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January-March 2010Volume I Issue II

e-Globuz ZInternational Business Society @ SIMSR

How is the Industry?SOUR SWEET

S I M S R

K J Somaiya Institute of Management Studies & Research

Cover Story


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Foreword

DearReaders,

It gives me immense pleasure to bring to you the second issue of e-Globuzz, Jan-

Mar'10. Wehopeyoulikedourfirstissue,Nov-Dec'09.TheInternationalBusinessSociety (IBS@SIMSR) organized during the last four months some importantevents like an interactive session with international experts onWTO for studentsandfaculty.WeinteractedwithadelegationofManagementfacultyandstudentsfrom Deakin University, Australia. We had the privilege of hosting an interactivesession with Mr. O K Kaul, Executive Director,TATA International Limited, for ourstudents and faculty. In fact, this issue includes highlights of Mr. O K Kaul'sinterview taken by our students of International Business this week. We also hadan interactive session with Mr. Walter Stechel, the Consul General for FederalRepublic of Germany (FRG) in India. As a part of the International Businesscelebration at Samavesh '09, we had the privilege of having with us eminentspeakers from ECGC and TATA International Limited, who gave us meaningfulinsightsoncountry risk evaluationandinternational transferpricing.

These sessionshostedby IBS@SIMSR attendedbya large cross section ofSIMSRstudentsand faculty wenta longway incomplementing the classroom learningatSIMSR with the expertise of industry leaders, international professionals,

studentsandfaculty from universitiesabroad.Continuing with the format of the inaugural issue of e-Globuzz, which was highlyappreciated, we have covered in this issue, Mr. O K Kaul's interview and articlescontributed by SIMSR students, Corporate Executives and Industry Experts onvarious aspects of international trade, international marketing, internationalfinance, international logistics and world affairs, complete with a popularcrossword.

OurnextissueisplannedinJuly'10,whichwetrustgivesyouenoughtimetosendus your articles for the third issue of e-Globuzz. We also look forward to yourfeedbackandcontinuedsupport.

Tillthenwewillmissyou.

Prof C P Joshi Faculty Mentor


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6 Cover StoryThe Confectionery SectorHow is the SWEET Industry?SOUR1

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Business Leader in Focus: Aiko Toyoda

Company in Focus: Wal-Mart

Cover Story: How Sour is the Sweet Industry?The Confectionery Sector

International Marketing: Marketing of Avatar

Crossword # 02

Country in Focus: Germany

International Logistics: Green Supply Chain

Interview with Mr. O.K. Kaul, ED, TATA International

Debate Copenhagen:SuccessorFailure for India?

Book Review: The New Age of Innovation

Did you knowtheseterms?

USA Health Reforms

International Business News


4/21

He likes to race cars andjust completeda 24-hour endurancecompetition

with three other team members in a Toyota supercar at Germany'sfamed

Nrburgring, a Grand Prix-style race. When the 52 year old Toyoda

Nicknamedas "Prince" by Japanese media took over thepostfromToyota

President, Katsuaki Watanabe, in June 2009, the company expected

Toyoda to inject an international approach to correct the miserable

performance of the company's overseas operations which led to the first

major losses in 70 years and he may not have expected the kind of

situationhe is facing.

While getting his law degree from Tokyo's prestigious Keio University, he

dreamt of playing Olympic field hockey. Instead, he went on to get his

master's degree in business administration at Babson College in

Wellesley, Mass. He set out on a career away from autos by joining an

investment bank and working as a management consultant, living on

Manhattan's Upper East Side, then moving to London. At Toyota his

musings about a possible career were met with a lukewarm response

from his father, Shoichiro Toyoda, who told his son: "No one wants to be

your boss." Buthe believed he could make a uniquecontribution because

he wasa young presidentby Japanesestandards.

But, seven months into his job and one month into the worst crisis in his

company'shistory, thegrandsonof thecompany'sfounderis facing strong

questions from all corners of the world for manufacturing of defective

vehicles. The company is under scanner over the company's handling of

customer safety concerns and its series of recalls over potentially faulty

accelerators and braking systems. Mr Toyoda is facing harsh criticism for

shattering the Japanese manufacturer's management. Mr Toyoda, a

corporate implant of mighty Japan, groomed from birth for leadership,

educated abroad has followed steady ascent through the ranks of the

company reflecting a manwitha decentgrasp of thebusiness, a hands-on

approach to management and a relatively high level of internationalsophistication.

If Toyoda is fazed by the challenges awaiting him, he never betrays it. The

all criticism does not mean, he will fall and resign. The much talked

accelerator problems were generated under the control of his two

predecessors. Mr Toyoda very nearlypredicted a crisisof some sort when

he said last June that the company had grown too fast. When he

reiterated there was a faint glint behind the apology; it may never work,

buthe may have itin mind totrimthe behemothhis forebears created.

The toughest task ahead of Mr. Toyoda is to regain and maintain the faith

in brand. In case of Toyota the quality of its product, the honesty of its

claimsand continuous improvement are at itscore,and therecent recalls

have shaken the foundation of the brand. The company has already

started taking essential steps by the recall of vehicles worldwide,

maintaining communication through democratic channels (e.g. Twitter)

tomaintaina dialogue with itscustomer base reinforcesits intentto make

good. He vows to rein in overcapacity, reorganize operations to

strengthen control, and get the company back to basics. He especially

wants to re-instill dedication to one of the pillars of Toyota's production

system: ,meaning"goandseeforyourself."Thesestrong

moves showa commitment to itsbrand positioning values andpromise.

genchigenbutsu

by

Anirudha Kandharkar,

PGDM IB 2009-11

Aiko Toyoda - President, Toyota Motors

Business Leader in Focus

TOYOTA

e-Globuzz, Volume I, Issue II Jan-March 2010 Page 1

He vows to rein in overcapacity,reorganize operations to

strengthen control, and get thecompany back to basics. Heespecially wants to reinstill

dedication to one of the pillarsof Toyota's production system:

genchi genbutsu, meaninggo and see for yourself."


5/21e-Globuzz, Volume I, Issue II Jan-March 2010 Page 2

Company in FocusCompanyOverview

.

FinancialPerformance:

Global Presence:

Wal-Mart,PartnersandSociety:

:If you feel that your purchases have become convenient and costeffective, then here is the company to know about. Wal-MartStores, Inc. was established in 1962 and only to change the wayretail industry operates all over the globe. Its unique strategicposition is the outcome of hard work of the founder Mr. SamWalton David, and subsequent President and Chief ExecutiveOfficers,Mr. David Glass, Mr. LeeScott and recently appointedMr.Michael T. Duke My Dad created Wal-Mart to help people savemoney so they can have a better life. This mission remains asrelevant now as it was in 1962, says Rob Walton, Chairman of the

Board for Wal-Mart. In sync with it the company focuses entirelyon EDLC-EDLP, that is, Everyday Low Cost- Everyday Low Prices.Walton opened his first Wal-Mart in Rogers, Arkansas. Thecompany went public in 1970and addedmore stores every year. In1990, Wal-Mart surpassedkeyrivalKmartin size.Two yearslater, itsurpassed Sears. The store formats include the Discount Stores,Super Centers and the Neighborhood Markets. Their way tosuccess was by balancing the deliverance of value, variety andquality to satisfy customers andbuild longterm relationships withsuppliers,and its employeeswhomthey refer as-'associates'.Wal-Mart efficiently deployed technology for operational efficiency in

its logistical and marketing processes. Wal-Mart has sustainedfirmly onitsbusinessmodel. Wal-Mart'scostleadershipposition isderived from firstly, theeconomiesof scale.Thus thinnermarginiscompensated by volume. Secondly, economies of scope, whereinemphasis is laid on categories in which the Wal-Mart's brand hasauthority and can offer a full line of products. Third is the stabilityandconsistencyof the management.

