eijmms volume - 02 issue - 05 ( may, 2012 )

EXCEL International Journal of Multidisciplinary Management Studies

Vol.2 Issue 5, May 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/

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EXCEL INTERNATIONAL JOURNAL OF MULTIDISCIPLINARY MANAGEMENT STUDIES

(EIJMMS)

VOL. 2 - ISSUE 5; MAY 2012

S.NO. CONTENTS PAGE

1.

INCREMENTAL INFORMATION CONTENT OF CASH FLOWS VERSUS FUNDS

FROM OPERATIONS AND EARNINGS: APPLYING NEW METHODOLOGIES IN

FRENCH CONTEXT

KHALID ELOUAFA

1-13

2.

A STUDY ON CUSTOMERS’ SATISFACTION TOWARDS BSNL LANDLINE

SERVICES IN SALEM CITY, TAMIL NADU

M.GURUSAMY, A.VELSAMY, DR.N.RAJASEKAR

14-28

3.

IMPORTANCE TO MAINTAIN A LEVEL OF SECRECY IN CORPORATE SECTOR

IN THE BACKGROUND OF ARTHASASTRA

SMT. DEBASHREE MAHAPATRA, DR. SANJIT KUMAR DAS

29-36

4.

BRAND IMAGE, CUSTOMER SATISFACTION AND LOYALTY INTENTION:

A STUDY IN THE CONTEXT OF COSMETIC PRODUCT AMONG THE PEOPLE

OF CENTRAL INDIA

SATENDRA THAKUR, DR. A. P SINGH

37-50

5.

CAPITALISM v. NEO CAPITALISM A COMPARISON OF POLICIES OF WORLD

BANK AND RBI

DR. SHOBHALATA V. UDAPUDI, BARNIK GHOSH

51-63

6. DIVERSIFICATION - STRATEGIES FOR MANAGING A BUSINESS

P. KANNAN, DR. R.SARAVANAN

64-73

7. EMERGENCE OF CORPORATE GOVERNANCE IN INDIA

C.UDAYA KUMAR RAJU, M. SUBRAMANYAM, HIMACHALAM DASARAJU

74-90

8.

SOCIAL MEDIA MARKETING IN INDIA – CREATING NEW GROUNDWORK IN

MARKETING INNOVATION

KHUSHBU PANDYA

91-99

9. CORPORATE GOVERNANCE IN INDIA: EVOLUTION AND CHALLENGES

DR. ANSHUL SHARMA, MS. POOJA GUPTA

100-119

10.

GLOBALIZATION & NEW POLITICAL-CULTURAL IDENTITY

RAHMAT ABBASTABAR MOGHRI, G.T.RAMACHANDRAPPA

120-131

11. 100% FDI IN SINGLE-BRAND RETAIL OF INDIA- A BOON OR A BANE?

J.J.SOUNDARARAJ

132-146

12.

TRAINING NEEDS IDENTIFICATION OF NURSING STAFF – A CASE STUDY OF

A HEALTH CARE ORGANIZATION

DR. V.RAMA DEVI, M.MALLIKA RAO

147-153



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13.

AN EXPLORATORY STUDY ON MEASURING IMPACT OF INTERNET ON

STUDENTS’ ACADEMIC LIFE OF S.P. UNIVERSITY

RINA DAVE

154-167

14.

GREEN PRODUCT LIFE CYCLE TO CALCULATE THE GROSS DOMESTIC

PRODUCT POLLUTION OF A COUNTRY

S. RAJASHEKHAR

168-172

15. INCLUSIVE ECONOMIC GROWTH IN INDIA: ISSUES AND CHALLENGES

MR.CH.PRASHANTH, DR.G.SHASHIDHAR RAO

173-183

16. GREEN MARKETING

MRS. FATI SHAFAAT, ARIF SULTAN

184-195



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1

INCREMENTAL INFORMATION CONTENT OF CASH FLOWS VERSUS

FUNDS FROM OPERATIONS AND EARNINGS:

APPLYING NEW METHODOLOGIES IN FRENCH CONTEXT

KHALID ELOUAFA*

*Assistant Professor,

Cadi Ayyad University,

Marrakesh, Morroco.

ABSTRACT

The purpose of our study is to examine the information content of cash flows versus funds from

operations and earnings in the French context. By applying two methodologies relating to linear

and nonlinear models, our work analyzes the capacity of these accounting measures to explain

stock returns of French listed companies in the SBF120 index. Our results relating to linear

models show that cash flows and funds from operations have incremental information content

while nonlinear models note that these accounting measures have incremental information

content only in the case of extreme variations. In addition, the results note that earnings have

incremental information content in the case of moderate variations. One can infer that market

participants in French context use and appreciate information contained in cash flows to evaluate

firms’ performances especially when they show extremes variations.

KEYWORDS: Incremental information content, cash flows, funds from operations, earnings,

stock returns, French companies.

______________________________________________________________________________

INTRODUCTION

During the last two decades, one witness a growing interest of researchers to information

contained in cash flows, funds from operations and earning. However, this topic in France is not

widely considered by researchers. The studies relating to information content are retrospective

and are based on efficiency hypothesis, i.e. the stocks prices reflect all information available on

the market. Generally, there are two forms of studies: 1/ reaction studies, they are based on short

event windows (for example, 8 days until one month) and measure the market reaction following

the disclosure of accounting information and 2/ association studies, they are based on long term

windows (for example, one quarter or one year) and calculate the degree of correlation between

stock returns and accounting measurements.

Prior studies concerning information content of cash flows have assumed a linear relationship

between this accounting measurement and stock returns and did not document conclusive results

about the presence of incremental information content in cash flows (Rayburn, 1986; Bowen,

Burgstahler and Daley, 1987; Wilson, 1986, 1987 et Bernard and Stober, 1989).However, the

recent studies have taken the presence of transitory components into account and have assumed a

non linear relation between accounting information and stock returns (Freeman and Tsee, 1992;



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Ali and Zarowin, 1992; Ali, 1994; Cheng and al., 1996); they note the presence of incremental

information content for cash flows especially in the case of moderate variations.

Our results confirm those documented in several studies applying the control of extreme

variations; thus, earnings have incremental information content only when they show moderate

variations. However, the cash flows and funds from operations show a similar behaviour, they

have incremental information content only when they have extremes variations.

The rest of this paper is organized as follows: section 2 presents hypothesis. Section 3 discusses

linear models. Section 5 presents variable definitions, sample selection and descriptive statistics.

Section 6 shows results relating to linear models. Section 7 describes non linear models. Section

8 shows results concerning non linear models. Section 9 concludes the paper.

1. HYPOTHESIS

One of the major concerns of investors is the appreciation of the firm’s capacity to generate cash

flows in order to face its own exploitation, investment and financing needs, and to remunerate

shareholders by taking into account risk rate of equity which is placed in firm’s capital. In

addition, the investors placed on the market seek for any useful information which enables them

to form and adjust their anticipations; so the cash flows information shows advantage that is not

affected by accounting conventions compared to other accounting measurements based on

accruals (earnings and funds from operations). Therefore, I assume that information contained in

cash flows is in eyes of investors relevant to form and adjust theirs anticipations. Moreover, this

information is differently assessed by investors compared to that contained in the net income or

funds from operations. Consequently, one expect a positive relation between the change of cash

flows and abnormal returns.

H1: Cash flow from operations likely has incremental information content beyond that contained

in earnings or funds from operations.

H2: The information contained in cash flow from operation is likely to be differently assessed by

investors compared to information contained in earnings or funds from operations.

Incremental information content of cash flows, funds from operations and earnings: application

of linear models

Prior studies on incremental information content of cash flows, funds from operations and

earnings are generally applying linear models (Rayburn, 1986; Bowen, Burgstahler and Daley,

1987; Wilson, 1986, 1987 et Bernard and Stober, 1989) and show incremental information

content of accounting measurements based on accruals –earnings and funds from operations–

while they don’t report conclusive results about cash flows measurements. In order to compare

the results of prior studies to those of our study, I use the following linear models:

Model 1: itittittit uCFOaEaaAR 210

Model 2: itittitttit uFFObEbbAR 210



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Model 3: itittitttit uCFOcFFOccAR 210

Where ARit is the abnormal stock returns of firm i in period t (beginning in the April of year N-1

and ending in the March of year N), its calculation is presented below; ΔEit is change in

earnings; ΔCFOit is change in cash flow from operations and ΔFFOit is change in funds from

operations. All variables are deflated by beginning-of-period market value of equity.

The abnormal returns are defined as follows:

ARit= Rit – Rmt

Where Rit is the cumulated returns of firm i in period t (from April of fiscal year N-1 to March of

fiscal year N), it’s estimated from monthly returns (Rim): 1)1(0

im

n

mit

RR ; and RMt

represents the index market return in period t.

2. VARIABLE DEFINITIONS, SAMPLE SELECTION AND DESCRIPTIVE

STATISTICS

Accounting variables (earnings, funds from operations, cash flow from operations) are gathered

from annual financial statements disclosed in annual reports for [2000-2006] period, because in

France the imposition of cash flow statements disclosure came into force in 2000. The annual

reports are downloadable on the site of the Authority of Financial Market (AMF) or from

companies’ web sites. Earnings are defined as income before extraordinary items; funds from

operations correspond to operating profit before working capital changes; and cash flows are

defined as net cash flow from operating activities. On the other hand, stock exchange

information (stock price, dividend and returns) is obtained from database DataStream for the

period [2000-2006].

Our sample consists of French companies listed on the SBF120 index of Euronext Paris

exchange. Because of their accounting specificities, the financial companies are excluded from

the sample as well as the observations whose absolute value of their change is higher than 1.

Moreover, I eliminate all companies whose fiscal years are not closed at 31 December. Thus, I

obtain 436 annual observations corresponding to 75 companies for the period [2000-2006]

(Insert table 1 here).

The descriptive statistics in table (2) point out that the average of earnings (0,0728) is lower than

that of funds from operations (0,1980) and cash flows from operations (0,1894) –given that all

explanatory variables are deflated by beginning-of-period market value of equity. This result can

be explained by the fact that earnings include short and long term accruals which generally

decrease their values. The table (1) also shows that standard deviation of cash flows (0,5560) is

higher than that of earnings (0,4894). This result confirm those noted by Dechow (1994) and

Dechow et al. (1998), assuming that by accruals earnings are less volatiles than cash flows.

However, accruals can be used by managers to convey their own information and offer them an

opportunity to manipulate accounting measures. In addition, the averages of three accountings



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measures present values close to their last quartiles, (0,0728) versus (0,0863) for earnings;

(0,1980) versus (0,1907) for funds from operations; and (0,1894) versus (0,1829) for cash flows

from operations; this means that almost 75% of our observations are lower than the average of

their distribution and almost 25% are higher than the average of their distribution. Thus, the

presence of high variations seems inevitable and can affect the robustness of our linear

regressions (Easton and Harris, 1991; Ali and Zarowin, 1992; Ali, 1994; Cheng and Yang,

2003..).

In addition, the bilateral correlation analysis between abnormal returns and explanatory variables

(table 3) shows a positive and not statistically significant correlation for changes in cash flows

(0,098) and changes in funds from operations (0,093) at 0,01 level. However there is a negative

and not statistically significant relationship between changes in earnings and abnormal returns. It

can also be seen that there are positives and statistically significant relationships between

independent variables but they are not so strong to compromise our regressions by causing

multicollineraty problem.

(Insert table 3 here)

3. REGRESSION RESULTS OF LINEAR MODELS

Prior works on the incremental information content of earnings, funds from operations and cash

flows commonly apply linear models and note a presence of incremental information content for

accounting measures based on accruals while they don’t report a conclusive result for cash flows

measures. In the same way, I estimate in the French context the linear models provide both a

basis for comparing my results with those of prior studies and a benchmark for comparing the

results of the non linear model used in this study. Following prior studies, I use changes in

earnings, funds from operations, and cash flows as measures of their unexpected values to obtain

the following models:

Model 1: itittitttit uCFOaEaaAR 210

Model 2: itittitttit uFFObEbbAR 210

Model 3: itittitttit uCFOcFFOccAR 210

I consider only changes in accounting measures because they allow to better capture their

behaviours, especially in the case of presence of permanent component into variables. Thus, I

assume implicitly that the three variables are only composed by permanent component.

However, in the case of dominance of transitory component into variables, it is their value which

permits to capture their behaviours rather then their change (Easton and Harris, 1991; Ohlson,

1989; Ali and Zarowin, 1992a and Cheng and Yang 2003).

Table (4) reports the regression estimates of models 1, 2 and 3. The results relating to model (1)

show as expected that cash flows have incremental information content beyond earnings. Thus,

one can deduce that change in cash flows can explain the price changes that are assumed to

reflect market anticipations. In addition, the coefficients equality tests point out that the null



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hypothesis can be rejected at 5% level. Consequently, the investors placed on the market assess

differently the information contained in cash flows compared to that contained in earnings.

However, and contrary to the prior studies, our results show the earnings don’t have incremental

information content beyond cash flows.

The estimate of regression (2) confirms that funds from operations as well as cash flows have

incremental information content beyond earnings, they show a positive and statistically

significant coefficient 0,263 (2,027). On the other hand, earnings don’t have incremental

information content beyond funds from operations. In addition, the test of coefficients equality

(table 5) confirms that the information contained in funds from operations can be differently

assessed by investors comparing to information contained in earnings. Thus, one can suggest that

investors appreciate and have a great interest in information contained in funds from operations.

On the other hands, the estimation of regression (3) does not confirm a presence of incremental

information content for cash flows as well as funds from operations. Moreover, the Wald test can

not reject the null hypothesis so one conclude that investors do not assess differently the

information contained respectively in theses two accounting measures.

From the estimates of the linear regressions presented above one can conclude that cash flows

and funds from operations show a similar behaviour so they have incremental information

content beyond earnings. Moreover, the information contained in each measure is differently

assed by participants on the market compared to that contained in earnings. On the other hand,

earnings do not have incremental information content beyond cash flows or funds from

operations. This result can be explained both by the fact that information about earnings of big

companies can be provided to the market by several channels (interim reporting, financial

news..) or by the effect of presence of the transitory component in earnings measure. In addition,

cash flows and funds from operation do not show incremental information content and they not

differently assessed by investors on the market. Nevertheless, the linear regressions do not take

into account a presence of extreme values in accounting measure; for this reason, one witness the

appearance of news methodologies which milked with the nonlinear model.

4. APPLICATION OF NON LINEAR MODELS

The prior studies on incremental information content of accounting measure are commonly

applied linear models, but this methodology can be relevant only in the case of absence of

transitory component in the variables (Brooks and Buckluster, 1976 and Freeman, Ohlson and

Penman, 1982). In other words, the correlations between the abnormal returns and accounting

measures might be affected by the presence of extreme variations. According to Ali (1994), the

majorities of former studies adopt linear models and confirm the presence of incremental

information content for earnings but not for cash flows. These results reflect the relation between

the price changes and transitory component in earnings rather than its permanent component, and

thus they are not conclusive. In order to consider the presence of transitory components in

accounting measures, the new methodologies are implemented; they concern the application of

non linear models (Freeman and Tsee, 1992; Ali, 1994; Cheng et al, 1996 and Cheng and Yang

2004). These models allow noting that the marginal reaction of stock prices to change of

accounting measures decrease with the increase in the absolute value of this change.



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The application of nonlinear models implies the consideration of the magnitude of change in

accounting measures and their tendency (transitory or permanent). Following Ali (1994) and

Cheng and Yang (2003), I classify the variables (earnings, cash flows and funds from operation)

to two groups: 1- group of extreme change or high group (the absolute value of variable change

is higher than its median); 2- group of low change or low group (the absolute value of variable

change is lower than its median).

Because of the significant level of correlation between cash flows and funds from operation, I

limit our analyse to, firstly, information content of cash flows versus earnings and, secondly, to

information content of funds from operations versus earnings. Thus, I estimate the nonlinear

models as follows:

Models 4: it

CFO

ittitt

E

ittitttituDCFOaCFOaDEaEaaAR **

43210

Model 5: it

FFO

ittitt

E

ittitttituDFFObFFObDEbEbbAR **

43210

Where the binary variable DE (DFFO, DCFO) is one when its observation belongs to the high

group and zero in the case of low group. All explanatory variables are deflated by market value

of equity at the beginning of year t.

Following prior works applying new methodologies (Freeman and Tsee, 1992; Ali 1994; Cheng

et al 1996 et Cheng et Yang 2003), I assume that extreme values of accounting measure are

generally transitory and less informative. Thus, the absence of incremental information content

noted for earnings in our linear models might be due to the presence and domination of extremes

values in this measure. Consequently, the cash flows and funds from operation have incremental

information content beyond earnings. In other words, they play a complementary role if the

earnings are less informative; hence, the informational importance of these two accounting

measures.

5. RESULTS RELATING TO NONLINEAR MODELS

THE INCREMENTAL INFORMATION CONTENT OF CASH FLOWS VERSUS

EARNINGS

The incremental information content of earnings (cash flows) for the low group and high group

can be deduced respectively from the coefficients a1 (a3) and the sum of coefficients a1+a2

(a3+a4). The estimate of regression (4) (table 6) shows that the marginal reaction of stock price

to the earnings change in the high group -6,278 (-1,784) is lower than that concerning low group

6,232 (1,771). However, for cash flows, the marginal reaction of stock price is not significant for

two groups. Moreover, the estimate of nonlinear model point out that its explanatory power is

higher than that of linear model (R² adjusted is 0,021 versus 0,012).



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The incremental information content analysis of cash flows and earnings allows to note that

earnings of low group have incremental information content beyond cash flows a1 = 6,232

(1,771). However, earnings of the high group do not have incremental information content

a1+a2= -0,046 (t = -0,858 = a1+a2/σa1+a2). On the other hand, cash flows do not show incremental

information content for the low group a3 = -0,225 (t = -0,123) whereas they have incremental

information content for the high group a3+a4 = 0,207 (t = 7,096).

These results confirm those noted in previous studies, so earnings are less informative in the case

of extreme values. Therefore, one can suggest that cash flows would have incremental

information content when earnings show extreme values. In other words, the market participants

use and appreciate information contained in cash flows when earnings have extreme and

transitory values.

THE INCREMENTAL INFORMATION CONTENT OF FUNDS FROM OPERATIONS

VERSUS EARNINGS

The incremental information contents of earnings (funds from operations) for low group and

high group can be obtained respectively from the coefficients b1 (b3) and the sum of coefficients

b1 + b2 (b3 + b4). Similarly to the results relative to model (4), the estimate of model (5) (table

7) confirms a weak marginal reaction of the price to the extreme variations of earnings -6,810 (-

1,901) compared to that of low variations 6,751 (1,885). In addition, the explanatory power of

model (5) is higher than that of model (4) and the linear model (2) (adjusted R² =

0,024>0,021>0,013).

From the incremental information content analysis relating to earnings and funds from operations

notes a similarity in funds from operations and cash flows behaviors compared to earnings. Thus,

funds from operations show incremental information content beyond earnings only in the case of

presence of high variations b3+b4=0,255 (t = 10,851= b3+b4/σb3+b4). However, for the group of

low variations, funds from operations do not have incremental information content beyond

earnings -2,180 (-0,826). Moreover, the earnings have incremental information content for the

low variations group b1 = 6,751 (1,885) and not for the group of high variations b1+b2= -0,016

(t= 0,298). Thus, the earnings, contrary to funds from operations, are not informative when it is

the subject of high variations.

By estimating model (5), one conclude that earnings have incremental information content

beyond funds from operations only when they represent moderate variations. On the other hand,

FFO expresses a similar behaviour to cash flows, so they have incremental information content

beyond earnings only in the case of presence of high variations. These results suggest that

investors appreciate the information contained in earnings when they show moderate variations;

whereas in the case of high variations, it is the funds from operation information which fill the

information gap and, consequently, shows incremental information content.

To recapitulate, the estimate of nonlinear models note that earnings have incremental

information content beyond cash flows and funds from operation only when they show moderate

variations. However, cash flows and funds from operations have incremental information content

beyond earnings only when they have extreme variations. Moreover, cash flows and funds from



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operations express similar behaviour in term of their information content compared with

earnings.

THE INFORMATION CONTENT OF CASH FLOWS AND FUND FLOWS AFTER

CONTROLLING FOR EARNINGS EXTREMITY

In order to precisely determine for which degree of earnings variation, cash flows and funds from

operations have incremental information content; I re-estimate models (4) and (5) after

separating our sample into two groups as a function of the extent of earnings variations :

moderate variations (group 1) and extreme variations (group 2). The results are presented in table

(8).

(Insert table 8 here)

After controlling for the earnings variations, the results reported in table (7) confirm those

reported above, so for the first group the earnings have incremental information content beyond

cash flows and funds from operations. However, cash flows and funds from operations have

incremental information content beyond earnings only when they show extreme variations. For

the second group, the earnings do not have incremental information content beyond the two other

accounting measures, this results is consistent with the prior studies (Freeman and Tsee, 1992;

Cheng et al., 1996 and Cheng and Yang, 2003); thus the earnings are less informative when they

show extreme variations. In this case, I suggest that cash flows and funds from operations would

fill the information gap and contain incremental information. Nevertheless, the results point out

that cash flows and funds from operations have incremental information content only when they

present extreme variations.

In addition, the complementary tests, after controlling for the extent of cash flows and funds

from operations variations, note and confirm our results i.e. the earnings have incremental

information content only when they present moderate variations, whatever the extent of cash

flows and funds from operations variations. On the other hand, the cash flows and funds from

operations have incremental information content only when they have extreme variations,

whatever the variation of earnings.

These results follow the deduction that investors on the market appreciate the information

contained in earnings when they present moderate variations. This is consistent with previous

studies, based on time series, which have noted that moderate variations of earnings are rather

permanent and more informative. On the other hand, the investors appreciate the information

contained in cash flows and funds from operations only when their variations are extremes, and

whatever the extent of earnings variations. This last result is not consistent with those noted by

Ali (1994) and Cheng and Yang (2003) who argue that cash flows have incremental information

content beyond earnings only when they present moderate variations.

CONCLUSION

The study of cash flows information content versus other accounting measures is an issue of

great interest as regards to investments decisions. It provides knowledge if the investors

appreciate this information compared to that contained in measures based on accruals. If several



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studies confirm the capacity of earnings to explain stock return, the presence of incremental

information content of cash flows is rarely documented. Within the framework of these works, I

try to analyze the information content of cash flows versus earnings and funds from operations in

the French context. The results point out the presence of incremental information content for

cash flows only when they show extreme variations. Therefore, the investors agree a great

importance to this information especially when it experiences extreme variations.

Certainly, our study presents some limits relating to, firstly, association study which can

describes the tendency of association between accounting measures and stock prices variations

rather than the reaction of stock prices to accounting disclosures; secondly, to weakness of

explanatory power of models, it does not exceed 4% and, thirdly, to size of our sample (75 listed

companies) which is relatively weak to produce conclusive results on the whole of French listed

companies.

In spite of these limits, this study constitute, to our knowledge, one of the rare studies on

information content of cash flows disclosed in the French context. Thus, I hope that our study

will draw researchers’ attention of cash flows information importance, in term of its content and

its predictive ability; especially in an international context characterized by calling into question

the credibility of accounting information.

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Research, Vol 24, pp. 165-200.

Wilson, E. (1987), "The incremental information content of accruals and cash flows after

controlling for earnings", The Accounting Review, Vol. 62 No. 2, pp. 293-322.



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TABLE 1

Year Number of observations

2005 74

2004 75

2003 74

2002 72

2001 71

2000 70

Total 436

TABLE (2): DESCRIPTIVE STATISTICS

Average Standard

deviation

1st

quartile

Median 3rd

quartile

- Abnormal returns (ARit)

0,1073

0,4785

-0,1485

0,0362

0,2585

- Change in earnings per share (ΔEit)

-0,0025 0,6999 -0,0203

0,0021 0,0294

- Change in funds from operations per

share (ΔFFOit)

-0,0102

0,2639

-0,0314

0,0019

0,0402

- Change in cash flows from operations

(ΔCFOit)

-0,0058

0,3057

-0,0393

0,0056

0,0546

- Earnings per share (Eit) 0,0728

0,4894

0,0227

0,0533

0,0863

- Funds from operation per share

(FFOit)

0,1980

0,5845

0,0623

0,1124

0,1907

- Cash flows from operations (CFOit) 0,1894

0,5560

0,0517

0,1044

0,1829



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TABLE (3): PEARSON CORRELATION BETWEEN VARIABLES

ARit Δ(Eit) Δ(FFOit) Δ(CFOit)

-Abnormal returns (ARit)

1

-0,034

0,093

0,098

- Change in earnings Δ(Eit)

1 0,292** 0,158**

- Change in funds from operations Δ(FFOit)

1 0,780**

- Change in cash flows from operations

Δ(CFOit)

1

**: Correlation is significant at the 0.01 level (2-tailed).

TABLE (4): REGRESSION RESULTS OF THE INCREMENTAL INFORMATION

CONTENT OF EARNINGS, FUNDS FROM OPERATIONS AND CASH FLOWS

Intercept ΔEit ΔFFOit ΔCFOit Adjusted R²

Model (1)

coefficient

(t-stat)

0,180

(5,504)

-0,045

(-0,948)

0,214

(1,972)*

0,012

Model (2)

coefficient

(t-stat)

0,181

(5,546)

-0,056

(-1,208)

0,263

(2,027)*

0,013

Model (3)

coefficient

(t-stat)

0,181

(5,515)

0,098

(0,494)

0,131

(0,767)

0,010

*: is statistically significant at 5% level.

TABLE(5): COEFFICIENTS EQUALITY TEST

Wald test

21 aa

F-stat

Chi-square

16,589

16,589

Prob

Prob

0,000

0,000

21 bb F-stat

Chi-square

15,271

15,271

Prob

Prob

0,000

0,000

21 cc

F-stat

Chi-square

0,169

0,169

Prob

Prob

0,680

0,680



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TABLE (6): ESTIMATE OF NONLINEAR MODEL RELATIVE TO EARNINGS AND

CASH FLOWS

Model (4) : it

CFO

ittitt

E

ittitttituDCFOaCFOaDEaEaaAR **

43210

Intercept (a0t) a1tΔEit a2tΔEit*D

E a3tΔCFOit a4tΔCFOit*D

CFO

Adjuted-

R²

Coeff.

t-stat

0,178

(5,439)

6,232

(1,771)**

-6,278

(-1,784)**

-0,225

(-0,123)

0,432

(0,236)

0,021

**: Statistically significant at 10% level

TABLE (7): ESTIMATE OF NONLINEAR MODEL RELATIVE TO EARNINGS AND

FUNDS FROM OPERATIONS

Model (5) : it

WCFO

ittitt

E

ittitttituDWCFObWCFObDEbEbbAR **

43210

Intercept (b0t) b1tΔEit b2tΔEit*D

E b3tΔFFOit b4tΔFFOit*DFFO Adjusted R²

Coeff.

t-stat

0,180

(5,508)

6,751

(1,885)**

-6,810

(-1,901)**

-2,180

(-0,826)

2,435

(0,922)

0,024

**: Statistically significant at 10% level

TABLE (8): ESTIMATE OF MODELS (4) AND (5) AFTER CONTROLLING FOR

EARNINGS EXTREMITY

Δ (E) Δ (CFO) Δ (FFO)

Adjusted

R²

moderate extreme moderate extreme moderate extreme

Gro

up

(1)

Model (4)

6,360 (1,869)**

-1,381 (-0,627)

0,484 (22,201)*

0,031

Model

(5) 5,489

(1,529)** -0,080

(-0,025) 1,056

(69,513)* 0,034

Gro

up

(2)

Model (4)

-0,044 (-0,911)

1,882 (0,612)

0,205 (4,297)*

0,022

Model

(5) -0,057

(-1,136) -4,404

(-1,031) 0,247

(6,0687)* 0,027

*: Statistically significant at 5% level.

**: Statistically significant at 10% level.



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A STUDY ON CUSTOMERS’ SATISFACTION TOWARDS

BSNL LANDLINE SERVICES IN SALEM CITY, TAMIL NADU

M.GURUSAMY*; A.VELSAMY**; DR.N.RAJASEKAR***


Department of Management Studies, Paavai College of Engineering,

Pachal,Namakkal – 637018.

**Associate Professor, Sona School of Management,

Salem – 636005.

***Professor and Head,

Department of Business Administration,

Thiagarajar College, Madurai – 625009.

ABSTRACT

The customer satisfaction is the main goal of every business organization. In this competitive

business scenario each and every activity starts and ends with the customer. In the present

scenario, the telecommunication is lifeblood for every business activities. Even in this industry

there prevails a stiff competition between the service providers. The objectives of the study are to

study the customer satisfaction level towards BSNL landline services; the influence of

demographic variables of the respondents; usage level of various BSNL schemes; the operational

performance; The major purpose of descriptive research is description of state of affairs, as it

exists at present. Simple random sampling method is used to collect data. The size of the sample

is 200. The respondents of the study are part of population of Salem city. Both primary and

secondary data is used. The data has been mainly analyzed by using the Weighted Average

Method, Ranking Method and Chi – Square Test. most of the respondents are not much satisfied

with the features of the phone provided by BSNL when compare to other private landline

providers, significant weight age should be given by the BSNL. Most of the respondents are not

aware of various schemes. It is identified that the service provided by BSNL is at satisfactory

level to the respondent’s. But most of the respondents are not satisfied with the features of the

phone. BSNL should focus on the promotional measures as equal to the private service providers

to enhance their service activity to satisfy their customers.

KEYWORDS: Telecommunication, Demographic variables, Landline services, Promotional

measures and Customer satisfaction.

______________________________________________________________________________

INTRODUCTION

Telecommunication is recognized, world over, as a key factor in the development of social,

economic, commercial and cultural activities. The development of telecommunication

infrastructure is likely to play a greater role in meeting the diverse needs of people and

improving their quality of life through inter-linked development of many other sectors. The term



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‘Telecommunication’ in ITU parlance covers a very wide variety of services such as sound &

television broadcasting, space communications, aeronautical and maritime mobile

communications, radio-location and radio-navigation systems, radio astronomy, meteorological

aids and services, radio amateurs, etc, besides the public telecommunications services. There are

large telecommunication networks belonging to railways, defence and para-military

organizations, law and order services (police etc), public utility organizations like electricity

grids, transport organizations, municipal services, national and international telecommunications

service providers – both government and private, civil aviation department and airlines, shipping

& port authorities, sound and TV broadcasting organizations, meteorological department, oil

exploration, processing and distribution companies, large private companies, etc.

REVIEW OF LITERATURE

CUSTOMER SATISFACTION

Customer Satisfaction, a business term, is a measure of how products and services supplied

by a company meet or surpass customer expectation. It is seen as a key performance indicator

within business and is part of the four perspectives of a Balanced Scorecard.In a competitive

marketplace where businesses compete for customers, customer satisfaction is seen as a key

differentiator and increasingly has become a key element of business strategy.There is a

substantial body of empirical literature that establishes the benefits of customer satisfaction for

firms.

MEASURING CUSTOMER SATISFACTION:

Customer Satisfaction, a business term, is a measure of how products and services supplied

by a company meet or surpass customer expectation. It is seen as a key performance indicator

within business and is part of the four perspectives of a Balanced Scorecard.In a competitive

marketplace where businesses compete for customers, customer satisfaction is seen as a key

differentiator and increasingly has become a key element of business strategy.

CUSTOMER SERVICE PLAN

Maintaining an effective customer service program is one of the biggest challenges faced

by managers in the current environment. Today, managers are faced with cutbacks in personnel,

workforce reshaping, and lack of funds for adequate training. These constraints, although

serious, must not be allowed to compromise customer service. Developing an effective customer

service plan and instilling a commitment to it within the organization are key to the management

process.

Once developed and implemented, the plan helps to overcome other obstacles. Success

breeds success, and in the service business there is no greater success than a satisfied customer.

Therefore, managers should alwaysconsider the impact of how an effective customer service plan

can help them to meet their goals.

Enlightened managers fully recognize the relationship between a sense of ownership and

positive results. Organizations may vary greatly in their methods to establish and maintain a



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customer service plan, but individual loyalty to the concept and personal effort ensure its

success. This requires the enthusiastic involvement and support of top management, as well as

the active solicitation and input of ideas from all members of the organization.

Once in place, the plan becomes a framework to evaluate the effectiveness of the

organization to meet customer needs and provides a standard for recognizing individual

performance. It should be tailored to meet the goals and objectives of the organization and

should identify a way to measure and evaluate results.

Clearly defined objectives provide the parameters and are essential for evaluating

performance. For example, measuring planned against actual accomplishments indicates whether

objectives are met and provides information on the validity of the process.

Feedback from customers provides a valuable tool for measuring customer satisfaction

relative to the professionalism of the provider and the relevance and timeliness of the service.

As with any plan, be realistic, periodically review, and make adjustments when necessary.

Think of the plan as being cyclical: define, schedule, allocate, oversee, measure, and modify or

change. Define objectives, schedule times, allocate resources, oversee the process, define a

means to measure and evaluate, and finally, modify or change. The objective is not to achieve

perfection at the outset, but to provide a framework for building and improving as you progress

toward a realistic and workable plan.

Starting out with a simple plan is easier to implement and allows for more flexibility;

details can be added later. The validity of the plan to reach the objectives should be reviewed

during various stages. Consider lessons learned, and don't hesitate to incorporate changes based

on findings from milestone reviews.

As a customer service plan develops, there will be to encounter challenges. We plan to

succeed when outlining a strategy to implement our goals, and we must include within that

strategy a plan to overcome obstacles.Lack of funds for training is a significant challenge for

managers today, but most will agree that training is an integral part of performance. So a strategy

to overcome this obstacle might include looking within our own organizations for answers.

There are individuals within most organizations who have a depth of institutional

knowledge as well as organizational expertise. These individuals will no doubt be very familiar

with the organization's goals and objectives and will be instrumental in developing the customer

service plan. As these experienced individuals train and mentor less experienced members, many

of theorganizational training objectives are accomplished in-house. As with other objectives, the

results of measuring and evaluating the training plan provide a basis to recognize and reward

motivation and promote success.

Implemented correctly, an effective customer service plan leads to a more effective and

efficient workforce. Invaluable knowledge and skills are gained by search--problem solving is a

natural result. Likewise, we gain a greater understanding of what we do and how it impacts

others. Inherent in the process, we learn what others need from us and how we can support them

in their efforts to improve customer service.



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The ultimate reward for management is customer satisfaction provided by a skilled and

committed workforce able to solve problems and understand the importance of effective

customer service.

NEED FOR THE STUDY

The customer satisfaction is the main goal of every business organization. In this

competitive business scenario each and every activity starts and ends with the customer. In the

present scenario, the telecommunication is lifeblood for every business activities. Even in this

industry there prevails a stiff competition between the service providers. In spite of a well-

established network and infrastructure supporting, certain service providers weren’t able to root

their footsteps in the market due to lack in customer service and satisfaction. Due to this their

promotional initiatives haven’t yielded fruitful results. Since there is a marginal difference

between the services rendered, there is more possibility for the subscriber to switch from one

service provider to another based on their satisfaction. So it is very essential for the service

provider to understand the influence of various demographic variables that influence the

satisfaction level to win the hearts of the customers. This study could aid the BSNL with respect

to their enhancement.

OBJECTIVES OF THE STUDY

To study the customer satisfaction level towards landline service provided by BSNL.

To study the influence of demographic variables of the respondents.

To find out usage level of various schemes provided by BSNL.

To identify the operational performance of BSNL.

To identify the satisfaction level of customer services provided by BSNL.

To identify the customers’ opinion about BSNL

LIMITATIONS OF THE STUDY

The area of study is limited to Salem city only; hence the results may not be true for other

geographical areas.

Validity & Reliability of the data are obtained depends on the responses from the

customer.

Structured questionnaire are base for collecting the data, it may have disadvantages of not

being to probe deep into the respondents thoughts.

The time at the disposal of the researcher is limited.

The size of the sample comparing to the population is very less and hence it will not

represent the whole population.



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RESEARCH METHODOLOGY

Methodology is a way to systematically solve the research problems. It explains the

various steps that are generally adopted by a researcher in studying the research problem with

logic behind them.

RESEARCH DESIGN

The research design is the basic framework or a plan for a study that guides the collection

of data and analysis of data. In this market survey the design used is useddescriptive research

design. It includes surveys and fact-finding enquiries of different kinds. The major purpose of

descriptive research is description of state of affairs, as it exists at present.The information are

collected from the individuals and analyzed with the help of different statistical tools, to find the

satisfaction level of customer.Moreover cross table analysis has been done for processing the

data and information is derived to attain the objectives of the study.

POPULATION

Since the population of Salem city is large in number, researcher was unable to collect

information from all individuals due to limitation of time. So part of the population is taken for

analyzing and generating the findings, which is applicable for total population.

SAMPLING TECHNIQUE

Simple random sampling method is used to collect data. Data has been collected from the

sample chosen from the directory randomly.

SAMPLE SIZE

The size of the sample is 200, and factors to be considered are time, cost and effectiveness

etc. The study was conducted during the period of May 2011 to July 2011.

SAMPLE UNIT

The respondents of the study are part of population of Salem city. Each individual is

considered to be the sampling unit

DATA COLLECTION

The collection of data is considered to be one of the most important aspects in the research

methodology. Both primary and secondary data is used in this study in order to meet the

requirements of the purpose.

PRIMARY DATA

Under this study primary data was collected by using structured questionnaire. The

structured questionnaire consists of both open-ended and closed-ended questions. The primary

data has been collected through the questionnaire by means of personal interview. The



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questionnaire consists of number of questions printed in a definite order on a form. The primary

data was collected from individuals residing in Salem city, with the help of questionnaire.

SECONDARY DATA

The secondary data are sourced from various telecommunication websites, Magazines,

Books, Pamphlets, and Periodical Surveys etc.

STATISTICAL TOOLS USED FOR THE STUDY

The data has been mainly analyzed by using the following methods and tests.

Weighted Average Method

Ranking Method

Chi – Square Test

DATA ANALYSIS AND INTERPRETATION

TABLE NO.1: SATISFACTION LEVEL WITH RESPECT TO THE BASIC SERVICES

PROVIDED BY BSNL

Particulars Weightage score Rank

Getting a new phone connection after submitting our application 846 II

Call connectivity (Local, STD/ISD) 831 III

Voice clarity while communicating 897 I

Features of the phone 792 IV

Rent/free various tariff package 766 V

It is inferred from the above table that the factor ‘voice clarity while communicating’, gets

first rank, second and third rank goes to the factor ‘Getting a new phone connection after

submitting the application’ and ‘Call connectivity (Local, STD/ISD)’ respectively. Fourth and

last rank goes to the factor ‘Features of the phone’ and ‘Rent/free various tariff package’

respectively.It is concluded from the analysis that maximum of the respondents’ opinion that

BSNL provides best voice clarity while communicating.



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TABLE NO.2: SATISFACTION LEVEL WITH RESPECT TO THE BILLING

SERVICES PROVIDED BY BSNL

Billing Services factors Weightage score Rank

Local call tariff rates 769 V

STD/ISD call tariff rates 747 VI

Mode of payment 803 II

Issuing duplicate bills 771 IV

Issuing itemized bills 797 III

Delivery of bills 841 I

It is identified from the above table that the factor ‘Delivery of bills’ gets the first rank, the

second and third rank goes to the factors ‘mode of payment’ and ‘issuing itemized bills’

respectively. Fourth and fifth rank goes to the factor ‘Issuing duplicate bills’ and ‘Local call

tariff rates’ respectively. Last rank goes to the factor ‘STD/ISD call tariff rates’.It is concluded

from the analysis that maximum numbers of the respondents’ are satisfied with ‘Delivery of

bills’.

TABLE NO.3: SATISFACTION LEVEL WITH RESPECT TO THE CUSTOMER

SERVICES PROVIDED BY BSNL

Customer Service Factors Weightage score Rank

Attitude of staff and response to their queries 902 I

Providing information about the new schemes / services 778 III

Transfer of phone connection 748 VI

Call waiting facility 707 VII

Call divert option 654 IX

Caller ID facility 632 X

Dynamic locking facility 691 VIII

Bill collection centers 837 II



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Fault complaint redressal 759 IV

Other general complaint redressal 752 V

It is understood from the above table that the factor ‘Attitude of staff and response to their

queries’ is the best service and it ranked first by the respondents with score of 902 points. Second

and third rank goes to the factor ‘Bill collection centers’ and ‘Providing information about the

new schemes / services’ with score of 837 and 778 points. Fourth and fifth rank goes to the

factor ‘Fault complaint redressal’ and ‘other general complaint redressal’ with score of 759 and

752 points. Sixth and seventh rank goes to the factor ‘Transfer of phone connection’ and ‘Call

waiting facility’ with score of 748 and 707 points. Eighth and ninth rank goes to the factor

‘Dynamic locking facility’ and ‘Call divert option’ with score of 691 and 654 points. Last rank

goes to the factor ‘Caller ID facility’ with score of 632 points.It is concluded from the analysis

that maximum numbers of the respondents’ are satisfied with ‘Attitude of the staff and response

to the queries.

TABLE NO.4: AGE AND OVERALL SATISFACTION LEVEL TOWARDSBSNL

LANDLINE SERVICES

Age Level of Satisfaction of BSNL Landline Services

Total Highly satisfied Satisfied Neutral Dissatisfied

Below 27 years 1 47 10 1 59

27 to 35 years 9 51 8 2 70

Above 35 years 4 50 17 0 71

Total 14 148 35 3 200

Null Hypothesis (H0)-There is no significant relationship between age and overall level of

satisfaction towards BSNL landline service.

Alternative Hypothesis (H1)-There is close relationship between age andoverall level of


Calculated 2 value: 11.491; Table value: 12.592

From the above analysis, we find that the calculated 2value of is lesser than the table value and

hence, the null hypothesis accepted. Hence, there is a no significant relationship between age

and overall level of satisfaction towards BSNL landline service.



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TABLE NO.5: GENDER AND OVERALL SATISFACTION LEVEL TOWARDSBSNL

LANDLINE SERVICES

Gender

Level of Satisfaction of BSNL Landline Services


Male 14 102 25 2 143

Female 0 46 10 1 57

Total 14 148 35 3 200

Null Hypothesis (H0)-There is no significant relationship between gender and overall level of

satisfaction t towards BSNL landline service.

Alternative Hypothesis (H1) - There is close relationship between genderand overall level of



From the above analysis, we find that the calculated value of 2is lesser than the table value and

hence, the null hypothesis accepted. So, there is a no significant relationship between gender and

overall level of satisfaction towards BSNL landline service.

TABLE NO.6: EDUCATIONAL STATUS AND OVERALL SATISFACTION

LEVELTOWARDS BSNL LANDLINE SERVICES

Educational Status Level of Satisfaction of BSNL Landline Services

Total

Highly satisfied Satisfied Neutral Dissatisfied

Primary Education 1 3 2 0 6

SSLC/+2 5 60 12 0 77

Collegiate Education 8 85 21 3 117

Total 14 148 35 3 200

Null Hypothesis (H0)-There is no significant relationship between educational status and overall

level of satisfaction towards BSNL landline service.



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Alternative Hypothesis (H1)-There is close relationship between educational status and overall


Calculated 2value: 4.652; Table value: 12.592

From the above analysis, we find that the calculated value of 2is lesser than the table value and

hence, the null hypothesis accepted. So, there is a no significant relationship between educational

status and overall level of satisfaction towards BSNL landline service.

TABLE NO.7: OCCUPATION STATUS AND OVERALL SATISFACTION

LEVELTOWARDS BSNL LANDLINE SERVICE

Occupation status



Government Employee 0 5 0 2 7

Private Employee 7 87 23 0 117

Professionals 2 12 4 0 18

Self employed 5 44 8 1 58

Total 14 148 35 3 200

Null Hypothesis (H0) - There is no significant relationship between occupational status and


AlternativeHypothesis(H1)-There is close relationship between occupational status and overall



From the above analysis, we find that the calculated value of 2is greater than the table value

and hence, the null hypothesis rejected. So, there is a close significant relationship between

occupational status and overall level of satisfaction towards BSNL landline service.



