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e-GlobuzZ Volume IV Issue II
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e-GlobuzZ Volume IV Issue II
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FOREWORD Dear Readers,
It gives us great pleasure to bring out the Volume IV Issue II of e-GlobuzZ, the quarterly e-
periodical of IBS@SIMSR.
In this issue we have focused on countries like Kazakhstan, Argentina, Turkey, Iran, Qatar
and Venezuela across various continents like South America & Asia. These articles on
emerging country markets have been written by SIMSR students and we are sure you will
find them comprehensive and insightful. One of the fundamental requirements of International Business is to have
an in depth understanding of various countries in terms of their factor conditions, political and economic risk,
opportunities for trading and cross border investments, and appropriate country entry strategies MNEs could use for
building market leadership in these countries and the neighboring regions including the relevant trade blocs.
In addition to the articles on countries we have included an article on current affairs like the ongoing crisis in
Ukraine. We have also covered an article on opportunities for Inbound FDI in the emerging Indian automobile sector.
One of the highlights of this January-March quarter was Commercio 2014, held on 15th Feb, 2014 as a part of the
prestigious SIMSR event Melange, 2014. Commercio, 2014 was the third annual inter B school competition on
country analysis and strategies which IBS@SIMSR commenced with the Melange, 2012. Commercio, 2014 like in
prior years brought together talented teams from 25 leading B schools across India. Of these, IMI Delhi, NITIE,
Mumbai, SJMSOM (IIT, Bombay) and NMIMS, Mumbai were among the finalists in addition to the SIMSR teams.
Commercio 2014 turned out to be a great learning experience for all the SIMSR students and participating teams as
well.
We will be meeting you again in August 2014 for our Independence Day issue (July-September, 2014) on 15th Aug,
2014 due to the ensuing summer break from mid April to June, 2014.
In the mean time we invite our esteemed Faculty, SIMSR students and Alumni to write articles for the forthcoming
Independence Day issue of e-GlobuzZ.
Happy reading! ...
Prof. C. P. Joshi
Faculty Mentor, IBS@SIMSR
Area Chairperson (General Management) & Program Coordinator (PGDM and PGDM– International Business)
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CONTENTS
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CONTENTS
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Country in Focus - QATAR
Q atar, a former pearl-fishing centre and once
one of the poorest Gulf states, is now one of
the richest countries in the region, owing to
the exploitation of large oil and gas fields since the
1940s.
Ascribed Features :
Location: The Qatari peninsula just 100 miles (161 km)
north into the Persian Gulf from Saudi Arabia. Much of
the country consists of a low, barren plain, covered
with sand.
Population: 2 Million (2013). Since 2004 its population
has increased more than double.
Climate: Pleasant winters and hot, and humid
summers.
Religion: 81.5% - Islamic , 8.5 % – Christianity .
History: Qatar gained independence from the United
Kingdom on 3 September, 1971 and is an absolute
monarchy that has been ruled by the Al Thani family
since the mid-19th century
Gas and Oil: Qatar has the world's third largest natural
gas reserves and oil reserves in excess of 25 billion
barrels which has fuelled Qatar to become world's
richest country per capita and achieve the
highest human development in the Arab World.
Acquired Features :
Membership: Qatar is a member of the WTO, OPEC,
ILO, IMF, Arab League and is also a founding member
ofthe Gulf Cooperation Council
Infrastructure: Qatar is currently undergoing
transformation under the National Vision 2030, in which
it expects to achieve an advanced, sustainable, and
diversified economy.[18] In order to promote tourism,
Qatar has invested billions into improving infrastructure.
It held the 2006 Asian Games and will be the host of
the 2022 FIFA World Cup, becoming the first Arab
country to host either of the events.
Corporate structures available for investors are the
Qatar Financial Centre (QFC), Qatar Science &
Technology Park (QSTP)
Life Expectancy : 78.54 years for males , 77.95 years for
females
Technology : The major investments are in Internet
presence, distributive networking (networks and
intranets) and computerization of administrative tasks.
Political Environment :
The political system of Qatar is a constitutional
monarchy, with the Emir of Qatar as head of
state and head of government, hence in possession of
full control over the country. On 25 June 2013,
Sheikh Tamim bin Hamad Al Thani became the Emir of
Qatar after his father handed over power in a televised
speech. Though Qatar is undergoing a gradual process of
political liberalization, the Emir continues to hold
ultimate power. While political risk does not directly
- Aditya Sharma, Shivek Dhar, Shrikant Joshi (PGDM-International Business, 2013-15)
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impact Qatar, regional stability is the concern for future
growth.
Economic Factors :
Qatar was the world’s fastest growing economy during
2008-12, with a real GDP growth rate of 12.0%. Its
economy is fully dependent on oil and gas exports.
Around 58% of the GDP is constituted by oil and gas. The
current account surplus rose sharply (32.0% of GDP) on
record-high gas and nonoil exports. It has very low
unemployment rate of 0.5%. It is the world’s richest
country in terms of GDP per capita. There is no personal
income tax system. Tax is only collected from business
income.
Cultural Factors :
Demographics: Arab 40%, Pakistani 18%, Indian 18%,
Iranian 10%, other 14% .
Religion: Islam (state religion, claimed by virtually all of
the indigenous population) .
Languages: Arabic (official) , English (widely spoken) .
Polygyny is religiously and legally sanctioned. The
preference is to live with or at least near the members of
the husband's family.
Legal Factors :
Qatar's legal system is a mixture of the Civil and Islamic
laws. Qatar has a well established code of laws and trials
are generally thought to be fair. Qatar has produced a
viable dualism in its legal system different from that of
the other Gulf States. Many cases of ill-treatment of
immigrant labour have been observed. Preferential
treatment is given to bids that include a high percentage
of local content.
Bilateral Relations: India - Qatar
India has a long history of friendly relations with Qatar
marked by commercial ties. The relationship today is
rich, close and multi-dimensional. There is a growing
synergy in the hydrocarbon sector. More recently, a
number of steps have been taken to further strengthen
and expand bilateral relations. The various occasions for
high-level dialogue on business matters and regular
exchange of delegations have established a sound basis
for a constructive, mutually beneficial relationship.
Bilateral Trade :
India is the 3rd largest export partner of Qatar: The value
of the two-way trade between the two countries in 2010
-11 exceeded US $ 7 billion. For Qatar, India is the 3rd
largest market for its exports, accounting for more than
8% of its global exports (2011). In terms of imports by
Qatar, India ranks 11th and is the source of around 4% of
Qatar’s total imports (2011). The figure below depicts
export- import in numbers.
Trade in the current year: During the financial year i.e.
April-Dec, 2012-13, exports were around US$ 500.49
million whereas the imports for Qatar were around US$
12550.97 million. The total trade was US $ 13051.46
million.
Top items of Exports from India: Machinery and
equipment, transport equipment, textiles, food
products, ores and minerals etc.
Top items of Imports by India: Petro-chemicals, LNG,
fertilizers, Sulphur and Iron Pyrites.
Bilateral Investments :
Hydrocarbons : India has signed an agreement to
purchase 7.5 million tonnes of LNG every year from
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Qatar for a period of 25 years; the first shipment took
place in 2004. The full supplies of 7.5 million ton have
begun from January, 2010.
Information Technology : Wipro has executed a project
for Doha Bank for providing enterprise application
integration and security consultancy services. Wipro is
presently providing IT consultancy to Qatar Petroleum in
their Ras Abu Aboud Development Project. Mahindra
Consulting have successfully executed SAP
implementation project with Qatar Petroleum. Mahindra
Consulting has also been providing SAP technical and
functional consulting services to RasGas in areas of
logistics management and maintenance management.
