eijmms volume - 02 issue - 05 ( may, 2012 )
Transcript of eijmms volume - 02 issue - 05 ( may, 2012 )
EXCEL International Journal of Multidisciplinary Management Studies
Vol.2 Issue 5, May 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/
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EXCEL INTERNATIONAL JOURNAL OF MULTIDISCIPLINARY MANAGEMENT STUDIES
(EIJMMS)
VOL. 2 - ISSUE 5; MAY 2012
S.NO. CONTENTS PAGE
1.
INCREMENTAL INFORMATION CONTENT OF CASH FLOWS VERSUS FUNDS
FROM OPERATIONS AND EARNINGS: APPLYING NEW METHODOLOGIES IN
FRENCH CONTEXT
KHALID ELOUAFA
1-13
2.
A STUDY ON CUSTOMERS’ SATISFACTION TOWARDS BSNL LANDLINE
SERVICES IN SALEM CITY, TAMIL NADU
M.GURUSAMY, A.VELSAMY, DR.N.RAJASEKAR
14-28
3.
IMPORTANCE TO MAINTAIN A LEVEL OF SECRECY IN CORPORATE SECTOR
IN THE BACKGROUND OF ARTHASASTRA
SMT. DEBASHREE MAHAPATRA, DR. SANJIT KUMAR DAS
29-36
4.
BRAND IMAGE, CUSTOMER SATISFACTION AND LOYALTY INTENTION:
A STUDY IN THE CONTEXT OF COSMETIC PRODUCT AMONG THE PEOPLE
OF CENTRAL INDIA
SATENDRA THAKUR, DR. A. P SINGH
37-50
5.
CAPITALISM v. NEO CAPITALISM A COMPARISON OF POLICIES OF WORLD
BANK AND RBI
DR. SHOBHALATA V. UDAPUDI, BARNIK GHOSH
51-63
6. DIVERSIFICATION - STRATEGIES FOR MANAGING A BUSINESS
P. KANNAN, DR. R.SARAVANAN
64-73
7. EMERGENCE OF CORPORATE GOVERNANCE IN INDIA
C.UDAYA KUMAR RAJU, M. SUBRAMANYAM, HIMACHALAM DASARAJU
74-90
8.
SOCIAL MEDIA MARKETING IN INDIA – CREATING NEW GROUNDWORK IN
MARKETING INNOVATION
KHUSHBU PANDYA
91-99
9. CORPORATE GOVERNANCE IN INDIA: EVOLUTION AND CHALLENGES
DR. ANSHUL SHARMA, MS. POOJA GUPTA
100-119
10.
GLOBALIZATION & NEW POLITICAL-CULTURAL IDENTITY
RAHMAT ABBASTABAR MOGHRI, G.T.RAMACHANDRAPPA
120-131
11. 100% FDI IN SINGLE-BRAND RETAIL OF INDIA- A BOON OR A BANE?
J.J.SOUNDARARAJ
132-146
12.
TRAINING NEEDS IDENTIFICATION OF NURSING STAFF – A CASE STUDY OF
A HEALTH CARE ORGANIZATION
DR. V.RAMA DEVI, M.MALLIKA RAO
147-153
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13.
AN EXPLORATORY STUDY ON MEASURING IMPACT OF INTERNET ON
STUDENTS’ ACADEMIC LIFE OF S.P. UNIVERSITY
RINA DAVE
154-167
14.
GREEN PRODUCT LIFE CYCLE TO CALCULATE THE GROSS DOMESTIC
PRODUCT POLLUTION OF A COUNTRY
S. RAJASHEKHAR
168-172
15. INCLUSIVE ECONOMIC GROWTH IN INDIA: ISSUES AND CHALLENGES
MR.CH.PRASHANTH, DR.G.SHASHIDHAR RAO
173-183
16. GREEN MARKETING
MRS. FATI SHAFAAT, ARIF SULTAN
184-195
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INCREMENTAL INFORMATION CONTENT OF CASH FLOWS VERSUS
FUNDS FROM OPERATIONS AND EARNINGS:
APPLYING NEW METHODOLOGIES IN FRENCH CONTEXT
KHALID ELOUAFA*
*Assistant Professor,
Cadi Ayyad University,
Marrakesh, Morroco.
ABSTRACT
The purpose of our study is to examine the information content of cash flows versus funds from
operations and earnings in the French context. By applying two methodologies relating to linear
and nonlinear models, our work analyzes the capacity of these accounting measures to explain
stock returns of French listed companies in the SBF120 index. Our results relating to linear
models show that cash flows and funds from operations have incremental information content
while nonlinear models note that these accounting measures have incremental information
content only in the case of extreme variations. In addition, the results note that earnings have
incremental information content in the case of moderate variations. One can infer that market
participants in French context use and appreciate information contained in cash flows to evaluate
firms’ performances especially when they show extremes variations.
KEYWORDS: Incremental information content, cash flows, funds from operations, earnings,
stock returns, French companies.
______________________________________________________________________________
INTRODUCTION
During the last two decades, one witness a growing interest of researchers to information
contained in cash flows, funds from operations and earning. However, this topic in France is not
widely considered by researchers. The studies relating to information content are retrospective
and are based on efficiency hypothesis, i.e. the stocks prices reflect all information available on
the market. Generally, there are two forms of studies: 1/ reaction studies, they are based on short
event windows (for example, 8 days until one month) and measure the market reaction following
the disclosure of accounting information and 2/ association studies, they are based on long term
windows (for example, one quarter or one year) and calculate the degree of correlation between
stock returns and accounting measurements.
Prior studies concerning information content of cash flows have assumed a linear relationship
between this accounting measurement and stock returns and did not document conclusive results
about the presence of incremental information content in cash flows (Rayburn, 1986; Bowen,
Burgstahler and Daley, 1987; Wilson, 1986, 1987 et Bernard and Stober, 1989).However, the
recent studies have taken the presence of transitory components into account and have assumed a
non linear relation between accounting information and stock returns (Freeman and Tsee, 1992;
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Ali and Zarowin, 1992; Ali, 1994; Cheng and al., 1996); they note the presence of incremental
information content for cash flows especially in the case of moderate variations.
Our results confirm those documented in several studies applying the control of extreme
variations; thus, earnings have incremental information content only when they show moderate
variations. However, the cash flows and funds from operations show a similar behaviour, they
have incremental information content only when they have extremes variations.
The rest of this paper is organized as follows: section 2 presents hypothesis. Section 3 discusses
linear models. Section 5 presents variable definitions, sample selection and descriptive statistics.
Section 6 shows results relating to linear models. Section 7 describes non linear models. Section
8 shows results concerning non linear models. Section 9 concludes the paper.
1. HYPOTHESIS
One of the major concerns of investors is the appreciation of the firm’s capacity to generate cash
flows in order to face its own exploitation, investment and financing needs, and to remunerate
shareholders by taking into account risk rate of equity which is placed in firm’s capital. In
addition, the investors placed on the market seek for any useful information which enables them
to form and adjust their anticipations; so the cash flows information shows advantage that is not
affected by accounting conventions compared to other accounting measurements based on
accruals (earnings and funds from operations). Therefore, I assume that information contained in
cash flows is in eyes of investors relevant to form and adjust theirs anticipations. Moreover, this
information is differently assessed by investors compared to that contained in the net income or
funds from operations. Consequently, one expect a positive relation between the change of cash
flows and abnormal returns.
H1: Cash flow from operations likely has incremental information content beyond that contained
in earnings or funds from operations.
H2: The information contained in cash flow from operation is likely to be differently assessed by
investors compared to information contained in earnings or funds from operations.
Incremental information content of cash flows, funds from operations and earnings: application
of linear models
Prior studies on incremental information content of cash flows, funds from operations and
earnings are generally applying linear models (Rayburn, 1986; Bowen, Burgstahler and Daley,
1987; Wilson, 1986, 1987 et Bernard and Stober, 1989) and show incremental information
content of accounting measurements based on accruals –earnings and funds from operations–
while they don’t report conclusive results about cash flows measurements. In order to compare
the results of prior studies to those of our study, I use the following linear models:
Model 1: itittittit uCFOaEaaAR 210
Model 2: itittitttit uFFObEbbAR 210
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Model 3: itittitttit uCFOcFFOccAR 210
Where ARit is the abnormal stock returns of firm i in period t (beginning in the April of year N-1
and ending in the March of year N), its calculation is presented below; ΔEit is change in
earnings; ΔCFOit is change in cash flow from operations and ΔFFOit is change in funds from
operations. All variables are deflated by beginning-of-period market value of equity.
The abnormal returns are defined as follows:
ARit= Rit – Rmt
Where Rit is the cumulated returns of firm i in period t (from April of fiscal year N-1 to March of
fiscal year N), it’s estimated from monthly returns (Rim): 1)1(0
im
n
mit
RR ; and RMt
represents the index market return in period t.
2. VARIABLE DEFINITIONS, SAMPLE SELECTION AND DESCRIPTIVE
STATISTICS
Accounting variables (earnings, funds from operations, cash flow from operations) are gathered
from annual financial statements disclosed in annual reports for [2000-2006] period, because in
France the imposition of cash flow statements disclosure came into force in 2000. The annual
reports are downloadable on the site of the Authority of Financial Market (AMF) or from
companies’ web sites. Earnings are defined as income before extraordinary items; funds from
operations correspond to operating profit before working capital changes; and cash flows are
defined as net cash flow from operating activities. On the other hand, stock exchange
information (stock price, dividend and returns) is obtained from database DataStream for the
period [2000-2006].
Our sample consists of French companies listed on the SBF120 index of Euronext Paris
exchange. Because of their accounting specificities, the financial companies are excluded from
the sample as well as the observations whose absolute value of their change is higher than 1.
Moreover, I eliminate all companies whose fiscal years are not closed at 31 December. Thus, I
obtain 436 annual observations corresponding to 75 companies for the period [2000-2006]
(Insert table 1 here).
The descriptive statistics in table (2) point out that the average of earnings (0,0728) is lower than
that of funds from operations (0,1980) and cash flows from operations (0,1894) –given that all
explanatory variables are deflated by beginning-of-period market value of equity. This result can
be explained by the fact that earnings include short and long term accruals which generally
decrease their values. The table (1) also shows that standard deviation of cash flows (0,5560) is
higher than that of earnings (0,4894). This result confirm those noted by Dechow (1994) and
Dechow et al. (1998), assuming that by accruals earnings are less volatiles than cash flows.
However, accruals can be used by managers to convey their own information and offer them an
opportunity to manipulate accounting measures. In addition, the averages of three accountings
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measures present values close to their last quartiles, (0,0728) versus (0,0863) for earnings;
(0,1980) versus (0,1907) for funds from operations; and (0,1894) versus (0,1829) for cash flows
from operations; this means that almost 75% of our observations are lower than the average of
their distribution and almost 25% are higher than the average of their distribution. Thus, the
presence of high variations seems inevitable and can affect the robustness of our linear
regressions (Easton and Harris, 1991; Ali and Zarowin, 1992; Ali, 1994; Cheng and Yang,
2003..).
In addition, the bilateral correlation analysis between abnormal returns and explanatory variables
(table 3) shows a positive and not statistically significant correlation for changes in cash flows
(0,098) and changes in funds from operations (0,093) at 0,01 level. However there is a negative
and not statistically significant relationship between changes in earnings and abnormal returns. It
can also be seen that there are positives and statistically significant relationships between
independent variables but they are not so strong to compromise our regressions by causing
multicollineraty problem.
(Insert table 3 here)
3. REGRESSION RESULTS OF LINEAR MODELS
Prior works on the incremental information content of earnings, funds from operations and cash
flows commonly apply linear models and note a presence of incremental information content for
accounting measures based on accruals while they don’t report a conclusive result for cash flows
measures. In the same way, I estimate in the French context the linear models provide both a
basis for comparing my results with those of prior studies and a benchmark for comparing the
results of the non linear model used in this study. Following prior studies, I use changes in
earnings, funds from operations, and cash flows as measures of their unexpected values to obtain
the following models:
Model 1: itittitttit uCFOaEaaAR 210
Model 2: itittitttit uFFObEbbAR 210
Model 3: itittitttit uCFOcFFOccAR 210
I consider only changes in accounting measures because they allow to better capture their
behaviours, especially in the case of presence of permanent component into variables. Thus, I
assume implicitly that the three variables are only composed by permanent component.
However, in the case of dominance of transitory component into variables, it is their value which
permits to capture their behaviours rather then their change (Easton and Harris, 1991; Ohlson,
1989; Ali and Zarowin, 1992a and Cheng and Yang 2003).
Table (4) reports the regression estimates of models 1, 2 and 3. The results relating to model (1)
show as expected that cash flows have incremental information content beyond earnings. Thus,
one can deduce that change in cash flows can explain the price changes that are assumed to
reflect market anticipations. In addition, the coefficients equality tests point out that the null
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hypothesis can be rejected at 5% level. Consequently, the investors placed on the market assess
differently the information contained in cash flows compared to that contained in earnings.
However, and contrary to the prior studies, our results show the earnings don’t have incremental
information content beyond cash flows.
The estimate of regression (2) confirms that funds from operations as well as cash flows have
incremental information content beyond earnings, they show a positive and statistically
significant coefficient 0,263 (2,027). On the other hand, earnings don’t have incremental
information content beyond funds from operations. In addition, the test of coefficients equality
(table 5) confirms that the information contained in funds from operations can be differently
assessed by investors comparing to information contained in earnings. Thus, one can suggest that
investors appreciate and have a great interest in information contained in funds from operations.
On the other hands, the estimation of regression (3) does not confirm a presence of incremental
information content for cash flows as well as funds from operations. Moreover, the Wald test can
not reject the null hypothesis so one conclude that investors do not assess differently the
information contained respectively in theses two accounting measures.
