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ARTICLES
PAPERS
MANAGEMENT CASES
LEADERS SPEAK
BOOK REVIEWS
MOVIE REVIEWS
samvidVolume 1.0 | Issue 1 | July 2012Student Management Review
“A hundred times every day, I remind
myself that my inner and outer life
depend on the labours of other men, living
and dead. And that I must exert myself in
order to give in the same measure as I
have received and am still receiving.”
-Albert Einstein
Alfred North Whitehead
“The essential spring of all growth is within
you. All that you can get from without is
some food - material or spiritual - with
which to build your own organism, and
some stimulus to spur you to activity. What
is really essential in your development, you
must do for yourself.”
- Alfred North Whitehead
Albert Einstein
Our Inspiration
Aim & Scope
Samvid is a journal published by the students of S.P. Jain Institute of Management and Research (SPJIMR), Mumbai to disseminate the most relevant and contemporary management thinking from among the SPJIMR fraternity. It aims to serve academicians and practitioners alike with a blend of cutting edge research and insightful opinions targeted at adding to the body of management knowledge and influencing practice. It is edited by a board of students from SPJIMR who accept or reject submissions based on an independent review process conducted both by the editorial board and the faculty review panel.
Vision
To help in positioning SPJIMR as a leading research business school by publishing relevant, topical, and insightful features on management ideas, theory and practice and disseminating them to a global audience.
Mission
To draw upon the body of management research performed at SPJIMR and act as a vehicle for publishing the most relevant among them, with the aim of encouraging a healthy debate in the academia and business.
Faculty Advisory Board
Dr. Ajit Prasad
Dr. Debasis Malik
Dr. D.G. Karmakar
Prof. Jiban Mukhopadhyay
Dr. Uma Narain
Publication Team
Hari Iyer
Abhineet Rawat
Abhishek Goud
Aditya Narang
Anirudh Kunjal
Anshuman Gautam
Ayush Kapuria
Khushboo Sharma
Swati Dogra
Swati Sachdeva
Vipinsingh Parihar
Editor in Chief
Editors
Creative Team
Administrative heads
Aditi Saronwala
Ankit Thakral
Shashank Shekhar
Vaibhav Kher
Vishwas Venkatesha
Disclaimer
Reasonable care is taken to ensure that the articles and features in Samvid are as accurate as possible. However, the editors do not take responsibility for any errors or omission contained herein. Readers are advised to exercise caution before acting on any information contained in this publication. Further, the opinions expressed are those of the authors only and do not represent the views of the editors or of SPJIMR.
Editorial
It gives me great pleasure to bring out the inaugural edition of Samvid, the student management journal of the S.P. Jain Institute of Management and Research (SPJIMR), Mumbai.
SPJIMR, founded in 1981 on the twin pillars of 'promoting value based growth' and 'influencing practice', has grown to be one of the premier business schools of the country. Research is one of the important components of the institute's functioning and a natural extension of its motto of influencing practice.
This journal aims to be a compendium of working papers showcasing the best of management thinking among the students of SPJIMR. It draws on the considerable body of research performed by students during their stint at the institute, both in curricular and co-curricular activities. The breadth of features published in this issue – ranging from cases on non profit institutions to papers on statistical models for predicting mortality rate – are indicative of the diversity of thought of the student body.
The journal consists of a mix of articles, research papers, management cases, book and movie reviews and excerpts from talks at the institute. Prasad Vaidya's article challenges the current definition of the poverty line in India and urges a re-look at the calculation formula. Swati Koul proposes an idea for enhancing the experience for visually challenged people in virtual environments, and Vaibhav Kher talks of the emerging social, economic and political risks and the ways to convert them into opportunities. Anshuman Gautam, et al, propose a new framework for evaluating business at the group level, while two other papers by Hari Iyer and Pooja Shrivastava provide statistical models for estimating mortality rate of a population.
The case on the National Rural Employment Guarantee Scheme (NREGS) by N.V. Satya Dutt brings a social perspective to the journal. Piyush Guilani's case outlines the transformation of Air Deccan through adoption of IT, while Pooja Shirwaikar, talks of adherence to ethical practices at Deloitte in her case. Two leaders from academia and industry, viz., Dr. T.V. Rao, founder president of the National HRD Network, and Mr. C. Devdas Nair, Customer Care Associate and Head, Supply Chain & Mission Control at Shoppers' Stop, share their views on various topics at the institute. 'The Ascent of Money' by Niall Ferguson is reviewed by Hari Iyer while Abhishek Goud reviews Dheeraj Sinha's 'Consumer India: Inside the Indian Mind and Wallet'. Rahul Unnikrishnan interprets the movie 'Moneyball' from the management perspective.
I hope reading this journal gives you fresh ideas and perspectives in management. I look forward to your feedback on this issue and suggestions for the future.
Hari IyerEditor in Chief
Contents
Articles
Papers
Management Cases
Leaders Speak
Book Reviews
Movie Reviews
Ÿ
Ÿ
Ÿ
Ÿ Causes of Infant Mortality - A Cross Country Analysis - Pooja Shrivastava
Ÿ The Impact of Education, Income Inequality and Primary Healthcare on Mortality
Rate - An Empirical Study of US Census Data - Hari Iyer
Ÿ Taming the Future - A Framework to Analyse Businesses at the Group Level
- Anshuman Gautam
Ÿ MGNREGS in Andhra Pradesh: Social Transformation through e-commerce
- N.V. Satya Dutt, Kirthiga Sridhar and Shruti Parthasarathy
Ÿ
Ÿ Ethics in Action - Pooja Shirwaikar
Ÿ The Need for Social Transformation in Corporate India - Abhishek Goud
Ÿ Supply Chain Initiatives at Shoppers Stop - Abhineet Rawat
Ÿ The Ascent of Money - A Review - Hari Iyer
Ÿ Consumer India - Inside the Indian Mind and Wallet - Abhishek Goud
Ÿ ‘Moneyball’ and Management - Rahul Unnikrishnan
The Poverty Line Controversy - Is the Current Definition Faulty? - Prasad Vaidya
Second Life - How to Provide a Better Virtual Experience for Visually Challenged
People? - Swati Koul
Emerging Risks - Icebergs in the Global Socio-Economic Ocean - Vaibhav Kher
Air Deccan: IT's in the Air - Piyush Guilani
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The Poverty Line ControversyIs the Current Definition Faulty?Prasad Vaidya (PGDM 2010-12 Marketing)
This article aims to define the poverty line as laid down by the government, and its misinterpretation by the citizens of the country. The methodology used is to refer to the Minimum Daily Dietary Requirements for a person as specified by the Food and Agriculture Organization (FAO) in 2008 and the NSSO survey of 2004-05 for benchmarking against the existing consumption by Indians. Defending the absolute threshold in India is justified by references to the government policies and schemes that take into account the poverty line and those countries that don't. The author makes a quiet plea to the public, the government and the politicians to look beyond the apparent illusion that is the poverty line and instead focus on implementation of development programs.
“YOU ARE POOR, YOU ARE NOT!” does it make a subjective comment that any person even marginally above this line is living a perfect life.
The issue of a poverty line definition has gripped the The objective of drawing a line is to see how many people have risen above it over a period of time. This minds of all strata of people. One can hear discussions objective makes it impossible to move away from the on this issue from street-side tea stalls to high-tea old definition, as any major changes in the mode of events. Public perception that the planning commission calculation will make the poverty line historically has made a mockery of poverty has been heightened by incomparable. The Government of India draws a the Rs. 32 per day representation of the original separate Food Security Bill to which almost 96% of the affidavit. While this represents the very argumentative Social Benefit Schemes are linked and which defines side of the Indian populace, the concept of poverty line almost 41% of the population as beneficiary. Hence the
remains elusive to many. The poverty line in the benefit of these schemes is spread over a much wider
definition, calculation and suggested modifications target population than defined by the Poverty Line.
need a closer look. Only about 4-5 schemes such as pension, total sanitation campaign, national social benefit scheme, The poverty line, in its present form, is an economic state subsidies for kerosene etc. are linked to Poverty indicator among many others, indicating the equitable Line, others are not.distribution of a country's economic progress. First
established in the 1970s, the poverty line has been Nevertheless, a huge amount of time, energy, updated every decade by taking into account the manpower and money are invested in calculating the inflationary pressures and rising consumer expenditure poverty line and hence it is only sensible to have a on different goods and services. By checking the exact uniform definition which will serve the purpose of both percentage of people that lie below this benchmark, one economic monitoring and allotment for social benefit can see whether economic growth has trickled down to schemes. the country's underprivileged as well. In fact, about
70% of Indians lay below this line in 1970 and 32% India's GDP has grown exponentially after the 1990s, remain so even today. Rather than stirring a hue and cry and hence, benchmarking of India's economic progress on the definition of poverty line, it is more important to in the post-liberalization era is more logical. Even the debate and discuss the past practices which led to this Tendulkar Committee report, which has been used as fall in percentage and how they could be strengthened the basis for calculation of poverty line by the Planning to make the reduction even faster.Commission, has documented some preliminary work for re-estimation of poverty lines after the 1990s with a Talking of the confusion created over the issue, let's modified mode of calculation.clarify the conceptual understanding on the poverty
line. As per the affidavit submitted by the Planning Here some light has to be thrown on the methodology Commission to the Supreme Court, a family of 5 of calculation of poverty lines and the suggested spending less than Rs. 4824 per month in urban areas, changes in it. The calculations are based on the or less than Rs. 3905 per month in rural areas is defined nationwide survey conducted by National Sample to be Below Poverty Line. The affidavit neither makes Survey Organization, which collects consumer any reference to the daily expenditure per person, expenditure on various products and services. Certain which has been widely exaggerated through various basic products and services such as Food, Education, media channels to be Rs. 32 per day per person, nor
4
Medical expenses, livelihood expenses, rent etc. are country, whether these people lack essential resources collected together into a Poverty Line Basket and or not. The core of poverty line fixation in this case lies consumer expenditure on it is analyzed. The latest in fixing the threshold percentage. This percentage in poverty line calculation has used the Minimum Daily different European countries and US ranges from 49% Dietary Requirements for a person as specified by the to 60%. There, the poverty threshold is more of an Food and Agriculture Organization (FAO) in 2008 and indicator of income inequality than anything else. Also, the NSSO survey of 2004-05 for benchmarking against since poverty threshold is defined as a percentage of the existing consumption by Indians. By matching the
median consumer expenditure, an automatic minimum dietary requirements (1770 calories per
inflationary correction happens. While such a concept person) with the total expenditure on the products in the
in India will surely throw a huge percentage of people Poverty Line Basket by a family of 5 which meets that
below poverty because of the wide rich-poor divide, it requirement, the poverty line has been set.will be of little use in gauging economic growth
penetration and allotment of beneficiaries for social But there is an anomaly in fixing the minimum dietary benefit schemes.requirements (MDR). The MDR used according to the
specifications of FAO was originally defined for a
sedentary worker whereas the people below poverty
line are mostly involved in heavy work. Even Thus, while India must continue with its policy of considering the work done under the NREGA scheme defining the poverty line based on Poverty Line as the norm for the amount of work done, the MDR will Baskets, the baskets themselves should be modified as be much higher for a person and hence the total detailed earlier and a benchmark should be set from the expenditure of a family of 5 which meets that MDR year 1990. Setting such a comprehensive poverty line (3800 calories per man and 2925 calories per woman, will give a clearer picture of economic progress and its as mentioned in the Food and Nutrition Security Bill benefits to the poor. This will also cut the doubling of released by planning commission on its website) will efforts for calculating the two separate measures.shoot up. The latter MDR is actually used for defining
the Food Security Bill (FSB) beneficiaries and the use While the experiments with living on Rs. 100 per day of the same will benefit in bringing parity between the abound and public insinuations of making a mockery of two measures, i.e. Poverty Line and FSB. the poor get hurled at the Planning Commission, there
is little interest in going behind the apparent facts and Apart from the technical issues of MDR, there is also a finding the objective behind the actions of government need to relook the Poverty Line Basket and allot more officials. Of course, the picture is never black and white product categories and services to it. For example, even and there are bound to be some grey areas in deciding “Entertainment”, as very broadly defined by the NSSO who is poor and who is not. What a poverty eradication in its “2007-08 Household Expenditure Survey”, scheme really needs is an efficient and effective should be considered as a necessary part of personal implementation of the development programs, a sense life, however negligible its share may be in the total of purpose in each responsible officer to see no hungry expenditure of underprivileged people. Such measures face in India and a solidarity shown by all stakeholders: may not drive the poverty line up, but will make it only the public, the government, the systems as well as the more comprehensive in its definition. politicians. Defining who is poor is just the first step.
Having described the poverty line calculations, it is
interesting to note how the same concept is used in
other economies. The Poverty Line definitions in the 1. Report of the Expert Group to Review the US shows similar confusion as well, where the two Methodology for Estimation of Poverty, Govt. of main measures of poverty viz., “Poverty Threshold” India, Planning Commission, under chairmanship of defined by the Census Bureau and “Administrative Prof. Suresh Tendulkar, November 2009guidelines” issued by the Dept. of Health and Human
2. Household Consumer Expenditure in India, 2007-Services do not match. At the same time, US and many 08, National Sample Survey Organization, March other European countries such as France use the 2010“Relative Poverty” line concept (For calculating
Poverty Threshold). A state of “Relative Poverty” 3. Food and Nutritional Security Bill, part of Tenth means “having significantly less access to income and Five Year Plan 2002-2007wealth than other members of society”. Thus, Relative
Poverty encompasses all people below a certain
percentage of median consumer expenditure of the
CONCLUSION
REFERENCES
5
Second LifeHow to Provide a Better Virtual Experiencefor Visually Challenged People?Swati Koul (PGDM 2011-13 Information Management)
This article aims to provide insights into some of the shortcomings of the virtual world software for the aid of visually challenged people. The methodology describes the current features of the virtual experience, and shifts focus from a one way communication to a dialogue based approach between the user and the software by describing the second person in the form of an Avatar. The virtual appearance, communication aspects like tone, accent and actions can be mimicked with the technology in place. Finally the implementation suggestions are stated along with relevance, complexity as well as perceived benefits to the users.
INTRODUCTION
SOLUTION PROPOSED
FEATURES
Companies constantly endeavour to make products
that are usable by the widest possible customer base. As
a logical extension, new products that come into the
market should be such that they are usable by
physically challenged people as well.
the icons on the Second Life client.
Direct conversion from voice to text and vice versa has
been implemented. However for a more intuitive
experience, the context of the environment needs to be
brought to the physically challenged user.
Virtual world software is gradually becoming a reality.
A lot of effort is currently being made to embrace the
virtual world in all aspects of information technology. 1. To associate the tone of an avatar with the nuances of People with disabilities like complete or partial it's physical appearance. (For example, an avatar blindness might find it difficult to use this environment. having a jazzy outfit may have a similar kind of voice The paper tries to propose a solution to provide a better and normal looking avatar may have a plain voice) virtual life experience to people with complete
blindness or partial blindness through Second Life, a 2. To use the mechanism of letting the physically leading online virtual world client [1].challenged user set these associated tones based on
his/her preferences. The problem is not one that can be tackled easily
because of the following reasons. 3. To intersperse the virtual environment's voice along
with the avatar's voice to give a better virtual 1. Second life has features like whisper, shout, etc. that experience. involve emotions or expressions.
4. To make a rich database of sounds available to 2. The voice needs to be determined based on the simulate a virtual environment [2].avatar. (For example, Male/Female)
5. To generate voice based on tags that can be 3. The accent needs to be modified based on the user's associated with a second life environment. For social profile. (For example, geographic location). example, if a virtual environment can be associated
with a pool and a mountain, and these locations are 4. Effective voice modulations need to be implemented tagged with these keywords and voice samples so that the visually challenged user can get a feel of the associated with these tags in the database mentioned actual activity that is happening in the Second Life above, then a new location which does not come with world (For example, if an avatar is flying or jumping)any voice sample for its environment can be easily
dealt with by using the tags that were part of a similar 5. For a visually challenged person, it would be easier location in second life [3].to issue voice commands rather than type them/click
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6. To use voice commands to control the avatar's 1. The user needs to associate an avatar template with a
maneuverability [1]. voice.
7. To associate emotions with voice modulation and 2. The user needs to configure whether he wants
then convert these modulations accordingly to second audible alerts as and when he approaches a location.
life actions like shout, whisper etc. (This will be useful for normal users who do not want
unnecessary audible alerts when they can see where
their avatar is going)
3. The user also needs to configure his second life to be
1. The visually challenged user will be able to associate connected to the voice toolkit which exists on the same
a voice pattern for each avatar template allowing him to host as that of the second life client.
visualize the avatar better.
4. The user has the option to import a set of voice
2. The second life client would come shipped with a samples into the proposed database.
database of voice samples that can be associated with a
virtual environment. This rich database would enable a 5. The user has the option to import the set of tags (geo
real life virtual experience for the visually challenged. tags) which could be made generally available on the
second life server itself.
3. The use of voice commands will enhance the
navigation experience through the environment. The
voice would be interpreted as a command if the user
holds down the mouse button or uses a special voice For each voice input, the second life client tries to
pattern, say the word "command" to mean that the next check whether the command mode is enabled. The
few words should be interpreted as a command [1]. detection of the command mode can be checked by
determining whether a particular mouse key is pressed
4. The user will get audible indicators during or the word “command” is uttered. This issues a
navigation. For example, a welcome message on directive to the second life client to interpret the next
entering a classroom would indicate that he has reached few words as a command. The textual equivalent of the
the classroom which otherwise he may not have command is looked up in a database of commands and
promptly comprehended [2]. the appropriate action is triggered. Some of the
example commands that can be given at this point are
5. After the user approaches the location of his/her jump, fly, talk, whisper, shout etc. There is also a
choice, he/she will use voice to interact with the avatars possibility that navigation commands like “move
in the surrounding space. right” are issued which would trigger the second life
client to simulate a right arrow key press. After the
6. The second life client will fetch the surrounding command is processed, the user interface is updated in
avatars' information to simulate the voice as set by the the second life client as per the user's activity.
visually challenged user in his/her preferences as per
step one. Since locations in second life can be tagged, the tags
can be used to generate the appropriate voice stream.
7. The second life client will also alert the visually For example, if a location has tags like water bodies or
challenged user about the proximity of avatars. forests, and there are voice samples that have been
associated with these tags, the corresponding voice
streams will be activated by the second life client.
After arriving at a particular location, the second life
client checks to see if there are any avatars that are in
the vicinity of the user's avatar. Then profile
information of these adjacent avatars is fetched so that The visually challenged user would need to set
it could be used by the second life client to find out following preferences in order to improve his virtual
which user voice template that each avatar belongs to. experience:
This categorization can be done on the following
parameters.
