member of the group (usually

a manageable number of

about five) is liable if one or

more members default on the

loan. The joint liability serves

as collateral, since even if an

individual project fails and

some of the borrowers are

unable to pay, the group as a

whole might still manage the

debt. In economic terms, this

also cuts down on the need

for the bank to monitor its

borrowers, since the borrow-

ers will have the incentive to

monitor themselves. One

clear advantage to putting

borrowers into groups is that

it creates a support group

mechanism.The major chal-

lenge faced by the Micro-

finance Institutions (MFIs) is

the higher interest rates

charged on loans. In order for

microfinance institutions to

remain viable, in large part

due to high administrative

costs associated with small

loans, they either need to be

heavily subsidized or to

charge relatively high interest

rates. While on the surface,

this appears contrary to the

operating objectives of micro-

finance (or, at the very least,

of poverty relief), it should be

emphasized that while interest

rates of 30 percent, 50 per-

cent,

Cont…..on Page 4

various ways how such ser-

vices can assist low income

people will be discussed

demonstrating that even the

poorest can benefit from the

provision of small loans. This

is a view that is still ques-

tioned in the academia.

India has been a forefront

participant in using micro-

finance as a tool of poverty

alleviation as microfinance is

used both by government and

Reserve Bank of India as a

means for poverty alleviation

with credit support from the

banking system. RBI and

NABARD regulate the micro-

finance operations of the

banking sector as a part of

their overall banking opera-

tions. The informal group

lending in India started in

1986-87 when the NABARD

supported and funded an ac-

tion research project on

„Saving and Credit Manage-

ment of Self-Help Group‟s.

The large numbers of wom-

en‟s organizations like, SE-

WA (Self Employed Wom-

en‟s Association), Working

Women‟s Forum (WWF) etc

were also involved in micro-

finance activities.One feature

common to many microcredit

programs is that loans are

only offered to small groups

of people, not to individuals.

Each member of the peer

group has his or her own

business plan, but every

The Reserve Bank of India

(RBI) defines microfinance

as “the provision of thrift,

credit and other financial

services and products of very

small amounts to the poorer

in rural, semi-urban and ur-

ban areas for enabling them

to raise their income levels

and improve their living

standards.”

Microfinance has emerged as

a needful programme to the

needs of the most underprivi-

leged people. The concern

over today is ever increasing

poverty and there is an urgent

need of empowering, ena-

bling the most neglected sec-

tions of the society through

organized support to all pov-

erty alleviation programmes.

Considering the paucity of

funds with poor people, the

need of the hour is to provide

adequate credit to the needy

people to enable them to un-

dertake entrepreneurial activi-

ty.

The concept of providing

financial services to low in-

come people is much older

than still believed by many

development practitioners

and bankers around the

world. This is important since

it underlines the contribution

that microfinance institutions

(MFIs) can make to the de-

velopment of the financial

sector in their respective

countries. Subsequently the

Microfinance: An Effective Tool to Eradicate Poverty

Inside this issue:

Corporate Speaks 2

News Bits 3

Inside Consumer Mind 3

Quote for the Month 4

March 2012

Volume 1, Issue 9 Mi`bytes

BUSINESS LETTER Masters of International Business

Centre for management Studies

Jamia Millia Islamia University

Mr. Kaushik Chattopadhyay

ITD

Godfrey Phillips Q1. What are the different risks which you face in domestic and international market? A. Risks in domestic market are different from risks in international market. For instance in domestic busi-

ness the major risk might be government rules and regulation whereas in international market primary risk

for us is currency fluctuation but we keep Gross Margin Contribution (GMC) at a reasonable level to mini-

mise the same. Another important risk which we face is Credit Risk, although ECGC takes care of this risk,

but still we cannot give credit to every market. For Example Europe Banking is strong and our Letter of

Credit is pretty safe but in Africa it is risky to work even on Letter of credit which is considered as one the

safest method of making payment, as banks have gone bankrupt in Africa. Economic sanctions and political

instability are other risks which we face in international market.

Q 2.How do you promote your Brands as cigarette is injurious to health?

