January-March 2010 Volume I Issue II

e-GlobuzZ
International Business Society @ SIMSR
Cover Story

How SOUR is the SWEET Industry?

S I MSR K J Somaiya Institute of Management Studies & Research

Foreword
Dear Readers, It gives me immense pleasure to bring to you the second issue of e-Globuzz, JanMar '10. We hope you liked our first issue, Nov-Dec '09.The International Business Society (IBS@SIMSR) organized during the last four months some important events like an interactive session with international experts on WTO for students and faculty.We interacted with a delegation of Management faculty and students from Deakin University, Australia. We had the privilege of hosting an interactive session with Mr. O K Kaul, Executive Director,TATA International Limited, for our students and faculty. In fact, this issue includes highlights of Mr. O K Kaul's interview taken by our students of International Business this week. We also had an interactive session with Mr. Walter Stechel, the Consul General for Federal Republic of Germany (FRG) in India. As a part of the International Business celebration at Samavesh '09, we had the privilege of having with us eminent speakers from ECGC and TATA International Limited, who gave us meaningful insights on country risk evaluation and international transfer pricing. These sessions hosted by IBS@SIMSR attended by a large cross section of SIMSR students and faculty went a long way in complementing the classroom learning at SIMSR with the expertise of industry leaders, international professionals, students and faculty from universities abroad. Continuing with the format of the inaugural issue of e-Globuzz, which was highly appreciated, we have covered in this issue, Mr. O K Kaul's interview and articles contributed by SIMSR students, Corporate Executives and Industry Experts on various aspects of international trade, international marketing, international finance, international logistics and world affairs, complete with a popular crossword. Our next issue is planned in July '10, which we trust gives you enough time to send us your articles for the third issue of e-Globuzz. We also look forward to your feedback and continued support. Till then we will miss you.

Prof C P Joshi Faculty Mentor

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Cover Story

The Confectionery Sector

How SOUR is the SWEET Industry?

Business Leader in Focus: Aiko Toyoda Company in Focus: Wal-Mart Country in Focus: Germany International Logistics: Green Supply Chain USA Health Reforms Cover Story: How Sour is the Sweet Industry? The Confectionery Sector International Marketing: Marketing of Avatar Interview with Mr. O.K. Kaul, ED, TATA International Debate Copenhagen: Success or Failure for India? Book Review: The New Age of Innovation International Business News Did you know these terms? Crossword # 02

TOYOTA
Business Leader in Focus Aiko Toyoda - President, Toyota Motors
He likes to race cars and just completed a 24-hour endurance competition with three other team members in a Toyota supercar at Germany's famed Nrburgring, a Grand Prix-style race. When the 52 year old Toyoda Nicknamed as "Prince" by Japanese media took over the post from Toyota President, Katsuaki Watanabe, in June 2009, the company expected Toyoda to inject an international approach to correct the miserable performance of the company's overseas operations which led to the first major losses in 70 years and he may not have expected the kind of situation he is facing. While getting his law degree from Tokyo's prestigious Keio University, he dreamt of playing Olympic field hockey. Instead, he went on to get his master's degree in business administration at Babson College in Wellesley, Mass. He set out on a career away from autos by joining an investment bank and working as a management consultant, living on Manhattan's Upper East Side, then moving to London. At Toyota his musings about a possible career were met with a lukewarm response from his father, Shoichiro Toyoda, who told his son: "No one wants to be The toughest task ahead of Mr. Toyoda is to regain and maintain the faith your boss." But he believed he could make a unique contribution because in brand. In case of Toyota the quality of its product, the honesty of its he was a young president by Japanese standards. claims and continuous improvement are at its core, and the recent recalls But, seven months into his job and one month into the worst crisis in his company's history, the grandson of the company's founder is facing strong questions from all corners of the world for manufacturing of defective vehicles. The company is under scanner over the company's handling of customer safety concerns and its series of recalls over potentially faulty accelerators and braking systems. Mr Toyoda is facing harsh criticism for shattering the Japanese manufacturer's management. Mr Toyoda, a corporate implant of mighty Japan, groomed from birth for leadership, educated abroad has followed steady ascent through the ranks of the company reflecting a man with a decent grasp of the business, a hands-on approach to management and a relatively high level of international sophistication. If Toyoda is fazed by the challenges awaiting him, he never betrays it. The all criticism does not mean, he will fall and resign. The much talked by Anirudha Kandharkar, PGDM IB 2009-11 have shaken the foundation of the brand. The company has already started taking essential steps by the recall of vehicles worldwide, maintaining communication through democratic channels (e.g. Twitter) to maintain a dialogue with its customer base reinforces its intent to make good. He vows to rein in overcapacity, reorganize operations to strengthen control, and get the company back to basics. He especially wants to re-instill dedication to one of the pillars of Toyota's production system: genchi genbutsu, meaning "go and see for yourself." These strong moves show a commitment to its brand positioning values and promise. accelerator problems were generated under the control of his two predecessors. Mr Toyoda very nearly predicted a crisis of some sort when he said last June that the company had grown too fast. When he reiterated there was a faint glint behind the apology; it may never work, but he may have it in mind to trim the behemoth his forebears created.

He vows to rein in overcapacity, reorganize operations to strengthen control, and get the company back to basics. He especially wants to reinstill dedication to one of the pillars of Toyota's production system: genchi genbutsu, meaning go and see for yourself."

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Company in Focus
Company Overview: If you feel that your purchases have become convenient and cost effective, then here is the company to know about. Wal-Mart Stores, Inc. was established in 1962 and only to change the way retail industry operates all over the globe. Its unique strategic position is the outcome of hard work of the founder Mr. Sam Walton David, and subsequent President and Chief Executive Officers, Mr. David Glass, Mr. Lee Scott and recently appointed Mr. Michael T. Duke. My Dad created Wal-Mart to help people save money so they can have a better life. This mission remains as relevant now as it was in 1962, says Rob Walton, Chairman of the Board for Wal-Mart. In sync with it the company focuses entirely on EDLC-EDLP, that is, Everyday Low Cost- Everyday Low Prices. Walton opened his first Wal-Mart in Rogers, Arkansas. The company went public in 1970 and added more stores every year. In 1990, Wal-Mart surpassed key rival Kmart in size. Two years later, it surpassed Sears. The store formats include the Discount Stores, Super Centers and the Neighborhood Markets. Their way to success was by balancing the deliverance of value, variety and quality to satisfy customers and build long term relationships with suppliers, and its employees whom they refer as-'associates'. WalMart efficiently deployed technology for operational efficiency in its logistical and marketing processes. Wal-Mart has sustained firmly on its business model. Wal-Mart's cost leadership position is derived from firstly, the economies of scale. Thus thinner margin is compensated by volume. Secondly, economies of scope, wherein emphasis is laid on categories in which the Wal-Mart's brand has authority and can offer a full line of products. Third is the stability and consistency of the management. Financial Performance: Of the total business 63.7% is contributed by Wal-Mart's operations in the USA where Texas and Florida have highest concentration of stores, 24.6% sales come from International operations where Mexico(1197), Central America(502) and UK(358) have maximum number of stores, and remaining 11.7% comes from the Sam's Club. Global Presence: With a clear intention to focus on price leadership in every market to drive global leadership, it has set up 3615 international stores, in total of 7873 stores. It entered various markets recently by way of joint- ventures, and acquisitions. Some of its recent moves include opening a Hong Kong regional office to facilitate long-term opportunities in Asia with focus on Japan, India and China. In October 2007, the Company acquired the majority of the common shares and all minority preferred shares in its own Japanese subsidiary, The Seiyu Ltd. In January 2009, the Company acquired approximately 58.2% of the outstanding D&S shares Distribucin y
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Servicio, Chile.In February 2007, the Company announced the purchase of a 35% interest in BCL. BCL operates 101 hypermarkets in 34 cities in China under the Trust-Mart banner. In August 2007, the Company announced an agreement between Wal-Mart and Bharti Enterprises, to establish a joint venture called Bharti WalMart Private Limited to conduct wholesale cash-and-carry and back-end supply chain management operations in India, in compliance with Government of India guidelines. In addition, Bharti Retail entered into a franchise agreement with an Indian subsidiary of Wal-Mart to provide technical support to Bharti Retail's retail business.

