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Pratibimb March 12
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Pratibimb | March 2012 | 1 Pratibimb | January 2011 | 1
A Students’ Initiative
PRATIBIMB FINANCE | GENERAL MANAGEMENT | HUMAN RESOURCE | MARKETING | HEALTHCARE | OPERATIONS | SYSTEMS
The Reflection of Management
A Student’s Initiative
Volume II, Issue IX March 2012 A Monthly e-Magazine
DIRECTOR’S CUT ―Scholarship is too
important a
phenomenon to be left
to scholars alone‖
Outreach on Social Networks
Strategies for companies in the
service sector
―Though social networking websites provide a
huge
platform for a company to market itself and
project its brand, it is equally a big hazard for
the company as well.‖
By Amit Mukherjee, K.JSIMSR Mvmbai
Can management teach
us to manage our
emotions? ―Whether managing our own emotions is
difficult or managing others emotions, we
realize that it is easier to manage others than
to manage self while dealing with emotions”
By Lakshmi Divya Vegiraju, BIMT Gvrgaon
EURO CRISIS: Will EU survive the
second decade of the new millennium?
By Asmita Karanje, SIBM Bangalore
Philosophy of Management
By Prof. Kushankur Dey, TAPMI Manipal
An Interyiez zith Yogesh Chavdhvry, Managing Director, Jaipvr Rvgs Company
Pratibimb | March 2012 | 2
T. A. Pai Management Institute (TAPMI) is a premier management institute situated in
Manipal and is well known for its academic rigor & faculty-student interaction. The
Institute has been recently ranked amongst top 1 per cent of B-schools in India & 4th in
the South Zone by The Week Magazine.
Founded by the visionary, Late Shri. T. A. Pai, TAPMI’s mission is to provide much
needed impetus to the task of building professional management capability in the
country. In the process, it has also played a role in strengthening the existing educational
and health infrastructure of Manipal.
We are committed to excellence in post graduate management education, research
and practice by nurturing and developing global wealth creators and leaders. We
shall continually benchmark ourselves against the best-in-class institutions. We shall
foster continuous learning and reflection, achievement-orientation, creative
interdependence, and respect for diversity with a holistic concern for ethics,
environment and society.
T. A. Pai Management Institute
Manipal, Karnataka
About TAPMI
Our Mission
Pratibimb | March 2012 | 3
Pratibimb – The TAPMI’s e-Magazine - is the conglomeration of
the various specializations in MBA (Marketing, Finance, HR,
Systems and Operations). It is primarily intended to provide
insights into the plethora of knowledge that relate to the various
departments of Management and to give an opportunity to the
students of TAPMI and the best brains across country to exhibit
their creative cells. The magazine also strives to bring expert
inputs from industries, thereby bringing the academia and
industry together.
Pratibimb the e-Magazine of TAPMI had its first issue in
December 2010. The issue comprised of an interview of denoted
writer Ms. Rashmi Bansal along with a series of articles by
students and industry experts like MadhuSudan Rao (AVP-Delivery, Mahindra Satyam) & Ed
Cohen who is a global leader and chief learning officer who led Booz Allen Hamilton & Satyam
Computer Services to the first rank globally for learning & development . It also included a
hugely successful and engrossing game for finance geeks called ―Beat the Market‖ to bring out
the application based knowledge of students by providing them the platform where they were
expected to predict the stock prices of two selected stocks on a future date. The magazine is
primarily intended for the development of all around management knowledge by providing
unbiased critical insights into the modern developments.
TAPMI believes that learning is a continuous process and is not limited to the four walls of the
classroom. This viewpoint is further enhanced through Pratibimb wherein students manage
and contribute to create a refreshing learning environment outside the classrooms which
eventually leads to a holistic development process. The magazine provides a competitive
platform and opportunity to the students where they can compete with the best brains of the
country. The magazine also provides a platform for prominent industry stalwarts to
communicate their views and learning about and from the recent developments from their
respective fields of business which in turn helps to create a collaborative learning base for its
readers.
Pratibimb is committed in continuing this initiative by bringing in continuous improvement
in the magazine by including quality articles related to various management issues and
eventually creating a more engaging relationship with its readers by providing them a
platform to showcase their talent.
We invite all the best brains across country to be part of this initiative and help us take this to
the next level.
PRATIBIMB TAPMI’S MONTHLY e-MAGAZINE VOLUME 2, ISSUE IX MARCH, 2012
Pratibimb | March 2012 | 4
It is always a pleasure to witness that certain efforts of the students are
sustained and carried forward; Pratibimb is one such. The oft-beaten
track, “We are here to learn,” ends up as a mere platitude when there are
no visible actions and documentation. Whereas there is no dearth of
actions at TAPMI, documentation is not something that many—other than
scholars—choose to engage in; it is normally viewed as uninteresting,
drab and a drudgery. TAPMIans have proved that they are equally
capable of actions and of documentation without losing the intellectual
flavour of it.
Scholarship is too important a phenomenon to be left to scholars alone,
especially in the field of management. As future practising managers who
will be engaged in rigorous action in different fields of business, TAPMIans
have manifested both the penchant to produce research works and also
get their counterparts in other leading business schools to contribute their
thoughts to this endeavour. In this regard, TAPMIans have truly
demonstrated the evidence for creative interdependence, an important
aspect of TAPMI’s mission.
I sincerely appreciate the students and the faculty of TAPMI who have
made Pratibimb a possibility through their scholarly works, co-ordination
efforts and support. I wish the team the very best.
Dr. R. C. Natrajan.
DIR
EC
TO
R’S
ME
SS
AG
E
Pratibimb | March 2012 | 5
Editor’s corner
Dear Readers,
We thank all the participants and readers for their
valuable contributions. By making it monthly, we
present you a platform that will provide more
opportunities to share knowledge and showcase your
talent by competing with best minds in the country.
Our presence through social media has become
engaging. We have seen a rise in our total audience, and
more number of posts has gone viral. We have focused
on management gurus such as Peter Drucker and
Michael Porter and innovative advertising that help
leading brands define themselves better. Apart from
students of TAPMI and eminent b-schools in the
country, we would also like to thank Prof. Kushankur
Dey for his contribution in the latest issue.
The articles have been selected by the Editorial Team.
We also thank all those who helped us in improving
Pratibimb through their feedbacks. We would like to
take this opportunity to extend our gratitude to all
faculties and students at TAPMI for their continued
support, guidance, motivation and inspiration to take
Pratibimb to the next level.
To stay updated, please like our page on Facebook.
Also, send in your valuable suggestions/feedbacks to
Happy Reading!
EDITOR IN CHIEF
Sushmit Sinha
BRANDING & ADVERTISING
Manish Mishra
DESIGN & CREATIVES
Abhishek Dubey
Namrata Mahapatra
INTERNAL COMMUNICATIONS
Divyanshu
EXTERNAL COMMUNICATIONS
Abhishek Anupam
PUBLISHING
Vandana Soni
FACULTY ADVISORS
Prof. Chowdari Prasad
Dean (Planning & Development),
TAPMI
Dr. Jaba M. Gupta
Professor and Chairperson—eGPX,
TAPMI
Pratibimb | March 2012 | 6
contents An Interyiez zith: Mr. Yogesh Chavdhary, MD Jaipvr Rvgs Company on
The Fvtwre of CSR: Inclvsixe Bvsiness Models that address the Needs of Poor 7
Emotional Intelligence and The Imporuance of Self Management 10
Lakshmi Dixya Vegirajv, BIMT Greater Noida
Evro Crisis - Will the Evro Svryixe the Second Decade of Millennivm 12
Asmita Karanje, SIBM Bangalore
Philosophy of Management: Retrospection in the Eyes of Drwcker 19
Prof. Kvshankvr Dey, TAPMI Manipal
Fvtwristic rvality control in PSU Banks: A case of SBI corqorate banking 21
Axik Sinha | Atwl Mehta, IIM Indore
Internationalization 25
Siddharuh Chhottray, TAPMI Manipal
Ovtreach on Social Net{orks: Strategies for companies in the seryice sector 29
Amit Mvkherjee, K.JSIMSR Mvmbai
When Airuel lavnches Airuel Bank 33
Himangshv Das, NITIE Mvmbai
Pratibimb | March 2012 | 7
An Interview with Mr. Yogesh Chaudhary
Barclays, Ericsson, Pfizer, PepsiCo or Tata
Consultancy Services are known players in the
international markets. Even if the industries in
which they activate are different, these companies
have something in common: they have adopted
inclusive business strategies to address social
problems at the base of the economic pyramid by
harnessing their core business competencies and
interests.
Recently, Jaipur Rugs Company, one of the
leaders of handmade rugs in India and globally
renowned for its hand-knotted rugs, has been
recognized as a member of the Business Call to
Action (BCtA), a global leadership platform
supported by the United Nations Development
Programme and governmental agencies from
Australia, UK, Netherlands, Sweden and USA.
Our team has been eager to find out more about
the membership on BCtA in an effort to decipher
the company`s famous, inclusive business model.
