Vol III Issue I Jul-Sep 12

Foreword
We bring you our 9th issue of e-Globuzz amidst a lot of sadness. In early August, within a period of ten days we lost two visionaries and mentors to IBS@SIMSR; Late Prof. P.V Narasimham and Prof. Dr. S.C Ghai. Their demise is an immense loss to SIMSR. We are still recovering from this sudden shock. We hope you will find this issue as interesting and informative as the previous eight ones. We have our regular features Country in focus: Egypt and Colombia, Industry in focus: Information Technology, topical issues in International Business i.e. GAAR affecting adversely inbound FDI into India, depreciation of the rupee and our Cover Story Foreign Direct Investment IKEA. It has been our on-going endeavour to broaden the base of e-Globuzz to not only include SIMSR students, faculty and our alumni but also corporate leaders and government officials. We invite all SIMSR students, faculty and alumni to write an article on any aspect of International Business for our 10th issue i.e. October-December 2012 which will be our 3rd anniversary issue. During the third week of this academic year, IBS@SIMSR arranged an important and informative interaction on 21st July, 2012, with Mr P.R Dalal, Executive Director of ExportImport Bank of India. We will be conducting many such sessions, with other industry leaders in the coming months to enrich the students perspective on contemporary industry practices. Details of the interaction with Mr P.R Dalal are covered later in this issue. Looking forward to your continued engagement with e-Globuzz.
Prof. C.P. Joshi Mentor, IBS@SIMSR

Vol III Issue I Jul-Sep 12

Obituary

In what has been a very sad few weeks for our institute, and all of Somaiya Vidyavihar infact, KJ Somaiya Institute of Management Studies and Research lost two of its most respected and admired mentors and leaders Prof. Dr. Suresh Ghai, our beloved Director General and Prof. V. Narsimham, our highly revered former Director General and Professor Emeritus-SIMSR, both of whom left for their heavenly abode this August. Professor P.V. Narasimham is widely regarded as having played the pivotal role in developing KJ Somaiya Institute of Management Studies and Research into the reputed B-school it is today. Prof. Narasimham led SIMSR as Director General till March 2011. Prof. Narasimham was associated with the boards of numerous organizations, including positions such as Chairman of IFCI Ltd. and Executive Director of IDBI Ltd. He was highly revered in the financial community in India and abroad. He was known to be an expert in international finance and had a deep insight into World Bank funding for infrastructure projects in developing countries. During his association with IDBI and IFCI, he also played a major role in establishing and developing Management Development Institute (MDI), Gurgaon. For the last one and a half years, as Professor Emeritus SIMSR, Prof. Narasimham continued to be involved very actively in the working of the institute as a highly respected mentor for everyone here at SIMSR. Although the extent of his role in shaping SIMSR to the premier institute it is today, cannot simply be put into words, it may suffice to say that he has left a void that cannot be filled, both in the hearts of the people he touched throughout his life and in the minds of people that he so ably guided and mentored throughout his career. Professor Dr. Suresh Ghai had been SIMSRs guiding light and one of our most respected faculty for the last fourteen years, in numerous roles and positions at the institute. He had been the director at SIMSR for ten years, from August 2001 to March 2011, when he took over as Director General. Prof. Ghai joined the institute in January 1998, when he took charge as professor and HOD of the Marketing Department. Before joining SIMSR, Prof. Ghai held several senior positions in the industry for nearly 30 years, having completed his bachelors degree as an Electrical Engineer from the University of Roorkee (later IIT Roorkee), and subsequently a Post Graduate Programme in Management from IIM Ahmedabad.

He has been honored with the Life Time Contribution to Higher Education by the Higher Education Forum. One of the most highly respected and admired professors in the field of business, in India and around the world, Professor Ghai will be sorely missed, and his memory cherished here at SIMSR for decades to come.

Vol III Issue I Jul-Sep 12

Faculty Mentor Prof. C. P. Joshi EditorsPrerna Makhijani , Angadvir Singh, Neha R. Designers Swetaleena Das, Neha R. Did You Know?... Angadvir Singh Circulation Swati Moolchandani, Gurpreet Kaur
All the views expressed in this e-periodical reflect the personal opinions and views of the authors and do not reflect IBS@SIMSR views
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INSIGHTS ON FDI IN INDIA

Vol III Issue I Jul-Sep 12

Vol III Issue I Jul-Sep 12

Overview of FDIs

Prerna Jain (With inputs from Prerna Makhijani) PGDM IB (2011-2013)

oreign Direct Investment is an investment made by a company or entity based in one

country, into a company or entity based in another country. FDIs differ substantially from indirect investments such as portfolio flows, wherein overseas institutions invest in equities listed on a nation's stock exchange. Entities making direct investments typically have a significant degree of influence and control over the company into which the investment is made. Open economies with skilled workforces and good growth prospects tend to attract larger amounts of foreign direct investment than closed, highly regulated economies.

FDI in sectors to the extent permitted under the automatic route does not require any prior approval either of the Government or the Reserve Bank of India

FDIs differ substantially from indirect investments An example of foreign direct investment could be an American company taking a majority stake such as portfolio flows, in a company in China. wherein overseas institutions invest in Entry of FDI in India equities listed on a nation's stock A foreign company planning to set up business operations in India may: exchange
Incorporate a company under the Companies Act, 1956, as a Joint Venture or a Wholly Owned Subsidiary
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Factors Determining FDI Set up a Liaison / Representative Office or a Project Office or a Branch Office of the foreign company which can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2000 Exchange Rate: The appreciation and depreciation of currency does have an impact on the price of exports and imports making their comparative position and competitiveness in international markets fluctuate sometimes towards advantage to the home country and sometimes disadvantage. According to studies, the firms which come from countries that have strong currency are able to financially support their foreign direct investments in a much better manner than those firms which come from countries that have an inherently weak currency. Interest Rate: If there is abundant capital in the home country, it may become one of the primary reasons for going in for foreign investment by large firms. The opportunity cost of capital for such firms also comes down due to relatively low interest rate which occurs as a result of capital abundance. It is expected that if the interest rate of the home country is low, then there would be high propensity for FDI inflows and vice versa. Technology: This factor is widely recognized as one factor that does have a sure and great impact on FDI. In fact the FDI sometimes may be the cause for increasing technological progress as it also gets influenced by the level of technological progress of the economy. The ability of firms to generate technological inputs of a country is approximated by the number of patents issued. Thus higher the patents issued, higher would be the outward FDI propensity of the country. Human Capital: The availability of the human resources is one factor that plays an important role in determining the FDI; however the sheer number does not affect the inflow as the quality of the human resource does. Furniture giant Ikea plans to invest Rs. 10,500 Crore After the recent decision from the Union Government on FDI in the retail sector, Swedens Ikea, the worlds largest furniture maker, has announced that it will be
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Procedure for Receiving FDI in Indian Company An Indian company may receive Foreign Direct Investment under the two routes as given under: i. Automatic Route: FDI up to 100 per cent is allowed under the automatic route in all activities/sectors except where the provisions of the consolidated FDI Policy, paragraph on 'Entry Routes for Investment' issued by the Government of India from time to time, are attracted. FDI in sectors /activities to the extent permitted under the automatic route does not require any prior approval either of the Government or the Reserve Bank of India.

ii. Government Route: FDI in activities not covered under the automatic route requires prior approval of the Government which is considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, and Ministry of Finance. Indian companies having foreign investment approval through FIPB route do not require any further clearance from the Reserve Bank of India for receiving inward remittance and for the issue of shares to the non-resident investors.
Prohibited Sectors for FDIs FDI is prohibited under the Government Route as well as the Automatic Route in a number of sectors. The sectors are retail trading (except single brand product retailing); atomic energy; lottery business; gambling and betting; business of chit fund; Nidhi company; some agricultural and plantations activities (other than Tea Plantations); housing and real estate business (except development of townships, construction of residential/commercial premises, roads or bridges); trading in transferable development rights (TDRs); manufacture of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.

