tapmi pratibimb march 2012

Pratibimb | March 2012 | 1 Pratibimb | January 2011 | 1

A Students’ Initiative

PRATIBIMB FINANCE | GENERAL MANAGEMENT | HUMAN RESOURCE | MARKETING | HEALTHCARE | OPERATIONS | SYSTEMS

The Reflection of Management

A Student’s Initiative

Volume II, Issue IX March 2012 A Monthly e-Magazine

DIRECTOR’S CUT ―Scholarship is too

important a

phenomenon to be left

to scholars alone‖

Outreach on Social Networks

Strategies for companies in the

service sector

―Though social networking websites provide a

huge

platform for a company to market itself and

project its brand, it is equally a big hazard for

the company as well.‖

By Amit Mukherjee, K.JSIMSR Mvmbai

Can management teach

us to manage our

emotions? ―Whether managing our own emotions is

difficult or managing others emotions, we

realize that it is easier to manage others than

to manage self while dealing with emotions”

By Lakshmi Divya Vegiraju, BIMT Gvrgaon

EURO CRISIS: Will EU survive the

second decade of the new millennium?

By Asmita Karanje, SIBM Bangalore

Philosophy of Management

By Prof. Kushankur Dey, TAPMI Manipal

An Interyiez zith Yogesh Chavdhvry, Managing Director, Jaipvr Rvgs Company

Pratibimb | March 2012 | 2

T. A. Pai Management Institute (TAPMI) is a premier management institute situated in

Manipal and is well known for its academic rigor & faculty-student interaction. The

Institute has been recently ranked amongst top 1 per cent of B-schools in India & 4th in

the South Zone by The Week Magazine.

Founded by the visionary, Late Shri. T. A. Pai, TAPMI’s mission is to provide much

needed impetus to the task of building professional management capability in the

country. In the process, it has also played a role in strengthening the existing educational

and health infrastructure of Manipal.

We are committed to excellence in post graduate management education, research

and practice by nurturing and developing global wealth creators and leaders. We

shall continually benchmark ourselves against the best-in-class institutions. We shall

foster continuous learning and reflection, achievement-orientation, creative

interdependence, and respect for diversity with a holistic concern for ethics,

environment and society.

T. A. Pai Management Institute

Manipal, Karnataka

About TAPMI

Our Mission


Pratibimb – The TAPMI’s e-Magazine - is the conglomeration of

the various specializations in MBA (Marketing, Finance, HR,

Systems and Operations). It is primarily intended to provide

insights into the plethora of knowledge that relate to the various

departments of Management and to give an opportunity to the

students of TAPMI and the best brains across country to exhibit

their creative cells. The magazine also strives to bring expert

inputs from industries, thereby bringing the academia and

industry together.

Pratibimb the e-Magazine of TAPMI had its first issue in

December 2010. The issue comprised of an interview of denoted

writer Ms. Rashmi Bansal along with a series of articles by

students and industry experts like MadhuSudan Rao (AVP-Delivery, Mahindra Satyam) & Ed

Cohen who is a global leader and chief learning officer who led Booz Allen Hamilton & Satyam

Computer Services to the first rank globally for learning & development . It also included a

hugely successful and engrossing game for finance geeks called ―Beat the Market‖ to bring out

the application based knowledge of students by providing them the platform where they were

expected to predict the stock prices of two selected stocks on a future date. The magazine is

primarily intended for the development of all around management knowledge by providing

unbiased critical insights into the modern developments.

TAPMI believes that learning is a continuous process and is not limited to the four walls of the

classroom. This viewpoint is further enhanced through Pratibimb wherein students manage

and contribute to create a refreshing learning environment outside the classrooms which

eventually leads to a holistic development process. The magazine provides a competitive

platform and opportunity to the students where they can compete with the best brains of the

country. The magazine also provides a platform for prominent industry stalwarts to

communicate their views and learning about and from the recent developments from their

respective fields of business which in turn helps to create a collaborative learning base for its

readers.

Pratibimb is committed in continuing this initiative by bringing in continuous improvement

in the magazine by including quality articles related to various management issues and

eventually creating a more engaging relationship with its readers by providing them a

platform to showcase their talent.

We invite all the best brains across country to be part of this initiative and help us take this to

the next level.

PRATIBIMB TAPMI’S MONTHLY e-MAGAZINE VOLUME 2, ISSUE IX MARCH, 2012


It is always a pleasure to witness that certain efforts of the students are

sustained and carried forward; Pratibimb is one such. The oft-beaten

track, “We are here to learn,” ends up as a mere platitude when there are

no visible actions and documentation. Whereas there is no dearth of

actions at TAPMI, documentation is not something that many—other than

scholars—choose to engage in; it is normally viewed as uninteresting,

drab and a drudgery. TAPMIans have proved that they are equally

capable of actions and of documentation without losing the intellectual

flavour of it.

Scholarship is too important a phenomenon to be left to scholars alone,

especially in the field of management. As future practising managers who

will be engaged in rigorous action in different fields of business, TAPMIans

have manifested both the penchant to produce research works and also

get their counterparts in other leading business schools to contribute their

thoughts to this endeavour. In this regard, TAPMIans have truly

demonstrated the evidence for creative interdependence, an important

aspect of TAPMI’s mission.

I sincerely appreciate the students and the faculty of TAPMI who have

made Pratibimb a possibility through their scholarly works, co-ordination

efforts and support. I wish the team the very best.

Dr. R. C. Natrajan.

DIR

EC

TO

R’S

ME

SS

AG

E


Editor’s corner

Dear Readers,

We thank all the participants and readers for their

valuable contributions. By making it monthly, we

present you a platform that will provide more

opportunities to share knowledge and showcase your

talent by competing with best minds in the country.

Our presence through social media has become

engaging. We have seen a rise in our total audience, and

more number of posts has gone viral. We have focused

on management gurus such as Peter Drucker and

Michael Porter and innovative advertising that help

leading brands define themselves better. Apart from

students of TAPMI and eminent b-schools in the

country, we would also like to thank Prof. Kushankur

Dey for his contribution in the latest issue.

The articles have been selected by the Editorial Team.

We also thank all those who helped us in improving

Pratibimb through their feedbacks. We would like to

take this opportunity to extend our gratitude to all

faculties and students at TAPMI for their continued

support, guidance, motivation and inspiration to take

Pratibimb to the next level.

To stay updated, please like our page on Facebook.

Also, send in your valuable suggestions/feedbacks to

[email protected].

Happy Reading!

EDITOR IN CHIEF

Sushmit Sinha

BRANDING & ADVERTISING

Manish Mishra

DESIGN & CREATIVES

Abhishek Dubey

Namrata Mahapatra

INTERNAL COMMUNICATIONS

Divyanshu

EXTERNAL COMMUNICATIONS

Abhishek Anupam

PUBLISHING

Vandana Soni

FACULTY ADVISORS

Prof. Chowdari Prasad

Dean (Planning & Development),

TAPMI

Dr. Jaba M. Gupta

Professor and Chairperson—eGPX,

TAPMI

http://www.facebook.com/pratibimb.reflecting.management

mailto:[email protected]


contents An Interyiez zith: Mr. Yogesh Chavdhary, MD Jaipvr Rvgs Company on

The Fvtwre of CSR: Inclvsixe Bvsiness Models that address the Needs of Poor 7

Emotional Intelligence and The Imporuance of Self Management 10

Lakshmi Dixya Vegirajv, BIMT Greater Noida

Evro Crisis - Will the Evro Svryixe the Second Decade of Millennivm 12

Asmita Karanje, SIBM Bangalore

Philosophy of Management: Retrospection in the Eyes of Drwcker 19

Prof. Kvshankvr Dey, TAPMI Manipal

Fvtwristic rvality control in PSU Banks: A case of SBI corqorate banking 21

Axik Sinha | Atwl Mehta, IIM Indore

Internationalization 25

Siddharuh Chhottray, TAPMI Manipal

Ovtreach on Social Net{orks: Strategies for companies in the seryice sector 29

Amit Mvkherjee, K.JSIMSR Mvmbai

When Airuel lavnches Airuel Bank 33

Himangshv Das, NITIE Mvmbai


An Interview with Mr. Yogesh Chaudhary

Barclays, Ericsson, Pfizer, PepsiCo or Tata

Consultancy Services are known players in the

international markets. Even if the industries in

which they activate are different, these companies

have something in common: they have adopted

inclusive business strategies to address social

problems at the base of the economic pyramid by

harnessing their core business competencies and

interests.