Through BCtA, Jaipur Rugs has associated
itself with names like PepsiCo, Microsoft and
other multinationals or innovative start-ups
around the word. What does the membership
on BCtA mean for Jaipur Rugs?
The Business Call to Action is a platform that
recognizes and supports businesses that combine
profitability with impact. The main idea is to
encourage businesses to contribute to the United
Nations Millennium Development Goals by 2015.
From 150 members that will join BCtA in the next
3 years, we are the 42nd member.
As a member, we are committed to train 10,000
low-income people from rural areas in Rajasthan,
Uttar Pradesh, Bihar, Jharkhand or Orissa on
advanced rug weaving techniques and provide
them with access to global markets by 2015.
I emphasize: it is profits that bring employment
and sustainable income to the rural poor. The
interdependence between profits and impact has
been defined as a ―different way of doing
business‖.
Why is there a need for a different way of
looking and doing business?
In 2001, C. K. Prahalad was talking about the
―fortune at the bottom of the pyramid.‖ Most of
the global population was poor, he argued and the
business sector was not addressing the poor in any
way. Since then, a trend has grown up around the
concept of doing business with the poor.
Companies have begun to engage those at the base
of the global income pyramid and to give access to
goods, services, and livelihood opportunities for
those who need them most.
Managing Director, Jaipur Rugs Company
Pratibimb | March 2012 | 8
In our case, we see the rural poor as skilled
producers and give them the status of artisans and
the chance to create beautiful rugs. We are proud
to say that C. K. Prahalad published Jaipur Rugs
case study in the 5th edition of his bestseller:
―The fortune at the bottom of the pyramid.
Eradicating poverty through profits‖, in 2009.
What is the main characteristic of an inclusive
business?
Doing business with the poor is now commonly
called ―inclusive business‖.
In more complex definitions, inclusive business
models talk about sustainability and engagement
of low-income communities, in such a way that
the heart of the business, its core competencies are
responding to the needs of the poor, either seen as
producers or as consumers. Commercial viability
remains the focus of the business.
In our case, we have tried to break the perception
on the Indian carpet industry which was known as
highly exploitative. Back in `80s, my father, N. K.
Chaudhary has initiated a direct contact with the
weavers from under-privileged communities and
since then we have continuously worked to build
a fair wage model for them.
How is inclusive business different than
Corporate Social Responsibility (CSR)?
We like to say that CSR is lipstick, while we
embed the CSR activities in the heart of our
business (laughs). Presently, CSR is practiced as a
separate department in most of the companies
through social or environmental projects. In
Jaipur Rugs, the social activities are embedded in
the efforts of increasing the profits.
What are the keys to understand the Jaipur
Rugs model?
First of all, Jaipur Rugs is a group of three,
strongly interconnected entities: Jaipur Rugs
Company, manufacturer and exporter, Jaipur
Rugs Foundation, an NGO focused on training,
health and education for artisans and Jaipur Rugs
Incorporated, a wholesale unit in the USA, our
largest market.
Secondly, in order to ensure access to global
markets – we have clients in 35 countries of the
world – we developed quality control systems in
the production chain. There are around 60
processes from the wool to the final rug and all of
these processes are executed by people at the
grassroots in order to ensure international quality
standards.
Fig. 1: A Women with a weaver
(40,000 Indian artisans create rugs for clients in 35 coun-
tries of the world)
Fig. 2: A women weaver with the End-User
(Rug Weaving Skills Connect the Rural Poor with the Rich)
Pratibimb | March 2012 | 9
Finally, we control a decentralized production:
most of our 40,000 artisans are working in their
homes. Through our local branches we provide
them with the material of their work directly in
their village and homes.
It seems that Jaipur Rugs has innovated in
many ways. What are the main challenges you
face?
It's very different to work with the poor, because
you need to understand how they think. About
97% of artisans we work with are illiterates. It's
very different working with them, particularly
when it comes to harnessing talent and
capabilities.
Besides, there is a challenge to find the right
people in middle & top management as there is a
tendency to avoid working with the illiterates and
poor. So we tap talent at leading educational
institutions of India, like TAPMI.
Moreover, the global supply chain that we
maintain needs to be improved in terms of
efficiency in order to make it scalable. A team
from Harvard Business School has tied up with us
to study our supply chain and give suggestions for
improvement.
What about numbers? How profitable is a
business that works with the poor?
In the last fiscal year, we registered a turnover of
around $21 million (Rs 100 crore). We estimate
that over the next seven years, Jaipur Rugs will be
a Rs 500 crore company, with an additional
investment of Rs 300 crore pumped into it and a
profit of at least Rs 25 crore.
How do you see the future of business in
general?
Uneducated people in rural India, who are
considered downtrodden, have wisdom and
capabilities. We involve such people in our
business and we seek to empower them: to help
them find themselves a way out of poverty. We
think that involving the poor in the business is a
great opportunity for all businesses.
Pratibimb | March 2012 | 10
Emotional Intelligence and the Importance of
Self– Management
Although traditionally emotions were considered
to be disruptive to organizations, they are now
being increasingly recognized as providing
valuable insight into the behaviour and
performance of an individual. Whether we choose
to concur with the former or the latter, we cannot
ignore the fact that emotions need to be managed.
With issues like stress, work-life balance,
problematic bosses and peers, etc; employees as
well as organizations are beginning to understand
the importance of managing emotions at
workplace. ‗Emotional Intelligence‘ is the new
buzz word and is being talked about in personal as
well as business circles. Managing emotions helps
to develop psychological resilience in people
which is of utmost importance in today‘s world.
The concept of Emotional Intelligence in the area
of Human Resources Management has been
thought of as highly controversial for a long time.
While on one side being aware of one‘s own
emotions, managing them, detecting emotions in
others and being able to control their emotions is
believed to give an edge over others lacking such
skills in the business world; counter arguments
suggest that Emotional Intelligence cannot be
measured and is too vague a concept to be
regarded as a matter of intellectual capacity.
Emotions as such are complex in nature and
difficult to manage. Most people believe that
emotions are natural reactions to people or
situations and the phrase Emotional Intelligence
itself is a misnomer!
Even as the arguments for and against the concept
of Emotional Intelligence continue, there seems to
be some ambiguity in the idea of the Pyramid of
Emotional Intelligence. The starting point or the
base of the pyramid is ―Self-awareness‖ or
―knowing your emotions‖. The second level is
―Self-management‖ or ―managing your emotions‖.
Together, these two levels make up the personal
sphere. The third level of the pyramid is ―Social
awareness‖ or ―the ability to understand others
feelings and emotions‖, and the final level is the
―Relationship Management‖. These two levels
make up the ―social sphere‖. Relationship
management is therefore considered to be the
culminating point in the emotional intelligence
pyramid and anybody who has made way to this
point in the pyramid is said to be very high on
emotional intelligence.
The Pyramid of Emotional Intelligence:
by Lakshmi Divya Vegiraju , BIMT Greater Noida
Fig. 1: The Pyramid of EI
Pratibimb | March 2012 | 11
The point to be pondered upon is whether the
spheres have been placed appropriately and
whether Relationship Management can really be
considered as the capstone of the Emotional
Intelligence Pyramid. If we go by our experiences
and ask ourselves whether managing our own
emotions is difficult or managing others emotions,
we realize that it is easier to manage others than to
manage self while dealing with emotions. Often
we find it easier to soothe a grieving friend,
motivate a disheartened soul, to give advice and
solutions but fail to manage our emotions when
we find ourselves in similar situations. Somehow,
lending an ear and being a shoulder to cry on or
just saying that we understand and we relate to
what others are going through, does all the magic
that is required. Many a times we are even
successful in making others feel better, if not
completely fine.
The same is true even in the business setting.
Stress could leave us frustrated; rumours could
provoke and upset us; Boss, peers, subordinates,
all of them have the capacity to fudge with our
emotions. ‗Managing self‘ becomes extremely
difficult as well as demanding in such situations
and the one who has mastered the skill is a sure
shot at success. Therefore, even as companies are
looking at ways to manage the emotions of their
employees, they should instead make their
employees learn the art of self management.
The charisma of human nature is in its ability to
manage others emotions better than one‘s own
emotions. When we learn to understand others
emotions and perfect in managing them, we
understand ourselves better and as a result also
tend to manage our own emotions better. So
should we say understanding our own emotions is
the building block for understanding the emotions
of others or is it vice-versa? In Aristotle‘s words:
It is easy to be angry, but to be angry with the
right person, to the right degree, at the right time,
for the right purpose, and in the right way is not
easy‖. That is self-management which should be
the highest point in the Emotional Intelligence
Pyramid for he who has conquered himself has
conquered the world!
References:
Robbins, Stephen P., Judge, Timothy A.,
2009. Organizational Behavior, Pearson
Education
Pratibimb | March 2012 | 12
Major reason behind euro crisis:
This Euro crisis isn‘t just a story about some
incompetent Greeks who went on wild shopping
sprees with money lent to them by hardworking
Germans who didn't check the books carefully; it
is much deeper and interwoven into various
economies that it would take another few years for
us to come out of it. No doubt there will be a day
when we shall be writing about the revival of the
Euro and its upward journey in the future, that day
is still far and at present we need to understand
what caused this crisis and how it will impact the
world not just Europe or the western markets.