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TABLE NO.8: MONTHLY INCOME AND OVERALL SATISFACTION

LEVELTOWARDS BSNL LANDLINE SERVICES

Monthly Income



Less than Rs.5000 1 14 3 1 19

Rs.5001 – 10000 2 49 20 2 73

Rs.10001-15000 4 66 11 0 81

Above Rs.15000 7 19 1 0 27

Total 14 148 35 3 200

Null Hypothesis (H0)-There is no significant relationship between Monthly income level and


Alternative Hypothesis (H1)-There is close relationship between Monthly income level and





Monthly income level and overall level of satisfaction towards BSNL landline service.

TABLE NO.9: NAME OF THE SCHEMES AND OVERALL SATISFACTION

LEVELTOWARDS

BSNL LANDLINE SERVICES

Name of the scheme Level of Satisfaction of BSNL Landline Services


General 4 80 28 2 114

Special 8 52 7 0 67

Super 2 16 0 1 19

Total 14 148 35 3 200



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Null Hypothesis (H0) -There is no significant relationship between using the type of scheme and


Alternative Hypothesis (H1)-There is close relationship between using the type of scheme and


Calculated 2 values: 16.595; Table value: 12.592



using the type of scheme and overall level of satisfaction towards BSNL landline service.

TABLE NO.10: PERIOD OF USING THE LANDLINE AND OVERALL

SATISFACTION LEVEL TOWARDS BSNL LANDLINE SERVICES

Period of Using



Less than 1 year 0 3 0 1 4

1 to 3 years 3 30 16 0 49

3 to 5 years 5 70 10 2 87

More than 5 years 6 45 9 0 60

Total 14 148 35 3 200

Null Hypothesis (H0)-There is no significant relationship between period of using and overall

level of satisfaction towards BSNL landline service

Alternative Hypothesis (H1) - There is close relationship between period of using and overall





period of using and overall level of satisfaction towards BSNL landline service.



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TABLE NO.11: PURPOSE OF USING THE LANDLINE AND SATISFACTION LEVEL

TOWARDS BSNL LANDLINE SERVICES

Purpose of Using



Residential 3 57 18 3 81

Official 11 91 17 0 119

Total 14 148 35 3 200

Null Hypothesis (H0)-There is no significant relationship between purpose of using and overall


Alternative Hypothesis (H1)-There is close relationship between purpose of using and overall





purpose of using and overall level of satisfaction towards BSNL landline service.

FINDINGS

Most of the respondents belong to the age groups 27-35 years and above 35 years and

most of the respondents belong to male category.

Most of the respondents are educated till the level of collegiate education and most of the

respondents are working as private employee.

Most of the respondents are earning Rs.10001- Rs.15000 per month.

It is stated that 57.0% of the respondents are using general scheme.

Most of the respondents are using the BSNL landline for more than 3 years.

Most of the respondents are using for the official purpose and all are availed of STD

facility.

It is inferred that maximum respondents are making more than 150 calls per month and

paying their bill amount from 1001-1500.



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It is finding that most of the respondents are satisfied by getting their new connections

immediately after submitting their applications.

It is found that most of the respondents are satisfied with basic services provided by

BSNL.

It is found that most of the respondents are satisfied with billing services provided by

BSNL.

It is found that most of the respondents are satisfied with customer services and value

added facility provided by BSNL.

It is inferred that most of the respondents are not much satisfied with the features of the

phone provided by BSNL.

It is noted that among the various billing service provided by BSNL delivery of bills and

mode of payment makes the respondents very much satisfied.

It is noted that there is no distraction while communicating.

It is noted that most of the respondents are not aware of call divert option.

It is noted that the demographic variables age, gender, and educational status has no

relationship with the overall satisfaction level.

It is noted that the demographic variables occupational status, monthly income level has

relationship with the overall satisfaction level.

It is inferred that other variables like usage of schemes, period of using, and purpose of

usage also has relationship with the overall satisfaction level.

SUGGESTIONS

Most of the respondents are satisfied with the services provided by BSNL landline, steps

to be taken to make the customers more satisfied.

Most of the customers are not aware of the phone plus facility, steps to be taken to create

awareness about these facilities.

It is inferred that most of the respondents are not much satisfied with the features of the

phone provided by BSNL when compare to other private landline providers, significant

weight age should be given by the BSNL.

Few of the respondents are satisfied with call connectivity. It is suggested to the company

to give importance to that and make the entire customer to be satisfied.



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It is noted that the demographic variables occupational status, monthly income level has

relationship with the overall satisfaction level. So it is suggested while making changes in

service/tariff these factors to be considered.

The service providers could focus the crew around the existing subscriber for adding new

clients to their basket.

It is noted from the above study that most of the respondents are not aware of various

schemes. So it is suggested to the service provider to give more weight age to know about

various schemes.

CONCLUSION

From the study the influence of demographic variables in the level of satisfaction yielded

by the user as well as the behavioral pattern of the user is analyzed in this study.It is identified

that the service provided by BSNL is at satisfactory level to the respondent’s.But most of the

respondents are not satisfied with the features of the phone. BSNL should focus on the

promotional measures as equal to the private service providers to enhance their service activity to

satisfy their customers.

BILIOGRAPHY

1. Kothari. C.R (2004): ‘Research Methodology Methods & Techniques’, New Age

International Publishers, New Delhi, 2nd Edition.

2. Richard I. Levin, David S. Rubin (2004): ‘Statistics for Management’, Prentice Hall of

India Private Limited, New Delhi, 7th Edition.

3. www.trai.com

4. www.bsnl.co.in

5. www.indianinfoline.com



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IMPORTANCE TO MAINTAIN A LEVEL OF SECRECY IN

CORPORATE SECTOR IN THE BACKGROUND OF ARTHASASTRA

SMT. DEBASHREE MAHAPATRA*; DR. SANJIT KUMAR DAS**

*Lecturer in Sanskrit,

Jhargram Raj College, Jhargram, West Bengal.

**Reader in Commerce,

Bhairab Ganguly College,

Belghoria, Kolkata-700056.

ABSTRACT

This paper reasons with the importance of maintaining secrecy at level in business and corporate

sector even when the society demands with pitches for openness and transparency. In the climate

of rampant corruption and lack of reliability in higher eulachon of society this demand is

welcome. However, camouflaging and expressing one‘s identity are some of the basic traits of

any living creature developed from the survival instinct. This trend persists remarkably in

corporate sector existing in a world of competition. Therefore, from stage of conceptualization

to profit-making or from the stage of market survey to marketing a company has to frame

policies to capitalize the situation to the maximum extent through consultation with the trusted

officials and employees, those remain mainly confidential. In this context, this paper would

concentrate on the directions of Kautily, the author of Arthasastra who probably appeared in

Mauryan era around 2400 years back, only because he is very relevant in this present context.

Arthasastra is a treatise on royal administration where the king is in the helm of the system. It

may be shown how the suggestions of Arthasastra are really helpful to run a corporate

administration where the maintaining secrecy plays a vital role.

______________________________________________________________________________

I INTRODUCTION

Secrecy is inherent in human nature i.e. concealing information, coexists with the instinct of

exposure of self. In the living world, secrecy is developed from the survival instinct as well as

from the desire to protect oneself from any impending danger. In spite of massive expansion of

scientific knowledge there remains see of secrecy in nature. We have taken this subject for

discussion because there are certain necessities and advantages of maintaining secrecy from the

mundane interaction of the everyday life to the corporate life.

It is a normal policy matter of the company to maintain the secrecy of all confidential

information and documents which give the company a competitive advantage in the industry. All

the confidential discussions viz. information relating to trade secrets of the company, existing or

contemplated products, services, technology, designs, processes, manuals, formulas, computer

systems, business plans etc. are prepared in a closed-door meeting and are kept confidential.

Generally important decisions are framed after consultation with high officials and trusted

persons. In recent years, corporate consultation has received increased attention because of high-



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profile scandals involving abuse of corporate power and, in some cases, alleged criminal activity

by corporate officers. The reason is that these trusted employees keep and handle the secret

documents and information in their possession. Rarely any decision is taken in corporate sector

by a single person. If it is done generally that is a case of exigency. Consultation in decision

making is an important activity because it helps in generating ideas and approaches and future

course of action. Unfortunately we have several instances like the case of Rajat Gupta, where a

responsible officer is supplying secret information and documents of his own company to the

rival one against bride and other considerations for personal benefit. Therefore, to check this

dangerous practice, a company must be assured of the integrity of the person invited for

consultation. We know that in corporate governance, consultation or communication is a vital

part of corporate activity where secrecy of some important documents and information is really

important.

The importance of secrecy as envisaged by the Indian theoretician may be referred in this

context, ―Ayur Vittam Grihashchhidram Mantramaithunam Vesajam/Tapo Danaapamanancha

Nava Gopyani Yatnatah‖ means one should carefully conceal his age, wealth, family dispute,

intellectual property, personal dalliance, special knowledge of medicine, endeavour, self-

sacrifice and embarrassment. Kautilya, the author of Arthashastra, is one of the pioneers who has

emphasized on consultation in decision making process maintaining secrecy of the confidential

information. Kautilya directed that a king (may be identified as a leader or C.E.O. in the context

of an organisation) should maintain a certain level of secrecy in governing a monarchy. Decision

making through consultation can be used in all matters related to a wide range of topics

concerning team effectiveness, organizational culture and participatory processes. According to

Kautilya, all kinds of administrative measures are preceded by deliberations in a well-formed

council.

Inspite of the enactment of the Right To Information Act with fanfare in practice both the

state and the central government have to remain silent in different important issues even before

the Parliament. The importance of secrecy has also recognized in our Constitution. For the post

of President to a councilor of a local self-government, one has to take the oath of secrecy prior to

one‘s appointment. Kautilya has correctly justified that there is every chance that the king may

be driven away by his consultants and advisors. There is an ancient proverb ―Annyalakshita

Karyasya Siddhirnjayate‖ means least ones competitor will not be succeeded, just getting

information with a watchful eye. In this situation maintaining secrecy is essential. There is a

general aspersion on the ancient Indian culture that the gurus give their lessons in a small

restricted circle and remained vigilant on its disclosure ―Na Deyam Parasisyebhyh‖. This

explanation does not provide the total picture of academic scenario of ancient India. They were

over-conscious to maintain their standard of instruction because if any instruction was received

by any unwanted or unworthy person it would be dangerous for the society. It is recorded in the

Nirukta a text around 3000 years back that once the knowledge incarnate approached to a

Bramhana with the request, ―Vidya Bramhanametyah Shevadhiste Raksa mam/ Asukaya na mam

Bruya Viryavati Yatha Syam‖ means ― O Bramhana! I am in your custody, please protect me,

don‘t expose me to any envious person, otherwise I would be fruitful‖.

Kautilya‘s guidelines for well-knitted consultation process were useful primarily for

maintaining the monarchical system. Selection of place, maintaining the secrecy and process of



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deliberation with due importance is given to all councilors, number and qualification of

councilors. Everything relating to consultation has been suggested by Kautilya systematically.

This paper intends to assess the direction on secrecy in consultation and its application in

corporate life despite the fact that the original text was composed for running a monarchy.

Following an introduction in section I, section II discusses about the relevance of consultation in

business, Section III focuses on the role of secrecy in consultation, section IV describes the duty

of the leaders with concluding remarks in section V.

II CONSULTATION IN BUSINESS

Consultation is an important part of decision making process because it allows

involvement of many stakeholders. Consultation is a participatory process for taking decisions

through different types of meetings and it enables the organization to achieve their ultimate goal.

It is advantageous because better solutions can be achieved through collective intelligence that is

not available by individual endeavour. In today‘s corporate world, President, Vice president,

Board of Directors, Chairman, Chief executive officers, Chief Finance Officer, Chief Operations

Officer, etc. constitute the councilors to discuss about the different matters of business. In

different meetings viz. Annual General Meeting, Extraordinary General Meeting, Statutory

Meeting, etc. they prepare the strategies, plans, programmes and other courses of action. These

meeting provide a special opportunity to achieve organizational outcomes through discussions

and consultations. Consultation is vital for management and communication because fruitful

consultation save time, increase motivation & productivity, and solve problems. In the meetings,

consultation among the various personnel creates new ideas and initiatives, diffuses conflicts and

confusion as well as creates opportunities to come together and achieve their objectives.

Kautilya has said, ―All undertakings should be preceded by consultation‖. It means that

the concerned authority has to make proper discussion before starting of any undertaking

(mantramula sarbarambha). Kautilya has suggested, ―juktijuktang bacho graghyang baladapi

shukadapi juktihinam bacho tajyo shukradapi shukadapi‖ (1.15.22). That means the leader

should consider the valuable suggestions of even a child and at the same time should ignore the

unrealistic suggestions of even a wise man. Kautilya has said ―Success is three-fold that

attainable by the power of counsel, that attainable by the power of might, that attainable by the

power of energy‖(6.2.34). It should be noted that even a monarchial system when might was

considered right, Kautilya emphasized the importance of consultations apart from other sources

for success. According to Kautilya, the king should ask the councilors concerning matters

exactly similar to the undertaking he has in mind. As they might advise he should do the work.

Kautilya has used the term yathasamarthyam (capabilities) as one of the qualifications of

a consultant. Here capability implies proficiency in politics, brilliant intellect and skill in practice

affairs (mantre samarthyai sastracaksusmatta niratisaya prajna lokavyavahara kushalam). In

appointing councilors a leader must consider the qualities and expertise of the candidates.

Kautilya has mentioned that the son of the soil, of noble birth, persons who can restrain himself,

intelligent, bold, upright, friendly, firmly devoted, energetic, healthy and spiritual etc. are the

expected qualities of a good advisor. Kautilya emphasized, ―Time comes but once to a man

waiting for an opportunity: that time is difficult for that man to get again when he wants to do his

work‖ (5.6.31). Having found a matter for deliberation the leader should not waste time to



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discuss and take the necessary steps because he should grab those opportunities which are

knocking at the door. He should not deliberate for a long time, nor with the partisans of those

would he like to harm. Kautilya has referred five successive steps of discussions namely 1) ways

and means of starting an undertaking 2) arrangement of men and materials 3) place and time of

execution 4) apprehension of probable obstacles and 5) successful accomplishment (1.15.42).

Similarly, Kautilya has prescribed he function of the associates as 1) starting work of new

undertaking 2) continuing an undertaking already begun 3) improving a work 4) implementation

of order issued (niyogasampadam) 5) getting success (1.15.32).

III ROLE OF SECRECY

Now, in the age of Right To Information Act, transparency in is an important issue.

Transparency is a trust building mechanism used to open up the information and documents of

an organization to stakeholders. The employees are expected know about the organizational

strategy, decision-making, and performance management and by getting those information they

feel more trust toward the management of their organization and thus can become more

committed and engaged in their performance. It is a concept of removing all barriers of secrecy

in order to facilitate easy access of corporate information to the outsiders. Transparency stands

for openness and creates an atmosphere of accountability. On the other hand, if the media and the

public know everything about the company then there will be a lot of questions, protests and

suggestions coming from media and the public. People with vested interest may interfere and

influence the decision making process and create a lot of problems. Therefore, all the business

has to create some sort of mechanism for maintain secrecy of confidential information and

documents.

Kautilya has seriously considered the issue of secrecy of consultation. He has suggested

that the place for consultation should be secluded, not allowing talks to be heard outside and

incapable of being peeped in even by birds. Hence without providing himself with sufficient

safeguard against disclosure, the king shall never enter into deliberations in a council.

Maintaining secrecy is very important and so an unauthorized person must not encroach the

place of counsel. Considering the issue of secrecy, it is an important decision of the leader to fix

the number of councilors. Very little number of advisors may not be able to suggest fruitful

advice and too many advisors may divulge the secrecy. Kautilya has mentioned ―To as many

persons the lord of men (the leader) communicates a secret; to as many does he become

subservient, being helpless by that act (of his)‖ (1.8.9). Kautilya has advised that the king should

ask the advisors one by one or meet them in a conference. He should carefully watch about any

deviations of advises from the advisors at the time of individual discussion and group discussion.

He wants to clarify if a single person expresses his opinion in the same way or differs in his

opinion during the conference.

Kautilya has mentioned ―In case of secret associations, those concluded in secret shall

succeed‖ (3.1.11). It means that if a leader wants to get success in a project, he must not expose

about his plan to public in general, never before his competitor. Every project executed in an

organization goes through some stages viz. conceptualization stage, preparation stage and

delivery stage. A leader has to maintain a certain level of secrecy in every stage of operation.

Kautilya has asserted, ―Therefore, others should know about any work sought to be done by him.



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Only those who undertake it should know (about it) when it is begun or even when it is actually

completed‖(1.15.11). In today‘s corporate world several agreements are signed by the

counterparties such as non-disclosure agreement, confidentiality agreement, confidential

disclosure agreement, proprietary information agreement or secrecy agreement because it is

aimed to share with one another for certain purposes, but with the restriction of access by the

third parties.

Every enterprise has to maintain some sort of secrecy for smooth running, protecting its

own interest and for survival in a competitive situation. The secrecy means secrecy of

information may be kept in different forms such as written, memorized, and stored electronically,

or may be in the graphical form. An enterprise should not expose his future plan or strategy

definitely in the initial stage of business. If this is divulged, other competitors may take

advantages of the situation and try to push the organization outside of the market. Corporate

competition has some similarities with a war like situation. There is an old proverb that ‗nothing

is unfair in love and war‘. In the true sense, every business has to hold some kind of secrecy of

information and documents to stay in the market and that is his capital. In fact, business secrecy

is quite different from copyrights, trademarks, and patents. Secrecy can be divulged mainly in

two ways: 1) Leakage of confidential information like quotation price, content of agreement,

marketing strategy etc. discussed in the meeting 2) Despatch of document regarding formula,

codes, design, software etc. stolen from office. Insider trading is one aspect divulgence of

secrecy, common in today‘s business world which has shaken the confidence on the stock

market. When such incidences happen companies may be ruined where some individuals become

gainer at the cost of thousand employees of that undertaking. In a competitive situation a

marginal specialty makes a lot of differences in market. Kautilya suggested that (Guhet

Kurmaiba Angani) as a turtle protects itself from its foe with its hard external cover so also the

authority should ensure complete secrecy about the functions of its organs (departments).

IV DUTY OF THE LEADER

According to Kautilya, a leader is expected to be careful of his way of conversation and

body language during communication or consultation with his subordinate and other people. He

should not hurt anyone unnecessarily and must not be casual at the time of consultation. Kautilya

advises, ―Just as an elephant, blinded by intoxication and mounted by an intoxicated driver,

crushes whatever it finds, so the king, not possessed of the eye of science, and blind, has risen to

destroy the citizens and the country people‖ (1.14.7). The leader of the organization should not

be intoxicated by his power and position; otherwise the organization may be destroyed. So, the

leaders of the organizations have the responsibility of doing the right thing for the business with

the help of his workforce. The discussion would not be completed without referring to the

ancient direction relevant to our contemporary problem. It is directed ―it is better for the

councilor not to enter the assembly hall than to be remain silent there or to give a distorted

statement. Doing so, the councilor shall go to the hell‖ (Sabha na pravestvya vaktavyam va

samanjasam/ Avruvan vivruvan vapi naro bhavati kilvisi). In fact by this practice the entire

process of consultation become futile. The king or the leader, in addition to learning of different

subjects must be able to exercise control over his senses (indriyajaya), and keep his passions in

check during the consultation process. He should adjust his conduct in respect of the three goals



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of dharma, artha and kama. Whatever advices are given to a king by kautilya should be

applicable to a leader of an organization.

A leader or the authority has to enforce some mechanism so that secrecy of the meetings

can not divulge. The disclosure of counsels may be possible by observing changes in the attitude

and countenance in a royal system and the same may be possible in corporate world.

Carelessness, intoxication, talking in sleep, love and other peculiar habits of councilors are the

causes of the betrayal of counsels. Change in conduct is change in attitude

(ingitamanyathávrittih); and observation of physical appearance is countenance

(ákritigrahanamákárah). Leaders have to build a climate of trust and commitment among their

employees through effective management practices but at the same time ensure that the secrecy

is not being divulged. Through the creation of transparent systems and processes for strategy

development in managing human resources firms can achieve higher levels of trust and

commitment from employees. Kautilya has mentioned that ―Control over the senses, which are

motioned by training in the sciences, should be secured giving up lust (kaam), anger (krodha),

greed (lobha), pride (mana), arrogance (madh) and overexcitement (harsha)‖ (1.6.1). He has

mentioned that the role of a leader is very critical because he has to take varieties decisions

considering different types of complexities in day to day business. The leader must have a close

look after the persons around him and he must set himself as an example to the followers.

V CONCLUSION

A renowned multi-national company, Coca-Cola keeps its secret soft drink recipe locked

in a vault that can only be opened by the company‘s board of directors, and it only reveals the

ingredients to two employees at a time. Generally the companies should keep secrecy of the

confidential documents under lock and key so that the information stored in computers can not

be hacked. However, a confidentiality agreement may be the best way to protect a trade secret. A

legally binding contract, the agreement prohibits involved parties (such as company-employees)

from disclosing secret information to the public, third parties, or worse—the competitor. In

today‘s business, the authority can bring information security expert to assist in designing

effective information security system. This arrangement includes measures like limited access to

network system, use of virus scanning software, properly checking of employees‘ background,

introduction of employees‘ awareness training programme, etc. A protective system may be

developed by the application of overall security checking policy.

Secrecy in consultation is mainly done in the preparatory stage of a project and it is like

the protective amulet from unnecessary complication and exaggeration. In this connection it is

wise to mention that the Official Secrets Act, 1989 has been enacted to provide protection of

specific government information and documents from disclosure with the aim not to jeopardized

public interest and state security. In the contrast we have in our hand the Right To Information

Act, 2005. By the enactment of this Act, it is intended to make every transaction transparent.

Therefore, in practice we have to maintain an equilibrium between and secrecy and disclosure.

The aim is not to hamper the good environment but to create a climate of trust and confidence of

the people. At the same time, the companies have to maintain some sort of secrecy about their

activities. The divulgence of secrecy, whether in ancient times or in modern times, is made by

human being for getting some undue advantage from any source. It really happens because of

complexities and expectations in the private and public life where sensual passion plays a vital



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role. But, it is true that private matter, individual character or family relations are not to be

confused with the public affair. We cannot resist the temptation from uttering the verse of Manu,

the mythical father of human race when he says ―Nasya chhidram paro vidyat Vidyat Chhidram

Parasyatu‖ means behave in a way that other cannot identify your weakness rather try to search

the same in your opponent‖.

REFERENCES

1. Beird Anne (2010) Consultation Skills and Decision Making, Cambridge University

Press

2. Feri, F. B. Irlenbusch, and M. Sutter (2010) ―Efficiency Gains from Team-Based

Coordination:Large-Scale Experimental Evidence‖, American Economic Review

3. Hastie, R (1986) Review essay: Experimental evidence on group accuracy. In

Information pooling and group accuracy, ed. G. Owen and B. Grofman

4. Kangle, R. P (1965) ―The Kautilya Arthasastra‖, University of Bombay, Part-I,II and III

5. Kocher, M.G.& M. Sutter (2005) ―The Decision Maker Matters: Individual Versus Group

Behaviour in Experimental Beauty-Contest Games‖, The Economic Journal

6. Kohli, R (1995) ―Kautilya‘s Political Theory – Yogakshema: The Concept of Welfare

State‖, Deep and Deep Publications

7. Muniapan, B. & Das, M (2008) ― CSR: A philosophical approach from an ancient Indian

perspective‖ International Journal of Indian Culture & Business Management, Vol. I

No. 4

8. N.Siva Kumar & U.S. Rao (1996) ―Guidelines for Value Based Management in

Kautilya‘s Arthsastra, Journal of Business Ethics, Vol. 15, No. 4

9. Pillai, R (2011) ―Corporate Chanakya, JAICO Publishing House

10. Pravin, P (2008) ― Kautilya: Politics, Ethics and Statecraft‖ http://mpra.ub.uni-

muenchen.de, MPRA Paper- 9962

11. Rangarajan, L. N (1992) ―The Arthasastra‖, Penguin Books India Pvt. Ltd

12. Rockenbach, B., A. Sadrieh, and B. Mathauschek (2007) ―Teams take the better risks‖

Journal of Economic Behavior & Organization

13. Shyam, Shastri (1909) The Arthasastra of Kautilya. Mysore, Printed at the Government

Branch Press

14. Siva Kumar, N & Rao U.S (1996) ―Guidelines for Value Based Management in

Kautilya‘s Arthsastra, Journal of Business Ethics, Vol. 15, No. 4

http://mpra.ub.uni-muenchen.de/

http://mpra.ub.uni-muenchen.de/



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15. Yogi Ramesh (1997) ―Ethics of Chanakya‖, Sahni Publications, New Delhi

16. http://inventors.about.com/od/nondisclosure/a/Nondisclosure.htm

17. http://www.lawdepot.com/contracts/confid/?pid=google-confid_ca-nondisclosure

18. http://www.victorwhite.com/Capital/CapaitalR_NDA.htm

http://inventors.about.com/od/nondisclosure/a/Nondisclosure.htm

http://www.victorwhite.com/Capital/CapaitalR_NDA.htm



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BRAND IMAGE, CUSTOMER SATISFACTION AND LOYALTY

INTENTION: A STUDY IN THE CONTEXT OF COSMETIC PRODUCT

AMONG THE PEOPLE OF CENTRAL INDIA

SATENDRA THAKUR*; DR. A. P SINGH**

*Assistant professor,

Department of Management, RKDF Group of Institute,

Gandhi Nagar, Bhopal.

**Director,

Maharana Pratap College of Management,

Bhopal.

ABSTRACT

In this research article we have examine the relationship between brand image, customer

satisfaction and loyalty intention in the context of cosmetic product of selected company brand

among the peoples of central India, five benefit of brand image has been discussed namely

social, functional, symbolic, experiential and appearance enhance. Information has been obtained

from 150 male as well as female customers who always used the cosmetic product of selected

brand for the proposed research work. Result has show that three brand image benefit namely

functional, social and appearance enhance has positively and significantly related to customer

satisfaction and loyalty intention and two benefit namely experiential and symbolic has no

significant impact on customer satisfaction and loyalty intention on the other hand result indicate

that there is a positive relationship between customer satisfaction and loyalty intention. The

result imply that marketing manager should focus on the brand image to win the customer

satisfaction in order to make the customer loyal about their product and service.

______________________________________________________________________________

INTRODUCTION

Customer satisfaction and loyalty has become widely accepted as an important issue for all

organization, it is used as a marketing benchmark for the company performance (Bennett &

Rundle -Thiele, 2004) [04]

. On the other hand we can say that brand image, customer satisfaction

and customer loyalty all are important for both customer and organization. This is also to be say

that if the customer is satisfy so he is interesting to display loyal behavior i.e. repurchase

intention and also willing to pay positive word-of-mouth (Taylor, 1998; Bennett & Rundle -

Thiele, 2004; Schultz, 2005)[45,04,44]

. Now a day‟s all the company are more attention about 4ps

i.e. product, place, price and promotion and future implementing additional 3ps i.e. physical

layout, process and people for service marketing (Kotler et al 1999)[26]

, As a direct consequence

brand image as a significant feature of current marketing strategy is now measured as a

organizational assess (Kotler 2001)[27]

. The symbolic value associated with the brand image, has

become the product differentiation. In fact presently most of the company understands those

customers are not loyal about one particular brand (Dekimpe, Steenkamp, Mellens, & Abeele,

1997; Bennett & Rundle -Thiele, 2005; Kapferer, 2005) [15, 04, 22]

. Magnificence of brand loyalty



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comes out particularly with some of national brand (Howell, 2004; Dekimpe et al., 1997)[18,15]

.

Furthermore the present environment is to increased competition and entry of new product and

service leads customer to select their choice among the group of alternative and opportunity

(Ballantyne et al., 2006) [03]

.therefore it is important to company and manufacturing to focus on

product differentiation from their competitors

REVIEW OF LITERATURE

BRAND IMAGE

Brand is a symbol or sign which is helpful for customer to identify the product, a company which

have product with favorable brand image by the public surely gained better position in the

market also can be sustain competitive advantage and increased number of market share (Park,

C. W., Jaworski, B. J., & Maclnnis, D. J. 1986) [38]

. Some of the research has been found that

favorable brand image always helpful to lead customer satisfaction in order to create loyal

customer base ( Koo, 2003; Kandampully & Suhartanto, 2000; Nguyen & LeBlanc,

1998)[25,23,32]

, brand image is a mental setup developed by the customer on the basis of few

selected impression from the particular branded product ( Reynolds 1965)[39]

. According to the

Kotler (2001)[27]

brand image is the set of beliefs, idea and impression that person hold regarding

as an object, in the other hand brand image is the set of perception about a brand as reflected by

brand association in memory (Keller 1993)[24]

. Brand image has been conceptualization and

operational in several ways (Reynolds & Gutman, 1984; Faircloth et al., 2001)[40,16]

.

Measurement of brand has been done on the basic of the attributes (i.e. Koo 2003; Kandampully

& Suhartanto, 2000)[25,23]

, on the basic of the brand benefit and value (Hsieh et al., 2004; Roth,

1995; Bhat & Reddy, 1998)[17,42,06]

, on the basic of the using Malhotra's (1981)[30]

, ano also can

be measured on the basic of the brand image scale (Faircloth et al., 2001) on the basic of the

above definition marketer can easily identify the weakness and strength of their particular brand

and also helpful to understand customer perception about their product or service.

CUSTOMER SATISFACTION

Satisfaction is the fulfill response of customer about the service and product (Oliver 1997) [34]

. It

is also a finding about the product and service feature or the product and service itself, according

to Levesque and McDougall (1996) [29]

satisfaction is conceptualized as an overall, customer

attitude towards a service provider. Similarly, Andreassen and Lindestad (1998) [01]

claimed that

customer satisfaction is the accumulated experience of a customer‟s purchase and consumption

experiences. It was therefore; client satisfaction construct in this paper will be measured through

overall satisfaction toward the services. Yi (1990) [48]

mentioned that customer‟s satisfaction is

influenced by two factors which is experiences and expectations with service performance.

Operationally, satisfaction is similar to an attitude, as it can be assessed as the sum of the

satisfactions with the various attributes of the product or service (Churchill and Surprenant,

1982) [10]

. Customer satisfaction may be defined as expectation before purchase and perception

about performance after purchase, The expectancy disconfirmation paradigm suggests that

consumers are satisfied when the product perform better than expected (positive

disconfirmation), dissatisfied when consumers' expectations exceeded actual product

performance (negative disconfirmation), and neutral satisfaction when the product performance

matches expectations (zero disconfirmation/confirmation) (Oliver, 1980; Churchill &



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Surprenant, 1982; Oliver & Sarbo, 1988; Bearden & Teel, 1983)[36,10,35,05]

. Oliver (1980) [36]

identified satisfaction and dissatisfaction in terms of the disconfirmation of consumers

expectation. A positive disconfirmation leads to customer satisfaction and a negative

disconfirmation leads to customer dissatisfaction.

LOYALTY INTENTION

The development of loyalty has been put over the time, primarily the focus of loyalty

development was product related service as well as with respect to tangible goods towards the

focus on brand loyalty (Cunningham, 1956; Day, 1969; Kostecki, 1994 ;) [11, 14, 28,

Loyalty as the

Proportion of purchased of a family dedicated to the brand it purchased regularly Cunningham

(1956). Later, Cunningham (1961) [12]

has broadened the spectrum into store as opposed to brand

loyalty by using the same measures with Brand loyalty. The composite of loyalty highlighted

two different approach of loyalty known as behavioral and attitude which initially proposed by

Jacoby and Chestnut (1978) [20]

and later by Oliver (1997) [34]

. On the other hand Jacoby and

Chestnut (1978)[20]

provided a conceptual definition of brand loyalty as: (i) biased (i.e. non-

random), (ii) behavioral response (i.e. purchase), (iii) expressed over time, (iv) by some decision-

making unit, (v) with respect to one or more brands out of a set of such brands, and is a function

of psychological (decision-making evaluate) processes. Customer loyalty as a deep commitment

by the customer to re-purchase or re-buy service and product from one particular firm or agency

in the future thus customer repeating same brand for purchasing Oliver (1997)[34]

. Brand loyalty

can be explained on the basic of the behavioral, attitudinal or composite approach (Jacoby &

Chestnut, 1978) [20]

. Behavioral loyalty has been measured as repeat purchase frequency of the

customer (Brown, 1952) [08]

, while attitudinal loyalty refers to the stated performance,

commitment or purchase intention of the customer. Jacoby and Chestnut (1978) [20]

argued that

the behavioral measures basically represent the static outcome of a dynamic decision process

(i.e. solely on actual behavior). Therefore, this approach unable to understand the factor

underlying brand loyalty and also not enough to simplify the fundamental factors that determine

how and why brand loyalty should be developed or modified (Jacoby & Chestnut, 1978)[20]

. The

attitudinal measures are refers to the consumer feelings toward the brand and confirmed intention

such as possibility to suggest and possibility to repurchase the product and service (Schiffman &

Kanuk, 2004; Jacoby & Chestnut, 1978) [43, 20]

. Intention of customer can be measured by asking

customer about their future intentions to repurchase product or service again (Jones & Sasser,

1995) [21]

. Furthermore, Jones and Sasser (1995)[21]

suggested that (i) companies can capture this

information (i.e. intention to repurchase) when they measure satisfaction level of customer

towards the product and service, (ii) customer repurchase intention can be measured at any time

by making relationship with customer (iii) repurchase intention of customer is a strong indicator

of future behavior.

OBJECTIVE OF THE STUDY

The objectives of the study are as follow

To determine the strength of relationship between brand image benefit, customer satisfaction

and loyalty intention

To identify the brand image benefit from the customer point of view



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To measure the brand image, satisfaction and loyalty of the cosmetic product from the

customer perception

To identify new marketing strategy for the marketing manager


DEFINING RESEARCH METHODOLOGY

Research has being is “an active, diligent, and systematic process of inquiry in order to discover,

interpret and/or revise facts. This intellectual investigation should produce a greater

understanding of events, behaviors, or theories, or to make practical applications with the help of

such facts, laws, or theories. The term research is also used to describe a collection of

information about a particular subject (www.wikipedia.com)

Methodology is considered to be the “way in which information is found or something is done.

The methodology includes the methods, procedures, and techniques used to collect and analyze

information (www.google.com)

THEORETICAL FRAMEWORK

According to the brief review of literature related to the subject I proposed that the image of

cosmetic product can be detained easily with the help of customer trust about the brand image of

the given product. This implies that the different brand image benefit namely functional, social,

symbolic, experiential, appearance enhances overall comes from the brand image. These

different benefits of brand image may influence to the customer satisfaction and also to the

loyalty intention this model produced likes the traditional attitude structure developed by Oliver

(1999) [37]

. The proposed theoretical framework for this study has been design and the

development of hypothesis is discussed

[H1]

[H3]

[H2]

Brand image benefits

Functional

Symbolic

Social

Experiential

Appearance enhances

Customer

satisfaction

Loyalty

Intention



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DEVELOPMENT OF HYPOTHESIS

RELATIONSHIP BETWEEN BRAND IMAGE AND LOYALTY INTENTION

Most of the researcher has indicated that product image/brand image has significant impact on

loyalty intention i.e. customer repurchase intention. According to the Vazquez-Carrasco and

Foxall (2006)[46]

social, confident and special brand/ product image has positive impact on

loyalty intention, if the customer received high social benefit from the salesperson then he will

be more loyal with salesperson (Reynolds and Beatty 1999)[41]

. Symbolic benefit, affective

benefit and trade of benefit work as a indicator for purchase value of brand product and has a

positive relationship with repurchase intention of the customer according to the all the hypothesis

is:

H1: There is a positive relationship between brand image benefit and loyalty intention

RELATIONSHIP BETWEEN BRAND IMAGE AND CUSTOMER SATISFACTION

According to the Na, Marshall, and Keller (1999) [31]

image cannot be measured, for the

measurement of image must include the measurement of customer perception about the product

image and brand image this imply the importance of brand image on customer satisfaction,

However this study examining the impact of brand image benefit on customer satisfaction which

is received by the customer from the interpersonal relationship and benefit comes from the

purchase intention of the customer. According to the Reynolds and Beatty (1999) [41]

customer

may be more satisfy with the salesperson if he received high social and functional benefit from

the salespersons side. the majority of the authors has described in this study that brand image

benefit is positively and significantly related to the customer satisfaction , therefore the

hypothesis is:

H2: There is a positive relationship between brand image benefit and customer satisfaction

RELATIONSHIP BETWEEN CUSTOMER SATISFACTION AND LOYALTY

INTENTION

Number of authors has verified in this study that there is positive relationship between customer

satisfaction and loyalty intention (e.g. Ismail, Hasnah, Ibrahim, & Isa, 2006; Da Silva & Syed

Alwi, 2006; Anderson & Sullivan, 1993; Chiou et al., 2002; Bloemer & Ruyter, 1998: Yang &

Peterson, 2004)[19,13,02,09,07,47]

. If the customers are satisfied with the product then he will like to

repurchase intention (Bennett & Rundle-Thiele, 2004) [04]

. Empirical study of the retail/ store

image has confirmed that satisfaction has strong positive impact on loyalty intention as a

intention to recommended others about the product and services, this leads to the following

hypothesis:

H3: There is a positive relationship between customer satisfaction and loyalty intention



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METHODOLOGY

SAMPLE AND DATA COLLECTION

Cosmetic product has become basic need for both male as well as female customer, in this study

we have select number of cosmetic product which is always used by the female and male

customer in central Indian. For the proposed research work we have select so many branded

cosmetic product such as cosmetic product of Hindustan union lever limited (hull), cosmetic

product of Indian tobacco company (ITC Limited), cosmetic product of Revlon, cosmetic

product of blue heaven and cosmetic product of McNroe consumer product private limited

The sample of this study has been focused on 150 male and female customers, those who have

used all cosmetic products select for research, and data has collected through structured

questionnaire and were personally administered.

FINDING OF THE STUDY

FREQUENCY DISTRIBUTION

Total 150 Male and Female Customer Has Been Selected as a Sample size of the study. Among

the majority of people 59.34 percent are female and 40.66 percent individuals are male. In the

age group 38.67 percent individual are between age of 18-24, 26 percent individual are the age of

between 25-30,years old, 22.67 percent individual are the age of between 31-35 years old and

12.66 percent individual are the age of 35-39 years old. In the subject 54.67 percent of people are

married and 45.33 percent people air single nad in the majority of people 30.67 percent

individual has completed their master degree or about to complete, 42 percent individual has are

graduate in different discipline, 9.33 percent of individual are in secondary and 18 percent

individual are others



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TABLE1

FREQUENCY DISTRIBUTION

Characteristic frequency percentage (%)

Gender

Male 61 40.66

Female 89 59.34

Age group

18-24 58 38.67

25-30 39 26

31-35 34 22.67

35-39 19 12.66

Marital status

Married 82 54.67

Single 68 45.33

Education

Master degree 46 30.67

Bachelor degree 63 42

Secondary 14 9.33

Other (i.e. PhD, Diploma…etc) 27 18



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RELIABILITY ANALYSIS

Table 2 show reliability analysis among the all study variable, we have found the alpha value for

all variable is sufficient, the alpha value for all variable is between 0.63 to 0.78 thus we can say

that all the study variable are reliable

TABLE2

SUMMARY OF RELIABILITY ANALYSIS

Variable

No. of item

Alpha

Experiential image 4 0.78

Symbolic image 3 0.66

Social image 4 0.71

Functional image 4 0.76

Appearance image 5 0.68

Satisfaction 4 0.63

Loyalty intention 5 0.71

MEAN AND STANDARD DEVIATION

Table 3 show mean and standard deviation among the study variable in addition the range of

mean value for all variable such as five brand image benefit as well as satisfaction and loyalty

intention is between 4.31to 4.58 and the value of standard deviation is between 0.39 to 0.60



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TABLE 3

MEAN AND STANDARD DEVIATION

Variable

No. of item

Mean

S D

Experiential image 4 4.35 0.49

Symbolic image 3 4.39 0.50

Social image 4 4.34 0.51

Functional image 4 4.31 0.60

Appearance image 5 4.36 0.48

Satisfaction 4 4.38 0.43

Loyalty intention 5 4.58 0.39

CORRELATION MATRIX

Table 4 show the correlation matrix for all used variable, social image has found to be a

significantly and positively related with customer satisfaction (r =0.25, p <.01) and loyalty

intention (r = 0.19, p <.01), functional image has found to be positive and significantly related

with customer satisfaction ( r =0.27, p < .01) and loyalty intention (r = 0.25, p <.01), appearance

image has found to be positive related with customer satisfaction ( r =0.36, p <.01) and loyalty

intention ( r =0.34, p <.01) customer satisfaction has also found to be positive related with

loyalty intention and the last customer satisfaction and loyalty both has to be found correlated

with each other (0.49, p <.01)



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TABLE 4

CORRELATION MATRIX FOR BRAND IMAGE BENEFITS

(Experiential image, Symbolic image, Social image, Functional image, Appearance enhances,)

Variable 1 2 3 4 5 6 7

Experiential image __ 0.57** 0.51** 0.57** 0.49** 0.42** 0.26**

Symbolic image __ __ 0.56** 0.68** 0.49** 0.31** 0.37**

Social image __ __ __ 0.68** 0.48** 0.25** 0.19**

Functional image __ __ __ __ 0.58** 0.27** 0.25**

Appearance enhances __ __ __ __ __ 0.36** 0.29**

Satisfaction __ __ __ __ __ 0.19** 0.34**

Loyalty intention __ __ __ __ __ __ 0.49**

DISCUSSION

The purpose of the research to know the relationship between brand image benefit, customer

satisfaction and loyalty intention in the context of selected cosmetic product among the people of

central India, the result show that three brand image benefit namely functional, social and

appearance enhance are positively and significantly related to customer satisfaction and loyalty

intention. And on the other side two brand image benefit namely experimental and symbolic has

no positive and significant relationship with customer satisfaction and loyalty in the other word

we can say that symbolic and experimental brand image benefit has negative impact on customer

satisfaction and loyalty intention, hence we can say that H2 and H3 both hypothesis are not fully

supported because only three benefit i.e. social , symbolic and appearance enhance has

significant related with satisfaction and loyalty, the suggestion is this that the users of cosmetic

product is more satisfy and loyal if they perceived high social, functional and appearance

enhance brand image from the service side.

Finding of the study also suggested that customer satisfaction is the key of loyalty intention, on

the basic of the finding we can say that there is positive relationship between customer

satisfaction and loyalty intention, this is also to be say that if the users of cosmetic product are

much satisfy then they may create base of loyalty easily, therefore we can say that H3 is fully

supported. The finding indicates the importance of social, functional mad appearance enhances

benefits to the users of cosmetic product as strength of mind about the brand loyalty as well as

customer satisfaction.



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Therefore according to the result we can imply that to improved customer satisfaction and

customer loyalty to the cosmetic product marketer always try to improved the brand appeal

related to the aspect that, how customer received the solution about the need and expectation.

CONCLUSION

This study has show relative importance of relationship between brand image benefit, customer

satisfaction and loyalty intention, the justification of the brand image benefit is support full for

marketer to create effective marketing strategy for the purpose to make customer satisfy in order

to create loyal customer base. For receiving the customer support about the product and service,

the justification of brand image benefit should be from customer point of view. On the other

hand this benefit should be related to the expectation and perception of the customer, therefore

we may assist the marketing manager to develop marketing strategy on the basic of the customer

perception and importance of the product. If we talk about satisfaction and loyalty this is

significant for companies to measure customer satisfaction in order to analyze their product and

service and image of the product from the customer point of view thus there satisfy customer are

willing to recommend their product and service to other and also willing to pay re-purchase

intention, finally to create successful brand, marketing manager should be more devoted about

the development of brand image , customer satisfaction and loyalty it all should be under the

development of branding strategy.

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CAPITALISM v. NEO CAPITALISM

A COMPARISON OF POLICIES OF WORLD BANK AND RBI

DR. SHOBHALATA V. UDAPUDI*; BARNIK GHOSH**

*Associate Professor,

Gujarat National Law University, Gandhinagar.

**Student,

Gujarat National Law University,

Gandhinagar.

ABSTRACT

India is a mammoth of a democracy. In the recent times, it has taken a place in the global market

scenario. It has virtually become impossible to ignore India. The Apex Bank of the country is the

Reserve Bank of India.

Over the years, the World Bank has tried to influence India by the superior monetary advantage

it may gain. The policies of both of these banks bring on a demeanor which is essentially

shocking in its realms. But both the banks are not what they portray. Behind the glass doors lies

the indoor management which is enthralling to the evangelical, secretive to the society, dominant

in its doctrines and essentially mystical in its might.