IDEA BEHIND THE PROPOSED FEATURES
IMPLEMENTATION FLOWCHART
IMPLEMENTATION DESIGN OF THE PROPOSED FEATURES
CONFIGURATION DETAILS
7
1. The look and feel of the avatar
2. The profile information of the avatar. For example, 1. White, G.R., Fitzpatrick, G., McAllister, G.,its geographic location information as per the profile “Toward Accessible 3D Virtual Environments forcould be used to generate the accent and features of the the Blind and Visually Impaired”, sussex.ac.uk,voice that needs to be emitted. <http://www.sussex.ac.uk/Users/gw43/publications/
White,%20Gareth%20R.%20Toward%20AccessibleAfter applying the voice decorations for each of the %203D%20Virtual%20Environments%20for%20theadjacent avatars, the second life client can also proceed %20Blind%20and%20Visually%20Impaired.pdf>to construct the voice samples for the location itself.
The flowchart above gives the full implementation 2. wordpress.com, “Second Life Accessibility” details of the idea. < http://twinx45.wordpress.com/>, 2007
3. Axistive, http://www.axistive.com/virtual-worlds-
open-up-to-blind.html,< http://www.axistive.comAn effective mechanism can enhance existing /virtual-worlds-open-up-to-blind.html > technology to provide a better virtual world experience 13th October, 2007for visually challenged users. With the help of audio
aids, they can maneuver the virtual World and interact
with the Avatars of other users. The voice modulation
of Avatar, voice tags in the background, audio
commands and audio indicators will make the tool
user-friendly for visually challenged people.
REFERENCES
CONCLUSION
Start
User logs in
Is command
mode enabled?
SL client captures
voice stream using voice
toolkit
Convert voice to text
Lookup command directory
based on text
Command is triggered in
SL client
UI is updated
along with
audible hints
Audible alerts given as per tags
Fetch avatar template
Are avatars present
in vicinity ?
Reset voice modulation
for each adjacent avatar
Send feed of environment
voice sample to the main voice stream
Has any avatar
communicated ?
Fetch pitch, loudness and
other emotion params
Convert text/voice to appropriate tone
Feed to main voice channel
Is more communication
required ?
Log out
Stop
Y
A
Y
N
N Y
A
Enable the command
mode
8
Emerging RisksIcebergs in the Global Socio-Economic Ocean
Vaibhav Kher (PGP 2011-13 Operations)
The word “Risk” fetches 1.02 billion hits on Google have a median age of 60 by 2050!
while the word “Opportunity” fetches 1.2 billion. This
observation is symbolic of the equity of the two Demographic risk may lead to reversal of the constructs of human behaviour.demographic dividend which could worsen the fiscal
position of countries due to reduced tax revenues and a
slowdown in Gross Domestic Product (GDP) growth.
The rising working population of the late 20th century This quote by Erica Jong perhaps explains the would now become the rising dependent population to behaviour of a risk taker like China, which still relies on be supported by fewer working people. This inversion United States Treasury Bonds for its surplus reserves of the demographic pyramid would put an increasing despite the latter's poor fiscal position. Already into the
st burden on inclusive governments that support welfare second decade of the 21 century, the world economy, programmes, such as those in Western Europe where after an initial boom period, has gone into a recession the spending on welfare is around 15% of GDP. This and a sovereign debt crisis. A global slowdown looms ratio is expected to rise to an unsustainable level of 40% ahead. This is but one example of the many emerging by 2040 [2]. According to the Organization for risks that seem poised to confront the world in the Economic Cooperation and Development (OECD [2]), coming decades. the gross public pension replacement rate is over 50%
for most of the developed European countries which
are already burdened with over or around 100% debt.
The “Emerging Risks Survey 2010” [1] published by
the Canadian Institute of Actuaries defines emerging Although emerging economies, predominantly in risks as those with little or no historical precedent. The Africa, appear to be sizeable potential markets, socio-
thlate 20 century was characterized by unprecedented economic inequity would render this class of technological advances such as the digital revolution consumers powerless resulting in a zero-sum game. and socio-demographic changes that led to higher Inequity is mainly due to poor infrastructure, economic growth rates. However, this also crystallized unemployment and volatile oil prices. This benefits certain inherent risks which now lie ahead of the neither the global industry nor the people of these current working generation. countries. However, short-sightedness and excessive
emphasis on bottom-lines has rendered the global
industry oblivious to this fact, when actually it should
be developing these markets. For example, when
millions of people are succumbing to preventable and According to the US Census Bureau [2], the world's curable diseases and to malnutrition, it makes one median age is around 29 and is projected to rise to over wonder whether actions like exorbitant prices for 37 by 2050. Germany and Japan already have median patent-protected drugs and speculation on food grains ages in the range of 45, while Hong Kong is projected to in the commodity markets are ethical.
Inversion of the demographic pyramid
“If you don't risk anything you risk even more”
EMERGING RISKS OF THE EARLY ST 21 CENTURY
Social Inequity – “Failure of the Bottom of the
Pyramid”
EMERGING SOCIETAL RISKS
Demographics
The article attempts to describe the emerging risks witnessed in the late 20th century under three broad categories –
economic growth, technological advances and social changes. The inversion of the demographic pyramid and its'
consequences on the dependant population as well as the potential threat to the “bottom of the pyramid” market are
discussed with current examples. The economic growth faces risk of the dollar bubble and lack of consensus on
successor to Kyoto protocol. Political risks in the Arab countries threatening energy security as well as China's State
Capitalism favoring unrealistic expectations are some of the risks discussed that could entail the global economy today
and change the future.
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EMERGING ECONOMIC RISKS
The Dollar Bubble
Unsustainable Economic Growth
The Sino-US Stalemate
EMERGING POLITICAL RISKS
India – Emerging Governance Deficit Risk
The Euro Zone Crisis
The Jasmine Revolution – Political Instability and Oil
Shocks
The Dollar Hegemony
economic risk the world would have to deal with in the
future because the scariest part is that nobody knows
how to react to a possible US default.The Real Estate bubble that triggered the 2008
recession has demonstrated not only the fragility of the With the Kyoto Protocol set to expire in 2013, and no US Economy but also the dependence of the global sight of a global consensus on the road ahead economies on the US. This is just a prelude to the dollar concerning environmental protection, the risk of bubble which has the potential to unleash economic unsustainable growth looms ahead. Global oil devastation upon anyone with exposure to US Treasury consumption is set to cross the 100 million barrels per Bills and other dollar denominated assets. Mounting day (bpd) mark and at 2010 production levels, the public debt & the recent downgrading of the sovereign global oil reserves will reportedly [7] last for about 131 credit rating of the US serve as a clear indication of the years. With absence of formal sustainability most significant emerging economic risk: the world agreements, there is an impending risk of energy has taken the US' solvency for granted, for far too long.shocks, price volatility and reckless growth,
particularly by former non-signatories to the Kyoto US Treasury bills, apparently the most secure Protocol such as the US.investment, have historically attracted the bulk of
excess Chinese reserves, creating a debt fuelled
economy in the US. As of November 2011, China's
holdings of US Treasury Bills were valued at $1.13 In India, the ruling government has come under heavy trillion [3]. With the US federal debt forecast at around fire in the current term for a multitude of scams, some 105% [4] of GDP in 2012 and the US federal budget of which are to the tune of trillions of Indian Rupees (or deficit around 8% [5] of GDP, there is a great risk that a few tens of billion dollars). The prominent ones are the dollar and the US economy may not be able to the “2G Spectrum Scam” and the “Commonwealth support the weight of value placed on them by China & Games Scam”. The former relates to the auctioning of the rest of the world anymore. China, being the biggest 2G mobile telephony spectrum licenses at prices external creditor to the US Treasury, stands to lose if it below market standards. The Comptroller and Auditor starts pulling out of its investments, since the loss of General of India (CAG) estimated the losses to the confidence would erode the value of the dollar and exchequer at 1.76 lakh crore Indian Rupees or US$ hence all dollar-denominated assets. On the other hand, 33.56 billion [8]. The latter scam concerns a variety of if China continues to step up its investment, it risks matters including over-priced contracts, infrastructural increasing its dollar-exposure even more. It's indeed a compromises, delays etc. on account of serious catch-22 situation- like riding a tiger but not knowing corruption by officials of the Games' Organizing how to get off without being eaten [6]. The Committee. The Commonwealth Games Scam became interdependence of China and the US has fueled the a national shame and faced boycott calls & withdrawal dollar bubble and a lot depends on how these two from a few countries, drawing global media attention. economic partners take this relationship forward.These scams have scarred the “India Shining” image
and are becoming major hindrances in India's growth The sovereign debt crisis in the European Currency objectives.Union countries has led to a loss of confidence in the
Euro as the alternate reserve currency to the dollar. In
fact, it is a supplementary cause of increased dollar-2011 was marked with political upheaval and regime demand in spite of the weak structural position of the changes in the Arab world. Till date, governments of US economy. The likelihood of Euro mitigating the risk 3 countries have fallen and many more are on the of excess dollar-exposure now looks bleak.brink. While this appears to be in favour of the
oppressed masses, the lack of political stability & The US Dollar is the world reserve currency, simply credible democracy is a big risk to these countries. because there is no other alternative. Dollar hegemony Fragmented political factions and armed militia make has become the US' biggest disincentive to maintain its matters worse, potentially leading to anarchy and fiscal and monetary discipline. The power of the dollar governance problems. The uncertain geopolitical has become a double-edged sword that has the potential outlook has raised concerns about the potential re-to cut through both the US and the global economy. pricing of risk and the impact on international oil and The dollar bubble is perhaps the greatest emerging
10
gas markets, not to mention bubble creation in other China could focus on domestic consumption to tame its
assets like gold. It is estimated that for every $20 surplus reserves. This would potentially restore the
price increase per crude oil barrel, the world would global trade balance. Sustainable growth, however,
have to forego 1% of GDP [9]. This translation of would require a major commitment from developed
political risk into economic risk is a deadly countries. To counter the implications of a deadlock
consequence especially in times that lie ahead. over environmental agreement by the US, the
European Union could set stringent import regulations
linked with environmental policies, besides the China's state capitalism model [10] has helped it groom imposition of carbon tax which would incentivize the global corporations that have thrived and turned into move towards sustainable growth.big businesses churning out money for the state,
increasing Chinese footprint in global markets. Yet, for Transforming political risk into opportunity is the all its upsides, state capitalism has inherent flaws such toughest. Nevertheless, measures such as the “Lokpal as conflict of interest in regulation, political Bill”, a bill to bring accountability to politicians and interference in business and lack of innovation. bureaucrats, are being proposed and debated in the Moreover with rising per capita income in China and Indian Parliament. This is the right time (just after the emergence of educated youth, the next generation is all scams) to channelize public opinion towards bringing set to demand more freedom, rights and liberty. This is about an anti-corruption bill. The Arab countries on the already visible in the form of protests against the other hand, could be assisted in bringing in a government when the latter introduced internet access democratic and politically stable regime through restrictions. It is likely that imminent risks would be economic aid and other forms of support from soon evident, should the ruling class in China fail to developed economies which could imply oil price address this issue. The credibility of the business stability. China, on the other hand, could capitalize on environment in China would be at stake with serious the success of state owned enterprises (SOEs) by political & economic consequences. disinvesting and strengthening regulation at the same
time to ensure that a free market capitalist disaster such
as the 2008 recession is avoided.
As expressed earlier, every risk comes with an
opportunity. The key lies in transforming the risks into The world, with its emerging risks, may not be the opportunities. world that the current generation would have wished
for. Nevertheless, that's what it will inherit. Will the To counter the demographic risk, countries demographic risk weigh down on the current experiencing the inversion of the demographic generation & will social inequity hamper balanced pyramid need to encourage immigration of skilled & growth? Will the dollar bubble burst & will the world semi-skilled labour. This may result in cultural make a transition to a green economy? Will the assimilation problems in the short term, but would corruption in India, the political turmoil in the Arab prevent the country from going into a phase of world and the changing socio-political environment in slowdown in the long-term. Policies to boost China impact the regional and global economic demographic figures, such as tax-breaks to couples growth? Only time can tell. bearing children could be implemented along the lines
of policies in Germany. To foster social equity, public-
private partnerships could be undertaken in emerging
economies to develop infrastructure. Global 1. Emerging Risks Survey 2010, prepared by Max J.
corporations could chip in to aid this inclusive growth Rudolph, FSA CERA CFA MAAA, Rudolph
by bringing in technology at affordable prices, since Financial Consulting, LLC; sponsored by Joint Risk
they too stand to gain in the long run.Management Section, Society of Actuaries, Casualty
Actuarial Society, Canadian Institute of Actuaries. Capitalizing on dollar bubble risk would require bold
Publication date: Feb 2011moves from both the US and the rest of the world.
China being a major global trade partner could open 2. “Economic Outlook: Beware of demographic
currency swap lines with other large economies to risks” by Alejandra Grindal, to be published in the
reduce dependence on the dollar as the trading January 2012 issue of Euromoney. Abstract of the
currency. The US could swing into savings mode while
Dark Clouds over China's State Capitalism
TRANSFORMING EMERGING RISKS INTO OPPORTUNITIES
SUMMARY
REFERENCES
11
article accessed on Access date: 30-Jan-2012. 112 years of oil reserves
http://www.euromoney.com/Article/2951993/Econo by OPEC countries and 19 years of reserves by non-
mic-outlook-Beware-of-demographic-risks.html OPEC countries (collectively 131 years of global oil
Access date: 25-Jan-2012 reserves).
3. Source: English.news.cn article dated 20-Jan- 8.“Performance Audit Report on the Issue of
2012.http://news.xinhuanet.com/english/china/2012- Licences and Allocation of 2G Spectrum”, by the
01/20/c_131370259.htm Access date: 25-Jan-2012 Department of Telecommunications, Ministry of
Communications and Information Technology,
4. Source: http://www.usgovernmentdebt.us/ Access Government of India, No. 19 of 2010-11
date: 27-Jan-2012
9. “Investment Implications of the evolving Jasmine
5. Source: Revolution”, Analyst report by Fidelity International.
http://www.usgovernmentspending.com/us_deficit Accessed on:
Access date: 27-Jan-2012 http://www.fundsupermart.com/main/articleFiles/web
articles/4950/SG/FID%20MktPersp%20-
6. Quote from Ramalinga Raju's letter to employees %20Jasmine%20-%20Feb11E.pdf Access date: 28-
dated 7-Jan-2009 (ex-Managing Director of former Jan-2012
Satyam Ltd, charged for accounting and other
financial frauds that led to dissolution & subsequent 10.“The visible hand”, Special Report on State
takeover of the original company) Capitalism, The Economist, January 21st 2012
7.Source: OPEC website -
http://www.opec.org/opec_web/en/press_room/179.htm.
12
Causes of Infant Mortality
Pooja Shrivastava (PGDM 2011-13 Finance)
A Cross Country Analysis
The paper attempts to perform a cross country analysis of the correlation between infant mortality and various socio-economic and demographic factors. The methodology adopted essentially consists of using cross country data and running statistical tools on it. The author finds that infant mortality rate is dependent more on health and demographic factors than income for the least developed nations, and on both for the developing nations. Income and health related factors do not seem to significantly affect IMR in developed nations.
INTRODUCTION
LITERATURE SURVEY
BACKGROUND
work. A similar situation is seen within India. Here,
Kerala, with a low per capita income has exceptionally
low IMR but Punjab, with a much higher per capita Infant Mortality Rate (IMR), defined as the number of income has a significantly higher IMR [4]. deaths of children before the age of one year for every
thousand live births, is often considered as a summary It is therefore important to clearly understand the indicator of socio-economic development of a country interplay of demographic, economic, and healthcare or region. Systematic demographic data is available for availability factors and devise policies and programs almost all countries for the past several decades. IMR accordingly.has been declining in all countries, although at a
varying pace. Data for 2011 indicates that the IMR
varies between 2.6 for Singapore and 144 for
Afghanistan [1]. A subject as important as this one has naturally been
intensely studied [5][6][7]. One of the more The reduction of IMR is an important policy objective comprehensive works in this area is the publication, for all governments. Towards this end, governments 'The decline of Infant Mortality in Europe – 1800-1950 have committed significant resources for providing – Four National Case Studies' [8] by UNICEF in 1993. education, health care and livelihood support This work highlights the debate on whether the decline programs. Nevertheless, the outcomes of such in IMR is due to economic factors alone or whether programs across regions and nations vary. Thus, there access to preventive and curative healthcare is also an is still a running debate on both the cause of infant important factor.mortality and the best strategy for reducing it.
The accepted view is that a host of socio economic The present study is an attempt to capture the variables factors affect IMR. Mosley and Chen (1984) [10] most affecting IMR by analyzing the latest cross grouped the proximate determinants into five country data and to arrive at some specific policy categories, viz. maternal factors (age, parity, birth prescriptions.intervals), hygiene and sanitary factors, availability of
nutrition, availability of preventive healthcare and
accidental or intentional injury. A similar classification
is adopted by Gandotra and Das (1988) [11]. Pandey, At the turn of the 19th century, infant mortality showed et. al. (1998) [12] considered mother's literacy and the a rapid decline in Europe. This decline was broadly child's sex also as possible variables. associated with a general rise in living standards. By
the 1950s, the IMR for most of Europe varied between Another study by Dr. Mohamed Salih Mahfouz, et al, 30 and 50. Data is available for almost all the countries [13] has considered child immunization as one of the from the 1950s [2], [3].factors. Shruti Kapoor[14] analysed district level data
in India to find that female literacy had a strongly IMR is low for the more developed nations but there is beneficial effect on infant mortality. Sunita Kishor & variation among countries within the same income Sulabha Parasuraman [15] discovered that infant group. Thus, while income could be an important mortality was somewhat higher if the mother was variable affecting IMR, there are other factors also at employed either at home or outside for cash. J.
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VanDerslice, B. Popkin, and J. Briscoe [16] have population growth rate, total fertility rate, crude birth
found that breast feeding could positively affect infant rate, crude death rate and life expectancy at birth. This
mortality, especially if sanitation was poor –the reason study also extends the scope of coverage from 152
being that it protected the child from diarrhoea. An countries to 211 and uses more recent data.
Indonesian study [17] too reported that infant mortality
rate was greatly affected by the level of education of the However, this study does not take into consideration
mother. On similar lines, Julie DaVanzo, Jean-Pierre the time series analysis of the data. The data used is a
Habicht, [18] who studied the causes of decline in snapshot in time. Second, the inequalities in income in
infant mortality in Malaysia between 1946 and 1975, the various nations considered, which can be addressed
concluded that mothers' education and improvement in using the Gini Index have not been considered to due
water and sanitation were the main causes for the lack of consistent data for the entire sample. Third, the
improvement in IMR. However, it is found that a size of the country has not been considered as a
change in breast feeding habits significantly offsets parameter directly, though we have taken population as
such gains. a major influencing factor. These limitations could be
addressed in further studies.