Of the total business 63.7% is contributed by Wal-Mart'soperations in the USA where Texas and Florida have highest

concentration of stores, 24.6% sales come from Internationaloperations where Mexico(1197), Central America(502) andUK(358) have maximum number of stores, and remaining 11.7%comesfromtheSam'sClub.

Witha clear intention to focus on price leadership in every marketto drive global leadership, it has set up 3615 international stores,in total of 7873 stores. It entered various markets recently by wayof joint- ventures, and acquisitions. Some of its recent movesinclude opening a Hong Kong regional office to facilitatelong-termopportunities in Asia with focus on Japan, India and China. InOctober 2007, theCompany acquired themajority of thecommonshares and all minority preferred shares in its own Japanesesubsidiary, The Seiyu Ltd. In January 2009, the Company acquiredapproximately 58.2%of theoutstandingD&S shares Distribuciny

Servicio, Chile.In February 2007, the Company announced thepurchase of a 35% interest in BCL. BCL operates 101 hypermarketsin 34 cities in China under the Trust-Mart banner. In August 2007,the Company announced an agreement between Wal-Mart andBharti Enterprises, to establish a joint venture called Bharti Wal-Mart Private Limited to conduct wholesale cash-and-carry andback-end supply chain management operations in India, incompliance with Government of India guidelines. In addition,Bharti Retail entered into a franchise agreement with an Indiansubsidiary of Wal-Mart to provide technical support to BhartiRetail'sretail business.

Wal-Mart created more than 63,000 jobs worldwide in 2009. ItsSustainability 360 is the Companywide effort to takesustainability beyond their direct footprint to encompass Wal-Mart's associates, suppliers, communities and customers. As thepurchasing agent for the customers, Wal-Mart's goal is to

encourage improvements in sustainability and ethical practicesamong suppliers. The Wal-Mart Foundation is dedicated tosupporting programs that help people live better, primarily byexpandingaccess to education,health care,and jobopportunities,as well as by promoting responsible sourcing. Wal-Mart is aneconomic force, a cultural phenomenon and a lightning rod forcontroversies. Be its unprecedented power to shape labormarketsgloballyor changingthe way entireindustryoperates, andpressurize the suppliers to sell at cheaper prices. Wal-Mart hasexplored new sectors of retail, used technology favorably andadopted a frugalcorporateculture to clearly be the leader in retailandmakeitsFrugality,theglobalinthing.

byAnchal Sachan

PGDM IB 2009-11



Country in FocusGERMANY

ocated in the heart of Western Europe, Germany is thecontinent'sost industrialized and populous country. It is a federal

arliamentary republic of sixteen states ( ), and is a majorower withthe world's fourthlargesteconomyby nominal GDPande fifth largest in purchasing power parity. Germany is recognizeda scientificand technological leader inseveral fields.

he Great Depression, which began in 1929, led to a polarization of erman politics and to an upsurge in support for the Communist

ndNazi parties. In1933, theNazisunderAdolfHitlergainedpower.he Nazis imposed a totalitarian regime and followed anxpansionist foreign policy that led to World War II. After Naziermany's defeat, the country was divided into democratic West

ermany andcommunistEast Germany. In 1990, East Germany wasunitedwithWest Germany

ermany is a federal, parliamentary, representative, democraticpublic, with rights guaranteed by the Basic Law, or constitution.

he Chancellor is the head of government and exercises executiveower, where as The President is the head of state, investedimarily with representativeresponsibilitiesand powers.he Judiciary of Germany is independent of the executive and thegislative branches. Germany has a civil or statute law system thatbasedon Romanlawwithsomereferencesto Germanic law

ermany is the largest national economy in Europe. In 2008ermany's GDP was about US$2.9 trillion on a purchasing powerarity (PPP) basis and nearly US$3.65 trillion at current exchangetes. Germany is the world's second largest exporter with $1.170illion exported in 2009. Most of the country's products are inngineering, especially in automobiles, machinery, metals, andhemical goods. Germany is the leading producer of wind turbinesndsolarpowertechnologyintheworld.

ermany hasa modernfinancialmarket sectorandtransparentandfective laws and policies to promote competition. It has strict

omestic anti-corruption and anti-bribery laws and is considered

ne of the least corruption-plagued countries of the industrializedorld. Foreign and domestic entities have the right to establish

nd own business enterprises, engage in all forms of remunerativectivity, and to acquire and dispose of interests in businessnterprises.

riefHistory

overnment andLegal System

conomy

vestmentClimate

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.

Lnder

Protectionof PropertyRights

Culture

ForeignRelations

Conclusion

Intellectual property is well protected in Germany. Germany is a

memberof theWorld IntellectualPropertyOrganizationand a partyto most of the major international intellectual property protectionagreements.

Germany, in general, is a very conservative country and this featureis also reflected in their way of business. They have very distinct,somewhat formal, ways of working. Prescribed rules, distinctetiquettes are what they adhere to. Besides their conservatism,their innovation, productivity and excellence are distinctcharacteristics of German business. The Germans emphasize onindividualism, masculinity, and uncertainty avoidance. Power

distance and long-term orientation are both ranked considerablylower than the others. This illustrates Germany's belief in equalityand opportunity for each citizen, as well as its ability to change andadapt rapidly.

Germany has played a leading role in the European Union since itsinception. It is also a partner ofNATOand is fullyprotected by NATOagreements. As one of the world's leading industrial nations,Germany has partnerships and special agreements with countriesall around the globe. That makes it a safeplace to do business in. Inthe area of development aid, Germany is one of the largest netcontributors of the UN and has several development agenciesworkinginAfricaandtheMiddleEast.

From manufacturers of complex nanotechnology solutions toenergy efficiency consultancies, Germany has become a pacesetterfor modern products and services on highly competitiveinternational markets. It has the capability to become Europe'smost successful economy. Already today, Germany has attractedthe highest concentration of American investment in Europetotalling more than 130 billion euros and directly creating morethan 800,000 jobs. In the year 2020 no international company willbe able to ignoreGermany as a business location. As thecontinent's

entrepreneurial hub, the country is the best address for everyinvestorin Europe.

by

Lubna Akhtar

PGDM IB 2009-11



International Logistics - Green Supply ChainAnil Kumar, Sr. Consultant, IBM Global Business Services SAP Practice

Whatis the one ofthe questionsthatis one ofthe top priority ofallexecutives across the globe apart from the economic scenario?According to a recent ' study by '

, sustainability and corporate social responsibilityfeature amongst the top three priorities of the consumer goods

industry. A similar finding is resonated in the IBM Institute forBusiness Valuestudy.

Many of us would be thinking why companies and businesses arethinking about Green Initiatives, when they should be focusingtheir energies on growth and other strategic issues. Energy andwater efficiency not only helps the planet, but also saves on bills.The technology employed to optimize logistics not only reducesfuel usage and toxic emissions, but makes for a leaner, moreefficient and cheaper supply chain. Aligning an organization'sgreen strategy with its overall business strategy is paramount.This begins with a clear understanding of the overall corporate

objectives and priorities, followed by carefully defined programs,goals and tasks that address environmental and stakeholderviews. It creates a positive perception about the company andcompanies are better prepared to meet the regulations as andwhentheycome. Sustainability makes perfectbusinesssense.

