Download - Mibytes November 2011
some financial institutions
clearly profited from the
growing Greek government
debt but reality is very dif-
ferent from the interpreta-
tion.
In April 2010 Greek govern-
ment asked EU/IMF for
bailout package. IMF said it
was “prepared to move ex-
peditiously on the request”
but Greek debt rating was
decreased to BB+ by S&P
and estimated that investor
would lose 30-40%of the
money. Stock market and
euro currency declined in
the response.
In may 2010 series of AUS-
TERITY measures was pro-
posed, but in Nov. 2010
problem became murky,
which gave signal to harsh
DEBT CRISIS. Same in the
league was SPAIN, PRO-
TUGAL AND GREECE,
now in “credibility prob-
lem” and the reason is very
clear i.e. lack of ability to
repay adequately due to this
low growth rate and less
FDI.
Cont. on page 4
DEFICITS. By 2009, com-
bination of international and
local meltdown (the world
financial crisis and uncon-
trolled government spending
respectively) pushed coun-
try in great trouble. Early
2010 it was revealed that
the, Government had been
consistently and deliberately
misrepresenting the coun-
try‟s economic statistics to
keep with the monetary un-
ion guidelines. This had
enabled Greek Government
to spend beyond their
means, whilst not disclosing
the actual deficit from the
world. In 2010 situation
became more grime when
deficit estimated to 13.6%
(one of highest in world)
and public debt hit around
120% of GDP. The commis-
sion and finance ministers
late last year found Greece
had failed to take „effective
action‟ to curb its budget
deficit, which is the result of
decline tax revenue. All
situations being against it
and with no any effective
policy the made situation
worse.
Although in the short run
THE Impact of crises
should be very local, Indian
companies and citizens do
not have any worthwhile
investment in countries or
banks where debt crisis has
been spreading like havoc.
“The impact on export
should be minimal as our
export to be trouble econo-
mies are not significant;
panic does not lasts in per-
petuity it lasts for short peri-
ods of time one way or the
other” said PRASHANT
JAIN (Chief investment ,
HDFC MUTUAL FUND)
Debt crisis started from
GREECE, where the gov-
ernment was trying to opti-
mize the foreign capital
after the removal of
RIGHT WING
MILITARY JUNTA. The
government wanted to bring
disenfranchised left -leaning
portion of the population
into the economic main-
stream. During the period of
2000-2007, growth rate of
the country was 4.2% as
foreign capital flooded in
the country. Strong econo-
my allowed government to
run large STRUCTUAL
Crises in Crises
Inside this issue:
Corporate Speaks 2
News Bits 3
Liquid vs. Profit 3
Crises in Crises 4
About Us 4
November 2011
Volume 1, Issue 6 MI`Bytes
BUSINESS LETTER
Mr. RAJEEV SHARMA,
DY. GENERAL MANAGER,
MITSUBISHI ELECTRIC INDIA
Q1: The earthquake in Japan has affected your company. What has been the strategy to
overcome losses incurred by the damage? Ans: Our plant, too, was hit by the earthquake and the vendor and ancillary units were affected
most. We have shifted our production to Kyoto where plants are at 80% capacity. We have also
shifted our 20-25% production to Malaysia, Thailand and Korea and rationalization saved us. Q2: How is the company positioned at the moment and how far is the growth trajectory
going? Ans: We have an increasingly huge demand but are suffering from supply; inventories are low,
this year, however, we intend to do business Rs.300cr. By March 2016, business of MEI shall
be Rs 1000cr. Q3: MEI, being a giant and highly innovative, quality driven company, has refrained
from entering into consumer durable goods. Why? Ans: MEI is an innovative and quality driven company, we strive more for quality, technology
and after sales services. Till we are not in position to provide after sales services, we do not
enter. For the time being we are into B2B sales, since we only have the infrastructure for B2B.
But with the current infrastructure we cannot penetrate into a hard core consumer market
as we are a wholesale company under FDI rules. Q4: To enter into Indian market, have you customized your products to some extent? Ans: To some extent, yes, we have customized our products, keeping in consideration with the
Indian customer demand. Since we cater primarily to a premium segment of the market we try
finding out features needed by consumers, and after doing a market research we then ei-
ther drop certain of those features or add them as per requirement. For instance, we have 500
models of Air Conditioners but in the Indian market we offer only 2 of those models. Q5: How do you position your company in raising an Indian brand presence in such a
fierce, competitive market? Ans: We brand our selves as a technology-oriented company, a pioneer in reliable technology
and a company which works out on future. In Eco-product Exhibition, Delhi, we presented our
selves as an eco-friendly company and have put a target of being a zero-emission company by
2021. Q6: Word is Hitachi and Mitsubishi Heavy Industries are on a merger. From governance
point of view companies may face significant challenges since time and again mergers in
Japan don’t work out in the end. Ans: Yes, actually a 50-50 doesn’t work. In a merger there will be challenges as the work-
culture philosophy of both companies differ, so our strategy is not to merge as a whole. Some
plants from both companies will be merged. Q7: Generally Indian distributors do not have standardized procedures as needed by a
company like MEI, so how do you keep up with those distributors. Ans: Our objective is to have a global view with a local approach. We had some difficulties at
the distributors end and being a sales company we set the parameters for distributors which
were quite easy to follow. At the same time, we found our distributors far ahead of us in fields
like servers or information communication. Q8: Are there any plans to capitalize on Delhi-Mumbai Industrial Corridor? Ans: Being a Japanese funded corridor, we are closely related to this project. In DMC there
are 2 projects which are going simultaneously, the Dedicated Freight Corridor (DFC) and
Delhi-Mumbai Industrial Corridor (DMIC). In DFC we supply locomotives which are capable
of 80kmph and a load-carrying capacity of 8 times more than the existing capacity. In DMIC
we are developing an entire industrial area in Gujarat and are in the process of making a
Smart City too. Q9: Your advice to our IB students in today’s global, socio-economical environment. Ans: Believe more in learning where the mantra is hard work. Don’t run after money, chase
excellence and things will follow suite.
