PRATIBIMB
The Reflection of Management
FINANCE | GENERAL MANAGEMENT | HUMAN RESOURCE | MARKETING | HEALTHCARE | Chaogiog Phase qf Fqqd Retail io Iodia By Aashwi Verma,IIM Ahmedabad Glqbal Svrrly Chaio :Risk & Resilieoce By Smuti Sankar Lenka,XIMB
Hqw cao Iodiao airsqrus leverage Emergiog techoqlqgies? By Vijaya Krushna Ponnada and Yashwanth J G, NITIE
Hqw Kiogfisher’s stars fizzled qvt By Bharat Hegde,TAPMI
Ioterpet qf thiogs:Cao we maoage sq maoy “thiogs” qo the ioterpet? By Shovik Kar,MDI Gurgaon
Reviviog the Iodiao Ecqoqmy By Aditi Vidyarthi and Nitin Bhat, INFOSYS LTD.
Caritalism,exserieociog a raradign shift By Saurav Biswas, TAPMI
Rqle qf Sqcial Media io Eogagiog Existiog Clieots aod Wiooiog New Ooes By Rahul Mukherjee, MDI
The Tale qf Slqrry EU By Mayur Challawar and Sidharth Panigrahi, TAPMI
A Students’ Initiative
Volume II, Issue XV
November 2012
A Monthly e-Magazine
T. A. Pai Management Institute Manipal, Karnataka
About TAPMI T. A. Pai Management Institute (TAPMI) is a premier management institute situated in Manipal and is well known for its academic rigor & faculty-student interaction. The Institute has been recently ranked amongst top 1 per cent of B-schools in India & 4th in the South Zone by The Week Magazine. Founded by the visionary, Late Shri. T. A. Pai, TAPMI‖s mission is to provide much needed impetus to the task of building professional management capability in the country. In the process, it has also played a role in strengthening the existing educational and health infrastructure of Manipal.
Our Mission Team Pratibimb is committed to excellence in post graduate management education, research and practice by nurturing and developing global wealth creators and leaders. We shall continually benchmark ourselves against the best-in-class institutions. We shall foster continuous learning and reflection, achievement-orientation, creative interdependence, and respect for diversity with a holistic concern for ethics, environment and society.
Recent Updates TAPMI has been graded A*** by CRISIL at the national and state (Karnataka) levels for the year 2012. For the second consecutive year, CRISIL has reaffirmed this highest grading at both the levels. The gradation is valid up to October 2013. Pratibimb | November 2012 | 2
PRATIBIMB TAPMI’S MONTHLY e-MAGAZINE
VOLUME 2, ISSUE XV
NOVEMBER, 2012
TAPMI‖s e-Magazine - is the conglomeration of the various specializations in MBA (Marketing, Finance, HR, Systems and Operations). It is primarily intended to provide insights into the plethora of knowledge that relate to the various departments of Management and to give an opportunity to the students of TAPMI and the best brains across country to exhibit their creative cells. The magazine also strives to bring expert inputs from industries, thereby bringing the academia and industry together. Pratibimb the e-Magazine of TAPMI had its first issue in December 2010. The issue comprised of an interview of well known writer Ms. Rashmi Bansal along with a series of articles by students and industry experts like MadhuSudan Rao (AVPDelivery, Mahindra Satyam) & Ed Cohen who is a global leader and chief learning officer who led Booz Allen Hamilton & Satyam Computer Services to the first rank globally for learning & development . It also included a hugely successful and engrossing game for finance geeks called “Beat the Market” to bring out the application based knowledge of students by providing them the platform where they were expected to predict the stock prices of two selected stocks on a future date. The magazine is primarily intended for the development of all around management knowledge by providing unbiased critical insights into the modern developments. TAPMI believes that learning is a continuous process and is not limited to the four walls of the classroom. This viewpoint is further enhanced through Pratibimb wherein students manage and contribute to create a refreshing learning environment outside the classrooms which eventually leads to a holistic development process. The magazine provides a competitive platform and opportunity to the students where they can compete with the best brains in the B-Schools of the country. The magazine also provides a platform for prominent industry stalwarts to communicate their views and learning about and from the recent developments from their respective fields of business which in turn helps to create a collaborative learning base for its readers. Pratibimb is committed in continuing this initiative by bringing in continuous improvement in the magazine by including quality articles related to various management issues and eventually creating a more engaging relationship with its readers by providing them a platform to showcase their talent. We invite all the best brains across country to be part of this initiative and help us take this to the next level. Pratibimb | November 2012 | 3
Director’s Message
It is always a pleasure to witness that certain efforts of the students are sustained and carried forward; Pratibimb is one such. The oft-beaten track, “We are here to learn,” ends up as a mere platitude when there are no visible actions and documentation. Whereas there is no dearth of actions at TAPMI, documentation is not something that many—other than scholars—choose to engage in; it is normally viewed as uninteresting, drab and a drudgery. TAPMIans have proved that they are equally capable of actions and of documentation without losing the intellectual flavour of it. Scholarship is too important a phenomenon to be left to scholars alone, especially in the field of management. As future practicing managers who will be engaged in rigorous action in different fields of business, TAPMIans have manifested both the penchant to produce research works and also get their counterparts in other leading business schools to contribute their thoughts to this endeavour. In this regard, TAPMIans have truly demonstrated the evidence for creative interdependence, an important aspect of TAPMI‖s mission. I sincerely appreciate the students and the faculty of TAPMI who have made Pratibimb a possibility through their scholarly works, co-ordination efforts and support. I wish the team the very best. Dr. R. C. Natarajan
Pratibimb | November 2012 | 4
Editor’s corner Dear Readers, TAPMI ‘s calendar is never short of activity. This month was no exception. TAPMI’s flagship market research event, Brandscan 2012 celebrated its 20th year by entering into the Rural format(Kundapur) along with the time tested Mall format(Mangalore) and Fair format(Manipal).Months of hard work put in by TAPMIANs paid off and the event was a grand success. Teeming with variety, the November edition has a rich assortment of items. Aashwi Verma gives us a glimpse of the food retail scenario in India over the years. Vijaya Krushna Ponnada and Yashwanth J G explore the next generation technologies in air travel. Shovik Kar talks about the whole concept of “Internet of Things” and informed decision making. And for all those who are interested in careers in IT, our current edition has a feature on Career development in IT industry. Aditi Vidyarthi and Nitin Bhat,of Infosys analyzes how global uncertainty affects the Indian economy and why reforms are important in their article," Global uncertainty- The way forward for Indian economy”. This issue’s Best Article Contest winner is Saurav Biswas of TAPMI for his article “Capitalism: Experiencing a paradigm shift “,where he discusses on Conscious capitalism and how it is more than just a social responsibility. On behalf of our entire team, I wish to congratulate him on his wonderful piece.
Editor in Chief Sushmit Sinha Marketing & Advertising Manish Mishra Design Abhishek Dubey Creative & Cover Design Namrata Mahapatra Communications Divyanshu Varun Anant Sub-Editors Abhishek Raghupungav Aditya Bhat Arun Stephen Devi Kailas Kannan Venkat Pallavi Prasad Rithwik Krishnakumar Publishing Vandna Soni
Team Pratibimb would like to wish all the readers a Happy and safe Diwali. Also,this is the first edition the first year team has come up with from scratch, taking the full reins of responsibility from the seniors. So the November edition is doubly special to all of us! Stay updated, like our page to hear more from us at http://www.facebook.com/pratibimb.reflecting.management We would like to thank all faculty members who have provided their valuable feedback to help maintain the standards we have strived to achieve. Also, send in your valuable suggestions or feedback to pratibimb@tapmi.edu.in Enjoy Reading! ~ Devi Kailas
Faculty Advisors Prof. Chowdari Prasad Dean (Branding and Promotions)
Prof. Vinod Madhavan Asst. Prof. , Marketing
Prof. Srivatsa H S Associate Prof. , Marketing
Prof. Vrishali N Bhat Asst. Prof. , Economics & Finance
Prof. Animesh Bahadur Asst. Prof. , Human Resources
Prof. Sanjay Choudhari Asst. Prof. , Operations
Prof. Mohan Kumar V Associate Prof. , Systems
Prof. Jaims K. J. Associate Prof. , Marketing
Prof. Sulagna Mukherjee Asst. Prof. , Economics
Pratibimb | November 2012 | 5
Contents Changing Phase of Food Retail in India
7
Global Supply Chain: Risks & Resilience
10
How can Indian airports leverage Emerging technologies?
14
by by Aashwi Verma, IIM Ahmedabad
by Smruti Sankar Lenka, XIM Bhubaneshwar
by Vijaya Krushna Ponnada and Yashwanth J G, NITIE
How Kingfisher‖s stars fizzled out
18
Internet of Things: Can we manage so many ―things‖ on the Internet?
22
Reviving the Indian Economy
25
by Bharat Hegde, TAPMI
by Shovik Kar, MDI
by Aditi Vidyarthi and Nitin Bhat, Infosys Ltd.
Capitalism-Experiencing a Paradigm shift
28
by Saurav Biswas, TAPMI
Role of Social Media in Engaging Existing Clients and Winning New Ones
31
The Tale of Sloppy EU
34
by Rahul Mukherjee, MDI
by Mayur Challawar and Sidharth Panigrahi, TAPMI
Pratibimb | November 2012 | 6
Changing Phase of Food Retail in India by Aashwi Verma, IIM Ahmedabad
Indians are used to buying their food items which include rice, wheat, fruits and vegetables, cereals, pulses, etc. from roadside grocery shops, neighborhood kirana stores, mandis, haats and bazaars which generally form a part of the so called unorganized food retail sector. A kirana store has a retail area of around 500 sq feet and sells 500 to 800 SKUs (Stock Keeping Units) typically. These kirana stores mainly sell the dry food products like cereals, pulses, etc. whereas mandis, haats, vendors sell fresh foods like fruits and vegetables, milk, etc. to the consumers. Kirana stores fall under the unorganized category of retail. There are more than 10 million mom n pop stores in India and around 6 million sell food items. These stores generate revenues of well over $200 billion each year. These stores are considered a one-stop destination for the needs of an average household and most of them have started offering home delivery facility too.
