S I M S R

foreword

Dear Readers,

It is a matter of great pride and pleasure to present the first anniversary issue of e-globuzZ
(Oct-Dec '10). As you may recall e-globuzZ was launched on 18th November 2009 as the
International Business magazine of IBS@SIMSR. This is our fourth issue and like the
earlier three issues, it has contributions from SIMSR students and corporate executives. It
continues to be our endeavour to improve with every issue and we would like to have, for future issues,
contributions from SIMSR alumni and faculty in addition to SIMSR students and corporate executives.

International competition continues to be intense across all industry sectors and will continue to be even more so in
the years ahead. Not only companies but also all of us need to be far more effective both in terms of innovation and
productivity. You would find some of the articles in this issue addressing the global competitiveness aspects of
companies and countries.

In line with our belief that we learn a lot from the strategies and best practices of globally leading multinationals, we
have in this issue significant coverage of strategies of some of the leading MNEs. We also learn a lot from strategies
adopted by Government of countries to attract Foreign Direct Investments (FDI). We have chosen South Korea as
the country in focus since it is one of the world's leading export led economies and hosts many successful MNEs.

Seasons greetings and all the very best wishes for 2011. We look forward to hearing from our readers. Please do send
your feedback at [email protected].

Prof. C.P Joshi

Faculty Mentor-IBS@SIMSR
Course Coordinator PGDM-IB
08 Ohio Outsourcing
Ban: A Critical Analysis
Team e - GlobuzZ

Faculty Mentor
Prof. C. P. Joshi

03 Company in Focus: Samsung

Editor
05 Sector in Focus: Textile Industry
Vikash Kumar Singh
08 Ohio Outsourcing Ban:
A Critical Analysis Anchal Sachan

10 Country in Focus: South Korea

12 Business Leader in Focus: Designer

Muhammad Yunus Tejashree Bhanawala
13 International Finance: ASEAN-India Parul Shrivastava
FTA

15 International Marketing: The Circulation

Volkswagen Story
Astha Pasricha
17 International HR: Talent
Management Celia Madona Vincent

19 Alumni Speak

21 Debate: Is China an Opportunity or All the views expressed

Threat to other emerging economies? in the magazine reflect the
23 International News personal opinions and views
of the author and do not
24 Did you know?
reflect the magazine’s view
 Company in focus
Next is What?

What.. and more recently “Bhurj Khalifa” of Dubai, UAE.

Samsung is an organization that epitomizes Porter's
generic strategies: overall cost leadership, The Quest for excellence
differentiation through cutting edge innovation and It invested heavily in Research and Development in the
focus on innovation and customer experience. It is the late 1980s and early 1990s. This catapulted the
world's largest conglomerate by revenue and South company into the league of leading innovators and in
Korea's largest chaebol. It is headquartered at Samsung turn a pioneer in the electronics marketplace.
Town, Seoul, South Korea. The growth of the organization into
As much as 20% of South Korea's an international conglomerate
total exports are of the Samsung happened in the 1990s. In line with
Group. It is also a major contributor this development, it forayed into the
to the country's GDP. semiconductor space. It has been
“Sustainability leading the way in the design and
The Story Begins production of DRAMs which are
It started out as a small time trading management” has predominantly used in PCs and
company around the 1940s. Post the laptops.
Korean war, with ample support become one of the Samsung is the current market
from the government, like most leader in AMOLED displays. It is
other chaebols it diversified into key enablers of also the largest manufacturer of
various lines of business. The DRAM chips, flash memory and
chaebol led industrialization in the success in business optical storage drives.
1960s accelerated its growth story It also has proven expertise in
further. The major breakthrough Operations servicing government entities
entry was into the field of across the globe. Some of the
electronics in the 1960s. It started customers are Royal Dutch Shell,
out producing black and white The United Arab Emirates
television sets in 1972 and expanded Government and The Government
its portfolio to washing machines of Canadian Province of Ontario.
and refrigerators in 1974. It further This in particular has proved to be a
diversified into the petrochemicals industry in 1974 and key strategic move in gaining governmental support in
construction in 1977. It began the mass production of operating businesses in the respective regions.
microwave ovens in 1979. It began large scale exports
of consumer electronic products in the late 1970s and Conquering the mindspace
early 1980s. Samsung has adopted a broad-based strategy in
Samsung Construction has been an integral part of promoting the brand. The major shift in strategy came
mega projects such as “Petronas Twin Towers” in in 1996 when all the sub brands were consolidated to
Kualalampur, Malaysia, “Taipei 101” of Taipei, Taiwan form a single brand. This was a major move in terms of

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 3

 Company in focus
Next is What?(cont.)

in the brand building process. But however Samsung

still seems to be lagging behind in terms of design
“The lifeblood of our business is aspect of the brand. This is a major contributor towards
that R&D spend. There's nothing building stronger brands. Most of its product designs
that flows through a pipe or down have a striking resemblance to products in vogue that
a wire or anything else. We have are brought out by other competitors. Strengthening this
to continuously create new area can help the brand image by leaps and bounds.
innovation that lets people
do something they didn't think they Success built to last
could do the day before. “Sustainability Management” has become one of the
Steve Ballmer” key enablers of success in business operations in recent
- Microsoft CEO years. This requires taking into account the global
environmental and social issues, demanding a greater
level of corporate responsibility in the conduct of
business. The value delivered to the all the stakeholders
could be maximized in the process. Samsung is among
offloading the financial and operational burden of the very few companies that come out with an annual
having to manage multiple brands and the right step sustainability report. It has worked out elaborate
forward in building a stronger brand. It has been strategies to continuously and progressively maximize
sponsoring several major sporting events around the stake holder value in terms of: innovation in customer
world. The brand building exercise off late has been relationship building/management, employee
built around flagship products in the product portfolio engagement, inter employee relationship management,
such as mobile phones and LCD/LED/Plasma ecological innovation, green convergence, addressing
televisions. climate change, corporate social responsibility and
Samsung more recently has also experimented with a partner innovation initiatives. It has in place what it
signature brand sound which is played with the display takes to sustain the competitive over others and retain
of the brand towards the end of every commercial. The the position of leadership.
same has also been incorporated into products such as
mobile phones and television sets to increase the brand Harnessh G.
recall and loyalty. The brand promotion campaigns PGDM-IB 10-12
have also seen a gradual shift from a product centric
approach to a more customer centric approach. This has
been achieved by involving the brand community more