TCS is executing projects for Qatar Petroleum and Qatar
Telecom. NIIT and APTECH are successfully running their
IT training institutes in Qatar.
Infrastructure : The Qatari side had highlighted its
interest in getting access to the public sector undertaking
disinvestments in India via the anchor investor route.
With Qatar becoming the host for 2022 FIFA World Cup
and massive investment likely in infrastructure, Indian
companies with a global profile are planning to secure
lucrative deals in the engineering, procurement and
construction contracts (EPCs).
Conclusion:
The Qatari pharmaceutical industry will benefit from the
forthcoming implementation of the National Health
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Insurance program, which envisions covering all the
residents and visitors in the country under the scheme.
Moreover, the potential signing of a free trade
agreement between the GCC and India, thus paving the
way for less expensive imports of generics, can alter the
structure of the pharmaceutical industry in the country.
Hence, as per the above analysis it could be concluded
that Qatar is emerging as a new market for healthcare
sector. It has also outperformed other Middle Eastern
countries in terms of trade, GDP growth etc. Qatar is now
planning to diversify its portfolio in order to reduce its
dependency on oil. So, it provides a huge opportunity for
India, as we provide pharmaceutical products &
healthcare services at a much lesser price as compared
to other countries.
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Country in Focus - Iran
I ran, also known as Persia till 1935, is officially
the Islamic Republic of Iran since 1980. It is a
country in Western Asia with Tehran as it. The
motto of Iran is "Independence, Freedom, and Islamic
Republic“. The currency of Iran is the Iranian rial and, as
of 2014, remains the world's least valued currency unit.
The Official language is Persian and official religion is Shia
Islam.
Factor Conditions :
Iran is located in the Middle East, between Iraq and
Pakistan, bordering the Gulf of Oman, the Persian Gulf
and the Caspian Sea. The bordering countries of Iran
include Armenia, Azerbaijan, Afghanistan, Iraq, Pakistan,
Turkey and Turkmenistan. It is the only country that has
both Caspian Sea and Indian Ocean as coastline. Iran is
strategically located on the Persian Gulf and Strait of
Hormuz which are crucial maritime pathways for crude
oil transportation. Two-thirds of the country is either
mountains or desert with climatic conditions ranging
from subtropical to sub polar.
Some of the natural resources of Iran are petroleum,
natural gas, coal, chromium, copper and iron ore. Iran
has the largest natural gas supply in the world and the
fourth-largest oil reserves. Iran is a major regional and
middle power, exerting influence on the world through
its reserves of fossil fuels. Iran's scientific progress is the
fastest with great strides in aerospace, nuclear science,
medical development, stem cell and cloning research.
Iran is an energy superpower. Iran is in a constant battle
to use its energy resources more effectively in the face of
subsidization and the need for technological advances in
energy exploration and production. Iran is a member of
the United Nations (UN), Non-Aligned Movement (NAM),
Organization of the Islamic Conference (OIC),
Organization of the Petroleum Exporting Countries
(OPEC) and Gas Exporting Countries Forum (GECF).
History :
From 224-651 AD the Sassanid dynasty rules Persian
Empire during which Zoroastrianism was the dominant
religion. In 636 AD - Arab invasion brings start of Islamic
rule. There was dynasties rule from 1501–1979. Iran was
known as Persia till 1935, was one of the greatest
empires of the ancient world, maintaining a distinct
cultural identity within the Islamic world. It became an
Islamic Republic in 1979, when clerics assumed political
control under supreme leader Ayatollah Khomeini.
During 1980-1988 Iran fought a war against Iraq.
Culture :
The culture of Iran is a mix of ancient pre-Islamic culture
and Islamic culture. Iran has a high context culture where
the emphasis is on interpersonal relationships and
developing trust. It is a collectivist nation where family,
- Ankit Bagadia, Vishnu Manasa Kanchiraju, Sanghmitra Varma (PGDM-International Business, 2013-15)
Population of Iran 77,176,930 (2013 estimate)
17th most populous nation
Median Age 27.8 years
Literacy rate 77%, ranked 160th
HDI index 0.742, ranked 76th
Population below poverty line 18.7%
Population of Iran 77,176,930 (2013 estimate)
17th most populous nation
Median Age 27.8 years
Literacy rate 77%, ranked 160th
HDI index 0.742, ranked 76th
Population below poverty line 18.7%
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hierarchy, honour, networks and consensus is given more
importance. Iran follows idealism where the culture
prefers to establish overall principle before they try to
resolve small issues. It has a polychromic culture with
ascribed group memberships.
Political Structure :
The political system of the Islamic Republic is based on
the 1979 Constitution, and comprises several intricately
connected governing bodies. The Leader of the
Revolution (‘Supreme Leader’, of which there have been
two: the founder of the Republic, Ayatollah Ruhollah
Khomeini, and his successor, Ali Khamenei) is responsible
for delineation and supervision of the general policies of
the Islamic Republic of Iran. The Supreme Leader is
Commander-in-Chief of the armed forces, controls the
military intelligence and security operations; and has sole
power to declare war or peace. The heads of the
judiciary, state radio and television networks, the
commanders of the police and military forces and six of
the twelve members of the Guardian Council are
appointed by the Supreme Leader. The Assembly of
Experts elects and dismisses the Supreme Leader on the
basis of qualifications and popular esteem. Iran's
syncretic political system combines elements of a
modern Islamic theocracy with democracy. The official
religion of Iran is Shi’a Islam. The figure describes the
composition of the Electorate.
The Constitution defines the President as the highest
state authority after the Supreme Leader. The President
is elected by universal suffrage, for a term of four years.
Presidential candidates must be approved by the Council
of Guardians prior to running. After being elected, the
president must be appointed by the Supreme Leader.
The President is responsible for the implementation of
the Constitution and for the exercise of executive
powers, except for matters directly related to the
Supreme Leader. The President appoints and supervises
the Council of Ministers, coordinates government
decisions, and selects government policies to be placed
before the legislature. Currently, 10 Vice-
Presidents serve under the President, as well as a cabinet
of 21 ministers, who must all be approved by the
legislature. Unlike many other states, the executive
branch in Iran does not control the armed forces.
Although the President appoints the Ministers of
Intelligence and Defense, it is customary for the
President to obtain explicit approval from the Supreme
Leader for these two ministers before presenting them to
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the legislature for a vote of confidence.
Legislative :
The current legislature of Iran is Unicameral (since
Iranian Revolution). The Parliament (Majlis) comprises
290 members elected on for 4 years term. The Guardian
Council comprises 12 jurists (6 elected by the Majlis & 6
by Supreme Leader). The Expediency Council is the
advisory to Supreme Leader, and it also mediates issues
between Majlis & Council of Guardians.
Judicial :
The Supreme Leader appoints the Head of Judiciary, who
in turn appoints the Head of Supreme Court & Chief
Public Prosecutor. There are several types of courts
including public courts that deal with civil and criminal
cases, and "revolutionary courts" which deal with certain
categories of offenses, including crimes against national
security. The Special Clerical Court handles crimes
allegedly committed by clerics.