Recently, Jaipur Rugs Company, one of the

leaders of handmade rugs in India and globally

renowned for its hand-knotted rugs, has been

recognized as a member of the Business Call to

Action (BCtA), a global leadership platform

supported by the United Nations Development

Programme and governmental agencies from

Australia, UK, Netherlands, Sweden and USA.

Our team has been eager to find out more about

the membership on BCtA in an effort to decipher

the company`s famous, inclusive business model.

Through BCtA, Jaipur Rugs has associated

itself with names like PepsiCo, Microsoft and

other multinationals or innovative start-ups

around the word. What does the membership

on BCtA mean for Jaipur Rugs?

The Business Call to Action is a platform that

recognizes and supports businesses that combine

profitability with impact. The main idea is to

encourage businesses to contribute to the United

Nations Millennium Development Goals by 2015.

From 150 members that will join BCtA in the next

3 years, we are the 42nd member.

As a member, we are committed to train 10,000

low-income people from rural areas in Rajasthan,

Uttar Pradesh, Bihar, Jharkhand or Orissa on

advanced rug weaving techniques and provide

them with access to global markets by 2015.

I emphasize: it is profits that bring employment

and sustainable income to the rural poor. The

interdependence between profits and impact has

been defined as a ―different way of doing

business‖.

Why is there a need for a different way of

looking and doing business?

In 2001, C. K. Prahalad was talking about the

―fortune at the bottom of the pyramid.‖ Most of

the global population was poor, he argued and the

business sector was not addressing the poor in any

way. Since then, a trend has grown up around the

concept of doing business with the poor.

Companies have begun to engage those at the base

of the global income pyramid and to give access to

goods, services, and livelihood opportunities for

those who need them most.

Managing Director, Jaipur Rugs Company


In our case, we see the rural poor as skilled

producers and give them the status of artisans and

the chance to create beautiful rugs. We are proud

to say that C. K. Prahalad published Jaipur Rugs

case study in the 5th edition of his bestseller:

―The fortune at the bottom of the pyramid.

Eradicating poverty through profits‖, in 2009.

What is the main characteristic of an inclusive

business?

Doing business with the poor is now commonly

called ―inclusive business‖.

In more complex definitions, inclusive business

models talk about sustainability and engagement

of low-income communities, in such a way that

the heart of the business, its core competencies are

responding to the needs of the poor, either seen as

producers or as consumers. Commercial viability

remains the focus of the business.

In our case, we have tried to break the perception

on the Indian carpet industry which was known as

highly exploitative. Back in `80s, my father, N. K.

Chaudhary has initiated a direct contact with the

weavers from under-privileged communities and

since then we have continuously worked to build

a fair wage model for them.

How is inclusive business different than

Corporate Social Responsibility (CSR)?

We like to say that CSR is lipstick, while we

embed the CSR activities in the heart of our

business (laughs). Presently, CSR is practiced as a

separate department in most of the companies

through social or environmental projects. In

Jaipur Rugs, the social activities are embedded in

the efforts of increasing the profits.

What are the keys to understand the Jaipur

Rugs model?

First of all, Jaipur Rugs is a group of three,

strongly interconnected entities: Jaipur Rugs

Company, manufacturer and exporter, Jaipur

Rugs Foundation, an NGO focused on training,

health and education for artisans and Jaipur Rugs

Incorporated, a wholesale unit in the USA, our

largest market.

Secondly, in order to ensure access to global

markets – we have clients in 35 countries of the

world – we developed quality control systems in

the production chain. There are around 60

processes from the wool to the final rug and all of

these processes are executed by people at the

grassroots in order to ensure international quality

standards.

Fig. 1: A Women with a weaver

(40,000 Indian artisans create rugs for clients in 35 coun-

tries of the world)

Fig. 2: A women weaver with the End-User

(Rug Weaving Skills Connect the Rural Poor with the Rich)


Finally, we control a decentralized production:

most of our 40,000 artisans are working in their

homes. Through our local branches we provide

them with the material of their work directly in

their village and homes.

It seems that Jaipur Rugs has innovated in

many ways. What are the main challenges you

face?

It's very different to work with the poor, because

you need to understand how they think. About

97% of artisans we work with are illiterates. It's

very different working with them, particularly

when it comes to harnessing talent and

capabilities.

Besides, there is a challenge to find the right

people in middle & top management as there is a

tendency to avoid working with the illiterates and

poor. So we tap talent at leading educational

institutions of India, like TAPMI.

Moreover, the global supply chain that we

maintain needs to be improved in terms of

efficiency in order to make it scalable. A team

from Harvard Business School has tied up with us

to study our supply chain and give suggestions for

improvement.

What about numbers? How profitable is a

business that works with the poor?

In the last fiscal year, we registered a turnover of

around $21 million (Rs 100 crore). We estimate

that over the next seven years, Jaipur Rugs will be

a Rs 500 crore company, with an additional

investment of Rs 300 crore pumped into it and a

profit of at least Rs 25 crore.

How do you see the future of business in

general?

Uneducated people in rural India, who are

considered downtrodden, have wisdom and

capabilities. We involve such people in our

business and we seek to empower them: to help

them find themselves a way out of poverty. We

think that involving the poor in the business is a

great opportunity for all businesses.


Emotional Intelligence and the Importance of

Self– Management

Although traditionally emotions were considered

to be disruptive to organizations, they are now

being increasingly recognized as providing

valuable insight into the behaviour and

performance of an individual. Whether we choose

to concur with the former or the latter, we cannot

ignore the fact that emotions need to be managed.

With issues like stress, work-life balance,

problematic bosses and peers, etc; employees as

well as organizations are beginning to understand

the importance of managing emotions at

workplace. ‗Emotional Intelligence‘ is the new

buzz word and is being talked about in personal as

well as business circles. Managing emotions helps

to develop psychological resilience in people

which is of utmost importance in today‘s world.

The concept of Emotional Intelligence in the area

of Human Resources Management has been

thought of as highly controversial for a long time.

While on one side being aware of one‘s own

emotions, managing them, detecting emotions in

others and being able to control their emotions is

believed to give an edge over others lacking such

skills in the business world; counter arguments

suggest that Emotional Intelligence cannot be

measured and is too vague a concept to be

regarded as a matter of intellectual capacity.

Emotions as such are complex in nature and

difficult to manage. Most people believe that

emotions are natural reactions to people or

situations and the phrase Emotional Intelligence

itself is a misnomer!

Even as the arguments for and against the concept

of Emotional Intelligence continue, there seems to

be some ambiguity in the idea of the Pyramid of

Emotional Intelligence. The starting point or the

base of the pyramid is ―Self-awareness‖ or

―knowing your emotions‖. The second level is

―Self-management‖ or ―managing your emotions‖.

Together, these two levels make up the personal

sphere. The third level of the pyramid is ―Social

awareness‖ or ―the ability to understand others

feelings and emotions‖, and the final level is the

―Relationship Management‖. These two levels

make up the ―social sphere‖. Relationship

management is therefore considered to be the

culminating point in the emotional intelligence

pyramid and anybody who has made way to this

point in the pyramid is said to be very high on

emotional intelligence.

The Pyramid of Emotional Intelligence:

by Lakshmi Divya Vegiraju , BIMT Greater Noida

Fig. 1: The Pyramid of EI


The point to be pondered upon is whether the

spheres have been placed appropriately and

whether Relationship Management can really be

considered as the capstone of the Emotional

Intelligence Pyramid. If we go by our experiences

and ask ourselves whether managing our own

emotions is difficult or managing others emotions,

we realize that it is easier to manage others than to

manage self while dealing with emotions. Often

we find it easier to soothe a grieving friend,

motivate a disheartened soul, to give advice and

solutions but fail to manage our emotions when

we find ourselves in similar situations. Somehow,

lending an ear and being a shoulder to cry on or

just saying that we understand and we relate to

what others are going through, does all the magic

that is required. Many a times we are even

successful in making others feel better, if not

completely fine.

The same is true even in the business setting.

Stress could leave us frustrated; rumours could

provoke and upset us; Boss, peers, subordinates,

all of them have the capacity to fudge with our

emotions. ‗Managing self‘ becomes extremely

difficult as well as demanding in such situations

and the one who has mastered the skill is a sure

shot at success. Therefore, even as companies are

looking at ways to manage the emotions of their

employees, they should instead make their

employees learn the art of self management.

The charisma of human nature is in its ability to

manage others emotions better than one‘s own

emotions. When we learn to understand others

emotions and perfect in managing them, we

understand ourselves better and as a result also

tend to manage our own emotions better. So

should we say understanding our own emotions is

the building block for understanding the emotions

of others or is it vice-versa? In Aristotle‘s words:

It is easy to be angry, but to be angry with the

right person, to the right degree, at the right time,

for the right purpose, and in the right way is not

easy‖. That is self-management which should be

the highest point in the Emotional Intelligence

Pyramid for he who has conquered himself has

conquered the world!

