Beacon Management Review 2012
Beacon Management Review 2012
Established in 1978, SIBM Pune is in its 34th year of service to the student community. It remains the flagship brand of symbiosis and is recognized as one of the best business schools in India. Life at SIBM Pune revolves around the perpetual process of learning and unlearning. The breathtaking location and brilliant infrastructure act as catalysts giving us an unfair advantage in this process. Academics at SIBM Pune are rigorous to say the least because we believe that a framework for questioning the current management practices can be built on a foundation of strong academics. The pedagogy at SIBM Pune is built around the principles of experienced teachers, open ended teaching, and the nurturing of argument. SIBM Pune strongly believes in the all-round development of its students and has arguably the best sports complex of any B school in the country. All in all, the brilliance of students provoked by the best of faculty and aided by an awe inspiring campus results in an MBA experience worth dying for.
Niket Khaitan
Jaikishore Sharma
Ketan Agarwal
Krupesh Shevgaonkar
Mridula Muraleedharan
Arun Prateek K
Bhavik Bhathgara
Manisha Rana
Snehal Narang
Vasudha Tripathi
CONTRIBUTORS
Aanshul Agarawal
Anant Jindal
Ankit Deshpande
Ankit Srivastava
Bharath Harish
Dhruv Talwar
Eunice Mudialba
Manisha Rana
Nihal Satam
Prateek Batra
Rachit Baxi
Ronald Browne
Sagar Rachh
Snehal Narang
Srumita Narzary
Sudhanshu Shekhar
Supriya M S
Surabhi Singhal
DIRECTORS NOTE
Dear Reader, I take great pleasure in introducing you to the second issue of Beacon Management Review, an initiative taken up by the students of Symbiosis Institute of Business Management, Pune. Beacon Management Review is an attempt at showcasing SIBM students interest in understanding the business environment and that in research. This issue is a compilation of the best management and research based articles written by SIBM Pune students in the academic year 2011-12. These articles cover a wide range of topics ranging from strategy and finance to human resource and marketing management, stressing the diversity of the business environment today. At SIBM Pune, we believe that research and management education are complementary activities. People with insight and initiative are invariably more valuable to recruiters. This publication is another initiative of Research and Scholastic Development Team, SIBM Pune for showcasing the zeal for research among the students of our institute. I appreciate the efforts of Research and Scholastic Development Team in getting live projects from the industry for students to work on. They have worked on live projects for Godfrey Phillips India, Mother Dairy, Mahindra Composites Ltd., Credit Analysis of Banks and BVG Cleantech this academic year. Neil Armstrong said, Research is creating new knowledge. But this is not necessarily true. Knowledge already exists in countless domains and forms, collecting relevant knowledge and interpreting it to reach meaningful conclusions is the real art. In its second year, Beacon Management Review has tried to improve the degree of detail of its articles and their treatment of the subject matter. I hope you will find the experience of reading it as enjoyable and enlightening as the students found the process of creating it.
Abstract
The objective of this research is to look at one of the most talked about areas of professional world, work-life balance with an angle of relationship. Job and relationship affect each other. The research aims to look at the trade-off between career orientation and relationship progression. Work life balance is increasingly becoming part of employee value proposition for most of the organizations. But how well can this be addressed when the emotional angle of relationship is factored in is what we aim to analyse through this study.
Introduction
Work-life balance has always been a concern of those interested in the quality of working life and its relation to broader quality of life. Especially for todays Generation Y, relationship in terms of marriage or before marriage, impacts the work and the same gets reflected positively or negatively on organisations performance. The pressure of work for professionals has been intensifying in recent decades. Factors such as the advancement in information technology, the need for being more responsive to situations, the importance attached to quality of customer service, its implication for constant availability and the pace of change with its resultant upheavals and adjustments all demand time and can be sources of pressure. The evidence from the UK, which has the longest working hours in Europe, shows while the average number of hours worked has been steady for the past twenty years, the proportion of working more than 48 hours in a week has increased in the past decade. 1
Research Methodology
To understand the impact of relationships on work and career and vice versa, a primary survey was 3
80 70 60 50 40 30
Percentage
Graph 1: Relationship - Age Group Connect The age group of 21-25 is crucial in the terms that this marks the entry of large chunk of professionals in the industry, mostly in the services sector. In the growth phase of their career, it becomes crucial how emotionally intelligent an individual is and how well he/she maintains the balance between his/her job and relationship. The average working hours for the professionals was around 8.5-9 hours per day. The amount of time that they spent on direct interaction (via calls, messages, chats etc.) and indirect interaction (thinking about the partner) with their partner was on an average 4.5 hours. The higher end of the distribution of hours spentwas attributed to those in long distance relationship. Table 1 shows the number of leaves taken by the professionals in a year for spending exclusive time with their partner.
On an average the number of leaves in a year allotted to the employees range from 25 to 30. More than 50% of the professionals in a relationship spend a major part of those leaves with their partner. There is an emotional gap which comes about because of the work priority and pressure. To fill that gap becomes the inherent interest when professionals take leave. There are instances when an individual needs to take a career or a job related decision, for example, the decision to relocate and taking up a higher post or a better job responsibility or profile. In such scenarios, whether the individual considers the relationship or career on priority impacts the progress of both. The survey shows that about 57% of the professionals in relationship considered relationship on higher priority, whereas 23% didnt consider relationship for making career decisions. Around 20% considered relationship on second priority while making such decisions weighing their options but with higher weightage to career. Work pressure affects relationship. About 40% of the professionals in relationship felt that work related pressure affected their relationship to a large or serious extent. Another 38% felt that it affected their relationship to a certain extent. The genesis of why so many relationships fail comes out of this trade-off with respect to work. Gen Y employees have an inherent focus on career progression and learning. When relationship becomes a part of life, it overlaps with the work and career aspirations. A lot of exasperation comes when a professional is looking for both intellectual and emotional satisfaction, but a healthy mix of both in reality is a far cry. Graph 2: Effect of Work Pressure on Relationship NO (it dosent affect) 38% The impact of relationship on job can be measured in terms of the variation in work efficiency. About 58% of the professionals reported a reduction in efficiency of more than 10% on account of their relationship, whereas 10% reported reduction in efficiency by a small degree. Only 28% felt that relationship doesnt affect their work efficiency.
YES (to a serious extent) YES (to a large 19% extent) 20%
19%
In monetary terms, the cumulative impact of this reduction in efficiency would amount to a significant loss factor for organisations. Emotional presence at workplace is more important than physical and mental presence. This is a grey area which is not directly addressed by organizations. Efficiency translates into revenue generation and if efficiency gets affected, the top-line and eventually the bottom-line gets affected.
Conclusion
The research shows that relationship as a factor is very significant in work-life balance. This is an area which is not directly addressed but has a huge potential to improve the organizational performance if addressed rationally. In this regard, an informal culture which drives professionals to openly talk about their relationships with peers could help to improve the emotional health of the organization. Any relationship calls for a high degree of maturity and understanding. Sometimes a third party view helps an individual to understand the perspective of his/her partner. With the development of generations, the tendency has been to turn inwards. Thus, we are at a juncture where we need to revisit the very characteristic of the younger generation of being selforiented. What we are looking at is more of an empathetic environment, at work in particular, or else the third level of Maslows hierarchy of needs i.e. social needs will ever prevent us from moving into the realm of esteem and self-actualization!
References
[1.] David E Guest (2001), Perspectives on the Study of Work-Life Balance. ENOP Symposium, Paris. [2.] Timothy A. Judge and Remus Ilies (2004), Affect and Job Satisfaction: A Study of Their Relationship at Work and at Home, Journal of Applied Psychology, 89, 4, 661-673 [3.] Nancy R. Lockwood (2003), Work/Life Balance Challenges and Solutions, Society of Human Resource Management Research
Algorithmic Trading
- Eunice Deeptha Mudialba
Abstract
Algorithms are widely recognized as one of the fastest moving bandwagons in the capital markets. As research and execution are unbundled and as clients increasingly access the market directly, brokers need to find new ways to keep their institutional clients. Algorithmic trading gives the creative brokers- those able to design flexible, customized algorithms, a new way to stay ahead of the competition Algorithmic trading cuts down transaction costs and allows investment managers to take control of their own trading processes. More sophisticated algorithms allow buy-side firms to fine-tune the trading parameters in terms of start time, end time, and aggressiveness. In todays hypercompetitive, cost-conscious trading environment, being the first to innovate can give a broker a significant advantage over the competition both in capturing the order flow of early adopters and building a reputation as a thought leader. This paper discusses the types of algorithms used in the trade cycle, the key effects that the rise in the use of algorithms has had on the trading environment, And the emerging Algorithmic trading trends. It also discusses the future of algorithmic trading and some of the concerns that surround it. Algorithmic innovation is here to stay and it for firms to reap the returns of a really unique execution strategy.
Introduction
Trade carried out using algorithms is known as algorithmic trading. Algorithmic trading can be defined as placing a buy or sell order of a defined quantity into a quantitative model that automatically generates the timing of orders and the size of orders based on goals specified by the parameters and constraints of the algorithm. The rules built into the model attempt to determine the optimal time for an order to be placed that will cause the least amount of impact on the price of the financial instrument. Algorithmic trading is a way to codify a traders execution strategy. 7
Popular Algorithms
In practice the most commonly used algorithms in the market place are: arrival price, time weighted average price (TWAP), volume weighted average price (VWAP), market-on-close (MOC), and implementation shortfall (the difference between the share-weighted average execution price and the mid-quote at the point of first entry for market or discretionary orders). Arrival price is the midpoint of the bid-offer spread at order-receipt time, and it also notes the speed of the execution. VWAP is calculated by adding the dollars traded for every transaction in terms of price and multiplying that by shares traded, and then dividing that by the total shares traded for the day. MOC measures the last price obtained by a trader at the end of the day against the last price reported by the exchange. Implementation shortfall is a model that weighs the urgency of executing a trade against the risk of moving the stock. Most algorithms already allow customers to change the timing of executions, the rate of order-filling attempts at the beginning or end of the trading day, and the tolerance for the slippage of a stock from certain benchmarks. There are many more complicated strategies implemented by algorithmic trading software. 8
Customized Algorithms
The buy-side until now predominantly access algorithms pre-built by sell-side brokers. Buy-side players are gradually moving away from commoditized algorithms in order to capture their own intellectual property in customized algorithms.
