M O N T H LY B U S I NN E S S L E T T E R F R OM M I B J A N U A R Y E D I T I O N

Few months back we witnessed KBC episode where the participant who won Rs 1 cr. Still went for the Rs 5cr question. He had a lifeline and had already become a crorepati yet he decided to go for the killer. Sadly he got it wrong and went home with only Rs 3.2 lakh. It was quite disappointing to see a person who made Rs. 1 cr in few minutes losing it next minute. In 2004, virgin Group made a TV series, THE REBEL BILLIONARE, the final episode had a twist ,winner SHAWN NEL-SON was offered a cheque of 1 million $ and another cheque was offered with a long line of zeros. Sir Richard Branson took back million $ cheque and he took out the silver coin and he offered the cheque with a long line of Zeros and a toss of coin i.e. nothing or everything. This was a huge gamble and a great risk. Shawn owned a small business. He decided to take the cheque of million dollars only. Phenomenon described in above instances is MENTAL ACCOUNTING. Mental Accounting is nothing but the way we decide to treat money differently because of its source. Just because mon-ey was earned in few minutes the participants decided to treat it differently. If that person who missed 1Cr Rs have earned even one -tenth of that from profession he would have certainly treated it differently, not everybody can treat money like Shawn Nelson who wisely calculated the risk of gamble and took correct decision judiciously employing men-tal accounting in decision making. Mental accounting is at work every day in our all financial decisions we make savings, eating out, holiday’s expenses, bonuses earned, investments etc. Thus mental accounting is a powerful phenomenon and must be used to gain from it and avoid costly mistakes.

By:- Soobian Ahmed

FROM THE DESK OF EDITOR IN CHIEF

With the introduction of Mi’bytes, students of MIB have traversed yet another inch in their success

journey. I see a variety of information being contributed here. I pray that this initiative of theirs earn

them a rich dividends of knowledge and information .I am very hopeful that readers will have an

enriching experience in going through the contents of this business letter and students will have a

good overall learning in contributing articles and news in it. I wish all the best for the success of this

business letter and for the efforts put by students of MIB in bringing this business letter.

Syed Wajid Ali Asst. Professor

Center for Management Studies Jamia Millia Islamia

MENTAL ACCOUNTING

Last year Leaders of 5 permanent Members of the UN Security Council visited India, which shows in the age of Neo-Liberal economy India sustains with high potential ,despite of economic recession. The following Chronology of events stand an inspiration that India is the paradise for foreign investors.

British Prime Minister David Cameron -27-29 July 2010 UNSC SEAT : Support KEY DEALS : $ 1.1 bn deal to supply 57 Hawk trainer jets. US President Barak Obama -6-9 November 2010 UNSC SEAT : Support KEY DEALS : $ 10 bn in deal over 20 agreements. French President Nicolas Sarkozy – 4-7 December 2010 UNSC SEAT : Support KEY DEALS : $ 7 bn with Areva for nuclear reactors. Chinese Prime Minister Wen Jiabao – 15-17 December 2010 UNSC SEAT : No support KEY DEALS : $ 16 bn , 48 agreements Russian President Dmitry Medvedev – 21-22 December 2010 UNSC SEAT : Support KEY DEALS : $ 30 bn deal on fifth generation fighter aircraft

CHANGING BUSINESS CONTOURS IHERO HONDA PARTNERSHIP ENDS AFTER 26 YEARS

26 year old partners finally decided to ride off on their own in different directions, one of the most successful joint Ven-

ture between Indian and Japanese automobile companies got approval from board of directors to end partnership. A

partnership that began when India was tentatively opening it’s doors to multinational investment and growing middle

class was coming into it’s own. Both companies will face challenges in coming years ,although Hero gets liberty to sell

two wheeler worldwide but also losses the strong technology partner. Honda gets a chance to build it’s own brand but

also losses the hero’s extensive sales and distribution network.

INDIGO: CONQUERING SKY

Launched in August 2006 with a modest capital , that people hardly noticed. Gurgoan based Indigo Airline has emerged

as a big challenger in Indian Aviation Industry taking on Jet Airways and kingfisher. Less than 5 years in Indian Aviation

Industry Indigo is 3rd largest domestic Airline with domestic market share of 17.3%.When most of the lines are in red

Indigo made a profit of Rs 550 cr. in 2009-2010.Recently it signed a whopping $15.6 billion deal to purchase 180 aircraft

with Airbus a world record in commercial aviation Industry. In August 2011 it will complete 5 year of local operations a

key requirement to fly overseas, Indigo has already submitted a proposal to the civil aviation ministry and short listed 15

international sector.

INDIA RESSURUCTING WORLD ECONOMIES

Ideas about the role of corporations in society have changed in the past few years. Twenty years ago, many corporate executives believed that “the business of business is business,” and social issues had no place in corporate management. Corporate social responsibility (CSR) efforts rarely went beyond that idea. Today, the perspective is different and is shaped by what we now call Corporate Personal PHILANTHROPY: that is corporations shelling out large donations out of their personal wealth and adds a new dimension to business.

The main difference between personal philanthropy and CSR is that in latter the company spends shareholders money and promoters get the credit. In the former, promoters dig into their pockets to share wealth. Although India spends thousands of crores on CSR, the activity has often been looked upon with suspicion. Firstly because it gives companies tax breaks. Second, it is seen as a way of keeping local community compassionate towards the enterprise.