In their study of state level infant mortality in India,
F.Ram, et al, [19] concluded that mothers' education is The data on the demographic and economic parameters
the most significant determinant of infant and child was obtained for 211 countries from the CIA –The
mortality. Mizanur Rahman , et al, [20] found that world Fact book, 2011 [1] and the United Nations
neonatal mortality (death within 28 days) was not Development Programme website [9].
affected by either access to latrines or size of the
household, but post neonatal mortality (death between Since the number of countries considered is large and
28 days and 11 months) was very significantly affected they have diverse characteristics, this study aims to
by access to latrines and also on whether the household investigate whether any patterns or groups can be
size was more than 10. Quamrul Hasan, et al, [21] observed in the data, and further, to discover the
inferred from their study that mothers' education, dependence of IMR on the selected demographic
sanitation and electrification were an absolute must for factors.
a quick decline in infant mortality. John M. Shandra , et
al, [22] found through a panel regression of data from For the study, the following statistical methods were
59 countries that multinational corporation penetration employed:
could adversely affect infant mortality, especially in
countries with weak democracies. 1. Cluster Analysis: It was desirable to see if the data
could be clustered into more homogenous groups or
Schell CO, et al, [23] have concluded that extrapolating some pattern could be observed.
health strategies across income groups could be
inappropriate as the causes for infant mortality may 2. Factor Analysis: It helped segregate variables that
vary significantly across nations. They found that the were highly correlated, reducing the number of
per capita public spending on health did not correlate independent variables that had to be regressed.
strongly with IMR and there could be significant
advantages to be gained from improved female 3. Stepwise Linear Regression: The independent
education in low income countries. variables and factors were tested to see whether they
enter the model.
This study is based on the work of Schell CO, et al. Taking Infant Mortality Rate (IMR) as the dependent
(2003) [23]. The income levels are represented by GDP variable, a cluster analysis (using Wards method) was
per capita, electricity consumption per capita, and carried out on the above mentioned variables for all the
mobile users per thousand population. The educational 211 countries. This was done due to the large number of
attainments of mothers are represented by mean years cases and high variability of the data.
of education. In addition to these parameters, this study
also considers the impact of factors relating to
population growth, which have not been included in
their study. These parameters are population,
DATA COLLECTION AND METHODOLOGY MODEL BUILDING AND FINDINGS
14
CLUSTER ANALYSIS OUTPUT
FACTOR ANALYSIS OUTPUT
The following points were observed:
· Data got neatly divided into three more or less
homogenous groups representing the least
developed, developing and the developed
countries.
· It is seen by analyzing the range and the mean
for the variables that there is very minimal
overlap among the three clusters with respect
to each of the variables. Thus the variables
selected are seen to go together, giving a
multidimensional view of development.
As these clusters represented a very natural
classification of the countries according to their
development, we retained the number of clusters at 3,
despite the first cluster (containing developed
countries) having relatively lower number of countries.
The second step was to consider a factor analysis for the
10 independent variables for each cluster. This was
done independently for each cluster to investigate
cluster specific correlations.
The following points emerged from the factor analysis
of each cluster
· The ratio of cases to variables was more than
the required 5:1, except for the first cluster of
least developed nations. This was taken as an
15
exception in order to maintain the natural
clustering of data. Here, less than 50 cases Two factors were formed with factor 1 including
were taken, since the variables are birth_rt, and TFR, factor 2 being death_rt,
significantly correlated a factor analysis was mean_yrs_edu & pop_grwth_rte.
expected to reveal significant grouping. The The variables rejected by factor analysis viz.
results of the analysis bear this out. population, LEB and GDP_ppp, mobile_usage, and
electricity_consumption and the two factors were
· It was ensured that the correlation coefficient considered for the step wise regression.
was greater than 0.3 for atleast 2 variables.
· Bartlett's test of sphericity was done to check if
the significance value (p- value) was
satisfactory.
· Overall Measure of Sample Adequacy (MSA)
was checked to be greater than 0.5.
· MSA values for each variable from the Anti
Image correlation matrix was investigated to
make sure that they are above 0.5. Then the
value of communality for the variables was
observed to check if they were above 0.5. Three factors were formed with factor 1 being
GDP_ppp, mobile usage & electricity_consumption,
· The number of optimal factors was found factor 2 being birth_rt, TFR, and pop_grwth_rte, and
using Eigen Values. factor 3 being death_rt, and LEB .
· A rotated component matrix was used to The variables rejected by factor analysis viz.
indicate the components of various factors. Population and mean_yrs_edu and the three factors
The loading of each variable in a particular were considered for the step wise regression.
factor was ensured to be greater than 0.4
Three factors were formed with factor 1 including
birth_rt, death_rt and TFR, factor 2 being
mobile_usage,& electricity_consumption and factor 3
being mean_yrs_edu and population.
The three variables rejected by factor analysis, viz.
pop_grwth_rte, LEB and GDP_ppp and the three
factors were considered for the step wise regression
A step wise regression was run on the variables after the
factor analysis with acceptance criteria of 5% to enter
the model. The null hypothesis and alternate hypothesis
were as follows:
H : The independent variables and factors 0
mentioned above do not have explanatory power over the dependent variable, IMR.
H : The independent variables and factors are 1
capable of explaining the variation in the dependent
variable.
CLUSTER II: DEVELOPED NATIONS
CLUSTER III: DEVELOPING NATIONS
CLUSTER 1: LEAST DEVELOPED NATIONS
STEPWISE REGRESSION OUTPUT
16
For the cluster 1, the regression model can be expressed correlation though, is weak as this group represents the
as developed nations where systematic causes of IMR
have been adequately addressed leaving the random
IMR = 94.1574 + 4.5791* Factor1 - factors more significant.
7.7690*Popultion_grwth_rt - 0.0503*Factor2-
1.3935 * LEB For cluster 3, the regression model can be expressed as
Where IMR= 73.3706 - 0.0026 * Factor1 + 0.0053 * Factor 3
+ 1.6700* Factor 2 - 1.2413 * Mean_yrs_edu
Factor1:0.316891*Birth_rt+0.405734*Death_rt+0.27
7375*TFR Where
Factor2: Factor1:
0.290376*Mobile_usage+0.709624*Electrical_consu 0.344325* GDP_ppp + 0.291217 * Mobile_usage +
mption 0.364458 * electricity_per Cap
Factor 2:
0.30528*Birth_rt + 0.294842 * TFR +0.399878 *
Pop_grwth
Factor 3:
109.4404 * Death_rt -108.44 * LEB
Thus we see that, IMR is positively correlated with
Birth Rate, Death Rate and TFR and negatively
correlated with population growth, mobile usage and
electrical consumption. This seems to show that within
LDCs, correlation of IMR with health and
demography related factors affect IMR more than
income related factors.
It is seen that IMR is positively correlated with Birth For the cluster 2, the regression model can be expressed Rate, TFR, Population growth and Death Rate and as negatively correlated with all other factors. The
regression equation for this cluster shows a direct IMR = 50.25725 + 0.9358* Factor1 - 0.5235* LEB - dependency on GDP per capita and mean_yrs of 0.0001*GDP_ppp - 0.3152* Factor 2
education. These are middle income countries and both
demographic and income related factors have an Where
impact on the IMR.Factor 1:
0.490078* Birth_rt + 0.509922* TFR
Factor 2:
0.647155* Death_rt + 0.994655*mean_yrs_edu -
0.64181*Pop_grwth The IMR for the countries in cluster 1 (least developed
Countries) is pretty high. In these countries the
dispersion around the mean is not so much related to
income related factors as much as health and
demographic factors. Thus, an LDC can achieve
reduction in IMR by focusing on health and education
parameters.
The countries in cluster 3 (middle income countries) We see that IMR is positively correlated with Birth show an intermediate IMR. The dispersion of the IMR Rate, TFR and population growth, but negatively with about the mean depends upon the health, demography all other variables. The signs are as expected. The and income related factors. Thus, to reduce IMR
CONCLUSION AND POLICY PRESCRIPTION
17
further, they may need to look into health and education
on one hand, and income and livelihood issues on the
other. The countries in cluster 2 are developed
countries with low IMR. As systematic factors have
already been addressed here, IMR seems to be a little
random and weakly correlated with health, education
and income related factors. Further reductions may be
difficult to achieve in this case.
10. Mosley, W.H., and Chen, L.C, “An Analytical
Framework for the Study of Child Survival in
Developing Countries.” 1984
11. Gandotra, M.M., and Das, Nayaran, 1988. “Infant
Mortality: An Analysis of Recent Births.” In: Infant
Mortality in India – Differentials and Determinants;
Edited by Anrudh K. Jain and Pravin Visaria, Sage
Publications, New Delhi, 1988
REFERENCES12. Pandey, Arvind; Choe, Minja Kim; Luther
Norman Y.; Sahu, Damoder; and Jagdish Chand, 1. The CIA –The World Fact Book available online at 1998. “Infant and Child Mortality in India”, National https://www.cia.gov/library/publications/the-Family Health Survey Subject Reports Number 11, worldfactbook/rankorder/ 2091rank.html accessed IIPS Mumbai12 April 2012.
13. Level and Determinants of Infant and Child 2. Indicators and facts about IMR across the world Mortality in Malakal Town – Southern Sudan available online at available at http://www.sjph.net.sd/files/vol4i2/SJPH-http://www.indexmundi.com/facts/indicators/SP.DYNvol4i2-p250-255.pdf accessed 12 May 2012..IMRT.IN accessed 12 May 2012.
14. Shruti Kapoor; “Infant Mortality Rates in India: 3. List of IMR country wise available at District Level” available online at http://en.wikipedia.org/wiki/List_of_countries_by_inhttp://www.isid.ac.in/~pu/conference/dec_10_conf/Pafant_mortality_rate pers/ShrutiKapoor.pdf accessed 14 May 2012 accessed 15 May 2012.
15. Sunita Kishor & Sulabha Parasuraman; “Mother's 4. SRS Bulletin Volume 46 No 1 available online at Employment and Infant and Child Mortality in India” http://pib.nic.in/archieve/others/2012/feb/d20120201available online at 02.pdf accessed 15 May 2012http://scholarspace.manoa.hawaii.edu/bitstream/handl
e/10125/3474/NFHSsubjrpt008.pdf?sequence=1 5. Poverty, nutrition and mortality: A comparative accessed 14 May 2012perspective available online at
http://www.cicred.org/Eng/Publications/pdf/Trivandr16. J. VanDerslice, B. Popkin, and J. Briscoe; um_LIVRE_SHS_200208_def.pdf accessed 17 May “Drinking-water quality, sanitation, and breast-2012feeding: their interactive effects on infant health.”
6. Relationships between water, sanitation and infant, 17. “Infant and Child Mortality” available online at child, and maternal mortality. Environmental Health http://www.measuredhs.com/pubs/pdf/FR147/10chap2012, 11:4 doi:10.1186/1476-069X-11-4 Published: ter10.pdf accessed 16 May 201227 January 2012
18. Julie DaVanzo and Jean-Pierre Habicht; “ Infant 7.Godelieve Masuy-Strooban; “The determinants of Mortality Decline in Malaysia” Rand publication, infant mortality: how far are conceptual frameworks 1946-1975really modelled?”
19. F. Ram, S.K. Mohanty, Usha Ram; “Progress and 8. Carlo A. Corsini and Pier Paolo Viazzo; “The Prospects of Millenium Development Goals in decline of Infant Mortality in Europe – 1800-1950 – India.” Available online at Four National Case Studies” available online www.iipsindia.org/pdf/a08mohanty_report.pdf http://www.unicef-accessed 17 April 2012irc.org/publications/pdf/hisper_decline_infantmortalit
y.pdf accessed 09 May 201220. Mizanur Rahman; “Impact of environmental
sanitation and crowding on infant mortality in rural 9. www.undp.org.in/ accessed 09 April 2012Bangladesh”, The Lancet : Volume 326, Jul 06, 1985
18
21. Quamrul Hasan Chowdhury , et al,; “Socio- 23. Schell CO , et al,.; “Socioeconomic determinants
economic determinants of neonatal, post neonatal, of infant mortality: a worldwide study of 152 low-,
infant and child mortality”, International Journal of middle-, and high-income countries.” Available
Sociology and Anthropology Vol. 2(6), pp. 118-125, online at
June 2010 http://www.ncbi.nlm.nih.gov/pubmed/17530551
accessed 17 May 2012.
22. John M. Shandra;” Dependency, Democracy, and
Infant Mortality: A quantitative, cross-national
analysis of less developed countries”, Social Science
& Medicine 59 (2004) 321–333
19
The Impact of Education, Income Inequality and Primary Healthcare on Mortality Rate An Empirical Study of US Census DataHari Iyer (PGDM 2011-13 Operations)
This paper studies the causal relationship between mortality rate and social development indicators such as education, income inequality and primary healthcare in the United States. Traditional studies on this subject have focused primarily on the effect of income inequality. Using the methods of factor analysis and linear regression, this author argues for broadening the set of variables under consideration, and concludes that additional variables such as the percentage of population below the poverty line and the number of hospitals in each state are strong predictors of mortality.
INTRODUCTION
LITERATURE SURVEY
BACKGROUND
with different age profiles – for instance, a population with a larger proportion of young people may exhibit lower death rates, and so on. Since the US census data is Mortality rate, or the number of deaths per unit collected periodically, it is important that the data be population in a year, is an important indicator of public standardized to enable comparison across years. One health and human development in a country. The such table of weights is taken from Klein and developed regions of Western Europe, the Schoenborn [2].Scandinavian countries and North America have low
mortality rates and score better on human development Mortality rate has been shown to be strongly associated indices than the rest of the world. It is of interest to with income inequality in the United States. Similar every government to reduce the mortality figure to the reports have confirmed a relation between these extent possible. There are different ways to do this – it variables in the UK and other OECD countries. These could boost spending on public hospitals to provide studies have been used in various policy documents better healthcare, give this money to citizens in the across the world, such as the National Health Strategy form of transfer payments, increase the number of Unit in Australia, the World Bank, the Canadian physicians' training colleges, and so on. Given the Program in Population Health, and the Commission on limited budget, it is of interest to know which factors Social Justice in Britain. Despite the widespread influence mortality rate the most, so that resources can popularity of this hypothesis, doubts have been raised be directed optimally. about the validity and completeness of these studies, i.e., that mortality rate cannot plausibly depend on one This study aims to capture the variables affecting factor alone. Proponents argue that income inequality mortality rate in fifty one US states for the year 2009 is not just a variable, but also an indicator of a number and identify the most important contributing factors. of other factors such as social status, prestige, etc. [3]. This is done by means of a factor analysis and stepwise The present study attempts to bridge this gap in linear regression on the data. US data is chosen since understanding, and identifies some other factors that the US has among the highest income inequality levels may be responsible for a variation in mortality rate.(measured by the Gini coefficient) among the
OECD nations. US data is also standardized and comprehensive, making any regression analysis meaningful.
A large number of studies have confirmed the link between income levels and their distribution and health indicators such as mortality rate, incidence of cardiovascular disease, and physical, psychological Mortality rate is defined as “the ratio of deaths in an and cognitive functioning. Lynch, et al concluded from area to the population of that area, expressed per 1000 their study of population samples in Alameda County, per year.” [1] US mortality data is age adjusted, that is, California that there were significant associations mortality figures for each age range are multiplied with between poverty (measured as the number of times in a pre-determined weights, and the weights add up to 1. range of years that the total household income was less Age adjustment is necessary to compare populations
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than twice the federal poverty level for that year) and inequality as well as primary care (measured by the measures of functional status (in terms of activities of number of physicians per unit population) as the daily living, physical performance scale, etc.), independent variables. Significant explanatory power psychological functioning (depression, cynical was found for both variables through all the four years hostility and optimism) and cognitive function investigated. The relation persisted after additional (difficulties in remembering things, paying attention, measures such as health insurance, per capita income, etc.) [4]. Lynch and Kaplan argue that apart from education, poverty and minority status were individual characteristics like education or income introduced. However, income inequality ceased to be level, health is affected by social and economic factors an important measure after their inclusion [15].such as inequality of income distribution [5]. Other studies have established a correlation between Muller additionally introduced education, measured by socioeconomic factors and cardiovascular disease [6, the percentage of people aged 18 years or higher 7], while yet others have verified the link between these without a high school diploma, as a variable, and found factors and mortality rate, both in the US and that the effect of income inequality disappeared when internationally [8-11]. education was added to the regression model. He
argued that lack of high school education itself The seminal study in this field was conducted by accounted for the income inequality effect [16].Wilkinson, who hypothesized that variations in
mortality rate could be explained by socio-economic Others have cautioned against excessive reliance on measures such as occupational class, education, income inequality as a sole explanation for mortality. unemployment, etc. As a proxy for these measures, he Judge argues that it is the “product of many influences, tested the explanatory power of gross national product which probably interact over long periods of time.” He (GNP) per capita and income inequality on mortality. suggests using more sophisticated methods and more Data was taken for nine European and North American factors [17]. Bishop, et al suggest that family income countries. He concluded that while GNP per capita had may not be as good a measure as individual income as no significant effect on mortality beyond the level of $ internationally, family sizes vary with change in 5000 per person, the relative (rather than absolute) income levels, making comparisons difficult [18]. income helped explain a significant amount of Gravelle opines that the relationship between income variation in mortality rate [12]. inequality and health may simply be a statistical
artifact, and that absolute income is sufficient to Similar research work carried out in the United States explain variations in population health [19].Wolfson, and Canada confirms this correlation. Lynch, et al, have et al counter this by saying that the strength of studied the variation of mortality with different association between income inequality and mortality measures of income inequality such as Gini coefficient, extends beyond what can be explained as a statistical Theil entropy index, Atkinson deprivation index, and artifact [20].so on in US metropolitan areas. Data for 283
metropolitan areas was taken from the 1990 US census. Most of the studies mentioned here suffer from poor It emerged that metropolitan areas that exhibited high adjusted R-square values of the statistical model, i.e., income inequality also had higher age-adjusted the explanatory power of the independent variables is mortality rates [13]. not sufficient. The typical range of adjusted R-square
values is between 30 and 40% (see Conclusion section Ross, et al, performed a similar analysis with data for for details). This indicates a need to include some 10 Canadian provinces, the 50 US states as well as 53 additional explanatory variables apart from measures Canadian and 282 US metropolitan areas. They of income inequality to account for variations in concluded that while Canada bucked the trend of mortality rate. While Shi, et al attempted to consider income inequality accounting for variation in other indicators of social status and inclusion, their mortality, the United States showed a strong study did produce a sufficiently high R-square value. correlation between the two, both in provincial as well This indicates the need to further expand the scope of as the metropolitan areas. They surmised that Canada the variables considered. The present study aims to did not exhibit similar tendencies because of “the increase the explanatory power of the model by different ways in which social and economic resources considering additional variables like education levels, are distributed in Canada and the United States” [14]. quality of primary care and government transfer Shi, et al investigated the existence of a similar payments to individuals. While some of these variables relationship in the United States for four time periods, have been found significant, others have not viz., 1980, 1985, 1990 and 1995, taking income contributed to model formation. This study produces an
21
improvement in the R-square value and paves the way regression are formed as follows:
to a better understanding of the causes of mortality. Null hypothesis H : Each of the independent variables, 0
viz., HSgrad, BachDegree, Gini, BPL, Physicians,
DATA COLLECTION AND Hospitals and TransPayment, do not have explanatory
METHODOLOGY power over the dependent variable, viz., age adjusted
mortality rate per 1000.
