PRATIBIMB
The Reflection of Management
FINANCE | GENERAL MANAGEMENT | HUMAN RESOURCE | MARKETING | HEALTHCARE | OPERATIONS | SYSTEMS
DIRECTOR’S CUT ―Scholarship is too important a phenomenon to be left to scholars alone‖
An Interyiez zith Yogesh Chavdhvry, Managing Director, Jaipvr Rvgs Company
Can management teach us to manage our emotions? ―Whether managing our own emotions is difficult or managing others emotions, we realize that it is easier to manage others than to manage self while dealing with emotions”
By Lakshmi Divya Vegiraju, BIMT Gvrgaon
Philosophy of Management By Prof. Kushankur Dey, TAPMI Manipal
Pratibimb | March 2012 | 1 Pratibimb | January 2011 |IX 1 Volume II, Issue
EURO CRISIS: Will EU survive the second decade of the new millennium?
By Asmita Karanje, SIBM Bangalore
Outreach on Social Networks Strategies for companies in the service sector ―Though social networking websites provide a huge platform for a company to market itself and project its brand, it is equally a big hazard for the company as well.‖
By Amit Mukherjee, K.JSIMSR Mvmbai
A Students’ Initiative A Student’s
March 2012
Initiative
A Monthly e-Magazine
T. A. Pai Management Institute Manipal, Karnataka
About TAPMI T. A. Pai Management Institute (TAPMI) is a premier management institute situated in Manipal and is well known for its academic rigor & faculty-student interaction. The Institute has been recently ranked amongst top 1 per cent of B-schools in India & 4th in the South Zone by The Week Magazine. Founded by the visionary, Late Shri. T. A. Pai, TAPMI’s mission is to provide much needed impetus to the task of building professional management capability in the country. In the process, it has also played a role in strengthening the existing educational and health infrastructure of Manipal.
Our Mission We are committed to excellence in post graduate management education, research and practice by nurturing and developing global wealth creators and leaders. We shall continually benchmark ourselves against the best-in-class institutions. We shall foster continuous learning and reflection, achievement-orientation, creative interdependence, and respect for diversity with a holistic concern for ethics, environment and society.
Pratibimb | March 2012 | 2
PRATIBIMB TAPMI’S MONTHLY e-MAGAZINE
VOLUME 2, ISSUE IX
MARCH, 2012
Pratibimb – The TAPMI’s e-Magazine - is the conglomeration of the various specializations in MBA (Marketing, Finance, HR, Systems and Operations). It is primarily intended to provide insights into the plethora of knowledge that relate to the various departments of Management and to give an opportunity to the students of TAPMI and the best brains across country to exhibit their creative cells. The magazine also strives to bring expert inputs from industries, thereby bringing the academia and industry together. Pratibimb the e-Magazine of TAPMI had its first issue in December 2010. The issue comprised of an interview of denoted writer Ms. Rashmi Bansal along with a series of articles by students and industry experts like MadhuSudan Rao (AVP-Delivery, Mahindra Satyam) & Ed Cohen who is a global leader and chief learning officer who led Booz Allen Hamilton & Satyam Computer Services to the first rank globally for learning & development . It also included a hugely successful and engrossing game for finance geeks called ―Beat the Market‖ to bring out the application based knowledge of students by providing them the platform where they were expected to predict the stock prices of two selected stocks on a future date. The magazine is primarily intended for the development of all around management knowledge by providing unbiased critical insights into the modern developments. TAPMI believes that learning is a continuous process and is not limited to the four walls of the classroom. This viewpoint is further enhanced through Pratibimb wherein students manage and contribute to create a refreshing learning environment outside the classrooms which eventually leads to a holistic development process. The magazine provides a competitive platform and opportunity to the students where they can compete with the best brains of the country. The magazine also provides a platform for prominent industry stalwarts to communicate their views and learning about and from the recent developments from their respective fields of business which in turn helps to create a collaborative learning base for its readers. Pratibimb is committed in continuing this initiative by bringing in continuous improvement in the magazine by including quality articles related to various management issues and eventually creating a more engaging relationship with its readers by providing them a platform to showcase their talent. We invite all the best brains across country to be part of this initiative and help us take this to the next level.
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MESSAGE
DIRECTOR’S
It is always a pleasure to witness that certain efforts of the students are sustained and carried forward; Pratibimb is one such. The oft-beaten track, “We are here to learn,” ends up as a mere platitude when there are no visible actions and documentation. Whereas there is no dearth of actions at TAPMI, documentation is not something that many—other than scholars—choose to engage in; it is normally viewed as uninteresting, drab and a drudgery. TAPMIans have proved that they are equally capable of actions and of documentation without losing the intellectual flavour of it. Scholarship is too important a phenomenon to be left to scholars alone, especially in the field of management. As future practising managers who will be engaged in rigorous action in different fields of business, TAPMIans have manifested both the penchant to produce research works and also get their counterparts in other leading business schools to contribute their thoughts to this endeavour. In this regard, TAPMIans have truly demonstrated the evidence for creative interdependence, an important aspect of TAPMI’s mission. I sincerely appreciate the students and the faculty of TAPMI who have made Pratibimb a possibility through their scholarly works, co-ordination efforts and support. I wish the team the very best. Dr. R. C. Natrajan. Pratibimb | March 2012 | 4
Editor’s corner Dear Readers, We thank all the participants and readers for their valuable contributions. By making it monthly, we present you a platform that will provide more opportunities to share knowledge and showcase your talent by competing with best minds in the country. Our presence through social media has become engaging. We have seen a rise in our total audience, and
EDITOR IN CHIEF
Sushmit Sinha BRANDING & ADVERTISING
Manish Mishra DESIGN & CREATIVES
Abhishek Dubey Namrata Mahapatra INTERNAL COMMUNICATIONS
more number of posts has gone viral. We have focused on management gurus such as Peter Drucker and
Divyanshu
Michael Porter and innovative advertising that help
EXTERNAL COMMUNICATIONS
leading brands define themselves better. Apart from students of TAPMI and eminent b-schools in the
Abhishek Anupam
country, we would also like to thank Prof. Kushankur
PUBLISHING
Dey for his contribution in the latest issue.
Vandana Soni
The articles have been selected by the Editorial Team.
FACULTY ADVISORS
We also thank all those who helped us in improving
Prof. Chowdari Prasad
Pratibimb through their feedbacks. We would like to take this opportunity to extend our gratitude to all
Dean (Planning & Development), TAPMI
faculties and students at TAPMI for their continued support, guidance, motivation and inspiration to take Pratibimb to the next level. To stay updated, please like our page on Facebook. Also, send in your valuable suggestions/feedbacks to pratibimb.tapmi@gmail.com.
