S I M S R

foreword

Dear Readers,

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

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

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

Seasons greetings and all the very best wishes for 2011. We look forward to hearing from our readers. Please do send
your feedback at simsr.ibs@gmail.com.

Prof. C.P Joshi

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

Faculty Mentor
Prof. C. P. Joshi

03 Company in Focus: Samsung

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

10 Country in Focus: South Korea

12 Business Leader in Focus: Designer

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

15 International Marketing: The Circulation

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

19 Alumni Speak

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

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

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

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

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

 Company in focus
Next is What?(cont.)
“The lifeblood of our business is
that R&D spend. There's nothing
that flows through a pipe or down
a wire or anything else. We have
to continuously create new
innovation that lets people
do something they didn't think they
could do the day before.
Steve Ballmer”
- Microsoft CEO
offloading the financial and operational burden of
having to manage multiple brands and the right step
forward in building a stronger brand. It has been
sponsoring several major sporting events around the
world. The brand building exercise off late has been
built around flagship products in the product portfolio
such as mobile phones and LCD/LED/Plasma
televisions.
Samsung more recently has also experimented with a
signature brand sound which is played with the display
of the brand towards the end of every commercial. The
same has also been incorporated into products such as
mobile phones and television sets to increase the brand
recall and loyalty. The brand promotion campaigns
have also seen a gradual shift from a product centric
approach to a more customer centric approach. This has
been achieved by involving the brand community more
e-GlobuzZ, Vol I Issue IV, October-December 2010
in the brand building process. But however Samsung
still seems to be lagging behind in terms of design
aspect of the brand. This is a major contributor towards
building stronger brands. Most of its product designs
have a striking resemblance to products in vogue that
are brought out by other competitors. Strengthening this
area can help the brand image by leaps and bounds.
Success built to last
“Sustainability Management” has become one of the
key enablers of success in business operations in recent
years. This requires taking into account the global
environmental and social issues, demanding a greater
level of corporate responsibility in the conduct of
business. The value delivered to the all the stakeholders
could be maximized in the process. Samsung is among
the very few companies that come out with an annual
sustainability report. It has worked out elaborate
strategies to continuously and progressively maximize
stake holder value in terms of: innovation in customer
relationship building/management, employee
engagement, inter employee relationship management,
ecological innovation, green convergence, addressing
climate change, corporate social responsibility and
partner innovation initiatives. It has in place what it
takes to sustain the competitive over others and retain
the position of leadership.
Harnessh G.
PGDM-IB 10-12
Page 4
 Sector in focus
Textile industry
The Indian Textile Industry has a significant presence in
the socio-economic life of the country. It is the second
largest textile industry in the world after China. Apart
from providing one of the basic necessities of life i.e.
cloth, the textile industry contributes about 14% to the
country's industrial output and about 17% to export
earnings,4% of GDP. Apart from agriculture this
industry provides employment to maximum number of
people in India employing 35 million people & another
50 million people in allied activities. The global textile
sector was worth us $214.7 billion in 2005 which
represented 14.6% of the industry value share. India
aims to become the second largest exporter of apparel
among LCCs by 2010, next only to China.
Indian perspective
Since 1991, Industrial liberalization indigenously has
been followed by changes in the global perspective. The
eradication of licensing controls on the Indian industry
followed by Uruguay Round negotiations,
consequential in a ten-year phase out of textile and
apparel export quotas under the 'Agreement on Textiles
and Clothing' (ATC), saw the advent of a great
opportunity and challenge to the Indian industry.
Particularly, the widespread and intricate system of
bilateral restraints came to an end, and importing
countries are no longer able to show favouritism
between exporters by applying safeguard measures to
individual countries. It can be termed as an opportunity
as with the phasing-out of the quota system, restrictions
e-GlobuzZ, Vol I Issue IV, October-December 2010
in trade are removed, and gain wider access to world
consumption markets for manufacturers and exporters.
India has emerged as one of the main textile and apparel
exporting countries in the Asian region, competing with
China, Turkey, Bangladesh, Mexico, Korea and other
Asian counterparts. This induced the necessity for the
Indian textile industry to comprehend the opportunities
and challenges in a WTO era and formulate strategies
for being competitive.
Growth Propensity
Growth and investment of an industry depends heavily
on the economic status of the country. Indian economy
grew rapidly during the fiscal year 2006-2007 posting a
growth rate of 9.4% p.a. with an average yearly rate of
growth that has been estimated to be 8% for the past
three years.
India's garment exports totaled USD 10.17 billion
during the year 2008-09, giving it a desirable market
share of 2.99%. The Americas, European Union, much
of Asia and Middle East are India's clients.
Even today it is the second largest provider of
employment in the country. For every INR 100,000
invested in the industry, an average of 7 additional jobs
are created. The Apparel Sector alone contributes to 8%
of India's total exports. By the year 2011-12, India
expects to record a 15% & 20% growth in quantity &
values respectively. The fruits of economic growth have
far-flung effect on the people which is evident from the
rising per capita income of the middle class. The total
strength of this class in absolute terms is expected to rise
to 351 million by 2010. This has generated huge
demand for fashionable dresses which has
consequently led to the surfacing of some world class
Indian designers.
Textile industry is one of the major contributors to the
total output of the fast growing industrial sector which
is at present revolving around 14%. It has been found
out that Indian textile industry is one of the major
sources of foreign exchange earnings for India and
contributes around 16-17% of the total export earnings.
From the above discussion it is quite clear that the
market size of India is growing at a very high pace. With
increasing demand new players are jumping in the
Page 5
 Sector in focus
Textile industry(cont.)
league to get a slice of the profitable pie and the existing
mills are increasing their capacity to meet the demand.
Hence, the expansion process of the domestic industry
has seen a tremendous rush.
Thus, it can be said that the whole Indian economy is on
a growing trend which has its obvious impact on every
possible sector including the Indian Industry.
Post MFA Scenario
Indian Textile Industry is going through a major change
in its outlook after the expiry of Multi-Fibre
Agreement.
Multi Fibre Agreement was introduced in the year 1974
as a short term measure directed towards providing a
limited time period to the developed countries for
adjusting their textile industries in accordance with that
of the developing countries. Labour intensive
developing countries have comparative advantage in
the production of textile related products and can
supply goods at a very low price. The basic idea behind
this policy was to eradicate all sorts of quota system
from the textile industry all over the world and a level
playing field was established which materialised on Jan
01, 2005.
Now, this era after MFA is looked upon by the experts as