Wal-Mart, Partners and Society: Wal-Mart created more than 63,000 jobs worldwide in 2009. Its Sustainability 360 is the Companywide effort to take sustainability beyond their direct footprint to encompass WalMart's associates, suppliers, communities and customers. As the purchasing agent for the customers, Wal-Mart's goal is to encourage improvements in sustainability and ethical practices among suppliers. The Wal-Mart Foundation is dedicated to supporting programs that help people live better, primarily by expanding access to education, health care, and job opportunities, as well as by promoting responsible sourcing. Wal-Mart is an economic force, a cultural phenomenon and a lightning rod for controversies. Be its unprecedented power to shape labor markets globally or changing the way entire industry operates, and pressurize the suppliers to sell at cheaper prices. Wal-Mart has explored new sectors of retail, used technology favorably and adopted a frugal corporate culture to clearly be the leader in retail and make its Frugality, the global in thing. by Anchal Sachan PGDM IB 2009-11
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Country in Focus GERMANY

Located in the heart of Western Europe, Germany is the continent's most industrialized and populous country. It is a federal parliamentary republic of sixteen states (Lnder), and is a major power with the world's fourth largest economy by nominal GDP and the fifth largest in purchasing power parity. Germany is recognized as a scientific and technological leader in several fields. Brief History The Great Depression, which began in 1929, led to a polarization of German politics and to an upsurge in support for the Communist and Nazi parties. In 1933, the Nazis under Adolf Hitler gained power. The Nazis imposed a totalitarian regime and followed an expansionist foreign policy that led to World War II. After Nazi Germany's defeat, the country was divided into democratic West Germany and communist East Germany. In 1990, East Germany was reunited with West Germany. Government and Legal System Germany is a federal, parliamentary, representative, democratic republic, with rights guaranteed by the Basic Law, or constitution. Protection of Property Rights Intellectual property is well protected in Germany. Germany is a member of the World Intellectual Property Organization and a party to most of the major international intellectual property protection agreements. Culture Germany, in general, is a very conservative country and this feature is also reflected in their way of business. They have very distinct, somewhat formal, ways of working. Prescribed rules, distinct etiquettes are what they adhere to. Besides their conservatism, their innovation, productivity and excellence are distinct characteristics of German business. The Germans emphasize on individualism, masculinity, and uncertainty avoidance. Power distance and long-term orientation are both ranked considerably lower than the others. This illustrates Germany's belief in equality and opportunity for each citizen, as well as its ability to change and adapt rapidly.

The Chancellor is the head of government and exercises executive power, where as The President is the head of state, invested primarily with representative responsibilities and powers. The Judiciary of Germany is independent of the executive and the legislative branches. Germany has a civil or statute law system that is based on Roman law with some references to Germanic law. Economy Germany is the largest national economy in Europe. In 2008 Germany's GDP was about US$2.9 trillion on a purchasing power parity (PPP) basis and nearly US$3.65 trillion at current exchange rates. Germany is the world's second largest exporter with $1.170 trillion exported in 2009. Most of the country's products are in engineering, especially in automobiles, machinery, metals, and chemical goods. Germany is the leading producer of wind turbines and solar power technology in the world. Investment Climate Germany has a modern financial market sector and transparent and effective laws and policies to promote competition. It has strict domestic anti-corruption and anti-bribery laws and is considered one of the least corruption-plagued countries of the industrialized world. Foreign and domestic entities have the right to establish and own business enterprises, engage in all forms of remunerative activity, and to acquire and dispose of interests in business enterprises.

Foreign Relations Germany has played a leading role in the European Union since its inception. It is also a partner of NATO and is fully protected by NATO agreements. As one of the world's leading industrial nations, Germany has partnerships and special agreements with countries all around the globe. That makes it a safe place to do business in. In the area of development aid, Germany is one of the largest net contributors of the UN and has several development agencies working in Africa and the Middle East. Conclusion From manufacturers of complex nanotechnology solutions to energy efficiency consultancies, Germany has become a pacesetter for modern products and services on highly competitive international markets. It has the capability to become Europe's most successful economy. Already today, Germany has attracted the highest concentration of American investment in Europe totalling more than 130 billion euros and directly creating more than 800,000 jobs. In the year 2020 no international company will be able to ignore Germany as a business location. As the continent's entrepreneurial hub, the country is the best address for every investor in Europe. by Lubna Akhtar PGDM IB 2009-11
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International Logistics - Green Supply Chain