References:

Robbins, Stephen P., Judge, Timothy A.,

2009. Organizational Behavior, Pearson

Education


Major reason behind euro crisis:

This Euro crisis isn‘t just a story about some

incompetent Greeks who went on wild shopping

sprees with money lent to them by hardworking

Germans who didn't check the books carefully; it

is much deeper and interwoven into various

economies that it would take another few years for

us to come out of it. No doubt there will be a day

when we shall be writing about the revival of the

Euro and its upward journey in the future, that day

is still far and at present we need to understand

what caused this crisis and how it will impact the

world not just Europe or the western markets.

The root cause of the crisis can be attributed to the

US recession of 2008 which led to the financial

turmoil, the repercussions of which can be felt

even today. Although the housing bubble

triggered the unprecedented crisis, the real reason

was the sudden dryness in the interbank market

due to fears of creditworthiness of the

counterparties. The interbank market rates soared

up and the banking system faced a liquidity crisis

as being termed by the Government only to later

realise that this liquidity crisis can transform into

enormous proportions leading to solvency crisis.

The impact was that the stock markets started

spiralling downwards, investor confidence was

low, valuations were evaporated and investors

started investing in sovereign bonds. Downturn in

the financial market spread to other parts of the

world due to increased exposure between the

banks. Banks were restrained to provide credit,

loan book deteriorated, economic activity

plummeted, sales started decreasing, world trade

plunged and contraction of economies took place.

In Europe it was triggered by BNP Paribus which

froze redemptions of 3 investments increasing the

short term call rates and increased counterparty

risk. The panic button was pressed. The

government helped recapitalizing the banks which

had undertaken huge write-offs or provided

guarantees on the same but whether the actions

taken or capital infused sufficient is now quite

clear to us after two years.

The cause of this crisis is faulty Government

policies which kept the asset prices artificially

high. And here is the irony - governments

everywhere bailed banks out in 2008. To do this

they incurred debt. This debt now has become

burdensome and some governments cannot pay

it. But many of the banks governments bailed out

hold this debt, and now, again, the banks are

threatened by the very governments who tried to

save them.

The question also arises that when the Maastricht

treaty asks for certain obligations to be fulfilled by

the European nations then how PIGS nation did

broke all limits so disgracefully. The answer lies

in the complex financial instruments created by

the US investment banks such CDS and currency

derivatives for a substantial fees. The yield of a 2

year bond has reached 15% levels leading to a

junk status attributed to the country.

Will EU survive the second decade of

the new millennium?

- Unearthing the Euro crisis

by Asmita Karanje, SIBM Bangalore


Also such high debt levels have been seen in case

of other countries too such as Japan, Italy and

Belgium's creditors but the difference is that they

are mainly domestic institutions, but Greece and

Portugal have a higher percent of their debt in the

hands of foreign creditors, which is seen by certain

analysts as more difficult to sustain. Greece,

Portugal, and Spain have a 'credibility problem',

because they lack the ability to repay adequately

due to their low growth rate, high deficit, less FDI,

etc

Credit growth, low risk premium, economic

growth, rampant optimism, stable inflation, greater

integration of the world‘s financial markets,

international risk sharing and various related

factors can be a few reasons. Also with higher

yields available in the European bond market there

was a spill over of liquidity leading to soaring of

real estate prices on one hand and deterioration of

credit quality on the other hand. Leveraging

became extremely attractive and the CDS which

provides insurance on these assets became clearly

underpriced. And these highly leveraged

institutions can be thought of as a stack of cards

created with no support in terms of adequate

capital, so any small correction in prices could

lead to insolvency of the market players.

More than anything the real question that needs to

be addressed is that there is a structural problem in

the formation of euro zone, admission of countries

with different budget deficits, debt levels, GDP

growth rates and more importantly politics. Also

with fiscal policy left onto the individual countries

to decide, even after uniting the different monetary

policies have also been one of the reasons for the

fall of euro. Thus in short the Euro area countries

that hold huge amounts of bonds of the PIIGS

nations are unable to redeem them which would

result in huge losses if written down.

Fig. 1: Euro Zone’s Problem Children


Impact on the Euro Zone countries:

These countries such as France and Germany have

huge exposure to Greece. France has nearly 50%

and Germany 30%. Huge write-downs by banks

have been witnessed, consumption and demand

has fallen, confidence level is shattered, stock

markets go into a tailspin, the GDPs contract and

as predicted by Ms Lagarde, the world may have

lost one decade. EU contracted by 4% in 2009 and

the projections for year ending 2011 is around 1%.

Moreover the demographic is shifting towards an

ageing population, unemployment figure is close

to 9-10% in western countries, outputs are

shrinking, taxes shall go down and fiscal positions

of Government will deteriorate. This will lead to

increased budget deficits, ratings to sovereign

nations will go down and the vicious cycle of a

economic crisis shall doom on the world‘s growth

objectives. Unless the Governments of different

nations come together to attain the bigger goal of

saving the world economy from dwindling into the

whirlpool of darkness, it would be very difficult to

see the growth levels reached during the booming

periods.

Austerity measures needs to be implemented by

Greece and Italy and several other European

nations.

a. Greek is required to reduce wages by

layoffs, cut down on Government

expenditure, raise $40 Bn from privatization

and reduce the current debt levels of 130-

150% of GDP. This is unsustainable to attain

as this is faced by a lot of opposition from

the general public who is at the receiving

end of it. Also if attained it may provide

short term benefits but the long term impact

is detrimental to the health of the economy.

b. Greek bailout may make future bailouts

more likely.

c. Eurozone still does not have the firepower to

bailout all the EU countries in trouble. The

$1 Trillion set aside for bailout has been

utilised by Greece, Ireland and Portugal. For

rescuing Spain and Italy it would need funds

to the tune of $3 trillon. Also with more

delaying of decision on the part of member

countries this problem is only becoming

graver, with confidence levels going down,

uncertainties increasing, euro falling, debt

Fig. 2: Eurozone’s Sovereigns


levels going up and chances of a revival

coming down.

Biggest loser will be the banks as they will need to

write off the assets and the borrowers who shall be

passed on the cost of the debt write down.

From another perspective there are talks about

such increased economic tensions may get

translated into political tensions as the Defence

chiefs are drawing up plans to cope with the

potential military fallout from the Eurozone crisis.

There has been a lot of opposition by the civilians

taking to protests which have turned violent on the

streets of Athens against the spending cuts and tax

rises.

Portugal, Italy, Ireland and Spain are in dire need

too but the Greece is in succour and its needs are

so huge that if Govt needs to decide whether it

would focus entirely on Greece others will need to

take care of themselves.

Role of US:

The advantage with US to avert such a crisis is

because of the reserve status of the UDD, writing

off losses, marking to market of assets,

unprecedented quantitative easing, burgeoning

deficits to push growth and unparalleled stand in

the world economy for creating financial crisis as

well as cleaning it up. US banks and many other

export oriented companies shall be affected by the

Euro zone‘s slowed growth which is expected to

be around 0.2% for this year end. According to the

Institute of International Finance, US financial

institutions have $US767 billion ($A789 billion)

of exposure via bonds, credit derivatives and other

guarantees to private and public sector borrowers

in the euro zone's weakest economies.

Crisis control and Mitigation:

As Ms Angela Merkel, Vice Chancellor of

Germany puts it the crisis shall never be solved in

one go and it is essential to look at curator

measures first and then precautionary as against

what is happening where talks about closer

economic linkages and fiscal plans are charted out.

Fig. 3: Total Returns for Major Equity Markets


The heads of the EU state have met for eight times

in this years, summits have happened, endless

rounds of high level talks have taken place, first

steps in terms of the greater ―fiscal union‖ have

been suggested but will that restore the credibility

today when debt levels are rising and currency is

falling. Markets are convinced that the debt crisis

has got ahead of politicians again. Banks need to

be recapitalised for them to write down the losses

to the tune of 50%. But recapitalising them would

mean diluting the holding of existing shareholders

and that would then cause bank share to fall

further. EU rescue plan – will it be successful?

There are certain views that say the best option

would be to let Greece default in a phased manner

and allowing it to withdraw from the Euro Zone,

reintroducing its national currency the drachma at

a debased rate.