By driving operational efficiencies and adopting Lean and GreenSupply Chain Management practices, companies are trying toreduce their carbon foot print. Below are the key areas wherecompanies are channeling their efforts to turn their supply chainsgreener:

Companies are redesigningproducts to reduce energy consumption in the production anddistribution. Innovations in product design are leading toreductionof some of theprocesses leading toGreener products.

Reduced energy usage throughstreamlined production and greener supplier networks arehelping companiesbecome manufacturing Greener products.

By consolidatinglogistics and shipment dispatch companies are reducing theircarbon foot print. Route planning has made the supply chaingreener.

Well, how does all thistranslate into business and what have beenthe results so far. Let us examine a few examples on howcompanies have used Sustainability, Green initiatives and CSR toachieve spectacularbusinessresults.

Many times sustainability helps you beyond the usual cost saving.When a company champions of a cause, customers associate itwith something good and are willing to pay premium price fortheir products. Consider the case of US clothing and adventuregear maker, Patagonia. Patagonia turned its fortunes by adoptingan eco friendly product range by switching to organic cotton andchanging the packaging to reduce impact on environment and alotof other such initiatives. Patagonia'sproducts notonly becamea big hit with the consumers but also allowed the company tocharge a premium price. This strategic change turned Patagoniafrom near bankruptcy in 1996to a company withthirtynine storesinsevencountriesand$270millioninrevenuein2006.

In US, Wal Mart has redesigned its stores to reduce energy andwater consumption. It has started harvesting sunlight to reducethe usage of electricity in its stores. This has not only made thestores Greener but also has helped Wal Mart in reducing theoverall costof its operations.

IT companies have also joined the bandwagon and are coming upwith innovative products which have reduced energy usage. IBMthrough its smarter planet initiative is working with organizationsboth public and private to help them turn smarter and moreefficient.

Sustainability andCSR canalso help companies in creating a brandpresence. Consider the exampleof the ' campaignby Aircel. By associating itself with the noble cause of saving thetigers, Aircel has created a unique brand presence in the minds of the consumers. So when we think of saving the tigers, Aircel'snameisalwaysthereinthebackofourminds.

In Bihar'srice belt, a groupof individualshavefoundeda company,Husk Power Systems, which caters to the energy needs to thevillages. The company uses rice husk to produce sustainable andrenewableenergy andis electrifyingtheremotestvillages in Bihar.

Sustainability andClean Technology have becomethe focus of thegovernments and enterprises worldwide. From energy efficiencyand renewable energy to efficient and lean manufacturing andsupply chains, clean technologies have opened huge market forinnovation. The entire Clean Technology industry is estimated tobe worth more than trillions of dollars. Organizations andcountries whichare prepared to take on this new opportunity willemerge as leaders in the coming decades. So, start thinking howyou can contribute and catch up on the business opportunity thatisgood for theworld.

Top of the Mind' The Consumer Goods Forum'

Save our Tigers' Product Design and Redesign

Green Manufacturing

Route Planning and Shipment Consolidation



USA Health ReformsPuneet Kumar, Business Analyst, Accenture USA

USHealthReform

Plan:

ImpactonUSAEconomy

ImpactonPrivateInsurers:

NAICResponse:

United States's health care reform plan is one of the mostimportant bill which will have a major impact on US health caresystem, private health care insurers and on US economy in nearfuture.US badly needs to reviveitspoor healthcaresystem filledwith insurance frauds, skyrocketing premiums, uninsuredfamilies, unaffordable medical bills and personal bankruptcy. OnFebruary 22, 2010, President Barack Obama launched a newhealth care reform plan that is mainly modeled after

. It will regulate the health insuranceindustry undera seven-member Health Insurance RateAuthoritythat could deny or limit substantial premium increases. This hastraditionallybeenastateresponsibility.LiketheSenateBill,itwillcreatean exchange that allowed familiesandsmallbusinesses toshop for insurance plans. It will restrict on federal funding for

abortion,butcutsbacktaxesonthehighendhealthplans.

Reasons forReform:Health insurancepremiums have doubled inlast 8 years, rising3.7 times faster thanwages,and increasingco-pays anddeductibles threaten accessto care.This forcesfamiliesto sit around kitchen table and decide whether to pay rent orhealth premium. Many insurance plans cover only a limitednumber of doctors' visits or hospital days, exposing families tounlimited financial liability. Unaffordable medical bills areresponsibleformorethan50%ofallpersonalbankruptciestoday.Lack of affordablehealth care is compounded by serious flaws inhealth care delivery system. One-quarter of allmedical spendinggoes to administrative and overhead costs, and reliance onantiquated paper-based record and information systemsneedlesslyincreasesthesecosts.

The rising health care cost will devastate the federal budget infuture. The US health care system contributes $2.5 trillion ornearly 18% to GDP, the highest percentage in the developedworld. Health care reform is needed to stem theeconomic costs

of frauds. Between 3-10% ($60-$200 billion) is lost to fraud. If those same percentages areapplied to theproposed $436 billionMedicare program, the cost of Medicare fraud is $14-30 billion.Without health care reform, government spending on Medicareand Medicaid is unsustainable. These costs will rise from 6%(current)to 15%of GDPby 2040.That'sbecause Medicare payrolltaxes and premiums cover only 57% of current benefits. The

remaining 43% is financed from general revenues. Because of rising health care costs, general revenues would have to pay for62%ofMedicarecostsby2030.

The Insurance business is dominated by a small group of largecompaniesthat hasbeen gobbling up their rivals. In recent years,for-profit companies have bought up not-for-profit insurersaround the country. There have been over 400 health caremergers in the last 10 years and just two companies dominate afullthirdofthenationalmarket.Thesechangesweresupposedtomake the industry more efficient, but instead premiums haveskyrocketed.Thisbill ifgetspassedwillhurtthe firm'sbottom lineand lead to much more competitive market. Health insurance initself is not a quiet profitable line of business as critics seems tothink. For every dollar paid as premium, 83 cents goes out inmedical costs doctors, hospitals, and drugs. However consider

WellPoint, the biggest private health insurer on Wall Street,which paid out 83.6% of revenues in expenses but the net profitafter tax deduction came out to be princely 4.1%. Returns onassets are also key measure in profitability and are typicallypretty modest. The health-care reform was dominated by theissue of the so-called "public option" - whether the governmentshould offer an insurance plan that competes with those offeredby private insurers. But that is out of picture now as per the newplan. If public option of health insurance would have come intopicture then this 4.1% profit would havemade quiet a significantdifferencebetweengovernmentandprivatesector.

State regulators are working closely with congressional draftersto make certain that the legislation preserves the critical role of state regulators and continues the use of objective standards inrate reviewprocess.State regulators arepleased that President'sproposal emphasizes state-based reforms but are concerned forabout theinadequacyof theindividualmandate which couldleadto a dysfunctional market place and higher rates for consumers.The members of the NAIC are strongly opposed to any bill inwhich the federal government allows insurance carriers to selltheir products in our states using the regulatory rules of anotherstate. This misguided proposal would increase premiums forthose who need insurance the most and eliminate importantconsumer protections. It would also fragment the insurancemarket andexpose consumersto increasedfraudandabuse.Thisconcept must be rejected and thedecision whether to allow, andunder what conditions to allow, interstate sales of insuranceshouldbeleftuptotheindividualstates.

the SenateHealth Care Reform Bill

Insurancewillbe moreaffordable Sets upnew competitivehealth insurancemarket Greater accountability to health care by keeping

premiums down and prevent insurance industryabusesanddenialofcare

End of discrimination for patients with pre existingconditions

Stability in economy by reducing the deficit by morethan $100 billion over next ten years and about $1trillionoverseconddecade

:



Cover Story - Sector in Focus

Confectionery Sectoronfectionery SectorMarket Overview:

Market size and growth:

Major Players:

Confectionery is undeniably a part of everybody's everyday life.Allof us reachforchocolatesandcandies at virtually every meal and many times during theday. Almost two-thirds of all confectionery consumption isdriven by "emotional" as opposed to functional "needstates"--presenting endless consumption opportunities tothe buyers and myriad branding opportunities tomanufacturers. Not surprisingly, the global confectionerymarket is expected to reach $152.37 billion by the end of 2010.

