Business acumen is needed for long term sustainability in such a volatile environment. Businesses are striving to achieve precisely that. Else many noble ideas haven’t survived to see the light of the day. Kodak probably suffered from complacency. IIM Lucknow Businesses are intent on building long term customer relations. Having taken a decisive lead and even with the discovery of digital camera. of Commerce. Market researchers are laying more and more emphasis on customers’ latent desire rather than carrying on with their own assumptions and understanding of consumer needs. For some visionaries like Steve Jobs it is an almost intuitional talent but others too are catching up. They failed to identify the new markets opened by this disruptive innovation. value contributions and aren’t afraid to venture into uncharted waters . Companies want managers who can work in uncertainty. Company organisation is becoming flatter thereby giving their employees at least some experience in every major division. The number of fortune 500 companies from Asia too has risen from 50 in 2010 to 186 in 2012. It is by now more than clear that much depends on the acumen of people operating a business. Likewise if we see China. probably suffered under the illusion of a perfect product. Vol. A point which holds much greater significance today is customer’s urges for complete products. Political environment in a country decides which business will be allowed. A product. Employee involvement is encouraged at every stage which helps them come up with creative ideas. Of course those who are successful are handsomely rewarded. the one which can solve all their needs. problems of technology obsolesce and disruptive innovation has never been more pressing. in developed worlds. McDonalds and Motorbike”. Kodak failed to capitalize on a very promising market position. Another concept which is becoming increasingly popular is of starched goals. Product development too is done keeping the customer in mind and by involving them. skills requirements are giving rise to lots of opportunities and eradicating the obsolete ones. The second kind consists of those who convert these opportunities into viable businesses. at times inflated. DSE . They are more knowledgeable. most of them Chinese and Japanese. Keeping pace with changes and adap- -Abhishek Agarwal UDAY 2012. In case of technology based product. two different kinds of people are needed. which provides some very interesting business lessons. at least for technology firms. take quick decisions. as we’ve known it. Issue 1 41 MIB. Technology is driving the world towards a common platform where a resident of China wants the same consumer goods as one living in the US. howsoever revolutionary. Mobile. Developing managerial skill suited for this dynamic an environment is in itself becoming a major challenge. they have able to leverage human resource because of strict government regulations imposing tough decisions. Student. The confluence of both bring out the best results: innovation and implementation both are at the heart of a successful run. Deptt. which in essence was caused by weak leadership and a lack of dynamic strategy. The distinction between industries is blurring. This presents a serious implication to managers and entrepreneurs all over the world. touch sensors and brain map sensors. what are the policies to run them or whether they are feasible at all or not. In this concept managers are given optimistic. For running a successful business. Achieving economics of scale is as much of prime importance to companies as is achieving political and social synergy with the countries they are operating in. needs to be sold and more often than not. They are more knowledgeable. environment conscious and rely more than ever on non-market controlled promotional sources. Great leaders can be found in both the types. work pattern. The world is looking forward to Asia and the latter is responding with great zeal. 3. This really has helped many companies to achieve better results year after year by motivating and allowing employees to use different methods rather than stick to the conventional ones. One of the best known brands of past century. is rapidly changing.4% in the age group of 18-25 as compared to median age of 36 in USA and the corresponding figure of 37 years in Europe mean that the Asian markets have the right demographics for outsourcing.