From the estimates of the linear regressions presented above one can conclude that cash flows
and funds from operations show a similar behaviour so they have incremental information
content beyond earnings. Moreover, the information contained in each measure is differently
assed by participants on the market compared to that contained in earnings. On the other hand,
earnings do not have incremental information content beyond cash flows or funds from
operations. This result can be explained both by the fact that information about earnings of big
companies can be provided to the market by several channels (interim reporting, financial
news..) or by the effect of presence of the transitory component in earnings measure. In addition,
cash flows and funds from operation do not show incremental information content and they not
differently assessed by investors on the market. Nevertheless, the linear regressions do not take
into account a presence of extreme values in accounting measure; for this reason, one witness the
appearance of news methodologies which milked with the nonlinear model.
4. APPLICATION OF NON LINEAR MODELS
The prior studies on incremental information content of accounting measure are commonly
applied linear models, but this methodology can be relevant only in the case of absence of
transitory component in the variables (Brooks and Buckluster, 1976 and Freeman, Ohlson and
Penman, 1982). In other words, the correlations between the abnormal returns and accounting
measures might be affected by the presence of extreme variations. According to Ali (1994), the
majorities of former studies adopt linear models and confirm the presence of incremental
information content for earnings but not for cash flows. These results reflect the relation between
the price changes and transitory component in earnings rather than its permanent component, and
thus they are not conclusive. In order to consider the presence of transitory components in
accounting measures, the new methodologies are implemented; they concern the application of
non linear models (Freeman and Tsee, 1992; Ali, 1994; Cheng et al, 1996 and Cheng and Yang
2004). These models allow noting that the marginal reaction of stock prices to change of
accounting measures decrease with the increase in the absolute value of this change.
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The application of nonlinear models implies the consideration of the magnitude of change in
accounting measures and their tendency (transitory or permanent). Following Ali (1994) and
Cheng and Yang (2003), I classify the variables (earnings, cash flows and funds from operation)
to two groups: 1- group of extreme change or high group (the absolute value of variable change
is higher than its median); 2- group of low change or low group (the absolute value of variable
change is lower than its median).
Because of the significant level of correlation between cash flows and funds from operation, I
limit our analyse to, firstly, information content of cash flows versus earnings and, secondly, to
information content of funds from operations versus earnings. Thus, I estimate the nonlinear
models as follows:
Models 4: it
CFO
ittitt
E
ittitttituDCFOaCFOaDEaEaaAR **
43210
Model 5: it
FFO
ittitt
E
ittitttituDFFObFFObDEbEbbAR **
43210
Where the binary variable DE (DFFO, DCFO) is one when its observation belongs to the high
group and zero in the case of low group. All explanatory variables are deflated by market value
of equity at the beginning of year t.
Following prior works applying new methodologies (Freeman and Tsee, 1992; Ali 1994; Cheng
et al 1996 et Cheng et Yang 2003), I assume that extreme values of accounting measure are
generally transitory and less informative. Thus, the absence of incremental information content
noted for earnings in our linear models might be due to the presence and domination of extremes
values in this measure. Consequently, the cash flows and funds from operation have incremental
information content beyond earnings. In other words, they play a complementary role if the
earnings are less informative; hence, the informational importance of these two accounting
measures.
5. RESULTS RELATING TO NONLINEAR MODELS
THE INCREMENTAL INFORMATION CONTENT OF CASH FLOWS VERSUS
EARNINGS
The incremental information content of earnings (cash flows) for the low group and high group
can be deduced respectively from the coefficients a1 (a3) and the sum of coefficients a1+a2
(a3+a4). The estimate of regression (4) (table 6) shows that the marginal reaction of stock price
to the earnings change in the high group -6,278 (-1,784) is lower than that concerning low group
6,232 (1,771). However, for cash flows, the marginal reaction of stock price is not significant for
two groups. Moreover, the estimate of nonlinear model point out that its explanatory power is
higher than that of linear model (R² adjusted is 0,021 versus 0,012).
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The incremental information content analysis of cash flows and earnings allows to note that
earnings of low group have incremental information content beyond cash flows a1 = 6,232
(1,771). However, earnings of the high group do not have incremental information content
a1+a2= -0,046 (t = -0,858 = a1+a2/σa1+a2). On the other hand, cash flows do not show incremental
information content for the low group a3 = -0,225 (t = -0,123) whereas they have incremental
information content for the high group a3+a4 = 0,207 (t = 7,096).
These results confirm those noted in previous studies, so earnings are less informative in the case
of extreme values. Therefore, one can suggest that cash flows would have incremental
information content when earnings show extreme values. In other words, the market participants
use and appreciate information contained in cash flows when earnings have extreme and
transitory values.
THE INCREMENTAL INFORMATION CONTENT OF FUNDS FROM OPERATIONS
VERSUS EARNINGS
The incremental information contents of earnings (funds from operations) for low group and
high group can be obtained respectively from the coefficients b1 (b3) and the sum of coefficients
b1 + b2 (b3 + b4). Similarly to the results relative to model (4), the estimate of model (5) (table
7) confirms a weak marginal reaction of the price to the extreme variations of earnings -6,810 (-
1,901) compared to that of low variations 6,751 (1,885). In addition, the explanatory power of
model (5) is higher than that of model (4) and the linear model (2) (adjusted R² =
0,024>0,021>0,013).
From the incremental information content analysis relating to earnings and funds from operations
notes a similarity in funds from operations and cash flows behaviors compared to earnings. Thus,
funds from operations show incremental information content beyond earnings only in the case of
presence of high variations b3+b4=0,255 (t = 10,851= b3+b4/σb3+b4). However, for the group of
low variations, funds from operations do not have incremental information content beyond
earnings -2,180 (-0,826). Moreover, the earnings have incremental information content for the
low variations group b1 = 6,751 (1,885) and not for the group of high variations b1+b2= -0,016
(t= 0,298). Thus, the earnings, contrary to funds from operations, are not informative when it is
the subject of high variations.
By estimating model (5), one conclude that earnings have incremental information content
beyond funds from operations only when they represent moderate variations. On the other hand,
FFO expresses a similar behaviour to cash flows, so they have incremental information content
beyond earnings only in the case of presence of high variations. These results suggest that
investors appreciate the information contained in earnings when they show moderate variations;
whereas in the case of high variations, it is the funds from operation information which fill the
information gap and, consequently, shows incremental information content.
To recapitulate, the estimate of nonlinear models note that earnings have incremental
information content beyond cash flows and funds from operation only when they show moderate
variations. However, cash flows and funds from operations have incremental information content
beyond earnings only when they have extreme variations. Moreover, cash flows and funds from
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operations express similar behaviour in term of their information content compared with
earnings.
THE INFORMATION CONTENT OF CASH FLOWS AND FUND FLOWS AFTER
CONTROLLING FOR EARNINGS EXTREMITY
In order to precisely determine for which degree of earnings variation, cash flows and funds from
operations have incremental information content; I re-estimate models (4) and (5) after
separating our sample into two groups as a function of the extent of earnings variations :
moderate variations (group 1) and extreme variations (group 2). The results are presented in table
(8).
(Insert table 8 here)
After controlling for the earnings variations, the results reported in table (7) confirm those
reported above, so for the first group the earnings have incremental information content beyond
cash flows and funds from operations. However, cash flows and funds from operations have
incremental information content beyond earnings only when they show extreme variations. For
the second group, the earnings do not have incremental information content beyond the two other
accounting measures, this results is consistent with the prior studies (Freeman and Tsee, 1992;
Cheng et al., 1996 and Cheng and Yang, 2003); thus the earnings are less informative when they
show extreme variations. In this case, I suggest that cash flows and funds from operations would
fill the information gap and contain incremental information. Nevertheless, the results point out
that cash flows and funds from operations have incremental information content only when they
present extreme variations.
In addition, the complementary tests, after controlling for the extent of cash flows and funds
from operations variations, note and confirm our results i.e. the earnings have incremental
information content only when they present moderate variations, whatever the extent of cash
flows and funds from operations variations. On the other hand, the cash flows and funds from
operations have incremental information content only when they have extreme variations,
whatever the variation of earnings.
These results follow the deduction that investors on the market appreciate the information
contained in earnings when they present moderate variations. This is consistent with previous
studies, based on time series, which have noted that moderate variations of earnings are rather
permanent and more informative. On the other hand, the investors appreciate the information
contained in cash flows and funds from operations only when their variations are extremes, and
whatever the extent of earnings variations. This last result is not consistent with those noted by
Ali (1994) and Cheng and Yang (2003) who argue that cash flows have incremental information
content beyond earnings only when they present moderate variations.
CONCLUSION
The study of cash flows information content versus other accounting measures is an issue of
great interest as regards to investments decisions. It provides knowledge if the investors
appreciate this information compared to that contained in measures based on accruals. If several
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studies confirm the capacity of earnings to explain stock return, the presence of incremental
information content of cash flows is rarely documented. Within the framework of these works, I
try to analyze the information content of cash flows versus earnings and funds from operations in
the French context. The results point out the presence of incremental information content for
cash flows only when they show extreme variations. Therefore, the investors agree a great
importance to this information especially when it experiences extreme variations.
Certainly, our study presents some limits relating to, firstly, association study which can
describes the tendency of association between accounting measures and stock prices variations
rather than the reaction of stock prices to accounting disclosures; secondly, to weakness of
explanatory power of models, it does not exceed 4% and, thirdly, to size of our sample (75 listed
companies) which is relatively weak to produce conclusive results on the whole of French listed
companies.
In spite of these limits, this study constitute, to our knowledge, one of the rare studies on
information content of cash flows disclosed in the French context. Thus, I hope that our study
will draw researchers’ attention of cash flows information importance, in term of its content and
its predictive ability; especially in an international context characterized by calling into question
the credibility of accounting information.
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pas", Revue Française de Gestion, Vol 122 No. Janvier-Février, pp. 99-105.
Dumontier, P and Amadieu, P. (2001) "Les chiffres comptables et la valeur de l'entreprise," in
Vuilbert (Ed), Faire de la recherche en comptabilité financière, Paris, pp. 211-24.
Easton, P. and Harris, T. (1991) "Earnings as an explanatory variable for returns", Journal of
Accounting and Economics, Vol . 20, pp. 19-36.
Freeman, R.N., J. Ohlson, and S.H. Penman. 1982. "Book rate of return and prediction of
earnings changes: an empirical investigation", Journal of Accounting Research, Vol.20, pp. 639-
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unespected earnings", Journal of Accounting Research, Vol. 30, pp. 185-209.
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améliorations méthodologique?", Comptabilité, Contrôle, Audit, Vol. 2 No. Décembre, pp. 9-30.
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Wilson, G. (1986), "The relative incremental information content of accruals and cash flows:
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TABLE 1
Year Number of observations
2005 74
2004 75
2003 74
2002 72
2001 71
2000 70
Total 436
TABLE (2): DESCRIPTIVE STATISTICS
Average Standard
deviation
1st
quartile
Median 3rd
quartile
- Abnormal returns (ARit)
0,1073
0,4785
-0,1485
0,0362
0,2585
- Change in earnings per share (ΔEit)
-0,0025 0,6999 -0,0203
0,0021 0,0294
- Change in funds from operations per
share (ΔFFOit)
-0,0102
0,2639
-0,0314
0,0019
0,0402
- Change in cash flows from operations
(ΔCFOit)
-0,0058
0,3057
-0,0393
0,0056
0,0546
- Earnings per share (Eit) 0,0728
0,4894
0,0227
0,0533
0,0863
- Funds from operation per share
(FFOit)
0,1980
0,5845
0,0623
0,1124
0,1907
- Cash flows from operations (CFOit) 0,1894
0,5560
0,0517
0,1044
0,1829
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TABLE (3): PEARSON CORRELATION BETWEEN VARIABLES
ARit Δ(Eit) Δ(FFOit) Δ(CFOit)
-Abnormal returns (ARit)
1
-0,034
0,093
0,098
- Change in earnings Δ(Eit)
1 0,292** 0,158**
- Change in funds from operations Δ(FFOit)
1 0,780**
- Change in cash flows from operations
Δ(CFOit)
1
**: Correlation is significant at the 0.01 level (2-tailed).
TABLE (4): REGRESSION RESULTS OF THE INCREMENTAL INFORMATION
CONTENT OF EARNINGS, FUNDS FROM OPERATIONS AND CASH FLOWS
Intercept ΔEit ΔFFOit ΔCFOit Adjusted R²
Model (1)
coefficient
(t-stat)
0,180
(5,504)
-0,045
(-0,948)
0,214
(1,972)*
0,012
Model (2)
coefficient
(t-stat)
0,181
(5,546)
-0,056
(-1,208)
0,263
(2,027)*
0,013
Model (3)
coefficient
(t-stat)
0,181
(5,515)
0,098
(0,494)
0,131
(0,767)
0,010
*: is statistically significant at 5% level.
TABLE(5): COEFFICIENTS EQUALITY TEST
Wald test
21 aa
F-stat
Chi-square
16,589
16,589
Prob
Prob
0,000
0,000
21 bb F-stat
Chi-square
15,271
15,271
Prob
Prob
0,000
0,000
21 cc
F-stat
Chi-square
0,169
0,169
Prob
Prob
0,680
0,680
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TABLE (6): ESTIMATE OF NONLINEAR MODEL RELATIVE TO EARNINGS AND
CASH FLOWS
Model (4) : it
CFO
ittitt
E
ittitttituDCFOaCFOaDEaEaaAR **
43210
Intercept (a0t) a1tΔEit a2tΔEit*D
E a3tΔCFOit a4tΔCFOit*D
CFO
Adjuted-
R²
Coeff.
t-stat
0,178
(5,439)
6,232
(1,771)**
-6,278
(-1,784)**
-0,225
(-0,123)
0,432
(0,236)
0,021
**: Statistically significant at 10% level
TABLE (7): ESTIMATE OF NONLINEAR MODEL RELATIVE TO EARNINGS AND
FUNDS FROM OPERATIONS
Model (5) : it
WCFO
ittitt
E
ittitttituDWCFObWCFObDEbEbbAR **
43210
Intercept (b0t) b1tΔEit b2tΔEit*D
E b3tΔFFOit b4tΔFFOit*DFFO Adjusted R²
Coeff.
t-stat
0,180
(5,508)
6,751
(1,885)**
-6,810
(-1,901)**
-2,180
(-0,826)
2,435
(0,922)
0,024
**: Statistically significant at 10% level
TABLE (8): ESTIMATE OF MODELS (4) AND (5) AFTER CONTROLLING FOR
EARNINGS EXTREMITY
Δ (E) Δ (CFO) Δ (FFO)
Adjusted
R²
moderate extreme moderate extreme moderate extreme
Gro
up
(1)
Model (4)
6,360 (1,869)**
-1,381 (-0,627)
0,484 (22,201)*
0,031
Model
(5) 5,489
(1,529)** -0,080
(-0,025) 1,056
(69,513)* 0,034
Gro
up
(2)
Model (4)
-0,044 (-0,911)
1,882 (0,612)
0,205 (4,297)*
0,022
Model
(5) -0,057
(-1,136) -4,404
(-1,031) 0,247
(6,0687)* 0,027
*: Statistically significant at 5% level.