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Algorithmic Everything: the Convergence of the Front and the Back office
Historically, calculating risk exposure was often conducted in batch at the end of the trading day. Now, firms are beginning to incorporate traditionally back office functions, such as changes to foreign exchange (FX) risk exposure, into their front-office operations. This reinforces the need for real-time risk monitoring. If performed in real time, value-at-risk (VaR) calculations can 13
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Conclusion
When considering the future of trading and the role that algorithms will play, perhaps a sensible question is: what will not change? In the coming years, the evolution of the algorithmic landscape will result in firms re-evaluating and evolving their views on information technology, trading 20
References
[1.] Bob McDowall Algorithmic Trading: its growth and limitations?, IE4C, December 9, 2005. [2.] Daniel Safarik Algorithms a la Carte. Wall Street & Technology, January 30, 2006. [3.] Daniel Safarik The Holy Grail: Pre-Trade Analytics. Wall Street & Technology March 01, 2005. [4.] Jessica Pallay Algorithmic Arms Race.Wall Street & Technology; May 25, 2005. [5.] John Bates Algorithmic gymnastics keeping at least one vault ahead of the rest. Hedge Funds Review, June 2006. [6.] John Bates Todays top 10, a guide for buy sides on how to get ahead in algo. STP Magazine, April 2006. [7.] Katherine Heires Algorithms and Clearing Wrapped Up in One Algorithmic Trading. Wall Street & Technology; May 25, 2006. [8.] Kerry Massaro 7 Surfacing Algo Trends. Wall Street & Technology; September 26, 2006. [9.] Michelle Price Go forth and multiply. STP Magazine, March 2006
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Abstract
This research article primarily focuses on how technology has and will change the face of HRM as we know it today. It revisits the transformation of HRM from its nascent stages and its transition from Personnel management as was known before. It describes the history of eHR and reviews the transformation of HR from manual processes to completely automated systems. It moves on to provide a thought provoking review of the issues associated with the eselection systems in organizations. It discusses the exciting new prospect of distance learning in organizational setting. It considers how technology supports the administration of compensation systems in organizations. In particular it highlights how technology can facilitate decision making about compensation, enable round-the-clock access to salary and benefits information, streamline processes and increase the effectiveness of strategic decision making.
Introduction
Our field is changing, rapidly and profoundly. Those of us in HR once wished that we could eliminate all the routine paperwork and concentrate on strategy and be a Business Partner. Well, be careful what you wish for. Today technology has finally begun to deliver on the promises of the previous century. HR is providing more and better service to our stakeholders. It has finally made the data accessible to those who need it. It is no longer the bottleneck in HR information flow. We today are talking about portal strategy, employee self-service and data ownership. It has the analytical tools to allow HR profession to be more strategic.
Evolution of e-HR
Payroll management can be credited with a distinction of being the reason he concept of Personnel management came into being. But ironically over the years it has been the most 22
It also helps companies build brands. For example Cisco Systems prides itself in recruiting employees only through the internet. Apart from the fact that companies are using these systems to recruit, we can quiz ourselves why? Reasons can be many. Few of them can be stated as follows: Reaching large number of qualified applicants.
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One of the elements which cant be left un-discussed here is Online Assessment Techniques.
Points against online self-assessment techniques are: In spite of the advantages of using online systems to screen applicants, there are number of potential dysfunctional consequences. In particular the following Numbers of misclassification errors are very much possible, which means that the organization may eliminate qualified candidates in favour of those who are not. Online screening methods may not always yield valid or reliable results. As a result organizations may select candidates who use the right words rather than the more qualified ones. There is no way of monitoring if the candidates are not copying online tests, researching the answers online and sharing them with others.
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e- Based Learning
When one leads today hes not only looking after individuals from the same city but different continents. So communicating uniform training exercises all over the spread of an organization is of utmost importance. In recent years apart from web-based training companies use satellite, video, audio, audio-graphic computer, and multimedia technology have been applied to organizational development programs, allowing organizations to provide training to employees all over the world. The popularity of distance learning stems from its convenience and substantial cost savings. For example IBM reported savings of $400 million, HP savings of $5.5 million. But distance learning programs can prove detrimental to organizational development if improperly implemented. One reason might be that they are not always developed according to standardized, experimental tested procedures but instead are often simply adaptations of other training tools used by the company.
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Let us evaluate how web systems can help us with the aboveInternal Equity: It refers to establishing the relative worth of jobs inside the organization. Organizations achieve internal equity through performing job analysis and job evaluations. How does the automated systems help here Increasing Accessibility- Internet technologies make available expert information to much broader audience. For example, HR managers can electronically access advanced job analysis techniques developed by well-regarded experts such as Personnel Systems and Technology Corporations web based job analysis tools. They can access the Common Metric Questionnaire (CMQ) designed and validated by researchers to accurately describe both managerial and non-managerial occupations.www.pstc.com Streamlining the Process- With online JPS Management Consulting Questionnaires, once the manager completes the online survey, the data is automatically generated, converted to job evaluation format, and given a job evaluation point score.
Challenges to Achieving Web-Enabled Internal Equity Integrating internal, external and individual equity. These tools are only as good as data they access. Proper training is required for the users. Quality and efficiency with which decisions are made ultimately with the manager.
External Equity: or external competitiveness, involves determining an organizations pay in relation to the external labour market. Organizations have to offer competitive rates of pay if they wish to attract and retain competent employees. They establish external equity by conducting wage and salary surveys. How does the automated systems help here Increasing Availability of Salary Data-Spread sheets are available for download from the internet that save hours in matching jobs, summarizing and auditing data. The salary survey data published on the web, while accessible 24/7, and nevertheless does not represent real-time data. 26
Challenges to achieving Web-Enabled External Equity Easy access to market information does not eliminate the necessity to be careful consumers of this data. This includes considering the quality of survey data, quality of the benchmark job matches, survey age, sample size and relevant competitive market. Integrating market data into the present HRIS.
Conclusion
Today, every HR department is in midst of a seemingly endless transformation, one that not only encompasses the function of the HR department, but also its role within the business, the relationships it maintains, and the technology it uses and is responsible for deploying. More businesses are realizing that people are the true differentiating factor in long-term competitive success. For so long HR technology was focused only on automating back-office functions and was necessarily leveraged throughout the business to give employees, managers and executives the tools they needed to make better personal decisions, let alone better people management decisions. Now that human capital management permeates the business, companies are committed to deploying the right collaborative tools to employees so that they can not only make better decisions about such personal options as healthcare or investments but also leverage collaborative tools that enable better teamwork across and outside of the business. With this teamwork comes innovation, access to better and more relevant information. HR can now contribute to the many capabilities that impact key performance drivers and ultimate business 27
References
[1.] Making the most of on-line recruiting. Harvard Business Review. (Cappelli P. 2001) [2.] Protect applicant privacy to be safe. www.shrm.org, (Brotherton,P. 2004) [3.] The use of technologies in the recruitment, screening and selection processes of jon candidates. International Journal of Selection and Assessment. (Cober,R.T. Brown, D.J 2003) [4.] Resume database nightmare: Job seeker privacy at risk. www.privacyroghts.org(Dixon,P. 2003) [5.] Millenium compensation trends, The Handbook of compensation. (Berger D.R. 2000) [6.] Web based compensation planning, Web based human resources. (Gherson,D 2001) [7.] Compensation (7th edition). (Milkovich, G.T & Newman, J.M 2002)
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Abstract
In this study, we discuss the significant impact that Employee Value Proposition is having on the organizations on a whole. The study starts with discussing factors that comprise Employee Value Proposition and how these factors weigh against each other. An attempt has been made to ascertain how these factors change with the age of the employees. These stated factors can then be compared with the Employee Value Proposition factors of various other companies to see how the factors stated have been implemented. This study further discusses how along with keeping the strategy of the company in sight and benchmarking exercises and surveys, Employee Value Proposition for an organization can be modeled.
Keywords
Employee Value Proposition (EVP), offer, flexible arrangements, compensation, organizational behaviour, loyalty and commitment, Career Development, Confidence in senior management, Recognition, Reward of Work (ROW) model, Compensation, Benefits, Work content, Career, Affiliation, motivator, Affiliation, Talent, Analytics.
Introduction
For a long time now Employee Value Proposition has been a rather defied topic in the field of Human Resource Management. The HR professionals many a times looks at it, if at all, as a document which they need to create because competition around them is creating one whereas the line managers consider it an ineffective piece of paper which adds to their budget and has no consequential use in helping them increase the top line. Caught between these two assumptions lies the actual effectiveness of the concept, which has helped a lot of organisations in giving their employees what they actually expect, in increasing engagement, in bettering efficiency and in slashing turnover rates. Discussed below are the underlying factors and research which has gone 29
After defining all of the above, then the company discusses the role compensation plays in the employment value proposition. The pay should exist to provide employees with a fair return on the investment they make of time, skills and energy, but ideally, it should not be the fundamental reason they come to work. According to Jeffrey Pfeffer, professor of organizational behaviour at Stanford Business School in the May 1998 edition of Harvard Business Review, People work for money, but they work even more for getting meaning out of their lives. In fact, they work to have fun. Companies that ignore this fact are essentially bribing their employees and will pay the price in lack of loyalty and commitment. According to a survey done by Mercer [3], the top drivers for employee engagement are as shown in the figure on the left. It is evident that employees consider Career Development, Confidence in senior management and Recognition as the three most important factors for being engaged with their work.