Economy :
Iran's economy is a mixture of central planning, state
ownership of oil and other large enterprises, village
agriculture, and small-scale private trading and service
ventures. The World Ranks of Iran based on various
Economic Indicators is as given below:
PPP - 17th (Value: $988.437 billion)
GDP - 21st (Value: $548.590 billion)
GDP per Capita :
Nominal - 76th (Value: $7,207)
PPP - 75th (Value: $12,986)
GNI per Capita- $6,913
CPI- 466 (2011) (2000=100)
Ease of Doing Business Rank- 145th (World Bank)
HDI- 76th (0.742)
Inflation (CPI)- 40%
Other prominent industries of Iran are:
Petroleum, Petrochemicals, Fertilizers, Caustic Soda, Car
Manufacture, Pharmaceuticals, Electronics, Telecom,
Energy, Power, Textiles, Home Appliances,
Construction, Cement and other Construction
Sector wise GDP contribution
Total Exports, Imports & Trade Balance
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Materials, Food Processing (particularly sugar refining
and vegetable oil production), Ferrous and Non-
Ferrous metal fabrication and Armaments .
Trade Barriers in Iran :
1. High Import Tariffs - Currency Fluctuations
2. Investment Regulations - Foreign Relations and Trade
Sanctions
3. Environmental Restrictions - Safety Regulations
4. Immigration Policies - Sanctions and other
restrictions
Risk Analysis:
Strengths :
Second largest OPEC oil producer.
Large natural gas reserves (ranked second after
Russia).
Very low foreign debt.
Weaknesses :
Nuclear programme the cause of UN sanctions,
toughened by USA and EU.
Economic and financial situation still dependent on
hydrocarbon revenues.
Political and social tensions.
Unfavourable business climate and insufficient
investment.
Risk Assessment :
Recession caused by the tightening of international
sanctions, with persistent high rate of inflation .
Widening of fiscal and current account deficits .
Internal political tensions and further tightening of
international sanctions, affecting the
business environment .
Factor conditions
Include raw materials, knowledge resources, physical
resources, human resources, technological resources,
capital resources, infrastructure, innovation power and
manager’s capabilities.
Demand conditions
Determine the circumstances of domestic demand for
products of an industry. Increase in demand has a great
influence on competitiveness. Porter (1990) believes that
a big growing domestic market encourages the producers
to develop technology and efficiency.
Related and Supporting Industries
Include raw materials suppliers, equipment and tools,
distributors and retailers, research organizations,
product distribution systems, financial organizations such
as banks and stock market, transportation systems, and
industries which use specific technology, raw materials,
and laboratory facilities.
Firm Strategy, Structure, and Rivalry
The conditions of the macro level of society and also the
way organizations and firms are founded, managed, and
organized highly affects competitiveness. Thus, strategies
and structure used for managing a firm or an industry has
direct influence on performance and competitiveness.
Government
Government as a major power can always affect
competitiveness positively or negatively by its
intervention in politic, economy, and society and also by
setting rules. Monetary, financial and business policies,
supporting policies, administrative policies, import and
export rules, exchange rate, money supply, inflation rate,
government costs, macro and micro economics policies,
Balance of Payments- Current Account
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formal and informal political agreements, and
establishing or cutting political and economic relations
with other countries are the most obvious governmental
issues which can affect the competitiveness of firms,
industries and countries.
Chance
Events or occurrences that are outside of control of the
firms, industries or even governments are called chance.
Disasters, wars, economic sanctions, oil shocks, economic
or political crises, and great technological innovations are
examples of chance.
Conclusion
As a part of the modern economy Iran is known for its
natural gas reserves, but on the contrary the barriers to
trade and the reasons behind country being in the news
all cater and direct to the increasing concerns the
country is facing. Prominently the country can boost its
economy with certain regulations in effect, but only time
will tell what Iran has in reserve for the Global Economy.
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Country in Focus - Venezuela - Divya Kaul, Abhilasha Ubhare, Nisha Dmello (PGDM-International Business, 2013-15)
V enezuela is a country that lies on the
Northern coast of South America. Despite
having many similarities with other South
American nations like Brazil and Colombia (in terms of
natural resources, which is an invariant factor condition,
other cultural features and membership of Trade Blocs),
Venezuela still stands as quite a peculiar country, if
viewed objectively through the lens of opportunities in
International Business. Through this article, we attempt
to study and bring to the surface the uniqueness of
Venezuela.
Introduction
Officially called the Bolivarian Republic of Venezuela,
Venezuela is a federal presidential republic consisting
of 23 states, the Capital District (covering Caracas),
and Federal Dependencies (covering Venezuela's
offshore islands). With Spanish as its national language,
Venezuela is among the most urbanized countries
in Latin America.
Hofstede's 5D model for Venezuela
The population consists of Spanish, Italian, Portuguese,
Arab, German, African and indigenous people. It has a
high context, collectivist and conservative culture with
high power distance, uncertainty avoidance and
masculinity index.
Factor conditions
Natural resources: Venezuela has one of the largest oil
and natural gas reserves in the world. Its total energy
consumption is driven by oil, gas, hydro electricity and
coal. There is a thriving fishing industry all along the sea
coast. The state holds a large interest in the basic
industries and in the oil sector, since both are considered
of strategic importance for the nation.
Favourable geographic location: The country bordering
the Caribbean Sea and the North Atlantic Ocean,
between Colombia and Guyana, Venezuela is on major
sea and air routes linking North and South America. The
nearby Panama Canal provides a shortcut to the pacific
to trade with the Asian countries. Ports and terminals
include La Guaira, Maracaibo, Puerto Cabello, Punta
Cardon.
Demographic Profile: Venezuela’s population is
28,459,085 (July 2013 est.) and 39.% of the people fall in
the age bracket of 25-54 years, which is usually
considered as the most productive bracket in terms of
contribution to GDP.
Urbanization: 93% of total population (2010) is urban
and rate of urbanization: 1.7% annual rate of change
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(2010-15 est.). Venezuela has good health parameters
and literacy rate of 95.5%.
Technology
Today, 2.69% of Venezuela's GDP is aimed at science and
technology. With the creation of the Infocentros (centres
of information) and the National Technological Literacy
Plan, the access of the population to information and
communication technologies was boosted.
History and salient features
As we understand the history and past actions determine
the present conditions and activities, as per the concept
of Path Dependence, Venezuela’s history offers much
insight to understanding its present scenario.
Earlier a Spanish colony, Venezuela proclaimed
independence in 1811 as a part of Gran Colombia and
seceded in 1830 to form an independent country.
Worsening social indicators and increasing political
instability, resulted in two major coup attempts in 1992,
led by a former paratrooper, Hugo Chavez. As a reaction
against the established political parties and the
corruption and inequalities their policies created, Chávez
was elected president in 1998.His term was characterized
by radical reform, political unrest and deep divisions.
Some of his popular economic reforms included
nationalisation of many sectors of the economy,
especially the oil sector, and expansion of social
programmes aimed to help the poor benefit from
inflation, running at 27.2% in 2010. In January 2010, his
government devalued the Bolivar in an attempt to boost
oil revenues and simulate domestic production.
Economy
Coming to the economic insights, 13% of the people are
engaged in agriculture. Venezuela is the world´s tenth
largest exporter and the thirteenth largest producer of
oil. Oil accounts for about 90% of the export income, 50%
of government earnings, and 30% of the gross domestic
product, Imports include raw materials, machinery,
transportation equipment, and construction material,
Venezuela is the fifth largest member of OPEC by oil
production. The Gross Domestic Product (GDP) in
Venezuela was worth 382.42 billion US dollars in 2012.
The GDP value of Venezuela represents 0.62 present of
the world economy.