This Oct the rescue plan was such –

European banks were ready to write off 50% of

Greece debt held by them. Write off of 100Bn

Euros is voluntary; it shall be done by exchange of

long term bonds giving Greece the time to mend

its economy. It will not lead to any drop in CDS.

EFSF created in May 2010 to ensure stability

across Europe with Euro 750 Bn has been

expanded from Euro 440 Bn to Euro 1 trillion.

Recapitalising of the banks shall take a hit. It is

imperative that strengthening of the Governance

be undertaken by the individual Governments.

Proposed Solutions and Future of EU:

There are talks doing the rounds of symmetrical

reflation – what does it mean?

This implies significant easing of monetary policy

by the European Central Bank; provision of

unlimited lender-of-last-resort support to illiquid

but potentially solvent economies; a sharp

depreciation of the euro, which would turn current

-account deficits into surpluses; and fiscal

stimulus in the core if the periphery is forced into

austerity. Unfortunately, Germany and the ECB

oppose this option, owing to the prospect of a

temporary dose of modestly higher inflation in the

core relative to the periphery.

On the other hand Germany and the ECB want to

impose on the periphery—the second option—is

recessionary deflation: fiscal austerity, structural

reforms to boost productivity growth and reduce

unit labour costs, and real depreciation via price

adjustment, as opposed to nominal exchange-rate

adjustment. This will lead to deeper recession,

unemployment going up as loss making firms shall

be shut down, currency devaluation would

increase the real value of debt worsening the

insolvency of the Governments.

Germany and France have recently signed up a

stability pact that shall enforce fiscal consolidation

with greater budget discipline and strict deficit

rules. Such a pact is necessary in the wake of the

crisis, its impact on Eurozone and addressing the

bigger problem of survival of an EU. There is a

need to take action against disorderly sovereign

defaults, a sharp credit contraction, systemic bank

failures and excessive fiscal tightening. There is

no provision for any exit option for any of the

Euro zone countries. If Greece departs from the

Euro area, it may have dire consequences on the

banking system which will fall like a pack of

cards. Also it would have to leave the 27-member

European Union as well, thus entering a more

profound state of exile. Also an option to be

considered in future is that euro-area-wide finance

minister be elected by the European Parliament,

who would have limited federal powers to raise

revenue, to decide on the issue of ECB bonds, to

approve of deficit requirements in case of certain

countries, measure the performance of each

country‘s economy and strengthen the euro area

on the principle of comparative advantage. Such a

radical change would require time and efforts to

amend the treaty.

A more integrated EU is a farfetched option

especially when fiscal stabilization comes at a

poltical cost. Smaller democracies would lose the

autonomy to other the stronger bureaucrats, the


Merkels and the Cameron will rule the roost with

very little flexibility to the sovereign countries to

manage their budget and economic policies. Also

countries like the UK which has backed off from

the treaty citing lack of protection for the financial

centre whereas the underlying reason is the lack of

confidence in the proposed treaty.

On 21 November 2011, the European Commission

suggested that Eurobonds issued jointly by the 17

euro nations would be an effective way to tackle

the financial crisis. Using the term "stability

bonds", Jose Manuel Barroso insisted that any

such plan would have to be matched by tight fiscal

surveillance and economic policy coordination as

an essential counterpart so as to avoid moral

hazard and ensure sustainable public finances.

Germany remains opposed to debt that would be

jointly issued and underwritten by all 17 members

of the currency bloc, saying it could substantially

raise the country's liabilities in the debt crisis.

However, a growing field of investors and

economists say it would be the best way of solving

the debt crisis.

There is a stark imbalance in the trade deficits

among the Euro area countries, the 2009 trade

deficits for Italy, Spain, Greece, and Portugal were

estimated to be $42.96 billion, $75.31B and

$35.97B, and $25.6B respectively, while

Germany's trade surplus was $188. Unless such

imbalances are resolved it is unlikely that the Euro

area together as a group of nations can achieve a

fiscal consolidation.

The European Stability Mechanism (ESM) is a

permanent rescue funding programme to succeed

the temporary European Financial Stability

Facility to allow for a permanent bail-out

mechanism to be established including stronger

sanctions.

EU leaders hoped the plan would calm months of

volatility in financial markets by offering a long-

term solution to the Eurozone government debt

crisis but what is required is a magic wand that

heals the wounds of the global economy that has

jeopardised by the delay in decision making by the

Governments.

The solution should cure the root cause and not

just the symptoms which lies in the fact that

Western economies - with high wages, generous

middle-class subsidies and complex regulations

and taxes face pressures from three fronts:

demography (an aging population), technology

(which has allowed companies to do much more

with fewer people) and globalization (which has

allowed manufacturing and services to locate

across the world). For this it is essential that there

is growth in GDP, tax revenues decreasing deficits

and debt levels. What it basically entails is to

deleverage the economies, bring confidence

amongst the investor community, bring some signs

of revival of economies and a institutional

framework that oversees the same. There are

several ways of achieving these objectives but

broadly there are only two ways – monetary

easing as done by US or austerity measures as

proposed by EU. Going by the European way

would mean meagre growth, drop in living

standards and increasing unemployment.

Conclusion:

Going by the world politics it is quite unlikely that

there would be a colossal collapse of the Euro

although it has already touched the years low of

$1.3 as the European leaders would not ever let it

happen but at the same time infusion of liquidity

by means of Eurobonds shall also not take place

any time soon leaving us in a state of muddle.

Also time and again, the history of crisis tells us

that the way out of crisis does not lie in austerity

but the growth led by expansion of economies. So

there is an impending shift in the mindset of the

policy makers who are hooked onto the budget-

cutting agenda. They should instead shore up the

European banks in the face of a sovereign default.


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ambitious-plan.html

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1.30-on-debt-crisis-fears.html

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http://www.nytimes.com/2011/11/18/world/europe/confronting-economic-emergency-new-leader-in-italy-mario-monti-offers-ambitious-plan.html





Introduction

Literally, philosophy implies the love for wisdom.

Today, philosophy of management has,

astoundingly, achieved scholarship in the realm of

both theory and practice. Management is an

amalgamation of fundamental blocks of many

disciplines, namely the social science, the

psychology, the social psychology, the

anthropology, and other basic sciences. Managing is

a key in management. This, as a field, has emerged

from practice leading on to theories. Interestingly,

this field has underwent rebirth on several

occasions because of innovations and restructuring

at three levels-product, process, and organization

(business model). It is worth noting that

management has its presence in business or practice

for almost more than ten decades. However, this

field is at molting stage which means that it has

been changing its colours and outfits since the

pulses generated through desired or undesired

innovations.

Having said this, one can go deeper to explore the

essence of ―philosophy of management‖. We firmly

believe that philosophy embodies a set of rules,

norms, and methods to think, analyse, and articulate

the phenomena/situation comprehensively and

consistently. Philosophy is omnipresent.

Management is contextual and domain specific. In

this article, we attempt to look at this from three

perspectives: normative, positive, and synthesis.

This is exploratory in nature that we try to establish

whether management in practice is a reflection of

past theories. Is it a retrospection of past theories

including normative and positive? Or is it a

metaphor for theory?

For exploring this, we present Drucker‘s beliefs and

his remarkable contributions in management. We

try to summarize his one of the best classics in

management, ―the practices of management‖. This

book talks about that philosophy of management

comprises three elements: decision, activity, and

relation at organisation or group level. Since the

boundary of management is huge, fencing is

sometimes required to scope the discussion. In this

article, we seek to identify and list out the morals of

management in practice through the Drucker‘s

classic. Eventually, our linguistic apparatus would

sharpen the analysis of this classic in synthesized

manner.

What is “Core”?

In the classic, ―the practices of management‖, Peter

F. Drucker introduced that the changing role of

management witnessed many years before because

of the shift from the economics of capital and

labour (factors of production) to the necessity of

management. As a result, management has become

an essential, distinct and leading institution. The

key message is to manage means by objectives

(management by objectives).

Drucker defined the business as a purpose ―to create

customer‖. The business is not determined by the

producer rather by the customer. Getting clarity

upon the business, marketing and innovation: two

are the pillars of any successful ventures. Drucker

Philosophy of Management: Retrospection in the Eyes of

Drucker

by Prof. Kushankur Dey, TAPMI Manipal


elaborated on product mix as a judicious allocation

and assortment of resources, but process mix is

organization‘s production strengths and outsourcing

activities adding competitive advantages to its

business. He also identified eight key areas of

business enterprise where objectives are to set in

including market standing, innovation, productivity,

contribution, physical and financial resources etc.

From his point of view, managers are the basic

resources of any business. Human capital is the

scarcest and most expensive resources required

constant replenishment. Drucker mentioned that the

main objective of the management is to ―manage

business, manage manager, and manage worker‖.