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 4

 Sector in focus
Textile industry

The Indian Textile Industry has a significant presence in in trade are removed, and gain wider access to world
the socio-economic life of the country. It is the second consumption markets for manufacturers and exporters.
largest textile industry in the world after China. Apart India has emerged as one of the main textile and apparel
from providing one of the basic necessities of life i.e. exporting countries in the Asian region, competing with
cloth, the textile industry contributes about 14% to the China, Turkey, Bangladesh, Mexico, Korea and other
country's industrial output and about 17% to export Asian counterparts. This induced the necessity for the
earnings,4% of GDP. Apart from agriculture this Indian textile industry to comprehend the opportunities
industry provides employment to maximum number of and challenges in a WTO era and formulate strategies
people in India employing 35 million people & another for being competitive.
50 million people in allied activities. The global textile
sector was worth us $214.7 billion in 2005 which Growth Propensity
represented 14.6% of the industry value share. India Growth and investment of an industry depends heavily
aims to become the second largest exporter of apparel on the economic status of the country. Indian economy
among LCCs by 2010, next only to China. grew rapidly during the fiscal year 2006-2007 posting a
growth rate of 9.4% p.a. with an average yearly rate of
Indian perspective growth that has been estimated to be 8% for the past
Since 1991, Industrial liberalization indigenously has three years.
been followed by changes in the global perspective. The India's garment exports totaled USD 10.17 billion
eradication of licensing controls on the Indian industry during the year 2008-09, giving it a desirable market
followed by Uruguay Round negotiations, share of 2.99%. The Americas, European Union, much
consequential in a ten-year phase out of textile and of Asia and Middle East are India's clients.
apparel export quotas under the 'Agreement on Textiles Even today it is the second largest provider of
and Clothing' (ATC), saw the advent of a great employment in the country. For every INR 100,000
opportunity and challenge to the Indian industry. invested in the industry, an average of 7 additional jobs
Particularly, the widespread and intricate system of are created. The Apparel Sector alone contributes to 8%
bilateral restraints came to an end, and importing of India's total exports. By the year 2011-12, India
countries are no longer able to show favouritism expects to record a 15% & 20% growth in quantity &
between exporters by applying safeguard measures to values respectively. The fruits of economic growth have
individual countries. It can be termed as an opportunity far-flung effect on the people which is evident from the
as with the phasing-out of the quota system, restrictions rising per capita income of the middle class. The total
strength of this class in absolute terms is expected to rise
to 351 million by 2010. This has generated huge
demand for fashionable dresses which has
consequently led to the surfacing of some world class
Indian designers.
Textile industry is one of the major contributors to the
total output of the fast growing industrial sector which
is at present revolving around 14%. It has been found
out that Indian textile industry is one of the major
sources of foreign exchange earnings for India and
contributes around 16-17% of the total export earnings.
From the above discussion it is quite clear that the
market size of India is growing at a very high pace. With
increasing demand new players are jumping in the

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 5

 Sector in focus
Textile industry(cont.)

league to get a slice of the profitable pie and the existing

mills are increasing their capacity to meet the demand.
Hence, the expansion process of the domestic industry
has seen a tremendous rush.
Thus, it can be said that the whole Indian economy is on
a growing trend which has its obvious impact on every
possible sector including the Indian Industry.

Post MFA Scenario

Indian Textile Industry is going through a major change
in its outlook after the expiry of Multi-Fibre
Agreement.
Multi Fibre Agreement was introduced in the year 1974 Strengths of the industry
as a short term measure directed towards providing a 1) India enjoys benefit of having plentiful resources of
limited time period to the developed countries for raw materials. It is one of the largest producers of cotton
adjusting their textile industries in accordance with that yarn around the globe, and also there are good resources
of the developing countries. Labour intensive of fibres like polyester, silk, viscose, etc.
developing countries have comparative advantage in 2) There is wide range of cotton fibre available and has a
the production of textile related products and can rapidly developing synthetic fibre industry.
supply goods at a very low price. The basic idea behind 3) India has great competitiveness in spinning sector
this policy was to eradicate all sorts of quota system and has presence in almost all processes of the value
from the textile industry all over the world and a level chain.
playing field was established which materialised on Jan 4) Availability of highly trained manpower in both,
01, 2005. management and technical field. The country has a huge
Now, this era after MFA is looked upon by the experts as advantage due to lower wage rates.
the high growth phase of the Indian textile and apparel 5) The installed capacity of spindles in India contributes
industry. Integration of Indian industry with that of the for 24% share of the world.
whole world started from the last period of 1980s. It
improvised to the top ten leagues of textile exporting Possibilities that can be exploited
countries as well as apparel products after 1998. 1) The industry has the potential of doubling-up the
export earnings by the year 2010. The authoritarian
Trade scenario polices is helping out to enhance infrastructures of
According to the Ministry of Textiles, India's textile apparel parks, specialized textile parks, EPZs and
exports during FY09 was USD 20.9 billion (Rs 963.1 EOUs.
billion) and registered a negative growth of 5%, in 2) The Indian manufacturers and suppliers are
dollar terms, over the previous year. According to the improving design skills, which include different fabrics
provisional figures for FY09, exports of textiles and dress material according to different markets.
constituted about 11.5% of the country's total exports; 3) The industry is anticipated to generate new jobs in
however, during the same period, the exports of textiles various sectors until 2010, with the doubling of GDP &
in USD terms registered a yearly decline of over 5%. In increase in exports.
rupee terms textile exports registered a growth of 8% 4) Medical textiles, construction, packaging, home
evidently due to the depreciation of the rupee against textiles (with fine retarded fabrics) are major areas that
major foreign currencies. can propel the growth.
5) These technical textiles are an emerging industry

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 6

 Sector in focus
Textile industry(cont.)

with a potential to reach a size of USD 127 billion by share only in the Japanese import market. Thus there is
2010 and hold a great promise for Indian textiles tremendous growth potential for the industry in these
industry. markets.
6) Another interesting observation is that the share of The demand for quality Indian textile products is also
intra-EU imports is declining, and being replaced by increasing in the domestic market. According to the
extra-EU imports. This is good news for the countries Ministry of Textiles, during 2008-09, the textile
that are among the list of preferential suppliers to EU. industry was valued at over USD 52 billion and 64% of
7) The removal of international quota restrictions its production serviced the domestic demand. The
should allow India to convert its cost advantages into a domestic ready-made garments market, which was
larger share of the global market valued at USD 14 billion in 2004-05, is expected to
8) Opportunity to exploit India's large and growing grow by more than 70% to USD 24 billion during 2009-
consumer market with increasing spending power. 10. Thus the growth prospects are good for the domestic
9) Cost advantages of manufacturing textiles and industry.
garments in India derive from:
!Abundant supply of inputs at competitive prices Government initiatives
!Low-cost manpower with a range of skill levels !Technology up gradation Fund Scheme (TUFS)
from unskilled labour to fashion design !Initiatives under National Textile Policy (NTP) 2000
!Reduced transaction costs !Technology Mission on Cotton (TMC)
!Better infrastructure
10) Focus on developing markets key for growth. Recommendations
!Setting up textile SEZs
From the second half of 2008, the textile sector has been !Setting up new courses of textile engineering at IITs
adversely affected by the cut in exports as a result of the !Liberalized labour laws, tax benefits
financial crisis in the economies across the globe. !Access to high quality and cost effective manpower
Exports registered a yearly decline of over 5% in dollar !Infrastructure & connectivity
terms during FY09 primarily due to the appreciation of !Single window clearance
the rupee against the US dollar and decrease in demand !Maintaining global standards
for imported textile products in foreign markets. !Export market concentration
Though the western markets are recovering from the !Improved profit margin by in house spinning,
crisis, their recovery is slow; therefore, companies weaving and processing
should move towards the Asian markets and adopt the !Setting up Indian good quality brands
“look east policy”. The South East Asian and Japanese
markets are largely untapped and provide enormous Soumyajyoti Kundu
opportunities for the industry to grow. According to the PGDM-IB 10-12
Ministry of Textiles, Japan is one of the biggest
consumers of textiles and clothing, but India has 1.1%