In this paper, the author will bring on a comparison between the two banks in comparing its

policies and trying to find an answer to a seeming rhetoric which has mesmerized the money

market for over several decades.

This paper is a try to prove the policies of both the banks in a comparison manner, by linking up

states which have been effected by the World Bank policies as well as the Reserve Bank as well

as trying to answer the question, banking or….??

______________________________________________________________________________

INTRODUCTION

In little beginnings lies the greatness of civilisation. Banking is one of the most important sectors

of the modern day. It has evolved from humble beginnings to giant financial institutions which

form the backbone of the modern economy. The banking sector has been divided into the private

and the public sector with several banks crossing their resident country‟s boundaries in order to

do business in foreign shores. The governments also play a major role in undertaking the

functions of banks. In India, the banking sector is highly regulated by the government in every

aspect.

The Reserve Bank of India forms the spine of the Indian banking system serving several key

functions in the banking activities. It regulates and controls the monetary flow in the mammaries



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of the welfare state thus managing the chequered comparatives of a complex yet unique

monetary system.

The World Bank is a mammoth by its own demeanour. This Titanic structure takes on the

monitory policies of the world and controls and regulates not only policies but also social and

welfarist aspects in a global level. The scale of its operations are global sidelining the other vast

banks which rules over the banking systems of the world.

The reaches and aspects of both these banks are unique in their own different ways. Sometimes it

is but evident that the policies of the world bank and reserve bank are complete opposite

polarities to one another. Some scholars contend that the outlook of both the banks are basically

the same with just the areas of operation being very different, one on a national and the other on

an international level.

But in this paper the author contends on a different level. I will look into the perspectives from

the point of view of system the banks follow in determining their policies.

This paper has tried to bring into light the several ideologies which drive these banks.

Economically speaking, the paper will look into the credit policies of both these banks and the

subsequent changes taking place in the markets because of these. We will try to decipher the

impact of the policies of the Reserve Bank on the market scenario of India and of the World

Bank on the nations.

Often the World Bank has been criticised to be a tool through which the developed nations have

taken the upper hand over that of the developing and under developed nations and the subsequent

tragedies that follow.

It is also to be noted that the World Bank has been criticised to have an approach which is

detrimental for the survival of those countries which are in adverse situations. The adverse

situations may not just mean war ravaged or economically downtrodden. It may also refer to the

fact that the bank has been used sometimes for ulterior motives for spreading the imperial

hegemony of some of the highly developed countries to get a control on the developing and

underdeveloped countries.

The Reserve Bank on the other hand has been known to be welfarist in its programmes. Though

a term like humanist would be quite detrimental to the policies undertaken by the Reserve Bank,

it is a notch between that of highly capitalistic and a highly socialistic one. It is also definite that

the pro capitalistic policies adopted by the Reserve Bank in India are to reach the humanitarian

conclusion at the end of the day.

A FREEDOM SO DEAR?

The four pillars of monitory control were laid down during this period which was a major

achievement for the Indian Ecomomy. The first pillar1 of the monetary policy was the first pillar

of the RBI. It can be called to be the proudest among all the other pillars simply because of its

1 Supra Note 2



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sheer scope which has come into operation. This is considered to be the first pillar because it has

come into operation in the initial stages of the planning processes of the Indian administration

from the earliest times of the Indian Economy. Monetary policy was instrumental not only in

implementing the short term pressures but also sensitive to the need of the hour in terms of the

financing requirements of the Government for building the Indian economy.

The whole process of financing the budget deficits was channelized through the use of a

controlled monetary policy. Ad hoc Treasury Bills were issued whenever the available balances

of the government went below the stipulated minimum balances of Rs. 50 crore at the end of

each week.

During this period we also find the evolution of the system to one which is concerned with the

maintaining a stipulated minimum of foreign exchange reserves to get a security on the issuance

of currency. This period ranged from the keeping a stipulated proportion of the foreign exchange

reserves that could be deemed to be held necessary to impose sharp limit per se which was

required to keep the deficit financing policies of the government because the government was

instrumental in this period to run a system which was essentially used to run a payments deficit. 2

In this period we can further see the system changing towards one with a system of varying cash

reserve ratio (CRR), The CRR was also coordinated with the use of the statutory liquidity ratio

or the SLR. These were considered to be the prudential instruments which ensured the sufficient

liquidity with banks to capture the evolving role of monetary policy instruments of the RBI. This

monetory policy played a major role in controlling the first three phrases of the monetory policy.

The second pillar of the apex bank was regarding the regulation and promotion of the orderly

development which had taken place in controlling the commercial banks.

The reason for considering the timing and context of the erection of this pillar were well known.

It was mainly due to the crisis faced by the banks which were abating in 1951. There was a new

responsibility which was entrusted to the RBI which was regarding overseeing and strengthening

the weak and unwieldy banking system which was prevailing in India.3

In this period we see the efforts being made by the RBI in dealing with the strengthening and

consolidation of the banking system as a whole. This period is known for the origin early years

of the Deposit Insurance Corporation (DIC), alongwith the scheme of insuring bank deposits

which came into existence from 1962 as a consequence of the banking crisis in 1960. As a result

of the RBI‟s policy of reconstruction and amalgamation of small and financially weak banks for

improving viability of the banks, there was a drop in the number of insured banks.

The RBI was vigorously involved in promoting the institutionalisation of credit to agriculture

from the 1950s which was a primary objective stated in the third pillar of central banking. This

period also led to the initiation of the All-India Rural Credit Survey. It basically was a reflection

2 Supra Note 4 3 Ibid



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of the determined efforts of the apex bank for promoting the agricultural credit institutions and

expanding institutional credit to agriculture in rural parts of India.4

The State Bank of India was established from the Imperial Bank of India in 1955, and this

expansion had been coupled with the growth and spread of the cooperative movement, the RBI

became steadily more involved in developing the cooperative movement and meeting the

financial requirements of India. This time was used to however, admits that despite its

impressive quantitative expansion, the cooperative credit system did not measure up to the

expectations that had been generated.

The fourth pillar of central banking has been established by the erected by the RBI was

institutionalization of credit to the industrial fields industry from the 1960s. The Shroff

Committee had recommended that the RBI should be playing a more active role for the RBI in

promoting availability of finance to industry. The RBI, with a prior commitment to the

developmental responsibilities had set up institutions which were capable of mobilising and

channelising long-term funds into industry in the 1960s.5

THE SEVENTIES SAGA AND THE EIGHTIES TALE

The „defining event‟ of the period 1967-1981, was the nationalisation of major commercial

banks which, as argued in the volume, essentially was a reflection of the economic

consideration which was rooted in the minds of people and debated over a long time even though

the time at which the event may have been a political one. This caused the emergence of a

dramatic shift in the orientation and operation of commercial banks. In the Post nationalisation

period there was an impressive and unparalleled spread of the banking system and significant

directing of credit to the norms which have been completely neglected upon.

In order to push the branch expansion in the rural areas, banks were required to open two rural

branches for branch they will be opening in the areas where are the urban areas. Furthermore, in

order to address the declining trend of credit-deposit ratios in lower population centres, the Lead

Bank Scheme was started in the 1970s whereby a lead bank was designated for each district to

carry out the task of expanding credit to customers hitherto not served. This period looks into the

fact that there is a hidden effect as to the viability and efficiency of the banks which had an

effect which took on a stark demeanour in the subsequent periods.

The emergence of the Government as the owner of the major banks also created a new situation

of „dual control‟ over the system of banking which could be beneficial to the RBI.

The deficits in the budgetary policies of the Government rose sharply and the fiscal policy held

the centre stage from the 1970s onwards. This period is noted for the abandonment of monetary

policy as a tool of economic policy and corrective intervention. It is also true that in the given

4 Findlay G. Shirras: The Reserve Bank of India. In The Economic Journal. Vol. 44, No. 174 (Jun., 1934),

pp. 258–274. 5 Narenda Jadhav, Partha Ray, Dhritidyuti Bose, Indranil Sen Gupta: THE RESERVE BANK OF INDIÀ`S

BALANCE SHEET: ANALYTICS AND DYNAMICS OF EVOLUTION, November 2004.



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when we are dealing with the balance after a full consideration of evidence, the RBI had to

become overtly accommodative to the Government. 6

The monetory policy had become very conjugated with the other measures which was being

actively used to control inflation when it reached alarmingly high levels, and the entire

importance during the rest of the times were being devoted to accommodate the fiscal policy.

Thus, the RBI‟s monetary management became a delicate balancing act between the

compulsions of fiscal policy and price stability considerations. The threshold of inflation was

regarded as being 7 per cent to be the ideal one and when it used to creep up beyond that level

that the efforts required to reduce money supply started.

The RBI took certain policy decisions In order to contain inflationary pressures, the apex bank

had used non-price instruments like raising the SLR and CRR. The SLR became an instrument of

mobilising resources for the Government from a captive financial system. While the concept of

deficit financing through ad hocs was meant to be of a temporary nature, the practice of renewal

of these Treasury Bills on maturity after 91 days laid the seeds of automatic monetisation7 of

Government deficits. The CRR has been operated to neutralise the effect of the monetary impact

of increasing RBI‟s accommodation of Government. The monetary policy of the RBI had to be

focussed on credit as an indicator rather than through demand management. The monetary policy

was formulated and conducted by the RBI was mainly guided by the supply-side, mainly dealing

with the agricultural persona and the consistent shortfalls in agricultural production, the

resulting inflationary pressures and developments in Government finances.

LAISSEZ FAIRE OR A M.N. ROY?

The process of structural reforms was initiated in India in the early 1990s in order to place the

economy on a growth path which was higher than on a sustainable basis. These reforms were

being encompassed in almost all sectors of the Indian economy and, among others; it helped to

necessitate changes in the monetary policy framework. The policy of the apex bank during this

undertook a detailed assessment of the key issues which were related to the Monetary Policy.8

The Report is in many ways a continuation of the analysis which was attempted in the previous

two Reports. The Report on Currency and Finance, 2001-02 undertook a comprehensive

assessment of a decade of economic reforms in India, whereas the Report for the year 2002-03

focused on management of the external sector in an open economic framework.9

Monetary policy in India went through significant changes in the 1990s as there was the opening

up of the India Economy with drastic financial sector reforms were put in place. In the early

1980s,monetary policy was being geared towards controlling the qunatam,cost and directions Of

credit flow in the economy. the quantity variables dominated as the transmission Channel of

monetary policy. The reforms which were taking place during the 1990s were being used to

enhance the sensitivity of price Signals which dominated the price policy undertaken from the

6 Dipak Basu: Balance-of-Payments Policies and Structural Reforms: an Adaptive-Control Model for India in

Journal of Economics, Volume 70 (1999), No. 3, pp. 261-280, S.275. 7 Supra Note 9 8 Samarjit Das, Kaushik Bhattacharya: Price convergence across regions in India in Empirical Economics

(2008) 34:299–313, S. 312. 9 http://rbi.org.in/scripts/PublicationsView.aspx?id=10796 as last accessed on 22nd February, 2010



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central bank, making interest rates the increasingly dominant transmission channel of monetary

policy in India.10

While price stability is to be considered to be of utmost importance and necessity it is not

sufficient to cope up with the expectations. With the opening up of the economy since the early

1990s,11

financial stability will now be emerging to be the second key consideration in the

conducting of the monetary policy in India. It is good for the scholars to bring to notice that the

RBI has also been successful in keeping up with the financial stability in the country even in

times when the progressive liberalization of the economy started from the early 1990s.

The record on part of India in this field was to be considered to be of great importance as the

decade of the 1990s has been considered to be of a very turbulence nature for the financial sector

in most of the emerging market economies.

The reforms in the Financial sector India was initiated during the 1990s. These reforms were

aimed at promoting a diversified, efficient and competitive financial sector and it is but evident

from the times that the reforms have succeeded in their objectives. In the environment of a

deregulated financial sector, our ability to maintain financial stability, even as it eluded many

other economies, can be attributed to the success achieved in ensuring reasonable price stability

in the economy on the one hand and prudent policies in regard to financial and external sector

management on the other.12

The process of liberalization, privatization and globalization led to the openness of the economy,

as has been measured by the ratio of the amount of trade in the merchandise fora(exports plus

imports) to the GDP, rose from about 18% in 1993-94 to about 26% by 2003-04. including

services trade plus invisibles, external transactions as a proportion of GDP rose from 25% to

40% during the same period. Alongwith the increase in trade as a percentage of GDP, capital

inflows have increased even more sharply foreign currency Assets of the reserve bank of

India(RBI) rose from USD 15.1 billion in the march 1994 to over USD 140 billion by march

15,2005.these changes have affected liquidity and monetary management. Monetary policy has

responded continuously to changes in domestics and international macroecomic conditions. In

this process, the current monetary operating framework has relied more on outright open market

operations and daily repo and reserve repo operations than on the use of direct instruments.

overight rate are now gradually emerging as the principal operating target.13

The Monetary and Credit Policy is the policy statement which is traditionally always brought to

the public domain twice a year, through which the Reserve Bank of India seeks to ensure price

stability for the economy. These factors include - money supply, interest rates and the inflation.

10 www.scribd.com/.../MONETARY-POLICY-india as last accessed on 1st March 2010 11 Amal Kanti Ray: India’s Social Development in a Decade of Reforms: 1990–91/1999–2000 in Social

Indicators Research, Volume 87, Number 3 / July, 2008, p. 410. 12 Speech of the Prime Minister for the RBI http://www.rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=271 as

last accessed on 5th March 2010 13 Supra



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THE WORLD BANK CONNECTION

At the entrance to the World Bank‟s headquarters situated in Washington, a large sign reads:

“Our dream is a world without poverty”. In March 2000, in a report sponsored by the US

Congress (Meltzer Commission 2000), Allen Meltzer of Carnegie Mellon University and Jeffrey

Sachs of Harvard University suggested that the World Bank should restrict its focus to poverty

alleviation and vacate its role as a Bank, where capital markets can better take care. Recently,

however, the very method of calculating poverty by the World Bank has been contested [Sanjay

Reddy 2001]. The World Bank is often seen as the beacon of development, a lender of last resort

and a saviour of poor countries.

It is supposed to combine the hard nose of a banker with the human face of a development

agency. It is perceived to be more intellectual than UNDP agencies and less harsh than the IMF

in administering bitter pills through conditionalities. It has tried to differentiate itself as a

development bank lending to poor countries who are denied access to market financing and to

social projects that do not command the interest of private investors.14

However, as the Meltzer Commission 200015

found, in practice, most World Bank lending goes

to countries that borrow in the capital markets. World Bank credit is just seen as a bit cheaper

source of finance, comforted by government guarantee, normally not available for private sector

lenders. With reduced funds at its disposal, and bearing the criticism of its unwarranted taking up

those functions that could well

be left to the capital market, the Bank has changed its strategy from project based lending – for

hardware, which requires large funds – to lending for capacity building (for „software‟ or

consultancy services, requiring smaller amounts). It has also changed its role from primarily

being a lender to being a catalyst of lending by facilitating projects to access funds from the

capital market. It does this by itself providing the A loan which enables securing of much larger

B loans from commercial banks. It has also entered the guaranteeing and insurance business

through its affiliate Multilateral Investment Guarantee Agency (MIGA).16

For instance, it gives a

counter guarantee on a sovereign guarantee of a country, for a fee! It can also give a political risk

insurance, without a sovereign guarantee. In all these areas of credit enhancement, it has levered

on its expertise in project appraisal and monitoring and dealing with varieties of governments on

the one hand and its unique ability to armtwist them, if need be, on the other! Certainly, some of

this is just duplication of private insurance companies and it is not certain if these activities are

self-supporting as an independent profit centre. It is, however, difficult to apportion either the

success or failure of its policies between the Bank and the country, as it has to work through the

country government and its institutions. Here, good policies may become victims of poor

implementation.17

14 India: Power and Infrastructure Report (2001): „The Electricity Act – The Tip of an Iceberg, A View of an

Energy Expert‟, Vol 2, No 13, August 2000-2001. 15 Ibid 16 McKinsey (2001): „India: The Growth Imperative‟, http://www.mckinsey.com/knowledge/mgi/

reports/ as last accessed on 21st March 2010 17 Ibid



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THE POLICIES OF THE GLOBAL BANK

In this context, one of its own study came with a revelation that wherever there was good

governance backed up by strong institutional infrastructure, the results have been good, and India

was counted as one of those countries where the results were good.

A resultant policy recommendation was that it should focus on the „good‟ countries.

However, India has not benefited much from this approach in terms of higher inflow of funds.

Between 1993 and 1999, India received a modest 4 per cent of the non-aid resources of the Bank,

compared to 12 per cent for China, 10 per cent for Argentina, 9 per cent for Russia, 7 per cent for

Mexico, 7 per cent for Brazil, 6 per cent for Korea, 3 per cent for Thailand, 3 per cent for Turkey

and 2 per cent for Philippines,18

these nations accounting for a majority of the developing

world‟s population. Notwithstanding the fact that World Bank considers India a good borrower,

but yet not given it its due in terms of quantum of lending, it is worthwhile to examine the impact

of the Bank‟s lending from the recipient‟s point of view.19

What is the World Bank‟s

contribution to India‟s growth, development and its poverty alleviation?

In its 50-year partnership with India, the Bank concentrated on the growth objective in the first

phase, subscribing to the theory that development would automatically trickle down out of

growth. It has started initiatives on the main plank of poverty alleviation only since the last five

years, and the results are yet to show up.

However, recently the Bank formulated a near 20-20 vision for the year 2010 and has drawn up

the following targets for India: [Report of the Operations Evaluation Department (OED) 2001].

(i) reducing poverty to 15 per cent;

(ii) halving the proportion of malnourished children;

(iii) putting in place a reliable disease surveillance system;

(iv) increasing contraceptive prevalence to more than 60 per cent of eligible couples; and

reducing the population growth rate to 1.2 per cent (from 1.9 per cent).

POVERTY ALLEVIATION OR ….?

To be sure, poverty has reduced from 50 per cent in the beginning of 1970s to 30 per cent

towards the end of 1990s, but it is difficult to identify any specific Bank‟s effort in achieving

this.20

18 Meltzer Commission (2000): International

Financial Institutions, March 2000. For a summary see http://csf.colorado.edu/roper/

if.Meltzer-commission-mar00/ as last accessed on 20th March 2010 19 Supra Note 20 Parikh, Kirit (1996): „The Renegotiated Enron Deal: Does It Meet All Objections?‟, The Times of India,

Bombay, January 22.



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Even on the objective of growth, where the Bank concentrated its lending in the first phase, the

investments resulted in less growth than in other countries, notably China, because about 40 per

cent of capital stock was under government ownership, with poor productivity. Investment (as

per cent of Gross National Product (GNP)) required to produce 1 per cent growth of GNP is 4.2

for India, while it is 3.6 for Indonesia and Korea, 3.5 for Thailand, 3.2 for Malaysia and 3 for

China [McKinsey 2001]. The Bank lent and still does exclusively to the government with such

low capital productivity. Thus its mandate to lend only to the government appears to be a critical

constraint, particularly in India where government‟s capital productivity is lower than even other

LDC‟s!21

Agriculture is a major sector for India, accounting for 38 per cent of Gross Domestic Product

(GDP) in 1980, declining but still remaining at a significant 27 per cent , and accounting for 62

per cent of employment even in 1998. Here, the Bank concentrated on irrigation which,

according to the OED „came at the cost of neglect of rainfed (i e, semi-arid) areas in which a

large proportion of the rural poor live‟. Tackling poverty was a more intractable problem

involving access to land for the landless labourers on a more formal basis, rather than through

often illegal tenancy arrangements, and finding more off-farm employment opportunities, etc.

Even in the area of irrigation which the Bank focused on for funding, there seems to be a

revelation that projects which were viable ex ante became unviable ex post, due to assumptions

not materialising; slow development of the command area, inefficient utilisation of water

resources, and break down of the built-up institutional capacity, viz, Water Users‟ Associations

(WUA) becoming defunct.

The Upper Krishna Irrigation II Project has been showcased as representative of colossal failure.

In this project, the WUA members “had stopped water rotation soon after the project delivered

ample water, as they saw no reason to ration water and submit individual delivery preferences to

group decisions. Moreover, the oversupply

of water with considerable waterlogging has caused serious damage to houses and crops” [OED

2001:29]. Consequently in the 1990s there was a sharp fall in irrigation lending compared to

1980s, this coinciding with the ascendance of anti dam activists. With the likelihood of the

„guidelines‟ of the World Commission on Dams being incorporated into the lending policies of

the Bank, one investment banker commented that „you have to know everything about

everything before doing anything‟.22

CAPITALISM HO?

To sum up, initially the Bank concentrated on major irrigation and big dams, giving priority to

growth over poverty reduction. Even here, there were implementation shortfalls in terms of

actual benefits falling short of projected benefits. Later even this effort towards growth was

given up, with rising opposition for big dams.

21 McKinsey (2001): „India: The Growth Imperative‟, http://www.mckinsey.com/knowledge/mgi/ reports/ as

last accessed on 21st March 2010 22 Power Line (2002): „Limited Success: World Bank‟s Reform-Linked Package Runs into Problems‟, New

Delhi, September, p 65.



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The Bank also lent to social forestry, mainly with a view to reduce the drudgery of rural folks

walking long distances to fetch fuel wood and also to prevent indiscriminate felling of trees by

local villagers in their search of fuel wood. A Wood Balance Study for Karnataka concluded that

there was no evidence to suggest either a fuel wood crisis or to presume that this lead to

deforestation. Nevertheless a loan was given to the Karnataka Forest Department for social

forestry, which was used to raise eucalyptus plantations, inviting ire from the NGOs.23

THIS CLASSICALLY ILLUSTRATES THE BANK’S PREDISPOSITION

It gives primacy to economic efficiency and growth objective even in projects where the focus is

on redistribution to the poor. The Bank‟s argument in this case was that the higher market value

of eucalyptus, an input to paper industry, enhances the income of the grower, and enables him to

buy the fuel in the market, and makes the project economically viable for the Bank. However,

the target audience is totally missed in the process, as the poor fuel wood gatherers have neither

the land to grow the plantation and realise the income nor the ability to buy the fuel in the

market.24

In spite of supporting such ideas as Joint Forest Management (JFM) involving the villagers, etc,

the Bank has been suffering a capture effect by having to implement its ideas through the

government departments whose role, it is its mission to minimise. The forest departments mouth

various jargons like „participatory management‟, „stakeholder interest‟, etc, and go through the

motions of JFM, but inherently remain deeply suspicious of the efficacy of such new fangled

ideas, and embrace the NGOs only to disarm them by co-opting them, and use them for low cost

outsourcing! Similarly, the entire funds provided for the fuel wood plantation under social

forestry have very little to show for it in terms of actual plantation.

The Bank‟s paradoxical attitude of befriending the government departments and persuading them

to extinguish themselves, arises because mainly it lacks the flexibility and agility to deal with

smaller institutions. Commenting on the Bank‟s outreach in India, the OED report says “outreach

has improved, but still falls short...Bank needs to make a greater effort to reach the vernacular

press and to harness the potential of television, especially in local language.” The area of „micro

credit‟ provides for development with a human face, but much as the Bank wants to get involved

in this effort, it has not made any mark in India, mainly because of this inability to network with

smaller institutions.

Traditionally, the Bank‟s biggest portfolio has been in the power sector, for project based

lending. Here, it has a rather impressive record, particularly in funding central sector generation

with National Thermal Power Corporation (NTPC) as the main beneficiary.25

It also funded a

major share of the national grid thus restoring the importance to transmission. Even at state level

major power projects, as well as system improvement projects had been financed to good results.

Paradoxically, the World Bank‟s record in this sector, in the pre-reform era, under central

23 Ibid 24 Bhaumik, S, S Bose, D Coondoo (2003): „The Emerging Indian Bond Market: Evolution, Problems and

Prospects‟, Journal of Global Financial Markets, Spring. 25 Purukayastha, Prabir (2001): „Power Sector Policies and New Electricity Bill: From Crisis to Disaster‟,

Economic and Political Weekly, June 23, pp 2257-62. Ranganathan, V (1990):‟



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planning by the Planning Commission, and power sector planning by the Central Electricity

Authority and through the project based approach has been much better than its performance in

the reform era, a reform the Bank itself initiated under the „institutional strengthening‟ based

approach.26

FOR A BIT OF BREAD AND BUTTER….. THEY CAME

The reforms were indeed badly needed. But the manner in which it went about the reforms only

added confusion to an already complex situation. This was due to a constellation of factors: the

consultants had a superficial „cut and paste‟ attitude to reforms, chanting mantras of unbundling,

corporatisation and privatisation, and setting up of regulatory commissions; adequate homework

involving the various stakeholders was not done; and quite possibly, the reform process was also

agenda driven, of creating a market for global power equipment sellers through the mechanism

of independent power producers (IPPs).

According to International Energy Agency‟s forecasts, electricity demand in OECD countries

had reached a plateau at 3 per cent growth and two-thirds of the incremental demand was to

come from the developing countries, notably from China and India. This lead to a scenario of the

north as the supplier of equipment and south as the consumer. The equipment had to be sold and

also the payment received. Reforms, seen in this context, would be to create market for power

equipment to satisfy the demand, and tariff reforms to make the buyer of equipment a financially

viable entity.

Such an agenda then automatically gives primacy to opening up the generation, rather than deal

with the cancer of corruption and inefficiency at the distribution end.27

Distribution reforms are

also messier, requiring political will to confront engineer‟s associations and an area where the

foreign investor is much less interested. Thus the reforms started at the generation end.

SOME OF THE MAJOR LACUNAE OF THE REFORM PROCESS ARE

Lack of understanding of the enormity of the reform process and a piecemeal, quick-fix and

vacillating approach. Contrasting with UK‟s reforms, one of the Bank‟s own consultant wrote in

India [Power and Infrastructure Reporter 2001]: “In the UK with the new Electricity Act, for

pool based competitive trading, some 300 contracts were written...most organizations had to

recruit some new staff, business people, not electrical engineers, to help them cope with

privatisation...and the ministry of energy employed consultants to reinforce their efforts, indeed

the cost of advisors ran into 100s of million pounds.

In all it was a major effort lasting for two years before the date of privatisation”.

An overemphasis on privatisation and underemphasis on competition: With the exception of

Putnam Hayes and Bartlett who, acting as consultants for UPSEB, further unbundled

transmission into a wires monopoly and a trading entity and introduced different types of

26 Darbha, G, S Dutta Roy and V Pawaskar (2000): „Estimating the Zero Coupon Yield Curve‟,

http://www.nseindia.com/debt/debtprodportindex.htm. 27 Sinha, Sidharth (2001): „Power Sector Privatisation: Lessons of Orissa‟, Indian Institute of

Management, Ahmedabad, September 6, mimeo.



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contracts for the IPPs, the state gencos and central gencos to get over transition problems en

route to wholesale competition, none of the other reform consultants of the Bank had ever

thought of wholesale competition in the power sector.28

Setting up regulatory commissions before privatisation and making them toothless before the

public sector licensees; staffing them with retired civil servants who have neither the expertise

nor independence from government. In a masters programme in public policy, for a question on

the effectiveness of the regulator to control public monopoly, most civil servants themselves

wrote these as the answer: “erosion of independence, capture by government, regulators taking

orders from the government to protect their chair, lack of expertise, etc.”29

In contrast, in UK, the

regulator was appointed only after privatisation. The Bank started the reforms with the state of

Orissa. The rationale of choosing Orissa was that it was not stymied by the agriculture tariff

subsidy problem with only about 10 per cent of energy being supplied to agriculture as against

30 to 40 per cent in other states. Secondly, it was also likely to have less opposition from the

staff unions, since most of the engineers were in fact from the government and hence statutorily

immune to job loss fears. The motions of unbundling, corporatisation and setting up of the

regulatory body were gone through. In the first instance, distribution was given to the private

sector on a management contract, as a prelude to privatisation and also to test the waters.

This turned out to be a failure as enhancement of revenue by plugging the leakages did not

materialise.30

NEVER AN ABSOLUTION

Undaunted, the Bank counselled outright privatisation selling 51 per cent of shares of the

distribution zones. Coincidentally the same BSES of Mumbai with whom the management

contract was abrogated, was awarded three zones and AES, a US firm, the remaining zone. AES

took that zone as it was also an Independent Power Producer (IPP) in that area and it thought that

control over distribution would mitigate some of the payment risks in generation. Later AES

realised to its chagrin that unbundling generation, transmission and distribution, with a public

sector Gridco in-between would annul this advantage of payment risk mitigation. The

privatisation process was marked by insufficient investor interest, with only three bidders finally

submitting the bid [Sinha 2001]. The main reasons for insufficient investor appetite cited by the

consultant [Frontier Economics] were: high level of losses and collection risk; problems of

inherited staff; low size of the system that that could not support the estimates of fixed costs (e g,

3 to 4 expatriate employees in India); tariff uncertainty (the regulator never made clear what

28 Fisher, M, D Nychka and D Zervos (1995): „Fitting the Term Structure of Interest Rates with Smoothing

Splines‟, Finance and Economics Discussion Series No 1995-1, Board of Governors of the Federal Reserve System. 29 Ranganathan, V and S Kumar (1991): „Economics of Wind Energy: A Reappraisal‟, International

Journal for Energy, Environment and Economics, Nova Science Publishers, NY 1 (4). 30 The RBI reports a list of securitywise annual (and monthly) yields as well as weekly minimum and maximum

yields for securities maturing at different times, e g, securities maturing in the year 2000-01, 2001-02, etc, and also reports monthly yields with a maturity band of one year. Similarly for treasury bills RBI provides weekly minimum

and maximum yields and average yields for a range of residual maturities, e g, up to 14 days, 15-90 days, etc (see

RBI‟s Report on Currency and Finance or Handbook of Statistics on the Indian Economy, the central bank‟s

monthly bulletin and the Weekly Statistical Supplement.) Central banks of many other Asian countries also do not

report any such maturitywise yields and often just report yields of certain benchmark securities.



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investment would be allowed under the rate base for earning returns); poor information from

government of Orissa31

and GRIDCO and returns being too low for the risk. It is interesting to

note that investors did not see the big losses as opportunity for better returns through

improvements, which is the basic argument for privatisation. During the operations for 1999-

2000 and 2009-10, all the privatised sectors were making losses.

CONCLUSION

Over the years, the Bank has made two significant departures in its policy of lending: it changed

its policy of lending to government and public sector and concentrated on private sector, and it

changed its approach from a project-based lending to sector based lending, ostensibly to develop

institutional capacity. The result in both cases, as witnessed in the case of the power sector, has

been worse, with a great stagnation of investment, due to uncertain policy environment and

without any institutional capacity building. In short, the Bank‟s intellectual and physical

contribution to India‟s development has not been as much as it thinks it is. Its impact on reducing

poverty has been insignificant and the efforts initiated in the last five years have yet to bear fruit.

This has been partly acknowledged in the report of the Operation‟s Evaluation Department of the

Bank. Even some areas which the report praises as successful “Results have been strongest in

power” have actually been deeply disappointing. It is time the Bank does some introspection and

reforms its strategies.

After the study of the policies of the Reserve Bank and the World Bank we find that the policies

overall are more or less similar in nature going forward and looking to building an approach

which is essentially welfarist in nature. It is also to be considered that the World Bank takes up a

keen interest in dealing with the poverty alleviation programmes in India.

But if we go to the underlined meanings we will find that the policies are fundamentally different

on account of the control which are generally held by the developed nations in the World Bank.

Often India has been made to bow down to the demands of the World Bank in order to come out

of the fact that the system will be ceasing economically. This is the basic difference we can see

in the case of the World Bank and the RBI.

The policies of the RBI has always tried to bring on a welfarist strategy by using pro capitalist

means while the World Bank while putting on a socialist façade has been constantly dealing with

that of the capitalist wings of creation.

Hence we see the basic and stark difference of the two which can be made right by adopting a

stringent international policy so as not to let the developed countries dictate the terms.

31 The Hindu (December 4, 2001): „Paneerselvam Rules Out Roll Back‟, Bangalore, p 6.



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DIVERSIFICATION - STRATEGIES FOR MANAGING A BUSINESS

P. KANNAN*; DR. R.SARAVANAN**

*Head, Department of Management Studies,

N.P.R. College of Engineering & Technology, Natham.

*Research Scholar,

Anna University of Technology Coimbatore, Coimbatore, Tamil Nadu, India.

**Director, School of Management,

Sri Krishna College of Technology, Kovaipudur, Coimbatore- 641042,

Tamil Nadu, India.

ABSTRACT

When thinking about building a diversified portfolio, remember the old adage, “Don’t put all

your eggs in one basket.” Diversification is not only about the number of investments in your

portfolio, it’s also about the relationships among those investments. Diversification becomes an

attractive strategy when a company runs out of profitable growth opportunities in its core

business. In a diversified company the strategy making challenge involves assessing multiple

industry environments and coming up with a set of business strategies, in which it operates.

Multinational diversification strategies feature a diversity of business and a diversity of national

markets. Despite the complexity of having to devise and manage so many strategies, these

strategies have considerable appeal and more competitive potential. The study focuses on the

manner in which diversification strategy is applied for different sectors like IT, FMCG etc. It

deals with the core concept of diversification strategy to succeed by companies.

KEYWORDS: Investments, Related Diversification, Strategy, Unrelated Diversification.

______________________________________________________________________________

INTRODUCTION

Diversification is a form of growth marketing strategy for a company. It seeks to increase

profitability through greater sales volume obtained from new products and new markets. A

diversification strategy stands apart from the other three strategies such as merger and

acquisition, internal start – up, Joint – Venture. These are usually pursued with the same

technical, financial, and merchandise resources used for the original product line, whereas

diversification strategy usually requires a company to acquire new skills, new techniques and

new facilities. Therefore, diversification is meant to be the riskiest of other strategies to pursue.

Whenever a single business companies faced with diminishing market opportunities and

stagnating sales in its principal business, it is the indication for diversification. And a

Management quote about diversification is given by Andrew Campbell as below,



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“Fit between a parent and its business is a two – edged sword; a good fit can create value and a

bad one can destroy it.”

WHEN TO DIVERSIFY – KEY FACTORS

Whenever a single business companies faced with diminishing market opportunities and

stagnating sales in its principal business, it is the signal for diversification. The other key factors

are,

a) When it has a powerful and well-known brand name that can be transferred to the product

of other business.

b) When diversifying into closely related business opens new avenue for reducing costs.

c) When it can expand into industries whose technologies and products complement its

present business?

Judgments about the timing of a company’s diversification effort are best made instance by

instance, according to company’s own unique situation.

CORE CONCEPT PATH

Once the decision is made to pursue diversification, the firm must choose whether to diversify

into related business, unrelated business. Businesses are said to be related when their value

chains possess competitively valuable cross – business value chain matchups. Business are said

to be unrelated when the activities comprising their respective value chains are so dissimilar that

no competitively valuable cross – business relationship are present. Most companies favor

related diversification strategies because of the performance enhancing potential of cross –

business synergies. However, some companies opted to try to build shareholder value with

unrelated diversification strategies.

CASES FOR DIVERSIFYING INTO RELATED BUSINESS

To present opportunity for the following,

a) Combining the related activities of separate businesses into a single operation to achieve

lower costs.

b) Transferring valuable expertise, technology, marketing capabilities, managerial

knowledge etc.,

c) Exploiting common use of a well – known brand name.

d) To create valuable resource strength and capabilities.



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RELATED DIVERSIFICATION BUSINESS ACTIVITIES

Related diversification thus has a strategic appeal from several angles. It allows a firm to reap the

competitive advantage benefits of skills transfer, lower cost, common brand names, and stronger

competitive capabilities over a broad business phase. It also provides sharper focus for managing

diversification and a useful degree of strategic unity across the company’s various business

activities.

COMPANIES THAT HAVE DIVERSIFIED INTO RELATED BUSINESS

Samples of companies that have pursued a strategy of related diversification are illustrated

below.

TABLE 1 COMPANY IN RELATED DIVERSIFICATION

JOHNSON & JOHNSON

Baby products

First – aid products

Medical devices

Surgical & Hospital products

Contact lenses

Personal Care products

PEPSICO

Soft drinks

Fruit juices (Tropicana)

Other beverages (Aquafina bottled water etc.,)

Sports drinks (Gatorade)

Snack foods (Lays, Chee – tos etc.,)

Breakfast products

GILLETTE

Blades and Razors

Tooth Brush (Oral B)

Toiletries products

Hair dryers,

Shavers.

PROCTER & GAMBLE

Hair care products

Household cleaning/care

Beauty care products

Laundry products



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FIGURE 1

REPRESENTING VALUE CHAIN ACTIVITIES

Table 1 it is inferred that the factors the companies adopted while going for related

diversification.

From the above samples, the Core areas that the companies pursue as under:

Transfer of technology, Marketing Capabilities, Managerial Knowledge

Shared Skills and Competencies

Exploitation of by – Products – Reduction in unit cost

Reduces risks

SUPPORT ACTIVITIES

operati

ons

COMPETITIVE VALUE CHAINS OF A (BUSINESS A) AND B (BUSINESS B)

Distrib

ution

Customer

services

Techno

logy

Supply

chain

Sales &

marketing

Operati

ons

Distrib

ution

Customer

services Techno

logy

Supply

chain

Sales &

marketing

SUPPORT ACTIVITIES

A

B



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CASES FOR DIVERSIFYING INTO UNRELATED BUSINESSES

Companies that pursue a strategy of unrelated diversification generally exhibit a willingness to

diversify into any industry where there is potential market for a company to realize consistently

good financial results.

CRITERIA TO KEEP OR DIVEST EXISTING BUSINESS

a. Whether the business can meet corporate targets for profitability and return on investment

b. Whether the business will require substantial infusions of capital to replace out-of-date

plants and equipment, fund expansion etc.,

c. Whether the business is in an industry with significant potential growth

d. Whether the business is big enough to contribute significantly to the parent firm’s bottom

line

UNRELATED BUSINESS ACTIVITIES

FIGURE 2

REPRESENTATIVE VALUE CHAIN ACTIVITIES

SUPPORT ACTIVITIES

Production

ABSENCE OF COMPETITIVE VALUE CHAINS OF A (BUSINESS A) AND

B (BUSINESS B)

Dealers Product

R & D

Advt &

Promotion

Assembly Customer

services Supply

chain

Distribution

SUPPORT ACTIVITIES

A

B



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From the below illustration of unrelated business activities says that, “A strategy of unrelated

diversification involves no deliberate effort to seek out businesses having strategic fit with the

firm’s other business.”

COMPANIES THAT HAVE DIVERSIFIED INTO UNRELATED BUSINESS

A sample of companies that have pursued a strategy of unrelated diversification are illustrated

below.

TABLE 2 COMPANY IN UNRELATED DIVERSIFICATION

WIPRO

Electrical appliances

Information technology

Computer accessories

Toilet soap (santoor)

GE medical system

Baby care products

TATA GROUPS

Home appliances

Financial services

Watches

Telecom services

Information technology

Tea products

LG

Mobile Phones

Television, Radio

Projectors

Home appliances

Lamps

Note books

RELIANCE

Telecom services

Power

Petro – chemical products

Mobile phones

Construction

Textiles

Mutual funds ,

money



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From the above table it is depicts that the following are the merits of Unrelated

diversification strategy for the above companies:

Superior skills of top management people

Business risks is scattered over a set of diverse industries.

Company’s financial resources can be employed to maximum advantage investing in

industries offers the best profit prospects.

Building share-holder value

Increasing Profitability by exploiting general organization competencies

DISCUSSION & FINDINGS

From the above analysis of both diversification strategies the below are the findings

Why is related diversification only marginally profitable than unrelated?

How can diversification dissipate rather than create value?

Michael Porter’s research(1)

suggests that average related company is at best only marginally

more profitable than the average unrelated company.

He found that most of the companies had divested many more diversified acquisitions than

they had kept. He and its team have concluded that the corporate diversifications strategies

pursued by most companies can dissipate value rather than creating it.

Accomplishments of unrelated diversification business are,

Cutting unrelated cost

Concentrating on core areas

Seeking external markets



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KEY BARRIERS OF UNRELATED DIVERSIFICATION

WHY RELATED DIVERSIFICATION MOSTLY PREFERRED BY THE

COMPANIES?

Boost profitability in numerous ways

Involved fewer risks

Top management has related knowledge about parent business

KEY BARRIERS OF RELATED DIVERSIFICATION

Barriers for

Unrelated

Diversification

Planning

controls

Specialist

business

advisor

Lack of

Skills

Regulatory

controls

Capacity to

develop a

business case

Barriers for

Related

Diversification

Regulatory

controls

Planning

controls

Validity of

Marketing

Research

Skilled

Personnel Access to

finance



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RESULTS

Diversification

Strategies Characteristics Growth Profit Risk

Related

Diversification

Operates in a few

related industries Low High Low

Unrelated

Diversification

Operates in many

unrelated

industries

High Low Medium

DIVERSIFICATION STRATEGY MATRIX

Growth

High Low

High

Profit

Low

INFERENCE

When companies mainly focusing on profit, they can prefer unrelated or mixed

diversification strategy.

When companies mainly focusing on growth, they can prefer related diversification or

mixed diversification strategy.

When the company’s growth and profit are at low, suggest that they can go for

disinvestment the business operations.

CONCLUSION

It is very tempting for a business leader to diversify with related or unrelated business

activities carried out in a company. But it must be understood that it is a very complex task.

Hence any such move must be planned & executed with great care. And diversification strategy

matrix is given above for the business leader to help in choosing the strategy for diversifying the

business activities.

Mixed

Diversification

Related

Diversification

Unrelated

Diversification Divestment



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REFERENCES

(1) Charles W.L.Hill and Gareth R. Jones on Strategic Management, Volume- 06, Biztantra

Publication.

(2) Arthur .A. Thompson, A. J. Strickland, John. E. Gamble on Crafting and Execution

Strategy, vol.14, Tata McGraw-Hill Publication.

(3) George Stone House, David Campbell, Jim Hamill, Tony Purdie on Global and

Transnational Business, 2nd

Edition, Wiley Publication.

(4) Sukul Lomash abd P K Mishra on “Business Policy and Strategic Management”

3rd

Edition, Vikas Publication.

WEBSITES

1. http://ideas.repec.org/p/imf/imfwpa/06-50.html

2. http://www.fao.org/docrep/006/ad689e/ad689e07.htm

3. http://www.investopedia.com/articles/02/111502.asp

4. http://www.mydigitalfc.com/personal-finance/why-diversification-strategy-

didn%E2%80%99t-work-crash-353

5. http://dkmt.regionalnet.org/docu/t4.htm

6. Company websites for the following:

i. Johnson & Johnson

ii. Gillette

iii. Protector & Gamble

iv. PepsiCo

v. Tata Groups

vi. Reliance

vii. Wipro

viii. LG

http://ideas.repec.org/p/imf/imfwpa/06-50.html

http://www.fao.org/docrep/006/ad689e/ad689e07.htm

http://www.investopedia.com/articles/02/111502.asp

http://www.mydigitalfc.com/personal-finance/why-diversification-strategy-didn%E2%80%99t-work-crash-353

http://www.mydigitalfc.com/personal-finance/why-diversification-strategy-didn%E2%80%99t-work-crash-353

http://dkmt.regionalnet.org/docu/t4.htm



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EMERGENCE OF CORPORATE GOVERNANCE IN INDIA

C.UDAYA KUMAR RAJU*; M. SUBRAMANYAM**; HIMACHALAM DASARAJU***

*Research Scholar,

Department of Commerce, Sri Venkateswara University,

Tirupati - 517502, Andhra Pradesh, India. **Research Scholar,


Tirupati – 517502, Andhra Pradesh, India. ***Professor & Chairman BOS,


Tirupati - 517502, Andhra Pradesh, India.

ABSTRACT

The present paper is a theoretical exposition focusing on regulatory mechanism on corporate

governance in developing economies. In India, lots of serious efforts have been made at

overhauling the economic system since liberalization. As a part these initiatives, the SEBI

instituted the Clause 49 of the Listing Agreements dealing with corporate governance in India.

The corporate governance in India is undergoing a process of change with a move towards more

market-based governance. India, with its vast population has emerged as one of the most

attractive country for the multi nationals as they scourge around the world to woo the customer.

These organizations in their attempt to attract the customer have indulged in number of

malpractices damaging the geographical, socio, and political climate of the destination country.

