Mibytes April 2012

Volume 1, Issue 10April 2012 Mi`bytesMasters of International BusinessCentre for management Studies BUSINESS LETTERJamia Millia Islamia University Health of Budget. A GDP growth in 2012-13 aggressive policies like disin- panies have been allowed to expected to be 7.6 percent, vestment of PSUs could be raise money through ECBs twelfth five year plan to be helping hand to fill the for their working capital and launched with the aim of “ pocket of government. But proposal to allowed FDI UP FASTER, SUSTAINABLE subsidies and rise in crude oil TO 49% by foreign airlines is AND MORE INCLUSIVE price more and less creating still being considered by gov- GROWTH. And at this junc- the same problem which may ernment. ture where economy is re- affect the future plans of covering, inflation is also government‟s introduction of low from last fiscal, there is new schemes. Some subsi- Provision regarding imple- good sign of recovery in core dies, while being inevitable, mentation of advance pricing sectors, a balance policy and may become undesirable if agreement to be introduced more options for industry is they compromise the micro- in finance bill 2012. Micro needed to cope up with economics fundamental of Finance Institution bill 2012, global slowdown. A balance economy. Endeavour to keep pension fund regulatory and between expenditure and central subsidies under 2 development authority bill collections is a need for fight percent of GDP in 2012-13. 2011, banking laws against deficit .GST network Over next 3 year, to be fur- (amendment) bill 2011 and to be set up in August, 2012 ther brought down 1.75 per- insurance laws (amendment) with more transparent tax cent of GDP. A recommen- bill 2008 to be moved in the system. Proposal to allow dation of task force headed session of the parliament are FDI of upto 49% by foreign by Sri NANDAN positive for the financial sec- airlines is still being consid- NILEKANI, a mobile-based tor, recapitalization of PSUs ered by Government. All and fertilizer management system ba nk is expe cted to all mixture of expenditure has been designed to provide strengthen credit growth, and collection, attracting end to end information on while specific measures such more investor and make IN- movement of fertilizers and as the increase in customInside this issue: duty on the gold imports is DIA accessible as an invest- subsidies. ing destination is of prime likely to channelize higher concern. savings into financial invest-The IPL Business is 2 FOREIGN DIRECT IN- ment, including bank depos-Here to Stay. VESTMENT which is now its. Micro finance institutionsThe Eclectic Paradigm. 3 The Government is planning more open for sectors like bill, which will supersede to recover and correct the retail. Beside that aviation state government laws, will fiscal deficit situation in which is most loss oriented provide a big boost to theDo You Know?? 3 Fy13 by implementing sev- (we have examples) industry. struggling micro finance in- eral revenue augmentation Is also has his own opportu- dustry. measures, mainly tax reve- nities but it is a capital ori-Quote for the Month. 4 nue and expected to end the ented industry because of year with fiscal deficit at technology and infrastruc- Cont…..on Page 4 5.1%. The increase in excise ture, is now more open and and service tax and some have options, Aviation com-

