editor from the
www.advancedge.com Editor-in-Chief Kamlesh Sajnani
The best laid plans of mice and men often go astray.
This is what Scottish poet Robert Burns, long back in 1785. However ironclad Editor Aditya Prakash Iengar
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your plans may be, there is always a chance that they will go awry. Written nearly 250 years ago, Burns’s line continues to remain highly relevant for all of us. And it is especially significant for you, my dear reader and eager MBA aspirant, as you stride along in your preparation journey. Right now, you’re working on building your conceptual knowledge, and have probably gotten into the stage of preparation when you start applying the concepts you’ve learned to problems. In a few weeks, you will graduate to solving full length simulated tests, which will really test your preparation, and the strategy you’ve been working on for cracking the entrance test.
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Apart from this, you should also be focusing on adding as much weight to your profile as possible, which will definitely give you an edge when you’re facing an
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interview panel during the selection process at the various business schools. Which means there are additional certifications you can explore, experiences that you can garner, organisations you can collaborate with — all of which goes towards
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convincing the institute that you’re the one they’ve been looking for. Additionally, you should constantly be in touch with everything that’s happening around you, in the various corporates, the Indian economy and on the global stage as a whole. So basically, you’re laying the best plan that you can, in order to improve the probability of getting an admit to your dream businesss school. And you’re doing all that is possible to ensure that the shot you’re making is the best you have. In other words, if you’ve been following an optimum preparation strategy like the C.A.T. Approach, in which your preparation is categorised into the ConceptAppilcation-Testing stages, and staying up to date on all that’s happening around you, and building your profile for your dream B-school, you’re looking at the best
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laid plan that you can come up with. So let’s prove that while sometimes, luck doesn’t play fair and a few plans do go awry, the plan that you’ve made sees you through to the future of your dreams.
Aditya Prakash Iengar Editor
CONTENTS 05
COVER STORY The mock tests beckon!
08
MBA BUZZ A C.A.T. Approach to Cracking the CAT
10
CORPORATE INTERVIEW PRIYANKA KHURANA GOYAL, Executive Director, Nomura
June 2018
23
CORPORATE WORLD
26
Bhushan Steel sale: Can it set a precedent?
29
What’s the deal with crude oil?
Flipkart-Walmart deal: What the future holds
13
SPECIAL REPORT The price of FREE!
32
STUDY HOUR
18
COUNT DOWN Top 10 Risk businesses fear the most
35
Word Dose: The decline of neurosis
22
MUST READS Surely You’re Joking Mr Feynman
36
Globescan
38
SuDoKu
The Effective Executive Water for Elephants Disclaimer : The views expressed in the articles by contributors and others are not necessarily those of the Publishers, unless specifically stated therein. While no effort is spared in ensuring the accuracy of the information published herein, readers are advised to reconfirm the current facts before acting upon any such information. The Publishers regret their inability to accept responsibility for any inadvertent errors of commission or omission in this issue. Readers are recommended to make appropriate inquiries before incurring expenses or entering into commitments in relation to any advertisement appearing in this publication. The publishers do not vouch for any claims made by the advertisers of any products or services. The Publisher, Printers or Editor shall not be held liable for any consequences in the event of such claims not being honoured by the advertisers. All rights reserved. No part of this publication may be reproduced, in any form or means, or stored in a database or retrieval system without prior permission from the publisher.
Period 1 Year 2 Years 3 Years
Test Q&As
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COVER STORY
The mock tests beckon! Now is the time when you will start taking simulated test series, to get yourself out of the ‘concept building’ mode and into the ‘test-taking’ mode. You will have to know how to make the most of the simulated tests, how to deal with stress, etc. Here a few things you need to know about the various tests, and what you can expect to face in the mocks. The Advanc’edge Team
What’s all the fuss about? Many might ask: Why all the hullabaloo about these tests? You only have to know basic concepts. Well, that’s exactly the point. Knowledge of basic facts is important, but mere knowledge of these facts learnt in a conventional “orderly” pattern can sometimes act as a hindrance while taking a test such as the CAT, CMAT or XAT. This is because the multiple choice questions attempt to probe that knowledge
from an unusual angle. Take, for example, a simple mathematical problem: Q. 5 is 25 percent of _____ (a) 1/20 (b) 5/4 (c) 20 (d) 125 Now this is not a very complex problem (certainly not the sort you’ll find in the actual test!), but what keeps it from being absolutely simple for anyone who has finished his primary
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he countdown has begun for the few months till November 25th, the allimportant D-Day, when the future careers of lakhs of students will be decided. The tension is palpable, with some students delving deeper into their books and others finding that their enthusiasm has suddenly frozen into fear of the test and their performance at it. This is the time that you actually take the concepts that you’ve been studying these last few months, and apply them to tests. In other words, the phase of taking mock test series begins now. Although some of you may know exactly what the CAT and other competitive exams like it, such as the CMAT, XAT, SNAP, NMAT, among others, entails, you will never get the feel of it until you actually sit down and stare at the questions on the screen, just waiting to be answered. So for all those who may or may not be fully aware, here are a few details about the tests that you will be taking.
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COVER STORY
school is its unusual nature. We are not used to thinking about percentage problems in this way. If it were presented in an honest, straightforward “What is 25 percent of 20?” form, most of us would have no difficulty with it. Hence, a good objective type question is likely to have this unusual twist. Let us take another example: Q. Which of the following could be considered the opposite in conception to secular state? (a) theocratic (b) communistic (c) fascist (d) non-religious Now, you know that the opposite of ‘secular’ in this regard is ‘theocratic’ and that is the right choice. However, if you are even slightly unsure of your answer, the two alternatives (b) and (c) can easily distract you. It is common knowledge that communist (b) states have no religion. Likewise, alternative (d) would suggest nearly the same idea as “secular”, except that the latter has the backing of usage in politics. Thus, each of the alternatives, except (a), has an element of distraction built into it. In order to sail through one needs more than mere knowledge of facts. Essentially, therefore, the CAT is unlike other tests in that merely being aware of the various concepts will not be enough. It is highly important that every test taker takes the next step, and cultivate the habit of applying multiple concepts to a single problem! The various other tests have their own complexities. For instance, Decision Making in the XAT, General Awareness in the CMAT, etc, require their own forms of preparation!
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Duration of the tests If you’ve done homework, you’ll see that most of the management entrance tests have a similar test taking duration. Most range from 120 minutes (2 hours) to 180 minutes (3 hours). The important aspect from this analysis is that you should possess the ability to concentrate continuously for a minimum of 2 to 3 hours. Although most students can solve questions easily when there are no time limits, they find it quite difficult to correctly solve the same questions when they have to concentrate on multiple areas and sections under time constraints. Your score can definitely improve
All entrance tests either look for fundamental conceptual understanding, or applications of those fundamentals. just by getting used to taking tests under a time frame and for a continuous concentration of 2 to 3 hours. You have to be disciplined and have the ability to concentrate for long durations.
Negative marks Almost all multiple choice question tests (MCQs) penalise the students for incorrect answers. This characteristic is unique to MCQs only to help avoid outright guessing. In this case, the test is fair to those test takers who really know the answers, versus those who will guess the answers and may get them right. Negative marks ensure that the student more often than not knows the
real answers to the questions. This way, the test setter can check if the student is really answering the question or is gambling.
Accuracy By creating the negative marks concept, the test is clearly harping on accuracy. Therefore, it is important that the student knows how to answer the question as a priority. Most Indian students are used to studying only those portions of the subject where they are good at. However, these tests are very clear on the fact that the student needs to be competent rather than casual.
Speed Speed is a factor of the number of questions to be answered in the given time. If the number of questions in the test is high and the duration is short, it suggests that the test setter is seeking fundamental understanding. If the number of questions is less compared to the duration of the test, he is seeking to test not only the fundamentals but has gone a step further by checking applications of the fundamentals. The CAT of the 21st century as compared to the CAT of the 90s has changed from just checking fundamentals to querying the students on applications. In CAT 2017, the test takers had a total of 180 minutes to answer 100 questions, which means the test gave them 108 seconds (1 minute 48 seconds) to solve each question. Earlier, the CAT used to have anything between 150 and 180 questions, and the duration was just 120 minutes, meaning that the candidate had just 40 seconds to answer a question. So now, although the time given per question is more, the test taking skills are more tilted in favour of applying your knowledge.
COVER STORY
No fixed structure
Some points that will help When dealing with a competitive exam like the CAT, it helps to be connected with your peers, especially those who are serious about cracking it. Some peers in your immediate circle may be nervous and don’t do the required amount of work. In fact, friends who are not better prepared will reinforce each other’s negative feelings about how difficult it will be to crack the test. So it’s better to spend time with someone who can enhance your preparedness, rather than with someone who creates tension and continuously complains about the lack of effort
Accuracy is as essential as speed if you want a good score and crack MBA entrance tests you and he or she is putting in. The CAT does not demand sacrifices, but a balanced lifestyle that keeps your stress under control instead. It has been seen that students spend the last few weeks packing in studies into the whole day’s schedule. Since the test is a timed test, there is already a pressure exerted on you. You shouldn’t have to handle anymore. So keep your mind relaxed and uncluttered by spending time in activities that make you happy. This could be anything as simple as listening to music. Nervousness and panic set in only because of what you feed into your mind. If you keep brooding over the prospect of failing at the test, you will definitely hamper your performance. This test is so competitive that a lot of your preparation can be done in the mind, by dealing in the right manner with your thoughts. It is also important to have backup plans. Make sure you discuss
your options with the concerned experts – if CAT then what, if not the CAT, then what? You are led to distraction and procrastination only when you don’t have a specific goal in place. If your goal is set in your mind, you automatically find that you don’t waver from it. Again, it becomes important to set aside time for all your activities. For example, you may be spending time with friends, all the while thinking that you haven’t studied for the CAT that day. Therefore, you will end up worrying even more. Keep these few things in mind, keep the concepts you have learnt in your head, and remember, it’s just about applying those concepts. So start taking the mock tests, and more importantly, analyse your score and performance so that you can improve them in the next. So finally, when you get to the actual exam, it’ll become just another test! A
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Although you may know the test structures of all the important tests in the Indian MBA calendar, the tests do bring in factors to throw students off balance, such as changing the structure/pattern of the test subtly. This is done especially since the areas and the subjects tested are same and cannot change. So the test setter alters other parameters, like the duration of the test, quantum of negative marks, breaking up areas into different sections or suddenly combining them into one, altering the weightage of subjects or areas or topics, and changing the level of difficulty of the questions themselves. Very often, the CAT comes up with ingenious ways to unsettle students who have pre-set notions and fixed expectations about the structure of the test. Therefore, the two prime requirements to crack the entrance tests are: • Knowledge of the fundamentals of each subject. • A consciously cultivated ability to think on one’s feet. Both are absolute requirements to become a successful manager.