One of the many advantages of these neighborhood kirana stores is the facility of short-term credit, which is very attractive for the average middle class household. Therefore, these stores cater to the local needs be it in terms of credit or delivery or anytime exchange facility. The people running these stores live in the locality itself or have lived there for generations and understand the needs of people better than anyone else. Hence, the people in the locality have trust in what these shops sell and the customers are greatly influenced by these shopkeepers. What do you do if that your child is craving for a toffee? Simple, you could walk up to the kirana store and buy it for him! This kind of convenience is not available in supermarkets or modern retail outlets as they believe in selling a whole pack of toffees to you rather than a single one. Nowhere would you get loose items and this is a real boon for the average Indian. Same is true if one wants to buy shampoo in a small quantity for one time use and not the whole bottle. One just goes and buys a sachet of shampoo. Do we find such sachets at a modern retail outlet? The answer is No. But we find a number of such
Pratibimb | November 2012 | 7
shampoo sachets hanging at our neighborhood kirana store. But there is a significant shift of the buying patterns of these Indian consumers. They have started visiting the upcoming organized retail stores like supermarkets, hypermarkets, etc. where they can select a food product offered by a certain brand over a thousand others displayed in the same category, inspect the quality of the particular product in a comfortable ambience, and still buy it a fair price and at times by paying a lesser price than what they would have paid at a nearby kirana store. This kind of shift is responsible for the revolutionizing Indian food retail.
The Food and Grocery market is currently at US$ 325 Bn and is expected to grow to US$ 425 Bn by 2016. The market is growing at a CAGR 5.5% whereas the organized Food and grocery market is growing at a CAGR 30%.
The retail market in India is estimated at US$ 470 Bn in 2011, which accounts for roughly 35% of GDP and is expected to grow to US$ 675 Bn by 2016 with a CAGR of 7.5%. (Technopak Analysis, 2011)
Growing at a CAGR 30%, Food and Grocery retail is undoubtedly going to be the major driving force for the growth of the total Retail industry in India. The high growth in the sector is mainly due to the following factors:
(Technopak Analysis, 2011) The biggest share of the retail pie belongs to the food and grocery segment, roughly 70 %. But the most significant fact about retail in India is that much of it is unorganized (more than 97%).
Increasing Income
Changing lifestyles Need for convenience foods Increasing number of working females in Indian families Change in consumption patterns
With the changing face of Indian consumerism, there is a growing opportunity for various organized retail formats to cater to the needs of these shifting loyals.
Nilgiris was the first organized food retailer in India.
(Technopak Analysis, 2011)
Pratibimb | November 2012 | 8
It started its operations in 1905 as a dairy farm in South India. Safal was the first organized fruits and vegetables retailer in India. It was established in 1988 by National Dairy Development Board and operates mainly in Delhi. In 1996, RPG Group opened its Food World outlet in Chennai and this clearly showed the increasing corporate interest in Food retail business. With time other corporates also entered the fruits and vegetables retail sector and at present, Reliance (Fresh), ITC (Choupal Fresh), Aditya Birla Group
(More), Future group (Food Bazaar) and Bharti (Easy Day) are the major players in the market.
and Reliance fresh are loss-making ventures till now and will require some time before they become profitable. Till then kirana stores will remain the undisputed kings of Indian retail.
References
With a number of corporate houses entering the market, there is bound to be an impact on traditional retailers i.e. street hawkers and neighborhood stores who sell 97% of food and groceries today. Their profits are expected to decrease in future due to the increasing competition in the market. Apart from the impact on the intermediaries present in the supply chain, there is going to be a significant impact on the producers and the end consumers. Therefore, with the inflow of FDI in retail( wholesale) and private investment, the scenario in urban India is changing. Supermarkets and hypermarkets are springing up everywhere and this will definitely having an impact on the unorganized food retail sector. But most of the population still lives in rural India (70%) for whom the kirana stores are the only source of FMCG goods and food items. Moreover the average Indian perceives products being sold in big and flashy stores as more expensive than those sold in kirana stores. This is limiting the profitability of such modern stores. Most of the big retailers such as Big Bazaar
Pratibimb | November 2012 | 9
http://articles.economictimes.indiatimes.com/201008-17/news/27599478_1_china-s-gdp-real-gdpgrowth-savings-rate
http://www.mbaknol.com/retail-management/ unorganized-retail-in-india/
http://www.caclubindia.com/articles/fdi-in-indianretail-sector-highlights-analysis-12546.asp
PWC report - Winning in India's retail sector
Technopak report - Emerging TrendsinIndianRetail and Consumer2011
Global Supply Chain: Risks & Resilience by Smruti Sankar Lenka, XIM Bhubaneshwar
Recent news reports claimed that Foxconn, the world‖s largest contract electronics supplier and manufacturer, faced a riot of 2000 odd workers at one of its plants in China. The affected plant is supposed to assemble 57 million iPhone5s by the year end. The list of the clients of Foxconn includes Hewlett Packard, Sony, Dell, Nokia and others. Now let us focus on the fact that the 2012 Gartner study for the supply chain Top25 reveals Apple at No.1 while HP at 24 and Dell at No.4. Every company in the Top-25 list has a multi-national presence driven by efficient global supply chains. The link between the two is that of risk and return. The global leaders across various industries invest huge sums in their supply chain and logistics operations and reap huge cost benefits and operational leverage, while in adverse scenarios which may be economic, natural or social; they are the ones who bear the brunt. When Henry Ford started Ford Motor Company; he relied on of suppliers near his factories. He had more control over the supply chain as they were located near to the plant and he could clearly understand and manage the variables affecting the production process. If any one supplier failed to meet his manufacturing demands, another could fill in with minimal delay. However, the past decades have experienced a tectonic shift in the world economic order with globalization, rapid commercialization and cut-throat competition compelling firms to move out of their local geography in search of newer ones. The benefits- lower production cost, cheap labour and raw material, high revenue and profits. The recent global meltdown and the ongoing financial sluggishness posed even bigger challenge for firms to stay competitive and profitable. The agile ones responded with optimization of resources and minimizing their production cost by venturing into newer geographies. This paid huge dividends when implemented successfully but brought along enormous operational and financial risk –the biggest instance being the earthquake in Japan in 2011. Hence, the imperative to understand the management of global supply circle and the risks associated with it. The prime reason for outsourcing operations is a purely economic one while the others are listed in the table. Though the advantages are huge, the hindrances are also significant which are discussed below: Lack of Working Capital Companies are aggressively focussing on reduction of inventory to free-up cash for day-to-day operations as the traditional resources of working capital generation are becoming financially unviable and unavailable. They are revamping the product assortments to focus more on profitable products and putting an end to the cost-bearing ones and lowering operating costs by
Pratibimb | November 2012 | 10
channelizing productivity.
more
resources
in
enhancing
the
Fluctuating energy costs: Companies must plan in advance for incessantly fluctuating energy and prices of commodity, as well as variable labour and exchange rates.
found out with many goods produced and sourced from China. The cost of recall often makes a serious dent on the balance sheet of the company with the loss of consumer confidence difficult to assess and mitigate. The recent spree of recall of Toyota and GM are also indicating a serious issue of global supply chain risk.
Reasons to Outsource
Example
Risk of Power failure
Organizationally Driven
Available Capacity Strategic Relationships Focus on Core Capabilities
Improvement Driven
Access to Technology, Skills
Financially Driven
Capital Spending Avoidance Cost Saving
Revenue Driven
Access to New Markets
The risk of power failure and other infrastructure impediments are also a major component of global supply chain risks. China has two-third of the country‖s provinces experiencing power shortages. A huge concentration of manufacturers in China is operating in regions exposed to floods, typhoons, earthquakes and potential electrical blackouts. The recent example of grid failure and black-out in Northern states of India caused heavy losses to autoparts manufacturing companies who are first and second tier suppliers to the global auto giants.
Financial risk: In this pessimistic business scenario, the sustainability and business profitability of companies are at serious crossroads. So a rise in bankruptcy cases among suppliers is inevitable and organizations have to re-evaluate their existing supply chains to re-calibrate and support the key partners and try to minimize the number of potential “weak links”. Meanwhile focus should also be on establishing contract with multiple suppliers for a single category of product or component to make sure that supply chains run smoothly in difficult times. Supply Chain Compression Manufacturers are re-aligning their supply chains by bringing plant operations within their scope of control and sourcing from vendors closer to home and away from Asia though they are low cost and more profitable. The new term being “near-sourcing” replacing “out-sourcing” gradually. The main deterrent in Asian countries are constrained free trade agreements, rising energy costs, and escalating labour and production costs which are compelling companies to re-evaluate their global supply chains. Mexico is increasingly becoming a preferred destination for manufactured goods as companies are leveraging on the financial incentives provided in Mexico‖s multiple free trade agreements and exploit the investment incentives to the optimum. Quality Issues A couple of years ago, serious quality issues were
Pratibimb | November 2012 | 11
Cultural Gap Cultural ―gap‖ between the two firms is also a major source of conflict while implementing global supply chains. In case of a French automobile company, the gap between the North American customers, the Chinese production facilities and the top executive team in France resulted in a production crisis. The management teams in all the three continents were sensitive to cultural differences but lacked the professional will to arrive at a common conclusion and get the desired performance level. Unforeseen Risks These risks have very less probability to appear in common consideration while designing a global supply chain system, but their consequences as and when they occur, have the potential to create enormous distortion in the entire supply chain. We are often unaware of what exactly we are fighting against, so the best practice is to have a set of standard protocols and anticipatory actions in place to ensure a prompt, effective reaction to such a situation whenever it arises. The more potent risk is the collaborative nature of the risk factors. They often prove to be more disastrous when occur together. For example, as the distance increases between the supplier and the buyer, transportation cost becomes significant and the lead
time increases substantially which in effect hampers product delivery and customer confidence. The plausible way to mitigate such risks to an acceptable level is to choose the supplier after exhaustive analysis of all the risk factors pertaining to the supplier even at the expense of higher investment. Short-term profit gains shouldn‖t be a deciding factor for deciding global supply chain strategy.
of the facility, its construction and maintenance followed by various design rules and safety regulations guiding the site. Building Collaborative Growth Collaborative relationships with the suppliers- primary and secondary as well as with members further down in the supply chain has been the norm of the day. A prominent apparel manufacturer in the U.S. recently hit the headlines as they extended monetary support to one of their second tier supplier for its routine operating costs as the company was unable to access credit from the market. Immaculate Timing
Mitigating Risk and Failures To mitigate risks associated with global sourcing, companies today have looked at alternate suppliers across the globe with a focus on features which their primary suppliers have been missing out on – reliable
transportation, proximity to raw materials, macroeconomic conditions. This strategy ensures that even on any disruption of service by the primary supplier, the company has a fallback option and the production does not stop.