The present study draws principally on the work of
Muller and Shi, et al, and considers variables that Alternate hypothesis H : The independent variables are 1
broadly fall under the following categories (concepts) capable of explaining the variation in mortality rate.
as being responsible for accounting for variation in age
adjusted mortality per 1000 population (which is the MODEL BUILDING AND FINDINGSdependent variable):
1. Education levels The dependent variable is the age adjusted mortality
2. Income and income inequality rate. The remaining 7 independent variables are
3. Quality of primary care considered for factor analysis. The total number of
cases considered is 51 (one case for each American
Data for the study is taken from the 2009 US census state).
[21]. Data for 51 states form the 'rows' of the data table.
The US Census Bureau uses the American Community FACTOR ANALYSIS OUTPUTSurvey (ACS), whereby data is collected continuously
using independent monthly samples via three modes – The following salient features emerge from running a
mails, telephone calls and personal visits. The sample factor analysis in SPSS:
for this survey is generated from the American national Ÿ The ratio of cases to variables is 7.28:1, which is
Master Address File (MAF), which is the Census more than the required ratio of 5:1
Bureau's official record of living quarters (which
includes housing units and group quarters) and some Ÿ Bartlett's test of sphericity has a significance of
non-residential units. For the American Community 0.000, indicating that the factor analysis is valid (see
Survey and the Puerto Rico Community Survey Table 1)
(PRCS), two separate samples are taken – Housing
Unit (HU) addresses and persons in Group Quarters Table 1
(GQ). For Hus, address samples are taken from each of
the 3142 counties of the US and the 78 municipalities of
Puerto Rico, making a total of 3 million HU addresses
annually in the US and 36000 HU addresses in Puerto
Rico. For GQ samples, approximately 2.5% of the
number of residents in GQ facilities is included [22].
Following Judge, excessive reliance on few variables is
avoided. The variables which are derived from the
concepts outlined above are shown in Table 2.
Ÿ Measures of sampling adequacy obtained from anti- The objective of this study is twofold:image correlation shows that all variables have 1. To investigate whether the correlations worked out MSA values greater than 0.5, meaning they are by earlier researchers up to 1995 hold true for 2009 suitable for factor formation. However, values of data, given the demographic changes; andcommunality for two variables, viz., Hospitals and
TransPayment, are below 0.5. The one with the 2. To investigate whether additional variables outlined lower value, viz., TransPayment, is chosen for above have any effect in predicting mortality rateremoval first. In the next run, only Hospitals has
communality less than 0.5, and hence it is removed. To carry out this study, factor analysis and stepwise In the third run, all variables have communality linear regression are used. Factor analysis helps club values above 0.5 (see Table 2).variables that are highly correlated, while stepwise
linear regression identifies whether each variable or
factor enters the model or not. A significance level of α
= 5% is used as an acceptance criterion.
The null and alternate hypotheses for stepwise
22
Table 2: Communalities Factor loading values are extracted from SPSS and
(Extraction method is Principal Component Analysis) transferred to an spreadsheet; and are multiplied with
the variable values to form Factor 1 and Factor 2.
The data is now ready for a stepwise regression analysis
with four variables – viz., Hospitals, TransPayments,
Factor 1 (consisting of BPL, Gini and HSgrad) and
Factor 2 (consisting of Physicians and BachDegree).
STEPWISE REGRESSION OUPUT
Stepwise regression is run on two variables and two
factors with acceptance criteria of 5% to enter the
model. The following features are observed:
Ÿ Looking at the Eigenvalues, it is seen that two Ÿ Pearson correlation table shows low correlation components have eigenvalues above 1, indicating between different factors and variables (all the formation of two factors (see Table 3) correlation values below 0.5), meaning that the data
is suitable for regression analysis without the Table 3: Eigenvalues problem of multicollinearity (see Table 5).
(Extraction method is Principal Component Analysis)
Table 5
Ÿ The rotated component matrix indicates that
Physicians and BachDegree form one factor,
i.e.,they are closely related, while the other three
variables, viz., BPL, Gini and HSgrad, form another
factor (see Table 4).
Ÿ Highest adjusted R-square value of 0.458 is Table 4: Rotated component matrix obtained with model 2, which shows that it has
(Extraction Method: Principal Component Analysis. Rotation higher explanatory power that model 1 (see Table 6 Method: Varimax with Kaiser Normalization. Rotation converged for model summary)
in 3 iterations)
Table 6
Ÿ The ANOVA table shows that model 1 has an F
value of 35.236 and model 2 has a value of 22.101.
Both of them have a significance of 0.000,
indicating that the null hypothesis of independent
23
variables having no explanatory power is rejected. graduation rates, percentage unemployed, and so on. This is reflected in the factor formation, in which two measures of income disparity (viz., Gini coefficient and Table 7: ANOVA tablepercentage of population below poverty line) have been found to correlate with education levels.
The other factor consists of the number of physicians per 100,000 population and the percentage of population with a bachelor's degree or higher. While intuitively it may seem that percentage of population with a high school diploma and the percentage with a bachelor's degree should enter the same factor, it must be kept in mind that being a high school graduate by Ÿ The coefficients table indicates that Factor 1 itself guarantees an economic status above the poverty and Hospitals have entered model 2, while line (from US census data, high school graduates' mean TransPayment and Factor 2 have been income in 2009 was $30627 – well above the poverty excluded. Since the constant has a significance line), and further educational attainments have little value of 0.000, unstandardized coefficients are bearing on income inequality, and hence, on mortality to be used in building the regression model (see rate. The association between number of physicians Table 8).and percentage with a bachelor's degree can probably be explained by the fact that educational qualification Table 8: Coefficients and collinearity accounts for higher income, and a greater concentration
statistics for regression modelof physicians can be found in high income areas.
From the regression model, we find that Factor 1, which consists of the percentage of people below poverty line, the Gini coefficient and the percentage that has a high school diploma are highly significant in explaining mortality rate. This validates Muller's findings and introduces an additional important income variable, viz., percentage of people below poverty line, as a predictor of mortality rate. The number of hospitals
Using the coefficients obtained, the regression model in thousands also directly influences the health of the can be expressed as follows: population, and hence, the mortality rate.Mortality rate = 16.048 + 0.088*Factor 1 –
0.003*Hospitals Factor 2 and transfer payments do not enter the regression model. As explained earlier, educational
CONCLUSION attainments beyond the high school diploma do not have a significant effect on income inequality or mortality rate. Surprisingly, contrary to the findings of From factor analysis, it emerges that Hospitals and Shi, et al, the number of physicians per 100,000 TransPayments are independent variables and do not population has no effect on the dependent variable. enter any factor. This is quite intuitive, since transfer This is most likely a result of the fact that difference in payments does not belong to any of the three concepts health care access has already been accounted for by outlined above, and the number of public hospitals has the number of public hospitals. Transfer payments from little correlation with the number of physicians in a the government to citizens occurs through multiple state, or with education or income inequality levels.channels – for instance, through retirement and disability insurance benefits, education and training It is interesting to note that the percentage of people payments, veterans benefits, and so on – leading to a below poverty line, the Gini coefficient and the diffusion of benefit and hence, a weakening of its percentage of population that has a high school explanatory power. Additionally, transfer payments are diploma have entered a single factor, showing that usually not made to immigrants and non-citizens – a these are highly correlated. This is consistent with vulnerable group whose mortality rate is higher than Wilkinson's assertion that income inequality is an average.indicator of a wide range of psycho-social factors.
Lynch, et al, assert that income inequality corresponds The present study has an adjusted R square value of to per capita medical expenditures, high school
24
0.458, meaning that 45.8% of the variation in the Expectancy: a Critical Appraisal”, BMJ, vol. 311,
dependent variable is explained by the independent November 1995.
variables. While an adjusted R-square value of > 0.60 is 4. Lynch, J.W., Kaplan, G.A. and Shema, S.J, usually preferred, a comparison with previously “Cumulative Impact of Sustained Economic Hardship published studies indicates an improvement in this on Physical, Cognitive, Psychological and Social value. The comparison is shown in Table 9.Functioning”, New England Journal of Medicine, vol.
Table 9: Comparison of adjusted R-square values 337, December 1997.
with prior studies
5. Lynch, J.W. and Kaplan, G.A., “Understanding How Inequality in the Distribution of Income Affects Health”, Journal of Health Psychology, vol. 2, 1997.
6. Lynch, J.W., Kaplan, G.A., Cohen, R.D., Tuomilehto, J. and Salonen, J.T., “Do cardiovascular risk factors explain the relation between socioeconomic status, risk of all-cause mortality, cardiovascular mortality, and acute myocardial infarction?”, American Journal of Epidemiology, vol. 144, November 1996.
2It is seen that the adjusted R value obtained in this 7. Kaplan, G.A. and Keil, J.E., “Socioeconomic study is better than most of the previous published data, factors and cardiovascular disease: a review of the indicating that the current research is valid. literature”, Circulation, vol. 88, October 1993.The key takeaways from this study can be summed up as follows: 8. van Doorslaer, E., Wagstaff, A., Bleichrodt, H.,
Calonge, S., Gerdtham, U.G., Gerfin, M., Geurts, J., What is already known: Gross, L., Häkkinen, U., Leu, R.E., O'Donnell, O., Income inequality, education levels and primary care Propper, C., Puffer, F., Rodríguez, M., Sundberg, G. availability are strongly correlated with mortality rate and Winkelhake, O., “Income-related inequalities in in the US and other OECD countries in data leading up health: some international comparisons”, Journal of to 1995. Health Economics, vol. 16, 1997.
What this study adds: 9. Haam, M.N. and Kaplan, G.A, “The Contribution The conclusions of prior studies are largely valid for of Socioeconomic Position to Minority Health”, 2009 data also. The percentage of population below Report of the Secretary's Task Force on Black and poverty line and number of hospitals in each state are Minority Health. Vol. 2, 1985, available online at strong predictors of mortality rate. The number of http://deepblue.lib.umich.edu/handle/2027.42/51552,
stphysicians per 100,000 people, percentage of accessed 31 May 2012.population with a bachelor's degree and transfer payments from government to individuals do not affect 10. Kaplan, G.A., Pamuk, E.R., Lynch, J.W., Cohen, mortality rate R.D. and Balfour, J.L, “Inequality in income and
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1.Princeton WordNet, 11. Kennedy, B.P., Kawachiaki, I.K. and Prothrow-http://wordnetweb.princeton.edu/perl/webwn?s=mort Stith, D, “Income Distribution and Mortality: cross
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R.D., Heck, K.A., Balfour, J.L., and Yen, I.H., “The 3. Judge, K., “Income Distribution and Life
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The Journal of the American Board of Family Department of Economics, Finance and Legal
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Berthelot, J.M., Kaplan, G.A., and Lynch, J.W., Between Population Mortality and Unequal
“Relation between income inequality and mortality Distribution of Income is a Statistical Artefact?”,
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Blacklund, E., “Relation Between Income Inequality
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“International Comparisons Of Income Inequality:
26
Taming the FutureA Framework to Analyse Businesses at the Group LevelAnshuman Gautam (PGDM 2011-13 Operations)
This article attempts to provide a framework for analyzing the capability of business to perform in the future in light of the trends governing the dynamic business environment. The framework developed with some modification can be used to analyze conglomerate performance with an opportunity to compare companies across industries so as to provide strategic thinkers a platform to understand where the business is headed. The Earth Model explains the position of companies in the "layers" of the earth with the core having best performing companies using parameters such as market value and intrinsic value. The 5 As of Strategic Drive further provide a directional viewpoint to the corporate executives on where to take their businesses in the future.
changes, which will be a major factor in determining INTRODUCTIONorganizational success.
The principal purpose of business is to increase 3. Shifting Industry Structure/Corporate Portfolio shareholder value over the long term. For this, building – The McKinsey report “Strategy In An Era businesses need to understand and predict how their Of Global Giants” of 2004 [3] says that the net income operations should be aligned to the environment. This of mega institutions (world's top 150 public companies paper aims to provide a framework to analyze at the end of 2004 based on market capitalization) has environmental changes and the best ways to align increased 3 fold whereas their market capitalization businesses with them. In the process a framework is has grown 6 fold over 1984. This points to a trend not presented, viz., the 5 As of Strategic Drive, which, if only of expansion, but also of corporate portfolio applied in its true sense, will help businesses gauge the building and large businesses using their intellectual changing business landscape and calibrate their and financial assets to acquire smaller companies in a response accordingly. variety of sectors. This phenomenon will accelerate in
the future and affect the operations of businesses.GLOBAL FORCES CHANGING THE BUSINESS LANDSCAPE
4. More Intense backlash against Businesses – The
recent financial crisis and is aftermath have created a The changes that are likely to affect businesses in the backlash against businesses, as witnessed in near future are:movements like 'Occupy Wall Street'. Now more than
ever, companies need to focus on ethics and 1. Growing number of consumers in emerging transparency. In the 2007 McKinsey survey “Acting on economies – The 2011 BCG global challenger report Global Trends”, approximately 60% of executives rate [1] says that the middle class in recently developed social backlash as 'important' or 'somewhat important'. economies will grow to 30% of the world population by This figure has doubtlessly increased after the financial 2020 and to 50% by 2030. Businesses, therefore, would crisis of 2007 and the Euro crisis of 2011-12.need to segment the world into “developed” and
“developing” markets and design focussed plans to 5. Shift of economic activity to emerging economies serve consumers from both the worlds. – This phenomenon, which dominated businesses in
the last 20 years, will continue in the foreseeable future. 2. Increasing role of External Factors – In the 2010 Businesses will constantly look for new opportunities McKinsey global forces survey of more than 1,400 that will be created by the changing geo-political executives [2], 48% are reported to feel that the environment across the world. “Acting on Global environmental factors are affecting their business and a Trends” says that 58 % of the executives felt that the significant 51% say that their company is addressing effect of increasing global labor has had a significant this issue actively. Nearly half the businesses, effect on their business.therefore, are passive in their reaction to environmental
PA
PE
RS
27
6. Increasing communication between social realms Step 1: Measure intrinsic value & market value - and businesses – With the rise of social networking Every firm has value creation for investors as its major and Web 2.0 tools, communication between businesses goal. Measuring value helps to understand the business and society has increased to a great extent. This will put potential of the company extra pressure on businesses to be accountable to the society at large. Step 2: Represent the business on Earth model
(explained further) - This gives a competitive view of THE IDEA the industry and information about the players that
have the ability to acquire and the ones that can be
In light of the above changes, businesses need a acquired.[5]forward looking framework to help analyse their performance. There are two viewpoints from which a Step 3: Apply “5As of strategic drive” (explained framework can be made – one, from the scope of a further) framework to assess whether a conglomerate burgeoning diversified company like ITC Ltd., Tata should continue with a business in its portfolio or move Sons, etc., and two, from the scope of a growing out it.industry attracting a large number of players (like the telecom industry in India). These viewpoints would MEASURING INTRINSIC & MARKET help in understanding the competitive position of the VALUEfirms, where they are at the present and where they want to go. Intrinsic value can be measured through the discounted
cash flow (DCF) method if a company maintains a Thus, the Earth Model is proposed. There are 3 layers – stable debt to equity ratio (D/E). When the company's viz., the core, the mantle and the crust. To fit companies D/E is expected to change then adjusted present value into this model, the Market Value and Intrinsic Value of (APV) can be used. However for companies in the firms are to be calculated. Market value is found out by banking sector where D/E forms an intrinsic part of using the market price of the stock and financial ratios business, methods like capital cash flow or equity cash of the firm, mainly using the DCF (Discounted Cash flow can be used [6]. Market value calculation for Flow) methodology. Intrinsic Value of the firm is found companies that are publicly traded can be done by out by the available cash flow statements of the firms. taking the share price. However, if company is not The Crust consists of companies which have high traded publicly, peer valuation can be used as a proxy.Market Value and low Intrinsic Value. The Core consists of companies high on Intrinsic Value and After that, based on the intrinsic and market values, the Market Value while the Mantle consisting of companies can be plotted on a 2X2 matrix as shown companies having medium market and intrinsic values. below. Post that, to understand the movement of companies within the model, the 5 As of Strategic Drive is proposed. In order to give strategic direction to companies, it is critical to establish the 5 Advantages that a company can leverage– viz., competitive advantage, people advantage, learning advantage, social advantage and risk advantage.
These parameters (the 5 As) may be calculated based on surveys conducted with senior executives across companies who are asked questions with specific rating scales. After plotting these ratings on a normalised scale to eliminate discrepancies; we get an indexed score to compare companies across sectors, whereby a Financial Stability – A company lying in this quadrant diversified portfolio of a conglomerate can be should be considered for potential divestment. As the analysed. A database approach always helps in market value is higher than the intrinsic value of the quantifying a qualitative finding and giving a firm, selling the firm could add synergy benefit to the standardised platform for cross sector comparison of buyer and unlock value for the investors of the
businesses and finally, provides a direction for strategic company being sold[7].movement of companies within the Earth Model framework. Strategic View –Firms that are low on market value but The three step process can be summarized as follows: have a high intrinsic value need to work on their capital
28
market communication. This shows that the firm is not temporary period to create business synergies and raise able to communicate properly to the financial market their intrinsic value. However they must understand about its capacity to generate value [8]. that this state is not going to exist for long and the
market will eventually understand the value adding Core Business – This is the best position for any firm to capacity of these companies. These companies should be in. This shows that the firm is not only investing in also look for potential buyers because it is the best time value adding activities but also communicating well for companies to move out of business, thereby creating with the capital market which is valuing its existence. maximum value for shareholders.Firms with low intrinsic and market value need to move out of the business as they are destroying shareholder The Mantle: This comprises of companies that have a value and the markets are well aware of their actions. relatively low market value and possibly low intrinsic
value. These are the companies that need a strategic After calculation of market value and intrinsic value for drive to move either towards the core or the crust. The themselves and for competitors in the industry, all the best way to decide which direction they should move in competitors may be represented on the Earth model. will depend on the strategic drive that exists in these
companies.THE EARTH MODEL
For instance, based on calculations of the intrinsic & market value [10] of consumer product companies of
the TATA group, the following earth model was developed:
This model will help the managers of a conglomerate understand which businesses it makes sense to be in and At this juncture, managers of the Tata group can ask a in which businesses there is a potential for divestment. question, “Is it the right time to divest Mount Everest For businesses in the future, divestment should also be mineral water?” Reaching a conclusion only on the considered as a value adding activity [9]. While striving basis of earth model is taking a narrow view of for growth, companies enter many businesses that business, and further analysis is required. This requires never add value to their portfolio in the first place. a new framework, viz., the 5 As of strategic drive.