Much of this recent growth has come from developingregionsandcountries, aided by the spreadof multinationalcompanies and their brands, as well as a growing base of increasingly affluent consumers in places such as Russia,China and India. In the developed world, much of themarket's recent growth can be attributed to niche sectors,such as low-fat, low-sugar, organicand fair trade products.Mergers and acquisitions in this sector have alsocontributed immensely to growth and penetration in thedeveloping markets. In 2012, the confectionery market inthe BRIC (Brazil, Russia, India, China) nations is forecasted

tohaveavalueof$25.6Billion.The confectionery sector is highly dependent on twoprimary ingredients; Sugar and Cocoa. Unfortunately,these commodities are subject to high price volatilitywhich, in turn,puts anupwardprice pressure on productioncosts and consumer prices. This seriously affects theindustry'ssalesvolumesandprofitmargins.

The confectionery industry iscategorizedasfollows:

Chocolate confectionery: molded bars, boxedchocolate, chocolate countlines, novelties andchocolatestraightlines.

Sugar confectionery: caramels and toffees, hardboiled sweets, gums and jellies, medicatedconfectionery,regularmints,andpowermints.

Gum: sugar free gum, regular chewing gum,functionalchewinggumandbubblegum

Cerealbars: sports andenergybarsandotherbars.

The market for confectionery is valued according to retailselling price (RSP) and it includes applicable taxes. By theend2012,theglobalconfectionerymarketisexpectedtobeworth USD 161.39 billion in terms of value, with anexpected CAGR of 3% between 2007 and 2012, while themarket, by volume, will total 16.18 billion kg, with an

expectedCAGR of 2.2% during the same period.Out of thebroad categories in the confectionery industry, chocolateconfectionery is the largest sector, accounting for almost60% of total sales in value terms. By volume, however,sugarconfectionery accountsfor themajority of sales,witha share of 51% and gum holds only a 14% stake but is thefastest-growing segment. The per capita consumption of confectionery in most of the developed countries averagesalmost 11 kilograms. Also, per capita consumption of chocolate confectionery tends to be higher in northern

European countries, while the Scandinavian marketscommand high per capita rates for sugar confectionery.The per capita consumption of chocolate is highest incountries like Switzerland, Germany, Austria, UnitedKingdomandBelgium.

The global confectionery market remainsrelatively fragmented, with big names like Hershey, Kraft-Cadbury,Mars,Nestle, Ferrero, Lindt,LotteConfectionery,Perfetti Van Melle, Meiji Seika Kaisha etc.accounting forless than half (45%) of value sales. Some of the brandsunder established names are M&M by Mars, Cadbury'sDairy Milk and Trident, Wrigley's Orbit, Mars's Snickers,Hershey's Kisses, Kraft's Tobolerone, Meiji Seika Kaisha's

Meijietc.In recent years, this sector has seen many mergers andacquisitions. Companies have been buying high growthsegments and utilizing their existing distribution channelsnot only for market penetration but also increasing theirgeographical spread. A special mention of the two recentbig deals sealed cannot be missed in this segment. TheKraft-Cadbury deal hasput Kraft on the top position in thechocolate andconfectionery segment.The group willhave40 confectionery brands, each having an annual sale of $100 million. This deal will help Kraft reach leading

positions in developing markets, including BRIC nationsand Mexico. Another deal between Mars and Wrigley in2008 boosted Mars position in the global market throughits acquisition of The Wrigley Company, the leader in thechewingandbubblegumsubsector.

How is the Sweet Industry?Sourow Sour is the Sweet Industry?



GrowthDriversandMarketTrends:1. Consumer's purchasing power

2. Innovation

3. Healthy lifestyles

4. Sugar confectionery remains an importantcategory

5. Kids Confectionery

6. Imported confectionery items

7. Seasonality

8. Increase in supermarkets /hypermarkets

: Demand forpremium varieties is not only increasing indeveloped nations, but is also witnessing a growthin developing countries owing to stable economic

growth, rising middle class incomes and increasingspendingpower.: New Product Development taking

local factor into consideration in the form of flavourextensions, innovative packaging and variety of new combinations are being developed bymanufacturers to cater to the taste buds of themasses.

: Consumer concerns overportion sizes and emerging natural and wellnesstrends is forcing companies to come up withofferings providing functional health benefits suchas oral health care, skin care, low sugar, low fat, lowcalorie and low carbohydrate kind of products.Companies in certain countries have introducednutritional labeling for their brands displayingcalorie content on pack fronts and guideline dailyamounts(GDA)onthereverse.

: Sugar confectionery is still the mostdominating and important confectionery categorydue to its lower unit price than chocolate and gum.In addition, consumer awareness of the dangers of sugar-based confectionery on oral health is stillrelatively poor among consumers in thesecountries.Theyhave a strong holding in developingregions for cultural reasons, in addition to ease of

local manufacture, transportation and shelf-stabilityofsugarproducts.

: Primarily, kids remain themain target group for confectionery items. Tocreate a buzz among target consumers is a very

tedious and capital intensive activity. A kid thesedays is very selective and has approximately 14brands in his/her preference set (lack of product orbrand loyalty), luring him/her towards products isextremelydifficult.Companies come outwith manyfirsts in sales promotions (freebies such as tazos,giga cards, temporary tattoos, magic candles) toexpandandsustainmarketshares.

: Consumers arechoosing chocolate according to region and thelevel of cocoa solids, an approach similar to that in

wine and cheese tasting. Single-origin chocolatewillexperience highgrowthover thenextfive years.All the big global players in confectionery sectorexport in large quantities as confectionery isbecoming a part of developing nations' growingappetiteforWesternfoodproducts.

: Sale of confectionery items isinduced by festivities or other social occasions.Hence, special packaging for promotional activitiesincluding one-off promotions is increasingly indemand. Companies engage in special limitededitions products and packaging to promote theirproductsandbuildbrandstrengththerebygrabbingnot only the share of consumers' wallet but alsotheirminds.

: With


2010 2011 2012Region

Western Europe

North America

Asia Pacific

Latin America

Middle East and Africa

OVERALL

53.75 54.50 56.12

17.80 18.83 19.84

38.21 39.19 40.15

26.45 27.25 28.07

10.98 11.32 11.67

5.18 5.36 5.54

152.37 156.86 161.39

Source: Datamonitor

Global Confectionery Value Region-wise Forecast, 2010-2012 (USD billion, nominal prices)

Eastern Europe



the booming retail sector, confectionery productshave managed to get an increased presence onshelves and also in inducing impulsive buying, thusgaining much greater visibility, enhanced sales andincreasedpenetration.

: Heavy fluctuation in the

price of cocoa is adversely impacting the profitmargins of companies operating in this sector, aschocolate based confectionery generates highersales revenues compared to other two componentsof this sector. The recent hike in sugar price hasbecome another area of concern for the companies,thereby bringing tremendous pressure on theseplayers.

: All most all the globalplayers have been integrating horizontally byacquiring or merging with other food giants in sub

sectors like Kraft bought Danone biscuits, Nestlebought Kraft's Pizza business, thus expanding theirproduct portfolio and increasing reach by usingexistingdistribution networks.