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The government had increased the FDI cap for investing in single-brand retail from 51% to 100% earlier this year, subject to the clause that 30% of the sourcing has to be from domestic small and medium enterprises
investing around Rs 10,500 crore for setting up 25 retail stores in India. The government had increased the FDI cap for investing in single-brand retail from 51% to 100% earlier this year, subject to the clause that 30% of the sourcing has to be from domestic small and medium enterprises (and up to $ 1 million investment is made in plant and machinery). After putting its India plans on hold, because of the 30% local sourcing clause, Ikea will now finally come to India with an investment of 1.5 billion. This makes it the largest foreign investment in Indias retail sector and gives India a much needed booster in investor confidence, which is currently quite low due to the government failing to enact important reforms. Ikeas investment in India will be done in two phases: 600 million in the first phase followed by a 900 million investment in the second tranche. Ikea however still sees the clause that requires goods to be purchased from small and medium enterprises as a challenge. The management believes that in order to secure low prices and benefit the Indian economy and society, small industries need to grow and develop. Nonetheless, Ikea said it expected to function within the spirit of the policy and hopes that the definition of small industries is reviewed and will provide some flexibility in the future. FDI in the Last Decade: A snapshot Foreign direct investment in India has grown immensely in the last ten years due to strong support from the Union Government. This growth has in turn helped with the progress of the national economy. Recently, India has strived hard to draw FDI from the leading investors of the world. In the last few years the following sectors have attracted the maximum FDI as per a fact sheet brought out by the Department of Industrial Policy and Promotion: Services Automobile Computer hardware and software Power Telecommunications

Metallurgical industries
Real estate and housing Petroleum and natural gas Construction Chemicals with the exception of fertilizers

Impact of FDI on Indian Economy India has recently liberalized its FDI policy and decided to allow 100 percent international investment in the single brand retail segment. Reforms to industrial policies have brought about significant reductions to requirements regarding to licensing and done away with restrictions related to expansion and made it easy to use international technology. The real estate sector has performed well in recent times and much of the credit in this instance can be given to the relaxed FDI regulations and the properly performing economy. The Indian government has been trying hard to do away with the FDI caps for majority of the sectors but there are still critical areas like retailing and insurance where much thought needs to be given before more FDI is allowed. India is the 3rd biggest economy of the world in terms of purchasing power parity and is thus a popular destination when it comes to FDI.

Vol III Issue I Jul-Sep 12

Foreign investments in India have increased of late but the strict FDI policies have impeded the possible growth in this sector. India is however set to become one of the major recipients of FDI in the Asia-Pacific region because of the economic reforms for increasing foreign investment and the deregulation of this important sector. India has technical expertise and skilled managers and a growing middle class market of more than 300 million and this represents an attractive market. FDI Inflows in India The table provides a list of countries that are the leading foreign direct investors for India:

Country
Mauritius Singapore USA UK Netherlands

Approximate percentage of inflow

42 9 7 5 4

Approximate inflow in million US dollars

50164 11275 8914 6158 4968

Foreign investments in India have increased of late but the strict FDI policies have impeded the possible growth in this sector

(Source: Department of Industrial Policy and Promotion) As the table shows, within 2000 and 2010 India has attracted FDI worth 178 billion dollars. Majority of the foreign direct investment comes through Mauritius as it enjoys several tax advantages, which works well for the international investors. Biggest inbound FDI deals * India's environment ministry last month approved plans by South Korea's POSCO to build a $12 billion steel mill, a boost for the foreign investment climate in Asia's thirdlargest economy after several setbacks for big ticket industrial projects. * Vodafone entered India in 2007, paying $11.1 billion to buy a 67 percent controlling stake in Hutchison Whampoa Ltd.s mobile business in India, in which India's Essar Group is a partner. The deal is the largest inbound foreign direct investment to be completed. * Miner Vedanta Resources' planned deal worth up to $9.6 billion for control of energy firm Cairn India, slowed by disagreement over royalties, will be decided by India's cabinet, which could delay it further. * Japanese drug maker Daiichi Sankyo paid up to $4.6 billion in 2008 for control of India's Ranbaxy Laboratories Ltd. * NTT DoCoMo Inc agreed to pay USD 2.7 billion in 2008 for a 26% stake in Indian telecoms firm Tata Teleservices, giving Japan's top mobile operator a foothold in the world's fastest-growing major mobile market.

Vol III Issue I Jul-Sep 12

Egypt: Finally.For the People, by the People

Malvik Majithia PGDM IB (2012-2014)

ong known for its pyramids, the Nile, cotton and Students can obtain extensive education, but still hope to find no meaningful work that had little connection to the regime. Egypts key tourism industry on the other hand grew slowly to a net worth of $11 billion in the 1990s.It suffered an unfortunate setback when terrorists massacred 58 tourists in 1997 which was again a result of hostility towards Mubarak from Islamic groups. Egypts cotton exports industry, however, experienced growth due to his policy reforms and tax relaxations.

its ancient civilization, Egypt is the intellectual and cultural leader in the Middle East. However, its rich past has been ridden with turmoil, autocracies and sufferings. Not until very recently (June 2012) did Egypt for the first time ever democratically elect its presidential leader. This article walks through some recent political events and their social and economic influences on Egypt, its trade and its businesses. The rise and fall of Hosni Mubarak Hosni Mubaraks climb began in 1973 when he won the respect of then President Anwar Sadat during the war on Israeli forces as commander in chief. His ascent to power was quick and he became president in 1981 upon the assassination of Sadat. Under Mubaraks authoritarian reign of Egypt for over three decades, the Land of the Pharaohs surrendered its position as leader of the contemporary Arab world. His most significant action was the upholding of Sadats 1979 treaty with Israel. This decision assured more than $1 billion in aid from USA that was, however, counterbalanced by enmity from the Arab nations. Mubaraks role was pivotal in the peace negotiations between Israel and the Palestinian National Authority. He even opposed the American invasion of Iraq in 2003 (to topple Saddam Hussein) arguing that regime change is an internal affair and should not be affected by external forces. This statements irony only comes to effect in lieu of recent events. At home, Mubarak's regime stifled the countrys political growth. He nipped any challenge from the National Democratic Party in the bud; even imprisoning a presidential challenger (Ayman Nour, 2005) on trumped up charges of forgery. The autocracy adversely affected the Egyptian economy as well.

