E globuz z vol ii issue ii


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E globuz z vol ii issue ii

  1. 1.   e-­‐GlobuzZ   Vol  II  Issue  II  Oct-­‐Dec’11  “Stay Hungry Stay Foolish”                            -­‐  Steve  Jobs       Volume  II  Issue  II  Oct-­‐Dec’11   e-­‐GlobuzZ   K.J.Somaiya Institute Of management Studies & Research      
  2. 2.   e-­‐GlobuzZ   Vol  II  Issue  II  Oct-­‐Dec’11     FOREWORD   Dear  Readers,   It   gives   us   immense   pleasure   to   bring   you   the   7th   and   second   anniversary  issue  of  e-­‐Globuzz  (Oct-­‐Dec  2011).  The  business  world  was   even  more  turbulent  in  this  quarter  in  comparison  to  the  previous  ones,   with   the   European   Union   (EU)   going   into   a   deeper   financial   crisis,   change   of   regime   in   Libya   and   the   sad   demise   of   one   of   the   most   successful   and   respected   innovators   in   the   personal   technology   industry,   Late   Steve   Jobs   in   Oct   2011.   Considering   the   monumental   contributions  of  Steve  Jobs,  the  e-­‐Globuzz  team  has  dedicated  this  issue   to   him.   A   lot   has   been   said   in   the   press   and   other   media   about   the   unique   contributions   of   Steve   Jobs.   We   remember   him   and   cherish   his   commencement   address  to  MBA  students  at  Stanford  University  in  2005,  which  will  always  be  an  inspiration   for  several  generations  of  innovators  and  MBAs  alike.   Some  of  the  Highlights  of  this  issue  include  a  brief  report  on  the  first  International  Business   Conference   Pangea   2011   organized   by   IBS@SIMSR   on   24th   September   2011,   a   write   up   on   emerging   markets   of   African   countries   along   with   other   contemporary   articles   on   international   marketing,   finance   and   logistics.   One   of   the   e-­‐Globuzz’s   first   that   we   have   for   this  issue  is  an  article  by  our  own  faculty  Prof.  B.  Bhatia  on  international  finance.   We  have  also  covered  highlights  of  the  international  business  session  on  emerging  trends  in   international   trade   and   cross-­‐border   investments   of   multinational   enterprises   on   16th   December  at  Samavesh  this  year  which  is  our  institute’s  prestigious  annual  event.   We   hope   you   like   this   issue   of   e-­‐Globuzz   just   as   much   as   the   earlier   issues.   We   invite   contributions   from   all   our   readers   for   the   8th   issue   (Jan-­‐Mar   2012)   proposed   for   e-­‐publication   by  mid  Feb  2012.   Happy Reading, Prof. C. P. Joshi Faculty Mentor IBS@SIMSR     2    
  3. 3.   e-­‐GlobuzZ   Vol  II  Issue  II  Oct-­‐Dec’11       VOL  II  ISSUE  II  OCT-­‐DEC  ‘11   Obituary 4 Steve Jobs Taming the 5 recession Faculty Mentor Electric-Car Industry – 8 The road ahead Prof.  C.  P.  Joshi   A New Chapter In 10 Editor-in-Chief Indo-Iran Ties Islamic Banking 12 Prerna  Makhijani   Battling the skies - 14 The success of Manvinder  K  Sodhi   AirAsia Designers Emerging Markets: 16 African Countries Vishu  Kartik   International 20 Swetaleena  Das   Logistics Did you know Issue of GDR/ADR by 23 Indian companies- Ankur  Yadav   Recent Trends Alumni Speak 26 Circulation Highlights 27 Swati  Moolchandani   International Business Conference Shivam  Awasthi   Highlights 32 Samavesh     All  the  views  expressed  in  this  e-­‐periodical  reflect  the  personal  opinions  and  views  of  the  authors  and  do   not  reflect  IBS@SIMSR  views.   3    
  4. 4.   e-­‐GlobuzZ   Vol  II  Issue  II  Oct-­‐Dec’11           Obituary:  Steve  Jobs   The   Man   Who   re-­‐established   the   vitality   of   the   The   success   of   Macbook,   iPhone,   iPad   ,   all   recite   forbidden  Fruit!     the  story  of  the  much  glorified  Apple  Inc.  and  the   man   behind   it.   The   legend   who   miniaturized   the   We  as  management  students  try  to  learn  business   world   and   brought   it   into   our   palms.   What   would   in   the   world,   but   rarely   does   the   world   produce   an   you  like  to  call  him?    An  Inventor?    An  Innovator?   individual,   who   gives   business   so   much   to   learn   Maybe  a  blend  of  both!   from.     Forbes   magazine   laid   down   the   top   ten   lessons   Steve   Jobs,   CEO   of   Apple   Inc.   and   one   of   the   that   Steve   Jobs   Taught   us.   To   emphasize   on   of   one   greatest   mastermind   and   innovators   of   all   time,   them,   that   is   quite   relevant   in   terms   of   passed  away  on  6th  October  2011,  at  the  age  of  56,   management   education   is:   To   create   the   future,   after   a   long   battle   with   cancer.   His   unsurpassable   you   can’t   do   it   through   focus   groups:   “Even,   the   contribution   to   personal   technology   and   more   consumer   today   does   not   know   what   he   wants.   broadly  to  the  innovation  revolution,  has  not  only   Innovate   for   him   and   give   him   something,   he   left  an  indelible  mark  on  our  society,  but  has  also   would  crave  for”.   The  success  of  iPod,  iPhone  and   made   him   immortal   and   forever   ideated.   He   iPad  depicts  it  so  perfectly.     