Confectionery brands rely onadvertising for brand building. In fact, TV advertising spendis second highest for theconfectionerysegment.To enhancevisibility, companies engage in ATL activities and focus onBTL as well in order to complement the overall marketingprogramme. Confectionery sales are primarily retail salesthus laying emphasis on point of purchase promotions likeposters, danglers, jars, 3-tier,5-tier stands, as confectionerypurchases are generally driven by impulse. Innovations,limited editions and brand extensions including flavour andtexture developments such as Snickers Cruncher (fromMars) or KitKat Orange (from Nestl) are being launched tosustainconsumer interest.

There is lot of pressure oncompanies to ensure retailers stock their products all thetime to bring about deeper market penetration and thusenabling more products to reach more consumers. There isheavy reliance on convenience stores and other formats of organised trade. In developing nations however small retailoutlets and other unorganized formats like small grocerystores, tobacconists result in thebulk of thesales.Supplyingto fragmented retail channels in developing nations is quitecostly, so it becomes absolute necessary for companies todevelopa comprehensivedistribution network.

1. Highlycompetitivemarketdueto fragmentation2. Plethoraof spuriousproductsavailable3. Huge investments in innovation and new product

development

Chocolates will remain the morepromising area of opportunity for confectionery giantsbecause it lends itself better to the increasingly accessible(high-end, high income) markets. Sugar confectionery willbe next, with the best opportunities being captured byunique novelty/specialty candies. Gum is the challengingcategory going forward, as price pointsarelow, volumes aresmall, distribution costs are high, and competition is fierce.Sugar-free confectionery demand is expected to growrapidly as there is a considerable increase in healthconscious population. In future, the main trend inconfectionery will be of experimenting with flavours andvariety, specifically a growing demand for health benefitsand 'better for you' ingredients, boosting the `natural'credentials of brands through the removal of artificialcolours and preservatives and replacing them with

ingredients such as fruit juices etc. Eco-friendlymanufacturing efforts, like recyclable packaging, willinfluence product development and consumer purchasing.Another factor that companies need to look into is theircommunication strategies. Since in many countries,objections have been raised regardingadvertising to kids, sofuture growthcanbe dependent on creating sweetsthat areaspopularwithadultsaschildren.

byAstha Pasricha

Sukhmani Grewal:

PGDM IB 2009-11

9. Prices of factor inputs

10. Horizontal Integration

Promotional Strategies:

Distribution Strategies:

Issues/challenges

The Road Ahead:



12/21

AVATAR built successful

connectionsand

conversationswith the

visitors onFacebook (closeto 1.3 million

fans), MySpace(close to800,000

friends) and Twitter (over 25,000

followers)e-Globuzz, Volume I, Issue II Jan-March 2010 Page 9

International Marketing

Marketing of AVATARThe movie Avatar directed by famous JamesCameron who made a comeback after 12 yrswas a smashing hit at the box office.According to the Los AngelesTimes, the costof making and marketing this magnum opusfrom the Titanic'' director James Cameronwas $430 million, though some havesuggested $500 million.This state-of-the-artblockbuster which is about an evil 22nd-century corporation raping a pure-utopianplanet, brought healthy profit to its makers,with more to come in line with DVDs, actionfigures, books,videogames, andsequels

Thismoviehas revolutionizedthe 3Dindustry.In India, Reliance BigTV bagged the deal andentered into strategic alliance with Fox StarStudios. As by its very nature movies have ashortlifetimeastheyneedtomakeanimpactin the first week of their release or they areswiped from the minds of consumers. Withworld entering into digital era, it opens theopportunity for the marketers to a widepopulation but this needs to be carefully finetunedtoitslastdetail.

A lot has been talked about the successof themovie. But the strategy and the effort thatwentintothemakingofatrendsetterisworthrevealing. Marketing of the movie was doneat International level with attention paid toeveryminisculedetail.The comeback of a great director JamesCameron itself created curiosity among theviewers. The audience was waiting eagerly tosee the brainchild of James on which he hasspent so much of time.This in itself drew a lotof attention and created a buzz. August 21,2009 was celebrated asAvatar's day with 100IMAX 3-D theaters worldwide showcased 16minutes of footage for the movie. The sameday Ubisoft made a debut with a trailer for avideogame based on the film and Mattelunveiled action figures inspired by the film'scharacters. A day earlier, the teaser for thevery same film broke a record on Apple.comafter bong streamed more than four milliontimesonitsfirstday.The website of the movie was itself creativethat it had all the elements of pull strategy.Visitors had access to more than thestandardfare of trailers, images and backgroundmaterials. The website offered side-scrolling

square boxes that showcase many of thedigital initiatives that make this movie standout. Fans had access to the story, characterbios, the music, and wallpaper downloads;and they also had opportunities to contributecontent and showcase their interest in thefilm -- including Pandorapedia, a wiki for allthings "Avatar," and the previously discussedblogging community. Moreover the self crashof the site by the viewers trying to bookadvance tickets in August added fuel to thefire and in way was related to the concept of the movie, that is, Humans trying to destroy

hometree.Avatar also exploited Social network sites astheyare popularmarketing toolnowadays forlaunch of any new product in the market andthey also have the potential of roping in alarge number of viewers. It built successfulconnections and conversations with thevisitorsonFacebook(closeto1.3millionfans),MySpace (close to 800,000 friends) andTwitter (over 25,000 followers). Due to itswide reach, these sites were able to create

enthusiasm among the viewers and themarketing team ofAvatar fuelled it by addingTweet to Listen" promo that required fans tosend a message onTwitter inorder to listen tomusic from the film. Avatar social mediastrategy also extended toYouTube with closeto 11 million viewers, Flikr with 1 millionviewers and TypePad blogging community(closeto4,000members).Avatar also had interactive trailers added tothe success of the movie. It had 11 points of interaction and provided viewers with oneclick access to each character. Mattel created"Avatar" toys that buyers could activate and"bring to life" through webcams and specialproduct tags, while Coke Zero producedcustom cans that opened up the world of PandoraatAVTR.com.The end result is that "Avatar" is now thebiggest box office movie of all time. Themovie has eclipsed $2 billion in total ticketsales, driven largely by 3-D revenues andinternationalinterest.

by Shilpi Tayal

PGDM IB 2009-11



Q &A Excerpts of talk of Mr O K Kaul, Executive Director, TATA International with Shashi Shekhar and Manish Raj of PGDM IB 2008-10 & Sukhmani and Vikash of PGDM IB 2009-11, SIMSRMr. OK Kaul joined the leather business of TataInternational in 1975.He was promoted to vicepresident of the Leather & Leather Products division in1993 where Tata became the first leather company inAsia to be certified with ISO 9000 and ISO 14000. O K Kaul was later appointed as President of the Leather &Leather Products Business. In April 2009, he wasappointed executive director of Tata International Ltd Worldwide encompassing leather & leather products,engineering and newbusiness opportunities.

Mr. O.K.KaulTata International has many businesses ranging fromaluminium, s tee l, au to components, so la rengineering to trading and modular housing. It'sprimarily a trading organization. We do OpportunityTrading Somebody somewhere wants something,

Tata International fulfils it. Since Tata Internationalhas a strong foothold and sound infrastructure in theAfrican continent; we act as distributor for TataMotors and not its competitor. After all we all fallunder one umbrella-Tata Group. Our role is topromote small companies and is involved in totalsupply chain. Tata International works with a tradingmindsetaddingvalueateachstageofthevaluechain.Tata International runs on a model where itempowers all i ts employees to operate asentrepreneurs. We run Strategy workshops and

sessions wherein each vertical proposes its BusinessPlan for the next five years, this is then discussed withthe whole team. Feedback is taken from otherverticals, the technical team and the seniormanagement on thefeasibilityaspectsof thebusinessplan and only then is it taken forward. This may beconfusing for an outsider but this enables in quickdecisionmaking and allowsforflexibility.