the high growth phase of the Indian textile and apparel
industry. Integration of Indian industry with that of the
whole world started from the last period of 1980s. It
improvised to the top ten leagues of textile exporting
countries as well as apparel products after 1998.
Trade scenario
According to the Ministry of Textiles, India's textile
exports during FY09 was USD 20.9 billion (Rs 963.1
billion) and registered a negative growth of 5%, in
dollar terms, over the previous year. According to the
provisional figures for FY09, exports of textiles
constituted about 11.5% of the country's total exports;
however, during the same period, the exports of textiles
in USD terms registered a yearly decline of over 5%. In
rupee terms textile exports registered a growth of 8%
evidently due to the depreciation of the rupee against
major foreign currencies.
e-GlobuzZ, Vol I Issue IV, October-December 2010
Strengths of the industry
1) India enjoys benefit of having plentiful resources of
raw materials. It is one of the largest producers of cotton
yarn around the globe, and also there are good resources
of fibres like polyester, silk, viscose, etc.
2) There is wide range of cotton fibre available and has a
rapidly developing synthetic fibre industry.
3) India has great competitiveness in spinning sector
and has presence in almost all processes of the value
chain.
4) Availability of highly trained manpower in both,
management and technical field. The country has a huge
advantage due to lower wage rates.
5) The installed capacity of spindles in India contributes
for 24% share of the world.
Possibilities that can be exploited
1) The industry has the potential of doubling-up the
export earnings by the year 2010. The authoritarian
polices is helping out to enhance infrastructures of
apparel parks, specialized textile parks, EPZs and
EOUs.
2) The Indian manufacturers and suppliers are
improving design skills, which include different fabrics
and dress material according to different markets.
3) The industry is anticipated to generate new jobs in
various sectors until 2010, with the doubling of GDP &
increase in exports.
4) Medical textiles, construction, packaging, home
textiles (with fine retarded fabrics) are major areas that
can propel the growth.
5) These technical textiles are an emerging industry
Page 6
 Sector in focus
Textile industry(cont.)
with a potential to reach a size of USD 127 billion by
2010 and hold a great promise for Indian textiles
industry.
6) Another interesting observation is that the share of
intra-EU imports is declining, and being replaced by
extra-EU imports. This is good news for the countries
that are among the list of preferential suppliers to EU.
7) The removal of international quota restrictions
should allow India to convert its cost advantages into a
larger share of the global market
8) Opportunity to exploit India's large and growing
consumer market with increasing spending power.
9) Cost advantages of manufacturing textiles and
garments in India derive from:
!Abundant supply of inputs at competitive prices
!Low-cost manpower with a range of skill levels
from unskilled labour to fashion design
!Reduced transaction costs
!Better infrastructure
10) Focus on developing markets key for growth.
From the second half of 2008, the textile sector has been
adversely affected by the cut in exports as a result of the
financial crisis in the economies across the globe.
Exports registered a yearly decline of over 5% in dollar
terms during FY09 primarily due to the appreciation of
the rupee against the US dollar and decrease in demand
for imported textile products in foreign markets.
Though the western markets are recovering from the
crisis, their recovery is slow; therefore, companies
should move towards the Asian markets and adopt the
“look east policy”. The South East Asian and Japanese
markets are largely untapped and provide enormous
opportunities for the industry to grow. According to the
Ministry of Textiles, Japan is one of the biggest
consumers of textiles and clothing, but India has 1.1%
e-GlobuzZ, Vol I Issue IV, October-December 2010
share only in the Japanese import market. Thus there is
tremendous growth potential for the industry in these
markets.
The demand for quality Indian textile products is also
increasing in the domestic market. According to the
Ministry of Textiles, during 2008-09, the textile
industry was valued at over USD 52 billion and 64% of
its production serviced the domestic demand. The
domestic ready-made garments market, which was
valued at USD 14 billion in 2004-05, is expected to
grow by more than 70% to USD 24 billion during 2009-
10. Thus the growth prospects are good for the domestic
industry.
Government initiatives
!Technology up gradation Fund Scheme (TUFS)
!Initiatives under National Textile Policy (NTP) 2000
!Technology Mission on Cotton (TMC)
Recommendations
!Setting up textile SEZs
!Setting up new courses of textile engineering at IITs
!Liberalized labour laws, tax benefits
!Access to high quality and cost effective manpower
!Infrastructure & connectivity
!Single window clearance
!Maintaining global standards
!Export market concentration
!Improved profit margin by in house spinning,
weaving and processing
!Setting up Indian good quality brands
Soumyajyoti Kundu
PGDM-IB 10-12
Page 7
 A Critical analysis
Ohio outsourcing ban
On August 6 of this year, Ohio Governor Ted Strickland
issued an executive order, which prohibits the use of
public funds for services provided offshore or
effectively putting a ban on offshore outsourcing of IT
services. The so called Ohio outsourcing ban provoked
strong criticism from India's USD 50 billion strong IT
industry as well as commerce ministry of India. The
issue was highly sensitised in the wake of US-India
trade policy forum and it was even termed as
discriminatory and a blatant case of protectionism.
Although India is trying to contest the Ohio's ban on
offshore outsourcing in WTO, the issue is too sensitive
to be analyzed in isolation without keeping the stake of
both the countries into consideration. The issue is far
more critical than simple trade issues as it has the
potential to shape the future of “Indo-US relationship”
which is still in nascent stage. The Indo-US relationship
is strategic not just for US and India but for the entire
world.
US Predicament
It is quite understandable that with 10% unemployment
rate and declining popularity, the Barack Obama
administration is under pressure to do something to
sustain the economy which is facing the threat of a
double-dip recession. It is also understandable when the
governor of Ohio State says that the state has the right to
choose what to do with its own resources.
But with a long term strategy the bigger consideration
for US should be the “Indo-US Relationship”. With the
rise of China as a potential rival and competitor for US,
e-GlobuzZ, Vol I Issue IV, October-December 2010
and with deteriorating geo-political stability in Af-Pak
region, US must understand that only India can become
a strong diplomatic partner for US in future from south
east region. With India still as a growing country, it
would be unfair for US to demand a matching
compensation from India for every grant provided by
it. US should also understand that India may not exactly
match with its grants in terms of short term
compensation. But, investments in India will pay off in
terms of future strategic and diplomatic tie-ups with
US.
As per the current state the entire out-sourcing act along
with the other hostile amendments like “H1B Visa fee
hike” has been blocked in the Senate by the Democratic
Party.
The Indian Story
On the other side, the Ohio outsourcing ban would not
affect the Indian IT sector much as it only prohibits the
Ohio State government agency to outsource their IT
services offshore. The entire private sector will still
outsource and continue to take advantage of cost
effectiveness offered by burgeoning Indian IT sector.
Although US accounts for 60% of the revenue
generated by Indian IT industry, but only a little
proportion of that comes from the government projects.
Moreover some companies like Infosys have also
incorporated their government-focussed US subsidiary,
like Infosys Public Services Inc, to operate from US as
a local company. The outsourcing ban would not affect
the businesses of such subsidiaries. The outsourcing
“Leading the Revolution: How to
Thrive in Turbulent Times by Making
Innovation a Way of Life”
- Gary Hamel
Page 8
 A Critical analysis
Ohio outsourcing ban(cont.)