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Affiliation
Mission and values Reputation and Ranking Work enviroment Community citizenship Instituteional culture
Pay
Work Content
0%
10%
20%
30%
40%
50%
60%
Graph 1: Employee Engagement Trends in Asia Source: Employee Engagement Trends in Asia Survey (May, 2010)
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Organizations need to consider this as a skeleton framework and understand and design their own value proposition, the preferences of their staff, and the causes of any gaps between employee and/or organization aspirations and the actual EVP. Sibson then went on to study the importance which different age groups within an organisation attach to the five elements. [5] The data from Sibson Consultings Rewards of Work study, based on 1,059 respondents, reveal the elements that employers can use to drive employee performance over the course of their careers. The research shows that: Benefits are of average importance for employees of all ages. Employees aged 30 and younger rated benefits fourth for driving performance. Benefits tied for fourth place among workers ages 31 to 50; tied for third for those ages 51 to 60; and ranked third among those aged 61 and older. Surprisingly, the youngest respondent group was the most likely age group (62%) to rate benefits as important or very important. This finding does not indicate that benefits are less important to older employees than to younger employees, but it does indicate that benefits tend to become less effective motivators as people age. Work content is the top motivator for every age group. Respondents of every age chose this element as the primary driver of good performance. It was the only element to maintain the same relative importance in each age group. Career elements, such as title, status and opportunities for growth, decline in value among older employees. Career elements were rated second most important by employees age 30 and younger. They slipped to a third place for workers ages 31 to 50 and finally dropped to last place for respondents age 51 and older. While 81% of workers age 30 and younger indicated that career elements were important or very important in motivating their performance, only 41% of those older than 60 agreed. Compensation gains - and then loses - importance as the age brackets progress. Although 33
Percentage
42%
32%
28%
34%
25%
10 0
High-performing organizations Average-performing Organizations organizations performing below their peers Global organizations U.S. organizations
Graph 2: Classifying Percentage of Organisations with Formalised EVPs Source: Creating a sustainable Rewards and Talent Management Model., Global Talent Management and Rewards Study, Towers Watson (2010) According to a research article (Attracting and Retaining Critical Talent Segments, Building a Competitive Employment Value Proposition, Corporate Leadership Council, Corporate Executive Board, 2006) [8], an effective EVP provides organizations with three quantifiable benefits: Improved attractiveness: Organizations with effective EVPs are able to source from a much deeper pool of talent in the labour market. Top-performing organizations draw candidates from about 60% of the labour market, including passive candidates who would otherwise be content to stay with their current job. Lesser-performing organizations are able to source only from the most active 40% of the workforce. Greater employee commitment: Organizations with effective EVPs enjoy significantly higher levels of commitment from their employees. Top-performing organizations have 30-40% of their workforce displaying high levels of commitment, compared to less than 10% in underperforming organizations. Compensation savings: Organizations with effective EVPs are able to reduce the compensation premium required to attract new candidates. Top-performing organizations are able to spend 10% less on base pay compared to under-performing organizations.
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Introduction
The European Union is constituted by 27 European nations. Its existence came into being in 1993 with the Treaty of European Union also known as the Treaty of Maastricht. The motive behind the European nations coming together was not only strengthening a political bloc, but also fighting the economic hegemony of the US dollar over other currencies. The fundamentals for the adoption of a single currency were growth and trading benefits that these countries desperately looking for. By switching over to a single currency, they opened their economies to each other by easing trading conditions between each other. The European Union or EU, as we know it, consists of some member functions through which it performs its decision making functions. 1. The European Commission 2. The European Parliament 3. The Council of Ministers 4. The European Court of Justice (ECJ) 5. European Central Bank (ECB) The European Central Bank is the main economic powerhouse of the Eurozone. The ECB laid down certain conditions for entry into Eurozone. A budget deficit of less than 3% of GDP and debt-GDP ratio of not more than 60% was the main constraint laid down for new entrants. Though the monetary policy i.e. setting up of interest rates and controlling inflation(keeping it under 2%) were under the purview of the ECB, the fiscal measures like issuing government bonds for raising debt, forming budgets, tax policies and banks were still under the control of these nations.
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0.00%
10.00%
20.00%
30.00%
40.00%
2010 2009
0%
20%
40%
60%
38
39
40
Euro area
5 10
Floting currency
20 25
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Conclusion
While the Europe keeps the world on wait, the catastrophe is not too far. However, it can take many forms. A country might be thrown out of the Euro, which the treaty forbids as of now; or a government that might try to adopt austerity measures might be thrown away. There are speculations rife that Germany could be the first one to breakaway. Amid all this, a Greek exit from Eurozone could open a Pandoras box for the EU and multiply its miseries manifolds. This could lead to a butterfly effect spanning not only the Eurozone but also the Banks and Institutions all over the world. The EU is just taking its last breaths. The end may not be too far.
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Abstract
In this study we analyse the significant transformations that organisations are liable to undergo in the coming future. We further discuss how the course of future organisations will be set in a world which will be globally more integrated having better information flow channels and collaboration forces in action. The central issue raised in this study is: aligning the organisations interest with that of the new generation, the Gen Y as it will be this generation that will constitute a major part of workforce in the future organisations that we envisage. A comparative analysis is made based on the findings of SHRM 2010 report on job satisfaction to compares the top five factors needed for job satisfaction as perceived by Gen Y, Gen X and the HR Professionals in the organisations. With the help of this analysis we find the gap in perception of factors signifying satisfaction among Gen Y workforce and the organisations and we analyse how the gap can be reduced with alignment of interests of the new generation and the organisations.
Introduction
The dynamic landscape that we are working in requires for a change in the way organisations work. Before we envisage organisations in near future we need to look as to what defines an organisation. Over a period of years development of various cultures, onset of various revolutions, coming up of various innovations and change in the demographics, have time and again helped shape and define organisations. Organisations are wrought in ways which are often reflections of the changes and events occurring in the world over a period of time. Amidst all these changes organisations have become larger and more intertwined in a global framework. Today the companies handle operations in more countries than they used few years back and we 45
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Source: Society for Human Resource Management 2010 Employee Job Satisfaction Survey Report Table 2: Workforce Distribution in Government and Private Sector 2010 Age Under 30 30-39 40-49 50 and over Government Workforce Age Distribution 8% 18% 31% 43% Private Sector Workforce Age Distribution 25% 24% 25% 26%
Source: Deloitte Millennial Model: An Approach to Gen Y Readiness Report 2010 With significant workforce percentage on the verge of retirement now is the time for government organisations to capitalize on opportunities to attract millennial by bringing change in rigid and lax human capital policies and practices that lag in time.
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Conclusions
Organisations in near future will get a renewed outlook in terms of framing strategies and how workers approach their jobs. Future organisations will be more have more contractual workforce and there will be a dynamic balance of power between local and global offices. To manage the complexities inherent in the evolving global organisations it will be a critical for organisations to align their interests with that of the new generation which will be leading these organisations in the future. Comparative analysis of the survey done by Society of Human Resources 2010 reveals that organisations need to put more impetus on kind of benefits that are provided to the Gen Y employees as well as the kind of work that is offered to this generation in order to attract and retain the millennial population. Focus on relationship and communication between employees and superior and senior management is considered as a topmost factor by HR Professional in driving employee satisfaction. This aspect may not be factored as high ranking by the Gen Y employees in the present scenario but according to a report of Economic Intelligence Unit 2010 it is expected that with the rise of matrix type of organisations in near future the new generation of employees, the Gen Z will expect their employers to care more for them. They would want more frequent and clear discussion with their managers on their work priorities and development goals.
References
[1.] Global firms in 2020: The next decade of change for organisations and workers: A Report by Economist Intelligence Unit. [2.] SHRM 2010 Employee Job Satisfaction Report: Investigating What Matters Most to 50
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Abstract
Recession is a word that triggers off a whirlpool of uncertainty and fear in the minds of people. Through this article, a host of issues pertaining to the after-effects of recession have been discussed. A number of these issues are very sensitive and subjective in nature leading to diversity in opinions. The discussion revolves around topics such as recession leading to inflation, outsourcing in times of crisis, ethical ways of compensating, rising number of sweatshops, organisational downsizing and global supply chain ethics amongst others.
Keywords
Recession, Inflation, Outsourcing, Compensation, Supply Chain, Stakeholders, Sweatshops, Bluffing, Downsizing
A Clash Of Opinions Not everyone is so quick to condemn the practices of multinationals in this area. Several prominent economists have spoken out claiming that the wages paid to the workers of foreign suppliers in the third world are hardly immoral slave wages but rather represent an increase in the standard of living. These arguments are defended in an article by Maitland (2004). Maitland argues that multinationals are wrong to improve working conditions because doing so will lead to higher unemployment in developing nations. He argues that corporate executives should explain to activists and others that improving working conditions will be bad for workers and bad for developing economies, since it will slow economic growth. However, in their article Sweatshops and Respect for Persons Denis Arnold and Norman Bowie defend a different view. They use Kantian arguments to show that multinational enterprises have a moral obligation to ensure that their suppliers follow local labour laws, refrain from coercion, meet minimum safety standards, and provide a living wage for employees. Talking Tough On Bribery In their essay Taking Responsibility for Bribery, Thomas Dunfee and David Hess explain the connection between bribery and human right violations. After reviewing international efforts to combat corruption, they articulate and defend a corporate principles approach to bribery, one that relies on rigorous internal guidelines and controls. They point to shell as an example of a company that has had great success at implementing such a program especially during times of economic dullness when unscrupulous activities are on the rise.
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Despite the positive overall picture, there is a toll that the recession has taken on ethics in American business in particular. When asked about the effects of recession, about 25 percent respondents said that to stay in business during recession, their company had lowered its ethical standards. NBES also found that a companys tactics to combat recession can damage employee perceptions of an ethical workplace. The more such tactics an organisation employed, the less positive the ethics. Overall, NBES reflected the importance of ethical culture in the workplace. Measures of culture 61
Conclusion
The aim of this article was to present an all-pervading view on the various ethical issues that are associated with the effects of recession on the global economy. Considering the post-recession fragile nature of the economy and uncertainty in the minds of common people, it is popularly believed that proper planning and forecasting on behalf of the responsible agencies would have ensured that India wouldnt have been facing the inflation crisis that it is facing today. With regards to outsourcing, one sect believes that USA has no choice but to tap in on the lower costs and unique skills of labour abroad to remain competitive. However, there is another wing that opines that hiring staff in India may help companies like IBM and others lower their costs and boost their profits, but it hurts the workers who lose jobs and those who lose the prospect of jobs. Questions were being raised related to the compensation that was being given to CEOs of top companies (the fact that they were being paid on an average 301 times more than a regular employee), however, the result of NBES 2011 stating that over 70 percent of the sampled employees felt that the compensation was justified effectively puts these questions to rest. Likewise, issues pertaining to global supply chain ethics, the stakeholder versus stockholder debate, rising number of sweatshops, deceptive marketing and organisational downsizing have received a divided stance. However, the common perception that binds all these arguments is the belief that this recession has been an eye-opener of sorts in terms of the difficulty that was faced by organisations in sustaining their culture. Companies around the world could take a cue from it to ensure that in the future, if the situation demands, they are in a position to take decisions that they can deem appropriate from a managerial as well as an ethical viewpoint.
References
[1.] Shaw, W. H., (2004), Business Ethics, Rydson Publishers & Distributors, New Jersey, USA 62
63
Abstract
If there is one word that has persistently been in the news for the past 24 months, it is inflation. This article attempts to give an overview about this important economic phenomenon. It starts by defining inflation and its different forms. Then it explains the methodologies used to measure inflation, followed by outlining the driverss of inflation. It goes on to elaborate the impact of inflation on the economy. Finally, it focuses on the current scenario in India and the measures that can be taken to keep inflation in check.
