WALL FOCUS - 126

(News collection for Management studies)

Volume: 02           Issue: 126         13-December, 2010 – Monday Pages:12

Focus on Private Banks -Money & Banking - Credit Cards & Debit CardsNow, debit cards for 7-year-olds!

THE NEW-AGE PIGGY BANK

 “A slightly overrated piggy-bank” is how Mr Saju Joseph, a senior IT employee in Bangalore, describes the bank account held by his 10-year-old son Rohan in a private bank.

Children are the new focus group for private banks. From colourful debit cards and discounts at fastfood joints to offering special sessions in nursery schools and creating virtual games, private banks are hard-selling savings accounts to children.

So, the next time you spot children drawing money from an ATM, don't be surprised. After all, they may not be using their mother's or father's card, but their very own.

Safeguards

But before you begin to think that minors are being entrusted with millions and that banks are preying on them, rest assured that there are a number of safeguards. And, for the children themselves, this is an empowerment tool and an early introduction to financial planning and independence.

There is the sense of ownership that young Rohan now has, says the proud father. “And, more important, he is thrilled to have his own colourful ATM card,” says Mr Joseph.

Earlier, banks opened accounts for minors jointly with parents. Now, banks such as ING Vysya Bank and ICICI Bank allow independent savings accounts for children. Mr Uday Sareen, Country Head - Retail Banking of ING Vysya Bank, which recently launched ING Zing, describes the children's account as a “clear off-shoot of the KGOY syndrome (Kids Growing Older Younger).”

Zing is easy to open, operate and be managed by a child, he says. ING Zing has been designed by ‘kids for kids.' A set of children in the 7-13 age group selected and approved everything — from product features, discount offers, user guide, to the looks of the debit card, he points out.

The accounts, in both ING Vysya Bank and ICICI Bank, will be funded through a mandatory standing instruction from a parent's account.

The ING Zing account also comes with a personalised account statement for the child that shows from where the money has come into the account, and where it has been spent.

Setting the limit

Even though Rohan has the freedom to use his debit card to draw money from an ATM whenever he wants, for parents, the greatest advantage is being able to set limits on withdrawals and spends, and also monitor transactions.

The Zing debit card lets parents decide and set monthly limits on ATM withdrawals, and also for shopping at points of sales (POS). There are three options of spend limits for parents, ranging from Rs 500 to Rs 3,000 for ATMs, and Rs 1,000 to Rs 5,000 at POS. The quarterly average balance prescribed for this account is Rs 2,500, says Mr Sareen.

The banks run special sites for their young customers and “once done with banking, the child's account can be accessed with all the fun links to special zones designed to suit the child's area of interests and also impart knowledge on the current events of the world,” says a spokesperson from ICICI Bank that offers the ‘ICICI Bank Young Stars' account.

Some of the key features of the ICICI Young Stars Account are, free personalised cheque book, Internet banking, free international debit card (which is issued on request), and transfer funds facility.

The debit card from these banks comes loaded with offers on books, toys, games, bikes, fast food and many such purchases that children would want to make

SPECIAL FOCUS

Obama’s Visit and the Nuclear Conundrum: ( Contributed by K. Bhanu Teja  ,09D61E0013 )

 The 2010 American presidential visit to India was arguably an economy-dominant event. Admittedly, Pakistan and the endorsement of the Indian candidature for permanent membership of United Nations (UN) Security Council dominated media discussions. Both issues constituted a big thriller before and during President’s address to the Indian Parliament. The Strategic Trade management or export controls issue may fall in the grey area. It has both geo-strategic and geo-political connotations.

Other than strategic trade management and the nuclear liability bill, the writings and discussions during the visit did not pay much attention to other nuclear or non-proliferation issues. This was highly unusual, if we make comparisons with previous US Presidential visits especially in recent decades. The current Indian diplomacy needs to be complimented for managing to draw attention away from the contentious non-proliferation or nuclear issues before and almost throughout the visit.

One may also attribute it to a sense of purposelessness of the US non-proliferation community. Surprisingly, the US non-proliferation community and various think tanks working on the subject did not issue any demand list on non-proliferation to make the visit contentious and the relationship tense. True, we heard some occasional noises on the nuclear liability bill and export controls reforms by India.