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

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

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

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

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

outlying islands which led to Korean War from 1950 to

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

Society & Culture

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

Weather
Introduction
South Korea tends to have a humid continental climate
South Korea is a democratic country in North East Asia
and a humid subtropical climate, and is affected by the
covering nearly half of the Korean Peninsula bordering
East Asian monsoon, with precipitation heavier in
the Sea of Japan, Yellow Sea and North Korea (also
summer during a short rainy season.
known as Democratic People's Republic of Korea
DPRK a single party state). Korean Peninsula is
Political System
sandwiched between China & Japan.
South Korea is a constitutional democracy.
Government's structure is determined by the
History
Constitution of the Republic of Korea. Government is
An independent Korean state has existed almost
Republic with powers shared between the president, the
continuously for several millennia until the 20th
legislature, and the courts.
century. In 1905, following the Russo-Japanese War,
Korea became a protectorate of imperial Japan, and in
Economy
1910 it was annexed as a colony. Korea regained its
South Korea is the fourth largest economy in Asia. It is a
independence following Japan's surrender to the United
high-income developed country, with an emerging
States in 1945. After World War II, a Republic of Korea
economy. Main industries include electronics,
(ROK) was set up in the southern half of the Korean
automobile production, chemicals, shipbuilding, steel,
Peninsula while a Communist-style government was
textiles, clothing, footwear, food processing, treatment.
installed in the north the DPRK.
South Korea is a leading producer of ships, including oil
super tankers, and oil-drilling platforms. Apart from it;
International Issues and Disputes
automobiles, construction and armaments industries
Both North and South Korea continue to officially
are main pillars of economy.
claim sovereignty over the entire peninsula and
e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 10
 Country in Focus
South Korea (Republic of Korea- ROK)(cont.)
Time Zone
Difference
South Korea is 3.5
hours ahead of
India.
B u s i n e s s
Opportunity
India can benefit from co-operation with ROK in ship
building as ship building industry is still at the
beginning stage in India. Lot of Korean construction
companies are interested in highways and other
infrastructure project in India. Nuclear power sector has
lot of opportunities laid for both the countries. Indian
automobile industry is also collaborating with South
Korean industry to increase their market reach and
technology. For example Tata-Daewoo and Mahindra-
Ssangyong. Indian IT companies can explore Korean
market to reduce their dependency from Americas and
Europe. There is a lot of scope for cooperation in semi-
conductor, plastics, agricultural instruments, textiles,
multimedia, ceramic products industries among the two
countries.
India-South Korea Relations
IndiaSouth Korea relations has been relatively limited,
since the formal establishment of the diplomatic ties
between the two countries in 1973. Much progress
arose during the two decades with India's new look east
policy & Korea looking beyond its traditional trading
partners to sustain trade and economic progress. Still
the size of trade and investment is low compared to size
e-GlobuzZ, Vol I Issue IV, October-December 2010
and structural complementarities of the two economics.
Both countries have signed Double Taxation avoidance
Treaty, Trade Promotion & Economic & Technological
cooperation, Cooperation in Science & Technology and
last year most strategic Free trade agreement
(Comprehensive Economic Partnership Agreement
CEPA). There has been consistent growth in trade of
both countries and ample scope to further increase their
bilateral trade especially in space, heavy engineering,
ship building, automobile, electricity generation
nuclear technology, service industries.
Some of the Indian companies operating in South
Korea are Indian Overseas bank, Air India, TCS, Tata
Daewoo commercial vehicle Company, Novelis,
Wipro, Jindal Stainless steel, L&T, and Mahindra while
some of Korean companies in India are Samsung, LG,
Hyundai, and POSCO.
Conclusion
South Korea is one of the important countries in Asia.
Due to several tariff and non-tariff barriers, size of trade
and investment has been low in India and South Korea.
But recently both countries have recognized the
potential of bilateral trade and have signed FTA. There
is still ample of scope for co-operation in IT sector,
Science & technology, pharmaceutical industry,
broadcasting, tourism, healthcare, construction and
related services, Co-operation in human resource
development, nuclear power sector.
Sushant Shah
PGDM-IB 10-12
Page 11
 Business leader in focus
Muhammad Yunus, banker to the poor
Muhammad Yunus, a
pioneer in the practice of
microcredit lending and
Managing Director of
Grameen bank in
Bangladesh has been a
source of inspiration to
many enterprising
people around the world.
He was featured in a
book entitled, Lasting
Leadership: Lessons
from the 25 Most
Influential Business People, co-authored by
Knowledge Wharton and Nightly Business Report.
Apart from winning the Nobel peace prize in the year
2006 at the age of 65 for his contributions in the field of
economic and social development he has also received
numerous accolades with a few to name- “Presidential
Medal of Freedom” in 2009, “the King Abdul Aziz”
medal in 2007, “the Ramon Magsaysay Award”, “the
World Food Prize”, “the Sydney Peace Prize”, and in
December 2007 “the Ecuadorian Peace Prize” etc. He
has also various publications under his name as-
“Banker to the Poor”, “A World Without Poverty” and
“Building Social Business” etc. His greatest challenge
was to change the mindset of people which acted as a
roadblock for gradual acceptance of new ideas. He
believed in making credit a human right so that each
individual has the opportunity to take loans and
implement his or her ideas as well as help develop a
world where nobody suffers from poverty. He attained
this through a financial innovation called microcredit
which has acted as an instrument to provide small loans
to those in poverty to encourage entrepreneurship.