MBA BUZZ
A C.A.T. Approach to Cracking the CAT Just in case you thought that the above conforms to the age old wisdom in the adage - “an eye for an eye and a tooth for a tooth”, you are definitely right - the C.A.T. for the CAT!
The Advanc’edge Team
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he CAT is a test which Concepts ability to connect with the sends shivers down the This is the first phase of fundamentals therein. Obviously, spines of the students, preparation and is imperative not knowing a concept can be a for the following obvious reasons to building basic conceptual huge deterrent in effectively – it is the most widely accepted knowledge. A sectional view of tackling a question; for example, aptitude test for admission to top the CAT reveals three areas of it is virtually impossible to business schools in the country, testing – Quantitative, Logic solve a question on “cyclic the magnitude of competition & Data Interpretation and quadrilaterals” without knowing of mind-bogglingly huge, the Verbal Ability. Performance in what a cyclic quadrilateral is! stakes involved are enormous, each section is linked to your Furthermore, each section and the pressures to handle are differs in the range of concepts multifold. involved – the “Quantitative All of this requires a Section” has a greater “well chalked-out and diversity of concept areas meticulously executed as compared to the “Logic strategy”. In fact, the & Data Interpretation right approach to prepare Section”, the latter being is what differentiates more practice intensive; a CAT cracker from while the “Verbal Section” a CAT defaulter. You has more concepts to need to phase out your be familiar with in the preparation, identify “Usage & Grammar” the effort required area as compared to the in each phase and “Reading Comprehension” customise your area. approach accordingly This difference in the – a process which we sensitivity of each section will label as “the C.A.T. to concept-intensiveness Approach,” wherein the determines the time to be C.A.T. is an acronym for devoted to each section during Concepts, Application this phase of preparation. and Test taking, the three Learn and unlearn a lot in the Concept It is also recommended that stage in your preparation for the CAT phases of preparation. you take a Diagnostic Test at
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MBA BUZZ
Application This is the next level of preparation and logically follows the “concept building level”. Students should graduate to the “application level” only after a comprehensive know-how of the key concept areas. It is therefore suggested that a section-wise analysis of concept awareness be conducted and the gaps be plugged in before escalating to this level. The focus here is to develop a section-wise ability to apply concepts and ingrain a problem-solving approach, involving skills to identify the sequential steps for effectively handling the questions. Students also need to stress on an integrated approach to solving questions; for example, a question might require an application of multiple concepts
It is critical to have a strategy to prepare for entrance tests, such as one that takes you through all stages until you’re prepared well. and therefore demand the proficiency to apply concepts in an integrated manner – previous CAT questions reveal that certain questions on time, speed and distance also entailed an application of concepts from geometry, while questions on permutations and combinations required concepts from number theory as well. Taking an optimum number of section-wise tests followed by in-depth analysis is the way forward in this level of preparation. It has been observed that a strong application orientation can take a test-taker to a performance level of 95 percentile in the CAT.
Solving mock or simulated tests is they key phase in your preparation for any entrance test.
Test Taking This is the conclusive level of preparation and assumes successful completion of the first two levels. Test-taking, per se, makes no sense if concept awareness is not in place or if the ability to apply concepts is questionable. The way ahead in this level of preparation is taking a range of tests simulating the difficulty level of the CAT and reflecting your performance on a certain scale. It is advisable that you take an adequate mix of paper-based and computer-based tests; while paper-based tests gauge your ability to respond to test questions in a conventional way, computer-based tests mirror your adaptation to the new mode of test-taking and ensure the desired comfort levels. Moreover, each test needs to be analysed well – the attempted questions need to be revisited from the perspective of bettering the approach and reducing the time allocated for solving them; the unattempted questions need to be explored from a feasibility perspective, which when attempted could have reduced the opportunity costs and apportioned out more time for other questions. Optimal test-taking can ensure competence with respect to significant test-taking skills such as time management, strategy formulation, prioritisation, judicious management of diverse sections, and can enable the testtaker to graduate to the highest levels of performance, with even 100 percentile being a possibility! In a nutshell, the C.A.T. approach helps you to structure your preparation in distinct phases and identify the challenges in each phase, thereby enabling you to put concerted and focused efforts ensuring more effective and strategic preparation. A
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the onset, which will bring out the difference between the desired and expected levels of preparedness in each section. It has been observed that just a thorough awareness of major concepts can take a test taker to a performance level of 75 percentile in the CAT.
CORPORATE INTERVIEW
‘Focus on your role to give the best you can’ Says PRIYANKA KHURANA GOYAL, the Executive Director at Nomura, winner of Mrs India Queen of Substance 2015 and a doting mother to a two-year-old. She has achieved all this and much more at only 32 years of age. The 3rd rank holder from IIM Calcutta talks to Advanc’edge MBA about her astounding journey and how she plays the multiple cards of her life with ease and élan. Q. Was it always your dream to be an MBA? How did you turn your dream into reality? (Smiles) When I was pursuing my Bachelors in Information Technology from Delhi University, I was introduced to someone who was working for Lehman Brothers. That was the first time I’d heard about the company. He was placed in New York, and after listening to his description of his profile and position, I fell in love with investment banking. Now, once I get curious about something, I make sure I get to the bottom of it. The very next day I went to a cyber café and did a thorough research on everything about trading, investments and about investment banking as a whole. The same gentleman told me that he had got the job after studying at IIM Ahmedabad. So I started my study about the CAT, its format, the topics and the score required to make it to the top IIMs. I usually do a lot of research and homework before taking any plunge; I knew cracking the CAT would not be easy. So I researched about the institutes that helped students to prepare for CAT. I think the right training can do wonders to polish students and make them ready for the big day.
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Q. Tell us about your life at IIM-C. How was the experience there right after you entered? Everybody at IIM-C had scored brilliantly in the CAT, which is why they could make it to the premier institute. Naturally, the environment in the college was extremely competitive. You must have seen the movie 3 Idiots;
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well, the situation was quite similar at IIM. The first trimester was slightly tough not only for me but others too. We were will figuring things out and tying to cope with the pressure. And relative grading was practised when it came to assessments. So, in a Class of 100, only 5 could get A+, the next set A and then A- and so on. Therefore, the competition was quite intense. But then IIM prepared us for the professional world. The cut throat competition that we experienced there was quite useful for us in the long run. The classroom scenario was more like an office. Many work in a company, many perform well also, but there is only one person who gets to become the MD eventually! (Laughs)
Q. How did you manage to overcome the competition at IIM-C and emerge a winner? I believe I became attuned to the rhythm there. I started enjoying the pressure and the competitive environment; in fact, I stood 3rd! Everyone too gradually adjusted to the process. After the first year, the focus shifted from the grades and the real learning started. I managed to get a pre-placement offer (PPO) from my dream company — Lehman Brothers — during my summers. I’d accomplished my primary mission! The second year was comparatively more relaxed and naturally we had a lot more fun. I learned far more then than I had in my first year. We had group activities and team events, which not only brought us together but also taught us how to become team players. I cherish my campus life every bit. It was my first experience at a hostel and the bonding we developed there was amazing. I had never interacted with such a cosmopolitan crowd before. At Delhi University, the
CORPORATE INTERVIEW
Q. How was life after you graduated from IIM-C, during the initial days of your career? I joined Lehman Brothers at their London office for the first two years. I realised everyone working there was a topper from somewhere or the other! And that perpetual competitive environment persisted in office.
Q. Did it help being an IIM alumnus? My stint at IIM certainly helped me when I joined Lehman Brothers. I felt I was more equipped to handle my responsibilities. Also, I personally feel the Indian education system is far more comprehensive, rigorous and thorough than others, especially in Maths. IIM Calcutta prepared me well and that advantage helped me immensely.
Q. Why did you return to India? After two years I joined Lehman India. London was already a developed market, so I didn’t find the work challenging enough. Developed markets like London or New York are already saturated and it can get boring after a while. On the other hand, Lehman had just started out in India, and I wanted to be a part of that start-up, that growth phase. It was more challenging. I love taking up challenges over and over again. Later Nomura took over Lehman Brothers so I became a part of Nomura.
Q. The early days of your career must certainly have been quite different from what it is now. Please share with us the challenges that you faced and how you overcame them. Nothing really changes, as far as the work is concerned. It all depends on how one approaches it. During the initial phase of my career, my boss used to give me work. Now I create work and give it to others. This is the same pattern for everyone. Initially, learning the work takes a lot of time. But things like tight deadlines, challenges and setbacks can happen to people anytime in their career. When you’re younger and just starting to learn, you get quite stressed by these things. But once you start getting a hang of things and become familiar with the work pattern, then the ability to handle pressure increases. Moreover, a seasoned player starts analysing his or her role into the whole thing much better than a fresher.
Q. Nowadays, people hardly stick to one job for a long time, and yet, you’re still working in your first company. What is your secret of sustenance? I don’t give up on things very easily. Every company in every field has its problems. I can’t run away from them! So it is better to face them head on in my current company. Some of my colleagues in Nomura have changed jobs four or five times in a career spanning eight or 10 years, but they couldn’t run away from problems. I feel it is more about how we approach things, our individual personalities. There are bound to be good days and bad days. But one bad day doesn’t mean I leave the company. I feel I am paid a certain amount of money for working in taxing situations and facing gruelling issues. So I always look at them as challenges that I have to overcome. There is no point shying away from them and getting dejected. If I can’t do something, there’s no point in feeling frustrated about it. I must find out why it isn’t happening and make sure it does, because at the end of the day, I get paid for it. If I am unable to do something on a particular day, I go back and think about it at length and the very next day I attack it fresh!
Q. You seem completely settled in your life as an investment banker at Nomura. So how did you happen to take part in a beauty pageant? My brother had recently developed a love for photography, and he needed a free model! So he asked me to pose and shot a portfolio for me, and it came out really well. I sent those pictures to Mrs India Queen of Substance contest, for no real reason. But then, I got selected and eventually won the contest.
Priyanka Khurana Goyal after winning the Mrs India Queen of Substance 2015.