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 7

 A Critical analysis
Ohio outsourcing ban

and with deteriorating geo-political stability in Af-Pak

region, US must understand that only India can become
a strong diplomatic partner for US in future from south
east region. With India still as a growing country, it
would be unfair for US to demand a matching
compensation from India for every grant provided by
it. US should also understand that India may not exactly
match with its grants in terms of short term
compensation. But, investments in India will pay off in
terms of future strategic and diplomatic tie-ups with
US.
As per the current state the entire out-sourcing act along
with the other hostile amendments like “H1B Visa fee
On August 6 of this year, Ohio Governor Ted Strickland hike” has been blocked in the Senate by the Democratic
issued an executive order, which prohibits the use of Party.
public funds for services provided offshore or
effectively putting a ban on offshore outsourcing of IT The Indian Story
services. The so called Ohio outsourcing ban provoked On the other side, the Ohio outsourcing ban would not
strong criticism from India's USD 50 billion strong IT affect the Indian IT sector much as it only prohibits the
industry as well as commerce ministry of India. The Ohio State government agency to outsource their IT
issue was highly sensitised in the wake of US-India services offshore. The entire private sector will still
trade policy forum and it was even termed as outsource and continue to take advantage of cost
discriminatory and a blatant case of protectionism. effectiveness offered by burgeoning Indian IT sector.
Although India is trying to contest the Ohio's ban on Although US accounts for 60% of the revenue
offshore outsourcing in WTO, the issue is too sensitive generated by Indian IT industry, but only a little
to be analyzed in isolation without keeping the stake of proportion of that comes from the government projects.
both the countries into consideration. The issue is far Moreover some companies like Infosys have also
more critical than simple trade issues as it has the incorporated their government-focussed US subsidiary,
potential to shape the future of “Indo-US relationship” like Infosys Public Services Inc, to operate from US as
which is still in nascent stage. The Indo-US relationship a local company. The outsourcing ban would not affect
is strategic not just for US and India but for the entire the businesses of such subsidiaries. The outsourcing
world.

US Predicament
It is quite understandable that with 10% unemployment
rate and declining popularity, the Barack Obama
administration is under pressure to do something to “Leading the Revolution: How to
sustain the economy which is facing the threat of a Thrive in Turbulent Times by Making
double-dip recession. It is also understandable when the Innovation a Way of Life”
governor of Ohio State says that the state has the right to - Gary Hamel
choose what to do with its own resources.
But with a long term strategy the bigger consideration
for US should be the “Indo-US Relationship”. With the
rise of China as a potential rival and competitor for US,

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 8

 A Critical analysis
Ohio outsourcing ban(cont.)

ban can also be seen as an opportunity for the Indian Plants with the help of various US based companies.
IT/Outsourcing industry to become more competent Thus the world is moving towards co-sourcing.It is well
and indispensable. Moreover, it will make the Indian IT understood that any country can't usher into the new era
industry diversify its customer base in other countries without collaborating and co-sourcing. A country must
and also focus on domestic markets. protect the interests of its less competent industries, but
It should also be understood that India is no longer a at the same time it must also encourage free and fair
sitting duck with a USD 200 billion Indian Nuclear international trade practices.
Power Market which the US companies are eager to Also, with increasing cross border trade, the role of
exploit. WTO has also become indispensable. It has to promote
free trade, by drawing up the rules of international trade.
The Way Ahead With new rational international trade laws coming up
In the fast globalizing world where companies are and with successful negotiation in WTO forum like
going international and trade barriers are falling, DOHA round, protectionism and trade ban will soon
outsourcing is increasingly being overtaken by a become things of the past and every country will ripe
concept called co-sourcing. Airtel, an Indian company, the benefits of international trade and selective cost
has placed orders of $3.5 billion with IBM. Boeing has advantages.
the maximum number of orders placed by Indian airline
industry. Are these not examples of reverse out- Ajit Kumar
sourcing or just co-sourcing? Today NASA is working PGDM-IB 10-12
with Indian IT companies to develop high quality
software and India is developing its Nuclear Power

“Unless a variety of opinions are laid before us, we have no opportunity of

selection but are bound to adopt the particular view which may have been
brought forward” - Herodotus

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 9

 Country in Focus
South Korea (Republic of Korea- ROK)

outlying islands which led to Korean War from 1950 to

1953. The border between the two nations is currently
the most heavily fortified in the world & Korean
Demilitarized zone serve as Buffer zone between two
countries. Both countries signed an eight-point
agreement in 2007 on issues of permanent peace, high-
level talks, economic cooperation, renewal of train
services, highway and air travel, and a joint Olympic
cheering squad.

Society & Culture

Korea's population is one of the most ethnically and
linguistically homogenous in the world & virtually all
Koreans share a common cultural and linguistic
heritage. Korean is official language. Freedom of
religion is protected under South Korea's constitution
with half the population follow no religion while other
half mainly Christianity and Buddhism. Culture has
been highly influenced by Buddhism and
Confucianism.

Weather
Introduction
South Korea tends to have a humid continental climate
South Korea is a democratic country in North East Asia
and a humid subtropical climate, and is affected by the
covering nearly half of the Korean Peninsula bordering
East Asian monsoon, with precipitation heavier in
the Sea of Japan, Yellow Sea and North Korea (also
summer during a short rainy season.
known as Democratic People's Republic of Korea
DPRK a single party state). Korean Peninsula is
Political System
sandwiched between China & Japan.
South Korea is a constitutional democracy.
Government's structure is determined by the
History
Constitution of the Republic of Korea. Government is
An independent Korean state has existed almost
Republic with powers shared between the president, the
continuously for several millennia until the 20th
legislature, and the courts.
century. In 1905, following the Russo-Japanese War,
Korea became a protectorate of imperial Japan, and in
Economy
1910 it was annexed as a colony. Korea regained its
South Korea is the fourth largest economy in Asia. It is a
independence following Japan's surrender to the United
high-income developed country, with an emerging
States in 1945. After World War II, a Republic of Korea
economy. Main industries include electronics,
(ROK) was set up in the southern half of the Korean
automobile production, chemicals, shipbuilding, steel,
Peninsula while a Communist-style government was
textiles, clothing, footwear, food processing, treatment.
installed in the north the DPRK.
South Korea is a leading producer of ships, including oil
super tankers, and oil-drilling platforms. Apart from it;
International Issues and Disputes
automobiles, construction and armaments industries
Both North and South Korea continue to officially
are main pillars of economy.
claim sovereignty over the entire peninsula and
e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 10
 Country in Focus
South Korea (Republic of Korea- ROK)(cont.)

Time Zone and structural complementarities of the two economics.