Mohammed Yunus started his career as a research
assistant to the economical researches of Professor
Nurul Islam and Rehman Sobhan. Later he attained his
Ph.D. in economics from Vanderbilt University in
United States. The idea of Grameen bank came to him,
when he noticed that a very small loan makes a
disproportionate difference to a poor person, so he
started by lending money to poor women and
subsequently signing himself off as a guarantor for
them for taking loans from the bank. Yunus believed
that given the chance, the poor would repay the money
with much more surety as compared to the rich
e-GlobuzZ, Vol I Issue IV, October-December 2010
businessman. The Grameen bank came into operation
on 1st October 1983. He devised an intuitive way of
distributing the loans and ensuring recoveries from the
villagers. The system of 'Solidarity Lending', the
cornerstone of microcredit is now immensely popular
and has been adopted in nearly 43 countries. As of July
2007, Grameen bank has already issued US $6.38
billion to 7.4 million borrowers. Today 96% of the
borrowers are women. In due course of time Grameen
Bank has also diversified into several profitable and
non-profit ventures. e.g. Grameen Motsho (Grameen
Fisheries Foundation) and the irrigation project
Grameen Krishi (Grameen Agriculture Foundation),
Grameen Trust and Grameen Fund, which runs equity
projects like Grameen Software Limited, Grameen
CyberNet Limited, and Grameen Knitwear Limited, as
well as Grameen Telecom, which has a stake in
Grameen phone (GP), biggest private sector phone
company in Bangladesh. GP is a joint venture enterprise
between Telenor and Grameen Telecom Corporation.
Telenor, the largest telecommunications company in
Norway, owns 55.8% shares of Grameenphone,
Grameen Telecom owns 34.2% and the remaining 10%
are publicly held. With the slogan “Stay Close”, the
project aims to provide telephony services to the entire
population of Bangladesh. Yunus' other ventures also
includes a “Struggling members program” that served
beggars. His goal was to reach 50:50 gender
distributions among borrowers, which he accomplished
in 6 years.
In 1997 most rural villages in Bangladesh lacked
electricity and had only 1 phone for every 300 people.
The Village Phone (Polli Phone) project of GP brought
cell-phone ownership to 260,000 rural poor in over
50,000 villages with ladies selling their neighbors
access to their cell phones purchased with Grameen
loans.
Mohammad Yunus has proved himself to be a leader
who has helped in translating the visions of millions of
people into actual businesses. His efforts of extending
financial support to the under-privileged people of
Bangladesh have borne fruit with the people realizing
their independence. We at team e-globuzz wish him all
the best for his future endeavors.
Prachi Garg
PGDM-IB 10-12
Page 12
 International finance
ASEAN - India FTA
It took nearly a decade to establish stronger dialogue
partnership and strengthen cooperation and cordial
relations among ASEAN countries and India.
In 1991, India decided to aggressively increase trade
and strategic relations with South East Asian countries
as part of its 'Look East' policy. The aim was to build
upon historical and cultural ties to expand markets,
counter Chinese influence in the region and improve
India's standing as a regional power. This 'Look East'
policy has allowed India to grow economically and
strategically.
As a part of their strategy, India signed a free trade
agreement (FTA) with ASEAN in August 2009. The
agreement came into effect in January 2010, and, under
the terms of this FTA, bilateral trade is expected to reach
$50 billion by 2010. In 2009, trade between the two was
around $40 billion. This means that ASEAN is already
India's fourth largest trading partner after the EU, the
US and China.
India will be implementing this FTA in goods with two
more ASEAN countries (Indonesia and Cambodia) by
slashing duties on variety of products including
seafood, chemicals, apparel and tyres. In return,
Cambodia and Indonesia will slash duties on hundreds
of Indian goods. Currently, the India-ASEAN FTA is
functional with four members (Singapore, Thailand,
Malaysia and Vietnam). The remaining four (Laos,
Philippines, Brunei and Myanmar) will take more time
to become complete members.
India-ASEAN potential
Intra-ASEAN trade stands at US$376.2 billion in 2009.
These figures are impressive, and should provide an
e-GlobuzZ, Vol I Issue IV, October-December 2010
indication of what further potential may exist in the
region, provided interested parties, like the government
of India, take care to expediently defuse any future
challenges. It is also true that trade with countries
outside ASEAN is more important than intra-ASEAN
trade relations for the collective growth and economic
welfare of the ASEAN countries.
Indian exporters stand to gain additional market access
in sectors such as machinery and machine parts, steel
and steel products, auto components, chemicals and
synthetic textiles and agricultural products such as
oilcakes, wheat as a result of tariff liberalization by
ASEAN. Furthermore, as there is huge scope for an
increase in trade in engineering and industrial goods
between India and the ASEAN countries, India has a
unique opportunity to upgrade its products to compete
with the likes of Japan, the EU, the US and China within
the ASEAN market.
Will the India-ASEAN FTA help India step up its
trade and make its presence stronger within the
ASEAN region?
The answer is yes.
With a combined population of 1.8 billion and GDP of
US$2.75 trillion, the ASEAN-India FTA is one of the
largest in the world. It offers huge growth opportunities
to both ASEAN and India. Currently, India's share in
ASEAN imports is 2.1 per cent against 13 per cent for
China. Given the China-ASEAN FTA, which makes
Chinese goods cheaper in the ASEAN market, India
needed this FTA with ASEAN to maintain this trade
share.
But if the FTA manages to extend not only to goods but
also services and investment, India stands to achieve
even greater gains. According to the Federation of
Indian Chamber of Commerce and Industry, the
ASEAN-India FTA will provide greater market access
to Indian professionals and service providers. The
ASEAN region is a net importer of services and India's
competitive advantages in terms of cost and expertise in
the range of areas will be very beneficial by such an
increase in access.
Affect of India-ASEAN FTA on unorganized sector
Normally it is believed that an FTA will adversely affect
Page 13
 International finance
ASEAN - India FTA(cont.)