EARTH MODEL EXPLAINED 5 A'S OF STRATEGIC DRIVE
The Core: The businesses that lie in the core are the Strategic Drive is the force that decides the direction of ones that not only create value for their investors but movement of companies within the earth model so that also communicate well with the market. These they either move towards the core or to the crust. This businesses are in the best position to take advantage of strategic drive is measured on the basis of the innovation, market growth and their knowledge base. advantages that the company enjoys in that particular These will be the companies that will look for potential sector. The advantages that will decide the future of the M&As in the sector. company in that sector are given below. These
advantages are hereby referred to as the 5As of The Crust: The companies that are in crust are in need Strategic Drive.of working on their value creation. They need to take advantage of the high market value that exists for a
TITAN INDUSTRIESMkt Value – 243.45, EPS- 6.76,
Intrinsic Value – 408.98
TATA GLOBAL BREVERAGESMkt Value – 119.35, EPS – 6.29,
Intrinsic Value – 179.27
TRENT LIMITEDMkt Value – 907.30, EPS – 13.49,
Intrinsic value – 654.27
MOUNT EVEREST MINERAL WATERMkt Value – 99.65, EPS – -3.48, Intrinsic
Value - NEGATIVE
Crust : Companies with High Market Value & Low Intrinsic ValueForms the Financial Portfolio..
Core : Companies with High market Value & High Intrinsic ValueForms the Core of Portfolio..
Mantle : Companies with lower Market & Intrinsic Values and which are comparableNeeds Strategic Direction..
29
2. How much do currency & exchange rates affect the sector?
3. How much does an economic slowdown affect the sector?
4. How much does a financial market crisis affect the sector?
5. How much do pandemics affect the sector?
6. How much does a raw material price rise affect the sector?
COMPETITIVE ADVANTAGE (TO 7. How much does a natural disaster affect the sector?MAINTAIN OR INCREASE MARKET SHARE) 8. How much does geographical instability affect the The questions [11] that businesses should ask to sector?understand the competitive advantage of their existence are: LEARNING ADVANTAGE (TO REDUCE
COST & GAIN CUSTOMER BASE)1. How much does the improvement of capability of competitors affect their relative position? The market/book ratio of top 150 companies has
increased significantly in comparison to the same ratio 2. How much does the entry of low cost competitors for top 2000 companies [12]. This shows that affect their relative position? businesses are becoming more valuable on the basis of
the intellectual assets that they have in the field of 3. How does the number of competitors affect their operation. This trend makes learning advantage one of relative position? the critical parameters for success in the future. So a
company needs to understand whether it has the 4. How does the growth of competitors affect their
capability to create intellectual assets. relative position?
5. How does an innovative market entrant affect their relative position?
6. How does a regulatory change affect their relative position?
7. What is their consumer awareness index?
8. What is the growth potential that exists in the sector?
RISK ADVANTAGE (TO CATER TO OPPORTUNITIES IN THE MARKET)
Managing risk is key to corporate success in a fast moving, increasingly competitive global environment. Strategic risk planning offers a method to identify opportunities that exist for a particular market in the future. The questions that business should ask to understand the competitive advantage of their existence are:
1. How much do regulatory changes affect the sector?
0%
20%
40%
60%
80%
100%
Equity of Top 2000 Companies
Book value
Remaining mkt value
0%
20%
40%
60%
80%
100%
Equity of Top 150 Companies
Book value
Remaining mkt value
30
The questions that businesses should ask to understand The questions that businesses should ask to understand the learning advantage of their existence are: the people advantage of their existence are:
1. What is the company's contribution to an employee's 1. How much has the capacity to innovate increased in learning opportunities?the company?
2. What is the flow of knowledge to and from the 2. How much do consumer awareness & knowledge company?exist within the company?
3. What are guiding principles of its operations?3. What is the company's ability to customize a product
or a service? Further to the discussion on Mount Everest mineral
water, it seemed that the company is a candidate for 4. How good is the company in target marketing? divestment. Managers of the group should try to
answer the questions that are discussed in the 5A 5. To what extent do supply chain insights exist within framework. This will give a set of values that decide the the company? either capability of movement of the company towards
the core or potential to move out of the model. Based on 6.To what extent does the company involve the the analysis, the scores for the company on the 5As areconsumer in product development?
SOCIAL ADVANTAGE – (TO ATTAIN SUSTAINABILITY)
** The detailed calculation is outside the scope of this In the wake of the global financial crisis, businesses write-up. The values are worked by writer's analysis of across the world are losing traction with the society, the company as an external agent. which makes this a critical parameter to judge the
future viability of a business. Companies need to make The values show that all the advantage factors, except social responsibility the core value of their operations. risk advantage, for the company are low. The company Companies should not only be proactive in compliance bears a high risk advantage because as the natural with regulatory requirements, but also have a resources across the world are getting scarce, this farsighted vision in ensuring sustainability of business company gives the Tata group a hold over the supply of processes, restoration of biodiversity, and so on. pure water. So divesting may not be a great idea, but the
company does need to work on the other advantages to The questions that businesses should ask to understand move itself towards the core. the social advantage of their existence are:
1. What are the social & ecological costs of doing CONCLUSIONbusiness?
The implementation of the Earth model to formulate 2. What is the level of trust that the company enjoys strategy is highly dependent on the data supporting the among suppliers, customers & vendors? qualitative factors. The first part of the model, viz.,
comparison of intrinsic and market values, comes from 3. What are the social contributions of the company? equity research. The second part, viz., the 5 As of
strategic drive, are calculated based on surveys 4. What is the ability of the company to affect the conducted with senior executives across companies industry ecosystem? who are asked questions, the answers to which have
specific ratings, which are then normalized to enable PEOPLE ADVANTAGE – (TO ATTAIN comparison across companies. Ultimately, this ADAPTABILITY) provides a direction for strategic movement of
companies within the Earth Model framework. This In a world when every tangible capability can be copied approach needs to be conducted every year to by competitors, it's the people who have become a understand how effective the initiatives taken in the company's most important assets. Moreover, to best past year have been and also to assess new use M&As for inorganic growth, companies need to opportunities and risks needing strategic attention that develop people advantage in their portfolio. have developed in the environment.
31
7. Nippa, Michael.,Pidun, Ulrich., and Rubner, REFERENCESHarald.,”Corporate Portfolio Management: Appraising Four 1. “Companies on the Move – Rising Stars From
Rapidly Developing Economies Are Reshaping Global Industries”, BCG Global Report, January 2011.
2. Bisson, Peter, Stephenson, Elizabeth, and Viguerie, S.Patrick,“Global Forces – An Introduction”, McKinsey Quarterly, June 2010.
3. Bryan, Lawell L., Zanini, Michele., ”Strategy in an era of global giants”, McKinsey Quarterly, November 2005.
4. Koller, Tim., Goedhart, Marc., andWessels David., “Valuation – Measuring And Managing The Value Of Companies”, Wiley Finance, 2005.
5. D'silva, Vijay.,Fellan, Bob., and Mehta, Ashit.,“Enduring Ideas – The Strategic Control Map”, McKinsey Quarterly, July 2010.
6. Damodaran, Aswath ., ”Security Analysis For Investment And Corporate Finance”, Wiley Finance, 2006.
Decades of Academic Research”, BCG Perspectives, Volume 25, Number 4, November 2011.
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MGNREGS in Andhra PradeshSocial Transformation through e-commerceN.V. Satya Dutt (PGDM 2010-12 Information Management), Kirthiga Sridhar (PGDM 2010-12 Information Management) and Shruti Parthasarathy (PGDM 2010-12, Operations).
“Five years is a short period but the achievements are But one question has been constantly bothering Mr.
amazing. About 10 crore poorest of India's poor have Murali – what next? In order to plug any leakages in the
earned a livelihood through MGNREGS. There are disbursement, provide greater flexibility and faster
several benefits but there are also challenges in the payment to the wage seeker, Murali came up with a
implementation of the world's largest social welfare grand plan – smart cards. While smart cards are being
scheme. I think that is what makes my work interesting” used by approximately 50 percent of the wage seekers,
–Murali Akunuri, Director, MGNREGS, Andhra several unforeseen problems have cropped up, forcing
Pradesh. Murali to wonder if his plan should be scaled up or
scrapped. The benefits and risks associated with it must
After attending a series of fairly long interviews and be carefully assessed along with the social and
panel discussions conducted by several Indian technological impact of such a usage. “Can Smart Cards
television channels, Murali Akunuri (Murali), Director, be the next big step towards better implementation of
MGNREGS Andhra Pradesh, finally got a chance to the scheme?” thought Murali as he walked into the
visit his office at the Commissionerate of Rural conference room of his office building
Development, located in Hyderabad. While he was
tired, this feeling was overshadowed by the excitement MAHATMA GANDHI NATIONAL RURAL of meeting his employees and celebrating the occasion. EMPLOYMENT GUARANTEE SCHEMEFebruary 8, 2011 was a special day for the entire
MGNREGS-AP team. It was the day MGNREGS was MGNREGS is a legislation passed by the Indian
awarded the 'Genpact NASSCOM Social Innovation Parliament guaranteeing wage employment to any adult
Honours – 2011'. Innovation in the use of Information who is willing to do unskilled manual work.
and Communications Technology (ICT) for social MGNREGS was started in Andhra Pradesh in the year
development and transparency in e-governance were 2006. It now covers all districts of the country. The
two of the several criteria considered by NASSCOM important objectives in the implementation of the
foundation for selecting it as the winner. scheme are:
Murali had a smile on his face as he vividly remembered 1) To enhance livelihood security in rural areas by
the statement made by one of his colleagues when the providing at least 100 days of guaranteed wage
idea of using ICT in MGNREGS was discussed. “You employment in a financial year to every rural household
are talking about taking technology to the village level. willing to do manual unskilled work.
There is no precedence of any such usage at such a
large scale. It would involve lot of cost and the 2) Regenerating natural resource base and creating
implementation might fail.” Murali was happy that he productive assets protecting the environment; reducing
could prove many naysayers wrong on several forums rural urban migration.
of internat ional repute. Andhra Pradesh 's
implementation of MGNREGS is one of the most 3) Strengthening grass root processeses of democracy
successful implementations among all the states and has infusing transparency and accountability in
completely changed the e-governance space. governance.
The case aims to highlight the need to harness the potential of Information Technology in order to bring about economic
and social progress in rural india. It emphasizes on the use of Information and Communication Technology for social
development and transparency in e-governance in villages. The author brings forth this idea by discussing the adoption of
smart card technology for wage disbursement as a big step towards better implementation of MGNREGS scheme in
Andhra Pradesh.
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MGNREGS envisages that physical work leading to technologies (ICTs) herald new opportunities for
development of community assets like irrigation growth and development in countries around the world.
canals, all-weather roads, water tanks, etc. be created Governments worldwide are seeking to harness the
through this scheme in rural areas. The central potential offered by these new technologies to create
government has released over Rs. 75000 crores in the new dimensions of economic and social progress.
past four years to state governments under MGNREGS Immediate challenges relate to the need for requisite
and 69 % of the amount has been paid as wages to efforts by governments to aim at transcending the
workers. 4.15 crore rural households have been digital divide by narrowing the gap incrementally
provided employment under the programme so far. The through the following measures.
budget for Andhra Pradesh for the year 2011 is more
than Rs. 6000 crores. · Putting in place the necessary national
information infrastructure;
This scheme had performed better than most other anti- · Developing and nurturing human resources to
poverty initiatives undertaken in India. It was operate the national information infrastructure
estimated that in 2009-10, around five crore families · Providing adequate financial resources to
were provided around 300 crore person-days of work implement both infrastructural and human
under the scheme. This was more than three times the resource requirements.
employment generated in 2006-07. What was even The Government of Andhra Pradesh, in partnership more remarkable was the coverage of SC/STs and with technology providers such as Tata Consultancy women under the scheme. The share of SC/ST families Services, launched an ICT based solution in support of in the work provided under MGNREGS in the past four MGNREGS. Specifically, its mission is to strengthen
years ranged between 51 and 56%, while that of women accountability in public service delivery through
was 41-50% in the corresponding period. enhanced transparency and enabling the poor to demand their rights based entitlement to employment
The scheme appeared to be sinking under the weight of as set out by the scheme. The study takes a snapshot of how the large scale of operations, the limitations of corruption in some states. Therefore, in Andhra outreach of various services and the need to handle Pradesh, MGNREGS implementation was monitored large volumes of information in a transparent manner by drafting social audit rules and setting up a separate necessitated the use of ICT for successful
organization for framing them. This has paid rich implementation of the above scheme. But the
dividends and is borne out by the fact that while in enthusiasm for realizing the potential of ICTs is often Andhra Pradesh, misappropriation to the tune of Rs. 88 dampened by the bar r ie rs to success fu l crores has been detected so far, it is not even Rs. 8 crore implementation.in the rest of the country. Besides, about 5,000 officials In the implementation of the scheme, the role of ICT have been removed on charges of corruption and other comes at several places. They are:irregularities.
1. Computer Operator uploading all the data received MGNREGS is being implemented in 21,858 Gram from workers at the village level, generating pay Panchayats, 1098 mandals and 22 districts in Andhra orders, fund transfer orders, pay slips for wage seekers, Pradesh, providing wage employment for 100 days to using RAGAS software.more than 1 crore households
every year across the state. The scheme is being 2. Maintaining and updating MGNREGS website so as implemented by more than 21,000 Field Assistants to provide maximum information to the end users and at the Gram Panchayat level, 3500 Technical assistants ensure transparency.each handling 7 Gram Panchayats in a mandal,
2196 Computer Operators working at the mandal level, 3. Field Assistant using eMMS to record and upload 820 Engineering consultants working at the mandal attendance.level, 1098 Additional Programme Officers working at
the mandal level and 1098 Programme Officers 4. Use of eFMS for fund transfer and Smart Cards for heading the mandal team. (Refer to Exhibit 1) wage disbursement
ROLE OF INFORMATION AND 5. Overall usage of IT infrastructure at CRD.COMMUNICATION TECHNOLOGY (ICT)
The most critical of all the above processes is the wage The rapid development, deployment and proliferation disbursement process. It is of utmost importance of new and emerging information and communication because the highest scope for mismanagement and
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corruption exists at this step. Beyond the obvious prepares the work closure report and submits the same
benefits of automation across the workflow and access to the MCC. The Village Panchayat also endorses their
to real time data for government officials, an IT- remarks in the work closure report on the quality of
powered MGNREGS in AP not only raises the standard work (Refer Exhibit 2).
of living, but also helps people lead a dignified life.
With a wage slip, savings account and access to all PROBLEMS WITH THE TRADITIONAL
information, wage seekers earn respect apart from METHOD
better monetary benefits. And in order to ensure that the
wage seeker gets the right pay for the right work, wage The above method of wage payment led to leakages of
payment processes were designed. funds due to malpractices by middlemen who were
responsible for wage disbursement:
THE TRADITIONAL WAGE PAYMENT
PROCESS Ÿ The death of a wage seeker was not recorded in due
time in the system. This lapse opened up
Wage seekers and village administration officials possibilities for several malpractices such as
choose the work from the Shelf of Sanctioned Works follows:
for execution. The Gram Panchayat intimates the same o Impostors of a dead wage seekers could
to the Mandal Computer Center (MCC). Field collect the wage payment entitled to him
Assistant and wage seekers congregate at the work site o The Post master could himself pocket the
and carry out work as per standards already made money which was entitled to a dead wage
public. A wage seeker willing to work comes to the seeker as it stayed uncollected in his
work site and performs the allocated work. Once a account, thereby accruing interest
week, the Field Assistant prepares the summary of Ÿ Many wage seekers could enroll twice for job cards
Work in Progress Report and submits the report along and collect multiple payments
with the Muster Roll to the MCC. The field assistant Ÿ Many women were facing trouble because their
also gives an acknowledgement slip to each wage husbands would forcefully collect their wage
seeker duly mentioning weekly work details. payments .There was no mechanism such as a
photo-ID verification to ensure that the payment
At the MCC, attendance is captured from the submitted was made to the right wage seeker
muster roll. The data is validated and stored in the Ÿ Collaboration among paying agencies (the
database. Based on the reported progress of work and postmaster or the VO) and some of the local people
the number of person-days spent, payment to the ensured that malpractices were not reported
workers is computed. The system generates individual Ÿ There was only one post office for a set of villages.
pay slips, wage list and pay order to the bank / post Wage seekers often had to travel long distances,
office. The generated wage list is then sent to the compromising their earnings for the day, in order to
Village Panchayat and the paying agency. The paying collect their wages from the post office. Many times
agency can be the Post Office savings account, bank they had to make multiple visits to the post office
account, village organization or the Gram Panchayat, due to a timing mismatch or non-availability of the
whichever is convenient to the wage seeker. The funds post master. This increased the extent of
required for disbursement of wages is transferred to the dissatisfaction among labourers and affected their
account of the post master or any other paying agency motivation to enrol for NREGS
and is also credited to the wage seeker’s account in the Ÿ The process was highly manual and required a lot of
post office or the bank. The post master or the effort for reconciliation. It also involved too many
corresponding payment authority withdraws the fund middle men, thereby reducing transparency and
from this account and makes the payment to the wage accountability to a great extent
seeker. The wage seeker then signs an acquittance
which has his acknowledgment for the receipt of INTRODUCTION OF SMART CARDS FOR
money. Based on this acquittance, a corresponding WAGE DISBURSEMENT
amount of money is deducted from his account. The In order to alleviate these leakages and to improve the process of reconciliation matches the pay orders with overall wage-seeker satisfaction, the Department of the acquittance form and makes sure that all the pay Rural Development, AP, introduced the system of wage orders have been executed.payments using the biometric smart card technology. The prime motive behind this move was to ensure The Field Assistant reports work completion to the transparency and accountability in the system. Smart executing department, which sends an official who
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cards are unique identification cards for every wage provide 2% commission to banks on the amount seeker. They contain the wage seeker's photograph and disbursed. Every week payment details of who should registration information (Refer to Exhibit 3). They are be paid how much and the cash amount are transferred similar to ATM debit cards owned by bank customers. to the bank. The bank is accountable for the Instead of a PIN number, these smart cards require the disbursement of wages and return of undisbursed wage seeker's biometric identification as part of the money to the government account. These transaction authentication process for every transaction. Every falling under priority sector lending, aroused the wage seeker's smart card is linked to his bank account interest of many banks like ICICI, UBI, Axis Bank, number. SBI, Andhra Bank, ING Vysya, Corporation Bank, etc.