Preventing Site Disruptions Companies today maintain a control over the location
Pratibimb | November 2012 | 12
Organizations need to keep in mind the lead times of suppliers and the entire supply chain to avoid any stock out situations or idle inventory. Critical decisions regarding the location of the suppliers could make the difference. In case of sudden spike in demand, the company should have the resources and suppliers to provide them with raw materials and ancillaries to meet the demand.
Supply Chain Visibility Supply chain visibility can be defined as the traceability of the product from then manufacturer to last destination. If the organization business spans globally, there is a need for real time visibility into the status of order, shipments and in-transit inventory. The detailed visibility that is demanded by each stage of supply chain is cited in the process flow diagram.
It helps in maintaining the inventory and preventing blue-whip effect in a supply chain. Also we can plan for an impending situation due to availability of a real time data of each stage. Good Sales Forecasting Accurate forecasts might be a myth, but a good sales forecast is of paramount importance for a company. Not only would it keep the costs down but also maximize profit and help in successfully managing the entire supply chain. Conclusion The costs involved in managing a global supply chain are huge but are outweighed by the benefits received by the organization in the long run. It has been time and again proved that companies with effective supply chain have been more successful than their competitions. With global supply chain in place, organizations have mitigated their risks to considerable extent and benefited substantially from their channel members.
References
http://www.mhia.org/news/archive/7960/visibilitywithin-the-supply-chain
http://www.edigeeks.com/syncron-releases-suite-global -supply-chain/ http://hbswk.hbs.edu/item/6684.html http://www.infosysblogs.com/supply-chain/2011/09/ the_role_of_information_sharin.html
http://www.gartner.com/id=2021615#h-N65875
http://advice.cio.com/thomas_wailgum/ supply_chain_disaster_brewing_quest_for_cheaper_and_f aster_has_created_huge_data_blindspots
http://online.wsj.com/ad/article/managingriskdisruption
http://www.voxeu.org/article/japans-earthquake-andtsunami-global-supply-chain-impacts http://www.mhia.org/news/archive/9780/top-7-globalsupply-chain-risks-in-2010
http://www.fungglobalinstitute.org/publications/ speeches/global-supply-chains--past-developmentsemerging-trends-193.html
http://www-935.ibm.com/services/uk/bcs/pdf/ blueprint_for_supply_chain_visibility.pdf
Pratibimb | November 2012 | 13
How can Indian airports leverage Emerging technologies? by Vijaya Krushna Ponnada and Yashwanth J G, NITIE
Airport sector- An Indian scenario Airports in India are developed in the PPP model. Public Private Partnership is an arrangement between governments or statutory entity or government owned entity on one side and a private sector entity on the other, for the provision of public assets and or public services, through investments being made and or management being undertaken by the private sector entity, for a specified period of time. This arrangement is aimed at promoting both financial and nonfinancial investment by the private sector to leverage the private sector efficiency to improve national infrastructure and deliver quality services. This arrangement also helps in sharing risk with the private sector. In PPP, Public entity shares risk with the private entity through well defined allocation of risk between the two parties. Public entity or its representative sets predetermined performance standards and measures the performance to calculate the performance linked payments for the private entity. The PPP arrangement will always be temporary in nature, so this arrangement always come to a closure when the agreed upon date is arrived. What is the need of next generation technology? As a part of discharging its sovereign function the state is obliged to provide certain services to its citizens. The idea of creating a PPP is to develop the assets required to deliver these services. There are many forms of PPPs which are popular in India, such as management contracts, different types of build-operate-transfer models (popularly known as BOT), build-lease-transfer (popularly known as BLT), design-build-operatetransfer (popularly known as DBFOT), operate-maintain-transfer (popularly known as OMT), etc. With intent to develop Indian infrastructure, government is pursuing Public Private Partnership option in six major Sectors in India. Airports sector is one amongst these sectors. This sector has a tremendous potential of growth when it is IT enabled, creating a huge business opportunity for the IT MNCs to help the PPPs reap the benefits of new technologies. In this context, we put forward the latest and emerging technologies in this sector which is one of the major sector allowed for PPP in India, which can profitably exploited by the IT majors.
Pratibimb | November 2012 | 14
Highlights
PPP Sector Airports
Suggested Solutions
Benefits
Critical Success Factor
Smart eGate system
Far more safe and efficient Quickly captures biometric data including facial recognition and retinal scan using a high-accuracy camera Quick processing
• High penetration of IT among youth • Established infrastructure should support such a radical up gradation • Seamless integration of different platforms for using egate card is critical to the success. • Increasing number of similar services in that country • Interest to adopt international standards • Increasing government IT initiatives such which requires shared database • To achieve the maximum benefit of this system with minimum risk the products (both hardware and software) with it is going to be integrated should be world-class. • The head room height where the baggage is handled should be apt to accommodate safe passage.
The CrisBag® tote sys- improved security with intem line baggage screening Less risk of tampering Reduced screening and transfer times Gives an adaptive tilt mechanism which provides both static and dynamic tilt for baggage discharge
What are the unexplored technologies in India?
next
generation
Recent predictions shows that the air travel throughout the world is expected to grow at an average rate of 5% through 2020. Asia-Pacific and Middle East countries, especially China, Australia and south East Asian countries like India and Singapore which are expected to grow at a combined annual growth rate (CAGR) of about 6.0% through 2017 will become growth hubs. There are many proven next generation technologies which were in practice elsewhere in the world, which can be used here to improvise the existing processes. We take the pleasure of taking forward this discussion
Pratibimb | November 2012 | 15
to the major technological advances which can be implemented in developing airports. Smart eGate system Smart e-Gate could be an ambitious and futuristic project and an important step towards encouraging the culture of e-travel which far more safe and efficient. The new eGate system scans and reads passport information quickly and captures biometric data including facial recognition and retinal scan using a high-accuracy camera. Then it matches the traveler‖s captured biometrics and passport information against the existing database to detect potential immigration issues. The best part is, that all these procedures are
expected to be completed in 12 to 14 seconds with high-level of accuracy and standards.
The Dubai case Smart e-Gate system, installed in Dubai International’s immigration entry and exit points paves the way for a faster and more efficient movement of the growing number of passengers into and out of the world’s fourth busiest airport for international passengers. This new e-Gate has completely eliminated the need for prior user registration with the General Directorate of Residency and Foreigner Affairs (GDRFA). Challenges: In the beginning stage care should be exercised to carryout out the entry or exit processes of the Passengers, who hold passports without ereadable barcodes. Before rolling the technology out, the airport au- Figure 1http://www.expatwoman.com/ thority should conduct a trial of the system, dubai/monthly_faqs_egate_5072.aspx which should be continuously monitored by the officers to assess its performance and operational efficiency. The CrisBag® tote system This is another major breakthrough in the field of airport security systems. This system is designed to improve security by using in-line baggage screening. This system combines high-speed transport with special totes which enable 100% track and trace throughout the baggage-handling process including during X-ray scanning and in the EBS system. By allowing baggage to remain in the tote throughout the entire screening process, CrisBag® not only minimizes the risk of tampering, but also helps to reduce screening and transfer times. The latest system feature also includes an adaptive tilt mechanism which provides both static and dynamic tilt for baggage discharge. Crisplant will also demonstrate the new LS-4000econ sorter, which enables airports to minimize their energy and maintenance costs, in addition to reducing the floor space of the baggage. Düsseldorf Airport case Düsseldorf Airport and Calgary Airport, which are both expanding, are the latest airports to commission
Pratibimb | November 2012 | 16
the CrisBag® system to provide greater flexibility in their baggage handling. The new technologies will allow airports to achieve greater efficiencies in the sorting, transportation, storage and screening of baggage. Acquisition and integration of new technologies Challenges Acquisition and integration of technologies into the system is not a piece of cake! Acquiring the above mentioned systems is a costly affair and requires thorough through analysis of requirements, fine fit of the application, and future scope. Some systems affect a part of the organization where as some other systems effect the whole organization. So organizations fail to integrate successfully unless proper human and technical skills are developed for each type of new implementation. The viability and criticality of the application for the success of the organization should be properly validated before taking a deployment decision. The future ahead Public private Partnerships are gaining momentum in India a phenomenal phase. This drive is expected to
gain a lot of momentum in the near future drawing huge amounts of FDI and private funds in building the nation‖s infrastructure. PPPs are throwing a lot of opportunities at the IT Majors in the form of implementation of basic IT infrastructure and breakthrough applications. The main challenge lies in helping the client suggesting and implementing breakthrough applications and integrating this with the existing one. From the Information and communication technology perspective, a lot of opportunities are on the way for the MNC IT companies. However, there is lot of ground work needs to be done by these entities to gain the confidence of the PPP by convincing the benefits of these technologies. There are certain factors which are discussed in this article proved very critical to success, for e.g. the penetration of IT among the users and employees, socio and economic factors and political factors such as the commitment of the leaders to technological development. Breakthrough technological innovations in this sector happening elsewhere in the world have the potential to transform India‖s infrastructure. It is high time, that these technologies be introduced in the India to improve the infrastructure capabilities and bring down the operational inefficiencies.