India has the best corporate governance laws but poor implementation together with socialistic

policies of the pre-reform era has affected corporate governance. Concentrated ownership of

shares, pyramiding and tunneling of funds among group companies mark the Indian corporate

landscape. Boards of directors have frequently been silent spectators with the DFI nominee

directors unable or unwilling to carry out their monitoring functions.

KEYWORDS: corporate governance, regulatory mechanism, audit committee, SEBI, DFI,

Clause 49.

______________________________________________________________________________

INTRODUCTION

The corporate governance is a multi-faceted subject which ensures the accountability of certain

individuals in an organization through mechanisms that try to reduce or eliminate the principal-

agent problem. It focuses on the economic efficiency, with a strong emphasis on shareholders'

welfare. There are yet other aspect to the corporate governance subject, such as the stakeholder

view and the corporate governance models around the world.

The history of the development of Indian corporate laws has been marked by interesting contrast

(Goswami, 2002) In terms of corporate laws and financial system, therefore, India emerged far

better endowed than most other colonies. The 1956 Companies Act as well as other laws

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

http://en.wikipedia.org/wiki/Principal-agent_problem

http://en.wikipedia.org/wiki/Principal-agent_problem

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

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





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governing the functioning of joint-stock companies and protecting the investors‟ rights built on

this foundation. The beginning of corporate developments in India were marked by the managing

agency system that contributed to the birth of dispersed equity ownership but also gave rise to

the practice of management enjoying control rights disproportionately greater than their stock

ownership. The turn towards socialism in the decades after independence marked by the 1951

Industries (Development and Regulation) Act as well as the 1956 Industrial Policy Resolution

put in place a regime and culture of licensing, protection and widespread red-tape that bred

corruption and stilted the growth of the corporate sector. The situation grew from bad to worse in

the following decades and corruption, nepotism and inefficiency became the hallmarks of the

Indian corporate sector. Exorbitant tax rates encouraged creative accounting practices and

complicated emolument structures to beat the system.

In the absence of a developed stock market, the three all-India development finance

institutions (DFIs) the Industrial Finance Corporation of India, the Industrial Development Bank

of India and the Industrial Credit and Investment Corporation of India together with the state

financial corporation‟s became the main providers of long-term credit to companies. Along with

the government owned mutual fund, the Unit Trust of India, they also held large blocks of shares

in the companies they lent to and invariably had representations in their boards. In this respect,

the corporate governance system resembled the bank-based German model where these

institutions could have played a big role in keeping their clients on the right track. Unfortunately,

they were themselves evaluated on the quantity rather than quality of their lending and thus had

little incentive for either proper credit appraisal or effective follow-up and monitoring. Their

nominee directors routinely served as rubber-stamps of the management of the day. With their

support, promoters of businesses in India could actually enjoy managerial control with very little

equity investment of their own. Borrowers therefore routinely recouped their investment in a

short period and then had little incentive to either repay the loans or run the business. Frequently

they bled the company with impunity, siphoning off funds with the DFI nominee directors mute

spectators in their boards.

This sordid but increasingly familiar process usually continued till the company‟s net

worth was completely eroded. This stage would come after the company has defaulted on its loan

obligations for a while, but this would be the stage where India‟s bankruptcy reorganization

system driven by the 1985 Sick Industrial Companies Act (SICA) would consider it “sick” and

refer it to the Board for Industrial and Financial Reconstruction (BIFR). As soon as a company is

registered with the BIFR it wins immediate protection from the creditors‟ claims for at least four

years. Between 1987 and 1992 BIFR took well over two years on an average to reach a decision,

after which period the delay has roughly doubled. Very few companies have emerged

successfully from the BIFR and even for those that needed to be liquidated, the legal process

takes over 10 years on average, by which time the assets of the company are practically

worthless (Rajesh Chakrabarti, 2009 ).

Protection of creditors‟ rights has therefore existed only on paper in India. Given this

situation, it is hardly surprising that banks, flush with depositors‟ funds routinely decide to lend

only to blue chip companies and park their funds in government securities. Financial disclosure

norms in India have traditionally been superior to most Asian countries though fell short of those

in the USA and other advanced countries. Noncompliance with disclosure norms and even the



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failure of auditor‟s reports to conform to the law attract nominal fines with hardly any punit ive

action. The Institute of Chartered Accountants in India has not been known to take action against

erring auditors. (Franklin Allen, Rajesh Chakrabarti, Sankar De October 27, 2007)

While the Companies Act provides clear instructions for maintaining and updating

share registers, in reality minority shareholders have often suffered from irregularities in share

transfers and registrations – deliberate or unintentional. Sometimes non-voting preferential

shares have been used by promoters to channel funds and deprive minority shareholders of their

dues. Minority shareholders have sometimes been defrauded by the management undertaking

clandestine side deals with the acquirers in the relatively scarce event of corporate takeovers and

mergers. Boards of directors have been largely ineffective in India in monitoring the actions of

management. They are routinely packed with friends and allies of the promoters and managers,

in flagrant violation of the spirit of corporate law. The nominee directors from the DFIs, who

could and should have played a particularly important role, have usually been incompetent or

unwilling to step up to the act. Consequently, the boards of directors have largely functioned as

rubber stamps of the management. For most of the post-Independence era the Indian equity

markets were not liquid or sophisticated enough to exert effective control over the companies.

Listing requirements of exchanges enforced some transparency, but non-compliance was neither

rare nor acted upon. All in all therefore, minority shareholders and creditors in India remained

effectively unprotected in spite of a plethora of laws in the books. (Sunanda Chavan September

28th, 2010)

CHANGES SINCE LIBERALIZATION

Since its financial liberalization began in 1991, India has undergone significant

corporate governance reform. (Aggarwal, Reena, Leora Klapper, and Peter D. Wysocki ,2005)

By the time of Independence in 1947 India had functioning stock markets, an active

manufacturing sector, a fairly developed banking sector, and comparatively well developed,

British-derived corporate governance. However, from 1947 through 1991, the Indian government

pursued socialist policies. The state nationalized most banks, and became the principal provider

of both debt and equity capital for non-state controlled firms. The government agencies who

provided this capital were evaluated based on the amount of capital invested rather than return on

investment. Competition, especially foreign competition, was suppressed. Private providers of

debt and equity capital faced serious obstacles to exercising oversight over managers due to long

delays in judicial proceedings and difficulty enforcing claims in bankruptcy. Public equity

offerings could be made only at government-set prices.

Indian corporate governance deteriorated, and Indian firms looking for outside capital

had to rely primarily on government sources (Bhattacharyya & Rao, 2005; World Bank, 2005).

The Indian economy performed poorly. In 1991, the Indian government faced a fiscal crisis. It

responded by enacting a series of reforms including reduction in state-provided financing, bank

privatization, and general economic liberalization. The Securities and Exchange Board of India

(SEBI) India's securities market regulator – was formed in 1992. By the mid-1990s, the Indian

economy was growing steadily, and Indian firms began to seek equity capital to finance

expansion into the market spaces created by liberalization and the growth of outsourcing. The

need for capital, amongst other things, led to corporate governance reform.



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The industrial policy and corporate studies expert attached to the Delhi-based Institute

for Studies in Industrial Development (ISID), the present economic climate demands the

initiation of new regulatory mechanisms. He suggests the introduction of audit by the

Comptroller and Auditor General for all large corporations; making public information on all

companies small or large, public or private, listed or unlisted; bringing back development

financial institutions; reassessing the role of portfolio investors; and strengthening the policing of

politicians through genuine LokAyuktas (FrontlineVolume26-Issue03::Jan.31-Feb.13,2009

India's National Magazine from the publishers of The Hindu)

The corporate frauds that have come to the fore since Independence can be broadly

classified into three phases and categories: those perpetrated during a period when regulatory

mechanisms were virtually non-existent; those that can be termed as „regulatory capture‟ because

they were advanced using the very regulatory norms that were supposed to ensure a strict and

exacting regime; and those that came up in an unbridled manner in a climate of liberalisation.

Chronologically, the first phase consisted of the decade and a half following Independence. The

second phase extended to a period of nearly two and a half decades between the mid 1960s and

the early 1990s. The third and current phase started in the early 1990s with economic

liberalization.

The phrase corporate governance is relatively new in India. It gained prominence in

the early 1990s as a number of scams. Securities scam of 1992, disappearance of a number of

companies after raising many through the stock market during the 1993-1994, etc. shattered

investor‟s confidence, these were also cases of unscrupulous corporate issuing preferential equity

allotments to their controlling group at steep discounts to the market price. All these episodes

strengthened the case for corporate governance. Over the years, financial crises in the East Asian

countries in 1997, corporate scandals in the USA in the beginning of this decade have intended

to keep this issue in limelight and new guidelines have been developed. With the advent of

Sarbanes-Oxley standards in USA. The need for disclosure of information has become

paramount through such compliance. Comes with increased bureaucratization and hence higher

costs as well.

These scandals were believed to have been made possible by the absence of well-

defined regulatory mechanisms, and efforts were made to strengthen such mechanisms.

According to observers of the financial sector, the 1960s was a period in which the government

initiated several measures to put in place stringent regulatory mechanisms to control the sector.

Among the notable initiatives of this period was the defining of norms for industrial licensing

and allocation of bank credit.

Further companies have realized that good corporate governance is a pre-requisite for

accessing finds from competitive capital markets in an increasingly integrated international

economy leading to more transparent disclosures. For that to strengthen the regulatory

mechanism appointed several committees. (Arun Balakrishnan, C&MD, HPCL,

25th

June, 2008)



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EVOLUTION OF CORPORATE GOVERNANCE IN INDIA

The Indian ethos of corporate governance as articulated by Mahatma Gandhi in his writings.

He believed that management is a trustee of shareholders capital and business is a trustee of all

resources, including the environment. As trustees the primary goal of management is to protect

the interest of the owners and also, not to exploit resources for short term profits. In India, the

initiative on corporate governance was not a result of any major corporate scandal, like Enron,

World Com, etc. It started as a self-regulatory move from the industry rather than the rule of law.

(Prof. Uday Salunkhe, Prof. P.S. Rao, and Prof. Amitha Sehgal,2011)

The need for Corporate Governance has become highlighted by the scams brought high

almost as an annual feature ever since the liberalization of the economy in 1991, To cite a few

Harshad Metha, ketan Parikh scam, UTI scam, the vanishing company scam, the Bhansali scam

and so on (Omkar Goswami, 2002).Lessons should be learning from the countries like USA and

UK where companies exposed to lot of hardships and failures due to misgovernance and

unethical business practices. The Errors issue was examined by number of committees at

different levels in the U.S and at the end of all these examinations, they came with a better

model. In the Indian corporate scenario, it is imperative to induct good global standards so that at

least the scope for scams should be minimized. The single most Important development in the

field of Corporate Governance and Investor protection in India has been the establishment of the

Securities and Exchange Board of India in 1992 and its gradual empowerment since the time it

was established primarily to regulate and monitor stock trading, it has played a crucial role in

establishing the basic minimum ground rules of corporate conduct in the country. Concerns

about corporate governance in India were, however, largely triggered off by a spate of crises in

the early 1990‟s as already noted. This concerns about Corporate Governance stemming from the

several corporate scandals, coupled with a perceived need to open up to the forces of competition

and globalization, gave rise to several investigations into ways to fix the Corporate Governance

situation in India. One of the first such end eavours was the confederation of Indian Industry

(CII) code for Desirable Corporate Governance, developed by a committee chaired by Rahul

Bajaj, this committee was formed in 1996 and submitted its code in April 1998. Later the

Securities and Exchange Board of India (SEBI) constituted two committees to look into the issue

of Corporate Governance. The first was chaired by KumarMangalam Birla, which submitted it‟s

report in early 2000, and the second by Narayana Murthy, which submitted it‟s report three years

later. These two committees have been Instrumental in bringing about for reaching changes in

Corporate Governance in India through the formulation of clause 49 of listing Agreements.

Concurrent with the Initiatives by the SEBI, the Department of Company Affairs, the Ministry of

Finance of the Government of India also began contemplating Improvements in Corporate

Governance. These efforts include the establishment of a study group to operationalize the Birla

Committee recommendations in 2000, the Naresh Chandra Committee on Corporate Audit and

Governance in 2002, and the expert committee on Corporate Law (The J.J.Irani Committee) in

late 2004. All these efforts were aimed at reforming the existing Companies Act of 1956 still

forms the backbone of corporate law in India.



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RECOMMENDATIONS OF VARIOUS COMMITTEES ON CORPORATE

GOVERNANCE IN INDIA

CII CODE RECOMMENDATIONS (1997)

BOARD OF DIRECTORS

1. No need for German style two-tiered board.

2. For a listed company with turnover exceeding Rs. 100 crores, if the Chairman I also the

MD, at least half of the board should be Independent directors, else at least 30%.

3. No single person should hold directorships in more than 10 listed companies.

4. Non-executive directors should be competent and active and have clearly defined

Responsibilities like in the Audit Committee.

5. Directors should be paid a commission not exceeding 1% (3%) of net profits for a company

with (out) an MD over and above sitting fees. Stock options may be considered too.

6. Attendance record of directors should be made explicit at the time of re-appointment.

Those with less than 50% attendance should not be reappointed.

7. Key information that must be presented to the board is listed in the code.

AUDIT COMMITTEE

Listed companies with turnover over Rs. 100 crores or paid-up capital of Rs. 20 crores

should have an audit committee of at least three members, all non-executive, competent and

willing to work more than other non-executive directors, with clear terms of reference and access

to all financial information in the company and should periodically interact with statutory

auditors and internal auditors and assist the board in corporate accounting and reporting.

Reduction in number of nominee directors. FIs should withdraw nominee directors from

companies with individual FI shareholding below 5% or total FI holding below 10%.

DISCLOSURE AND TRANSPARENCY

1. Companies should inform their shareholders about the high and low monthly averages of

their share prices and about share, performance and prospects of major business segments

(exceeding 10% of turnover).

2. Consolidation of group accounts should be a) Companies should inform their

shareholders about the high and low monthly averages of their share prices and about share,

performance and prospects of major business segments (exceeding 10% of turnover).

3. Consolidation of group accounts should be optional and subject to FI‟s and IT department‟s

assessment norms. If a company consolidates, no need to annex subsidiary accounts but the

definition of “group” should include parent and subsidiaries.



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4. Stock exchanges should require compliance certificate from CEOs and CFOs on

company accounts

5. For companies with paid-up capital exceeding Rs. 20 crore, disclosure norms for domestic

issues should be same as those for GDR issues.

CREDITORS’ RIGHTS

1. FIs should rewrite loan covenants eliminating nominee directors except in case of serious

and systematic debt default or provision of insufficient information.

2. In case of multiple credit ratings, they should all be reported in a format showing relative

position of the company

3. Same disclosure norms for foreign and domestic creditors.

4. Companies defaulting on fixed deposits should not be permitted to accept further deposits

and make inter-corporate loans or investments or declare dividends until the default is

made good.

BIRLA COMMITTEE (SEBI) RECOMMENDATIONS (2000)

BOARD OF DIRECTORS

1. At least 50% non-executive members

2. For a company with an executive Chairman, at least half of the board should be

independent directors, else at least one-third.

3. Non-executive Chairman should have an office and be paid for job related expenses.

4. Maximum of 10 directorships and 5 chairmanships per person.

AUDIT COMMITTEE

A board must have an qualified and independent audit committee, of minimum 3 members, all

non-executive, majority and chair independent with at least one having financial and accounting

knowledge. Its chairman should attend AGM to answer shareholder queries. The committee

should confer with key executives as necessary and the company secretary should be he

seceretary of the committee. The committee should meet at least thrice a year - one before

finalization of annual accounts and one necessarily every six months with the quorum being the

higher of two members or one-third of members with at least two independent directors. It

should have access to information from any employee and can investigate any legal/professional

service as well as secure attendance of outside experts in meetings. It should act as the bridge

between the board, statutory auditors and internal auditors with far-ranging powers and

responsibilities.



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REMUNERATION COMMITTEE

The remuneration committee should decide remuneration packages for executive

directors. It should have at least 3 directors, all nonexecutive and be chaired by an independent

director. The board should decide on the remuneration of non-executive directors and all

remuneration information should be disclosed in annual report. At least 4 board meetings a year

with a maximum gap of 4 months between any 2 meetings. Minimum information available to

boards stipulated.


1. Companies should provide consolidated accounts for subsidiaries where they have majority

shareholding.

2. Disclosure list pertaining to “related party” transactions provided by committee till ICAI‟s

norm is established.

3. A mandatory Management Discussion & Analysis segment of annual report that includes

discussion of industry structure and development, opportunities, threats, outlook, risks etc.

as well as financial and operational performance and managerial developments in HR/IR

front.

4. Management should inform board of all potential conflict of interest situations.

5. On (re)appointment of directors, shareholders must be informed of their resume,

expertise, and names of companies where they are directors.

SHAREHOLDERS’ RIGHTS

1. Quarterly results, presentation to analysts etc. should be communicated to investors,

possibly over the Internet.

2. Half-yearly financial results and significant events reports be mailed to shareholders

3. A board committee headed by a nonexecutive director look into shareholder

Complaints/grievance

4. Company should delegate share transfer power to a officer/committee/registrar/share

transfer agents. The delegated authority should attend to share transfer formalities at least

once in a fortnight.

The Committee in its report observed that “the strong Corporate Governance is

indispensable to resilient and vibrant capital markets and is an important instrument of investor

protection. It is the blood that fills the veins of transparent corporate disclosure and high quality

accounting practices. It is the muscle that moves a viable and accessible financial reporting

structure.”



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NARAYANA MURTHY COMMITTEE (SEBI) RECOMMENDATIONS (2003)

BOARD OF DIRECTORS

1. Training of board members suggested.

2. There shall be no nominee directors. All directors to be elected by shareholders with same

responsibilities and accountabilities.

3. Non-executive director compensation to be fixed by board and ratified by shareholders and

reported. Stock options should be vested at least a year after their retirement. Independent

directors should be treated the same way as non-executive directors.

4. The board should be informed every quarter of business risk and risk management

strategies.

AUDIT COMMITTEE

Should comprise entirely of “financially literate” non-executive members with at least

one member having accounting or related financial management expertise. It should review a

mandatory list of documents including information relating to subsidiary companies. “Whistle

blowers” should have direct access to it and all employees be informed of such policy (and this

should be affirmed annually by management). All “related party” transactions must be approved

by audit committee. The committee should be responsible for the appointment, auditor.

1. Boards of subsidiaries should follow similar composition rules as that of parent and should

have at least one independent director s of the parent company.

2. The Board report of a parent company should have access to minutes of board meeting in

subsidiaries and should affirm reviewing its affairs.

3. Performance evaluation of non-executive directors by all his fellow Board members should

inform a re -appointment decision.

4. While independent and non-executive directors should enjoy some protection from civil

and criminal litigation, they may be held responsible of the legal compliance in the

company‟s affairs.

5. Code of conduct for Board members and senior management and annual affirmation of

compliance to it


1. Management should explain and justify any deviation from accounting standards in

financial statements.



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2. Companies should move towards a regime of unqualified financial statements.

Management should provide a clear description, followed by auditor‟s comments, of

each material contingent liability and its risks.

3. CEO/CFO certification of knowledge, veracity and comprehensiveness of financial

statements and directors‟ reports and affirmation of maintaining proper internal control as

well as appropriate disclosure to auditors and audit committee

4. Security analysts must disclose the relationship of their employers with the client company

as well as their actual or intended shareholding in the client company.

Narayana Murthy committee to review the performance of Corporate Governance and to

determine the role of companies in responding to rumour and other price sensitive information

circulating in the market in order to enhance the transparency and integrity of the market. The

Committee in its Report observed that “the effectiveness of a system of Corporate Governance

cannot be legislated by law, nor can any system of Corporate Governance be static. In a

dynamic environment, system of Corporate Governance need to be continually evolved.”

Based on the recommendations of the Committee, the SEBI had specified principles of

Corporate Governance and introduced a new clause 49 in the Listing agreement of the Stock

Exchanges in the year 2000. These principles of Corporate Governance were made applicable in

a phased manner and all the listed companies with the paid up capital of Rs 3 crores and above or

net worth of Rs 25 crores or more at any time in the history of the company, were covered as of

March 31, 2003.

With a view to promote and raise the standards of Corporate Governance, SEBI on the

basis of recommendations of the Committee and public comments received on the report and in

exercise of powers conferred by Section 11(1) of the Securities and Exchange Board of India

Act, 1992 read with section 10 of the Securities Contracts (Regulation) Act 1956, revised the

existing clause 49 of the Listing agreement vide its circular SEBI/MRD/SE/31/2003/26/08 dated

August 26, 2003. It clarified that some of the sub-clauses of the revised clause 49 shall be

suitably modified or new clauses shall be added following the amendments to the Companies Act

1956 by the Companies (Amendment) Bill/Act 2003, so that the relevant provisions of the

clauses on Corporate Governance in the Listing Agreement and the Companies Act remain

harmonious with one another.



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SUMMARY OF CLAUSE 49

Characteristic Clause 49

Director

Independence

Requirement – 50% independent directors if Chairman is executive

director or 33% if Chairman is a nonexecutive.

Definition – no material pecuniary relationship with company, not related to

Board or one level below Board and no prior relationship with the Company

for the last 3 years.

Nominee Directors of Financial Institutions - considered independent.

Board

Requirements

&

Limitations

Meet 4 times a year (maximum 3 months between meetings)

Limits on number of committees a director can be on (10), but only 5

for which director can be Chair of committee.

Code of Conduct (Ethics) required.

Audit

Committee

Composition

At least 3 directors (two-thirds must be independent).

All financially literate.

At least one having accounting or financial management experience.

Audit

Committee

Role & Powers

Minimum 4 meetings/year (gap between meetings not exceed 4

months).

Broad role – review statutory and internal auditors as well as internal

audit function, obtain outside legal or other professional advice, and review

whistleblower program if one exists amongst other things.

Disclosures

Related party transactions,

Accounting treatments and departures,

Risk management,

Annual report include discussion of internal controls adequacy,

significant trends, risks, and opportunities,

Proceeds from offerings,

Compensation for directors (including nonexecutives and obtain

shareholders‟ approval),



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Details of compliance history for last 3 years.

Corporate governance reports (and discloses adoption, if any, of

mandatory and non-mandatory requirements).

Certifications

CEO & CFO:

financial statements

effectiveness of internal controls

Inform audit committee of any significant changes in the above.

Auditor or Company Secretary:

Compliance with corporate governance

Subsidiary

Companies

At least one Independent director of Holding Company should sit as a

director on Board of material non-listed Indian subsidiary.

Significant transactions report to Holding Company Board (along with

subsidiary board‟s minutes).

Other

Recommendations:

Whistleblower policy is optional

Independent directors loses status as “independent” if served 9 years at

company

Training board members

Evaluate nonexecutive board performance.

In the Indian context, once clause 49 came into effect in 2005 end, the regulatory content for

corporate governance changed significantly, additionally, with much greater inflow of foreign

institutional investments (FII) into the Indian capital markets, there has been an increasing

demand for transparency and disclosure from Indian firms to be in line with best practices in the

developed world.

The new guidelines on corporate governance issued at the year of 2007 for the state owned

enterprises in India are quite similar to the clause 49 requirements. These include guidelines with

respect to role of the board of directors and management, audit committee, code of conduct and

business ethics etc. These guidelines are voluntary however, the department of public enterprises

may grade state owned enterprises on the basis of the compliance with the guidelines. While

there is no denying that these guidelines promote the objective of good corporate governance



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however certain challenges remain.(Arun Balakrishnan, C&MD,HPCL). There is no denying the

fact that clause 49 and the new guidelines provide an ideal for corporate governance. This is

essential as the Indian economy and companies operate in an integrated international economy.

However as is the case with any statute, it is quite often implementation which determines the

effectiveness.

REGULATORY MECHANISMS OF CORPORATE GOVERNANCE

In our country, there are some major mechanisms to ensure corporate governance:

COMPANIES ACT

Companies in our country are regulated by the companies Act, 1956, as amended up to date. The

companies Act is one of the biggest legislations with 658 sections and 14 schedules. The arms of

the Act are quite long and touch every aspect of a company's insistence. But to ensure corporate

governance, the Act confers legal rights to shareholders to

1. Vote on every resolution placed before an annual general meeting;

2. To elect directors who are responsible for specifying objectives and laying down policies;

3. Determine remuneration of directors and the CEO;

4. Removal of directors and

5. Take active part in the annual general meetings.

SECURITIES LAW

The primary securities law in our country is the SEBI Act. Since its setting up in 1992,

the board has taken a number of initiatives towards investor protection. One such initiative is to

mandate information disclosure both in prospectus and in annual accounts. While the companies

Act itself mandates certain standards of information disclosure, SEBI Act has added substantially

to these requirements in an attempt to make these documents more meaningful. The main

objective of SEBI regulation is shareholder value maximization by putting corporate governance

structures in place and through the reduction of information asymmetry between the managers

and the investors of the company. Jensen (2000) also argues in favour of shareholder wealth

maximization as the main objective function of any company.

RESERVE BANK OF INDIA (RBI)

The RBI, established in 1935, is the central bank of India and is entrusted with monetary

stability, currency management and supervision of the financial and payments systems. Its

functions and focus have evolved in response to India‟s changing economic environment. It acts

as the banker to the state and national governments, the lender of last resort and the controller of

the country‟s money supply and foreign exchange. The RBI supervises the operations of all

banks and NBFCs in the country. It is responsible for monetary policy, setting benchmark



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interest rates, managing the treasury operations (both borrowings and redemption) for the

government and as custodian and controller of the foreign exchange reserves

DISCIPLINE OF THE CAPITAL MARKET

Capital market itself has considerable impact on corporate governance. Here in lies the

role the minority shareholders can play effectively. They can refuse to subscribe to the capital of

a company in the primary market and in the secondary market; they can sell their shares, thus

depressing the share prices. A depressed share price makes the company an attractive takeover

target.

NOMINEES ON COMPANY BOARDS

Development banks hold large blocks of shares in companies. These are equally big debt

holders too. Being equity holders, these investors have their nominees in the boards of

companies. These nominees can effectively block resolutions, which may be detrimental to their

interests. Unfortunately, the role of nominee directors has been passive, as has been pointed out

by several committees including the Bhagwati Committee on takeovers and the Omkar Goswami

committee on corporate governance.

STATUTORY AUDIT

Statutory audit is yet another mechanism directed to ensure good corporate governance.

Auditors are the conscious-keepers of shareholders, lenders and others who have financial stakes

in companies. Auditing enhances the credibility of financial reports prepared by any enterprise.

The auditing process ensures that financial statements are accurate and complete, thereby

enhancing their reliability and usefulness for making investment decisions.

CODES OF CONDUCT

The mechanisms discussed till now are regulatory in approach. They are mandated by

law and violations of any provision invite penal action. But legal rules alone cannot ensure good

corporate governance. What is needed is self-regulation on the part of directors, besides of

course, the mandatory provisions.

GLOBAL BEST PRACTICES

A number of supranational organisations have drawn codes/principles of corporate

governance. The most well known is perhaps the OECD principles of corporate governance of

1999. It is instructive to summarise the five basic pillars of OECD code, viz.,

i. Protecting the rights of shareholders;

ii. Ensuring equitable treatment of all shareholders including having an effective grievance

redressed system;

iii. Recognizing the rights of stakeholders as established by law;



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iv. Ensuring the timely and accurate disclosure regarding the corporation including the

financial situation, performance, ownership and governance of the company; and

v. Ensuring the strategic guidance of the company, effective monitoring arrangement by the

board and the board‟s responsibility to the company and the shareholder. While the OECD

principles went a long way in emphasizing the basic tenets of corporate governance.

(Shyamala Gopinath, 2004)

SYSTEMIC PROBLEMS OF CORPORATE GOVERNANCE

Demand for information: A barrier to shareholders using good information is the cost of

processing it, especially to a small shareholder. The traditional answer to this problem is the

efficient market hypothesis (in finance, the efficient market hypothesis (EMH) asserts that

financial markets are efficient), which suggests that the shareholder will free ride on the

judgements of larger professional investors.

Monitoring costs: In order to influence the directors, the shareholders must combine with

others to form a significant voting group which can pose a real threat of carrying resolutions or

appointing directors at a general meeting.

Supply of accounting information: Financial accounts form a crucial link in enabling

providers of finance to monitor directors. Imperfections in the financial reporting process will

cause imperfections in the effectiveness of corporate governance. This should, ideally, be

corrected by the working of the external auditing process.

Above attempts made by the various regulating bodies shown a rising level of concern in

the manner in which the corporate manage themselves and their geo political environment. As

more and more multi nationals chip in to utilize cheap Indian labors – the regulating bodies will

not have the only onus of task building, but will also have to ensure means to implement the

regulations. Not only this, as more and more stakeholders make an attempt to maximize their

profits, the investors (especially the smaller ) will have to be wary of the crafty speculators who

can ruin the market confidence and decimate them. Investor training therefore is an important

area of immediate action. Organizations cannot create long term value without having

appropriate corporate governance policies in place, as the need of the hour is to not only manage

earnings, but also to create value. It becomes of utmost importance especially for a country like

India, as it comprises of the various odd sections of the society standing at juxtaposition to each

other. Moreover, with the change in the context there is also a need to evolve the governance

policies suiting the geo political, social and economical environment of that state.

In the last few years the thinking on the topic in India has gradually crystallized into the

development of norms for listed companies. The problem for private companies, that form a vast

majority of Indian corporate entities, remains largely unaddressed. The agency problem is likely

to be less marked there as ownership and control are generally not separated. Minority

shareholder exploitation, however, can very well be an important issue in many cases. The

development of norms and guidelines are an important first step in a serious effort to improve

corporate governance. The bigger challenge in India, however, lies in the proper implementation

of those rules at the ground level. More and more it appears that outside agencies like analysts



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and stock markets (particularly foreign markets for companies making GDR issues) have the

most influence on the actions of managers in the leading companies of the country. But their

influence is restricted to the few top (albeit largest) companies. More needs to be done to ensure

adequate corporate governance in the average Indian company. Even the most prudent norms can

be hoodwinked in a system plagued with widespread corruption. Nevertheless, with industry

organizations and chambers of commerce themselves pushing for an improved corporate

governance system, the future of corporate governance in India promises to be distinctly better

than the past.

REFERENCES

1. Goldman Sachs. (2003) “Dreaming with BRICs: the path to 2050”, Global Economics

Paper, No 99, October.

2. Joshi, V. (2004) Corporate Governance : The Indian Scenario. Foundation Books.

Organization for Economic Development and Co-operation, Code on Corporate

Governance, OECD, Paris September, 1999.

3. Reports on Corporate Governance, (2004), Economic India Info Services. Academic

Foundation.

4. Chhibber, P.K., and S.K. Majumdar (1999), Foreign Ownership and Profitability: Property

Rights,Control, and the Performance of Firms in Indian Industry, Journal of Law and

Economics, 42, 209-238.

5. Claessens, Stijn, Simeon Djankov, Joseph P. H. Fan, and Larry H. P. Lang,

2002.Disentangling the Incentive and Entrenchment Effects of Large

Shareholdings,Journal of Finance 57 (6): 2741–71.

6. Goswami, Omkar, 2002, “Corporate Governance in India,” Taking Action Against

Corruption in Asia and the Pacific (Manila: Asian Development Bank), Chapter 9.

7. Gregory, Holly J., 2000, International Comparison of Corporate Governance: Guidelines

and Codes of Best Practice in Developing and Emerging Markets, Weil, Gotshal & Manges

LLP.

8. Gregory, Holly J., 2001, International Comparison of Corporate Governance: Guidelines

and Codes of Best Practice in Developed Markets, Weil, Gotshal & Manges LLP.

9. Jensen, M.C., and W.H. Meckling (1976), Theory of the Firm: Managerial Behavior,

Agency Costs and Ownership Structure, Journal of Financial Economics, 3, 305-360.

10. Johnson, S., P. Boone, A. Breach, and E. Friedman 2000. Corporate Governance in the

Asian Financial Crisis, Journal of Financial Economics, 141-186.

11. La Porta, R., F. Lopez-De-Silanes, and A. Shleifer 1999. Corporate ownership around the

world, Journal of Finance, 54, 471-518.



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12. La Porta, R., F. Lopez-de-Silanes, A. Shleifer, R. Vishny 2000. Investor Protection and

Corporate Governance, Journal of Financial Economics, 58, 3-27.

13. La Porta, R., F. Lopez-de-Silanes, A. Shleifer, R. Vishny 2002, Investor Protection and

Corporate Valuation, Journal of Finance, 57, 1147-1170.

14. Shyamala Gopinath, 2004” Reserve Bank of India Bulletin” pp 1106

15. Prof. Uday Salunkhe, Prof. P.S. Rao, and Prof. Amitha Sehgal,date 01-10-2011online.

Evolution Of Corporate Governance In India & It's Influence On India's Capital Market

16. Franklin Allen, Rajesh Chakrabarti, Sankar De* India's Financial System October 27,

2007

17. Sunanda Chavan Corporate Governance in India - September 28th, 2010

18. Aggarwal, Reena, Leora Klapper, and Peter D. Wysocki (2005), "Portfolio Preferences of

ForeigInstitutional Investors," Journal of Banking and Finance, vol. 29, pp. 2919- 2946.

19. World Bank Report (2005), India: Role of Institutional Investors in the Corporate

Governance of their Portfolio Companies.

20. Bhattacharyya, Asish K and Sadhalaxmi Vivek Rao (2005), “Economic Impact of

„Regulation on Corporate Governance‟: Evidence from India,” a

http://ssrn.com/abstract=640842.

21. FrontlineVolume26-Issue03::Jan.31-Feb.13,2009 INDIA'S NATIONAL MAGAZINE

from the publishers of THE HINDU)

22. Arun Balakrishnan, C&MD, HPCL,25th june , 2008. New Guidelines on SOE Corporate

Governance in India.

http://ssrn.com/abstract=640842



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SOCIAL MEDIA MARKETING IN INDIA – CREATING NEW

GROUNDWORK IN MARKETING INNOVATION

KHUSHBU PANDYA*

*Department of Management,

Sumandeep Vidyapeeth, Piparia, Waghodia,

Vadodara, Gujarat.

ABSTRACT

Social media has risen to a great level in India since last few years. Marketers in the west have

already taken advantage of Social Media. But Indian marketers are still lagging behind in this

foray. According to a survey done by DEI Worldwide in 2008, among US consumers,

“companies not engaging in social media as part of their online marketing strategy are missing

an opportunity to reach consumers”. Social Media Marketing (SMM) is emerging as an

innovation in the marketing field. In India SMM is catching fire since last 3 to 4 years. But still

some companies are finding ways and means to manage it professionally. Hence, the need arise

to study the state of social media use in marketing activities by Indian companies. By scouting

the secondary data this study presents the state of social media marketing in India.

This study is an attempt to create awareness among Indian marketers about the power of SM

Environment spreading at large. The study has used secondary sources of information from last 5

years and it is an exploratory in nature. This study answers one major research question – What

is the state of social media marketing in India? And so to unravel this question, the study

provides all major facts, figures, major research findings and some popular case study examples.

Major findings show that social media platforms do have an impact on business and marketing.

SM, primarily, is to be used for engaging consumers.

KEYWORDS: Social Media, Social Media Marketing, Social Media Platforms.

______________________________________________________________________________

INTRODUCTION

The base for any media to succeed is to make Conversation impactful. Social media marketing

(SMM) is the new method of marketing, which is based on the common principle of Word of

Mouth (WOM). SMM is the latest innovation in the marketing world. It is been found that India

is the world‟s 7th

largest internet market growing at 11.2% (Comscore). The research also found

some other interesting facts. There are 21 million people in India who are estimated to visit

social media sites regularly, which is 60.3% of the total active Indian internet audience. More

than 90% of Indian online users belong to 18 -45 age group, which has high purchase power and

high disposable income. A typical social media site visitor in India spends 110.4 minutes on the

site and makes 10.4 visits per month to a social network. In a nutshell, the social media websites

in India are growing by almost 100% year after year. What do these facts reveal? The answer is

simple. The amount of growth social media sites are experiencing is not to be seen anywhere.



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Besides the growth, opportunities lie within the high profile target audience with the age group

majorly consisting 18 – 45 age group. Also on social networking sites, it is all about a

conversation. Everything is an experience on this platform and it is the job of marketers to make

the experience wonderful. Marketing via Social Media has become more and more interesting as

the days are passing by.

There is an excellent example to prove the above statement. India is called the country of three

C‟s: Cricket, Cinema, and Congress. India loves Cricket and its cricket stars. India is among the

few countries where its own film industry, better known as Bollywood beats Hollywood. Also,

Congress has been a long time darling of India as far as politics is concerned. It goes without

saying, that India follows what the three C‟s follow. It came as no surprise to me when India‟s

top movie stars like Shahrukh Khan, Priyanka Chopra, Abhishek Bachchan etc. joined Twitter to

market their movies. But, the fact that Bollywood‟s highest earning movie, 3 Idiots releases on

YouTube just three months after its Global release does signal Bollywood‟s new found love in

YouTube. Congress embraced this new age media by creating fan pages for Rahul Gandhi and

the Indian Prime Minister, Dr. Manmohan Singh. Shahi Tharoor has over 600,000 followers on

twitter and his „human‟ tweets make sure, he is in the news at all times. Our own Honourable

Chief Minister Mr. Narendra Modi won a prize for social media. Last but not the least, IPL 3.0

will be telecasted live on YouTube. This can be considered the ultimate tribute of the IPL to the

new age Indian who loves YouTube as much as he loves cricket.

STUDY OBJECTIVE & METHODOLOGY

The objective of this study is to know the state of social media marketing in India. How the

Indian companies respond to this new media? This study provides significant facts and figures

based on relevant research studies and literature. The study has used secondary sources of

information from last 5 years and it is an exploratory in nature. To unravel research question of

this study, it provides all major facts, figures, major research findings. Research question is also

supported by some popular case studies which leveraged upon social media for marketing

purposes.

SOCIAL MEDIA MARKETING by INDIAN BRANDS

Social Media Marketing is been practiced by bunch of Indian Companies. In this study, some

successful organisations are presented as case studies for clear understanding of the scenario in

Indian perspective. These organisations are practising Social Media Marketing successfully and

are the benchmark for other brands.

Unit Trust of India, popularly known as UTI, recently marked their presence on social media to

engage with their consumers. The leading mutual fund company – with over 1 crore investor

portfolios – has taken the digital route to promote the “Language of Investment” by addressing

user queries and helping them achieve a stable financial life. The mutual fund giant has set up

official accounts on social media platforms like Facebook, Twitter and YouTube to spread its

message “Kisney Sikhai India ko Investment ki Bhasha” indicating that UTI MF has taught India

the Language of Investment. It conducts activities that lead people to think about investments,

wealth management, smart ways to getting rich, etc. In order to attain user views about the

different aspects of finance and investment, UTI MF announces polls to test their knowledge on



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its fan page “UTIMF – Let‟s Plan to Get Rich” (See Figure 1). Besides, it provides investment

tips, engages with users from across the world, and provides suggestions for investment

on Twitter. The company also has an official YouTube channel featuring its advertisements.

Being one of the oldest firms in the mutual fund industry, the latest move by UTI MF just goes

on to show how important “social media” is in today‟s marketing context. Platforms like Twitter,

Facebook and YouTube have become an essential tool to communicate with users from across

the world. The move also implies that Indian corporate firms are now ready to take up the

challenge and be present amongst their consumers online.

FIGURE 1

http://www.facebook.com/stressfreezone#/pages/UTIMF-Lets-Plan-to-Get-Rich/236594704332?ref=ts

http://twitter.com/utimutualfund

http://www.youtube.com/user/utimutualfunds



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Not so long ago, social media was a hot-spot for companies belonging to the hospitality, travel &

tourism and the financial services industry. But now that the time spent by average users on the

social media sites has increased significantly, we have several companies from other industries

stepping on the gas and rolling out their official platforms on popular sites like Facebook,

Twitter, YouTube, etc.

Just recently, Videocon d2h, a popular Direct-to-Home (DTH) service provider in India,

launched its official account on Facebook, Twitter and Orkut to engage with users. As the brand

is quickly catching up in the Indian market, going social is probably the best way it can further

build relationships with the users by addressing their queries, interacting with them, launching

campaigns and educating them about their products & services. The response so far that it has

generated is tremendous with active user participation and constant brand engagement.

While the DTH market is large and is entertainment – oriented, brands certainly have

tremendous scope on the social media platform to convert users into ultimate consumers and

communicate with the existing ones. There lies an opportunity to use the medium as an effective

CRM platform by regularly monitoring the brand across the Web and adding another touch-point

for Customer Care Support. Following are some snapshots of how Videocon d2h is actively

addressing user queries and building relationships with its consumers on Facebook

(See Figure 2).

FIGURE 2

http://www.facebook.com/videocond2h

http://twitter.com/videocon_d2h

http://www.orkut.co.in/Main#Community?cmm=101627531



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Cleartrip, launched in July 2006, is one of the leading online travel companies in India. It is

based on a straight forward premise of “making travel simple” for its customers.

FIGURE 3

Cleartrip uses Blogs, Customer Support Forum, Twitter, and Facebook to announce product

launches, share interesting information/statistics related to the travel industry, educate the

customer about this segment, and share our opinions on happenings in the online travel segment

and the online world at large. Cleartrip is among the early adopters of Social Media Tools. The

brand‟s approach towards SMM is very simple. It avoids the cardinal sin of using the platform to

deliver a sales pitch. Because they believe that it‟s counter-intuitive, because marketers want to

sell; but the key to success here is not to be selling, but to be building relationships and

encouraging conversations (chatter) around the brand. On Twitter, for instance, Cleartrip far

outstrips its competitors as the most referenced and recommended online travel brand. This

“chatter” demonstrates that Cleartrip has a high degree of engagement with their customers.

According to a research by MarketingProfs Research, Nearly half of the marketers surveyed

reported that their company maintains a corporate profile on one or more social media networks.

Among that half, Facebook, Twitter and LinkedIn (in that order) were the most popular. Despite

consumer usage of social media decreasing with age, usage of social media for work purposes

actually increases with age among the marketers in the study. Only 15%

of social media marketers report that their blogging, posting or networking responsibilities are

included in their job descriptions, yet more than 50% of marketers indicate that they

use social media for work purposes. Email and traditional PR are still the most-used

forms of “earned” media, with more than twice as much use as blogs or viral videos. The most-

used tactic among Twitter-using marketers is to broadcast links in the hopes of driving traffic,

yet the most successful use of Twitter for marketing purposes is monitoring for real-time PR

problems. Most marketers report that their measurement of return on investment (ROI) for their



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participation in social media is mediocre or average. However, over half are using some

form of tracking.

According to the well known Social Media Expert and a Founder at Blogworks.in „Rajesh

Lalwani‟ – The key right now is growth, not monetisation. As the number of users grows and the

communities consolidate, commercial opportunities will only grow in the coming months.

Growing participants is more important right now than brand awareness and sentiment. Right

now, we need to build to a critical mass of users, and then e-commerce will grow rapidly.

Social media was originally just a feel-good move for many people. Today though, there is a

focus that is moving from brand awareness to leveraging social content. There has been a lot of

growth in scale through the changing access to technology and through the growth of user

generated content,” As reported by exchange4media and Blogworks, in collaboration with The

Nielsen Company, 78 per cent of the respondents use social media for B2C. Marketing, online

reputation management and lead generation are the key areas that companies are using social

media for.

SOCIAL MEDIA MARKEING PROSPECTS IN INDIA

Social Media Marketing is possible when there is an active participation among the people in

general. It is very much important to have interested consumers for active conversation. This

population can be referred to as “Active Internet Users”. According to the research data released

by Global Web India in March 2010, India is the country which comes 3rd when it comes to

social networking and photo sharing (See Figure 3). While United States and China are the

biggest market, the next level of growth is expected out of India. As the country is poised for a

3G launch and with 500+ mobile phone penetration across the billion plus people populated

country, it‟s only a matter of time that the adoption of internet and social media comes via

mobile and other devices as well.

FIGURE 4

http://www.socialtrakr.com/wp-content/uploads/2010/03/india-social-media-statistics.JPG



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Facebook is the most growing viral media for marketers because of the gaining popularity among

people. Figure 5 shows the statistics of Facebook India as of Feb 2011. Compared to last month

(Jan 2011), Facebook recorded an increase of more than 1 million (11.22 lakhs) users.