But it is very uneconomical for these banks to set up a How does the smart card system work? branch in gram panchayats and operate accounts of the Smart cards can be considered akin to mobile ATMs. beneficiaries. The low transaction amount and high The wage seeker swipes his smart card in a hand-held volume did not justify the costs incurred. So the banks POT (Point of Transaction) machine which records his had to turn to service providers.transaction in a pre-loaded chip and issues the payment slip to him. The money disbursement alone is done Service Providers (SPs)manually. Later, the chip is synced with the server and Service providers like FINO, FinTech Foundation, the amount is deducted from the wage seeker's bank Zero Mass Foundation are technology and operations account automatically. Since the transaction is not providers. They serve as conduits between banks and possible without the finger prints of the wage seeker, the beneficiaries partaking1.75% of the commission the system proves to be a fool proof mechanism for given to banks. In fact, FINO has covered over 2.5 lakh making sure that leakage of funds due to impostors is persons under the MGNREGS scheme in AP. Service arrested. The smart card system can also be extended to providers are responsible for enrolling beneficiaries, avoid multiple payments to the same person using Bio- issuing smart cards and disbursing cash regularly. They metric de-duplication which is a system for ensuring are accountable to the bank.that the same wage seeker has not collected his wages more than once. Wage Seeker Enrolment
Armed with the beneficiary and job card details given The Benefits of Biometric Smart Card by MGNREGS, the service providers visit the Gram
· No one other than the wage seeker can collect Parishad with the village officials. The point of his wages transaction (POT) machines (Refer to Exhibit 5), a cell
· As every transaction is recorded in chip phone with requisite software built-in and an enrolment automatically, it is easy to track wage form are the prerequisites. The beneficiaries are asked payments, thereby bringing transparency to for the ID proof. Ten finger prints are recorded using the payment system the POT machine and a picture taken using the cell
· The service provider is made accountable for phone. The form is filled in and the process continues wage payment as it is necessary for him to for all beneficiaries.produce the acquittances matching with the transactions recorded in the chip The data collected is uploaded to the SP’s server where
· Wage seekers can collect the wages anytime at accounts are created with the help of the bank. The data a place near their residence in the village is further used for printing smart cards which are instead of having to walk miles to a distant post distributed to the respective beneficiaries at the gram.office
Village officials short-list a few women for the position SMART CARD IMPLEMENTATION of 'Customer Service Provider' (CSP). This is a
conscious step taken towards women’s empowerment. The pilot initiative started in a phased manner with One woman is selected by the SP after a written test and great promise in 2006. Banks and service providers an interview. She disburses the amount to the became a part of the payment system (Refer to Exhibit beneficiaries at a banking outpost set up at the gram by 4). As of March 2011, cards have been issued in 14227 the village officials. A POT machine is given to each villages and payments started in 8597 of these, out of CSP at the village by the SP.the targeted 21702 villages.
Payment ProcessBanks The work measurement input into the RAGAS MGNREGS outsourced most of the payment process to Software raises a Fund Transfer order (FTO) and an the banks. The government has taken the initiative to Electronic Pay order (EPO) (Refer to Exhibit 6) The
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FTO is sent to the bank after being approved by the bank and thereby the reconciliation effort by the bank.Mandal head using a DSK (Digital Security Key). The bank verifies the amount in MGNREGS's account and Manual Paymentstransfers the amount to the nodal bank and then sends a confirmation to TCS which is the technology provider The CSP, under the influence of the village officers for MGNREGS. The EPO generated at the Mandal overrides protocol and pays manually. The SP has little office is sent to the smart card bank (Bank where the SP control over her and is unable to prevent manual holds an account). The EPO received is forwarded to overrides despite Government orders. This discourages the SP who sends cheques to the Mandal offices with the bank in its participation as it become liable toconsolidated amount as per the EPO. pay the overriden amount to the government. Some
villages have power shortages and the battery backup The Mandal office of the SP gives the cheques to the of the POT machines are rendered insufficient for Mandal Officers who encash it at the nearest branch of disbursement to the wage seekers. This again the bank handling the operations. An acquittance is necessitates manual payments. The pressure on the collected at the Mandal office of MGNREGS. The cash CSP is high given her responsibility. She is paid Rs. 300 is distributed to the CSPs in various villages along with per month and 0.25% commission for every lakh the acquittance. disbursed. In some villages, the CSP earns as much as
Rs. 2500 per month. But most others hardly make a The CSP swipes the smart card on the POT machine thousand. Hence the position sees high levels of and authenticates the biometric identification. The attrition.wage amount is automatically debited from the account, and she hands over the cash to the beneficiary. The MC has to disburse the cash and acquittance to all A thumb print is also taken on the acquittance as the villages in the Mandal. There being no regularity in physical proof. The undisbursed amount and the the pay orders, he is overloaded with basic work. acquittance are collected by the MC who returns a copy Service providers constantly replace the POT machines of the acquittance to the bank and another to the as the usage is harsh. Faded impressions on thumb due MGNREGS Mandal office after reconciliation. This is to person's age and toil are not captured by the reader a process of matching the amount given to the SP to the leading to manual payments.amount returned to bank and paid to beneficiaries.
Cash ManagementISSUES WITH SMART CARDS
The government emphasizes that the SP should carry Though process, on paper, seems transparent and the entire amount due for the week without accountable, the implementation is not free of glitches. consideration to undisbursed amount left with the CSP. It has been observed that payment delays occur and the This increases the security risk of MC and CSP for poorest of the poor constituting 20% of the wage handling and storing large amount of cash.seekers drop out. This basically defeats the purpose of the scheme. “The service provider, FINO, that has its The CSP is harangued by wage seekers for their due for operations in over 50% of the State, is the main cause the week in case of delay. But there is no way of for the delay. The accountability factor is very poor knowing where the payment is stuck unless one too” says Murali. physically calls all the players in the system. The EBT
coordinator on behalf of MGNREGS manually collects Enrolment Process information to monitor the process. This is a long
winding and time consuming process which only The enrolment process produces a lot of errors in the solves the problem temporarily.data uploaded and delays in the issue of smart card payment. Re-enrolment is uneconomical for the SP and The service providers have come up with new systems the wage seekers do not understand its significance like 'Bandhu card system' (Refer to Exhibit 7) that have thereby rendering the process incomplete. improved their processes. MGNREGS has come up
with information capture at each level. But the different Technology technologies used by the service providers will require
more investment and time to make it compatible with The technology at FINO consists of high interaction the MGNREGS server. The infrastructure at the village with the banking back end processes. Some banks let level limits the amount of information captured, and the SP operate the Core banking Solution (CBS). This hence, the transparency.restricts the data sharing on transaction details with the
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harangue the scheme and the poor are affected the CONCLUSIONmost. “We are even considering the option of reverting
to the payment process through village officials and Even before becoming fully operational in the State, post offices” said Murali.the smart card scheme is witnessing many trying
challenges. Teething problems are continuing to
Exhibit 2 Traditional Payment Process
Exhibit 1Key Implementing Agencies
Village level Field Assistant (FA) – 1 per village
Technical Assistant (TA) – 1 per 6-7 villages Panchayat Secretary – 1 per village (Gram Panchayat)
Mandal Level Engineering Consultant – 1 per Mandal
Additional Project Officer – 1 per Mandal Mandal Project Development Officer – 1 per Mandal
Computer Operator – 2 per Mandal
Cluster Level Additional Project Director – 1 per Cluster
District Level District Resource Person – 1 per District
Project Director – 1 per District
State Level Director
Special Commissioner Commissioner
Principal Secretary
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SPs visit villages with Govt. officials for
enrolling beneficiaries
Data captured. Conversion of data
to smart cards & a/c opening
Appoint CSP
Smart cards preparedProcurement of POS machines by SPs and
distributing to CSP
Beneficiaries swipe cards and collect cash
from the CSPs
Data goes to Govt., cash transfer from
Govt. to bank
Bank transfers funds to SPs account
Cash distributed by SPs to CSPs
Enrolment prerequisites:- POT machine
- Enrolment form
Smart cards distributed to the beneficiaries
Exhibit 4Smart Cards Enrolment Process
Exhibit 3Smart Cards
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Exhibit 5Finger print authentication on a PoT machine for a transaction using smart card.
Exhibit 6Wage disbursement process using Smart cards
NREGA MCC
TCS SERVER INTERFACE NODAL BANK
SMART CARD BANK
SUB BANK
FINO HQO
FINO Dist Office
CSPBENEFICIARY
Govt. a/c
Pooling a/c
FTO
EPOConfirmation
of transfer
Return of acquittance
by MC
Return of acquittance
by MC
MC collects to encash
Cash transfer by MC
Issue of payslips by FA
Collection of acquittance by MC
File containing EPO details
Transaction
3 days 1day 1day
1day
1 day slack6 days of
work
7 days target
FINO has a system of accountability in place by means of a 'Bandhu Card'. Every CSP is given a Bandhu card. When MC hands
over the cash to the CSP, he updates the POT machine with the amount handed over after debiting his card. The POT machine
debits this amount after every transaction. The CSP credits her card with the remaining amount in the POT machine. At the end of
the day, the POT transactions are uploaded. The CSP is liable to the amount unaccounted for in the transactions. The MC transfers
the amount from CSP's card to his own card after all payments are done. He then electronically credits the amount from his card in
the district office. Here the acquittance and the carded payment transactions are matched.
Exhibit 7Bandhu Card System
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Air Deccan: IT's in the AirPiyush Guilani (PGDM 2010-12 Finance)
would go on to change the Indian aviation sector.INTRODUCTION AND OVERVIEW
Starting with a single aircraft and scaling up to a fleet of Air Deccan is the story of India's first low cost airline. 30 aircraft by March 2006 [See Exhibit 1], the airline Through an innovative business model and a ruthless had rapidly expanded its operations within just three focus on cost, the airline changed the dynamics of the years of its launch. By June 2006, it increased its industry. The case illustrates how Air Deccan used IT as market share to 19% and became the third biggest a tool to bring about a transformation in its business player by market share in the Indian aviation sector processes. [See Exhibit 2]. A pioneer of the low cost model, it
offered fares close to 30% lower than those offered by “Are you planning to book an Air Deccan ticket online other low cost airlines [3]. Its low fares were or through travel agents? Then be prepared to waste a comparable to those offered by the upper classes of the few hours” [1]Indian railways. Deccan's strategies were aimed at
generating additional revenue and reducing costs. In Feb 2006: This is how DNA, a national daily in India, order to increase revenue, the airline reduced the turn-summed up the concerns of frustrated customers who around time of its aircraft; and planned aircraft had spent hours trying to book Air Deccan tickets selection, flight scheduling, ground handling and route online. Col. Arvind Saksena, Air Deccan's CIO, was selection so that utilization rates were maximized. The rather prompt in addressing customer concerns in the airline also followed a lean staffing model aimed at media, attributing the speed of the server to a surge in maintaining a low aircraft-to-employee ratio, thereby customer traffic. According to him, this was driven by a further reducing costs. It did away with in-flight meals, one-time special discount offer made by the airline. His rationalized crew to the barest minimum and added assurances on previous occasions regarding the more passenger seats. Through its ruthless cost problem being solved had failed to address the containment initiatives, it became the pioneer of the concerns of customers and travel agencies, who still low cost aviation model in India [3].complained of poor speeds. To handle the rising online
traffic and to ensure efficiency in operations, Air In many ways, Air Deccan had changed the dynamics Deccan had started making investments in technology, of the Indian aviation sector. Before Air Deccan started but nothing concrete was expected in the next four its business, air travel remained an expensive dream for months. Till then, the airline risked antagonizing more many middle class Indians. Even upper class Indians customers and travel agents as its server grappled with preferred to travel by road as flights were prohibitively surging customer traffic. priced.
AIR DECCAN AND ITS LOW COST MODEL
“We will be the Udupi hotels of the airline business [2]”
remarked Capt. Gopinath, using the metaphor for the
popular budget Indian restaurant, as he looked set to
launch his low cost, no-frills airline, in a move that
The case is based on Air Deccan, India's first low cost airline. The case attempts to showcase the significant role played
by Information technology in providing cost advantage to businesses. The case details the benefits to airlines through
the use of IT for cost advantage and issues involved in vendor selection for key services offered by a business. The case
stresses the need for effective customer relationship management systems in predominantly service oriented
industries. The case offers insights on how IT can be used as a strategic lever within a firm. It illustrates the manner in which
Air Deccan integrated technology in its business model and leveraged outsourcing as a business opportunity. The
shortcomings in customer relationship management due to technological limitations may come at a huge cost for
businesses in a growth industry.
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it set up a 24X7 multilingual call centre to book tickets OVERVIEW OF THE INDIAN online. The company received a phenomenal response AVIATION SECTORfrom its customers for its new distribution channels. In
a six month period, it generated 28% of its ticket The history of the civil aviation industry in India can be bookings from the internet and close to 10% of its traced back to the year 1912 when the first flight bookings from call centres [5].between Karachi and Delhi was started by the Indian
State Air Services in collaboration with the UK based In order not to alienate travel agents, who still sold Imperial Airways.close to 50% of its tickets during this period, the
company made them an important part of the new In 1995, the Indian Government ended the monopoly of business model. Travel agents were now supposed to state owned aircraft carriers by allowing private book tickets through Deccan's CRS, unlike the players to operate in the sector. By 1995, six private previous system where they booked tickets through airlines accounted for more than 10 % of the domestic GDS. The airline was a breakthrough innovator in air traffic but only Jet Airways and Sahara could adopting other methods and practices as well. For survive in the domestic market [4]. As incomes grew instance, its practice of rolling out bar-coded paper and business activity accelerated, domestic air tickets, a significant cost saving method, was passenger traffic shot up. [See Exhibit 3]eventually adopted by international carriers like
Southwest Airlines [5]. (For a detailed overview of the USE OF IT AND AIR DECCAN'S company's CRS system, please see Exhibit 4).TRANSFORMATION
Adoption of IT played a significant role in bringing While many associated Deccan with its low frills about a transformation in Air Deccan's fortunes. IT model and its cost focus, it was the strategic use of adoption brought about the following advantages.information technology that enabled the airline's real
transformation. Using technology allowed Captain Significant cost savings: It allowed savings of Gopinath to adopt a sustainable low cost model and the about 20% in distributions costs [See Exhibit 5], which airline became the first player in the Indian aviation proved to be a critical aspect of the low cost model. sector to offer an electronic ticketing facility to its “Distribution cost is seen as one of the key customers. 'controllable' expenditures in an air carrier's cost
structure; thus an effective and efficient distribution Turning the existing reservation system upside down, it mechanism goes a long way in making an airline adopted its own system and allowed customers to book successful,” Air Deccan's Chief Revenue Officer John tickets online. The company defied conventional Kuruvilla had pointed out in late 2005 [4]. Printing bar business practices and created its own Airline coded paper tickets with thermal printers allowed Distribution System (ADS). savings of INR 4/ticket.
Traditionally, most full service airline carriers hosted Growth in E-Commerce: Once Air Deccan started their seating inventory on databases of Global selling its tickets online, it went on to become India's Distribution Services (GDS) like Galileo, Worldspan, biggest e-commerce website, surpassing IRCTC and Sabre and Amadeus. Travel agents accessed this generating daily online revenues of INR 25-30 database to allocate tickets and GDS billed the airline a million. fixed sum, varying between 3 and 4% of the ticket
price [5].Improved cash flow position and reduced cash collection cycle: Using a CRS model allowed Air Deccan wanted to reduce the expenditure incurred Deccan to receive payments in advance via pre paid on the GDS system and it considered the possibility of deposits or credit cards, allowing it to reduce its cash hosting ticket inventory on its own server. It developed collection cycle.an internet based Centralized Reservation System
(CRS), which allowed centralization of customers' Outsourcing and Vendor Selection: For Air reservations through all channels - including the Deccan, outsourcing of some of its functions was an internet, call centres and travel agents. It added a obvious decision as it believed that an outside vendor payment gateway to its online reservation system to could provide the same service at higher levels of allow customers to pay via credit cards. For customers accountability. Outsourcing of functions becomes a who did not have access to the internet or a credit card,
42
smooth process once it gets the backing of the top model and leveraged outsourcing as a business
management. Because the company was banking on a opportunity. Outlining the role of IT, Captain Gopinath
web-based model as a driver of its future performance, said, “I'm not in favor of technology for technology's
vendor selection was critical. It evaluated different sake. Solutions that our IT team delivers must be high-
vendors by looking at their delivery models and by tech, but low-cost.” Later, in an interview in 2007, he
contacting their clients. “Basically I look for stability went on to stress the importance of IT in his
and reliability in a vendor. What are their processes for organization, “IT is an integral part of our operations
support and problem resolution like, and what is the and growth strategies”, adding that he interacts with the
order volume they can absorb?” said Col Saksena [5]. CIO “on a daily basis” [6].
Deccan approached Accenture for developing its
online ADS model but did not get a very encouraging Path Ahead: Strains on the IT system response. It eventually chose Gurgaon based
InterGlobe Technology Quotient (ITQ) as its vendor, a The company wanted to go slow in scaling up its IT
relatively small player then. ITQ developed a system to deal with the anticipated rise in passenger
comprehensive solution to host a range of enabling traffic. “We don't ramp up the system in a knee-jerk
services: from reservations to schedules and fares to fashion. We periodically review the system's capacity
payment gateway integration to a departure control and keep in mind special launches and our expanding
system. fleet of aircraft”, is how Col. Saksena put it [5] when
asked about scaling up the system capacity. It all
VENDOR PERFORMANCE AND changed a couple of months later in Feb 26, 2006, when
RESULTS Air Deccan launched a promotional campaign, offering
a hundred thousand tickets at INR 9991 for travel to any
It might seem a little surprising that Deccan selected destination. Its server crashed due to increased
ITQ, a small player, as a vendor, given the fact that the customer traffic, which left travel agents as well as
firm had initially looked at players like Accenture to customers disgruntled. “It takes only one-and-a-half
develop the system. Col. Arvind had earlier remarked hour to reach Bangalore from Mumbai. But to book a
that “there are critical factors (to be outsourced), and ticket for the journey, I have been waiting for the past
smaller players tend to become 'unstable' by taking on four hours,” complained one customer. Col. Saksena
too much.” According to Mr. Deepak Choupadi, the tried to pacify customers by promising better
then Operations officer in Air Deccan, the vendor technology and efficiency, without much success.
selection was dictated by ''cost advantages'' and
because the airline “had faith in the capabilities of Deccan had left customers and travel agents
ITQ”. ITQ did a remarkable job with Air Deccan, dissatisfied, a potentially deadly situation in the highly
rolling out the ADS in 40 days. competitive airline industry. Had the company been too
slow to react in scaling up its system and offering better
Air Deccan also chalked out an unconventional fee technology to customers? Was ITQ a good long term
structure with ITQ. Instead of a flat fee upfront to avoid bet? Was choosing ITQ as the vendor a correct
making a heavy initial investment, it worked out a decision, considering Col. Saksena had not long ago
payment schedule that was based on the number of cast doubts on the ability of smaller players to deliver?
passengers booked every month. “We look to convince All these uncomfortable questions were confronting
vendors to grow along with us. Believe me, this not Capt. Gopinath and Col. Saksena, as other Indian
only works out to be more cost effective without any Airlines braced themselves to move towards e-
extra investment on our part, but the vendor also gets an ticketing to meet global norms set by International Air
incentive to constantly improve the application”, said Transport Association (IATA). The domestic aviation
Col. Saksena [5], justifying his decision to opt for this sector meanwhile also looked set to become highly
model of fee structure. The model was also well taken competitive as incumbent players entered into price
by ITQ, which was ramping up its team dedicated to Air wars with Deccan and new carriers looked set to enter
Deccan simultaneously. the Indian aviation sector.