Business by its virtue contains three powerful

factors of misdirection: the specialized works of

managers; the hierarchical structure of management;

differences in vision and work and the resultant

being insulation of various levels of management.

What is Key to Steer the Business?

Drucker introduced the most powerful concept,

―philosophy of management‖ and narrated that

―management by objectives‖ (MBO) and ―self

control‖ are two key determinants in deciding the

success of business. His speeches were unequivocal

while he pointed out that the purpose of the

organization is to make common men do uncommon

things. There are five areas in which practices are

required to ensure right spirit throughout the

management organization: first, there must be high

performance requirements, no condoning of poor or

mediocre performance and rewards must be based

on performance. Second, each management job must

be rewarding job in itself rather than just a step in

the promotion ladder. Third, there must be a rational

and just promotion system. Fourth, management

needs a charter spelling out clearly who has the

power to make life and death decisions affecting

manager and there should be some way for a

manager to appeal to higher court. Five, in its

appointments management must demonstrate that it

realizes that integrity is the one absolute

requirement of a manager, the one quality that he

has to bring with him and cannot be expected to

acquire later on.

Drucker believed that business needs a central

governing organ, ―the chief executive‖ and a central

organ of review and appraisal (of) the board. On the

quality of these two organs which together

compromise with top management, its performance,

results and spirit are largely dependent. Manager

development is three-fold responsibility: to the

enterprise, to the society, and to the individual

himself. Drucker narrated that what is needed is the

development of managers equal to the tasks of

tomorrow, not tasks of yesterday. He also

emphasized on the management of worker and work

in order to achieve the business objective.

Effectiveness is often considered as a performance

yardstick for the employees, who should get the

continuous opportunity for improvement.

Drucker described the organizational structure

which is an outcome of activities analysis, decisions

analysis, and relations analysis. He mentioned

decision making may be routine or critical

depending upon the situation the manger engages in.

It has five distinct phases, viz. defining the problem,

analyzing the problem, developing alternative

solutions, finding the best solution with respect the

risk containment, economy of effort, timing, and

limitation of resources, and lastly, making the

decision effective (actionable).

What is all about Management in the eyes of

Drucker?

At the end, Drucker expressed his views about the

responsibilities of management. He beautifully

portrayed on the canvas saying that

―Responsibility requires the manager that he

assumes responsibility for the public good, that he

subordinates his actions to an ethical standard of

conduct and that he restrains his self-interest and his

authority wherever their exercise would infringe

upon the common will and upon the freedom of the

individual. The modern business enterprise for its

survival needs to be able to recruit the best educated

and most dedicated… The enterprise must be able to

give such men a vision and sense of mission‖.


Futuristic quality control in PSU Banks:

A case of SBI Corporate Banking by Avik Sinha | Atul Mehta, IIM Indore

Preamble:

In the dynamic global scenario, it has become a

mandate for the public sector banks to implement

quality control of their existing processes. Indian

public sector banks started with pens and papers.

But gradually the business needs have driven them

towards BPR initiatives, which was enabled by IT

implementation. State Bank of India is the pioneer

of the initiative. For the further discussion, it is

taken as a model bank. The banking business of

SBI is divided into eight domains:

Given the criticality of business, revenue growth

and the customer profiles, futuristic quality control

is mostly required in Corporate Banking domain.

This is the domain which encapsulates all other

banking domains. Hence problems faced regarding

quality control are more in this domain. The pain

areas and the implications are crucial in a few

major areas, depending on the impact of error and

consequences. Details are listed in the Table 1.

There was a time, when SBI struggled a lot to

combat the aforesaid problems, even after the IT

implementation, started in June, 2002. Then with

the graduation of time, SBI formulated its own

ways to overcome those problems, which as a

whole was a very futuristic quality control

measure. This has set an example before the other

PSU banks in terms of quality control.

The Control Mechanism: In this section, we will discuss the area-wise

mechanisms, which were adopted by SBI to

control the quality of corporate banking.

1. Quarter-end and Year-end reporting:

It becomes a tedious activity for a bank to search

for the flaws in their reports when the Quarter end

and Year end activities take place. Abridged

activities involved in reporting mechanism are

given in Figure 1. During the process, mainly the

profit / loss figures in the reports differ several

1. Corporate Banking 5. Trading and Sales

2. Retail Banking 6. Commercial Banking

3. Payment and Settlement 7. Agency Services

4. Asset Management 8. Retail Brokerage

Areas Actual Problems Implication

Quarter / Year end report-

ing Mismatch of balances Time consumption in analysis

Merger & Acquisition Mismatch of architecture Improper interest capitalization /

provision

Balance Sheet generation Absence of audit trail Less / No reliability of balances

Risk Management Balances not following Basel-II

norms Non-conformance with RBI norms

Table 1: Major pain areas in corporate banking in PSU banks


times. The difference arises due to improper

mapping of branch-wise and type-wise customer

a/c mapping in several heads of the reports. So to

get rid of the problem, SBI periodically reviews

the a/c mapping, at least once in a month. They

have also automated a/c mapping practice

automated by leveraging their IT infrastructure.

This reduces the chances of errors during the

actual activities and saves a great deal of time and

cost. It also helps them keeping track of the

balances appearing in different heads during the

internal and external audit of the reports. The

mapping mechanism will be discussed in details in

the following sections [Figure 4].

The PSU banks, which have already IT

infrastructure in place, or in the transformation

mode, can automate the process at the branch

level, so that whenever any new a/c gets opened, it

automatically gets mapped in the granular head of

the Balance Sheet or P&L statement, depending

on the type of a/c. This reduces the manual

intervention of mapping them in proper heads, and

standardization reduces the business risk.

2. Merger Activities:

When the banking industry is in the mode of

consolidation, PSU banks face a major problem

while going for the merger and acquisition

activities, in terms of merging the databases of the

two banks, which follow different IT architecture

and standards. SBI also faced the same problem

during the merger with State Bank of Saurashtra.

Generally Problems were faced in the following

functional areas:

Interest Provisioning

Interest Capitalization

Business Logic

With a view of getting rid of the above mentioned

problems, SBI followed a systematic approach,

which in short is called the ―Conflict Resolution‖.

It was applied on the dummy real-time database of

the bank to be merged, which we can call as the

reference database in our discussion. It consisted

of the following phases [Figure 2]:

Application of the interest calculation

prevailing in SBI on reference database – for

both interest provisioning and interest

capitalization

Application of the business logic on the

corporate banking services on reference

database

Comparing the actual and forecasted result

Checking the branch no, a/c no and

transaction ID format of the reference

database and making necessary changes in

sync with the format of SBI

Monitor the daily deviations for at least a

month prior to the actual merger activity –

on the day of merger the total number of

deviations must come to zero

This mechanism was applied in mid 2010, during

the merger of SBI with State Bank of Indore. This

approach resulted in the smoothest merger in the

history of Indian banking industry. The success

had made this approach standardized for all kinds

of merger activities to be taken up in SBI.

All the PSU banks must leverage their IT

infrastructure to get a functional flexibility in

terms of the merger activities. Sometimes platform

dependence can create a problem. So it is an

essential requirement for the banks to design their

Fig. 4: Quarter End and Year End Reporting Mechanism


architecture flexible, scalable, and modifiable.

This can in turn help them in merging the banks or

the financial institutions, which work on different

platforms. A multi-layered business case is also

needed to be developed to support the deviation

checking activities.

3. Balance Sheet and P&L report generation:

These are the two major performance indicative

reports for any bank. After the IT revolution in the

banking industry, most of the PSU banks have

made it a practice of generating the major

financial reports through the systems in place. But

most of the auditors place a question regarding the

authenticity of the data. The same happened with

SBI also. As a reactive approach, they came up

with the idea of ―Audit Trail‖ [Figure 3] of the

balances those appear in the reports.

The balances in the financial reports appear in two

ways:

From the live transactions

From the memorandum of changes, those

are passed in several report heads while

branch level audit

Whenever a transaction takes place, the

transaction should be traceable in case of any

discrepancy. While the manual transactions are

done via memorandum of changes, the

transactions are nearly impossible to track. Hence

SBI has taken a measure of storing the

authentication record as the proof of the

occurrence of the transaction. The record consists

of the following:

Date of transaction

Time of transaction

The transacting branch

The report head

The amount of change in balance

The employee ID of the user

Non-fulfillment of aforesaid details will

lead to rejection of the transaction. The

details will be recorded in the

centralized database for tracking the

transaction. At the same time it will

also act as the authenticity of balances

appearing against the report heads.

