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: sahilbhat_12@yahoomail.com,

soobianahmed@gmail.con

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