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students were mostly from north India, but at IIMC, they were from across India. Those two years in such a diverse environment opened me up to many new perspectives in life.
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CORPORATE INTERVIEW
For me, participating in the contest was again like preparing for the CAT – knowing the syllabus well, the subjects involved and gearing up accordingly. In CAT, I was careful to score well in all three subjects, in this contest too, I was keen to ensure I did well in all the rounds of the pageant. So I gave it a lot of importance. I think I have been doing pretty diverse things lately, and it is a result of inspiration from my son. In the last one year I have joined cooking classes. I am learning soap making as well.
Q. What do you think is the best part about winning this contest? The best part about winning this contest is that it has given me a voice to talk about things about which I feel strongly. I always wanted to do something for women entrepreneurs. There are a lot of talented women in India who stop working after marriage. A few of my friends have done so. I want to use my title to support such women and the businesses that they run and take them to the next level. For example, the person who will be designing my wardrobe for Mrs Earth is a very talented designer. But she doesn’t get any kind of exposure and is restricted to a small store in Chembur, Mumbai. But designing for me will give her a fillip to reach the next level.
Q. How are you preparing yourself for Mrs Earth Queen of Substance 2015? The contest is in Jamaica in October, but I’ve already started preparing. I am diligently working out in the gym and practising yoga. I ensure that I eat healthy and follow diet charts religiously.
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Q. Executive Director at Nomura, a rank 3 IIM Calcutta graduate, Mrs India Queen of Substance 2015 pageant winner, a doting mother — how do you manage everything so deftly? Prioritising in life is very important. We have to know what to do, and when to do it. In this respect, yoga helps to a great extent. I am also extremely focused with one work at one point of time, and probably this is why I can accomplish things really fast. Our Prime Minister works at least a 100 times more than me. If he can do it, why can’t I? It is also very important to delegate things correctly, and not try and to do everything together. But I must say I have the full support of my family and staff. My parents and in-laws keep coming to help me now and then.
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Q. Did your stint at a beauty pageant change others’ perspective towards you in any way? I do get mixed reactions, but I don’t worry too much. I just focus on my work and let it do the talking.
Q. Do you think climbing the corporate ladder can be quite a challenge, especially for women? I feel that nowadays, if one woman has been discriminated against, it gets maximum media coverage. But the same thing could have happened to a man as well. There are a lot of nice things happening to women, but these never get the publicity because they’re boring. Organisations these days are far more mature and conscious to retain women talent. Women bring in a new perspective to the work culture. They certainly make better managers, because they can handle emotional situations well and are better at reading people’s feelings. Companies these days want to maintain the balance. Business schools too are deliberately taking in more women in order to alter the skewed ratio. So good days are ahead for women. There is always demand for talent in the industry, be it male or female.
Q. You said meditation helps you to achieve the perfect work life balance and get maximum results with minimum effort. How do you find time to meditate? I simply have to find time for my meditation. I have been practising yoga ever since I had been preparing for the CAT exams. Now, I do both. I am an early riser and the first few hours are for yoga and meditation.
Q. Finally what words of advice do you have for MBA aspirants who are planning to bell the CAT? Preparing for the CAT is an extensive process. Ideally, the best time to start preparing is seven to eight months before the exam. If the CAT is in November, it is advisable to begin studying seriously by January or February. Equally important is knowing how to bell it best. Many people follow different paths but I can suggest what I had followed myself: • It’s all about working smart, not working hard. • Know the correct format of the CAT well. • Dedicate at least four hours every day to prepare for the exam. • Give regular mock tests and analyse the scores of each tests. • Identify your weak areas and keep improving. • Try and study from 4 to 8 in the morning. It’s the best time to learn. A
SPECIAL REPORT
The Price of It is a cliché that nothing in this world comes for free. That doesn’t make it any less true. So when we deal with freebies, what is it that we’re giving up? What is the cost attached to the freebie, whether monetary or otherwise? This Special Report is an introduction of sorts to the fascinating world of consumer behaviour. Soumen Dutta
Mentor, Program Director, PG India
Zero Price Effect “When people are offered something for free, they have this extreme positive reaction that clouds their judgement. They are ready to forgo options that are, rationally speaking, better for them.” This is the ‘Zero Price Effect’1. This esoteric term was coined as a result of a series of experiments that Dan Ariely, Kristina Shampanier and Nina Mazar conducted at the Massachusetts Institute of Technology (MIT). These experiments about “free” with the fun-loving lads of MIT led to the publication 1
of an article on the true value of free things in the journal Marketing Science. And suddenly, free no longer appeared free. So, why does getting something for free make
ORIGINS OF ‘COST-BENEFIT ANALYSIS’ Basically, Cost-Benefit Analysis (CBA) is when you’re faced with a situation where you have to take a decision, and you draw up the advantages and disadvantages of taking that decision. At its simplest, if the advantages outweigh disadvantages, go ahead with the decision. Even though the origins of the economic concept of CBA can be traced to the works of Jules Dupuit, a French engineer and Alfred Marshall, a British economist, the true credit of the practical development of CBA goes to the Federal Navigation Act of 1936 that mandated the US Corps of Engineers to carry out projects for the improvement of the waterway system only when the total benefits of a project exceeded the costs of that project. According to the US Corps of Engineers, CBA estimates and totals up the equivalent money value of the benefits and costs to the community of projects to establish whether they are worthwhile. By the 1950s, economists developed a rigorous, consistent set of methods for measuring benefits and costs of projects. According to investopedia, CBA is defined as a process by which business decisions are analysed. The benefits of a given situation or business-related action are summed up, and then the costs associated with taking that action are subtracted.
Zero as a Special Price: The True Value of Free Products, by Kristina Shampanier, Nina Mazar and Dan Ariely
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hen was the last time you downed that extra beer to get the ‘Happy Hours’ free beer for your friend? When was the last time you bought an extra shirt to get the FREE voucher at Shoppers Stop? When was the last time you bought an item on Amazon only when it had free shipping to your house? If your answer to all three questions is ‘NEVER’, you are one of those rare individuals who have not been bitten by the FREE bug. For the rest of us, we are deeply infected with “FREElaria” – the non-terminal disease of being irrationally in love with things given to us for free. Most of our actions are usually predictable when we have a price tag to our purchase. We have this thing about the glory of bargaining and an obscure economic concept called ‘cost-benefit analysis’ that our mental faculties churn out in seconds. But why is it that our actions change completely when we hear the word FREE? Almost like a zombie we toe the line the marketer has laid for us. What is it in the 4 letter word that turns our world upside down?
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us act so differently than when efficient rules and mental we pay? What changes when the shortcuts — to help us in EVERYTHING WE CONSUME making judgments and taking price of something is lowered to zero? To understand the decisions. Depending on the THAT HAS A PRICE MUST effect of zero, we first have importance of our decisions, GO THROUGH THE to delve into the normal maze our brains select a pathway COST-BENEFIT ANALYSIS, of common decision making for our actions. While buying with things that have a price. a car, we take utmost care WHETHER IT IS A MAJOR Everything that has a price to go through every step of DECISION OR OTHERWISE. the complex cost-benefit must go through the costbenefit analysis, whether it is analysis, as we believe it to as significant a decision to solve be of high importance with the Kashmir issue by declaring war on Pakistan (the a lot at stake. However, while deciding on which cost of this is really high), or as minor a decision paratha to eat, we mostly rely on our gut feeling to to buy the ticket to the matinee show of Avengers: save ourselves the effort of the complex decision Infinity War. While the stakes involved in both these making process. It is like cajoling yourself, saying, decisions are dramatically different, the route for “There’s not much to lose in this decision, so why arriving at the decision is roughly the same: bother so much!” This is our “affect heuristic” — 1) How much are you losing a short cut based on gut feelings or instinct. More 2) How much are you gaining pronouncedly, when FREE becomes a part of the 3) Subtract the first from the second to see what transaction, we no longer do a cost-benefit analysis have you got. at all before taking a decision. Rather, we start a) If you have a positive number, go for it! relying solely on gut feelings and a positive emotion. b) If not, look for the next best alternative. Let’s explore this with another common The real dilemma begins when the concept of example. Two different hotel rooms are listed on free enters the fray. According to Juan Nicolau, the same website, one without breakfast, the other Economics Professor at the University of Alicante, with FREE breakfast. While comparing the rooms, “It only implies benefits and no costs, while another you might have first liked the room without the offer with a positive price, no matter how small it breakfast. However, the moment you saw FREE is, always conveys both benefits and costs.” Dan breakfast in the second room, you suddenly start Ariely in his book Predictably Irrational theorizes, liking the second one more. “Benefits and costs “’FREE!’ gives us such an emotional charge that are always present, as opting for the alternative we perceive what is being offered as immensely with a free component does imply paying for the more valuable than it really is. Why? I think it’s other component of the product,” Nicolau says. because humans are intrinsically afraid of loss. “Nonetheless, a positive affection is generated There’s no visible possibility of loss when we toward the component and, in turn, toward the choose a FREE! item.” whole product itself.” So, even though we know An alternative thought is that our love for FREE we are paying for the free item through the other stems from our laziness. Can it be that we prefer part of the bundle, we are just happy to feel better FREE, because we it is easier to grab a free object about the FREE option! than make the effort of reaching for the wallet or purse, taking the money out and paying up? Kristina 5 FREE things which aren’t really FREE Shampanier tried to ascertain the reason, through 1. Free Search her experiments at a cafeteria checkout line where While Google’s free searches have actually given people were already prepared to reach into their the Internet the shape that it is today, it is in reality wallets. She proved that “it’s not about having to an extremely costly proposition. While you do not reach out for the money, it is this affective reaction physically shell out a single rupee for your searches, that people have.” So, more than laziness, it is our you’re actually selling yourself! Google it records irrational love for FREE that makes us act the way your behavioural, attitudinal and usage patterns, we do. But how does it really work? and makes these patterns available to the various sellers to show you their ads. In effect, Google is The Free-work selling your patterns to various third parties. This As rational human beings, we use “heuristics”— leads to a wide variety of impulse purchases and
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get put off by any additional charges like shipping added to your purchase! Advice: While buying online, it is always better to compare identical products with shopping charges or free shipping, as on numerous occasions, products work out cheaper when you actually opt to pay separate shipping charges.