The Joint Statement issued at the end of the visit had a reasonable section devoted to nuclear and non-proliferation matters. These issues indicate the kind of relationship India is developing with the US. The relationship between the two countries is also called strategic, though the plethora of joint statements on strategic partnerships is increasingly complicating the phrase. The joint statement on nuclear and non-proliferation issues would point to the struggle the negotiators of both countries may have waged to make it a balanced document.

In the joint statement, there are some pleasant issues, but these are hardly inspiring for the relationship. The joint statement has talked about “common ideals, complementary strengths and a shared commitment to a world without nuclear weapons.” Indian diplomacy may be congratulated for making the US talk about nuclear disarmament. It seems it was for the first time that the US administration shared nuclear disarmament ideals in an India-US bilateral document.

Interestingly, the talk of complementary strengths could also be a new experiment for the bilateral agenda. India may delight its Non-Aligned Movement and nuclear disarmament constituency and take the leadership on the issue of nuclear disarmament. This constituency was apparently unhappy with India because of the July 18, 2005 joint statement and subsequent developments. This international force felt that India, the friend and the leader of nuclear disarmament, distanced itself from its long cherished ideal and commitment. The US may have addressed that section of the Western world which is restless about nuclear disarmament.

India or at least a strong section of the Indian strategic community always has had a nuclear disarmament dream. It dreamt when India won its freedom, kept dreaming during the Cold War and even after it, and more importantly, did not stop dreaming in nuclear India. Needless to say, this dream was shattered. It seems the joint statement intends to do something to synthesize a common dream. Chasing American nuclear disarmament dreams may be soothing, but like any dream would end without producing any result.

President Obama’s promised the moon during his elections. A campaign pamphlet of the Democratic Party informed that “Obama and Biden will set a goal of a world without nuclear weapons, and pursue it. But they will take several steps down the long road toward eliminating nuclear weapons.” Obama’s famous Prague speech made a fleeting landing. Obama told the Prague audience, “I’m not naïve. This goal will not be reached quickly – perhaps not in my lifetime.” Afterwards, the American nuclear disarmament dream came to an end. Several disarmament enthusiasts all over the world, including Indians, were utterly disappointed. Global disarmament initiatives were left for brave hearts and lofty idealists.

Like the Prague speech, the India-US joint statement awakens us to the reality. In the same line in which a world without nuclear weapons has been mentioned, it talks of global efforts for non-proliferation before universal and non-discriminatory global nuclear disarmament in the 21st century. It seems the US priority took over. The struggle continued in the next line. Here it seems Indian diplomacy toiled to incorporate mention of “…the need for a meaningful dialogue among all states possessing nuclear weapons to build trust and confidence….”

At the press conference, the Prime Minister referred to India and the US as two nuclear weapon countries. This aroused expectations that advancement towards recognition of India’s nuclear weapon status would be made, and the joint statement would use a new formulation recording India’s nuclear weapon status. The 2005 joint statement had alluded to “other leading countries with advanced nuclear technology.” Unfortunately, the joint statement, possibly because of American reluctance, did not refer to India and the US as two nuclear weapons countries. However, for getting the phrase (all states possessing nuclear weapons) used in the joint statement, we must give credit to Indian diplomacy. India may have to consolidate upon this and move forward towards gaining recognition as a nuclear weapons state. Needless to add, the best option would be joining the NPT as a nuclear weapon country.

The other half of the same line talks about “reducing the salience of nuclear weapons in international affairs and security doctrines.” This is quite significant. India has a ‘no first use policy’ in its nuclear doctrine. In the run up to the 2010 Review Conference of the Nuclear Non-Proliferation Treaty, many countries as well as inter-governmental and non-governmental groupings campaigned for no-first use. An idea of a no-first use treaty was also floated. However, nothing came of it.

The Indian government and its diplomacy must build on this US commitment, and mobilize American think tanks working on nuclear issues. It could be the first practical step towards reducing the salience of nuclear weapons in the nuclear doctrines of all nuclear weapon countries - declared and undeclared. Other components may be taken up later.