The root cause of the crisis can be attributed to the
US recession of 2008 which led to the financial
turmoil, the repercussions of which can be felt
even today. Although the housing bubble
triggered the unprecedented crisis, the real reason
was the sudden dryness in the interbank market
due to fears of creditworthiness of the
counterparties. The interbank market rates soared
up and the banking system faced a liquidity crisis
as being termed by the Government only to later
realise that this liquidity crisis can transform into
enormous proportions leading to solvency crisis.
The impact was that the stock markets started
spiralling downwards, investor confidence was
low, valuations were evaporated and investors
started investing in sovereign bonds. Downturn in
the financial market spread to other parts of the
world due to increased exposure between the
banks. Banks were restrained to provide credit,
loan book deteriorated, economic activity
plummeted, sales started decreasing, world trade
plunged and contraction of economies took place.
In Europe it was triggered by BNP Paribus which
froze redemptions of 3 investments increasing the
short term call rates and increased counterparty
risk. The panic button was pressed. The
government helped recapitalizing the banks which
had undertaken huge write-offs or provided
guarantees on the same but whether the actions
taken or capital infused sufficient is now quite
clear to us after two years.
The cause of this crisis is faulty Government
policies which kept the asset prices artificially
high. And here is the irony - governments
everywhere bailed banks out in 2008. To do this
they incurred debt. This debt now has become
burdensome and some governments cannot pay
it. But many of the banks governments bailed out
hold this debt, and now, again, the banks are
threatened by the very governments who tried to
save them.
The question also arises that when the Maastricht
treaty asks for certain obligations to be fulfilled by
the European nations then how PIGS nation did
broke all limits so disgracefully. The answer lies
in the complex financial instruments created by
the US investment banks such CDS and currency
derivatives for a substantial fees. The yield of a 2
year bond has reached 15% levels leading to a
junk status attributed to the country.
Will EU survive the second decade of
the new millennium?
- Unearthing the Euro crisis
by Asmita Karanje, SIBM Bangalore
Pratibimb | March 2012 | 13
Also such high debt levels have been seen in case
of other countries too such as Japan, Italy and
Belgium's creditors but the difference is that they
are mainly domestic institutions, but Greece and
Portugal have a higher percent of their debt in the
hands of foreign creditors, which is seen by certain
analysts as more difficult to sustain. Greece,
Portugal, and Spain have a 'credibility problem',
because they lack the ability to repay adequately
due to their low growth rate, high deficit, less FDI,
etc
Credit growth, low risk premium, economic
growth, rampant optimism, stable inflation, greater
integration of the world‘s financial markets,
international risk sharing and various related
factors can be a few reasons. Also with higher
yields available in the European bond market there
was a spill over of liquidity leading to soaring of
real estate prices on one hand and deterioration of
credit quality on the other hand. Leveraging
became extremely attractive and the CDS which
provides insurance on these assets became clearly
underpriced. And these highly leveraged
institutions can be thought of as a stack of cards
created with no support in terms of adequate
capital, so any small correction in prices could
lead to insolvency of the market players.
More than anything the real question that needs to
be addressed is that there is a structural problem in
the formation of euro zone, admission of countries
with different budget deficits, debt levels, GDP
growth rates and more importantly politics. Also
with fiscal policy left onto the individual countries
to decide, even after uniting the different monetary
policies have also been one of the reasons for the
fall of euro. Thus in short the Euro area countries
that hold huge amounts of bonds of the PIIGS
nations are unable to redeem them which would
result in huge losses if written down.
Fig. 1: Euro Zone’s Problem Children
Pratibimb | March 2012 | 14
Impact on the Euro Zone countries:
These countries such as France and Germany have
huge exposure to Greece. France has nearly 50%
and Germany 30%. Huge write-downs by banks
have been witnessed, consumption and demand
has fallen, confidence level is shattered, stock
markets go into a tailspin, the GDPs contract and
as predicted by Ms Lagarde, the world may have
lost one decade. EU contracted by 4% in 2009 and
the projections for year ending 2011 is around 1%.
Moreover the demographic is shifting towards an
ageing population, unemployment figure is close
to 9-10% in western countries, outputs are
shrinking, taxes shall go down and fiscal positions
of Government will deteriorate. This will lead to
increased budget deficits, ratings to sovereign
nations will go down and the vicious cycle of a
economic crisis shall doom on the world‘s growth
objectives. Unless the Governments of different
nations come together to attain the bigger goal of
saving the world economy from dwindling into the
whirlpool of darkness, it would be very difficult to
see the growth levels reached during the booming
periods.
Austerity measures needs to be implemented by
Greece and Italy and several other European
nations.
a. Greek is required to reduce wages by
layoffs, cut down on Government
expenditure, raise $40 Bn from privatization
and reduce the current debt levels of 130-
150% of GDP. This is unsustainable to attain
as this is faced by a lot of opposition from
the general public who is at the receiving
end of it. Also if attained it may provide
short term benefits but the long term impact
is detrimental to the health of the economy.
b. Greek bailout may make future bailouts
more likely.
c. Eurozone still does not have the firepower to
bailout all the EU countries in trouble. The
$1 Trillion set aside for bailout has been
utilised by Greece, Ireland and Portugal. For
rescuing Spain and Italy it would need funds
to the tune of $3 trillon. Also with more
delaying of decision on the part of member
countries this problem is only becoming
graver, with confidence levels going down,
uncertainties increasing, euro falling, debt
Fig. 2: Eurozone’s Sovereigns
Pratibimb | March 2012 | 15
levels going up and chances of a revival
coming down.
Biggest loser will be the banks as they will need to
write off the assets and the borrowers who shall be
passed on the cost of the debt write down.
From another perspective there are talks about
such increased economic tensions may get
translated into political tensions as the Defence
chiefs are drawing up plans to cope with the
potential military fallout from the Eurozone crisis.
There has been a lot of opposition by the civilians
taking to protests which have turned violent on the
streets of Athens against the spending cuts and tax
rises.
Portugal, Italy, Ireland and Spain are in dire need
too but the Greece is in succour and its needs are
so huge that if Govt needs to decide whether it
would focus entirely on Greece others will need to
take care of themselves.
Role of US:
The advantage with US to avert such a crisis is
because of the reserve status of the UDD, writing
off losses, marking to market of assets,
unprecedented quantitative easing, burgeoning
deficits to push growth and unparalleled stand in
the world economy for creating financial crisis as
well as cleaning it up. US banks and many other
export oriented companies shall be affected by the
Euro zone‘s slowed growth which is expected to
be around 0.2% for this year end. According to the
Institute of International Finance, US financial
institutions have $US767 billion ($A789 billion)
of exposure via bonds, credit derivatives and other
guarantees to private and public sector borrowers
in the euro zone's weakest economies.
Crisis control and Mitigation:
As Ms Angela Merkel, Vice Chancellor of
Germany puts it the crisis shall never be solved in
one go and it is essential to look at curator
measures first and then precautionary as against
what is happening where talks about closer
economic linkages and fiscal plans are charted out.
Fig. 3: Total Returns for Major Equity Markets
Pratibimb | March 2012 | 16
The heads of the EU state have met for eight times
in this years, summits have happened, endless
rounds of high level talks have taken place, first
steps in terms of the greater ―fiscal union‖ have
been suggested but will that restore the credibility
today when debt levels are rising and currency is
falling. Markets are convinced that the debt crisis
has got ahead of politicians again. Banks need to
be recapitalised for them to write down the losses
to the tune of 50%. But recapitalising them would
mean diluting the holding of existing shareholders
and that would then cause bank share to fall
further. EU rescue plan – will it be successful?
There are certain views that say the best option
would be to let Greece default in a phased manner
and allowing it to withdraw from the Euro Zone,
reintroducing its national currency the drachma at
a debased rate.
This Oct the rescue plan was such –
European banks were ready to write off 50% of
Greece debt held by them. Write off of 100Bn
Euros is voluntary; it shall be done by exchange of
long term bonds giving Greece the time to mend
its economy. It will not lead to any drop in CDS.
EFSF created in May 2010 to ensure stability
across Europe with Euro 750 Bn has been
expanded from Euro 440 Bn to Euro 1 trillion.
Recapitalising of the banks shall take a hit. It is
imperative that strengthening of the Governance
be undertaken by the individual Governments.
Proposed Solutions and Future of EU:
There are talks doing the rounds of symmetrical
reflation – what does it mean?
This implies significant easing of monetary policy
by the European Central Bank; provision of
unlimited lender-of-last-resort support to illiquid
but potentially solvent economies; a sharp
depreciation of the euro, which would turn current
-account deficits into surpluses; and fiscal
stimulus in the core if the periphery is forced into
austerity. Unfortunately, Germany and the ECB
oppose this option, owing to the prospect of a
temporary dose of modestly higher inflation in the
core relative to the periphery.