Difference Both countries have signed Double Taxation avoidance
South Korea is 3.5 Treaty, Trade Promotion & Economic & Technological
hours ahead of cooperation, Cooperation in Science & Technology and
India. last year most strategic Free trade agreement
(Comprehensive Economic Partnership Agreement
B u s i n e s s CEPA). There has been consistent growth in trade of
Opportunity both countries and ample scope to further increase their
India can benefit from co-operation with ROK in ship bilateral trade especially in space, heavy engineering,
building as ship building industry is still at the ship building, automobile, electricity generation
beginning stage in India. Lot of Korean construction nuclear technology, service industries.
companies are interested in highways and other Some of the Indian companies operating in South
infrastructure project in India. Nuclear power sector has Korea are Indian Overseas bank, Air India, TCS, Tata
lot of opportunities laid for both the countries. Indian Daewoo commercial vehicle Company, Novelis,
automobile industry is also collaborating with South Wipro, Jindal Stainless steel, L&T, and Mahindra while
Korean industry to increase their market reach and some of Korean companies in India are Samsung, LG,
technology. For example Tata-Daewoo and Mahindra- Hyundai, and POSCO.
Ssangyong. Indian IT companies can explore Korean
market to reduce their dependency from Americas and Conclusion
Europe. There is a lot of scope for cooperation in semi- South Korea is one of the important countries in Asia.
conductor, plastics, agricultural instruments, textiles, Due to several tariff and non-tariff barriers, size of trade
multimedia, ceramic products industries among the two and investment has been low in India and South Korea.
countries. But recently both countries have recognized the
potential of bilateral trade and have signed FTA. There
India-South Korea Relations is still ample of scope for co-operation in IT sector,
IndiaSouth Korea relations has been relatively limited, Science & technology, pharmaceutical industry,
since the formal establishment of the diplomatic ties broadcasting, tourism, healthcare, construction and
between the two countries in 1973. Much progress related services, Co-operation in human resource
arose during the two decades with India's new look east development, nuclear power sector.
policy & Korea looking beyond its traditional trading
partners to sustain trade and economic progress. Still Sushant Shah
the size of trade and investment is low compared to size PGDM-IB 10-12

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 11

 Business leader in focus
Muhammad Yunus, banker to the poor

Muhammad Yunus, a businessman. The Grameen bank came into operation

pioneer in the practice of on 1st October 1983. He devised an intuitive way of
microcredit lending and distributing the loans and ensuring recoveries from the
Managing Director of villagers. The system of 'Solidarity Lending', the
Grameen bank in cornerstone of microcredit is now immensely popular
Bangladesh has been a and has been adopted in nearly 43 countries. As of July
source of inspiration to 2007, Grameen bank has already issued US $6.38
many enterprising billion to 7.4 million borrowers. Today 96% of the
people around the world. borrowers are women. In due course of time Grameen
He was featured in a Bank has also diversified into several profitable and
book entitled, Lasting non-profit ventures. e.g. Grameen Motsho (Grameen
Leadership: Lessons Fisheries Foundation) and the irrigation project
from the 25 Most Grameen Krishi (Grameen Agriculture Foundation),
Influential Business People, co-authored by Grameen Trust and Grameen Fund, which runs equity
Knowledge Wharton and Nightly Business Report. projects like Grameen Software Limited, Grameen
Apart from winning the Nobel peace prize in the year CyberNet Limited, and Grameen Knitwear Limited, as
2006 at the age of 65 for his contributions in the field of well as Grameen Telecom, which has a stake in
economic and social development he has also received Grameen phone (GP), biggest private sector phone
numerous accolades with a few to name- “Presidential company in Bangladesh. GP is a joint venture enterprise
Medal of Freedom” in 2009, “the King Abdul Aziz” between Telenor and Grameen Telecom Corporation.
medal in 2007, “the Ramon Magsaysay Award”, “the Telenor, the largest telecommunications company in
World Food Prize”, “the Sydney Peace Prize”, and in Norway, owns 55.8% shares of Grameenphone,
December 2007 “the Ecuadorian Peace Prize” etc. He Grameen Telecom owns 34.2% and the remaining 10%
has also various publications under his name as- are publicly held. With the slogan “Stay Close”, the
“Banker to the Poor”, “A World Without Poverty” and project aims to provide telephony services to the entire
“Building Social Business” etc. His greatest challenge population of Bangladesh. Yunus' other ventures also
was to change the mindset of people which acted as a includes a “Struggling members program” that served
roadblock for gradual acceptance of new ideas. He beggars. His goal was to reach 50:50 gender
believed in making credit a human right so that each distributions among borrowers, which he accomplished
individual has the opportunity to take loans and in 6 years.
implement his or her ideas as well as help develop a In 1997 most rural villages in Bangladesh lacked
world where nobody suffers from poverty. He attained electricity and had only 1 phone for every 300 people.
this through a financial innovation called microcredit The Village Phone (Polli Phone) project of GP brought
which has acted as an instrument to provide small loans cell-phone ownership to 260,000 rural poor in over
to those in poverty to encourage entrepreneurship. 50,000 villages with ladies selling their neighbors
Mohammed Yunus started his career as a research access to their cell phones purchased with Grameen
assistant to the economical researches of Professor loans.
Nurul Islam and Rehman Sobhan. Later he attained his Mohammad Yunus has proved himself to be a leader
Ph.D. in economics from Vanderbilt University in who has helped in translating the visions of millions of
United States. The idea of Grameen bank came to him, people into actual businesses. His efforts of extending
when he noticed that a very small loan makes a financial support to the under-privileged people of
disproportionate difference to a poor person, so he Bangladesh have borne fruit with the people realizing
started by lending money to poor women and their independence. We at team e-globuzz wish him all
subsequently signing himself off as a guarantor for the best for his future endeavors.
them for taking loans from the bank. Yunus believed
that given the chance, the poor would repay the money Prachi Garg
with much more surety as compared to the rich PGDM-IB 10-12

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 12

 International finance
ASEAN - India FTA

indication of what further potential may exist in the

region, provided interested parties, like the government
of India, take care to expediently defuse any future
challenges. It is also true that trade with countries
outside ASEAN is more important than intra-ASEAN
trade relations for the collective growth and economic
welfare of the ASEAN countries.
Indian exporters stand to gain additional market access
in sectors such as machinery and machine parts, steel
and steel products, auto components, chemicals and
synthetic textiles and agricultural products such as
oilcakes, wheat as a result of tariff liberalization by
ASEAN. Furthermore, as there is huge scope for an
It took nearly a decade to establish stronger dialogue increase in trade in engineering and industrial goods
partnership and strengthen cooperation and cordial between India and the ASEAN countries, India has a
relations among ASEAN countries and India. unique opportunity to upgrade its products to compete
In 1991, India decided to aggressively increase trade with the likes of Japan, the EU, the US and China within
and strategic relations with South East Asian countries the ASEAN market.
as part of its 'Look East' policy. The aim was to build
upon historical and cultural ties to expand markets, Will the India-ASEAN FTA help India step up its
counter Chinese influence in the region and improve trade and make its presence stronger within the
India's standing as a regional power. This 'Look East' ASEAN region?
policy has allowed India to grow economically and The answer is yes.
strategically. With a combined population of 1.8 billion and GDP of
As a part of their strategy, India signed a free trade US$2.75 trillion, the ASEAN-India FTA is one of the
agreement (FTA) with ASEAN in August 2009. The largest in the world. It offers huge growth opportunities
agreement came into effect in January 2010, and, under to both ASEAN and India. Currently, India's share in
the terms of this FTA, bilateral trade is expected to reach ASEAN imports is 2.1 per cent against 13 per cent for
$50 billion by 2010. In 2009, trade between the two was China. Given the China-ASEAN FTA, which makes
around $40 billion. This means that ASEAN is already Chinese goods cheaper in the ASEAN market, India
India's fourth largest trading partner after the EU, the needed this FTA with ASEAN to maintain this trade
US and China. share.
India will be implementing this FTA in goods with two But if the FTA manages to extend not only to goods but
more ASEAN countries (Indonesia and Cambodia) by also services and investment, India stands to achieve
slashing duties on variety of products including even greater gains. According to the Federation of
seafood, chemicals, apparel and tyres. In return, Indian Chamber of Commerce and Industry, the
Cambodia and Indonesia will slash duties on hundreds ASEAN-India FTA will provide greater market access
of Indian goods. Currently, the India-ASEAN FTA is to Indian professionals and service providers. The
functional with four members (Singapore, Thailand, ASEAN region is a net importer of services and India's
Malaysia and Vietnam). The remaining four (Laos, competitive advantages in terms of cost and expertise in
Philippines, Brunei and Myanmar) will take more time the range of areas will be very beneficial by such an
to become complete members. increase in access.
India-ASEAN potential Affect of India-ASEAN FTA on unorganized sector
Intra-ASEAN trade stands at US$376.2 billion in 2009. Normally it is believed that an FTA will adversely affect
These figures are impressive, and should provide an