possessed  great  business  acumen  and  at  the  same   time  despite  his  greatness,  also  taught  us  that  he  is   Over   a   million   people   from   all   over   the   world   have   just   another   man.   His   speeches,   his   philosophies   shared   their   memories,   thoughts,   and   feelings   and   more   informally   his   attire,   all   marked   the   about   Steve.   One   thing   they   all   have   in   common,   greatness  of  the  man  and  his  humility.   including   his   friends,   colleagues   and   owners   of   Apple   products,   is   how   they’ve   been   touched   by   Jobs   was   a   perfectionist,   attention   to   details   and   his  passion  and  creativity   minuteness   being   his   forte.   No   wonder,   today   we   so   conveniently   use   the   i-­‐prefixed   devices,   the   With   the   last   inspiring   words   from   the   legend   most   swanky   hand   and   palm   pieces.   Steve   Jobs   himself,   who   shall   remain   alive   in   everyone’s   heart   started  his  career  in  1977  with  his  friend  and  Apple   not  just  for  being  a  technological  revolutionary  but   co-­‐founder   Steve   Wozniak,   by   launching   the   first   for  being  “Steve  Jobs”   successful   mass-­‐market   PC-­‐   Apple   II.   There   onwards,   he   bought   and   lead   Pixar   Animation   “Your   time   is   limited,   so   dont   waste   it   living   Studios   till   the   mid   nineties.   The   company   set   an   someone   elses   life.   Dont   be   trapped   by   dogma   —   epitome  of  cutting  edge  technology  that  animation   which   is   living   with   the   results   of   other   peoples   had  ever  known.   thinking.   Dont   let   the   noise   of   others   opinions   drown   out   your   own   inner   voice.   And   most   Technology   was   further   revolutionized   when   Steve   important,   have   the   courage   to   follow   your   heart   introduced  iPod,  the  ultimate  boon  to  music;  with   and   intuition.   They   somehow   already   know   what   the   introduction   of   iPod,   music   aid   like   CDs,   Tapes,   you   truly   want   to   become.   Everything   else   is   LP  records  and  Walkman,  all  became  a  passé.   secondary.”     -­‐Nikita  Agarwal  (PGDM-­‐IB  2011-­‐13)     4    
  5. 5.   e-­‐GlobuzZ   Vol  II  Issue  II  Oct-­‐Dec’11       Taming  the  recession   -­‐Nikunj  Garg  (MMS-­‐B  2011-­‐13)   The   signs   of   an   imminent   recession   are   all   around   For   most   companies,   the   majority   of   funds   us.   The   spill   over   from   the   subprime   mortgage   crisis   originally   earmarked   towards   industry   events   and   is   weakening   both   consumer   confidence   and   tradeshows   has   either   migrated   to   other   consumer   spending—much   of   it   on   credit—that   has   marketing  programs  or  simply  been  eliminated.   been  buoying  the  US  economy.   While   traditional   advertising   programs   and   The   dismal   state   of   the   economy   is   causing   industry   trade   events   may   be   on   the   decline   in   companies   everywhere   to   reassess   their   marketing   terms  of  marketing  investment,  a  number  of  other   budgets   to   ensure   that   theyre   allocating   their   channels   and   programs   are   gathering   steam.   A   limited   marketing   funds   in   the   most   productive   good   example   is   social   media.   Today   a   growing   ways  possible.     number   of   companies   are   deploying   technology-­‐ enabled   solutions   for   leveraging   word   of   mouth   as   In  many  cases,  this  means  curtailing,  postponing  or   a  way  to  drive  marketing  improvement.   even   eliminating   previously   planned   marketing   expenditures.     By   turning   consumers   into   brand   advocates   and   building   market   awareness   in   an   exponential   In   other   cases,   companies   are   actually   investing   manner,   social   media   marketing   can   be   a   cost-­‐ more   aggressively   in   various   types   of   marketing   effective  way  for  a  company  to  achieve  some  of  its   programs,   sensing   an   opportunity   to   capitalize   on   key  marketing  objectives.   the  grim  economic  headlines.   Companies   are   paying   close   attention   to   online   The   recession   is   also   causing   some   marketers   to   marketing,   in   general.   This   category   is   broad   in   rethink   their   trade   promotions.   Consumer   brand   scope,   encompassing   everything   from   search   companies   typically   spend   upwards   of   15%   of   engine  marketing  to  Web-­‐based  promotions.   revenue   on   trade   promotions,   which   involve   temporary  price  cuts  to  encourage  reseller  channels   Mobile  marketing   to  reduce  retail  prices  for  consumers.        Through  a  confluence  of  technologies  and   standards  related  to  mobile  devices,  including   5    