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

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

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

 International marketing
The volkswagen story
It was the brainchild of Adolf Hitler and fine
engineering of Ferdinand Porsche that Volkswagen or
“The People's car” was first rolled out in 1936. Still,
after so many years it is one the of few automobile
brands in the world that evoke this kind of reverence.
One of the largest car manufacturers, the Volkswagen
AG group owns and controls most of the renowned
automobile manufacturers such as Audi, Bentley
Motors, Bugatti Automobiles, Automobili
Lamborghini and Skoda Motors among others.
Volkswagen commands an almost rabid fan base who
swears by its precision engineering, innovative
marketing strategies and excellent after-sales support.
Moreover all the brands under the Volkswagen group
have retained their respective differentiated brand
image and continue to operate independently. In fact the
proliferation of the brand is of such level that every fifth
car in Europe that rolls out of the assembly line is from
the Volkswagen stables.
Point of Differentiation
Volkswagen's points of differentiation lie in the way it
constantly changes its strategies; be it engineering or
marketing. It was one of the first manufacturers who
introduced Mc-Pherson struts when its competitors
were using torsion bars. Also it has been doing creative
marketing of its cars throughout the decades.
Double Marketing Strategy
This means dueling product/service benefits i.e running
multiple campaigns on different messages concurrently
and Volkswagen used it beautifully by launching
campaigns to highlight speed as well as safety features
of their different models Jetta and GTI at same time. By
doing this it catered to different segments of audience
and also refrained from positioning its brand in a single
light. These campaigns helped them to push their
conflicting but core messages.
Mobile Marketing
Volkswagen has also embraced Mobile Channel quite
well .It managed to increase its reach by launching its
wap site (http://m.vw.com) and thus entering the mobile
space. On the site, consumers can search for deals,
e-GlobuzZ, Vol I Issue IV, October-December 2010
look at different features of the car, get quotes, and
find retail locations and click-to-call. Besides this it
has also been launching iPhone applications as well as
dabbling with mobile advertising. The freely
downloadable Volkswagen Polo challenge, Real
Racing GTI and Scirocco R 24H Challenge games
have helped generate customer awareness and
interest about their cars.
Viral Marketing
One of the notable mentions are the viral videos like
piano stairs, fast lane, etc. Which have been massive
hits on cyber space. Apart from this it have series of
short online films on the International website which
attempts to make the customers aware of the salient
features of their new offerings. This is done through 30-
second humorous clips which showcase the features of
the vehicle in the end.
Innovative Marketing
Volkswagen came up with talking newspaper ad in
India which created waves across the nation. With this
campaign it aimed to get mindshare of millions of
Indian customers by building brand image of
Volkswagen and launching their new offering 'Vento'.
Besides they also tried Roadblock Advertising in Print
Media as a brand building exercise. This has definitely
helped them in generating showroom traffic and
increase buyer consideration.
Market Segmentation
Volkswagen has been experimenting with cost
leadership strategy for emerging markets. It intends to
strengthen its presence in countries like Indonesia,
India China etc. It has collaborated with Ogilvy and
Mather Indonesia for an integrated marketing plan
regarding launching VW products. By doing this the
group aims to increase its presence in Indonesia through
the upcoming Indonesian motor show and boost sales of
the existing offerings.
Emotional Branding
Volkswagen also aims to further bolster its presence in
the European market by filling gaps in its product line.
Page 15
 International marketing
The volkswagen story(cont.)
For decades Volkswagen did not have a proper sports
coupé model to satiate the needs of the European
customers. The sports coupé, Audi TT, was the closest
that came to cater to the market left vacant by the
demise of famous Coraddo.
It also unveiled Iroc at the Berlin festival. Iroc is the
upgraded version of the Sirocco which was well
received in European as well as U.S. markets. With
Iroc, Volkswagen intended to reclaim its share of the
sports coupé market. This fulfilled Volkswagen's need
for more emotional brands. The move was
Volkswagen's strategy to increase sales by taking
advantage of the emotional attachment its popular
yesteryear models had among a niche segment of car
buyers.
Future Sustainable Marketing
It has unveiled a new global image and marketing
campaign for the VW passenger-car brand called
“Think Blue”. This campaign highlights the brand's
focus on building cars that are more fuel efficient and
environmentally friendly than previous models. Thus
"Think Small has become Think Blue" and with this
company wants to highlight corporate mindset of
Volkswagen brand's ecologically sustainable activities.
They want to prove that Volkswagen leads the way in
providing efficient and sustainable mobility for
everyone.
Challenges
Volkswagen is a famous international brand name that
e-GlobuzZ, Vol I Issue IV, October-December 2010
has traditionally been associated with the mass market.
However in future company is also attempting to make
a stronger presence into luxury-car segment which is
dominated by established brands like Mercedes and
BMW. Its first venture into this market segment was
with the new Passat V6 Syncro, which was out of the
price range of the typical VW buyer. Even though VW
owns Audi, Bentley, and Lamborghini, amongst other
brands but it is difficult to stretch their brand upwards,
when consumer perceptions still associate the VW-
branded cars with smaller and less prestigious vehicles.
Such brand associations do not appeal to customers of
BMW, Mercedes. Hence VW will need to do a
considerable amount of consumer perception
management and distributor education to successfully
bring any of its VW branded models into that league.
Lastly, all these marketing practices in the international
market, acquisition plans and strategies strongly
suggest the aggressive expansion plans of Volkswagen.
Clearly Volkswagen attempts to wrest away the title of
largest automobile manufacturer from Toyota by 2018.
Rustling up feathers in the competitors' camp, the
Volkswagen AG group certainly seems poised to be a
market leader in the years to come.
Shinu N. U.
PGDM-IB 10-12
Page 16
Talent Management- Maintaining continuous flow in
Talent Pipeline
A cross boundary Challenge
A guest article by anil kumar sinha