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 13

 International finance
ASEAN - India FTA(cont.)

the unorganized sectors, especially the agricultural into India through ASEAN as the China-ASEAN FTA is
sectors, as the domestic market will be flooded with also operational. The Indian domestic industry must be
cheap imports. This view holds true for India, because prepared to face the challenge of cheap imports from
of low productivity in these areas. The Indian ASEAN flooding the Indian market. Even without this
government must meet this challenge by providing all FTA, India faces large trade deficits with Indonesia and
necessary and reasonable support to the various other ASEAN countries.
stakeholders in the trade agreement, especially the To sum it up, the ASEAN-India FTA must be considered
unorganized sectors like agriculture, so that their to be a positive development. Both ASEAN and India
production efficiency is brought in line with those of the need each other. For ASEAN, India's working age
other ASEAN countries. Measures should be taken by population is growing while the working age population
the governmental and non-governmental other Asian economies, such as China, Korea, and
organizations, along with self-governed bodies of Japan, is declining. India is also a world leader in
farmers, to strengthen the competitiveness of India's information technology and an attractive destination for
agricultural sector. FDI. For India, an FTA will drive existing economic
reforms, assisting India to establish itself in Asia as a
Will the ASEAN-India FTA have any negative growing economic power.
impacts?
There are concerns about FTA adversely affecting Jatin Singal
India's trade balance with some of the ASEAN PGDM-IB 10-12
countries. Countries like China will route their products

“When I have one week to solve a seemingly impossible problem I spend 6 days
defining the problem then, the solution becomes obvious.” - Albert Einstein

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 14

 International marketing
The volkswagen story

It was the brainchild of Adolf Hitler and fine look at different features of the car, get quotes, and
engineering of Ferdinand Porsche that Volkswagen or find retail locations and click-to-call. Besides this it
“The People's car” was first rolled out in 1936. Still, has also been launching iPhone applications as well as
after so many years it is one the of few automobile dabbling with mobile advertising. The freely
brands in the world that evoke this kind of reverence. downloadable Volkswagen Polo challenge, Real
One of the largest car manufacturers, the Volkswagen Racing GTI and Scirocco R 24H Challenge games
AG group owns and controls most of the renowned have helped generate customer awareness and
automobile manufacturers such as Audi, Bentley interest about their cars.
Motors, Bugatti Automobiles, Automobili
Lamborghini and Skoda Motors among others. Viral Marketing
Volkswagen commands an almost rabid fan base who One of the notable mentions are the viral videos like
swears by its precision engineering, innovative piano stairs, fast lane, etc. Which have been massive
marketing strategies and excellent after-sales support. hits on cyber space. Apart from this it have series of
Moreover all the brands under the Volkswagen group short online films on the International website which
have retained their respective differentiated brand attempts to make the customers aware of the salient
image and continue to operate independently. In fact the features of their new offerings. This is done through 30-
proliferation of the brand is of such level that every fifth second humorous clips which showcase the features of
car in Europe that rolls out of the assembly line is from the vehicle in the end.
the Volkswagen stables.
Innovative Marketing
Point of Differentiation Volkswagen came up with talking newspaper ad in
Volkswagen's points of differentiation lie in the way it India which created waves across the nation. With this
constantly changes its strategies; be it engineering or campaign it aimed to get mindshare of millions of
marketing. It was one of the first manufacturers who Indian customers by building brand image of
introduced Mc-Pherson struts when its competitors Volkswagen and launching their new offering 'Vento'.
were using torsion bars. Also it has been doing creative Besides they also tried Roadblock Advertising in Print
marketing of its cars throughout the decades. Media as a brand building exercise. This has definitely
helped them in generating showroom traffic and
Double Marketing Strategy increase buyer consideration.
This means dueling product/service benefits i.e running
multiple campaigns on different messages concurrently Market Segmentation
and Volkswagen used it beautifully by launching Volkswagen has been experimenting with cost
campaigns to highlight speed as well as safety features leadership strategy for emerging markets. It intends to
of their different models Jetta and GTI at same time. By strengthen its presence in countries like Indonesia,
doing this it catered to different segments of audience India China etc. It has collaborated with Ogilvy and
and also refrained from positioning its brand in a single Mather Indonesia for an integrated marketing plan
light. These campaigns helped them to push their regarding launching VW products. By doing this the
conflicting but core messages. group aims to increase its presence in Indonesia through
the upcoming Indonesian motor show and boost sales of
Mobile Marketing the existing offerings.
Volkswagen has also embraced Mobile Channel quite
well .It managed to increase its reach by launching its Emotional Branding
wap site (http://m.vw.com) and thus entering the mobile Volkswagen also aims to further bolster its presence in
space. On the site, consumers can search for deals, the European market by filling gaps in its product line.

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 15

 International marketing
The volkswagen story(cont.)

For decades Volkswagen did not have a proper sports has traditionally been associated with the mass market.
coupé model to satiate the needs of the European However in future company is also attempting to make
customers. The sports coupé, Audi TT, was the closest a stronger presence into luxury-car segment which is
that came to cater to the market left vacant by the dominated by established brands like Mercedes and
demise of famous Coraddo. BMW. Its first venture into this market segment was
It also unveiled Iroc at the Berlin festival. Iroc is the with the new Passat V6 Syncro, which was out of the
upgraded version of the Sirocco which was well price range of the typical VW buyer. Even though VW
received in European as well as U.S. markets. With owns Audi, Bentley, and Lamborghini, amongst other
Iroc, Volkswagen intended to reclaim its share of the brands but it is difficult to stretch their brand upwards,
sports coupé market. This fulfilled Volkswagen's need when consumer perceptions still associate the VW-
for more emotional brands. The move was branded cars with smaller and less prestigious vehicles.
Volkswagen's strategy to increase sales by taking Such brand associations do not appeal to customers of
advantage of the emotional attachment its popular BMW, Mercedes. Hence VW will need to do a
yesteryear models had among a niche segment of car considerable amount of consumer perception
buyers. management and distributor education to successfully
bring any of its VW branded models into that league.
Future Sustainable Marketing Lastly, all these marketing practices in the international
It has unveiled a new global image and marketing market, acquisition plans and strategies strongly
campaign for the VW passenger-car brand called suggest the aggressive expansion plans of Volkswagen.
“Think Blue”. This campaign highlights the brand's Clearly Volkswagen attempts to wrest away the title of
focus on building cars that are more fuel efficient and largest automobile manufacturer from Toyota by 2018.
environmentally friendly than previous models. Thus Rustling up feathers in the competitors' camp, the
"Think Small has become Think Blue" and with this Volkswagen AG group certainly seems poised to be a
company wants to highlight corporate mindset of market leader in the years to come.
Volkswagen brand's ecologically sustainable activities.
They want to prove that Volkswagen leads the way in Shinu N. U.
providing efficient and sustainable mobility for PGDM-IB 10-12
everyone.
Challenges
Volkswagen is a famous international brand name that

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 16

Talent Management- Maintaining continuous flow in
Talent Pipeline
A cross boundary Challenge
A guest article by anil kumar sinha

The rapid pace at which business and industry has

grown world over has brought to surface issues which
till very recently were not at the forefront. Finance
always was, Markets always were and in most cases "... all too often, a successful
technology did attract the attention of business planners new business model becomes
and those owning and running it. Typically people and the business model for
leadership related aspects found mention more as a lip companies not creative enough
service in any DPR (Detailed Project Report). The last to invent their own." -
decade has witnessed a sea change and Leadership ANONYMOUS
Development or Talent Management is no more an
option. It has come to acquire the status of a key success
factor.

