(News collection for Management studies)

Volume: 02           Issue: 113          27-November, 2009 – Friday   Pages: 9

Focus :  Social Network Sites
B-schools talk the talk on social network sites
 

“Summer PlacementNotification: Process starts November 4. Media entry to campus restricted. Info to be sourced only through external relations (ER) secretaries...”

Reads like a notice board? Actually, this is a blog by IIM Calcutta (IIM-C) on its Twitter account and it's just one of India’s top management schools to have started using social networking and micro-blogging sites to keep students and aspirants abreast of placements and other institute-related information.

IIM-C is busy using Twitter.com to share the latest updates on its summer placements for its first-year students that will start on November 4. The process will run till the entire batch of 408 students is placed.

Paul Savio, one of the students behind this initiative, says: “We plan to keep sending out updates as often as possible, to intimate the public as to what is happening during the summer placement process. Twitter is our informal way of communicating with all those who are interested in the campus -- current studetns, alumni, faculty, press, associated universities and so on.”

IIM-C started using Twitter informally last December. “We are even connected to many other universities, both in India, like with the other IIMs, MDI, etc, and abroad, like with the University of Melbourne, among others,” Savio adds.

IIM Bangalore (IIM-B), on its part, started a Twitter account this October to provide updates on campus-related news and information on campus activities to the world. Vernon Fernandez, a student behind this initiative, says: “Twitter is a means of instantly broadcasting small titbits of news to a large audience. By updating activities on the twitter account, a large cross section of web-users, like the alumni, present students, future aspirants and interested press, can find out information on IIM Bangalore. We might even use the Twitter account to answer frequently asked questions about IIM Bangalore.”

IIM Ahmedabad (IIM-A), too has taken to Twitter.com, with its Twitter channel followed by almost 1,000 users and the blog read more than 10,000 times.

Rohan Desai, secretary of IIM Ahmedabad's media cell, said, “We may tweet once in a while about summer placements. Besides, the media cell at IIM-A maintains a blog at insideiima.wordpress.com. We also use YouTube and Facebook to connect with everyone from aspirants who dream of studying at the institute to alumni who love to stay connected.”

Meanwhile, IIM Lucknow (IIM-L) has created a presence on popular social networks like Yahoo Groups, LinkedIn and Facebook. These are managed by student and alumni committees. IIM-L is also present on Wiki through a detailed profile of the institute and its active committees. “We are working towards hosting a blog to serve as a communication medium to the outside world at large,” said Nitin Jacob, spokesperson for IIM Lucknow.

“For all major events on campus, like the recently concluded sports and cultural meet Varchasva, we have an active online presence. Again, the recently concluded leaders' conclave Samvit ’09 was actively followed on Facebook,” says Jacob. IIM-L’s twitter account has about 366 followers who occasionally re-tweet messages. The Varchasva fan page had regular traffic during the event and has about 380 fans.

At IIM Kozhikode (IIM-K) the placement season statistics covering final, lateral and summer placements, are released at the end of the process on social networking sites like Twitter. The target is to reach the intended audience covering maximum students and corporate entities.

Most B-schools feel social networking sites are expected to serve as a new strategic communication medium in the near future, not least because it offers a low-cost and virtual communication platform.

“Social networking sites like Twitter and LinkedIn allow us to maintain industry and alumni contacts. The alumni community prefers to keep in touch with their alma mater through Yahoo or Google groups. Facebook and Orkut are also widely used for related discussions and event updates. In addition to this, several managerial and social initiatives are publicized on social networking sites to generate public opinion and encourage community participation. The mentorship programme to offer assistance to CAT aspirants is operated online,” said Tess Zacharias, a student behind this initiative at IIM-K.

A good example of how social networking has been useful was when IIM-A used it to inform people about the “Joy of Giving Week” at IIM-A. Students offered a guided tour of the campus and visitors were charged a nominal fee of Rs 25 which went towards a social intitiative by IIM-A students called “Prayaas”. More than a 1,000 visitors made use of the opportunity and Rs 25,000 was donated to Prayaas.

XLRI Jamshedpur uses social networking sites to disseminate details about activities by the current batch, which in turn are expected to help the alumni and recruiters get a good idea about things inside the campus leading to the placement season.

A spokesperson for XLRI says: “The two major social networking sites XLRI is looking forward to are Twitter and Facebook. One of the major support social networking sites provide is the opportunity to interact with the aspirants and help future XLIers with all the information they need. So far this was being done through one or two MBA help sites that were still serving the purpose but it was more of a one-to-one conversation that could not help the masses. With blogs, Facebook and Twitter, both the purposes are taken care of. While Twitter and blogs help to disseminate the information in micro and macro forms, Facebookise the bridge between the two paradigms where both the group and individuals can converge.”

Small is sensible

The balloons, streamers, stars and flowers are all over. Workers ready cars for delivery — there are number plates to screw in, wheels to polish and accessories to fit. Visitors glide in and out of cars. Located off the busy road that connects Faridabad with Delhi, the Hyundai showroom hopes to sell at least 600 cars in October. The period is auspicious for Hindus, with Diwali smack in the middle of the month. The Central government has handed out another lot of pay arrears that resulted from the award of the Sixth Pay Commission. Companies have given bonuses to employees. And people are keen to put their money to good use.