GDP growth rate was maximum in the years 2003-2008
when oil prices were rising .But then it drastically reduces
after the 2008 recession from 5.3% to -3.2% in 2009 as
Venezuela was severely hit by the recession as US
formed its main trading country
Venezuela recorded a Current Account surplus of 7.10
percent of the country's Gross Domestic Product in 2012
and Balance of Trade in Venezuela averaged -1826.19
VEF Million from 1998 until 2013, reaching an all-time
high of 1326 VEF Million in the second quarter of 2003
and a record low of -6470 VEF Million in the fourth
quarter of 2012. Venezuela's balance of payments
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experienced wide swings in the 1980s after enormous
success in the 1970s .Fluctuations, largely negative,
depended primarily on the prevailing value of exports
and the level of the country's foreign debt payments.
Bilateral Economic Relations:
The United States is Venezuela's most important trading
partner. U.S. exports to Venezuela include machinery,
organic chemicals, agricultural products, optical and
medical instruments, autos and auto parts. Oil dominates
U.S. imports from Venezuela, which is one of the top five
suppliers of foreign oil to the United States. About 500
U.S. companies are represented in Venezuela. U.S.
foreign direct investment in Venezuela is concentrated
largely in the petroleum, manufacturing, and finance
sectors.
In 2013, the Department of State announced the re-
imposition of non proliferation sanctions on the
Venezuelan Military Industry Company (CAVIM) and
other foreign entities and individuals under the Iran,
North Korea, and Syria non proliferation Act (INKSA).
Venezuela has in recent years expelled a number of
senior U.S. diplomats. The two countries have not had
representation at the ambassadorial level since 2010.
Both nations continue to maintain diplomatic relations
and embassies in one another’s capitals.
Other than US, Venezuela has trade relations with major
South American countries, Iran and China as well.
According to the 2014 Index of Economic Freedom (by
www.heritage.org), over the 20-year history of the Index,
Venezuela’s economic freedom has deteriorated by 23.5
points, the worst decline of any country.
Regulatory Efficiency: No minimum capital is required to
establish a business, but the process takes 17 procedures
and over 100 days. Completing licensing requirements
costs about the level of average annual income and takes
more than 10 months.
This leads Venezuela to be not considered as highly
attractive in terms of Regulatory Efficiency.
Open Markets: Venezuela’s average tariff rate is 8.6
percent. Non-tariff barriers restrict imports of cars and
agricultural products. It may take several weeks to
import goods. Restrictive currency controls,
expropriation of private property, and other government
measures discourage foreign investment. The financial
sector, dominated by banks, remains controlled by the
state through directed credits and threats of confiscation
and long-term finance is scarce.
Risk:
Country Risk is one of the most pertinent factors in
determining overall country attractiveness as a
destination for operations in International Business.
Venezuela, a CRT-5 country, has a moderate level of
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economic risk and very high levels of political and
financial system risk. The Country Risk Tier (CRT) reflects
A.M. Best’s assessment of three categories of risk:
Economic, Political and Financial System Risk.
Venezuela’s economy grew at 5.5% in 2012 and is
expected to be roughly flat in 2013 as the formal
economy has become largely stagnant.
Economic Risk: Moderate- Oil accounts for about a third
of Venezuela’s GDP. Its economy is therefore vulnerable
to oil price shocks.
Political Risk: Since the political and social conditions in
Venezuela have continued to be tumultuous, the risk
associated with it is also very high.
Financial System Risk: The state is heavily involved in
the financial sector and risk of expropriation exists. Price
and exchange rate controls, in combination with
corruption, allow for limited economic expansion.
Therefore, this risk is categorized as ‘High’.
Business Opportunities:
Venezuela remains highly dependent on oil revenues,
which account for roughly 90% of export earnings, more
than 50% of the federal budget revenues, and around
30% of GDP.
Major sectors which MNEs can target are Oil and Gas
Sector, IT Sector, Mining, Agriculture Tourism Industry
and telecommunication Industry. Out of the total
sectors, when these industries are judged on the basis of
Porter’s Five Forces, their overall attractiveness falls in
the moderate-high category. Because of nationalization
of various sectors and ambiguous regulations, most other
sectors remain unattractive and hence tapped below
their potential.
To sum up, the following representation of the
competitive advantage of Venezuela in the form of
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Porter’s Diamond clarifies the interrelationships between
factor conditions, demand conditions, supporting
industries and the Government.
Challenges:
Major challenges include: Inflation – 30%, high crime
rate, energy crisis, fluctuating oil prices, declining oil
production, strained relations with partners: US and
Columbia and the 8.6% unemployment rate.
As recently as in February, 2014, widespread discontent
among the people (mostly students), regarding release of
political prisoners, has gained momentum in view of
human rights. Therefore, the social and political
conditions appear to be quite volatile.
Conclusion :
Crude oil sales remain the financial pillar of the late
Chavez's self-styled socialist revolution.
PDVSA is one of the world's biggest energy
companies, but its production and exports have
stagnated over the years, despite government
promises and ambitious targets for increases.
Current concerns include: a weakening of
democratic institutions, political polarization, a
politicized military, drug-related violence along the
Colombian border, increasing internal drug
consumption, overdependence on the petroleum
industry with its price fluctuations, and irresponsible
mining operations that are endangering the rain
forest and indigenous people.
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Country in Focus - Turkey
T urkey is the world's 37th-largest country in
terms of area (783,562 km2) and has a varied
geography rich in mountains, plains, caves,
seas and many other natural formations and beauties. It
is encircled by seas on three sides: The Aegean Sea to the
West, Black Sea to the North and the Mediterranean to
the South. Turkey is also blessed with a wide range of
climatic diversity. The Aegean and Mediterranean coasts
have cool, rainy winters and hot, moderately dry
summers while the Black Sea coast receives the greatest
amount of precipitation. However, most of Turkey lies
within an earthquake zone, and recurrent tremors are
recorded.
Its location at the crossroads of Europe and Asia makes it
important from geostrategic viewpoint. This strategic
location has also made this country a cradle of cultures
and civilizations. The lifestyle and trading patterns of the
country is defined to a great extent by the remnants of
Bronze Age and ancient Anatolian civilizations.
Since the liberalization of the Turkish economy during
the 1980s, the country has enjoyed stronger economic
growth and greater political stability. The national and
local authorities in Turkey have been implementing
numerous infrastructure projects through Public and
Private Partnership (PPP) and it has been attracting
considerable foreign direct investment (FDI) in recent
years in sectors like education, energy, defense, health,
transportation and other public services.
Turkey is a founding member of the United Nations
(1945), the OECD (1961), the OIC (1969), the OSCE
(1973), the ECO (1985), the BSEC (1992), the D-8 (1997)
and the G-20 major economies (1999). A Customs Union
agreement was signed with the EU in 1995 and Turkey
was officially recognized as a candidate for full
membership on 12 December 1999, at the Helsinki
summit of the European Council. All the negotiations
were started on 3 October 2005, and the process, should
it be in Turkey's favor, is likely to take at least a decade to
complete. The membership bid has become a major
controversy of the ongoing enlargement of the European
Union.
Political and Legal Framework
Turkey has developed a strong tradition of secularism
since its foundation as a republic in 1923 and follows a
Socialist Planned Economy. The President of the
Republic is the head of state for a period of 7-years and
has a largely ceremonial role. The Executive power is
exercised by the Prime Minister and the council of
Ministers. But Turkey’s government is no longer a shining
example because of allegations of sleaze and its
increasingly authoritarian rule. Turkey's
constitution governs the legal framework of the country.
- Laxmi Deshpande, Niharika Deo, Manisha Tripathy (PGDM-International Business, 2013-15)
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It sets out the main principles of government and
establishes Turkey as a unitary centralized state.