**: Statistically significant at 10% level.
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A STUDY ON CUSTOMERS’ SATISFACTION TOWARDS
BSNL LANDLINE SERVICES IN SALEM CITY, TAMIL NADU
M.GURUSAMY*; A.VELSAMY**; DR.N.RAJASEKAR***
*Assistant Professor,
Department of Management Studies, Paavai College of Engineering,
Pachal,Namakkal – 637018.
**Associate Professor, Sona School of Management,
Salem – 636005.
***Professor and Head,
Department of Business Administration,
Thiagarajar College, Madurai – 625009.
ABSTRACT
The customer satisfaction is the main goal of every business organization. In this competitive
business scenario each and every activity starts and ends with the customer. In the present
scenario, the telecommunication is lifeblood for every business activities. Even in this industry
there prevails a stiff competition between the service providers. The objectives of the study are to
study the customer satisfaction level towards BSNL landline services; the influence of
demographic variables of the respondents; usage level of various BSNL schemes; the operational
performance; The major purpose of descriptive research is description of state of affairs, as it
exists at present. Simple random sampling method is used to collect data. The size of the sample
is 200. The respondents of the study are part of population of Salem city. Both primary and
secondary data is used. The data has been mainly analyzed by using the Weighted Average
Method, Ranking Method and Chi – Square Test. most of the respondents are not much satisfied
with the features of the phone provided by BSNL when compare to other private landline
providers, significant weight age should be given by the BSNL. Most of the respondents are not
aware of various schemes. It is identified that the service provided by BSNL is at satisfactory
level to the respondent’s. But most of the respondents are not satisfied with the features of the
phone. BSNL should focus on the promotional measures as equal to the private service providers
to enhance their service activity to satisfy their customers.
KEYWORDS: Telecommunication, Demographic variables, Landline services, Promotional
measures and Customer satisfaction.
______________________________________________________________________________
INTRODUCTION
Telecommunication is recognized, world over, as a key factor in the development of social,
economic, commercial and cultural activities. The development of telecommunication
infrastructure is likely to play a greater role in meeting the diverse needs of people and
improving their quality of life through inter-linked development of many other sectors. The term
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‘Telecommunication’ in ITU parlance covers a very wide variety of services such as sound &
television broadcasting, space communications, aeronautical and maritime mobile
communications, radio-location and radio-navigation systems, radio astronomy, meteorological
aids and services, radio amateurs, etc, besides the public telecommunications services. There are
large telecommunication networks belonging to railways, defence and para-military
organizations, law and order services (police etc), public utility organizations like electricity
grids, transport organizations, municipal services, national and international telecommunications
service providers – both government and private, civil aviation department and airlines, shipping
& port authorities, sound and TV broadcasting organizations, meteorological department, oil
exploration, processing and distribution companies, large private companies, etc.
REVIEW OF LITERATURE
CUSTOMER SATISFACTION
Customer Satisfaction, a business term, is a measure of how products and services supplied
by a company meet or surpass customer expectation. It is seen as a key performance indicator
within business and is part of the four perspectives of a Balanced Scorecard.In a competitive
marketplace where businesses compete for customers, customer satisfaction is seen as a key
differentiator and increasingly has become a key element of business strategy.There is a
substantial body of empirical literature that establishes the benefits of customer satisfaction for
firms.
MEASURING CUSTOMER SATISFACTION:
Customer Satisfaction, a business term, is a measure of how products and services supplied
by a company meet or surpass customer expectation. It is seen as a key performance indicator
within business and is part of the four perspectives of a Balanced Scorecard.In a competitive
marketplace where businesses compete for customers, customer satisfaction is seen as a key
differentiator and increasingly has become a key element of business strategy.
CUSTOMER SERVICE PLAN
Maintaining an effective customer service program is one of the biggest challenges faced
by managers in the current environment. Today, managers are faced with cutbacks in personnel,
workforce reshaping, and lack of funds for adequate training. These constraints, although
serious, must not be allowed to compromise customer service. Developing an effective customer
service plan and instilling a commitment to it within the organization are key to the management
process.
Once developed and implemented, the plan helps to overcome other obstacles. Success
breeds success, and in the service business there is no greater success than a satisfied customer.
Therefore, managers should alwaysconsider the impact of how an effective customer service plan
can help them to meet their goals.
Enlightened managers fully recognize the relationship between a sense of ownership and
positive results. Organizations may vary greatly in their methods to establish and maintain a
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customer service plan, but individual loyalty to the concept and personal effort ensure its
success. This requires the enthusiastic involvement and support of top management, as well as
the active solicitation and input of ideas from all members of the organization.
Once in place, the plan becomes a framework to evaluate the effectiveness of the
organization to meet customer needs and provides a standard for recognizing individual
performance. It should be tailored to meet the goals and objectives of the organization and
should identify a way to measure and evaluate results.
Clearly defined objectives provide the parameters and are essential for evaluating
performance. For example, measuring planned against actual accomplishments indicates whether
objectives are met and provides information on the validity of the process.
Feedback from customers provides a valuable tool for measuring customer satisfaction
relative to the professionalism of the provider and the relevance and timeliness of the service.
As with any plan, be realistic, periodically review, and make adjustments when necessary.
Think of the plan as being cyclical: define, schedule, allocate, oversee, measure, and modify or
change. Define objectives, schedule times, allocate resources, oversee the process, define a
means to measure and evaluate, and finally, modify or change. The objective is not to achieve
perfection at the outset, but to provide a framework for building and improving as you progress
toward a realistic and workable plan.
Starting out with a simple plan is easier to implement and allows for more flexibility;
details can be added later. The validity of the plan to reach the objectives should be reviewed
during various stages. Consider lessons learned, and don't hesitate to incorporate changes based
on findings from milestone reviews.
As a customer service plan develops, there will be to encounter challenges. We plan to
succeed when outlining a strategy to implement our goals, and we must include within that
strategy a plan to overcome obstacles.Lack of funds for training is a significant challenge for
managers today, but most will agree that training is an integral part of performance. So a strategy
to overcome this obstacle might include looking within our own organizations for answers.
There are individuals within most organizations who have a depth of institutional
knowledge as well as organizational expertise. These individuals will no doubt be very familiar
with the organization's goals and objectives and will be instrumental in developing the customer
service plan. As these experienced individuals train and mentor less experienced members, many
of theorganizational training objectives are accomplished in-house. As with other objectives, the
results of measuring and evaluating the training plan provide a basis to recognize and reward
motivation and promote success.
Implemented correctly, an effective customer service plan leads to a more effective and
efficient workforce. Invaluable knowledge and skills are gained by search--problem solving is a
natural result. Likewise, we gain a greater understanding of what we do and how it impacts
others. Inherent in the process, we learn what others need from us and how we can support them
in their efforts to improve customer service.
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The ultimate reward for management is customer satisfaction provided by a skilled and
committed workforce able to solve problems and understand the importance of effective
customer service.
NEED FOR THE STUDY
The customer satisfaction is the main goal of every business organization. In this
competitive business scenario each and every activity starts and ends with the customer. In the
present scenario, the telecommunication is lifeblood for every business activities. Even in this
industry there prevails a stiff competition between the service providers. In spite of a well-
established network and infrastructure supporting, certain service providers weren’t able to root
their footsteps in the market due to lack in customer service and satisfaction. Due to this their
promotional initiatives haven’t yielded fruitful results. Since there is a marginal difference
between the services rendered, there is more possibility for the subscriber to switch from one
service provider to another based on their satisfaction. So it is very essential for the service
provider to understand the influence of various demographic variables that influence the
satisfaction level to win the hearts of the customers. This study could aid the BSNL with respect
to their enhancement.
OBJECTIVES OF THE STUDY
To study the customer satisfaction level towards landline service provided by BSNL.
To study the influence of demographic variables of the respondents.
To find out usage level of various schemes provided by BSNL.
To identify the operational performance of BSNL.
To identify the satisfaction level of customer services provided by BSNL.
To identify the customers’ opinion about BSNL
LIMITATIONS OF THE STUDY
The area of study is limited to Salem city only; hence the results may not be true for other
geographical areas.
Validity & Reliability of the data are obtained depends on the responses from the
customer.
Structured questionnaire are base for collecting the data, it may have disadvantages of not
being to probe deep into the respondents thoughts.
The time at the disposal of the researcher is limited.
The size of the sample comparing to the population is very less and hence it will not
represent the whole population.
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RESEARCH METHODOLOGY
Methodology is a way to systematically solve the research problems. It explains the
various steps that are generally adopted by a researcher in studying the research problem with
logic behind them.
RESEARCH DESIGN
The research design is the basic framework or a plan for a study that guides the collection
of data and analysis of data. In this market survey the design used is useddescriptive research
design. It includes surveys and fact-finding enquiries of different kinds. The major purpose of
descriptive research is description of state of affairs, as it exists at present.The information are
collected from the individuals and analyzed with the help of different statistical tools, to find the
satisfaction level of customer.Moreover cross table analysis has been done for processing the
data and information is derived to attain the objectives of the study.
POPULATION
Since the population of Salem city is large in number, researcher was unable to collect
information from all individuals due to limitation of time. So part of the population is taken for
analyzing and generating the findings, which is applicable for total population.
SAMPLING TECHNIQUE
Simple random sampling method is used to collect data. Data has been collected from the
sample chosen from the directory randomly.
SAMPLE SIZE
The size of the sample is 200, and factors to be considered are time, cost and effectiveness
etc. The study was conducted during the period of May 2011 to July 2011.
SAMPLE UNIT
The respondents of the study are part of population of Salem city. Each individual is
considered to be the sampling unit
DATA COLLECTION
The collection of data is considered to be one of the most important aspects in the research
methodology. Both primary and secondary data is used in this study in order to meet the
requirements of the purpose.
PRIMARY DATA
Under this study primary data was collected by using structured questionnaire. The
structured questionnaire consists of both open-ended and closed-ended questions. The primary
data has been collected through the questionnaire by means of personal interview. The
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questionnaire consists of number of questions printed in a definite order on a form. The primary
data was collected from individuals residing in Salem city, with the help of questionnaire.
SECONDARY DATA
The secondary data are sourced from various telecommunication websites, Magazines,
Books, Pamphlets, and Periodical Surveys etc.
STATISTICAL TOOLS USED FOR THE STUDY
The data has been mainly analyzed by using the following methods and tests.
Weighted Average Method
Ranking Method
Chi – Square Test
DATA ANALYSIS AND INTERPRETATION
TABLE NO.1: SATISFACTION LEVEL WITH RESPECT TO THE BASIC SERVICES
PROVIDED BY BSNL
Particulars Weightage score Rank
Getting a new phone connection after submitting our application 846 II
Call connectivity (Local, STD/ISD) 831 III
Voice clarity while communicating 897 I
Features of the phone 792 IV
Rent/free various tariff package 766 V
It is inferred from the above table that the factor ‘voice clarity while communicating’, gets
first rank, second and third rank goes to the factor ‘Getting a new phone connection after
submitting the application’ and ‘Call connectivity (Local, STD/ISD)’ respectively. Fourth and
last rank goes to the factor ‘Features of the phone’ and ‘Rent/free various tariff package’
respectively.It is concluded from the analysis that maximum of the respondents’ opinion that
BSNL provides best voice clarity while communicating.
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TABLE NO.2: SATISFACTION LEVEL WITH RESPECT TO THE BILLING
SERVICES PROVIDED BY BSNL
Billing Services factors Weightage score Rank
Local call tariff rates 769 V
STD/ISD call tariff rates 747 VI
Mode of payment 803 II
Issuing duplicate bills 771 IV
Issuing itemized bills 797 III
Delivery of bills 841 I
It is identified from the above table that the factor ‘Delivery of bills’ gets the first rank, the
second and third rank goes to the factors ‘mode of payment’ and ‘issuing itemized bills’
respectively. Fourth and fifth rank goes to the factor ‘Issuing duplicate bills’ and ‘Local call
tariff rates’ respectively. Last rank goes to the factor ‘STD/ISD call tariff rates’.It is concluded
from the analysis that maximum numbers of the respondents’ are satisfied with ‘Delivery of
bills’.
TABLE NO.3: SATISFACTION LEVEL WITH RESPECT TO THE CUSTOMER
SERVICES PROVIDED BY BSNL
Customer Service Factors Weightage score Rank
Attitude of staff and response to their queries 902 I
Providing information about the new schemes / services 778 III
Transfer of phone connection 748 VI
Call waiting facility 707 VII
Call divert option 654 IX
Caller ID facility 632 X
Dynamic locking facility 691 VIII
Bill collection centers 837 II
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Fault complaint redressal 759 IV
Other general complaint redressal 752 V
It is understood from the above table that the factor ‘Attitude of staff and response to their
queries’ is the best service and it ranked first by the respondents with score of 902 points. Second
and third rank goes to the factor ‘Bill collection centers’ and ‘Providing information about the
new schemes / services’ with score of 837 and 778 points. Fourth and fifth rank goes to the
factor ‘Fault complaint redressal’ and ‘other general complaint redressal’ with score of 759 and
752 points. Sixth and seventh rank goes to the factor ‘Transfer of phone connection’ and ‘Call
waiting facility’ with score of 748 and 707 points. Eighth and ninth rank goes to the factor
‘Dynamic locking facility’ and ‘Call divert option’ with score of 691 and 654 points. Last rank
goes to the factor ‘Caller ID facility’ with score of 632 points.It is concluded from the analysis
that maximum numbers of the respondents’ are satisfied with ‘Attitude of the staff and response
to the queries.