Mubaraks policy reforms since 2004 had its GDP growing (except during the global economic crisis). The U.S. State Department noted that Mubaraks team "simplified and reduced tariffs and taxes, improved the transparency of the national budget, revived stalled privatizations of public enterprises and implemented economic legislation designed to foster private sector-driven economic growth and improve Egypt's competitiveness." According to a 2010 International Monetary Fund report, Sustained and wide-ranging reforms since 2004 had reduced fiscal, monetary, and external vulnerabilities, and improved the investment climate. Investors' confidence in Egypt and appetite for risk has improved since March 2009, and the stock market reversed course, capital inflows resumed, and official international reserves have been rising." Egypts GDP grew 5.3% in 2010, up from 4.7% in 2009, but still below the rates recorded during the economic boom.

Vol III Issue I Jul-Sep 12

So where did the economy fail? There was no trickle down of money. Many Egyptians continue to live in poverty. 44% of the population was illiterate. The educated often looked at unemployment. Most of them needed to work multiple jobs just for sustenance. Inflation was an astounding 12.8% in 2010 and corruption was commonplace. Some cases describe that that businesses preferred to hire foreigners, claiming that they are better trained than Egyptians. There was widespread public unrest. In December 2010, protests in Tunisia turned into a revolution. This along with other significant factors became a rallying point for activists in Egypt. Social media had become the medium for communication among them to plan a nationwide protest on 25 January, 2011 yawm al-aab or Day of Anger. Continued protests eventually led President Mubarak to step aside on February 11, 2011. Economic implications of turmoil The interim military administration took more than a year to transition to democracy. Even the lifting of Egypt's emergency law was only brought to effect at the end of May 2012. This point in Egypts history was marked by the narrow victory of Islamist Muslim Brotherhood candidate Mohammed Morsi at the presidential elections on 30th June 2012. The most populous Arab Middle East economy which relies heavily on tourism was devastated by political upheaval now relies on implementations of Morsis promises.

During recent months, civilians were divided between rival parties which resulted in street protests. This political unrest had severe economic implications as a result of which, business and trade suffered. Banks were shut down for more than a month and salaries fell. Inflation ran at 8.8% with an increasing budget deficit (approximately 144 billion Egyptian pounds ~ US $24 billion). The rivalry between the government and the parliament discouraged the IMF from sanctioning a $3.2 billion loan that would support state finances and improve investment climate. However, the political scenario and hence the economic climate changed two weeks after Mohammed Morsi was announced as the countrys first civilian president. There is clear evidence of a lack of aggressiveness in political treatment as well in the civilians. The key reason here is the spread of a sense of optimism. Morsis challenge On the first day after Morsis first day in office, the Cairo bourse closed on a surge of 7.5%. Within two days, the IMF agreed to help Egypt with its significant immediate economic challenges and there was an immediate rise in Egypt's stock indexes. Clearly investors are hoping for a stable political environment. Morsis greatest challenge would be to maintain such investor confidence and stabilize the countrys economy. Managing the state budget will be crucial in order to increase spending but cut down on deficit in an environment riddled with uncertainty.

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More importantly, Morsi needs to orchestrate the drafting of a democratic Egyptian constitution. The Supreme Council of Armed forces however is of great threat to the democratic since their soft coup that reinstated martial law and also stripped the president of significant powers. He must work towards gathering world support, maintaining peaceful relations with Israel and converting its markets into an emerging economy which will pave the path towards globalization. Indo-Egyptian perspective India and Egypt have always shared great relations ever since the days of the Non Aligned Movement that was the brainchild of Jawaharlal Nehru from India, Yugoslavias Josip Broz Tito and Egypts second president Gamal Abdel Nasser. Morsi can look East towards India to re-establish close connections in order to learn about Indias booming SME industry and related technologies as well as to learn about Indias mixed economic practices as well as advice for the draft of a solid constitution. India can also gain good relations with the oil controlling Arab council through close ties with a new democratic Egypt.

UPS (United Parcel Service) was founded by two teenagers with one bicycle and $100 borrowed from a friend in 1907 As of 2011, the company has 398,300 employees and an annual revenue of around $53 billion
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Vol III Issue I Jul-Sep 12

GAAR: A make or break situation!

Nikhil Mehta PGDM FS (2012-2014)

lack money has been a perpetual problem in

India since the last few decades. The cause for this is not just the evaders but the government as well for its regressive tax structure. Black money was around 10% of the GNP in 1975-76. Along with the growth of the country and various tax evasion practices, black money is now termed as a parallel economy, becoming a serious issue for the government. Measures like Voluntary disclosure of Income scheme (1996) for converting black money to white money failed to make a dent. Some cases like Hasan Ali (caught for stashing 36,000 Crore rupees in foreign banks), showed how deeply ingrained black money is in our economy. While the biggest eye opener was the Vodafone - Essar deal. Vodafone entered India through Cayman Islands, a tax haven. This deal which was worth $11.2Bn, not a single penny was paid as tax to the government. Getting 100% depreciation in first year of investing in windmills was to promote clean energy. Companies used it as a tax evasion tool. This meant that there is a need for a law against avoidance of taxes.

This includes the power to override international tax treaties that India has negotiated with other countries. The onus of proof would all be on the revenue department and not on the taxpayer. GAAR also introduces the retrospective tax, which means by applying GAAR, tax authorities can tax a transaction that took place in the past. However, as Pranab Mukherjee said the changes will not override the provisions of double-tax avoidance treaties India has with 82 countries. It will not reopen the cases in which assessment orders are already provided. However, within days of declaring this rule, it faced a strong opposition from across the globe. The ambiguous language, the lack of details, and the sudden onset of the provisions have been key factors that have upset foreign investors. Foreign investors are neither clear about tax liability, nor is there any mention of penalties. Amidst the ambiguity, GAAR had to be postponed to April 2013. Currently a team of government officials along with Dr. Manmohan Singh is working on having clear guidelines for GAAR.

Pranab Mukherjee, the then finance minister of India, introduced GAAR (general anti avoidance rule), along with annual budget of 2012-2013. Pranab Mukherjee, finance minister, sought to formalize the provisions through an amendment to the income tax act of 1961. . The main feature of GAAR is that, it targets tax evaders, partly by stopping companies from routing investments through tax havens. It gives the tax departments substantial powers to levy tax on the adjustments done by companies or individuals

Apart from foreign investors, Indian MNCs are also worried over GAAR. These companies open a subsidiary in a given country so as to get cheaper borrowings. However, they do not transfer the dividends from foreign entities to Indian company, thus avoiding taxes. Under GAAR, tax authorities would be able to ask them questions for not bringing in that profit to India. Merger of loss making companies in profit making company is considered as a malpractice to avoid taxes.