Happy Reading! Pratibimb | March 2012 | 5
Dr. Jaba M. Gupta Professor and Chairperson—eGPX, TAPMI
contents An Interyiez zith: Mr. Yogesh Chavdhary, MD Jaipvr Rvgs Company on The Fvtwre of CSR: Inclvsixe Bvsiness Models that address the Needs of Poor
7
Emotional Intelligence and The Imporuance of Self Management
10
Lakshmi Dixya Vegirajv, BIMT Greater Noida
Evro Crisis - Will the Evro Svryixe the Second Decade of Millennivm
12
Asmita Karanje, SIBM Bangalore
Philosophy of Management: Retrospection in the Eyes of Drwcker
19
Prof. Kvshankvr Dey, TAPMI Manipal
Fvtwristic rvality control in PSU Banks: A case of SBI corqorate banking
21
Axik Sinha | Atwl Mehta, IIM Indore
Internationalization
25
Siddharuh Chhottray, TAPMI Manipal
Ovtreach on Social Net{orks: Strategies for companies in the seryice sector
29
Amit Mvkherjee, K.JSIMSR Mvmbai
When Airuel lavnches Airuel Bank Himangshv Das, NITIE Mvmbai
Pratibimb | March 2012 | 6
33
An Interview with Mr. Yogesh Chaudhary
Managing Director, Jaipur Rugs Company
Barclays, Ericsson, Pfizer, PepsiCo or Tata Consultancy Services are known players in the international markets. Even if the industries in which they activate are different, these companies have something in common: they have adopted inclusive business strategies to address social problems at the base of the economic pyramid by harnessing their core business competencies and interests. Recently, Jaipur Rugs Company, one of the leaders of handmade rugs in India and globally renowned for its hand-knotted rugs, has been recognized as a member of the Business Call to Action (BCtA), a global leadership platform supported by the United Nations Development Programme and governmental agencies from Australia, UK, Netherlands, Sweden and USA. Our team has been eager to find out more about the membership on BCtA in an effort to decipher the company`s famous, inclusive business model. Through BCtA, Jaipur Rugs has associated itself with names like PepsiCo, Microsoft and other multinationals or innovative start-ups around the word. What does the membership on BCtA mean for Jaipur Rugs? The Business Call to Action is a platform that recognizes and supports businesses that combine profitability with impact. The main idea is to Pratibimb | March 2012 | 7
encourage businesses to contribute to the United Nations Millennium Development Goals by 2015. From 150 members that will join BCtA in the next 3 years, we are the 42nd member. As a member, we are committed to train 10,000 low-income people from rural areas in Rajasthan, Uttar Pradesh, Bihar, Jharkhand or Orissa on advanced rug weaving techniques and provide them with access to global markets by 2015. I emphasize: it is profits that bring employment and sustainable income to the rural poor. The interdependence between profits and impact has been defined as a ―different way of doing business‖. Why is there a need for a different way of looking and doing business? In 2001, C. K. Prahalad was talking about the ―fortune at the bottom of the pyramid.‖ Most of the global population was poor, he argued and the business sector was not addressing the poor in any way. Since then, a trend has grown up around the concept of doing business with the poor. Companies have begun to engage those at the base of the global income pyramid and to give access to goods, services, and livelihood opportunities for those who need them most.
In our case, we see the rural poor as skilled producers and give them the status of artisans and the chance to create beautiful rugs. We are proud to say that C. K. Prahalad published Jaipur Rugs case study in the 5th edition of his bestseller: ―The fortune at the bottom of the pyramid. Eradicating poverty through profits‖, in 2009.
How is inclusive business different than Corporate Social Responsibility (CSR)?
What is the main characteristic of an inclusive business?
We like to say that CSR is lipstick, while we embed the CSR activities in the heart of our business (laughs). Presently, CSR is practiced as a separate department in most of the companies through social or environmental projects. In Jaipur Rugs, the social activities are embedded in the efforts of increasing the profits.
Doing business with the poor is now commonly called ―inclusive business‖.
What are the keys to understand the Jaipur Rugs model?
In more complex definitions, inclusive business models talk about sustainability and engagement of low-income communities, in such a way that the heart of the business, its core competencies are responding to the needs of the poor, either seen as producers or as consumers. Commercial viability remains the focus of the business.
First of all, Jaipur Rugs is a group of three, strongly interconnected entities: Jaipur Rugs Company, manufacturer and exporter, Jaipur Rugs Foundation, an NGO focused on training, health and education for artisans and Jaipur Rugs Incorporated, a wholesale unit in the USA, our largest market.
In our case, we have tried to break the perception on the Indian carpet industry which was known as highly exploitative. Back in `80s, my father, N. K. Chaudhary has initiated a direct contact with the weavers from under-privileged communities and since then we have continuously worked to build a fair wage model for them.
Secondly, in order to ensure access to global markets – we have clients in 35 countries of the world – we developed quality control systems in the production chain. There are around 60 processes from the wool to the final rug and all of these processes are executed by people at the grassroots in order to ensure international quality standards.
Fig. 1: A Women with a weaver (40,000 Indian artisans create rugs for clients in 35 countries of the world)
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Fig. 2: A women weaver with the End-User (Rug Weaving Skills Connect the Rural Poor with the Rich)
Finally, we control a decentralized production: most of our 40,000 artisans are working in their homes. Through our local branches we provide them with the material of their work directly in their village and homes. It seems that Jaipur Rugs has innovated in many ways. What are the main challenges you face? It's very different to work with the poor, because you need to understand how they think. About 97% of artisans we work with are illiterates. It's very different working with them, particularly when it comes to harnessing talent and capabilities. Besides, there is a challenge to find the right people in middle & top management as there is a tendency to avoid working with the illiterates and poor. So we tap talent at leading educational institutions of India, like TAPMI. Moreover, the global supply chain that we maintain needs to be improved in terms of efficiency in order to make it scalable. A team
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from Harvard Business School has tied up with us to study our supply chain and give suggestions for improvement. What about numbers? How profitable is a business that works with the poor? In the last fiscal year, we registered a turnover of around $21 million (Rs 100 crore). We estimate that over the next seven years, Jaipur Rugs will be a Rs 500 crore company, with an additional investment of Rs 300 crore pumped into it and a profit of at least Rs 25 crore. How do you see the future of business in general? Uneducated people in rural India, who are considered downtrodden, have wisdom and capabilities. We involve such people in our business and we seek to empower them: to help them find themselves a way out of poverty. We think that involving the poor in the business is a great opportunity for all businesses.
Emotional Intelligence and the Importance of Self– Management by Lakshmi Divya Vegiraju , BIMT Greater Noida Although traditionally emotions were considered to be disruptive to organizations, they are now being increasingly recognized as providing valuable insight into the behaviour and performance of an individual. Whether we choose to concur with the former or the latter, we cannot ignore the fact that emotions need to be managed. With issues like stress, work-life balance, problematic bosses and peers, etc; employees as well as organizations are beginning to understand the importance of managing emotions at workplace. ‗Emotional Intelligence‘ is the new buzz word and is being talked about in personal as well as business circles. Managing emotions helps to develop psychological resilience in people which is of utmost importance in today‘s world. The concept of Emotional Intelligence in the area of Human Resources Management has been thought of as highly controversial for a long time. While on one side being aware of one‘s own emotions, managing them, detecting emotions in others and being able to control their emotions is believed to give an edge over others lacking such skills in the business world; counter arguments suggest that Emotional Intelligence cannot be measured and is too vague a concept to be regarded as a matter of intellectual capacity. Emotions as such are complex in nature and difficult to manage. Most people believe that emotions are natural reactions to people or situations and the phrase Emotional Intelligence itself is a misnomer! Pratibimb | March 2012 | 10
Even as the arguments for and against the concept of Emotional Intelligence continue, there seems to be some ambiguity in the idea of the Pyramid of Emotional Intelligence. The starting point or the base of the pyramid is ―Self-awareness‖ or ―knowing your emotions‖. The second level is ―Self-management‖ or ―managing your emotions‖. Together, these two levels make up the personal sphere. The third level of the pyramid is ―Social awareness‖ or ―the ability to understand others feelings and emotions‖, and the final level is the ―Relationship Management‖. These two levels make up the ―social sphere‖. Relationship management is therefore considered to be the culminating point in the emotional intelligence pyramid and anybody who has made way to this point in the pyramid is said to be very high on emotional intelligence. The Pyramid of Emotional Intelligence:
Fig. 1: The Pyramid of EI
The point to be pondered upon is whether the spheres have been placed appropriately and whether Relationship Management can really be considered as the capstone of the Emotional Intelligence Pyramid. If we go by our experiences and ask ourselves whether managing our own emotions is difficult or managing others emotions, we realize that it is easier to manage others than to manage self while dealing with emotions. Often we find it easier to soothe a grieving friend, motivate a disheartened soul, to give advice and solutions but fail to manage our emotions when we find ourselves in similar situations. Somehow, lending an ear and being a shoulder to cry on or just saying that we understand and we relate to what others are going through, does all the magic that is required. Many a times we are even successful in making others feel better, if not completely fine. The same is true even in the business setting. Stress could leave us frustrated; rumours could provoke and upset us; Boss, peers, subordinates, all of them have the capacity to fudge with our emotions. ‗Managing self‘ becomes extremely difficult as well as demanding in such situations and the one who has mastered the skill is a sure