Number of users on Facebook in India 21 726 960

Number of male users on Facebook in India: 15,338,760

Number of female users on Facebook in India: 6,216,600

Penetration of Facebook in India to population: 1.85%

Penetration of Facebook in India to online population: 26.82%

The Graph showing the Age wise distribution of Facebook in India

Source: Facebook.com

Since Social Media is at an evolving stage, some companies do falter in trying to come to terms

with the rabble against them. The chatter of the consumer does get to them. Some still believe

that by thundering “SILENCE” like a primary school teacher, the noise that consumers are

http://www.adheeth.com/facebook-india-statistics-september-2010/



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making will die down. Those who try arm twisting techniques do not understand the might of the

internet savvy consumer. Nothing is going to silence him. He is going to go hammer and tongs at

a brand if he is not provided the desired service and quality. But most brands are sensible to

realize the growing power of the online consumer and try to engage him rather than antagonize

him.

SMM SERVICES

Social Media Marketing Services are the services which helps the organization in enhancing the

usability of the company‟s website using integration with social tools and application; improve

site likability; allow easy sharing of site content on popular social sites; increase visibility on

custom and niche search engines (Technorati etc.); easy tracking of updates on your website;

encouraging discussions on the site and a whole lot more. SMM Services helps positioning one‟s

business on social networks to improve online brand visibility, brand protection / reputation

management, leads and /or sales generation and increase quality inbound links. Some of the

major SMM Services are:

Social media audit

Social media optimization

Optimized blog development, design, maintenance and promotion

Brand management using social media monitoring

Social media profile creation and management (Twitter, Facebook, YouTube, etc.)

Community building and monitoring

LinkedIn Direct Ads

Facebook Advertisement

Social bookmarking

Social media distribution: leveraging social channels besides the regular channels to

promote press releases and newsworthy content

Everybody is a winner in the Social Media space, no doubt about it. But one thing that is to be

remembered by the Brand Managers that average consumer is far more vocal today. He does not

need a Letter to the Editor to voice his opinion. His voice is far stronger than what it is today. All

he needs to do is sneeze which will create a viral effect. One blog on any platform can make or

mar your image. So just don‟t sit there and bombard him with marketing initiatives. Listen to

him and talk to him. That‟s how he likes it.



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REFERENCES

1. Banas. P (2010) Top 10 examples of Brand Leveraging on Twitter, Available at

insightbuzz.com

2. Chadwick Martin Bailey and iModerate Research Technologies (2010). Social Media affects

Consumer Buying Behavior, CMB Consumer Pulse, Available at viralblog.com

3. Copeland. C (2009). The Influenced: social media, search and the interplay of consideration

and consumption, published by GroupM Search, Avilable at www.groupmsearch.com

4. Exchange4india. Com and Blogworks (2010). India social media survey brands and

corporate, Edition 1, Available at blogworks.in

5. Forrester Research, Inc. (2009). North American technographics empowerment online

survey, Q4, Forrester Social Technographics Report

6. Interactive Advertising Bureau (2009). Social Media Ad Metrics Definitions, Available at

http://www.iab.net/ugc_metrics_definitions

7. John. R (2009) I Network, I Buy; Financial Chronicle Story on Social Media and Consumer

Behavior, Available at gauravonomics.com

8. OTX Research and DEI Worldwide (2008). The Impact of Social Media on Purchasing

Behavior, Available at insightbuzz.com

9. Unica Corporat ion (2010). State of Market ing 2010, Available at

www.unica.com

10. Vanina. D (2008). Social media strategy, Available at vaninadelobelle.com

http://www.groupmsearch.com/

http://www.iab.net/ugc_metrics_definitions

http://www.gauravonomics.com/blog/financial-chronicle-story-on-social-media-and-consumer-behavior/

http://www.gauravonomics.com/blog/financial-chronicle-story-on-social-media-and-consumer-behavior/

http://www.docstoc.com/docs/2864298/The-Impact-of-Social-Media-on-Purchasing-Behavior

http://www.docstoc.com/docs/2864298/The-Impact-of-Social-Media-on-Purchasing-Behavior

http://www.unica.com/



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CORPORATE GOVERNANCE IN INDIA:

EVOLUTION AND CHALLENGES

DR. ANSHUL SHARMA*; MS. POOJA GUPTA**


S.D.College of Management, Israna, Panipat.

**Lecturer,

S.D.College of Management,

Israna, Panipat, Haryana.

ABSTRACT

Good governance means that processes and institutions produce results that meet the needs of

society while making the best use of resources at their disposal. Good corporate governance

(GCG) is a mandatory requirement in today‘s corporate world by every stakeholder groups.

Failure of giant corporate groups in last two-three decade strengthens the demand further. And

surprisingly, in some of such failures, accounting as a discipline is held liable. The way

accounting is practiced or the interpretations that may give different prescriptions in similar

situations are some dark areas that may open some scope for the corrupted accountants. Still, the

author believes that such claim against accounting is undue and unfounded. The paper is an

earnest effort to uncover the issue and to protect it from such unfounded critics. It covers the

concept of corporate governance, its legal framework, its current status and how accounting may

be practiced to protect corporate from corruption by establishing governance. This study

describes the Indian corporate governance system and examines how the system has both

supported and held back India‘s ascent to the top ranks of the world‘s economies. While on

paper the country‘s legal system provides some of the best investor protection in the world,

enforcement is a major problem with slow, over-burdened courts and significant corruption. It

finds that better corporate frameworks benefit firms through greater access to financing, lower

cost of capital, better firm performance, and more favourable treatment of all stakeholders

KEYWORDS: Corporate Governance, Compliance, Government Policy, Natural Law Ethics,

Regulation and Virtue Ethics.

______________________________________________________________________________

INTRODUCTION

Corporate Governance in its most simplified iteration refers to the manner in which corporate

bodies are managed and operated. Until the latter part of the 1900‘s the expression good

corporate governance was invariably used to describe how well a business was directed and

managed from the perspective of its controllers or managers. This was no doubt a truism in the

context of privately owned companies in which the operators and shareholders were usually one

and the same persons and there was no conflict between the persons managing or controlling the

company and the ultimate beneficiaries. However the same could not be said in respect of

publicly owned enterprises in which the managers and controllers are not the sole beneficiaries



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of the enterprise. In such circumstances situations do arise wherein the objectives of the

controllers or managers of the enterprise and the shareholders as a whole regarding the manner in

which a company is directed and managed does not necessarily coincide.

This impasse invariably gives rise to tensions between the controllers/managers and

shareholders, which can sometimes have disastrous consequences not only for the company itself

but also the commercial and economic environment the company, operate in. These tensions are

sometimes aggravated through the lack of transparency and communication between the parties.

In this background good corporate governance in modern terminology has been often described

as the mechanism of addressing and easing the tensions which arise between the controllers or

managers and other stakeholders of a company. The expression stakeholders being an indication

of the development that has been witnessed in corporate cultures wherein a corporate citizen is

deemed to owe obligations not only to its owners but to its employees, creditors and in some

instances generally to society at large.

Corporate governance in the context of a modern corporation has become synonymous with the

practices and processes used to direct and manage the affairs of a corporate body with the object

of balancing the attainment of corporate objectives with the alignment of corporate behaviour to

the expectations of society and accountability to shareholders and other stakeholders.

Corporate governance encapsulates -

• The management of the relationships between a corporate body‘s management, its board, its

shareholders and other stakeholders.

• The provision of the structure through which the objectives of the company are identified and

the monitoring of the means used to attain these objectives including the monitoring of

performance in this regard.

• Bringing more transparency to bear on the decision-making processes of the company.

• The provision of proper incentives for the board and management to pursue objectives that is in

the interests of the corporate body and shareholders.

• Encouraging the use of resources in a more efficient manner.

• The management of risk and the minimisation of the effects of commercial misadventure.

Corporate governance covers a large number of distinct concepts and phenomenon as we can see

from the definition adopted by Organization for Economic Cooperation and Development

(OECD) – ―Corporate governance is the system by which business corporations are directed and

controlled. The corporate governance structure specifies the distribution of rights and

responsibilities among different participants in the corporation, such as, the board, managers,

shareholders and other stakeholders and spells out the rules and procedures for making decisions

in corporate affairs. By doing this, it also provides the structure through which the company

objectives are set and the means of attaining those objectives and monitoring performance‖.



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GOVERNANCE STYLES LINKED TO EVOLVING PERFORMANCE PRIORITIES

Rationalization

Time

Expense

s

Revenues

Growt

h

Influenced Board Trusted Board Sovereign Board Controlled Board

Perfo

rman

ce

Harvest Phase

(Distribution)

Production Phase

(Profitability)

Formation Phase

(Sales Growth)

Investment Phase

(Valuation)



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The concept of "governance" is not new. It is as old as human civilization. Simply put

"governance" means: the process of decision-making and the process by which decisions are

implemented (or not implemented). Governance can be used in several contexts such as

corporate governance, international governance, national governance and local governance.

Since governance is the process of decision-making and the process by which decisions are

implemented, an analysis of governance focuses on the formal and informal actors involved in

decision-making and implementing the decisions made and the formal and informal structures

that have been set in place to arrive at and implement the decision. Government is one of the

actors in governance. Other actors involved in governance vary depending on the level of

government that is under discussion. In rural areas, for example, other actors may include

influential land lords, associations of peasant farmers, cooperatives, NGOs, research institutes,

religious leaders, finance institutions political parties, the military etc. The situation in urban

areas is much more complex.

Recently the terms "governance" and "good governance" are being increasingly used in

development literature. Bad governance is being increasingly regarded as one of the root causes

of all evil within our societies. Major donors and international financial inst itutions are

increasingly basing their aid and loans on the condition that reforms that ensure "good

governance" are undertaken. It is participatory, consensus oriented, accountable, transparent,

responsive, effective and efficient, equitable and inclusive and follows the rule of law. It assures

that corruption is minimized, the views of minorities are taken into account and that the voices of

the most vulnerable in society are heard in decision-making. It is also responsive to the present

and future needs of society.



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CHARACTERISTICS OF GOOD GOVERNANCE

PARTICIPATION

Participation by both men and women is a key cornerstone of good governance.

Participation could be either direct or through legitimate intermediate institutions or

representatives. It is important to point out that representative democracy does not

necessarily mean that the concerns of the most vulnerable in society would be taken into

consideration in decision making.

RULE OF LAW

Good governance requires fair legal frameworks that are enforced impartially. It also

requires full protection of human rights, particularly those of minorities. Impartial

enforcement of laws requires an independent judiciary and an impartial and incorruptible

police force.

TRANSPARENCY

Transparency means that decisions taken and their enforcement are done in a manner that

follows rules and regulations. It also means that information is freely available and

directly accessible to those who will be affected by such decisions and their enforcement.

It also means that enough information is provided and that it is provided in easily

understandable forms and media.

RESPONSIVENESS

Good governance requires that institutions and processes try to serve all stakeholders

within a reasonable timeframe.

CONSENSUS oriented

There are several actors and as many view points in a given society. Good governance

requires mediation of the different interests in society to reach a broad consensus in

society on what is in the best interest of the whole community and how this can be

achieved.

EQUITY AND INCLUSIVENESS

A society‘s well being depends on ensuring that all its members feel that they have a

stake in it and do not feel excluded from the mainstream of society. This requires all

groups, but particularly the most vulnerable, have opportunities to improve or maintain

their well being.



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EFFECTIVENESS AND EFFICIENCY

The concept of efficiency in the context of good governance also covers the sustainable

use of natural resources and the protection of the environment.

ACCOUNTABILITY

Accountability is a key requirement of good governance. Not only governmental

institutions but also the private sector and civil society organizations must be accountable

to the public and to their institutional stakeholders.

THE IMPORTANCE OF CORPORATE GOVERNANCE

The subject of corporate governance commenced attracting attention at national level in more

developed markets in the late 1900‘s. This was in the wake of some spectacular business

collapses, which appeared to be largely attributable to the lack of proper corporate governance.

The above coupled with the globalisation of economies and financial and investment markets in

the 1990‘s lead to the convergence of national initiatives on the subject. This development was

accelerated with the onset of the Asian crisis in mid 1997 after which the subject attracted

significant attention internationally especially in the context of emerging markets. Whilst the

causes of the crisis are still the subject of contention and debate there is an overall consensus that

the lack of proper corporate governance in companies operating in the affected economies

contributed significantly to the onset and spread of the contagion.

In this background a concerted international effort was initiated to improve the levels of

corporate governance especially in emerging market economies. This initiative was no doubt

spurred on amongst other factors by the recognition that the degree to which corporations

observe basic principles of good corporate governance will be an increasingly important factor

for investment decisions in the future.

THE PRINCIPLES OF CORPORATE GOVERNANCE

The principles advocated in these codes are essentially non-binding and embody the experience

and views of member countries of these organisations on the subject. While a multiplicity of

factors affect the governance and decision-making processes of firms, and are important to their

long-term success, the principles focus primarily on governance problems that result from the

separation of ownership and control.

The principles of corporate governance cover the following areas:

1. The rights of shareholders;

2. The equitable treatment of shareholders;

3. The role of stakeholders;

4. Disclosure and transparency;



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5. The responsibilities of the board.

COLLECTIVE RESPONSIBILITY TO MONITOR CORPORATE GOVERNANCE

The Commission envisages the ensuring of proper corporate governance practices as a collective

responsibility cast upon all persons involved in the operations of a corporate body.

For instance controlling shareholders, who may be individuals, family holdings, bloc alliances,

or other corporations acting through a holding company or cross shareholdings, can significantly

influence corporate behaviour. In the same vein institutional investors are in a position to

demand acceptable standards of corporate governance in the companies they invest in.

Individual shareholders usually do not seek to exercise governance rights but can be concerned

about obtaining fair treatment from controlling shareholders and management. Creditors too can

play an important role in governance and have the potential to serve as external monitors over

corporate performance. Employees and other stakeholders play an important role in contributing

to the long-term success and performance of the corporation, while governments establish the

overall institutional and legal framework for corporate governance.

Consequently all these persons in a position to influence a corporate body should endeavour to

encourage compliance with corporate governance practices. In this context there are three

important groupings of persons whose co-operation the Commission considers integral to

achieving acceptable corporate governance practices. They are the directors and managers of a

corporate body and its shareholders and other stakeholders and auditors.

THE BOARD OF DIRECTORS

Investors in equity have certain property rights over which they must have control and which

should be protected. However a corporation cannot be managed practically on a day to day basis

by shareholder referendum. In the light of these realities the responsibility for corporate strategy

and operations is placed in the hands of the board of directors of the corporation and a

management team that is selected, motivated and, when necessary, replaced by the board.

In the above context the implementation of good corporate governance hinges on the competence

and integrity of the board of the body corporate.

The board is required to fulfil certain key functions, including:

• Reviewing and guiding corporate strategy, major plans of action, risk policy, annual budgets

and business plans; setting performance objectives; monitoring implementation and corporate

performance; and overseeing major capital expenditures, acquisitions and divestitures.

• Selecting, compensating, monitoring and, when necessary, replacing key executives and

overseeing succession planning.

• Reviewing key executive and board remuneration, and ensuring a formal and transparent board

nomination process.



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• Monitoring and managing potential conflicts of interest that may arise amongst management

board members and shareholders.

• Curtailing the misuse of corporate assets and abuse in related party transactions.

• Ensuring the integrity of the corporation‘s accounting and financial reporting systems.

• Ensuring the credibility of the independent audit and the existence of appropriate internal

control systems.

• Ensuring the monitoring and management of risk

• Ensuring compliance with the law.

• Monitoring the effectiveness of the governance practices under which the body corporate

operates and making changes as needed.

• Overseeing the process of disclosure and communications.

INDEPENDENCE FROM MANAGEMENT

In order for boards to effectively fulfil their responsibilities they must have some degree of

independence from management. Board independence usually requires that a sufficient number

of board members should not be employed by the company or be closely related to the company

or its management through significant economic, family or other ties. It does not mean though

that shareholders are discouraged from being board members. However it does imply that a

balance must be maintained between controlling shareholders and managers and other persons

with ownership or proprietary interests in the company.

Independent or non-executive board members can contribute significantly to the decision-making

processes of the board by bringing an objective view to bear on the evaluation of the

performance of the board and management in particular. In addition, they can play an important

role in areas where the interests of management and shareholders may diverge such as executive

remuneration, succession planning, changes of corporate control and the audit function.

THE ROLE OF THE CHAIRMAN

The chairman as the head of the board can play a central role in ensuring the effective

governance of the corporate body and functioning of the board. The separation of the roles of the

chairman and the chief executive is advocated as a mechanism of ensuring an appropriate

balance of power, increasing accountability and enhancing the capacity of the board for

independent decision making.

GENERAL RESPONSIBILITIES OF DIRECTORS

Directors should devote sufficient time to their responsibilities. Service on too many boards can

interfere with the performance of board members. Companies must consider whether excessive



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board service interferes with board performance and this should be a fact taken into account at

the time of nomination.

Specific limitations on the size of the board of a corporate body are not advocated. However it is

necessary to emphasise the need to ensure that members of the board enjoy legitimacy and

confidence in the eyes of shareholders as regards their commitment to discharge the functions

and obligations imposed on them.

SHAREHOLDERS AND STAKEHOLDERS

Shareholders must have the right to influence the corporate body on certain fundamental issues,

such as:

• The election of board members;

• Changes in capital;

• Amendments to the regulations of the company;

• Approval of extraordinary transactions; and

• Other issues as specified in corporate law and the regulations of the corporate body.

Additional rights accruing to shareholders include the approval or election of auditors and the

approval of the distributions of profits.

AUDITORS

Financial and annual reports are increasingly becoming the most extensively used methods for

the conveyance and dissemination of corporate information to shareholder and investors. These

reports are a medium for disclosing not only the financial status of a company and its

performance but also information pertaining to ownership, governance, and business ethics and

in some instances the environment and other public policy commitments.

PRINCIPLES

Key elements of good corporate governance principles include honesty, trust and integrity,

openness, performance orientation, responsibility and accountability, mutual respect, and

commitment to the organization.

Commonly accepted principles of corporate governance include:

RIGHTS AND EQUITABLE TREATMENT OF SHAREHOLDERS: Organizations

should respect the rights of shareholders and help shareholders to exercise those rights.

They can help shareholders exercise their rights by effectively communicating

information that is understandable and accessible and encouraging shareholders to

participate in general meetings.



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INTERESTS OF OTHER STAKEHOLDERS: Organizations should recognize that

they have legal and other obligations to all legitimate stakeholders.

ROLE AND RESPONSIBILITIES OF THE BOARD: The board needs a range of

skills and understanding to be able to deal with various business issues and have the

ability to review and challenge management performance.

INTEGRITY AND ETHICAL BEHAVIOUR: Ethical and responsible decision

making is not only important for public relations, but it is also a necessary element in risk

management and avoiding lawsuits. Organizations should develop a code of conduct for

their directors and executives that promotes ethical and responsible decision making.

DISCLOSURE AND TRANSPARENCY: Organizations should clarify and make

publicly known the roles and responsibilities of board and management to provide

shareholders with a level of accountability. They should also implement procedures to

independently verify and safeguard the integrity of the company's financial reporting.

ISSUES INVOLVING CORPORATE GOVERNANCE PRINCIPLES INCLUDE

internal controls and internal auditors

the independence of the entity's external auditors and the quality of their audits

oversight and management of risk

oversight of the preparation of the entity's financial statements

review of the compensation arrangements for the chief executive officer and other senior

executives

the resources made available to directors in carrying out their duties

the way in which individuals are nominated for positions on the board

SYSTEMIC PROBLEMS OF CORPORATE GOVERNANCE

Demand for information: In order to influence the directors, the shareholders must

combine with others to form a significant voting group which can pose a real threat of

carrying resolutions or appointing directors at a general meeting.

Monitoring costs: A barrier to shareholders using good information is the cost of

processing it, especially to a small shareholder. The traditional answer to this problem is

the efficient market hypothesis (in finance, the efficient market hypothesis (EMH) asserts

that financial markets are efficient), which suggests that the small shareholder will free

ride on the judgements of larger professional investors.

Supply of accounting information: Financial accounts form a crucial link in enabling

providers of finance to monitor directors. Imperfections in the financial reporting process

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



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will cause imperfections in the effectiveness of corporate governance. This should,

ideally, be corrected by the working of the external auditing process.

INTERNAL CORPORATE GOVERNANCE CONTROLS

Internal corporate governance controls monitor activities and then take corrective action to

accomplish organizational goals. Examples include:

MONITORING BY THE BOARD OF DIRECTORS: The board of directors, with its

legal authority to hire, fire and compensate top management, safeguards invested capital.

Regular board meetings allow potential problems to be identified, discussed and avoided.

Whilst non-executive directors are thought to be more independent, they may not always

result in more effective corporate governance and may not increase performance.

INTERNAL CONTROL PROCEDURES AND INTERNAL AUDITORS: Internal

control procedures are policies implemented by an entity's board of directors, audit

committee, management, and other personnel to provide reasonable assurance of the

entity achieving its objectives related to reliable financial reporting, operating efficiency,

and compliance with laws and regulations

BALANCE OF POWER: The simplest balance of power is very common; require that

the President be a different person from the Treasurer. This application of separation of

power is further developed in companies where separate divisions check and balance

each other's actions.

REMUNERATION: Performance-based remuneration is designed to relate some

proportion of salary to individual performance. Such incentive schemes, however, are

reactive in the sense that they provide no mechanism for preventing mistakes or

opportunistic behaviour, and can elicit myopic behaviour.

EXTERNAL CORPORATE GOVERNANCE CONTROLS

External corporate governance controls encompass the controls external stakeholders exercise

over the organization. Examples include:

competition

debt covenants

demand for and assessment of performance information (especially financial statements)

government regulations

managerial labour market

media pressure

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



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takeovers

CORPORATE GOVERNANCE INITIATIVES IN INDIA

Soon after independence, India, like most underdeveloped economies, was caught in a low-

income-level trap, which occurred at low levels of physical capital, both productive and

infrastructural, and was maintained by low levels of accumulation and by Malthusian population

growth. That implied a powerful case for government activism as a way of breaking out of the

trap. Accordingly, the Government of India adopted a model of economic development that

could be best described as ―mixed economy‖. The state operated from the ―commanding heights‖

and aimed at the highest level of socio-economic good for the largest number (Dewan, 2004a).

This development paradigm, a ―big push‖ of sorts, accorded a strategic position to the public

sector in the economy. It was in line with the first Industrial Policy Resolution of 1956 which

sought to achieve a self-reliant economic and social growth. The private sector was also

encouraged to prosper, but played second fiddle to the public sector.

It was the policy of mixed economy that initiated the creation of large number of SOEs. The

policy was to address the aspiration of a new nation towards quick industrialization. The basic

argument has been that Indian industrialization has to be anchored on the core sectors that were

highly capital intensive with long gestation periods.

Since the private sector of the nascent economy was not strong enough to invest in such sectors,

state initiative was imperative. Later, the policy got mixed up with trade union pressure for

nationalization of many enterprises. By the last decade of the last century SOEs in India were

spread over from core sectors like steel, power, and machinery to many consumer goods that

included even bakery products (Nath, 2004). The reversal of fortunes for SOEs occurred in the

eighties, which saw a gradual opening up of the Indian economy. But it was in 1991 when the

Government of India decided to give a further impetus to accelerate the process of liberalization

and opening up of the economy, which boosted the chances of private enterprises. Yet, according

to Nair, although India‘s growth accelerated, this performance could not be sustained in later

years.

The average growth rate during the five-year period 1997-02 was only 5.4 percent as against the

targeted 6.5 percent (Nair, 2003). However, economic growth rate picked up later, to more than 8

percent during the years 2004-05 and was expected to slow down to around 6.5 percent

beginning 2006. The erratic economic behavior suggested that the reform was not simply about

―getting the price right‖ but ―getting the institutions right‖.

Realizing that good governance plays a crucial role in developing an efficient economy, the

Indian government embarked on a course that put emphasis on corporate behavior. A 2004 study

of the World Bank recognized this effort and acknowledged a marked improvement in corporate

governance in India (Economic Times, 16 May 2005). Several major corporate governance

initiatives have been launched in India since the mid-nineties. The first was by the Confederation

of Indian Industries (CII), India‘s largest industry and business association, which came up with

the first voluntary Code of Corporate Governance in 1998. The confederation was driven by the

conviction that good corporate governance was essential for Indian companies to access



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domestic as well as global capital at competitive rates. The code focused on listed companies.

While this code was well received and some progressive companies adopted it, it was felt that

under Indian conditions a statutory rather than a voluntary code would be more purposeful.

Consequently, the second major initiative in the country was undertaken by the Securities and

Exchange Board of India (SEBI) which envisaged that corporate norms would be enforced

through listing agreements between companies and the stock exchanges. In early

2000, the SEBI board incorporated new regulations into Clause 49 of the Listing Agreement of

the Stock Exchanges. This clause has been further revised in 2002, and again, in 2004. Clause 49

lays down guidelines for composition of the board including the number and qualities of

independent directors, remuneration of board members, code of conduct, and the constitution of

various committees (including audit), disclosures, and suggested contents of annual reports.

THE VALUE OF GOOD CORPORATE GOVERNANCE

Many institutional investors perceive corporate governance as a tool for extracting value for

shareholders from under-performing, undervalued companies. This approach has been very

successful for Lens Inc., California Public Employees' Retirement System (CalPERS), Hermes

and Active Value Advisors, to name but a few. Targeting companies that are under performing

according to one of the main market indices, and analysing those companies‘ corporate

governance practices, can lead to improvements that unlock a company's hidden value. These

improvements often include replacing poorly performing directors and ensuring that the

companies comply with perceived best practice in corporate governance.

Corporate governance can also be used to help restore investor confidence in markets that have

experienced financial crises. This has happened in the last few years in Japan, Malaysia and the

Russian Federation, for example. In these countries, as in a number of other countries that have

similarly been affected by a lack of investor confidence, particularly overseas investor

confidence, new or improved corporate governance practices have been introduced. Key features

of these changes include improving transparency and accountability.

While many studies have examined the possible link between corporate governance and

corporate performance, the evidence appears to be fairly mixed. In an early, much-quoted study,

Nesbitt (1994) reported positive long-term stock price returns for firms targeted by CalPERS.

Nesbitt‘s later studies show similar findings. More recently, Millstein and MacAvoy (1998)

studied 154 largely publicly traded United States corporations over a five-year period and found

that corporations with active and independent boards appeared to perform much better in the

1990s than those with passive, non-independent boards. However the work of

Dalton, Daily, Ellstrand and Johnson (1998) showed that board composition had virtually no

effect on firm performance, and that there was no relationship between leadership structure and

firm performance. Patterson (2000) of The Conference Board produced a comprehensive review

of the literature relating to the link between corporate governance and performance, and states

that the survey does not present conclusive evidence of such a link.



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CORPORATE GOVERNANCE RATING SYSTEMS

With increasing emphasis on corporate governance across the globe, it is perhaps not surprising

that a number of corporate governance rating systems have been developed. Two firms that have

developed such systems are Deminor and Standard & Poor‘s. The rating systems cover several

markets: for example, Deminor has tended to concentrate on European companies, while

Standard & Poor‘s has used its corporate governance rating system in quite different markets,

such as the Russian Federation. These corporate governance rating systems should benefit both

investors (both potential and current ones) as well as the companies themselves. Deminor's

corporate governance ratings are based on four main categories in which each company receives

a rating from 5 to 1, with 5 representing best practice and 1 the most questionable standard. The

categories are:

1. Rights and dut ies of shareholders

2. Absence of takeover defences

3. Disclosure

4. Board structure.

INVESTORS: OPPORTUNITIES AND TRENDS

For shareholders, effective corporate governance structures have become an important criterion

for selecting the companies in which they wish to invest. Basically there are two approaches. The

first focuses on the analysis of corporate governance structures. As investors interested in the

long term, pension funds examine the extent to which a company has implemented the

recommendations contained in the most important codes. This analysis is the starting point for a

comparison of various companies with respect to good corporate governance. The results

influence investment decisions. Companies with poor structures are avoided.

The second, far more effective approach consists of acting as shareholders who exercise their

proprietary and other rights. Shareholders have the right to demand information from the

company at any time about important questions in connection with management.

GOOD CORPORATE GOVERNANCE AS AN OPPORTUNITY FOR COMPANIES

AND INVESTORS

The long-term success of a company depends on sensible measure of good corporate governance.

However, good corporate governance also requires that all stakeholders, and especially

shareholders, exercise their participatory rights. In particular, shareholders should be aware that

they elect the board of directors who decide on company strategy and monitor the

implementation of that strategy. Being annoyed with the board because of a large financial loss is

of little use if, when electing the board, one did not constructively address the question of

whether the board of directors standing for election had the necessary qualifications,

independence and time to do its job properly.



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CORPORATE GOVERNANCE AND THE ECONOMY

Effective corporate governance is at the core of an efficient market economy. Shareholders and

other financial stakeholders must have access to information and the ability to influence and

control management, through both internal governance procedures and external legal and

regulatory mechanisms, in order to ensure that a company‘s assets are being utilized in the

interests of all financial stakeholders. This is important in both developed and developing

economies.

In developed markets, large institutional investors pay considerable attention to corporate

governance practices. Some US pension funds, such as the California Public Employees'

Retirement System (CalPERS) and the Teachers Insurance and Annuity Association College

Retirement Equities Fund (TIAA/CREFF), actively pursue corporate reform through their

positions as major shareholders. Every year, for example, CalPERS publishes a list of the best

and worst US corporate boards in an attempt to promote change. As institutional investors own

more than 50 per cent of the equity of US companies, companies are becoming much more

sensitive to the desires of these shareholders.

The market rewards those companies that do change. Some studies have shown that efforts by a

company to improve the quality of its board have a significant and positive effect on share price.

Similarly, companies that continue to engage in activities that place the interests of management

over those of shareholders tend to trade at a discount relative to other companies in their sector.

In emerging economies, the quality of corporate governance can vary enormously. Indeed, poor

governance or corrupt governance (―crony capitalism‖) negatively affects the returns on

investment in many countries and also contributes to larger, systemic problems at national and

regional levels. The scarcity and poor quality of publicly available information, along with

limited legal and regulatory recourse, frequently complicates efforts by financial stakeholders to

ensure that management is acting in their interests. The sometimes legal expropriation of outside

investors is a major problem of corporate governance. Although expropriation is not exclusive to

emerging economies, it is certainly much more prevalent there. Examples of expropriation

include cash flow diversion (transfer pricing), dilution of minority shareholders, asset stripping

and delay (or non-payment) of dividends.

One of the aims of good governance should be to introduce checks and balances to create the

conditions necessary to facilitate external finance. This view is apparently supported by a

number of studies, including a recent one by Credit Lyonnais Securities (CLSA) Emerging

Markets, which found that the shares prices of companies with high corporate governance

standards have been more resilient during market downturns.

RECENT DEVELOPMENTS IN CORPORATE GOVERNANCE IN INDIA

Liberalization of the Indian economy began in 1991. Since then, we have witnessed wide-

ranging changes in both laws and regulations, and a major positive transformation of the

corporate sector and the corporate governance landscape. Perhaps the single most important

development in the field of corporate governance and investor protection in India has been the

establishment of the Securities and Exchange Board of India in 1992 and its gradual and growing



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empowerment since then. Established primarily to regulate and monitor stock trading, it has

played a crucial role in establishing the basic minimum ground rules of corporate conduct in the

country. Concerns about corporate governance in India were, however, largely triggered by a

spate of crises in the early 1990‘s—particularly the Harshad Mehta stock market scam of 1992--

followed by incidents of companies allotting preferential shares to their promoters at deeply

discounted prices, as well as those of companies simply disappearing with investors‘ money.

These concerns about corporate governance stemming from the corporate scandals, coupled with

a perceived need of opening up the corporate sector to the forces of competition and

globalization, gave rise to several investigations into ways to fix the corporate governance

situation in India. One of the first such endeavors was the Confederation of Indian Industry Code

for Desirable Corporate Governance, developed by a committee chaired by Rahul Bajaj, a

leading industrial magnate. The committee was formed in 1996 and submitted its code in April

1998. Later the SEBI constituted two committees to look into the issue of corporate governance--

the first chaired by Kumar Mangalam Birla, another leading industrial magnate, and the second

by Narayana Murthy, one of the major architects of the Indian IT outsourcing success story17.

The first Committee submitted its report in early 2000, and the second three years later. These

two committees have been instrumental in bringing about far reaching changes in corporate

governance in India through the formulation of Clause 49 of Listing Agreements.

LEGAL AND ETHICAL COMPLIANCE MECHANISMS

LEGAL COMPLIANCE MECHANISMS

The difficulty with legal compliance mechanisms is that many abuses that have enraged the

public are entirely legal, for example, companies can file misleading accounting statements that

are in complete compliance with generally accepted accounting principles (GAAP). France et al

(2002) point out that laws regulating companies are ambiguous, that juries have a hard time

grasping abstract and sophisticated financial concepts (for example, special-purpose entities or

complex derivatives), well-counseled executives have plenty of tricks for distancing themselves

from responsibilities (Enron and the individual officers all deny they‘ve broken any laws), and

the fact that criminal law applies only to extreme cases so violations are hard to enforce. Based

upon in-depth interviews with 30 graduates of Harvard MBA program, Badaracco and Webb

(1995) revealed several disturbing patterns. First, young managers received explicit instructions

from their middle-manager bosses or felt strong organizational pressures to do things that they

believed were sleazy, unethical, or sometimes illegal. Second legal compliance mechanisms

(corporate ethics programs, codes of conduct, mission statements, hot lines, and so on) provided

little help in such environments. Third, many of the young managers believed that their

company‘s executives were out-of-touch on ethical issues; either they were too busy or because

they sought to avoid responsibility. Finally, the young managers resolve the dilemmas they faced

largely on the basis of personal reflection and individual values, not through reliance on

corporate credos or company loyalty.

Although the accounting profession has always had a strong focus on internal controls, recent

spectacular business failures, which have undermined auditors‘ credibility in their reporting

function, have eroded public confidence in the accounting and auditing profession. Brief et al

(1997) found that 87% of accountants surveyed were willing to misrepresent financial statements



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in at least one case when presented with seven financial reporting dilemmas. This has led to new

and more stringent applications of standards3.

The problems of the professions (law, accounting, medicine) we are witnessing today are not

endemic to the industry. They are part of the problems we are witnessing today in the wider

society: sports, business, government and politics, education, and so on. Many of us, however,

are concerned about the lack of ethics in the business world, particularly in the financial system,

since there are greater incentives for unethical conduct. As a result of many scandals, there has

been a renewed interest and focus on legal compliance mechanisms.

ETHICAL COMPLIANCE MECHANISMS

Trevino et al (1999) study found that specific characteristics of legal compliance programs

matter less than broader perceptions of the program‘s orientation toward values and ethical

aspirations. They found that what helped the most are consistency between policies and actions

as well as dimensions of the organization‘s ethical climate such as ethical leadership, fair

treatment of employees, and open discussion of ethics. On the other hand, what hurts the most is

an ethical culture that emphasizes self-interest and unquestioning obedience to authority, and the

perception that legal compliance programs exist only to protect top management from blame.

With respect to the issues of ethical leadership, Collins (2001) examined the character traits of

effective business leaders in the culture of eleven companies that transformed themselves from

good solid businesses into great companies that produced phenomenal and sustained returns for

their stockholders. Every one of the companies he profiled during the critical period in which it

was changing from good to great has what he termed ―Level 5‖ leadership which was his top

ranking for executive capabilities. Leaders in all companies exhibited the traits of fanatical drive

and workmanlike diligence, but Level 5 leaders were also people of integrity and conscience

who put the interest of their stockholder and their employees ahead of their own self-interest.

CONCLUSION

From the above discussion it should be clear that good governance is an ideal which is difficult

to achieve in its totality. Very few countries and societies have come close to achieving good

governance in its totality. However, to ensure sustainable human development, actions must be

taken to work towards this ideal with the aim of making it a reality. Additionally, the corporate

governance ratings systems discussed in this paper all include disclosure and transparency as

core attributes of good corporate governance and rightly so. Without transparency and

disclosure, shareholders and stakeholders would not be able to assess how the company was

being managed, and hence no meaningful accountability would exist. Failure in corporate

governance is a real threat to the future of every corporation. With effective corporate

governance based on core values of integrity and trust (reputational value)companies will have

competitive advantage in attracting and retaining talent and generating positive reactions in the

marketplace – if you have a reputation for ethical behavior in today‘s marketplace it engenders

not only customer loyalty but employee loyalty. Effective corporate governance can be achieved

by adopting a set of principles and best practices. Even among large companies, shareholdings

remain relatively concentrated with ―promoters‖ and family business groups continuing to

dominate the corporate sector despite the above corporate governance shortcomings, the Indian



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economy and its financial markets have started attaining impressive growth rates in recent years,

and display an exceptionally high level of optimism. The reason is that India is now clearly and

strongly committed to sustaining and rapidly furthering the major economic reforms and the

liberalization started in the early nineties.

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GLOBALIZATION & NEW POLITICAL-CULTURAL IDENTITY

RAHMAT ABBASTABAR MOGHRI*; G.T.RAMACHANDRAPPA**

*Research Scholar,

Department of Political Science. University of Mysore, Mysore.

**Reader Dos,

Department of Political Science,

University of Mysore, Mysor.

ABSTRACT

lobalization phenomenon, nowadays, is one of the most important discourses in different

scopes of human life. Globalization in influenced of modernism and post modernism

foundations, has excellent affective in change and evolution of nations and state’s political and

cultural identities. Traditions, language, religion and cultural and religious ordinance, nationality,

territory, freedom, independence, political insight, government, sovereignty, etc. are former

political and cultural identity in every country. Globalization with deletion limitation of three

elements space, time and place as determinant elements in formation of political and cultural

identities, has caused redefinition and creation of new political and cultural identities which have

been caused appearance of political and cultural movements in last few decades special in late

years. In this article, first will definition the characteristics and elements of political and cultural

identity in globalization age, and then will emphasis on hypothesis: globalization in base of

modernism and post modernism principles has created new form of political and cultural

identities which in influenced of this, many of modern political and cultural movements and

mobilities has been formed in the world.

New identity in globalization age, is neither merely traditional nor liberal completely but is based

on human new knowledge of himself and factors and elements of his around, with, in opposite of

past, characteristics like dynamic, flexible, knowledgement and blissfulment. This identity able

with globalization instruments to creation new political and cultural mobility in world wid.

KEYWORDS: Identity, Politics, Culture, Globalization, Political and Cultural Movement and

Mobility.

______________________________________________________________________________

INTRODUCTION

In beginning of twentieth century and especially from 1960 decade, the human life has been

faced more evolutions. Different scopes of human life and political, economic, social and

cultural structures have been changed. Various and different scopes of sciences such as

sociology, culturalogy, political science, international relations, economic and commerce have

reconsiderated in influenced of globalization phenomenon from second half of twentieth century.

These evolutions in global level have changed world order and have formed global new order.

The abroad accelerator wave of globalization (according to Toffler’s opinion: third wave of

G



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knowledge) has been caused deep widespread evolutions in knowledge and epistemology system

of societies.

Globalization with creation of new social, political and cultural contexts and with engage

informational communicational advanced instruments has caused changing in human knowledge

and creation new political – cultural identity in national and global level. In globalization age,

the kind of human identity and his attitude toward himself and the world has been dominated

supply for human behavior. The politics have been based frequently on the identity instead of

interest, class and power. The politics and culture which creating identity in globalization are not

single scope, single polar and merely left or right, but all cultures and politics, even regional and

native, have been exited from border and are in center of new political – social formation.

Globalization has caused redefinition of main elements of identity making and has interned new

actors in political and cultural decision making.

The author in this article will try to specify some questions such as; what is

globalization? What are dimensions of globalization? What are consequences of globalization in

different scopes, special in political and cultural dimensions? Why and how new political and

cultural identities have been formed in influenced of globalization phenomenon in national and

global level? And which movements and actors have been created in influenced of new identities

in national and global scopes?

The author believes that; Globalization has changed insight and knowledge of nations by

modern informational and communicational instruments and by post modernism foundation, and

has caused enter new actors in management, decision and identity making system in national and

global level.

CONCEPTUAL SPECIFY

GLOBALIZATION

Nowadays the word globalization has been a current term in various contexts in the

world. And it caused mental disturbance for many literates and scholars in politics, economic and

culture contexts. The word globalization is equivalent ''mondialisation'' in French, and

''globalisieruny'' in German, and''globalisacion''in Spanish and Latin American language.

The word globalization has been used first time by ''Marshal Mc luhan'' in his book '' war

and peace in global village '' in 1970(McLuhan, 1964: 54). This term has been seen in other

sciences such as: political and social science, and caused new theory codification.

The term globalization is a buzzword, because it is a multidimensional and complex

concept, and has many definitions in various scopes. So, scientific and exact definition of

globalization is very difficult. As yet, globalization has been defined as: ''world compaction'', ''

affiliation different part of world'', ''increases global affiliation and connection'', ''westernization

process and world similarity''(Taylor, 2000: 49-70),''world economic contraction''(Hirst, 1996:

48), ''extensiveness of impress and impressibility of social reactions'',''deallocation of states and

decrease limitation state's activity in relation to other countries''(Sander,1996: 27). The common

point of all definition of globalization is that; globalization is a process that impress on politics,



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economic, social and cultural, human and state's life in material and spiritual scopes. And next

common point is that, globalization is not only a simple concept, but also is a process that begun

in the past and now is continuing and increasing its speed and impress every day.

Finally, my definition picked up from many thought and theory about globalization is:

Globalization is a process compaction of time and spaces that people in the world, awareness or

ignorantly, are interaction in a global single community. And many of geographic, political,

economic, and cultural limitations disappear, and this causes confirmation, reformation or

alteration of human thoughts and experiences in different scopes.

Mainly, some essential factors that have impressed globalization are follows:

Technologic development and increase of science and communication, because of scientific

advancement and new explorations that have been occurred in twentieth century.

Development of free market, globalization of markets and global economic, because of

development of export, extension of railing and marine transportation (Luke, 1995: 99-100).

Spread and globalization of many political, social and cultural matters, such as environment,

global wars, human rights, terrorism and peace.

Formation some supranational organizations and regional agreements, such as, Europe society

(1992), NFTA, nation society and UN.

Some important political and economic events, like soviet fall, and china economic

experiences that have happened in eighty decade.

Increase of human experiences and knowledge in various scopes (Shahramnia, 2006: 56).

Most of authors and scholars specified globalization in four political, economic, social

and cultural dimensions. And some addicted technical, observer on the third industrial revolution

(Nash, 2001: 10). "Malcolm Waters" also argued globalization has three economic, political and

cultural dimensions (Waters, 2000: 18). In my opinion, there are five dimensions in globalization

that are follows:

I. TECHNOLOGIC DIMENSION: Communication technology has been created in this

dimension and caused strongly flow of information and created other scopes, by computer

networks.

II. ECONOMIC DIMENSION: Economic globalization with its many faces and scopes,

effective considerable on other dimensions of globalization. Some of its scopes are: trade

globalization, external investment, international division of labor, economic free market,

multinational companies, and work force emigration (Scout, 1993: 21).

III. POLITICAL DIMENSION: Political globalization is; the political matters that only have

belonged internal of nation-state scope in influenced of international evolutions, they have



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changed and they are globally maters now. Some of them are: globalization and nation-state,

politics globalization and political new actors, common political problems in the earth, human

rights, modern political culture (Safaei , 1999,: 528-528).

IV. CULTURAL DIMENSION: Globalization of culture refers to compaction of time and

space, and formation new conditions for cultural globalization. In this condition, the people

and societies in the world will communicate in culture and mutual effectiveness together. Some

new cultural matters that should be attention in era of globalization are: global culture and

identity (Oxford, 2009: 6), development of communication (Sklair, 1998: 302),

consumptionalization and formation of national, local and ethnic culture.

V. SOCIAL DIMENSION: Some effectives of globalization on social dimension are:

formation of supranational and hybrid identities, creation of cosmopolitanism interests,

formation of social movements of modernization, increase of emigration, special pay attention

to global environmental problems, formation of supranational social organizations.

Some of the main and basic characteristics of globalization in its different dimensions are

follows:

Development of advanced information and communication technology.

Facilitate and increase the speed of communication between individuals and various societies

in the world.