In his office above the showroom, Hyundai Motor India Managing Director & CEO Heung Soo Lheem looks satisfied with the state of affairs. “We are running full three shifts at our two plants (in Tamil Nadu). We hope the momentum will continue after Diwali as well.” Lheem has worked 37 years in Hyundai, last close to four in India.

Car makers reckon sales will grow at least ten per cent in 2009. For Hyundai, it is important that sales grow at a fast clip. Its production (600,000 cars per annum or 50,000 per month) is at present split equally between local sales and exports. Several countries in the West had announced “scrappage” incentives for buyers of fuel-efficient cars. This gave a huge momentum to exporters like Hyundai. But now the incentives have begun to run out. Lheem admits getting new export orders has become tough. Hyundai Motor India Senior Vice-president (marketing & sales) Arvind Saxena says exports in 2009 may fall about 10,000 short of local sales, and the gap may double in 2010. It is therefore crucial for Hyundai to do well in India.

Hyundai sits on 23 per cent of the Indian car market. But the market place is turning crowded by the day. Leader Maruti Suzuki (market share: 52 per cent) has strengthened its small car portfolio with launches like the A-Star, Ritz and new Zen Estillo. Fiat has begun its new innings with the Linea and Punto. Ford has announced a new small car for India called the Figo. Nissan has set its sights on a 5 per cent market share. General Motors wants a 10 per cent slice of the pie.

Portfolio makeover 
Small cars account for over 75 per cent of the Indian market. The economic slowdown of the last one year has reinforced consumers’ preference for fuel-efficient and inexpensive small cars. According to Saxena, almost a quarter of Hyundai’s repeat customers now own two small cars. In the past, the second purchase was invariably a mid-sized sedan.

And Hyundai knows this is where the future lies. The Korean chaebol has made India its hub for small cars in the world. Models like the Santro, i10 and i20 are not made anywhere else in the world. This ensures, Lheem claims, that the cars sold in India are of global standards. But it cuts the other way too. Often cars for the overseas market need to be fitted with expensive components and material; this drives up the price in India.

To consolidate its position, Hyundai launched the i10 in October 2007 and the i20 in December 2008. In September, it gave a facelift to its old warhorse, the Santro. The company has sold 11,000 to 12,000 i10s, about 7,000 Santros and between 4,200 and 5,000 i20s every month this year. The surprise here was the i20. “We expected to sell not more than 700 every month,” says Lheem. The car’s export volumes have been cut, says Saxena, to feed the domestic market.

The Getz will be taken off the road soon. In the works is a new 800-cc, 3-cylinder car somewhere in a Hyundai laboratory in South Korea. The brief to the engineers, says Lheem, is to keep the price below $6,000 (approximately Rs 300,000). “It will be smaller than the Santro in price as well as size,” adds Saxena. The car, which is yet to get a name, could take another two or three years before it launches.

The focus on small cars has had an unexpected fallout. Sector experts say that Hyundai faces a problem similar to Maruti Suzuki — consumers feel that it is good only with small cars. “Globally, Hyundai is strong in middle- and large-sized cars. But that imagery is somehow missing in India,” says Synovate Motoresearch Associate Director Sumit Arora.

Lheem says his mix of small and big cars mirrors that of the industry — 75:25 — but admits that people perhaps are more familiar with the brand Santro than Hyundai.

Privately, car makers admit that real money is in middle- and large-sized cars. The profit margins in small cars are just a fraction. To be fair, Hyundai does have more than one brand in this segment: the Verna, Accent, Sonata and Tuscon. It has withdrawn the Elantra and wants to plug that gap between the Accent and Sonata with a new brand. The SUV portfolio will see the Santa Fe in addition to the Tuscon.

Still, Lheem says he has to fight an unfair battle against the likes of Honda and Toyota in this segment as they import parts free of duty from Thailand. (India and Thailand have a free-trade agreement.) The answer, he says, is to buy more and more components from within India. Lheem admits that not all his cars sell at a profit, in India as well as abroad. He doesn’t name them but says some exports of “developing country” models are being done at a loss.

Some experts believe there is enough headroom in the small car market for all to grow. “More car buyers are getting into the market,” says Ernst & Young Partner Kapil Arora. “Customers were always price-sensitive; they have now become value conscious — they want small cars with more features.” This might be true. Saxena says Hyundai gets almost 45 per cent of its volumes from first-time buyers, up from 33 per cent a few years ago.

To cater to price-sensitive customers, several car makers have extracted the last ounce of profit from their vendors. Component manufacturers have complained for long that business is tough. Car makers have used the threat of sourcing from China to beat down prices. More and more of them also want full control over sales in the lucrative retail market. Lheem says he has offered all vendors who get a majority of their business from Hyundai financial compensation in case they begin to lose money. “Thankfully, nobody has come to me so far,” says he.

Diesel for growth
India has for long subsidised diesel more heavily than petrol. As a result, a growing number of consumers want to buy cars that run on diesel engines. This was about 20 per cent of the market three years ago. Now, it stands at 27 per cent. The projections are that the figure will hit 35 per cent in the next three years.

Maruti Suzuki got a strong foothold in this market after it set up a plant at Manesar near Delhi to make 100,000 diesel engines per annum. Hyundai has a limited play in the diesel market. Its only presence is the diesel i20 fitted with an imported diesel engine. But the company knows that if it wants to increase its market share, it needs to do much more. At the moment, the company is studying the feasibility of a factory to make 120,000 to 150,000 small diesel engines every year. The investment, according to Saxena, could be as much as Rs 1,200 crore. A decision is expected by the end of the year. “The industry has to move towards diesel,” says Arora of Synovate. Hyundai needs to move fast with its plans.