This approach provides a systematic measure for

auditing the financial reports. The PSU banks,

which have IT infrastructure already in place, can

leverage the advantage for their internal and

external audit. This also works as a triggering

mechanism for the banks, which are yet to

implement the IT approach for their financial

report generation. It provides quality of the

balances those appear in the reports and the

authenticity of the transactions during audit.

Risk Management reporting:

In the Basel-II regime, all the PSU banks must

comply with norms set by RBI. The income /

expense of the banks must be classified in the

following categories:

Interest

Exchange

Commission

Discount

Charges / Dividend

Profit / Loss on sale of fixed asset

Profit / Loss on revaluation of investment

Profit / Loss on exchange transactions

Figure 3: Audit Trail Mechanism


In any of the mentioned categories, there are

ranges specified for the eight banking domains

specified already at the beginning of the

discussion. Any preset a/c mapping can lead to

non-compliance of Basel-II, as the balances in the

customer a/c changes with the volume of the

transactions. But the problem with this approach is

that, a retail branch having an amount of

transaction more than or equal to the balance

maintained by the corporate banking branches,

may shift to the corporate banking domain. So an

indefinite loop is formed keeping both the

validations in place.

To overcome this problem regarding validations,

SBI has taken the following measures:

The a/c mapping architecture is three-tired

[Figure 4]. The customer a/c mapping has

been made dynamic, so that any drastic

changes in the balances will automatically

change the type of product. Hence the risk

management category will change

accordingly, without any manual

intervention.

The validation has been kept only at the

branch level, irrespective of the balances

appearing against those branches. This is

called as ―Total Standardized Approach for

Risk Management‖ in SBI. This approach

has proved at least 80-85% conformance

with the RBI norms.

This has set an example before the other

PSU banks which are struggling with the

loops of validation. Rapid iterative

approaches have been taken by SBI and the

resultant mechanism has reduced the non-

conformance to a huge extent. This has

reduced the chances the getting lower credit

rating and enhanced quality of risk measure

in Indian banking industry.

Conclusion:

As a pioneer of the Indian banking industry, SBI

has built the plinth of futuristic quality control for

the PSU banks. In the reign of consolidation, this

will not only help to enhance the competitiveness,

but also in turn upgrade the customer relationship

in long term.

Figure 4: Account mapping structure (branch-wise) for financial reports


Internationalization

by Siddharth Chhottray, TAPMI Manipal

Process of Internationalization:

The term Internationalization may refer to the

transfer of a company‘s product offering, its

strategic policies or management functions across

different boundaries. The extent to which two

countries or two different regions may vary from

each other depends on various factors like

demographic variables, language barriers,

economic conditions, culture, consumer

characteristics and lifestyle habits. (Myers, 1995)

It is essential for small or medium sized

enterprises to have a distinct advantage in terms of

product benefits and features, if it wishes to go

global. Successful product innovation leads to an

increase in the firm‘s productivity which, in turn,

increases the entry into export market.

Internationalization: A co-evolutionary

perspective:

The process of internationalization has been of

significant interest for a long time. It is to be learnt

that internationalization is an evolutionary

process, and not an incremental one. Various

factors like the evolution of the industry, business

network relationships and organizational resources

and capabilities will have a major role in deciding

the path of the company‘s internationalization

process. The co-evolutionary model integrates the

var ious fac to rs and expla ins how

Internationalization can be considered as a product

which has emerged due to the co-evolution of all

these influences.

Earlier, the behavior process model described

internationalization as an incremental process in

terms of increased international participation,

which is achieved through experimental learning

(Uppsala Internationalization Model). However,

this model was questioned by major findings on

‗global start-ups‘ and ‗born global‘ firms. It was

later concluded that this process cannot be

described by a single theory which led to the

argument that Internationalization is a holistic

process which combines interrelated decisions and

processes.

T h e n e w t h e o r i e s s u g g e s t t h a t

‗Internationalization‘ process in a co-evolutionary

interaction between the external factors

(competitive environment) and the company‘s

internal processes and capabilities. In order to

decide the process of internationalization, it is

essential to focus on two factors – how the

industry has an impact on the types of

international operations a company pursues; and

how managers try to adapt their activities and

organizational resources to meet the standards of

the industry.

(Pajunen, K, 2008)

The other two theories are (Osarenkhoe, A, 2009)


Transaction cost approach

Network approach

Transaction cost approach: In this method, the

prime focus is on costs associated with several

transactions. While expanding, the company will

decide whether to do so through internalization, or

with the help of external collaboration

(externalization).

Network approach: A firm should not be

considered a single player in the market. Instead,

it should be viewed in relation to other players in

the international arena. Progress in the

international business has started taking place

through relationship development. A small

organization is said to be dependent on its

relations with other firms and the external world.

As a result, many firms have stopped expanding

internationally in a sequential or an incremental

process. Many firms have started to target multiple

markets, enter joint ventures and other forms of

collaborations at early stages without prior

experience. This can be attributed to several

factors like entrepreneurial mindset of the current

managers, presence of ever increasing number of

people having international experience,

technological advancements, improvement in

transportation facilities and networking.

Internationalization of SMEs in India:

The internationalization process of SMEs is

gaining widespread importance with increased

integration of world economy. SMEs are vital for

emerging nations in terms of providing

employment opportunities and contributing to the

national economy. They are responsible for

encouraging entrepreneurship and innovation.

SMEs also play an important role in breaking the

monopolistic nature of big players.

In order to develop India‘s ties with other

countries, the Government started relaxing import

and other regulations. As a result of this, SMEs

have started facing stiff competition from

international players. SMEs which are not into

export business lack information to deal with

international business as well as experience to

develop an international strategy. These firms

being small in size lag behind in terms of financial

capital and human resources. These firms are at

competitive disadvantage in terms of power which

is positively correlated to the size of an

organization. They generally have a very small

customer base and have little impact on global

pricing.

A firm must be innovative, proactive and be

willing to take risks in order to enter the

international arena. It should be innovative in

terms of implementing creative solutions to solve

its own problems. It should continuously upgrade

its products and services, spend on research and

development activities, and use effective

managerial concepts. It should be proactive in

terms of understanding its competition and take

necessary steps to beat them and achieve its own

objectives. Financial investment is the major risk

for a small enterprise. Nevertheless, the firm

should be willing to borrow capital and invest in

its expansion to new markets. It should be willing

to take up projects which are risky, but have high

return in terms of revenue if successful.

SMEs must include IT in their business models in

order to ensure success in the long run. IT helps in

cost reduction and enhancement of global

communication.

A SME faces three types of issues:

Country specific issues – These are the

external environmental factors (political,

economic, social, technological, legal)

Industry specific issues – Business

environment of the firm

Firm specific issues – capital, human

resource, R&D, technology, organization

structure and culture : (Todd, P & Javalgi,

R, 2007)

The organizational culture must focus on

entrepreneurial perspective to expand

internationally. The employees and managers must

have the knack of observing their surroundings

and process information. This will enable the

company to deal with uncertainty and other


challenges in the business environment, and

implement an effective strategy to expand

internationally.

Internationalization process through an

organizational model:

Today, several firms are entering into the

international arena. They can be classified into

different sectors like the service sector,

manufacturing sector, financial service sector, or

knowledge based institutions. Each of these shall

follow a different approach for internationalization

while creating, communicating and delivering

their product or service on a global scale.

Internationalization depends on four major factors:

The mode of entry into the foreign market

The type of market or client

Steps taken to improve commitment and

presence in the market

Operations undertaken which reflect how the

company is evolving in terms of resource

utilization and institutional commitment

with the progress in internationalization

process

For a mass production company, holding on to

existing market share or an increase in share is

necessary to sustain internationalization process.

This can be achieved through a deeper

understanding of the market scenario, healthy

supplier and customer relations, and creating a

brand name in the market. In terms of production,

the firm will always aim at minimizing costs. It

shall set up manufacturing units in the host

country if there are any benefits associated with

the physical presence within the host country. In

the case where physical presence is not needed,

the firm can ensure its presence through exports

and licensing. But, as its internationalization

process progresses, it can aim at a joint venture or

a fully owned venture. The steps taken also

depend on market uncertainty. If the market

uncertainty is high, the firm may adopt a slow and

steady approach like starting with exports, then

moving on to partnerships and finally shifting to

wholly owned venture. If the firm has gained

expertise through certain other activities, it can

follow a faster approach by skipping a few steps in

between. For instance, if the competition is high

and the company has a good experience of the


existing market, it can directly increase its

resource commitment by entering into a wholly

owned venture.