Economic State
Turkey has the world's 15th largest GDP-PPP and 17th
largest nominal GDP. From 1923 till 1983, the Turkish
economy has adhered to a quasi-statist approach.
However post the 90s, a series of reforms were designed
to shift the economy from a statist, insulated system to a
more private-sector, market- based model.
While many economies have been unable to recover
from the recent global financial recession, the Turkish
economy has been standing out as the fastest growing
economy in Europe, and one of the fastest growing
economies in the world. It has also been a part of EU
Customs Union since December 31, 1995.
Economic & Political Risks
Turkey has a reliance on volatile capital like portfolio
investments, short-term external loans and non-resident
deposits. The continuation of the European crisis could
bring an end to these sources of finance. The country is
now in open crisis with Syria whilst tensions with the
Kurd minority remain high. Also, as corruption scandal
drags on, it could weaken the government and
undermine its ability to take timely policy measures that
would maintain economic stability. It has been noted
that tensions between the government and judiciary has
strained institutions in Turkey.
Human rights in Turkey have also been the subject of
some controversy and international condemnation.
Between 1998 and 2008 the European Court of Human
Rights made more than 1,600 judgments against Turkey
for human rights violations (more than any other
member state of the Council of Europe). Particularly
regarding the right to life, freedom from torture, other
issues such as Kurdish rights, women's rights, and press
freedom have also attracted controversy. Turkey's
human rights record continues to be a significant
obstacle to future membership of the EU.
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Porter’s Diamond for National Advantage .Turkey is a
middle-income developing income country, which has
recently opened up its economy to the international
market. Thus there are four attributes of Porter’s
Diamond model that play a major role in shaping the
context that allows domestic firms to gain and sustain
competitive advantage.
With regard to the factor conditions, the Turkish glass,
construction and automobile industries derive
considerable advantages from basic and generalized
factors like lower labor and raw materials costs.
When we consider the second determinant, home
demand conditions, we see that Turkey is a developing
country with a large and rapidly growing population. This
means that many industries are far from being mature
and face a considerable potential increase in demand.
Income levels are, however, still rather low, restricting
this potential. The flat steel industry has kept some part
of the production for exports, despite the fact that
domestic production cannot meet domestic demand. The
main motive is the anticipation that exporting may
contribute to quality improvement.
One of the strongest hypotheses proposed by Porter is
that the internationally competitive industries of a nation
tend to cluster together. The highly competitive
industries like glass and construction prove it to boot.
While there are many significant opportunities for U.S.
companies in Turkey, there are also obstacles impeding
entrance into the market. One of the most successful,
proven ways to access the market quickly is to work with
an experienced local partner (JV). The local partner can
provide knowledge of the local regulatory framework,
language assistance and valuable business contacts.
With regard to the last determinant, which Porter calls
‘firm strategy, structure and rivalry two major issues
arise. The first one is that entrepreneurial and
managerial skills are amongst the leading assets of the
Turkish firms, for almost all industries studied. The
second issue relates to the other element included in this
category: the intense domestic rivalry in the
internationally competitive industries of a nation. The
construction and leather clothes industries, in particular,
have benefited from the emergence of geographically
proximate new markets, especially the Russian
Federation.
The jury is still out on what Turkey manages to
achieve in future.
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Country in Focus - Argentina
A rgentine leadership in world commerce is the
result of adaptations to different disturbances,
through innovation and adaptation in the
institutional, organizational and technological
environments. The purpose of this article is to analyze
various factor conditions of the country, its political, legal
and economical conditions and analyze favorability of
any business based on Porter’s Diamond Theory.
Invariant Factor Conditions:
Location: Argentina is located in southern South
America, with the Andes Mountains on the west and the
South Atlantic Ocean to the east and south between
Chile and Uruguay. Area is 2,780,400 km; Water
percentage -1.57.
Coastline: Total 4,989 km long Atlantic coast varies
between areas of sand dunes and cliffs.
Natural Resources:
Agriculture: With over 54 million head of cattle,
Argentina’s beef is renowned around the world. Annual
production of cereals and oilseeds exceeds 70 million
tonnes, which makes Argentina one of the main
exporters of these products and their derivatives.
Mendoza on the western border makes Argentina
world’s fifth-largest producer of wine.
Mining: Some of the minerals mined at present are
copper, tin, lead, zinc, gold, silver, manganese and
uranium.
Gas and Oil: Together with mining products it makes
out for 15% of total exports. It produces about 900,000
barrels of crude oil/day.
Forest: The provinces of Misiones, Corrientes, Entre
Ríos, and Buenos Aires form the country's eastern border
with Uruguay and Brazil, and comprise 80% of the total
cultivated area. Forests are composed of the following
species- 50% Pine, 30% Eucalyptus, 16% Willow and
aspen, 4% Other broad-leaved trees.
Population: 2013 estimate 41,660,417; 2010 census:
40,117,096(32nd); Population Density: 14.4/sq km
(212th); Population growth rate: 0.98% (2013 Est.)
Acquired Factor Conditions:
Infrastructure: The nation has 215,434 kms of roads,
including 734 kilometers of expressways or highways, but
only 63,553 kms of the country's roads are paved. There
is an extensive rail system that transports both freight
- Sayoni Maitra, Daniel Dsouza, Asmita Shankar (PGDM-International Business, 2013-15)
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and passengers around Argentina, with a total of 38,326
kms of track. Argentina has 10,950 kms navigable
waterways. There are 1,359 airports in Argentina,
although only 142 have paved runways.
Technology:
Biomedical Industry: Argentine research has led to the
treatment of several forms of cancer. First artificial heart
implantation & coronary bypass surgery successfully
performed in a human being in here.
Nuclear Program: Argentina was the first country in
Latin America to design and build a research reactor with
homegrown technology, the RA-1 Enrico Fermi.
Satellite: Argentine built satellites include LUSAT-1
(1990), Víctor-1 (1996), PEHUENSAT-1 (2007) developed
by CONAE, the Argentine space agency, of the SAC series
for cosmic ray observatory.
Space Research: Argentina has its own satellite
program, nuclear power station designs (4th generation)
and public nuclear energy company INVAP, which
provides several countries with nuclear reactors.
Established in 1991, the CONAE has since launched two
satellites successfully.
Membership of International Organizations & Trade
Blocs:
United Nations (UN), Conference on Disarmament (CD),
International Atomic Energy Agency (IAEA), Organization
for the Prohibition of Chemical Weapons2 (OPCW),
Comprehensive Test Ban Treaty Organization Preparatory
Commission, World Bank Group (WBG), World Trade
Centre (WTO), Organization of American States (OAS),
Mercosur, Union of South American Nations (UNASUR),
Community of Latin American and Caribbean States
(CELAC), Organization of Ibero-American States (OEI)
Treaties or Agreements: Nuclear Non-proliferation
Treaty (NPT), Comprehensive Nuclear Test Ban Treaty
(CTBT), Partial Test Ban Treaty (PTBT) .
Culture
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Political System:
Argentina has a Bicameral National Congress. It follows a
multi party system and elections takes place regularly.
Cabinet is appointed by the President who is the head of
the state and the head of the Government.
Political Risk:
Argentina is rated higher on Political Risk. Political
tension particularly involves labor unions which
contribute to political instability in Argentina. State
intervention is in the form of nationalization, tighter
capital controls with limited access to international
currencies, repatriation of capital and price fixing have
greatly diminished Argentina's Economic outlook. High
crime & Poverty rates remain the key social issues.
Country faces extreme social and political polarization
over President’s current policies.