Dealer upgrade 
Recent research by Synovate shows that when markets turn bad, as they did in the country till a few months back, buyers prefer to go for brands that have a wider presence. It reassures them that the company will not go out of business. And for that a large dealer network for sales as well as repairs and service is essential. At present, Hyundai has 272 dealers across 190 cities and towns. The company plans to raise the network to 300 across 230 cities and towns by the end of the year, though Lheem feels 295 would be a more reasonable number.

Saxena feels this more or less covers the entire country. “The top ten cities sell 60 per cent of the cars in the country, and the top 20 sell 75 per cent. Beyond what we plan is not profitable,” says he.

Dealers are clearly an important cog in the Hyundai game plan. The key therefore is to boost the profitability of the dealers. What Lheem has done is that he has channeled all sales of spare parts through the dealers. Even the 700-odd authorised service stations have no option but to buy components from dealers. The logic is simple: While the profit margins on car sales are low (the industry average is below eight per cent), those on spares can be as high as 60 per cent. Hyundai has been around for ten years in the country now and there are 1.5 million Santros on the road. The service volume is not negligible.

Meanwhile, the company has also worked with dealers to improve their showrooms and service infrastructure. Hyundai every year rates its dealers collectively on a scale of 1,000. Last year, the score was 800. Lheem had set a target of 950 by the end of 2009. By mid-October, it has hit 905. “We have seen at least 15 per cent improvement in most of our dealers,” says Lheem. He also plans to convert 100 of them into elite dealers.

Finance matters 
A large dealer network may be fine, but for footfalls to convert into purchases, credit is the key. In the last one year, private banks as well as non-bank finance companies, which had fuelled the last boom in car sales, have turned conservative. Earlier, they had financed up to 90 per cent of the cars sold — only around 10 per cent customers bought cash down. The number shot up to 40 per cent in December 2008, thanks to the financial meltdown, it has since dropped to 33 per cent.

Saxena is of the view that unless it falls to 15 per cent to 20 per cent, car sales are unlikely to boom like in 2006 and 2007. Hyundai has thus quietly tied up with about a dozen state-owned banks which have been “gently persuaded” by the government to lend freely. (This is a part of its stimulus to revive the fortunes of the economy.) These banks lend freely to Hyundai’s customers. In return, Hyundai dealers have given business to these banks. They source, for instance, all their working capital from them. So far, the trick seems to have worked. State-owned banks accounted for about 15 per cent of Hyundai’s sales a year ago; today, they contribute as much as 29 per cent.

It is every chief executive’s job, Lheem waxes philosophical, to aim for market leadership. Though he refuses to disclose his targets, these initiatives he hopes will help bridge the gap with Maruti Suzuki.

DAY FOCUS:  Focused by J.Deepthi, 1-Sem MBA (09D61E0011)

Macro Economy -RBI studying Dubai World default impact: Subbarao

The Reserve Bank of India on Friday said it is examining the impact of the Dubai Government’s decision to suspend debt payments by Dubai World, which led global stock markets to tumble amid fears of widespread default. The RBI Governor, Mr D. Subbarao, said he has asked his officials to study the impact and “if necessary make recommendations.”

“We shouldn’t react to instant news like this. One lesson that we learnt from the (global financial) crisis is that we must study the developments and measure the extent of the problem and hence study the impact on India,’’ said Mr Subbarao, who attended an interactive session with the students of Indian School of Business at Hyderabad.

Meanwhile, Mr N. Chandrasekharan, CEO and MD, Tata Consultancy Services, said it did not have much exposure to Dubai markets and so impact if any is negligible.

Macro Economy -Dubai crisis will not hit remittances: Finance Secretary

The Finance Ministry on Friday said the financial crisis in Dubai, triggered by a slump in real estate, may not impact remittances sent by Indian expatriates in the Gulf.

“Remittances from expats didn’t suffer during the period when the larger crisis was on. So whether this should have an impact in terms of employment, in terms of salaries and therefore in terms of remittances is somewhat unlikely,” the Finance Secretary, Mr Ashok Chawla told . India gets nearly a quarter of its total remittances from the United Arab Emirates.

The former RBI Governor, Dr Y.V. Reddy, said: “On the basis of past evidence, the recent development in West Asia should not have any serious impact on the Indian remittances.”

Mr Chawla, however, said it will take some time for the Finance Ministry to examine the exact impact of the crisis on the Indian economy. “We have seen the press reports. We will have to study what the issue is, what the problem is and what will be the possible implications, if any for the Indian economy, on the people, on the corporates. It will take some time for us to examine this,” he said.

Just a year after the global downturn derailed Dubai’s explosive growth, the city is now swamped in debt.There are fears that Dubai’s conglomerate, Dubai World , may default on its around $59-billion debt and is seeking postponement of the debt until at least May because of the crisis triggered by real estate slump.

Dubai, which borrowed hugely, in a real estate boom, suffered due to slump in real estate following the global recession.

Macro Economy -Oct infrastructure output up 3.5%

India’s key infrastructure industries rose by 3.5 per cent in October on better performance by petroleum refinery products, electricity and finished steel. The six infrastructure industries, which account for a quarter of the nation’s industrial production, registered 2 per cent growth in October 2008.