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shot at success. Therefore, even as companies are looking at ways to manage the emotions of their employees, they should instead make their employees learn the art of self management. The charisma of human nature is in its ability to manage others emotions better than one‘s own emotions. When we learn to understand others emotions and perfect in managing them, we understand ourselves better and as a result also tend to manage our own emotions better. So should we say understanding our own emotions is the building block for understanding the emotions of others or is it vice-versa? In Aristotle‘s words: It is easy to be angry, but to be angry with the right person, to the right degree, at the right time, for the right purpose, and in the right way is not easy‖. That is self-management which should be the highest point in the Emotional Intelligence Pyramid for he who has conquered himself has conquered the world! References:
Robbins, Stephen P., Judge, Timothy A., 2009. Organizational Behavior, Pearson Education
Will EU survive the second decade of the new millennium? - Unearthing the Euro crisis by Asmita Karanje, SIBM Bangalore Major reason behind euro crisis: This Euro crisis isn‘t just a story about some incompetent Greeks who went on wild shopping sprees with money lent to them by hardworking Germans who didn't check the books carefully; it is much deeper and interwoven into various economies that it would take another few years for us to come out of it. No doubt there will be a day when we shall be writing about the revival of the Euro and its upward journey in the future, that day is still far and at present we need to understand what caused this crisis and how it will impact the world not just Europe or the western markets. The root cause of the crisis can be attributed to the US recession of 2008 which led to the financial turmoil, the repercussions of which can be felt even today. Although the housing bubble triggered the unprecedented crisis, the real reason was the sudden dryness in the interbank market due to fears of creditworthiness of the counterparties. The interbank market rates soared up and the banking system faced a liquidity crisis as being termed by the Government only to later realise that this liquidity crisis can transform into enormous proportions leading to solvency crisis. The impact was that the stock markets started spiralling downwards, investor confidence was low, valuations were evaporated and investors started investing in sovereign bonds. Downturn in the financial market spread to other parts of the world due to increased exposure between the banks. Banks were restrained to provide credit, Pratibimb | March 2012 | 12
loan book deteriorated, economic activity plummeted, sales started decreasing, world trade plunged and contraction of economies took place. In Europe it was triggered by BNP Paribus which froze redemptions of 3 investments increasing the short term call rates and increased counterparty risk. The panic button was pressed. The government helped recapitalizing the banks which had undertaken huge write-offs or provided guarantees on the same but whether the actions taken or capital infused sufficient is now quite clear to us after two years. The cause of this crisis is faulty Government policies which kept the asset prices artificially high. And here is the irony - governments everywhere bailed banks out in 2008. To do this they incurred debt. This debt now has become burdensome and some governments cannot pay it. But many of the banks governments bailed out hold this debt, and now, again, the banks are threatened by the very governments who tried to save them. The question also arises that when the Maastricht treaty asks for certain obligations to be fulfilled by the European nations then how PIGS nation did broke all limits so disgracefully. The answer lies in the complex financial instruments created by the US investment banks such CDS and currency derivatives for a substantial fees. The yield of a 2 year bond has reached 15% levels leading to a junk status attributed to the country.
Also such high debt levels have been seen in case of other countries too such as Japan, Italy and Belgium's creditors but the difference is that they are mainly domestic institutions, but Greece and Portugal have a higher percent of their debt in the hands of foreign creditors, which is seen by certain analysts as more difficult to sustain. Greece, Portugal, and Spain have a 'credibility problem', because they lack the ability to repay adequately due to their low growth rate, high deficit, less FDI, etc Credit growth, low risk premium, economic growth, rampant optimism, stable inflation, greater integration of the world‘s financial markets, international risk sharing and various related factors can be a few reasons. Also with higher yields available in the European bond market there was a spill over of liquidity leading to soaring of real estate prices on one hand and deterioration of credit quality on the other hand. Leveraging
became extremely attractive and the CDS which provides insurance on these assets became clearly underpriced. And these highly leveraged institutions can be thought of as a stack of cards created with no support in terms of adequate capital, so any small correction in prices could lead to insolvency of the market players. More than anything the real question that needs to be addressed is that there is a structural problem in the formation of euro zone, admission of countries with different budget deficits, debt levels, GDP growth rates and more importantly politics. Also with fiscal policy left onto the individual countries to decide, even after uniting the different monetary policies have also been one of the reasons for the fall of euro. Thus in short the Euro area countries that hold huge amounts of bonds of the PIIGS nations are unable to redeem them which would result in huge losses if written down.
Fig. 1: Euro Zone’s Problem Children
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Impact on the Euro Zone countries: These countries such as France and Germany have huge exposure to Greece. France has nearly 50% and Germany 30%. Huge write-downs by banks have been witnessed, consumption and demand has fallen, confidence level is shattered, stock markets go into a tailspin, the GDPs contract and as predicted by Ms Lagarde, the world may have lost one decade. EU contracted by 4% in 2009 and the projections for year ending 2011 is around 1%. Moreover the demographic is shifting towards an ageing population, unemployment figure is close to 9-10% in western countries, outputs are shrinking, taxes shall go down and fiscal positions of Government will deteriorate. This will lead to increased budget deficits, ratings to sovereign nations will go down and the vicious cycle of a economic crisis shall doom on the world‘s growth objectives. Unless the Governments of different nations come together to attain the bigger goal of saving the world economy from dwindling into the whirlpool of darkness, it would be very difficult to see the growth levels reached during the booming periods. Austerity measures needs to be implemented by
Greece and Italy and several other European nations. a.
b. c.
Greek is required to reduce wages by layoffs, cut down on Government expenditure, raise $40 Bn from privatization and reduce the current debt levels of 130150% of GDP. This is unsustainable to attain as this is faced by a lot of opposition from the general public who is at the receiving end of it. Also if attained it may provide short term benefits but the long term impact is detrimental to the health of the economy. Greek bailout may make future bailouts more likely. Eurozone still does not have the firepower to bailout all the EU countries in trouble. The $1 Trillion set aside for bailout has been utilised by Greece, Ireland and Portugal. For rescuing Spain and Italy it would need funds to the tune of $3 trillon. Also with more delaying of decision on the part of member countries this problem is only becoming graver, with confidence levels going down, uncertainties increasing, euro falling, debt
Fig. 2: Eurozone’s Sovereigns
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levels going up and chances of a revival coming down. Biggest loser will be the banks as they will need to write off the assets and the borrowers who shall be passed on the cost of the debt write down. From another perspective there are talks about such increased economic tensions may get translated into political tensions as the Defence chiefs are drawing up plans to cope with the potential military fallout from the Eurozone crisis. There has been a lot of opposition by the civilians taking to protests which have turned violent on the streets of Athens against the spending cuts and tax rises. Portugal, Italy, Ireland and Spain are in dire need too but the Greece is in succour and its needs are so huge that if Govt needs to decide whether it would focus entirely on Greece others will need to take care of themselves.
because of the reserve status of the UDD, writing off losses, marking to market of assets, unprecedented quantitative easing, burgeoning deficits to push growth and unparalleled stand in the world economy for creating financial crisis as well as cleaning it up. US banks and many other export oriented companies shall be affected by the Euro zone‘s slowed growth which is expected to be around 0.2% for this year end. According to the Institute of International Finance, US financial institutions have $US767 billion ($A789 billion) of exposure via bonds, credit derivatives and other guarantees to private and public sector borrowers in the euro zone's weakest economies. Crisis control and Mitigation: As Ms Angela Merkel, Vice Chancellor of Germany puts it the crisis shall never be solved in one go and it is essential to look at curator
Fig. 3: Total Returns for Major Equity Markets
Role of US: The advantage with US to avert such a crisis is Pratibimb | March 2012 | 15
measures first and then precautionary as against what is happening where talks about closer economic linkages and fiscal plans are charted out.