On the other hand Germany and the ECB want to
impose on the periphery—the second option—is
recessionary deflation: fiscal austerity, structural
reforms to boost productivity growth and reduce
unit labour costs, and real depreciation via price
adjustment, as opposed to nominal exchange-rate
adjustment. This will lead to deeper recession,
unemployment going up as loss making firms shall
be shut down, currency devaluation would
increase the real value of debt worsening the
insolvency of the Governments.
Germany and France have recently signed up a
stability pact that shall enforce fiscal consolidation
with greater budget discipline and strict deficit
rules. Such a pact is necessary in the wake of the
crisis, its impact on Eurozone and addressing the
bigger problem of survival of an EU. There is a
need to take action against disorderly sovereign
defaults, a sharp credit contraction, systemic bank
failures and excessive fiscal tightening. There is
no provision for any exit option for any of the
Euro zone countries. If Greece departs from the
Euro area, it may have dire consequences on the
banking system which will fall like a pack of
cards. Also it would have to leave the 27-member
European Union as well, thus entering a more
profound state of exile. Also an option to be
considered in future is that euro-area-wide finance
minister be elected by the European Parliament,
who would have limited federal powers to raise
revenue, to decide on the issue of ECB bonds, to
approve of deficit requirements in case of certain
countries, measure the performance of each
country‘s economy and strengthen the euro area
on the principle of comparative advantage. Such a
radical change would require time and efforts to
amend the treaty.
A more integrated EU is a farfetched option
especially when fiscal stabilization comes at a
poltical cost. Smaller democracies would lose the
autonomy to other the stronger bureaucrats, the
Pratibimb | March 2012 | 17
Merkels and the Cameron will rule the roost with
very little flexibility to the sovereign countries to
manage their budget and economic policies. Also
countries like the UK which has backed off from
the treaty citing lack of protection for the financial
centre whereas the underlying reason is the lack of
confidence in the proposed treaty.
On 21 November 2011, the European Commission
suggested that Eurobonds issued jointly by the 17
euro nations would be an effective way to tackle
the financial crisis. Using the term "stability
bonds", Jose Manuel Barroso insisted that any
such plan would have to be matched by tight fiscal
surveillance and economic policy coordination as
an essential counterpart so as to avoid moral
hazard and ensure sustainable public finances.
Germany remains opposed to debt that would be
jointly issued and underwritten by all 17 members
of the currency bloc, saying it could substantially
raise the country's liabilities in the debt crisis.
However, a growing field of investors and
economists say it would be the best way of solving
the debt crisis.
There is a stark imbalance in the trade deficits
among the Euro area countries, the 2009 trade
deficits for Italy, Spain, Greece, and Portugal were
estimated to be $42.96 billion, $75.31B and
$35.97B, and $25.6B respectively, while
Germany's trade surplus was $188. Unless such
imbalances are resolved it is unlikely that the Euro
area together as a group of nations can achieve a
fiscal consolidation.
The European Stability Mechanism (ESM) is a
permanent rescue funding programme to succeed
the temporary European Financial Stability
Facility to allow for a permanent bail-out
mechanism to be established including stronger
sanctions.
EU leaders hoped the plan would calm months of
volatility in financial markets by offering a long-
term solution to the Eurozone government debt
crisis but what is required is a magic wand that
heals the wounds of the global economy that has
jeopardised by the delay in decision making by the
Governments.
The solution should cure the root cause and not
just the symptoms which lies in the fact that
Western economies - with high wages, generous
middle-class subsidies and complex regulations
and taxes face pressures from three fronts:
demography (an aging population), technology
(which has allowed companies to do much more
with fewer people) and globalization (which has
allowed manufacturing and services to locate
across the world). For this it is essential that there
is growth in GDP, tax revenues decreasing deficits
and debt levels. What it basically entails is to
deleverage the economies, bring confidence
amongst the investor community, bring some signs
of revival of economies and a institutional
framework that oversees the same. There are
several ways of achieving these objectives but
broadly there are only two ways – monetary
easing as done by US or austerity measures as
proposed by EU. Going by the European way
would mean meagre growth, drop in living
standards and increasing unemployment.
Conclusion:
Going by the world politics it is quite unlikely that
there would be a colossal collapse of the Euro
although it has already touched the years low of
$1.3 as the European leaders would not ever let it
happen but at the same time infusion of liquidity
by means of Eurobonds shall also not take place
any time soon leaving us in a state of muddle.
Also time and again, the history of crisis tells us
that the way out of crisis does not lie in austerity
but the growth led by expansion of economies. So
there is an impending shift in the mindset of the
policy makers who are hooked onto the budget-
cutting agenda. They should instead shore up the
European banks in the face of a sovereign default.
Pratibimb | March 2012 | 18
References:
www.ec.europa.eu/economy_finance/.../
publication15887_en.pdf
www.guardian.co.uk/business/debt-crisis
www.articles.moneycentral.msn.com/.../euro
-crisis-is-tip-of-the-iceberg.asp
www.bloomberg.com/.../de-jager-says-euro-
crisis-requires-global-res..
economictimes.indiatimes.com/
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http://www.guardian.co.uk/
commentisfree/2011/mar/13/eu-euro-
competition-germany-take
http://online.wsj.com/article/
SB100014240527023042593045763755907
70135026.html
http://www.bloomberg.com/news/2011-09-
08/trichet-loses-his-cool-at-prospect-of-
deutsche-mark-s-revival-in-germany.html
http://online.wsj.com/article/
SB100014240527487044314045750673123
70615300.html
http://www.independent.co.uk/news/
business/news/markets-boosted-following-
eu-deal-2376535.html
http://www.guardian.co.uk/world/2011/
oct/27/berlusconi-reforms-italy-debt-crisis
http://online.wsj.com/article/
SB100014240529702036875045766551604
62785484.html?
mod=WSJEUROPE_hpp_MIDDLETopNew
s
http://www.bbc.co.uk/news/business-
15474298
http://www.bbc.co.uk/news/business-
15474298
http://www.rte.ie/news/2011/0418/rating-
business.html
http://www.publicserviceeurope.com/
article/790/ireland-set-for-strong-recovery-
after-bail-out
http://www.dn.pt/inicio/tv/interior.aspx?
content_id=1750097&seccao=Media
http://articles.moneycentral.msn.com/
Investing/JubaksJournal/euro-crisis-is-tip-of-
the-iceberg.aspx
http://www.channelnewsasia.com/stories/
economicnews/view/1171575/1/.html
http://www.voanews.com/english/news/
europe/Germanys-Merkel-No-Simple-Quick
-Fix-for-Euro-135588543.html
http://www.nytimes.com/2011/04/13/
opinion/13fishman.html?_r=1
http://www.bbc.co.uk/news/world-europe-
16024316
http://www.usatoday.com/money/world/
story/2011-11-25/Italy-debt-
crisis/51397718/1
http://www.nytimes.com/2011/11/18/world/
europe/confronting-economic-emergency-
new-leader-in-italy-mario-monti-offers-
ambitious-plan.html
http://www.telegraph.co.uk/finance/
financialcrisis/8955931/Euro-slides-below-
1.30-on-debt-crisis-fears.html
http://www.guardian.co.uk/commentisfree/
cifamerica/2011/nov/29/eurozone-crisis-why
-the-fed-should-buy-italian-bonds
Pratibimb | March 2012 | 19
Introduction
Literally, philosophy implies the love for wisdom.
Today, philosophy of management has,
astoundingly, achieved scholarship in the realm of
both theory and practice. Management is an
amalgamation of fundamental blocks of many
disciplines, namely the social science, the
psychology, the social psychology, the
anthropology, and other basic sciences. Managing is
a key in management. This, as a field, has emerged
from practice leading on to theories. Interestingly,
this field has underwent rebirth on several
occasions because of innovations and restructuring
at three levels-product, process, and organization
(business model). It is worth noting that
management has its presence in business or practice
for almost more than ten decades. However, this
field is at molting stage which means that it has
been changing its colours and outfits since the
pulses generated through desired or undesired
innovations.
Having said this, one can go deeper to explore the
essence of ―philosophy of management‖. We firmly
believe that philosophy embodies a set of rules,
norms, and methods to think, analyse, and articulate
the phenomena/situation comprehensively and
consistently. Philosophy is omnipresent.
Management is contextual and domain specific. In
this article, we attempt to look at this from three
perspectives: normative, positive, and synthesis.
This is exploratory in nature that we try to establish
whether management in practice is a reflection of
past theories. Is it a retrospection of past theories
including normative and positive? Or is it a
metaphor for theory?
For exploring this, we present Drucker‘s beliefs and
his remarkable contributions in management. We
try to summarize his one of the best classics in
management, ―the practices of management‖. This
book talks about that philosophy of management
comprises three elements: decision, activity, and
relation at organisation or group level. Since the
boundary of management is huge, fencing is
sometimes required to scope the discussion. In this
article, we seek to identify and list out the morals of
management in practice through the Drucker‘s
classic. Eventually, our linguistic apparatus would
sharpen the analysis of this classic in synthesized
manner.