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Vol III Issue I Jul-Sep 12

Also, salary structures of the companies will come under scrutiny since some companies manipulate the salary structure to avoid taxes. If a strict GAAR is implemented, salary structures might be revamped. Company leased cars, a perk senior executives enjoys, can be challenged as a tax avoidance measure. Individuals also try to avoid taxes using methods like giving loan to their family members or gifting money to evade taxes. GAAR will cover all people connected to India, and hence it is very crucial. Amidst the global slowdown, introduction to GAAR might not do any good. Since Indian economy relies heavily on the investments from foreign countries, stricter norms of GAAR might hurt the Indian growth story. Foreign investors staying away is not a good sign for a developing economy. However, in March 2012 foreign investments were at $8.1Bn, which were much higher when compared to year-on-year basis as well as monthon-month basis. Similar was the case for foreign investment in June 2012. Other countries like Canada, Australia and New Zealand have introduced a statutory General Anti-Avoidance Rule. In the United Kingdom, there is no GAAR, but many provisions of the tax legislation apply to prevent tax avoidance where the main objective or one of the main objectives, of a transaction is to enable tax payments.

A balance has to be maintained between governments objective to preserve the integrity of its tax system, and the commercial interests of investors, industry, and individual taxpayers
Keeping in mind the number of tax evasion cases, India definitely needs to have an anti-tax avoidance law. This law if toothless would be a burden than beneficiary. However, considering global interests and possible investment opportunities we cannot have a law which hurts its own interests. A balance has to be maintained between governments objective to preserve the integrity of its tax system, and the commercial interests of investors, industry, and individual taxpayers. If GAAR is well implemented and well-practiced it can help government generate more taxes, which might reduce issues of liquidity crunch for government and to some extent the fiscal deficit as well. It will act as a fuel to the growth of nation. Government needs to first streamline its taxation system, which currently is very complicated. If there is a single tax like GST, implementing and practicing GAAR will be a simpler task. On a cautionary note, in the Indian context we have huge distrust between taxpayer and tax assessors, so implementing GAAR would be a serious concern. Dr. Manmohan Singh and his team have a tough task on hand.

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Vol III Issue I Jul-Sep 12

Is it fair to blame Germany for Euro Zone crisis?

Germanys role in the EUs response to the euro crisis is widely criticized by southern EU countries. Greece and Spain have already raised concerns over Germanys response to the European Central Banks debt reforms. None of the EU members can deny the fact that an assertive Germany has become Europes leading economic power. There is much talk of German leadership in Europe. Federalist-leaning analysts insist that the only solution to the EUs woes is for Germany to move the continent forward to a significantly closer union. The view that Germany is becoming a dominating power in Europe, ready to translate its economic power into actual European dominance, is tempting. It looks as if Germany has decided that southern Europe (Greece, Spain and Italy especially) is a burden that prevents it from going global and needs to be dumped. But politicians and economists of South Europe claim that Germany has been at the centre of Europes mishandling of the euro crisis from the very beginning. But German analysts have a different view. Germanys influence in Europe is highly specific to the resolution of the euro crisis. It does not reflect a more general rise in German power in Europe. claims an analyst of one of the leading political advisory firm in Germany.

Dhvanil Patel PGDM IB (2012-2014)

While Spaniards, Irish, Portuguese and others had partied on lower interest rates, the German people cut their wages, endured punishing structural reforms and accepted the pain of 5 million unemployed in a drive to modernize their own industries
During 1998 2010 its exports have been grown to almost two fold. It has the largest trade surplus in euro zone. Therefore, any response to the crisis of euro zone had to be largely shaped by Berlin. Ironically German leadership in the euro crisis has been temporary and limited to specific strands of economic policy for a long time. Though German chancellor Merkel is trying to resolve the euro crisis in a politically viable manner, voters in Germany are in no mood to see their taxpayer money being used to bailout the Greeks and Irish. Their view is acceptable up to some extent as over the last 10 years, while Spaniards, Irish, Portuguese and others had partied on lower interest rates; the German people cut their wages, endured punishing structural reforms and accepted the pain of 5 million unemployed in a drive to modernize their own industries. Hence there is a limit to how far Merkel can go in using German resources to rescue the rest of Europe. Germany now has Europes strongest economy, and Angela Merkel and the German people deserve praise for the German export achievement. According to the Bank for International Settlements, Germany lent almost $1. 5 trillion to Greece, Spain, Portugal, Ireland and Italy. At the start of the crisis German banks had 30 percent of all loans made to these countries private and public sectors. Even today this one category of loans is equivalent to 15 percent of the size of the German economy. Germanys trade with euro zone has been increased by 106% over the last 10 years. Hence it is unfair to deny Berlins role in supporting euro zone economies. Between 1998 (the year in which the European Monetary Union was effectively introduced, although euro currencies and bills were not introduced 13 until 2000) and 2011 only Germany has witnessed huge surge in output across all the sectors against rest of the euro zone countries. It shows how well Germany was

THE EXPORT FACTOR

Germany has potential to dominate the European Unions response to the euro crisis, not because it strives for power and domination, but because the German economy is growing like never before.

(Source: http://www.nytimes.com)

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(Source: http://www.eurasiareview.com )

Learning Lessons From History

Germany remains true to the features that have guided its foreign policy since 1949. After the Second World War, never again became its founding motto of German constitution. Checks on the new states power were introduced at every level, from the local to the international. As a result, today Germans are enjoying more peace, freedom and prosperity than ever before. NATO is seen as fundamental to German security. The fundamental orientation of German foreign policy has not been challenged by any relevant political actors in Germany. One of the reasons why Chancellor Angela Merkel wins high marks in the polls is that she keeps German foreign policy true to the fundamental orientations of post war Germany: on security stay close to Washington, on everything else to Paris and the EU. Public interest in military affairs remains low in Germany. Neither German elites nor the broader public have any appetite for leadership in international affairs.

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Vol III Issue I Jul-Sep 12

Strategic Analysis: Will Linux be the New Microsoft?

Rajat Mishra PGDM IB (2011-2013)

Importantly from managerial perspective, the significant questions is whether OSS will be able to displace traditional software and if yes, what traditional software firms need to do, so as to adapt as quickly as possible to the new competitive landscape, for example, by incorporating some aspects of the open source development model, or else be ready to exit. There are broadly four dynamics that influence the ruggedness of future landscape: It has been the source of a heated debate among technologists for more than a decade now. More importantly, can open source software cripple Microsoft in the market place? Strategic buyers Demand-side learning Role of piracy Pricing

The biggest advantage that Linux offers its users is that they can modify the source code directly as and when they encounter a problem usually called the "demandside learning" .In addition, software engineers claim that the better architecture of most OSS projects make them a potentially superior product, adding to the probability of success. The biggest catch is its free. The disadvantage Linux suffers from is that the value of an operating system depends on the number of users, thus more the users an OS has the more valuable it becomes for the current and potential users.
Microsoft has the early mover advantage of having a substantial user base which makes it comparatively valuable to the potential users. The drawbacks being that it does not allow users to better the product and other being its price.