A survey of the Fortune 500 Companies in 2009

Companies in West have experienced that this approach
revealed that more than 40% of the time of the Business
has led to several advantages. Firstly, there is
Leaders is devoted to nurturing and developing people.
tremendous synergy between the requirements of the
This in the current scenario and the one which is likely
business and what gets taught in B-schools. Secondly, it
to emerge in their opinion is key investment in future.
provides a very structured foundation both for the
industry as well as the students to identify and work on
The challenge is varied across different regions and
what is mutually best fit at the end of a reasonably
economies. For instance, in a fast growing economy
decent association and on some rationale. Moreover,
like India , where there is still a strong base , “make or
instruments like competency based selection further
buy “ i.e. growing talent within or hiring at lateral level
help in this process.
still exists . But in a developed economy like US or
Germany there are severe limitations on the “Buy"
The base or foundation having got created and once a
option for sheer reason that either this option is not
person becomes a part of a Company like Emerson Inc.,
available or if available a large number of organizations
he becomes a part and parcel of its Talent Development
cannot afford it. Issues like loyalty and how long this
Process which today extends far beyond mere
category of talent would remain are also an issue.
'Competencies getting Identified'. The focus is more on
the Development aspects. Individual Development
Consequently identifying, on boarding of talent and
Plans have a stress on Projects, development
continuous efforts at developing their competencies
assignments and secondments rather than inputs
and honing their skills is an organizational issue and not
through classroom or training alone. The latter though
just KRA of someone in the HR department.
does form a part of the IDP but is more as a supplement
Companies like GE believe in the gospel 'catch em
to the former. An important aspect is the Top
young'. The campus initiative is not restricted to a
Management attention which this is getting, who
presentation and selection process. It is a year long and
typically will have a structured review of the outcome
continuous exercise characterized by frequent
of all these initiatives and how does it fit in with the
exchanges. For instance, students getting attached in
overall current future requirements of the organization
Projects in GE units and the experts from GE gets
in terms of the Succession Plan for the key and critical
actually involved in teaching the students in their
positions within the organization. A recent trend also is
respective areas of expertise. Actually it begins even
t h at wh i le t h e o rgan i zat i o n s d o o wn u p th e
earlier with Universities and Management schools
responsibility for development, individuals concerned
taking input from the industry on an ongoing basis
are equally liable for their development. If one does not
while developing their course and curriculum, a trend
take the process and various steps in it seriously it is
which is yet to strike roots in the Indian context.
made very clear by organizations that such individuals
e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 17
Talent Management- Maintaining continuous flow in
Talent Pipeline
A cross boundary Challenge
A guest article by anil kumar sinha(cont.)

should not aspire for higher responsibilities or role and they could actually start making contribution, their time
leadership positions. There are some companies where to pack up would be knocking. MNCs did realize this
this becomes reason for a non interested person being and took steps to indigenize senior Managerial
shown the exit door. Because like organizations, positions in these countries. However, today things
individuals who do not show zeal for their growth and have made a complete turnaround with Indian or
development, lose relevance. Chinese or Eastern European expats working in
regional offices or headquarters of MNCs. Not only
A look at the Performance Appraisal document and the these expats come relatively cheap but bring with them
key result areas of any senior manager of GE further aspects of work culture which has brought in new
strengthens the importance which is attached to Talent energy within these Organization. Testimony to this is
Development. One of the important aspects on which a also borne out by the critical and key positions occupied
manager is measured is the initiatives taken by him to by this category in the Fortune 500 Companies. HUL
develop a successor for his position and the results the Indian arm of Unilever is known for the talent it
thereof. More and more companies are also investing in provides at the leadership level to its parent body.
developing the mentoring and coaching skills of
managers thereby providing them with tools and Businesses and Economies which have come into fore
abilities to be effective on these aspects of their role. later on the time scale have the advantage of not
reinventing the wheel. The learning curve would be
At the outset, the “buy” aspect of this issue had been to much shorter. But one must not be oblivious of the fact
some extent been discounted. However, recruitment of that a Talent Management Program which is successful
experienced talent does happen in large measure even in a company may not be the same in another company.
while internal initiatives are getting actioned. In this There are some contextual factors which would need to
respect also there are new trends. Expat assignment in considered and factored in. A long term focus and top
days gone by would typically mean a “White Skinned” management support are vital for its success. Also
manager from a company coming to a country like India critical is the fact that there should not be any gap
or China with a very hefty pay packet and several perks between preaching and practicing.
to overcome “ hardships” in working in a these
countries. Such managers would come on a time bound Mr. Anil Kumar Sinha
2-3 year assignment, lot of times a part of their President, Human Resource Dept.
development plan but more often than not by the time HINDALCO

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 18

 ALUMNI Speak
Mr. Harshdeep singh bhatia, commodity trader at stemcor & mr.
Manish gadia, vice president at hsbc

cases on arbitration especially Shipping and

Mr.Harshdeep Singh Bhatia is currently International Terms of Trade. They definitely help.
Commodity Trader at Stemcor, India, based in SIMSR has one of the best libraries, make full use of
Mumbai. He is a 2005 batch Alumnus of PGDM same. Enjoy every moment and make friends for life..!!
(IB). We indicate below his responses to our While choosing your job, avoid a myopic view and do
questions not just look for salary. It feels great for a couple of
months to be regarded as the "BEST PACKAGE"
picker but that lasts till you are in college. Rather if you
Q1. What has your experience been like since you love the job and are good at it...money follows.
left college?
It has been a fantastic journey so far, although I would
like to believe it's just a start...there is loads to learn and
improve upon. I have learnt so many new things in
terms of business, products, and cultures. It has given
Mr. Manish Gadia is currently Assistant Vice
me opportunities to travel across the world, make new
President at HSBC based in Mumbai .He is also a
friends, have new teachers who "walk the talk" and
2005 batch Alumnus. The same questions were
learn about the world from them. At the cost of
posed to him.
sounding hackneyed, everyday is a new learning...!!