The internationalization process for other kinds of

organization can be developed on similar lines.

(Malhotra, N & Hinings, C.R, 2010)

References:

Kavi ta Pandi t (2009) : Leading

Internationalization, Annals of the

Association of American Geographers, 99:4,

645-656

Myers, H 1995, ‗The Changing Process of

Internationalisation in the European Union‘,

The Service Industries Journal, Vol 15, Issue

4, pp. 42 (online Business Source Premier)

Pajunen, K 2008, ‗Internationalization: A co

-evolutionary perspective‘, Scandinavian

journal of management, Vol. 24, Issue 3, pp.

247 (online ScienceDirect)

Todd, P & Javalgi , R 2007,

‗Internationalization of SMEs in India:

Fostering entrepreneurship by leveraging

Information Technology‘, International

Journal of Emerging Markets, Vol. 2, No.2,

pp. 166-180

Osarenkhoe, A 2009, ‗An integrated

framework for understanding the driving

forces behind non-sequential process of

internationalization among firms‘, Business

Process Management Journal, Vol.15, No.2,

pp. 286-316

Malhotra, N & Hinings, C.R 2010, ‗An

organizational model for understanding

internationalization process‘, Journal of

International Business Studies, Vol.41,

pp.330-349


INTRODUCTION:

Social networking websites in the digital age have

become the crux of communication and

information dissemination. They serve as a huge

platform for broadcasting of messages and

reaching out to the public. Companies need to

have an organized social media marketing and

tracking policies to ensure its business growth.

I have done a detailed study of the social

networking websites Facebook, Twitter and

LinkedIn and how companies use these platforms

to exercise their online marketing strategies in this

dissertation. I have taken various factors into

consideration and analyzed how companies can

improve their performance through the medium of

social media marketing.

C U S T O M E R S E R V I C E A N D

INFORMATION DISSEMINATION:

The role of Social Network Websites in building

the brand image of companies and serving as an

information database is becoming increasingly

relevant all over the world and financial

institutions and financial advisory firms are not to

be left behind. These firms need to use these

Social Network Websites as platforms to

understand their customers and provide better

service.

CUSTOMER SERVICE:

One of the first steps that a financial advising firm

would need to take is to setup a web page of itself

on a social networking websites like Facebook or

LinkedIn.

While Facebook represents more of an inorganic,

cluttered source of information LinkedIn is more

of a professional oriented social network website.

With over 300 million and 120 million

registrations on Facebook and LinkedIn

respectively, they provide a huge platform for

Customers to voice their opinions and concerns.

Customer grievances can be addressed online

through these social network websites. Google

alerts and Twitter searches can be setup to search

actively for customer complaints. Some customers

are miffed by the indifferent attitude shown by

company representatives when they express their

opinions, such issues end up being voiced online

which is highly detrimental to the public image of

the company. Such issues can be resolved online

through dedicated customer grievance tracking.

Banks like BOFA, Wells Fargo and Wachovia

have already implemented this form of social

interactions with customers and Indian financial

institutions and advisories must follow suit.

INFORMATION DISSEMINATION:

Social networking websites are an unmatched way

to disseminate information. Companies through

their web pages on social websites can market

their upcoming products and services. They can

also update their recent achievements and financial

stability through positive marketing on these web

pages.

A Social Media research carried out in 2011 by

Burson-Marstellar show the increasing trends

globally to disseminate information via social

networking platform. The results depict the

percentages of companies globally that use at least

one social networking platform for information

dissemination which is classified according to

different regions.

Outreach on Social Networks: Strategies for

companies in the service sector

by Amit Mukherjee , KJSIMSR Mumbai


A typical thing to notice is 67% of fortune 100

companies in the Asia Pacific region have a

presence on social websites which is an increment

of 17% from the previous year.

Source: Burson-Mastellar 2011 Fortune Global 100 Social

Media Study

ENGAGEMENT WITH CUSTOMERS,

INVESTORS, MARKET-MAKERS AND

EMPLOYEES:

Various methodologies to improve engagement of

customers, investors, market-makers and

employees with the firm are listed below.

CUSTOMERS, INVESTORS AND

MARKET-MAKERS:

All the customers, investors and market makers of

the company which play a significant part in the

growth and development of the company are

bound to have an account on at least one of the

social networking websites in this modern age.

Establishing a relationship with them on this front

can lead to faster modes of communication and an

informal but clear view of how the company is

perceived in the public. Following are some of the

steps that lead to better engagement of customers,

investors and market-makers.

Addressing customer grievances

online through social networking

websites.

Allowing marke t -makers t o

intercommunicate which lead to

exchange of ideas and knowledge

sharing.

Presenting a clear financial image

of the company through web pages on

social websites so that the investors are

aware of the company‘s position in the

market when they visit these web

pages at leisure.

Encouraging customers and

investors to write online blogs on the

company web page on these social

websites so that a frank opinion about

the company‘s perception can be

found out.

Marketing the company‘s products

and services online and encouraging

customer feedback on the same.

EMPLOYEES:

The workplace is witnessing an increasing number

of employees accessing social network websites

during working hours. Companies can use this as a

tool of communication between management and

employees to ensure that employees are

productive but not overworked. Social networking

websites provide an opportunity for management

to have faster contact with their subordinates. If

there is an issue that needs immediate attention, a

manager can send a message through social

networking websites and the internet to their

employees to get the information they need to

make a decision. Social networks also cut down on

unnecessary e-mail and instant message among co

-workers. In this way Social networking websites

can replace the internal modes of communication

that the company has and lead to better employee

engagement.

LISTENING TO THE MARKETS:

Accessing the social networking websites by the

corporate officials provides an effective platform

to ―listen‖ to the markets and gather information

from them.


There are two ways you can ―listen‖ to the social

web: passively and proactively. The passive

approach is simply trying to eavesdrop on

conversations that occur organically and naturally

among regular consumers. The proactive approach

is actively trying to stimulate these conversations

with questions and dialogue with the customers.

PASSIVE APPROACH:

The passive approach can be executed by adopting

simple tools like ‗Google Alerts‘ and ‗Twitter

Searches‘. Once a conversation about the

Company is traced online it can be listened to by

dedicated employees whose task is to preserve the

social image of the company in the online markets.

PROACTIVE APPROACH:

The proactive approach is an initiative by the

company itself to stimulate opinions about the

company on social networking websites and then

modulate them. This can be done by a variety of

ways like opening opinion polls about the

company ―What do you think about our new

product‖ on websites like Facebook, inviting

customer feedback on these websites, etc. The

important task after this first step is to modulate

these opinions by providing justifiable reasons to

the customer issues and concerns and by actively

promoting favorable customer response.

SOCIAL MEDIA THREATS:

Though social networking websites provide a huge

platform for a company to market itself and

project its brand, it is equally a big hazard for the

company as well. Employees can leak vital

information or can express their angst towards

company policies online. According to a survey

conducted by ‗Deloitte‘ employees themselves

feel that it is easy to damage a company‘s

reputation on social media.

Organizations need to have well defined social

media policies to regulate employee conduct.

These include not blocking social websites during

working hours but to allow restricted access to

these websites. Access rights can be restricted to

prevent employees from leaking useful

information.

Users should also carefully control what

information they post on social media accounts

and to whom this information is available. This

particularly applies to users who actively

participate on social media sites as part of their

company job function, in order to network with

customers and promote brand awareness.

Summarizing all the above factors, the company

should implement the following policies to ensure

it doesn‘t face a threat due to social media

interactions:

Create well defined social media policies for

its organization.

Have a well equipped IT team to

apply and inform employees about

how these policies should be followed.

Installing Up-To-Date antivirus

systems to ensure malicious activities

like hacking and phishing doesn‘t

occur due to information provided on

social media platforms.

Source:-Deloitte 2009 survey


REFERENCES:

www.mashable.com

www.thefinancialbrand.com

www.burston-marstellar.com

www.jiad.org

Social Network and Corporate Financial

Performance: Conceptual Framework of

Board Composition and Corporate Social

Responsibility-William S. Chang, Finance

department, Ming Chuan University

A Measurement-driven Analysis of

Information Propagation in the Flickr Social

Network- Meeyoung Cha, Alan Mislove,

Krishna P. Gummadi

Social media-A guide for researchers- Alan

Cann, Department of Biology at the

University of Leicester, Konstantia

Dimitriou and Tristram Hooley of the

International Centre for Guidance Studies

Social Networking and Its Effects on

Companies and Their Employees-Douglas

Baker, Nicole Buoni, Michael Fee, and

Caroline Vitale

Social Media Marketing: Successful Case

Studies of Businesses Using Facebook and

YouTube with an In-depth Look into the

Business Use of Twitter-Maddy Coon

Detailed study of websites-Facebook,

Twitter and LinkedIn

http://www.mashable.com

http://www.thefinancialbrand.com

http://www.burston-marstellar.com

http://www.jiad.org


When Airtel launches Airtel Bank...

by Himangshu Das , NITIE Mumbai

We always come across telecom companies

launching new ―Talktime‖ or ―Top Up‖ offers.