Anil Kumar, Sr. Consultant, IBM Global Business Services SAP Practice
What is the one of the questions that is one of the top priority of all executives across the globe apart from the economic scenario? According to a recent 'Top of the Mind' study by 'The Consumer Goods Forum', sustainability and corporate social responsibility feature amongst the top three priorities of the consumer goods industry. A similar finding is resonated in the IBM Institute for Business Value study. Many of us would be thinking why companies and businesses are thinking about Green Initiatives, when they should be focusing their energies on growth and other strategic issues. Energy and water efficiency not only helps the planet, but also saves on bills. The technology employed to optimize logistics not only reduces fuel usage and toxic emissions, but makes for a leaner, more efficient and cheaper supply chain. Aligning an organization's green strategy with its overall business strategy is paramount. This begins with a clear understanding of the overall corporate objectives and priorities, followed by carefully defined programs, goals and tasks that address environmental and stakeholder views. It creates a positive perception about the company and companies are better prepared to meet the regulations as and when they come. Sustainability makes perfect business sense. By driving operational efficiencies and adopting Lean and Green Supply Chain Management practices, companies are trying to reduce their carbon foot print. Below are the key areas where companies are channeling their efforts to turn their supply chains greener: Product Design and Redesign Companies are redesigning products to reduce energy consumption in the production and distribution. Innovations in product design are leading to reduction of some of the processes leading to Greener products. Green Manufacturing Reduced energy usage through streamlined production and greener supplier networks are helping companies become manufacturing Greener products. Route Planning and Shipment Consolidation By consolidating logistics and shipment dispatch companies are reducing their carbon foot print. Route planning has made the supply chain greener. Well, how does all this translate into business and what have been the results so far. Let us examine a few examples on how companies have used Sustainability, Green initiatives and CSR to achieve spectacular business results. Many times sustainability helps you beyond the usual cost saving. When a company champions of a cause, customers associate it with something good and are willing to pay premium price for their products. Consider the case of US clothing and adventure gear maker, Patagonia. Patagonia turned its fortunes by adopting an eco friendly product range by switching to organic cotton and changing the packaging to reduce impact on environment and a lot of other such initiatives. Patagonia's products not only became a big hit with the consumers but also allowed the company to charge a premium price. This strategic change turned Patagonia from near bankruptcy in 1996 to a company with thirty nine stores in seven countries and $ 270 million in revenue in 2006.
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In US, Wal Mart has redesigned its stores to reduce energy and water consumption. It has started harvesting sunlight to reduce the usage of electricity in its stores. This has not only made the stores Greener but also has helped Wal Mart in reducing the overall cost of its operations. IT companies have also joined the bandwagon and are coming up with innovative products which have reduced energy usage. IBM through its smarter planet initiative is working with organizations both public and private to help them turn smarter and more efficient.

Sustainability and CSR can also help companies in creating a brand presence. Consider the example of the 'Save our Tigers' campaign by Aircel. By associating itself with the noble cause of saving the tigers, Aircel has created a unique brand presence in the minds of the consumers. So when we think of saving the tigers, Aircel's name is always there in the back of our minds. In Bihar's rice belt, a group of individuals have founded a company, Husk Power Systems, which caters to the energy needs to the villages. The company uses rice husk to produce sustainable and renewable energy and is electrifying the remotest villages in Bihar. Sustainability and Clean Technology have become the focus of the governments and enterprises worldwide. From energy efficiency and renewable energy to efficient and lean manufacturing and supply chains, clean technologies have opened huge market for innovation. The entire Clean Technology industry is estimated to be worth more than trillions of dollars. Organizations and countries which are prepared to take on this new opportunity will emerge as leaders in the coming decades. So, start thinking how you can contribute and catch up on the business opportunity that is good for the world.

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USA Health Reforms

Puneet Kumar, Business Analyst, Accenture USA
US Health Reform
United States's health care reform plan is one of the most important bill which will have a major impact on US health care system, private health care insurers and on US economy in near future. US badly needs to revive its poor health care system filled with insurance frauds, skyrocketing premiums, uninsured families, unaffordable medical bills and personal bankruptcy. On February 22, 2010, President Barack Obama launched a new health care reform plan that is mainly modeled after the Senate Health Care Reform Bill. It will regulate the health insurance industry under a seven-member Health Insurance Rate Authority that could deny or limit substantial premium increases. This has traditionally been a state responsibility. Like the Senate Bill, it will create an exchange that allowed families and small businesses to shop for insurance plans. It will restrict on federal funding for abortion, but cuts back taxes on the high end health plans. remaining 43% is financed from general revenues. Because of rising health care costs, general revenues would have to pay for 62% of Medicare costs by 2030.

Impact on Private Insurers:

The Insurance business is dominated by a small group of large companies that has been gobbling up their rivals. In recent years, for-profit companies have bought up not-for-profit insurers around the country. There have been over 400 health care mergers in the last 10 years and just two companies dominate a full third of the national market.These changes were supposed to make the industry more efficient, but instead premiums have skyrocketed.This bill if gets passed will hurt the firm's bottom line and lead to much more competitive market. Health insurance in itself is not a quiet profitable line of business as critics seems to think. For every dollar paid as premium, 83 cents goes out in medical costs doctors, hospitals, and drugs. However consider WellPoint, the biggest private health insurer on Wall Street, which paid out 83.6% of revenues in expenses but the net profit after tax deduction came out to be princely 4.1%. Returns on assets are also key measure in profitability and are typically pretty modest. The health-care reform was dominated by the issue of the so-called "public option" - whether the government should offer an insurance plan that competes with those offered by private insurers. But that is out of picture now as per the new plan. If public option of health insurance would have come into picture then this 4.1% profit would have made quiet a significant difference between government and private sector.

Plan:
Insurance will be more affordable Sets up new competitive health insurance market Greater accountability to health care by keeping premiums down and prevent insurance industry abuses and denial of care End of discrimination for patients with pre existing conditions Stability in economy by reducing the deficit by more than $100 billion over next ten years and about $1 trillion over second decade

NAIC Response:
State regulators are working closely with congressional drafters to make certain that the legislation preserves the critical role of state regulators and continues the use of objective standards in rate review process. State regulators are pleased that President's proposal emphasizes state-based reforms but are concerned for about the inadequacy of the individual mandate which could lead to a dysfunctional market place and higher rates for consumers. The members of the NAIC are strongly opposed to any bill in which the federal government allows insurance carriers to sell their products in our states using the regulatory rules of another state. This misguided proposal would increase premiums for those who need insurance the most and eliminate important consumer protections. It would also fragment the insurance market and expose consumers to increased fraud and abuse.This concept must be rejected and the decision whether to allow, and under what conditions to allow, interstate sales of insurance should be left up to the individual states.

Reasons for Reform: Health insurance premiums have doubled in last 8 years, rising 3.7 times faster than wages, and increasing copays and deductibles threaten access to care.This forces families to sit around kitchen table and decide whether to pay rent or health premium. Many insurance plans cover only a limited number of doctors' visits or hospital days, exposing families to unlimited financial liability. Unaffordable medical bills are responsible for more than 50% of all personal bankruptcies today. Lack of affordable health care is compounded by serious flaws in health care delivery system. One-quarter of all medical spending goes to administrative and overhead costs, and reliance on antiquated paper-based record and information systems needlessly increases these costs.