15/8/2012 )
http://www.mobility.siemens.com/mobility/global/en/ interurban-mobility/rail-solutions/rail-automation/etcstrainguard/gsm-r-radio-system/pages/gsm-r-radiosystem.aspx(Accessed on 15/8/2012 )
http://www.getransportation.com/rail/rail-products/ locomotives/fuel-savings-solutions/trip-optimizer.html (Accessed on 15/8/2012 )
http://www.rff.org/Documents/RFF-Rpt-NEPI%20Tech% 20Manual_Final.pdf(Accessed on 14/8/2012 )
http://www.cseindia.org/content/cse-demands-publicconsultation-fuel-economy-standards-cars-guard-againstweak-standards-pus(Accessed on 15/8/2012 )
http://www.getransportation.com/component/content/ article/2-rail-blog/252-ge-transportation-addressestoughest-rail-challenges-at-innotrans-2010.html(Accessed on 16/8/2012 )
www.jisc.ac.uk/media/documents/techwatch/tsw0602.doc (Accessed on 16/8/2012 )
ftp://129.35.224.112/software/pervasive/info/tech/ gsoee200.pdf(Accessed on 16/8/2012 )
http://www.champs.eng.vt.edu/docs/research/ HowertonSideris%20P&R%20Final%20Report.pdf(Accessed on 17/8/2012 )
http://ec.europa.eu/transport/rail/interoperability/ertms/ doc/edp/national_deployment_plans/ czech_republic_ndp.pdf(Accessed on 17/8/2012 )
References
http://www.pppinindia.com/(Accessed on 13/8/2012)
http://www.ibef.org/download/Infra_Brochure_Spread.pdf (Accessed on 13/8/2012)
Ömür Y. Saatçioglu, Durmus Ali Deveci, A. Güldem Cerit, (2009),"Logistics and transportation information
systems in Turkey: e-government perspectives", Transforming Government: People, Process and Policy, Vol. 3 Iss: 2 pp. 144 – 162
http://wn.com/luggage_really_handling_it(Accessed 17/8/2012 )
http://ge.ecomagination.com/_files/downloads/reports/ ge_2008_ecomagination_report.pdf(Accessed on 17/8/2012 )
IT Task force report for power sector
Anutosh Maitra, Rahul Walawalkar, Anil Khanna, “AN ASSESSMENT OF INFORMATION TECHNOLOGY FOR POWER SECTOR”
M. Kia, E. Shayan, F. Ghotb, (2000) "The importance of information technology in port terminal operations", International Journal of Physical Distribution & Logistics Management, Vol. 30 Iss: 3/4, pp.331 - 344
http://www.getransportation.com/component/content/ article/2-rail-blog/252-ge-transportation-addressestoughest-rail-challenges-at-innotrans-2010.html(Accessed on 14/8/2012 )
http://theconstructor.org/concrete/concrete-durabilityproblems/852/(Accessed on 14/8/2012 )
http://www.rfid1984.com/tollway.html(Accessed 14/8/2012 )
http://www.topconpositioning.com/products/mobilemapping/ip-s2(Accessed on 13/8/2012 )
http://www.expatwoman.com/dubai/ monthly_faqs_egate_5072.aspx(Accessed on 13/8/2012 )
www.beumergroup.com/(Accessed on 14/8/2012 )
http://www.airport-int.com/article/crisplant-featurestechnology-breakthroughs-in-baggage-handling-atpassenger-terminal-expo-2012.html(Accessed
Pratibimb | November 2012 | 17
on
on
on
How Kingfisher’s stars fizzled out by Bharat Hegde, TAPMI
On 25th September 2012, the news broke that Diageo, World‖s biggest liquor maker, was in talks with the UB group and United Spirits (USL) to acquire stake in USL a deal that could give Diageo a controlling stake in USL. Vijay Mallya‖s woes do not seem to reduce after as the group has more than Rs 16000 crores of debt. Lenders are refusing to pay, debilitating the operations of its star airliner, Kingfisher Airlines. Though both UB group and Kingfisher Airlines are knee deep in debt, the Airlines seems to be the worst hit of the two. Operations are down with very few flights still flying. Because of frequent cancellations, passengers are refusing to fly Kingfisher. Employees have not been receiving salaries, debtors their interest and suppliers their payments. Diageo‖s entrance was seen as the light at the end of the tunnel. The deal, if goes through, can solve Kingfisher‖s major problems by taking bulk of the debt off the book which will substantially improve company‖s financial position. This is what the lenders are looking for. One cannot help but wonder how Kingfisher got into such deep trouble? When liquor baron Vijay Mallya launched the Kingfisher Airlines on his son‖s birthday, it was thought to be a gift to him. Parallels were drawn as to how our Indian Branson, with his Kingfisher Airlines, is matching Richard Branson and his Virgin Atlantic. While Virgin Atlantic, after some trouble, has managed to get back in the green, Kingfisher has lost ground in that front. Once the leading airlines in India, it is sixth now in terms of market share with little hope, at least in the near future. It is difficult to imagine how Kingfisher‖s stars fizzled out. When it was launched in 2005, it was looked upon for the quality and service. Kingfisher was seen as a premium airline and it was made sure that there was no compromise in quality. In fact, Mr Mallya took pride in saying that each of the cabin crew members was personally interviewed and selected by him. But it remains a fact that the Airline hasn‖t made profit since its inception, something that would come to bite it in the future. Kingfisher airlines was backing on the growth of India‖s economy, its upper middle class and hence, the increasing number of air travellers. In 2007, went on to acquire Air Deccan. Both the airlines were seeing bad times and Air Deccan couldn‖t sustain its ultra low cost model. The benefits of the merger were multi-fold for KFA, some obvious, some not so much. New entity wwould have synergies in the routes, operations, would wipe out a competitor who brought the reference price down, reduce pressure in pricing and so on. Acquisition of Air Deccan would also allow Kingfisher to start international flights from the following year. But some of the benefits were not so obvious. With the merger, Kingfisher got extra planes which meant it could push away delivery of its already ordered A320s. It did and traded the delivery slots with Air Qatar which fetching between $1-2 millions.
Pratibimb | November 2012 | 18
Despite all these efforts, the pressure on the costs did not ease as Aviation Turbine Fuel (ATF) kept on rising. Not only Kingfisher but the whole industry was bleeding heavily. Indigo was the only profitable airline in the entire country. The ATF prices, which started its upward movement, hit its peak in mid-2008, when the crude was trading at around $150 per barrel. Though it eased out near the year end, it again started its upward movement reaching peak levels in 2012. High taxes and oligopolistic market conditions for the oil PSUs meant that ATF prices are higher by 60-70% in India than the global average. Fuel costs account for about 30-45% of operating expenses for full cost carriers and 40-55% for low cost carriers. Figure 1: ATF prices in four Metros. (Figure in Rs per Kilo litre)
Kingfisher was caught between its operational model and financial trouble. On one hand, it was not able to sustain its luxury services at the prices it charged. On the other hand, any increase in price would take away whatever few customers it flies now. This is a problem to which, Kingfisher has not seem to have found a permanent solution. Apart from the operational losses, Kingfisher is also servicing a huge debt. In the financial year ending March 2012, Kingfisher paid Rs 1276.3 crores as interest on the outstanding loans of Rs 9133.6 crores, which makes up half the losses it faced in that year. To stop the haemorrhage, it stopped all international flights on April 10, 2012 and stopped flying many unprofitable routes. According to a statement made by Mr Mallya himself, Kingfisher is flying 15 of the 40 aircrafts it has operating permits for, on 80 domestic routes.
Pratibimb | November 2012 | 19
Figure 2: Kingfisher Airlines Financials.
In 2005, the company had ordered 50 Airbus aircrafts including the superjumbo Airbus A380, adding taking the sum to $1.9 Billion. At that point in time, Kingfisher didn‖t see any red flag as the burgeoning Indian middle class and demand for air travel was expected to make the company profitable pretty soon. Kingfisher airlines was the fastest growing airlines then. The company came out with an IPO in 2006. Through the issue, Kingfisher had raised about Rs 127 crores. The offer price was set at Rs 148 per share of Rs 10 face value, which was near the lower end of the price band of Rs 146-Rs175. This indicated low confidence of investors in the airline from the beginning. The low confidence could also be seen from the way the stock got hammered on the day it was listed, closing almost 50% down, at Rs 97 per share. The company did not have too much debt on its books and the interest payment amounted to only 10% of the net loss. Onset of 2009 had changed everything quite drastically, especially for the aviation industry. The aviation industry faced the double whammy of low number of air travellers because of the global economic slowdown, and record levels of crude oil prices. The company had taken loans for the predelivery payment of the aircrafts it had ordered and for other operating leases. Kingfisher‖s interest payment suddenly jumped nearly 10 times to about Rs 700 crores in 2009. By the end of the year, the company nearly had Rs 6000 crores of debt on its books of which, Rs 2500 crores was short term debt. In 2009, the company rolled over Rs 800 crores worth of short term debts. The company was leveraged 13 times and was planning to raise additional debt of Rs 1500 crores of debt. Making losses consistently, year after year, the airline was cash strapped and needed capital badly to keep its flights in the air. In its annual report for year ending 2009, the company made statement saying its net worth has been eroded due
to sustained losses. By 2010, the interest payment by the company had risen to staggering Rs 1096 crores, which was about 20% of its net sales and more than 60% of its net losses for the year. Following RBI‖s decision of a relief package for the airline industry, the consortium of banks led by SBI capital markets made a debt restructuring plan in 2010. Post the restructuring; the average interest payment would be about 11%. It would also help in raising another Rs 900 crores of additional facilities. The new structure will be marked by a 7 year easy repayment schedule period with 2 years of moratorium. Banks have also converted some part of their debt to equity to ease off the pressure on the airline. Figure 3: Kingfisher Airlines debt from 2006-2012.
Furthering its cost cutting measures, KFA has deferred the delivery of the superjumbo Airbus A380 which it was scheduled to receive in 2011, till 2014. As of 2012, the company is still bleeding heavily, most of its flights grounded and few of them repossessed by the lessors. It plans to stop the low cost arm, Kingfisher Red. After many flight cancellations and passenger furores, Kingfisher struggles to get back on its feet. The share price hit as low as Rs 7 per share as the market cap plummeted to about Rs 570 crores. The consortium of banks led by SBI turned down a request by Mr Mallya for issuing fresh debt of Rs 200 crores, and has given the task of formulating a revival plane for the airline to SBI capital markets. The banks are apparently not happy with Mr Mallya‖s efforts to infuse fresh equity into the company.