  6. 6.   e-­‐GlobuzZ   Vol  II  Issue  II  Oct-­‐Dec’11     Through   a   confluence   of   technologies   and   standards   related   to   mobile   devices,   including   third-­‐generation   (3G)   networks   and   data   Did  you  know??   packages,   the   mobile   Internet   has   now   reached   a   critical   mass.   As   more   consumer   brands   are   discovering,   the   mobile   Internet   can   now   enable   large-­‐scale   mobile   marketing   activities   capable   of   engaging   consumers   in   unprecedented   (and   largely   affordable)   Treaty of Rome - An ways.     international agreement that led to the founding of the Reassessing  Marketing  Messages  and  Pricing  Tactics   European Economic Community on 1 January Companies   have   reassessed   their   marketing   and   advertising   1958. It was signed on 25 messages   in   the   context   of   their   cash-­‐strapped   buying   audiences   March 1957 by Belgium, and   modified   these   messages   to   better   resonate   with   consumers   France, Italy, Luxembourg, who,   in   many   cases,   have   become   increasingly   risk   averse   and   price   the Netherlands and West sensitive.   Germany. The word Economic was deleted from the treatys Based   on   their   demand   forecasts,   companies   are   taking   steps   to   name by the Maastricht eliminate   poorly   performing   products   and   solutions,   shifting   funds   Treaty in 1993, and the treaty to  product  lines  that  seem  better  suited  to  weathering  a  recession   was repackaged as the Treaty and   even   introducing   new   products   and   services   that   meet   the   on the functioning of the needs  of  consumers  on  an  austerity  plan.   European Union on the entry into force of the Treaty of Lisbon in 2009. To   that   point,   companies   are   also   modifying   their   pricing   tactics,   including   engaging   in   temporary   price   promotions   and   reduced   thresholds   for   quantity   discounts,   in   order   to   achieve   their   marketing  and  sales  objectives.  Some  companies  are  simply  selling   fewer  products  for  the  same  price.   Smoot Hawley Tariff Act Tariff Act of 1930, Companies   should   bear   following   factors   in   mind   when   making   otherwise known as the Smootñ Hawley Tariff was their  marketing  plans.   signed into law on June 17, 1930. It raised U.S. tariffs on 1.   Research   the   customer.  Instead   of   cutting   the   market   research   over 20,000 imported goods to budget,   you   need   to   know   more   than   ever   how   consumers   are   record levels. After the 1929 redefining   value   and   responding   to   the   recession.   Consumers   take   stock market crash, more  time  searching  for  durable  goods  and  negotiate  harder  at  the   unemployment never reached point   of   sale.   They   are   more   willing   to   postpone   purchases,   trade   double digits in any of the 12 down,  or  buy  less.     months following that event,   peaking at 9 percent, then drifted downwards until it 2.   Focus   on   family   values.  When   economic   hard   times   loom,   we   reached 6.3 percent in June tend   to   retreat   to   our   village.   Look   for   cosy   hearth-­‐and-­‐home.   1930. Then the federal Family   scenes   in   advertising   should   replace   images   of   extreme   government made its first sports,  adventure  and  rugged  individualism.   major intervention in the economy with the Smoot- 3.  Maintain  marketing  spending.  This  is  not  the  time  to  cut   Hawley tariff advertising.  It  is  well  documented  that  brands  that  increase     6    
  7. 7.   e-­‐GlobuzZ   Vol  II  Issue  II  Oct-­‐Dec’11       advertising   during   a   recession,   when   competitors   You   do   not   necessarily   have   to   cut   list   prices   are   cutting   back,   can   improve   market   share   and   but   you   may   need   to   offer   more   temporary   return   on   investment   at   lower   cost   than   during   price   promotions,   reduce   thresholds   for   good   economic   times.   Brands   with   deep   pockets   quantity   discounts,   extend   credit   to   long-­‐ may   be   able   to   negotiate   favourable   advertising   standing  customers  and  price  smaller  pack  sizes   rates  and  lock  them  in  for  several  years.     more   aggressively.   In   tough   times,   price   cuts   attract   more   consumer   support   than   4.  Support  distributors.  In   uncertain   times,   no   one   promotions   such   as   sweepstakes   and   mail-­‐in   wants   to   tie   up   working   capital   in   excess   offers.   inventories.   Early-­‐buy   allowances,   extended   financing   and   generous   return   policies   motivate   6.   Stress   market   share.   Companies   such   as   distributors   to   stock   your   full   product   line.   Wal-­‐Mart   and   Southwest   Airlines,   with   strong   However,   now   may   be   the   time   to   drop   your   positions   and   the   most   productive   cost   weaker   distributors   and   upgrade   your   sales   force   structures  in  their  industries,  can  expect  to  gain   by  recruiting  those  sacked  by  other  companies.   market   share.   Other   companies   with   healthy   balance   sheets   can   do   so   by   acquiring   weak   5.   Adjust   pricing   tactics.  Customers   will   be   competitors.   shopping  around  for  the  best  deals.       In   the   end,   companies   have   no   choice   but   to   strive   for   higher   levels   of   efficiency   and   effectiveness   across   all   aspects   of   their   marketing  operations  in  the  face  of  persistently   weak  spending  by  consumers  and  businesses.   “ By turning consumers into brand advocates, social media marketing can be a cost-effective way for a company to achieve some of its key marketing objectives. “ 7    