Trends of acquisitions also indicate where the world economy is shifting and who the big players in the present economic scenario are. Issue 1 42 MIB. Now the technology has become advanced enough to enable people to just scan items with their smart phones to know the best deals and price in a particular locality. First of course is the advent of social network. This has altered the field of marketing. howsoever autonomous. Companies. has never been so possible. Likewise information shared on these sites can be Abhishek Agarwal is a student at Indian Institute of Management. people want to tell each other what they are doing. Good corporate management not only builds confidence among all parties but also sends out positive signals about the economy. some of which are making small SKUs including working on packaging and logistics. According to studies customers tend to filter ads which they think are against their views or which they think doesn’t contain information needed by them. A more subtle impact all these changes are making concerns accessibility and modes of payments. This also facilitates resource sharing. Now marketers have a tool which is both innovative as well as destructive in nature. involve presence of companies across the value chain by vertical and/ or horizontal integration. desires and requirement. thus giving birth to a whole new business model in e-commerce. not entirely new though. The developed markets are experiencing almost no growth because of economic downturn. The same need becomes more strategic if the business is knowledge oriented like those of Boston consulting group or Mckinsey and Co. Being proactive in identifying future market trends is extremely important. They tend to achieve it by increased collaboration with buyers and suppliers which ensure better relations as well as saving in inventory carrying cost and increases reliability in service. Companies now want their presence all across the supply chain. A more forceful impact of strong logistic system can be seen in the advent of online stores which don’t carry an inventory. The business environment is dynamic and market may react in unpredictable manner even to a seemingly sensible move. His areas of interests are strategy formation and implementation. He is a mechanical engineer from Jadavpur University. Companies also go for M&A to gain entry into a particular geographical area. In essence there is no fixed method to start or sustain a successful business. 3. of Commerce. An important aspect of business today concerns corporate governance meant to protect the rights of shareholders and stakeholders in a company by a board which is independent of its management. These countries pose a challenge in term of strategy formations and implementation. interconnectedness. sharing and processing. It has greatly impacted and altered the way of doing business. Information technology. Being proactive in identifying future market trends is extremely important. Lucknow. Risk management too is claiming its rightful attention. 2011-13 batch. Apart from reaching out to different nations. Companies are trying to develop better ways of utilizing renewable resources or increasing the efficiency of existing systems. especially those in FMCG. need to have a strong link with the parent company in which IT plays an important role. So all the leading companies are focusing more on developing countries where a large section of population is promising. although entailing its own benefits and drawbacks. This has become significant due to increased awareness due to education and research into climate change and its implications. which have significantly helped in lessening the time required in dealing similar situations. Risk management too is claiming its rightful attention. Another phenomenon.Academic Ar ticle ting and/or improvising on the demands of the situation draws the line between success and failure. Mckinsey especially has taken lots of steps to consolidate the knowledge generated by its highly talented and motivated employees and made it available to all its consultants across the globe. Kolkata. Advertisements which go viral reach a large mass with practically no expense. They help in acquiring strategically important resources and provide new and innovative ideas which can be developed into products. which allow them to get feedback from their customers and expand their customer base. is on one hand becoming more complex by the day and at the same time is easier to use. used to guess needs. UDAY 2012. So these targeted ads arguably are better suited to attract attention of users. The present global economic climate too poses major threats to businesses across the world. DSE . Vol. Illustrating this are companies like Wal-Mart and P&G. He is majoring in Marketing. so that manufacturing can be scheduled according to demand which saves significant cost. Use of IT becomes increasingly important if we consider the fact that today companies want to extend their presence in multiple markets. for instance. Deptt. these sub-units. want to capture the “bottom of pyramid”. This has led to comparative analysis between brands on a range of parameters and most marketers know that their customers are more awa- The business environment is dynamic and market may react in unpredictable manner even to a seemingly sensible move. though still not as affluent as their counter-parts in developed nations. re than ever. The importance of corporate governance has increased in the wake of recent financial crises which has seen non-adherence to rules and fair practices as the prime cause of economic downturn grasping almost the entire world. They have implemented various process innovation unseen before to capture this market. Today the world is connected. Mergers & Acquisitions in itself is very crucial for a company’s growth. both of which share data on real time basis. Most of the companies today operate their pages on various social networking sites. primarily facilitated by various organizations and NGOs but lack of awareness among masses is still a big barrier. The popularity of such technology is on an increase but still viable mass adaptation has not been achieved due to economic sustainability and suspected lobbying by conventional energy provider companies. revolving around its primary functions of information transfer. If we look at today’s world we can identify certain megatrends which are there to stay and are not limited by geography. There are multiple dimensions in the use of an information technology system. Another trend which is sweeping the world is that of green technology which also extends to organic products. Business is all about strategy and the winners do it well.
Purnava Ganguly and Zarmina Parvez Patrons Prof.Credits The Editorial Board (Left to right) Jayeeta Bhattacharya. K. Bhanu Murthy Dr.V. Kavita Sharma Design Abhinav Kumar Singh .
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