Keywords
Inflation, WPI, CPI, RBI, demand, supply, fiscal, monetary, policies, repo rate
Introduction
Inflation can be defined as an observed increase in the value of goods and services produced in an economy. This change in prices is called the inflation rate, which is mostly calculated annually. An economy comprises of innumerable goods and services and this makes it virtually inconceivable to find out the change in prices of all these goods and services. Hence, a predetermined group (popularly referred to as a basket) of goods and services, which acts as a representative of the whole, is commonly used to get an indicative figure of the change in prices.
Types of inflation
There are two primary types of inflation: cost-push and demand-pull. The two types of inflation are not mutually exclusive, so it is possible for both to occur simultaneously. 64
12 10 8 6 4 2 0
Apr-10
May-10
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Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
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Cost-Push Inflation: The four factors of production comprise of land, labor, capital and entrepreneurship. When there is an increase in costs of any of these factors of production, the companies cannot maintain profit margins by producing the same amounts of goods and services. Hence, they increase the product prices to protect their profit margins. These increased costs are passed on to consumers, causing a rise in the general price level. Demand-Pull Inflation: Demand-pull inflation occurs when there is an increase in the purchasing power of the consumer. Such a situation mostly exists in a growing economy where there are huge expansions from the government and private sector, leading to increase in employment which in turn increases the purchasing power of the consumer. Since demand is running ahead of supply, there is an increased pressure on scarce resources. This is also referred to as too much money chasing too few goods. This prompts the producers to increase the price of goods and services. It is not necessary that only one type of inflation exists in an economy at a time. They can coexist. For instance, in India right now we have both types of inflation, oil and metal prices have gone up to record highs, giving rise to cost push inflation. At the same time, purchasing power has also increased due to increases in employment, wages, and easy availability of money, creating demand pull inflation.
Inflation measures
Inflation is calculated using price indices. Of the many indices, two are of critical importance. The first is the Wholesale Price Index (WPI) and the other is the Consumer Price Index (CPI). Both these indices are the weighted averages of prices of a specified set of goods and services.
65
Dec-11
Consumer Price Index (CPI): It is a price index that tracks the prices of a specified basket of consumer goods and services, providing a measure of inflation. It attempts to measure changes in the retail prices of fixed baskets of goods and services being consumed by the target group (namely the average 66
All Commodies I Primary Arcles (A) Food Arcles (B) Non- Food Arcles (C) Minerals II Fuel & Power A. Coal B. Mineral Oils C. Electricity Manufactured Products (A) Food Products (B) Beverages, Tobacco & Tobacco Products (C) Texles (D) Wood & Wood Products (E) Paper & Paper Products (F) Leather & Leather products (G) Rubber & Plasc Products (H) Chemicals & Chemical Products (I) Non- Metallic Mineral Products (J) Basic Metals Alloys & Metal Products (K)Machinery & Machine Tools (L) Transport Equipment & Parts
100 20.12 14.34 4.26 1.52 14.91 2.09 9.36 3.45 64.97 9.97 1.76
100 22.03 15.4 6.4 0.48 14.23 1.75 6.99 5.48 63.75 11.54 1.34
435 98 54 25 19 19 4 10 5 318 41 11
259 91 54 25 12 19 4 10 5 149 32 7
55 10 18 13
29 2 11 1
17 1 9 0
12 1 2 1
38 9 9 13
457 64 138 91
100 9 67 9
18 0 15 0
2.99 12.02
2.39 11.93
45 107
15 69
10 24
5 45
35 83
5=351 11111
55 276
19 41
2.56
2.52
26
23
225
42
10.75
8.34
69
53
20
33
49
696
203
10
8.93 5.21
8.36 4.29
107 33
56 21
23 3
33 18
84 30
903 287
312 101
43 0
68
2 Populaon Group
Consumers having Non- manual occupaons in the non-agricultural sector 59 Centres (34 centres are common with CPI-IW)
3 Centres
4 Coverage: Goods & Services with weights Food Beverages and Tobacco Fuel & Light Housing Clothing & Footwear Miscellaneous Total 5 Basis for Weighng Diagram 60.15(base year = 1982) 48.39(base year = 2001) 6.28(base year =1982) 6.42(base year =2001) 8.67 (base year =1982) 15.29 (base year =2001) 8.54 (base year =1982) 6.58(base year =2001) 16.36 (base year = 1982) 23.32 (base year =2001) 100 47.13 5.48 16.41 7.03 23.95 100 72.94 8.35 6.98 11.73 100 38th Round (1983)NSSO 70.47 7.9 9.76 11.87 100
1. Working class family income and Family Living Survey expenditure survey (1981-82) for old (1982-83 and 1999series (1982) 2000)- NSSO 2.Consumpon paern of the working class populaon at al the 78 selected centres across the country during 19992000 for new series (2001) Laspeyres Index Formula Labour Bureau, Govt. of India cso, Govt. of India
6 Methodology 7 Source
Hence, despite the criticisms, WPI remains the focal point or inflation discussion in India. With CPI-Urban and CPI-Rural indices available may be over a period of time focus shifts to CPI inflation.
Causes of Inflation
Both supply and demand side pressures have been responsible for the inflationary surge seen 69
1951-52 1953-54 1955-56 1957-58 1959-60 1961-62 1963-64 1965-66 1967-68 1969-70 1971-72 1973-74 1975-76 1977-78 1979-80 1981-82 1983-84 1985-86 1987-88 1989-90 1991-92 1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2007-08 2009-10
-10.0
70
Primary Food Articles Primary Non-food Articles Fuel,power,light And Lubricants Manufactures
Percentage
2 0
1950s
1960s
1970s
1980s
1990s
2000s
1. One major reason for inflation is getting more money in the market. The Governments contributes heavily to this problem by printing money to fund the deficit, to pay extra salaries, and to provide subsidy. Unless the Government looks at its own revenue and expenditure gap and reduces to a manageable level, inflation will remain a concern. 2. The other significant problem lies in supply side. India is amongst the worlds largest wasters of food and faces a potential challenge to provide food security to its growing population in light of increasing global food prices and the declining rate of response of crops to added fertilizers. It is estimated that around 20-30% of the total food grain harvest is wasted annually due to gaps in the cold chain such as poor infrastructure, insufficient cold storage capacity, unavailability of cold storages in close proximity to farms, poor transportation infrastructure, etc. India produced a record 2,410 lakh tons of food grains in the agricultural year 2010-11 according to the Fourth Advanced Estimates on crop production for the year. At present the government has a storage capacity of 625 lakh tons of food grains as against burgeoning stocks at 654 lakh tons. As a result,a huge amount of food grains is left in the open to rot and finally turn unusable for human consumption. This creates an artificial gap between the demand and supply of food grains. 3. Additionally, inefficiency in basic industries and lack of infrastructure create their own bottleneck causing price rise of commodities. Transporting goods from railways is much cheaper than by roadways. But there is a dearth of capacity in railways. The result is that major goods are transported by trucks, which run on bad roads, which further increases cost in the form of fuel. 4. Sovereign debt concerns in the euro area pose a major downside risk to overall
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Current Scenario
GDP growth moderated from 7.7 per cent in Q1 to 6.9 per cent in Q2 of 2011-12. This was mainly due to deceleration in industrial growth from 6.7 per cent to 2.8 per cent. GDP growth is projected to be around 7.2% for this fiscal. Headline WPI inflation, which averaged 9.7 per cent during April-October 2011, moderated to 9.1 per cent in November and further to 7.5 per cent in December. This decline was driven largely by a decline in primary food and non-food articles inflation. Primary articles inflation, which was in double digits for over two years from September 2009 to October 2011, moderated to 8.5 per cent in November and further to 3.1 per cent in December. This was essentially on account of seasonal decline in vegetable prices. However, inflation in protein items eggs, fish, meat, milk and pulses remained in double digits. Fuel group inflation remained high at 14.9 per cent in December 2011, reflecting high global crude oil prices and rupee depreciation. In fact, there is sizeable suppressed inflation in the fuelgroup as administered prices do not fully reflect the market prices. Core inflation declined from 8.1 per cent in October to 7.9 per cent in November and further to 7.7 per cent in December. This indicator is sensitive to international commodity prices and currency movements and the recent rupee depreciation has accentuated price pressures as reflected by this indicator.
Conclusion
The long-term growth prospects of the Indian economy provide an enormously attractive investment environment for a range of businesses. The challenge, therefore, is to keep inflation in check over long periods of time, allowing the economy to grow at its potential rate with minimal disruptions and deviations. The inflation rates that the economy is now experiencing, both from the supply and the demand sides, are clearly a matter of great concern. It is incumbent on the government and the central bank to use all the means at their disposal to rein inflation in. This is the best way in which the macroeconomic environment can contribute to a positive business climate.
References
[1.] http://www.rbi.org.in/scripts/bs_viewspeeches.aspx [2.] http://www.mospi.nic.in/Mospi_New/site/home.aspx [3.] http://www.labourbureau.nic.in/
76
77
Abstract
The plastic money is replacing the traditional use of cash and paper money. The Digital and Electronic payments have brought about a revolution in the transaction mechanism. This paper discusses the effect of plastic money on Indian Economy. Its effect on the money supply, money demand and the money multiplier is paramount and has been studied in this paper. Also the measures of money supply M1, M2 and M3 have been seen and their impact on the money supply has been studied.
Keywords
Credit card transactions, Plastic Money, Liquidity, Money Multiplier, Money Supply, Money Demand, Earnings, Interest rates, Inflation.
Introduction
The expansion of financial systems and globalisation has led to an increased awareness of credit cards by the consumers irrespective of their age and gender. In US alone, the past couple of years have seen a rise of 25% in the credit card usage for buying gasoline. This drastic change happened due to the easy availability of credit and liquidity crunch due to the recent downturn in the world economies. If we look at a developing country like India, the effect has been much more prominent. The table below shows the expected rise in the transactions through various mediums.