Q2. To what extent does your learning as an IB Q1. What has your experience been like since you
student in the two years that you spent in SIMSR, left college?
come handy in your job? The experience was initially a big struggle as I switched
2 years in SIMSR teaches you lots in terms of excellent industry from retail to finance after which I came into
case studies and they help in knowing the best practices the groove. I got used to the work and the effort it
across the world. The important thing for a student is to requires. An MBA served as ammunition to face the
find its relevance in the existing world and every struggle and gave me a platform to excel.
student/budding corporate has to develop his own way
for connecting with international practices in the Indian Q2. To what extent does your learning as an IB
context. student in the two years that you spent in SIMSR ,
It is very important that one has the basics right come handy in your job?
especially for IB rules/UCP terms/Shipping terms if Most of the stuff which is taught at MBA can really be
one is looking for career in international trade. It is like applied in the practical scenario, only the
cricket, no matter how much of net practice you may interpretations differ. Here is one of the experiences
have, every match is different and what helps you in is where the IB course helped me. "I am proud of being a
how strong you are with "BASICS" which always stay member of the team which won the “HSBC Dominate
the same, only the execution is improvised, based on International Business challenge” held in Canada. The
situations. challenge was to provide an innovative proposal to
grow cross border business. Team leaders of nine global
Q3. What advice do you have for current IB students finalists were called to Canada for the final
at SIMSR? presentation. The most lucrative and creative team
One of the best ways to learn is to have forum proposal to increase cross-border revenue won the
discussions and work on case studies in a group. Grand Prize of USD 10000 cash and a chance to
Another thing which we did not do while in B school but commercially implement the idea. Criteria of judgment
which helped me later was reading books on Legal were Strategic Alignment with Global HSBC Strategy,

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 19

 ALUMNI Speak
Mr. Harshdeep singh bhatia, commodity trader at stemcor & mr.
Manish gadia, vice president at hsbc(cont.)

Financial Impact to the Group, Timeframe to bring the power point presentation. I interacted with HSBC
idea into commercial application, Legal / Regulatory / global relationship managers of regional hubs like
Compliance / Technical Concerns and Creativity & Singapore, Hong Kong and gained positive feedback in
Innovation. Our submission of launching an support of launch of “International Channel Finance
“International Channel Finance product” was adjudged Product”. The team leader lauded my contribution
joint winner along with an entry from Bangladesh. towards the winning the contest. ""

In domestic Channel Finance, we have an arrangement Q3. What advice do you have for current IB students
with domestic companies for funding the materials to at SIMSR?
distributors located within the country, in the proposed Do not try to switch industries unless really required
product we would fund the supplies to distributors else you will lose valuable years. Be very sure about
located out of country. Being an International Business what you want to do. Analyse both the monetary &
graduate, my team leader asked me to take charge of passion levels before selecting an Industry for a career.
preparation of the contest which included the Also focus on extracurricular. Corporate life may be
responsibility of getting in touch with current customer mentally & physically draining. Try to unwind at
base (Sony, Tata motors, Nokia, Hyundai, and Suzuki) regular intervals.
and explore the feasibility of such a product, revenue
projection analysis (assets to increase from current US Namrata Mishra
$ 300 M to US $ 600 M in the very first year), defining PGDM-IB 10-12
credit parameters and the actual launch. I was also
responsible for preparing the draft and final cut of the

“You have to understand what it is that you are better at than anybody else
and mercilessly focus your efforts on it.” - Intel CEO

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 20

Debate on “IS china an opportunity or threat to other
emerging economies?”

factories that make car engines, food processing

For machinery and air conditioners. China has the most
China is more of an opportunity than a threat to other advanced biotech program after the United States. It has
emerging economies, the main ones being India, Brazil 20,000 people employed at 200 labs devoted to biotech
and Russia. What makes me say this is that, China with research and spends about $300 million a year on it. The
its might has been able to pave the way for the other Asus Factory in Suzhoum near Shanghai, which makes
emerging economies. It is a learning ground for them, laptops and desktops for Dell and cell phones and other
an almost live case study. With the world's largest electronic products, is a square kilometre in area. In
population, it has been able to achieve tremendous 2009, the world's three largest global banks, measured
growth, significant enough to attract attention. With its by market capitalization, were all Chinese. In 2006,
rising gold reserves and the ongoing currency war with China didn't have a single bank in the world's top 20.
the developed economies, it shows what a so called Foreign companies doing business in China are
'emerging economy' can do to the world. generally required to form joint ventures with Chinese
To begin with, the infrastructure in China is inspiring. companies instead of forming wholly owned
The cities like Beijing, Shanghai, and Shenzhen etc subsidiaries. The mix of cheap labour and stable prices
have skyscrapers which compete with some of the best and stable politics is what foreign companies find
cities in US. Spending on infrastructure has been appealing. A Wal-Mart executive told the Washington
increasing at rate of around 25 percent a year in recent Post, “There might be places in other parts of the world
times. There is an old Chinese saying that goes: “If you where you can get inexpensive labour. If we have to
want to be rich, you must first build roads”. A lot of look at a country that's not politically stable, you might
money is spent on infrastructure in China including the not get your order on time. If you deal with a country
building of new bridges, roads, dams, railroads, power where the currency fluctuates daily, there is a lot of risk.
plants, port facilities and airports all around the country. China happens to have the right mix.”
No other country spends more and devotes as much It is now up to the other emerging economies to look at
resources to infrastructure projects as China. The their strengths and tap the opportunities coming their
Chinese sometimes achieve near-miraculous results by way just as China did.
mobilizing massive labour forces. Transportation is a
major factor in China's national economy. Riddhi Todi
By 2030 China wants to increase the amount of nuclear- PGDM 09-11
power-produced electricity 20-fold to 120 to 160
million kilowatts. China is the only place in the world
where nuclear power generation is regarded as a major Against
growth industry. Zhongguancun, in the Haidian
districts in northwest Beijing, is sometimes called the United States President Barack Obama's chief
Silicon Valley of China. It is the home of many Internet economic advisor Larence H. Summers, recently,
and computer firms as well as 40 universities and 138 mentioned that the growth model of India was people-
scientific institutions and many of China's 810,000 centric known as 'Mumbai Consensus' and that of China
research scientists and engineers. Manufacturing was export oriented known as 'Beijing consensus'. (On
sophistication is rising all the time. China is no longer the lines of how specific economic policies promoted
just a producer of toys, textiles and shows. It has made by IMF and World Bank were described as Washington
the leap into high-end manufacturing. Consensus). The average GDP growth of China has
Telecommunications companies make electronic been over 9 % and 300 million people were lifted out of
switches that route phones calls and Internet traffic poverty over the last two decades. As mentioned above,
through telecommunications networks. There are also China's growth has largely been export oriented.