Petroleum refinery products grew by 7.2 per cent in October compared to 5 per cent in the same month last year, as per the data released by the government here on Friday. In case of electricity and finished steel (carbon), the growth was 4.7 per cent and 1.1 per cent, respectively. The index for the six key industries rose to 254.8 in October from 246.3 a year earlier, the data said.

During April—October this year, the six infrastructure sectors rose by 4.7 per cent better than 3.3 per cent in the year ago period. Except for crude oil which posted negative growth of 2.2 per cent, all other key industries posted positive growth. Cement grew by 5.3 per cent against 6.2 per cent in the same period last year. Among other components of the six key industries, coal outp ut stood at 5 per cent in the reviewed period.

However, on sequential basis since August, when the core industries grew by 7.8 per cent, it has been on a decline. For the September month, the index rose by 4.1 per cent and in October growth was 3.5 per cent. 

Core sector investment target may not be achieved

The Government may not achieve the Eleventh Five-Year Plan’s investment target of $500 billion in infrastructure due to the global economic downturn, a senior Government official said.

“It is very difficult to achieve the target as many projects kicked-off very late...even many projects’ bidding process started late. The projects were delayed due to the global (economic) downturn,” the Planning Commission Advisor (Infrastructure), Mr G ajendra Haldea, told reporters on the sidelines of a conference at Mumbai today.

Mr Haldea said resource generation would not be a constraint for the Government and it is committed to building a world-class infrastructure for Indian industries. “Efforts are going on to complete all mega projects by 2012,” he said.

About 46,000 km of national highways at an investment of Rs 2,36,000 crore would be completed by 2012, he said, adding investments for 21,036 km have been approved through Public Private Partnership (PPP) programmes. To achieve the target, Mr Haldea said: “the Government has decided to involve state governments to accelerate the national highway projects.” 

Panel opposes model schools in PPP mode

The Government’s move to set up 2,500 model schools in public-private-partnership (PPP) mode has been opposed by a Parliamentary Panel which wants such institutions under public sector. The Parliament’s Standing Committee on HRD has said it does not agree with the proposal for setting up of model schools in PPP mode.

“The Committee does not agree with the proposal to set up model schools particularly through the PPP mode. The Committee is in favour of setting up these schools under the government support and control,” the committee said in its report.

The Government has decided to set up 6,000 model schools under the 11th Plan period. Of these, about 3,500 would come up under government sector, and 2,500 in PPP mode. The process of evolving suitable a PPP model for starting these schools is already underway. The government has conveyed to the Parliamentary committee that the rationale behind setting up of some of the model schools in PPP mode was to supplement the efforts of the government sector. The PPP mode will enable philanthropic bodies or trusts to meaningfully contribute to the government’s efforts to provide quality schooling to rural children, the Committee was informed. 

Info-Tech -TCS offers doctorate funding programme

Tata Consultancy Services has announced a new doctorate funding programme to drive quality academic research and increase the available faculty talent pool in India.

Announcing the TCS Research Scholar Programme on the sidelines of Sangam, TCS’ annual academic conclave, Mr N. Chandrasekaran, CEO and Managing Director, said: “At a time, when the introduction of new technologies is changing business models rapidly, the re is an urgent need for more focused research to stay ahead of the learning curve. The TCS Research Scholar Programme will help enlarge the R&D agenda and encourage exploration of new ideas by funding candidates in doctorate programmes.’’ 

Info-Tech -‘Poor economy not an excuse for layoffs’

Poor economy should not be an excuse for laying off people especially in recession when it becomes inevitable for the corporate world, Infosys mentor Mr N R Narayana Murthy said at Mumbai on Friday.

“In today’s economic downturn, the challenge lies in having the courage to set an example that responsible profitability is a realistic achievement, and by using data to demonstrate that it is possible to preserve jobs in economic downturn while innovati ng to increase profits, productivity and efficiency,” Mr Murthy said here.

It is simply too risky to pour money into projects or assets that may or may not yield desired results. Therefore, from the perspective of resource management, there is a case to be made for creative thinking and innovation to create new productivity and efficiency solutions from existing resources, Mr Murthy said. “The other imperative of Indian companies is to improve the lives of the largest number of Indians because that is how you can make this a better society,” he said. 

ONGC eyes 20-25% stake in Iranian gas field

ONGC Videsh Ltd (OVL), the overseas arm of Oil and Natural Gas Corporation (ONGC), will discuss participation in the development of Phase-12 of the gigantic South Pars gas field in the Persian Gulf, when top officials of Iranian national oil firm visit the country next week, sources said.

Hinduja Group, too, is interested in the $7.5-billion South Pars Phase-12 (SP-12) project but OVL’s pursuit is independent of it. OVL has not approached Petropars, the unit of National Iranian Oil Co (NIOC) which holds the rights for the field, for picking a stake through a joint venture with the Hindujas.

Both OVL and the Hindujas had in the past signed separate MoUs with Petropars for SP-12 and are independently talking to NIOC, they said, adding if the Hindujas are able to convince Iran to give them a stake in the field, the state-run company will welcome them in the consortium formed by Petropars.

In its talk with NIOC next week, OVL would also take up the issue of granting development rights for the offshore Farsi gas fields for which it, along with IndianOil and Oil India, has submitted a $5-billion development plan.Sources said OVL would negotiate getting liquefied natural gas in return for its efforts in both the projects.