  8. 8. e-­‐GlobuzZ     Vol  II  Issue  II  Oct-­‐Dec’11             Electric-­‐Car  Industry  –  The  road  ahead                      -­‐Sahil  Patel  (PGDM-­‐IB  2011-­‐13)   Demand   for   Crude   Oil   is   increasing   along   with   the   number  of  Cars  on  road  making  any  economy  highly   dependent  on  Foreign  Oil.  Thus,  today,  all  the  major   economies   want   to   shift   their   transportation   sector   from  internal  combustion  engine  (ICE)-­‐based  vehicles   to  fully  electric  vehicles.  Now,  we  will  see  how  some   major  economies  of  the  world  have  taken  a  few  but   vital  steps  in  this  direction.   US   The   American   transportation   industry   today   faces   a   perfect   storm   of   economic,   geopolitical,   and   environmental   concerns   that   threatens   its   future.   capacity  that  will  be  equal  to  1  million  units  of   The   decline   of   the   US   automobile   industry,   the   battery-­‐powered   automobiles   in   operation.   By   country’s   increasing   dependence   on   foreign   oil   achieving   this,   they   will   also   boost   their   own   imports,   and   global   warming   have   spurred   the   battery-­‐export   opportunities.   Moreover,   Obama   Administration   to   publicly   commit   the   Municipal   governments   have   offered   up   to   country   to   developing   alternative   transportation   $8,800   in   subsidies   to   taxi   fleets   and   local   methods  and  alternative  energy  sources  as  a  way  of   governments   for   hybrid   and   all-­‐electric   combating   these   problems   and   setting   a   new   path   vehicles.     for   the   US   transportation   sector   and   economy   as   a   Rest  of  the  World   whole.   Governments   from   rest   of   the   world   too   have   The  U.S.  government  in  2008  began  to  talk  about  the   shown   keen   interest   in   building   Electric-­‐Car   energy   crisis   in   earnest   in   response   to   both   Industry.   In   Israel,   for   example,   the   skyrocketing   gasoline   prices   and   a   national   mood   government   is   working   with   Silicon   Valley   that   favoured   decreasing   the   U.S.’s   dependence   on   start-­‐up  “Project  Better  Place”  and  established   foreign   oil.   When   President   Barack   Obama   entered   car  companies  Renault  and  Nissan  to  bring  the   office   in   2009,   he   made   energy   independence   one   of   electric   car   to   Israel,   and   has   committed   to   his   core   issues,   and   his   administration   allocated   offer   substantial   tax   incentives   to   consumers   billions   of   dollars   to   promote   electric   vehicle   who  would  buy  electric  cars.  Denmark  has  also   manufacturing   and   development   of   advanced   worked   with   Renault   and   Nissan,   and   with   batteries  for  those  vehicles.   “Project  Better  Place”,  to  build  a  country-­‐wide   China   electric   car   network   with   20,000   recharging   stations   powered   by   wind   turbines.   In   Japan,   The   Chinese   government,   in   2008,   wanted   to   turn   has   pledged   to   install   power   outlets   the  country  into  a  global  leader  in  hybrid  and  electric   throughout   public   areas   in   certain   cities   and   cars   within   three   years.   Within   that   period,   each   of   towns,   and   has   planned   to   encourage   private   the   country’s   passenger   vehicle-­‐makers   would   be   companies   to   give   discounts   on   loans,   required   to   have   a   licensed   new   energy   vehicle   on   insurance  and  parking  to  electric  car  owners.   the  market.  Today,  China  wants  to  hit  battery              
  9. 9. e-­‐GlobuzZ     Vol  II  Issue  II  Oct-­‐Dec’11         All  the  countries  discussed  above  are  encouraging  the  Electric  Car     Industry   not   only   to   avoid   becoming   energy   dependent   on   a   Did  you  know??   foreign   country   but   also   to   keep   their   carbon   footprint   under     check.     Lessons  for  India   Chicago Board of Trade   (CBOT). In   light   of   this   state   of   affairs   of   the   emerging   global   electric   car     industry,  when  it  comes  to  India,  the  account  is  almost  NIL.  Though   The CBOT, established in 1848, is in   India,   there   are   a   lot   of   issues   that   doubt   the   feasibility   of   the     the worlds oldest derivatives electric   car   industry,   we   can’t   just   keep   quiet.   Major   incumbent   (futures and futures-options) automakers,   such   as   Nissan   and   Renault,   have   secured   internal     exchange. Futures and options on agricultural (wheat, corn, oats, access   to   critical   new   battery   technology   as   well   as   cooperative     etc.), financial (U.S. Treasury agreements   with   national,   regional   and   local   governments   in   bonds and notes, etc.), and index different   parts   of   the   world.   And   now,   it’s   time   for   the   Indian     (Dow Jones Industrial Average) Government  to  encourage  such  private  Automobile  Manufacturers   instruments trade on the CBOT. to   invest   into   Electric-­‐Car   Industry   to   gain   the   dual   merits     associated  to  it.   ________________________     German Customs Union One   of the first economic blocs was the German Customs   Union(Zollverein) initiated in 1834, formed on the basis of the   German Confederation and subsequently German Empire from “Today all the major economies want to shift   1871. Surges of trade bloc their transportation sector from internal   formation were seen in the 1960s and 1970s, as well as in the 1990s combustion engine (ICE)-based vehicles to after the collapse of Communism.   fully electric vehicles. “ By 1997, more than 50% of all   world commerce was conducted under the auspices of regional   trade blocs                   9  