The heads of the EU state have met for eight times in this years, summits have happened, endless rounds of high level talks have taken place, first steps in terms of the greater ―fiscal union‖ have been suggested but will that restore the credibility today when debt levels are rising and currency is falling. Markets are convinced that the debt crisis has got ahead of politicians again. Banks need to be recapitalised for them to write down the losses to the tune of 50%. But recapitalising them would mean diluting the holding of existing shareholders and that would then cause bank share to fall further. EU rescue plan – will it be successful? There are certain views that say the best option would be to let Greece default in a phased manner and allowing it to withdraw from the Euro Zone, reintroducing its national currency the drachma at a debased rate. This Oct the rescue plan was such – European banks were ready to write off 50% of Greece debt held by them. Write off of 100Bn Euros is voluntary; it shall be done by exchange of long term bonds giving Greece the time to mend its economy. It will not lead to any drop in CDS. EFSF created in May 2010 to ensure stability across Europe with Euro 750 Bn has been expanded from Euro 440 Bn to Euro 1 trillion. Recapitalising of the banks shall take a hit. It is imperative that strengthening of the Governance be undertaken by the individual Governments. Proposed Solutions and Future of EU: There are talks doing the rounds of symmetrical reflation – what does it mean? This implies significant easing of monetary policy by the European Central Bank; provision of unlimited lender-of-last-resort support to illiquid but potentially solvent economies; a sharp depreciation of the euro, which would turn current -account deficits into surpluses; and fiscal stimulus in the core if the periphery is forced into austerity. Unfortunately, Germany and the ECB oppose this option, owing to the prospect of a Pratibimb | March 2012 | 16
temporary dose of modestly higher inflation in the core relative to the periphery. On the other hand Germany and the ECB want to impose on the periphery—the second option—is recessionary deflation: fiscal austerity, structural reforms to boost productivity growth and reduce unit labour costs, and real depreciation via price adjustment, as opposed to nominal exchange-rate adjustment. This will lead to deeper recession, unemployment going up as loss making firms shall be shut down, currency devaluation would increase the real value of debt worsening the insolvency of the Governments. Germany and France have recently signed up a stability pact that shall enforce fiscal consolidation with greater budget discipline and strict deficit rules. Such a pact is necessary in the wake of the crisis, its impact on Eurozone and addressing the bigger problem of survival of an EU. There is a need to take action against disorderly sovereign defaults, a sharp credit contraction, systemic bank failures and excessive fiscal tightening. There is no provision for any exit option for any of the Euro zone countries. If Greece departs from the Euro area, it may have dire consequences on the banking system which will fall like a pack of cards. Also it would have to leave the 27-member European Union as well, thus entering a more profound state of exile. Also an option to be considered in future is that euro-area-wide finance minister be elected by the European Parliament, who would have limited federal powers to raise revenue, to decide on the issue of ECB bonds, to approve of deficit requirements in case of certain countries, measure the performance of each country‘s economy and strengthen the euro area on the principle of comparative advantage. Such a radical change would require time and efforts to amend the treaty. A more integrated EU is a farfetched option especially when fiscal stabilization comes at a poltical cost. Smaller democracies would lose the autonomy to other the stronger bureaucrats, the
Merkels and the Cameron will rule the roost with very little flexibility to the sovereign countries to manage their budget and economic policies. Also countries like the UK which has backed off from the treaty citing lack of protection for the financial centre whereas the underlying reason is the lack of confidence in the proposed treaty. On 21 November 2011, the European Commission suggested that Eurobonds issued jointly by the 17 euro nations would be an effective way to tackle the financial crisis. Using the term "stability bonds", Jose Manuel Barroso insisted that any such plan would have to be matched by tight fiscal surveillance and economic policy coordination as an essential counterpart so as to avoid moral hazard and ensure sustainable public finances. Germany remains opposed to debt that would be jointly issued and underwritten by all 17 members of the currency bloc, saying it could substantially raise the country's liabilities in the debt crisis. However, a growing field of investors and economists say it would be the best way of solving the debt crisis. There is a stark imbalance in the trade deficits among the Euro area countries, the 2009 trade deficits for Italy, Spain, Greece, and Portugal were estimated to be $42.96 billion, $75.31B and $35.97B, and $25.6B respectively, while Germany's trade surplus was $188. Unless such imbalances are resolved it is unlikely that the Euro area together as a group of nations can achieve a fiscal consolidation. The European Stability Mechanism (ESM) is a permanent rescue funding programme to succeed the temporary European Financial Stability Facility to allow for a permanent bail-out mechanism to be established including stronger sanctions. EU leaders hoped the plan would calm months of volatility in financial markets by offering a longterm solution to the Eurozone government debt crisis but what is required is a magic wand that Pratibimb | March 2012 | 17
heals the wounds of the global economy that has jeopardised by the delay in decision making by the Governments. The solution should cure the root cause and not just the symptoms which lies in the fact that Western economies - with high wages, generous middle-class subsidies and complex regulations and taxes face pressures from three fronts: demography (an aging population), technology (which has allowed companies to do much more with fewer people) and globalization (which has allowed manufacturing and services to locate across the world). For this it is essential that there is growth in GDP, tax revenues decreasing deficits and debt levels. What it basically entails is to deleverage the economies, bring confidence amongst the investor community, bring some signs of revival of economies and a institutional framework that oversees the same. There are several ways of achieving these objectives but broadly there are only two ways – monetary easing as done by US or austerity measures as proposed by EU. Going by the European way would mean meagre growth, drop in living standards and increasing unemployment. Conclusion: Going by the world politics it is quite unlikely that there would be a colossal collapse of the Euro although it has already touched the years low of $1.3 as the European leaders would not ever let it happen but at the same time infusion of liquidity by means of Eurobonds shall also not take place any time soon leaving us in a state of muddle. Also time and again, the history of crisis tells us that the way out of crisis does not lie in austerity but the growth led by expansion of economies. So there is an impending shift in the mindset of the policy makers who are hooked onto the budgetcutting agenda. They should instead shore up the European banks in the face of a sovereign default.
References:
http://www.bbc.co.uk/news/business15474298
www.ec.europa.eu/economy_finance/.../ publication15887_en.pdf
http://www.rte.ie/news/2011/0418/ratingbusiness.html
www.guardian.co.uk/business/debt-crisis
www.articles.moneycentral.msn.com/.../euro -crisis-is-tip-of-the-iceberg.asp
http://www.publicserviceeurope.com/ article/790/ireland-set-for-strong-recoveryafter-bail-out
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Philosophy of Management: Retrospection in the Eyes of Drucker by Prof. Kushankur Dey, TAPMI Manipal
Introduction Literally, philosophy implies the love for wisdom. Today, philosophy of management has, astoundingly, achieved scholarship in the realm of both theory and practice. Management is an amalgamation of fundamental blocks of many disciplines, namely the social science, the psychology, the social psychology, the anthropology, and other basic sciences. Managing is a key in management. This, as a field, has emerged from practice leading on to theories. Interestingly, this field has underwent rebirth on several occasions because of innovations and restructuring at three levels-product, process, and organization (business model). It is worth noting that management has its presence in business or practice for almost more than ten decades. However, this field is at molting stage which means that it has been changing its colours and outfits since the pulses generated through desired or undesired innovations. Having said this, one can go deeper to explore the essence of ―philosophy of management‖. We firmly believe that philosophy embodies a set of rules, norms, and methods to think, analyse, and articulate the phenomena/situation comprehensively and consistently. Philosophy is omnipresent. Management is contextual and domain specific. In this article, we attempt to look at this from three perspectives: normative, positive, and synthesis. This is exploratory in nature that we try to establish whether management in practice is a reflection of past theories. Is it a retrospection of past theories Pratibimb | March 2012 | 19
including normative and positive? Or is it a metaphor for theory? For exploring this, we present Drucker‘s beliefs and his remarkable contributions in management. We try to summarize his one of the best classics in management, ―the practices of management‖. This book talks about that philosophy of management comprises three elements: decision, activity, and relation at organisation or group level. Since the boundary of management is huge, fencing is sometimes required to scope the discussion. In this article, we seek to identify and list out the morals of management in practice through the Drucker‘s classic. Eventually, our linguistic apparatus would sharpen the analysis of this classic in synthesized manner. What is “Core”? In the classic, ―the practices of management‖, Peter F. Drucker introduced that the changing role of management witnessed many years before because of the shift from the economics of capital and labour (factors of production) to the necessity of management. As a result, management has become an essential, distinct and leading institution. The key message is to manage means by objectives (management by objectives). Drucker defined the business as a purpose ―to create customer‖. The business is not determined by the producer rather by the customer. Getting clarity upon the business, marketing and innovation: two are the pillars of any successful ventures. Drucker
elaborated on product mix as a judicious allocation and assortment of resources, but process mix is organization‘s production strengths and outsourcing activities adding competitive advantages to its business. He also identified eight key areas of business enterprise where objectives are to set in including market standing, innovation, productivity, contribution, physical and financial resources etc.
acquire later on. Drucker believed that business needs a central governing organ, ―the chief executive‖ and a central organ of review and appraisal (of) the board. On the quality of these two organs which together compromise with top management, its performance, results and spirit are largely dependent. Manager development is three-fold responsibility: to the enterprise, to the society, and to the individual himself. Drucker narrated that what is needed is the development of managers equal to the tasks of tomorrow, not tasks of yesterday. He also emphasized on the management of worker and work in order to achieve the business objective. Effectiveness is often considered as a performance yardstick for the employees, who should get the continuous opportunity for improvement.