Legal System:
Argentina follows a civil law system based on West
European legal systems. The two pillars of the civil
system are the Constitution of Argentina (1853) and the
Civil Code of Argentina (1871). The Argentine
Constitution of 1853 was an attempt to unite the
unstable and young country of the United Provinces of
the Rio de la Plata under a single law, creating as well the
different organisms needed to run a country. The Civil
Code was written by Argentine jurist Dalmacio Vélez
Sársfield, and started being effective on January 1, 1871.
Beyond the influence of the Spanish legal tradition, the
Argentine Civil Code was also inspired by the Draft of the
Brazilian Civil Code, the Draft of the Spanish Civil Code of
1851, the Napoleonic code and the Chilean Civil Code.
Economic Analysis:
The GNI per capita i.e. PPP (US dollar) in Argentina was
last reported at 17250 in 2011, according to a World
Ho
fstede’s C
ultu
ral Typo
logy:
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Bank report published in 2012. Currently Argentina is
ranked 45th out of 187 countries in the world, based on
its HDI that is 0.811 as per the data available till 2012.
The Current account balance in Argentina was last
reported at 21185854.38 in 2011, according to a World
Bank report published in 2012. Argentina’s economic
freedom score is 44.6, making its economy the 166th
freest in the 2014 Index. Its overall score has decreased
by 2.1 points, reflecting substantial declines in
investment freedom, business freedom, labor freedom,
and the management of government spending.
Bilateral Trade with India:
Indian investment in Argentina is estimated $930 million
with 13 Indian Companies establishing operations. There
has also been investment by Non-Resident Indian
Companies in Argentina. Total Argentinian investment in
India stands at $ 120 million. A unique Regional Action
Plan was started in August 2012, to promote India´s
commercial and economic interests in Argentina.
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Financial Risk:
Argentina has been rated high on financial risk. New
regulations require insurance companies to repatriate all
capital, make mandatory investment in infrastructure
project in Argentina. And only use domestically
domiciled reinsurance companies has hampered the
industry’s ability to manage liquidity and risk. Argentina’s
Fiscal balances will require additional funding or
significant budget cuts. Without access to international
capital markets it will become increasingly difficult for
the country to meet its debt obligations.
Based on the above analysis the following industries have
ample opportunities in Argentina –
1. Agriculture business and dairy cereals, Soybean, fats
and oils, beef and related products and dairy products
2. Minerals- Base metals, glassware, Crude oil, fuels
3. Others- Automobiles and auto parts, electronic goods
Analysis based on Porter’s Diamond Theory:
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Analysis of the favorability of Soybean industry based
on the above model:
We have chosen Soybean industry to discuss its
favorability using Porter’s Diamond Theory. The
efficiency found at industrial level along with the
evolution of technical environments they are based are
the key drivers that explains the opportunities in
Soybean sector. So summarizing, the above diagram
explains all the competitive advantages gestated based
on the four attributes proposed by Porter and it
ascertains that the country has the best opportunities to
achieve international success in Soybean industry.
Porter’s Diamond for Soyabean cultivation in Argentina
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Country in Focus - Kazakhstan
- Prabhat Mishra, Vineet Mohandas, Sudhanshu Mishra (PGDM– International Business, 2013-15)
K azakhstan officially known as the Republic
of Kazakhstan, is a
contiguous transcontinental country
in Central Asia, with its smaller part west of the Ural
River in Eastern Europe. Kazakhstan is the world's
largest landlocked country by land area and the ninth
largest country in the world .It has a territory of
2,727,300 square kilometers. It has borders
with Russia, China, Kyrgyzstan, Uzbekistan,
and Turkmenistan and also adjoins a large part of
the Caspian Sea. The terrain of Kazakhstan includes
flatlands, steppe, taiga, rock canyons, hills, deltas, snow-
capped mountains, and deserts. With 17 million
people, Kazakhstan has the 62nd largest population in
the world, though its population density is less than
6 people per square kilometer. The currency of the
country is the Kazakhstani Tenge. The capital is Astana.
History:
Established on August 26, 1920, it was initially
called Kirghiz Autonomous Soviet Socialist Republic and
was a part of the Russian SFSR. On April 15–19, 1925, it
was renamed Kazak ASSR and on December 5, 1936 it
was elevated to the status of a Union-level
republic, Kazakh Soviet Socialist Republic. On December
10, 1991 the Kazakh SSR was renamed the Republic of
Kazakhstan. It became independent on December 16,
becoming the last republic to secede before the final
collapse of the Soviet Union. Nursultan Nazarbayev, has
been leader of the country since 1990.
Cultural Traits:
Kazakhstan is a high context country. It is a collectivistic
country wherein people like to keep strong relations with
family and colleagues. It has a masculine culture, but it is
relatively moderate as compared to former Soviet
countries like Russia. It can be described as a country
following the principle of pragmatic idealism. Its power
distance index is comparable to Western nations. Kazakh
culture can be characterized as polychromic
Legal and Political Environment:
Kazakhstan is officially a presidential republic i.e. a
constitutional republic with a strong presidency. The first
and the only president in Kazakhstan since its
independence in 1991 has been Nursultan Nazarbayev.
He functions as the head of the state and holds all of the
nation’s executive authority. The president is also the
commander in chief of the armed forces and may veto
legislation that has been passed by the parliament.
Kazakhstan has a bicameral parliament. It is composed of
the lower house, also known as the Mazhilis, and the
upper house also known as the Senate. The Mazhilis is
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formed on the basis of a proportional system of
representation consisting of 98 deputies, where the
majority is appointed by the ruling Nurotan party, which
Nazarbayev heads.
The judiciary remains, both institutionally and in practice,
highly dependent upon the will of the executive and the
economically powerful. Even though it says that rule of
law is present in Kazakhstan but in reality the rule of man
is being followed as all decisions taken by the courts can
be vetoed by the president who wields absolute power.
Corruption such as bribery is still widely encountered in
the business transactions.
Economic Environment:
It’s the largest economy in Central Asia and oil and gas are
its leading economic sector. It is a leading producer of
many mineral commodities, including uranium,
ferrochrome, titanium, sponge, cadmium, magnesium,
rhenium, copper, bauxite, gallium and zinc. It is one of the
leading uranium producing countries in the world
producing 35% of the total global production, and it owns
the world’s second largest uranium reserves
after Australia.
GDP:
According to GDP (PPP) Kazakhstan is ranked 54th in the
world & is ranked 64th according to GDP growth rate.
Agriculture & Industry:
The key agricultural products grown are grains (mostly
spring wheat and barley), potatoes, vegetables, melons;
livestock. The key industries are oil, coal, iron ore,
manganese, chromites, lead, zinc, copper, titanium,
bauxite, gold, silver, phosphates, sulphur, uranium, iron
and steel; tractors and other agricultural machinery,
electric motors, construction materials.
Exports and Imports:
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Its main export commodities are oil and gas, ferrous
metals, chemicals, machinery, grain, wool, meat & coal
and main imports are machinery and equipment, metal
products & foodstuffs.
Export wise Kazakhstan is ranked 44th in the world and
import wise its is ranked 56th in the world.
Porter's Diamond model:
Factor Conditions:
It has 3% of the world’s raw materials and natural
resource base such as oil, uranium, coal etc. The literacy
rate is 99.7%. Grains and animal livestock are in
abundance.
Demand Conditions:
Since basic resources of energy are available, related
processing industries can be set up as per demand. There
is a lot demand for infrastructure.
Firm Strategy, Structure and Rivalry:
It’s easy to enter in Kazakhstan through the FDI route.
Government provides ample support to industries. Oil
refineries can play a major role in future. Firms can export
hides and animal products.