Mr O.K. Kaul: We entered the retail space last year inthe bicycles segment in the north east India. We arealso considering into entering the leather shoes

Mr. O.K. Kaul: TSMG is Tata Group's consulting arm.Tata International provides its local domainknowledge to TSMG in the countries where TIL ispresent. Tata International Ltd scans the country andexplores market opportunities and risks. The alliancebetween TSMG and Tata International enhances the

reach of TSMG in these international markets.Additionally, Tata International provides businessdevelopment and infrastructure support to TSMG forproject execution, local business knowledge andidentifying opportunitiesin these geographies.

segment to begin with and then diversify into leatheraccessories and garments. The move to enter retailspace is triggered by the simple fact that the sheerconsumption drives promising growth rate to Indianretail industry. As of now we are limiting it to Indianmarkets,however wewill expandour operations to fewneighbouring countries, but not in the immediatefuture.

SIMSR STUDENT: Tata Group hasseveral companies indiversified businesses under itsumbrella. Howyoudo

you manage to tap group synergies for growth inInternational Business? Have you ever felt that thepresence of so many companies has proved to bed isadvan tageous to the p rospec ts o f Ta taInternational?

SIMSR STUDENT: Will we see Tata Internationalentering into retail and FMCG sector in the nearfuture? If so, is itgoing tobeIndia specificorabroad aswell?

SIMSR STUDENT: How do you view the marketingalliance in Tata International entered with TataStrategic ManagementGroup?

Students should dirty theirhands in the industry rather

than just focusing onpowerpoint presentations

from day one. They should getinvolved in the entire vicious

circle of activities.Management education adds

value when you have priorwork experience. Internshipshould focus on deliverables

rather than just getting acertificate. And to achieve

deliverables, two months istoo short a time.



MSR STUDENT: How do you view Agriculture as aotential lucrative sector and how can Tataternational leverage its competencies to tap thisctor at a global scale forInternational markets?

MSR STUDENT: Tata International is an end to endCM Solution provider in India through its Joint ventureIESL. Will we see the value chain expanding to tap theoballogistics market of3.5 trillion USD?

MSR STUDENT: What do you think have been thefects of the Copenhagen summit on international

usinessenvironment?

MSR STUDENT: What is your view on Technicalarriers to Trade (TBT) as non-tariff barriers to restrictather exports from developing countries like India,

since average and bound tariffs for leather still remainhigh for developed countries, while forother categoriesithasfallen with theadvent ofWTO.

SIMSR STUDENT: What in your opinion could be the keychanges you would like to see in the currentmanagementeducationin India?

r. O.K. Kaul:. With the population increasing manifoldnd the demand for food soaring, the agriculture sectormands a lot of attention from both the government

odies and corporate sector. Tata International wants toeate a business model whereby it can partner with

niversities to conduct R&D programs to enhanceoductivity in this sector. This project is still in the

ascent stage and it purely depends on the availabilityland and productivity potential. So if there is land

vailable for R&D in Latin America or Africa, we wouldo there and conduct soil-crop fit testing and otherlevant tests. We could collaborate with either foreign

niversities or Indian universities and other IT firms toelp us carry out this project. These projects are longawn and require time and effort to be brought toaturity tomeetitsobjective.

r. O.K. Kaul: Yes, expansion is certainly on the cards.ur next step is to make our global presence felt. Drivewe call it and DIESL as you call, is growing very fast

ndso is the logistics sector. It hasfew organised playersnd the unorganised ones are integrating withganised players to increase value. Moreover, the

gistics sector is directly related to the growth in thetail, hospitality and services sector. Thus with therengthening of these sectors, Logistics and our role toovide value addition to these sectors has immenseope.

r. O.K. Kaul: The greatest achievement of this summitas been that it has been able to create awarenessmong people, governments and the corporate sector.

has helped people to have a GO GREEN mindset.ompanies have started thinking in this direction andauging opportunities to benefit from it too. Issueslated to global warming, carbon emissions andlated aspects such as carbon credits are being talkedout. Tata as a group has worked diligently on theseeas and has given its best to make the world a better

nd greener place to live in. For instance, in the Africanntinent people prefer to deploy solar panels in thew residential and office buildings. We have boardedewagonlong back toaddress this.

Mr. O.K. Kaul: This is specifically a problem with leatherindustry since there have been oppositions by the PETAand other similar organizations. Leather industry isfragmented and issues such as child labour anddegradation of environment have been raised severaltimes. There is a need now for organised players tocome together and be vociferous about their practices.Tata has never been media shy and has been proactiveto communicate its practices and norms to the people.But we need to be more aggressive to showcase ournorms and practices. To sum up, Corporate initiative isthe key in this regard and role of WTO can only beleveraged if theorganization takes the first step.

Mr. O.K. Kaul: Keep yourself updated. READ. Studentsshould dirty their hands in the industry rather than justfocussing on PPT presentation from day 1.They shouldget involved in the entire circle of activities in the totalvalue chain. Management education adds value whenyouhaveprior workexperience. Internship should focuson deliverablesrather thanjustgettinga certificate. Andto achieve deliverables, two months is too short a time.Neither the intern nor the company employee has themotivation to give the best or take the best. AmericanUniversities have mastered these very effectively and

result is clearly evident all over the world. We have totakea cueandemulate thesamehere.

Solution # 01



Debate: COPENHAGEN - Success or Failure for India?

Beforegoing to the15 Conference ofParties (COP) at theDanish capital i.e.Copenhagen Summit, India had threekey objectives.They were: No legally binding emission cuts;No peaking year; No international review of domestic

funded mitigation actions.Also Indian govt said that the outcome of the talk must be within UN frameworkconventiononclimate change (UNFCCC), countriesespeciallydeveloped pollutingcountrieswhoareput inAnnex-IofKyotoProtocol (KP) should stick to it even after its expiry in 2012 and also should abide by the Bali action plan onlong-termcooperativeaction.

Lookingat theoutcomeof theconference which sets global warming target of below 2 temprise than thatof1990 and $100B annual financing byAnnex-Icountries to the developing & poor countries to

fight theclimatechange,one can observe that it doesnotmeet theexpectationsof t h e w o r l d . T h eCopenhagenAccorddoesnot put any legally bindingemissioncutsonanycountry, does not provide anymechanismonhow to achieve the temperaturetargetandhow to raise& finance the fund todeveloping&poornations. Thus, it failed to stick orstrengthen theKP.Also the a c c o r d w a s m a d ebetweenfew(26)countries including India inside closedroomandwasnotacceptedbyall the193participatingparties.

Comingto thepositives fromthis summit, One of the most valuableoutcome has been the guarantee of the continuity of UNFCCC negotiations,whichwillnowcontinueatleast forayear despite the accord. Another success fordevelopingcountries like India was that theyensured thatprimaryagenda of developed countriestodilute theKPprincipleof c o m m o n b u tdifferentiated responsibilities a n d r e s p e c t i v ecapabilitieswerepushedback.Their attemptstodumptheKP andaltersignificantlythetermsofUNFCCCwerenotsucceededat theformal level.The developing countries' position that their voluntarymitigation actions, which arenot financially assisted, will be reported only through periodic national communication and will be reviewed onlydomesticallyhasbeenpartiallypreserved.