From his point of view, managers are the basic resources of any business. Human capital is the scarcest and most expensive resources required constant replenishment. Drucker mentioned that the main objective of the management is to ―manage business, manage manager, and manage worker‖. Business by its virtue contains three powerful factors of misdirection: the specialized works of managers; the hierarchical structure of management; differences in vision and work and the resultant Drucker described the organizational structure which is an outcome of activities analysis, decisions being insulation of various levels of management. analysis, and relations analysis. He mentioned What is Key to Steer the Business? decision making may be routine or critical Drucker introduced the most powerful concept, depending upon the situation the manger engages in. ―philosophy of management‖ and narrated that It has five distinct phases, viz. defining the problem, ―management by objectives‖ (MBO) and ―self analyzing the problem, developing alternative control‖ are two key determinants in deciding the solutions, finding the best solution with respect the success of business. His speeches were unequivocal risk containment, economy of effort, timing, and while he pointed out that the purpose of the limitation of resources, and lastly, making the organization is to make common men do uncommon decision effective (actionable). things. There are five areas in which practices are required to ensure right spirit throughout the What is all about Management in the eyes of management organization: first, there must be high Drucker? performance requirements, no condoning of poor or At the end, Drucker expressed his views about the mediocre performance and rewards must be based responsibilities of management. He beautifully on performance. Second, each management job must portrayed on the canvas saying that be rewarding job in itself rather than just a step in ―Responsibility requires the manager that he the promotion ladder. Third, there must be a rational assumes responsibility for the public good, that he and just promotion system. Fourth, management subordinates his actions to an ethical standard of needs a charter spelling out clearly who has the conduct and that he restrains his self-interest and his power to make life and death decisions affecting authority wherever their exercise would infringe manager and there should be some way for a upon the common will and upon the freedom of the manager to appeal to higher court. Five, in its individual. The modern business enterprise for its appointments management must demonstrate that it survival needs to be able to recruit the best educated realizes that integrity is the one absolute and most dedicated… The enterprise must be able to requirement of a manager, the one quality that he give such men a vision and sense of mission‖. has to bring with him and cannot be expected to Pratibimb | March 2012 | 20
Futuristic quality control in PSU Banks: A case of SBI Corporate Banking by Avik Sinha | Atul Mehta, IIM Indore Preamble: In the dynamic global scenario, it has become a mandate for the public sector banks to implement quality control of their existing processes. Indian public sector banks started with pens and papers. But gradually the business needs have driven them towards BPR initiatives, which was enabled by IT implementation. State Bank of India is the pioneer of the initiative. For the further discussion, it is taken as a model bank. The banking business of 1. Corporate Banking 2. Retail Banking 3. Payment and Settlement 4. Asset Management
Merger & Acquisition
There was a time, when SBI struggled a lot to combat the aforesaid problems, even after the IT implementation, started in June, 2002. Then with the graduation of time, SBI formulated its own ways to overcome those problems, which as a whole was a very futuristic quality control measure. This has set an example before the other PSU banks in terms of quality control.
5. Trading and Sales 6. Commercial Banking 7. Agency Services 8. Retail Brokerage
SBI is divided into eight domains: Given the criticality of business, revenue growth and the customer profiles, futuristic quality control is mostly required in Corporate Banking domain. This is the domain which encapsulates all other banking domains. Hence problems faced regarding quality control are more in this domain. The pain areas and the implications are crucial in a few Areas Quarter / Year end reporting
major areas, depending on the impact of error and consequences. Details are listed in the Table 1.
The Control Mechanism: In this section, we will discuss the area-wise mechanisms, which were adopted by SBI to control the quality of corporate banking.
1. Quarter-end and Year-end reporting: It becomes a tedious activity for a bank to search for the flaws in their reports when the Quarter end and Year end activities take place. Abridged activities involved in reporting mechanism are given in Figure 1. During the process, mainly the profit / loss figures in the reports differ several
Actual Problems
Implication
Mismatch of balances
Time consumption in analysis
Mismatch of architecture
Balance Sheet generation Risk Management
Absence of audit trail Balances not following Basel-II norms
Improper interest capitalization / provision Less / No reliability of balances Non-conformance with RBI norms
Table 1: Major pain areas in corporate banking in PSU banks
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times. The difference arises due to improper mapping of branch-wise and type-wise customer a/c mapping in several heads of the reports. So to get rid of the problem, SBI periodically reviews the a/c mapping, at least once in a month. They have also automated a/c mapping practice automated by leveraging their IT infrastructure. This reduces the chances of errors during the actual activities and saves a great deal of time and
and standards. SBI also faced the same problem during the merger with State Bank of Saurashtra. Generally Problems were faced in the following functional areas:
Interest Provisioning Interest Capitalization Business Logic
With a view of getting rid of the above mentioned problems, SBI followed a systematic approach, which in short is called the ―Conflict Resolution‖. It was applied on the dummy real-time database of the bank to be merged, which we can call as the reference database in our discussion. It consisted of the following phases [Figure 2]:
Fig. 4: Quarter End and Year End Reporting Mechanism
cost. It also helps them keeping track of the balances appearing in different heads during the internal and external audit of the reports. The mapping mechanism will be discussed in details in the following sections [Figure 4]. The PSU banks, which have already IT infrastructure in place, or in the transformation mode, can automate the process at the branch level, so that whenever any new a/c gets opened, it automatically gets mapped in the granular head of the Balance Sheet or P&L statement, depending on the type of a/c. This reduces the manual intervention of mapping them in proper heads, and standardization reduces the business risk.
Application of the interest calculation prevailing in SBI on reference database – for both interest provisioning and interest capitalization Application of the business logic on the corporate banking services on reference database Comparing the actual and forecasted result Checking the branch no, a/c no and transaction ID format of the reference database and making necessary changes in sync with the format of SBI Monitor the daily deviations for at least a month prior to the actual merger activity – on the day of merger the total number of deviations must come to zero
2. Merger Activities:
This mechanism was applied in mid 2010, during the merger of SBI with State Bank of Indore. This approach resulted in the smoothest merger in the history of Indian banking industry. The success had made this approach standardized for all kinds of merger activities to be taken up in SBI.
When the banking industry is in the mode of consolidation, PSU banks face a major problem while going for the merger and acquisition activities, in terms of merging the databases of the two banks, which follow different IT architecture
All the PSU banks must leverage their IT infrastructure to get a functional flexibility in terms of the merger activities. Sometimes platform dependence can create a problem. So it is an essential requirement for the banks to design their
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architecture flexible, scalable, and modifiable. This can in turn help them in merging the banks or the financial institutions, which work on different platforms. A multi-layered business case is also needed to be developed to support the deviation checking activities.
authentication record as the proof of the occurrence of the transaction. The record consists of the following:
Non-fulfillment of aforesaid details will lead to rejection of the transaction. The details will be recorded in the centralized database for tracking the transaction. At the same time it will also act as the authenticity of balances appearing against the report heads.