What is “Core”?
In the classic, ―the practices of management‖, Peter
F. Drucker introduced that the changing role of
management witnessed many years before because
of the shift from the economics of capital and
labour (factors of production) to the necessity of
management. As a result, management has become
an essential, distinct and leading institution. The
key message is to manage means by objectives
(management by objectives).
Drucker defined the business as a purpose ―to create
customer‖. The business is not determined by the
producer rather by the customer. Getting clarity
upon the business, marketing and innovation: two
are the pillars of any successful ventures. Drucker
Philosophy of Management: Retrospection in the Eyes of
Drucker
by Prof. Kushankur Dey, TAPMI Manipal
Pratibimb | March 2012 | 20
elaborated on product mix as a judicious allocation
and assortment of resources, but process mix is
organization‘s production strengths and outsourcing
activities adding competitive advantages to its
business. He also identified eight key areas of
business enterprise where objectives are to set in
including market standing, innovation, productivity,
contribution, physical and financial resources etc.
From his point of view, managers are the basic
resources of any business. Human capital is the
scarcest and most expensive resources required
constant replenishment. Drucker mentioned that the
main objective of the management is to ―manage
business, manage manager, and manage worker‖.
Business by its virtue contains three powerful
factors of misdirection: the specialized works of
managers; the hierarchical structure of management;
differences in vision and work and the resultant
being insulation of various levels of management.
What is Key to Steer the Business?
Drucker introduced the most powerful concept,
―philosophy of management‖ and narrated that
―management by objectives‖ (MBO) and ―self
control‖ are two key determinants in deciding the
success of business. His speeches were unequivocal
while he pointed out that the purpose of the
organization is to make common men do uncommon
things. There are five areas in which practices are
required to ensure right spirit throughout the
management organization: first, there must be high
performance requirements, no condoning of poor or
mediocre performance and rewards must be based
on performance. Second, each management job must
be rewarding job in itself rather than just a step in
the promotion ladder. Third, there must be a rational
and just promotion system. Fourth, management
needs a charter spelling out clearly who has the
power to make life and death decisions affecting
manager and there should be some way for a
manager to appeal to higher court. Five, in its
appointments management must demonstrate that it
realizes that integrity is the one absolute
requirement of a manager, the one quality that he
has to bring with him and cannot be expected to
acquire later on.
Drucker believed that business needs a central
governing organ, ―the chief executive‖ and a central
organ of review and appraisal (of) the board. On the
quality of these two organs which together
compromise with top management, its performance,
results and spirit are largely dependent. Manager
development is three-fold responsibility: to the
enterprise, to the society, and to the individual
himself. Drucker narrated that what is needed is the
development of managers equal to the tasks of
tomorrow, not tasks of yesterday. He also
emphasized on the management of worker and work
in order to achieve the business objective.
Effectiveness is often considered as a performance
yardstick for the employees, who should get the
continuous opportunity for improvement.
Drucker described the organizational structure
which is an outcome of activities analysis, decisions
analysis, and relations analysis. He mentioned
decision making may be routine or critical
depending upon the situation the manger engages in.
It has five distinct phases, viz. defining the problem,
analyzing the problem, developing alternative
solutions, finding the best solution with respect the
risk containment, economy of effort, timing, and
limitation of resources, and lastly, making the
decision effective (actionable).
What is all about Management in the eyes of
Drucker?
At the end, Drucker expressed his views about the
responsibilities of management. He beautifully
portrayed on the canvas saying that
―Responsibility requires the manager that he
assumes responsibility for the public good, that he
subordinates his actions to an ethical standard of
conduct and that he restrains his self-interest and his
authority wherever their exercise would infringe
upon the common will and upon the freedom of the
individual. The modern business enterprise for its
survival needs to be able to recruit the best educated
and most dedicated… The enterprise must be able to
give such men a vision and sense of mission‖.
Pratibimb | March 2012 | 21
Futuristic quality control in PSU Banks:
A case of SBI Corporate Banking by Avik Sinha | Atul Mehta, IIM Indore
Preamble:
In the dynamic global scenario, it has become a
mandate for the public sector banks to implement
quality control of their existing processes. Indian
public sector banks started with pens and papers.
But gradually the business needs have driven them
towards BPR initiatives, which was enabled by IT
implementation. State Bank of India is the pioneer
of the initiative. For the further discussion, it is
taken as a model bank. The banking business of
SBI is divided into eight domains:
Given the criticality of business, revenue growth
and the customer profiles, futuristic quality control
is mostly required in Corporate Banking domain.
This is the domain which encapsulates all other
banking domains. Hence problems faced regarding
quality control are more in this domain. The pain
areas and the implications are crucial in a few
major areas, depending on the impact of error and
consequences. Details are listed in the Table 1.
There was a time, when SBI struggled a lot to
combat the aforesaid problems, even after the IT
implementation, started in June, 2002. Then with
the graduation of time, SBI formulated its own
ways to overcome those problems, which as a
whole was a very futuristic quality control
measure. This has set an example before the other
PSU banks in terms of quality control.
The Control Mechanism: In this section, we will discuss the area-wise
mechanisms, which were adopted by SBI to
control the quality of corporate banking.
1. Quarter-end and Year-end reporting:
It becomes a tedious activity for a bank to search
for the flaws in their reports when the Quarter end
and Year end activities take place. Abridged
activities involved in reporting mechanism are
given in Figure 1. During the process, mainly the
profit / loss figures in the reports differ several
1. Corporate Banking 5. Trading and Sales
2. Retail Banking 6. Commercial Banking
3. Payment and Settlement 7. Agency Services
4. Asset Management 8. Retail Brokerage
Areas Actual Problems Implication
Quarter / Year end report-
ing Mismatch of balances Time consumption in analysis
Merger & Acquisition Mismatch of architecture Improper interest capitalization /
provision
Balance Sheet generation Absence of audit trail Less / No reliability of balances
Risk Management Balances not following Basel-II
norms Non-conformance with RBI norms
Table 1: Major pain areas in corporate banking in PSU banks
Pratibimb | March 2012 | 22
times. The difference arises due to improper
mapping of branch-wise and type-wise customer
a/c mapping in several heads of the reports. So to
get rid of the problem, SBI periodically reviews
the a/c mapping, at least once in a month. They
have also automated a/c mapping practice
automated by leveraging their IT infrastructure.
This reduces the chances of errors during the
actual activities and saves a great deal of time and
cost. It also helps them keeping track of the
balances appearing in different heads during the
internal and external audit of the reports. The
mapping mechanism will be discussed in details in
the following sections [Figure 4].
The PSU banks, which have already IT
infrastructure in place, or in the transformation
mode, can automate the process at the branch
level, so that whenever any new a/c gets opened, it
automatically gets mapped in the granular head of
the Balance Sheet or P&L statement, depending
on the type of a/c. This reduces the manual
intervention of mapping them in proper heads, and
standardization reduces the business risk.
2. Merger Activities:
When the banking industry is in the mode of
consolidation, PSU banks face a major problem
while going for the merger and acquisition
activities, in terms of merging the databases of the
two banks, which follow different IT architecture
and standards. SBI also faced the same problem
during the merger with State Bank of Saurashtra.
Generally Problems were faced in the following
functional areas:
Interest Provisioning
Interest Capitalization
Business Logic
With a view of getting rid of the above mentioned
problems, SBI followed a systematic approach,
which in short is called the ―Conflict Resolution‖.
It was applied on the dummy real-time database of
the bank to be merged, which we can call as the
reference database in our discussion. It consisted
of the following phases [Figure 2]:
Application of the interest calculation
prevailing in SBI on reference database – for
both interest provisioning and interest
capitalization
Application of the business logic on the
corporate banking services on reference
database
Comparing the actual and forecasted result
Checking the branch no, a/c no and
transaction ID format of the reference
database and making necessary changes in
sync with the format of SBI
Monitor the daily deviations for at least a
month prior to the actual merger activity –
on the day of merger the total number of
deviations must come to zero
This mechanism was applied in mid 2010, during
the merger of SBI with State Bank of Indore. This
approach resulted in the smoothest merger in the
history of Indian banking industry. The success
had made this approach standardized for all kinds
of merger activities to be taken up in SBI.
All the PSU banks must leverage their IT
infrastructure to get a functional flexibility in
terms of the merger activities. Sometimes platform
dependence can create a problem. So it is an
essential requirement for the banks to design their
Fig. 4: Quarter End and Year End Reporting Mechanism
Pratibimb | March 2012 | 23
architecture flexible, scalable, and modifiable.
This can in turn help them in merging the banks or
the financial institutions, which work on different
platforms. A multi-layered business case is also
needed to be developed to support the deviation
checking activities.