India seems to prefer countering nuclear terrorism with the US framework. The joint statement mentioned the Nuclear Security Summit and the documents produced at the summit. The US has a somewhat different approach towards Pakistan on terrorism in general and nuclear terrorism in particular. Through the summit, it has tried to project Pakistan as a responsible actor. Moreover, the US deals with Pakistan unilaterally and hardly shares information with other countries.

The US’ ambivalent approach towards Pakistan is reflected in the joint statement on illicit nuclear trafficking. This is a major security issue not only for India but also for the US. Pakistan and AQ Khan do not figure in the joint statement. America’s own allies complain about Washington not sharing information about the proliferation network. India should insist on highlighting Pakistan’s involvement. Non-governmental organizations may underscore the role of Pakistani diplomacy in managing the fallout of its nuclear proliferation network. Help from the International Atomic Energy Agency, Interpol and the nuclear security summit framework has been mentioned. The Indian government should make maximum use of these institutions.

The US government and a section of its policy making community saw the Indian civil nuclear liability bill quite negatively. They demanded changes in the provision which made suppliers responsible for supplying defective items that may cause an accident. If an Indian operator finds that the accident has been caused due to defective equipment supplied by a supplier, it has the right to ask for compensation from the supplier under the passed bill.

The joint statement seems to have tried to address American uneasiness. It has secured a level playing field for American companies. US sceptics would do well to remember that there are many Indian suppliers for the Indian nuclear industry. The bill nowhere discriminates between an Indian private supplier and a foreign supplier. It seems the government of India has taken an extra step on the Convention on Supplementary Compensation which has been recorded in the joint statement.

There are other significant nuclear issues in the joint statement. First is the information about the Memorandum of Understanding for cooperation in the Indian Global Centre for Nuclear Energy Partnership. During his recent visit to Tokyo, the Indian Prime Minister agreed to work with Japan for development of this Global Centre. The future challenge for Indian diplomacy would be to make the Centre an important hub of nuclear energy and nuclear security activities. It could do well by becoming more transparent.

The joint statement has also talked about Iran. The formulation on Iran is quite positive. Obama began his Presidency and indeed conducted his election campaign by promising to use the diplomatic framework to manage the Iranian nuclear issue. In the last few months, he and his administration seem to have moved away from the diplomatic approach to confrontational and worse, military approach. In the joint statement, the emphasis on diplomacy to deal with the Iranian puzzle has been made. At the same time, the statement has urged Iran “to take constructive and immediate steps to meet its obligations to the IAEA and the UN [United Nations] Security Council.” Quite interestingly, any reference to its treaty obligations is missing. It seems the allusion to IAEA and UN Security Council indirectly addresses the issue.

Quite terribly, some superfluous issues haunted the joint statement. For example, the unnecessary mention of the Indian commitment to unilateral and voluntary moratorium and the American commitment to the Comprehensive Test Ban Treaty could have been avoided. It is well known that the changed US Congress and the American security establishment would not allow the ratification of the treaty.

In sum, the visit witnessed several positive developments on the nuclear front. The joint statement on nuclear issues reflects the joint endeavor of the two countries to find a new common ground. Yet, the final outcome reflects the struggle of the traditional contending approaches of the two countries. The synthesis of the two approaches tries to paper over old differences, but is becoming manifest at most of the places in the joint statement. In the future, these wrinkles need to go.

Strategy
Addressing eternal youthfulness –

Marketers have to appeal to a tricky customer segment — one that sees itself as youthful at heart, if not in body..

The present day context is apt for targeting consumers who are chronologically older but would like to be psychologically younger in their thoughts and consumption styles.

Age is just a number. _ P. V. SIVAKUMAR

Have you recently seen some 35-plus consumers wearing a pair of Denizen jeans, a Fastrack watch and carrying a mobile phone such as a Samsung Corby, or an iPod? Social media sites such as Facebook and Twitter also have attracted not just youth but consumers who are 40-plus too, who display their interests and hobbies and have a huge network of followers and fans! They are old by demographic definition but they adopt technology and lifestyle gadgets earlier than many of their peers.