Mi`bytes THE IPL BUSINESS IS HERE TO STAY. Its said – IPL to Cricket is what Page 3 to Journalism A harmless hilarity and money-minting ma- chine. All eyes focused on flow of money into few pockets. Then again the ultimate goal of every business is to make money and the IPL business model is here to stay. Cricket and Bolly Wood, two fascinations of Indians mingled themselves into IPL-T20. Glamour and Game into a cocktail, a meet called „Globalization of Cricket Culture‟. It is not the critics who count. Some of their views on the premier league may be very negative but the fact remains that the IPL is here to stay as a successful business model. Its time to examine the issue in some detail since IPL 5, the first of 10 in the initial series, has got off the ground. While varied opinions are part and parcel of the game, whats happening is that it is becoming fashionable to knock the IPL for all the ills that beset the national team in the disastrous season. The attitude of the players who prioritise the league in their career plans may have clouded the issue. But why blame the league for being such a valuable asset as to impel cricketers to monetize it to make and secure their lives? There may be issues of temperament brought on by over exposure to limited- overs cricket. There may even be technical issues because of the peculiar demands of the shortest format that forces batsmen to improvise all the time. Leaving aside the players attitude and problems, an examination of the league that is going into a fifth season would reveal that it is in reasonable shape as a business. In which other business would a mid- sized investment have promised to bring such valuations in four years as to fetch a reported firm offer of Rs 1,000 crore to one team last season and another investment proposition said to be Rs 900 crores for a 90 percent ownership of one of nine teams at the beginning of IPL 5? The valuation of the league by brand consultancies can be viewed with some suspicion since the business of sport is hardly quantifiable in the regular sense of more established ways of running com- merce. If international consultancies do value the IPL at an estimated $3.67 billion - down from an earlier $4.13 billion of 2010 - then the league must be said to be doing alright. The downward revision last year was understandable after all the shenanigans surrounding the Kochi Tuskers that finally dropped out. It can be argued that television audience figures show a declining trend estimated to be as much as 29“The TRP of IPL in the 4th week percent. Viewer fatigue, which may have been the primary cause, is an accepted reason why this hap-was 4.6, whereas in this week its pened because of the peculiar scheduling last season when IPL 4 began just days after a World Cup that was played mainly in India. And yet the broadcaster is estimated to have made a profit close to TRP dropped to 4.5, but the $200 million dollars in IPL 4 despite the mind boggling TV rights fees paid as a yearly fraction of ashow has still maintained the top near $2 billion 10-year deal. position in the TRP chart.” To deride the league for some innovations is silly because these innovations were there in some form or the other much earlier. Dugouts, in American pro sport style, are by no means an IPL invention. Players were sitting in dugouts in cricket in 2003 in England. Cheerleaders are not an IPL invention. Pom-pom girls have been known to grace the game in New Zealand and Australia for at least 30 years; so too pop shows at intermissions, music over the tannoy, etc. Players speaking into micro- phones embedded in their clothing to converse with commentators is not an IPL innovation - it was tried out in festival cricket Down Under 20 years ago. It is a different issue that cricket was Bollywoodised to make an impact in the founding of the league. Here lies the spark of genius that brought together cricket, Indian big business and filmy glamour to make Indian cricketainment that brought in the big television bucks. Why would anyone professing a love for the game have a grouse about something that did a whole lot of good to cricket even as it raised the profile of the international cricketer? Critics have pounced upon dropping TRPs, declining in-arena attendance and slow booking of ad slots on TV as factors that would affect the league. All this before a ball was bowled in IPL 5. Even if they were all true, these are normal vicissitudes affecting all businesses, including sport, which have learnt to deal with them over time. Life is never a smooth run from start to finish for anyone, far less so for businesses. And sport cannot insure itself against dips, much less counter them just for a few critics who tend to believe their negativity is the only way to go. Businesses dont bend every time there is bad news. They learn to deal with it. And doomsday pundits predicted the death of cricket long before the IPL was born but the game goes on. Samik Sarkar, 1st Year MIB,JMI.