BylookingattheobjectivesofIndia&theoutcomeofthesummit,IcaneasilysaythatIndiawasabletomeetitskeyprinciples and was partially successful in others. Now after 3 months of the summit, the Copenhagen accord has

beenendorsedbymore than100 nations, which providesa small boost to the accord.Thus, the summitwas not thelasthopebutit isanimportantbeginningastermedbyUNSecretaryGeneralBanKi-moon.

th

0

Success for Indiaby Abhay K Agrawal, Technologist, GE Energy



Debate: COPENHAGEN - Success or Failure for India?

As Kyoto protocol is about to expire in 2012, a strong conclusion was needed from Copenhagen, to address the globalclimate change. The Final document that emerged from the summit has no firm commitments in it at all. Instead theagreement simply stuck to the normal diplomatic nonsense about the necessity of tackling the problem, reflects theglobal failure.

India had set two distinct goals for itself when deciding its strategy for Copenhagen negotiations. First, it wanted toleave no room for the western media and politicians to paint India as obstructionist. Second, being firmly of the viewthat in the long run India will suffer disproportionately more from catastrophes resulting from global warming, itwanted tocuta deal that would lead tomajor reductions incarbonemissionsworldwide.

Mr. Manmohan Singh went so far as to state in his maiden speech inCopenhagen that India will deliver on its promise of bringing downits 2005 emission intensity by 20 percent by 2020 even if anagreement were not reached in C o p e n h a g e n . T h i ssomehow initially managed to achieve its first goal. But itcan cost dearly to India. On one hand, it will not haveachieved the goal of avoiding e n v i r o n m e n t a lcatastrophes and on the other; it would have ended upcompromising growth and poverty alleviation.

Prime Minister Singh will need to carefully weigh thiscost of India's own mitigation commitments against thebenefits to be reaped from improved commitmentoffers from industrial countries in the negotiations for a finalclimate accord. He must remember that given just 4 percent share inglobal emissions, mitigation by India by itself has virtually no impact onfutureglobalwarming.Hiscommitments will acquire value only if major emitterscountries sign on to an ambitious mitigation agreement. Under existingtechnologies, cuts in emissions or their growth are almost sure to translate intocuts in energy consumption or its growth, which would in turn adversely impactIndia's GDPgrowth andpoverty alleviation.

With India's initial stand, that given the country's lowper-capita emissions, India should not be subjectedto any mitigation commitments Singh went on step-by-step to raise the level of his c o u n t r y ' s v o l u n t a r ycommitments. Afterbringing down emission by 20 %, he proceeded to commit to the goal of holding the averagetemperature increases around the globe to 2C. This was followed by the announcement of eight national missionsaimedat mitigation.

As a part of as yetnon-binding Copenhagen Accord, Singh also accepted theU.S. demandfor submission of mitigationplans& progressreportonmitigation to theUNFCCC. Inprinciple, this provision canbe seen asa firststep towards theconversion of what are currently voluntary steps towards mitigation into internationally mandated commitmentthat Singhhaspromised not toacceptunderany circumstances.

These progressively rising levels of concessions have not led to any improvement in the offer by the United States,which currently stands at cutting it's country's 1990 emissions by merely 3 percent by 2020. This meager U.S.response testifies toSingh's failure toachieve hissecondobjective.

Failure for Indiaby Pratik Jha, Territory Manager, Hindalco Industries Ltd.


17/21

Book Review

e-Globuzz, Volume I, Issue II Jan-March 2010 Page 14

THE NEW AGE OF INNOVATIONTHE KEY TO CREATING VALUE & THE FUTURE GROWTH

The book co-authored by C K Prahalad and M KKrishnan is about co-creation of value by companiesandcustomerstogether.

The fabric of the book is woven from two threads,expressedasformulas. N = 1 meansfocussing ononeconsumer experience at a time"; R = G means that"resources from multiple vendors and often fromaround the globe". N=1, is different from masscustomisation offered by companies. Moreover, therange of skills needed for N=1 approach, can only beachieved by building collaborative networks by

companies. Also, there are certain capacities,capabilities and flexibilities that one needs to build inone's business systems, in one's human capital andone's geographical reach. Prahalad and Krishnanwrite that all firms will access resources from a widevariety of other big and small firmsa globalecosystem. Company's internal focus should be ongaining access to resources, not necessarily owningthem.

Further in the book, the authors emphasize the need

of information and communication technology (ICT)architecture that canconnect business processes andanalytics to data and application. In a rapidlychanging environment business process cannot bestatic. There is a need for continuous innovation.Continuous Analysis is required for insights for nextinnovations in the organizations. They alsoemphasize how legacy systems need to be replacedto make the organizat ion more f lexible toaccommodate the N=1, R=G model. They present acaseoflotofIndiancompanieswhohaveadaptedthis

model and have built flexibilities in their systems.They make a case for the strategic importance of ITand how organizations cannot afford to write it off asacommodity.

Further they explain the mindset changes that themanagers need to go through to accept and be thechange that would enable the organization for thisnew model.They talk about the new requirements intalent management which again needs to be bothflexibleandmobile.Authorsalsotalkabouttheroleof

leadership in bringing in these changes in theorganization.

The chapter on Efficiency and Flexibility highlights achallenge that every company that has ever tried tobe both nimble and efficient has faced. There is a

distinct tension between the two and it is often notresolvable. The chapter also discusses problemsmoving from the old way to the new way. The finalchapter,An Agenda for Managers, promises that theauthor's model is the one that will be the basis forinnovation and value creation. There are some goodadvice like "learn by doing, take small steps" and "Along-term focus with short-term actions is theessenceoforganizationaltransformation."

They include examples of failures and mistakes. Inone powerful example, the authors discuss about a

"major auto supplier" in the U.S shifting the sourcingof variouspartstoChina.Unexpectedly, what seemedlike a clear-cut business decision had a negativeimpact on many levels: The logistics of air-freightingparts from China wiped out any cost benefits, whilethe resulting lack of flexibility and longer lead timesmeant that the company's internal design processalso had to be entirely rethought. The exampleprovides a salient reminder of the importance of stepping back and thinking about the big picture, toconsider the existence of less codified processes and

systems, and to identify and pre-empt the potentialconsequencesofanydecision.

Although, theconcept hasbeenbeautifully packagedand presented, it is tough to fully agree with theuniversality of this concept.At times thebook gives afeeling of being written for IT companies, especiallythosehavingtheirprimarybaseinIndia.Itwouldhavebeen better if there were as many cases or examplesf rom o ld t r ad i tiona l companies who havetransformed or remodeled themselves to adapt to

themodelproposedinthebook.

SometimesThe NewAge of Innovation veers into theacademic speak and formulaic structures so belovedof college professors, and there's a fair amount of managementjargonthatcanbegratingattimes.But,in the main, this is a fairly breezy and informal readthat provides a timely snapshot of a rapidlytransforming business landscape. As the authorsmake clear, thistransformation isneitheroptionalnorreversible. This book provides a valuable primer for

thosewishingtostayonfortheride.

by Parul Shrivastava

Mitul ShahPGDM IB 2009-11



International Business News

India and the European

Union will be entering aFree Trade Agreement(FTA) by the end of thisyear which could open upnew export opportunitiesworth USD 9 billion forIndia. Daniele Smadja,Ambassador, Head of ECDelegation to India, saidthe exact date for signingthe pact would be decidedafter the final round of talks in March. IndianP r i m e M i n i s t e rManmohan Singh and EUCommission PresidentJose Manue l Barrosowould be finalizing theagreementsoonTerming India for its fastemergence as a majorpower in the r eg ion,Smadja said the countryfigured in the EU's list of significant tradingpartners

as one of the first ten

nations. "Once the FTA isf i n a l i ze d , b u s i n e s sbetween the two willgo upseveral fo lds ." Tradebetween India and the EUcurrently stands at 78bil lion euro (USD 107billion), but is still less thanone-fifth the value of theEU's trade with China. Inr e c e nt y e a rs t r ad ebetween India and EUc o un t ri e s h a d b e e ngrowing at 16% a yearcompared to EU's overallgrowth rate of trade of tenper cent on account of thegrowth performance of the Indian economy.