MANAGEMENT TIPS: BOOSTING PRODUCTIVITY

Getting the most out of your day can be difficult with a busy schedule, but you can use these tips to help you maximize your time in order to be better available to employees.

Get the most out of meetings. Be organized and prepared for meetings to increase effectiveness and time savings.

Focus your energy on things that matter. Don't let trivial tasks take time away from things that are really important.

Identify your time-stealers. Everyone has little things that detract their attention and make them lose focus. Figure out what these are and work to eliminate them, if only for a few hours a day.

Be punctual. Being on time is a big deal. Never keep people waiting for appointments or meetings if you can help it.

Respond to your correspondence within a reasonable amount of time. You don't have to be chained to your inbox, but make sure you respond to emails within a few hours whenever possible.

Do only what is necessary. There are times when going above and beyond works, but doing so on a daily basis can derail your progress on more important issues. Get the key things done first, then see if you have time for additional things.

Stick to schedules and routines. While they may not be the most exciting things, schedules and routines can help streamline and improve your productivity.

Organize and manage your schedule. Use any tools and utilities you have at your disposal to prioritize your day and keep track of what you need to get done.

Plan more than you think you can do. While this may sound stressful, it can actually be a great motivator. If you manage to get everything done, you'll enjoy a great sense of achievement.

Get to work early on occasion. Sometimes an uninterrupted half hour in an unoccupied office can help you get key things done or allow you to plan your day before there are any distractions to slow you down.

Know that sometimes stress is good. While too much of anything, especially stress, can be bad, sometimes a little stress can be the motivation to get you moving, allowing you to get more done.

Do your least favorite tasks first. Get your most tedious and least desirable tasks out of the way earlier in the day. After that, everything else will be a breeze

Focus – Day Tip The unity of thought, word and deed is true humanness.

(News collection for Management studies)

Volume: 02           Issue: 112          26-November, 2009 – Thursday          Pages: 6

Focus :  Media and Entertainment Industry
SWOT Analysis of Media And Entertainment Industry
STRENGTHS:
1. Media And Entertainment is one of the most booming sectors in India due to its vast customer reach. The various segments of the Media And Entertainment industry like television and film industry have a large customer base.
2. The growing middle class with higher disposable income has become the strength of the Media And Entertainment industry.
3. Change in the lifestyle and spending patterns of the Indian masses on entertainment.
4. Technological innovations like online distribution channels, web-stores, multi- and mega-plexes are complementing the ongoing revolution and the growth of the sector.5. Indian film industry is second largest in the world and the largest in terms of the films produced and tickets sold.
6. The low cost of production and high revenues ensure a good return on investment for Indian Media And Entertainment industry.

WEAKNESSES:
1. The Media And Entertainment sector in India is highly fragmented.
2. Lack of cohesive production & distribution infrastructure, especially in the case of music industry.
3. The lack of efforts for media penetration in lower socio-economic classes, where the media penetration is low.

OPPORTUNITIES:
1. The concept of crossover movies, such as Bend It Like Beckham has helped open up new doors to the crossover audience and offers immense potential for development.
2. The increasing interest of the global investors in the sector.
3. The media penetration is poor among the poorer sections of the society, offering opportunities for expansion in the area.
4. The nascent stage of the new distribution channels offers an opportunity for development.
5. Rapid de-regulation in the Industry
6. Rise in the viewership and the advertising expenditure.
7. Technological innovations like animations, multiplexes, etc and new distribution channels like mobiles and Internet have opened up the doors of new opportunities in the sector.

THREATS:
1. Piracy, violation of intellectual property rights pose a major treat to the Media And Entertainment companies.
2. Lack of quality content has emerged as a major concern because of the 'Quick- buck' route being followed in the industry.
3. With technological innovations taking place so rapidly, the media sector is facing considerable uncertainty about success in the marketplace. 

Focus : Brands

It’s proven! The Indian consumer has a heart
Here’s proof we that we have a heart after all! A study has found that Indians have been found to be more conscious and demanding on social concerns than the global average while shopping.

According to the 3rd annual Goodpurpose Consumer Study, cause is a bigger factor than cost when making a purchase for 75 per cent of Indian shoppers and 78 per cent of Indians are willing to change consumption habits if it helps make the world a better place to live.

Globally, 66 per cent of those interviewed (and 69 per cent of those interviewed in India) believe it is no longer enough for corporations to simply give money away to a good cause; they need to integrate good causes into their day-to-day business. The 2009 Goodpurpose survey was fielded among 6,026 consumers across US, China, Canada, UK, Germany, Italy, France, Brazil, Japan and India in July-August 2009 by research firm StrategyOne.

“People are demanding social purpose and brands are recognising it as an area where they can differentiate themselves and in many parts of the world, not only meet governmental compliance requirements, but also build brand equity,” said Mitch Markson, founder of Goodpurpose. He added that this year’s study shows that if companies respond intelligently to the sea change in consumer attitudes, brand loyalty among consumers — even during seriously challenging economic times — will actually grow. Even better, consumers will want to share their support for these brands with others.

In the past year, 61per cent of global shoppers have bought a brand that supports a good cause even if it was not the cheapest brand.

Managing risk is key to growth

Risk and reward are two sides of the same coin. People take risks beca use

they see a reward at the other end. The bigger the reward, the greater would be the risk.