unwanted expenditure. Imagine yourself pining for the latest PS4 video game console for a while, but just not being able to buy it because you want to take the GMAT. However, not being able to buy doesn’t mean you can’t take a peek at all the good things and features of the PS4. So, once in a while, you end up searching for the various technical specifications of the PS4 and the new games being released for it. Suddenly, an ad pops up while you are reading an article about Permutation and Combination. The simple ad says, “Buy PS4 at 32% discount on www.amazon.com with special cashback from Paytm and financing from Bajaj Finance.” Now, this seems too good to be true, and you end up closing the deal! So, while you wind up with a cracking deal for the PS4, you end up spending money on something you could have done without. Advice: Google tracks your every activity in order to improve your search recommendations and serve ads suitable for you. You can be untraceable by deleting items from your history, turning tracking off on your browser or using the incognito mode while browsing. On the other hand, you can just focus on what’s important and let go of the rest. 2.Free Shipping Free Shipping is an extremely popular way for e-retailers to sell higher priced items. A classic example is when you find a t-shirt worth `1250 to be a better bargain than a t-shirt worth `800 with `200 shipping charges, just because the former comes with FREE shipping. While the latter is a better deal, you may, like most other online shoppers,
4.Free Food and Beverages About a month ago, a strange sight welcomed me when I entered the usually sparsely crowded Inorbit Mall in Vashi. A serpentine queue about a mile long slithered at a snail’s pace towards the newly opened Starbucks, while the rest of the mall wore a dejected look. While I was trying to figure out what was wrong, two super busy teens shoved a piece of glossy pamphlet while tracking down their next target. Starbucks was giving away a FREE drink on their nth store opening. While I have nothing against Starbucks’s policy, what I found strange was how much time one wasted in the queue waiting for that free drink. While the free drink had no price, there were so many other valuable tasks that could have been accomplished in the time wasted for the drink. So, while your downside for the drink in price is really Zero, your opportunity cost for the time wasted is really high. Advice: The next time you plan to stand in that long queue for a free thing, ask yourself if there’s
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Before you stand in a queue for a freebie, think whether the time you spend could be used better!
3. Free Prizes Free prizes come at a large cost, be it the smaller prizes or the bigger ones. In case of the former, like a movie ticket or even an iPhone, you feel obligated to behave the way the seller wants you to. So, at a very low cost, you become a believable brand ambassador for the company. By accepting the “Free Gift” from the company, you lose your negotiation power by being forced by your conscience. In case you are lucky enough to win the bigger gifts like a car, a flat or air tickets for an international vacation, be prepared for the additional costs that accompany them. While the marketer gifts you the car, he doesn’t pay the road taxes, the registration fees or the maintenance costs for your car. Similarly, a flat comes with its whole bouquet of taxes and fees. And the vacation doesn’t end with the flights – the costs of stay, travel, sightseeing and food, all add up to be an additional expenditure. Advice: Before you start celebrating a Free Gift, make sure you can afford the additional costs that come with it.
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anything better that you can do with your time. If there is, then that drink isn’t free for you. 5.Free Hotel Breakfasts Very often when I go on vacation, my family is excited about the FREE breakfast at the hotel. On one of my official trips, I actually did a costbenefit analysis of this free breakfast. The hotel was charging `7,500 per night on one of the travel sites, while it was charging me `9,000 per night, which included the FREE breakfast. And frankly, I don’t remember the last time I had breakfast worth `1,500! Advice: Actually, “Free Breakfast” means you’ve already paid for it. Doling out “Free” food and beverages worth thousands of rupees every single day would ensure a speedy demise for any hotel. So, book the hotel after a thorough price comparison on websites like Hotels.com, trivago, agoda.com.
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Why give something for free?
Free comes with an obligation There’s a saying among marketers that giving out freebies can mean either you are desperate or you are going out of business. And both these things lower the brand value of any company. Over and above this, there’s an actual cost for the freebies. So, in all it would mean a losing proposition. Contrary to this belief, Fast Moving Consumer Goods or FMCG companies have stuck to using the technique of FREE sampling. Free samples at supermarkets help boost sales (at least partially), because customers who’ve been given a taste tend to feel obliged to buy the food they’ve been given for free. The reason for this is what marketers call the Reciprocity Principle. But there’s more to reciprocity than the simple giving The reciprocity principle is one of the basic laws of social psychology that states that in many social situations, we pay back what we received from others.
Most cost accountants would agree with me that a free gift or a free sample is a sure shot money loser. But the truth is that consumers love freebies. And any marketer worth his salt would agree that if done properly, freebies are the bait that guarantees a nitro-boost to sales. A positive takeaway from this is that consciously or unconsciously, consumers respond in a host of surprising and conducive ways when they get something for nothing. This leads to generous rewards for the companies in return for their ‘generosity’. Here are a few of the surprising ways consumers are affected by freebies.
back. According to Randy Garner, a professor of behavioural science at Sam Houston State University, feeling obliged to reciprocate a favour “can occur despite the fact that we may never have requested the favor in the first place. (sic)”2 So, while you had no interest in buying Cheddar Cheese when you entered Star Bazaar, the small bite of Free Cheddar that your son just loved made you feel obligated to buy at least one pack of it.
Give the customers a feel Free samples ensure that your product reaches the hands of your customers. And every person who is trying out your product has the potential to become a lifelong customer. This eliminates the choices and options that were in the mind of the customer and hooks him to your product. Imagine yourself walking down the aisle of beverages at your local supermarket. While you are confused between Red Label and Society Tea, a Sales Rep from Lipton walks up to you and offers a free sip of their latest Darjeeling Tea. While you are unsure about how the other brands will taste, you now know for sure how Lipton tastes. And if you like what you tasted, you’ll want to keep the headache of choosing and justifying your choice by simply picking up the pack that the smiling Sales Rep hands you!
Free is not cheap We, as rational human beings, have this irrational tendency to associate quality with price. So, anything cheap is deemed to be of lower quality in relation to a comparable product. However, how do you measure the quality of something that is given for FREE with an expensive item? Imagine the free parking sensors that come with your latest auto-transmission car. We would imagine it to be of good quality as well, right? Isn’t it surprising that while we associate lower quality with something that has been discounted, we suddenly look at a similar thing with high regard the moment it is FREE. You can think of this as a derivative of the common man’s Theory of Relativity, which says ‘Everything is relative’. We place a price value to an item that
2
Randy Garner, Post-It® Note Persuasion: A Sticky Influence, Journal of Consumer Psychology, 2005
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Free gives you extra Haipeng (Allan) Chen, Howard Marmorstein, Michael Tsiros, & Akshay R. Rao in an article in Journal of Marketing Study3 talk about an experiment in which participants had a choice of getting 33% more coffee or 33% off the regular price of coffee. More people picked the former, even though the discount is a better deal in terms of how much the coffee costs per ounce. Refer to Table 1. Assume the original weight of the coffee to be 100, and the original price to be 200, which means the cost per weight will be 200/100, i.e., 2. In Scenario A, participants got 33% more coffee, so the weight increases to 133 with the price the same as earlier, i.e., 200. In Scenario B, participants got a 33% discount, so the weight remains 100 while the discounted price is 134 instead of 200. And the new cost per weight shows the actual story! ALL ABOUT COFFEE Old Weight Old Price Cost per weight New Weight New Price New Cost per weight
Scenario A Scenario B 100 100 200 200 2 2 133 100 200 134 1.50 1.34
Apparently, we’re really bad at math when it comes to calculating percentages! The researchers found that people thought a 33% increase in quantity and a 33% percent discount were equivalent; in fact, the discount is equal to getting 50% more in terms of unit price. Once shoppers get confused with the numbers, they’re left with only the emotional factors to guide their decision-making. People perceive getting something free or extra as a gain, while a discount is viewed as just reducing the amount paid out of pocket. We’d rather gain than lose, even when it’s not in our best interest economically! People talk when they are happy Who doesn’t love freebies? And what better way
to make your customers praise you than to give freebies! Given our current closely interconnected world which is dominated by social media, the elusive good word that the brand is after is easily spread through social networks. In fact, multiple researches have proven that customers converted into brand advocates can garner a brand more sales than a brand ambassador can through traditional advertising. And, of course, it’s a lot cheaper! Procter & Gamble figured out that one of the easiest and best ways to get people using and talking about their products is simply to give them out for free. In their article titled, What Drives immediate and ongoing word of mouth?, Jonah Berger and Eric M. Schwartz found that people who got a product for free talked about it 20% more.
So what do we do now? Now that we are aware of our own small little shortcomings and fallacies, can we really do something about it? Is there a way to get our own decision making system back to work? The answer comes from Kristina Shampanier. According to her, the solution lies in making the decision after changing the equation, by increasing the price of the FREE item so that it is no longer free. Let’s break it down. Add 10 rupees to the free price and add the same amount to the other alternative you were considering, and see how you would react to these new choices. Now that you have price tags for both the options, it will help you understand if you’re truly overvaluing the free product or not. And of course, even after you’ve added 10 rupees, you may still want to take the FREE item, and that’s a completely personal choice! I’m pretty price sensitive (read, thrifty) and don’t mind spending the extra time or marginally extra expense once in a while for a FREE bargain that is acceptable to me. But only when my cost-benefit analysis comes out to be positive. Always remember: There are no free lunches in this world. A
The author is an alumnus of IEM, Kolkata and IIFT, and has had extensive experience across multiple industries in India, Europe and Africa. After an illustrious career with TATA, his love for mentoring students brought him to IMS. He is the Program Director of the PG India vertical and a regular mentor.
Chen, Allan, Howard Marmorstein, Michael Tsiros, and Akshay Rao (2012), “When More is Less: The Impact of Base Value Neglect on Consumer Preferences for Bonus Packs over Price Discounts,” Journal of Marketing Study, Mays Business School Research Paper 3
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already has a price; researchers call it a ‘natural anchor’. But without a price as a cue, we tend to get confused, and our brain starts looking for other signs to indicate value. So, when the primary purchase item is a non-discounted high value one, you automatically associate its quality perception to the freebie as well.
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MUST READS MUST STUDY ANDHRA READS HOUR PRADESH
Since you’re planning on doing your MBA, you need to be well read, and not just on current affairs. In this section, we offer you some choices of books that will broaden your perspective, and you will find that you will never be at a loss in a discussion!