The rapid pace at which business and industry has

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

A survey of the Fortune 500 Companies in 2009

Companies in West have experienced that this approach
revealed that more than 40% of the time of the Business
has led to several advantages. Firstly, there is
Leaders is devoted to nurturing and developing people.
tremendous synergy between the requirements of the
This in the current scenario and the one which is likely
business and what gets taught in B-schools. Secondly, it
to emerge in their opinion is key investment in future.
provides a very structured foundation both for the
industry as well as the students to identify and work on
The challenge is varied across different regions and
what is mutually best fit at the end of a reasonably
economies. For instance, in a fast growing economy
decent association and on some rationale. Moreover,
like India , where there is still a strong base , “make or
instruments like competency based selection further
buy “ i.e. growing talent within or hiring at lateral level
help in this process.
still exists . But in a developed economy like US or
Germany there are severe limitations on the “Buy"
The base or foundation having got created and once a
option for sheer reason that either this option is not
person becomes a part of a Company like Emerson Inc.,
available or if available a large number of organizations
he becomes a part and parcel of its Talent Development
cannot afford it. Issues like loyalty and how long this
Process which today extends far beyond mere
category of talent would remain are also an issue.
'Competencies getting Identified'. The focus is more on
the Development aspects. Individual Development
Consequently identifying, on boarding of talent and
Plans have a stress on Projects, development
continuous efforts at developing their competencies
assignments and secondments rather than inputs
and honing their skills is an organizational issue and not
through classroom or training alone. The latter though
just KRA of someone in the HR department.
does form a part of the IDP but is more as a supplement
Companies like GE believe in the gospel 'catch em
to the former. An important aspect is the Top
young'. The campus initiative is not restricted to a
Management attention which this is getting, who
presentation and selection process. It is a year long and
typically will have a structured review of the outcome
continuous exercise characterized by frequent
of all these initiatives and how does it fit in with the
exchanges. For instance, students getting attached in
overall current future requirements of the organization
Projects in GE units and the experts from GE gets
in terms of the Succession Plan for the key and critical
actually involved in teaching the students in their
positions within the organization. A recent trend also is
respective areas of expertise. Actually it begins even
t h at wh i le t h e o rgan i zat i o n s d o o wn u p th e
earlier with Universities and Management schools
responsibility for development, individuals concerned
taking input from the industry on an ongoing basis
are equally liable for their development. If one does not
while developing their course and curriculum, a trend
take the process and various steps in it seriously it is
which is yet to strike roots in the Indian context.
made very clear by organizations that such individuals
e-GlobuzZ, Vol I Issue IV, October-December 2010 Page 17
Talent Management- Maintaining continuous flow in
Talent Pipeline
A cross boundary Challenge
A guest article by anil kumar sinha(cont.)
should not aspire for higher responsibilities or role and
leadership positions. There are some companies where
this becomes reason for a non interested person being
shown the exit door. Because like organizations,
individuals who do not show zeal for their growth and
development, lose relevance.
A look at the Performance Appraisal document and the
key result areas of any senior manager of GE further
strengthens the importance which is attached to Talent
Development. One of the important aspects on which a
manager is measured is the initiatives taken by him to
develop a successor for his position and the results
thereof. More and more companies are also investing in
developing the mentoring and coaching skills of
managers thereby providing them with tools and
abilities to be effective on these aspects of their role.
At the outset, the “buy” aspect of this issue had been to
some extent been discounted. However, recruitment of
experienced talent does happen in large measure even
while internal initiatives are getting actioned. In this
respect also there are new trends. Expat assignment in
days gone by would typically mean a “White Skinned”
manager from a company coming to a country like India
or China with a very hefty pay packet and several perks
to overcome “ hardships” in working in a these
countries. Such managers would come on a time bound
2-3 year assignment, lot of times a part of their
development plan but more often than not by the time
e-GlobuzZ, Vol I Issue IV, October-December 2010
they could actually start making contribution, their time
to pack up would be knocking. MNCs did realize this
and took steps to indigenize senior Managerial
positions in these countries. However, today things
have made a complete turnaround with Indian or
Chinese or Eastern European expats working in
regional offices or headquarters of MNCs. Not only
these expats come relatively cheap but bring with them
aspects of work culture which has brought in new
energy within these Organization. Testimony to this is
also borne out by the critical and key positions occupied
by this category in the Fortune 500 Companies. HUL
the Indian arm of Unilever is known for the talent it
provides at the leadership level to its parent body.
Businesses and Economies which have come into fore
later on the time scale have the advantage of not
reinventing the wheel. The learning curve would be
much shorter. But one must not be oblivious of the fact
that a Talent Management Program which is successful
in a company may not be the same in another company.
There are some contextual factors which would need to
considered and factored in. A long term focus and top
management support are vital for its success. Also
critical is the fact that there should not be any gap
between preaching and practicing.
Mr. Anil Kumar Sinha
President, Human Resource Dept.
HINDALCO
Page 18
 ALUMNI Speak
Mr. Harshdeep singh bhatia, commodity trader at stemcor & mr.
Manish gadia, vice president at hsbc
Mr.Harshdeep Singh Bhatia is currently
Commodity Trader at Stemcor, India, based in
Mumbai. He is a 2005 batch Alumnus of PGDM
(IB). We indicate below his responses to our
questions
Q1. What has your experience been like since you
left college?
It has been a fantastic journey so far, although I would
like to believe it's just a start...there is loads to learn and
improve upon. I have learnt so many new things in
terms of business, products, and cultures. It has given
me opportunities to travel across the world, make new
friends, have new teachers who "walk the talk" and
learn about the world from them. At the cost of
sounding hackneyed, everyday is a new learning...!!
Q2. To what extent does your learning as an IB
student in the two years that you spent in SIMSR,
come handy in your job?
2 years in SIMSR teaches you lots in terms of excellent
case studies and they help in knowing the best practices
across the world. The important thing for a student is to
find its relevance in the existing world and every
student/budding corporate has to develop his own way
for connecting with international practices in the Indian
context.
It is very important that one has the basics right
especially for IB rules/UCP terms/Shipping terms if
one is looking for career in international trade. It is like
cricket, no matter how much of net practice you may
have, every match is different and what helps you in is
how strong you are with "BASICS" which always stay
the same, only the execution is improvised, based on
situations.
Q3. What advice do you have for current IB students
at SIMSR?
One of the best ways to learn is to have forum
discussions and work on case studies in a group.
Another thing which we did not do while in B school but
which helped me later was reading books on Legal
e-GlobuzZ, Vol I Issue IV, October-December 2010
cases on arbitration especially Shipping and
International Terms of Trade. They definitely help.
SIMSR has one of the best libraries, make full use of
same. Enjoy every moment and make friends for life..!!
While choosing your job, avoid a myopic view and do
not just look for salary. It feels great for a couple of
months to be regarded as the "BEST PACKAGE"
picker but that lasts till you are in college. Rather if you
love the job and are good at it...money follows.
Mr. Manish Gadia is currently Assistant Vice
President at HSBC based in Mumbai .He is also a
2005 batch Alumnus. The same questions were
posed to him.
Q1. What has your experience been like since you
left college?
The experience was initially a big struggle as I switched
industry from retail to finance after which I came into
the groove. I got used to the work and the effort it
requires. An MBA served as ammunition to face the
struggle and gave me a platform to excel.
Q2. To what extent does your learning as an IB
student in the two years that you spent in SIMSR ,
come handy in your job?
Most of the stuff which is taught at MBA can really be
applied in the practical scenario, only the
interpretations differ. Here is one of the experiences
where the IB course helped me. "I am proud of being a
member of the team which won the “HSBC Dominate
International Business challenge” held in Canada. The
challenge was to provide an innovative proposal to
grow cross border business. Team leaders of nine global
finalists were called to Canada for the final
presentation. The most lucrative and creative team
proposal to increase cross-border revenue won the
Grand Prize of USD 10000 cash and a chance to
commercially implement the idea. Criteria of judgment
were Strategic Alignment with Global HSBC Strategy,
Page 19
 ALUMNI Speak
Mr. Harshdeep singh bhatia, commodity trader at stemcor & mr.
Manish gadia, vice president at hsbc(cont.)