78
Table 1: Revenues and Growth rates of various transactions Source: McKinsey India Payments Map
Thus, we can clearly see the changing trend in the payments methodology. In 2008, about 45% of the payments were through cash. However, it is estimated that in 2015 this number would come down to nearly 40 42% range. This is mainly due to the use of plastic money like debit and credit cards and also the use of e-commerce and internet protocols. The credit card holders in the country are expected to increase to about 38 million in 2015 as against 18.3 million in 2010. The number is expected to more than double in a span of 5 years. According to RBI data, customers spent an average of Rs 2,685.97 per transaction in 200910, up from Rs 2,518.4 in 2008-09. Thus, not only the number of card holders but also the transaction amount per swipe is on a rise. Now, the Indian economy grew at an average of 8% year on year for the last 3 years. If the trend continues for the next 5 years, the average spending per consumer would increase by about 40 50%. This would give a tremendous boost to the use of debit/credit cards and internet shopping. Also, the growing awareness about changing technology and rise in internet users gives a clear indication of the change in the trend from cash to credit cards.
As seen from the table, the money supply has been on a constant rise in the country. The growth rate has reduced in the last year owing to the measures taken to curb high prevailing inflation levels.The money supply M3 depicts the true picture of the money available in the system. Graph 1: Board Money Supply Components
India: Board Money Supply (M3) Components
Currency With Public Time Deposits With Bank
70,00,000 60,00,000 50,00,000 40,00,000 30,00,000 20,00,000 10,00,000 0
17 Mar 2006
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17 Dec 2010
17 Sep 2009
17 Sep 2010
Transaction and Precaution are a function of Earnings of common people. People spend a part of their income on necessities and luxuries which becomes the consumption. This forms the transaction money. Also, some part of their income is kept as cash as a precautionary measure. The rest of it is the speculativemoney demand caused by the banks due to a change in their interest rates. The sum total of all these is the total demand for money existing in the country. The trend is shown as follows: 1960s: Demand of liquid money = 20% of GDP 2009 : Demand of liquid money = 12% of GDP 2010 : Demand of liquid money = 15% of GDP Now there are 2 reasons why the money demand increases or decreases. The rising inflation makes the commodities expensive and it requires more amount of money to buy the same commodities. This increases the demand for money in the country as a whole. The increase in Demand of money in 2010 was due to the lag effect of high levels of inflations existing in 2008-2009. The excessive use of debit and credit cards reduces the currency circulation in a country. The effect of net banking and online transactions can also be seen in the demand of physical money in the country. Hence, as people become more familiar with advancing technologies and increase the use of plastic money and online transfer the demand for physical money reduces. The 2 factors give a net effect on the money demand in the country. Furthermore, the Liquidity in the country is a function of Consumers income and the prevailing interest rates. Thus L = f(Y,i) 81
Currency Drain Ratio = Percentage of total money that people want to hold as cash Desired Reserve Ratio = Cash Reserve Ratio (CRR) for the commercial banks
2012 Predictions
But, we know that the credit transactions have been on a rise in India. This enables people to hold fewer amounts of cash with them. Instead they prefer to use the swipe cards to make any transactions. Hence, with the increase in plastic money, the need for physical money in the system goes down. Due to this the Cash-Drain ratio goes down. And hence, the multiplier m increases. Now, with the same liquidity in the system, the consumption goes up. As a result the central bank needs to print less money to suffice the needs of people. Thus, with an increase in plastic money, the economy could be fuelled much faster without the printing or inducing excess cash in the system.
Conclusion
There would be a definite increase in the money multiplier in the country. Hence, the control of RBI or Central bank on the liquidity floating in the system would reduce. Presently, RBI uses CRR and REPO rates to effectively control the money present in the system. This gives it a stronghold on issues like Inflation, Growth, Consumption, Demand and Supply aspects of the economy. With increasing use of digital money, the liquidity in the country would no longer be an issue, since the banks could effectively utilize their deposits to generate multiple levels of income and liquidity in the system. This would be a sense of worry for the Central Authority, as then the consumers would be more than willing to spend for luxury items. The credit period would boost the consumption of people and that too without the need of actual money. The transactions are digital and even the money transfer takes place just on paper. Hence, the multiplier would be many-folds as of present scenario.
83
References
[1.] Prakash Singh (2009) - Structural Break, Stability and Demandfor Money in India [2.] Takeshi Inoue (2008) - An Empirical Analysis of the Money Demand in India [3.] McKinsey (2009) -A Strategic Review of Indias emerging payments market [4.] Scott Schmitt (2008) - Credit Card Market: Economic Benefits and Industry Trends [5.] Journal of Finance and Accountancy The Swipe and Spend Economy [6.] Reserve Bank of India (July 2011) Press Release [7.] Statements of Money Supply RBI [8.] N. Gregory Mankiw Money Supply and Money Demand [9.] Purna Chandra Padhan- Stability of Demand for Money in India: Evidence from Monetary andLiquidity Aggregates [10.] http://www.rbi.org.in/home.aspx [11.] http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6234&Mode=0 [12.] IMF,www.Property-Investing.org [13.] http://www.creditcards.com/credit-card-news/research-statistics-stories.php [14.] www.business-standard.com [15.] www.timesofindia.indiatimes.com [16.] www.economictimes.indiatimes.com [17.] www.economywatch.com [18.] http://business.rediff.com/report/2010/may/18/number-of-credit-card-holders-slips-to18-point-3-million-in-march.htm 84
Abstract
Safe as houses is the famous and an old saying. By the look of it, we even have exceptions to an old adage like this. Guessing the exception is not worth a prize either. Its always the country which has its idiosyncrasies in every walk of a life, which is on the way of becoming a standing testimonial to the fact the houses or real estate, in a literal sense, is no more a safe form of investment. I am talking about the Dragon economy of the world, China. During the recent past (5 to 10 years), there has been an observation that the property prices are sky rocketing and yet the occupancy rates are atrociously low. Recent survey by the Hong Kong based economist shows that there are huge malls built where most of the shops are empty and huge apartments built where occupancy again is too low. The research also goes one step ahead and shows that China is adding at least 10 cities every year to the country! Now comprehending these facts are sometimes is not possible for a sane, logical and a simple mind like me so I went a little deep into understanding what is happening in the country. That is exactly the purpose of this paper. This is a record of my understanding of the property prices conundrum of China. The secondary observations which were required to form my opinions have stemmed from various resources available on the internet. I have quoted my sources where ever necessary, The paper is roughly categorized into 3 sections. In the first part, I have tried to find out, how property or real estate really affects the engine of an economy. This gave me valuable insight into how a country can really grow if the real estate sector really booms. Off course, one must never forget what happens to an economy when the financial system is not regulated properly, especially when we have the example of the US economy plunging into a recession because of real estate price bubble. However, greedy countries have short memories. In my second part, I have tried to figure out why the craze for property in China, how and why is the government spending money by giving credit and mortgages at, say, really cheap rates. I have 85
Chinas Craze for Property, GDP Calculation and Obsession with GDP Growth
As far as GDP calculation is concerned, China is a different animal when compared to the rest of the world. Once we understand Chinese GDP calculation, its use and its importance, we can relate to why Chinese have a penchant to build property. One important thing which we have to keep in mind is that China is a command economy where the state dictates the proceedings that affect the economy of the country unlike a free market economy where market forces like demand and supply gap that drives the economy of a country. For rest of the world, GDP is a byproduct of the actual progress of the country and GDP is an indication of the countrys capability to produce goods. In China, GDP is more of a planning tool and before the year starts, they have a target for GDP growth in the particular year and then they plan suitably as to what has to be done to achieve this particular GDP. GDP calculation for china is very complex. Complex to the extent that printing their own currency adds to their own GDP! It is quite incredible as to how they come up with GDP targets and keep meeting the targets year on year. This craze for GDP is directly connected to the amount of foreign investments that happen to the country. It is not rocket science to understand that better the GDP growth, higher the foreign investments because, GDP is considered one of the most comprehensive measures of the performance of a country. Hence the craze for property building and investments into fixed assets of the country because as mentioned before, property sector is a huge contributor to the GDP of a country. Chinese craze for property also stems from the fact that a lot of urbanization has happened in China in the recent years. China is investment in the property where most of the property is in terms of building high quality infrastructure, high speed trains, roadways, huge malls and multiplexes. To testify this, one of the key statistics from IMF website indicated that more than 50% of the steel requirement and construction material is coming from China thus keeping the global capitalistic system alive. All this sounds great as far as we can relate this to growth of China and its role in the global economy. However, economists think that as far as Chinese property craze is considered, the contribution to the GDP in terms of quantity is significantly high but quality of GDP is not good because as far as demand for real estate is concerned, it has reached a tipping point and many economists believe this entire property and pricing is concerned, it is a bubble. Bubble of a magnitude bigger than the US crisis during 2007. In the following section, I have tried to explain as to why this is a bubble.
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References
[1.] http://www.politico.com/news/stories/1109/29330_Page2.html [2.] http://www.youtube.com/watch?v=0h7V3Twb-Qk [3.] http://www.time.com/time/magazine/article/0,9171,1971284,00.html [4.] http://www.washingtonpost.com/wp-dyn/content/article/2010/01/10/AR2010011002767.html
88
Abstract
The sub-prime crisis of 2008 has made one thing absolutely crystal clear All the countries in the world are extremely interdependent. If one fails, it pulls down the others. The sub-prime crisis was an event which occurred due to fundamental mistakes in the financial sector of United States of America, but it caused a financial Tsunami all over the world. There was hardly any place in the world which was unaffected by the game called Financial Innovation and Globalization. Investors and wealth managers all over the world, be it London, Cape Town, Dubai, Shanghai or Sydney, were beaten and left completely shattered. Losses amounting to trillions of dollars buried the entire globe into a deep grave called Recession. Even today, as we see the political and economic developments in Europe, it becomes clearly very evident that the financial world is tightly knit. A debt market burden which was felt too heavy for Greece (GDP- $312 billion) is now also proving heavy for the bigger economies like Italy (GDP$2 trillion)1. Trading partners of such distressed European countries are also facing the heat. The banking system across the globe and particularly Europe and North America is on the brink of another disaster. Any event (positive or negative) is seen to have a very visible impact on the stock markets all across the globe. So what is it that is driving these stock markets on a bull or a bear ? Is it the fundamental strength of the local markets, the performance of the listed companies, highly influential investors or macroeconomic flowers and bombs ? In this paper, I have tracked the movement of global stock markets. These movements have been confined to the last four years (2008, 09, 10, 11). These stock indices are the most developed and respected indices globally. I have tried to find out the relations between them and also the effect of 89
Hang Seng
11\2\2008
1\1\2008
6\2\2008
4\2\2009
9\2\2009
2\2\2010
7\2\2010
12\2\2010
5\2\2011
Shanghai Composite
FTSE
11\2\2008
5\2\2011
11\1\2008
12\1\2010
BM & F Bovespa
25000 20000 15000 10000 5000 0
10\1\2011
BSE
12\2\2010
11\2\2008
5\2\2011
12\2\2...