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n this book, Richard Feynman (1918-1988), winner of the Nobel Prize in physics, recounts in his inimitable voice his experience and ideas on atomic physics with Einstein and Bohr and ideas on gambling with Nick the Greek. The book thrives on his outrageous adventures, from cracking the uncrackable safes guarding the most deeply held nuclear secrets; painting a naked female toreador – and much else of an eyebrow-raising nature. Google cofounder Sergey Brin had once commented that this autobiography of Richard Feynman inspired him to dedicate his career Surely You’re Joking Mr Feynman to blending technology and creativity. Author: Richard P Feynman The book bares open Feynman’s life in all its eccentric glory – a Publisher: Random House combustible mixture of high intelligence, unrestrained interest, and Genre: Autobiography uncontrolled impudence. Overall, this is a highly interesting book for Price: `389 sure.
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hat is it that an executive is supposed to do? The author Peter F. Drucker defines an executive’s job role when he specifies that it’s the ability to ‘get the right things done’. And, that usually includes doing what other people have overlooked as well as avoiding what is unproductive. Drucker harps on the fact that intelligence, imagination, and knowledge may all be wasted in an executive’s job without the acquired habits of mind that mold them into results. Drucker identifies certain practices essential to business effectiveness that can, and must, be learned: a) Managing time, b) Choosing what to contribute to the organisation, c) Knowing where and how to mobilise strength for best possible results, e) Setting the right priorities and finally f) Knitting all of them together with effective decision-making. Ranging widely through The Effective Executive the annals of business and government, Peter F. Drucker demonstrates Author: Peter F. Drucker the distinctive skills of executives and offers fresh insights into old and Publisher: HarperBusiness seemingly obvious business situations. Amazon CEO Jeff Bezos found this Genre: Non-fiction book such a brilliant read that he chose this among the three books that he Price: `864 had his senior managers read for a series of all-day book clubs.
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he story is about an old man Jacob Jankowski recounting his days in a circus in America’s Depression era. Even though the storyline might seem a little cliché, with a boy stealing his ladylove away from her evil husband, it’s the background and the other side characters that make the story stand out from the rest. From Jacob’s bad tempered dwarf roommate, to the occasionally psychopathic equine master, to the sinister ring master, and Uncle Al, every character has an interesting story. Even the animals seem Water for Elephants to be more than mere brute creatures, with the most adorable Author: Sara Gruen being an elephant, who for a non-speaking character has an edge Publisher: Hodder & Stoughton and humour to her. Water for Elephants is fun, sweet and thrilling Genre: Fiction and will pull you into the mysterious life of the circus in such a Price: `339 gripping manner that you won’t want to leave.
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Flipkart-Walmart deal: What the future holds The Indian e-commerce has been given a major shaking up after the WalmartFlipkart deal. What does this entail for the various competitors, including the biggest rival Amazon, and other groups eyeing their share of the pie, like Alibaba? And ultimately, how will the customer benefit, if they do at all? Dr Suresh Srinivasan
Flipkart’s future Flipkart is certainly a proud Indian startup that has achieved its fair share of glory and is currently valued at $20 billion, and the Bansals will always
remain a great role model for the Indian startup community. Flipkart is the largest funded Indian startup, and its growth has been astonishing, although the valuations have been volatile, in line with industry sentiments. The company was valued, at its peak, at around $15 billion in 2015, but dropped steeply to around $12 billion in 2016 and further to less than $10 billion in 2017. However, in spite of its seesaw valuation, it has been steadily building capabilities; acquiring eBay is an example. Such a steady drop in valuation over the last three years is proof of the investor’s perception of the industry losing its attractiveness. However, the current deal that
places a value of around $20 billion on Flipkart is way ahead of what the market perceived, and brings a lot of optimism to the industry as a whole, and more specifically to Flipkart as an entity. Assuming that Walmart has prudently valued Flipkart, such a high valuation and the transaction demonstrates the unlocked value both within the industry as well as within Flipkart.
Competitors, including the biggest, Amazon, and other smaller players
The Walmart effect will have different kinds of impact on the competitors. For example, Snapdeal’s case will be interesting! Over the last 12 months or so, Snapdeal has been seen to be looking at a long term philosophy. Sharply moving away from the ‘top line’ and the discounting race, Snapdeal has shrunk its business and size (including staff reductions), and is focusing more on creating a loyal customer group through providing a superior platform experience. In Flipkart has always enjoyed investments effect, Snapdeal may not grow that aggressively, but over the years of its operations.
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almart has signed and concluded the deal acquiring 77% of Flipkart spending US$16 billion. This transaction values Flipkart at around $20 billion. The Indian e-commerce industry continues to prosper; growing exponentially at more than 20% on a compounded annual growth rate (CAGR), and is likely to reach $70 billion by the year 2020. This translates to nearly `5 lakh crore. Homegrown players Flipkart, Snapdeal, Paytm and various other local players have been struggling to keep pace with this growth and keep needing more cash infusion for sustenance; it is still a discounting game, after all. The global giants are tightening their belts; be it Amazon, Walmart or Alibaba — they are descending into the Indian market in full force, and their timing, for that matter, is quite perfect!
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can carve a clientele for itself. This means that in the future, with aggressive players like Amazon and Flipkart growing steeply, Snapdeal may turn out to be a good acquisition target. As far as the Paytm story is concerned, the impact of the Flipkart-Walmart deal on Paytm is likely to be different. It is an aggressive player with a strong backing from Chinese investors, especially the Alibaba Group, which has aspirations of making it big in the Indian market. In fact, Alibaba is aspiring to emulate its Chinese e-commerce success in the Indian market context, but is unfortunately stuck with the ‘China’ perception, i.e., something which the customers may not value to a great deal. Hence, Alibaba has soft pedaled the issue and is using the Paytm umbrella to make it big in the Indian e-commerce market. At the end of the day, the essence of its strategy will be to beat Amazon and Walmart in the Indian market; it will be prudent to mention here that after all, Alibaba is the largest e-commerce company in the world! Today, Paytm is valued at close
100 million tickets across the country during the current year. These are a few examples of how Paytm, and therefore Alibaba, is leaving no stone unturned to achieve scale.
How will the e-commerce market react?
to $10 billion. The group also has received a payments bank licence from the Reserve Bank of India. Alibaba, along with Ant Financial (formerly known as Alipay) holds close to 40% of Paytm. Alibaba aggressively expanding across the e-commerce space, including the entertainment arena, and is talking positions in companies like Bookmyshow, Insider.in and TicketNew. It is aiming to sell
Walmart’s entry into the Indian market through the Flipkart route is great news for the e-commerce industry. The industry was sliding into a bit of cash deficiency, with too much of private equity investor cash being burnt up. More funding at attractive valuations were not flowing in. The valuations of the Indian e-commerce companies were dropping quite steeply with every round of private equity infusion. Now, with a strong player like Walmart taking the lead to come in at a very high valuation, the signalling effect to the e-commerce industry can be quite powerful, encouraging more players to stay invested and for fresh investments to flow in at higher valuations. The other big boost for the e-commerce industry comes from an infrastructure perspective. With a company
INDIA INC: AT A GLANCE Outbreak of deadly Nipah virus in Kerala The fatal Nipah virus reared its ugly head after nearly two decades, with an outbreak in Kerala that has claimed 11 lives, including a nurse treating a patient, at the time of this magazine going to press. The brain damaging virus’s symptoms include breathing trouble, brain swelling, fever, headache, drowsiness, disorientation and delirium, and there is no apparent cure, except for intensive supportive patient care. Nipah was first identified in Malaysia in 1998. In India, the disease was first reported in 2001 and again 6 years later, with the two outbreaks claiming 50 lives. www.advancedge.com
Pfizer Inc recalls 1.8 million vials of antibiotics In what can potentially be a major embarrassment for India’s pharma sector, Pfizer Inc has recalled over 1.8 million vials of antibiotics — piperacillin and tazobactam — from the US market. These vials were manufactured by Hospira Healthcare India Private Limited, a Pfizer company, at its Chennai plant. According to a notification released by the company, the antibiotics contain “elevated levels of impurities that may result in decreased potency”.
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like Walmart coming into the fray, its spends to improve logistics can be significant. Currently, Amazon has embarked at around $5 billion, and has been spending large sums to create the logistics and last mile delivery effectively. Such investments have cascading effects and ‘common-use’ infrastructure are created, as a sort of ‘spillover’ effect, which smaller e-commerce companies can also use. This also gives a lot of encouragement for smaller e-commerce companies in different areas that are sprouting and growing, such as niche players like events booking e-commerce companies, used car sales, online travel aggregators, home rental sites, etc.
How the consumer will benefit (or not) from this deal Indian e-commerce players are, by law, allowed to operate only as marketplaces. What this means, in effect, is that such companies should be in the business of connecting the buyers and sellers through their platform and should have a wide range of sellers on their platform without relying on only a few sellers, which is the current practice. More than selling their own products (by holding inventory), these market makers need to promote a good mix of third party products on their sites. Such a regulation will also move the industry away from the ‘deep’ discounting practice and towards offering quality products to customers at
affordable prices, giving them a pleasant buying experience. Hence, on balance, the deal is good news to the e-commerce industry as a whole. The Walmart deal is a loud and clear sign that ‘discounting’ as a philosophy is not going to work anymore in the Indian e-commerce context, and customer loyalty cannot be bought by merely offering discounts. Last mile connectivity, a liberal ‘return of goods’ policy and providing a quality user experience will be the name of the game. The deal brings in a financially strong ‘strategic’ shareholder like Walmart into the Indian e-commerce industry, and with Amazon also moving along the same lines, the customer is bound to benefit. A
INDIA INC: AT A GLANCE M&A in India The Indian e-commerce segment has seen more than 20 mergers and acquisition (M&A) deals worth US$2.1 billion the last year. Now, 2018’s Walmart Flipkart deal of $16 billion will be an icing on the cake, and make the 2017 M&A numbers miniscule.
Airel takes over Telenor Bharti Airtel Ltd. has announced that it has completed the merger of the Indian arm of Telenor Communications with itself. As a part of the acquisition, Airtel will also take over the outstanding spectrum payments and other contractual commitments of Telenor.
Deutsche Bank acquires first Indian firm Deutsche Bank of Germany has acquired 4-year old Mumbai-based financial technology start up Quantiguous Solutions. This acquisition will enable Deutsche Bank to provide an open banking platform to its corporate clients across the world. Notably, this is the first acquisition for the German bank in India.
EarlySalary acquires CashCare
UltraTech acquires Century Textiles Aditya Birla Group-owned UltraTech Cements is absorbing the cement business of Century Textiles. This will help UltraTech gain market share and leadership positions in regional markets in a deal that has long been in in the works.