Risk management is a platform on which an organisation can launch its growth strategy. We live in a dynamic environment and change is the order of the day. We all have to deal with it on a regular basis. Risk management is, therefore, a framework to manage or mitigate the risks. Once managements understand this, managing risks becomes imperative for growth strategies.

It is important here to pa use and think why cars have br akes? One may think of ma ny answers, but the single-mo st relevant reason is to allow the car to be driven faster. Similarly, a good risk management mi tigation pro cess, if put in pl ace, will help companies grow st ronger and avoid accidents.

One may be tempted to ask that before Clause 49 (on corporate governance), did co mpanies not look at risks? Yes, entrepreneurs always did ev aluate and manage risks. But with regulators making it ma ndatory, it gained importa nce as an item to be addre ssed at board meetings. So what did some companies do? They em ployed consultants and co mplied. Did they actually take ownership?

The other important aspe ct is that of risk oversight. Those charged with oversight respo nsibilities at the board level have several questions to answer. Which board committee should look at risks? How do bo ards stay abreast with ch anging business and external environment? How do th ey de­al with selective communication? A classic example in the Indian context is foreign exchange risk. Many companies approached their currency exposures based on positive sentiment about the rupee st rengthening. It was noticed that often decisions on the use of derivatives were not based on facts and multiple scenarios were not considered. Audit committees also did not challenge manageme nts. In many instances, it was later discovered that companies did not fully comprehend the structured derivative pro ducts that banks offered them.

Risk management should be viewed from the overall ri sks, which can be termed ‘top down’. These would include br and reputation, sustainability and strategic risks. A good example is Indian IT giants, who continuously ev olve based on situational demands. Apple is another organisation that has sustained under extraneous circumst ances by challenging its limits since it detected sustainability risks.

The other set of risks are operational, and should be vi ewed as ‘bottoms up’. While both these views of risks are important, they need to be de alt at different levels. Once it is decided that risk management needs to be practiced ac ross the organisation, not just in boardrooms, and each person is sensitised to this cul ture, organisations would reap its true benefits.

It is also important to fix the ownership issue. Ownership for risk management sh ould reside in business units that make the operating decisions and implement strategy. To facilitate this, the role of the chief risk officer becomes important. He or she should play the role of translating ri sk policies into standard pro cesses that can help identify, assess, monitor and report on risks, using applied procedur es, templates, thresholds and information dashboards.

The quality of oversight also needs considerable overha ul. Typically, in most cases, this resides with the audit co mmittee. However, the complex and dynamic nature of risks in the present business scenario has encouraged progressive companies and regulators to challenge this conventional wisdom. Although the audit committee has the financial expertise, it might lack the broader expertise required to identify new and em erging risks.

For this, several areas need to be improved, such as re-alignment of board compositi on, obtaining information fr om varied sources, seeking advice independently from ex perts and having objective and challenging conversati ons ab out risks with several insiders and outsiders in the organisation. This involves ob taining information and advice that is independent from that provided by manageme nts. It does not matter who lo­oks at risks, as long as the people who look at it have the right skills to understand its process and content.

Companies are also adopting the practice of having th eir chief risk officer directly reporting to the risk committee. Many companies have su ch a committee that includes key executives from business units and non-executive dire ctors. This is considered necessary to understand the inter-linkages. It is also essential to de-silo the approach to risk management. While most risks are assessed in their respective silos, it is important to understand their inter-li nkages to make the process effective.

Hence, one should align risk management with the culture of the company; imbibe related principles across operational and middle management; monitor and improve the mechanics for risk management to work effectively; develop a profit centre attitude on risk management-related spends and review risks in correlation to activities across an organisation.

It is extremely important to understand the inter-linkages in making the risk management process for it to be effectively used to enhance enterprise value.

The writer is COO, KPMG India. These are his personal views

DAY FOCUS:  Focused by J.Deepthi, 1-Sem MBA (09D61E0011)

Banking -- Non-Performing Assets
Banks may get more time for NPA provisioning – Will need Rs 1.3-lakh cr more by Sept 2010 to meet higher coverage norm: Crisil

The Reserve Bank of India may give banks a breather by extending the deadline for increasing the provision coverage for non-performing assets (NPAs) to 70 per cent from September 2010 to March 2011.

In its Second Quarter Review of Monetary Policy, the RBI had said that banks should have minimum provision coverage of 70 per cent for NPAs by September 2010.

Fearing the impact of the RBI decision on their profits, banks had sought a review of the new norm. A PSU bank official said on Wednesday on the sidelines of an international banking seminar that the RBI refused to lower the provisioning requirement from 70 per cent but conveyed to banks that the deadline will be extended by six more months. However, the central bank is yet to issue a formal communication in this regard, he added.

This leeway will allow banks to step up gradually their provision coverage, thereby reducing the impact on profits.

In the monetary policy the RBI said, “With a view to improving the provisioning cover and enhancing the soundness of individual banks, it is proposed to advise banks to augment their provisioning cushions consisting of specific provisions against NPAs as well as floating provisions, and ensure that their total provisioning coverage ratio, including floating provisions, is not less than 70 per cent.”

Recently, the State Bank of India Chairman, Mr O. P. Bhatt, had said that all banks had sought a review of the deadline. The SBI will have to provide around Rs 5,000 crore for improving its NPA coverage ratio, which has fallen to 42.87 per cent as of September-end 2009, compared with 44.14 per cent as of September-end 2008, he had said.