Increasing interdependence among humans around the world.

Universalism and globalization of humanity values, such as: human rights, democracy,

liberalization, peace, security and justice.

Washy and liquidation of borders, and political and geographic limitations.

Pay attention seriously to humanity common problems and solution them. Such as:

environment, Air pollution, terrorism, global poverty, and apartheid and gender bias.

Supranational identity and cultural formation, and creation social spaces in global level.

Economic development in based on competitive free market, by World Tread Organization

(WTO) and other organizations.

Washy and cut off state control on local and national economics.

Appearance new actors in political and economic scopes, through increase of multinational

corporations.



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Formation of supranational classes and preferment struggles of classes, from local and

national level to global and international.

Formation of new international division of labor in various scopes, by multinational

corporations and some developed countries.

Increase of social mobility, and developed scientific, technologic, commercial, and

immigrations.

Extension and spread of global consumption pattern and human integration by

McDonaldization, Cocacolation and etc.

Formation radical and modernity movements, with different orientations.

Appearance and extension of new political culture in global level, that including humanity

common values.

Globalization is inevitable and based on western powers and developed countries

(Shahramnia, 2006: 118-124).

IDENTITY

The identity term means human insight and knowledge of nature and political, cultural and

social properties of himself and the world, and has characteristics like difference, fixity and

stability, locative, collectivity and time. Identity has two paradoxical evidently dimensions. First

is similarity and symphonic and second is difference from others. In Emanuel Castells’s

explanation, the identity is wellspring of meaning and experience for people. Identity is idea

making process according to a collection of political and cultural characteristics (Castells, 1989:

7). Basically, the identity is creating in contact to others (Golmohammadi, 2002: 20).

There are two kind of identities; subjective or privative and plural. Subjective identity is

related to human privative knowledge system, and plural identity is concern to political – cultural

belong of individual to particular group or cast. Another classification of identity is regional,

national and global. The native, local and regional identity in traditional societies and national

and global identities in modern and industrial societies have more power, solidarity and higher

function. The claim of this research is all kind of identities in all scopes will be catch of change,

evolution and redefinition in influenced of globalization’s consequences. Development and non

development is very important factors in stability and instability of societies’ identity.

There are many affective factors and elements in creation identities in various levels.

Some of them are such as; environmental and mental factors, historical, cultural, political, social,

economic and globalization phenomenon. The interaction and adaptability of these factors with

together are most important in identity making process. Political and cultural elements rather

than others have more potential in increase and advance of man identity especially in

globalization age, as in traditional societies because of their neglect or delusion of these factors



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have faced identity crisis. The supplies and factors of identity are making identity by four

elements; by traditional advantages, sensation and sentimental, linkage to thoughts, and linkage

to power relations (ghoraishi, 2002: 52).

As passed above, globalization is phenomenon and process that relative to extension of

communications, reconsideration and deformation in different subjects especially in human,

political and cultural issues. Identity is based on others, so it has been globalized by extension of

globalization phenomenon. Thus, the identity has globalized it’s communicate span by extension

globalization communication, and has interaction relation to distance phenomenon. These

interactions between identity and globalization have transformed the humanity knowledge about

himself and the world, and of course may be in some times eventuating to alienation (Ibid: 47).

The globalization phenomenon, in one hand, assimilates and standards cultures identities,

and in other hand, it includes communicate, accession and independent interaction among human

and nations and societies, and makes context for more extension of cultures and identities. Since

identities have construction nature, the foundations of identity making will have common faces

by impaction and singleton world, and will formed common identities in global aspect. In

globalization age, the gathering in modernism and post modernism thoughts and opinions,

secular and in secular schools, Islamic and non Islamic thoughts, will formed new knowledge of

identity in political and cultural scopes, as whilst human are able to abide on local and national

identity, and also able to catch new global identity. Hence, the human, in globalization age, have

various and plural identities which all have being of single knowledge.

The traditional identity making was based on time, place and space. Globalization with

strong instruments of communication and world integration and compaction of time and space,

has changed elements of identity making and has caused redefinition of them. In traditional

societies, the time and space were adopted with together and they had accessible relation, and all

functions and definition have been formed by time and space. Place, with characters of

difference and ridge has created a kind of stability and correlation sense, and restricted the space

which was instable and mobile. Globalization with separate space from place has caused

presentment, so place will be empty and singsong and space will has more extent. Globalization

also compacts time and space, and time has missed its function of correlation to place and will

created so many seconds which Castells explanted it as “time without time (Castells, 1989).

GLOBALIZATION AND IDENTITY

Two attitudes, process and project, about globalization phenomenon have created two

theories about its affection on different issues and particularly on identity. First outlook is related

to skeptical (like Boderio and his followers) whom believe globalization in political – cultural

identity making has completely negative consequences. Some of them are; cultural unsafely,

alienation, identity crisis, brain drain, deletion of cultural variety and growth of cultural single,

formation of new form political and cultural colonialism, and westernization (Golmohammadi,

2002: 377). Skeptical post modernists argue that, identity is construction which has based on

individual interpretations, paradoxical and in pragmatism, so it not possible to formation

absolutely a strategy in base of reality, truth and scientific (Henrico, 1984: 1-3). This outlook is

reference to pluralism theory of post modernism; that isn’t possible formation of stable and

common identity.



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Second outlook is concern to affirmative group (Lutar, Foucault, Muffe, Laklao). They

believe that globalization has positive consequences in political – cultural identity making. Some

of them are; more interactions among political – cultural elites in different societies, political –

cultural development, growth of authoritive manpower with national and global identity,

reinforcement local and regional political and cultural identity in parallel increasing global

identity, creation contexts for introduction of multiple and different cultures and identities in

world wide.

The various, different and plural cultures and politics, and new and common political –

cultural identity of humanity have been formed by broken and cancelation barriers of time and

place. These global new identities are expressive of main principles of human rights, and they

will be gradually global scales. New identity has global legitimacy and people in the world wide

interaction with together by new identity. In fact, a kind of global knowledge and awareness has

been formed among people in the world wide, so all local, national and global identities with

common knowledgment will contraction together (Pahlavan, 2001).

Globalization with advanced instruments of information and communication has created

revolution in political – cultural insight of nations and has formed the foundation of their new

identity. These new insights and identities reject every political – cultural despotism and political

absolutism and totalitarianism system, and established new cultural – political identity on

schools, religions and thoughts which are standards for human good life. Globalization by

foundations of post modernism controverts monopolistic and monoculture and rejects the claim

“Absolute trust” of some political system and publishes new knowledge and identity in global

level. Nowadays, the discourse of cultural pluralism in influenced of globalization phenomenon

has been new and dominant thought and model of individual and plural behavior of nations and

states. According to this new discourse, instead of decision making of similarization for various

political and cultural groups, it possible to recognize equal political, social and cultural rights for

all groups without any threat for political – cultural unique (Sinaei, 2005).

Globalization by bring out cultures from narrow bond of time and place, and by span

activities of cultures, has smoothed context of publish of micro and macro cultures in global

level and has caused formation of new political – cultural identities. New political – cultural

identities in national and global level has caused that political authoritarian system for exit of

new identity challenges and solve of legitimacy crisis, has decided to reform their political

system and created situating conditions for more participation of intellectual and cultural

minority in political decision making. Globalization and formation of new political – cultural

identities, and expand discourse of cultural pluralism, and extension wave of democracy in

global level, have caused authoritarian governors for preserve their political legitimacy,

responsible people’s requests, and reduce their authority, and increase more participation of

people (Ibid).



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EFFECTIVE FACTORS IN FORMATION OF NEW POLITICAL – CULTURAL

IDENTITY

AFFIRMATIVE FOUNDATIONS OF POST MODERNISM THEORIES

History effort for drawing political – cultural identity in post modernism age is concern to

expand social – cultural change in 1960 in Europe countries. In this time, the Marxism classic

theories in cast fighting scope couldn’t specify the nature of complex contemporary struggles in

power, political domination, formation of new political identities, subject and social movements.

After appearance of new political movements such as nationalism, feminism, peace,

civilization, etc. special theory has been formed for checking and analyzing them. The post

modernists, for new political – cultural identity making, have remade subject, social, culture, and

have reconsiderated the models of power and struggle analyzing (Best & Cerner, 1997: 286).

Post modernists in contrast to objectivism of cultural identity and modern social framework,

have discussed issues like construction of identity, pluralism of cultures, identities, meaning, and

new foundational societies, as “Robert J Doan” reads it; “Creation new territory of cultural

politics” (Doan, 2006: 22). They reject absolutism of modernity and create new identity in

specific view, emphasis on correlation of groups and societies in base of their interests (Nazari,

2006: 120). According to post modernism theory, the absolutism identity and hegemony and

imperialistic logic of modernity age have been finished and self knowledge and new identity age,

and also extension of nationalism movements, democracy and Islamic awakening and mobility

are beginning (Rosina, 1991: 146).

Post modernists in analyzing and specify of new political – cultural identity have some

important statements that are follow:

1- Identities are discourse construction and have communicational nature. It means that, the

human identities are continuing constructing and reconsideration (Paul Said, 2003: 80), and so

human in insight of widespread network of communication in globalization age, and in

influenced of different factors and in various environments, will catch new insight and identity.

In Foucault’s opinion, globalization is kind of new normalization. Globalization is arena of

different discourses which creating new identities (Hath, 1981: 101).

2- Identities generally have cultural face. Basically, post modernism is as a cultural paradigm.

So, in identity making it emphasizes on cultural element instead of political, economic and

business. With creation and extension of globalization, the creation scopes of identity also catch

more evolution. In traditional and even modern societies, the identity creator factors were family,

church, institutions and ministrations, but in industrial and post modern societies, the instruments

of communication and information are responsible of this task (Doan, 2006: 221). Hence, the

channels of identity making are cultural instruments and institutions.

3- Identities are based on distinct and difference. Identities are forming in relation to others. Post

modernists are imagine that, human identity is forming by creation difference between him and

others, and by creation dichotomy like; black/white, man/woman, relative/abroad (Ghasemi,

2004: 26). Globalization by extension of communication and compaction of time and place, has



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submitted many others, and thus changed self knowledge of human identity, and has created new

political – cultural identities.

4- New identity making is based on identity politics. Identity politics is a guideline which people

redefinition themselves by membership to groups which were in border of decision and identity

making (Doan, 2006: 35). In identity politics, the people belong themselves to groups which are

punished and are under dominant of imperialist’s power. The appearance of identity politics not

only created contexts for appearance new political – cultural identities in public scope, but also is

a new form of political participation and attention to interns of groups which were bordered, and

has created civil nationalism (Pakolesky, 2001: 384). The appearance of some movements like

feminism, labor, gender, environmental, etc. are shambles of formation of new political –

cultural identities (Best, 1997).

CREATION AND EXTENSION OF POST MATERIALISM VALUES

Another factor in formation of new political – cultural identities in influenced of

globalization phenomenon is value evolution and appearance of modern values in the world and

especially in western post industrial societies. “Ronald Inglehart” argues that, globalization in

addition to intellectual, cultural and identity alteration of societies, also has created new form of

social foundation political contrast, the reasons of election and support to political parties, and

catch ways to political goals (Inglehart, 1994: 2). Because of evolution from secular values to

post material, and creation new political – cultural knowledge, many of new political – cultural

issues came to center of decision making, and have caused main stimulation of many politics and

movements. The formation of new values have farted parties and created new parties, and

changed characters of evolution of people’s bliss. New knowledge and post materialism have

changed the nature of religious attitudes, sexuality rules, cultural, mural and behavior norms in

western and nonwestern societies (Karimi, 2007). “Haber Mass” is believe that, the appearance

of new political, cultural and social groups and movement, are consequences of

commoditization, growth of disposability economy, publication of bureaucratic welfare state

after World War II. He argues that, the philosophy goal of new social movements is defense of

life world (family and social values) (Ibid).

EVOLUTIONS IN INDUSTRIAL CAPITALIST SOCIETIES

The express and widespread evolutions and experiences in industrial societies, by

development and technology instruments from 1970, have eventuated deformation basically in

identity knowledge of people, and have formed new political – social forces which their goals

were not power and interest but were redefinition of selfhood, society, world and nature (Ibid).

“Alen Touraine” argues that, structural change and alteration in industrial societies have created

new identity structures and actors which will be intellect and thought producers instead of

financiers and even labors. So, knowledge and information are supply of identity making in post

industrial societies. Touraine by historicity concept, redefinition nature and human, and

introduces new movements as main actives in identity politics (Jalaeipor, 2002: 57). “Clause

Offe” is also believed that, relative welfare of social democracy, increase of education, and

express growth of service section are factors formation of new identities (Nesh, 2003: 134).



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GLOBAL SYSTEM EVOLUTIONS

The macro and widespread global system evolutions in influenced of globalization

process are basic causes formation of new identities. “Emanuel Castells” with discuss network

society as related between creation new identities, modern movements and globalization. In his

opinion, the revolution of informational technology and remaking structure of capitalism system

has grounded new form of society which formation of global new identity and universalization

important and strategic activities are symbols of new society. The new society changes culture

and new institutions (Castells, 2001: 17). With global evolutions and extension of informational

age, the political systems of industrial era have been faced to legitimacy crisis, and yet, labor

movements, political parties and nation – state’s institutions are not social independent and

affective agents, and instead of them, the ecologists, feminists, religious, localisms, nationalists,

partisans of human rights, supporters of environmental are actives of new society and new age.

Because, they are agents that have identity program and their goals are change of signs,

meanings and cultural cods (Ibid: 425).

The collection of these factors have formed new identities and then have been created

movements in the world which are enjoy especial characteristics; 1- Non instrumental. 2- Target

toward civil society. 3- Open, flexible and dynamic (Kenny, 2004: 131). 4- Rest on public media.

5- Belonging to social middle class. 6- Based on direct democracy. 7- Emphasis on public

identity (Cohen, 1985: 667). 8- Critic to cultural and moralist values of society. 9- Redefinition

and reinterpretation to values, norms, selfhood, and society. 10- Construction of new identities.

CONCLUTION

Globalization with its revolutionary speed in extension of communicational interaction,

and compaction of time and place, and increase of technology evolution has changed many of

political, social and cultural relations, and has caused creation new form of social and political

systems. Sciences, in all disciplines, have been faced to reconsideration and deformation.

Political systems of state has missed its function in identity making, and have been created new

actors in local, regional, national and global level. Globalization has caused redefinition of many

concepts such as selfhood, society, nature, political – social relations, political systems, supplies

of identity making, etc. New political – cultural constructed of identity has caused creation of

movements which are responsible for intellectual and behavior identity. Hence, in globalization

age, the traditional identities are affectless and new actives with different identity are main actors

in subjective and social scope.

REFFERENCES

E.M.Castells, (1989), The Power of Identity, Oxford, Blackwell.

Golmohammadi. Ahmad, (2002), National identity and globalization, Tehran, Nei Press.

Goraishi. Fardin, (2001), Globalization and Evolution in our Notion, Journal of National

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Henrique. Julian & Others, (1984), Changing the Subject: Psychology, Regulation, and

Subjectivity, New York, Methuen.

Pahlavan. Changiz, (2001), Culturalogy; Speeches in Contexts of Culture and Civilization,

Tehran, Payam Emrooz Press.

Sinaei. Vahid, (2006), Cultural Pluralism in Globalization Age, Journal of Olome Ejtemaei,

No: 25.

Best. Steven & Douglas. Kellner, (1997), Postmodern Theory: Critical Interrogations, New

York, The Guilford Press.

Doan. Robert. J, (2006), Social Critic of Post modernism; Identity Crisis, Translated by Saleh

Najafi, Tehran, Shirazeh Press.

Ashraf Nazari. Ali, (2006), Post modernism and Political Identity, Journal of National

Studies, Seven Year, No: 3.

Rosenau. Paulline Marie, (1991), Postmodernism and the Social Science, New Jersey,

Princeton U.P.

Hall. Stuart, (1991), The Local and The Global: Globalization and Ethnicity, London,

Macmillan.

Gasemi. Mohammad Ali, (2004), Identity in Post modern’s Space, Journal of Guideline

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Best. Steven & Douglas. Kellner, (1997), The Postmodern Turn, London, The Guilford

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Engelhat. Ronald, (1994), Cultural Evolution in Industrial Advanced Countries, Translated

by Maryam Vetr, Tehran, Kavir Press.

Karimi Male. Ali, (2007), New Identities in Globalization Age, Journal in Law and Political

Science, Second Year, No: 4.

Jaleipor. Hamid Reza, (2002), Sociology of Social Movements, Tehran, Nei Press.

Castells, Emanuel, (2001), Information Age; Social, Economy, Culture, Translated by Hasan

Chavoshian, Tehran, Tarh No Press.

Kenny. Michael, (2004), The Politics of Identity, London, Cambridge Polity Press.

McLuhan. M, (1964), Understanding Media, London, Roulade.



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Taylor. P.J. (2000), Inaction of the world, Americanization. Modernization and globalization,

in C. Hay and D. Marsh(Ed) Demystifying of globalization, Mc Milan.

Hirst.P. Thopson.G, (1996), Globalization in question : The international economy and

possibilities of governance, Cambridge, polity press.

Sander.H, (1996), Multilateralism, regionalism and globalization. The challenge to the world

trading system, in H.Sander and A.Inotai (Eds) World trade after the Uruguay round,

London, rout ledge.

Shahramnia. Amirmasoud, (2006), Globalization and democracy, Tehran, Negahe Moaser

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Luke .W, (1995), New world order or neoworld orders: power, politics and ideology in

information lazing globalist, milked Featherstone et al.

Nash. Kited, (2001), Contemporary political sociology; Globalization, Politics and Power,

Tehran, Kavir Press.

Waters .Malcolm, (2000), Globalization, Tehran, Organization of Industrial Management

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Safaei. Sohila,(1999), The process of globalization on human rights and it's challenge,

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R, to: http//www.center for globalization and policy research/ ucla



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100% FDI IN SINGLE-BRAND RETAIL OF INDIA- A BOON OR A BANE?

J.J.SOUNDARARAJ*


PG & Research Department of Commerce,

Loyola College, Chennai- 600034.

ABSTRACT

One of the most important developments during the last two decades is the notable growth of

FDI in the global economic landscape. This unprecedented growth of global FDI from 1990

around the world make FDI an important and vital component of development strategy in both

developed and developing nations and the policies are designed in order to stimulate inflows of

FDI. Perhaps, FDI provides a win-win situation to both host and home countries as well. The

home countries take the advantage of vast market potential accelerated by industrial growth,

whereas host / targeted countries want to acquire technical know-how and managerial skills and

supplement domestic savings and foreign exchange. According to AT Kearney‟s Annual Global

Retail development Index for the year 2010, it is found in the annual study, made among 30

Countries based on their retail investment attractiveness, India has been placed at third rank

which is next to China and Kuwait. It is also mentioned that the Indian retail market is worth

$410 billion as of now and only 5% sales are through organised retail whereas, the rest is in the

unorganised retail. Such a major unorganised segment of Indian retail could be perceived to be

the opportunities for domestic and international Companies. Moreover, it is estimated that the

Indian retail will grow very fastly to become worth of $535 billion in 2013, with 10% from

organised retail due to the effect of growing middle class which will demand better shopping

environment and quality brands. The Indian Government has now allowed 100% FDI in the

single-brand retail in addition to 100% FDI in the cash and carry B2B / wholesale segment that

already exists. Till today, FDI in Indian multi-brand retail has not been permitted due to the

resistance from the opponents and the allies of the central govt. Perhaps, the UPA government

might take it up again after the five state assembly elections that are scheduled between January

30, 2012 and March 03, 2012. This paper primarily makes an attempt to critically evaluate

whether allowing 100% FDI in Single-brand retail of India is a boon or a bane.

KEYWORDS: Retail; Organised Retail; Unorganised Retail; Retailer; Multi-Brand Retail;

Single-Brand Retail.

______________________________________________________________________________

INTRODUCTION

The High Court of Delhi in 2004 defined the term „retail‟, as a sale for final consumption in

contrast to a sale for further sale or processing (i.e. wholesale). It is a sale to the ultimate

consumer. Thus, retailing can be said to be the interface between the producer and the individual

consumer buying for personal consumption. This excludes direct interface between the

manufacturer and institutional buyers such as the government and other bulk customers.

Retailing is the last link that connects the individual consumer with the manufacturing and



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distribution chain. A retailer is involved in the act of selling goods to the individual consumer at

a margin of profit.

The marketers can very well take efforts to create demand for their market offer, but

eventually it is only the retailers who meet out the demand appropriately. In case, the retailers do

not stock the brands, demanded by the customers, all the efforts of the marketers go waste. Such

an important last link in the supply chain is occupied by the traders called „Retailers‟. There are

two sectors in Indian retailing namely, organised sector and unorganised sector. As far as the

Indian consumer market is concerned, 95% of the retailing is in the form of Informal /

Unorganised. It is the situation that primarily creates an opportunity for the giant domestic and

Multi-national companies to enter into the retailing in India. Entry of RIL (Reliance Industries

Ltd) into the retail industry of India is an apt example and evidence for the previous point.

It is obvious that retailing is the largest private sector industry in the world economy and

as per the survey by AT Kearney, it is found that India is the third most attractive Country next

to China and Kuwait in the world from the view point of the multi-national corporations which

are interested in making investment in the retailing of India. The Indian Government has already

opened up the gateway for 100% FDI in single-brand retailing and cash and carry wholesale. In

relation to the most important segment of retailing, namely multi-brand retailing, the government

is seeking FDI options in such a way it is permitted without affecting the existing social

framework. The above discussed aspects motivated the researcher to do a critical evaluation of

the choice and consequences of 100% FDI in single-brand Retail.

INDIAN RETAILING- AN OVERVIEW

Retailing is considered to be the largest private sector in India and moreover, it is second

to agriculture in terms of provision of employment. Indian retailing provides employment to

more than 4 crore people. The retail industry is divided into two sectors namely, organised or

formal and unorganised or informal. In simple terms, it could be said that Organised retailing is

one in which the trading or merchandising is carried out by licensed or authorized retailers who

are registered for sales tax and other taxes. The companies‟ owned super markets, hyper markets,

retail chains and other privately owned retail stores or departmental stores come under this

organised retailing. The revenue, generated by these enterprises is accounted for by the

Government. It is worth to mention few brands and companies that are presently marching in the

Indian Organised Retailing. They are, namely Foodworld, Spencers‟ daily, More super markets,

Big Bazaar, Hypercity, Shoppers stop, Khadims, Lifestyle, Pantaloons, Westside, Trent, Reliance

super, Reliance trends, Reliance footprints, and entertainment chains like, Adlabs, Fame, PVR,

Inox and Fun Republic. To spell out few Indian companies that have invested a big money in

Indian Organised Retailing are namely, Reliance, Future Group, Aditya Birla Group, TATA, and

Bharti etc. Regarding the Unorganised retailing, it stands for 95% of the Indian retailing and is

occupied by the sole-owner managed general provision stores, paan shops, convenient stores,

hand cart and pavement vendors etc. In relation to the provision of employment, the Organised

sector has employed 50 lakh people whereas, the unorganised has employed 3.5 crore people in

India. It is found that India has highest density of shops in the world (AC Nielson and KSA

Technopark, India). It is also estimated that the retail contributes about 10-11% to the GDP of

India. The value of the Organised retail is Rs. 35,000 crores and of the Unorganised is Rs.

9,00,000 crores approximately. The Organised retailing is growing at a rate more than 30%. It



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implies that slowly the unorganised segment is being converted into Organised. Regarding the

investment, made by some of the Indian giants, it is learnt that Reliance has already invested

$3.4 billion and emerging as the largest contemporary Indian conglomerate; Hypercity Retail of

K.Raheja group plans to open up 55 hypermarkets before 2015; Bharti enterprises plans to spend

$5 billion by 2015 in their retail business. The present state and future plans of companies in this

Indian retail industry will certainly ensure an abnormal growth rate than the present.

According to AT Kearney‟s Annual Global Retail Development Index for 2010, it is

found in the annual study, made among 30 Countries based on their retail investment

attractiveness, India has been placed at third rank which is ahead of Brazil, Saudi Arabia and

others.

TABLE-1 TOP FIVE RETAIL INVESTMENT COUNTRIES

2010

Rank

Country Market

Attractiveness

(25%)

Country

Risk

(25%)

Market

Saturation

(25%)

Time

Pressure

(25%)

GRDI

Score

1 China 50.6 85.8 32.9 86.6 64.0

2 Kuwait 75.4 94.3 56.2 24.5 62.6

3 India 35.4 51.3 62.2 97.8 61.7

4 Saudi Arabia 65.3 86.5 50.7 31.0 58.4

5 Brazil 73.5 74.3 46.6 36.9 57.8

Source: GRDI (Global Retail Development Index) 2010, AT Kearney Analysis

It is also learnt from the analysis of AT Kearney that the Indian retail market is worth

$410 billion as of now and only 5% sales are through organised retail whereas, the rest is in the

unorganised retail. Such a major informal segment of Indian retail could be perceived to be the

potential opportunities for domestic and international Companies. Moreover, it is estimated that

the Indian retail will grow very fastly to become worth of $535 billion in 2013, with 10% from

organised retail due to the effect of growing middle class which will demand better shopping

environment and quality brands.



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CHART-1

Source: GRDI (Global Retail Development Index) 2010, AT Kearney Analysis

The companies which have entered into the retailing in India have started introducing

innovative formats in stores. Future group has set up community family shopping centre in

Bangalore city. Wedding malls have been developed to offer every aspect of wedding

requirements. Wal-Mart is working innovatively to change the agricultural supply chain model in

India in order to improve the productivity and quality of goods by launching direct farm produce

sourcing method. Foreign companies, established in the global retail continue to show greater

interest in India to open hyper markets and Malls. In apparel, Zara from Spain opened its first

store in India in 2010. Polo Lauren and Diesel brands are expanding their retail business in India

fastly. Though the real estate is cheaper in India comparing many developed nations, the

companies are unable to find suitable locations in Tier-1 Cities. Therefore, they have started

opening shopping centers in Tier-2 Cities of India. For example, More, Spencer‟s, Mega Mart

and Shoppers stop have already opened up their stores inTier-2 cities.

SOURCES OF FDI IN INDIA

India has broadened the sources of FDI in the period of reforms. There were more than

130 countries investing in India in 2011 as compared to 15 countries in 1991. Thus, the number

of countries investing in India has been increased after reforms. After India adopted

liberalization of economy, Mauritius, South Korea, Malaysia, Cayman Islands and many more

countries predominantly appears on the list of major investors apart from U.S, U.K, Germany,

Japan, Italy, and France which are not only the major investor now but during pre-liberalisation

era also.



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TABLE-2 MAJOR SOURCES OF FDI (IN %) IN INDIA

(FROM APRIL 2000 TO APRIL 2011)

Mauritiu

s

Singapor

e

U.S.A U

K

Netherlan

ds

Japa

n

Cypru

s

German

y

Franc

e

UAE

41.56 % 9.84% 7.17

%

5

%

4.32% 4.15

%

3.75% 2.30% 1.87

%

1.44

%

Source: Complied & computed from the various issues of Economic Survey, RBI Bulletin,

Ministry of Commerce

The data in table-2 presents the major investing countries in India during 2000-2011.

Mauritius is the largest investor in India with 41.56% of total FDI during the period. This

dominance of Mauritius is because of the Double Taxation Treaty i.e, DTAA- Double Taxation

Avoidance Agreement between the two countries, which favours routing of investment through

this country. This DTAA has been made out with Singapore also. Singapore is the second largest

investing country in India. While comparing the investment made by both Mauritius and

Singapore, one interesting fact comes up which shows that there is a huge difference between

FDI inflows to India from Mauritius and Singapore. The other major countries are U.S.A with a

relative share of 7.17% followed by UK, Netherlands, Japan, Cyprus, Germany, France and

UAE.

CHART-2

Source: Complied & computed from the various issues of Economic Survey, RBI Bulletin,

Ministry of Commerce

SHARE OF TOP 10 COUNTRIES IN FDI INFLOWS ( 2000-2011)

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

COUNTRIES

FD

I C

ON

TR

IBU

TIO

N I

N %

Series1 41.56% 9.84% 7.17% 5% 4.32% 4.15% 3.75% 2.30% 1.87% 1.44%

MauritiusSingapor

eUSA UK

Netherlan

dsJapan Cyprus Germany France UAE



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Thus, it is understood that only these ten countries account for 81.4% of the total FDI

inflows in India during 2000-2011. India needs enormous amount of financial resources to carry

forward the agenda of transformation from the planned economy to the opened economy, to

tackle imbalance in BOP, to accelerate the rate of economic growth and to have a sustained

economic growth.

DISTRIBUTION OF FDI WITHIN INDIA

FDI inflows in India are concentrated around five cities namely, Mumbai, New Delhi,

Bangalore, Ahmedabad, and Chennai. Mumbai received heavy investment from Mauritius

(29%), apart from U.K. (17%), USA (10%), Singapore (9%), and Germany (4%). The key

sectors attracting FDI inflows to Mumbai are services (30%), Computer software and hardware

(12%), power (7%), metallurgical industry (5%) and automobile industry (4%). Delhi received

maximum investment from Mauritius (58%), apart from Japan (10%), Netherlands (9%), and UK

(3%). While the key industries attracting FDI inflows to Delhi region are telecommunications

(19%), services (18%), housing and real estate (11%), automobile industry (8%) and computer

software and hardware (6%).

CHART-3

Source: Compiled and computed from the various issues of SIA Bulletin, Ministry of Commerce,

GOI

Heavy investment in Bangalore came from Mauritius (40%) alone. The other major

investing countries in Bangalore are USA (15%), Netherlands (10%), Germany (6%), and UK

(5%). Top sectors reported the FDI inflows are computer software and hardware (22%), services

(11%), housing and real estate (10%), telecommunications (5%), and fermentation industries

(4%). Chennai received FDI inflows from Mauritius (37%), Bermuda (14%), USA (13%),

Singapore (9%) and Germany (4%). The key sectors attracting FDI inflows are construction

activities (21%), telecommunications (10%), services (10%), computer software and hardware

DISTRIBUTION OF FDI WITHIN INDIA (2000-2008)

0

5000

10000

15000

20000

25000

30000

Mumbai New Delhi Bangalore Ahmedabad Chennai

REGIONS

Am

t IN

MIL

LIO

N (

US

$)



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(7%), automobile industry (7%). As far as technical collaborations are concerned, Chennai

received 660 numbers of technical collaborations during 1991-2008.

FDI IN INDIAN RETAILING

It is good to look at the present state of FDI in Indian Retailing. The Indian Government

has so far permitted 100% FDI in cash and carry B2B format business and single-Brand Retail.

Cash and carry form of trade allows sale of goods to the member Institutions like, offices, hotels

and retailers. The consumers who buy goods for personal consumption are not permitted to be

served by the enterprises that are funded by FDI in cash and carry business format. Regarding,

single brand retailing, FDI to the tune of 100% has been permitted in India from 10th

January

2012 with certain conditions. However, the initiative of the Central Govt. to allow FDI in multi-

brand retail segment has not yet been materialised. Presently, the central government is looking

at the ways and modality of allowing FDI in the multi-brand retail segment. According to the

Finance Minister Mr. Pranab, who delivered his address at the 106th

annual session of PHD

Chamber of Commerce and Industry in New Delhi on 23rd

December 2012, FDI in multi-brand

retail is still in the „mind of the government‟ and it would be pursued once consensus emerged

among political parties and other stakeholders.

It is the general perception of the business people and also majority of the public that the

central Govt. is holding up the proposal of FDI in multi-brand retail of India till the state

assembly elections of five states – Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur that

shall be completed by March 3, 2012.

HOW DO FEW TOP RETAILERS OF THE WORLD LOOK AT INDIAN CONSUMER

MARKET?

It is certain that Indian consumer market is perceived to be an attractive and profitable

destination for many foreign companies. However, it is more appropriate to look at the details of

the fact. Among the many multi-nationals that are interested in Indian retail, few companies such

as, Wal-Mart, USA; Carrefour, France; Metro, Germany; Tesco, UK; and Costco, USA show

greater interest. Wal-Mart, USA with the retail sales of $ 256.33 Billion as of 2003 is very

particular to enter India. In fact, it has already entered in B2B format of India in collaboration

with Bharti enterprises. Carrefour, France which is a global retailer with the sales of $79.80

Billion in 2003 shows interest in entering India. Metro, Germany which has already entered into

India in the cash and carry format, now much interested in getting into the Indian multi-brand

retail segment. Tesco, UK is already in touch with the Indian Government to enter into India.

Similarly, Costco of USA is also in touch with the government to get an entry into India.

ENTRY STRATEGIES, USED BY THE FOREIGN FIRMS TO ENTER INTO INDIA

This part of the paper analyses the entry strategies that have been already utilised by the

foreign companies to enter into India. Franchising:- In this mode, the international companies

give the right of using the name and technology to their local partners in the foreign markets and

in return, they collect the consideration of Royalty. Nike, Pizza Hut, Tommy Hilfiger, Mark &

Spencer and Mango are few brands which have utilised this mode. Manufacturing:- If a foreign

company sets up its own production and also has the permission to establish retail counters in



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India, it has utilised Manufacturing mode of entry. Bata India, Coca Cola India, Pepsi India and

Perfetti India are few examples for this mode of entry. Wholesale Trading:- entry permitted to

involve in cash and carry business in B2B market. Wal-Mart and Metro are good examples here.

Distribution:- In this case, the multi-national companies establish local distribution centres

through which they supply products to Indian retailers.

CONDITIONS ON 100% FDI IN SINGLE-BRAND RETAIL

Unlike FDI in Multi-brand retail, which faced a lot of resistance from the opponents and

some of the allies of the UPA Govt, FDI in Single-brand retail has been approved easily.

According to the amendment made in „Circular 2 of 2011 – Consolidated FDI Policy‟, FDI in

Single-brand retail trading would be subject to the following conditions:

1. Products to be sold should be of a „Single-brand‟ only.

2. Products should be sold under the same brand internationally i.e. products should be sold

under the same brand outside India as well.

3. „Single-brand‟ product retail trading would cover only products which are branded during

manufacturing.

4. The foreign investor should be the owner of the brand.

5. For any FDI beyond 51%, mandatory sourcing of at least 30% of the value of products sold

would have to be done from Indian „small industries / village and cottage industries,

artisans and craftsman‟. Small Industries would be defined as industries which have a total

investment in plant & machinery not exceeding US $ 1.00 million.

6. The application seeking permission from the government for FDI in retail trade of single-

brand should be submitted to the Secretariat for Industrial Assistance in the Department of

Industrial Policy and Promotion. The application will specifically indicate the product /

product categories which are proposed to be sold under single-brand. Any addition to the

product / product categories to be sold under single-brand would require fresh approval

from the government.

7. Applications would be processed in the Department of Industrial Policy and promotion to

determine whether the products proposed to be sold satisfy the notified guidelines, before

being considered by the FIPB for government approval.

This is a great announcement for many foreign brands which have already entered into India as

well as those who desire to enter (Like IKEA, GUCCI etc).

BENEFITS OF ALLOWING 100% FDI IN SINGLE-BRAND CATEGORY

There are certain benefits, identified by the researcher on allowing FDI in Indian single-

brand retailing. They have been detailed as follows:



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SUPPORTS THE GROWTH OF INDIAN SMALL INDUSTRIES: If the consumers in India

buy goods at foreign single-brand outlets, established in India and enjoy the shopping

experience, in reality, they would be actively contributing towards significant money transfer to

a multinational based out of the USA, which after retaining profits, would end up sending

majority of this money to China, where most goods are being manufactured. The government

appears to be cognizant of this very issue, which is why they proposed that at least 30 per cent of

the procurement of manufactured / processed products shall be from "small industries"

(presumably this refers to "small industries" in India). This aspect will lead to support the growth

of the small industries in the country.

SUPPORTS IMPROVED STANDARD OF LIVING: Allowing FDI in Indian Single-Brand

Retail will certainly bring in more sophisticated and luxurious goods and services to the country.

Availability of such goods backed with good promotional support will definitely motivate /

induce the Indian buyers to buy and consume them. It will be certain that the standard of living

of the consumers will be improved. In addition to the above, the people who shall be employed

in the multi-national retail enterprises will be paid attractive salaries and wages that will also

stand for their increased affordability. The organised retail also provides other add-on services

along with the products sold. All these new changes, that shall be resulted by allowing FDI in

single-brand retail will surely support improved standard of living.

ENHANCED COMPETITION AND REDUCED PRICES: Entry of the many other multi-

national corporations will obviously promise intensive competition between the different

companies offering their brands in a particular product market. When the manufacturing

companies will take efforts to increase their market share or to accomplish their other marketing

objectives, competition among them will be activated. Such a competition will result in the

availability of many varieties, reduced prices, and convenient distribution of the marketing

offers.

ENHANCED SHOPPING ENVIRONMENT AND EXPERIENCE: Consumers in India

mostly suffer from unhygienic experiences, erratic price and irregular availability in daily food

and FMCG products. Many established foreign retail giants that are known for low pricing,

creation of pleasant shopping environment, maintenance of hygienity, better customer care,

effective inventory management and storage facilities shall efficiently contribute for eradicating

the said problems and make the shopping very productive and a happy experience to the

customers in India.

EXPLOITATION BY THE MIDDLEMEN SHALL BE STOPPED: Small farmers are

suffering from the middlemen who are depriving them a fair price. The foreign retail giants shall

involve in direct manufacturing and sourcing of their market offer from Indian small industries

as well. These activities that shall result by allowing 100% FDI in single-brand retail of India

will certainly control the exploitation by middlemen.

AN OPPORTUNITY FOR INDIAN COMPANIES / RETAILERS TO LEARN ABOUT

NEW STRATEGIES: Countries like China, Vietnam and Chile that initially hesitated but have

since opened 100 per cent FDI in retail are today enjoying the investments, job creation,

introduction of technology and infrastructure. Consumers are benefiting from better pricing and

better quality of products. As per Chinese analysts, entry of Walmart and Carrefour has changed



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the way Chinese companies manage business. Local Chinese retailers like Shanghai Bailian

group, Suning, Gome and Dashang still dominate the retail market as they have quickly learnt

how to set up new supply chain systems. In fact, small retail outlets have risen in China from 1.9

million to 2.5+ million since 2004. US market researcher RNCOS has projected that Vietnam‟s

retail market sales will increase from $39 billion in 2008 to $85+ billion by 2012. In 2009 alone,

FDI in Chile was $6.21 billion. Similarly Argentina, Brazil, Indonesia, Malaysia, Russia,

Singapore, and Thailand have allowed 100 per cent FDI in multi-brand retail since 1990s.

According to a Columbia University study, 10 years after Indonesia opened FDI, small traders

continue to retain 90 per cent of the business. Therefore, the similar progress could be expected

in India also after 100% FDI in single-brand is allowed.

INTEREST OF THE SMALL TRADERS IS NOT AFFECTED BY THE FDI POLICY OF

THE GOVT.

The loudest and most vocal opponents of FDI in retail are small traders who say they will go

bust. They staged similar, violent protests when the first Indian retail chains, opened.

There have been many surveys over the years of the impact of organised retail on the small

trader with varying conclusions. Generally they agree that in the initial few months, small traders

in the vicinity of modern stores took a hit but once the novelty wore off, things went back to

earlier. In a quick straw poll, conducted by an organization in 4 major cities of the country, it

was found that the Indian „Dukaandaar‟ after almost a decade of organised retail is largely

unruffled. Therefore, the new FDI policy for single-brand retail shall not affect the small retailers

in a large scale.

CONTROLLING INFLATION: It could be understood that the large organised retailers could

directly purchase their merchandise from the producers at most competitive prices. The absence

of middle men will help the organised retailers to set competitive but yet profitable prices for

their market offer. This is one way by which inflation could be controlled efficiently.

ENCOURAGE THE MOBILISATION OF FOREIGNERS INTO INDIA: Allowing FDI in

Indian retailing will obviously encourage the mobilisation of foreigners into India. The

foreigners who come to India may prefer to buy the offers of both the domestic and multi-

national companies. Moreover, the availability of the global brands and better quality products

shall encourage many foreigners to come into India for the purpose of employment or doing

business in manufacturing and other sectors.

BOON TO HOSPITALITY AND TOURISM INDUSTRIES IN THE COUNTRY:

The foreign companies will bring to India all the products and services they market in their

countries, provided they are permitted. Such a situation will be a boon to the Indian tourism and

hospitality industries that helps them to attract many foreigners to visit India. Since all the usual

products and services what they consume in their home countries are made available here in

India, visiting India will not be a problem for them. Therefore, it could be well said that the

availability of the global brands is a boon to the Indian hospitality and Tourism Industries.

INCREASE IN EXPORTS FROM THE COUNTRY: When the foreign companies are

permitted in Indian retail market, they will contribute for increase in exports. Those foreign

companies may find sourcing in India. It is evidenced that Wal-Mart in 2006, sourced operations



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worth $600 Million in India. In 2010, it sourced goods worth $125 Million from the State of

Punjab alone. If similar sourcing of various other products, done in India by even few other

world giant retailers, the export from India will surely contribute for trade surplus. It is what has

happened in China after 1994.

EFFICIENT ENFORCEMENT OF LAWS: The presence of International companies in

Indian Retail will facilitate effective enforcement of Tax Laws and increase in tax revenue. Tax

evasion could be stopped when more of the retail is in organised format.

OVERALL GROWTH OF THE COUNTRY: FDI in Indian retail will obviously result in the

growth and expansion of the market and change in consumer spending pattern and also increase

in their spending that eventually lead to higher GDP in the country.

CREATION OF MORE AND BETTER EMPLOYMENT OPPORTUNITIES: The entry of

foreign companies into Indian Retailing will not only create many employment opportunities but,

will also ensure quality in them. This helps the Indian human resource to find better quality jobs

and to improve their standard of living and life styles on par with that of the citizens of

developed nations.

THREATS OF ALLOWING 100% FDI IN SINGLE-BRAND CATEGORY

While on one hand, India can enjoy a good number of benefits by allowing FDI in Indian

single-Brand retail, on the other hand it is a fact to be accepted that there are few threats also

arise. This part of the paper shall identify and detail such threats.

DOMINATION OF ORGANISED RETAILERS: FDI in single-brand retail will strengthen

organised retail in the country. These organised retailers will tend to dominate the entire

consumer market. Much organised retailers might even easily involve in syndication among

them on certain activities which will be against the interest of consumers and government as

well. This is another threat of FDI in multi-brand Retail in India.

INDIRECTLY LEADS TO INCREASE IN REAL ESTATE COST: It is obvious that the

foreign companies which enter into India to open up their malls and stores will certainly look for

places in the vantage points of the cities. There shall be a war for place, initiated among such

companies. It will result in increase in the cost of real estate in the cities that will eventually

affect the interest of the ordinary people who desire to own their houses within the limit of the

cities.

DISTORTION OF CULTURE: Though FDI in Indian retail will indirectly or directly

contribute for the enhancement of Tourism, Hospitality and few other Industries, the culture of

the people in India will slowly be changed that is not for good. The youth of India shall easily

and more interestingly imbibe certain aspects and lifestyles from the foreigners who would in

high number come into India. So, there is a danger of negative changes in the rich Indian culture.

PROMOTION OF UNHEALTHY COMPETITION AMONG THE ORGANISED

RETAIL PLAYERS: Since there will be tremendous growth of organised form of retail

especially through FDI in retail, it will definitely lead to stiff competition among the domestic



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and other companies. The resources that will be spent by the companies to compete with one

another will be eventually charged on the heads of the final consumers. This will make the

products costlier.

CREATION OF MONOPOLY IN THE LONG-TERM: The foreign companies, which shall

be permitted through FDI in retail, will initially spend huge sum of money to chase the domestic

companies out of business. It will not be affordable to any domestic company to face the

competition from the multi-nationals in the retail market. The foreign giants will offer the

products in the beginning at subsidized rates in order to capture a large market share. They can

sustain for a longer period even in loss, but the same is not possible for domestic companies in

retail. Once, the domestic companies are suppressed fully and sent out of the market, the foreign

companies will play like Monopoly in different locations of the Indian consumer market. This

will only result in the exploitation of the interest of final consumers.

NEGATIVE INFLUENCE ON THE TRADE BALANCE: As many foreign companies which

will involve in Indian Retail will source majority of their products globally and show interest in

investment in much profitable countries, it will only affect the trade of India negatively in the

long term.