TABLE NO.4: AGE AND OVERALL SATISFACTION LEVEL TOWARDSBSNL
LANDLINE SERVICES
Age Level of Satisfaction of BSNL Landline Services
Total Highly satisfied Satisfied Neutral Dissatisfied
Below 27 years 1 47 10 1 59
27 to 35 years 9 51 8 2 70
Above 35 years 4 50 17 0 71
Total 14 148 35 3 200
Null Hypothesis (H0)-There is no significant relationship between age and overall level of
satisfaction towards BSNL landline service.
Alternative Hypothesis (H1)-There is close relationship between age andoverall level of
satisfaction towards BSNL landline service.
Calculated 2 value: 11.491; Table value: 12.592
From the above analysis, we find that the calculated 2value of is lesser than the table value and
hence, the null hypothesis accepted. Hence, there is a no significant relationship between age
and overall level of satisfaction towards BSNL landline service.
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TABLE NO.5: GENDER AND OVERALL SATISFACTION LEVEL TOWARDSBSNL
LANDLINE SERVICES
Gender
Level of Satisfaction of BSNL Landline Services
Total Highly satisfied Satisfied Neutral Dissatisfied
Male 14 102 25 2 143
Female 0 46 10 1 57
Total 14 148 35 3 200
Null Hypothesis (H0)-There is no significant relationship between gender and overall level of
satisfaction t towards BSNL landline service.
Alternative Hypothesis (H1) - There is close relationship between genderand overall level of
satisfaction towards BSNL landline service.
Calculated 2 value: 6.099; Table value: 7.815
From the above analysis, we find that the calculated value of 2is lesser than the table value and
hence, the null hypothesis accepted. So, there is a no significant relationship between gender and
overall level of satisfaction towards BSNL landline service.
TABLE NO.6: EDUCATIONAL STATUS AND OVERALL SATISFACTION
LEVELTOWARDS BSNL LANDLINE SERVICES
Educational Status Level of Satisfaction of BSNL Landline Services
Total
Highly satisfied Satisfied Neutral Dissatisfied
Primary Education 1 3 2 0 6
SSLC/+2 5 60 12 0 77
Collegiate Education 8 85 21 3 117
Total 14 148 35 3 200
Null Hypothesis (H0)-There is no significant relationship between educational status and overall
level of satisfaction towards BSNL landline service.
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Alternative Hypothesis (H1)-There is close relationship between educational status and overall
level of satisfaction towards BSNL landline service.
Calculated 2value: 4.652; Table value: 12.592
From the above analysis, we find that the calculated value of 2is lesser than the table value and
hence, the null hypothesis accepted. So, there is a no significant relationship between educational
status and overall level of satisfaction towards BSNL landline service.
TABLE NO.7: OCCUPATION STATUS AND OVERALL SATISFACTION
LEVELTOWARDS BSNL LANDLINE SERVICE
Occupation status
Level of Satisfaction of BSNL Landline Services
Total Highly satisfied Satisfied Neutral Dissatisfied
Government Employee 0 5 0 2 7
Private Employee 7 87 23 0 117
Professionals 2 12 4 0 18
Self employed 5 44 8 1 58
Total 14 148 35 3 200
Null Hypothesis (H0) - There is no significant relationship between occupational status and
overall level of satisfaction towards BSNL landline service.
AlternativeHypothesis(H1)-There is close relationship between occupational status and overall
level of satisfaction towards BSNL landline service.
Calculated 2 value: 39.947; Table value: 16.919
From the above analysis, we find that the calculated value of 2is greater than the table value
and hence, the null hypothesis rejected. So, there is a close significant relationship between
occupational status and overall level of satisfaction towards BSNL landline service.
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TABLE NO.8: MONTHLY INCOME AND OVERALL SATISFACTION
LEVELTOWARDS BSNL LANDLINE SERVICES
Monthly Income
Level of Satisfaction of BSNL Landline Services
Total Highly satisfied Satisfied Neutral Dissatisfied
Less than Rs.5000 1 14 3 1 19
Rs.5001 – 10000 2 49 20 2 73
Rs.10001-15000 4 66 11 0 81
Above Rs.15000 7 19 1 0 27
Total 14 148 35 3 200
Null Hypothesis (H0)-There is no significant relationship between Monthly income level and
overall level of satisfaction towards BSNL landline service.
Alternative Hypothesis (H1)-There is close relationship between Monthly income level and
overall level of satisfaction towards BSNL landline service.
Calculated 2value: 29.337; Table value: 16.919
From the above analysis, we find that the calculated value of 2is greater than the table value
and hence, the null hypothesis rejected. So, there is a close significant relationship between
Monthly income level and overall level of satisfaction towards BSNL landline service.
TABLE NO.9: NAME OF THE SCHEMES AND OVERALL SATISFACTION
LEVELTOWARDS
BSNL LANDLINE SERVICES
Name of the scheme Level of Satisfaction of BSNL Landline Services
Total Highly satisfied Satisfied Neutral Dissatisfied
General 4 80 28 2 114
Special 8 52 7 0 67
Super 2 16 0 1 19
Total 14 148 35 3 200
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Null Hypothesis (H0) -There is no significant relationship between using the type of scheme and
overall level of satisfaction towards BSNL landline service.
Alternative Hypothesis (H1)-There is close relationship between using the type of scheme and
overall level of satisfaction towards BSNL landline service.
Calculated 2 values: 16.595; Table value: 12.592
From the above analysis, we find that the calculated value of 2is greater than the table value
and hence, the null hypothesis rejected. So, there is a close significant relationship between
using the type of scheme and overall level of satisfaction towards BSNL landline service.
TABLE NO.10: PERIOD OF USING THE LANDLINE AND OVERALL
SATISFACTION LEVEL TOWARDS BSNL LANDLINE SERVICES
Period of Using
Level of Satisfaction of BSNL Landline Services
Total Highly satisfied Satisfied Neutral Dissatisfied
Less than 1 year 0 3 0 1 4
1 to 3 years 3 30 16 0 49
3 to 5 years 5 70 10 2 87
More than 5 years 6 45 9 0 60
Total 14 148 35 3 200
Null Hypothesis (H0)-There is no significant relationship between period of using and overall
level of satisfaction towards BSNL landline service
Alternative Hypothesis (H1) - There is close relationship between period of using and overall
level of satisfaction towards BSNL landline service.
Calculated 2value: 28.749; Table value: 16.919
From the above analysis, we find that the calculated value of 2is greater than the table value
and hence, the null hypothesis rejected. So, there is a close significant relationship between
period of using and overall level of satisfaction towards BSNL landline service.
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TABLE NO.11: PURPOSE OF USING THE LANDLINE AND SATISFACTION LEVEL
TOWARDS BSNL LANDLINE SERVICES
Purpose of Using
Level of Satisfaction of BSNL Landline Services
Total Highly satisfied Satisfied Neutral Dissatisfied
Residential 3 57 18 3 81
Official 11 91 17 0 119
Total 14 148 35 3 200
Null Hypothesis (H0)-There is no significant relationship between purpose of using and overall
level of satisfaction towards BSNL landline service.
Alternative Hypothesis (H1)-There is close relationship between purpose of using and overall
level of satisfaction towards BSNL landline service.
Calculated 2 value: 8.498; Table value: 7.815
From the above analysis, we find that the calculated value of 2is greater than the table value
and hence, the null hypothesis rejected. So, there is a close significant relationship between
purpose of using and overall level of satisfaction towards BSNL landline service.
FINDINGS
Most of the respondents belong to the age groups 27-35 years and above 35 years and
most of the respondents belong to male category.
Most of the respondents are educated till the level of collegiate education and most of the
respondents are working as private employee.
Most of the respondents are earning Rs.10001- Rs.15000 per month.
It is stated that 57.0% of the respondents are using general scheme.
Most of the respondents are using the BSNL landline for more than 3 years.
Most of the respondents are using for the official purpose and all are availed of STD
facility.
It is inferred that maximum respondents are making more than 150 calls per month and
paying their bill amount from 1001-1500.
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It is finding that most of the respondents are satisfied by getting their new connections
immediately after submitting their applications.
It is found that most of the respondents are satisfied with basic services provided by
BSNL.
It is found that most of the respondents are satisfied with billing services provided by
BSNL.
It is found that most of the respondents are satisfied with customer services and value
added facility provided by BSNL.
It is inferred that most of the respondents are not much satisfied with the features of the
phone provided by BSNL.
It is noted that among the various billing service provided by BSNL delivery of bills and
mode of payment makes the respondents very much satisfied.
It is noted that there is no distraction while communicating.
It is noted that most of the respondents are not aware of call divert option.
It is noted that the demographic variables age, gender, and educational status has no
relationship with the overall satisfaction level.
It is noted that the demographic variables occupational status, monthly income level has
relationship with the overall satisfaction level.
It is inferred that other variables like usage of schemes, period of using, and purpose of
usage also has relationship with the overall satisfaction level.
SUGGESTIONS
Most of the respondents are satisfied with the services provided by BSNL landline, steps
to be taken to make the customers more satisfied.
Most of the customers are not aware of the phone plus facility, steps to be taken to create
awareness about these facilities.
It is inferred that most of the respondents are not much satisfied with the features of the
phone provided by BSNL when compare to other private landline providers, significant
weight age should be given by the BSNL.
Few of the respondents are satisfied with call connectivity. It is suggested to the company
to give importance to that and make the entire customer to be satisfied.
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It is noted that the demographic variables occupational status, monthly income level has
relationship with the overall satisfaction level. So it is suggested while making changes in
service/tariff these factors to be considered.
The service providers could focus the crew around the existing subscriber for adding new
clients to their basket.
It is noted from the above study that most of the respondents are not aware of various
schemes. So it is suggested to the service provider to give more weight age to know about
various schemes.
CONCLUSION
From the study the influence of demographic variables in the level of satisfaction yielded
by the user as well as the behavioral pattern of the user is analyzed in this study.It is identified
that the service provided by BSNL is at satisfactory level to the respondent’s.But most of the
respondents are not satisfied with the features of the phone. BSNL should focus on the
promotional measures as equal to the private service providers to enhance their service activity to
satisfy their customers.
BILIOGRAPHY
1. Kothari. C.R (2004): ‘Research Methodology Methods & Techniques’, New Age
International Publishers, New Delhi, 2nd Edition.
2. Richard I. Levin, David S. Rubin (2004): ‘Statistics for Management’, Prentice Hall of
India Private Limited, New Delhi, 7th Edition.
3. www.trai.com
4. www.bsnl.co.in
5. www.indianinfoline.com
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IMPORTANCE TO MAINTAIN A LEVEL OF SECRECY IN
CORPORATE SECTOR IN THE BACKGROUND OF ARTHASASTRA
SMT. DEBASHREE MAHAPATRA*; DR. SANJIT KUMAR DAS**
*Lecturer in Sanskrit,
Jhargram Raj College, Jhargram, West Bengal.
**Reader in Commerce,
Bhairab Ganguly College,
Belghoria, Kolkata-700056.
ABSTRACT
This paper reasons with the importance of maintaining secrecy at level in business and corporate
sector even when the society demands with pitches for openness and transparency. In the climate
of rampant corruption and lack of reliability in higher eulachon of society this demand is
welcome. However, camouflaging and expressing one‘s identity are some of the basic traits of
any living creature developed from the survival instinct. This trend persists remarkably in
corporate sector existing in a world of competition. Therefore, from stage of conceptualization
to profit-making or from the stage of market survey to marketing a company has to frame
policies to capitalize the situation to the maximum extent through consultation with the trusted
officials and employees, those remain mainly confidential. In this context, this paper would
concentrate on the directions of Kautily, the author of Arthasastra who probably appeared in
Mauryan era around 2400 years back, only because he is very relevant in this present context.
Arthasastra is a treatise on royal administration where the king is in the helm of the system. It
may be shown how the suggestions of Arthasastra are really helpful to run a corporate
administration where the maintaining secrecy plays a vital role.
______________________________________________________________________________
I INTRODUCTION
Secrecy is inherent in human nature i.e. concealing information, coexists with the instinct of
exposure of self. In the living world, secrecy is developed from the survival instinct as well as
from the desire to protect oneself from any impending danger. In spite of massive expansion of
scientific knowledge there remains see of secrecy in nature. We have taken this subject for
discussion because there are certain necessities and advantages of maintaining secrecy from the
mundane interaction of the everyday life to the corporate life.
It is a normal policy matter of the company to maintain the secrecy of all confidential
information and documents which give the company a competitive advantage in the industry. All
the confidential discussions viz. information relating to trade secrets of the company, existing or
contemplated products, services, technology, designs, processes, manuals, formulas, computer
systems, business plans etc. are prepared in a closed-door meeting and are kept confidential.
Generally important decisions are framed after consultation with high officials and trusted
persons. In recent years, corporate consultation has received increased attention because of high-
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profile scandals involving abuse of corporate power and, in some cases, alleged criminal activity
by corporate officers. The reason is that these trusted employees keep and handle the secret
documents and information in their possession. Rarely any decision is taken in corporate sector
by a single person. If it is done generally that is a case of exigency. Consultation in decision
making is an important activity because it helps in generating ideas and approaches and future
course of action. Unfortunately we have several instances like the case of Rajat Gupta, where a
responsible officer is supplying secret information and documents of his own company to the
rival one against bride and other considerations for personal benefit. Therefore, to check this
dangerous practice, a company must be assured of the integrity of the person invited for
consultation. We know that in corporate governance, consultation or communication is a vital
part of corporate activity where secrecy of some important documents and information is really
important.