10\2\2...
90
12\2\2010
11\2\2...
10\2\2011
1\1\2008
6\2\2008
4\2\2009
9\2\2009
2\2\2010
1\2\2...
6\2\2...
4\2\2...
9\2\2...
2\2\2...
7\2\2...
5\2\2...
7\2\2010
10\2\2011
1\1\2008
6\2\2008
4\2\2009
9\2\2009
2\2\2010
1\1\2008
6\1\2008
4\1\2009
9\1\2009
2\1\2010
7\1\2010
5\1\2011
7\2\2010
10\2\2011
Statistical data
Index BSE Hang Seng Shanghai FTSE Bovespa (Brazil) Coefficient of Determination (R2) 0.36 0.77 0.35 0.86 0.42 Regression coefficient 1.57 2.5 0.3 0.5 5.56
Table 2: Relation between FTSE and other major indices The above tables have been prepared using the data of the respective indices for the period January 2008 to December 2011. Observations from table 1 and 2: Emerging markets like Hong Kong, Brazil and India move in sync with developed American and European markets. However, their regression coefficients are high which 91
Table 3 shows correlation between the movement of all the six indices for the given period. BSE BSE NYSE HangSeng Shanghai FTSE Bovespa
1 0.603322 0.828438 0.511123 0.761363 0.877421 1 0.882189 0.591388 0.930839 0.651864 1 0.676856 0.908842 0.85823 1 0.517422 0.53179 1 0.783738 1
NYSE
Hang Seng
Shanghai
FTSE
Bovespa
Table 3: Correlation between the six indices. Hang Seng, BSE and Bovespa have correlation coefficients with NYSE and FTSE ranging from 0.7 to 0.9 which shows that emerging market indices are influenced to a huge extent by the sentiments in the west and FII inflows and outflows. Other than Shanghai Composite index, movement of all the other indices is very well correlated with NYSE and FTSE. The high correlation coefficient between FTSE and NYSE (0.93) shows that the developed markets behave absolutely in the same way.
2. Lehman Brothers Bankruptcy Triggers Global Recession On September 15, 2008, Lehman Brothers filed for bankruptcy which led to a series of shocks globally: The NYSE lost almost 30% during September-December 2008. The Hang Seng lost more than 33% during September-November 2008. The Shanghai Composite dropped by almost 18% during September-October 2008. The FTSE shed around 27% of its value during September-November 2008. The Bovespa dropped by around 28% during September-December 2008.
The news of Lehman Brothers did shiver the entire world as every single index dropped by a significant amount on the day of filing bankruptcy i.e September 15, 2008.
3. March 18, 2009: the Federal Reserve announces decision to buy $1.2 trillion of government bonds and mortgage-related securities. This move take by Federal Reserve was aimed at improving the conditions in the private credit markets. This policy was termed as Quantitative easing. Shanghai Composite index gained almost 10% in 2 weeks. BSE gained more than 15% in 2 weeks. Bovespa index rallied from a level of 40142 to 44391 in 2 weeks. FTSE gained around 10%. Hang Seng gained around 10%.
This shows that the positive sentiment created by the Central Bank of USA was reflected elsewhere too. 4. A dull but stable 2010. The year 2010 was marked by mixed news from USA. Thousands of job cuts mixed with signs of GDP growing positive, rise in the sale of automobiles are some of the factors that 93
5. Euro and US debt problems lead to the tumbling of stocks globally (July-Aug 2011). This also involved downgrading of US credit. Hang Seng shed 10% over the 2 months. Shanghai Composite index dropped from around 2759 to 2567 losing close to 7% in 2 months. FTSE lost around 14% during this period. BSE lost around 11% during this period. NYSE lost around 17% during July-August 2011.
6. EURO zone bailout plan (Dec 9, 2011). European Union leaders met at Brussels and agreed on new fiscal rules highlighting tougher budget discipline. However, there was some kind of negativity always attached with the Euro zone as political considerations were overriding the economic considerations since months. So this new plan was decided but no concrete measures of implementing it were finalised. Global indices reacted as follows: Hang Seng lost 3% in 5 trading sessions post December 9, 2011. Shanghai Composite index lost 5.8% in 5 trading sessions post December 9, 2011. FTSE lost 5.8% in 5 trading sessions post December 9, 2011. BM&F Bovespa lost 5% in 7 trading sessions post December 9, 2011. BSE lost 6.4% in 8 trading sessions post December 9, 2011. NYSE lost 4.7% in 7 trading sessions post December 9, 2011.
Conclusions
The statistical data that we have used above clearly establishes the relationship between the behaviour of stock markets all over the world. It leads to the following conclusions: 94
The influential events discussed above highlight the following points: Any financial or economic event occurring in USA and Europe has had a severe impact on the movement of indices globally. Although markets such as China and India are developing at a rapid pace, they still depend quite a lot on the news from the west. India showed a GDP growth of close to 6.5% and China showed a GDP growth of 8.7% in 2009. However, we can see that the major stock market indices in these countries were heavily beaten due to the global meltdown. Hundreds of important economic events have happened in the emerging markets over the last 4 years. But these events have only affected the domestic stock market indices of these economies. No event in China, Brazil or India has had a huge impact on the stock markets of USA and Europe.
References
[1.] Major economic events of 2008 - http://useconomy.about.com/od/criticalssues/p/2008_ Economy.htm [2.] Major economic events of 2009 - http://www.examiner.com/economic-policy-in-national/ top-10-economic-events-of-2009 [3.] Data on closing values of indices - http://finance.yahoo.com/ [4.] GDP growth figures for 2009-http://edition.cnn.com/ [5. ]GDP figures for Greece and Italy - http://www.imf.org [6.] Data compiled using inputs from http://finance.yahoo.com/ and Microsoft Excel. [7.] The closing value of indices from Jan 1, 2008 to Dec 31, 2011 has been obtained from http://finance.yahoo.com/. The regression and correlation analysis on this data has been done using Microsoft Excel.
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Abstract
Which stock to invest in? The trickiest questions, which many fine brains, analysts and bankers are working day and night, to answer. With the increasing debt loads of developed controlling economies of the world and most of the global businesses underperforming, it has become difficult to make the right choice of investment. This article may help you in allocating some part of portfolio funds into one of the safest growth product. Since the crash of 2008-09 many business recovered but was unable to sustain the growth. One of the sectors which were able to do so was, Two wheeler industries. Two wheeler sales had seen very strong growth in the past 20 years in India and rest of the world. 2W grew at CAGR of 11% in 2001-2011. There had been strong growth seen in exports too. Exports from India also grew many folds from 100 thousand units to 1.5 million units per annum, in the past decade. India being the second largest populous country, with poor public transport and infrastructure, most of the people are depending on their personal mode of transport for comfort, convenience and style. With the cost of petrol increasing steadily 2W makes the daily travelling easy and affordable compared to passenger vehicles. With the growing economy India 2W market crossed the 10 million unit mark for the first time in FY 2010. 2Ws is one of the major modes of transport in many developing countries like China, India, Africa, Latin America and most of the ASEAN countries. Total global 2W demand was more than 50 million in 2010-2011. Global 2W demand had been growing at a CAGR 9% in the past 10 years.
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DOMESTIC MARKET
India is ranked as the second largest two wheeler market in the world after China. The twowheeler market in India is the biggest contributor to the Indian automobile industry with a size of 45 billion dollars. Two wheelers shares 76% of total automobile sales in India with the size of 11 billion dollars. There had been a phenomenal growth in two wheeler sales in the past decade. Strong economic growth and rising income levels has strengthened two wheeler sales in India. Reasons for strong 2W growth in Urban and Rural India Increase of population: Rural population growing at 1.7% per annum whereas urban population at 2.8% in (2000 to 2011). Upward migration of household income levels: Rise in disposable income gave increase in affordability hence strengthen automobile sales in rural areas and repeat buyers in urban area. Growing working population (between 15-35 years): Working population has increased at CAGR 2% in past 20 years and around 120 million people will be added to the working population in the next five years. Also increase in working women increased the growth of gearless scooter. Middle class expanding by 30-40 million every year: Presently there are 300 million Indian middle class consumers. Their numbers are growing at very fast rate with the rising per capita income.
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Indian Household income There are around 11 million urban households and 4.4 million rural households having annual incomes of Rupees 300 thousand to 500 thousand category. The next category consists of 25 million urban and 23 million rural households. The overall penetration of two wheelers in is of order of 30% of the households. In the urban region the penetration is of the order 45% whereas in the rural segment the penetration is only about 14% of the households. At least a quarter of them 11-12 million will move into the purchasing segment during the next 2 to 3 years. This is almost the same number as at present.
The NCAER in its research report on market demographics has clearly indicated that Indian households have graduated to higher income groups as can be seen in the table below.
Year Low income (less than Rs 45000) 1985-86 1993-94 2001-02 2007-08 2009-10 83.8 90.5 65.2 46.3 41 Middle income (Rs45000-180000) 43.3 62.9 109.2 135.9 140.7 High income (more than Rs 180000) 1.4 3.9 13.8 36.9 46.7 128.5 157.3 188.2 219.1 228.4 Total
Share of total number of households has increased from 10.6% in FY88 to 20.5% in FY96. The rising income profile has, however, been more pronounced in the urban areas as average annual growth in industry has surpassed that of agriculture since the period FY96. The number of households in the low income group has fallen since FY85. On the other hand, the numbers in the middle, upper middle and high income groups, which form the consumer base for two wheelers, have increased. Around 30 million more potential buyers have risen in the past 5 years and their numbers will be increasing in the coming years. In 2010, households with annual disposable incomes of US $ 5,000-$ 15,000 as a percentage of total households are estimated to be 14.6% in India. This will reach 41.1% by 2020. This rise of 300 million people in this group will form huge potential for the 2W market. Looking at the growing income of households and extreme low penetration assures that there is tremendous growth expected from current levels. Graph 4: Household distribution (in millions)
1.4
100% 80% 60% 40% 20% 0%
3.9
13.8
36.9
46.7
43.30
83.8
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Table 2: Demographic Trends India has more than 50% of its population below the age of 25 and more than 65% below the age of 35. With the increase in population, there will growth in youth population too. The growth in youth population was around 4% (age group of 15 to 45) in last 20 years (the potential 2W buyers). It is expected that, in 2020, the average age of an Indian will be 29 years, compared to 37 for China and 48 for Japan, by 2030. With more youth adding, will increase the workforce and the 2W demand.