DISTORTION OF URBAN DEVELOPMENT: The present slow and steady urban

development will be affected much by the entry of foreign companies in Indian retail. Those

companies will be interested in locating their stores and malls only within the limits of the cities.

They will never contribute for the structured development of the cities. Rather, they will

contribute for polluting the environment of the cities. This has been evidenced by allowing FDI

in automobile sector of India.

SUGGESTIONS

Many foreign companies have already entered into Indian market through the available

modes such as, Franchising and Exporting. They are much eager to change their entry to FDI that

would strengthen their operations in India. What is really needed for the growth of any country is

the promotion of consumption. Effective consumption will lead to greater economic growth of a

country. It is also not fair to deny the Indian consumers preferring better and modern products. It

is the belief of the researcher that allowing FDI in Indian single-brand retail by considering the

following suggestions will bring in more of benefits than threats to the country.

FDI should be initially allowed in less sensitive sectors and also in the sectors wherein

the domestic companies are established strongly.

In order to facilitate the establishment of infrastructure, FDI should be initially permitted

in Tier-II Cities of the country.

The new shopping centers, to be opened by the foreign companies should not add to the

congestion of the cities.

Since countries like Thailand and Malaysia have suffered badly out of the sourcing done

by Multi-nationals, permitted in the retail of their market, India should take a note of



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certain lessons from those countries while framing policies for allowing FDI in single-

brand retail.

Try to emphasise on more sourcing of products locally.

In order to avoid the foreign companies to make use of „predatory practices‟, allow the

companies to first set up stores in the form of super markets or departmental stores.

The government should take initiatives to improve the manufacturing sector that grows at

a very lesser rate of 3.7%. If the manufacturing is strengthened, the displaced employees

of the retail industry could be well accommodated there.

Indian government should bring out another condition by which the foreign retail giants

should require to spend a portion of their profit to take care of certain social welfare

activities such as, controlling pollution, generation and conservation of energy, etc.,

The conditions for allowing FDI in single-brand retail should also emphasise upon the

provision of employment opportunities to Indians that would enable India to reduce the

crucial unemployment problem.

CONCLUSION

It is obvious that India, being a member in WTO, it has to allow FDI in multi-brand retail

also. India could only delay the permission to FDI but not to disallow it. In this juncture, India

Should find out suitable ways as suggested in this paper to allow FDI so that it can enjoy more of

the benefits than threats. Even the threats of FDI could be handled properly if allowing FDI is

planned out very strategically. Since, many people involved in Indian retail traditionally shall be

displaced by the entry of foreign giants, the government should take efforts to strengthen the

industries like manufacturing which will accommodate those displaced employees. The advent of

FDI in retail sector is bound to pull up the quality standards and cost-competitiveness of Indian

producers in all these segments. It will benefit not only the Indian consumer but also open the

door for Indian products to enter the wider global market. Moreover, as any decision that affects

the consumption of the consumers will only stop the economic growth of a country, it is

concluded that the decision, taken by the Government to allow 100% FDI single-brand retail of

India is a boon to its economy.

REFERENCES

1. Annual Report, 2004, Wal-Mart Corp., www.walmart.com

2. Association of Traders of Maharashtra V Union of India, 2005 (79) DRJ 426

3. A.T.Kearney‟s (2007): Global Services Locations Index, www.atkearney.com

4. AT Kearney (2010): Expanding Opportunities for Global retailers-2010 Global retail

development Index, viewed on March 31, 2011

http://www.walmart.com/

http://www.atkearney.com/



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5. Bulbul Singh., Suvidha Kamra (2011), “FDI in Indian Retail Sector: Problems and

Prospects”, International Journal of Research in Commerce & Management, Volume No ,

Issue No: 1, pp 98-105

6. Business Line, „Never mind 100% FDI, foreign chains may not rush in‟, Jan 12, 2012, P-5

7. Chengappa, P.G, Achoth, Lalith, Mukherjee, Arpita, Ramachandra Reddy B.M. & Ravi,

P.C, “Evolution of Food Retail Chains: The Indian Context”, 5-6th Nov. 2003,

www.ficci.com

8. Chopra Komal (2011), “Wal-Mart - Can it succeed in India?”, Indian Journal of

Marketing,Vol:41,No.1,pp 56-61

9. “Does India need FDI”, The Business Standard, October 20,2005

10. “FDI in retail: More benefits than costs”, The Hindu Business Line, Nov 11, 2005

11. “FDI or not, Wal-Mart will enter India”, The Times of India, October 11, 2005

12. “Friend or Foe”, Business World, Cover story, October 24, 2005

13. Ganguly, Saby, Retailing Industry in India, www.indiaonestop.com

14. Guruswamy M.,Sharma K.,Mohanty J: FDI in India‟s retail sector-More Bad than Good?,

Viewed on March 25, 2011

15. Guruswamy M.,Sharma K.(2006): FDI in retail II- Inviting more trouble?, Viewed on

March 26, 2011

16. http://trak.in/tags/business/2012/01/10/100-fdi-single-brand-retail/

17. http://www.articlebase.com/investing-articles/foreign-direct-investment-in-retailing-in-

india-its-emergence-prospects-1354932.html

18. http://www.atkearney.com/index.php/publications/global-retail-development-index.html

19. http://www.india-briefing.com/news/india-100-fdi-single-brand-retail-5193.html/

20. http://indiatoday.intoday.in/story/small-traders-should-not-worry-about-fdi-in-

retail/1/168211.html

21. http://www.legalindia.in/foreign-direcr-investment-in-indian-retail-sector-%E2%80%93-an-

analysis

22. http://www.scribd.com/doc/15958632/FDI-in-Indian-Retail-beneficial-or-detrimental

23. “India among top nations to offer strong retail potential: PWC study, The Hindu Business

Line”, October 14, 2005

http://www.ficci.com/

http://www.indiaonestop.com/

http://trak.in/tags/business/2012/01/10/100-fdi-single-brand-retail/

http://www.articlebase.com/investing-articles/foreign-direct-investment-in-retailing-in-india-its-emergence-prospects-1354932.html

http://www.articlebase.com/investing-articles/foreign-direct-investment-in-retailing-in-india-its-emergence-prospects-1354932.html

http://www.atkearney.com/index.php/publications/global-retail-development-index.html

http://www.india-briefing.com/news/india-100-fdi-single-brand-retail-5193.html/

http://indiatoday.intoday.in/story/small-traders-should-not-worry-about-fdi-in-retail/1/168211.html

http://indiatoday.intoday.in/story/small-traders-should-not-worry-about-fdi-in-retail/1/168211.html

http://www.legalindia.in/foreign-direcr-investment-in-indian-retail-sector-%E2%80%93-an-analysis

http://www.legalindia.in/foreign-direcr-investment-in-indian-retail-sector-%E2%80%93-an-analysis

http://www.scribd.com/doc/15958632/FDI-in-Indian-Retail-beneficial-or-detrimental



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24. Iyengar, Jayanthi, China, India Confront the Wal-Marts, Online Asia Times,

www.atimes.com, January, 31,2004.

25. “Mixed reactions to FDI in Indian retail trade”, The Indian Express, September 16, 2005

26. “Pushing for retail FDI”‟ The Hindu Business Line, August 04, 2005

27. Review hints at FDI in retail, pp 1-15, Times of India, 14 Dec.2004

28. Ravi Shingari, Associate Director, KPMG.,The Hindu Business Brand Line, January 07,

2010, “Agenda 2010 for retail sector”.

29. Sapna Hooda, “A Study of FDI and Indian Economy”, January 2011.

30. Secretariat for Industrial Assistance, SIA (1999-2008): News letters, Annual Issue of

Ministry of Commerce and industry, Government of India, New Delhi.

31. Sengupta Debashish, Titus Ray (2011), “A Comparative study of Foreign Direct Investment

(FDI) in retail: A Boon or a Bane?”, Indian Journal of Marketing, Vol: 41,No.4,pp 15-20

32. Singhal, Arvind, Technopak Projections, 1999, Changing Retail Landscape, www.ksa-

technopak.com.

33. Singh Mandeep (2009): Foreign Direct Investment in retailing in India- its emergence &

prospects, viewed on April 15, 2011

34. Singhal, Arvind, “ A Strong Pillar of Indian Economy,” www.ksa-technopak.com

35. Vijay, Tarun, “Debate: Should FDI Be Allowed In Retail Branding?”, The Financial

Express, (Dec. 6, 2004)

36. “Wal-Mart to enter India in Bharti retail venture”, Unni Krishnan and Shailendra Bhatnagar,

Reuters, November 27, 2006

37. Why FDI in retail is good news : http://www.rediff.com/money/2005/jul/22spec1.htm

38. www.cpasind.com

39. www.cpim.org/upa/10272005_fdi_retail%20trade.pdf

40. www.ficci.com

41. www.indiaonestop.com

http://www.ksa-technopak.com/



news%20:%20http:/www.rediff.com/money/2005/jul/22spec1.htm

http://www.cpasind.com/

http://www.cpim.org/upa/10272005_fdi_retail%20trade.pdf

http://www.ficci.com/

http://www.indiaonestop.com/



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TRAINING NEEDS IDENTIFICATION OF NURSING STAFF –

A CASE STUDY OF A HEALTH CARE ORGANIZATION

DR. V.RAMA DEVI*; M.MALLIKA RAO**

*Professor,

KLU Business School, KL University, Vaddeswaram, Guntur (dt.) - 522502, Andhra Pradesh.

**KLU Business School, KL University,

Vaddeswaram, Guntur (dt.) - 522502, Andhra Pradesh.

ABSTRACT

The delivery of valuable health care depends on an expanding team of trained health care

professionals. As people are critical assets for the organization, the development of this asset is

essential for the continued health and prosperity of the organization. The training needs

assessment is a critical activity for the training and development function. It is against this

backdrop the paper is addressed to study training needs identification of nursing staff in a Health

care organization. The study was conducted through a survey among 110 nursing staff and 30

DMOs using structured questionnaires. The findings of the study revealed that the training need

gap is relatively more for enthusiasm in learning followed by Team Spirit and clinical skills. The

training need gap is the least for communication, followed by planning & organizing skills.

There should not be any compromise in the quality of services to be provided to the patients as

the health care organizations deal with the valuable life of the people and the need for trained

professionals in health care sector can hardly be overemphasized.

KEYWORDS: Health care, Training needs assessment, Training need gap, Training and

development.

______________________________________________________________________________

INTRODUCTION

Today the health care industry is considered one of the largest industries throughout the world. It

includes thousands of hospitals, clinics and other types of facilities which provide primary,

secondary and tertiary levels of care. Delivering this care requires health care workers,

including physicians, nurses, and other allied health professionals, as well as community-based

health workers especially to provide services in medically-underserved area.

There is increasing acceptance of the idea that value is the key to success for practically

all organizations, including health care organizations. Proponents of this idea emphasize that

only the delivery of superior value can create customer loyalty, and only loyalty can optimize

profitability. Promising value is what attracts customers and delivering value, is what keeps them

coming back. The delivery of valuable health care depends on an expanding interdisciplinary

team of trained health care professionals.

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

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

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

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

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

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

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




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



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SIGNIFICANCE OF TRAINING

With the increasing demand for improved productivity and quality of service in organizations,

strategies for improving the work performance of personnel have become increasingly important.

If an organization's greatest asset is its people, then the development of this asset is critical to the

continued health of the organization. The need for improved productivity has become universally

accepted and that it depends on efficient and effective training is not less apparent. Thus the role

played by staff training and development can no longer be over-emphasized.

Usually, before training or development programs are organized, efforts should be made through

individuals and organizational appraisals to identify the training needs. The training needs

assessment is a critical activity for the training and development function. It is against this

backdrop the paper is addressed to study training needs identification of nursing staff in a Health

care organization.

LITERATURE REVIEW

Organizations that develop and implement training without first conducting a needs assessment

may end up over training, under training, or just missing the point all together. Training can be

expensive; therefore it is critical that training be tailored to meet the specialized needs of the

organization and the individual trainees (Brown, 2002). Training needs assessment can provide

important data on the training needs of an organization. Salas and Cannon-Bowers (2001) felt

that needs assessment is the most important step in deciding who and what should be trained. In

addition to justifying the costs of training and providing important data for the organization,

taking part in a needs assessment can actually improve employee's (participants) satisfaction

with training.

Identification of training needs, design and implementation of training programmes, transfer of

training, and evaluation of programme benefits are key activities (Krishnaveni & Sriprabaa,

2008) in addition to studying general training variables such as types of training, selection of

trainees, selection criteria, evaluation instruments, etc. The Training Need Analysis is a

significant first step in the successful designing and implementation of training programmes.

TNA is a primary phase in the designing and development of training programmes (Dierdoff &

Surface, 2008). Conducting systematic needs assessment can significantly impact the overall

effectiveness and quality of training programmes (McGehee & Thayer, 1961).

In a training needs analysis for a specific company employee, the person conducting the analysis

(who will usually be a qualified trainer) should be able to describe what that employee is able to

do in the job in sufficient detail to be understood by all those concerned with

the training process, such as the trainees themselves, the eventual trainers and the company

management (Freeman, Jean M, 1993.) Staff working in the companies sometimes requires

individualized training to accomplish their duties more effectively. The form and content of any

tailor made training for them will depend on their special training needs. To determine

those needs, an analysis should be made in each case of the tasks that the person concerned

already carries out in his or her work, and the additional skills and knowledge required to reach a

higher standard of work. The gap between the two can then be filled by appropriate training.

(Cellich, Claude; Roberts, Alan, 1993)



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OBJECTIVES OF THE STUDY

1. To highlight the significance of training to the organizations

2. To study the importance of training needs assessment

3. To identify the training needs of nursing staff in a health care organization

METHODOLOGY

In order to identify the training needs of nursing staff two structured questionnaires – one for the

nursing staff and another for DMOs -were designed and administered. The inputs for preparing

the questionnaire were taken from the following:

1. The performance appraisal format of the nursing staff from the department of HR.

2. The observations being made on the main points suggested by the trainer.

3. Certain studies that were conducted in the same area.

One questionnaire was administered to a sample of 110 nursing staff out of 600 population. The

sample was chosen using stratified random sampling technique. Another questionnaire was

administered to a sample of 30 DMOs.

RESULTS OF THE STUD

Nursing and DMOs responded on a scale of 7-1. The responses of nurses indicate the perception

of their skills whereas the responses of DMO’s indicate their perception of skills possessed by

nurses.

LEVEL OF PATIENT CARE

The patient is the centre of the nurse's concern. Nurses care for patients continuously, 24 hours a

day. They help patients to do what they would do for themselves if they could. Quality has

become a major focus within health care, especially in the areas of quality assurance and patient

safety. As this focus increases, nurses' involvement in quality improvement activities is likely to

expand in coming years. The patient care in the present study includes different dimensions like

to listen attentively to the patients, being pleasant and polite with the patients, establishing a

relationship with patients, assessing patient’s physical needs, bed side manners, adherence to

doctors’ orders and handling emergencies.

It is observed that 14% of the nursing respondents perceived that their level of patient care skill

is outstanding and remaining respondents perceived as very good/good. Whereas DMOs

perceived that the nursing staff have good/very good patient care skills. Though it is a healthy

sign, there is always scope for strengthening the skill as patient care is the core function of the

nurses.



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ADMINISTRATIVE DUTIES:

The nursing staff also perform certain administrative duties like inputting data into written or

computerized records, using technical equipment and undertake other administrative duties.

Though performing administrative duties is not the main part of their job, still they need to be

proficient in these duties. Majority of the nursing respondents (70%) felt that their skill in

discharging administrative duties is only good. It appears that there is some scope for

improvement in this skill which can be taken care of by the training programme. DMOs feel that

the nursing staff are either good or very good in performing the administrative duties.

MANAGERIAL/SUPERVISORY SKILLS:

The staff very often needs to train junior staff or students and also feel responsible and

accountable. They should also have managerial/supervisory skills. 27% of the nursing

respondents felt that their managerial/supervisory skills are outstanding while DMOs did not

perceive them to be outstanding in this dimension. Rest of them have perceived to be either very

good /good in this skill.

CLINICAL SKILLS:

Clinical skills include interpreting patient data, interpreting results from clinical investigations,

undertaking clinical examination of patients and writing clinical, shift and other reports. Majority

of the nursing respondents and DMOs perceived that the clinical skills are good but not

outstanding. This area deserves attention because the clinical skills are very important for the

nursing staff in order to perform their functions effectively.

PLANNING & ORGANIZING SKILLS

We need to be planned and organized to produce good results. It applies in any profession. The

dimensions that are included in planning & organizing skills are prioritizing work according to

patient's needs, organizing skills, cost awareness, having consciousness and planning patient’s

discharge. The level of planning and organizing skills of the nursing respondents are considered

to either very good or good by majority of both nursing and DMO respondents.

ENTHUSIASM IN LEARNING

Knowledge has no bounds. Learning is a continuous process. People who are enthusiastic

learners can perform well and grow fast. Enthusiasm in learning here includes taking initiative in

learning, participation in academic program and ward teaching. The observation is that majority

of the nursing and the DMO respondents feel that their enthusiasm in learning is good but not

outstanding.

PERSONAL BEARING

The importance of personal bearing in nursing profession cannot be undermined. They need to

properly groom themselves, have positive attitude and pleasant manners, disciplined in work,

maintain punctuality and maintain regularity. For nursing professionals personal grooming is



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very important. Surprisingly neither nursing respondents nor the DMO respondents perceived

them to be outstanding in personal bearing.

COMMUNICATION

The nursing staff should be able to communicate well with patients, attendants, superiors and

other staff. Many times the problem arises because the nursing staff fails to understand what the

patient or the attendant is communicating and vice-versa. This is a major problem. The nursing

staff should have good communication skills and have command over language. A significant

percentage (41%) of the nursing respondents felt that their communication skills are outstanding.

But none of the DMOs perceived the same. They considered the nursing staff communication

skills to be either very good or good.

TEAM SPIRIT

The order of the day is team work as it will have synergy. People can perform better as a team.

One needs to be a team member and should also know how to lead the team in certain situations.

The perception of team spirit is just similar to communication skills. Many of the nursing

respondents considered themselves to be outstanding team players but the perception is not the

same by DMOs. They considered them to be just good team players.

TRAINING NEED GAP

Training need gap is calculated not just based on the skills possessed by the employees. It takes

two dimensions. One –the importance of a skill for successful performance of the job and second

the extent to which the employee has that skill. Certain skills are more important when compared

to others. If the skill is more important and the employee does not have that skill, the training

need gap will be more. On the other hand if the skill is less important and the employee does not

have that skill the training need gap will be less. The respondents were asked to rate the

importance of a skill and the extent to which they have that skill. Based on this, the training need

gap for different skills is calculated and the mean scores are presented in Table 1.



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TABLE 1

MEAN SCORES OF TRAINING NEED GAP OF DIFFERENT SKILLS

Sr.No. Skill/Knowledge Training need gap mean

score

1 Patient care 0.88

2 Administrative duties 0.69

3 Managerial/supervisory skills 0.76

4 Clinical skills 1.01

5 Planning & Organizing skills 0.58

6 Enthusiasm in learning 1.20

7 Communication 0.50

8 Personal bearing 0.76

9 Team Spirit 1.06

(Source: Survey)

It is observed from the table that the training need gap is not much for all the skills. Of all the

skills, the training need gap is relatively more for Enthusiasm in learning followed by Team

Spirit and clinical skills. These areas need more attention from training point of view. The

training need gap is the least for communication, followed by planning & organizing skills.

CONCLUSION

Training helps the employees to equip themselves with better knowledge and skills. The training

needs for the nurses have to be properly identified and they could be sent to some workshops and

increase their awareness on the new updates in the technology in the field of medicine. They

should also be trained internally. There should not be any compromise in the quality of services

to be provided to the patients as the health care organizations deal with the valuable life of the

people and the need for trained professionals in health care sector can hardly be overemphasized.

REFERENCES

1. Brown, J. (2002). Training needs assessment: A must for developing an effective training

program. Public Personnel Management, 31(4), p.569.

2. Cellich, Claude; Roberts Alan (1993). Analyzing export training needs for company staff.

International Trade Forum. 2, p 20.

http://web.ebscohost.com/ehost/viewarticle?data=dGJyMPPp44rp2%2fdV0%2bnjisfk5Ie45PFKr6eyS7Gk63nn5Kx95uXxjL6nsEewqK1KrqevOK%2bouEyvsLNInrfLPvLo34bx1%2bGM5%2bXsgeKzq0q1qLNLtaawS6Ti34bls%2bOGpNrgVeDp5j7y1%2bVVv8Skeeyzt0yup7BIrq%2bxSaTc7Yrr1%2fJV5OvqhPLb9owA&hid=123



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3. Dierdoff, C. Erich, & Eric A. Surface (2008). Assessing training needs: Do work

experience and capability matter? Human Performance, 21, pp 28-48.

4. Freeman, Jean M. (1993) Human resources planning -training needs analysis.

Management Quarterly, 34(3), p32.

5. Krishnaveni, R., and Sripirabaa, B. (2008).Capacity building as a tool for assessing

training and development activity: an Indian case study. International Journal of Training

and Development, 12(2s), pp121-134.

6. McGehee, W., & Thayer, P.W. (1961). Training in business and industry. Newyork:

Wiley publications.

7. Salas, E., & Cannon-Bowers, J. A. (2001). The science of training: A decade of progress.

Annual Review of Psychology, 52(1) , pp 471-499.



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4

AN EXPLORATORY STUDY ON MEASURING IMPACT OF INTERNET ON

STUDENTS’ ACADEMIC LIFE OF S.P. UNIVERSITY

RINA DAVE*

*Faculty, Semcom,

Vallabh, Vidyanagar.

ABSTRACT

The rapid growth of end-user computing, low-cost communications and network software now

exert a powerful influence on how students use and communicate information. This research

survey was conducted to find habits of Internet users at the S.P. University of V.V. Efforts are on

to find the search requirements related to the use of the Internet information. Data were collected

by using a questionnaire and follow-up interviews with Internet users from students. It is

revealed that the students are getting quality information through the Internet. They use the

Internet in different ways, such as accessing to online journals, downloading software or text,

chatting, discussion, E-mail services and for finding related references. It was unveiled that the

Internet services are normally used for projects. Also it is observed that the Google and Yahoo

search engines are more widely used compared to other search engines. The analysis reveals that

majority of Internet users always find useful information on the Internet and believed that quality

information is available on the Internet and finally, the studied population use print, online and

offline form of information for updating their subject knowledge.

______________________________________________________________________________

INTRODUCTION

Though college students as a group have grown up using tools such as instant messaging, chat

rooms and electronic mail, little has been done to determine academic effect, on college students.

Is it readily used or do many students depend on the more traditional method of communicating

over long distances—the telephone? Has the Internet and electronic mail helped improve social

connectedness for college students? Are college students more comfortable with the Internet than

others? What can be learned from college students’ Internet use about the shape of Internet use to

come? The Internet plays a crucial role in the access of information resources. "Sources of

information and other opportunities available via the Internet are increasing exponentially. This

comes with the steady increase in Internet use for education" (Edwards & Bruce, 2002) and

research. Also, with the growth of information on the Internet and the development of more

sophisticated searching tools, there is now the more likely possibility of finding information and

answers to real questions. But, within the morass of networked data are both valuable nuggets

and an incredible amount of junk (Tillman, 2003).

When you are looking for information, where is a better place to go than a library? The Internet

has some incredible electronic libraries ready for you. On a small screen of the personal

computer this digital world of the library is available for users. This library in terms of digital

format consists of various electronic resources, such as electronic books, electronic journals, and

http://www.webology.ir/2005/v2n1/a10.html#4




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electronic reports. These resources are available either in CD-ROM format or available online on

the Web and constitute the core of the electronic library collection. A new class of digitized

documents has been added to the electronic resources category, comprising those documents

either originally published in print or other formats converted into the digital format.

Many host servers offer free space to web sites; (many of them are free of cost and) government

web sites are often a treasure house for those people who are seeking reports and policy papers.

Now most of the popular newspapers and magazines have their E-versions providing full text of

news items and feature articles (Patil et al., 2004). As a result, it has become difficult to decide

about the quality and authenticity of such information available in digital form. In addition, a

user or information searcher needs to have basic skills in finding relevant information in the

Internet's ocean of information. "Web search services are now a major source of information for

a growing number of people. We need to know more about the information searching habits by

users to improve the effectiveness of their information retrieval" (Spink, Bateman, & Jansen,

1999).

In the light of this study, efforts are on to find the search requirements, related to the use of the

Internet information.

LITRECTURE REVIEW

Information searching habits of Internet users is multi-faced and the literature available is

extremely broad ranging. An attempt has been made to cover number of works that go beyond

discussions of the information seeking behavior itself and its direct applications to closely related

topics such as Internet use. This broad review also includes topics like Web searching, search

engines, the Internet resources, evaluation of information quality, electronic media, and Web

information retrieval.

Biradar (2006) conducted a study on internet usage by the students and faculties in Kuvempu

University. The results indicated that 42.1 % Students use internet twice a week and 31.25%

faculties use it every day. The majority of students as well as faculties use internet for study/

teaching purpose. The favorite place for using internet is library followed by commercial places.

A thumping majority of respondents are satisfied with internet sources and services.

Mishra, Yadav and Bisht (2005) conducted a study to know Internet utilization pattern of the

undergraduate students of G B Pant University of Agriculture and Technology, Pantnagar. The

findings of the study indicated that a majority of the students (85.7%) used the Internet. Out of

the Internet users 67.7% were male students and 32.3% female students. The findings of the

study also showed that 61.5% of the males and 51.6% of the females used Internet for preparing

assignments. A majority of the respondents i.e. 83.1% male and 61.3% female respondents

indicated that they faced the problem of slow functioning of Internet connection.

Kumar and Amritpal Kaur (2004) studied the use of internet by teachers and students in Shaheed

Bhagat Singh College of Engineering & Technology, Ferozepur (Panjab). They found that 46.7%

teachers and 36.7% students’ daily use the internet. About 90% respondents use internet at their

college. Yahoo is found as the favorite search engine. Only 31.7% respondents were fully

satisfied, whereas 36.7% were partially satisfied with internet facilities.





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Chang and Perng (2001) carried out a research work on "Information search habits of graduate

students at Tatung University". The purpose of their study was to investigate the information

requirements and search habits of graduate students at Tatung University in Taipei City, Taiwan.

They show that 90% of the subjects conducted information searches using outside sources in

addition to the university library. They also reported making extensive use of the Internet in the

recent past, mostly World Wide Web-based databases, electronic journals, and search engines.

Dong work emphasized the evaluation of the Internet. He reported the examination of the using

the Internet resources and the evaluation of their usefulness from the Chinese students' and

academics' point of view (Dong, 2003). Hölscherl and Strube (2000) conducted a study about

Web search behavior of Internet experts and newbies. They found the differential and combined

effects of both Web experience and domain knowledge. Spink and Jansen (2004) discuss the

changes in Web search trends from 1997 to 2003 that explored how people search the Web. They

show some patterns and trends in general Web searching. In summary, most Web queries are

short, without query reformulation or modification, and have a simple structure.


OBJECTIVES OF THE RESEARCH STUDY

The goal of this study was to learn about the Internet’s impact on college students’

daily Lives.

To determine the impact of that use on their academic and social routines.

To find the satisfaction derived by the researchers with the Internet and electronic

media.

To find out the importance of electronic information;

SOURCES OF INFORMATION

A major portion of secondary data was collected form articles and research paper that have been

published in various sources like magazines, reputed research journals and business newspapers.

COLLECTION OF PRIMARY DATA

The necessary primary data were collected only from students of different streams of various

institutions of S.P.University.

REPRESENTATIVE SAMPLE

The respondents selected in the research study were only students who have been studied in

different streams of S.P.University.






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RESEARCH TOOL

The researcher has used structured non-disguised questionnaire supported with sampling media

in form of personal interviewing technique.

DATA ANALYSIS AND INTERPRETATION

A BRIEF ABOUT QUESTIONNAIRE

A structured questionnaire was specifically used which covers 11 different questions. In all, 100

questionnaires were distributed among students of S.P.University V.V.Nagar. The researcher has

mainly provided this questionnaire through personal interviews. Finally, 75 responses were

considered for the purpose of data analysis and interpretation. The collected data were edited. It

has been presented in tabular form to provide comprehensive result on research study.

(REFER ANAXTURE I)

The goal of this study was to learn about the Internet’s impact on college students’ daily lives,

and to determine the impact of that use on their academic and social routines.

TABLE – 1: FIRST TIME USERS OF INTERNET

The study indicated that the 79 per cent of students started using internet after completing 10th

Standard followed with 21 per cent after joining college.

TABLE – 2: REASONS FOR USE OF INTERNET

Score Total

1 2 3 4 5

e-mail 26(37.14) 18(25.71) 3(4.29) 13(18.57) 10(14.29) 70

Communicate

socially

1(1.43) 10(14.29) 28(40.0) 18(25.71) 13(18.57) 70

Entertainment 14(20.0) 14(20.0) 16(22.86) 16(22.86) 10(14.29) 70

Frequency Percentage

After completing 10th std. 53 79.10

After joining college 14 20.90

Total 67 100



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Web surfing 10(14.29) 23(32.86) 9(12.86) 16(22.86) 12(17.14) 70

Chatting 19(27.14) 5(7.14) 14(20.0) 7(10.0) 25(35.72) 70

The above Table-2 revels that 38 per cant of respondents use Internet for the electronic mail

while only 1 per cent of respondents access internet to communicate socially i.e. with relative

and family members and 20 per cent of respondents reported that they use it for Entertainment

mostly. Only 15 and 27 per cent of respondents agreed that most primarily the use if Internet is

web surfing and chatting respectively.

TABLE – 3


Yes 67 95.71

No 3 4.29

It was found that 96 per cent of respondents believe that Internet has enhanced their academic

experience.

0

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10

15

20

25

30

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TABLE – 4: ACCESS OF INTERNET FOR ACADEMIC PURPOSE

Score Total

1 2 3 4 5

Research

work

43(61.43) 12(17.14) 7(10.0) 3(4.29) 5(7.14) 70

On line

journal

3(4.29) 22(31.43) 15(21.43) 18(25.71) 12(17.14) 70

Download

software

12(17.14) 7(10.0) 26(37.14) 10(14.29) 15(21.43) 70

Download

text

8(11.43) 16(22.86) 15(21.43) 22(31.43) 9(12.86) 70

Discussion 4(5.72) 13(18.57) 7(10.0) 17(24.29) 29(41.43) 70

The above study reveals that 61 percent of respondents use internet for research work followed

with 17 per cent had given second important reason for Net using. While use of Internet for

referring online Journals and magazines 4 per cent of respondents gave first important reason 31

per cent had given second stimulating factor of it.17 and 11 percent of respondents reported that

they Internet mostly for Downloading Software and Text. 4 per cent of them reported that the use

of internet for online discussion as primary reason for the access of Internet.

TABLE – 4: COMMUNICATION WITH FACULTY MEMBERS


Face to face 57 81.43

Via e-mail 9 12.86

Never communicated through e-mail 4 5.71

Total 70 100.0

Majority of respondents responded that mainly they with faculty members face to face followed

with 13 per cent agreed e-mail is the is means of communication.



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TABLE – 5 : INTERNET AS SOURCE OF INFORMATION


Use internet more than library 37 52.86

Use internet and library same 21 30.0

Use internet less than library 12 17.14

The revealed that student 53 per cent of students use Internet as source of information more than

library while 30 per cent use equal to library.

TABLE – 6: FREQUENCY OF USE OF INTERNET


1-2 hours in a day 34 48.57

4-7 hours in a week 36 51.43

The table shows that 49 per cent of respondents spent 1-2 hours daily on Internet for various

purposes.

TABLE – 7: MODE OF COMMUNICATION

Score Total

1 2 3

Cell phone 54(77.14) 3(4.86) 13(18.57) 70

Telephone 9(12.86) 40(57.14) 21(30.0) 70

e-mail 7(10.0) 27(38.57) 36(51.43) 70

It was found that 77 per cent of total respondents communicate threw with Cell Phone while for

13 per cent Land Line Telephone was the important means of communication.



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TABLE – 9: INTERNET ACCESS


Cyber cafes 33 47.14

Home 26 37.14

Through the facility at the college 11 15.72

Total 70 100.0

Table 9 shows that 11 users (16 percent) access the Internet through the facility in the Faculty. 26

(37 percent) respondents access it at home, 33 (47 percent) respondents access the Internet at

cyber cafes.

TABLE – 10: SEARCH ENGINE

Score Total

1 2 3

Yahoo 28(41.18) 29(42.65) 13(16.18) 70

Google 33(47.14) 30(42.86) 7(10.0) 70

MSN 7(13.73) 30(21.57) 33(64.71) 51

Other 3(13.64) 0(0.0) 19(86.36) 22

0

5

10

15

20

25

30

35

Yahoo Google MSN Other

1

2

3



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The above table gives the details about the usages of search engines mostly used by the students.

The findings revel that Yahoo and Google are the most popular and widely used

TABLE-10: ACCESSIBILITY OF INTERNET


Always comfortable with

internet

57 81.43

Always finds useful

information

57 81.43

Always finds answers to

quires

43 61.43

Internet has replaced the print

media

37 52.86

Best source of information 62 88.57

Subject search sometimes

problematic

51 72.86

Useful information on general

topic

64 91.43

Here a series of questions were framed to find out the Internet usefulness and quality

information. It is shown in the below mentioned tabulated format.

The analysis reveals that 57 (81 per cent) respondents always find useful information on the

Internet, 43 (61 per cent) respondents indicated that research-oriented information is available on

the Internet. 37 (53 percent) respondents agreed that electronic media replaced the print media.51

(73per cent) indicated subject search sometimes problematic whereas 64 (91.43) found that

useful information on general topics

RESEARCH FINDINGS

The goal of this study was to learn about the Internet’s impact on college students’ daily lives,

and to determine the impact of that use on their academic and social routines.

They must learn to integrate the Internet into new forms, patterns and habits of communication.

It is not surprising to find that college students use the Internet more for e-mailing and

Entertainment. In regard to academic work, the Internet has introduced considerable change for

college students. Today’s students still deal with professors in the classic way: face-to-face. And

the Internet is often used to supplement those encounters. In our own research, an overwhelming



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number of college students reported that the Internet, rather than the library, is the primary site of

their information searches.

Nowadays, the Internet has changed the way students use the library. Students tend to use the

Internet prior to going to the library to find information. Students spend a good portion of their

total Internet time on communication. The study revels that many college students spend

between one and two hours online per daily. Majority of students access Internet at cyber cafe

and at home. The findings revel that Yahoo and Google are the most popular and widely used for

the reasons like they are fast in access; Information contained on these search engines is updated

regularly; Links are provided to web sites in the world. Majority of students find comfortable

with Internet and believe threw Internet are able to find useful information .It is also been proved

that Internet is supplementing Print media.

CONCLUSION

Furthermore, unlike the general public, college students have mitigating circumstances that

directly affect how they use the Internet to communicate with others. College students are

expected to interact with professors and fellow students at a different level from what they had

previously experienced

The Internet provides a wealth of information. The students are using the Internet significantly

and it occupies an important place among various information sources. It is widely used by the

students for their research purposes and it plays an active role in searching of information.

Students still depend on print media. Electronic media has not replaced print media. The students

need to get skills for searching on the Internet. The information searching practice needs a

methodical training to gain the quality in information searching. Library professionals, on the

campus, may take initiatives to improve the information searching on the Internet process among

Internet users or digital resources users.

REFERENCES

Asemi A. Information searching habits of Internet users: A case study on the

Medical Sciences University of Isfahan, Iran. Webology, 2(1).

http://www.webology.ir/2005/v2n1/a10.html

Asemi, A. (2005). Familiarity and use by the students' of digital resources available in the

academic libraries of Medical Science University of Isfahan (MUI), Iran. International

CALIBER 2005: Multilingual Computing and Information Management in Networked

Digital Environment, February 3-5, Ahmedabad, India: INFLIBNET Centre with Cochin

University of Science and Technology (Kochi).

Chang, N.C., & Perng, J.H. (2001). Information search habits of graduate students at

Tatung University. International Information & Library Review, 33(4), 341-346.

Dong, X. (2003). Searching information and evaluation of Internet: a Chinese academic

user survey. International Information & Library Review, 35 (2-4), 163-187.




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Edwards, S. L., & Bruce, C. S. (2002). Reflective Internet searching: an action research

model. The Learning Organization: An International Journal, 9(4), 180-188.

Hölscherl, C. & Strube G. (2000). Web search behavior of Internet experts and newbies.

Computer Networks, 33 (1-6), 337-346.

Kalichman, S.C., Weinhardt, L., Benotsch, E., DiFonzo, K., Luke, W., & Austin, J.

(2002). Internet access and Internet use for health information among people living with

HIV-AIDS. Patient Education and Counseling, 46(2), 109-116.

Mishra (O P), Yadava (Neelam) and Bisht (Kamini). Internet Utilization Pattern of

Undergraduate Students. University News. 43(13); March 28-03 April 2005; pp. 8-

12.Robinson (Jannie W). Internet Use among African-American College Students: An

Exploratory Study. Retrieved from http://wwwlib.umi.com/ dissertations/fullcit/3156015.

Patil, S.K. et al. (2004). Nature and quality of digital information hunting: A case study

of the University of Pune. November 24-26. Pune, India: INFLIBNET.

Rajeev Kumar and Amritpal Kaur. Use of internet by Teachers and Students in

Shaheed Bhagat Singh College of Engineering and Technology: A Case study.

Journal of Library and Information Science. 29(1&2); June & December 2004;

pp. 81-94.

Spink, A., Bateman, J., & Jansen, B. J. (1999). Searching the Web: a survey of EXCITE

users. Internet Research: Electronic Networking Applications and Policy, 9(2), 117-128.

Spink, A., & Jansen, B. (2004). A study of Web search trends. Webology, 1(2). Article 4.

Retrieved March 28, 2005, from http://www.webology.ir/2004/v1n2/a4.html

Biradar (B S), Rajashekar (G R) and Sampath Kumar (B T). A study of internet usage by

students and faculties in Kuvempu University. Library Herald. 44(4); December 2006.

pp 283-294.

Xie (Iris), H. (2004). Online IR system evaluation: online databases versus Web search

engines. Online Information Review, 28(3), 211-219.

http://wwwlib.umi.com/




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ANAXTURE - I

WELCOME TO QUESTIONNAIRE

Q.1 When you started using Internet? [Please Put √]

1] After completing 10th Standard. ______________

2] After joining college.

______________

Q.2 Why do you access Internet [Give 1 to 5]

A] e-mail ______________

B] Communicate socially ______________

C] Entertainment ______________

D] Web surfing ______________

E] Chatting

______________

Q.3 Has the Internet communication enhanced your

academic experience?

A) Yes ________ B)__________

[Please Put √]

Q.4 For the academic purpose , you use Internet for, [Give 1 to 5]

A] Research Work ______________

B] On line Journals ______________

C] Download Software ______________

D] Down load Text ______________

E] Discussion

______________

Q.4 How do you contact with your professors? [Please Put √]

A] Face to face ______________

B] via e-mail ______________

C] Never communicated through e-mail ______________

Q.5 Internet as source of information.

A] Use Internet more than library

[Please Put √]

______________

B] Use Internet and library about same ______________



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C] Use Internet les than library ______________

Q.6 How much time you spend with Internet for

academic purpose?

[Please Put √]

A] 1-2 hours in a day ______________

B] 4-7 hours in a week ______________

Q.7 How do you communicate with your friends? [Give 1 to 3]

A] Cell Phone ______________

B] Telephone ______________

C] e-mail

______________

Q.8 How frequently do you look for e-mail? [Please Put √]

A] Daily ______________

B] Once in a week ______________

C] Twice in a week

______________

Q.9 From where do you access Internet? [Please Put √]

A] Cyber Cafes ______________

B] Home ______________

C] Through the facility at the college

______________

Q.10 Which search engine do you use normally? [Give 1 to 3]

A] Yahoo ______________

B] Google ______________

C]MSN ______________

D]Any other

______________

Q.11 Please put √ on following Statements

A] Always comfortable with Internet. Yes_______ No________

B] Always finds useful information. Yes_______ No________

C] Always finds answers to quires. Yes_______ No________



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D] Internet has Replaced the Print media Yes_______ No________

E] Best source of information Yes_______ No________

F]Subject search sometimes problematic Yes_______ No________

G]Useful information on general topic Yes_______ No________

PERSONAL INFORMATION

Name of the Student: _________________________

Course: __________________ Class: ________________

Age: __________yrs.

Residential Address: _________________

_________________

__________________



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8

GREEN PRODUCT LIFE CYCLE TO CALCULATE THE GROSS

DOMESTIC PRODUCT POLLUTION OF A COUNTRY

S. RAJASHEKHAR*

Ph.D. Scholar in Business Management,

Department of Business Management,

Osmania University, Hyderabad, India.

ABSTRACT

Gross domestic product is an indicator of economical growth of the country. This production has

creating the pollution problems along with the economical growth. There is no proper calculation

methods are there to measure the pollution. Green product life cycle is a tool to measure the

gross domestic product pollution. This is an effort to measure the pollution foot prints of an each

product from the productions stage to destruction stage of the product. Calculation of pollution

foot prints of product and per factory is enabling the organizations to improve their

organizational efficiency, to change in employee attitude to adopt an eco friendly processes and

methods.

This article deals with the social responsibility of business people in economical development

and as well as reducing the pollution. This is a proactive strategy of an organization to create the

trend towards the responsible business practices. Measuring countries gross domestic product

pollution is a proactive strategy and global responsibility of countries to meet legal imposition

of United Nations of Organization by 2020.

KEYWORDS: Gross domestic product pollution, social responsibility of business leaders,

proactive strategy, U.N.O. legal implications, global responsibility of countries.

______________________________________________________________________________

INTRODUCTION

Go green is the trend created by customers and organizations by preferring green products,

process and services to protect themselves from pollution, and to protect the bio diversity. In this

regard there is a mutual responsibility on all of us to discover and use the new eco- friendly

technologies or products to avoid the environmental problems like global warming, air, water,

land, space and sound pollution and its impact on health and other natural calamities etc. Product

manufactured in the hands of manufacturer and it is sold by business man to the market or a

product can be preferred by consumer according to his preferences product manufactured and

send to him by organizations.

Due to change in the customers preferences from non eco friendly to eco friendly products,

organizations has to review their existing concepts and strategies for sustainable business

growth.



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ENVIRONMENTAL PERSPECTIVE OF PRODUCT LIFE CYCLE

The green product life cycle approach deals with the all phases from raw material collection,

production process, package, distribution, consumption, wastage, recycle, reuse, and remove of

product with an environmental perspective. All these stages pollution should be measured. This

measurement gives the pollution emissions per unit of the product and to classify the products in

to various categories.

PHASES OF GREEN PRODUCT LIFE CYCLE TO CONSTRUCTING POLLUTION

EMISSIONS SCALES:

Pollution foot prints by extraction of raw material (direct or indirect pollution)

1. Pollution foot prints by Production Process

2. Pollution foot prints by package

3. Pollution foot prints by distribution

4. Pollution foot prints by consumption

5. Pollution foot prints by wastage

6. Pollution footprints by recycle

7. Pollution footprints by final removal/disposal of product.

IMPACT OF PRODUCT’S POLLUTION ON PUBLIC HEALTH AND BIODIVERSITY

1. Genuine green product’s impact: there is zero impact on bio diversity and on public health.

2. Semi green product’s impact: these products affect on public health and environmental

problems but these are the alternatives to the non green products. The impact is very high

compare to genuine green products, and impact is very less compare to non green products.

3. Non green product’s impact: these category products are very harmful to public health with

its product life cycle stages pollution. Air pollution is impact on lungs and causes to breathing

related products.



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We need doctors for environmental protection to maintain biodiversity of the globe. To reduce

the product pollution for public health and for sustainable business growth is the global

responsibility of the country.

MEASURING AND DECIDING THE POLLUTION STANDARD PER UNIT OF

PRODUCT OR FACTORY

The total number of products produced divided by the total pollution will give the product

pollution per unit.

Total pollution emissions

Per unit of product pollution = ------------------------------------------- (1)

Total number of products produced

CALCULATING THE FACTORY POLLUTION

To calculate the factory pollution requires calculating all the phases from raw material collection,

sources of raw material and production processes of production.