The importance of secrecy as envisaged by the Indian theoretician may be referred in this
context, ―Ayur Vittam Grihashchhidram Mantramaithunam Vesajam/Tapo Danaapamanancha
Nava Gopyani Yatnatah‖ means one should carefully conceal his age, wealth, family dispute,
intellectual property, personal dalliance, special knowledge of medicine, endeavour, self-
sacrifice and embarrassment. Kautilya, the author of Arthashastra, is one of the pioneers who has
emphasized on consultation in decision making process maintaining secrecy of the confidential
information. Kautilya directed that a king (may be identified as a leader or C.E.O. in the context
of an organisation) should maintain a certain level of secrecy in governing a monarchy. Decision
making through consultation can be used in all matters related to a wide range of topics
concerning team effectiveness, organizational culture and participatory processes. According to
Kautilya, all kinds of administrative measures are preceded by deliberations in a well-formed
council.
Inspite of the enactment of the Right To Information Act with fanfare in practice both the
state and the central government have to remain silent in different important issues even before
the Parliament. The importance of secrecy has also recognized in our Constitution. For the post
of President to a councilor of a local self-government, one has to take the oath of secrecy prior to
one‘s appointment. Kautilya has correctly justified that there is every chance that the king may
be driven away by his consultants and advisors. There is an ancient proverb ―Annyalakshita
Karyasya Siddhirnjayate‖ means least ones competitor will not be succeeded, just getting
information with a watchful eye. In this situation maintaining secrecy is essential. There is a
general aspersion on the ancient Indian culture that the gurus give their lessons in a small
restricted circle and remained vigilant on its disclosure ―Na Deyam Parasisyebhyh‖. This
explanation does not provide the total picture of academic scenario of ancient India. They were
over-conscious to maintain their standard of instruction because if any instruction was received
by any unwanted or unworthy person it would be dangerous for the society. It is recorded in the
Nirukta a text around 3000 years back that once the knowledge incarnate approached to a
Bramhana with the request, ―Vidya Bramhanametyah Shevadhiste Raksa mam/ Asukaya na mam
Bruya Viryavati Yatha Syam‖ means ― O Bramhana! I am in your custody, please protect me,
don‘t expose me to any envious person, otherwise I would be fruitful‖.
Kautilya‘s guidelines for well-knitted consultation process were useful primarily for
maintaining the monarchical system. Selection of place, maintaining the secrecy and process of
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deliberation with due importance is given to all councilors, number and qualification of
councilors. Everything relating to consultation has been suggested by Kautilya systematically.
This paper intends to assess the direction on secrecy in consultation and its application in
corporate life despite the fact that the original text was composed for running a monarchy.
Following an introduction in section I, section II discusses about the relevance of consultation in
business, Section III focuses on the role of secrecy in consultation, section IV describes the duty
of the leaders with concluding remarks in section V.
II CONSULTATION IN BUSINESS
Consultation is an important part of decision making process because it allows
involvement of many stakeholders. Consultation is a participatory process for taking decisions
through different types of meetings and it enables the organization to achieve their ultimate goal.
It is advantageous because better solutions can be achieved through collective intelligence that is
not available by individual endeavour. In today‘s corporate world, President, Vice president,
Board of Directors, Chairman, Chief executive officers, Chief Finance Officer, Chief Operations
Officer, etc. constitute the councilors to discuss about the different matters of business. In
different meetings viz. Annual General Meeting, Extraordinary General Meeting, Statutory
Meeting, etc. they prepare the strategies, plans, programmes and other courses of action. These
meeting provide a special opportunity to achieve organizational outcomes through discussions
and consultations. Consultation is vital for management and communication because fruitful
consultation save time, increase motivation & productivity, and solve problems. In the meetings,
consultation among the various personnel creates new ideas and initiatives, diffuses conflicts and
confusion as well as creates opportunities to come together and achieve their objectives.
Kautilya has said, ―All undertakings should be preceded by consultation‖. It means that
the concerned authority has to make proper discussion before starting of any undertaking
(mantramula sarbarambha). Kautilya has suggested, ―juktijuktang bacho graghyang baladapi
shukadapi juktihinam bacho tajyo shukradapi shukadapi‖ (1.15.22). That means the leader
should consider the valuable suggestions of even a child and at the same time should ignore the
unrealistic suggestions of even a wise man. Kautilya has said ―Success is three-fold that
attainable by the power of counsel, that attainable by the power of might, that attainable by the
power of energy‖(6.2.34). It should be noted that even a monarchial system when might was
considered right, Kautilya emphasized the importance of consultations apart from other sources
for success. According to Kautilya, the king should ask the councilors concerning matters
exactly similar to the undertaking he has in mind. As they might advise he should do the work.
Kautilya has used the term yathasamarthyam (capabilities) as one of the qualifications of
a consultant. Here capability implies proficiency in politics, brilliant intellect and skill in practice
affairs (mantre samarthyai sastracaksusmatta niratisaya prajna lokavyavahara kushalam). In
appointing councilors a leader must consider the qualities and expertise of the candidates.
Kautilya has mentioned that the son of the soil, of noble birth, persons who can restrain himself,
intelligent, bold, upright, friendly, firmly devoted, energetic, healthy and spiritual etc. are the
expected qualities of a good advisor. Kautilya emphasized, ―Time comes but once to a man
waiting for an opportunity: that time is difficult for that man to get again when he wants to do his
work‖ (5.6.31). Having found a matter for deliberation the leader should not waste time to
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discuss and take the necessary steps because he should grab those opportunities which are
knocking at the door. He should not deliberate for a long time, nor with the partisans of those
would he like to harm. Kautilya has referred five successive steps of discussions namely 1) ways
and means of starting an undertaking 2) arrangement of men and materials 3) place and time of
execution 4) apprehension of probable obstacles and 5) successful accomplishment (1.15.42).
Similarly, Kautilya has prescribed he function of the associates as 1) starting work of new
undertaking 2) continuing an undertaking already begun 3) improving a work 4) implementation
of order issued (niyogasampadam) 5) getting success (1.15.32).
III ROLE OF SECRECY
Now, in the age of Right To Information Act, transparency in is an important issue.
Transparency is a trust building mechanism used to open up the information and documents of
an organization to stakeholders. The employees are expected know about the organizational
strategy, decision-making, and performance management and by getting those information they
feel more trust toward the management of their organization and thus can become more
committed and engaged in their performance. It is a concept of removing all barriers of secrecy
in order to facilitate easy access of corporate information to the outsiders. Transparency stands
for openness and creates an atmosphere of accountability. On the other hand, if the media and the
public know everything about the company then there will be a lot of questions, protests and
suggestions coming from media and the public. People with vested interest may interfere and
influence the decision making process and create a lot of problems. Therefore, all the business
has to create some sort of mechanism for maintain secrecy of confidential information and
documents.
Kautilya has seriously considered the issue of secrecy of consultation. He has suggested
that the place for consultation should be secluded, not allowing talks to be heard outside and
incapable of being peeped in even by birds. Hence without providing himself with sufficient
safeguard against disclosure, the king shall never enter into deliberations in a council.
Maintaining secrecy is very important and so an unauthorized person must not encroach the
place of counsel. Considering the issue of secrecy, it is an important decision of the leader to fix
the number of councilors. Very little number of advisors may not be able to suggest fruitful
advice and too many advisors may divulge the secrecy. Kautilya has mentioned ―To as many
persons the lord of men (the leader) communicates a secret; to as many does he become
subservient, being helpless by that act (of his)‖ (1.8.9). Kautilya has advised that the king should
ask the advisors one by one or meet them in a conference. He should carefully watch about any
deviations of advises from the advisors at the time of individual discussion and group discussion.
He wants to clarify if a single person expresses his opinion in the same way or differs in his
opinion during the conference.
Kautilya has mentioned ―In case of secret associations, those concluded in secret shall
succeed‖ (3.1.11). It means that if a leader wants to get success in a project, he must not expose
about his plan to public in general, never before his competitor. Every project executed in an
organization goes through some stages viz. conceptualization stage, preparation stage and
delivery stage. A leader has to maintain a certain level of secrecy in every stage of operation.
Kautilya has asserted, ―Therefore, others should know about any work sought to be done by him.
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Only those who undertake it should know (about it) when it is begun or even when it is actually
completed‖(1.15.11). In today‘s corporate world several agreements are signed by the
counterparties such as non-disclosure agreement, confidentiality agreement, confidential
disclosure agreement, proprietary information agreement or secrecy agreement because it is
aimed to share with one another for certain purposes, but with the restriction of access by the
third parties.
Every enterprise has to maintain some sort of secrecy for smooth running, protecting its
own interest and for survival in a competitive situation. The secrecy means secrecy of
information may be kept in different forms such as written, memorized, and stored electronically,
or may be in the graphical form. An enterprise should not expose his future plan or strategy
definitely in the initial stage of business. If this is divulged, other competitors may take
advantages of the situation and try to push the organization outside of the market. Corporate
competition has some similarities with a war like situation. There is an old proverb that ‗nothing
is unfair in love and war‘. In the true sense, every business has to hold some kind of secrecy of
information and documents to stay in the market and that is his capital. In fact, business secrecy
is quite different from copyrights, trademarks, and patents. Secrecy can be divulged mainly in
two ways: 1) Leakage of confidential information like quotation price, content of agreement,
marketing strategy etc. discussed in the meeting 2) Despatch of document regarding formula,
codes, design, software etc. stolen from office. Insider trading is one aspect divulgence of
secrecy, common in today‘s business world which has shaken the confidence on the stock
market. When such incidences happen companies may be ruined where some individuals become
gainer at the cost of thousand employees of that undertaking. In a competitive situation a
marginal specialty makes a lot of differences in market. Kautilya suggested that (Guhet
Kurmaiba Angani) as a turtle protects itself from its foe with its hard external cover so also the
authority should ensure complete secrecy about the functions of its organs (departments).
IV DUTY OF THE LEADER
According to Kautilya, a leader is expected to be careful of his way of conversation and
body language during communication or consultation with his subordinate and other people. He
should not hurt anyone unnecessarily and must not be casual at the time of consultation. Kautilya
advises, ―Just as an elephant, blinded by intoxication and mounted by an intoxicated driver,
crushes whatever it finds, so the king, not possessed of the eye of science, and blind, has risen to
destroy the citizens and the country people‖ (1.14.7). The leader of the organization should not
be intoxicated by his power and position; otherwise the organization may be destroyed. So, the
leaders of the organizations have the responsibility of doing the right thing for the business with
the help of his workforce. The discussion would not be completed without referring to the
ancient direction relevant to our contemporary problem. It is directed ―it is better for the
councilor not to enter the assembly hall than to be remain silent there or to give a distorted
statement. Doing so, the councilor shall go to the hell‖ (Sabha na pravestvya vaktavyam va
samanjasam/ Avruvan vivruvan vapi naro bhavati kilvisi). In fact by this practice the entire
process of consultation become futile. The king or the leader, in addition to learning of different
subjects must be able to exercise control over his senses (indriyajaya), and keep his passions in
check during the consultation process. He should adjust his conduct in respect of the three goals
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of dharma, artha and kama. Whatever advices are given to a king by kautilya should be
applicable to a leader of an organization.
A leader or the authority has to enforce some mechanism so that secrecy of the meetings
can not divulge. The disclosure of counsels may be possible by observing changes in the attitude
and countenance in a royal system and the same may be possible in corporate world.
Carelessness, intoxication, talking in sleep, love and other peculiar habits of councilors are the
causes of the betrayal of counsels. Change in conduct is change in attitude
(ingitamanyathávrittih); and observation of physical appearance is countenance
(ákritigrahanamákárah). Leaders have to build a climate of trust and commitment among their
employees through effective management practices but at the same time ensure that the secrecy
is not being divulged. Through the creation of transparent systems and processes for strategy
development in managing human resources firms can achieve higher levels of trust and
commitment from employees. Kautilya has mentioned that ―Control over the senses, which are
motioned by training in the sciences, should be secured giving up lust (kaam), anger (krodha),
greed (lobha), pride (mana), arrogance (madh) and overexcitement (harsha)‖ (1.6.1). He has
mentioned that the role of a leader is very critical because he has to take varieties decisions
considering different types of complexities in day to day business. The leader must have a close
look after the persons around him and he must set himself as an example to the followers.
V CONCLUSION
A renowned multi-national company, Coca-Cola keeps its secret soft drink recipe locked
in a vault that can only be opened by the company‘s board of directors, and it only reveals the
ingredients to two employees at a time. Generally the companies should keep secrecy of the
confidential documents under lock and key so that the information stored in computers can not
be hacked. However, a confidentiality agreement may be the best way to protect a trade secret. A
legally binding contract, the agreement prohibits involved parties (such as company-employees)
from disclosing secret information to the public, third parties, or worse—the competitor. In
today‘s business, the authority can bring information security expert to assist in designing
effective information security system. This arrangement includes measures like limited access to
network system, use of virus scanning software, properly checking of employees‘ background,
introduction of employees‘ awareness training programme, etc. A protective system may be
developed by the application of overall security checking policy.
Secrecy in consultation is mainly done in the preparatory stage of a project and it is like
the protective amulet from unnecessary complication and exaggeration. In this connection it is
wise to mention that the Official Secrets Act, 1989 has been enacted to provide protection of
specific government information and documents from disclosure with the aim not to jeopardized
public interest and state security. In the contrast we have in our hand the Right To Information
Act, 2005. By the enactment of this Act, it is intended to make every transaction transparent.
Therefore, in practice we have to maintain an equilibrium between and secrecy and disclosure.
The aim is not to hamper the good environment but to create a climate of trust and confidence of
the people. At the same time, the companies have to maintain some sort of secrecy about their
activities. The divulgence of secrecy, whether in ancient times or in modern times, is made by
human being for getting some undue advantage from any source. It really happens because of
complexities and expectations in the private and public life where sensual passion plays a vital
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role. But, it is true that private matter, individual character or family relations are not to be
confused with the public affair. We cannot resist the temptation from uttering the verse of Manu,
the mythical father of human race when he says ―Nasya chhidram paro vidyat Vidyat Chhidram
Parasyatu‖ means behave in a way that other cannot identify your weakness rather try to search
the same in your opponent‖.