The concept of strategic buyer: becomes decisive in determining the success of Linux. If Strategic buyers, includes government, large corporations, adopt Linux extensively because it offers better control over critical information by providing source code then Linux can drive Microsoft out of the market by targeting its major source of revenue. Understandably, IBM supports Linux as a means to target Microsoft's dominance. The network effect and Demand-side Learning: as mentioned the concept of improving the OS as and when a user encounters a problem is seen adding value to the whole exercise of computing and increasing efficiency by the advanced users and its trickledown effect on the normal user. Thus prospect of an OS which improves constantly has the potential to change the landscape of the industry. As and when a substantial base of Linux users develops, the network effect will multiply the value of an intrinsically free OS and it will become the new standard.

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Role of Piracy: Linux being a free product, the concept of piracy only applies to Microsoft. In fact, piracy may end up increasing Microsoft's profit. To understand why, notice that there are two types of pirates: those who would not have bought Windows in the first place because it is too expensive, and those who would have bought Windows but now decide to pirate it. The first category increases Windows' installed base without affecting sales. As a consequence, this group increases the value of Windows. And thanks to these pirates, Microsoft is able to set higher prices in the future (because the value of the system goes up). In addition, having these pirates means that Linux's installed base does not grow as much as it would have if piracy weren't there. The second type of pirates (those who in the absence of piracy would have bought Windows) reduces Windows' sales and profit. Thus, if the proportion of firsttype pirates is sufficiently large, Microsoft's profits will increase with piracy.

Microsoft needs to capitalize on its initial user base to defend its position as the market leader

Price: The natural question that arises is if Microsoft can survive the onslaught of a competitor that is more efficient, more frequently upgradeable and more importantly is free of cost and freely available? Thus the pricing becomes critical for long term survival of Microsoft. Setting price higher initially and lowering it over time can lead to an increase in relative benefit of abandoning it in the last period. Thus the OS industry is due to witness increasing rivalry in the future. Microsoft needs to capitalize on its initial user base to defend its position as the market leader. Microsoft would need to rethink its practice of not distributing source codes as well as other ways to bring in frequent OS update feature to target the core selling proposition of Linux.

The farthest you can get from a McDonalds in the US, in any direction, is about 172 km as the crow flies and about 233 km by car

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Vol III Issue I Jul-Sep 12

Depreciation of the Indian Rupee: How does it affect India?

Angadvir Singh PGDM IB (2012-2014)

(Source: in.advfn.com) The value of the Indian Rupee as compared to the US dollar has fallen more than 26% in the last one year. This has happened a little more than twelve months after the rupee had its strongest standing against the dollar in 2011 at Rs.43.96. FIIs (Foreign Institutional Investors) are important factors that contribute to inflow of dollars into the Indian market. But recent trends show that FIIs are increasingly reluctant to invest in India and this again has contributed to an increased demand for dollars vis--vis the rupee

The unstable European markets are no longer an alternative for investors and the dollar is looking to be a much safer bet

There are many reasons attributed to this drastic fall in the rupees value in such a short time. The global economy is going through a grim period, with the European debt crisis looming. The unstable European markets are no longer an alternative for investors, and the dollar is looking to be a much safer bet. This increases the value of the dollar as compared to other currencies. India is also not a very safe option for investors at the moment, with increasing rates of inflation in 2011, and a lethargic manufacturing sector.

These factors, amongst a host of other speculations are what are causing the value of the Rupee to decrease as compared to the dollar. But what effect does this have on our economy? The first impact that a falling currency has on that countrys economy is of course, the import bill; the cost of imports into the country increases. India is no different; in fact, the situation is worse here since the Indian economy operates in a condition of trade deficit, which means that the total value of imports is more than the value of imports. The situation is offset somewhat by the fact that just like the value of the import bill 17 increases, the value of the export bill also increases. But since the European economy is in a state of crisis right now, and it forms a major chunk of Indias export market, this offset is reduced.

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India imports almost 70% of its fuel, and although the price of oil has decreased, India will not be able to benefit from this, because of the falling value of rupee
India imports almost 70% of its fuel. And although the price of oil has decreased, India will not be able to benefit from this, because of the falling value of rupee. Companies importing oil into India are one of the most adversely affected in the current scenario of a diminished-value rupee. In such a case, the oil companies have no other way out rather than to hike petrol prices in order to compensate for their losses. Indian companies will have to pay more for importing other commodities and raw materials also. All of this affects the bottom line of these firms, and this in turn adds to the rising rates of inflation higher prices of goods in the Indian market. The power sector, which is already under scrutiny, has a significant foreign currency loan exposure, amounting to about Rs.21,000Crore. This puts it at risk with a depreciating rupee. Import of material and fuel, especially coal could also put pressure on companies in this sector. Just like the power sector, in fact to a much larger extent, the Indian telecom industry also has a large foreign debt, amounting to about Rs. 45,000 billion, and most of it is unhedged. The Indian stock market also, is negatively affected by the falling rupee, because of the fact that FIIs start withdrawing from the Indian equity market, in anticipation of a loss of value. The FIIs are the main chunk of foreign investment into the Indian markets, and this causes the withdrawal to be detrimental to the overall market sentiment. Industries such as oil and gas, infrastructure, fertilizers etc. lose value in the stock market because they are largely dependent on imports for their raw material. On the other side of things, some industries tend to benefit from a depreciating rupee. The Indian IT sector which generates around 80-90% of its $70 billion revenue from overseas markets stands to benefit in the current economic climate.
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Every one percent change in rupee-dollar has a 40 basis points impact on the net profit numbers of IT services firms like Infosys, TCS, HCL etc. This effect though, is short lived since in the long run, overseas buyers seek price adjustments. The metals sector also stands to gain, since their export earnings will soar, although this sector might also face an adverse effect owing to more than Rs. 29,000 crore of foreign currency loan exposure, half of which is not hedged and is exposed to currency fluctuations.

In light of all this talk about the potential harms or perceived benefits of a depreciating rupee, it is important to realize that the falling value of rupee against the dollar is not a result of any weakness in the Indian economy. It is in fact, due to a worldwide recession which is causing a return of funds from emerging economies worldwide back to the US. The optimistic outlook in this scenario would be looking to somehow boost the exports and take advantage of a strong US dollar.

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Colombia LATAMs Next Gold Mine

Colombias President Mr. Juan Manuel Santos recently reiterated about the countrys stable economy at this years G20 summit in Los Cabos, Mexico. The G20 summit which is attended by the finance ministers and different heads of state from over 20 countries was an occasion for Colombia to press upon the world how well it had done over the past years with its sensible decision making. Mr. Santos insisted that the country weathered the storm due to the global crisis through having certainty over the future and identifying 3 key elements to sustainable future. These 3 elements Government, Banks and Businesses were according to him the drivers of the economy over a period of time. The president mentioned in his speech about the sensitive and viable policies which have formed the backbone for the growth of the Latin American economy.

Satwik Kabisathpaty PGDM IB (2011-2013)

The country has been able to keep relatively low inflation due to inflation targeting methods that it has adopted. The macro-economic stability of the country is such that according to the World Bank, France is much more likely to default than the Andes nation. It has a strong agricultural sector which has helped the country sustain its growth. Moreover it has no demand pressures which have contributed to the country managing inflation well.