  10. 10. e-­‐GlobuzZ     Vol  II  Issue  II  Oct-­‐Dec’11       A  NEW  CHAPTER  IN  INDO-­‐IRAN  TIES     -­‐Pratichi  Swain  (PGDM-­‐IB  2011-­‐13)         The   Wikileaks   recently   revealed   that   Indian   meant   Moscow   influenced   India’s   foreign   policy.     Prime   Minister   Dr.   Manmohan   Singh   had   The  Islamic  revolution  in  1979  saw  the  ouster  of   rejected   previous   requests   either   to   visit   Tehran   the   US   backed   Shah   Dynasty   rule   and   more     or   for   Iranian   President   Mahmoud   Ahmadinejad   importantly   brought   India   and   the   new   to   visit   India   as   the   United   Progressive   Alliance   theocratic   government   closer.   There   have   been     government   was   anxious   not   to   ruffle   American   many   high   level   visits   from   both   sides   with   the     feathers   at   the   height   of   the   U.S.-­‐led   campaign   highlight  being  President  Mohammad  Khatami’s   against   Iran   over   its   nuclear   programme.   So   visit  to  India  in  2003,  when  he  was  also  the  Chief     when   Dr.   Singh   met   the   Iran   President   on   the   Guest  at  the  Republic  Day  function.  But  in  recent   sidelines  of  his  visit  to  the  UN  in  September  this   years   it   has   been   a   seesaw   relationship   with     year  and  accepted  his  invitation  to  visit  Tehran,  it   Iran.   India’s   vote   against   Iran’s   alleged   nuclear   raised   a   few   eyebrows   indicating   a   substantial   weapons   programme   in   IAEA   in   2005   and   also   in     shift   in   India’s   foreign   policy.   The   cause   of   the   the  United  Nations  Security  Council  in  early  2011     shift   can   be   basically   attributed   to   a   host   of   led  to  new  lows  in  bilateral  ties.  Many  believed   various   reasons,   none   more   important   than   that   the   vote   against   Iran   at   IAEA   was   coerced     regional   stability   and   the   need   to   have   a   by   USA   in   lieu   of   the   lucrative   civilian   nuclear   dependable   source   of   fuel   to   meet   the   rising   deal   for   India.   This   plan   of   action   backfired   for     energy   demand.   India   and   Iran   did   not   enjoy   a   India   mainly   because   of   the   recent   nuclear     great   relationship   till   the   late   1970’s   mainly   due   tragedy   in   Japan,   leading   to   wide   scale   protests   to  the  Cold  War.  The  Shah  Dynasty  regime  in  Iran   by   locals   at   the   site   of   new   nuclear   plants   in     was  backed  by  Washington  and  India’s  proclivity   India  that  forced  the  government  to  go  slow  on   to  the  erstwhile  Soviet  Union  during  those  days     nuclear  energy.          10  
  11. 11. e-­‐GlobuzZ     Vol  II  Issue  II  Oct-­‐Dec’11         Also,   the   dependence   on   import   of   nuclear   fuel   dependency   on   oil   and   gas.   Presently   domestic   from   some   reluctant   member   countries   of   resources  supply  70%  of  India’s  energy  needs,  but   Nuclear   Suppliers   Group   like   Australia   and   New   as   consumption   rises,   dependence   on   foreign   Zealand  does  not  augur  well  for  India.  The  Indian   sources  would  increase  further.  Recent  discovery   Government  has  by  now  realized  that  the  aim  of   of   natural   gas   in   India   won’t   be   enough   to   keep   replacing   hydrocarbons   with   nuclear   energy   to   pace   with   the   growing   requirement   and   this   is   meet   the   energy   requirements   is   still   a   distant   where   Iran   can   be   more   than   a   normal   trade   dream   and   India   has   again   fallen   back   to   the   partner  to  India.  Iran  is  OPEC’s  second  largest  oil   traditional   suppliers   of   hydrocarbons.   Thus,   this   producer   and   has   10   percent   of   the   world’s   gesture  by  the  Indian  PM  can  be  seen  as  a  way  to   proven   oil   reserves.   It   is   also   the   second   largest   woo  Iran  for  India’s  greater  gain.   gas   reserves   that   are   about   16   percent   of   the     world’s   proven   gas   reserves.   Iran’s   current   India’s  trade  volume  with  Iran  is  not  as  significant   production  of  gas  is  very  low  in  comparison  to  the   compared   with   USA,   EU   and   China.   Iran   reserves   it   possesses   as   the   gas   fields   are   yet   to   accounted   for   around   1.1%   of   India’s   total   be   tapped,   giving   Indian   companies   an   exports   and   3%   of   imports   in   2010-­‐11.   India’s   opportunity   to   reap   the   benefits   by   investing   in   exports  to  Iran  include  petroleum  products,  rice,   the   Iranian   gas   sector.   With   such   prospects   lying   machinery   &   instruments,   manufactures   of   ahead,   Dr   Manmohan   Singh’s   visit   to   Tehran   will   metals,   primary   and   semi   finished   iron   &   steel,   act  as  a  catalyst  to  improve  bilateral  trade.     