Some of the recent activities in personal philanthropy that attracts our attention are Shiv Nadar pledged 10% of his wealth towards philanthropic activities. Wipro chairman Azim Premji gave a new dimension to personal philanthropy in India by transferring 8.7% of his equity worth `8846 cr. to trusts that run Azim Premji foundation. GMR’s G.M.Rao willed half of his 25% share amounting `2500 cr. to such activities.

So why there has been a spurt in announcements from promoters in 2010? First, two of the world biggest philanthropist, Warren Buffet and Bill Gates urged iconic and some of the wealthiest to pledge at least 50% of their wealth for such activities. Since 2010, Gates have hosted the wealthy around the world for their “The giving pledge” campaign, which will bring them to India next year. Secondly, since vast majority of wealth is in form of equity holding in their firms, 2010 was an opportune moment to donate as our domestic equity markets caught up with the all time peak.

The most heartening feature of personal philanthropy is that Gen Next has already taken over it. Adi Godrej’s younger daughter Nisaba who is one of the richest heiresses in the world is actively involved in such activities. These activities indicates, personal philanthropy is being looked seriously in making, India shinning and is there to help underprivileged

shine as well. By: Manika Chug

3G spectrum technology has recently entered in Indian market and is being taken as the opportunity of opening gold mines for cellular players. It is indicative by the fact that recent licenses distribution auction fetched ` 67, 718.95 crore to government. Finance Ministry cannot stop smiling as money inflow would be mainly used to reduce fiscal deficit, which has skyrocketed to 6.8% of GDP.

Some lands are using 4G technology for a while now but it cannot be used in Indian market at this stage, as the unavailability of specific infrastructure and market acceptance. Going beyond this level, the bets are being been placed on Video E-mails, Video Web-Show, Video Broadcast, Video Channel. Video E-mails: mail which contains customized video content which can be used to greet friend birthday. Video Web-Show: designed to designed for business in show-casing clients their product specification. Video Broadcast: live video broadcast which can run live video stream to any-one in world with 10 people at same time. Video Channel: private video channel over web to showcase your content with custom color and banner.

These products are highly customized able by the user and most interesting feature is they can be used over the existing level of network, at no extra cost. This technology has virtually the ability to change the way we work. These products has enormous business potential owing to the fact that 3G forms only 10% of these product.

Some business enterprise do offer services of video conferencing in market, lead by Reliance. But are limited at the corporate level. In this products will be bought for the use of the masses. There always be an opportunity to make mon-ey in business but early decision makers become Sunil Bharti Mittal.

By: Sahil Bhat

PHILANTHROPY: TAKE IT FROM ME

BEYOND 3G

A letter of credit is a document issued mostly by a finan-

cial institution , which usually provides an irrevocable,

revocable or other to a beneficiary against complying doc-

uments as stated in the Letter of Credit is abbreviated as

an LC and is often is referred to as a documentary credit.

The LC can also be the source of payment for a payment

for a transaction, meaning that an exporter will get paid by

redeeming the letter of credit. The Letter of Credit are

used primarily in international trade transactions of signifi-

cant value, for deals between a supplier in one country

and a wholesale customer in another. The parties to a let-

ter of credit are usually a beneficiary who is to receive the

money , the issuing bank of whom the applicant is the

client, and the advising bank of whom the beneficiary is

the client.

Almost all LC are irrevocable that mean cannot be

amended or cancelled without prior agreement of the

beneficiary, the issuing bank and the confirming bank, if

any. In executing a transaction LC incorporates function ,

common to giros and travelers cheque. Typically, the doc-

uments the beneficiary is to present in ordered to avail

himself of the credit , are commercial invoice, bill of lading,

insurance documents . However the list and form of docu-

ments is open to negotiation

The English name letter of credit derives from the French

word accreditis a power to do some thing which inturn ids

derivative of the Latin word “acccreditivue” , meaning

trust.

“”As apposed to necessarily tightening monetary

policy ,I think the focus has to be on the increased production and productivity of agricultural products and thereby making the market work more effectively .My own sense of Indian economy is that some of the inflationary pressure are more likely a function of some of the bottlenecks on the supply side than from the demand side”

World bank president Robert B Zoellick on the

present Indian economic conditions

GDP GROWTH - 8.90%

EXPORTS - US$164.7 bn

IMPORTS - US$ 247.1 bn

INFLATION - 9.82%

GOVERNMENT BOND(LAST 10 YEARS) - 8.01%

UNEMPLOYMENT RATE - 8.00%

BALANCE OF TRADE - -2600.0 mn

PURCHASING POWER PARITY GROWTH- 5.23%

CURRENT ACCOUNT DEFICIT - US$ -13.00bn

LETTER OF CREDIT QUOTE OF THE MONTH

ECONOMIC INDICATORS 2010

Google founded by two Stanford university PhD students Larry page and Sergey Brin. Google comes from word Googol which represent 1 followed by 100 zeros, a reference to the huge amount of data online.

Sony was stated as radio repair shop after world war II by Masuru Ikura and Akio Morita .Sony comes from “Sonus” the Latin word for “sound”.

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