Leveraging IT for achieving strategic goals: Deccan leading the way
Deccan offers great insights on how IT can be used as a
strategic lever within a firm, illustrated by the manner
in which it integrated technology into its business
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Exhibit 1Fleet Size Of Air Deccan
Exhibit 2
Source: Company Website and Reports
Exhibit 3Growth in Passenger Volume in Domestic Air Travel
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Exhibit 4Overview of Company's CRS system
“InterGlobe developed the CRS, a system that was based on a combination of .Net and J2EE technologies. The new solution handled a variety of activities ranging from reservations, schedules, fares, payment gateway integration, and departure control system and document production. The IT solution comprised three significant parts- the reservation engine, the inventory engine and the departure control system. The reservation engine facilitated transactions with online customers, corporate customers, call centers, travel agents, and city and airport offices, on a real time basis. The inventory engine managed inventory flights schedules, fares, sales and flight departures. Through the departure control system, passengers were issued boarding passes with ticket printouts that indicated PNR numbers. The departure control system interfaced with the reservation engine to track passengers who boarded an aircraft.”(Source: “Air Deccan”, Research Article by Jeffrey L Sampler, MITSloan, Nov 2006)
REFERENCES
1. Kerur, B., “Air Deccan gets caught in the Web”, DNA, Feb 25, 2006, available online athttp://www.dnaindia.com/mumbai/report_air-deccan-gets-caught-in-the-web_1014909.
2. Riti, M.D., “Air Deccan plans 'very low-cost' flights”, Rediff News, June 2, 2003, available online athttp://www.rediff.com/money/2003/jul/02spec1.htm.
3. Sampler, J.L., “Air Deccan”, Centre for Information Systems Research Working Paper No. 365 and MIT Sloan Working Paper No. 4657-07, Sloan School of Management, MIT, Nov 2006 .
4.“A Report on the Aviation Industry in India”, ICMR India.
5. Ramachandran, V., “Low Cost Takes Off”, Real CIO World, Dec 2005.
6. Prasad, S., “Technology is the key to innovation, which is our mantra for growth” (Captain Gopinath'sInterview), DataQuest, Feb 2007, available online athttp://dqindia.ciol.com/content/cio_handbook07/CEO/2007/107022802.asp.
7. Interview with Mr. Deepak Chopadi, Operations Officer of Air Deccan at the time in which the case is set.
Exhibit 5
45
Ethics in Action
Pooja Shirwaikar (PGDM 2011-13 Information Management)
organisation. During his stint at Deloitte he had INTRODUCTIONhandled many positions of responsibility which
involved managing teams and balancing the interests of Richard Jones, a 27 year old consultant was in his team members without compromising on ethical cubicle skimming through his e-mails over a cup of grounds.coffee, preoccupied with a troubling thought. He was
facing a dilemma. He had recently married his long- ETHICS AT THE WORKPLACEtime girlfriend, Susan Roberts, who had been working
for AKB, Inc. as an auditor for 4 years. In today's competitive market, employee retention and
alignment with organisational policies is a major Richard received his project allocation e-mail the challenge. Though efforts are being taken by previous week, and to his surprise, his new client was organizations across the globe to train employees AKB, Inc. This came to him as a challenge, since he towards achieving organizational goals, there is the would be working on tax and audit software and report added challenge of ensuring adherence to ethical generation for the client. This would require him to standards. A company's failure to adhere to ethical understand client requirements and work on the audit standards may have drastic economic, financial and records very closely. But this also meant that he would social repercussions. The fate of the formerly powerful be working with the audit team of AKB, Inc. When he Enron is a reminder of how ethical violations can bring mentioned to his senior manager that his spouse was a about a company's downfall. With all the media part of the client audit team, his senior manager called attention companies such as Enron have received, the Deloitte Independence helpline and the executive customers expect higher standards of behaviour. on call informed Richard that he was not compliant as Consumers and clients tend to focus closely on whether per Deloitte norms - which ensure that practitioners are companies' policies are socially and environmentally able to serve clients with integrity, professional responsible. scepticism, intellectual honesty, objectivity, and are
free of conflicts of interest, both in fact and appearance. It is in the interest of the company to follow a business Richard was looking forward to this client assignment. code of ethics, the benefits of which are enlisted below: His dilemma was whether to forego it, which would set
his career back or speak to his wife regarding a job a. Support ethical decision-making by officers and switch, which was not feasible considering that his employees wife's career was equally important to him.
b. Protect the company's public profile BACKGROUND
c. Prevent ethical misconduct It had been 4 years since Richard joined Deloitte
Consulting, LLP. He had been promoted to manager in d. Attract employees with high ethical standardshis scheduled milestone year. His experience with
Deloitte as an organization had been fairly satisfying. e. Avoid criminal persecutionHe had been recognised and rewarded promptly for his
work and had been offered a highly client-centric ETHICS IN ACTION AT DELOITTEresponsibility, which was a coveted position in the
The case aims to highlight the importance of ethics in workplaces with increasing competition and the need
to define a code of conduct for employees. It outlines the ethical dilemma faced by employees in their day-
to-day work of various practices adopted at Deloitte to ensure ethical practices are described. It talks of a
measure of the ethical performance of an organization, namely “Return On Ethics”. There is emphasis on a
new perspective of looking at trust as an important offering by an organization to its clients. The author
wants to bring to light the importance of the sustainability of ethical frameworks and policies in
corporations.
CA
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a. Organizational culture Sharon Allen, Chairman of the Board of Deloitte &
Touche USA LLP, explains the term ROE: “With b. Rewards for unethical behaviour: bonuses after everyone's current focus on the economy, you might winning a client order by bribery, gift-giving assume I'm talking about that traditional financial
metric, return on equity. But the ROE I advocate is c. Managerial values that undermine integrity: different. It's return on ethics. This ROE is really more focusing on the bottom line to the exclusion of mind-set than measure, an approach to encouraging the everything else, exploiting others, rationalizing highest standard of business behaviour. It's based on
the premise that ethical decision-making can lead to Some of the key findings of the survey were as follows: strong performance and competitive advantage, while
unethical decision-making leads to very different a. The top factors affecting the promotion of an ethical outcomes.” [1].workplace environment are: behaviour of management
and direct supervisors, and positive reinforcement for In one of her client meetings she experienced that the ethical behaviour. client had complete trust in the Company's technical
capability. However, he wanted to discuss the values of b. The factors causing conflict between work the firm and understand Deloitte's most important responsibilities and personal priorities are: high levels offering-trust. of stress, long hours, fast-paced environment,
inflexible schedule, highly competitive environment. Sharon Allen says, “When your most important
offering is trust, it's crucial that you have structures and c. Reasons for unethical behaviour of employees were mechanisms in place to safeguard that trust. The formal identified as: lack of personal integrity, job elements of our ethics program include: dissatisfaction, pressures to meet goals, ignorance of · A leader to guide it--our chief ethics and code of conduct. compliance officer
d. There is sometimes a perceived disconnect between · Policies and procedures, including our Code of overall ethics and ethical behaviour of business Ethics & Professional Conduct.leaders. Most often these two are not aligned. e. Business ethics are frequently treated as a separate · Ethics and compliance training programs, category from everyday ethical behaviour. including an extensive orientation in which we
introduce new hires to our ethical culture and f. 77% believe Management behaviour is one of the top define what acceptable ethical behaviour is. factors promoting an ethical workplace [2].
· An Integrity Helpline that's available to assist g. 91% of respondents cited that workers are likely to our people with any inquiries and reports they behave ethically at work when they have good work-may have, 24 hours a day, 365 days a year.” life balance [2].
Deloitte and many other organisations have made
provisions in their systems to ensure ethical practices. INDEPENDENCEHowever, are they fool proof? Just eliminating the
instances of unethical behaviour is not enough. There Professionals working in a service oriented company needs to be a thorough understanding of the causes and are expected to maintain high standards of impact of any kind of unethical behaviour at independence and compliance. workplaces.
Deloitte defines and publishes a list of its Deloitte has been undertaking the “Ethics at clientele/companies and sends an independence mailer Workplace” Surveys since 2007. It has surveyed its to each employee informing them about the client employees across the organisation to understand the companies Deloitte is working for. key issues which lead to unethical practices at
workplace. (Exhibit 1) These clients are called Restricted Entities and the Through these surveys, it has identified the key areas professionals working for them need to be affecting ethical behaviour: independence compliant in order to serve them with
47
integrity. There is a clear guideline on who could be COMPLIANCE AT DELOITTEtreated as a Restricted Entity and what the
independence compliance norms are. (Exhibit 2) Richard had just received a briefing from his manager
regarding the ethical practices at Deloitte and the How independent are you? mechanisms in place to ensure that practitioners remain Jennifer Orlando joined Deloitte in 2008. Jennifer lived ethical at all times while working on client at home with her parents. Her father previously worked engagements. The meeting left him wondering whether for a restricted entity named Rez Inc., and he, though this could be true in other organisations as well. retired, owned stock options of the Restricted Entity Richard was deliberating over the compliance issue. that accounted for more than 5% of his net worth. He had been advised to either opt for a change of Hence, Jennifer had to consult the 'Independence project (if his spouse disagreed to sell the stock options Advisor' at Deloitte via the helpline to get to know the and discontinue working at the Restricted entity firm) future plan of action. or adhere to the compliance norms and do the needful.
Opting out of the project meant losing a great career Richard has to ensure compliance on the same lines as opportunity and foregoing a role well deserved. Jennifer – he is compliant/independent if he or his wife Richard sat at his desk, weighing his options.sell any of the AKB Inc.'s stock options, received as
bonus, immediately.
Exhibit 1
48
About 87% of workers responded that their company's values promote an ethical workplace environment and almost the same
number mentioned that they agree with their company's values. About 85% said they know their company's values and that their
company makes their values clear to them. While a majority of respondents say their company promotes an ethical workplace, only
10% cite criminal penalties for violation of Code of Conduct as a factor that helps foster an ethical workplace.
Exhibit 1 (contd.)
49
Exhibit 2
Based on this, to ensure that a professional does not face an ethical dilemma while working on client projects, Deloitte
Consulting LLP has defined the following “Independence Requirements” pertaining to five areas:
1. Financial Interests:
Prohibition on employees owning Stocks, Bonds, Stock Options, Insurance Policies of 'Restricted Entities'.
2. Business Relationships:
We cannot have Business Relationships, like a Consulting Agreement, with a Restricted Entities' officers, directors or
major shareholders.
3. Employment Relationships:
There could be an Independence issue if a close relative works for a Restricted Entity in an accounting role, or other
financial decision-making capacity.
4. Scope of Service Restrictions:
Deloitte cannot offer certain non-audit services to a Restricted Entity.
5. Fee Restrictions:Deloitte cannot have certain type of fee agreements, like a contingent fee, with Restricted Entities.
Deloitte provides its employees with tools to help maintain 'Independence'
1. Independence helpline: Deloitte employees can call the helpline if they face any Independence dilemma to ensure
that they are compliant with Deloitte's Independence policies. The Independence Advisors are qualified to provide
sound judgment and advice on possible 'Independence Issue', such as getting tickets or discounted products from
clients companies which may or may not be Restricted Entities, or financial holding of spouse or spousal equivalent.
Confidentiality is maintained during such consultations.
2. Tracking and Trading System: The system is a kind of an 'account' where the Deloitte employee can enter all his and
spouse/spousal equivalent/dependent's financial holdings. The system alerts the employee if the holdings are of a
Restricted Entity. Also, if the invested company becomes a Restricted Entity at some point of time, the employee is
alerted of the same. The employee is support to sell/reallocate the holdings within 10 days and become 'Independent'
3. Deloitte Entity Search and Compliance System (DESC): This system can be used by employees to look up if
prospective investment options (Stocks, Bonds and Mutual Funds) are Restricted Entities.
4. Ethics and Independence resources on Deloitte net: Deloitte has provided its employees with access to a lot of
Independence resources and tools on its internal portal for employees.
REFERENCES
1. Allen, Sharon, “The New ROE: Return On Ethics”, Forbes.com, July 21st 2009, available online at
http://www.forbes.com/2009/07/21/business-culture-corporate-citizenship-leadership-ethics.html
2. Leadership Counts – “Deloitte & Touche USA 2007 Ethics & Workplace” Survey Results, available online at
http://www.deloitte.com/assets/Dcom-
UnitedStates/Local%20Assets/Documents/us_2007_ethics_workplace_survey_011009.pdf
50
The Need for Social Transformation in Corporate IndiaAbhishek Goud (PGDM 2011-2013 Marketing)
Dr. Rao is the founder president of the National HRD swearing by the need for innovation. He says, if you Network and the Indian Society for Applied want to progress, you need to be aware as to where Behavioural Sciences (ISABS). He was a professor at you're putting your time and effort. The time and effort IIM, Ahmedabad from 1973 to 1994. After IIMA, he may be in managing the present (box no.1), then worked at the Academy of Human Resources selectively forgetting the past processes (box no.2), and Development, set up with the support of RMCEI of finally focusing on the future (box no.3). Most IIMA, as honorary director. As the importance of successfully transforming organizations balance the Human Resources as a function in the Indian corporate three boxes. The policies of our country, as with most world grew, Larsen & Toubro set up an HRD Chair organizations fighting to transform, have forced us to Professorship at XLRI, Jamshedpur. They called on Dr. get stuck only in box no.1. Many banks have a T.V. Rao to head it. Dr. Rao's interests are primarily in notorious way of pleasing the government with the field of competency mapping and he believes it is an wonderful statistics while in reality not implementing importance measure of success. Dr. Rao has served as anything.Advisor, HRD to the Reserve Bank of India, BEML (Bangalore) and State Bank of India. The following WHAT ABOUT SOCIAL extract is from his keynote speech at S.P. Jain Institute TRANSFORMATION?of Management, during the annual academic conclave in January, 2012. While organizational transformation is going up, social
transformation is actually going on the negative side. UNDERSTANDING THE What's the evidence? YouTube showcases a scandal of NEED FOR TRANSFORMATION someone and hits run into hundreds of thousands whilst
a video of a “new role of a manager” hardly gets a Social transformation in the country is not of the type hundred hits. We need to demarcate the role of the that is required. Whatever transformation is taking academic institutions. Unfortunately, management place, it's due to technology and internet while the education has caused damage to the public services like transformation in the mindset isn't taking place. As introducing KRAs and KPAs into this sector. If not Sam Pitroda said at the National HRD Convention in explained properly and quantification is over stressed,
thNovember 2011, “We are living with a 19 Century then performance metrics can be manipulated. For th stmindset, 20 Century processes and 21 Century example, “releasing” grants for the construction of
needs.” All my attempts at making transformations in schools are enough to quantify the duty without the country have been disastrous. I was asked to bothering about the completion of the project. suggest transformations that are required in the Civil Services. After visiting various academies and places, I POLICY PARALYSIScame up with some of the most innovative transformations that could be applied, like Basic facilities are lacking. There is no planned, “Competency Mapping.” It is very difficult to measure systematic or committed way in which we are heading the output quality of officers in the civil services. A towards transformation. And speaking about our policy 500-odd page document of recommendations was makers, I am only going to echo what industry leaders given and it was accepted, but in the final report, not like Sunil Mittal and Ratan Tata have said that people one point was present. are preventing transformation rather than promoting it.
By nature, India is a divisive nation. For example, one REASON FOR LACK OF PROGRESS is always worried about his/her department without
regard to what is happening to the organization. We Dr. Govindarajan from the Tuck School of Business in haven't been able to learn to trust each other. Businesses the USA very famously quoted his 3 box theory, have taught us to look at each other with suspicion. We
An extract from a speech at SPJIMRBy Dr. T.V. Rao, Founder President, National HRD Network
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are used to looking at our neighbors with envy, with a Ÿ They demonstrated that they are changing and
feeling that “let them do it first then I will follow.” learning organizations
IS THERE LIGHT AT THE END OF Ÿ They used Personnel and HR Departments to
THE TUNNEL? initiate and manage changes
There are people who have done unusual things. People Ÿ They invested heavily on training
who have gone into the social services sectors, who've
made a difference - and this number is growing. Ÿ They integrated personnel with HRD
Business school graduates are now moving towards
this sector. Even in organizations, leaders are now Most of the successful Business Today Top 500
building on the successes of predecessors. Rather than companies are looking at succession planning as an
breaking down structure and imposing personal views, important spoke in the strategy wheel. They are all
leaders are making their own contributions. Top using 360 Degree Feedback as a management tool. In
management needs to be highly involved in Human most of these companies, the CEO plays the role of the
Resources and in social and organizational HR and the strategy department works in synergy with
transformation process. the HRD to generate transformation within the
organization.
SUCCESSFUL PRACTICES So what do successful enterprises need? I feel that they
should all have:
After studying and auditing the practices of the
companies that were awarded by the National HRD Ÿ Competency Mapping Systems
Network, we came to 7 conclusions: Ÿ Performance Management Systems
Ÿ New incentive mechanisms
Ÿ They managed leadership transitions well Ÿ Assessment and Development Centers
Ÿ Succession Planning
Ÿ They managed transition challenges through
liberalization CEOs should personify the HR practices of the
organizations.
Ÿ They focused on customers and quality as a strategy
to cope with challenges through liberalization
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Supply Chain Initiatives at Shoppers Stop
Abhineet Rawat (PGDM 2010-12 Marketing)
Shoppers Stop is a Raheja Group company promoted not selling; and the fifth question, how do we improve by C. L. Raheja and is a leading retail store in India. the sales? As a company we strongly believe that to
answer the fifth question supply chain can play a It has won numerous awards for its achievements leading role. Supply chain has to get very close to the including those for excellence in supply chain customer by understanding what the customer wants, management. when he wants it and at what place he wants it.