Toyota's recall of almost 8million cars across theworld and the subsequentsuspension of sales and

p ro d uc t io n o f e i gh tmodels with potentialfaulty accelerator pedalshas sent shock wavesthrough the industry.Toyota announced onFebruary 1st that it hadcome up with a cure forthe sticking pedals which,along with badly fittingfloor mats have beenblamed for at least 19deaths and more than2 , 00 0 i n c i d en t s o f u n i n t e n d e d

acceleration. Toyota hasput the cost of the recallsat $2 billion in the firstquarter alone. Toyota's

sales in America las tmonth plunged by 16%compared with a yearearlier, while those of General Motors rose by15% and Ford's by 24%,allowing it to reclaim thenumber-two slot in themarket it lost to Toyota in2 0 0 7 . M r To y o d ap ro mi se d a v is it t oA m e r i c a , t h e c a rcompany's largest market,to see the damage toToyota's reputation for

himself.

Other carmakers, notablyFord and the ambitiousVolkswagen Group, haveclosed the quality gap anda r e o f fe r i n g m o r einteresting cars. It is theworld's best selling hybridcar and Japan's mostpopular new car of all.Around half of the carsaffected by this recall arePriuses in Japan. This willundoubtedly do no goodfor a company that isattempting to maintain itslead in hybrid cars ascompetitors line up tolaunch competing green

models. The charge sheetagainst the companyl e ng t he n s d a il y t o o.Toyota probably faces an

avalanche of class-actionlawsuits in America whichwill prolong the adversepublicity. What is clear forTo y o t a a n d o t h e rcompanies that may findthemselves in a similarposition is that swift anddecisive action may bepainful but less agonisingthan letting a problem boilover and then attemptingtoclear upafterwards.

India-EU FTA to becompleted by Oct 2010

Kraft takeover Cadbury

Cadbury, a leading sweetsa n d c h o c o l a t emanufacturing companyof the world has lost itsindependence after theyaccepted the deal withKraft, one of the foodgiants of the Uni tedStates. As per the reports,the board members of Cadbury has decided tosell the brand to Kraftafter they modified thedeal and increased theamount of money. Thetakeover battle betweenKraft and Cadbury wasgoing on for severalmonths and the finaldecision ultimately camein favour of the KraftCompany.

Though the US foodcompany, Kraft has beensuccessful in acquiringtheownership of Cadbury,

they might have to facechallenges from Hershey.It has been reported thatKraft's next aim would beto persuade the majorstakeholders of Cadbury,as the time for counteroffer will remain open tillJanuary 25. They will havet o a ct c au ti ou sl y a sHershey might use thisopportunity andtry to winthe ownership of thecompany. The takeovercreates fresh worries forCadbury workers in thisc o un t r y, w i t h K ra f tpromising hundreds of millions of dollars inannual savings from thedeal, which analysts saymeans some of Cadbury's

45,000 workers aroundthe world will lose their jobs.

Toyota's ongoing troublesIt's not stopping...



HARMONIZEDSYSTEMS

HUSBANDING

BUNKERADJUSTMENTFACTOR

FORCE MAJEURE

LAYCAN

DUNNAGE

MALA FIDES

JETSAM

ALLRISKS CLAUSE

SNAKELOADING

PRO FORMAINVOICE

FOULBILLOFLADING

A provision thatestablishes internationaluniformity forproductclassifications.

Term used by steamship lines, agents, or port captains who are appointed to handle all matters inassisting the master of the vessel while in port to obtain bunkering, fresh water, food and supplies,payroll for thecrew, doctorsappointments, ship repair, etc.

A Fuel Surcharge expressed as a percentage added or subtracted from the freight amount, reflectingthemovementin themarket place price for bunkers.

The title of a standard clause in marine contracts, exempting the parties for non-fulfillment of theirobligations,as a resultof conditions beyondtheir control, suchasearthquakes, floods,or war.

Stands for "laydays commencing / laydays cancelling" and is a spread of dates which provides for the

earliest datefor the ship toarriveand for laytimetocommence

Materialsof various types,often timberor matting, placedamong thecargo for separation, andhenceprotection fromdamage, forventilation

A seller's representation that goods are usable for a particular purpose, when in fact the seller knowsthatthegoodsarenot.

Articlesfromashiporship'scargothatwerethrownoverboard

An insurance provision, which providesadditional coverage to an Open CargoPolicy, usuallyfor anadditionalpremium.

Loading products into a container in thesequence with which the goods will beunloadedandstored inatdestination.

Draft invoice sent to an importer by theexporter prior to order confirmation andshipment to assist in obtaining importlicences or foreignexchange allocations.

A receipt for goods issued by a carrierbearing a notation that the outwardcontainers or goods havebeen damaged.

Did

theseterms?

you

know



CROSSWORD#02

DOWN1.

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11.

ACROSS

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The process by which a countrybecomes a member of aninternational agreement, suchas theWTO or theEuropeanCommunity.(9)Official discussion with anothergovernment carried out oninstructions. (8)A document that establishes theterms and conditions of a contractbetween a shipper and a shippingcompany under which freight is to bemoved between specified points fora specified charge. (3)

The means companies select toachieve their objectives. (8)An intermediary storage facilitywhere goods are kept temporarily fordistribution withina country or for reexport. (8)The Japanese process of continuousimprovement, the cornerstone of TQM. (6)The practice of charging or payingexorbitant interest on a loan or other

transaction. (5)Taxes on imported goods andservices, levied by governments toraise revenues andcreate barriers totrade. (6)

A government grant that givesinventors exclusive right of making,using, or selling the invention. (6)A document issued by a bank at the

buyer's request in favor of theseller,promising to payan agreed amountof money upon receipt by the bank of conformingdocuments with aspecified time. (3)An agreement among, or anorganizationof, suppliers of aproduct to limit production in orderto minimize competition andmaximize market power. (6)

The treaty, formally known as theTreaty on EuropeanUnion, signed in1992 that led to the unification of many European countries. (10)Korean business groups that aresimilar to keiretsu andalso contain atrading company as part of thegroup. (7)The actof seizing commercialexchange with a particular country.Such act is common during wartime.(8)In an acquisition or merger, when thevalue of the combination is greaterthan thesumof the individual parts.(7)

A form of corporateacquisition inwhich one firm absorbs another andthe assets and liabilities of the twofirms are combined. (6)

Collaborative groups of vertically andhorizontally integrated firms withextensive sharecross-holdings andwith a major Japanese bank orcorporation at the center. (8)A community made up of Bolivia,Colombia, Ecuador, Peru andVenezuela. (6)An arrangement which establishesunimpeded exchange and flow of goods and services between trading

partners regardless of nationalborders. (3)A simultaneous spot andforwardforeign exchange transaction. (4)A treatybetween two countries toensure that investments between thetwo countries receive the sametreatment as domestic or otherinternational investments. (3)A domestic tax assessed on themanufacture, sale, or use of acommodity within a country.Usuallyrefundable if the product is exported.(6)


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E-globuzZ Vol1 Issue2