Figure 3: Audit Trail Mechanism
3. Balance Sheet and P&L report generation: These are the two major performance indicative reports for any bank. After the IT revolution in the banking industry, most of the PSU banks have made it a practice of generating the major financial reports through the systems in place. But most of the auditors place a question regarding the authenticity of the data. The same happened with SBI also. As a reactive approach, they came up with the idea of ―Audit Trail‖ [Figure 3] of the balances those appear in the reports. The balances in the financial reports appear in two ways:
From the live transactions From the memorandum of changes, those are passed in several report heads while branch level audit
This approach provides a systematic measure for auditing the financial reports. The PSU banks, which have IT infrastructure already in place, can leverage the advantage for their internal and external audit. This also works as a triggering mechanism for the banks, which are yet to implement the IT approach for their financial report generation. It provides quality of the balances those appear in the reports and the authenticity of the transactions during audit. Risk Management reporting: In the Basel-II regime, all the PSU banks must comply with norms set by RBI. The income / expense of the banks must be classified in the following categories:
Whenever a transaction takes place, the transaction should be traceable in case of any discrepancy. While the manual transactions are done via memorandum of changes, the transactions are nearly impossible to track. Hence SBI has taken a measure of storing the Pratibimb | March 2012 | 23
Date of transaction Time of transaction The transacting branch The report head The amount of change in balance The employee ID of the user
Interest Exchange Commission Discount Charges / Dividend Profit / Loss on sale of fixed asset Profit / Loss on revaluation of investment Profit / Loss on exchange transactions
In any of the mentioned categories, there are ranges specified for the eight banking domains specified already at the beginning of the discussion. Any preset a/c mapping can lead to non-compliance of Basel-II, as the balances in the customer a/c changes with the volume of the transactions. But the problem with this approach is that, a retail branch having an amount of transaction more than or equal to the balance maintained by the corporate banking branches, may shift to the corporate banking domain. So an indefinite loop is formed keeping both the validations in place.
branch level, irrespective of the balances appearing against those branches. This is called as ―Total Standardized Approach for Risk Management‖ in SBI. This approach has proved at least 80-85% conformance with the RBI norms. This has set an example before the other PSU banks which are struggling with the loops of validation. Rapid iterative approaches have been taken by SBI and the resultant mechanism has reduced the nonconformance to a huge extent. This has reduced the chances the getting lower credit rating and enhanced quality of risk measure
Figure 4: Account mapping structure (branch-wise) for financial reports
To overcome this problem regarding validations, SBI has taken the following measures:
The a/c mapping architecture is three-tired [Figure 4]. The customer a/c mapping has been made dynamic, so that any drastic changes in the balances will automatically change the type of product. Hence the risk management category will change accordingly, without any manual intervention. The validation has been kept only at the
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in Indian banking industry.
Conclusion: As a pioneer of the Indian banking industry, SBI has built the plinth of futuristic quality control for the PSU banks. In the reign of consolidation, this will not only help to enhance the competitiveness, but also in turn upgrade the customer relationship in long term.
Internationalization by Siddharth Chhottray, TAPMI Manipal
Process of Internationalization: The term Internationalization may refer to the transfer of a company‘s product offering, its strategic policies or management functions across different boundaries. The extent to which two countries or two different regions may vary from each other depends on various factors like demographic variables, language barriers, economic conditions, culture, consumer characteristics and lifestyle habits. (Myers, 1995) It is essential for small or medium sized enterprises to have a distinct advantage in terms of product benefits and features, if it wishes to go global. Successful product innovation leads to an increase in the firm‘s productivity which, in turn, increases the entry into export market. Internationalization: A co-evolutionary perspective: The process of internationalization has been of significant interest for a long time. It is to be learnt that internationalization is an evolutionary process, and not an incremental one. Various factors like the evolution of the industry, business network relationships and organizational resources and capabilities will have a major role in deciding the path of the company‘s internationalization process. The co-evolutionary model integrates the various factors and explains how Internationalization can be considered as a product which has emerged due to the co-evolution of all these influences. Earlier, the behavior process model described
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internationalization as an incremental process in terms of increased international participation, which is achieved through experimental learning (Uppsala Internationalization Model). However, this model was questioned by major findings on ‗global start-ups‘ and ‗born global‘ firms. It was later concluded that this process cannot be described by a single theory which led to the argument that Internationalization is a holistic process which combines interrelated decisions and processes. The new theories suggest that ‗Internationalization‘ process in a co-evolutionary interaction between the external factors (competitive environment) and the company‘s internal processes and capabilities. In order to decide the process of internationalization, it is essential to focus on two factors – how the industry has an impact on the types of international operations a company pursues; and how managers try to adapt their activities and organizational resources to meet the standards of the industry.
(Pajunen, K, 2008) The other two theories are (Osarenkhoe, A, 2009)
Transaction cost approach Network approach
Transaction cost approach: In this method, the prime focus is on costs associated with several transactions. While expanding, the company will decide whether to do so through internalization, or with the help of external collaboration (externalization). Network approach: A firm should not be considered a single player in the market. Instead, it should be viewed in relation to other players in the international arena. Progress in the international business has started taking place through relationship development. A small organization is said to be dependent on its relations with other firms and the external world. As a result, many firms have stopped expanding internationally in a sequential or an incremental process. Many firms have started to target multiple markets, enter joint ventures and other forms of collaborations at early stages without prior experience. This can be attributed to several factors like entrepreneurial mindset of the current managers, presence of ever increasing number of people having international experience, technological advancements, improvement in transportation facilities and networking. Internationalization of SMEs in India: The internationalization process of SMEs is gaining widespread importance with increased integration of world economy. SMEs are vital for emerging nations in terms of providing employment opportunities and contributing to the national economy. They are responsible for encouraging entrepreneurship and innovation. SMEs also play an important role in breaking the monopolistic nature of big players. In order to develop India‘s ties with other countries, the Government started relaxing import and other regulations. As a result of this, SMEs have started facing stiff competition from international players. SMEs which are not into export business lack information to deal with international business as well as experience to Pratibimb | March 2012 | 26
develop an international strategy. These firms being small in size lag behind in terms of financial capital and human resources. These firms are at competitive disadvantage in terms of power which is positively correlated to the size of an organization. They generally have a very small customer base and have little impact on global pricing. A firm must be innovative, proactive and be willing to take risks in order to enter the international arena. It should be innovative in terms of implementing creative solutions to solve its own problems. It should continuously upgrade its products and services, spend on research and development activities, and use effective managerial concepts. It should be proactive in terms of understanding its competition and take necessary steps to beat them and achieve its own objectives. Financial investment is the major risk for a small enterprise. Nevertheless, the firm should be willing to borrow capital and invest in its expansion to new markets. It should be willing to take up projects which are risky, but have high return in terms of revenue if successful. SMEs must include IT in their business models in order to ensure success in the long run. IT helps in cost reduction and enhancement of global communication. A SME faces three types of issues: Country specific issues – These are the external environmental factors (political, economic, social, technological, legal) Industry specific issues – Business environment of the firm Firm specific issues – capital, human resource, R&D, technology, organization structure and culture : (Todd, P & Javalgi, R, 2007) The organizational culture must focus on entrepreneurial perspective to expand internationally. The employees and managers must have the knack of observing their surroundings and process information. This will enable the company to deal with uncertainty and other
challenges in the business environment, and implement an effective strategy to expand internationally. Internationalization process organizational model:
through
an
Today, several firms are entering into the international arena. They can be classified into different sectors like the service sector, manufacturing sector, financial service sector, or knowledge based institutions. Each of these shall follow a different approach for internationalization while creating, communicating and delivering their product or service on a global scale. Internationalization depends on four major factors:
The mode of entry into the foreign market The type of market or client Steps taken to improve commitment and presence in the market Operations undertaken which reflect how the
company is evolving in terms of resource utilization and institutional commitment with the progress in internationalization process Pratibimb | March 2012 | 27
For a mass production company, holding on to existing market share or an increase in share is necessary to sustain internationalization process. This can be achieved through a deeper understanding of the market scenario, healthy supplier and customer relations, and creating a brand name in the market. In terms of production, the firm will always aim at minimizing costs. It shall set up manufacturing units in the host country if there are any benefits associated with the physical presence within the host country. In the case where physical presence is not needed, the firm can ensure its presence through exports and licensing. But, as its internationalization process progresses, it can aim at a joint venture or a fully owned venture. The steps taken also depend on market uncertainty. If the market uncertainty is high, the firm may adopt a slow and steady approach like starting with exports, then moving on to partnerships and finally shifting to wholly owned venture. If the firm has gained expertise through certain other activities, it can