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Kautilya‘s Arthsastra, Journal of Business Ethics, Vol. 15, No. 4
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10. Pravin, P (2008) ― Kautilya: Politics, Ethics and Statecraft‖ http://mpra.ub.uni-
muenchen.de, MPRA Paper- 9962
11. Rangarajan, L. N (1992) ―The Arthasastra‖, Penguin Books India Pvt. Ltd
12. Rockenbach, B., A. Sadrieh, and B. Mathauschek (2007) ―Teams take the better risks‖
Journal of Economic Behavior & Organization
13. Shyam, Shastri (1909) The Arthasastra of Kautilya. Mysore, Printed at the Government
Branch Press
14. Siva Kumar, N & Rao U.S (1996) ―Guidelines for Value Based Management in
Kautilya‘s Arthsastra, Journal of Business Ethics, Vol. 15, No. 4
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15. Yogi Ramesh (1997) ―Ethics of Chanakya‖, Sahni Publications, New Delhi
16. http://inventors.about.com/od/nondisclosure/a/Nondisclosure.htm
17. http://www.lawdepot.com/contracts/confid/?pid=google-confid_ca-nondisclosure
18. http://www.victorwhite.com/Capital/CapaitalR_NDA.htm
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BRAND IMAGE, CUSTOMER SATISFACTION AND LOYALTY
INTENTION: A STUDY IN THE CONTEXT OF COSMETIC PRODUCT
AMONG THE PEOPLE OF CENTRAL INDIA
SATENDRA THAKUR*; DR. A. P SINGH**
*Assistant professor,
Department of Management, RKDF Group of Institute,
Gandhi Nagar, Bhopal.
**Director,
Maharana Pratap College of Management,
Bhopal.
ABSTRACT
In this research article we have examine the relationship between brand image, customer
satisfaction and loyalty intention in the context of cosmetic product of selected company brand
among the peoples of central India, five benefit of brand image has been discussed namely
social, functional, symbolic, experiential and appearance enhance. Information has been obtained
from 150 male as well as female customers who always used the cosmetic product of selected
brand for the proposed research work. Result has show that three brand image benefit namely
functional, social and appearance enhance has positively and significantly related to customer
satisfaction and loyalty intention and two benefit namely experiential and symbolic has no
significant impact on customer satisfaction and loyalty intention on the other hand result indicate
that there is a positive relationship between customer satisfaction and loyalty intention. The
result imply that marketing manager should focus on the brand image to win the customer
satisfaction in order to make the customer loyal about their product and service.
______________________________________________________________________________
INTRODUCTION
Customer satisfaction and loyalty has become widely accepted as an important issue for all
organization, it is used as a marketing benchmark for the company performance (Bennett &
Rundle -Thiele, 2004) [04]
. On the other hand we can say that brand image, customer satisfaction
and customer loyalty all are important for both customer and organization. This is also to be say
that if the customer is satisfy so he is interesting to display loyal behavior i.e. repurchase
intention and also willing to pay positive word-of-mouth (Taylor, 1998; Bennett & Rundle -
Thiele, 2004; Schultz, 2005)[45,04,44]
. Now a day‟s all the company are more attention about 4ps
i.e. product, place, price and promotion and future implementing additional 3ps i.e. physical
layout, process and people for service marketing (Kotler et al 1999)[26]
, As a direct consequence
brand image as a significant feature of current marketing strategy is now measured as a
organizational assess (Kotler 2001)[27]
. The symbolic value associated with the brand image, has
become the product differentiation. In fact presently most of the company understands those
customers are not loyal about one particular brand (Dekimpe, Steenkamp, Mellens, & Abeele,
1997; Bennett & Rundle -Thiele, 2005; Kapferer, 2005) [15, 04, 22]
. Magnificence of brand loyalty
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comes out particularly with some of national brand (Howell, 2004; Dekimpe et al., 1997)[18,15]
.
Furthermore the present environment is to increased competition and entry of new product and
service leads customer to select their choice among the group of alternative and opportunity
(Ballantyne et al., 2006) [03]
.therefore it is important to company and manufacturing to focus on
product differentiation from their competitors
REVIEW OF LITERATURE
BRAND IMAGE
Brand is a symbol or sign which is helpful for customer to identify the product, a company which
have product with favorable brand image by the public surely gained better position in the
market also can be sustain competitive advantage and increased number of market share (Park,
C. W., Jaworski, B. J., & Maclnnis, D. J. 1986) [38]
. Some of the research has been found that
favorable brand image always helpful to lead customer satisfaction in order to create loyal
customer base ( Koo, 2003; Kandampully & Suhartanto, 2000; Nguyen & LeBlanc,
1998)[25,23,32]
, brand image is a mental setup developed by the customer on the basis of few
selected impression from the particular branded product ( Reynolds 1965)[39]
. According to the
Kotler (2001)[27]
brand image is the set of beliefs, idea and impression that person hold regarding
as an object, in the other hand brand image is the set of perception about a brand as reflected by
brand association in memory (Keller 1993)[24]
. Brand image has been conceptualization and
operational in several ways (Reynolds & Gutman, 1984; Faircloth et al., 2001)[40,16]
.
Measurement of brand has been done on the basic of the attributes (i.e. Koo 2003; Kandampully
& Suhartanto, 2000)[25,23]
, on the basic of the brand benefit and value (Hsieh et al., 2004; Roth,
1995; Bhat & Reddy, 1998)[17,42,06]
, on the basic of the using Malhotra's (1981)[30]
, ano also can
be measured on the basic of the brand image scale (Faircloth et al., 2001) on the basic of the
above definition marketer can easily identify the weakness and strength of their particular brand
and also helpful to understand customer perception about their product or service.
CUSTOMER SATISFACTION
Satisfaction is the fulfill response of customer about the service and product (Oliver 1997) [34]
. It
is also a finding about the product and service feature or the product and service itself, according
to Levesque and McDougall (1996) [29]
satisfaction is conceptualized as an overall, customer
attitude towards a service provider. Similarly, Andreassen and Lindestad (1998) [01]
claimed that
customer satisfaction is the accumulated experience of a customer‟s purchase and consumption
experiences. It was therefore; client satisfaction construct in this paper will be measured through
overall satisfaction toward the services. Yi (1990) [48]
mentioned that customer‟s satisfaction is
influenced by two factors which is experiences and expectations with service performance.
Operationally, satisfaction is similar to an attitude, as it can be assessed as the sum of the
satisfactions with the various attributes of the product or service (Churchill and Surprenant,
1982) [10]
. Customer satisfaction may be defined as expectation before purchase and perception
about performance after purchase, The expectancy disconfirmation paradigm suggests that
consumers are satisfied when the product perform better than expected (positive
disconfirmation), dissatisfied when consumers' expectations exceeded actual product
performance (negative disconfirmation), and neutral satisfaction when the product performance
matches expectations (zero disconfirmation/confirmation) (Oliver, 1980; Churchill &
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Surprenant, 1982; Oliver & Sarbo, 1988; Bearden & Teel, 1983)[36,10,35,05]
. Oliver (1980) [36]
identified satisfaction and dissatisfaction in terms of the disconfirmation of consumers
expectation. A positive disconfirmation leads to customer satisfaction and a negative
disconfirmation leads to customer dissatisfaction.
LOYALTY INTENTION
The development of loyalty has been put over the time, primarily the focus of loyalty
development was product related service as well as with respect to tangible goods towards the
focus on brand loyalty (Cunningham, 1956; Day, 1969; Kostecki, 1994 ;) [11, 14, 28,
Loyalty as the
Proportion of purchased of a family dedicated to the brand it purchased regularly Cunningham
(1956). Later, Cunningham (1961) [12]
has broadened the spectrum into store as opposed to brand
loyalty by using the same measures with Brand loyalty. The composite of loyalty highlighted
two different approach of loyalty known as behavioral and attitude which initially proposed by
Jacoby and Chestnut (1978) [20]
and later by Oliver (1997) [34]
. On the other hand Jacoby and
Chestnut (1978)[20]
provided a conceptual definition of brand loyalty as: (i) biased (i.e. non-
random), (ii) behavioral response (i.e. purchase), (iii) expressed over time, (iv) by some decision-
making unit, (v) with respect to one or more brands out of a set of such brands, and is a function
of psychological (decision-making evaluate) processes. Customer loyalty as a deep commitment
by the customer to re-purchase or re-buy service and product from one particular firm or agency
in the future thus customer repeating same brand for purchasing Oliver (1997)[34]
. Brand loyalty
can be explained on the basic of the behavioral, attitudinal or composite approach (Jacoby &
Chestnut, 1978) [20]
. Behavioral loyalty has been measured as repeat purchase frequency of the
customer (Brown, 1952) [08]
, while attitudinal loyalty refers to the stated performance,
commitment or purchase intention of the customer. Jacoby and Chestnut (1978) [20]
argued that
the behavioral measures basically represent the static outcome of a dynamic decision process
(i.e. solely on actual behavior). Therefore, this approach unable to understand the factor
underlying brand loyalty and also not enough to simplify the fundamental factors that determine
how and why brand loyalty should be developed or modified (Jacoby & Chestnut, 1978)[20]
. The
attitudinal measures are refers to the consumer feelings toward the brand and confirmed intention
such as possibility to suggest and possibility to repurchase the product and service (Schiffman &
Kanuk, 2004; Jacoby & Chestnut, 1978) [43, 20]
. Intention of customer can be measured by asking
customer about their future intentions to repurchase product or service again (Jones & Sasser,
1995) [21]
. Furthermore, Jones and Sasser (1995)[21]
suggested that (i) companies can capture this
information (i.e. intention to repurchase) when they measure satisfaction level of customer
towards the product and service, (ii) customer repurchase intention can be measured at any time
by making relationship with customer (iii) repurchase intention of customer is a strong indicator
of future behavior.
OBJECTIVE OF THE STUDY
The objectives of the study are as follow
To determine the strength of relationship between brand image benefit, customer satisfaction
and loyalty intention
To identify the brand image benefit from the customer point of view
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To measure the brand image, satisfaction and loyalty of the cosmetic product from the
customer perception
To identify new marketing strategy for the marketing manager
RESEARCH METHODOLOGY
DEFINING RESEARCH METHODOLOGY
Research has being is “an active, diligent, and systematic process of inquiry in order to discover,
interpret and/or revise facts. This intellectual investigation should produce a greater
understanding of events, behaviors, or theories, or to make practical applications with the help of
such facts, laws, or theories. The term research is also used to describe a collection of
information about a particular subject (www.wikipedia.com)
Methodology is considered to be the “way in which information is found or something is done.
The methodology includes the methods, procedures, and techniques used to collect and analyze
information (www.google.com)
THEORETICAL FRAMEWORK
According to the brief review of literature related to the subject I proposed that the image of
cosmetic product can be detained easily with the help of customer trust about the brand image of
the given product. This implies that the different brand image benefit namely functional, social,
symbolic, experiential, appearance enhances overall comes from the brand image. These
different benefits of brand image may influence to the customer satisfaction and also to the
loyalty intention this model produced likes the traditional attitude structure developed by Oliver
(1999) [37]
. The proposed theoretical framework for this study has been design and the
development of hypothesis is discussed
[H1]
[H3]
[H2]
Brand image benefits
Functional
Symbolic
Social
Experiential
Appearance enhances
Customer
satisfaction
Loyalty
Intention
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DEVELOPMENT OF HYPOTHESIS
RELATIONSHIP BETWEEN BRAND IMAGE AND LOYALTY INTENTION
Most of the researcher has indicated that product image/brand image has significant impact on
loyalty intention i.e. customer repurchase intention. According to the Vazquez-Carrasco and
Foxall (2006)[46]
social, confident and special brand/ product image has positive impact on
loyalty intention, if the customer received high social benefit from the salesperson then he will
be more loyal with salesperson (Reynolds and Beatty 1999)[41]
. Symbolic benefit, affective
benefit and trade of benefit work as a indicator for purchase value of brand product and has a
positive relationship with repurchase intention of the customer according to the all the hypothesis
is:
H1: There is a positive relationship between brand image benefit and loyalty intention
RELATIONSHIP BETWEEN BRAND IMAGE AND CUSTOMER SATISFACTION
According to the Na, Marshall, and Keller (1999) [31]
image cannot be measured, for the
measurement of image must include the measurement of customer perception about the product
image and brand image this imply the importance of brand image on customer satisfaction,
However this study examining the impact of brand image benefit on customer satisfaction which
is received by the customer from the interpersonal relationship and benefit comes from the
purchase intention of the customer. According to the Reynolds and Beatty (1999) [41]
customer
may be more satisfy with the salesperson if he received high social and functional benefit from
the salespersons side. the majority of the authors has described in this study that brand image
benefit is positively and significantly related to the customer satisfaction , therefore the
hypothesis is:
H2: There is a positive relationship between brand image benefit and customer satisfaction
RELATIONSHIP BETWEEN CUSTOMER SATISFACTION AND LOYALTY
INTENTION
Number of authors has verified in this study that there is positive relationship between customer
satisfaction and loyalty intention (e.g. Ismail, Hasnah, Ibrahim, & Isa, 2006; Da Silva & Syed
Alwi, 2006; Anderson & Sullivan, 1993; Chiou et al., 2002; Bloemer & Ruyter, 1998: Yang &
Peterson, 2004)[19,13,02,09,07,47]
. If the customers are satisfied with the product then he will like to
repurchase intention (Bennett & Rundle-Thiele, 2004) [04]
. Empirical study of the retail/ store
image has confirmed that satisfaction has strong positive impact on loyalty intention as a
intention to recommended others about the product and services, this leads to the following
hypothesis:
H3: There is a positive relationship between customer satisfaction and loyalty intention
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METHODOLOGY
SAMPLE AND DATA COLLECTION
Cosmetic product has become basic need for both male as well as female customer, in this study
we have select number of cosmetic product which is always used by the female and male
customer in central Indian. For the proposed research work we have select so many branded
cosmetic product such as cosmetic product of Hindustan union lever limited (hull), cosmetic
product of Indian tobacco company (ITC Limited), cosmetic product of Revlon, cosmetic
product of blue heaven and cosmetic product of McNroe consumer product private limited
The sample of this study has been focused on 150 male and female customers, those who have
used all cosmetic products select for research, and data has collected through structured
questionnaire and were personally administered.