Pratibimb | November 2012 | 20
Table 1: Exposure of banks to Kingfisher Airlines.
Bank State Bank of India Punjab National Bank Bank of Baroda SREI
Loan (in Crores, INR) 1400 700 500 450
So, after the banks rejecting a second rejig of the debt structure and refusing to release more money, Mr Mallya is left with very few options. He needs to infuse fresh equity into the company. The group is planning to sell all non-core assets like Mangalore Chemicals and Fertilizers. UB group holds about 30% of the company. Two unknown companies are known to be conducting due diligence to buy that stake. As per current market price, the Rs 3700 crore company has a market cap of about Rs 550 crores which means the value of UB holdings‖ stake would be about Rs 150 crores. MCF is a profitable company and hence may not find it difficult to find a buyer. Despite that, the money that the stake sale would bring in would be too less to solve KFA‖s problems. This is where the liquor giant Diageo enters the picture. UK based Diageo is world‖s biggest liquor producer and has many famous enviable brands such as Johnny Walker whisky and Smirnoff Vodka in its portfolio. Diageo and United Spirits Limited (USL) had held talks of possible stake sale by the later, earlier in 2008 but the deal did not materialise. At that point in time, Mr Mallya was not in dire requirement of funds to salvage his ailing airline. The situation has changed now. World‖s largest liquor maker by sales revenue is trying to save its promoter‖s airline business. Apart from this, USL has troubles of its own. It has debt outstanding to the tune of Rs 8600 crores. According to Mr Mallya himself, the firm is overleveraged. This makes it a perfect time for Diageo to enter the talks. Striking a deal is more important for the group now and hence, would be more open for such a partnership. The deal is also strategic from Diageo‖s point of view. Diageo has been looking to increase its revenues from international markets. India is world‖s third biggest liquor market, after China and Russia.
USL has about 44% market share in India, followed by Pernod Ricard with its measly 9% share. A deal with USL would see its revenues from international operations rise from 40% currently, to about 45%. Another advantage for Diageo is that scotch is very popular in India, something in which Diageo is renowned. All these indicators point towards the synergies the new entity might share. Both the parties have officially communicated about the talks being held. USL stocks have splurged on the news.
Airlines. Although none of the foreign airlines have publiclee shown interest in KFA, Mr Malaya has told that they are in talks with foreign airlines. They are also in contact with private equity firms and other domestic investors. With its net worth eroded and its unsustainable business model, finding a buyer at valuation that KFA wants to seek maybe be a very difficult task. The consortium of banks is keeping its fingers crossed, hoping that Mr Mallya will come up with some solution and some partner for the airline.
Mr Mallya and United Spirits' founder group, including United Breweries Holdings and Kingfisher Finvest India Ltd., together hold a 27.78% stake in United Spirits. Diageo is reported to be eyeing to buy 15% from the promoter and his group of companies and 10% from other share holders. According to the new takeover guidelines, after having acquired 25% in USL, Diageo will have to make an open offer for buying at least 26% for the stake, which would give it majority holding. This will make an entity with similar holding pattern as that of UB group where Heineken and the promoter group both hold 37.5% stake each. Diageo has made it clear that it wants most of the executive positions, but is willing to leave the Chairman‖s seat for Mr Mallya.
Kingfisher brand is something that is very close to Vijay Mallya‖s heart. UB group has been credited with the turnaround of MCF; there is no reason why he can‖t do it with Kingfisher Airlines. But the fact also remains that airline industry is nothing like the chemicals and fertilizers industry. Throughout the world, every airline is struggling to keep itself afloat. Giants like American Airlines and JAL have filed for bankruptcy protection. High fuel costs along with the global economic conditions and uncertainty in Europe means the airline will continue to see bad times, at least in the near future. Apart from operational conditions, Vijay Mallya promoted group has additional worries of the debt it has on its books. With KFA‖s and USL‖s debt, the company has more than Rs 16000 crores worth of debt on its books. Cash is hard to generate through the airline. Mr Mallya is trying everything possible to keep the Airline Up and running. He has given personal guarantees for the loans and has kept his lavish bungalows as collateral, which may be small for the debt but indicates his interest in saving the airline. It might not take long to see him pull a rabbit out of his hat and be the king of Good times again.
Figure 4: United Spirits Limited Shareholding pattern.
References
Paul, Cuckoo (2012, April). India's carriers are hobbled in their attempts to stop the financial bleeding despite a burgeoning market demand for air travel.
White, Gary. (2012, September 28).Diageo Indian moves makes strategic sense. The Telegraph Raghuvir Badrinath (2009, June 11). Kingfisher Airlines may roll over Rs 800-crore debt. Business
But on 28th Spetember 2012, Mr Mallya surprised everyone by saying that any proceeds from the stake sale won‖t be used to infuse capital into the debt laden airline. He said that the stake sale had nothing to do with KFA. It was being done to bring down USL‖s debt. USL has nearly Rs 8600 crores of debt on its books and is overleveraged. This statement came out few days after Indian Government allowed 49% FDI in
Pratibimb | November 2012 | 21
Standard.
Indian Oil Corporation website
Image: Kumar, Vinay (2012, Feb 20).Centre rules out bailout, Kingfisher blames it on I-T, The Hindu.
http://www.iocl.com/Products/ AviationTurbineFuel.aspx
Internet of Things: Can we manage so many ‘things’ on the Internet? by Shovik Kar, MDI
Internet of Things is the concept where devices connected to the Internet extend to home appliances, other utility objects like tyres, toothbrushes etc. A furniture sold, a house built, a bank account opened – everything generates data. IoT aims to process that data into actionable information. The IPSO Alliance has added a new heavy heavyweight. Google has joined the alliance -- with the end goal of connecting not only cars, phones, and computers but even mundane appliances such as smoke detectors and microwaves. With the addition of Google, FUJITSU, Echelon Corp, the Elster Group, and Augusta Systems the alliance totals 53 member companies. (Baumann, 2010) Fig.1. The 3-D connection grid
Source: (ITU Internet Reports, 2005)
The Highway of Possibilities
Pratibimb | November 2012 | 22
Monitoring behaviour of things, persons or data –Zipcar has pioneered a model where rental cars, embedded with sensors, can be leased for a short time and thus optimizing each car for higher revenues and reducing the need of rental centers. In retailing, Tesco is at the forefront of application where based on shoppers‖ profile data they can offer additional info or discount at the point of sale (Chui, Löffler, & Roberts, March 2010).
Sensor driven decision analytics – The IoT can enable more complex, planning and decision –making. In Oil & Gas industry the next wave of exploration could very well rely on the extensive sensor networks to provide more accurate readings of location, structure and dimension of potential fields (Chui, Löffler, & Roberts, March 2010).
Source: (Akamai, 2011) Information Access & Data Ownership It is the biggest of all the threats that have been identified so far. This table depicts the most prominent questions that are plaguing each of these factors.
The Threatening Potholes
Every coin has two sides and this is no exception. The Internet of Things will usher in a new wave of automation but the catch here is that Internet of Things is dependent on a plethora of factors.
Inter Device Connection Reports by Akamai® depicts a rather a dismal picture - the global average speed is 1.9Mbps and a mere 6.7% YoY increase in global speed. In some of the rather developed countries like S.Korea, Japan, Romania, the connection speed is showing a drop in QoQ. Czech Republic has depicted a YoY drop. As the number of connected devices increases exponentially and the given bandwidth will not be sufficient to meet the demands. Also the data does not paint a healthy picture of reliability as the peak speeds are growing at 31% annually while average speeds amble along at 6.7% growth rate.
Source: http://www.internetworldstats.com/stats.htm
Pratibimb | November 2012 | 23
Information Access
Data Ownership
How is the information accessed? How does the analytics vendor charge the user?
Who owns the data?
Will the information be on-demand and customizable or predefined?
Will there be a 1:1 relationship between user and vendor? What sort of privacy control will be implemented?
There is no single solution to this threat. The solution has to be multi-pronged in terms of
Regulations and their strict enforcement Standardization of information access channels, hosting of information etc. This will also
minimize user switching costs and allow healthy competition amongst the service providers.
Conclusion No breakthrough idea arrives without problems. Internet of Things brings the informed decision making and automation to the next level. This technology aims to solve some of the fundamental problems plaguing our society like energy efficiency, better quality of living. Even though some of the problems are reminiscent of challenges in the cloud technology adoption, it remains to be seen how the players in this market come up with solutions to tackle the challenges of this technology. References
Akamai. (2011). State of the Internet: Q4 2010.
Baumann, M. (2010). Google Joins Movement for 'Internet of Things'. EContent , 12.
Chui, M., Löffler, M., & Roberts, R. (March 2010). The Internet of Things . McKinsey Quarterly .
Cisco. (2012). Cisco Visual Networking Index: Global
Mobile Data Traffic Forecast Update, 2011–2016. Cisco Systems Inc.
Evans, D. (2011, July 15). The Internet of Things. Retrieved March 10, 2012, from Cisco Blogs:The Platform: http://blogs.cisco.com/news/the-internet-of -things-infographic/
Fehrenbacher, K. (2011, October 10). The Internet of Things and energy. Retrieved March 3, 2012, from Gigaom: http://gigaom.com/cleantech/the-internet-of -things-energy/
Forrestor. (2011). Forrester‖s US Tech Market Outlook For 2012. Forrester.
ITU Internet Reports. (2005). The Internet of Things. Geneva: International Telecommunication Union.
SRA. (Sept 2009). Internet of Things - A strategic
roadmap.
Vina, V. (n.d.). Internet of Things: what is it? . Retrieved March 9, 2012, from The Internet of Things: http://www.theinternetofthings.eu/internet-of-thingswhat-is-it%3F
Weber, T. (1998, August 27). Talking Toasters: Companies Gear Up For Internet Boom In Things That Think --- Appliances and Office Wares Become Chip-Equipped And Hook In to the Net --- The Threat of Copier Hackers. Wall Street Journal , A1. New York, N.Y, New York, US: Dow Jones & Company Inc.