3. Balance Sheet and P&L report generation:
These are the two major performance indicative
reports for any bank. After the IT revolution in the
banking industry, most of the PSU banks have
made it a practice of generating the major
financial reports through the systems in place. But
most of the auditors place a question regarding the
authenticity of the data. The same happened with
SBI also. As a reactive approach, they came up
with the idea of ―Audit Trail‖ [Figure 3] of the
balances those appear in the reports.
The balances in the financial reports appear in two
ways:
From the live transactions
From the memorandum of changes, those
are passed in several report heads while
branch level audit
Whenever a transaction takes place, the
transaction should be traceable in case of any
discrepancy. While the manual transactions are
done via memorandum of changes, the
transactions are nearly impossible to track. Hence
SBI has taken a measure of storing the
authentication record as the proof of the
occurrence of the transaction. The record consists
of the following:
Date of transaction
Time of transaction
The transacting branch
The report head
The amount of change in balance
The employee ID of the user
Non-fulfillment of aforesaid details will
lead to rejection of the transaction. The
details will be recorded in the
centralized database for tracking the
transaction. At the same time it will
also act as the authenticity of balances
appearing against the report heads.
This approach provides a systematic measure for
auditing the financial reports. The PSU banks,
which have IT infrastructure already in place, can
leverage the advantage for their internal and
external audit. This also works as a triggering
mechanism for the banks, which are yet to
implement the IT approach for their financial
report generation. It provides quality of the
balances those appear in the reports and the
authenticity of the transactions during audit.
Risk Management reporting:
In the Basel-II regime, all the PSU banks must
comply with norms set by RBI. The income /
expense of the banks must be classified in the
following categories:
Interest
Exchange
Commission
Discount
Charges / Dividend
Profit / Loss on sale of fixed asset
Profit / Loss on revaluation of investment
Profit / Loss on exchange transactions
Figure 3: Audit Trail Mechanism
Pratibimb | March 2012 | 24
In any of the mentioned categories, there are
ranges specified for the eight banking domains
specified already at the beginning of the
discussion. Any preset a/c mapping can lead to
non-compliance of Basel-II, as the balances in the
customer a/c changes with the volume of the
transactions. But the problem with this approach is
that, a retail branch having an amount of
transaction more than or equal to the balance
maintained by the corporate banking branches,
may shift to the corporate banking domain. So an
indefinite loop is formed keeping both the
validations in place.
To overcome this problem regarding validations,
SBI has taken the following measures:
The a/c mapping architecture is three-tired
[Figure 4]. The customer a/c mapping has
been made dynamic, so that any drastic
changes in the balances will automatically
change the type of product. Hence the risk
management category will change
accordingly, without any manual
intervention.
The validation has been kept only at the
branch level, irrespective of the balances
appearing against those branches. This is
called as ―Total Standardized Approach for
Risk Management‖ in SBI. This approach
has proved at least 80-85% conformance
with the RBI norms.
This has set an example before the other
PSU banks which are struggling with the
loops of validation. Rapid iterative
approaches have been taken by SBI and the
resultant mechanism has reduced the non-
conformance to a huge extent. This has
reduced the chances the getting lower credit
rating and enhanced quality of risk measure
in Indian banking industry.
Conclusion:
As a pioneer of the Indian banking industry, SBI
has built the plinth of futuristic quality control for
the PSU banks. In the reign of consolidation, this
will not only help to enhance the competitiveness,
but also in turn upgrade the customer relationship
in long term.
Figure 4: Account mapping structure (branch-wise) for financial reports
Pratibimb | March 2012 | 25
Internationalization
by Siddharth Chhottray, TAPMI Manipal
Process of Internationalization:
The term Internationalization may refer to the
transfer of a company‘s product offering, its
strategic policies or management functions across
different boundaries. The extent to which two
countries or two different regions may vary from
each other depends on various factors like
demographic variables, language barriers,
economic conditions, culture, consumer
characteristics and lifestyle habits. (Myers, 1995)
It is essential for small or medium sized
enterprises to have a distinct advantage in terms of
product benefits and features, if it wishes to go
global. Successful product innovation leads to an
increase in the firm‘s productivity which, in turn,
increases the entry into export market.
Internationalization: A co-evolutionary
perspective:
The process of internationalization has been of
significant interest for a long time. It is to be learnt
that internationalization is an evolutionary
process, and not an incremental one. Various
factors like the evolution of the industry, business
network relationships and organizational resources
and capabilities will have a major role in deciding
the path of the company‘s internationalization
process. The co-evolutionary model integrates the
var ious fac to rs and expla ins how
Internationalization can be considered as a product
which has emerged due to the co-evolution of all
these influences.
Earlier, the behavior process model described
internationalization as an incremental process in
terms of increased international participation,
which is achieved through experimental learning
(Uppsala Internationalization Model). However,
this model was questioned by major findings on
‗global start-ups‘ and ‗born global‘ firms. It was
later concluded that this process cannot be
described by a single theory which led to the
argument that Internationalization is a holistic
process which combines interrelated decisions and
processes.
T h e n e w t h e o r i e s s u g g e s t t h a t
‗Internationalization‘ process in a co-evolutionary
interaction between the external factors
(competitive environment) and the company‘s
internal processes and capabilities. In order to
decide the process of internationalization, it is
essential to focus on two factors – how the
industry has an impact on the types of
international operations a company pursues; and
how managers try to adapt their activities and
organizational resources to meet the standards of
the industry.
(Pajunen, K, 2008)
The other two theories are (Osarenkhoe, A, 2009)
Pratibimb | March 2012 | 26
Transaction cost approach
Network approach
Transaction cost approach: In this method, the
prime focus is on costs associated with several
transactions. While expanding, the company will
decide whether to do so through internalization, or
with the help of external collaboration
(externalization).
Network approach: A firm should not be
considered a single player in the market. Instead,
it should be viewed in relation to other players in
the international arena. Progress in the
international business has started taking place
through relationship development. A small
organization is said to be dependent on its
relations with other firms and the external world.
As a result, many firms have stopped expanding
internationally in a sequential or an incremental
process. Many firms have started to target multiple
markets, enter joint ventures and other forms of
collaborations at early stages without prior
experience. This can be attributed to several
factors like entrepreneurial mindset of the current
managers, presence of ever increasing number of
people having international experience,
technological advancements, improvement in
transportation facilities and networking.
Internationalization of SMEs in India:
The internationalization process of SMEs is
gaining widespread importance with increased
integration of world economy. SMEs are vital for
emerging nations in terms of providing
employment opportunities and contributing to the
national economy. They are responsible for
encouraging entrepreneurship and innovation.
SMEs also play an important role in breaking the
monopolistic nature of big players.
In order to develop India‘s ties with other
countries, the Government started relaxing import
and other regulations. As a result of this, SMEs
have started facing stiff competition from
international players. SMEs which are not into
export business lack information to deal with
international business as well as experience to
develop an international strategy. These firms
being small in size lag behind in terms of financial
capital and human resources. These firms are at
competitive disadvantage in terms of power which
is positively correlated to the size of an
organization. They generally have a very small
customer base and have little impact on global
pricing.
A firm must be innovative, proactive and be
willing to take risks in order to enter the
international arena. It should be innovative in
terms of implementing creative solutions to solve
its own problems. It should continuously upgrade
its products and services, spend on research and
development activities, and use effective
managerial concepts. It should be proactive in
terms of understanding its competition and take
necessary steps to beat them and achieve its own
objectives. Financial investment is the major risk
for a small enterprise. Nevertheless, the firm
should be willing to borrow capital and invest in
its expansion to new markets. It should be willing
to take up projects which are risky, but have high
return in terms of revenue if successful.
SMEs must include IT in their business models in
order to ensure success in the long run. IT helps in
cost reduction and enhancement of global
communication.
A SME faces three types of issues:
Country specific issues – These are the
external environmental factors (political,
economic, social, technological, legal)
Industry specific issues – Business
environment of the firm
Firm specific issues – capital, human
resource, R&D, technology, organization
structure and culture : (Todd, P & Javalgi,
R, 2007)
The organizational culture must focus on
entrepreneurial perspective to expand
internationally. The employees and managers must
have the knack of observing their surroundings
and process information. This will enable the
company to deal with uncertainty and other
Pratibimb | March 2012 | 27
challenges in the business environment, and
implement an effective strategy to expand
internationally.
Internationalization process through an
organizational model:
Today, several firms are entering into the
international arena. They can be classified into
different sectors like the service sector,
manufacturing sector, financial service sector, or
knowledge based institutions. Each of these shall
follow a different approach for internationalization
while creating, communicating and delivering
their product or service on a global scale.
Internationalization depends on four major factors:
The mode of entry into the foreign market
The type of market or client
Steps taken to improve commitment and
presence in the market
Operations undertaken which reflect how the
company is evolving in terms of resource
utilization and institutional commitment
with the progress in internationalization
process
For a mass production company, holding on to
existing market share or an increase in share is
necessary to sustain internationalization process.