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Pune-based EarlySalary has announced that it has acquired lending platform CashCare. Founded by Akshay Mehrotra and Ashish Goyal, EarlySalary is a mobile app that allows salaried individuals to avail instant loans for a few days or till the next salary cycle.
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Bhushan Steel sale: Can it set a precedent? The sale of the beleaguered Bhushan Steel to Tata Steel is a significant transaction. Not only does Tata Steel garner synergies and believes it to be a win-win proposition, the deal itself can be a precedent to the others following, thereby solving a large part of the NPA menace in the Indian banking system. Dr Suresh Srinivasan
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n the second week of May, Tata Steel announced that it had signed definitive agreements to acquire 73% equity stake in Bhushan Steel Limited (BSL) for around `36,000 crore. Tata Steel expects that its acquisition of BSL under the corporate insolvency resolution process will generate significant synergies. The company is also looking to forward to the possibility that the move will turn out to be a ‘win-win’ proposition for all stakeholders. More than viewing this transaction as a mere acquisition of one company by another, the Bhushan Steel case is a major breakthrough in terms of reforms for the current BJP government, in strengthening the currently ailing Indian banking industry. Let us see how.
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The stressed assets problem Stressed assets are a major challenge to the Indian banking industry. This is one of the major agenda items in the ‘to do’ reforms of the current government. Stressed assets are an aggregation of NonPerforming Assets (NPA) and restructured loans. NPAs are
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accounts that are overdue, principal and interest, or both, for more than 90 days. As of today, stressed assets are estimated at around `10 lakh crore; roughly 70% of these are NPAs and the remaining 30% are restructured loans. Overall, the amount of stressed assets in the economy translates to more than 15% of the total loans and advances made by the banks. A bulk of these relate to the public sector, which have NPAs in the range of around 14%, while for the private sector, it stands at less than 5%.
The regulations Last year, an
Currently, stressed assets are pegged at `10 lakh crore, roughly 70% of these are NPAs, and the rest are unstructured loans. amendment to the Banking Regulations Act, 1949 was brought in and the new Banking Regulations (Amend) Bill, 2017 was passed. This enactment puts more power in the hands of the Central government, the Reserve Bank of India and the banks to hasten the process of debt collection from companies that have been classified under the stressed assets program. The idea behind this is to allow defaulters to be dealt with under extremely stringent stipulations and within short time frames, so that the levels of NPAs in the economy can be swiftly reduced. The new enactment also gives power to the Central government to direct the RBI, through the banks, to act against
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loan defaulters and refer them to the National Company Law Tribunal (NCLT). The NCLT will then initiate proceedings under the Insolvency and Bankruptcy Code, 2016.
The players responsible With an aim to resolve the worrying NPA situation, a panel within the Reserve Bank of India was constituted. The panel’s mandate was to recommend the names of defaulting companies, against which the respective banks would initiate insolvency proceedings. Twelve large defaulters (companies) have been identified by the panel, and these defaulters jointly account for around 25% of the total NPA in the economy. Out of these, three companies Bhushan Steel, Essar Steel and Electrosteel had been referred by the lender to the NCLT in 2017 State Bank of India (SBI), with a request to initiate insolvency proceedings. These three companies alone account for around 10% of the overall
stressed assets. The panel also identified 500 other companies that have large NPA exposures. As the first step, insolvency proceedings were initiated by the NCLT against Bhushan steel Limited, which had stressed assets exposure to banks in the range of `30,000 crore.
The resolution: Steel case
Bhushan
At every stage of the insolvency proceedings, there has been enormous resistance from the owners to stall the whole process at every stage. The recent past has thrown up several instances wherein many of the rich and powerful borrowers appeared to hold no moral obligation to pay back the loans, in spite of stringent written contracts being well in place. In such a scenario, and given the prevailing sentiment, the insolvency proceedings have become very difficult to execute on ground. The insolvency proceedings are quite complex, with shareholders, creditors and
employees all being involved. In spite of all these complications, the first case is seems to be almost over, with the promise of bearing fruit within nine months. In the Bhushan Steel case, the government has not sold the defaulting company to any Tom, Dick or Harry on the back of insolvency and bankruptcy proceedings. Rather, a shortlist was carefully created containing names of potential buyers of Bhushan Steel, and the final buyer was chosen in such a way that there would be synergies for the buyer from such a purchase. This means the buyer will be able to unlock value out of the stressed asset and secure a return on its investment. And at the same time, the buyer will be ready to pay a higher price for the stressed asset acquired, which will benefit the government and the lending banks. This philosophy has worked out very well in Bhushan Steel’s sale to Tata Steel.
INDIA INC: AT A GLANCE Vedanta to acquire bankrupt steel co Metals and mining giant Vedanta Ltd has announced that it has received approval from the Competition Commission of India (CCI) to acquire the bankrupt Electrosteel Steels Ltd, which is one of the 12 companies identified by RBI as a ‘stressed asset’ candidate referred to NCLT.
L&T to sell electric biz Larsen & Toubro has agreed to sell its electrical unit to a consortium led by Schneider Electric SE, for around `14,000 crore. This is part of the restructure wherein L&T is turning focus towards its core construction business. The Shree Cement Ltd board has approved the acquisition of a 100% stake in private railway siding operator Raipur Handling and Infrastructure Pvt. Ltd for `59 crore. This acquisition will help Shree Cement better manage transportation of goods on the railways network.
Constantia becomes India’s 3rd biggest flexible packaging co Constantia Flexibles has stated that it has completed the acquisition of Creative Polypack. With this, Constantia Flexibles Group is now the third largest flexible packaging company in India. The industry is poised for a healthy growth with a positive outlook for manufacturing and FMCG sectors.
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Shree Cement to acquire railway siding co
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Possible synergies Tata Steel sees a lot of opportunities for synergies with its own operations. BSL’s blast furnace, its rolling mills and other supporting infrastructure are highly underutilised, and this gives Tata Steel a quick, easy and readily available route to ramp up production. Otherwise, had Tata Steel chosen to take the ‘green field’ expansion mode, wherein they set up the entire unit and operations, it could have been years before Tata Steel realised the sort of production they can expect to immediately. There are a number of other synergies that create a ‘win-win’ scenario for all the stakeholders. Staff issues is a case in point. Although BSL was technically bankrupt, all of its employees have been absorbed by Tata Steel — a far reaching outcome in a growing democracy like India. This also sets a precedent amidst the obvious positive result that employees and unions will not oppose such distressed sale. In fact, contrary to the norm, the employees and unions may even support the sale, especially if
The Bhushan Steel resolution can set a precedent for similar resolutions for the remaining defaulters named to the NCLT. they are given the reassurance that there will be no job losses.
The transaction Although, it has been reported that the breakdown value of the assets on the balance sheet is close to `14,000 crore, selling the company as an ‘as-going’ concern to buyers who have a synergy in such acquisition has yielded close to `36,000 crore, which is an enormous value addition to the economy. It has been reported that the lenders received almost the entire amounts that were outstanding, without the banks having to take any haircuts; this is truly a
milestone in managing stressed assets in the economy. This transaction sets the precedence that there is definitely a viable mechanism to address the stressed asset issue. Consequently, the key stakeholders in the matter, including the Reserve Bank of India, lending banks and the NCLT could become more aggressive in their efforts to go after the rest of the 11 stressed asset cases , which, the finance minister has indicated could easily bring to the pot close to `1 lakh crore. The stressed asset reform needs to be perfected and celebrated! However, it must be noted that this legislature does not by any means address the NPA problem and its coming into existence. Banks and the boards of banks need to take several steps, including noninterference by the government in the functioning of the banks, to improve governance, and lay down processes that will enhance the quality of debt, going forward. After all, as we all know, prevention is better than cure! A
INDIA INC: AT A GLANCE Iconic Xerox-Fujifilm deal in doubt?
With Xerox’s CEO Jeffrey Jacobson and six board members have stepped down from their posts. This puts the planned takeover — a deal that was struck in January 2018 — of Xerox by Fujifilm in a state of doubt. The resignations come after allegations that the CEO struck the deal without the board’s authorisation to preserve his own job. Under the terms of the deal, Xerox, which has a market value of $8.2 billion, would first merge with a joint venture that the company operates with Fujifilm in Asia. Fujifilm would ultimately end up owning 50.1% of the combined entity, which would expand the joint venture to encompass all of Xerox’s operations.
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Bayer-Monsanto deal gets regulatory nod
Bayer’s proposed buyout of Monsanto has been approved by the Competition Commission of India, following which Monsanto will become a subsidiary of Bayer. It was first announced in 2016 that Bayer, a pharma and crop sciences company, would take over Monsanto, a global giant in seeds, biotechnology and herbicides, for a whopping $66 billion. Last year, amidst concerns that this deal would create the world’s largest pesticides and seeds firm and limit the number of competitors in Europe, the European Union had initiated a probe. The Bayer-Monsanto deal will be the largest ever involving a German buyer, ahead of Daimler’s tie-up with Chrysler in 1998, which valued the US carmaker at more than $40 billion.
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What’s the deal with crude oil? With global crude prices touching record highs in the last two years, India is bracing for an impact on its sectors and therefore the economy’s growth. In this article, we explore the reasons for this increase. Dr Suresh Srinivasan government, as the increase in petrol and diesel price can be an extremely sensitive issue for the voting public.
The situation Generally, crude price increases occur on the back of geopolitical uncertainties or supply side constraints, or a combination of the two; the current increase is a combination. Developments with respect to Iran, OPEC and Russia not increasing production, and political unrest and uncertainties in Venezuela leading to supply shortage are a few reasons. The perception — and anticipation — that the global economy will grow at a much higher pace over earlier estimates is also a reason, as countries attempt to increase their stock pile of crude; this boosts demand on the back of supply side constraints. In fact, global oil consumption has expanded much faster than anticipated. A catch up game is also in force. With low crude p r i c e prevailing o v e r
the last few years, oil majors have not been investing in capital equipment that increases production, but will now have to cumulatively invest to meet additional demand, and it will take a while for such capital investment cycle to stabilise. All these forces jointly operate to push up global crude price.
Politics On the geopolitical side, developments with respect to Iran have intensified global uncertainty. Last month, the US pulled out of the Joint Comprehensive Plan of Action (JCPOA), commonly called the Iran Nuclear Deal, which was signed between Iran and the UN Security Council comprising China, France, Russia, UK, US and Germany in 2015. The deal provided certain checks and balances, whereby Iran agreed to cut down its destructive nuclear ambitions to the satisfaction of the international community, which the US believed was not working anymore. The US’s controversial pulling out of the agreement and warning to Iran that the strongest ever sanctions are likely to follow, has triggered a series of uncertainties, resulting in the eventual increase in crude oil price.