Impact onUSA Economy:

The rising health care cost will devastate the federal budget in future. The US health care system contributes $2.5 trillion or nearly 18% to GDP, the highest percentage in the developed world. Health care reform is needed to stem the economic costs of frauds. Between 3-10% ($60-$200 billion) is lost to fraud. If those same percentages are applied to the proposed $436 billion Medicare program, the cost of Medicare fraud is $14-30 billion. Without health care reform, government spending on Medicare and Medicaid is unsustainable. These costs will rise from 6% (current) to 15% of GDP by 2040.That's because Medicare payroll taxes and premiums cover only 57% of current benefits. The
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Cover Story - Sector in Focus

Confectionery Sector
How Sour is the Sweet Industry? Sour
Market Overview: Confectionery is undeniably a part of everybody's everyday life.All of us reach for chocolates and candies at virtually every meal and many times during the day. Almost two-thirds of all confectionery consumption is driven by "emotional" as opposed to functional "need states"--presenting endless consumption opportunities to the buyers and myriad branding opportunities to manufacturers. Not surprisingly, the global confectionery market is expected to reach $152.37 billion by the end of 2010. Much of this recent growth has come from developing regions and countries, aided by the spread of multinational companies and their brands, as well as a growing base of increasingly affluent consumers in places such as Russia, China and India. In the developed world, much of the market's recent growth can be attributed to niche sectors, such as low-fat, low-sugar, organic and fair trade products. Mergers and acquisitions in this sector have also contributed immensely to growth and penetration in the developing markets. In 2012, the confectionery market in the BRIC (Brazil, Russia, India, China) nations is forecasted to have a value of $25.6 Billion. The confectionery sector is highly dependent on two primary ingredients; Sugar and Cocoa. Unfortunately, these commodities are subject to high price volatility which, in turn, puts an upward price pressure on production costs and consumer prices. This seriously affects the industry's sales volumes and profit margins. Market size and growth: The confectionery industry is categorized as follows: Chocolate confectionery: molded bars, boxed chocolate, chocolate countlines, novelties and chocolate straightlines. Sugar confectionery: caramels and toffees, hard boiled sweets, gums and jellies, medicated confectionery, regular mints, and power mints. Gum: sugar free gum, regular chewing gum, functional chewing gum and bubblegum Cereal bars: sports and energy bars and other bars. expected CAGR of 2.2% during the same period.Out of the broad categories in the confectionery industry, chocolate confectionery is the largest sector, accounting for almost 60% of total sales in value terms. By volume, however, sugar confectionery accounts for the majority of sales, with a share of 51% and gum holds only a 14% stake but is the fastest-growing segment. The per capita consumption of confectionery in most of the developed countries averages almost 11 kilograms. Also, per capita consumption of chocolate confectionery tends to be higher in northern European countries, while the Scandinavian markets command high per capita rates for sugar confectionery. The per capita consumption of chocolate is highest in countries like Switzerland, Germany, Austria, United Kingdom and Belgium.

The market for confectionery is valued according to retail selling price (RSP) and it includes applicable taxes. By the end 2012, the global confectionery market is expected to be worth USD 161.39 billion in terms of value, with an expected CAGR of 3% between 2007 and 2012, while the market, by volume, will total 16.18 billion kg, with an
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Major Players: The global confectionery market remains relatively fragmented, with big names like Hershey, KraftCadbury, Mars, Nestle, Ferrero, Lindt, Lotte Confectionery, Perfetti Van Melle, Meiji Seika Kaisha etc.accounting for less than half (45%) of value sales. Some of the brands under established names are M&M by Mars, Cadbury's Dairy Milk and Trident, Wrigley's Orbit, Mars's Snickers, Hershey's Kisses, Kraft's Tobolerone, Meiji Seika Kaisha's Meiji etc. In recent years, this sector has seen many mergers and acquisitions. Companies have been buying high growth segments and utilizing their existing distribution channels not only for market penetration but also increasing their geographical spread. A special mention of the two recent big deals sealed cannot be missed in this segment. The Kraft-Cadbury deal has put Kraft on the top position in the chocolate and confectionery segment. The group will have 40 confectionery brands, each having an annual sale of $100 million. This deal will help Kraft reach leading positions in developing markets, including BRIC nations and Mexico. Another deal between Mars and Wrigley in 2008 boosted Mars position in the global market through its acquisition of The Wrigley Company, the leader in the chewing and bubble gum subsector.
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Cover Story - Sector in Focus

Global Confectionery Value Region-wise Forecast, 2010-2012 (USD billion, nominal prices) Region Western Europe Eastern Europe North America Asia Pacific Latin America Middle East and Africa OVERALL 2010 53.75 17.80 38.21 26.45 10.98 5.18 152.37 2011 54.50 18.83 39.19 27.25 11.32 5.36 156.86 2012 56.12 19.84 40.15 28.07 11.67 5.54 161.39

Source: Datamonitor
Growth Drivers and MarketTrends: 1. Consumer's purchasing power: Demand for premium varieties is not only increasing in developed nations, but is also witnessing a growth in developing countries owing to stable economic growth, rising middle class incomes and increasing spending power. 2. Innovation: New Product Development taking local factor into consideration in the form of flavour extensions, innovative packaging and variety of new combinations are being developed by manufacturers to cater to the taste buds of the masses. Healthy lifestyles: Consumer concerns over portion sizes and emerging natural and wellness trends is forcing companies to come up with offerings providing functional health benefits such as oral health care, skin care, low sugar, low fat, low calorie and low carbohydrate kind of products. Companies in certain countries have introduced nutritional labeling for their brands displaying calorie content on pack fronts and guideline daily amounts (GDA) on the reverse. 4. Sugar confectionery remains an important category: Sugar confectionery is still the most dominating and important confectionery category due to its lower unit price than chocolate and gum. In addition, consumer awareness of the dangers of sugar-based confectionery on oral health is still relatively poor among consumers in these countries. They have a strong holding in developing regions for cultural reasons, in addition to ease of 3.
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5.

6.

7.

8.

local manufacture, transportation and shelfstability of sugar products. Kids Confectionery: Primarily, kids remain the main target group for confectionery items. To create a buzz among target consumers is a very tedious and capital intensive activity. A kid these days is very selective and has approximately 14 brands in his/her preference set (lack of product or brand loyalty), luring him/her towards products is extremely difficult. Companies come out with many firsts in sales promotions (freebies such as tazos, giga cards, temporary tattoos, magic candles) to expand and sustain market shares. Imported confectionery items: Consumers are choosing chocolate according to region and the level of cocoa solids, an approach similar to that in wine and cheese tasting. Single-origin chocolate will experience high growth over the next five years. All the big global players in confectionery sector export in large quantities as confectionery is becoming a part of developing nations' growing appetite forWestern food products. Seasonality: Sale of confectionery items is induced by festivities or other social occasions. Hence, special packaging for promotional activities including one-off promotions is increasingly in demand. Companies engage in special limited editions products and packaging to promote their products and build brand strength thereby grabbing not only the share of consumers' wallet but also their minds. Increase in supermarkets /hypermarkets: With
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Cover Story - Sector in Focus