Related and Supporting Industries
Animal husbandry is one of the supporting industries in
the country. Banking Sector is also developed. Many MNC
banks are set up. Oil industries too are in abundance.
Trade Barriers and Economic Scenario:
Landlocked, with restricted access to the high seas,
Kazakhstan relies on its neighbors to export its products,
especially oil and grain. Although its Caspian Sea ports,
pipelines, and rail lines carrying oil have been upgraded,
civil aviation and roadways continue to need attention.
Telecoms are improving, but require considerable
investment, as does the information technology base.
Supply and distribution of electricity can be erratic
because of regional dependencies.
The subsequent and sharp fall of oil and commodity prices
in 2008 aggravated the economic situation, and
Kazakhstan plunged into recession. While the global
financial crisis took a significant toll on Kazakhstan's
economy, it has rebounded well, helped by prudent
government measures. GDP increased 7.5% year-on-year
in 2011, and 5.0% in 2012. Rising commodity prices have
helped the recovery. Despite solid macroeconomic
indicators, the government realizes that its economy
suffers from an overreliance on oil and extractive
industries, the so-called "Dutch disease." In response,
Kazakhstan has embarked on an ambitious diversification
program, aimed at developing targeted sectors like
transport, pharmaceuticals, telecommunications,
petrochemicals and food processing.
In 2010 Kazakhstan joined the Belarus-Kazakhstan-Russia
Customs Union in an effort to boost foreign investment
and improve trade relationships and is planning to accede
to the World Trade Organization. The future has a lot in
store for this country.
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India - An Emerging Automobile hub
- Sachin Mittal (PGDM-International Business, 2013-15)
The automobile industry is one of India’s major sectors.
Unfortunately, it is seeing slump in domestic car sales
following the sharp depreciation in Indian Rupee.
However exports of India-built vehicles are showing an
upward trend as seen in the graph.
India is emerging as an export hub of global auto firms
not just for small cars but also for big cars such as mid-
size sedans and UVs. Giants like Suzuki, Hyundai & Ford
have turned their Indian operations into bases to
produce for markets abroad. Nissan is exporting India-
built premium sedan Sunny since January 2012. Europe’s
largest car maker Volkswagen has also been selling
‘Made in India’ Vento across three continents and
recently started to shipping to Mexico also.
What are the possible reasons for such an increasing
trend in exports in contrast to the reducing domestic
sales of cars?
Well, looking at the export market is an opportunity
when domestic market is in downturn. This opportunity
may be acting as a major factor towards turning of India
into an export hub. Seeing the opportunity, Global car
companies are planning to turn India into export an hub
targeting vehicle shipments to US & Europe to hedge
against the shrinking domestic demand. One classic
example being opening of $1 billion factory this year by
Ford Motors to bring annual capacity to 440000 vehicle
per annum despite selling only 77000 vehicles in India
during the last financial year as a move towards
exporting to 50 markets from its two Indian facilities.
Post recession, the west is more focused on value. So it is
almost likely that mid range cars made in India like Ford
Ecosport can find good market in America & Europe as
said by Paul Blokland of Segment Y Automotive
Intelligence, an India-based research group. Especially in
Europe, people are moving towards public transport and
auto facilities are being predicted on the verge of closing
down due to slump in the market, falling labor wages &
labor
laws. Weak economy, high petrol prices & ageing
population may be acting as major enablers in Europe to
support mid range cars manufactured in India, in pursuit
of value.
Moreover, manufacturers use exports not only as an
opportunity to mitigate risk arising out of volatile
currency, but even to balance the demand in the
domestic market.
India is turning into an export hub because of the several
competitive advantages it has over the other nations.
India enjoys tremendous advantage of cost
competitiveness due to cheap labor availability. The cost
at the carmaker's end as well as supplier's level is highly
competitive, which gives India an edge over others.
Automobile firms from across the world can save
operation costs in India, which gives them a competitive
advantage over western nations. Extension of the
discounted import duty on some of the particular hybrid
automobile parts has helped the industry in attaining
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better cost-efficiency. Also, there is plethora of educated
and skilled manpower in India who speak English, and
they can be employed for lower wages/salaries in
comparison to the western market.
Being competitive in exports is not enough, but
sustainability is required to maintain long term profits.
One major initiative by the government is the permission
of 100% FDI in the sector. Development of “Automotive
Mission Plan” by Ministry of Heavy Industries and Public
Enterprises is another step to accelerate & sustain the
growth in automobile sector over the period 2006 to
2016. Government has also undertaken “National
Automotive Testing and R&D Infrastructure” Project
which is aimed at creating a dedicated testing, validation
and Research & Development infrastructure across the
country. Government has also extended the weighted
deduction of 200% in R&D expenditure by 5 years in the
Union budget (2012-13) under Income Tax Act. The
weighted tax deduction of 150% for expenses on skill
development has also been introduced as a help to auto
industry to enhance their products and performance.
Conclusively, factors like optimal business environment,
accessibility of inexpensive proficient workforce and
supportive government policies have played a major role
in transforming India into a global automobile hub. But
on revisiting the factors which are behind the increment
of exports of Indian vehicles, we will see that those
factors are largely external environment conditions like
slump in domestic market & need for value by western
countries; which are not in the control of the Industry.
Hence, I think Indian automobile industry needs to focus
continuously on matching its competencies or resources
with the changing environmental needs to have value
and long term sustainability in the global market.
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Path Dependence: View at Ukraine Crisis from Historical Perspective
- Hardik Dhagai (PGDM-International Business, 2013-15)
It is necessary to understand the past in order to predict
or understand the future. We will look at Ukraine crisis
from historical perspective.
Vladimir Putin’s Ideology
Vladimir Putin, born in the Soviet Russian city of
Leningrad, studied law and joined the Committee for
state security of Russia popularly known as KGB. It was
the main security agency for Soviet Union from 1954,
until it collapsed in 1991.
Putin’s job was to gather intelligence data and to
coordinate with the German Ministry of State Security,
which is one of the most effective and
repressive intelligence and secret police agencies that
ever existed, and to track down and recruit foreigners in
Dresden to send them undercover to the United States.
This job helped him build and maintain good
relationships with Berlin.
This past of Putin is disturbing for many Russian Liberals.
Putin had many authoritarian associations and has
nostalgia for the USSR. He also describes the collapse of
Soviet Union as "the greatest geopolitical catastrophe" of
the 20th century and stated that “Russia will decide for
itself the pace, terms and conditions of moving towards
democracy”. These statements clearly indicate that Putin
has had an authoritarian mindset.
Putin claimed that to expand the sphere of its influence,
a country must be strong (military strength) and
successful (politically and economically). He aspired to
empower Russia to become a global economic player and
therefore, Putin’s policies have emphasized the
importance of having customs union with other
countries. As a result of this, Russia sees Ukraine as an
important element in its regime of influence expansion.
Strategy of Putin to Integrate Ukraine
The idea of integrating Ukraine was shaped during the
Orange Revolution of 2004. Moscow had gained a strong
influence over Viktor Yanukovych, the ousted Ukrainian
President, by supporting him when his election was ruled
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to have been fraudulent.
Trade was another arrow in Russia’s quiver to keep
Ukraine unstable. Ukraine is dependent on Russia for
60% of its energy supplies and in order to increase
Ukraine’s dependence, Russia offered natural gas to
Ukraine much below the market price. Also, when Viktor
Yanukovych was accused of misappropriation, $70 billion
was sent out of the country via Ukraine’s financial system
to off shore accounts during the 3 years of his rule, due
to which $37 billion of state loans disappeared. The
country had only $12 billion in its reserves which was not
sufficient to fund the heavy gas bills and Ukraine was on
the verge of bankruptcy.