According to a report by rating agency Crisil, the proposed increase in NPA coverage ratio will mean that banks now have to make an additional provisioning of Rs 1,30,000 crore till end-September 2010. This estimate was based on the NPAs reported by banks as on March 31, 2009. As on this date, the banking system’s NPAs were at 2.3 per cent of total advances, while the NPA coverage was around 55 per cent.

In its report, Crisil also said that even if NPAs rise to 3 per cent by March 2010, the required additional provisioning could increase by Rs 2,00,000 crore. Therefore, the total provisioning requirement for the system could be between Rs 3,00,000 crore and Rs 3,30,000 crore till end-September 2010.

Consolidation issue -Also, on the sidelines of the seminar the RBI Deputy Governor, Dr K. C. Chakrabarty, said consolidation in the Indian banking industry is necessary, but the time for it has not yet come. The banking sector must focus on financial inclusion for now.

His comments assume significance in the light of the meeting between bankers and Finance Ministry officials to discuss consolidation, last week.

“Consolidation will happen in an industry where there is a proliferation of products and services. We are talking about consolidation in an industry where 50 per cent people are not having access to a bank account,” Dr Chakrabarty said.

While size is important to compete in the market, small banks are needed to reach out to the interiors of India, he said. For the next five years, financial products and services must be available through a bank-led model. Both large and small banks are needed, he added.

Mutual Funds - Stock Exchanges

Use NSE platform for mutual funds trading from Nov 30

From November 30, investors will be able to transact in mutual funds units via the National Stock Exchange’s fully automated online system. The exchange has issued elaborate guidelines in this regard. Investors can place subscription and redemption orders online through their demat account as they currently do while trading in the secondary market for equities. Investors not having demat account can place orders in the physical mode through an AMFI certified broker by providing specific KYC documents. In the case of physical mode of placing order, investors are required to submit redemption request stating the folio number and PAN card.

The system -Investors can connect to the NSE’s trading platform through brokers’ telecom network. “A fully automated online order collection system called National Exchange Automated Trading-Mutual Fund Service System (MFSS) will be provided to the participants (brokers).

The settlement of the units will be through the depository in the demat mode for the demat account holders whose designated bank account will be debited/credited for the order placed on T (trading day) + 1 day. In case an order is placed through the physical mode, the Registrar and Transfer Agent (RTA) will provide final redemption information to the exchange on T+1 day; the payout, however, will happen according to the scheme’s provisions and within the timelines.

The new MFSS will operate on all business days of the capital market segment between 9 a.m. and 3 p.m. To start with, depository settlement will be available only for DP account holders in NSDL. The value for a single transaction, according to NSE, should be less than Rs 1 crore.

Macro Economy - Food inflation rises to 15.58%

Food inflation rose to 15.58 per cent for the second week of November from 14.55 per cent in the previous week as potatoes and pulses turned costlier.On an annual basis, potato prices more than doubled, pulses became expensive by over 35 per cent, while onions rose by 27 per cent.

Price rise was significant on weekly basis with urad and poultry chicken rising by 15 per cent each, eggs by 8 per cent, moong by 6 per cent, arhar by 5 per cent and fruits and vegetables by 3 per cent. Among the non-food articles, raw silk turned expensive by 3 per cent, while fodder and groundnut seed by 2 per cent each.

Fuel index though remained unchanged at the previous week’s level.

Software – Outlook -Industry & Economy - Linguistics
Microsoft tool to break the language barrier - Key in phonetic English script to get text in 6 Indian tongues

Making computers accessible for those who don’t know English, Microsoft Corporation has said that it would soon release transliteration tools for six Indian languages – Tamil, Telugu, Hindi, Bengali, Kannada and Malayalam. These tools allow the users to key in the language words in phonetic way using the English script and get the text in their respective languages.

The company feels that lack of English language skills have kept people away from computers. Only 1.2 crore households have PCs as against 45 crore mobile phones, Mr Srini Koppolu, Corporate Vice-President and Managing Director of Microsoft India Development Centre (MSIDC), said.

The beta version of these tools would be made available for free downloads from Microsoft’s Web site in the next few weeks. Developed by the Emerging Markets Labs at the Microsoft Indian Development Centre (MSIDC), these tools would help increase the base of users, Mr Srini said.Showcasing the tools at a press conference here on Wednesday, he said the company had made modifications to the transliteration services it had been offering for about a decade. The beauty of the tools is that the users could send e-mails or chat in their mother tongue.

“They select the language option from the desktop option and key in the mails or chat messages in their mail or chat boxes,” Mr Thirumalai Anandanpillai, Group Programme Manager and Head of EM Labs, said. The receiver, even without downloading the tools, could see the content in the said languages. The transliterated text, which is in Unicode form, could be modified to other fonts, if any, using relevant converters. “We have built a platform. And basing on this, it is very easy to develop other language tools . We will roll out the tools for other Indian languages in phases,” he added.

Components -The offering would have desktop and Web versions. Both the versions comprise virtual keyboards that present the alphabets and the derivative words as they appear in their respective linguistic order. With regard to Windows 7 in Indian languages, he said the company would roll out the operating system in at least 14 languages in the next few months.