follow a faster approach by skipping a few steps in between. For instance, if the competition is high and the company has a good experience of the
existing market, it can directly increase its resource commitment by entering into a wholly owned venture. The internationalization process for other kinds of organization can be developed on similar lines. (Malhotra, N & Hinings, C.R, 2010)
References:
K a v i t a P a n d i t ( 20 0 9 ) : Le a d i n g Internationalization, Annals of the Association of American Geographers, 99:4, 645-656 Myers, H 1995, ‗The Changing Process of Internationalisation in the European Union‘, The Service Industries Journal, Vol 15, Issue 4, pp. 42 (online Business Source Premier) Pajunen, K 2008, ‗Internationalization: A co -evolutionary perspective‘, Scandinavian journal of management, Vol. 24, Issue 3, pp. 247 (online ScienceDirect)
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Todd, P & Javal gi, R 2007, ‗Internationalization of SMEs in India: Fostering entrepreneurship by leveraging Information Technology‘, International Journal of Emerging Markets, Vol. 2, No.2, pp. 166-180 Osarenkhoe, A 2009, ‗An integrated framework for understanding the driving forces behind non-sequential process of internationalization among firms‘, Business Process Management Journal, Vol.15, No.2, pp. 286-316 Malhotra, N & Hinings, C.R 2010, ‗An organizational model for understanding internationalization process‘, Journal of International Business Studies, Vol.41, pp.330-349
Outreach on Social Networks: Strategies for companies in the service sector by Amit Mukherjee , KJSIMSR Mumbai INTRODUCTION: Social networking websites in the digital age have become the crux of communication and information dissemination. They serve as a huge platform for broadcasting of messages and reaching out to the public. Companies need to have an organized social media marketing and tracking policies to ensure its business growth. I have done a detailed study of the social networking websites Facebook, Twitter and LinkedIn and how companies use these platforms to exercise their online marketing strategies in this dissertation. I have taken various factors into consideration and analyzed how companies can improve their performance through the medium of social media marketing. CUSTOMER SERVICE INFORMATION DISSEMINATION:
AND
The role of Social Network Websites in building the brand image of companies and serving as an information database is becoming increasingly relevant all over the world and financial institutions and financial advisory firms are not to be left behind. These firms need to use these Social Network Websites as platforms to understand their customers and provide better service.  CUSTOMER SERVICE: One of the first steps that a financial advising firm would need to take is to setup a web page of itself on a social networking websites like Facebook or LinkedIn. While Facebook represents more of an inorganic, Pratibimb | March 2012 | 29
cluttered source of information LinkedIn is more of a professional oriented social network website. With over 300 million and 120 million registrations on Facebook and LinkedIn respectively, they provide a huge platform for Customers to voice their opinions and concerns. Customer grievances can be addressed online through these social network websites. Google alerts and Twitter searches can be setup to search actively for customer complaints. Some customers are miffed by the indifferent attitude shown by company representatives when they express their opinions, such issues end up being voiced online which is highly detrimental to the public image of the company. Such issues can be resolved online through dedicated customer grievance tracking. Banks like BOFA, Wells Fargo and Wachovia have already implemented this form of social interactions with customers and Indian financial institutions and advisories must follow suit. 
INFORMATION DISSEMINATION:
Social networking websites are an unmatched way to disseminate information. Companies through their web pages on social websites can market their upcoming products and services. They can also update their recent achievements and financial stability through positive marketing on these web pages. A Social Media research carried out in 2011 by Burson-Marstellar show the increasing trends globally to disseminate information via social networking platform. The results depict the percentages of companies globally that use at least one social networking platform for information dissemination which is classified according to different regions.
A typical thing to notice is 67% of fortune 100 companies in the Asia Pacific region have a presence on social websites which is an increment of 17% from the previous year.
Source: Burson-Mastellar 2011 Fortune Global 100 Social Media Study
ENGAGEMENT WITH CUSTOMERS, INVESTORS, MARKET-MAKERS AND EMPLOYEES: Various methodologies to improve engagement of customers, investors, market-makers and employees with the firm are listed below.
CUSTOMERS, INVESTORS MARKET-MAKERS:
AND
All the customers, investors and market makers of the company which play a significant part in the growth and development of the company are bound to have an account on at least one of the social networking websites in this modern age. Establishing a relationship with them on this front can lead to faster modes of communication and an informal but clear view of how the company is perceived in the public. Following are some of the steps that lead to better engagement of customers, investors and market-makers.
Addressing customer online through social websites.
Allowing
grievances networking
market-makers
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to
intercommunicate which lead to exchange of ideas and knowledge sharing.
Presenting a clear financial image of the company through web pages on social websites so that the investors are aware of the company‘s position in the market when they visit these web pages at leisure.
Encouraging customers and investors to write online blogs on the company web page on these social websites so that a frank opinion about the company‘s perception can be found out.
Marketing the company‘s products and services online and encouraging customer feedback on the same.
EMPLOYEES:
The workplace is witnessing an increasing number of employees accessing social network websites during working hours. Companies can use this as a tool of communication between management and employees to ensure that employees are productive but not overworked. Social networking websites provide an opportunity for management to have faster contact with their subordinates. If there is an issue that needs immediate attention, a manager can send a message through social networking websites and the internet to their employees to get the information they need to make a decision. Social networks also cut down on unnecessary e-mail and instant message among co -workers. In this way Social networking websites can replace the internal modes of communication that the company has and lead to better employee engagement. LISTENING TO THE MARKETS: Accessing the social networking websites by the corporate officials provides an effective platform to ―listen‖ to the markets and gather information from them.
There are two ways you can ―listen‖ to the social web: passively and proactively. The passive approach is simply trying to eavesdrop on conversations that occur organically and naturally among regular consumers. The proactive approach is actively trying to stimulate these conversations with questions and dialogue with the customers.
Though social networking websites provide a huge platform for a company to market itself and project its brand, it is equally a big hazard for the company as well. Employees can leak vital information or can express their angst towards company policies online. According to a survey conducted by ‗Deloitte‘ employees themselves feel that it is easy to damage a company‘s reputation on social media.
Organizations need to have well defined social media policies to regulate employee conduct. These include not blocking social websites during working hours but to allow restricted access to these websites. Access rights can be restricted to prevent employees from leaking useful information.
PASSIVE APPROACH: The passive approach can be executed by adopting simple tools like ‗Google Alerts‘ and ‗Twitter Searches‘. Once a conversation about the Company is traced online it can be listened to by dedicated employees whose task is to preserve the social image of the company in the online markets. PROACTIVE APPROACH:
The proactive approach is an initiative by the company itself to stimulate opinions about the company on social networking websites and then modulate them. This can be done by a variety of ways like opening opinion polls about the company ―What do you think about our new product‖ on websites like Facebook, inviting customer feedback on these websites, etc. The important task after this first step is to modulate these opinions by providing justifiable reasons to the customer issues and concerns and by actively promoting favorable customer response.
Users should also carefully control what information they post on social media accounts and to whom this information is available. This particularly applies to users who actively participate on social media sites as part of their company job function, in order to network with customers and promote brand awareness. Summarizing all the above factors, the company should implement the following policies to ensure it doesn‘t face a threat due to social media interactions:
SOCIAL MEDIA THREATS:
Create well defined social media policies for its organization. Have a well equipped IT team to apply and inform employees about how these policies should be followed.
Installing Up-To-Date antivirus systems to ensure malicious activities like hacking and phishing doesn‘t occur due to information provided on social media platforms.
Source:-Deloitte 2009 survey
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REFERENCES: www.mashable.com www.thefinancialbrand.com www.burston-marstellar.com www.jiad.org
Social Network and Corporate Financial Performance: Conceptual Framework of Board Composition and Corporate Social Responsibility-William S. Chang, Finance department, Ming Chuan University A Measurement-driven Analysis of Information Propagation in the Flickr Social Network- Meeyoung Cha, Alan Mislove, Krishna P. Gummadi Social media-A guide for researchers- Alan
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Cann, Department of Biology at the University of Leicester, Konstantia Dimitriou and Tristram Hooley of the International Centre for Guidance Studies Social Networking and Its Effects on Companies and Their Employees-Douglas Baker, Nicole Buoni, Michael Fee, and Caroline Vitale Social Media Marketing: Successful Case Studies of Businesses Using Facebook and YouTube with an In-depth Look into the Business Use of Twitter-Maddy Coon Detailed study of websites-Facebook, Twitter and LinkedIn
When Airtel launches Airtel Bank... by Himangshu Das , NITIE Mumbai
We always come across telecom companies launching new ―Talktime‖ or ―Top Up‖ offers. The day is not far when we will see them launching new fixed deposit schemes, saving offers etc. The above statement, although seems absurd, would perhaps make sense as we read more.