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G
lobal crude oil prices have recorded its highest levels in the last 48 months; it breached the sensitive US$80 a barrel mark recently. Although the price has been inching upwards over the last year or so, the bulk of the increase came in the last few months. This is a major concern for the global economy, more so for a country like India, which imports close to 75% of its crude oil requirements. Over the last 4 years, the current NDA government has been lucky, since oil price has remained quite stable; this has greatly helped the government in keeping the budgetary deficits low. But as we approach the 2019 election year and with the oil price inching up, this may be a major concern for the
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Supply On the supply side, OPEC and Russia have been reducing outputs for over 15 months, but have not increased the same in light of such increase over the past 3 months. Venezuela has higher reserves than even Iraq, Iran, Saudi Arabia and Qatar, and its oil reserve life is estimated to be over 600 years. However, the country has been challenged by the ‘oil resource curse’, whereby the rulers are blamed for nepotism and corruption and for not making adequate investments to capitalise on such reserves and developing the economy. Its oil output, primarily heavy crude, has been steadily decreasing over the years. The re-election of President Nicolas Maduro has triggered off unrest in the country, and, followed by stringent US sanctions, has played a major role in the supply side shock; after all Venezuela is a major supplier to the US Gulf Coast, which houses a large number of heavy crude refineries. The Venezuelan crisis is serious, and has the potential to push up oil prices further. Analysts believe that crude breaching $100 a barrel may not be an unrealistic scenario!
Repercussions With oil prices increasing, who would be worried? The US won’t face a major impact, as it can now up its shale production,
Crude oil price increases due to geopolitical uncertainties, supply side constraints, or a combination of the two. which becomes viable once the oil price crosses $65 a barrel; hence they will meet the gap in short supply. Moreover, Canada is ready to supply heavy crude from its oil sands to the US gulf refineries. OPEC and other oil producing countries are happy with the high crude price, as they are getting a reprieve from the low price prevailing for years. So, in effect, only the emerging market countries that are consumers of crude will be worried with such high price. Various sectors of the Indian economy are likely to be impacted; airlines, petrochemicals and tire sectors will particularly have a problem. All other sectors will be impacted through the inflation route — energy and transpiration costs will feel the impact with high crude price. Corporate results will be impacted in the coming quarters, and the slowly emerging economy’s growth will take a beating again!
The rupee depreciation is a major concern, as it already inches closer to `70 a US$. It has already depreciated by more than 5% in the last few months. Inflation is likely to increase, and it is expected that the Reserve Bank of India will increase interest rates in its coming review meeting. The rise in the crude price and the resultant impact on the day to day life of the common man could come in handy for the Opposition, especially with the general elections in 2019 fast approaching. Retail prices of petrol and diesel are already at record highs; averaging `76 per litre for petrol and `67 for diesel. With the election year approaching, the government may hold back a part of such increase through excise cuts and pass on a smaller portion of the increase to retail consumers of diesel, petrol, gas and kerosene, but such actions will impact the government’s fiscal deficit position, which is a firefight at the moment anyway! A Dr Suresh Srinivasan is a Chartered Accountant, has an MBA (Bradford UK) and a Doctorate in Strategy. He is the Director of the 2-year PGDM at Great Lakes Institute of Management, as well as a Professor (Strategy & Accounting). He is also a management consultant.
INDIA INC: AT A GLANCE Hinduja acquires solar power co
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Hinduja National Power Corporation Limited (HNPCL), a subsidiary of the Hinduja Group, has successfully completed the acquisition of Kiran Energy Solar Power. The deal has been valued at approximately `1,000 crore.
Jet still eyeing Air India Jet Airways is not ruling out looking at the sale of loss-making national carrier Air India, its chairman has said, although he remains focused on his own airline. In addition to focusing on Jet Airways’s operations, it looks like Jet may consider looking at Air India privatisation seriously.
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April 2018
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STUDY HOUR
Are you a Brainiac? In this section, we shall explore several different types of questions from the various areas of entrance exams like the CAT, CET, GMAT, etc, and how to best solve them.
Quant 1. If in the following equation x and y are integers, then how many sets of solution do the equation have? log3(x – 13) + log3(x + 13) = log3(y + 17) + log3(y – 17) 1] 0 2] 1 3] 2 4] infinite
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1.
The equation can be reduced to (x + 13)(x – 13) = (y + 17)(y – 17) y2 – x2 = 120 i.e. (y + x)(y – x) = 2 × 2 × 2 × 3 × 5 Taking (y – x) = 2; (y + x) = 2 × 2 × 3 × 5 = 60 This gives y = 31 and x = 29 Taking (y – x) = 4; (y + x) = 2 × 3 × 5 = 30 This gives y = 17 and x = 13 If y – x = 6, y + x = 20. This gives y = 13, x = 7. If y – x = 10, y + x = 12. This gives y = 11, x = 1. We cannot have y – x = 3 or 5 or 8. But for the given equation to hold true we cannot have x 13 and y 17. This implies x = 29 and y = 31 is the only solution. Hence, [2].
3.
137 men participate in a knock-out singles tennis tournament. If the total number of players in a particular round is odd then one person gets a bye to the next round. What is the minimum number of matches required to decide the winner? 1] 34 2] 68 3] 137 4] 136
3. 4.
Because 136 players are eliminated, there must be 136 matches. Hence, [4].
1]
P, Q, R and S are points on the circle with centre O and radius 6 cm. M is the midpoint of PQ. OPQ and MSR are equilateral triangles. If x is the length of the sides of the larger equilateral triangle then, what can be the value of x? cm 2]
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cm 3]
cm 4]
cm
STUDY HOUR
4. Figure will be as shown.
Now D MOQ ~ D MON l (MO) = 6 sin60° = cm l (MN) = 6 cm Also l (ON) = 6 × sin30° = 3 cm Now D MON ~ D MDR \ Let l (OD) = y cm \
=
y=
–
In D ODR, l (DR)2 + l (OD)2 = l (OR)2 i.e.
+ y2 = 62 = 36
+ 3(
i.e.
– 3)2 = 36
+
+ 27 – 9x = 36
i.e. x – 9x – 9 = 0
x=
2
=
cm. Hence, [1].
Verbal Q1. A. It could be confusing. B. Unfortunately there would later be another Gupta Chandra-Gupta, so the founder of the Gupta dynasty is designated as Chandra-Gupta I – which naturally brings to mind the Mauryan Chandragupta. C. History is said to repeat itself. D. But the first date was, of course, BC, the second AD; and to clarify matters further, the Gupta Chandragupta is often phonetically dismembered as ‘Chandra-Gupta’ or ‘Chandra Gupta’. E. Seldom, though, does it oblige as readily as with the creators of ancient India’s two greatest dynasties: a Chandragupta had founded the Mauryan empire in c320; just so did a Chandragupta found the Gupta dynasty in c320.
1] CADEB 2] CEADB
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Directions for Questions 1 and 2: The sentences given in each question, when properly sequenced, form a coherent paragraph. Each sentence is labelled with a letter. Choose the most logical order of sentences, from among the given choices, to construct a coherent paragraph.
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STUDY HOUR
3] CDAEB 4] CEDAB
Statement C is clearly the first sentence, judging by the options. It connects best to E: ‘it’ in E refers to ‘history’ repeating itself. So options [1] and [3], which lack this CE link, can be ruled out. A fits best between E and D: the similarity between the two Chandraguptas and their dates mentioned in E ‘could be confusing’, but D attempts to resolve this partially by clarifying that the dates were BC and AD, and showing how the two names can be differentiated. Thus option [4] is ruled out, and we get the right sequence, CEADB. Hence, [2]
Q2) A. For more than half a century, physicists have been quietly aware of a dark cloud looming on the distant horizon of their field. B. The other is quantum mechanics, which provides a theoretical framework for understanding the universe on the smallest of scales: molecules, atoms, and all the way down to subatomic particles like electrons and quarks. C. But through years of research, physicists have come to a disturbing conclusion: as they are currently formulated, general relativity and quantum mechanics cannot both be right, as they are mutually incompatible. D. One is Albert Einstein’s general relativity, which provides a theoretical framework for understanding the universe on the largest of scales: stars, galaxies, clusters of galaxies, and beyond to the immense expanse of the universe itself. E. There are two foundational pillars upon which modern physics rests.
1] AEDBC 2] AECDB 3] EDBCA 4] ADECB
The EDB link is the most obvious one in the paragraph: E mentions the two foundational pillars of modern physics, D states that one is general relativity, and C states that the other is quantum mechanics. So option [4] can be ruled out. A makes more sense as the first sentence (as in [1] and [2]) than the last (as in [3]), since it introduces the problem at hand. D and B must precede C, as the former two introduce general relativity and quantum mechanics respectively, while C states the problem with them. So [2] is ruled out, and the correct sequence has to be AEDBC. Hence, [1]. Directions for Questions 1 and 2: The sentences given in each question, when properly sequenced, form a coherent paragraph. Each sentence is labelled with a letter. Choose the most logical order of sentences, from among the given choices, to construct a coherent paragraph.
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Q3. A. Autocomplete is one of those modern marvels of real-time search technology that almost seems like mindreading. B. Thanks to analysing and mining what millions of other users have already searched for and clicked on, C. Google knows that when you start typing a query with a ‘d’, your most likely looking for a dictionary. D. Besides the efficiency gains of not having to type as much, suggestions can be serendipitious and educational, spurring alternative query ideas. E. In the process, our search behaviour is subtly influenced by exposure to query possibilities we may not have considered if left to ourself. 1] A 2] B 3] C & D 4] B, D & E
There is a subject-verb error in A: ‘seems’ should be in the plural – i.e. ‘seem’ – as its subject is ‘marvels’ not ‘one’. The correct phrase in C should be ‘you are’ or its contraction ‘you’re’, not ‘your’. The correct spelling in D should be ‘serendipitous’ not ‘serendipitious’. E has a pronoun error: the correct word is ‘ourselves’ (i.e. plural) not ‘ourself’, since ‘our’ automatically implies that the people in question are in the plural. Therefore, only B is completely correct. Hence, [2]
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WORD DOSE
STUDY HOUR
The decline of neurosis In today’s era of exquisite confusion — political, economic and otherwise — the neurotic would be a welcome guest, nervous company for nervous days, always ready to provide doses of that most potent vaccine against gloominess: wisecracking, urbane gloominess. Some of the reasons that “neurotic” has fallen out of colloquial usage are obvious. Freudian analysis lost its hold on the common consciousness, as well as in psychiatry, and some of Freud’s language lost its power. And scientists working to define mental disorders began to slice neurosis into ever finer pieces, like panic disorder, social anxiety and obsessive-compulsive disorder — all evocative terms that percolated up into common usage, not to mention into online user groups, rock lyrics and TV shows. In 1994, the Diagnostic and Statistical Manual, psychiatry’s encyclopaedia of mental disorders, officially dropped the word neurosis from the book. “The DSM is the lingua franca of psychiatry, and given what we know today the term feels old-fashioned and quaint,” said Dr. Michael First, a former editor of the manual. “With the general decline of value of Freud in our society, it is ultimately anachronistic.”