Wikipedia.
(n.d.).
Near
field
Pratibimb | November 2012 | 24
communication.
Retrieved March 2, 2011, from Wkipedia: http:// en.wikipedia.org/wiki/Near_field_communication
Reviving the Indian Economy by Aditi Vidyarthi and Nitin Bhat, Infosys Ltd.
Global uncertainty- The way forward for Indian economy The performance of the Indian economy in 2011-12 was marked by sluggish growth, high fiscal deficit and widening current account deficit. The past year recorded the slowest growth in Indian economy, with marked fall industrial and agricultural output. With inflation sticky around 7% for the larger part of the year and with a deficient monsoon, there is an upside risk of further deterioration of macroeconomic factors. Concurrently, a risk of widening twin deficits (budget and fiscal) has accentuated concerns for an already overheated economy. Failing economies in the EU and slumped growth in the US have put pressures on the financial markets and exchange rates snowballing fears of a global meltdown. (RBI, 2012) After a sharp recovery from the global economic crisis and two successive years of robust growth, GDP plummeted to a nine year low of 6.5% during 2011-12. This slowdown was reflected across all sectors of the economy. For the first time in a decade, industrial sector contribution to GDP dropped to a single digit. A lethargic growth of less than 4% in agricultural sector contributed heavily in dragging the economy down. After impressive years of fiscal consolidation, there has been a marked deterioration in the gross fiscal deficit ratio, which currently stands at an alarming 5.9% of GDP. Increasing subsidy expenditures and partial fiscal stimulus, post 2008, have contributed heavily to this situation. Furthermore, stalled financial reforms have made it difficult to put fiscal consolidation back on rails. A rapidly increasing current account deficit at 4.5% of GDP is causing investors to shun Indian markets as an investment destination. In addition to this, subdued equity inflows, depleting forex reserves and rising external debt have tarnished India‖s relative attractiveness in the eyes of global investors. Uncertainty due to EUs sovereign debt crisis, downgrade of several EU economies, the relative instability of Euro as a common currency and US sovereign debt downgrade have kept foreign markets volatile for quite a while. With high levels of inflation impeding growth levels and a toothless monetary policy upsetting the liquidity needs of industrial sector, inclusive financial reforms is the need of the hour. Policymakers need to have a relook at the existing fiscal and governmental policies, rejig them to suit the demands of our economy. Sustainable growth of the economy can be possible only if concrete steps are taken to stabilize macro-economic indicators. Several areas of improvement can be chalked out, however, there are four crucial areas wanting immediate governmental intervention for their betterment. It is imperative that these measures are taken to revive business confidence and jumpstart investments and growth. (Nayar, 2012, March)
Pratibimb | November 2012 | 25
Reforms in Infrastructure Sector In the past, our robust growth has been substantially driven by large infrastructure investments and is expected to be driven by the same in the next decade. However, over the past 2 years, infrastructure sector has reached a point of morass wherein new investments have slowed due to large bottlenecks. Elongated gestation periods and shortages in input have deferred investments. Gross Domestic capital formation (as a % of GDP) which is an indicator of the investments has declined persistently from 32.9% in 2007-08 to 30.4% in 2011. Investment in infrastructure plummeted from 2.2 Trillion rupees in 2010 to 1.0 trillion rupees, with roads, telecom, power and ports accounting for most of it all. Investment in power sector is dried due to electricity board losses. Road projects have dried up due to issues in land acquisitions and challenges in environmental and legal clearances. Availability of finance is another logjam affecting investments. Higher capital spending is required from Central and State government to insulate domestic economy from any external slowdown factors. The government should revive some of the high impact projects like Dedicated Freight Corridor (DFC) and Delhi Mumbai Industrial Corridor (DMIC) as a means of stepping up investments. The Land Acquisition Bill needs a speedy pass to create regulatory clarity and swift availability of contiguous tracts of land for infrastructural development. Inter-ministerial consensus needs hastening to provide legal and environmental clearances to various Central/State government projects in the power and mining sector. However, a careful balancing of environmental and growth needs would be necessary. Adopting models like the one in Singapore where multiple agencies sit together to quickly clearing investment projects is a much needed initiative, the onus of which clearly rests on the bureaucratic machinery. It is imperative to allow private sector participation in railways, irrigation, and water supply to accelerate project deployment, execution and delivery. Notable
examples in this regard would be the Yamuna Expressway and Bandra Worli Sea Link projects. Reforms in Agriculture Over the years, agricultural contribution to GDP is rapidly diminishing. During 2011-12, agriculture grew by a scanty 4%. The agricultural sector is riddled with problems related to MSP, insufficient irrigation, improper storage facilities, unavailability of timely credit and lack of infrastructural and technological support. The existing Public Distribution System reeks of inefficiency and leakages, where storage facilities are stretched to their limits, often leading to wastage. Revising the PDS and a complete refurbishment of the food management system is necessary to plug leakages and improve availability. Experts have suggested the use of coupons and cash transfer system to ensure efficiency in the distribution system. Technological breakthrough is essential to augment the supply of pulses, vegetables, fish and meat to address supply constraints, which is necessary to contain inflation. Scientific technology like Low External Input Sustainable Agriculture (LEISA) promoted alongside with Integrated Pest Management system can help improve productivity in a viable manner without causing environmental distress. (RBI, 2012)
Source: RBI Annual Report 2012 Reforms in Manufacturing sector Alarm bells were rung this year when the IIP (Index of industrial output) figures came in. The IIP posted a shameful growth of 2.9% during 2011-12 as compared to the previous years. Slowdown was attributed to moderation in domestic and external demand, increase in interest rates, subdued business confidence and slowdown in consumption. Capital goods production posted a marked decrease.
Pratibimb | November 2012 | 26
Increase in the lending rates worsened liquidity constraints thereby tightening growth. Since manufacturing industry is heavily dependent on core sectors, structural bottlenecks in these sectors affected industrial performance in the past year. Dedicated investment framework in sectors like power, logistics is necessary to sustain manufacturing growth. Heavy investments in electricity can put a stop to long hours of load shedding leading to uninterrupted output. Supply chain efficiency and reduction in transportation costs can be achieved by strengthen the existing road and rail network (DFC and DMIC). Decision making of the government should be transparent by reducing discretionary powers of officials; this will simplify the legal and environmental compliance framework. Fiscal incentives and interest subsidies need to be extended to the proliferating SMEs to increase their contribution to the economy.
cumbersome legal procedures are clearly the need of the hour. Availability of skilled labor, better access to power and transportation, labor reforms and decrease in bureaucratic red-tapism would make the investment climate more favorable. Cash strapped sectors like insurance, aviation, retail and cable should be opened up to foreign investors in order to leverage FDI for growth. Large inflows of FDI can go a long way in bridging our widening current account deficit and creating employment. Conclusion
Source: RBI Monthly Bulletin, April 2012
Growth in the economy has remarkably slackened; in response to the global economic environment. There is a need for more prudent reform policies in various sectors as an impetus for growth. With our current infrastructure being ill suited for the economy, improvements in this area will boost the performance
Source: www.tradingeconomics.com Reforms in FDI policies Post liberalization, Indian has remained one of the hottest destinations for FDI. For the year 2011-12, FDI inflows rose to 42 billion USD, up 33% from 2010-11. Most of these investments were routed from Mauritius, with services sector being the biggest beneficiary. In spite of these comforting FDI figures, a
RBI study noted that the actual FDI inflow fell short by the potential inflow by 25%. Although the FDI policies were revised in 2006 to attract more investors, analysts remain speculative about sustained inflow in the face of a challenging business environment. According to an Ernst & Young report, foreign investors are frustrated with the lengthy gestation process taken to obtain clearances and approvals. (Babani, 2012) With the GAAR policies aiming at taxing these investors, the environment is set to become more hostile to the latter. Government needs to make the environment more conducive by clearing the air around GAAR, and by clarifying its intent more clearly. Transparent governance policies to streamline the
Pratibimb | November 2012 | 27
of core economy sectors. Our manufacturing sector needs more focus and attention, for, in the long run, the growth of the service sector would heavily depend on the manufacturing base. A quantum increase in food productivity is necessary for achieving the ―staggering‖ 4% growth in agriculture in the coming years. An expenditure switching strategy is needed that reduces government‖s revenue spending by cutting subsidies with a step up in capital expenditure. (RBI, 2012) References
Babani, A. (2012, May 13). Boosting FDI inflows. Business India , pp. 41-42.
Nayar, A. G. (2012, March). Outlook for the Indian economy. Delhi: ICRA.
RBI. (2012). The annual report on the working of the Reserve Bank of India. Mumbai: RBI.
Capitalism-Experiencing a Paradigm shift by Saurav Biswas, TAPMI
Capitalism is the astounding belief that the wickedest of men will do the wickedest of things for the greatest good of everyone. - John Maynard Keynes
The word ―Capitalism‖ has a negative connotation attached to it. People detest this economic system and find it hard to believe that capitalism can be beneficial for the entire society. It is believed that only a section of the society benefits under this system and hence there exists resentment against the beneficiaries. The Cuban communist revolutionary and politician Fidel Castro had once famously said -
“I find capitalism repugnant. It is filthy, it is gross, it is alienating... because it causes war, hypocrisy and competition.” Although corporations are most influential institutions of today‖s world, still they are widely perceived as greedy and selfish entities which practices relentless exploitation with the sole objective of maximizing profits. The recent scandals of Satyam in which the CEO confessed of broad accounting improprieties that overstated the company's revenues and profits, the accountancy scandal of Enron, America's seventh largest company and cases of insider trading by Rajat Gupta, former Goldman Sachs Group Inc board member strengthens this belief and keeps on reinforcing them in the minds of common man. In short, corporations and capitalism face serious branding problems. Hence, it is of utmost importance for corporations to relook and rethink about the way business is done in order to win public trust. The industrial revolution led the belief for a long time that the optimum mix of the triple factors of land, labor and capital leads to efficiency and profits. The model stated that the trinity serves as means to achieve a profit which is the end. But the present day world is complex and offers several intricacies. Business can no longer be treated as a simple machine. The interdependencies of several constituents or stakeholders need to be taken care of. The system interdependencies have to be given top priority. Unfortunately, the larger firms are still grounded in a theoretical model that does not acknowledge the complex interdependencies of all of the various constituencies. The business needs to experience a paradigm shift by following the idea of Conscious Capitalism in order to reach the full potential. Conscious Capitalism is a philosophy which is based on the belief that a higher form of capitalism is emerging which holds the potential for enhancing both the aspects of corporate performance and the quality of lives of billions. Conscious capitalism is based on the notion that our own lives improve when we focus on the lives of other individuals. The four basic beliefs as shown in Fig: 1 of conscious capitalism are:-
Pratibimb | November 2012 | 28
which are answerable to public shareholders do fall in the domain of conscious capitalism. For example, Marico is reducing the amount of plastics it uses in packaging, and is giving price and quantity guarantees to 40,000 of its safflower contract farmers. Whole Foods created the Animal Compassion Foundation in January 2005, a separate nonprofit organization, to help other producers evolve their practices to raise animals naturally and humanely. These initiatives could only been taken due to the belief of the leaders that profit is not the only objective of a business.