Volume 1, Issue 10 Page 3THE ECLECTIC PARADIGM.The eclectic paradigm was developed by John Dunning in 1979 as an attempt to synthesize theother FDI approaches based on the company specific advantages, internalization advantages andcountry specific advantages. As it is a synthesis of some of the foreign investment theories, it doesnot qualify to be a separate theory itself.International Business : Role and ProcessesThe main purpose of the eclectic paradigm is to provide an analytical framework to the analyst sothat he could choose the most suitable approach for the investigation that he intends to undertake.For example, the transaction cost approach may be most relevant for the investigations relating tothe hierarchical coordination of the different stages of the production process. An MNE adopts bothbackward and forward integrations in this case. The eclectic paradigm assumes that the MNEspossess ownership advantages from their intangible assets in the form of technology. This has en-abled them to reduce the transaction cost through the internalization process. Internalization advan-tages arise because of the exploitation of technology and the location and other advantages accru-ing in the host country.Although, the ownership advantages may be transferred to the host country though the licensingarrangements; yet certain advantages are such that non-transferable benefits from them would oc-cur only if they are managed within the MNEs themselves. Such advantages are organizational and “The main purpose of theentrepreneurial capabilities of the managers of the international firms, their experience of foreignmarkets, their political contacts and long-term business agreements with other enterprises. The con- eclectic paradigm is totrol over technology and its coordination with the host country resources would promote R&D ef- provide an analyticalforts, which can lead to the rapid growth of internationalization of the world economy.The MNEs follow different approaches for reaping the ownership advantages. Some adopt the com- framework to the analystpetitive approach for competing in the international markets, while others pursue the monopolistic so that he could choose theapproach. According to the competitive approach, the MNEs develop their competitiveness for a most suitable approach forplace in the foreign countries. In the case of monopolistic approach the ownership advantages arisefrom the monopolistic competition where the firms sell differentiated products. The eclectic para- the investigation ”digm provides merely a comprehensive framework. It does not specifically highlight the advantagesof competitiveness in the foreign countries. It also does not take into account any single FDI theoryon priority basis. It points out the circumstances which the investigator should take into account indeciding which FDI theory would suit his needs. The relevance of the eclectic paradigm lies in itsapplication to the simultaneous, operation of the market imperfection approach and the transactioncost approach. The former theory helps in identifying the benefits enjoyed by the MNEs due to theimperfections in the foreign countries, and the latter is helpful in the reduction of the cost of trans-actions. By-Ibrahim Badar 1st year MIB , JMI.DO YOU KNOW?? Hewlett Packard – The coin toss. We‟ve seen coin toss at the start of sports games. But deciding the name of a company through a coin flip? That is how HP got its name. Bill Hewlett and Dave Packard tossed a coin to decide whether the company would be called Hewlett-Packard or Packard-Hewlett . Google – The Back Rub . Did you know that the search engine you use frequently was once named ‘backrub‟? Google was created in 1996 under the name "BackRub". Moreover, the Google name change in 1998 came as a spelling mistake of the word “googol”.

CMS, MIB Quote For the Month E-mail: 2006.samik@gmail.com,mohammadfurquan1985@gmail.com Phone: 8860223083, 9716926240 “Success is a lousy teacher. It seduces smart people into thinking they cant lose.” -Bill Gates Health of Budget.EDITOR-IN-CHIEF: Cont...from page 1Prof. SAYED WAJID ALI The budget has introduced pee debts of the existing several measures such as power projects and reduction lowering the rate for with- of withholding tax on the holding tax on interest pay- interest payment on ECBsSTUDENT EDITORS: ment on three year ECBs for from 20% to 5%.MOHAMMAD FURQUAN. funding infrastructure pro-NAMITA DHAMANI. jects and encouraging public private partnership in road Increase in cess from currentSAMIK SARKAR. construction project by al- level, 43737 cr rupee for lowing ECBs for capital ex- petroleum subsidies have penditure on the maintenance been provided for FY13 and operations of toll sys- (would be insufficient if rise tems for road and highways. in crude oil price). Rise in cess and volatile crude oil Power sector is another sec- market can put oil companies tor that grabbed the attention, in trouble and more subsidies fuel shortage, elevated price can directly cut the pocket of of imported coal and poor government. financial situation are some common problems which this sector is facing. The major announcement including By-Mohammad Furquan waiving off basic custom 1st Year MIB , JMI. duty on coal import until FY14 and extension of 80- 1A benefits until FY13.Other positive announcement for the power sector including tax free bonds for financing the power sector, allowing ECBs for part financing ru- For Previous Editions Pleases Visit http://www.slideshare.net/mibytes/documents

Mibytes April 2012

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