Logistics -Singapore Shipyard forms JV with Kakinada Seaports

Singapore-based Sembawang Shipyard, a wholly-owned subsidiary of Sembcorp Marine and Kakinada Seaports on Thursday announced a joint venture to establish and operate a marine and offshore facility in India with an investment of $375 million.

The joint venture (JV) Sembmarine Kakinada Seaports Ltd (SKL) will develop the marine facility in east coast near Krishna-Godavari and Mahanadi basin area in three phases over 3-5 years.

“We are very optimistic of the region's growth in terms of shipping and offshore activities, oil and gas drilling and exploration, which will provide sustainable growth and expansion for SKSL,” Mr Ong Poh Kwee, Sembcorp Marine Deputy President and Sembaw ang Shipyard Managing Director said. Sembcorp Marine (through Sembawang Shipyard) will hold 19.9 per cent share of the JV's initial investment of $50 million with an option to increase it to 40 per cent, he said.

SKL Director, Mr Kris K Nittala said SKL was poised to become a one-stop integrated offshore service facility catering to offshore vessels and merchant ships including repairs, servicing and new building of offshore vessels and ships. “Indian ships at present go to Singapore for repair with a vessel mending cost of anything between $2 million to $200 million and we are hopeful of attracting that business here,” he said

Open up new sources of long-term financing’ - Commercial banking should reach the masses: Subbarao

Reserve Bank of India Governor D. Subbarao on Wednesday urged bankers to meet the formibale challenges head on. The four challenges were: deepening financial inclusion; financing infrastructure; strengthening risk management; and improving efficiency, he said.

“These are formidable challenges, and meeting them is going to be an exciting, rewarding and fulfilling opportunity. Perish the thought of Indian banking ever getting boring,” said Dr. Subbarao while speaking on ‘Should banking be made boring?: an Indian perspective’. He was addressing the International Finance and Banking Conference, organised by the Indian Merchants’ Chamber and the Institute of Chartered Accountants of India here. The theme of the conference was ‘Banking: crisis and beyond.”

“Commercial banking in India has not penetrated sufficiently to serve the large mass of rural, illiterate and poor people in any meaningful way,” the RBI Governor noted.

“A big issue in bank financing of infrastructure is the asset-liability mismatch,” said Dr. Subbarao. While infrastructure typically requires long-term funding, the deposits of banks, their main source of funds, are relatively short-term. The problem of asset-liability mismatch in long-term financing is not unique to India; banks elsewhere too face the same problem. But in advanced economies, the long term finance space is filled by insurance companies and pension and provident funds.

“If some of the pending legislation gets through, in India too we can expect new sources of long-term financing to open up. But until that happens, the burden of infrastructure financing will have to be met largely by the banks,” said Dr. Subbarao. To partly offset this problem, the Reserve Bank has, since 2000, allowed banks to enter into takeout financing arrangements with other financial institutions.

The intermediation cost in India is still high, largely due to high operating costs, said Dr. Subbarao. Non-interest sources of income constitute a small share in total income of banks in India.

Although overall efficiency and productivity have improved, resources are not being utilised in the most efficient manner. “The challenge for Indian banks, therefore, is to reduce costs and pass on the benefits to both depositors and lenders,” Dr. Subbarao asserted.

Banks need to develop a culture of risk management at the institutional level. What the crisis has shown is that risk management cannot be done in silos; it demands a more integrated approach with risks and their interconnections across the entire organisation recognised and managed synergistically. In the wake of the financial crisis there are proposals at the global level to mandate higher capital standards, stricter liquidity and leverage ratios and a more cautious approach to risk. “Admittedly, all these safeguards are necessary, but they will also raise the banks’ funding costs,” said Dr. Subbarao.

G R Fragrances launches new brand

G R Fragrances, a leading distributor of perfumes and cosmetics, has launched ‘Alta Moda’, a new brand of perfumes and deodorants. These are manufactured by Swiss Arabian Perfumes Group in the Middle East. G R Fragrances commenced its operations in 2002 and has captured a sizable market share in the perfumes and cosmetics market segment, according to B. Abdul Rahim, Managing Director.

MANAGEMENT TIPS: RESOLVING PROBLEMS

 

Whether problems are internal or external, they can make your management duties a nightmare if you don't handle them correctly. Here's how to stay on top of them.

Stand up for employees. If other departments or managers are bearing down hard on your employees, stand up for them.

Fix what's broken. Don't waste time placing blame. Take care of fixing the problem before dealing with any possible repercussions.

Manage and control your emotions. Don't let anger or frustration affect your problem resolution. If you are emotionally invested in a situation, cool down before discussing it or bring in an outside mediator.

Learn when to step in. Some problems might resolve themselves if you just let them be, but you need to be aware of times where you'll need to step in and take control of a situation.

Take the blame. If you've made a mistake, fess up. It'll give you more time to work on fixing the problem instead of talking your way out of taking the rap.

Get the facts first. Before you pass judgment on a situation, make sure you have the whole story. Listen to employees and refrain from questioning anyone's integrity without first ensuring that you've gathered all the data.

Rise above the crisis. Learn to separate yourself from the problem and rise above the fray. You'll be able to think more clearly and make a better decision on how to rectify the issue.

Don't ignore problems. A small problem can easily snowball and become something much more difficult to fix.

Try to depersonalize problems. Let employees know that the problem isn't with them but with their actions. Don't make it personal.

Focus – Day Tip Good and bad arise from within, they are not outside.