pharmaceuticals,   chemicals,   processed   minerals,   manmade   yarn   &   fabrics,   tea,   chemicals,   rubber   Along   with   energy   dependence,   one   more   factor   manufactured   products,   etc.   But   what   is   that   drives   India   to   have   a   strong   and   vibrant   noteworthy  is  that  almost  the  entire  import  from   relationship   with   Iran   is   regional   stability.   India   Iran   is   hydrocarbon.     As   per   the   latest   report   of   can   also   use   Iran   for   an   easier   route   to   access   the   Ministry   of   Commerce,   petroleum   alone   these  parts  of  the  world  not  only  for  trade  but  for   contributes   around   a   quarter   of   India’s   total   military   purpose   as   well.   Add   to   it   the   huge   gas   imports.  Iran  is  the  second  largest  exporter  of  oil   reserves   discovered   in   Central   Asia   which   gives   and  natural  gas  to  India  after  Saudi  Arabia.  Iran’s   India   all   the   more   reasons   for   stronger   ties.   The   contribution   has   decreased   from   nearly   20   development   of   Chabahar   Port   on   the   south-­‐ percent   of   India’s   total   petroleum   imports   to   eastern  shore  of  Iran  is  being  done  by  India  as  it  is   around   12   percent   in   last   2   years.   This   can   be   the  nearest  point  to  Iran  from  its  own  coastline.  It   owed   to   the   stringent   restrictions   imposed   by   can   be   seen   as   a   giant   step   towards   making   Iran   USA  and  EU  even  though  Iran’s  petroleum  sector   an  important  trade  partner.   Iran  can  also  hope  to   has  been  kept  out  of  UN  sanctions.     get   Indian   investments   in   Iran’s   untapped   gas     sector.   Strong   bilateral   ties   can   also   be   used   to   India’s   policymakers   are   systematically   looking   reap  mutual  benefits  in  multilateral  organizations   for  the  widest  possible  set  of  alternatives  to  meet   like  WTO  and  Organisation  of  Islamic  Conference   their   growing   energy   needs.   India   has   huge   coal   (OIC).With  so  much  at  stake,  PM  Singh’s  proposed   reserves,   but   oil   and   gas   reserves   are   modest.   visit   to   Iran   would   be   closely   followed   by   many   Moreover   attempts   to   increase   nuclear   power   agencies   and   governments   across   the   world.   It   production   are   facing   humongous   hurdles   definitely   promises   to   open   a   new   chapter   in   indicating  that  there  would  be  a  greater     Indo-­‐Iran  ties.                       11  
  12. 12. e-­‐GlobuzZ     Vol  II  Issue  II  Oct-­‐Dec’11     Islamic  Banking     -­‐Shefali  Shah  (PGDM-­‐IB  2011-­‐13)   Modern  banking  was  introduced  in  the  19th  century   the   practiced   Middle   Ages,   fostering   trade   and   in   the   Muslim   countries.   At   this   time   the   Muslim   business  activities.  The  origin  of  modern  Islamic   countries  were  politically  and  economically  not  very   banks   can   be   traced   back   to   the   very   birth   of   stable   and   thus   major   banks   set   up   only   in   Islam   when   the   Prophet   himself   acted   as   an   commercial   capitals   of   these   countries.   The   agent   for   his   wife’s   trading   operations   and   the   business   of   these   modern   banks   was   restricted   to   concept   of   interest   found   very   little   application   export   and   import   financing   and   thus   not   catering   in  day-­‐to-­‐day  transactions.   to   the   local   masses.   The   local   trading   community   avoided   the   “foreign”   banks   both   for   nationalistic   Islamic  Banks  in  the  20th  Century   as   well   as   religious   reasons.   As   time   went   by,   it   In  the  1960’s,  Muslim  thinkers  began  to  explore   became  difficult  to  not  make  use  of  the  commercial   ways   to   organize   commercial   banking   on   the   banks.   Their   only   involvement   would   be   in   terms   of   principles   of   Islam.   The   first   Islamic   interest-­‐free   current  accounts  or  money  transfers  as  borrowings   bank  came  into  being  in  Egypt  in  Mit  Ghamr,  in   from   or   deposits   in   the   bank   were   strictly   avoided   1963.   Mit   Ghamr   was   a   rural   area   where   people   so   as   to   keep   away   from   interest,   which   was   followed   Islam   and   thus   did   not   place   their   prohibited  by  the  Islamic  religion.   savings   in   any   bank,   knowing   that   interest   was   The   practice   of   these   Muslim   countries   was   to   have   forbidden  in  Islam.     interest   free   banking,   as   it   was   in   accordance   with   This   project   was   successful   as   the   deposits   the  principles  of  the  Shariah  (Islamic  rulings)  and  its   increased  in  the  period  between  1963-­‐1966.  The   practical   application   through   the   development   of   bank  was  cautious  and  had  rejected  about  60%   Islamic   economies.   Islamic   banking   has   the   same   of  the  loan  applications  and  the  default  ratio  of   purpose   as   conventional   banking,   except   that   it   non-­‐payment  was  zero.   operates   in   accordance   with   the   rules   of   Shariah.   Shariah   prohibits   the   payment   or   acceptance   of   interest  charge  for  lending  and  accepting  money,  as   well   as   carrying   out   trade   and   other   activities   that   provide  goods  or  services  considered  contrary  to  its   principles.   The   main   source   of   the   Shariah   is   the   Quran   and   the   recorded   sayings   and   actions   of   Prophet   Muhammad   the   Hadith.   Many   of   these   principles   upon   which   Islamic   banking   is   based   are   commonly   accepted   all   over   the   world,   for   centuries  rather  than  decades.   It   is   evident   that   Islamic   Banking   was   predominantly  in  the  Muslim  world  through              12  