the booming retail sector, confectionery products have managed to get an increased presence on shelves and also in inducing impulsive buying, thus gaining much greater visibility, enhanced sales and increased penetration. 9. Prices of factor inputs: Heavy fluctuation in the price of cocoa is adversely impacting the profit margins of companies operating in this sector, as chocolate based confectionery generates higher sales revenues compared to other two components of this sector. The recent hike in sugar price has become another area of concern for the companies, thereby bringing tremendous pressure on these players. 10. Horizontal Integration: All most all the global players have been integrating horizontally by acquiring or merging with other food giants in sub sectors like Kraft bought Danone biscuits, Nestle bought Kraft's Pizza business, thus expanding their product portfolio and increasing reach by using existing distribution networks. Promotional Strategies: Confectionery brands rely on advertising for brand building. In fact, TV advertising spend is second highest for the confectionery segment. To enhance visibility, companies engage in ATL activities and focus on BTL as well in order to complement the overall marketing programme. Confectionery sales are primarily retail sales thus laying emphasis on point of purchase promotions like posters, danglers, jars, 3-tier,5-tier stands, as confectionery purchases are generally driven by impulse. Innovations, limited editions and brand extensions including flavour and texture developments such as Snickers Cruncher (from Mars) or KitKat Orange (from Nestl) are being launched to sustain consumer interest. Distribution Strategies: There is lot of pressure on companies to ensure retailers stock their products all the time to bring about deeper market penetration and thus enabling more products to reach more consumers. There is heavy reliance on convenience stores and other formats of organised trade. In developing nations however small retail outlets and other unorganized formats like small grocery stores, tobacconists result in the bulk of the sales. Supplying to fragmented retail channels in developing nations is quite costly, so it becomes absolute necessary for companies to develop a comprehensive distribution network. Issues/ challenges 1. Highly competitive market due to fragmentation 2. Plethora of spurious products available 3. Huge investments in innovation and new product development The Road Ahead: Chocolates will remain the more promising area of opportunity for confectionery giants because it lends itself better to the increasingly accessible (high-end, high income) markets. Sugar confectionery will be next, with the best opportunities being captured by unique novelty/specialty candies. Gum is the challenging category going forward, as price points are low, volumes are small, distribution costs are high, and competition is fierce. Sugar-free confectionery demand is expected to grow rapidly as there is a considerable increase in health conscious population. In future, the main trend in confectionery will be of experimenting with flavours and variety, specifically a growing demand for health benefits and 'better for you' ingredients, boosting the `natural' credentials of brands through the removal of artificial colours and preservatives and replacing them with ingredients such as fruit juices etc. Eco-friendly manufacturing efforts, like recyclable packaging, will influence product development and consumer purchasing. Another factor that companies need to look into is their communication strategies. Since in many countries, objections have been raised regarding advertising to kids, so future growth can be dependent on creating sweets that are as popular with adults as children.

by Astha Pasricha Sukhmani Grewal: PGDM IB 2009-11

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International Marketing Marketing of AVATAR

The movie Avatar directed by famous James Cameron who made a comeback after 12 yrs was a smashing hit at the box office. According to the Los Angeles Times, the cost of making and marketing this magnum opus from the Titanic'' director James Cameron was $430 million, though some have suggested $500 million. This state-of-the-art blockbuster which is about an evil 22ndcentury corporation raping a pure-utopian planet, brought healthy profit to its makers, with more to come in line with DVDs, action figures, books, video games, and sequels This movie has revolutionized the 3D industry. In India, Reliance Big TV bagged the deal and entered into strategic alliance with Fox Star Studios. As by its very nature movies have a short life time as they need to make an impact in the first week of their release or they are swiped from the minds of consumers. With world entering into digital era, it opens the opportunity for the marketers to a wide population but this needs to be carefully fine tuned to its last detail. A lot has been talked about the success of the movie. But the strategy and the effort that went into the making of a trendsetter is worth revealing. Marketing of the movie was done at International level with attention paid to every miniscule detail. The comeback of a great director James Cameron itself created curiosity among the viewers. The audience was waiting eagerly to see the brainchild of James on which he has spent so much of time. This in itself drew a lot of attention and created a buzz. August 21, 2009 was celebrated as Avatar's day with 100 IMAX 3-D theaters worldwide showcased 16 minutes of footage for the movie. The same day Ubisoft made a debut with a trailer for a videogame based on the film and Mattel unveiled action figures inspired by the film's characters. A day earlier, the teaser for the very same film broke a record on Apple.com after bong streamed more than four million times on its first day. The website of the movie was itself creative that it had all the elements of pull strategy. Visitors had access to more than the standard fare of trailers, images and background materials. The website offered side-scrolling
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square boxes that showcase many of the digital initiatives that make this movie stand out. Fans had access to the story, character bios, the music, and wallpaper downloads; and they also had opportunities to contribute content and showcase their interest in the film -- including Pandorapedia, a wiki for all things "Avatar," and the previously discussed blogging community. Moreover the self crash of the site by the viewers trying to book advance tickets in August added fuel to the fire and in way was related to the concept of the movie, that is, Humans trying to destroy home tree. Avatar also exploited Social network sites as they are popular marketing tool nowadays for launch of any new product in the market and they also have the potential of roping in a large number of viewers. It built successful connections and conversations with the visitors on Facebook (close to 1.3 million fans), MySpace (close to 800,000 friends) and Twitter (over 25,000 followers). Due to its wide reach, these sites were able to create enthusiasm among the viewers and the marketing team of Avatar fuelled it by adding Tweet to Listen" promo that required fans to send a message onTwitter in order to listen to music from the film. Avatar social media strategy also extended toYouTube with close to 11 million viewers, Flikr with 1 million viewers and TypePad blogging community (close to 4,000 members). Avatar also had interactive trailers added to the success of the movie. It had 11 points of interaction and provided viewers with one click access to each character. Mattel created "Avatar" toys that buyers could activate and "bring to life" through webcams and special product tags, while Coke Zero produced custom cans that opened up the world of Pandora atAVTR.com. The end result is that "Avatar" is now the biggest box office movie of all time. The movie has eclipsed $2 billion in total ticket sales, driven largely by 3-D revenues and international interest.
by Shilpi Tayal PGDM IB 2009-11

AVATAR built successful connections and conversations with the visitors on Facebook (close to 1.3 million fans), MySpace (close to 800,000 friends) and Twitter (over 25,000 followers)
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Q&A

Excerpts of talk of Mr O K Kaul, Executive Director, TATA International with Shashi Shekhar and Manish Raj of PGDM IB 2008-10 & Sukhmani and Vikash of PGDM IB 2009-11, SIMSR
segment to begin with and then diversify into leather accessories and garments. The move to enter retail space is triggered by the simple fact that the sheer consumption drives promising growth rate to Indian retail industry. As of now we are limiting it to Indian markets, however we will expand our operations to few neighbouring countries, but not in the immediate future.