Mr. C. Devdas Nair, Customer Care Associate and Supply chain is always a top management priority. We Head, Supply Chain & Mission Control, Shoppers Stop have taken a lot of initiatives to ensure the right Ltd., was here at S P Jain to share the ideas and practices availability of merchandise for our customer. that make Shoppers Stop a leading light in the retail sector. One of the key initiatives that we have taken is that we
have concentrated on the triangle model from the very DIFFERENT SEASONS AT beginning - a triangle which talks about suppliers, IT SHOPPER’S STOP and logistics. In all these three fields Shoppers Stop has
taken a lot of initiatives. Retailing is detailing. We currently manage with 3 major seasons. We start with autumn-winter which runs SUPPLIER RELATED INITIATIVESfrom October to March and then spring-summer which runs from April to September. Then we have a flow. When it comes to suppliers we have a very powerful Today 60% of the products we sell are in flow and you Business to Business platform connected with nearly will find them in the shop floors for 365 days in the 800 suppliers. We have a two way communication with year. The style would keep changing, but it would be our B2B partners. We send them sales information, under the flow season. Autumn-winter style products stock information, payment information and reverse have to be removed from the floor before spring- logistics information. Internally, we also get an summer starts. Same thing continues for spring- advance shipping note and automatic style set up summer also. through suppliers.
BUSINESS MODELS As far as the suppliers are concerned, from a 3000 supplier base we have reduced to 800. We also have a
In the Shoppers Stop supply chain, we work on 3 delivery authorization system with our suppliers to business models, one is 'Outright' where we buy stocks manage inventory. Vendors will not supply anything from suppliers - which is currently 60% of our without us approving the delivery.business. The second business model we call 'SOR' (Sale or Return) . Whatever stocks are not sold for 2 or 3 Of the few key supply initiatives we have taken in the months, we can return them to the vendor and they will past, one is that we have made all our suppliers use our be paid only for the stocks which are sold. The third barcode. It is source tagging by the suppliers. This is a business model is the concessional business model win-win situation for Shoppers Stop and the suppliers where we will be giving space in our store to some of so that we don't have to retag it at our distribution the suppliers and they will come and sell, for example, centers. The stocks can go to the stores within 24 hours sarees. of receipt. We also have an intake consolidation
happening with our exclusive label vendors where our IMPORTANCE OF SUPPLY CHAIN other transport is going and picking up the stock from MANAGEMENT all the exclusive label vendors and delivering to our
distribution centers. We call it a milk run. We also have In a retail operation we always ask 5 questions. What is a strong B2B platform with our suppliers to be very selling? What is not selling? Why is it selling? Why is it transparent with them. We provide them all the
An extract from a speech at SPJIMRBy Mr. C. Devdas Nair, Customer Care Associate and Head, Supply Chain & Mission Control, Shoppers’ Stop Ltd.
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information so that they are aware about what we are INVENTORY MANAGEMENTdoing. We also meet our suppliers once a year. We have a partnership for progress summit where we discuss our The way we manage our inventory is that we release a future plans and we share all the plans with the purchase order with all our suppliers. A purchase order suppliers so that they are adequately informed. We are is an agreement between Shoppers Stop and the also into GS1 implementation, the global study of suppliers that they will manufacture and keep the barcode, which we are implementing with all our stocks ready for Shoppers Stop, but they are not suppliers. We have recently started this initiative. With authorized to deliver the stocks. Delivery will happen this initiative, we don't have to put our barcode in the only when Shoppers Stop releases delivery future. We will be in a position to read the suppliers authorizations and the supplier will only supply stock barcode. based on the delivery authorizations. If we book a
purchase order for 5000 pieces and we want to pick up USAGE OF IT only 500 pieces we will issue delivery authorization for
500 pieces and the supplier will deliver only 500 As far as IT is concerned, Shoppers Stop currently has pieces. This is one of the best ways in which we have one major IT platform developed. We have a very managed inventory. powerful retail ERP package. We have implemented a merchandise management system, a warehouse Currently, we keep 2 weeks’ cover at the distribution management system and an order replenishment centre and roughly 10 to 12 weeks’ cover at the store. module which runs from the distribution center store.
This 2 weeks’ cover which we keep at the distribution We have a perpetual inventory account system to center will manage replenishment and whatever manage the stock take module. We have Oracle finance quantity we are ordering will come and sit at the for the financial part. We also have one of the most distribution center. When we order a quantity from the powerful warehouse management systems that take vendor we are not ordering for a particular store, we are care of automatic picking. The picker would be ordering for a region. The stocks will come and sit at the informed which racks and shelf he has to go to and pick distribution center and from there we will replenish the stocks from. Even the put away happens in the same stocks. way. So we are in a position to replenish our stocks within 24 hours to all our outlets. We have a very strong GS1 AT SHOPPERS STOP IT platform with us.
Another initiative we have taken is GS1. We are LOGISTICS SET UP planning to implement GS1 with all our suppliers and
Shoppers Stop will be reading the GS1 barcode in the We also have a good logistics set up. We have future. Currently we have two barcodes. One is the regionalized the distribution centers. We have 4 supplier barcode and the other is the Shoppers Stop distribution centers in the country, one each in barcode which are not linked today. Tomorrow, when Mumbai, Delhi, Kolkata and Bengaluru. When we we start reading the GS1 barcode, both the supplier started we had a distribution center attached to the and Shoppers Stop will be speaking the same language. store. Now we are regionalized and we have decided This would lead to a better collaboration with the we will not be opening any more logistics centers. We suppliers in the future.might open another 30 or 40 stores but we would manage the replenishment from the same distribution centers.
We have outsourced 100% of our logistics set up. Not even a single person of Shoppers Stop sits at any of the distribution centers. It is independently managed by the logistics partners. We have mainly outsourced the logistics set up as we wanted to concentrate on our core competency which is retailing. The vision of Shoppers’ Stop supply chain was to build a collaborative supply chain, seamlessly integrating with all partners like vendors and service providers and perfectly aligned to the operational service requirements of the customers.
54
The Ascent of Money – A Review Published by Allen Lane, Year 2008
Hari Iyer (PGDM 2011-13 Operations)
“Financial innovation”, Niall Fergusson breathlessly market. In trying to address both the general public and
proclaims, “has been an indispensible factor in man's the financially adept reader, Mr. Ferguson may have
advance from wretched subsistence to the giddy done the book some injustice.
heights of material prosperity that so many people
know today.” In similar rushed tones, he traces nearly In any case, these are minor distractions in a historical
every major event in history – from the emergence of tour-de-force that, in one overarching swoop, traces the
Renaissance art to industrialization in continental rise and fall of human civilization through the lens of its
Europe, from Napoleon Bonaparte's final defeat to the financial actions. In the first chapter, the author
American Civil War –to financial causes; possibly describes the history of monetary systems from the
opening himself to allegations of misattribution. precious metal coins of the Romans (which,
interestingly, “outlived the Roman Empire itself”) to
A professor of history at Harvard University and an the moneyless system of the Incas and the gold standard
author of a number of books such as 'The Pity of War', of modern Europe, covering along the way the
'Empire: How Britain Made the Modern World', 'The emergence of lending and banking. The second chapter
Cash Nexus', and 'Colossus' over the past decade, Mr. talks of what is arguably the most important invention
Ferguson is no stranger to controversy. In 'The Pity of of modern finance – the issuance of bonds to finance
War', for instance, he argues that Britain's role in the government spending; and a closely related concept –
First World War was unnecessary and avoidable, and the rise of debt fuelled wars. With remarkable insight,
that the German victory that would have resulted from the author describes how easy access to bond markets
British non-participation would have been a favourable proved to be a major cause of inter-city wars in
outcome for both Britain and for Europe. The rise of medieval Italy, and also helped Britain finally hand
both Nazism and Bolshevism would have prevented, he defeat to Napoleon. Closely tied to the emergence of
says, and “Adolf Hitler could have eked out his life as a bond markets is the stock market and the bubbles
mediocre postcard painter”. While the economic therein, which are the covered in the third chapter. The
underpinnings of history have always been an first shares issue was done by the United Dutch
important part of his work, the run up to the 2008 crisis Chartered East India Company (or VOC, in Dutch), and
and its aftermath have brought a renewed focus on this it met with great success. About a century later came the
aspect. For instance, in a 2009 article in the Harvard first bubble, when John Law issued large amounts of
Business Review, he outlines the history of recessions stock in France to finance the expansion of his
in the US, ascribes causes to the financial crisis and 'Company of the West' and to create non-existent assets
tries to predict the future of the dollar and the American in Louisiana.
economy. It is in this light that the “The Ascent of
Money” has to be interpreted. The fourth chapter explores the history of insurance
and its close ties to the development of mathematics
A casual glance through the book reveals that it is not and the actuarial sciences. The author describes how,
entirely written for the layman – it demands a certain from humble beginnings as a collective fund for
degree of financial literacy from the reader. Despite the Scottish ministers' wives, the concept of insurance
author's protestations, it is hard to imagine how the spread all over the world in a mere couple of decades,
financially challenged man on the street (indeed, by the ultimately culminating in the welfare state. Property
author's own statistics, two-thirds of Americans and land have been considered among the most
surveyed in 2008 did not understand how compound important assets historically, and these form the subject
interest works; and a majority of respondents in another of the next chapter. It talks of the democratization of
survey claimed to have learned “'not too much' or these immovable assets – while in medieval times only
'nothing at all' about financial issues at school”) can the aristocratic elite could own property, the rise of
comprehend concepts like the Black-Scholes options easily accessible mortgages in the US after the Great
pricing model, monetary base (M0) or narrow money Depression led to near-universal property ownership.
(M1) in monetary theory, or for that matter, the relation Unfortunately, it also leads to asset bubbles like the
between market interest rates and prices in a bond Savings and Loan crisis of the 1980's and the more
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recent subprime crisis of 2008. The book closes with mutely wringing their hands, one wonders if a similar
'From Empire to Chimerica', which talks of the power situation would repeat. The lessons of history are won
shift happening from America to Asia' emerging hard, but are easily forgotten.
economies, of neo-imperialism and its consequences
for developing economies, and an economic future that In the final analysis, then, the book provides a
would be dominated by the duopoly of China and fascinating and lucid insight into the complex
America, or 'Chimerica'. machinations of the financial world. A serious reader
would glean perspective on the historical successes and
If there is one headline lesson from the book, it is that blunders of finance, and pointers on how to avoid past
history repeats itself. Mr. Ferguson vividly describes mistakes in the future. On a negative note, however,
the Argentine hyperinflation of the early 1990's: “.. perhaps the most remarkable feature of the book is its
Already in April customers in one Buenos Aires lack of prescience. Reading it four years later, after the
supermarket had overturned trolleys full of goods after recession of 2008 has played out and the euro crisis has
the management announced over a loudspeaker that all taken its place, one wonders whether the author's
prices would immediately be raised by 30 percent. For assessment of the 2008 crisis as primarily an asset
two days in June crowds in Argentina's second largest bubble was too simplistic. Had the book hinted at
city, Rosario, ran amok in an eruption of rioting and prolonged economic depressions in the future and
looting that left at least fourteen people dead.” As the attempted to unearth the complex web of historical,
world today stares at the possibility of a Greek exit cultural and political reasons behind it, it would well
from the Euro zone, in all probability leading to and truly have been a masterpiece.
sovereign default and inflation, with European leaders
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Consumer India
Written by Dheeraj Sinha, Published by John Wiley & Sons (Asia) Pte. Ltd.
Abhishek Goud (PGDM 2010-12 Marketing)
Inside the Indian Mind and Wallet
To capture the changing mindset of the Indian their challenge is to find out how their brands can play
consumers, to understand how they have undergone the a meaningful role in the lives of the people based on the
transformation from the “saving” phenomenon to the new cultural codes.”
“consumption” phenomenon, Dheeraj Sinha has
scripted the book, “Consumer India”. In his effort to It is understood that marketing is neither completely
encapsulate the change, he has chronicled the most theory nor fully practice but an amalgamation of both.
definitive changes that have occurred in the minds and From his personal experience, Sinha gives a clear
wallets of consumer India, mainly citing reasons picture of the needs of the Indian consumer from the
arising from the economic liberalization of the country. actual battlefield.
Beginning in the early 1990s, this has helped shape the
thinking of the Indian consumer. The author has classified the Indian Consumer into
three categories. The first: the “Partition Generation”, a
Liberalization of the economy has contributed to the very cautious group, slowly opening up. This group has
maturing of the Indian consumer. Today's marketer high regard for functionality in its consumption
must understand the phenomenon of change in the patterns and is highly traditional. “Food, shelter and
consumer's thinking, and suitable alter the product clothing” are the three critical slices of life they seek.
offering.
The second category is the “The Transition
Going beyond the clichéd “India is a different country Generation” which carries their yesterday while
with many complex cultures and people” notion, heading into tomorrow. While they are privy to a
Dheeraj Sinha etches out the uniqueness of the Indian plethora of enticing choices in lifestyles, goods,
consumer and the market he dwells in along with the entertainment and services, they want to “nourish the
intricacies of the “place” in its own right. He has practices of yesterday with the resources of today”.
contrasted this against the traditional way of shopping
and thinking, while wittily using stories and anecdotes The third category is the most intriguing one, “No
to elucidate his point, peppering in some Bollywood, Strings Attached Generation – Life Unbound” and this
category data, marketing cases and macroeconomics generation, according to Dheeraj Sinha, is one which
along the way. lives on a linear scale and measures everything on it-
Through this book, Sinha brings forth the changing from what interests them the most to the least. Driven
shopping landscape in India, thereby providing us the completely by technology, they adapt to changing
intricacies of the bonding that exists between the Indian lifestyles based on changing technology.
consumer and his money.
The book could perhaps have been enhanced by
India being a land of opportunity is probably a including cases of major FMCG companies and their
misnomer. Rather, India can be portrayed as a land of strategies to lure consumers, and how they have
numerous small pockets of opportunity. changed over the years. But in the end, to credit the
author, he has made an honest effort in showing the
This book helps in knowing the evolving relationship transformation of the mindset of the Indian consumer.
between the consumer and his environment and
understanding the 5 categories and 3 segments that
consumers exist in.
“It is imperative for brands and businesses seeking
success with Indians to understand this larger cultural
transformation,” says Dheeraj Sinha. “As marketers
take in how Indians are thinking and behaving today,
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‘Moneyball’ & Management Rahul Unnikrishnan (PGDM 2010-12 Finance)
You get on base, we win. You don't, we lose. And I hate
losing, Chavy. I hate it. I hate losing more than I even
wanna win.
– Billy Beane
which was different from the traditional method of
using batting averages, etc., Billy was quick to realize
its importance. He was ready to go ahead with it despite
very vocal opposition. He dug out the right set of
metrics to evaluate performance.
THE MOVIEWe often see in businesses that the parameters used to
evaluate peformance don't really measure what is The movie is based on the book Moneyball by Michael required. Here comes the necessity of using the right Lewis. The story is about Billy Beane, coach of numbers for evaluating. This is not a set of numbers Oakland Athletics who, along with his assistant Peter which will eternally point how well your business is Brand, assembles a team which sets a record breaking doing. There is a need to delve deep and understand if spree of 20 consecutive wins despite financial woes. these numbers are really giving us what we need.The team utilized a branch of statistics known as
Sabremetrics, which is radically different from the In the movie, Peter Brand was able to do that and traditional measures used to analyze players. convince Billy Beane too.
WHAT A MANAGER CAN TAKE Asking the right questions is a key skill for continuous AWAY FROM THE MOVIElearning and improvement. At many points in the
movie Billy is seen asking questions to his team of The first aspect of Billy Beane which would strike the scouts, and he repeatedly talks of understanding the viewer is his ability to make decisions under problem. This is a very important aspect- constraints. He was faced with a situation where his top understanding a business problem.players were on their way out, and with an inadequate
budget, he had to make a competitive team for the next Digressing slightly, let us take the example of Kodak to season. This required him to make some tough calls. see the importance of asking the right question. They When things weren't going right with his team of scouts invented the digital camera back in 1975. But they did he had to fire one of them who questioned about his not try to make a business out of it fearing they wouldn't decision to go with Peter Brand's techniques. be able to sell their films. Kodak was asking itself
“How do we sell more of our product” instead of asking The concept of blue ocean strategies has taken the “What business are we in.”world by storm since the time it was first propounded. If businesses do not ask the right question, they might What Billy decided to do more or less falls within the well find themselves in the situation that Kodak is in ambit of a strategic blue ocean. His decision to rely on today.Peter Brand's nontraditional statistics was a chance he
took. It was unprecedented in the world of baseball. Human resource management is another learning from There was huge risk involved as well. But in the end, the movie. Billy has to deal with a number of people in the rewards were commensurate. different capacities. He is answerable to the owner for
the team's performance. Despite wanting an increase in In management parlance, he was able to discover a the salary cap he is not able to get the owner to agree. competitive advantage which set his team apart from His coach is worried about his future and asks for a the rest. fresh contract. Billy has to deal with him the hard way
since things are not going well.Analytics is an important backbone of most
knowledge-based businesses. It can be defined as use This creates a rift between them and affects the team's of data to aid decision making process. In this context, performance an extent. He had to act against his it is important to understand the right data to be used experienced team of scouts for going ahead with the since vast amounts of it are available. new idea. He had to motivate his motley collection of When Peter Brand came out with a set of statistics players to perform well. He had to manage the ego of
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58
players like David Justice who was a big name in an is a result of continuous and persistent effort. The need
otherwise unheard of team. to change with the times is an essential component of
staying ahead in business and this might require going
This can be compared with a modern day company against set patterns at times. Billy was able to do it.
where a manager would have to deal with many people
every day. The higher the manager is in the corporate Billy's decision to trust Peter Brand also shows his risk
ladder, the more the number of people he would have to appetite. He knew that he had to do something radically
talk to. For instance, a CEO will have to talk to the different to stay competitive in the league given his
board members for important decisions, to his salary cap. His solution to the problem was risky, but
employees to keep them motivated, and so on. In the risks can be managed if backed up by proper analysis of
company he will have many managers reporting to him data and smart decision making. In fact, in this
with various problems. Finally, it boils down to talking situation, all the data was showing was what exactly a
to the people in the right manner and making them player was good at. So his decision which looked risky
realize that it's a team effort which is required to initially was actually just looking at data which was
achieve success. available to everyone in a different way.
When Billy decided to go against the vast experience of Businesses too need to realize the importance of
the scouts who had seen thousands of games and managing risk. There will be situations where certain
analyzed even more players, and finally reaped components of risk cannot be managed. But with
success, it showed that something was wrong in the proper analysis, risk can be diversified to achieve
way scouts were thinking. What probably happened success. It might just require some out of the box
was that over time, the scouts had become tuned to a thinking.
particular way of thinking which had so far proven
successful. The decision making used by these scouts Thus, watching Moneyball helps one learn some very
involved judgment. But in the face of the right important management skills through Brad Pitt and
statistics, the scouts who were skeptical about Billy's Philip Seymour Hoffman with a baseball theme in the
choices were proven wrong background.
Once businesses start tasting success they tend to get
little complacent. This can be dangerous since success
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This is a Research and Publications Committee 2011 initiative under the guidance of Dr. Debasis Malik, supported by members Priyansh Khanna, Rajas Abhyankar, Varun Madan and Viveka Jha.
A Research & Publications Committee 2011Initiative under ADMAP Programme