Marketers are constantly trying to analyse consumer consumption patterns to uncover lifestyles and characteristics that may enable them to find emotional differentiators along with functional attributes. One of the emerging segments that poses a challenge to marketers is the segment that can be defined as the one associated with cognitive age. While conventional demographic segmentation bases have been targeting consumers based on their chronological age, the present day context is apt for targeting consumers who are chronologically older but would like to be psychologically younger in their thoughts and consumption styles. Such a segment of consumers reflects consumption patterns akin to younger segments.

The phenomenon of cognitive age

Attempting to feel younger has always been a concern among a cross-section of individuals or consumers but reflecting the need to stay younger through conspicuous consumption of product categories and brands is an interesting aspect of the self-concept of individuals who have undergone a change with the shifts and consumerism taking place in the environment.

Even in a niche market of anti-aging creams for women in India, Pond's carries an advertisement for one of its offerings that is meant for a 32-year-old lady but for someone who has the looks of a 23-year-old. This may be a direct product category offering to consumers who may be oriented towards the cognitive age but the more interesting challenge is to probe the consumption patterns of brands marketed to youth but consumed by the older consumers who would like to identify with the youth segment.

Shifts in self-concept of aging consumers

With categories and brands almost accepted by consumers around the world as an extension of their personality, it is interesting to probe how older consumers have adapted themselves towards a self-concept that points to cognitive age directions. In the present day context broadly there are three kinds of consumers – those who went through their youth much before liberalisation (pre-nineties), those who went through their youth during the Nineties or so and the youth of the present day. The pre-Nineties segment that may have spent its youth close to mid-Eighties and the segment that went through its youth during the Nineties may have been exposed to brands and categories that may have been an extension of their personalities.

Some examples of brands that were popular in the mid-Eighties for youth are Charms cigarettes, 5-Star chocolate bar from Cadbury that initially positioned itself as the “togetherness bar “ and later as the “energy bar”, Gold Spot in soft drinks, Fair & Lovely and Lux. During the Nineties too there were many brands that targeted the youth, probably with greater intensity to outsmart competition. Allen Solly, Ruf&Tuf jeans, Titan, Hero Honda's motorcycle products, Scooty, Coca-Cola and Pepsi are some examples.

Self-concept is associated with the total sum of associations an individual has about himself or herself.

It is the complete perception of how an individual views himself and could range from his/her present actual context to how an ideal image is expected by the respective individual. This is an important aspect as an individual gets internalised with brands that are a part of his/her self-concept. For example, a middle-aged consumer who had as a youth smoked Charms (which came in a pack with denim imagery, symbolising the changing values of Indian youth and an overtone of rebellion) may like to be associated with a brand of jeans just to feel younger. Another similar consumer who may have missed out on using men's cosmetics (a category that barely existed during the mid-Eighties) may want to try out Fair & Handsome fairness cream.

Challenges ahead

It is to be noted that not all consumers may reflect a need for cognitive age dimensions. There may also be consumers across age groups who reflect cognitive age consumption characteristics that are normally oriented towards remaining younger. Or, for example, many brands targeted at this set of consumers can add a host of services (mobile apps and accessories) that attempt to appeal to this consumer. Many fashion brands can take cues from these lifestyle trends and design their products around these themes.

One brand that has done this well is Ambercombie+Fitch, which has different t-shirts at the same size but has different fits. For example, they have an XL size with muscle fit which really attempts to appeal to this specific consumer but with a different cognitive age.

This is not to be confused with the nostalgic or retro appeal that brands may try out. Vanilla Coke attempted it in India. The challenge is not only to track the lifestyle and psychographic aspects of cognitive age consumption: there are also challenges with regard to branding an offering. A brand of snacks positioned, for instance, towards youth may find that a sizable chunk is being sold to the unintended segment of consumers reflecting cognitive age. How the brand should react is the challenge.

An interesting example is the launch of Titan's hand-wound watch, Automatic. Mechanical automatic watches gave way to digital watches and such a launch with a premium orientation may appeal to consumers who may want to experience a sense of nostalgia with a touch of contemporary symbolism.

Consumer behaviour insights can offer incremental but vital insights that matter to marketers in a highly competitive era in a market that is emerging.