A. No doubt, there are lot of restrictions in this trade because of the product having a negative connotation

attached to it, however it provides new challenges for the business manager to adapt to. In India there is a

Law COTPA (Cigarette and other tobacco Prohibited Act) which bans media advertising. So the only point

of advertising we are left with is the point of sales like Kirana stores and Pan shops that too with POS mate-

rial. In international Market there is a provision called FCTC which is a framework which restricts the con-

sumption of tobacco products worldwide. We respect the same and believe that smokers make a conscious

decision to smoke and should not be incited to do the same. We take care to modify our Product & promo-

tional practices complying with the same. Marketing of Cigarette though difficult have now moved the

concept from the customer to the Intermediaries in the channel. Trade marketing is a key now a day to en-

hance market share. With respect to Consumer marketing sampling of new products and attractive POP

materials along with merchandise in certain markets are still allowed. ATL have been literally wiped out as

a marketing tool for us, though bill boarding is still allowed in certain countries like Tanzania.

Because of these restriction companies have to be dynamic in their approach and need to think out of the

Box to adapt and develop market.

Q3. What are the current changes in the market environment, which will impact Godfrey Phillips India

business globally? A. There has been a recent development where people are getting inquisitive about ethics of tobacco prod-

ucts including cigarette. As people will get more empowered and knowledgeable then they will take a con-

scious decision, so i think cigarette consumption will decrease over a period of time but will not fall drasti-

cally as it is an addictive product. Consequently industry will hit a mark where it will become stagnant and

competition will be fierce given that rules and regulations also change at a drastic pace. The companies

which are able to adapt would rule the roost.

Q4. Which market do you see as potential market for your product?

A. Europe and North America are on slide because of rules and regulations and consumer empowerment. In

Africa & Latin American markets which are key markets for us we have seen a sudden spurt in demand of

cheap and poor quality cigarettes. We want to provide an affordable but a quality product to those custom-

ers. At the same time to cater to markets in developed countries our packaging plays a major role because it

shows a premium image of the product. We at Godfrey Phillips are adept in catering to the needs of our

customer.

South-East Asia is on the rise because lots of illicit cigarette follow route of South-East Asia to make in-

roads into European and North American market.

Q5. How do you overcome cultural barriers while promoting your brand? A. First of all the brand name is chosen as such that it does not offend the feeling of any sect or religion. For

instance, in South Africa majority of the population is black but majority of consumers are white so while

targeting the segment a thorough market research is done on that segment‟s believe and practices so we do

not offend any of their cultural practice. For e.g Soccer is the most popular sport in Africa and companies

take note of the same in order to carve out new Cigarette package. Also colors are used as per the lifestyle

of the customers. Flashy colours are accepted in Africa whereas in Developed countries packaging need to

carry a royal image.

Q6. What will be your advice to international business students from Jamia Millia Islamia? A6. First of all come with fresh mind and with a sense of adaptability as you will be in foreign territory

frequently and you might face cultural or a social barrier and Best of luck for your future.

CORPORATE SPEAK

“Marketing of tobacco

is difficult ”

Mi`bytes Page 2

“100 of the Fortune 500

companies have R&D in In-

dia ”

“India is among 4 countries

that make Supercomputers”

What won‟t retailers do to understand what consumers want, and how to lure them? They‟ve left no

stone unturned in unraveling this mystery. They have quizzed consumers, asked them to fill out

forms, tracked them inside the shop and used mounds of point-of-sale data to figure them out better.

Now, the highest science employed in the pursuit of understanding man is coming to the aid of retail-

ers.

Welcome to the world of „neuromarketing‟. Coined in 2002 by Ale Smidts, a professor of marketing

research at Rotterdam School of Management, the term simply means studying a consumer‟s brain

activity and examining its responses to various stimuli. It‟s about researchers using advanced technol-

ogy, like functional magnetic resonance imaging, to understand why a consumer decides the way she

decides. Or using sensors to figure out how heartbeats respond when a buyer decides to spend her

hard-earned money on a brand.

The Subconscious Play

“Neuromarketing excels at diving to the subconscious level, where as much as 95% of all decisions

are made,” says AK Pradeep, founder of neuromarketing research firm NeuroFocus. “The subcon-

scious level is where critical marketing objectives, such as initial product or service interest, purchase

intent and brand loyalty, are formed.” So measuring at that level makes sense.

NeuroFocus, set up in 2005, tries to do precisely that. “They [companies] can test their brands, prod-

ucts, packaging designs, in-store marketing and advertising,” says Pradeep. “They can test their in-

vestor relations, human resource materials and the effectiveness of their spokespersons, and they can

test all the things that their competitors have as well. And much more.”