Fig: 1:- Four beliefs of Conscious Capitalism Source: http://www.consciouscapitalism.org/ learnmore/ 1. Higher Purpose: - Although we have been constantly tuned to believe that the sole purpose of business is to achieve profits, still these are merely the advocacies of the economists and fail to explain the higher purpose of business. In most cases the original purpose of a business is decided prior to any capital being received from investors. There are several entrepreneurs who do not start a business with the sole objective of maximizing profits although profit making is one of the factors. The entrepreneur can be a creative individual who wants to test whether his creativity can withstand in reality, he may be an idealist who wants to work for the betterment of the world or he may want to pursue a business just for the sheer pleasure derived from it. Thus, the better understanding of the reason of existence of the business can lead to better engagement with the stakeholders. 2. Stakeholder orientation: - Any business comprises of several stakeholders such as customers, suppliers, employees and investors who are intricately related in the new age economy. Nowadays, even the boundaries of an organization have become blurred and the enterprises have evolved to become extraprise. Thus, there exists a voluntary exchange between the various stakeholders of a business thereby creating value for each one of them. This voluntary exchange for mutual benefit is the ethical foundation of business and capitalism. Conscious capitalism believes that the entire system benefits by the creation of value for all the stakeholders. 3. Conscious Leadership: - This aspect weighs the most among the four beliefs since the leader has to ensure that the philosophy of conscious capitalism is embedded in the work culture of an organization. In order to do this, the conscious capitalist leaders need to have a holistic view of the entire system. Several executives like John Mackey of Whole Foods Market, Harsh Mariwala, chairman and managing director of Marico have been the practitioners of this philosophy. John Mackey is in fact a leading advocate of this philosophy. Specific initiatives taken by some firms
Pratibimb | November 2012 | 29
4. Conscious culture: - The companies which follow the philosophy of conscious culture have distinctly different culture. Consider the case of Wegmans Food Markets, a 90-year-old retailer that wasn't even among the top 20 by size in its industry. Wegmans was named by Fortune in 2004 as the best place to work in the US. The company was not in the league of high-fliers like Wal-Mart, Microsoft or Goldamn Sachs and hence it was an achievement for the firm in an industry notorious for large size, wafer-thin margins, low pay and high employee turnover. Wegman has a philosophy which is "good people working towards a common goal can accomplish anything they set out to do". So, the family-owned business pays its employees more than the industry average and throws in additional retirement benefits. It gives its people latitude at work to service the customer and promotes only from within. In 2004, its employee turnover rate was 6%, compared to 20% for the industry. It doesn't mind sacrificing some profits for a belief. It even stopped selling tobacco products in 2008.Thus we can infer that the values, beliefs, principles and practices of a firm ensure that the social fabric of the business is strong enough to connect the shareholders. The virtuous circle The philosophy of conscious capitalism can be elucidated in the Stakeholder‖s model of Whole Foods Market as shown in Fig: 2.This model works on the belief that all the constituents of the system are interwoven to each other. The management‖s role is to hire qualified people, train them well and provide them work environment where they feel happy and motivated to work. The team member‖s job is to satisfy the customers who will in turn ensure successful business and hence happy investors. Another aspect of the stakeholder‖s model is that the owners/investors are paid last, after everyone has received goods, services, wages and payments. Although the investors are entitled to the residual profits, still they have the legal and fiduciary control in order to prevent shortchanging by other stakeholders. When some of the profits from the investors are reinvested in the business, it ensures the enhancement of the worth of the business and thereby gives birth to a virtuous circle.
conscious-capitalism/
Fig: 2:- Stakeholders‖ model of the Whole Foods Market Source:http://www.wholefoodsmarket.com/blog/johnmackeys-blog/conscious-capitalism-creating-newparadigm-for%C2%A0business?page=1 Conclusion The emerging interaction between awareness and capitalism encapsulates the idea of Conscious capitalism. Some people may argue that the philosophy of conscious capitalism is in similar lines to that of what corporate social responsibility propagates. But as a matter of fact, Conscious capitalism and what it entails is not philanthropy, as it's not charity. It goes a step further than corporate social responsibility since it's about doing business, not being divorced from it. It's not even a social business, as social good is one of its several objectives, not the most important one. Conscious capitalism is not just about social responsibility, but it is more about the social alignment. Harsh Mariwala, chairman and managing director of Marico, rightly summed up the philosophy by stating that "It does not mean being uncompetitive in the marketplace or taking a hit on business. It means growing collectively by supporting those who partner you, be it vendors or consumers." Hence in this present day economy, as more and more businesses apply these principles and function more consciously, a system of conscious capitalism will emerge and ultimately become the predominant and accepted form of capitalism thereby alienating the negative connotation attached to capitalism. References
http://www.consciouscapitalism.org/ambassadors/ mackey/
http://articles.economictimes.indiatimes.com/201009-30/news/27571108_1_profits-conscious-capitalism -employee-turnover
http://www.triplepundit.com/2011/08/defining-
Pratibimb | November 2012 | 30
http://www.flowidealism.org/Action/CCC.html
http://www.investmentu.com/2006/ November/20061117.html
http://www.wholefoodsmarket.com/blog/johnmackeys-blog/conscious-capitalism-creating-newparadigm-for%C2%A0business
http://www.wholefoodsmarket.com/blog/johnmackeys-blog/conscious-capitalism-creating-newparadigm-for%C2%A0business
Role of Social Media in Engaging Existing Clients and Winning New Ones by Rahul Mukherjee, MDI
Introduction Today social media has emerged as a new two way conversation channel that encourages participation and openness through connectedness. This allows it to form communities online and interact. Use of social media is no longer restricted to just making friends, it is much more than that. Social media sparked the revolution in the Arab World. It is a platform where knowledge is shared. Organizations are now using social media to conduct market research, advertising and promotions, viral marketing, building online reputation, providing customer service and getting feedback from customers, brand monitoring, online collaboration etc. According to a survey conducted by AC Nielsen, the time spent on social networks is up by 82%. With the advent of social media platforms like Twitter, facebook, myspace, blogs, Linkedin, YouTube, plaxo etc. the digital world is changing like never before bringing to the fore new opportunities and business strategies. According to latest statistics there are close to 700 million computers connected to the internet and this number will only grow. 517 million Facebook users spend close to 700 billion minutes per month on Facebook. 165 million twitter users are averaging 90 million tweets per day. A staggering figure!!! It indicates how explosive the growth of social media has become.
Source: http://blogs.thenewstribe.com/blog/
With this exponential growth of social media, businesses are looking to harness the potential of this new channel and are emerging with a strong plan to include social media in their business strategy. New fields of study like “ Enterprise Social Media”, “Enterprise Gamification” and “Online Reputation Management” have emerged that are being leveraged by companies to engage existing clients and winning new ones.
Pratibimb | November 2012 | 31
Role of Social Media Today when all economies are on a short leash, it is imperative for businesses to maintain relationships with their existing customers. Engaging clients is vital to generate the best RoI for a company‖s investment in social media. Social media gives a platform to keeps its clients updated on the latest. Dell and Vodafone are using Twitter as a customer support tool. This not only helps the customers but builds a positive image amongst others about the customer services being offered. Social media represents a low-cost way for companies to engage customers in a dialogue and develop deeper relationships. Social media is important as:
A tool to market your company. If one wants to win new clients, people need to know about the services on offer and social media gives a platform like no other.
It allows a company to offer improved and timely customer service. It makes it easy for companies to answer queries; get feedback even negative. It shows a willingness to listen which is appreciated.
It
allows
for effective pricing. As “Showrooming”, “Online price comparison” are becoming the latest fad, good pricing and value added services can be a useful tool for word-ofmouth marketing. It allows customers to interact with the company through a platform they are comfortable using.
Two new areas that are helping in effective use of social media are: 1. Enterprise Social Media ESM tools like Chatter allow companies to collaborate with their customers. Customers know what is going on in the organization and sometimes also come up with solutions to challenges being faced by the company. 2. Online Reputation Management ORM is the art of manipulating the information related to your business that is available on the internet to reduce the visibility of negative content and promote positive content. Companies can no longer assume that customers will gain information about their company from their websites. Customers
Pratibimb | November 2012 | 32
are active on social media and will find this information on blogs, Facebook discussions, tweets etc. A company not only needs to respond to negatives but needs to amplify the positives around its brand and that is the intent of ORM. Social media monitoring tools like Trackur, SocialMention, Twazzup, Addictomatic, Twitter search etc. allows a company to track its brand on the social media. Case Study A good case in this context is that of KLM Royal Dutch Airlines. When Eyjafjallajökull erupted in 2010 in Iceland, it caused a massive disruption in European air traffic. Stranded passengers rushed to Twitter and Facebook looking for help. Using social media KLM responded quickly and effectively to customer queries, re-directed them to other modes of travel and managed to build the KLM brand image. It prompted the CEO of KLM to declare social media as the center of KLM‖s customer service efforts. Using Salesforce technologies like Chatter and Radian6 KLM has transformed into a Social Enterprise that can effectively collect and track all social conversations, measure brand sentiment and meet their goal of onehour response/24-hour resolution time. Conclusion I believe that no company can afford to neglect the role of social media in engaging and winning clients. Companies should be guided by below mentioned principles: Selective: Focus on social platforms where there are potential customers Social: Engage and make it a two way conversation Responsive: Reach out to customers through social media. Don‖t ignore them. Adaptable: The social media platform is evolving rapidly and so must the business strategy.