Colombia has seen a 183% growth in FDI over 2 years

Colombia has been able to keep relatively low inflation due to its inflation targeting methods The macro-economic stability of the country is such that according to the World Bank, France is much more likely to default than the Andes nation

This must not come as a surprise to many observers who have seen the continent grow at a very rapid clip over the past decade or so. Historically the continent was marred by poverty, corruption and anaemic growth. The growth story has been led by Brazil which buoyed by its petro dollars has grown in leaps and bounds. The Colombian economy is projected to grow by 4.7% in 2012 and 4.4 % in 2013 which is higher than the South American average. The growth rate in 2011 was 6% with a 3% inflation rate. It is a country with high reserves, low inflation and declining fiscal deficit. Its credit policies are lauded across the board and the macroeconomic policies have garnered many plaudits.

These cues have not gone unnoticed by the outside world. The country has seen a 183% growth in FDI over 2 years in sectors that generate jobs. This year itself a 10 billion dollar investment is expected in the mining and energy sector of the country. More hot money is expected to flow into the country as the Brazilian interest rates soar. It has been running a trade surplus since 2008. The first quarter exports have grown by 22%. Its exports to China grew by 225%. The Chinese slowdown should have hit the demand for oil and commodities but on the contrary exports have grown. Long gone are the days when the country was marred by guerrilla fighting. Improved public safety lured a record $13.2 billion last year from investors including billionaires Carlos Slim and Eike Batista with companies such as Tabasco Oil Co. and MPX Energia SA. The growing economy swelled the middle class, which will bolster consumer spending and fuel further stock gains.. Along with the mining and energy industry one other industry that is reaping the benefits of the boom period in the economy is the cement industry. The economic growth is always based on infrastructure and the cement industry is at the very heart of its. The three giants of Colombia: Argos, Cemex and Holcim. The country has four main economic centres: Bogota, Medellin, Cali and Barranquilla.The fifth largest city Cartagena is focused on tourism. The above 3 companies will reap the benefits of the growth story as 19 the government pays attention to the overtly neglected infrastructure.

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The country is poised to reach its economic potential. Colombian government and people have eagerly sought to shed its violent legacy and have moved towards a liberal progressive economy. Just as we see that Brazils extraordinary growth story stall, Colombias is still gathering momentum. It began as President Uribe flushed out the guerrilla militancy and buoyed investor faith in the economy. The current government of Juan Manuel Santos has maintained the policy of improving internal security and a liberal business friendly market. This has led to a more cohesive socio economic environment with falling unemployment and rising incomes. We hope for the greater good of the global economy as this is not another false dawn for the Andes nation.

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Branding in Industrial markets for Multinational Players

Sahil Patel PGDM IB (2011-2013)

Do you really believe that humans can change themselves into unemotional and utterly rational machines while at work? Is branding of any help to B2B companies? Microsoft, IBM, General Electric, Intel, HP, Cisco Systems, Dell, Oracle, SAP, Siemens, Accenture, FedEx, Boeing - they are all vivid examples of the fact that some of the world's strongest brands are B2B brands. Although most also operate in B2C segments, their main business operations are concentrated on B2B. Take Boeing as a case, in 2000 the company's first-ever branding strategy was formalized and synchronized with an overall strategy to extend its reach beyond the commercial-airplane business. Today, the brand spans literally everything from its logo to corporate headquarters. Even the plan to relocate its corporate headquarters from Seattle to Chicago has been devised with the Boeing brand in mind. In 2005, Boeing introduced its new flagship aircraft. In a worldwide campaign with AOL, they searched for a suitable name and invented the "Dreamliner", which was inaugurated by Rob Pollack, Vice President of Branding for Boeing Commercial Airplanes Marketing. Without great products or services, no brand can be successful for a long time. Now you may wonder what branding really is all about. Scott Bedbury, author of the book A New Brand World puts it as follows: Branding is about taking something common and improving upon it in ways that make it more valuable and meaningful.

Brands serve exactly the same purpose in B2B markets as they do in B2C markets: they provide the identification of products, services and businesses as well as differentiate them from the competition. The concept of Brand management has spread far beyond the traditional view of consumer-goods marketers. Today, brands are becoming increasingly essential for companies in almost every industry. Customers for metal products to consulting services now face a great number of potential suppliers. A Brand summarizes a person's perception toward a business service or a product. A brand has a personality with emotions, and it captures the hearts and minds of its customers. Great brands survive competition and volatile market trends because of the strong connections they build with customers. They facilitate the access to new markets by performing as ambassadors in global markets. Another important aspect of B2B branding is that brands do not just reach your customers but all stakeholders - investors, employees, partners, suppliers, competitors, regulators or members of your local community. To be successful in the highly competitive B2B world, a holistic branding approach is required that spans from R&D to the implementation of marketing campaigns and essential activities that are interdependent. Brand management will be critical to a company's success in the coming future.

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Trends in Global currencies

Saloni Bhatnagar PGDM IB (2012-2014)

The transformation of man from a hunter gatherer to an organized social animal isnt a psychological or emotional change. Economics explains the needs and wants, and thus the exchange of items to satisfy mans needs. Organized trade started in the 9th millennia and hence the need to exchange. From Barter system, where man used to exchange cattle, food grains, fruits to buy and sell to the current Fiat money, from commodity money, trade bills of exchange to the old Gold backed banknotes, currency has come a long way in giving people a medium for exchange. The answer to what decides the value of a currency is Demand. Currency value is determined by the purchasers of the currency. These are primarily travellers, Governments and FOREX traders. There are various factors that currency traders, governments and businesses take into consideration to determine the fair market value of a currency.

Branding is about taking something common and improving upon it in ways that make it more valuable and meaningful

Currency value is determined by the purchasers of the currency. These are primarily travellers, Governments and FOREX traders

The three main traded currencies in the world are USD (United States Dollar), EURO, Japanese Yen More than fourth-fifths of the world trade transactions and around half of the world exports is termed in US dollars context
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All modern currency systems are based on the concept of FIAT money, which means its value is determined by Government regulation and law. Its a sort of legal tender, where the Government declares the amount it promises to pay to the bearer. Even a coin containing valuable metal may be considered fiat currency if its face value is higher than its market value as metal. A feature of all fiat money is its acceptability to the government for payment of taxes and charges, or purchase of government debt, such as bonds, notes, and bills. In a fiat money system, money is not backed by a physical commodity (i.e.: gold). Instead, the only thing that gives the money value is its relative scarcity and the faith placed in it by the people who use it. In a fiat monetary system, there is no restrain on the amount of money that can be created. This allows unlimited credit creation.