A case Pradeep narrates is of a financial services client, which gave NeuroFocus six print ads and

asked the firm to determine which was the most effective. Pradeep and his team zeroed in on the one,

based on “how consumers responded at the subconscious level.” He recalls, “When I presented our

findings to the company‟s management, they told me that our winner had only been rated as

„mediocre‟ at best by the conventional research techniques.” But NeuroFocus still clinched the ac-

count. Here‟s how: “They quickly added that, to their great surprise, the ad we picked had actually

made their call centres receive a record number of inquiries from consumers.”

One of the courses Baba Shiv, Professor of Marketing, Stanford Graduate School of Business, teaches

is called „The Frinky Science of the Mind.‟ Well, he too confirms, “It‟s all happening at the instinc-

tive level, not at the rational level.”

Shiv shares an example from one of his pet themes—how perceptions about price and quality play out

in the real world: in the US, when Toyota launched its Corolla in 1984, it was a spitting image of

GM‟s Geo. The same production line churned out both the cars, only the badges were different. Says

Shiv, “When JD Power and Associates conducted a survey after three years and asked consumers

what problems they had with these cars, the people reported more problems with the GM Geo than

with Toyota Corolla.” In the eyes of the public, Toyota was a better brand and could do no wrong,

whereas GM manufactured cars for rough use. It had to do with the “perception” of Toyota being a

superior brand that led to people reporting fewer problems with its cars.

Toward Awareness

A couple of questions arise. One, are the traditional market research techniques still relevant? Pradeep

says they do have a role. “For example, they can be helpful in getting at answers to factual questions.

The conscious mind can deliver that information fairly readily.”

Two, what hurdles is micromarketing facing? Education, Pradeep says. He spends a lot of time travel-

ling across the world making presentations about the potential of neuromarketing. NeuroFocus is now

present in the UK, Europe, Latin America and Asia too. Pradeep‟s book The Buying Brain is an at-

tempt to make people more aware of this tool. Indeed, the industry is seeing more action in this

sphere. Apart from Pradeep‟s works, there has been Martin Lindstrom‟s Buyology and Amazon lists

61 books on the subject. Not surprisingly, the developed world has taken to neuromarketing more

swiftly than the other nations (see: Getting A Toehold In India). Even in 2004, there was a much-

publicised „blind taste test‟ involving Coke and Pepsi, wherein cola drinks were offered to subjects

without revealing the brand name to them. Half of the subjects chose Pepsi—it produces a “stronger

response” in the brain, as Wikipedia puts it. In reality, Pepsi has far less than half the market. Coke

scores for reasons other than taste.

Now, neuroscience research firms abound—so that the industry is wondering how to unify stand-

ards—and have started enlisting experts to get a competitive edge in the market. All with the hope

that they can, finally, understand the consumer!

Deepak Goel

Business Journalist

“70% FMCG

purchase decisions

are made at their

shelf”

INSIDE THE CONSUMER’S BRAIN

Volume 1, Issue 9 Page 3

GUEST COLOUMN

Cont...from page 1

or more appear exorbitantly

high, they are quite low com-

pared to its alternative, the

traditional informal sector

lending, which is usually

dominated by local elites.

And the high rates are neces-

sary, given the fact that there

are always overhead costs and

transaction costs, and transac-

tion costs must accurately

reflect risk.

Microfinance provides an

ambience for economic de-

velopment through mutual

cooperation between the

members. It is build up on the

framework of cooperative

system which includes mutual

help, identical needs, member

based ownership and legal

status. It promotes the partici-

patory finance (interest free),

risk sharing, profit sharing,

and manufacturing and pro-

duction of need based prod-

ucts. It inculcates a culture of

daily deposits and strengthens

the economic condition of the

members. Moreover they are

being trained and consulted

by the MFIs regularly and set

a mechanism for solving the

problems mutually.

By-Luthufi M

MA (HRM), JMI

MICRO FINANCE

E-mail: sahilbhat_12@yahoomail.com,

soobianahmed@gmail.com

Phone: 9891984210, 9871858982

CMS, MIB

EDITOR-IN-CHIEF:

Prof. SAYED WAJID ALI

STUDENT EDITORS:

SOOBIAN AHMED

NAMITA DHAMANI

SAHIL BHAT

INTERVIEW BY:

SOOBIAN AHMED

SAHIL BHAT

For Previous Editions Pleases Visit http://www.slideshare.net/mibytes/documents

Quote For the Month

“

-Steve Jobs