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40.5
Source: NSHIE 2004-05 data, NCAER-CMCR analysis If 20% of this growth adds up to the buyers list, the sales will double in next 3 years. This growth will continue with new and repeat buyers and India will remain as one of the biggest market for the coming years.
Per capita Chhattisgarh 60 Following data shows the penetration per 1000 people in the respective Indian states. 38,059 STATES Registered 2W penetration income (Rs) Rajasthan Kerala 16,119 51,644 48,937 42,601 35,800 27,197 41,469 21,434 45,982 30,582 50,365 23,132 28,531 33,226 30,719 55,877 27,250 Andhra Pradesh Maharashtra Karnataka Haryana Punjab Gujarat Tamil Nadu Goa (c) UTs A & N Islands Lakshadweep D & N Haveli Delhi Daman & Diu Pondicherry Chandigarh INDIA TOTAL 60 66 69 69 85 89 122 125 127 279 65 80 107 206 211 305 504 60 34,189 59,179 51,025 74,027 50,676 78,781 62,153 63,961 62,499 132,719 44,800 49,200 46,194 78,690 36,805 48,477 110,676 45,000 per 1000 people Bihar Arunachal Pradesh Sikkim Meghalaya Tripura Assam West Bengal Nagaland Mizoram Jammu & Kashmir Himachal Pradesh Uttar Pradesh Manipur Orissa Jharkhand Uttaranchal Madhya Pradesh 9 10 10 13 19 20 20 22 28 29 31 31 40 42 43 57 58
Working population
Indias working age population will increase a lot in the coming decade. In 2011-20 there will 102
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Around 69% of total Indian population i.e. rural India makes it the biggest 2W market. Increase in land prices, good monsoon, higher farms yield and better government subsidies have acted positively in increasing agriculture income hence increasing the 2W sales in past years. Overall two wheeler penetration is 11% in rural India. 27% of total rural households own a 2W.The rising rural income level will create a big opportunity in 2W growth. Hence biggest growth will be seen in the rural India and the products meeting their requirement.
Rural household Group High income household Middle income household Low income household % household owning 2W 44 32 19
Table 4: percentage household owning 2W The following table shows the estimate of households, population and income by state of residence in rural India.
Households (millions) Low income states Middle income states High income states Total 73.7 46.6 23.9 144.2 Population (millions) 398 214 120 732 Household size 5.4 4.6 5.02 5.08 Average household Per capita income income (Rs per annum) 44,999 55,604 66,121 51,922 income (Rs per annum) 8336 12094 13172 10227
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Increasing employment
There had been big shift of rural income from agricultural to non-agricultural products in the past years. With the rise job demand in urban areas, from non-agriculture sectors like mining, construction, manufacturing etc., have increased the purchasing power of rural population. Unlike in the past where the ratio between those who involved in agriculture and in other business was 75:25, today the estimated ratio is 55:45. The graph shows the percentage share of working population in different sectors and the changing trend. Graph 8: working population in different sectors
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1983 1991 2000 2005 2007
Community, social, and personal services Financial, insurance, real estate, and business services Transport, storage, and communication Trade, hotel and restaurant Construction Manufacturing Mining Agriculture
Source: India Statistics Today, 50-60 per cent of the rural population is involved in other businesses. A lot of people belonging to the second generation are getting white-collar jobs in nearby towns. Hence there is a growing rural middle class with rising nonagricultural income unlike before. This has resulted in a definite growth in the prosperity level in rural India. Still there are lots of poor people, especially the agricultural laborers. But there is a growing middle class with regular income and the rural rich are becoming richer. This shift has increased the necessity of personal modes of transport in many villages. Following graph shows the decrease in unemployment rate in the total work force in the past decade.
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Unemployment
URBAN MARKET
Around 53% of total urban population lives in towns, where public modes of transports are not as well developed. Hence, personal modes of transport are one of the only convenient options. Indias urban population is around 286 million. Out of which 62 million households around 69% own a 2W. Motorcycle is major mode of transport in most of the urban areas. It remained the most affordable and fastest mode of transport in many towns and cities. Present penetration of 2W in the urban areas is a lot more than in rural regions mainly due to higher affordability. Two-wheelers are more affordable than any low cost cars and even used cars. Since the average road speeds in India are low, the lower passenger safety of two-wheelers when compared to cars does not inhibit buyers. They are also cheaper to run and easier than cars to maneuver and park on narrow road. 2W remained the best modes of transport for working class in the urban areas. All the above reasons dont leave any option apart from a personal 2W in urban region. Around 44% of total urban household has 4 members per household and 36% have 5-6 members per household. So that makes around 248 million people. Considering 25% of total 2W buyers and riders, it comes around 62-65 million in numbers at present. Average house hold income in Urban regions have reached to around Rs 96,000, which is lot more than an average cost of bike (Rs41000). This shows the huge growth prospect in coming years. The following table shows the estimate of households, population and income by state of residence in Urban India.
Replacement demand
With rising purchasing power, buyers are replacing their old motorcycle more frequently than before, hence decreasing the product life. Average age of a motorcycle has come down from 10 years to 8 years for many buyers. This forms a big group of potential buyers every year. Considering 70 million 2W on Indian roads i.e. less than 10 years of age and yearly sales of more than 10 million, at least 4 to 5 million repeat buyers will add to the yearly sales and their numbers will continuously rise in future. Replacement demand grew at CAGR 9% approximately in the past 11 years.
OVERSEAS MARKET
2W are used as a personal/family vehicle or a goods carrier in the developing countries of Asia, Latin America and the Africa and Mideast region, whereas it is confined to sports/racing (heavy motorcycles) or short distance travelling (mopeds) in developed countries like US, Japan and Europe.
Table 8: Labor participation by gender and age group. Source: ILO Labor statistics 110
3044 3286
3615 3886
Working women population 15-64 (in millions) Working male population 15-64 (in millions)
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2008
Asia is the biggest 2W market in the world with market size of more than 70%.China, India and Indonesia have become the biggest market in terms of both demand and production of motorcycles. Most of these countries have low per capita income and major part of their economy is dependent on agriculture yield. Major portion of the countrys population lives in rural area. Their needs, choices and affordability are nearly same. Competitive intensity is increasing, in China, Vietnam, Indonesia, Thailand and other Southeast Asian markets. While Asia is dominant in terms of unit volume low margin motorcycle, most key players make higher revenues per unit from sales in developed markets such as North America and Europe. Although North America accounted for only 3% of global demand in unit terms in 2006, it comprised 24% global sales revenue. The world two-wheeler market is dominated by Japanese manufacturers account for around 65% of the total two 2W in the world. However, production within Japan has been declining due to lower domestic demand and shift in manufacturing base outside the country. Japan is also the worlds largest exporter of two-wheelers in the world controlling around 75% of the world trade. Its major markets are India, China, USA and Europe. In terms of player positions, Honda Motors Corporation, Yamaha Motors and Suzuki Motors Corporation share the top three positions in the world two-wheeler market. The following table shows the 2W penetration in different countries. Average 2W penetrations in most of the developing nations are very less. The demand is growing very fast in the countries lacking public transport, having high rural population and rising per capita income. With rising income levels more and more people are able to afford personal mode of transport. These are mostly developing countries in Asia, Africa and Latin America. China, India, Indonesia and other ASEAN countries have seen tremendous growth in the past decade.
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introduction of new models equipped with more features, boosting motorcycle demand.
Source: International Road Federations World Road Statistics, 2008 Table 9: 2W penetration in different countries.
Source: HONDA annual reports, SUZUKI annual reports, YAMAHA fact book affordability, road conditions, comfort level, distance traveled etc. Most of the developing nations lack proper means of public transport. Hence 2W acts as essential means of transport and goods carrier for them. Motorcycle remained the first choice for most of these countries, but there had been huge market for mopeds, scooters, and step-through 2W also. Most of the product liking was from 75 to 125cc segment. Indian 2W companies are the biggest manufacturer of entry level motorcycle in the world. Major revenue of Hero Honda was coming from the domestic market which is mostly 100-125cc product. Whereas, Bajaj Auto had major share in the exports and its major profitability was from premium segment. Its entire exports product has seen very good response in overseas market. With the diversifying product range in those markets, their exports would be increasing in future.
Domestic market share Hero Honda Bajaj Auto TVS motors 44% 20% 15% Exports market share 8% 64% 14%
Source: SIAM data Table 10: Market share of various of companies Indian manufacturers are good at producing high fuel efficient entry level and executive segment motorcycle at affordable cost. Their high production capacity gives advantage to compensate increase in raw material prices and maintain cost and profitability. New brands entering in these markets would find difficult to compete to Indian manufacturers and maintain margins.
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2010-11
large production capacity and good product quality with competent pricing can make Indian companies to grow fast in exports.Hero Honda can have better profitability in its low cost 100cc segment due to efficient volumes, whereas Bajaj Auto can grow with its established premium segment model having better margins. Graph 13: Segment wise export data
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
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Domestic market
Higher fuel prices may act negative in the growth. Maintaining profitability with the growing raw material prices and rising interest rates. Gaining market share and competing new low cost product from HONDA. Launching new models and modifying with the changing market needs. With more low cost cars entering domestic market and fall in second hand cars may affect the sales of premium two wheelers. Rising interest rates acts negatively in the 2W credit purchase.
Exports market
Building brand in the countries in less explored markets of Africa and Latin America and competing with well established brands in developing countries. Maintaining cost compared to other cheaper brands. Establishing dealer network and maintaining sufficient inventory. Maintaining profitability with the growing raw material prices and rising interest rates. Improving product with changing market needs. Competing with Japanese and Chinese rivals entered Latin America and Nigeria, targeting with highly affordable products. Establishing strong dealer network to penetrate in both Urban and Rural areas of overseas market.