Mr. OK Kaul joined the leather business of Tata International in 1975.He was promoted to vice president of the Leather & Leather Products division in 1993 where Tata became the first leather company in Asia to be certified with ISO 9000 and ISO 14000. O K Kaul was later appointed as President of the Leather & Leather Products Business. In April 2009, he was appointed executive director of Tata International Ltd Worldwide encompassing leather & leather products, engineering and new business opportunities. SIMSR STUDENT: Tata Group has several companies in diversified businesses under its umbrella. How you do you manage to tap group synergies for growth in International Business? Have you ever felt that the presence of so many companies has proved to be disadvantageous to the prospects of Tata International? Mr. O.K. Kaul Tata International has many businesses ranging from aluminium, steel, auto components, solar engineering to trading and modular housing. It's primarily a trading organization. We do Opportunity Trading Somebody somewhere wants something, Tata International fulfils it. Since Tata International has a strong foothold and sound infrastructure in the African continent; we act as distributor for Tata Motors and not its competitor. After all we all fall under one umbrella-Tata Group. Our role is to promote small companies and is involved in total supply chain. Tata International works with a trading mindset adding value at each stage of the value chain. Tata International runs on a model where it empowers all its employees to operate as entrepreneurs. We run Strategy workshops and sessions wherein each vertical proposes its Business Plan for the next five years, this is then discussed with the whole team. Feedback is taken from other verticals, the technical team and the senior management on the feasibility aspects of the business plan and only then is it taken forward. This may be confusing for an outsider but this enables in quick decision making and allows for flexibility. SIMSR STUDENT: Will we see Tata International entering into retail and FMCG sector in the near future? If so, is it going to be India specific or abroad as well? Mr O.K. Kaul: We entered the retail space last year in the bicycles segment in the north east India. We are also considering into entering the leather shoes
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Students should dirty their hands in the industry rather than just focusing on powerpoint presentations from day one. They should get involved in the entire vicious circle of activities. Management education adds value when you have prior work experience. Internship should focus on deliverables rather than just getting a certificate. And to achieve deliverables, two months is too short a time.
SIMSR STUDENT: How do you view the marketing alliance in Tata International entered with Tata Strategic Management Group? Mr. O.K. Kaul: TSMG is Tata Group's consulting arm. Tata International provides its local domain knowledge to TSMG in the countries where TIL is present. Tata International Ltd scans the country and explores market opportunities and risks. The alliance between TSMG and Tata International enhances the reach of TSMG in these international markets. Additionally, Tata International provides business development and infrastructure support to TSMG for project execution, local business knowledge and identifying opportunities in these geographies.
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SIMSR STUDENT: How do you view Agriculture as a potential lucrative sector and how can Tata International leverage its competencies to tap this sector at a global scale for International markets? Mr. O.K. Kaul:. With the population increasing manifold and the demand for food soaring, the agriculture sector demands a lot of attention from both the government bodies and corporate sector. Tata International wants to create a business model whereby it can partner with universities to conduct R&D programs to enhance productivity in this sector. This project is still in the nascent stage and it purely depends on the availability of land and productivity potential. So if there is land available for R&D in Latin America or Africa, we would go there and conduct soil-crop fit testing and other relevant tests. We could collaborate with either foreign universities or Indian universities and other IT firms to help us carry out this project. These projects are long drawn and require time and effort to be brought to maturity to meet its objective. SIMSR STUDENT: Tata International is an end to end SCM Solution provider in India through its Joint venture DIESL. Will we see the value chain expanding to tap the global logistics market of 3.5 trillion USD? Mr. O.K. Kaul: Yes, expansion is certainly on the cards. Our next step is to make our global presence felt. Drive as we call it and DIESL as you call, is growing very fast and so is the logistics sector. It has few organised players and the unorganised ones are integrating with organised players to increase value. Moreover, the logistics sector is directly related to the growth in the retail, hospitality and services sector. Thus with the strengthening of these sectors, Logistics and our role to provide value addition to these sectors has immense scope. SIMSR STUDENT: What do you think have been the effects of the Copenhagen summit on international business environment? Mr. O.K. Kaul: The greatest achievement of this summit has been that it has been able to create awareness among people, governments and the corporate sector. It has helped people to have a GO GREEN mindset. Companies have started thinking in this direction and gauging opportunities to benefit from it too. Issues related to global warming, carbon emissions and related aspects such as carbon credits are being talked about. Tata as a group has worked diligently on these areas and has given its best to make the world a better and greener place to live in. For instance, in the African continent people prefer to deploy solar panels in the new residential and office buildings. We have boarded the wagon long back to address this. SIMSR STUDENT: What is your view on Technical Barriers to Trade (TBT) as non-tariff barriers to restrict leather exports from developing countries like India,
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since average and bound tariffs for leather still remain high for developed countries, while for other categories it has fallen with the advent of WTO. Mr. O.K. Kaul: This is specifically a problem with leather industry since there have been oppositions by the PETA and other similar organizations. Leather industry is fragmented and issues such as child labour and degradation of environment have been raised several times. There is a need now for organised players to come together and be vociferous about their practices. Tata has never been media shy and has been proactive to communicate its practices and norms to the people. But we need to be more aggressive to showcase our norms and practices. To sum up, Corporate initiative is the key in this regard and role of WTO can only be leveraged if the organization takes the first step. SIMSR STUDENT: What in your opinion could be the key changes you would like to see in the current management education in India? Mr. O.K. Kaul: Keep yourself updated. READ. Students should dirty their hands in the industry rather than just focussing on PPT presentation from day 1.They should get involved in the entire circle of activities in the total value chain. Management education adds value when you have prior work experience. Internship should focus on deliverables rather than just getting a certificate. And to achieve deliverables, two months is too short a time. Neither the intern nor the company employee has the motivation to give the best or take the best. American Universities have mastered these very effectively and result is clearly evident all over the world. We have to take a cue and emulate the same here.

Solution # 01

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Debate: COPENHAGEN - Success or Failure for India?

Success for India by Abhay K Agrawal, Technologist, GE Energy
Before going to the 15 Conference of Parties (COP) at the Danish capital i.e. Copenhagen Summit, India had three key objectives. They were: No legally binding emission cuts;No peaking year; No international review of domestic funded mitigation actions.Also Indian govt said that the outcome of the talk must be within UN framework convention on climate change (UNFCCC), countries especially developed polluting countries who are put inAnnex-I of Kyoto Protocol (KP) should stick to it even after its expiry in 2012 and also should abide by the Bali action plan on long-term cooperative action. Looking at the outcome of the conference below 20 temp rise than that of 1990 Annex-I countries to the fight the climate change, one not meet the expectations of CopenhagenAccord does not emission cuts on any country, mechanism on how to target and how to raise & developing & poor nations. strengthen the KP.Also the between few (26) countries room and was not accepted by all which sets global warming target of and $100B annual financing by developing & poor countries to can observe that it does the world. The put any legally binding does not provide any achieve the temperature finance the fund to Thus, it failed to stick or accord was made including India inside closed the193 participating parties.
th

Coming to the positives from this summit, One of the most valuable outcome has been the guarantee of the continuity of UNFCCC negotiations, which will now continue atleast for a year despite the accord. Another success for developing countries like India was that they ensured that primary agenda of developed countries to dilute the KP principle of c o m m o n b u t differentiated responsibilities and respective capabilities were pushed back.Their attempts to dump the KP and alter significantly the terms ofUNFCCC were not succeeded at the formal level. The developing countries' position that their voluntary mitigation actions, which are not financially assisted, will be reported only through periodic national communication and will be reviewed only domestically has been partially preserved. By looking at the objectives of India & the outcome of the summit, I can easily say that India was able to meet its key principles and was partially successful in others. Now after 3 months of the summit, the Copenhagen accord has been endorsed by more than 100 nations, which provides a small boost to the accord.Thus, the summit was not the last hope but it is an important beginning as termed byUNSecretaryGeneral Ban Ki-moon.