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 21

Debate on “IS china an opportunity or threat to other
emerging economies?”(cont.)
Domestic consumption has been relatively low. Its communist power dominating the world affairs is not
current account surplus has been a real strength of its the best situation one can have. It lacks the maturity a
economy. Such an astounding and fast paced growth nation needs to have to be the big brother of the world.
has given its powers (financial and due to that military) One might blame the U.S. for misusing its powers at
anyone would envy. various instances (read Iraq) but one just cannot deny
China has been at the receiving end of quite some that it has given a lot of international aid and support.
accusations, and most of them being true, with respect Chinese products and services, though of low cost, are
to its currency and its devaluation. China has kept its also low in terms of quality. A survey carried out by
currency rate artificially undervalued giving it an unfair Harvard Business Review revealed that Chinese
advantage whereby it boosts exports and limits consumers in China's urban centers themselves have a
imports. And they have reaped the advantages of this by low opinion about “Made in China” goods. These goods
having a current account surplus (Exports exceeding have been extensively exported (or say dumped) to
imports) but at the same time due to tight controlling of other emerging markets where they are in demand
its economy it has avoided its side-effects such as because of their low cost, affecting existing market
inflation. Due to a current account surplus, a large players revenues, but at the same time they are low in
inflow of dollars takes place in the economy. In any quality which has its own set of implications.
other emerging market such as India, it has a two-fold China has a huge population with a growing per capita
effect. One, the domestic currency should appreciate income and thus a dream for most brands to enter the
making exports relatively less profitable. Secondly, country. This is the reason, that despite of its various
because the domestic currency appreciates, the central restrictive policy and regulations, companies are
bank intervenes and purchases these dollars releasing willing to enter the nation.
more of domestic currency in the market resulting in Now that China is producing a whole range of products,
inflation. But China due to a controlled exchange rate many see it as a market not only for selling finished
ends up avoiding these economic problems and gains products but also raw materials. Its cheap labor is one
an advantage. Thus, when it trades with other emerging another reason that companies see as an opportunity to
markets whose currency valuation is market-based and set up manufacturing units in China to save cost.
not controlled to a great extent, terms of trade lie Also a bipolar or multi-polar world, wherein more than
heavily in favour of China one power dominates, unlike in the past wherein U.S.
China, on the other hand, has not been responsible in was the one calling the shots, could be envisaged-
using its financial and military muscle. It has been provided China has a change of attitude. The IMF &
supporting Pakistan's nuclear program and supplying it WTO needs to reassess its role in dealing with China
with arms so as to counter the dominance of India in the being more assertive and pressurizing China to tackle
region in spite of knowing the instability of the region. the currency devaluation and other situations of global
China has also been controlling a part of Jammu and importance.
Kashmir known as the Aksai Chin in spite of that being To conclude, I would like to quote Uncle Ben, a
a part of India. Its claim of Arunachal Pradesh has not character from the movie Spiderman, “With great
helped to the cause and betterment of relations between powers comes great responsibility”. It is how China
India and itself causing further instability. This has handles these responsibilities that will determine
given rise to the Japan-India-South Korea axis in whether it can be an opportunity for others or threat to
opposition to the China-Pakistan-North Korea axis. All other emerging and developed nations.
signs pointing to growing discontent among the
countries involved. Parth Shah
Many, in future, see China as the power replacing the MMS 10-12
U.S. and its dominance. But does one want it? A

e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 22

 International news

VEDANTA CAIRNS Tie UP Tata-corus deal

Vedanta, a leading diversified mining company which Tata Steel acquired the Europe`s 2nd largest steel giant -
is in news with the ongoing controversy over bauxite Corus 3 years back and became the 5th largest steel
mining in Orissa, is once again in headlines with producer in the world. TSL`s main objectives behind
takeover of Cairns India. Vedanta confirmed recently this acquisition were to create Greenfield capacities in
that it is going to acquire 51-60 percent stake in Cairn India and abroad, foster technology transfer and cross-
India, fourth largest oil company in India for which it is fertilization of R&D capabilities, expand its presence
paying close to $9.6 billion leaving Edinburgh based globally and exploit a powerful combination of high
Cairn Energy with up to 10 percent stake. The purchase quality developed and low cost high growth markets.
is going to be split between Vedanta Resources (40 On 27th Sep 2010, Tata Steel`s European subsidiary
percent) and Sesa Goa, an iron ore producer (20 Corus`s name has changed to Tata Steel Europe. Tata
percent). It is reported that Vedanta is paying Rs.405 Steel Europe has been focused on increasing cost
($8.66) per share of Cairn India which includes Rs.50 a savings and raw material self-sufficiency, and working
share non-compete fee in exchange for the British oil with customers to develop tailor-made, value-added
company agreeing not to engage in any oil and gas
solutions. Tata Steel is paring costs by rationalising
exploration or extraction in India for three years. The
operations in Europe and restructuring interest
controversial part here is that none of the minority
shareholders will have a share in it. However, the payments.
acquisition must still be approved by the Indian The world economy has experienced an economic
government which have some reservations about slowdown in the last 3 years which has equally hit the
allowing a company with no track record in energy to steel industry. There was a huge drop in the steel
take over such a crucial energy asset which is India's production and capacity utilisation which resulted in
largest onshore oilfield located in Rajasthan. lower profits. It led the companies to make substantial
Government is not approving the deal citing serious job reductions to reduce costs and strengthen their
issues of conduct and corporate governance involved in competitiveness.
the take up. It is also reported that state-owned ONGC, The current challenges faced by Tata Steel Europe
which is a partner in the Rajasthan development may includes reserving cash for future plans and growth,
have the right of first refusal over any share sale. Indian restructuring the European operations to make them
oil companies are also considering a joint counter-offer competitive globally and providing raw material
to Cairn. In spite of the controversies, Vedanta hopes security in terms of iron ore ownership and coal mines
that the deal will be completed by the first quarter of to European operations. Also, increasing stringent
2011. If the deal goes ahead, Vedanta would be only the European environmental requirements and stricter CO2
second diversified mining group in the world after emission allowances pose a major threat to the long-
Anglo-Australian BHP Billiton to move in to energy term sustainability of the steel-making and steel-
production. consuming industries in Europe. Will programmes like
“weathering the storm” and “fit for future” ensure a
Sujitha V. bright future of Tata Steel Europe????
PGDM-IB 10-12
Manvinder Sodhi
PGDM-IB 10-12

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 Did you know?

National Trade Data Bank (NTDB) unsolicited orders. Export assistance is available to
The U.S. Government's most comprehensive source of companies with this classification.
international trade data and export promotion
information. Types of information on the NTDB Real Exchange Rate
include: international market research, export It is a measure of the nominal exchange rate that has
opportunities; indices of foreign and domestic been adjusted for inflation differentials since an
companies; how-to market guides; reports on arbitrarily defined base period.
demographic, political, and socio-economic conditions
for hundreds of countries; and much more. Keiretsu
Collaborative groups of vertically and horizontally
Middle Market integrated firms with extensive share cross-holdings
A market segment generally represented by financing with a major Japanese bank or corporation at the center.
under $2 million. In leasing, this sector is dominated by
single investor leases. Market Maker
A financial institution that quotes bid (buy) and offer
Downstream Dumping (sell) prices.
It is a type of dumping in which the primary producer
first sells its product to another domestic producer at Zaibatsu
below fair value or cost. The second producer then It is a Large family-owned conglomerates that
further processes the product and exports it to another controlled much of the Japanese economy prior to
country at a lower than normal cost. World War II. The four Zaibatsus (Big Four) are
Mitsubishi, Mitsui, Yasuda, and Sumitomo whose roots
Pan-Arab Free Trade Area (PAN-ARAB) date back to the Japanese Edo period.
It is an agreement to preserve the economic interests of
Arab States, as well as develop economic and trade Orderly Marketing Agreements
relations among Arab States and the outside world. Agreements between two or more governments to hold
back the growth of trade for certain products by limiting
New-to-export (NTE) exports and imposing import quotas.
It is the name of the circumstances of a company that
either engages in export activities for the first time, Garima Bharadwaj
engages in exportation for first time in twenty-four PGDM 09-11
months, or has only exported to because of prior

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