Conclusion
As affordability grows; people would choose to own a private means of transport in India and other developing nations resulting in high sales of motorcycle. New 2W demand grew at CAGR 12% whereas replacement demand grew by CAGR 10% in the past 10 years. The domestic two wheeler market is expected to double in next five years. With players grabbing 117
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Abstract
Inclusion in its most general sense signifies accommodation of all as a matter of equal right in spite of the various diversities that they might have. Inclusion is a realized concept in the consciousness of most governments, institutions, public discourse, forums, and societies and so on. However its realization in practical terms is something human kind will have to continuously strive for. Newer issues, power centers, trends and influences will keep emerging making the quest for a completely inclusive society a vision that binds its different hues into a single ray of its brilliance. Societies have gotten better in some aspects over time and still lag in others. Our cumulative wisdom and thought are evolving into newer perspectives, technologies, processes, laws and systems that our acting as enablers of inclusion in ways not thought of before. The main focus of this paper is the evolution of thought as alluded to above in the business domain. In some aspects that have been elucidated upon in the ensuing discussion, it is about including the bottom of the pyramid as a segment that businesses can profitably cater to. But it is more than C.K. Prahalads BOP concept, and answers the question why corporations have started looking at this segment, given that the bulge at the middle income bracket is going to be huge, as it is, for any corporation to capture. The paper looks at this new strategy of corporations as essential to their foundational core competencies, given that these are dynamic and have to keep pace with the ever changing business environment. In their seminal paper, The Core Competence of the Corporation, C.K. Prahalad and Gary Hamel talk of a concept called Rethinking the corporation. The concept talks about the elusive nature of markets, and consumer preferences and how A few companies have proven themselves adept at inventing new markets, quickly entering emerging markets, and dramatically shifting patterns of customer choice in established markets. [C.K. Prahalad and Gary Hamel; The Core Competence of the Corporation, 1990]. They then go on to stress the importance of infusing products with irresistible functionality, or creating products that customers need but have not yet even imagined. In this paper this concept is extended to creation of new markets and 119
ITCs e-Choupal
The ITC group of companies has a yearly turnover of Rs 7.5 billion (US$162 million), and its activities span tobacco and cigarettes, paper and packaging, paperboard, hotels and tourism, information technology, and agricultural exports. For its agri-export division, ITC procures various agricultural commodities such as soybeans, coffee, and oil seeds. Typically, a farmer sells his produce to a small trader called a kacchaadat, who sells the produce to a larger trader called the pakkaadat, who in turn takes the produce to a local mandi, where a larger trader buys the produce. The mandi traders then operate through brokers to negotiate sales to companies such as ITC. This long supply chain results in high procurement costs for ITC and in lost profit opportunities for the farmers. Because this long supply chain is a very time-consuming system, it also results in deterioration in the quality of the products. ITC introduced its famous E-Choupal model in rural areas to form a seamless partnership with the farmers in the hinterlands. What is worth noting is the success of the model in that e-choupal system has expanded to 6500 e-choupals. E-Choupal entered into an existing mode of agricultural supply chain operations, with set ways of working. The system is not only bound by linkages relating to the various stages of procurement and distribution but also strong social relationships, hierarchies and mores that have lasted the test of times over many years, hardships and joys of the Indian farmer. To be able to convince the stakeholders involved to ITCs e-choupal as a preferred way of selling their produce is a sound achievement. Not only that the intermediaries after initial resistance joined the initiative as well due to the volumes being generated. Any innovative way of doing business necessarily will break older linkages and form new ones. Here, the middleman, had an important historical relationship with the farmer of providing ready (risky) credit, not only for his crops but also for social purposes, like family functions, marriage of children, which are of central importance to the fabric of the rural society in India. Hence, building mutual trust gains high importance in such scenarios. Another spill-off effect this untangling of the systemic knots in agricultural procurement and supply chain is the improvement in productivity, efficiency and volumes for the farmer, enabled by better seeds, information, weather forecasting and other relevant education that ITC provides as part of its initiative. However, the e-choupal model has been highly successful in the trading of the Soya crop while the wheat choupal has not been doing that well due to the market conditions, it being an almost perfectly competitive wheat 120
A public sector enterprise, a sleeping mammoth unaware about its profit making ability till it performed its function of providing affordable transportation to millions in the country. The cheapest fare, charged before it actually started sharing its good fortune with employees and passengers, was Rs 7 which later dropped to Rs 4. Perhaps numbers provide the stark comparison of the time when the Railways was facing bankruptcy to a time when it achieved high financial stability. For example its cash surplus before dividend in 2001 was Rs 4790 crores compared to 25006 crores in 2008. Its bank balance in 2001 was 359 crores compared to 22279 crores in 2008. In the same period the railways improved its operational efficiency from 75.9% to 98.3% better than the operating ration of the Chinese rail as well as class one American railroads. Its return on net worth was a 21% better than many blue-chip companies listed on the Sensex. All this was accompanied by a decrease in passenger fares. In fact certain phrases from that time became famous. One was the no retrenchment, privatization, fare- hike refrain, when the railways set upon the task of bringing order to its house. This was done through a concept which became the by-ward of the railways that of running faster, heavier and longer trains. It found out ways of increasing profitability through increasing the number of higher yield coaches and wagons, decreased prices in the profitable freight and AC reserved classes which it had started to lose to alternate private modes. It started measuring cost per tonne and increased the length and load on a train which turned out to be more efficient as fixed cost of the engine, fuel, other related infrastructure and employee cost remained the same for that. It rejigged the earlier flaws in its pricing that as pointed to above not only took profitable business away but also the low prices it charged for transporting at `an extra service. It therefore started charging more in empty-load directions (parcel service) and door to door freight. It was therefore, able to achieve a politically/ socially desirable and commercially viable end. Transportation as a form of mobility is part of the options people have to access desired goods, services, spaces and social activities. Evaluations which ignore the relation between public transportation and human development can lead to unfavorable implications for more sustainable forms of development, constituting a reversal from a social development perspective.[Guidelines to mainstream social inclusion in public transportation evaluations, 122
Financial inclusion: The role of the Information and Communications Technology Industry:
Today banks have centralized operations, more and more banks and branches are moving to CBS , network based computing, new delivery channels such as networked ATMs, internet banking, smart card based products, mobile access etc and are using IT for customer relationship management, customer transaction pattern analysis credit profiling and risk management. At the same time, large number of households continues to be excluded from the formal banking system and as per some recent surveys their share has increased.
e-Financial Inclusion
It could be described as innovative applications of ICT for delivery of financial & payment services and adequate credit where needed, at an affordable cost to the vast section of disadvantaged and low-income groups, who currently are unbanked. The key deliverable is Financial Inclusion and therefore to accelerate the process, multiple channels of delivery of variety of financial services are required to be explored. Quite clearly, the task is gigantic and technology is general and ICT in particular is and would be the driving force for achieving this.
Conclusion
Through the varied examples above we see how it is not only possible but a new imperative to have inclusive growth accounted for in the business equation for any enterprise today. It shows that how not only can corporations in any sector and segment can take various hitherto 124
References
[1.] http://ideas.repec.org/p/ess/wpaper/id1653.html [2.] http://www.mpf.org.in/pdf/e-Financial%20inclusion.pdf [3.] http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4474 [4.] http://siteresources.worldbank.org/INTEMPOWERMENT/Resources/14647_Echoupal-web.pdf [5.] http://www.equitymaster.com/detail.asp?date=08/10/2009&story=4&title=HULProject-Shakti-business-model-overview [6.] How the Indian Railways Transformed Itself Sudhir Kumar, ShagunMehrotra [7.] Guidelines to mainstream social inclusion in public transportation evaluations, Diana DasteMarmolejo Development Planning Unit University College London 2010 [8.] 22nd Annual report of GCMMFLS Golden Jubilee [9.] The White Revolution- How Amul Brought Milk To India More Facets: JJ BAXI
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Acknowledgement
This case is written by students of Symbiosis Institute of Business Management, Pune in association with Kirloskar Brothers Limited to be used at marketing class in Business schools. We would like to extend a warm gratitude to the senior management team of Kirloskar Brothers Limited for their support and patience; without which this wouldnt have been possible. We would also like to take this opportunity to thank our director Dr. Vivek Sane for providing us this platform and supporting our efforts through to its completion.
It was 6:00 pm, Arun Mehra lifted his empty coffee mug for the fifteenth time and took another empty sip. Sir! said the guard hesitantly breaking his pensive silence, Should I bring you another cup? He said. Arun got startled as he realized what he was doing, thanked the guard and switched off his laptop. He had a very long drive home and he hoped he wouldnt be stuck in traffic. As Arun drove away from Yamuna, the headquarters of KBL, his thoughts went back to todays meeting with Riya about Multi Stage Multi Outlet pumps. Ms. Riya is the general manager of centrifugal pumps. MSMO pump is a fire pump that provides a continuous supply of pressurized water at all levels of a high rise building. Riya had said I doubt the acceptability of MSMO pumps in the price sensitive Indian market. Since these pumps are expensive than some traditional pumps in the market, the builders may not find them attractive even if they improve the long term cost effectiveness and safety of their building. We should pull out from the Indian market and channelize our marketing and distribution efforts in other geographies where demand for high rise buildings is poised to grow, and consumers are more safety conscious driving the demand for pumps that comply to safety norms such as the MSMO in the builder fraternity Arun believes that this product requires more awareness among Indian customers, and with 126
Terms
Head: Liquid in vertical pipe exerts pressure on a horizontal surface at the bottom. This pressure is expressed in metres of liquid column. This height of liquid column is known as Head. MSMO: MSMO refers to Multi Stage Multi Outlet. Multi Stage pumps have two or more impellers mounted on the same shaft. Number of impellers are connected in series in same casing in such a way that discharge of first impeller, is suction of second impeller and so on. Multi outlet pumps have multiple (two or more) discharge nozzles which can cater to different head requirements.
Product Specifications
A traditional active fire protection system involves use of sprinklers post manual or automatic fire detection. A typical sprinkler system operates when the heat generated due to fire in an area breaks the bulb and allows flow of water from the sprinkler causing the pressure in it to drop. The fire pump starts when the pressure in the fire sprinkler system drops below a threshold. 128
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The Research & Scholastic Development Team of SIBM Pune was formed with the intention of furthering the research and scholastic aptitude of the students. The team primarily looks at identifying, conceptualizing and executing live corporate projects and research projects that have the potential to contribute to the ever changing landscape of business management by associating students with live projects from the industry. A mutually beneficial relationship is nurtured. SIBM Pune offers specializations in the fields of finance, marketing, operations and human resources. Every real world business situation requires analysis from multiple perspectives and therefore, our multidisciplinary team comes into picture and creates a win-win for the industry as well as the students. Some of the projects that RSDT has executed in the past are: Strategy formulation for launch of new product for Godfrey Phillips India limited. Market research and Strategy formulation for Mahindra Composites, Mahindra Navistar Engines Special situations investment project for Tata Capital Credit Analysis of debt instruments of Indian and foreign banks and a study of loan book composition of banks Service level improvements using six sigma for Atlas Copco Understanding the aspirations of a segment of the sales force for Mother Dairy. Market research and strategy formulation for a new service for BVG Cleantech