FINDING OF THE STUDY
FREQUENCY DISTRIBUTION
Total 150 Male and Female Customer Has Been Selected as a Sample size of the study. Among
the majority of people 59.34 percent are female and 40.66 percent individuals are male. In the
age group 38.67 percent individual are between age of 18-24, 26 percent individual are the age of
between 25-30,years old, 22.67 percent individual are the age of between 31-35 years old and
12.66 percent individual are the age of 35-39 years old. In the subject 54.67 percent of people are
married and 45.33 percent people air single nad in the majority of people 30.67 percent
individual has completed their master degree or about to complete, 42 percent individual has are
graduate in different discipline, 9.33 percent of individual are in secondary and 18 percent
individual are others
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TABLE1
FREQUENCY DISTRIBUTION
Characteristic frequency percentage (%)
Gender
Male 61 40.66
Female 89 59.34
Age group
18-24 58 38.67
25-30 39 26
31-35 34 22.67
35-39 19 12.66
Marital status
Married 82 54.67
Single 68 45.33
Education
Master degree 46 30.67
Bachelor degree 63 42
Secondary 14 9.33
Other (i.e. PhD, Diploma…etc) 27 18
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RELIABILITY ANALYSIS
Table 2 show reliability analysis among the all study variable, we have found the alpha value for
all variable is sufficient, the alpha value for all variable is between 0.63 to 0.78 thus we can say
that all the study variable are reliable
TABLE2
SUMMARY OF RELIABILITY ANALYSIS
Variable
No. of item
Alpha
Experiential image 4 0.78
Symbolic image 3 0.66
Social image 4 0.71
Functional image 4 0.76
Appearance image 5 0.68
Satisfaction 4 0.63
Loyalty intention 5 0.71
MEAN AND STANDARD DEVIATION
Table 3 show mean and standard deviation among the study variable in addition the range of
mean value for all variable such as five brand image benefit as well as satisfaction and loyalty
intention is between 4.31to 4.58 and the value of standard deviation is between 0.39 to 0.60
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TABLE 3
MEAN AND STANDARD DEVIATION
Variable
No. of item
Mean
S D
Experiential image 4 4.35 0.49
Symbolic image 3 4.39 0.50
Social image 4 4.34 0.51
Functional image 4 4.31 0.60
Appearance image 5 4.36 0.48
Satisfaction 4 4.38 0.43
Loyalty intention 5 4.58 0.39
CORRELATION MATRIX
Table 4 show the correlation matrix for all used variable, social image has found to be a
significantly and positively related with customer satisfaction (r =0.25, p <.01) and loyalty
intention (r = 0.19, p <.01), functional image has found to be positive and significantly related
with customer satisfaction ( r =0.27, p < .01) and loyalty intention (r = 0.25, p <.01), appearance
image has found to be positive related with customer satisfaction ( r =0.36, p <.01) and loyalty
intention ( r =0.34, p <.01) customer satisfaction has also found to be positive related with
loyalty intention and the last customer satisfaction and loyalty both has to be found correlated
with each other (0.49, p <.01)
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TABLE 4
CORRELATION MATRIX FOR BRAND IMAGE BENEFITS
(Experiential image, Symbolic image, Social image, Functional image, Appearance enhances,)
Variable 1 2 3 4 5 6 7
Experiential image __ 0.57** 0.51** 0.57** 0.49** 0.42** 0.26**
Symbolic image __ __ 0.56** 0.68** 0.49** 0.31** 0.37**
Social image __ __ __ 0.68** 0.48** 0.25** 0.19**
Functional image __ __ __ __ 0.58** 0.27** 0.25**
Appearance enhances __ __ __ __ __ 0.36** 0.29**
Satisfaction __ __ __ __ __ 0.19** 0.34**
Loyalty intention __ __ __ __ __ __ 0.49**
DISCUSSION
The purpose of the research to know the relationship between brand image benefit, customer
satisfaction and loyalty intention in the context of selected cosmetic product among the people of
central India, the result show that three brand image benefit namely functional, social and
appearance enhance are positively and significantly related to customer satisfaction and loyalty
intention. And on the other side two brand image benefit namely experimental and symbolic has
no positive and significant relationship with customer satisfaction and loyalty in the other word
we can say that symbolic and experimental brand image benefit has negative impact on customer
satisfaction and loyalty intention, hence we can say that H2 and H3 both hypothesis are not fully
supported because only three benefit i.e. social , symbolic and appearance enhance has
significant related with satisfaction and loyalty, the suggestion is this that the users of cosmetic
product is more satisfy and loyal if they perceived high social, functional and appearance
enhance brand image from the service side.
Finding of the study also suggested that customer satisfaction is the key of loyalty intention, on
the basic of the finding we can say that there is positive relationship between customer
satisfaction and loyalty intention, this is also to be say that if the users of cosmetic product are
much satisfy then they may create base of loyalty easily, therefore we can say that H3 is fully
supported. The finding indicates the importance of social, functional mad appearance enhances
benefits to the users of cosmetic product as strength of mind about the brand loyalty as well as
customer satisfaction.
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Therefore according to the result we can imply that to improved customer satisfaction and
customer loyalty to the cosmetic product marketer always try to improved the brand appeal
related to the aspect that, how customer received the solution about the need and expectation.
CONCLUSION
This study has show relative importance of relationship between brand image benefit, customer
satisfaction and loyalty intention, the justification of the brand image benefit is support full for
marketer to create effective marketing strategy for the purpose to make customer satisfy in order
to create loyal customer base. For receiving the customer support about the product and service,
the justification of brand image benefit should be from customer point of view. On the other
hand this benefit should be related to the expectation and perception of the customer, therefore
we may assist the marketing manager to develop marketing strategy on the basic of the customer
perception and importance of the product. If we talk about satisfaction and loyalty this is
significant for companies to measure customer satisfaction in order to analyze their product and
service and image of the product from the customer point of view thus there satisfy customer are
willing to recommend their product and service to other and also willing to pay re-purchase
intention, finally to create successful brand, marketing manager should be more devoted about
the development of brand image , customer satisfaction and loyalty it all should be under the
development of branding strategy.
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CAPITALISM v. NEO CAPITALISM
A COMPARISON OF POLICIES OF WORLD BANK AND RBI
DR. SHOBHALATA V. UDAPUDI*; BARNIK GHOSH**
*Associate Professor,
Gujarat National Law University, Gandhinagar.
**Student,
Gujarat National Law University,
Gandhinagar.
ABSTRACT
India is a mammoth of a democracy. In the recent times, it has taken a place in the global market
scenario. It has virtually become impossible to ignore India. The Apex Bank of the country is the
Reserve Bank of India.
Over the years, the World Bank has tried to influence India by the superior monetary advantage
it may gain. The policies of both of these banks bring on a demeanor which is essentially
shocking in its realms. But both the banks are not what they portray. Behind the glass doors lies
the indoor management which is enthralling to the evangelical, secretive to the society, dominant
in its doctrines and essentially mystical in its might.
In this paper, the author will bring on a comparison between the two banks in comparing its
policies and trying to find an answer to a seeming rhetoric which has mesmerized the money
market for over several decades.
This paper is a try to prove the policies of both the banks in a comparison manner, by linking up
states which have been effected by the World Bank policies as well as the Reserve Bank as well
as trying to answer the question, banking or….??
______________________________________________________________________________
INTRODUCTION
In little beginnings lies the greatness of civilisation. Banking is one of the most important sectors
of the modern day. It has evolved from humble beginnings to giant financial institutions which
form the backbone of the modern economy. The banking sector has been divided into the private
and the public sector with several banks crossing their resident country‟s boundaries in order to
do business in foreign shores. The governments also play a major role in undertaking the
functions of banks. In India, the banking sector is highly regulated by the government in every
aspect.
The Reserve Bank of India forms the spine of the Indian banking system serving several key
functions in the banking activities. It regulates and controls the monetary flow in the mammaries
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of the welfare state thus managing the chequered comparatives of a complex yet unique
monetary system.
The World Bank is a mammoth by its own demeanour. This Titanic structure takes on the
monitory policies of the world and controls and regulates not only policies but also social and
welfarist aspects in a global level. The scale of its operations are global sidelining the other vast
banks which rules over the banking systems of the world.
The reaches and aspects of both these banks are unique in their own different ways. Sometimes it
is but evident that the policies of the world bank and reserve bank are complete opposite
polarities to one another. Some scholars contend that the outlook of both the banks are basically
the same with just the areas of operation being very different, one on a national and the other on
an international level.
But in this paper the author contends on a different level. I will look into the perspectives from
the point of view of system the banks follow in determining their policies.
This paper has tried to bring into light the several ideologies which drive these banks.
Economically speaking, the paper will look into the credit policies of both these banks and the
subsequent changes taking place in the markets because of these. We will try to decipher the
impact of the policies of the Reserve Bank on the market scenario of India and of the World
Bank on the nations.
Often the World Bank has been criticised to be a tool through which the developed nations have
taken the upper hand over that of the developing and under developed nations and the subsequent
tragedies that follow.
It is also to be noted that the World Bank has been criticised to have an approach which is
detrimental for the survival of those countries which are in adverse situations. The adverse
situations may not just mean war ravaged or economically downtrodden. It may also refer to the
fact that the bank has been used sometimes for ulterior motives for spreading the imperial
hegemony of some of the highly developed countries to get a control on the developing and
underdeveloped countries.
The Reserve Bank on the other hand has been known to be welfarist in its programmes. Though
a term like humanist would be quite detrimental to the policies undertaken by the Reserve Bank,
it is a notch between that of highly capitalistic and a highly socialistic one. It is also definite that
the pro capitalistic policies adopted by the Reserve Bank in India are to reach the humanitarian
conclusion at the end of the day.
A FREEDOM SO DEAR?
The four pillars of monitory control were laid down during this period which was a major
achievement for the Indian Ecomomy. The first pillar1 of the monetary policy was the first pillar
of the RBI. It can be called to be the proudest among all the other pillars simply because of its
1 Supra Note 2
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sheer scope which has come into operation. This is considered to be the first pillar because it has
come into operation in the initial stages of the planning processes of the Indian administration
from the earliest times of the Indian Economy. Monetary policy was instrumental not only in
implementing the short term pressures but also sensitive to the need of the hour in terms of the
financing requirements of the Government for building the Indian economy.
The whole process of financing the budget deficits was channelized through the use of a
controlled monetary policy. Ad hoc Treasury Bills were issued whenever the available balances
of the government went below the stipulated minimum balances of Rs. 50 crore at the end of
each week.
During this period we also find the evolution of the system to one which is concerned with the
maintaining a stipulated minimum of foreign exchange reserves to get a security on the issuance
of currency. This period ranged from the keeping a stipulated proportion of the foreign exchange
reserves that could be deemed to be held necessary to impose sharp limit per se which was
required to keep the deficit financing policies of the government because the government was
instrumental in this period to run a system which was essentially used to run a payments deficit. 2
In this period we can further see the system changing towards one with a system of varying cash
reserve ratio (CRR), The CRR was also coordinated with the use of the statutory liquidity ratio
or the SLR. These were considered to be the prudential instruments which ensured the sufficient
liquidity with banks to capture the evolving role of monetary policy instruments of the RBI. This
monetory policy played a major role in controlling the first three phrases of the monetory policy.
The second pillar of the apex bank was regarding the regulation and promotion of the orderly
development which had taken place in controlling the commercial banks.
The reason for considering the timing and context of the erection of this pillar were well known.
It was mainly due to the crisis faced by the banks which were abating in 1951. There was a new
responsibility which was entrusted to the RBI which was regarding overseeing and strengthening
the weak and unwieldy banking system which was prevailing in India.3
In this period we see the efforts being made by the RBI in dealing with the strengthening and
consolidation of the banking system as a whole. This period is known for the origin early years
of the Deposit Insurance Corporation (DIC), alongwith the scheme of insuring bank deposits
which came into existence from 1962 as a consequence of the banking crisis in 1960. As a result
of the RBI‟s policy of reconstruction and amalgamation of small and financially weak banks for
improving viability of the banks, there was a drop in the number of insured banks.
The RBI was vigorously involved in promoting the institutionalisation of credit to agriculture
from the 1950s which was a primary objective stated in the third pillar of central banking. This
period also led to the initiation of the All-India Rural Credit Survey. It basically was a reflection
2 Supra Note 4 3 Ibid
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of the determined efforts of the apex bank for promoting the agricultural credit institutions and
expanding institutional credit to agriculture in rural parts of India.4
The State Bank of India was established from the Imperial Bank of India in 1955, and this
expansion had been coupled with the growth and spread of the cooperative movement, the RBI
became steadily more involved in developing the cooperative movement and meeting the
financial requirements of India. This time was used to however, admits that despite its
impressive quantitative expansion, the cooperative credit system did not measure up to the
expectations that had been generated.
The fourth pillar of central banking has been established by the erected by the RBI was
institutionalization of credit to the industrial fields industry from the 1960s. The Shroff
Committee had recommended that the RBI should be playing a more active role for the RBI in
promoting availability of finance to industry. The RBI, with a prior commitment to the
developmental responsibilities had set up institutions which were capable of mobilising and
channelising long-term funds into industry in the 1960s.5
THE SEVENTIES SAGA AND THE EIGHTIES TALE
The „defining event‟ of the period 1967-1981, was the nationalisation of major commercial
banks which, as argued in the volume, essentially was a reflection of the economic
consideration which was rooted in the minds of people and debated over a long time even though
the time at which the event may have been a political one. This caused the emergence of a
dramatic shift in the orientation and operation of commercial banks. In the Post nationalisation
period there was an impressive and unparalleled spread of the banking system and significant
directing of credit to the norms which have been completely neglected upon.
In order to push the branch expansion in the rural areas, banks were required to open two rural
branches for branch they will be opening in the areas where are the urban areas. Furthermore, in
order to address the declining trend of credit-deposit ratios in lower population centres, the Lead
Bank Scheme was started in the 1970s whereby a lead bank was designated for each district to
carry out the task of expanding credit to customers hitherto not served. This period looks into the
fact that there is a hidden effect as to the viability and efficiency of the banks which had an
effect which took on a stark demeanour in the subsequent periods.