A number of countries and institutions over the globe have appropriate percentages of US dollar in their foreign exchange reserves making it the leading reserve currency among all. All currencies in the world are valued by the dollar exchange rate. US as a country is extremely strong politically, and most of the demand for USD is attributed to this stability of the US Govt. All countries have currency reserves - they hold their reserves mostly in US dollars, because of that stability. When their own economies start having difficulty, these other countries want to hold more of their reserves in the most secure, sizeable, and most stable currency - the US dollar. As more countries want to buy dollars, the price goes up. So the US dollars gains in strength. The US is the largest economy in the world. It is the world's economic engine. When the engine slows down, the whole vehicle slows down. US is also the largest importer of goods from various countries which get paid in dollars and hence, these countries peg their currencies to the dollar. Weak dollar values are inflationary because they increase the costs of imports All commodities and goods are bought and sold at US dollars, when the dollar rate of a commodity increases, it appears that the prices of that commodity has increased rather than the value of dollar which is down. For Example: The lower prices produced by the increase in oil and natural gas production have been disguised by the fall in the value of the dollar. As the unemployment rate in the U.S is large approximately 8.2%, US Government added only 80,000 jobs. The future implication of this could be that the buying capacity of the people will reduce, since the buying capacity will reduce the demand for various finished and unfinished goods will reduce, imports will reduce and hence the dollar reserves of 23 various exporter countries will reduce, which will reduce the demand for dollar and therefore the value of dollar will reduce.

The three main traded currencies in the world are USD (United States Dollar), EURO, Japanese Yen. These are widely used as reserve currencies.
USD US Dollar, USD stands like a solid rock in the economy of the world. The predominance of the currency is clear from the fact that more than fourthfifths of the world trade transactions and around half of the world exports is termed in US dollars context. Moreover, all the loans and forwards done by the International Monetary Fund are also in dollars. Many countries have independently adopted the US dollar as their official currency to have more financial security through the process of dollarization in which the residents of a country start to use the currency of the other country parallel to or instead of their domestic currency. The countries which use USD as their currency are British Virgin Island, East Timor, Ecuador, El Salvador, Marshall islands, Federated states of Micronesia, Palau, Panama, Pitcairn islands, Turks and Caicos islands and the United States. The United States dollar also acts as the standard unit in the international market for commodities. The most important commodities that are traded in terms of dollar are gold and petroleum. Major multinational companies in the world, which have less or no linkage with the USA, also prefer to trade their products in dollars so as to gain competitive edge and promote exports.

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Euro - 11 countries in the European Union adopted a common currency on January 1, 1999. However the residents of European Union countries didnt begin using Euro bank notes and coins until January 1, 2002. Today, Euro is one of the most powerful currencies used by 23 countries, Andorra, Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Kosovo, Luxembourg, Malta, Monaco, Montenegro, Netherlands, Portugal, San Marino, Slovakia, Slovenia, Spain, Vatican City. The creation of a true economic union requires integration of economic policies in addition to the free movement of goods, services and factors of production across borders. Under the economic union, members would harmonize monetary policies, taxation and government spending (Michael, 2005). The primary focus of the European Union was to create one marketplace throughout the continents of Europe to compete with that of the United States .The rationale for Economic and Monetary Union (EMU) was predominantly economic; the deeper rationale for the initiative was profoundly political, aimed at involving all European citizens in the process of European integration. The member countries of the Economic and Monetary Union of the European Union do not have the authority to produce or distribute currency. These decisions are taken by the European Central Bank (ECB) on behalf of the member nations. The impact of the euro is being felt deeply and widely, within the Euro area and the EU, but outside Europe's borders as well. The growing international role of the euro, including its profound effect on the business and financial sector, has provoked strong analytic and policy interest on both sides of the Atlantic. The circulation of Euro has indicated that it has established itself on to the platform and new heights in the International financial markets. Dollar currency, the strongest economy of the world has felt a strong threat from the currency and its share in the foreign exchange has reduced over the years. Moreover, it was also observed that the number of countries using Euro is adding up thus forming a strong economic and political integration in the European countries. Euro has made a mark among the top reserve currencies in the world and had a share of around 25% in the identified foreign exchange reserves in the world with the well-established United States dollar on the top with around 66% at the start of the year 2006. As a currency for commodities especially oil, euro is getting much deserved recognition. The currency is attracting the attention and tempting the OPEC nations to price their oil in terms of euro as on now oil is being priced in terms of dollar. The basic reason for it is that the nations in the Euro zone import oil on a much larger extent as compared to United States.

Japanese Yen - Japanese yen is the national currency of Japan and is ranked 3rd among the five most traded currencies of the world succeeding United States dollar and euro at 1st and 2nd places. The currency is not used in any other country of the world but it possesses a prominent importance as a reserve currency after the United States dollar and euro. Yen was adopted as the official currency of Japan in around the year 1871 when the New Currency Act was conferred upon. In the initial stages of its introduction, it was pegged to the dollar at a fixed rate but currently the currency uses a floating exchange rate system. As far as dollarization against the adoption of the Japanese yen is concerned, no country has done that yet but still the yen serves as the leading reserve currency after US dollar and Euro. The currency has experienced much volatility in its value but it still survived and earned the reputation it currently has. The Japanese yen adopted the fixed rate regime and was pegged to the US dollar @ 1USD = 360, after it lost much of its value during the Second World War. It gained back its value in the 80s when it adopted the floating rate regime after the collapse of the Bretton Woods monetary system. The oil prices in the world directly affect the value of the yen as Japan imports all of the oil that is needed in the country. In the current scenario of rising oil prices, the currencys value is on a drop. Another of the currencys feature is that yen does not have its circulation area outside the country.

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This often affects the value of the yen negatively making it weaker would rise and if the currency would gain strength, it would affect the manufacturing industry adversely as the prices of the goods they produce would increase making the goods less competitive in the international market. The value of Japanese Yen has been low in terms of US dollars because of the various factors which include the nuclear bombs dropped on Hiroshima and Nagasaki in World War 2, its vulnerability to natural calamities like tsunami and also because the Japanese Government is majorly export oriented, so by keeping Yens value low, it basically improves Japanese exports. Also, because the relative value of the yen is determined in foreign exchange markets by the economic forces of supply and demand. The supply of the yen in the market is governed by the desire of yen holders to exchange their yen for other currencies to purchase goods, services, or assets. The demand for the yen is governed by the desire of foreigners to buy goods and services in Japan and by their interest in investing in Japan (buying yendenominated real and financial assets). Since the 1990s, the Bank of Japan, the country's central bank, has kept interest rates low in order to spur economic growth. Short-term lending rates have responded to this monetary relaxation and fell from 3.7% to 1.3% between 1993 and 2008. Low interest rates combined with a ready liquidity for the yen prompted investors to borrow money in Japan and invest it in other countries (a practice known as carry trade). This has helped to keep the value of the yen low compared to other currencies.

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Corporate Governance: Way to Go!

Sampada Oak PGDM IB (2012-2014)

The middle of June was a turbulent time for the entire corporate community. The world followed the trial of one of the most influential persona in the business arena Mr. Rajat Gupta, who was charged with Insider Trading case. It is very heart-breaking to know that man of such accomplishment and such a great stature can stoop to this level. He doesnt belong to this courtroom. This was the statement of his defense lawyer. Though all of us would want to believe that and still continue to believe this, nobody can deny the fact that he abused his position and the privileges that were attached with it. This brings us to the topic of Corporate Governance in business.