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Debate: COPENHAGEN - Success or Failure for India?

Failure for India by Pratik Jha, Territory Manager, Hindalco Industries Ltd.
As Kyoto protocol is about to expire in 2012, a strong conclusion was needed from Copenhagen, to address the global climate change. The Final document that emerged from the summit has no firm commitments in it at all. Instead the agreement simply stuck to the normal diplomatic nonsense about the necessity of tackling the problem, reflects the global failure. India had set two distinct goals for itself when deciding its strategy for Copenhagen negotiations. First, it wanted to leave no room for the western media and politicians to paint India as obstructionist. Second, being firmly of the view that in the long run India will suffer disproportionately more from catastrophes resulting from global warming, it wanted to cut a deal that would lead to major reductions in carbon emissions worldwide. Mr. Manmohan Singh went so far as to Copenhagen that India will deliver its 2005 emission intensity by agreement were not reached in somehow initially managed to can cost dearly to India. On achieved the goal of avoiding catastrophes and on the other; compromising growth and Prime Minister Singh will need cost of India's own mitigation benefits to be reaped from offers from industrial countries climate accord. He must remember global emissions, mitigation by India by future global warming. His commitments countries sign on to an ambitious technologies, cuts in emissions or their cuts in energy consumption or its growth, India's GDP growth and poverty alleviation. state in his maiden speech in on its promise of bringing down 20 percent by 2020 even if an Copenhagen. This achieve its first goal. But it one hand, it will not have environmental it would have ended up poverty alleviation. to carefully weigh this commitments against the improved commitment in the negotiations for a final that given just 4 percent share in itself has virtually no impact on will acquire value only if major emitters mitigation agreement. Under existing growth are almost sure to translate into which would in turn adversely impact

With India's initial stand, that given the country's low per-capita emissions, India should not be subjected to any mitigation commitments Singh went on step-bystep to raise the level of his country's voluntary commitments. After bringing down emission by 20 %, he proceeded to commit to the goal of holding the average temperature increases around the globe to 2C. This was followed by the announcement of eight national missions aimed at mitigation. As a part of as yet non-binding Copenhagen Accord, Singh also accepted the U.S. demand for submission of mitigation plans & progress report on mitigation to the UNFCCC. In principle, this provision can be seen as a first step towards the conversion of what are currently voluntary steps towards mitigation into internationally mandated commitment that Singh has promised not to accept under any circumstances. These progressively rising levels of concessions have not led to any improvement in the offer by the United States, which currently stands at cutting it's country's 1990 emissions by merely 3 percent by 2020. This meager U.S. response testifies to Singh's failure to achieve his second objective.

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Book Review

THE NEW AGE OF INNOVATION

THE KEY TO CREATING VALUE & THE FUTURE GROWTH
The book co-authored by C K Prahalad and M K Krishnan is about co-creation of value by companies and customers together. The fabric of the book is woven from two threads, expressed as formulas. N = 1 means focussing on one consumer experience at a time"; R = G means that "resources from multiple vendors and often from around the globe". N=1, is different from mass customisation offered by companies. Moreover, the range of skills needed for N=1 approach, can only be achieved by building collaborative networks by companies. Also, there are certain capacities, capabilities and flexibilities that one needs to build in one's business systems, in one's human capital and one's geographical reach. Prahalad and Krishnan write that all firms will access resources from a wide variety of other big and small firmsa global ecosystem. Company's internal focus should be on gaining access to resources, not necessarily owning them. Further in the book, the authors emphasize the need of information and communication technology (ICT) architecture that can connect business processes and analytics to data and application. In a rapidly changing environment business process cannot be static. There is a need for continuous innovation. Continuous Analysis is required for insights for next innovations in the organizations. They also emphasize how legacy systems need to be replaced to make the organization more flexible to accommodate the N=1, R=G model. They present a case of lot of Indian companies who have adapted this model and have built flexibilities in their systems. They make a case for the strategic importance of IT and how organizations cannot afford to write it off as a commodity. Further they explain the mindset changes that the managers need to go through to accept and be the change that would enable the organization for this new model. They talk about the new requirements in talent management which again needs to be both flexible and mobile.Authors also talk about the role of leadership in bringing in these changes in the organization. The chapter on Efficiency and Flexibility highlights a challenge that every company that has ever tried to be both nimble and efficient has faced. There is a
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distinct tension between the two and it is often not resolvable. The chapter also discusses problems moving from the old way to the new way. The final chapter, An Agenda for Managers, promises that the author's model is the one that will be the basis for innovation and value creation. There are some good advice like "learn by doing, take small steps" and "A long-term focus with short-term actions is the essence of organizational transformation." They include examples of failures and mistakes. In one powerful example, the authors discuss about a "major auto supplier" in the U.S shifting the sourcing of various parts toChina. Unexpectedly, what seemed like a clear-cut business decision had a negative impact on many levels: The logistics of air-freighting parts from China wiped out any cost benefits, while the resulting lack of flexibility and longer lead times meant that the company's internal design process also had to be entirely rethought. The example provides a salient reminder of the importance of stepping back and thinking about the big picture, to consider the existence of less codified processes and systems, and to identify and pre-empt the potential consequences of any decision. Although, the concept has been beautifully packaged and presented, it is tough to fully agree with the universality of this concept. At times the book gives a feeling of being written for IT companies, especially those having their primary base in India. It would have been better if there were as many cases or examples from old traditional companies who have transformed or remodeled themselves to adapt to the model proposed in the book. SometimesThe New Age of Innovation veers into the academic speak and formulaic structures so beloved of college professors, and there's a fair amount of management jargon that can be grating at times. But, in the main, this is a fairly breezy and informal read that provides a timely snapshot of a rapidly transforming business landscape. As the authors make clear, this transformation is neither optional nor reversible. This book provides a valuable primer for those wishing to stay on for the ride.
by Parul Shrivastava Mitul Shah PGDM IB 2009-11
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International Business News

India-EU FTA to be completed by Oct 2010
India and the European Union will be entering a Free Trade Agreement (FTA) by the end of this year which could open up new export opportunities worth USD 9 billion for India. Daniele Smadja, Ambassador, Head of EC Delegation to India, said the exact date for signing the pact would be decided after the final round of talks in March. Indian Prime Minister Manmohan Singh and EU Commission President Jose Manuel Barroso would be finalizing the agreement soon Terming India for its fast emergence as a major power in the region, Smadja said the country figured in the EU's list of significant trading partners as one of the first ten nations. "Once the FTA is finalized, business between the two will go up several folds." Trade between India and the EU currently stands at 78 billion euro (USD 107 billion), but is still less than one-fifth the value of the EU's trade with China. In recent years trade between India and EU countries had been growing at 16% a year compared to EU's overall growth rate of trade of ten per cent on account of the growth performance of the Indian economy.