CORPORATE SPEAK
“Our thinking is to
have a global view
with a local
approach”
MI`Bytes Page 2
“Government investment is
round to US$90bn in
DMIC ”
“India aims to achieve a
turnover of US$400bn from
domestic electronics manu-
facturing by 2020 ”
A finance manager is always faced with a confusion between liquidity and profitability. He
has to strike a balance between the two terms.
Liquidity: It means the firm has adequate cash to pay off its bills and to make unexpected
large purchases. It also focuses on a firm having cash reserves to meet emergencies.
Profitability: It means that the accumulated funds of the firms are used so as to yield the high-
est return‟
Liquidity and profitability are very closely related. When one increases, the other decreases.
Apparently, liquidity and profitability goals of the finance manager are contradictory. For ex-
ample, if higher inventories are kept in anticipation of increase in price of raw materials, prof-
itability goal is approached but the liquidity of the firm gets endangered. Similarly, the firm
following a liberal credit policy may be in a position to push up its sales but its liquidity will
decrease. This is also a direct relationship between higher risk and higher return. Higher risk
one the one hand endangers the liquidity of the firm whereas, higher return on the other hand
increases its profitability. A company may increase its profitability by having a very high debt
-equity ratio. However, when the company raises funds from outside sources, it is committed
to make the payment of interest, etc., at fixed time and in fixed amounts and hence to that ex-
tent its liquidity is reduced.
Thus, the finance manager has to choose between risk and return and generally he chooses in-
between the two. He paves its ways through forecasting cash flows and analysing the various
sources of funds. Forecasting of cash flows and managing the flows of internal funds are the
functions which lead to liquidity whereas, cost control and forecasting future profits are the
functions of finance manager which lead to profitability. An efficient finance manager opt for
the level of operations where both risk and return are optimised. Such a level is termed as risk-
return trade off and every financial decision involves this trade off. At this level the market
value of the company‟s share would be maximum.
Md. Ibrahim Badar
Master of International Business
“Global 2000 companies now
account for $32 trillion in
revenues, $2.4 trillion in profits,
$138 trillion in assets and $38
trillion in market value. All
metrics are up from last year
with profits growing the most,
rising 67%. ”
LIQUIDITY VS. PROFITABILITY
Volume 1, Issue 6 Page 3
MI’BYTES IN KOTRA LIBRARY
It is an honor for Mi‟bytes to grace the shelves of the library of KOTRA which is the official
trade and investment wing of Government of Korea, promoting bilateral trade between India
and Korea.
The library provides access to the major collections of Korea and overseas newspapers. The
collections also include popular magazines, trade papers and comics. Mi‟bytes is read by vari-
ous Indian and Korean visitors and is popular since the next edition has already been request-
ed! The newsletter is In Vogue with young, enthusiastic management graduates and it is quite
motivating to see its popularity growing amongst the masters in International trade.
We thank KOTRA for this gesture and would work even hard to improve our future editions.
Team Mi‟bytes.
ABOUT US
MI`bytes was started by students en devour to give themselves a
platform to share their analysis and report on business. Produced
by an editorial team known for its quality & innovation. We also,
acknowledge the contributions of executives who run corporate
houses and by doing so we also integrate industry with MIB.
Cont. from page 1
In June 2011 S&P lowered
the Greek sovereign debt to
CCC (lowest in the world).
The crisis sent ripples
around the world with major
loss in stock markets and
stock exchange. Side effect
of globalization is now more
clear; after European crisis
whole world is Shivering.
Countries with constant
growth are now in crisis and
investors are in dilemma.
Experts are now coming up
with ideas like GREECE
should concentrate on his
own economy with their
own currency and engi-
neer an “orderly default”.
Where Greece represent
only 2.5% of the euro zone,
despite the size, danger is
basically about sending
wrong signal to investors
who are already hesitating
in investment and the RELI-
ANCE factor are gone with
the wind .
Euro zone countries like
PROTUGAL , IRELAND
have high deficit. ITALY
also has high debt , but aver-
age budget position is better
than other countries. Crisis
may reduce the confidence
in EUROPEAN countries.
So the disease is now con-
verting into syndrome.
Sovereign debt crisis in
some EUROPEN countries
and slow recovery in the US
will not impact the INDIAN
IT industry fiscal, “we do
not see the INDIAN IT in-
dustry getting impacted by
sovereign debt crisis or slow
recovery in this geogra-
phies” said NASSCOM
president SOM MITTAL.
GLOBAL GDP is expected
to grow at 3.1 percent in
2011, following 3.9 percent
in 2010. But if we look on
the export report, Indian
export continued its upward
trend, posting 44.2 percent
year growth, despite slow-
down in western countries
especially in the western
market and euro zone. But
Crises in Crises
Phone: 9891984210, 9871858982
E-mail: [email protected],
CMS, MIB
EDITOR-IN-CHIEF:
Asst. Prof. SAYED WAJID ALI
STUDENT EDITORS:
SOOBIAN AHMED
TULIKA SAIKIA
NAMITA DHAMANI
SAHIL BHAT
INTERVIEW BY:
MANIKA CHUGH
SOOBIAN AHMED
SAHIL BHAT
we must not analyze things
easily and so early, as
MOODY‟S global rating
firm downgraded SBI by
one notch to D+. Reason
being lender‟s low tier –I,
CAPITAL RATIO AND
DETERIORATING
ASSEST QUALITY.
MOHD. FURQUAN,
Masters of International
Business