Maximum financial inclusion of our human resource is crucial to tap the countries savings and investments. While Microfinance institutions do play an important role still the penetration level is very low. Comparing this with the 76.03 % of Tele-density and the projected Tele-density of 84% by 2012, Banks have realized the role that can be played by mobile banking in reaching out to the unbanked areas. It is also a good medium to attract on the run customers hence they have tied up with leading providers like Vodafone and Airtel to cater mobile banking services.
Source: http://t2.gstatic.com/images
While this is a positive signal for both the telecom and banking industry in terms of revenue and reach, it has also initiated discussion about the shift in the traditional role played by the telecom sector from that of a provider of just voice and message provider. With the provision of mobile service, mobile banking, mobile commerce etc these telecom companies have come a long way from their sectorial monotony. Dwindling returns from the stagnant and competitive voice calls and messaging market have forced the telecom companies to look out for new business opportunities. Telecom companies will eventually target those avenues which will give returns at a same scale as during the telecom heydays. Considering the consistent growth and returns of the banking industry, telecom companies seemingly have found a perfect ground.
The estimated banking penetration among middle and high income groups in India is about 45% while for low income groups is less than 5%.
Offering the complete set of banking services right from commercial loan services to bond services would however take considerable time. What customers may initially expect comprises a basic set of services like mobile payment, credit and
Source: http://gss.hubpages.com/hub/Class-ActionLawsuits-and-Litigation
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charge card facilities. With the experience in mobile banking the telecom companies can slowly takeover the whole umbrella of businesses that operates under a network. This will not only open up a whole gambit of opportunities for the operator but also provide a plethora of facilities to the customers. One of the important sectors that they might be able to finance would be the micropayments via messaging or voice call. It is imperative that carriers will try to battle it out for the mobile wallet and payments space. A slow demand of banking license caused by some of the Telecom giants has surfaced in the industry corridors. Rogers Communications Inc, one of the telecom giants in Canada has already filed papers with the federal bank to start a bank. As per Rogers the next big thing will be money transfer, whether that's paying for a subway pass or a parking meter, or sending money. The bank would primarily deal in credit and mobile payment services, as opposed to bricks and mortar bank branches that take traditional savings and loan accounts. While many big retailers have similar sort of finance divisions which are essentially extension of their core businesses. The Telecom companies are looking to position themselves in every part of the supply chain and hence manage to earn returns from the infinite monetary transactions that happen between customers and companies via their network. It also makes sense for operators to offer banking products and services as people would eventually wish to dispense plastic and start using mobile phones as a form of payment devices. They hence manage to take the control of the wallet over the phone. Banks are already getting detached from the end customer by an invisible layer. While mobile service from a bank needs to pass through layers of technology and approval from Google, RIM , Apple etc for future carrier bankers we need just a phone or go online and transfer the money. The only necessities would be the email address and the mobile phone number. An example of an offering will be a combination of prepaid phone deal with a prepaid debit card via which these Pratibimb | March 2012 | 34
Telecom banks. This can aggressively target the under banked customer segment and they will not need the entire expensive infrastructure like the traditional revenue generation format. It is just a new innovative form of revenue generation. Even banks seem to have opened up to this threat and have started offering more features to move up the value chain. Let‘s consider an interesting trend that has happened in Italy where one of the banks sensing this threat has managed to launch ―Poste Mobile‖, an ESP (Enhanced Services Provider)MVNO subsidiary of the Italian Postal Bank. Here the carrier just acts as a transport layer while Poste Mobile offers the various banking services and has full control on pricing as well as customer information which is stored in a separate area of the SIM card. Gauging the benefits, Governments of certain countries like Nigeria are even vetting proposals to license operators in the mobile banking sector thereby laying the foundation for another technological revolution. The Indian Planning Commission however is not in favor of allowing telecom companies to float banking companies. The government is more in the favor of allowing financial transactions to be done by banks to avoid any sort of financial crisis. Although they do not wish to allow the telecom companies to become banks themselves, an attempt has been made to set up a framework to allow people to undertake basic operations through cell phones. An interministerial group has recently submitted a report to Telecom Regulatory Authority of India (Trai) recommending that people in remote areas be allowed to open accounts linked via their cell phones and withdraw money up to Rs 5,000 a day. Though the government efforts do seem noble in questioning about how a telecom company can carry out the required security procedures to the extent that is usually done by a traditional bank, it would be better if it can propose for a Think Tank to study the pros and cons in the reverse process of a telecom company entering the banking services. In the days to come we might see the traditional
bank getting segregated to the back-end as a manager of risk and product manufacturer. However the day to day customers continue getting owned by the telecom companies, social networks and marketing organizations. Perhaps a possible technological and financial revolution is in the offering. References:
http://asiablog.celent.com/?p=404
http://en.wikipedia.org/wiki/ Communications_in_India
http://www.cbc.ca/news/business/ story/2011/09/06/rogers-bank.html
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http://www.carrierevolution.com/ articles/273852/telcos-will-be-banks/
http://m.economictimes.com/news/news-byindustry/telecom/plan-panel-against-telecom -operators-setting-up-banking-cos/ articleshow/7372089.cms
http://www.ft.com/cms/s/0/d5469d54-ca9611df-a86000144feab49a.html#axzz1lIwjB3wZ
Introduction `Does the stock market overreact?' De Bondt and Thaler in 1985 gave start to a new wave of thinking known as behavioural finance. Weak form inefficiency of the stock market was discovered by them after analysing how people are systematically overreacting to unexpected and dramatic news events which were surprising and profound. The Efficient Market Hypothesis as proposed by Fama (1970) asserts that the stock prices reflect the relevant information. The asset prices follow a random walk path i.e. they are merely random numbers. The study conducted by Caginalp G. and H. Laurent (1998) by the predictive power of price patterns finds patterns and confirms that they are statistically significant even in out-ofsample testing and report. The pattern of the stock index might help in predicting some of the effects of the various events. The calendar anomalies tends to exist which goes against the efficient market hypothesis. The researchers have used Gregorian calendar to investigate the calendar anomalies. There are various countries and societies which follow their own calendar on the basis of their religion. For example, the Hebrew calendar is followed by the Jewish society, which is strictly based on luni-solar, the Christian society follows the Gregorian, which is based on solar, and similarly Hindu and Chinese follow their own. The Hindu calendar is called ―Panchanga” and it is based on both movements of the sun and the moon. The festival of ―Diwali‖ is typically occurs at the end of October and beginning of November. The special ritual called ―Mahurat Trading‖ can be observed on major stock exchanges like NSE, BSE, NCDEX to name a few lasts for about an hour. It is performed as a symbolic ritual since many years. It marks a link with the rich past and brokers look at it on a positive note. It marks an auspicious beginning to the Hindu New Year. The investors place token orders and buy stocks for their children, which are sometimes never sold and intraday profits are booked, however small they may be. Thus, it is widely believed that trading on this day will bring wealth and prosperity throughout the year. It is interesting to observe the behaviour of trading activities during the period preceding and succeeding Mahurat Trading. The purpose of this study is to know the effect of the festival prior and post diwali on the the returns.
Econometric methodology
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I have measured stock return as the continuously compounded daily percentage change in the share price
pratibimb@tapmi.edu.in / pratibimb.tapmi@gmail.com
index (S&P CNX NIFTY) as shown below:
Visit: http://www.tapmi.edu.in/student-life/pratibimb/overview/ Rt = (lnPt – lnPt-1) x 100 …………………… (1) Team Where, Rt = return at time t
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TAPMI
Pt, Pt-1 = closing value of the stock price index at time t, t-1.
Bag No. 9 in its portfolio. Further, the National I have used S&P CNX Nifty as it has gotPost the most liquid stocks Stock Pratibimb Exchange | March is 2012 largest | 36in terms of Market capitalisation and Volume. I have used the data of the Manipal—576104