Ramesh Kumar is Professor of Marketing, Indian Institute of Management, Bangalore. Swaminathan is CEO, Hansa Cequity, Mumbai.

DAY FOCUS  ( Collected  by J. Deepthi, 09D61E0011)

Corporate -Canon eyes Rs 100 cr revenue from document services biz

Photographic and digital imaging solutions provider, Canon India eyes Rs 100 crore revenue from Document Services, which is designed to assist in effective management of document input-output environments and processes.

“With growing demand for Canon Managed Document Services, a domain which was started in 2009, we expect the revenue to touch Rs 100 crore in 2011,” Mr Alok Bharadwaj, Senior Vice President, Canon India told . In 2009, the revenue from the business stood at Rs 20 crore, which the company is confident will touch Rs 50 crore this year.

The company has 18 large enterprise clients, including firms like automaker Maruti and information technology firm Mindtree and other companies from the pharmaceutical, FMCG and banking segments, he said without naming them. “We plan to focus only on big enterprises under this vertical,” he added.

Functioning on a business2business (B2B) approach, about two companies every month are subscribing Canon MDS, which has helped firms save up to 30 per cent of their printing, he said.

Under this vertical, Canon takes care of the overall infrastructure needs of a company, related to documentation. However, this a very manpower intensive business and the company currently has 150 sales and marketing people and another 150 service personnel. “With growing business we will keep adding people for direct sales to handle large accounts,” he said.

Finance Ministry probing overseas deals for tax evasion

The Finance Ministry has begun its maiden investigation into over 100 offshore “financial structuring deals” undertaken by Indian business entities in foreign tax havens to allegedly evade the taxman’s net.

The multi-pronged probe has been undertaken by the international taxation wing of the Income Tax department and the foreign taxation unit in the Central Board of Direct Taxes (CBDT).

A number of investments and deals to the tune of billions of rupees have been already executed in tax havens like the Mauritius, Isle of Mann, Cyprus, British Virgin Islands and Bermuda, amongst others.

These deals will be scrutinised by the investigators, who are also travelling to some of these countries to collect additional information.

The exercise, dubbed “Lifting Corporate Veil”, will look into the overseas deals, including some big ticket ventures, to investigate whether “a chain of overseas takeovers may be part of an exercise for an elaborate treaty shopping or tax evasion exercis e.”

According to sources privy to the investigations, the I-T Department has identified almost seven lakh companies in the British Virgin Island alone that are possible front companies for such investments.

Certain Indian entities allegedly invested in companies set up in these offshore tax havens to avoid taxes or pay close to zero tax under the guise of financial restructuring.

“Privacy and confidentiality and freedom from all taxes in these havens are guaranteed. Company structures are flexible and the process of incorporation is fast and efficient while doing financial structuring in these places,” sources said.

The probe is to check the investments ‘made’ abroad and investments ‘made from’ abroad through a chain of tax haven countries without paying taxes in either country and causing loss of revenue to the national exchequer, sources said.

They said such probes are also expected to throw up some leads related to violation of foreign exchange rules and money laundering to fund illegal ventures, which will be referred to other investigative and enforcement agencies like the CBI and Enforceme nt Directorate (ED) for follow-up action.

The Finance Ministry is already working to finalise Tax Information Exchange Agreements (TIEAs) with countries like the United Arab Emirates, Kuwait, Oman, Saudi Arabia, Qatar, Jordan, Syria, China, Indonesia, Israel, Japan, Malaysia, Mongolia, South Kor ea and Vietnam.

Furthermore, Double Taxation Avoidance Agreements (DTAAs) with more than 70 countries are being fine-tuned.  The I-T department is also looking into evasion of Tax Deducted at Source (TDS) by some companies while making payments to purchase overseas shares, but sources declined to name the entities involved.

“Of the total Rs 250 crore market, we are gearing to capture 30 per cent business by next year,” he added

Cigarettes -Corporate – Outlook -Industry & Economy - HealthWill resume cigarette-making after order on warning sign: ITC

Stocks in the market fast dwindling, say industry watchers.