  13. 13. e-­‐GlobuzZ     Vol  II  Issue  II  Oct-­‐Dec’11       But   the   project   was   eventually   abandoned   for   Investment   Account:   Investment   deposits   are   political   reasons,   but   it   showed   that   commercial   accepted   for   a   fixed   or   unlimited   period   of   time   banking  can  be  organized  on  an  interest-­‐free  basis   and   the   investors   agree   in   advance   to   share   the   also.   profit  (or  loss)  in  a  given  proportion  with  the  bank.   Capital  is  not  guaranteed.   Deposit  Accounts   Islamic   banking   is   a   very   young   concept   and   has   All   Islamic   banks   have   three   kinds   of   deposit   been   accepted   not   only   in   the   Muslim   countries   accounts:  Current,  Savings  and  Investment.   but   also   in   many   non-­‐Muslim   countries.   Despite   Current   Account:   Current   or   demand   deposit   the   successful   acceptance   there   are   problems.   accounts   are   virtually   the   same   as   in   all   These   problems   are   mainly   in   the   area   of   conventional  banks.  A  deposit  is  guaranteed.   financing.   Savings   Account:   Savings   deposit   accounts   With  only  minor  changes  in  their  practices,  Islamic   operate   in   different   ways.   In   some   banks   banks   can   get   rid   of   all   their   cumbersome,   depositors   allow   banks   to   use   their   money   but   burdensome   and   sometimes   doubtful   forms   of   they  obtain  a  guarantee  of  getting  the  full  amount   financing   and   offer   a   clean   and   efficient   interest-­‐ back  from  the  bank.  Banks  adopt  several  methods   free   banking.   All   the   necessary   ingredients   are   of   inducing   their   clients   to   deposit   with   them,   but   already  there.  The  modified  system  will  make  use   no   profit   is   promised.   In   others,   saving   accounts   of   only   two   forms   of   financing   -­‐-­‐   loans   with   a   are   treated   as   investment   accounts   but   with   less   service   charge   and   participatory   financing   -­‐-­‐   both   stringent   conditions   as   to   withdrawals   and   of   which   are   fully   accepted   by   all   Muslim   writers   minimum   balance.   Capital   is   not   guaranteed   but   on  the  subject.   the   banks   take   care   to   invest   money   from   such   Such   a   system   will   offer   an   effective   banking   accounts   in   relatively   risk   free   short-­‐term   system   where   Islamic   banking   is   obligatory   and   a   projects.   As   such   lower   profit   rates   are   expected   powerful   alternative   to   conventional   banking   and   that   too   only   on   a   portion   of   the   average   where   both   co-­‐exist.   Additionally,   such   a   system   minimum  balance  on  the  grounds  that  a  high  level   will  have  no  problem  in  obtaining  authorization  to   of  reserves  needs  to  be  kept  at  all  times  to  meet   operate  in  non-­‐Muslim  countries.   withdrawal  demands.   Participatory   financing   is   a   unique   feature   of   Islamic   banking,   and   can   offer   responsible   financing   to   socially   and   economically   relevant   development  projects.  This  is  an  additional  service   Islamic  banks  offer,  over  and  above  the  traditional   services   provided   by   conventional   commercial   banks.       Source:  http://www.islamic-­‐banking.com       13  
  14. 14. e-­‐GlobuzZ     Vol  II  Issue  II  Oct-­‐Dec’11     Battling  the  skies  –  The  success  of  AirAsia     -­‐Prerna  Makhijani(PGDM  IB  2011-­‐13)   Undoubtedly,   this   makes   AirAsia   the   largest   low-­‐   fare   no-­‐frills   airline   in   Asia,   with   operation   in   25     countries  and  more  than  400  destinations.     The  Growth  Story     Tony   Fernandes,   CEO   of   AirAsia   bought   the     company   for   a   token   sum   of   one   ringgit   equivalent   to   US$   0.26   at   that   time   with   US$   11     million   worth   of   debts   in   2001.   Within   a   year,   Tony   turned   the   fortune   of   the   airlines   by     launching   new   routes   from   its   hub   and   at     extremely   low   promotional   prices.   Rest   is   just   history.     AirAsia’s   business   model   is   very   similar   to   Kingfisher   airlines   just   got   a   taste   of   the   storm   Southwest’s   model   of   quick   turnarounds   and   low-­‐ brewing   up   in   the   Indian   aviation   skies   recently.   cost   fares.   This   has   been   seen   as   a   “Blue   Ocean   Their   complains   range   from   exorbitant   jet-­‐fuel   Strategy”  by  industry  experts.  