MAT CH T HE WO R D S W IT H T H E IR M EA NING S 8. Urbane – (ur-beyn) (adj)
2. Exquisite – (ek-skwiz-it) (adj)
9. Colloquial – (kuh-loh-kweeuh l) (adj)
3. Neurotic – (nyoo-rot-ik) (n) 4. Company – (kuhm-puh-nee) (n)
10. Freudian – (froi-dee-uh n) (adj)
15. Evocative (ih-vok-uh-tiv) (adj) 16. Percolated – (pur-kuh-leyted) (v)
11. Hold – (hohld) (n)
17. Lingua franca – (ling-gwuh frang-kuh) (n)
6. Gloominess – (gloo-mee-ness) (n)
12. Psychiatry – (sahy-kahy-uhtree) (n)
18. Quaint – (kweynt) (adj) 19. Decline – (dih-klahyn) (n)
7. Wisecracking – (wahyz-kraking) (adj)
13. Slice – (slahys) (v) 14. Finer – (fahy-ner) (adj)
20. Anachronistic – (uh-nak-ruhnis-tik) (adj)
a. cut into pieces b. a person, people or thing regarded as pleasant (or unpleasant) to be with c. A gradual and continuous loss of strength, numbers, quality, or value d. relating to or influenced by Sigmund Freud and his methods of psychoanalysis, especially with reference to the importance of unconscious desires e. spread gradually through an area or group of people f. intensely felt g. the study and treatment of mental illness, emotional
disturbance, and abnormal behaviour h. sadness, dejection or melancholy i. Bringing strong images, memories, or feelings to mind j. used in ordinary or familiar conversation; not formal or literary k. having great power, influence, or effect l. attractively unusual or oldfashioned m. a witty remark or joke n. a long and distinct period of history o. an act or manner of grasping something; a grip
5. Potent – (poht-nt) (adj)
p. having the polish and suavity regarded as characteristic of sophisticated social life in major cities q. smaller, more delicate r. belonging or appropriate to a period other than that in which it exists, especially a thing that is conspicuously old-fashioned s. a person who is abnormally sensitive, obsessive, or anxious t. a language that is adopted as a common language between speakers whose native languages are different.
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1. Era – (eer-uh) (n)
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STUDY HOUR
A quiz to boost your General Knowledge 1. The Ministry of Tourism has collaborated with this company to launch a 360o virtual reality video on India’s heritage festivals, showcasing iconic destinations like Qutub Minar, Golden Temple, Hampi temples, etc. Name the company. a. Sony b. Google c. NVIDIA d. 360 Labs 2. The 226-year old New York Stock Exchange (NYSE) has named Stacey Cunningham as its president, succeeding Thomas Farley. Earlier, Cunningham held the post of Chief Operating Officer for the NYSE. Why is Cunningham’s appointment a historic landmark for the NYSE? a. First female president of the NYSE b. First president to be appointed from within the NYSE c. Youngest president of the NYSE d. First non-American to become NYSE president
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3.
‘ArchaeoBroma’, India’s first ever nationwide conference on the archaeology and sociology of food was organised recently, where discussions were held on examining food from the historical, archaeological and sociological viewpoints.
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Where was ArchaeoBroma held? a. Chennai b. New Delhi c. Hyderabad d. Mumbai
4. The 71st World Health Assembly started on May 21, with Union Health Minister J.P. Nadda leading the Indian delegation. The 6-day event is attended by delegations from all member states of the World Health Organisation; the agenda of the event is to determine the policies of the WHO, appoint the DirectorGeneral, supervise financial policies, and review and approve the proposed programme budget. Where was the 2018 WHA held? a. Germany b. Switzerland c. USA d. Denmark 5. The first ever female foreign ministers’ meeting will be held on September 20-21, 2018, with ministers from around 30 countries being invited to the event, which is expected to increase the global awareness regarding women empowerment. In which of the following countries will the meeting be held? a. USA b. Sweden c. Canada d. Australia
6. Who among the following has won the 2018 Man Booker International Prize for fiction, for a novel that combines modern day travelogues with a 17th century narrative of an exploration of a human body from the point of view of an anatomist who dissected his own amputated leg? a. Han Kang b. Ahmed Saadawi c. Jennifer Croft d. Olga Tokarczuk 7. Under the ‘Adopt a Heritage’ project, Dalmia Bharat has signed a memorandum of understanding with the Ministry of Tourism to look after the operations and maintenance which of the following historic sites for the next five years? a. Red Fort, Delhi b. Virupaksha Temple, Hampi c. Taj Mahal, Agra d. Konark Temple, Odisha 8. The Indian Institute of Spices Research (IISR) heads agricultural research related to spices in India. The institute is a subsidiary of the Indian Council of Agricultural Research. In which state is it located? a. Kerala b. Karnataka c. Orissa d. Karnataka
STUDY HOUR
10. Which of the following Indian Institutes of Technology (IIT) has entered into a memorandum of understanding worth `15 crore with VTOL Aviation India, a private company, to develop functional prototypes of craft that can take off and land vertically, ostensibly with a practical application of developing flying taxis in India? a. IIT Kharagpur b. IIT Kanpur c. IIT Madras d. IIT Bombay 11. The Union Cabinet has given its approval to a memorandum of understanding signed in March 2018 between India and this country for cooperation in the field of renewable energy, which includes joint research projects, research and development, workshops, research and technology exchange, exchange of domain experts, etc.Name the country. a. Russia b. Japan c. France d. Sweden 12. Tata Consultancy Services (TCS) announced recently in May 2018 that it has
expanded operations to which of the following US states, as part of its deal with Transamerica? a. California b. New Jersey c. Chicago d. Florida
13. Which of the following Greek goddesses is depicted on the Olympic medals? a. Hera b. Aphrodite c. Athena d. Nike 14. Sony has announced that it will acquire a major music publishing firm and record label for a price of around US$1.9 billion. Interestingly, this label is second largest music publishing company in terms of revenue, and has been valued at $4.75 billion. Which label is Sony acquiring? a. EMI b. Universal c. Warner d. Columbia Records 15. As many as 4.4 billion iPhone users have sued a technology giant in the UK, alleging that the company were tracking and collating personal information clandestinely. The lawsuit claims the company bypassed privacy settings of Apple’s Safari web browser, and the information collected include race, physical and mental health, political leanings, sexuality, social class, financial, shopping habits and location data. Name the company. a. Apple b. Google c. Facebook d. Yahoo
16. A report released recently ranks countries in terms of total wealth. The wealthiest country is the US ($62,584 billion), followed by China ($24,803 billion) and Japan ($19,522 billion). Other countries in the top 1o include UK, Germany, Australia, France, Canada, etc. What is India’s rank? a. 6 b. 11 c. 19 d. 24 17. Which of the following countries has launched the world’s first floating nuclear power station — a 21,500-tonne ship that will be primarily used to power oil rigs? a. US b. North Korea c. Russia d. China 18. The World Press Freedom Index (WPFI), by Reporters Without Borders, ranks 180 countries with respect to the power and freedom of expression of the media. For the second time in a row, Norway topped the list, with Sweden and The Netherlands following. The country with the least freedom of press is North Korea. What is India’s rank? a. 28 b. 57 c. 98 d. 138 19. Who is the longest serving Chief Minister of a state in India, recently surpassing the late Jyoti Basu, the chief minister of West Bengal, and has now been ruling the state for nearly 24 years?
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9. Which of the following cities is the first Indian city to be declared a world heritage site by UNESCO, joining the ranks of Paris, Vienna, Cairo, Brussels, Rome and Edinburgh and putting India on the world heritage city map? a. Madurai b. Jaipur c. Varanasi d. Ahmedabad
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STUDY HOUR
a. Gegong Apang b. Pawang Chamling c. Virbhadra Singh d. Naveen Patnaik
20. In 2017, India registered 6.7% growth. According to the UN World Economic Situation and Prospects report 2018, what is India’s GDP growth forecast for 2018-19? a. 7.4% b. 7.5% c. 7.6% d. 7.7%
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SUDOKU
1.b 2.a 3.d 4.b 5.c 6.d 7.a 8.a 9.d 10.b 11.c 12.d 13.d 14.a 15.b 16.a 17.c 18.d 19.b 20.c 21.a 22.b 23.c
For more similar puzzles, visit: www.sudoku.com
WORD DOSE
1.n 2.f 3.s 4.b 5.k 6.h
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GLOBESCAN
7.m 8.p 9.j 10.d 11.o 12.g
23. Scientists have recently discovered the world’s second oldest rock, a grain of magnetic zircon. The rock is estimated to be around 4.2 million years old. In which country was the rock discovered? a. Nicaragua b. Egypt c. India d. Czech Republic
ANSWERS
13.a 14.q 15.i 16.e 17.t 18.l
22. Organised by the Ministry of Housing and Urban Affairs under the Swachh Bharat Mission, the latest survey Swachh Survekshan of 2018 has named which of the following cities as India’s first cleanest city? a. Chandigarh b. Surat c. Bhopal d. Indore
How to Play Fill in the grid so that every horizontal row, every vertical column and every 3x3 box contains the digits 1-9, without repeating the numbers in the same row, column or box. You can’t change the digits already given in the grid. Every puzzle has one solution. Hint: Don’t fill in numbers at random. While filling a particular square, write numbers 1-9 on a pad and start eliminating those numbers that already appear in the same row, column or 3x3 box.
19.c 20.r
21. India’s first Post Office Passport Seva Kendra to be operated by all women staff was inaugurated recently in which of the following states? a. Punjab b. Tamil Nadu c. Odisha d. Andhra Pradesh