The day is not far when we will see them

launching new fixed deposit schemes, saving

offers etc. The above statement, although seems

absurd, would perhaps make sense as we read

more.

The estimated banking penetration among middle

and high income groups in India is about 45%

while for low income groups is less than 5%.

Maximum financial inclusion of our human

resource is crucial to tap the countries savings and

investments. While Microfinance institutions do

play an important role still the penetration level is

very low. Comparing this with the 76.03 % of

Tele-density and the projected Tele-density of

84% by 2012, Banks have realized the role that

can be played by mobile banking in reaching out

to the unbanked areas. It is also a good medium to

attract on the run customers hence they have tied

up with leading providers like Vodafone and

Airtel to cater mobile banking services.

While this is a positive signal for both the telecom

and banking industry in terms of revenue and

reach, it has also initiated discussion about the

shift in the traditional role played by the telecom

sector from that of a provider of just voice and

message provider. With the provision of mobile

service, mobile banking, mobile commerce etc

these telecom companies have come a long way

from their sectorial monotony. Dwindling returns

from the stagnant and competitive voice calls and

messaging market have forced the telecom

companies to look out for new business

opportunities. Telecom companies will eventually

target those avenues which will give returns at a

same scale as during the telecom heydays.

Considering the consistent growth and returns of

the banking industry, telecom companies

seemingly have found a perfect ground.

Offering the complete set of banking services right

from commercial loan services to bond services

would however take considerable time. What

customers may initially expect comprises a basic

set of services like mobile payment, credit and

Source: http://gss.hubpages.com/hub/Class-Action-

Lawsuits-and-Litigation

Source: http://t2.gstatic.com/images


charge card facilities. With the experience in

mobile banking the telecom companies can slowly

takeover the whole umbrella of businesses that

operates under a network. This will not only open

up a whole gambit of opportunities for the

operator but also provide a plethora of facilities to

the customers. One of the important sectors that

they might be able to finance would be the

micropayments via messaging or voice call. It is

imperative that carriers will try to battle it out for

the mobile wallet and payments space. A slow

demand of banking license caused by some of the

Telecom giants has surfaced in the industry

corridors. Rogers Communications Inc, one of the

telecom giants in Canada has already filed papers

with the federal bank to start a bank. As per

Rogers the next big thing will be money transfer,

whether that's paying for a subway pass or a

parking meter, or sending money. The bank would

primarily deal in credit and mobile payment

services, as opposed to bricks and mortar bank

branches that take traditional savings and loan

accounts. While many big retailers have similar

sort of finance divisions which are essentially

extension of their core businesses.

The Telecom companies are looking to position

themselves in every part of the supply chain and

hence manage to earn returns from the infinite

monetary transactions that happen between

customers and companies via their network. It also

makes sense for operators to offer banking

products and services as people would eventually

wish to dispense plastic and start using mobile

phones as a form of payment devices. They hence

manage to take the control of the wallet over the

phone. Banks are already getting detached from

the end customer by an invisible layer. While

mobile service from a bank needs to pass through

layers of technology and approval from Google,

RIM , Apple etc for future carrier bankers we need

just a phone or go online and transfer the money.

The only necessities would be the email address

and the mobile phone number. An example of an

offering will be a combination of prepaid phone

deal with a prepaid debit card via which these

Telecom banks. This can aggressively target the

under banked customer segment and they will not

need the entire expensive infrastructure like the

traditional revenue generation format. It is just a

new innovative form of revenue generation.

Even banks seem to have opened up to this threat

and have started offering more features to move up

the value chain. Let‘s consider an interesting trend

that has happened in Italy where one of the banks

sensing this threat has managed to launch ―Poste

Mobile‖, an ESP (Enhanced Services Provider)-

MVNO subsidiary of the Italian Postal Bank. Here

the carrier just acts as a transport layer while Poste

Mobile offers the various banking services and has

full control on pricing as well as customer

information which is stored in a separate area of

the SIM card.

Gauging the benefits, Governments of certain

countries like Nigeria are even vetting proposals to

license operators in the mobile banking sector

thereby laying the foundation for another

technological revolution. The Indian Planning

Commission however is not in favor of allowing

telecom companies to float banking companies.

The government is more in the favor of allowing

financial transactions to be done by banks to avoid

any sort of financial crisis. Although they do not

wish to allow the telecom companies to become

banks themselves, an attempt has been made to set

up a framework to allow people to undertake basic

operations through cell phones. An inter-

ministerial group has recently submitted a report

to Telecom Regulatory Authority of India (Trai)

recommending that people in remote areas be

allowed to open accounts linked via their cell

phones and withdraw money up to Rs 5,000 a day.

Though the government efforts do seem noble in

questioning about how a telecom company can

carry out the required security procedures to the

extent that is usually done by a traditional bank, it

would be better if it can propose for a Think Tank

to study the pros and cons in the reverse process of

a telecom company entering the banking services.

In the days to come we might see the traditional


bank getting segregated to the back-end as a

manager of risk and product manufacturer.

However the day to day customers continue

getting owned by the telecom companies, social

networks and marketing organizations. Perhaps a

possible technological and financial revolution is

in the offering.

References:

http://asiablog.celent.com/?p=404

http://en.wikipedia.org/wiki/

Communications_in_India

http://www.cbc.ca/news/business/

story/2011/09/06/rogers-bank.html

http://www.carrierevolution.com/

articles/273852/telcos-will-be-banks/

http://m.economictimes.com/news/news-by-

industry/telecom/plan-panel-against-telecom

-operators-setting-up-banking-cos/

articleshow/7372089.cms

http://www.ft.com/cms/s/0/d5469d54-ca96-

11df-a860-

00144feab49a.html#axzz1lIwjB3wZ


Introduction

`Does the stock market overreact?' De Bondt and Thaler in 1985 gave start to a new wave of thinking

known as behavioural finance. Weak form inefficiency of the stock market was discovered by them after

analysing how people are systematically overreacting to unexpected and dramatic news events which were

surprising and profound. The Efficient Market Hypothesis as proposed by Fama (1970) asserts that the

stock prices reflect the relevant information. The asset prices follow a random walk path i.e. they are

merely random numbers. The study conducted by Caginalp G. and H. Laurent (1998) by the predictive

power of price patterns finds patterns and confirms that they are statistically significant even in out-of-

sample testing and report.

The pattern of the stock index might help in predicting some of the effects of the various events. The

calendar anomalies tends to exist which goes against the efficient market hypothesis. The researchers have

used Gregorian calendar to investigate the calendar anomalies. There are various countries and societies

which follow their own calendar on the basis of their religion. For example, the Hebrew calendar is

followed by the Jewish society, which is strictly based on luni-solar, the Christian society follows the

Gregorian, which is based on solar, and similarly Hindu and Chinese follow their own.

The Hindu calendar is called ―Panchanga” and it is based on both movements of the sun and the moon.

The festival of ―Diwali‖ is typically occurs at the end of October and beginning of November.

The special ritual called ―Mahurat Trading‖ can be observed on major stock exchanges like NSE, BSE,

NCDEX to name a few lasts for about an hour. It is performed as a symbolic ritual since many years. It

marks a link with the rich past and brokers look at it on a positive note. It marks an auspicious beginning to

the Hindu New Year. The investors place token orders and buy stocks for their children, which are

sometimes never sold and intraday profits are booked, however small they may be. Thus, it is widely

believed that trading on this day will bring wealth and prosperity throughout the year.

It is interesting to observe the behaviour of trading activities during the period preceding and succeeding

Mahurat Trading. The purpose of this study is to know the effect of the festival prior and post diwali on the

the returns.

Econometric methodology

I have measured stock return as the continuously compounded daily percentage change in the share price

index (S&P CNX NIFTY) as shown below:

Rt = (lnPt – lnPt-1) x 100 …………………… (1)

Where, Rt = return at time t

Pt, Pt-1 = closing value of the stock price index at time t, t-1.

I have used S&P CNX Nifty as it has got the most liquid stocks in its portfolio. Further, the National

Stock Exchange is largest in terms of Market capitalisation and Volume. I have used the data of the

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