This can be achieved through a deeper
understanding of the market scenario, healthy
supplier and customer relations, and creating a
brand name in the market. In terms of production,
the firm will always aim at minimizing costs. It
shall set up manufacturing units in the host
country if there are any benefits associated with
the physical presence within the host country. In
the case where physical presence is not needed,
the firm can ensure its presence through exports
and licensing. But, as its internationalization
process progresses, it can aim at a joint venture or
a fully owned venture. The steps taken also
depend on market uncertainty. If the market
uncertainty is high, the firm may adopt a slow and
steady approach like starting with exports, then
moving on to partnerships and finally shifting to
wholly owned venture. If the firm has gained
expertise through certain other activities, it can
follow a faster approach by skipping a few steps in
between. For instance, if the competition is high
and the company has a good experience of the
Pratibimb | March 2012 | 28
existing market, it can directly increase its
resource commitment by entering into a wholly
owned venture.
The internationalization process for other kinds of
organization can be developed on similar lines.
(Malhotra, N & Hinings, C.R, 2010)
References:
Kavi ta Pandi t (2009) : Leading
Internationalization, Annals of the
Association of American Geographers, 99:4,
645-656
Myers, H 1995, ‗The Changing Process of
Internationalisation in the European Union‘,
The Service Industries Journal, Vol 15, Issue
4, pp. 42 (online Business Source Premier)
Pajunen, K 2008, ‗Internationalization: A co
-evolutionary perspective‘, Scandinavian
journal of management, Vol. 24, Issue 3, pp.
247 (online ScienceDirect)
Todd, P & Javalgi , R 2007,
‗Internationalization of SMEs in India:
Fostering entrepreneurship by leveraging
Information Technology‘, International
Journal of Emerging Markets, Vol. 2, No.2,
pp. 166-180
Osarenkhoe, A 2009, ‗An integrated
framework for understanding the driving
forces behind non-sequential process of
internationalization among firms‘, Business
Process Management Journal, Vol.15, No.2,
pp. 286-316
Malhotra, N & Hinings, C.R 2010, ‗An
organizational model for understanding
internationalization process‘, Journal of
International Business Studies, Vol.41,
pp.330-349
Pratibimb | March 2012 | 29
INTRODUCTION:
Social networking websites in the digital age have
become the crux of communication and
information dissemination. They serve as a huge
platform for broadcasting of messages and
reaching out to the public. Companies need to
have an organized social media marketing and
tracking policies to ensure its business growth.
I have done a detailed study of the social
networking websites Facebook, Twitter and
LinkedIn and how companies use these platforms
to exercise their online marketing strategies in this
dissertation. I have taken various factors into
consideration and analyzed how companies can
improve their performance through the medium of
social media marketing.
C U S T O M E R S E R V I C E A N D
INFORMATION DISSEMINATION:
The role of Social Network Websites in building
the brand image of companies and serving as an
information database is becoming increasingly
relevant all over the world and financial
institutions and financial advisory firms are not to
be left behind. These firms need to use these
Social Network Websites as platforms to
understand their customers and provide better
service.
CUSTOMER SERVICE:
One of the first steps that a financial advising firm
would need to take is to setup a web page of itself
on a social networking websites like Facebook or
LinkedIn.
While Facebook represents more of an inorganic,
cluttered source of information LinkedIn is more
of a professional oriented social network website.
With over 300 million and 120 million
registrations on Facebook and LinkedIn
respectively, they provide a huge platform for
Customers to voice their opinions and concerns.
Customer grievances can be addressed online
through these social network websites. Google
alerts and Twitter searches can be setup to search
actively for customer complaints. Some customers
are miffed by the indifferent attitude shown by
company representatives when they express their
opinions, such issues end up being voiced online
which is highly detrimental to the public image of
the company. Such issues can be resolved online
through dedicated customer grievance tracking.
Banks like BOFA, Wells Fargo and Wachovia
have already implemented this form of social
interactions with customers and Indian financial
institutions and advisories must follow suit.
INFORMATION DISSEMINATION:
Social networking websites are an unmatched way
to disseminate information. Companies through
their web pages on social websites can market
their upcoming products and services. They can
also update their recent achievements and financial
stability through positive marketing on these web
pages.
A Social Media research carried out in 2011 by
Burson-Marstellar show the increasing trends
globally to disseminate information via social
networking platform. The results depict the
percentages of companies globally that use at least
one social networking platform for information
dissemination which is classified according to
different regions.
Outreach on Social Networks: Strategies for
companies in the service sector
by Amit Mukherjee , KJSIMSR Mumbai
Pratibimb | March 2012 | 30
A typical thing to notice is 67% of fortune 100
companies in the Asia Pacific region have a
presence on social websites which is an increment
of 17% from the previous year.
Source: Burson-Mastellar 2011 Fortune Global 100 Social
Media Study
ENGAGEMENT WITH CUSTOMERS,
INVESTORS, MARKET-MAKERS AND
EMPLOYEES:
Various methodologies to improve engagement of
customers, investors, market-makers and
employees with the firm are listed below.
CUSTOMERS, INVESTORS AND
MARKET-MAKERS:
All the customers, investors and market makers of
the company which play a significant part in the
growth and development of the company are
bound to have an account on at least one of the
social networking websites in this modern age.
Establishing a relationship with them on this front
can lead to faster modes of communication and an
informal but clear view of how the company is
perceived in the public. Following are some of the
steps that lead to better engagement of customers,
investors and market-makers.
Addressing customer grievances
online through social networking
websites.
Allowing marke t -makers t o
intercommunicate which lead to
exchange of ideas and knowledge
sharing.
Presenting a clear financial image
of the company through web pages on
social websites so that the investors are
aware of the company‘s position in the
market when they visit these web
pages at leisure.
Encouraging customers and
investors to write online blogs on the
company web page on these social
websites so that a frank opinion about
the company‘s perception can be
found out.
Marketing the company‘s products
and services online and encouraging
customer feedback on the same.
EMPLOYEES:
The workplace is witnessing an increasing number
of employees accessing social network websites
during working hours. Companies can use this as a
tool of communication between management and
employees to ensure that employees are
productive but not overworked. Social networking
websites provide an opportunity for management
to have faster contact with their subordinates. If
there is an issue that needs immediate attention, a
manager can send a message through social
networking websites and the internet to their
employees to get the information they need to
make a decision. Social networks also cut down on
unnecessary e-mail and instant message among co
-workers. In this way Social networking websites
can replace the internal modes of communication
that the company has and lead to better employee
engagement.
LISTENING TO THE MARKETS:
Accessing the social networking websites by the
corporate officials provides an effective platform
to ―listen‖ to the markets and gather information
from them.
Pratibimb | March 2012 | 31
There are two ways you can ―listen‖ to the social
web: passively and proactively. The passive
approach is simply trying to eavesdrop on
conversations that occur organically and naturally
among regular consumers. The proactive approach
is actively trying to stimulate these conversations
with questions and dialogue with the customers.
PASSIVE APPROACH:
The passive approach can be executed by adopting
simple tools like ‗Google Alerts‘ and ‗Twitter
Searches‘. Once a conversation about the
Company is traced online it can be listened to by
dedicated employees whose task is to preserve the
social image of the company in the online markets.
PROACTIVE APPROACH:
The proactive approach is an initiative by the
company itself to stimulate opinions about the
company on social networking websites and then
modulate them. This can be done by a variety of
ways like opening opinion polls about the
company ―What do you think about our new
product‖ on websites like Facebook, inviting
customer feedback on these websites, etc. The
important task after this first step is to modulate
these opinions by providing justifiable reasons to
the customer issues and concerns and by actively
promoting favorable customer response.
SOCIAL MEDIA THREATS:
Though social networking websites provide a huge
platform for a company to market itself and
project its brand, it is equally a big hazard for the
company as well. Employees can leak vital
information or can express their angst towards
company policies online. According to a survey
conducted by ‗Deloitte‘ employees themselves
feel that it is easy to damage a company‘s
reputation on social media.
Organizations need to have well defined social
media policies to regulate employee conduct.
These include not blocking social websites during
working hours but to allow restricted access to
these websites. Access rights can be restricted to
prevent employees from leaking useful
information.
Users should also carefully control what
information they post on social media accounts
and to whom this information is available. This
particularly applies to users who actively
participate on social media sites as part of their
company job function, in order to network with
customers and promote brand awareness.
Summarizing all the above factors, the company
should implement the following policies to ensure
it doesn‘t face a threat due to social media
interactions:
Create well defined social media policies for
its organization.
Have a well equipped IT team to
apply and inform employees about
how these policies should be followed.
Installing Up-To-Date antivirus
systems to ensure malicious activities
like hacking and phishing doesn‘t
occur due to information provided on
social media platforms.