To stabilize the economy Yanukovych declared
integration of Ukraine with Russia and rejected
integration with EU. Russia also offered them economic
aid of $15 billion and natural gas supplies at a subsidized
price, which turned out to be the link of integration of
Ukraine and Russia.
This event led to a political crisis in Ukraine that ousted
Yanukovych, thus shattering Russia’s dream of
integration with Ukraine. Taking advantage of this
political crisis in Ukraine, Moscow declared new
authorities in Kiev, the capital of Ukraine, as fascist and
sent troops to eastern Ukraine ‘to protect’ ethnic
Russians. Russia increased political pressure on Crimea
by threatening to cut out gas exports if the debts were
not paid off.
Risk Involved in Ukraine Division
There is a difference in East Ukraine and West Ukraine
Ideology due to cultural – linguistic divide. Russian is
widely spoken in parts of the east and the south. It is also
the main language in some places, like the Crimean
peninsula. This is due to heavy immigration of Russians
during the Soviet Era. In the western part of Ukraine
people speak Ukrainian, are nationalists and identify with
Central Europe.
Vladimir Putin wanted to start his first acquisition by
taking over the Crimean peninsula. He claimed to protect
ethnic Russians. This step was unacceptable to the
United States, EU and IMF and they severely condemned
this action. They also insinuated various sanctions to be
imposed against Russia if it does not withdraw its troops.
And hence, it is quite evident that history helps
understand how have countries evolved and how will
they evolve in future.
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Samavesh
T he annual event which can best be described
as the meeting of minds of seasoned thought
leaders of the industry and the budding
managers at SIMSR, took place on December 21st 2013.
It opened with a session on International Business hosted
by International Business Society @ SIMSR which
witnessed the presence of stalwarts like Mr. M G
Parameshwaram, CEO, FCB Ulka, Mr. Dinesh Kumar,
founder CBay Systems, Mr. K. Rambhushan, Head M&A,
Barclays Bank and Mr. Clarence Fernandes - India
Representative, Rwanda Development Board. Our
Director Prof. Dr. S C Ailawadi was also present.
It began with the campus prayer and welcoming of all
guests by Prof. C P Joshi, Professor & Area Chairperson
(General Management) & Program Coordinator PGDM &
PGDM (IB) and Faculty Mentor of IBS@SIMSR. Prof. C P
Joshi introduced to the guests the purpose of
IBS@SIMSR, a student led initiative, established on 18th
November, 2009 to complement the classroom learning
by interaction with industry experts and senior
executives of the companies with substantial
international operations worldwide. Prof. C P Joshi also
spoke about e-GlobuzZ, the quarterly e-publication which
was also launched at the inauguration of IBS@SIMSR on
18th November, 2009 as a quarterly e-periodical.
Mr. M G Parameshwaram made an outstanding
presentation on the trends and challenges in global
communication for MNEs in various industry sectors. He
shared his insights on how MNEs choose between the
strategies of Adopt – Adapt – Create when they make
their advertising and other promotion decisions for a
brand.
Sayoni Maitra (PGDM - International Business, 2013-15)
Inaugurating Function of Samavesh 2013; In the front row Director Dr. S Ailawadi, Prof. C P Joshi,
Mr. M G Parameshwaram, CEO, FCB Ulka, Prof. D G Jha and Mr. Rajiv Vaishnav, VP, NASSCOM
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Mr. Dinesh Kumar shared his views about the importance
of innovation in economic downturn and gave examples
of companies in this context to illustrate his points
better. His presentation was very well received and
appreciated by the audience comprising of SIMSR
students and Faculty.
Then Mr. Clarence Fernandes spoke at length about the
changing face of Rwanda, an increasingly important
emerging country on the Africa continent over the last 20
years. His presentation included statistics and anecdotes
strengthening the case for larger trade and cross border
flow of investment between Rwanda and India. He was
accompanied by Miss Winnie Umutesi, an official of
Rwanda Development Board based at Pune, who
specially came to SIMSR to address our students at this
event.
Mr. K. Rambhushan made an excellent presentation on
emerging opportunities on trade and the cross border
M&A for the MNEs and highlighted the various risks and
pitfalls the managers of MNEs need to guard against for
cross border M&As and other international operations.
Prof. C P Joshi Faculty Mentor IBS@SIMSR thanked all the
five speakers for their excellent insightful presentations
which went a long way towards achieving the objective
of IBS@SIMSR to complement classroom learning by
interaction with Industry experts.
Prof. Nilkantan, Mr. Dinesh Kumar, Prof. C P Joshi, Mr. K. Rambhushan, Miss Winnie Umutesi,
Mr. Clarence Fernandes and Prof. Debraj Ghoshal with all the student members of IBS@SIMSR
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Commercio
T aking forward the purpose of IBS@SIMSR to
bring education and industry together we
organized the inter B School competition
Commercio’14 as a part of Melange’14 on 15th February,
2014.
Melange’14, being SIMSR’s annual festival was a splendid
show this year where students from premier B Schools
across India participated to unleash their talent in terms
of managerial and analytic skills, creativity and innovative
business ideas.
As a committee with a mandate to deliver the best to the
students, IBS@SIMSR leveraged this opportunity to
conduct a prestigious event like Commercio which
undoubtedly offered a platform to the participants to
formulate country entry strategies for emerging markets
based on an in depth analysis of the chosen countries.
This country analysis was based on various country
related parameters like political, legal, economic and
cultural environment and strategies for MNEs to enter
that country using Porter’s Diamond Theory.
The event commenced with campus prayer in presence
our honorable Director Dr. Satish Ailawadi, Prof. C. P.
Joshi, the Area Chairperson, General Management and
Program Coordinator for PGDM and PGDM-International
Business and Prof. Dr. Thomas Mathew, of General
Management Area at SIMSR. The keynote address was
- Sayoni Maitra (PGDM-International Business, 2013-15)
Prof. C P Joshi Faculty Mentor- IBS@SIMSR welcoming the finalist teams, the judges Dr. S Ailawadi, Director
SIMSR and Prof. Dr. Thomas Mathew of General Management Area at SIMSR and the students
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delivered by Prof. C. P. Joshi. The competition was
judged by our Director Prof. Dr. S Ailawadi and Prof. Dr.
Thomas Mathew.
Like in prior years, this year also Commercio continued to
draw exceptional talent from prestigious business
schools like IIFT, Kolkata, IIM Indore (Mumbai Campus),
NITIE, S P Jain, SJMSOM (IIT Bombay), IMI Delhi & SIMSR,
Mumbai across the country. The final round was a
presentation followed by a question and answer session
with the judges. The finalists were evaluated based on
the uniqueness of the country as portrayed in their
analysis and the basis for choice of sector based on an in-
depth analysis. The presentations made by all the eight
finalist teams were impressive and insightful. Due to the
tough competition, the judges had a difficult time
selecting the winning team and the two runner-up
teams.
The winning team was from our own SIMSR, second
team was from NITIE & the third team was from
SJMSOM. The event concluded with presentation of
Certificates and the Awards followed by the vote of
thanks given by our Prof. C. P. Joshi Faculty Mentor-
IBS@SIMSR.
Prof. Dr. S Ailawadi, Director SIMSR and one of the judges giving concluding remarks in the presence of Prof. Dr.
Thomas Mathew, the other judge and Prof. C P Joshi Faculty Mentor – IBS@SIMSR and the finalist teams and the
students
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