The Chairman of ITC, Mr Y.C. Deveshwar, addressing the`ITC Classmate Ideas for India Challenge,' during anational awards ceremony in the Capital on Saturday. -Kamal Narang

ITC Ltd has said that it would resume cigarette manufacturing only after receiving a `formal notification' from the Government on the pictorial warnings that need to be used on such products.

Recently, the Cabinet had decided that the current pictorial warnings of black lungs and scorpion would continue until December 2011, when the next review is likely to take place. The proposal before the Cabinet was to change the pictorial warning to that of a `cancer-affected mouth.'

TO READ FINEPRINT

Despite this breather, tobacco product makers are keen to read the fineprint before taking a call on resumption of production.

Asked when ITC would resume production, Mr Y.C. Deveshwar, Chairman, said: "I have no idea. as soon as the notification comes.we are trying to manufacture as early as possible." He was speaking on the sidelines of the ITC awards ceremony.

On the issue of sales being affected, he said, "I hope not. it depends .if it is closed for a long time, it will affect." Industry watchers say stocks in the market are fast dwindling, and that some of the brands are being sold at a premium.

SHORTAGE LOOMS?

While ITC maintains that it has enough stocks for the moment, it could face shortage if the production remains suspended for a longer period.

Nearly 50 per cent of ITC's Rs 18,150 crore turnover came from the cigarette business during the last fiscal. ITC and Godfrey Phillips India (GPI) stopped cigarette production on December 1.

GPI is also waiting for a `formal notification' before resuming production.

According to a GPI spokesperson, "We hope it can be resumed as soon as possible. Hopefully this week, but we cannot be sure."

General Insurance -Money & Banking - Mergers & AcquisitionsRoyal Sundaram to soon merge with Reliance General

The merger of Royal Sundaram Insurance with Reliance General Insurance is expected shortly. The merger will take place soon after the creation of the framework of mergers of general insurance companies, which is expected to be ready in a week, Mr J. Hari Narayan, Chairman, IRDA, said today.

The merger will create a size that will make sense for both parties. Just as in ‘retail', in ‘financial services' too, size matters — the bigger you are, the bigger you grow, he said. “In a merger, we see that one plus one is more than two,” he said.

For the year ended March 31, 2010, Royal Sundaram reported a higher net profit of Rs 31 crore against Rs 5.6 crore the previous year as the company earned an investment income of Rs 92 crore (Rs 75 crore).

Reliance General has been reporting losses. As on March 31, 2010, Reliance General's total assets were around Rs 2,608 crore and liabilities were at Rs 1,817 crore

MANAGEMENT TIPS

KEEP UP WITH CHANGE

There is no way to stop the world from changing, so follow these tips to keep up and ahead of the game.

Don't fight change. You can't stop markets, trends and technology from changing, so learn to go with the flow.Adopt a predictive managerial style. Don't wait for things to happen to make a move. Anticipate problems and provide contingency plans.Test your contingency plans. Waiting for disaster to strike is a dangerous way to find out if your emergency plans will hold. Test them out from time to time to fine-tune them and make sure they're still relevant.Identify the positives. Even the most negative changes can have positive aspects to them. Being able to identify and maximize them can help make adapting less painful.Be quick to adapt. Learn to adapt to changing situations quickly and be able to change plans on the spur of the moment if the situation requires it.Stay tuned to external factors. Your business is affected in many ways by outside factors. Keep abreast of these so you can anticipate any sudden market changes that would affect how you need to manage.Put in place a Research and Development plan. Encourage innovation and creativity to stay ahead of the demand for newer and better products and services.Keep an eye on the competition. Don't let the competition get the best of you. Keep up-to-date with what they're doing and use it to your advantage in managing your business
FOCUS ON CASE STUDY 
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

According to the Financial Express report, October 1988 the rate of return of Nagarjuna Fertilizer stock for the past five years is 19 per cent. This is assumed to continue for the next five years and after that rate of return is assumed to have a growth rate of 10 per cent indefinitely. The dividend paid for the year 1987-88 is    17 per cent. The required rate of return is 20 per cent. The price is Rs. 13 on 14-10-88.

Estimate the stock price according to the two stage model.

Focus – Day Tip 'If you will follow the right path, GOD will become a guide to you!'