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

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

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

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

Debate on “IS china an opportunity or threat to other
emerging economies?”
For
China is more of an opportunity than a threat to other
emerging economies, the main ones being India, Brazil
and Russia. What makes me say this is that, China with
its might has been able to pave the way for the other
emerging economies. It is a learning ground for them,
an almost live case study. With the world's largest
population, it has been able to achieve tremendous
growth, significant enough to attract attention. With its
rising gold reserves and the ongoing currency war with
the developed economies, it shows what a so called
'emerging economy' can do to the world.
To begin with, the infrastructure in China is inspiring.
The cities like Beijing, Shanghai, and Shenzhen etc
have skyscrapers which compete with some of the best
cities in US. Spending on infrastructure has been
increasing at rate of around 25 percent a year in recent
times. There is an old Chinese saying that goes: “If you
want to be rich, you must first build roads”. A lot of
money is spent on infrastructure in China including the
building of new bridges, roads, dams, railroads, power
plants, port facilities and airports all around the country.
No other country spends more and devotes as much
resources to infrastructure projects as China. The
Chinese sometimes achieve near-miraculous results by
mobilizing massive labour forces. Transportation is a
major factor in China's national economy.
By 2030 China wants to increase the amount of nuclear-
power-produced electricity 20-fold to 120 to 160
million kilowatts. China is the only place in the world
where nuclear power generation is regarded as a major
growth industry. Zhongguancun, in the Haidian
districts in northwest Beijing, is sometimes called the
Silicon Valley of China. It is the home of many Internet
and computer firms as well as 40 universities and 138
scientific institutions and many of China's 810,000
research scientists and engineers. Manufacturing
sophistication is rising all the time. China is no longer
just a producer of toys, textiles and shows. It has made
the leap into high-end manufacturing.
Telecommunications companies make electronic
switches that route phones calls and Internet traffic
through telecommunications networks. There are also
e-GlobuzZ, Vol I Issue IV, October-December 2010
factories that make car engines, food processing
machinery and air conditioners. China has the most
advanced biotech program after the United States. It has
20,000 people employed at 200 labs devoted to biotech
research and spends about $300 million a year on it. The
Asus Factory in Suzhoum near Shanghai, which makes
laptops and desktops for Dell and cell phones and other
electronic products, is a square kilometre in area. In
2009, the world's three largest global banks, measured
by market capitalization, were all Chinese. In 2006,
China didn't have a single bank in the world's top 20.
Foreign companies doing business in China are
generally required to form joint ventures with Chinese
companies instead of forming wholly owned
subsidiaries. The mix of cheap labour and stable prices
and stable politics is what foreign companies find
appealing. A Wal-Mart executive told the Washington
Post, “There might be places in other parts of the world
where you can get inexpensive labour. If we have to
look at a country that's not politically stable, you might
not get your order on time. If you deal with a country
where the currency fluctuates daily, there is a lot of risk.
China happens to have the right mix.”
It is now up to the other emerging economies to look at
their strengths and tap the opportunities coming their
way just as China did.
Riddhi Todi
PGDM 09-11
Against
United States President Barack Obama's chief
economic advisor Larence H. Summers, recently,
mentioned that the growth model of India was people-
centric known as 'Mumbai Consensus' and that of China
was export oriented known as 'Beijing consensus'. (On
the lines of how specific economic policies promoted
by IMF and World Bank were described as Washington
Consensus). The average GDP growth of China has
been over 9 % and 300 million people were lifted out of
poverty over the last two decades. As mentioned above,
China's growth has largely been export oriented.
Page 21
Debate on “IS china an opportunity or threat to other
emerging economies?”(cont.)
Domestic consumption has been relatively low. Its
current account surplus has been a real strength of its
economy. Such an astounding and fast paced growth
has given its powers (financial and due to that military)
anyone would envy.
China has been at the receiving end of quite some
accusations, and most of them being true, with respect
to its currency and its devaluation. China has kept its
currency rate artificially undervalued giving it an unfair
advantage whereby it boosts exports and limits
imports. And they have reaped the advantages of this by
having a current account surplus (Exports exceeding
imports) but at the same time due to tight controlling of
its economy it has avoided its side-effects such as
inflation. Due to a current account surplus, a large
inflow of dollars takes place in the economy. In any
other emerging market such as India, it has a two-fold
effect. One, the domestic currency should appreciate
making exports relatively less profitable. Secondly,
because the domestic currency appreciates, the central
bank intervenes and purchases these dollars releasing
more of domestic currency in the market resulting in
inflation. But China due to a controlled exchange rate
ends up avoiding these economic problems and gains
an advantage. Thus, when it trades with other emerging
markets whose currency valuation is market-based and
not controlled to a great extent, terms of trade lie
heavily in favour of China
China, on the other hand, has not been responsible in
using its financial and military muscle. It has been
supporting Pakistan's nuclear program and supplying it
with arms so as to counter the dominance of India in the
region in spite of knowing the instability of the region.
China has also been controlling a part of Jammu and
Kashmir known as the Aksai Chin in spite of that being
a part of India. Its claim of Arunachal Pradesh has not
helped to the cause and betterment of relations between
India and itself causing further instability. This has
given rise to the Japan-India-South Korea axis in
opposition to the China-Pakistan-North Korea axis. All
signs pointing to growing discontent among the
countries involved.
Many, in future, see China as the power replacing the
U.S. and its dominance. But does one want it? A
e-GlobuzZ, Vol I Issue IV, October-December 2010
communist power dominating the world affairs is not
the best situation one can have. It lacks the maturity a
nation needs to have to be the big brother of the world.
One might blame the U.S. for misusing its powers at
various instances (read Iraq) but one just cannot deny
that it has given a lot of international aid and support.
Chinese products and services, though of low cost, are
also low in terms of quality. A survey carried out by
Harvard Business Review revealed that Chinese
consumers in China's urban centers themselves have a
low opinion about “Made in China” goods. These goods
have been extensively exported (or say dumped) to