What are the different Governance Issues? A typical Corporate Organization is made up of some board of directors for managing the business. The management is entrusted with the faith of all the investors including the owners of the business of managing efficiently their money. It is required that the task delegated to them is carried out in a transparent manner. Hence, there are different rules laid so as to how owners interests are to be protected, how power of the enterprise can be exercised and legitimized. To whom the company is accountable and ultimately responsible etc. Models of Corporate Governance There are different Corporate Governance model followed all over the world. The major ones are

1) Anglo- American model: This emphasizes the interests of the shareholders, in which they have been given the power to elect the members of the board who supervise the working of the firm.
2) The Indian model derived from Gandhian principle of trusteeship where corporate Governance is defined as acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. Global initiatives on Corporate Governance In 1992 Sir Adrian Cadbury presented a report on proper governance in business referred to as 26 Cadbury report to address issues related to corporate Governance in UK.

In Microeconomics, The Theory of firm states that the firm (Corporation) exists and makes decisions in order to maximize the profits. A corporation has different stakeholders which can be depicted as: Protecting the Interest of all the stakeholders and making the profits at the same time are the two governing forces through which the company can be accountable and can contribute quality deliverables in their endeavour to contribute to the society. Corporate Governance essentially involves rules and regulations through which rights of all the stakeholders can be protected.

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In 2002 Sarbanes-Oxley act came to force after major corporate and accounting scandals costs investors billions of dollars. Some of the corporate scandals were those of Enron, Tyco International which shook public confidence. Chronology of Corporate Governance in India

It has been observed that companies with strong governance system have outperformed peers in the long run

Corporate Misconduct reasons:

Report of the Kumara Mangalam Committee on Corporate Governance. (2000).

Report of the Committee on Corporate Audit and Governance (Naresh Chandra Committee) Report of the SEBI Committee on Corporate Governance (2003) under the chairmanship of Shri. N R Narayana Murthy Report of the Expert Committee on Company Law , (2005) JJ Irani Law, Committee Report, Ministry of Company Affairs, Government of India

What forces some of the organizations to keep corporate governance on the back burner?
Pure Greed: For some people the desire for more never ceases. A well-known example is the Satyam Scandal. Error of Judgment: Those who lived their entire life with integrity but in the heat of the moment made an unethical decision. Example for this is Mr. Rajat Guptas Insider Trading scandal. Strategic Pawn: Some people are just used as pawns in the business while the big fish still remains in the business. Conclusion Any institution can no longer afford to ignore corporate governance as the law has become more and more stringent. Investors and stakeholders expect transparency and full disclosure of the various facets of the company. Corporate Misconduct has wiped out billions of dollars and in turn the savings of common man who had placed his faith in the organization. It is seen that companies with strong governance system have outperformed peers in the long run. Better corporate framework and ethical practices will increase profit, productivity and the performance and the overall brand image. To conclude, as rightly said by Robin Sharma, Deferring those things that are easy to do and preferring those things that are honourable and right things to do.

LIBOR and Corporate Governance July this year saw another major scandal unfolding. In the London Interbank Offered rate (LIBOR) scandal, Barclays bank was charged with manipulating the interest rate. This will leave a bad dent in the books of Barclays and have long standing repercussions on the banking industry. Libor is used in different U.S markets and thus manipulating. Libor rate violates American Law. Again an open defiance of Corporate Governance Principles.

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Interaction with Mr. Prabhakar Dalal of the EXIM Bank of India

On the 21st of July 2012, IBS@SIMSR had the honour of hosting Mr.Prabhakar Dalal, the executive director of EXIM Bank Of India for an interaction. Mr.Dalal, having already interacted with students at SIMSR on earlier occasions, this time focussed on the economic scenario, both international and from an Indian perspective, and also spoke at length about the Indian banking sector. He began with a very relevant insight into business ethics and its importance, especially in the present context. He briefly spoke about the recent trends in both the international and the Indian economy and the potential for growth in the future. Being intimately involved with the process of imports and exports, Mr.Dalal enlightened us about the existing trade patterns of India with various countries and also the most important commodities traded. The rest of the interaction was devoted to the nuances of the banking sector.

Angadvir Singh PGDM IB ( 2012-14)

DID YOU KNOW!

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Alunmi Speak: Varun Sood PGPIB - 2004-06

Gurpreet Kaur PGDM IB (2011-2013)

Over the last 6 years, how have you leveraged your learning pertaining to IB? In what ways has PGP-IB as a course helped you to rise up the corporate ladder? PGP-IB has a fair mix of subjects which allows you to gain exposure that is required to sustain yourself in an environment which deals with International business. Therefore, it gives you a head start in the market wherein you are one of the preferred resources in the market.
Profile:

Varun Sood is an alumnus of SIMSR, 2004-06, batch, PGP-International Business, is currently working as a Consultant (Strategy and Implementation) with McKinsey & Co. in Gurgaon. He started his career with Citigroup Global Services as an Executive. He later on also worked for NIIT Smart Serve Ltd. and Metlife in Quality Management roles.
Interview:

Looking back when you were a student, what do you feel (skills, capabilities, subjects); you should have focused on while you were a student at SIMSR-PGP-IB? I feel I should have focused more on subjects like Data Models and Business Strategy. What would you suggest for the current PGDM-IB batch (2011-13, 2012-14) to improve their long term career prospects? Its always good to start with a focus. You can unleash the power of the course even if you end up being focused before you sit for placements or join the corporate world.
What do you feel should be the capabilities and skills, PGDM-IB students should develop while at SIMSR? PGDM-IB students need to be aware of the nuances involved in the International business arena. Maybe a small time start-up within the campus to import/export books (study material) across borders can help people 29 understand business cycles better.

What were your expectations when you joined PGP-IB, SIMSR in 2004? Which of those expectations, you think, have been fulfilled in these 6 years? When I joined SIMSR in 2004, I wanted to gain business acumen, exposure to the corporate world and to understand the skill sets required to succeed in a competitive business environment. I did gain business acumen, corporate exposure through the capstone/concurrent projects that I undertook and definitely gained the skills and capabilities required to compete in the business world.

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What changes would you like to see in the content and format of e-Globuzz? I would like the e-periodical to respond to challenges/needs/queries of the corporate world. It could be like approaching a small entrepreneur working in the International business area and asking him about the problems and current challenges he/she is facing. eGlobuzz can then give out the possible solutions by applying the theory in real-time business issues. - What kind of International business problems (students and faculty put together) have they been able to solve/address? How this process will develop mutual meaningful relationships with the corporate? It would be like opening an International Business consulting forum within SIMSR which uses the text book knowledge to address real time live problems which the companies are facing, by applying the concepts learnt in classroom. Though, initially free of charge, this forum can after few years also be monetized. Would you like to suggest some initiatives for the Alumni Committee / Imprints? There should be dedicated people only to help alumni stay in touch with each other. Alumni Committee should act as a knowledge repository and promote mutual problem solving systems which would help and facilitate in meaningful sharing of information among the alumni network.

What additional initiatives would you suggest for International Business Society? I would like IBS to work on the following areas more: -Research on upcoming breakthroughs, business models.

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For any suggestions contact us at simsr.ibs@gmail.com K.J.Somaiya Institute Of Management Studies and Research Somaiya Vidyavihar ( E ) Mumbai-400077
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