Blue  Ocean  strategy   taxes,  or  denial  to  buy  its  fuel  elsewhere  for  less  to   is   all   about   the   high   growth   and   profits   an   the   ban   on   foreign   airlines   investing   in   Indias   organization   can   generate   by   creating   new   aviation   industry.   Kingfisher   is   looking   to   demand   in   an   uncontested   market   space,   or   a   restructure  the  companys  US$1.3  billion  debt  load   "Blue   Ocean",   than   by   competing   head-­‐to-­‐head   with  the  support  of  a  strategic  investor.     with   other   suppliers   for   known   customers   in   an   existing   industry.   This   is   exactly   what   AirAsia   has   Well  even  if  all  the  above  problems  for  Kingfisher   done   for   itself,   as   they   have   created   Asian   airlines  are  resolved  there  is  a  lot  they  could  learn   customers   for   whom   transportation   need   not   be   from  their  Malaysian  distant  cousin  –  AirAsia.   an   exotic   experience.   With   the   world   coming   closer,   people   want   to   explore   the   world.   Asians   To  begin  with,  AirAsia  has  the  world’s  lowest  unit   particularly   want   to   eat,   shop   and   travel.   This   is   cost   of   US$   0.023   per   available   seat   kilometer   (the   exactly   what   they   are   offered   by   AirAsia;   budget   figure   being   50%   higher   for   Indian   budget   carriers)   travel  and  lodging.     and  a  passenger  break-­‐even  load  factor  of  52%.  It   has   hedged   100%   of   its   fuel   requirements   for   the   As  for  the  promoter  of  the  company,  Tony,  he  has   next   three   years,   achieves   an   aircraft   turnaround   his   game   in   place   as   he   talks   about   his   strategy.   time   of   25   minutes,   has   a   crew   productivity   level   The   company   plans   to   be   the   largest   player   in   that  is  triple  that  of  Malaysia  Airlines  and  achieves   low-­‐cost  category  on  home  turf  and  then  go  on  to   an   average   aircraft   utilization   rate   of   13   hours   a   expand   in   ASEAN.   With   its   long   distance   carrier   day  for  domestic  and  17-­‐18  hours  a  day  for  its  long   AirAsiaX,   it   seems   to   be   already   eating   into   haul  flights.   China’s  and  India’s  market  share.        14  
  15. 15. e-­‐GlobuzZ     Vol  II  Issue  II  Oct-­‐Dec’11       AirAsias   LCC   model   is   borrowed   from   Ryanair   and   They   have   this   cost   advantage   because   they   like   the   Dublin-­‐based   airline,   AirAsia   too   has   an   employ  just  68  people  per  aircraft,  which  is  again   "ancillary   income"   component   in   its   earnings.   So   amongst  the  lowest  in  the  world.  The  cabin  crew   only   7   kg   hand   baggage   is   free   and   the   extra   often   multitasks   to   clean   the   aircraft   and   handle   charge   starts   at   US$   10   for   up   to   15   kg.   A   the   boarding.   AirAsia   is   increasingly   using   wide-­‐ preferred   seat   comes   for   an   extra   charge.   bodied   aircraft   which   offer   more   seats   and   burn   Ancillary  income  earned  per  passenger  works  out   less  fuel  than  narrow-­‐bodied  aircraft  -­‐  the  current   to  US$  1.2.  Advantages  for  passengers  are  no  fuel   favourite   of   Indian   carriers.   It   runs   its   own   surcharge   (until   May   2011)   and   a   30-­‐40   %   academy  to  train  pilots,  unlike  Indian  carriers  who   discount  on  meal  coupons,  baggage  charges,  etc  if   poach   from   each   other   and   drive   up   salaries   to   paid  online  while  booking.   exorbitant  levels  in  the  bargain.   The   company   also   does   aggressive   branding   The   company   also   plans   to   keep   the   budget   exercises  and  public  relations.  They  have  invested   traveler   happy,   by   offering   Airbus   A-­‐330   flights   a   lot   of   money   in   Manchester   United   football   club   from   Delhi   and   Mumbai,   12   premium   class   seats   and   motor   racing   team   Williams.   The   company   with   flat   beds,   but   the   fares   are   60   to   70   per   cent   believes   in   the   long   term   return   of   branding   and   lower  than  business  class  of  a  full-­‐service  carrier. plans  to  continue  to  do  so  in  future  as  well.       The  Future  for  AirAsia   For  future,  AirAsia  plans  to  connect  smaller  cities   and  towns  in  India  by  leveraging  on  under-­‐utilized   AirAsiaX,  the  long-­‐haul  budget  carrier  of  the  group   airports   and   under-­‐served   routes   in   the   country.   now   has   expansion   plans   for   the   Indian   and   They  believe  in  a  volume-­‐led  business  and  aspire   Chinese  skies.     to   play   the   game   to   perfection   with   27   million   AirAsia   entered   the   Indian   market   by   launching   a   passengers  aboard  this  year.     daily   Airbus   A-­‐330   flight   from   Delhi   to   Kuala   Lumpur   at   a   basic   fare   of,   hold   your   breath,   just   Re   1   for   two   days   (excluding   taxes   and   fuel   surcharges).  It  has  embarked  on  a  carpet-­‐bombing   strategy  in  India  since  then.  Its  costs  are  far  lower   than  any  of  the  Indian  low-­‐cost  carriers.                       15