Social Media Strategy Social Media Selective
Social
Responsive
Adaptable
However, lots of businesses lose customers due to poor use of social media. Therefore it is imperative that social media strategy be aligned with company‖s objectives. A good starting point could be the Enterprise Social Media Framework built by Deloitte which helps a company launch its social media initiative. Questions related to communications best practice, change readiness, governance policies, strategy, technology etc. are answered in this framework which helps in designing the Social Media strategy. Ability to harness social media will be the hallmark to success in years to come. References
Social Media Monitoring and Engagement, Social CRM. Retrieved from http://www.radian6.com/
Salesforce Chatter: A business collaboration tool. Available from www.salesforce.com/chatter
Abels, Marc., Willemsens, Bjorn., Nuyts, Emanuel. (2012). Four Effects of Social Media and Digital Marketing on Pricing. Available from http:// www.deloitte.com
Del Bello, Sara., Calvez, Mikael., Rochereau, Stephane. (2011). Enterprise Social Media: Exposed and down to eart. Available from http:// www.deloitte.com
Adapted from Deloitte Research. Social Media Report 2011
Wilson H, James., Guinan, PJ., Parise, Salvatore., Weinberg, Bruce D. (2011). What‖s Your Social Media Strategy? Available from http://hbr.org/2011/07/ whats-your-social-media-strategy/ar/1
Lin, Wendy. (2010). The Effects of Social Media Networks in the Hospitality Industry. Las Vegas: University of Nevada
Pratibimb | November 2012 | 33
The Tale of Sloppy EU by Mayur Challawar and Sidharth Panigrahi, TAPMI
Twenty and counting. That is the number of meetings held by European Union(till July 1, 2012) to address the ongoing debt crisis! Sadly the results haven‖t been as enthusiastic as the number of times meetings may suggest it to be. The roundtable conferences have turned into a table tennis board with Manolo Rajoy(Spain Prime minister) and his Italian counterpart Mario Monti have turned out to be spectators who keep on shaking their heads in order to pay attention to the match between Angela Merkel(German chancellor) and Francois Hollande(French President). Reducing transaction cost, improving trades, decreasing exchange rate(leads to higher exchange rate fluctuations experienced in relation with country‖s external partners), rapid reduction of interest rates were some of cushy factors which lured countries into European Union(EU). But the ambience in Europe echoes the dark truth that monetary union advantages were overshot and disadvantages were undershot. European countries are vulnerable to higher risk by large capital influx and uneven speculations on currency. Monetary union raises expectations of investors, which is dangerous if not complimented by appropriate actions. A lowering of interest rate would encourage more debts, which increases the likelihood of default. This is what happened in Portugal. At the onset of 1980, Portugal was struggling with its economic scenario caused due to 1975 revolution, coupled with losing colonies and second oil shock. An unsustainable condition was reached when the budgetary deficits surpassed twelve percent and current account deficit reached ten percent. The escudo depreciated by a massive sixty percent between 1980 and 1987 till reaching stability. This was followed by an accelerated process of economic development, which saw Portugal register a 5.1% growth in its GDP. When Portugal entered the Euro, it experienced a slash in interest rates. As a result there was more credit in form of loans. Acceleration of loans coupled with wage raises led to increase in illusory expectations. The result was a series of defaults and a flame of debt which is yet to extinguish.
Figure 1: Euro comes with a ‘hidden’ price: the risk of adopting Euro by a new member nation
Pratibimb | November 2012 | 34
Loss of monetary autonomy and national macroeconomic policy autonomy are compromise that a member country had to make to join Euro. Countries could no longer determine monetary policy and inflation rate. A mechanism to unite policy was absent. Regional policies crippled owing to political manipulation, economic adjustments delay and insufficient industries funding. Fiscal policy was not robust to compensate the loss of exchange policy instrument. Lack of central policy among European countries was a major thorn in green pastures of EMU. European Union hoped that monetary union would lead to consolidated fiscal action, but that did not happen. In such a scenario where every second yells a ―what if‖ phrase cautioning investor to stay away from burning his/her money in Europe, we consider two ―what if‖ scenarios and see the possible consequences of each action.
What if a member country breaks away EU? ―Catastrophe‖ is the first word that comes to mind. Break up from EU would raise country risk, interest rate, problems ranging from legal to technical domain; and weaken its individual currency. Add to it the plight of trade agreements of EU being revoked. The result would pose a mammoth challenge for nation to get back on its feet and resurrect the economy. A country quitting EMU will face massive dip in its domestic currency valuation. The remaining countries would have incentives to follow the rebel nation and ditch Euro, else they will have to pay increased cost occurred by country‖s exit. Thus, there is high cost for EMU if a nation breaks up.
synchronized business cycles, and entering the Economic and Monetary Union did not influence them in any significant way (Giannone, Lenza and Reichlin 2009). On the other hand, the business cycles of states that had relatively lower levels of GDP/capita (i.e. Spain, Italy, Portugal, Ireland, Greece) were not correlated with the business cycles of countries form the latter category, and moreover, even after the introduction of the euro currency, this variability persisted, together with the increased volatility of their business cycles. We can divide EU into two zones based on business, trade, fiscal, government spending, monetary, investment, fiscal, property rights, and freedom from corruption and labor freedom (Dimitrios 2012). Thus, we can have countries such as Germany, France, Netherlands, Belgium and Luxembourg grouped into one zone and Spain, Italy, Portugal, Ireland, Greece and co to be grouped into other zone. Two separate currencies can be created to cater to the zones respectively. Any solution at this stage is bound to have compromises. The best solution is one which takes care of every stakeholder involved in the crisis. While it‖s too early to expect any progressive action to yield results, we hope that Euro breaks the ongoing deadlock between Berlin and Paris and reach and consensus. Would we see EU issuing joint bonds or understand Merkel‖s intention to go for fiscal consolidation? As of now it looks like deadlock. References
Dimitrios, D. (2012). Can Euro Zone Survive and Long Prosper?. Journal Of Economics & Behavioral Studies, 4(2), 121-128.
Ovidiu C. THE RISKS OF A TOO QUICK EURO ADOPTION BY THE EU MEMBER STATES. THE CASE OF PORTUGAL. Annals Of The University Of Oradea, Economic Science Series [serial online]. December 2011;20(2):25-32. Available from: Business Source Complete, Ipswich, MA. Accessed July 12, 2012.
Giannone, D., Lenza, M., & Reichlin, L. (2011). Market Freedom and the Global Recession. IMF Economic Review, 59(1), 111-135. doi:10.1057/imfer.2010.14
What if the notion of Optimal Currency Area is introduced? An optimum currency area (OCA), also known as an optimal currency region (OCR), is a geographical region in which would maximize economic efficiency to have the entire region share a single currency. It entails to implement a common interest system allowing countries to participate in financial markets equally with the implementation of interest equalization tax within the zone. During 1970‖s the countries which had high levels of GDP/capita(i.e. Germany, France, Belgium, the Netherlands and Luxembourg) also exhibited highly
Pratibimb | November 2012 | 35
Introduction `Does the stock market overreact?' De Bondt and Thaler in 1985 gave start to a new wave of thinking known as behavioural finance. Weak form inefficiency of the stock market was discovered by them after analysing how people are systematically overreacting to unexpected and dramatic news events which were surprising and profound. The Efficient Market Hypothesis as proposed by Fama (1970) asserts that the stock prices reflect the relevant information. The asset prices follow a random walk path i.e. they are merely random numbers. The study conducted by Caginalp G. and H. Laurent (1998) by the predictive power of price patterns finds patterns and confirms that they are statistically significant even in out-ofsample testing and report. The pattern of the stock index might help in predicting some of the effects of the various events. The calendar anomalies tends to exist which goes against the efficient market hypothesis. The researchers have used Gregorian calendar to investigate the calendar anomalies. There are various countries and societies which follow their own calendar on the basis of their religion. For example, the Hebrew calendar is followed by the Jewish society, which is strictly based on luni-solar, the Christian society follows the Gregorian, which is based on solar, and similarly Hindu and Chinese follow their own. The Hindu calendar is called “Panchanga” and it is based on both movements of the sun and the moon. The festival of “Diwali” is typically occurs at the end of October and beginning of November. The special ritual called “Mahurat Trading” can be observed on major stock exchanges like NSE, BSE, NCDEX to name a few lasts for about an hour. It is performed as a symbolic ritual since many years. It marks a link with the rich past and brokers look at it on a positive note. It marks an auspicious beginning to the Hindu New Year. The investors place token orders and buy stocks for their children, which are sometimes never sold and intraday profits are booked, however small they may be. Thus, it is widely believed that trading on this day will bring wealth and prosperity throughout the year. It is interesting to observe the behaviour of trading activities during the period preceding and succeeding Mahurat Trading. The purpose of this study is to know the effect of the festival prior and post diwali on the the returns.
Econometric methodology us on: compounded daily percentage change in the share price I have measured stock return as the Join continuously index (S&P CNX NIFTY) as shown below: pratibimb@tapmi.edu.in Rt = (lnPt – lnPt-1) x 100 …………………… (1) Visit: http://www.tapmi.edu.in/student-life/pratibimb/overview/ Where, Rt = return at time t Pt, Pt-1 = closing value of the stock price index at time t, t-1. Team Pratibimb I have used S&P CNX Nifty as it has got the most liquid stocks in its portfolio. Further, the National TAPMI Stock Pratibimb Exchange | November is largest 2012in | 36 terms of Market capitalisation and Volume. I have used the data of the P. B. No: 9, Manipal - 576104, Karnataka