other emerging markets where they are in demand
because of their low cost, affecting existing market
players revenues, but at the same time they are low in
quality which has its own set of implications.
China has a huge population with a growing per capita
income and thus a dream for most brands to enter the
country. This is the reason, that despite of its various
restrictive policy and regulations, companies are
willing to enter the nation.
Now that China is producing a whole range of products,
many see it as a market not only for selling finished
products but also raw materials. Its cheap labor is one
another reason that companies see as an opportunity to
set up manufacturing units in China to save cost.
Also a bipolar or multi-polar world, wherein more than
one power dominates, unlike in the past wherein U.S.
was the one calling the shots, could be envisaged-
provided China has a change of attitude. The IMF &
WTO needs to reassess its role in dealing with China
being more assertive and pressurizing China to tackle
the currency devaluation and other situations of global
importance.
To conclude, I would like to quote Uncle Ben, a
character from the movie Spiderman, “With great
powers comes great responsibility”. It is how China
handles these responsibilities that will determine
whether it can be an opportunity for others or threat to
other emerging and developed nations.
Parth Shah
MMS 10-12
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 International news
VEDANTA CAIRNS Tie UP
Vedanta, a leading diversified mining company which
is in news with the ongoing controversy over bauxite
mining in Orissa, is once again in headlines with
takeover of Cairns India. Vedanta confirmed recently
that it is going to acquire 51-60 percent stake in Cairn
India, fourth largest oil company in India for which it is
paying close to $9.6 billion leaving Edinburgh based
Cairn Energy with up to 10 percent stake. The purchase
is going to be split between Vedanta Resources (40
percent) and Sesa Goa, an iron ore producer (20
percent). It is reported that Vedanta is paying Rs.405
($8.66) per share of Cairn India which includes Rs.50 a
share non-compete fee in exchange for the British oil
company agreeing not to engage in any oil and gas
exploration or extraction in India for three years. The
controversial part here is that none of the minority
shareholders will have a share in it. However, the
acquisition must still be approved by the Indian
government which have some reservations about
allowing a company with no track record in energy to
take over such a crucial energy asset which is India's
largest onshore oilfield located in Rajasthan.
Government is not approving the deal citing serious
issues of conduct and corporate governance involved in
the take up. It is also reported that state-owned ONGC,
which is a partner in the Rajasthan development may
have the right of first refusal over any share sale. Indian
oil companies are also considering a joint counter-offer
to Cairn. In spite of the controversies, Vedanta hopes
that the deal will be completed by the first quarter of
2011. If the deal goes ahead, Vedanta would be only the
second diversified mining group in the world after
Anglo-Australian BHP Billiton to move in to energy
production.
Sujitha V.
PGDM-IB 10-12
e-GlobuzZ, Vol I Issue IV, October-December 2010
Tata-corus deal
Tata Steel acquired the Europe`s 2nd largest steel giant -
Corus 3 years back and became the 5th largest steel
producer in the world. TSL`s main objectives behind
this acquisition were to create Greenfield capacities in
India and abroad, foster technology transfer and cross-
fertilization of R&D capabilities, expand its presence
globally and exploit a powerful combination of high
quality developed and low cost high growth markets.
On 27th Sep 2010, Tata Steel`s European subsidiary
Corus`s name has changed to Tata Steel Europe. Tata
Steel Europe has been focused on increasing cost
savings and raw material self-sufficiency, and working
with customers to develop tailor-made, value-added
solutions. Tata Steel is paring costs by rationalising
operations in Europe and restructuring interest
payments.
The world economy has experienced an economic
slowdown in the last 3 years which has equally hit the
steel industry. There was a huge drop in the steel
production and capacity utilisation which resulted in
lower profits. It led the companies to make substantial
job reductions to reduce costs and strengthen their
competitiveness.
The current challenges faced by Tata Steel Europe
includes reserving cash for future plans and growth,
restructuring the European operations to make them
competitive globally and providing raw material
security in terms of iron ore ownership and coal mines
to European operations. Also, increasing stringent
European environmental requirements and stricter CO2
emission allowances pose a major threat to the long-
term sustainability of the steel-making and steel-
consuming industries in Europe. Will programmes like
“weathering the storm” and “fit for future” ensure a
bright future of Tata Steel Europe????
Manvinder Sodhi
PGDM-IB 10-12
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 Did you know?
National Trade Data Bank (NTDB)
The U.S. Government's most comprehensive source of
international trade data and export promotion
information. Types of information on the NTDB
include: international market research, export
opportunities; indices of foreign and domestic
companies; how-to market guides; reports on
demographic, political, and socio-economic conditions
for hundreds of countries; and much more.
Middle Market
A market segment generally represented by financing
under $2 million. In leasing, this sector is dominated by
single investor leases.
Downstream Dumping
It is a type of dumping in which the primary producer
first sells its product to another domestic producer at
below fair value or cost. The second producer then
further processes the product and exports it to another
country at a lower than normal cost.
Pan-Arab Free Trade Area (PAN-ARAB)
It is an agreement to preserve the economic interests of
Arab States, as well as develop economic and trade
relations among Arab States and the outside world.
New-to-export (NTE)
It is the name of the circumstances of a company that
either engages in export activities for the first time,
engages in exportation for first time in twenty-four
months, or has only exported to because of prior
e-GlobuzZ, Vol I Issue IV, October-December 2010
unsolicited orders. Export assistance is available to
companies with this classification.
Real Exchange Rate
It is a measure of the nominal exchange rate that has
been adjusted for inflation differentials since an
arbitrarily defined base period.
Keiretsu
Collaborative groups of vertically and horizontally
integrated firms with extensive share cross-holdings
with a major Japanese bank or corporation at the center.
Market Maker
A financial institution that quotes bid (buy) and offer
(sell) prices.
Zaibatsu
It is a Large family-owned conglomerates that
controlled much of the Japanese economy prior to
World War II. The four Zaibatsus (Big Four) are
Mitsubishi, Mitsui, Yasuda, and Sumitomo whose roots
date back to the Japanese Edo period.
Orderly Marketing Agreements
Agreements between two or more governments to hold
back the growth of trade for certain products by limiting
exports and imposing import quotas.
Garima Bharadwaj
PGDM 09-11
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