Kraft takeover Cadbury

Cadbury, a leading sweets and chocolate manufacturing company of the world has lost its independence after they accepted the deal with Kraft, one of the food giants of the United States. As per the reports, the board members of Cadbury has decided to sell the brand to Kraft after they modified the deal and increased the amount of money. The takeover battle between Kraft and Cadbury was going on for several months and the final decision ultimately came in favour of the Kraft Company. Though the US food company, Kraft has been successful in acquiring the ownership of Cadbury, they might have to face challenges from Hershey. It has been reported that Kraft's next aim would be to persuade the major stakeholders of Cadbury, as the time for counter offer will remain open till January 25. They will have to act cautiously as Hershey might use this opportunity and try to win the ownership of the company. The takeover creates fresh worries for Cadbury workers in this c o u n t r y, w i t h K r a f t promising hundreds of millions of dollars in annual savings from the deal, which analysts say means some of Cadbury's 45,000 workers around the world will lose their jobs.

Toyota's ongoing troublesIt's not stopping...

Toyota's recall of almost 8 million cars across the world and the subsequent suspension of sales and p ro d u c t i o n o f e i g h t models with potential faulty accelerator pedals has sent shock waves through the industry. Toyota announced on February 1st that it had come up with a cure for the sticking pedals which, along with badly fitting floor mats have been blamed for at least 19 deaths and more than 2,000 incidents of u n i n t e n d e d acceleration. Toyota has put the cost of the recalls at $2 billion in the first quarter alone. Toyota's sales in America last month plunged by 16% compared with a year earlier, while those of General Motors rose by 15% and Ford's by 24%, allowing it to reclaim the number-two slot in the market it lost to Toyota in 2 0 0 7 . M r To y o d a p ro m i s e d a v i s i t t o America, the car company's largest market, to see the damage to Toyota's reputation for himself. Other carmakers, notably Ford and the ambitious Volkswagen Group, have closed the quality gap and are offering more interesting cars. It is the world's best selling hybrid car and Japan's most popular new car of all. Around half of the cars affected by this recall are Priuses in Japan. This will undoubtedly do no good for a company that is attempting to maintain its lead in hybrid cars as competitors line up to launch competing green models. The charge sheet against the company lengthens daily too. Toyota probably faces an avalanche of class-action lawsuits in America which will prolong the adverse publicity. What is clear for To y o t a a n d o t h e r companies that may find themselves in a similar position is that swift and decisive action may be painful but less agonising than letting a problem boil over and then attempting to clear up afterwards.

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HARMONIZED SYSTEMS
A provision that establishes international uniformity for product classifications.

HUSBANDING
Term used by steamship lines, agents, or port captains who are appointed to handle all matters in assisting the master of the vessel while in port to obtain bunkering, fresh water, food and supplies, payroll for the crew, doctors appointments, ship repair, etc.

BUNKER ADJUSTMENT FACTOR

A Fuel Surcharge expressed as a percentage added or subtracted from the freight amount, reflecting the movement in the market place price for bunkers.

FORCE MAJEURE
The title of a standard clause in marine contracts, exempting the parties for non-fulfillment of their obligations, as a result of conditions beyond their control, such as earthquakes, floods, or war.

LAYCAN
Stands for "laydays commencing / laydays cancelling" and is a spread of dates which provides for the earliest date for the ship to arrive and for laytime to commence

DUNNAGE
Materials of various types, often timber or matting, placed among the cargo for separation, and hence protection from damage, for ventilation

MALA FIDES
A seller's representation that goods are usable for a particular purpose, when in fact the seller knows that the goods are not.

JETSAM
Articles from a ship or ship's cargo that were thrown overboard

ALL RISKS CLAUSE

Did you know these terms?

An insurance provision, which provides additional coverage to an Open Cargo Policy, usually for an additional premium.

SNAKE LOADING
Loading products into a container in the sequence with which the goods will be unloaded and stored in at destination.

PRO FORMA INVOICE

Draft invoice sent to an importer by the exporter prior to order confirmation and shipment to assist in obtaining import licences or foreign exchange allocations.

FOUL BILL OF LADING

A receipt for goods issued by a carrier bearing a notation that the outward containers or goods have been damaged.

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CROSSWORD #02

DOWN 1. The process by which a country becomes a member of an international agreement, such as the WTO or the European Community. (9) 2. Official discussion with another government carried out on instructions. (8) 3. A document that establishes the terms and conditions of a contract between a shipper and a shipping company under which freight is to be moved between specified points for a specified charge. (3) 4. 5. The means companies select to achieve their objectives. (8) An intermediary storage facility where goods are kept temporarily for distribution within a country or for re export. (8) 6. The Japanese process of continuous improvement, the cornerstone of TQM. (6) 7. The practice of charging or paying exorbitant interest on a loan or other transaction. (5) 8. Taxes on imported goods and services, levied by governments to raise revenues and create barriers to trade. (6)

9.

A government grant that gives inventors exclusive right of making, using, or selling the invention. (6)

5.

A form of corporate acquisition in which one firm absorbs another and the assets and liabilities of the two firms are combined. (6)

10. A document issued by a bank at the buyer's request in favor of the seller, promising to pay an agreed amount of money upon receipt by the bank of conforming documents with a specified time. (3) 11. An agreement among, or an organization of, suppliers of a product to limit production in order to minimize competition and maximize market power. (6) ACROSS 1. The treaty, formally known as the Treaty on European Union, signed in 1992 that led to the unification of many European countries. (10) 2. Korean business groups that are similar to keiretsu and also contain a trading company as part of the group. (7) 3. The act of seizing commercial exchange with a particular country. Such act is common during wartime. (8) 4. In an acquisition or merger, when the value of the combination is greater than the sum of the individual parts. (7) 9. 8. 7. 6.

Collaborative groups of vertically and horizontally integrated firms with extensive share cross-holdings and with a major Japanese bank or corporation at the center. (8) A community made up of Bolivia, Colombia, Ecuador, Peru and Venezuela. (6) An arrangement which establishes unimpeded exchange and flow of goods and services between trading partners regardless of national borders. (3) A simultaneous spot and forward foreign exchange transaction. (4)

10. A treaty between two countries to ensure that investments between the two countries receive the same treatment as domestic or other international investments. (3) 11. A domestic tax assessed on the manufacture, sale, or use of a commodity within a country. Usually refundable if the product is exported. (6)

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