Source:-Deloitte 2009 survey
Pratibimb | March 2012 | 32
REFERENCES:
www.mashable.com
www.thefinancialbrand.com
www.burston-marstellar.com
www.jiad.org
Social Network and Corporate Financial
Performance: Conceptual Framework of
Board Composition and Corporate Social
Responsibility-William S. Chang, Finance
department, Ming Chuan University
A Measurement-driven Analysis of
Information Propagation in the Flickr Social
Network- Meeyoung Cha, Alan Mislove,
Krishna P. Gummadi
Social media-A guide for researchers- Alan
Cann, Department of Biology at the
University of Leicester, Konstantia
Dimitriou and Tristram Hooley of the
International Centre for Guidance Studies
Social Networking and Its Effects on
Companies and Their Employees-Douglas
Baker, Nicole Buoni, Michael Fee, and
Caroline Vitale
Social Media Marketing: Successful Case
Studies of Businesses Using Facebook and
YouTube with an In-depth Look into the
Business Use of Twitter-Maddy Coon
Detailed study of websites-Facebook,
Twitter and LinkedIn
Pratibimb | March 2012 | 33
When Airtel launches Airtel Bank...
by Himangshu Das , NITIE Mumbai
We always come across telecom companies
launching new ―Talktime‖ or ―Top Up‖ offers.
The day is not far when we will see them
launching new fixed deposit schemes, saving
offers etc. The above statement, although seems
absurd, would perhaps make sense as we read
more.
The estimated banking penetration among middle
and high income groups in India is about 45%
while for low income groups is less than 5%.
Maximum financial inclusion of our human
resource is crucial to tap the countries savings and
investments. While Microfinance institutions do
play an important role still the penetration level is
very low. Comparing this with the 76.03 % of
Tele-density and the projected Tele-density of
84% by 2012, Banks have realized the role that
can be played by mobile banking in reaching out
to the unbanked areas. It is also a good medium to
attract on the run customers hence they have tied
up with leading providers like Vodafone and
Airtel to cater mobile banking services.
While this is a positive signal for both the telecom
and banking industry in terms of revenue and
reach, it has also initiated discussion about the
shift in the traditional role played by the telecom
sector from that of a provider of just voice and
message provider. With the provision of mobile
service, mobile banking, mobile commerce etc
these telecom companies have come a long way
from their sectorial monotony. Dwindling returns
from the stagnant and competitive voice calls and
messaging market have forced the telecom
companies to look out for new business
opportunities. Telecom companies will eventually
target those avenues which will give returns at a
same scale as during the telecom heydays.
Considering the consistent growth and returns of
the banking industry, telecom companies
seemingly have found a perfect ground.
Offering the complete set of banking services right
from commercial loan services to bond services
would however take considerable time. What
customers may initially expect comprises a basic
set of services like mobile payment, credit and
Source: http://gss.hubpages.com/hub/Class-Action-
Lawsuits-and-Litigation
Source: http://t2.gstatic.com/images
Pratibimb | March 2012 | 34
charge card facilities. With the experience in
mobile banking the telecom companies can slowly
takeover the whole umbrella of businesses that
operates under a network. This will not only open
up a whole gambit of opportunities for the
operator but also provide a plethora of facilities to
the customers. One of the important sectors that
they might be able to finance would be the
micropayments via messaging or voice call. It is
imperative that carriers will try to battle it out for
the mobile wallet and payments space. A slow
demand of banking license caused by some of the
Telecom giants has surfaced in the industry
corridors. Rogers Communications Inc, one of the
telecom giants in Canada has already filed papers
with the federal bank to start a bank. As per
Rogers the next big thing will be money transfer,
whether that's paying for a subway pass or a
parking meter, or sending money. The bank would
primarily deal in credit and mobile payment
services, as opposed to bricks and mortar bank
branches that take traditional savings and loan
accounts. While many big retailers have similar
sort of finance divisions which are essentially
extension of their core businesses.
The Telecom companies are looking to position
themselves in every part of the supply chain and
hence manage to earn returns from the infinite
monetary transactions that happen between
customers and companies via their network. It also
makes sense for operators to offer banking
products and services as people would eventually
wish to dispense plastic and start using mobile
phones as a form of payment devices. They hence
manage to take the control of the wallet over the
phone. Banks are already getting detached from
the end customer by an invisible layer. While
mobile service from a bank needs to pass through
layers of technology and approval from Google,
RIM , Apple etc for future carrier bankers we need
just a phone or go online and transfer the money.
The only necessities would be the email address
and the mobile phone number. An example of an
offering will be a combination of prepaid phone
deal with a prepaid debit card via which these
Telecom banks. This can aggressively target the
under banked customer segment and they will not
need the entire expensive infrastructure like the
traditional revenue generation format. It is just a
new innovative form of revenue generation.
Even banks seem to have opened up to this threat
and have started offering more features to move up
the value chain. Let‘s consider an interesting trend
that has happened in Italy where one of the banks
sensing this threat has managed to launch ―Poste
Mobile‖, an ESP (Enhanced Services Provider)-
MVNO subsidiary of the Italian Postal Bank. Here
the carrier just acts as a transport layer while Poste
Mobile offers the various banking services and has
full control on pricing as well as customer
information which is stored in a separate area of
the SIM card.
Gauging the benefits, Governments of certain
countries like Nigeria are even vetting proposals to
license operators in the mobile banking sector
thereby laying the foundation for another
technological revolution. The Indian Planning
Commission however is not in favor of allowing
telecom companies to float banking companies.
The government is more in the favor of allowing
financial transactions to be done by banks to avoid
any sort of financial crisis. Although they do not
wish to allow the telecom companies to become
banks themselves, an attempt has been made to set
up a framework to allow people to undertake basic
operations through cell phones. An inter-
ministerial group has recently submitted a report
to Telecom Regulatory Authority of India (Trai)
recommending that people in remote areas be
allowed to open accounts linked via their cell
phones and withdraw money up to Rs 5,000 a day.
Though the government efforts do seem noble in
questioning about how a telecom company can
carry out the required security procedures to the
extent that is usually done by a traditional bank, it
would be better if it can propose for a Think Tank
to study the pros and cons in the reverse process of
a telecom company entering the banking services.
In the days to come we might see the traditional
Pratibimb | March 2012 | 35
bank getting segregated to the back-end as a
manager of risk and product manufacturer.
However the day to day customers continue
getting owned by the telecom companies, social
networks and marketing organizations. Perhaps a
possible technological and financial revolution is
in the offering.
References:
http://asiablog.celent.com/?p=404
http://en.wikipedia.org/wiki/
Communications_in_India
http://www.cbc.ca/news/business/
story/2011/09/06/rogers-bank.html
http://www.carrierevolution.com/
articles/273852/telcos-will-be-banks/
http://m.economictimes.com/news/news-by-
industry/telecom/plan-panel-against-telecom
-operators-setting-up-banking-cos/
articleshow/7372089.cms
http://www.ft.com/cms/s/0/d5469d54-ca96-
11df-a860-
00144feab49a.html#axzz1lIwjB3wZ
Pratibimb | March 2012 | 36
Introduction
`Does the stock market overreact?' De Bondt and Thaler in 1985 gave start to a new wave of thinking
known as behavioural finance. Weak form inefficiency of the stock market was discovered by them after
analysing how people are systematically overreacting to unexpected and dramatic news events which were
surprising and profound. The Efficient Market Hypothesis as proposed by Fama (1970) asserts that the
stock prices reflect the relevant information. The asset prices follow a random walk path i.e. they are
merely random numbers. The study conducted by Caginalp G. and H. Laurent (1998) by the predictive
power of price patterns finds patterns and confirms that they are statistically significant even in out-of-
sample testing and report.
The pattern of the stock index might help in predicting some of the effects of the various events. The
calendar anomalies tends to exist which goes against the efficient market hypothesis. The researchers have
used Gregorian calendar to investigate the calendar anomalies. There are various countries and societies
which follow their own calendar on the basis of their religion. For example, the Hebrew calendar is
followed by the Jewish society, which is strictly based on luni-solar, the Christian society follows the
Gregorian, which is based on solar, and similarly Hindu and Chinese follow their own.
The Hindu calendar is called ―Panchanga” and it is based on both movements of the sun and the moon.
The festival of ―Diwali‖ is typically occurs at the end of October and beginning of November.
The special ritual called ―Mahurat Trading‖ can be observed on major stock exchanges like NSE, BSE,
NCDEX to name a few lasts for about an hour. It is performed as a symbolic ritual since many years. It
marks a link with the rich past and brokers look at it on a positive note. It marks an auspicious beginning to
the Hindu New Year. The investors place token orders and buy stocks for their children, which are
sometimes never sold and intraday profits are booked, however small they may be. Thus, it is widely
believed that trading on this day will bring wealth and prosperity throughout the year.
It is interesting to observe the behaviour of trading activities during the period preceding and succeeding
Mahurat Trading. The purpose of this study is to know the effect of the festival prior and post diwali on the
the returns.
Econometric methodology
I have measured stock return as the continuously compounded daily percentage change in the share price
index (S&P CNX NIFTY) as shown below:
Rt = (lnPt – lnPt-1) x 100 …………………… (1)
Where, Rt = return at time t
Pt, Pt-1 = closing value of the stock price index at time t, t-1.
I have used S&P CNX Nifty as it has got the most liquid stocks in its portfolio. Further, the National
Stock Exchange is largest in terms of Market capitalisation and Volume. I have used the data of the
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