Total pollution emissions

Raw material pollution = ------------------------------------------- (2)

Total quantity of raw material used

If raw material is a paper then counting the number of trees cutting to produce a product and the

pollution increased by absence of those trees to be calculated and counted in the factory

pollution. Taking steps to develop an alternative eco-friendly material to replace the trees raw

material.



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In case of combustion pf raw material the air pollution is calculated.

Total air/water/sound/land/ other pollution emissions

Factory processes pollution = ---------------------------------------------------------------- (3)

Total number of products produced.

Total pollution emissions - total pollution reduction activities

Factory pollution = ------------------------------------------------------------------------ (4)

Total number of products produced.

Total pollution emissions are may be air pollution, water pollution, land pollution, sound

pollution and pother environmental pollutions.

FACTORY POLLUTION MEASUREMENT – AND ITS IMPORTANCE EMPLOYEE

ATTITUDE

Factory pollution measurement- to increase organizational efficiency

To reduce single unit product pollution

To adopt the clean technologies

As a proactive strategy for sustainable business growth

To attract the investors

To eco- friendly economic development

To identify the major pollution based companies and making responsible for their chief

executive officers Taking the measures to reduce the pollution for environmental justice

Accepting the pollution footprints by organizations, people, governments and customers is the

first step to eradicate the pollution foot prints towards environmental justice.

This approach helps the government to take decisions towards green product developments to

reduce the pollution. Green tax should be charged o non green products and on organizations.

From these taxes green budget separately announced allocated and spend the funds for

environmental protection and biodiversity. If carbon credits helps to eradicate the pollution then

only useful.

CALCULATING THE COUNTRY’S GROSS PRODUCT POLLUTION OR GROSS

DOMESTIC PRODUCT POLLUTION



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Total no. of products produced+ imported products-exports

G.D.P.P. = ------------------------------------------------------------------------- (5)

Total estimated pollution of all the phases of life cycle

COUNTRY POLLUTION MEASUREMENT TO CREATE A TREND TOWARDS

GREEN WORLD

To create the green world we need the individual and organizational social responsibility.

CONCLUSION

Gross product pollution helps in reduction of pollution problems in the country. Accepting and

fallowing green product life cycle by corporate and society responsibilities will helps to reduce

the pollution will provide the golden future to upcoming generations. We need eyes to see the

pollution problems of Nature, to take care for our future we need heart to love the nature, for our

humanity mature

In the court of the nature, man is the culprit, who destroying the biodiversity with non green

practices. Nature can decide the punishment to the culprit but each and every human being

going to experience the punishment it may be crush to the human race.

Nature is punishing us in the form of global warming, earthquakes, floods and draughts etc.

To accept the global responsibility is necessary to protect the earth from all global warming and

other problems.

REFERENCES

Products and the environment: an integrated approach to policy._ Frans Berkhout and

Derek Smith Source: European Environment, 9,174-185, 1999.

Evaluating the life cycle environmental performance of chlorine disinfection and

ultraviolet technologies. Taps K.Das Source: Clean techn environ policy4 (2002), 32-

33,DoI 10.1007/s10098-002-0139-X

Sustainable Product Policy in Europe ,Gred Scholl,IȫW,Heidelberg,Germany.

Source: European Environment, vol.6.183-193(1996), ccc0961-0405/96/060183-11.

Evaluating Pollution Prevention Progress (P2P).

An environmental tool for screening in product life cycle assessment and chemical design

Process. David W. Peenington, Jane Bare,Robert Knodel,Gregary carroll, Todd Martin

Source; clean tech environment policy5,(2003)70-86,DOI:10.1007/s10098-003-0188-9

http://www.sciencedirect.com

www.osmaniauniversity.ac.in

http://www.osmaniauniversity.ac.in/



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INCLUSIVE ECONOMIC GROWTH IN INDIA:

ISSUES AND CHALLENGES

MR.CH.PRASHANTH*; DR.G.SHASHIDHAR RAO**


Department of Business Management, Ramappa Engineering College,

Warangal -506001, A.P., India.

**Reader, Department of Commerce,

C.K.M. Arts & Science College,

Warangal – 506006, A.P., India.

ABSTRACT

In the recent past, the focus of economic policy in India has shifted to issues of equitable growth.

This implies that the economy should not only maintain the tempo of growth but also spread the

benefits of growth to all sections of the population and geographical regions of the country. In

India, where rapid economic growth has become a national goal, analysis of the sources of

growth assumes special significance to formulation of the macroeconomic strategy and policies

that affect the future growth rate- as well as pattern. This study explains “How has the Indian

economy growing after independence. Using the latest data on labour and a model of capital

accumulation and productivity growth, we map out GDP growth on India economy until 2050.

The present paper analyses the trends and patterns of economic inequality across Indian states

since the early 1990s. The basic objective here is to understand the dynamics of growth in the

country which is resulting in regional imbalances and propose measures for alleviating the

problem. The inter-state inequality in per capita income and consumption expenditure show a

clear increasing trend during the first and second phase of structural reform. The composite

indices of economic development, constructed based on a select set of indicators exhibit high

correlations with that of social development. This is understandable as the capacity of the

governments at the state level to make interventions and bring about social transformations is

high in relatively developed states. The correlation of economic development with amenities,

although statistically significant, is relatively low, which suggests that the problems pertaining to

health, education, and access to other amenities cannot be effectively addressed just by focusing

on economic development.

______________________________________________________________________________

INTRODUCTION

In the recent past, the focus of economic policy in India has shifted to issues of equitable growth.

This implies that the economy should not only maintain the tempo of growth but also spread the

benefits of growth to all sections of the population and geographical regions of the country. This

change in approach is particularly important for the hilly regions of the country, as they

constantly struggle with underdevelopment, even when the rest of the economy is doing well.



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There has been a significant shift in the focus of economic policy in India in the last few years,

with issues of equitable growth getting more importance. This is clearly revealed in the change in

the Planning Commission‟s perspective – from „high growth‟ during the Tenth Five Year Plan to

„inclusive growth‟ in its Approach Paper to the Eleventh Five-Year Plan.

With sustained fertility decline and growing survival chances, India is likely to face many

new challenges in the realm of its population management strategies especially those relating to

life situations or the quality of human life and their key socio-economic determinants. Some of

the received economic literature in recent years clearly indicates a growing strain on many of

these factors affecting the quality of human life and its determinants. Such literature and data

sources also highlight the disparities and emerging mismatch between the post liberalization high

GDP growth in the country and the quality of life experienced by a large segment of population

in India (Dev and Ravi, 2007; UNICEF, 2005; NSS 61st round).

There is another very important area that needs intervention of the state and that is

environmental degradation. The ecology of the area is already in a fragile state due to unplanned

development in the past. There is a chance that rapid development without due recognition of

this problem may lead to the destruction of the natural resource base of the area. Since the

livelihood of the weaker sections in the hill areas is completely dependent on these natural

resources, their destruction will make the process of inclusive growth unsustainable in the long

run. Thus the state must ensure that the growth process in general and private participation in

particular does not destroy the ecology of the area.

GROWTH RATE, SAVINGS AND CAPITAL FORMATION

In India, attainment of higher rate of economic growth received topmost priority in

almost all the five year plans of the country. But the achievements of planning in India are far

short of its targets. Table 1 shows the targeted and actual growth rate of the economy since 1950-

2010. There are two distinct growth periods: a first phase from 1950 to 1980 (phase I) and

second phase from 1980 to 2004 (phase II) (Virmani 2004a). The first phase is characterized by

slow growth rate in GDP as comparison to phase II.

TABLE 1: TARGETED AND ACTUAL GROWTH RATES OF THE INDIAN

ECONOMY

Plan period Targeted Growth Rate Actual Growth Rate

1951-56 2.1 3.5

1956-61 4.5 4.2

1961-66 5.6 2.8

1966-68 __ 3.9

1969-73 5.7 3.2



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1974-78 4.4 4.7

1979-80 __ -5.2

1980-84 5.2 5.5

1985-89 5.0 5.6

1990-91 __ 3.4

1992-96 5.6 6.5

1997-2001 6.5 5.5

2002-06 8.0 7.6

2007-12 9.0

2006-07 9.7

2007-08 9.6

2008-09 6.8

Source: Planning Commission, Eleventh five year plan, Government of India, New Delhi, 2007

STEADILY GROWING SECTORS

A single scenario, i.e., the Realistic Scenario, captures the growth dynamics for the six

Sub sectors that exhibit steady growth for the period 1993-04 to 2005-06. In this scenario, the

sectors are assumed to grow at the same (constant) rate at which they have grown in the post-

reform period. The projections for output from these sub-sectors for the Eleventh Plan period are

represented graphically below. The corresponding average projected growth rates are also

provided.

ISSUES AND CHALLENGES

India currently faces several issues and challenges in the area of Financial Inclusion for

Inclusive growth. Salient among them are stated here below;

1. SPATIAL DISTRIBUTION OF BANKING SERVICES

Even though after often emphasized policy intervention by the government and the

concerted efforts of Reserve Bank of India and the public sector banks there has been a

significant increase in the number of bank offices in the rural areas; but it is not in tune with the

large population living in the rural areas. For a population of 70% only 45% of bank offices

provide the financial services



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2. REGIONAL DISTRIBUTION OF BANKING SERVICES

The analysis by the authors brings to the fore that there has been uneven distribution of

the banking services in terms of population coverage per bank office in the six regions viz;

Northern, North-eastern, Eastern, Central, Western and Southern regions of the country.

4. OVERCOMING BANKERS’ AVERSION FOR FINANCIAL INCLUSION

Even though no banker openly expresses his aversion for the financial inclusion process,

overtly it can be noticed that they are averse to it in view of the cost aspects involved in opening

of no frill accounts.

5. BANK BRANCHES

Bank branches are required to be increased as it has a direct impact on the progress of

financial inclusion. It is clearly established that as the bank branches increase number of bank

accounts also increase significantly.

6. POVERTY LEVELS

Poverty levels are having direct relationship with the progress of financial inclusion. The

authors have established in their study that as the poverty levels decrease financial inclusion also

increase. As such, there should be multi fold strategic approach in such poverty dominated areas

for financial inclusion.

Economic Survey 2009-10, Government of India, New Delhi, 2010. The economic

activity is being supported by a significant rise in domestic savings and capital formation.

Insufficiency of capital is considered as an important limiting factor for growth (Ahmad, 2007).

The step up in the growth rate of the Indian economy since 2003-04, has been driven by a higher

capital formation, supported by a sizeable increase in the rate of gross domestic savings. Over

the longer term, India‟s gross domestic savings and gross domestic capital formation have

increased substantially. Both savings and capital formation have grown steadily throughout,

rising from low levels of 9 percent of GDP during 1950s to 23 percent ranges in the 1990s. The

national savings rate surged further to 27 percent during 2000-04, buoyed by inflow of

remittances. Domestic savings and capital formation rates reached highs during 2005-06. Gross

domestic savings rose to 32 percent of GDP in 2005-06 from 31 percent in 2004-05. The

increase during the year was driven by higher private corporate and household savings. Due to

higher savings rate as well as the higher recourse to foreign savings, the gross domestic capital

formation increased to 33 percent of GDP in 2005-06, a substantial jump from 23 percent

recorded during 2001-02. Overall, the average gross domestic savings and gross domestic capital

formation was much high than that in 1980.

A STATE LEVEL ANALYSIS

Given the main objective of the paper to identify a set of lagging states for directed policy

intervention, it would be important to probe into the state level scenario in a disaggregate manner

by considering the performance of each state separately. In a study undertaken as a part of



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background research for the World Development Report, 2009, Ahmad and Narain (2008)

classify the Indian states into „high‟, „medium‟ and „low‟ income categories. The north-eastern

states that belong to a special category, thereby enjoy special grants from the Finance

commission, as well as other preferential treatment, constitute a separate category. The study

shows that most of the states that had low levels of per capita income recorded low income

growth, not only in the 1980s, but also in the 1990s. The low income category states and the

north-eastern states were noted to have registered growth rates of 2.5 per cent and 2.8 per cent

respectively during the 1980s, which was much below the national average. These went down

further to 2.3 and 2.5 per cent respectively during the 1990s. These states were in the bottom

rung even in the early 1970s8. The growth rates for the high and middle income states, on the

other hand, increased from about 3.4 and 3.2 per cent to 3.6 and 4.9 respectively during this

period.

INTER-STATE INEQUALITY IN PER CAPITA CONSUMPTION EXPENDITURE

UN-WEIGHTED COEFFICIENTS OF VARIATION

Source: Computed from NSS unit records CD data.

Considering the growth performance of individual states, one would note that the low

income states like Assam, Bihar (including Jharkhand), Madhya Pradesh (including

Chhattisgarh), Orissa, and Uttar Pradesh (including Uttarakhand) have reported very low average

growth rates during the 1980s, which has further gone down in the 1990s. A more alarming fact

about these states (excluding Rajasthan) is the instability in growth rates as assessed through

their coefficient of variation over time. Furthermore, these states have reported a decline in the

absolute figure of per capita income or no growth in at least two years during the 1990s, a



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problem not encountered in the middle or high income states. What compounds the problem of

the former is that there is marginal or no decline in their population growth rates and these

continue to be much above the national average.

The average per capita SDP and growth in SDP at constant prices for the late 1990s, the

middle of the present decade, and for the final years of the present decade, provide interesting

insights in to the dynamics of regional development (Table 2a). It may be noted that eight of the

backward states such as Bihar, Uttar Pradesh, Rajasthan, Assam, Orissa, Madhya Pradesh,

Chhattisgarh, and Jharkhand occupy the bottom positions in terms of per capita SDP during the

latest triennium, 2007–9. Uttarakhand is the only state, identified as backward by Ahmad and

Narain (2008) as a part of the state of Uttar Pradesh, wherein the average SDP is about the

national average. Considering the growth scenario in SDP, the less developed states reported low

figures in the late 1990s, especially during 1998–2000. The situation, however, seems to be

changing rapidly. Three of the states, viz., Madhya Pradesh, Rajasthan, and Orissa, showed high

income growth during 2004–6. The distinct change in the spatial thrust in growth in favour of

backward states has further increased in the subsequent period, as almost all these nine states

record high growth rates.

TABLE 2: PER CAPITA SDP AND GROWTH IN SDP FOR SELECT STATES

A. THREE YEARLY AVERAGES



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B. CORRELATION CO-EFFICIENT

Correlations gr9799 gr0305 gr0709 Pcsdp9799 Pcsdp0305 Pcsdp0709

Gr9799 1.000 -0.165 -0.269 0.247 0.174 0.144

Gr0305 -0.165 1.000 0.056 0.222 0.362 0.426

Gr0608 -0.269 0.056 1.000 -0.130 -0.053 0.027

Pcsdp9799 0.247 0.222 -0.130 1.000 0.971 0.940

Pcsdp0305 0.174 0.362 -0.053 0.971 1.000 0.992

Pcsdp0608 0.144 0.426 0.027 0.940 0.992 1.000

The CV (un-weighted) in the growth rate has gone down from 44 per cent in late 1990s to

35 per cent in the middle of the present decade due to high growth in less developed states, as

discussed above. It has gone down further to 24 per cent in the later years of the decade. The

most important point is that the weighted CV of the growth rates works out to be marginally

below the un-weighted figure, implying that more populated states had a marginal advantage

over the others, in the early 1990s. This advantage of the former seems to be evening out in

recent years, the inter-state growth differentials becoming less than before. There is no evidence

of the growth being higher in more developed states as the correlation between level and growth

in income is statistically insignificant (Table 2b). The importance of this more equitable growth

pattern notwithstanding, one must note that this, unfortunately, has not made a dent on the trend

of regional imbalance. The inequality in per capita SDP has gone up consistently including the

recent periods, by both weighted and un-weighted CV, as presented in Table 2a. Furthermore,

the Gini Index too has maintained a rising trend, as exhibited in the 1990s, as presented in Figure

3, along with the CVs.

The correlations between the rates of growth for the three yearly periods across the states

work out to be negative, although not statistically significant (Table 2b). This is because a high

growth rate has been recorded in recent years in many of the less developed states that recorded

low growth in earlier years, as discussed above. Three newly formed states – Chhattisgarh,

Uttarakhand, and Jharkhand have grown faster than the average in the present decade, marking a

departure from the trend in late 1990s. The Plan-wise growth figures, including those for the

Eleventh Plan, as projected by the Planning Commission (2008), confirm the above conclusions.

The growth rate of less developed states was less than 4 per cent, much below the average of the

developed states during the Eighth and the Ninth Plans (Table 3).



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TABLE 3: ANNUAL GROWTH RATES IN STATE DOMESTIC PRODUCT IN

DIFFERENT PLAN

Periods

S.No. State/UT

Eighth Plan

(1992–7)

Ninth Plan

(1997- 2002)

Tenth Plan

(2002–07)

Eleventh Plan

(2007-12)

Non Special Category States

5.4

4.6

6.7

9.5

1 Andhra Pradesh

2 Bihar 2.2 4.0 4.7 7.6

3 Chhattisgarh NA NA 9.2 8.6

4 Goa 8.9 5.5 7.8 12.1

5 Gujarat 12.4 4.0 10.6 11.2

6 Haryana 5.2 4.1 7.6 11.0

7 Jharkhand NA NA 11.1 9.8

8 Karnataka 6.2 7.2 7.0 11.2

9 Kerala 6.5 5.7 7.2 9.5

10 Madhya Pradesh 6.3 4.0 4.3 6.7

11 Maharashtra 8.9 4.7 7.9 9.1

12 Orissa 2.1 5.1 9.1 8.8

13 Punjab 4.7 4.4 4.5 5.9

14 Rajasthan 7.5 3.5 5.0 7.4

15 Tamil Nadu 7.0 6.3 6.6 8.5

16 Uttar Pradesh 4.9 4.0 4.6 6.1

17 West Bengal 6.3 6.9 6.1 9.7



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Special Category States

5.1

4.4

5.8

6.4

1 Arunachal Pradesh

2 Assam 2.8 2.1 6.1 6.5

3 Himachal Pradesh 6.5 5.9 7.3 9.5

4 Jammu & Kashmir 5.0 5.2 5.2 6.4

5 Manipur 4.6 6.4 11.6 5.9

6 Meghalaya 3.8 6.2 5.6 7.3

7 Mizoram NA NA 5.9 7.1

8 Nagaland 8.9 2.6 8.3 9.3

9 Sikkim 5.3 8.3 7.7 6.7

10 Tripura 6.6 7.4 8.7 6.9

11 Uttarakhand NA NA 8.8 9.9

All India GDP 6.5 5 7 9.0

Developed States 7.2 5.2 7.0 9.6

Special Cat States 5.7 5.8 7.3 7.3

Less Dev States 3.7 3.8 7.2 8.0

CV in Growth Rates 38.8 29.9 27.8 21.7

Source: CSO (base 1999–2000 constant price) as on 31.8.2007.

The figures for the former during the Tenth Plan period are similar to that of the national

average or that of the developed states. The same can be said about their projected growth rates

during the Eleventh Plan period, suggesting that there has been a paradigm shift in the growth

pattern in the country. Happily, the actual growth rates for the less developed states in the first

couple of years in this Plan have turned out to be even higher than projected. The same is true for

the Special Category States in the North-East. Their growth rates, too, were less than the national

average in the Eighth and Ninth Plans, but have caught up with it in the Tenth Plan period. More

importantly, these are expected to be above the national average in the Eleventh Plan. One can,



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therefore, stipulate that the strategy of inclusive growth and balanced regional development has

led to acceleration in the average growth rate of the less developed states, including those in the

North- East, and this would continue in future. Unfortunately, however, this has made little

impact on the trend towards accentuation of regional imbalances measured through per capita

SDP.

CONCLUSION

Indian economy has changed a lot over the past 60 years. Over the next 40 years the

changes could be dramatic. Using the latest demographic projection and a model of capital

accumulation and productivity growth, we map out GDP growth in the Indian economy until

2050. The result shows that if things go right, the Indian economy could become an important

source of growth to the world economy. Our projections are optimistic, in the sense that they

assume reasonably successful development Any kind of long term projection is subject to a great

deal of uncertainty, and we need to be mindful that India‟s growth transition is unlikely to be

smooth or devoid of shocks. The present attempt may not be conclusive in itself to estimate

potential GDP growth. The empirical estimation based on multivariate production function is

constraint by data availability.

There was a large restriction on foreign capital since 1951. If the whole restrictions are

removed on foreign capital, it increases the availability of foreign capital and further increases

the growth rate of economy. The growth rate is also affected by the fiscal and monetary policies

of the government, consumer spending of the people of the country, the increase in infrastructure

facilities, governance and external and internal policies made by the government. Our results

show that Indian economy has the potential to have the fastest growth over the next 30 and 50

years. According to Goldman Sachs (2003), the Indian economy GDP potential could be more

than 46.03 percent in 2050 as comparison to 2004-05. The strength of the external sector would

supplement the growth process. India‟s high growth rate since 2003 represents a structural

increase rather than simply upturn. We project India‟s potential growth rate about 9 percent

until 2050.

REFERENCES

1. Acharya, Shankar (2002), “India: Crisis, Reform and Growth in the 1990s”, Working

Paper No.139, Centre for Research on Economic Development and Policy Reform,

Stanford University

2. Bhattacharya, B.B. and S. Sakthivel (2004): „Regional Growth and Disparity in India:

Comparison of Pre- and Post-Reform Decades‟, Economic andPolitical Weekly, Vol 39,

No. 10, pp. 1071-7, March 2004

3. Amitabh Kundu and K. Varghese (2010), Regional Inequality and„Inclusive Growth‟ in

Indiaunder Globalization:Identification of Lagging States forStrategic Intervention,

working papers series, Oxfam India.

4. Dr. Vighneswara Swamy and Dr. Vijayalakshmi(2009), pp.6-10, Role of Financial

Inclusion for Inclusive Growth in India- Issues & Challenges,,work paper.



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5. World Bank (2009), World Development Report 2009: Reshaping Economic Geography,

Oxford University Press, New York

6. Bank for International Settlements. International Financial Statistics.

http://www.bis.org/statistics/bankstats.htm.

7. Datt, G. and M. Ravallion (2002), „Is India's Economic Growth Leaving the Poor

Behind?‟ Policy Research Working Paper 2846, The World Bank, Washington DC

Ombir Singh and Manju Dahiya, „Long Run Prospects for GDP Growth in India‟, work

paper.

8. Central Statistical Organization (CSO). 2009. National Account Statistics. New Delhi:

CSO.

9. 2005), “Policy Regimes, Growth and Poverty: Lessons of Government Failure and

Entrepreneurial Success”, Working Paper No. 170, Indian Council for Research on

International Economic Relation, New Delhi.

http://www.bis.org/statistics/bankstats.htm



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GREEN MARKETING

MRS. FATI SHAFAAT*; ARIF SULTAN**

*Sr. Lecturer,

Technical Education & Research Institute (TERI), P.G.College, Ghazipur.

**Lecturer,

Technical Education & Research Institute (TERI),

P.G.College, Ghazipur.

ABSTRACT

Today there is growing interest among the consumers all over the world regarding protection of

environment. Worldwide evidence indicates people are concerned about the environment and are

changing their behavior. As a result of this, green marketing has emerged which speaks for

growing market for sustainable and socially responsible products and services. The past decade

has shown that harnessing consumer power to effect positive environmental change is far easier

said than done. The so-called "green consumer" movements in the U.S. and other countries have

struggled to reach critical mass and to remain in the forefront of shoppers' minds. While public

opinion polls taken since the late 1980s have shown consistently that a significant percentage of

consumers in the U.S. and elsewhere profess a strong willingness to favor environmentally

conscious products and companies, consumers' efforts to do so in real life have remained sketchy

at best.

One of green marketing's challenges is the lack of standards or public consensus about what

constitutes "green," according to Joel Makower, a writer on green marketing. In essence, there is

no definition of "how good is good enough" when it comes to a product or company making

green marketing claims. This lack of consensus—by consumers, marketers, activists, regulators,

and influential people—has slowed the growth of green products, says Makower, because

companies are often reluctant to promote their green attributes, and consumers are often skeptical

about claims. The popularity of such marketing approach and its effectiveness is hotly debated.

Supporter’s claim that environmental appeals are actually growing in number–the Energy Star

label, for example, now appears on 11,000 different companies' models in 38 product categories,

from washing machines and light bulbs to skyscrapers and homes. The difference is, however,

that green—rightfully so—is on the wane as the primary sales pitch for products. As resources

are limited and human wants are unlimited, it is important for the marketers to utilize the

resources efficiently without waste as well as to achieve the organization's objective. So green

marketing is inevitable. This paper will cover all the aspects regarding green marketing, its

issues, benefits, and practices by different companies.

KEYWORDS: Social Marketing, Green Marketing, Socially responsible Products &

Companies, Green Products.

______________________________________________________________________________



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INTRODUCTION

Consumers want to do the right thing when it comes to protecting the environment and their

health. Even in this economic climate, the green movement is gathering momentum, and it's hard

to miss the deluge of ads introducing new green products from well-known national brands.

These manufacturers are leading the way; studies such as the newly released BBMG Conscious

Consumer Report now show that nearly 80 percent of Americans agree they can make a positive

difference by purchasing products from socially or environmentally responsible companies. As

resources are limited and human wants are unlimited, it is important for the marketers to utilize

the resources efficiently without waste as well as to achieve the organization's objective. So

green marketing is inevitable.

Today in this turbulent and competitive environment where so many unethical practices are

going on in businesses which are regularly losing the interests of consumers. So society expects

business to act as responsible members of the social community as well as to provide goods and

services efficiently. By this the social responsibilities of any corporate houses has became an

important aspects of today's era, in which the conscious efforts are being made by an

organization to maximize its positive impact and minimize its negative impact on society as well

as a whole and on various groups and individuals within society. Business is marketing and vice

versa forcing corporate to go for social responsible activities in which it produces products and

render services for exchanging for money by which needs of man can be fulfilled and the needs

of the society can also be looked after.

In this situation when the consumers are becoming more concerned about what they as well as

business firms can do to protect the environment and the majority of society wants to help firms

clean up the air, water and land. They also must go for finding the new ways to dispose of

garbage, recycle and reuse of packaging. This expectation of the society gave the birth of Green

Marketing as a tool of performing corporate social responsibility.

MEANING

Green marketing refers to the process of selling products and/or services based on their

environmental benefits. Such a product or service may be environmentally friendly in it or

produced and/or packaged in an environmentally friendly way.

The obvious assumption of green marketing is that potential consumers will view a product or

service's "greenness" as a benefit and base their buying decision accordingly. The not-so-obvious

assumption of green marketing is that consumers will be willing to pay more for green products

than they would for a less-green comparable alternative product - an assumption that, in my

opinion, has not been proven conclusively.

While green marketing is growing greatly as increasing numbers of consumers are willing to

back their environmental consciousnesses with their dollars, it can be dangerous. The public

tends to be skeptical of green claims to begin with and companies can seriously damage their

brands and their sales if a green claim is discovered to be false or contradicted by a company's



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other products or practices. Presenting a product or service as green when it's not is called green

washing.

GREEN MARKETING- DEFINITION

According to the American Marketing Association, ―Green Marketing‖ is defined as the

development and marketing of products designed to minimize negative effects on the physical

environment or to enhance its quality. However, applying a concrete definition to such a

slippery concept, which has taken many forms and shapes over the years, has proven to be

anything but simple or manageable. And, as you have seen on our Source and Resource site thus

far, green marketing can include a variety of activities in diverse areas.

Green marketing refers to the process of selling products and/or services based on their

environmental benefits. Such a product or service may be environmentally friendly in it or

produced and/or packaged in an environmentally friendly way.

As per Mr. J. Polonsky, green marketing can be defined as, "All activities designed to generate

and facilitate any exchange intended to satisfy human needs or wants such that satisfying of

these needs and wants occur with minimal detrimental input on the national environment."

Green marketing involves developing and promoting products and services that satisfy customers

want and need for Quality, Performance, Affordable Pricing and Convenience without having a

detrimental input on the environment.

GREEN MARKETING CAN BE DEFINED IN THREE WAYS

RETAILING DEFINITION: The marketing of products that are presumed to be

environmentally safe.

SOCIAL MARKETING DEFINITION: The development and marketing of products designed

to minimize negative effects on the physical environment or to improve its quality.

ENVIRONMENTAL DEFINITION: The efforts by organizations to produce, promote,

package, and reclaim products in a manner that is sensitive or responsive to ecological concerns.

Green marketing is the process of developing products and services and promoting them to

satisfy the customers who prefer products of good quality, performance and convenience at

affordable cost, which at the same time do not have a detrimental impact on the environment. It

includes a broad range of activities like product modification, changing the production process,

modified advertising, change in packaging, etc., aimed at reducing the detrimental impact of

products and their consumption and disposal on the environment. Companies all over the world

are striving to reduce the impact of products and services on the climate and other environmental

parameters. Marketers are taking the cue and are going green.

Green marketing was given prominence in the late 1980s and 1990s after the proceedings of the

first workshop on Ecological marketing held in Austin, Texas (US), in 1975. Several books on

green marketing began to be published thereafter. According to the Joel makeover (a writer,



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speaker and strategist on clean technology and green marketing), green marketing faces a lot of

challenges because of lack of standards and public consensus to what constitutes "Green". The

green marketing has evolved over a period of time.

Green marketing is a vital constituent of the holistic marketing concept. It is particularly

applicable to businesses that are directly dependent on the physical environment; for example,

industries like fishing, processed foods, tourism and adventure sports. Changes in the physical

environment may pose a threat to such industries. Many global players in diverse businesses are

now successfully implementing green marketing practices.

EVOLUTION OF GREEN MARKETING

There is growing interest among the consumers all over the world regarding protection of



growing market for sustainable and socially responsible products and services.

The green marketing has evolved over a period of time. According to Peatti (2001), the evolution

of green marketing has three phases-

First phase was termed as "Ecological" green marketing, and during this period all marketing

activities were concerned to help environment problems and provide remedies for environmental

problems.

Second phase was "Environmental" green marketing and the focus shifted on clean technology

that involved designing of innovative new products, which take care of pollution and waste

issues.

Third phase was "Sustainable" green marketing. It came into prominence in the late 1990s and

early 2000.

WHY GREEN MARKETING

As resources are limited and human wants are unlimited, it is important for the marketers to

utilize the resources efficiently without waste as well as to achieve the organization's objective.

So green marketing is inevitable.

As we have all witnessed, consumer and corporate environmental consciousness has dramatically

elevated in recent years. Related news, events, and proposed legislation seem to emerge and

change at warp speed. More apparent causes and effects of global climate change, depleting

fisheries, deforestation, and the current energy and impending water crises have all caused

people to reassess what they put in their cupboards, dishwashers, and gas tanks, along with what

they do with such things once they’ve been used.

Because of this intensified environmental awareness, it has become increasingly important how a

firm deals with such global challenges. Or, one might argue, it may be even more crucial how a



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firm is viewed in approaching such issues. In this manner, CSR environmental behavior and

―cleantech‖ investments have become essential to a company’s core operations, regardless of the

sector in which the company operates. That is, companies are not only sensing the rising

accountability demands of shareholders, the public, and governmental bodies, but also the

opportunities involved in a ―green products‖ market estimated at US$209 billion.

There is growing interest among the consumers all over the world regarding protection of



growing market for sustainable and socially responsible products and services.

Thus the growing awareness among the consumers all over the world regarding protection of the

environment in which they live, People do want to bequeath a clean earth to their offspring.

Various studies by environmentalists indicate that people are concerned about the environment

and are changing their behavior pattern so as to be less hostile towards it. Now we see that most

of the consumers, both individual and industrial, are becoming more concerned about

environment-friendly products. Most of them feel that environment-friendly products are safe to

use. As a result, green marketing has emerged, which aims at marketing sustainable and socially-

responsible products and services. Now is the era of recyclable, non-toxic and environment-

friendly goods. This has become the new mantra for marketers to satisfy the needs of consumers

and earn better profits.

ADOPTION OF GREEN MARKETING

Most of the companies are venturing into green marketing because of the following reasons:

A. OPPORTUNITY

In India, around 25% of the consumers prefer environmental-friendly products, and around 28%

may be considered healthy conscious. There fore, green marketers have diverse and fairly

sizeable segments to cater to. The Surf Excel detergent which saves water (advertised with the

message—"do bucket paani roz bachana") and the energy-saving LG consumers durables are

examples of green marketing. We also have green buildings which are efficient in their use of

energy, water and construction materials, and which reduce the impact on human health and the

environment through better design, construction, operation, maintenance and waste disposal. In

India, the green building movement, spearheaded by the Confederation of Indian industry (CII) -

Godrej Green business Center, has gained tremendous impetus over the last few years. From

20,000 sq ft in 2003, India's green building footprint is now over 25 million sq ft.

B. SOCIAL RESPONSIBILITY

Many companies have started realizing that they must behave in an environment-friendly

fashion. They believe both in achieving environmental objectives as well as profit related

objectives. The HSBC became the world's first bank to go carbon-neutral last year. Other

examples include Coca-Cola, which has invested in various recycling activities. Walt Disney

World in Florida, US, has an extensive waste management program and infrastructure in place.



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C. GOVERNMENTAL PRESSURE

Various regulations rare framed by the government to protect consumers and the society at large.

The Indian government too has developed a framework of legislations to reduce the production

of harmful goods and by products. These reduce the industry's production and consumers'

consumption of harmful goods, including those detrimental to the environment; for example, the

ban of plastic bags in Mumbai, prohibition of smoking in public areas, etc.

D. COMPETITIVE PRESSURE

Many companies take up green marketing to maintain their competitive edge. The green

marketing initiatives by niche companies such as Body Shop and Green & Black have prompted

many mainline competitors to follow suit.

E. COST REDUCTION

Reduction of harmful waste may lead to substantial cost savings. Sometimes, many firms

develop symbiotic relationship whereby the waste generated by one company is used by another

as a cost-effective raw material. For example, the fly ash generated by thermal power plants,

which would otherwise contributed to a gigantic quantum of solid waste, is used to manufacture

fly ash bricks for construction purposes.

BENEFITS OF GREEN MARKETING

Today consumers are becoming more and more conscious about the environment and are also

becoming socially responsible. Therefore, more companies are responsible to consumers'

aspirations for environmentally less damaging or neutral products. Many companies want to

have an early-mover advantage as they have to eventually move towards becoming green. Some

of the advantages of green marketing are-

It ensures sustained long-term growth along with profitability.

It saves money in the long run, though initially the cost is more.

It helps companies market their products and services keeping the environment aspects in

mind. It helps in accessing the new markets and enjoying competitive advantage.

Most of the employees also feel proud and responsible to be working for an

environmentally responsible company.

Maintaining the ecological balance.

Maintaining the environment eco friendly.

Increasing awareness of consumers towards their planet.

Better utilization of natural resources.



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Performing the social responsibility.

THREE KEYS TO SUCCESSFUL GREEN MARKETING

Show potential customers that you follow green business practices and you could reap more

green on your bottom line. Green Marketing isn't just a catchphrase; it's a marketing strategy that

can help you get more customers and make more money. But only if you do it right.

For green marketing to be effective, you have to do three things; be genuine, educate your

customers, and give them the opportunity to participate.

1)BEING GENUINE means that a) that you are actually doing what you claim to be doing in

your green marketing campaign and b) that the rest of your business policies are consistent with

whatever you are doing that's environmentally friendly. Both these conditions have to be met for

your business to establish the kind of environmental credentials that will allow a green marketing

campaign to succeed.

2) EDUCATING YOUR CUSTOMERS isn't just a matter of letting people know you're doing

whatever you're doing to protect the environment, but also a matter of letting them know why it

matters. Otherwise, for a significant portion of your target market, it's a case of "So what?" and

your green marketing campaign goes nowhere.

3) GIVING YOUR CUSTOMERS AN OPPORTUNITY TO PARTICIPATE means

personalizing the benefits of your environmentally friendly actions, normally through letting the

customer take part in positive environmental action.

GREEN MARKETING MIX

Every company has its own favorite marketing mix. Some have 4 P's and some have 7 P's of

marketing mix. The 4 P's of green marketing are that of a conventional marketing but the

challenge before marketers is to use 4 P's in an innovative manner.

PRODUCT

The ecological objectives in planning products are to reduce resource consumption and pollution

and to increase conservation of scarce resources (Keller man, 1978).

PRICE

Price is a critical and important factor of green marketing mix. Most consumers will only be

prepared to pay additional value if there is a perception of extra product value. This value may be

improved performance, function, design, visual appeal, or taste. Green marketing should take all

these facts into consideration while charging a premium price.



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PROMOTION

There are three types of green advertising: -

Ads that address a relationship between a product/service and the biophysical

environment

Those that promote a green lifestyle by highlighting a product or service

Ads that present a corporate image of environmental responsibility

PLACE

The choice of where and when to make a product available will have significant impact on the

customers. Very few customers will go out of their way to buy green products.

CHALLENGES TO GREEN MARKETING

Green products require renewable and recyclable material, which is costly

Requires a technology, which requires huge investment in R & D

Water treatment technology, which is too costly

Majority of the people are not aware of green products and their uses

Majority of the consumers are not willing to pay a premium for green products

DIFFERENT EXAMPLES OF GREEN MARKETING PRACTICES

INTRODUCTION OF CNG IN DELHI

New Delhi, capital of India, was being polluted at a very fast pace until Supreme Court of India

forced a change to alternative fuels. In 2002, a directive was issued to completely adopt CNG in

all public transport systems to curb pollution.

ELECTRONICS SECTOR

The consumer electronics sector provides room for using green marketing to attract new

customers. One example of this is HP's promise to cut its global energy use 20 percent by the

year 2010. To accomplish this reduction below 2005 levels, The Hewlett-Packard Company

announced plans to deliver energy-efficient products and services and institute energy-efficient

operating practices in its facilities worldwide.

WAL-MART

Wal-Mart launched it’s highly visible environmental strategy in 2004. Since then, their goals

have encompassed everything from:



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Cutting energy usage at stores by 30% to reduce greenhouse gas emissions

Spending $500 million per year to improve truck fleet fuel economy

Working towards monitoring overseas suppliers to ensure they meet environmental

standards

FAIRMONT

Fairmont has attempted to position their brand as an industry leader in green practices through

several approaches, including:

Hiring a full time director of environmental affairs

Launching a 200-ton per year recycling program

Offering free parking for guests with hybrid cars

Retrofitting lighting with energy efficient bulbs

GENERAL ELECTRIC

In 2005, GE launched their Ecomagination campaign. Clarifying how the green positioning is

integrated with their overall business strategy, CEO Jeffrey Immelt notes that the campaign is

primarily ―a way to sell more products and services‖. To this end, GE has pledged to:

Double investments in clean R&D by 2010

Increase revenues from Eco magination products to $20 billion by 2010

Reduce their own greenhouse gas emissions by 1% over 7 years (when they would have

increased by 40%)

PHILIPS LIGHT'S "MARATHON"

Philips Lighting's first shot at marketing a standalone compact fluorescent light (CFL) bulb was

Earth Light, at $15 each versus 75 cents for incandescent bulbs. The product had difficulty

climbing out of its deep green niche. The company re-launched the product as "Marathon,"

underscoring its new "super long life" positioning and promise of saving $26 in energy costs

over its five-year lifetime. Finally, with the U.S. EPA's Energy Star label to add credibility as

well as new sensitivity to rising utility costs and electricity shortages, sales climbed 12 percent in

an otherwise flat market.

CAR SHARING SERVICES

Car-sharing services address the longer-term solutions to consumer needs for better fuel savings

and fewer traffic tie-ups and parking nightmares, to complement the environmental benefit of

more open space and reduction of greenhouse gases. They may be thought of as a "time-sharing"

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

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



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system for cars. Consumers who drive less than 7,500 miles a year and do not need a car for

work can save thousands of dollars annually by joining one of the many services springing up,

including Zip Car (East Coast), Flex Car (Washington State), and Hour Car (Twin Cities).

SOME OTHER CASES OF GREEN MARKETING ARE AS FOLLOWS

McDonald’s restaurant's napkins, bags are made of recycled paper.

Coca-Cola pumped syrup directly from tank instead of plastic which saved 68 million

pound/year.

Badarpur Thermal Power station of NTPC in Delhi is devising ways to utilize coal-ash

that has been a major source of air and water pollution.

Barauni refinery of IOC is taken steps for restricting air and water pollutants.

Low – Carbon Food Service by Bon Appetit

Green Building

Green Drivers Programme adopted by Novo Nordisk

Hotel Room Energy Management – Key-card enabled systems

Hybrid Trucks for municipalities in US

Greenputers

Mahindra Hariyali Project

Potato starch trays made by Dutch Paper Foam used in i-Phone reduces 90% carbon

footprint compared to plastic tray

CORPORATE INITIATIVES FOR GREEN MARKETING AS SOCIAL

RESPONSIBILITIES

a. Broadcaster New Delhi Television Ltd, or NDTV, in partnership with car maker Toyota

Kirloskar Motor Pvt. Ltd launched Greenathon on 7 February—a 24-hour live television

event to create awareness about environmental issues.

b. Reva Electric Car Co. developing a market for electric cars and thereby a sustainable

business—firms are gearing up to bring about a change in the way their businesses and

products are perceived.

c. Panasonic Corp. is working out a go-to-schools interactive campaign to spread

awareness among students on global warming and other environmental issues, to begin

with.



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d. Nokia India Pvt. Ltd has launched a campaign to recycle electronic waste. Consumers are

encouraged to dump old mobile phones and accessories, irrespective of brand, at any of

the 1,300 green recycling bins at Nokia priority dealers and Nokia care centres.

e. Henkel India Ltd launched "eco-learn"—a learning initiative to inculcate environmental

concern and sustainability.

f. Hindustan Unilever Ltd's, or HUL's, Surf Excel Quick Wash talked about how

housewives could save two buckets of water while using premium detergent powder to

wash clothes.

g. Reckitt Benckiser Group Plc. has launched a global campaign Our Home Our Planet to

help consumers save money and minimize their carbon footprint as part of its Carbon 20

programme.

CONCLUSION

Green marketing is based on the premise that businesses have a responsibility to satisfy human

needs and desires while preserving the integrity of the natural environment. This latter concern

has been ignored throughout most of recorded human history does not mean it will be

unimportant in the future. Indeed, there are significant indications that environmental issues will

grow in importance over the coming years and will require imaginative and innovative redesign

and reengineering of existing marketing efforts on the part of many businesses. Solutions to

environmental problems can be characterized into roughly three categories: ethical, legal, and

business (economic and technological). Green marketing and the promotion of responsible

consumption are related with business category.

A clever marketer is one who not only convinces the consumer, but also involves the consumer

in marketing his product. Green marketing should not be considered as just one more approach to

marketing, but has to be pursued with much greater vigor, as it has an environmental and social

dimension to it. Recycling of paper, metals, plastics, etc., in a safe and environmentally harmless

manner should become much more systematized and universal. Green marketing should not

neglect the economic aspect of marketing. Marketers need to understand the implications of

green marketing. If we think customers are not concerned about environmental issues or will not

pay a premium for products that are more eco-responsible, we should think again. The marketer

must find an opportunity to enhance their product's performance and strengthen the customer's

loyalty and command a higher price.

Green marketing is still in its infancy and a lot of research is to be done on green marketing to

fully explore its potential.



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REFERENCES

ARTICLES

Chopra, S. Lakshmi (2007), "Turning Over a New Leaf", Indian Management, Vol-64,

April-2007

Ottman, J.A. et al, "Avoiding Green Marketing Myopia", Environment, Vol-48, June-

2006

Charter M. 1992. Greener Marketing: a Responsible Approach to Business. Greenleaf

Sheffield. Fuller D. 1999, Sustainable Marketing: Managerial– Ecological Issues. Sage:

Thousand Oaks

CA. Greenpeace. 1994. The Greenpeace Book of Greenwash. Greenpeace International:

Amsterdam.

JOURNAL

Marketing Mastermind, January 2009, Green Products: Their Growth and Expansion

WEBSITES

www.greenpeace.org

www.coolavenues.com

www.google.co.in

www.ask.com

www.altavista.com

www.infoseek.com

www.greenmarketing.net

www.greenpeace.org

www.coolavenues.com%20

http://www.google.co.in/

http://www.ask.com/

http://www.altavista.com/

http://www.infoseek.com/

www.greenmarketing.net

Documents

eijmms volume - 02 issue - 05 ( may, 2012 )