The emergence of the Government as the owner of the major banks also created a new situation
of „dual control‟ over the system of banking which could be beneficial to the RBI.
The deficits in the budgetary policies of the Government rose sharply and the fiscal policy held
the centre stage from the 1970s onwards. This period is noted for the abandonment of monetary
policy as a tool of economic policy and corrective intervention. It is also true that in the given
4 Findlay G. Shirras: The Reserve Bank of India. In The Economic Journal. Vol. 44, No. 174 (Jun., 1934),
pp. 258–274. 5 Narenda Jadhav, Partha Ray, Dhritidyuti Bose, Indranil Sen Gupta: THE RESERVE BANK OF INDIÀ`S
BALANCE SHEET: ANALYTICS AND DYNAMICS OF EVOLUTION, November 2004.
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when we are dealing with the balance after a full consideration of evidence, the RBI had to
become overtly accommodative to the Government. 6
The monetory policy had become very conjugated with the other measures which was being
actively used to control inflation when it reached alarmingly high levels, and the entire
importance during the rest of the times were being devoted to accommodate the fiscal policy.
Thus, the RBI‟s monetary management became a delicate balancing act between the
compulsions of fiscal policy and price stability considerations. The threshold of inflation was
regarded as being 7 per cent to be the ideal one and when it used to creep up beyond that level
that the efforts required to reduce money supply started.
The RBI took certain policy decisions In order to contain inflationary pressures, the apex bank
had used non-price instruments like raising the SLR and CRR. The SLR became an instrument of
mobilising resources for the Government from a captive financial system. While the concept of
deficit financing through ad hocs was meant to be of a temporary nature, the practice of renewal
of these Treasury Bills on maturity after 91 days laid the seeds of automatic monetisation7 of
Government deficits. The CRR has been operated to neutralise the effect of the monetary impact
of increasing RBI‟s accommodation of Government. The monetary policy of the RBI had to be
focussed on credit as an indicator rather than through demand management. The monetary policy
was formulated and conducted by the RBI was mainly guided by the supply-side, mainly dealing
with the agricultural persona and the consistent shortfalls in agricultural production, the
resulting inflationary pressures and developments in Government finances.
LAISSEZ FAIRE OR A M.N. ROY?
The process of structural reforms was initiated in India in the early 1990s in order to place the
economy on a growth path which was higher than on a sustainable basis. These reforms were
being encompassed in almost all sectors of the Indian economy and, among others; it helped to
necessitate changes in the monetary policy framework. The policy of the apex bank during this
undertook a detailed assessment of the key issues which were related to the Monetary Policy.8
The Report is in many ways a continuation of the analysis which was attempted in the previous
two Reports. The Report on Currency and Finance, 2001-02 undertook a comprehensive
assessment of a decade of economic reforms in India, whereas the Report for the year 2002-03
focused on management of the external sector in an open economic framework.9
Monetary policy in India went through significant changes in the 1990s as there was the opening
up of the India Economy with drastic financial sector reforms were put in place. In the early
1980s,monetary policy was being geared towards controlling the qunatam,cost and directions Of
credit flow in the economy. the quantity variables dominated as the transmission Channel of
monetary policy. The reforms which were taking place during the 1990s were being used to
enhance the sensitivity of price Signals which dominated the price policy undertaken from the
6 Dipak Basu: Balance-of-Payments Policies and Structural Reforms: an Adaptive-Control Model for India in
Journal of Economics, Volume 70 (1999), No. 3, pp. 261-280, S.275. 7 Supra Note 9 8 Samarjit Das, Kaushik Bhattacharya: Price convergence across regions in India in Empirical Economics
(2008) 34:299–313, S. 312. 9 http://rbi.org.in/scripts/PublicationsView.aspx?id=10796 as last accessed on 22nd February, 2010
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central bank, making interest rates the increasingly dominant transmission channel of monetary
policy in India.10
While price stability is to be considered to be of utmost importance and necessity it is not
sufficient to cope up with the expectations. With the opening up of the economy since the early
1990s,11
financial stability will now be emerging to be the second key consideration in the
conducting of the monetary policy in India. It is good for the scholars to bring to notice that the
RBI has also been successful in keeping up with the financial stability in the country even in
times when the progressive liberalization of the economy started from the early 1990s.
The record on part of India in this field was to be considered to be of great importance as the
decade of the 1990s has been considered to be of a very turbulence nature for the financial sector
in most of the emerging market economies.
The reforms in the Financial sector India was initiated during the 1990s. These reforms were
aimed at promoting a diversified, efficient and competitive financial sector and it is but evident
from the times that the reforms have succeeded in their objectives. In the environment of a
deregulated financial sector, our ability to maintain financial stability, even as it eluded many
other economies, can be attributed to the success achieved in ensuring reasonable price stability
in the economy on the one hand and prudent policies in regard to financial and external sector
management on the other.12
The process of liberalization, privatization and globalization led to the openness of the economy,
as has been measured by the ratio of the amount of trade in the merchandise fora(exports plus
imports) to the GDP, rose from about 18% in 1993-94 to about 26% by 2003-04. including
services trade plus invisibles, external transactions as a proportion of GDP rose from 25% to
40% during the same period. Alongwith the increase in trade as a percentage of GDP, capital
inflows have increased even more sharply foreign currency Assets of the reserve bank of
India(RBI) rose from USD 15.1 billion in the march 1994 to over USD 140 billion by march
15,2005.these changes have affected liquidity and monetary management. Monetary policy has
responded continuously to changes in domestics and international macroecomic conditions. In
this process, the current monetary operating framework has relied more on outright open market
operations and daily repo and reserve repo operations than on the use of direct instruments.
overight rate are now gradually emerging as the principal operating target.13
The Monetary and Credit Policy is the policy statement which is traditionally always brought to
the public domain twice a year, through which the Reserve Bank of India seeks to ensure price
stability for the economy. These factors include - money supply, interest rates and the inflation.
10 www.scribd.com/.../MONETARY-POLICY-india as last accessed on 1st March 2010 11 Amal Kanti Ray: India’s Social Development in a Decade of Reforms: 1990–91/1999–2000 in Social
Indicators Research, Volume 87, Number 3 / July, 2008, p. 410. 12 Speech of the Prime Minister for the RBI http://www.rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=271 as
last accessed on 5th March 2010 13 Supra
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THE WORLD BANK CONNECTION
At the entrance to the World Bank‟s headquarters situated in Washington, a large sign reads:
“Our dream is a world without poverty”. In March 2000, in a report sponsored by the US
Congress (Meltzer Commission 2000), Allen Meltzer of Carnegie Mellon University and Jeffrey
Sachs of Harvard University suggested that the World Bank should restrict its focus to poverty
alleviation and vacate its role as a Bank, where capital markets can better take care. Recently,
however, the very method of calculating poverty by the World Bank has been contested [Sanjay
Reddy 2001]. The World Bank is often seen as the beacon of development, a lender of last resort
and a saviour of poor countries.
It is supposed to combine the hard nose of a banker with the human face of a development
agency. It is perceived to be more intellectual than UNDP agencies and less harsh than the IMF
in administering bitter pills through conditionalities. It has tried to differentiate itself as a
development bank lending to poor countries who are denied access to market financing and to
social projects that do not command the interest of private investors.14
However, as the Meltzer Commission 200015
found, in practice, most World Bank lending goes
to countries that borrow in the capital markets. World Bank credit is just seen as a bit cheaper
source of finance, comforted by government guarantee, normally not available for private sector
lenders. With reduced funds at its disposal, and bearing the criticism of its unwarranted taking up
those functions that could well
be left to the capital market, the Bank has changed its strategy from project based lending – for
hardware, which requires large funds – to lending for capacity building (for „software‟ or
consultancy services, requiring smaller amounts). It has also changed its role from primarily
being a lender to being a catalyst of lending by facilitating projects to access funds from the
capital market. It does this by itself providing the A loan which enables securing of much larger
B loans from commercial banks. It has also entered the guaranteeing and insurance business
through its affiliate Multilateral Investment Guarantee Agency (MIGA).16
For instance, it gives a
counter guarantee on a sovereign guarantee of a country, for a fee! It can also give a political risk
insurance, without a sovereign guarantee. In all these areas of credit enhancement, it has levered
on its expertise in project appraisal and monitoring and dealing with varieties of governments on
the one hand and its unique ability to armtwist them, if need be, on the other! Certainly, some of
this is just duplication of private insurance companies and it is not certain if these activities are
self-supporting as an independent profit centre. It is, however, difficult to apportion either the
success or failure of its policies between the Bank and the country, as it has to work through the
country government and its institutions. Here, good policies may become victims of poor
implementation.17
14 India: Power and Infrastructure Report (2001): „The Electricity Act – The Tip of an Iceberg, A View of an
Energy Expert‟, Vol 2, No 13, August 2000-2001. 15 Ibid 16 McKinsey (2001): „India: The Growth Imperative‟, http://www.mckinsey.com/knowledge/mgi/
reports/ as last accessed on 21st March 2010 17 Ibid
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THE POLICIES OF THE GLOBAL BANK
In this context, one of its own study came with a revelation that wherever there was good
governance backed up by strong institutional infrastructure, the results have been good, and India
was counted as one of those countries where the results were good.
A resultant policy recommendation was that it should focus on the „good‟ countries.
However, India has not benefited much from this approach in terms of higher inflow of funds.
Between 1993 and 1999, India received a modest 4 per cent of the non-aid resources of the Bank,
compared to 12 per cent for China, 10 per cent for Argentina, 9 per cent for Russia, 7 per cent for
Mexico, 7 per cent for Brazil, 6 per cent for Korea, 3 per cent for Thailand, 3 per cent for Turkey
and 2 per cent for Philippines,18
these nations accounting for a majority of the developing
world‟s population. Notwithstanding the fact that World Bank considers India a good borrower,
but yet not given it its due in terms of quantum of lending, it is worthwhile to examine the impact
of the Bank‟s lending from the recipient‟s point of view.19
What is the World Bank‟s
contribution to India‟s growth, development and its poverty alleviation?
In its 50-year partnership with India, the Bank concentrated on the growth objective in the first
phase, subscribing to the theory that development would automatically trickle down out of
growth. It has started initiatives on the main plank of poverty alleviation only since the last five
years, and the results are yet to show up.
However, recently the Bank formulated a near 20-20 vision for the year 2010 and has drawn up
the following targets for India: [Report of the Operations Evaluation Department (OED) 2001].
(i) reducing poverty to 15 per cent;
(ii) halving the proportion of malnourished children;
(iii) putting in place a reliable disease surveillance system;
(iv) increasing contraceptive prevalence to more than 60 per cent of eligible couples; and
reducing the population growth rate to 1.2 per cent (from 1.9 per cent).
POVERTY ALLEVIATION OR ….?
To be sure, poverty has reduced from 50 per cent in the beginning of 1970s to 30 per cent
towards the end of 1990s, but it is difficult to identify any specific Bank‟s effort in achieving
this.20
18 Meltzer Commission (2000): International
Financial Institutions, March 2000. For a summary see http://csf.colorado.edu/roper/
if.Meltzer-commission-mar00/ as last accessed on 20th March 2010 19 Supra Note 20 Parikh, Kirit (1996): „The Renegotiated Enron Deal: Does It Meet All Objections?‟, The Times of India,
Bombay, January 22.
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Even on the objective of growth, where the Bank concentrated its lending in the first phase, the
investments resulted in less growth than in other countries, notably China, because about 40 per
cent of capital stock was under government ownership, with poor productivity. Investment (as
per cent of Gross National Product (GNP)) required to produce 1 per cent growth of GNP is 4.2
for India, while it is 3.6 for Indonesia and Korea, 3.5 for Thailand, 3.2 for Malaysia and 3 for
China [McKinsey 2001]. The Bank lent and still does exclusively to the government with such
low capital productivity. Thus its mandate to lend only to the government appears to be a critical
constraint, particularly in India where government‟s capital productivity is lower than even other
LDC‟s!21
Agriculture is a major sector for India, accounting for 38 per cent of Gross Domestic Product
(GDP) in 1980, declining but still remaining at a significant 27 per cent , and accounting for 62
per cent of employment even in 1998. Here, the Bank concentrated on irrigation which,
according to the OED „came at the cost of neglect of rainfed (i e, semi-arid) areas in which a
large proportion of the rural poor live‟. Tackling poverty was a more intractable problem
involving access to land for the landless labourers on a more formal basis, rather than through
often illegal tenancy arrangements, and finding more off-farm employment opportunities, etc.
Even in the area of irrigation which the Bank focused on for funding, there seems to be a
revelation that projects which were viable ex ante became unviable ex post, due to assumptions
not materialising; slow development of the command area, inefficient utilisation of water
resources, and break down of the built-up institutional capacity, viz, Water Users‟ Associations
(WUA) becoming defunct.
The Upper Krishna Irrigation II Project has been showcased as representative of colossal failure.
In this project, the WUA members “had stopped water rotation soon after the project delivered
ample water, as they saw no reason to ration water and submit individual delivery preferences to
group decisions. Moreover, the oversupply
of water with considerable waterlogging has caused serious damage to houses and crops” [OED
2001:29]. Consequently in the 1990s there was a sharp fall in irrigation lending compared to
1980s, this coinciding with the ascendance of anti dam activists. With the likelihood of the
„guidelines‟ of the World Commission on Dams being incorporated into the lending policies of
the Bank, one investment banker commented that „you have to know everything about
everything before doing anything‟.22
CAPITALISM HO?
To sum up, initially the Bank concentrated on major irrigation and big dams, giving priority to
growth over poverty reduction. Even here, there were implementation shortfalls in terms of
actual benefits falling short of projected benefits. Later even this effort towards growth was
given up, with rising opposition for big dams.
21 McKinsey (2001): „India: The Growth Imperative‟, http://www.mckinsey.com/knowledge/mgi/ reports/ as
last accessed on 21st March 2010 22 Power Line (2002): „Limited Success: World Bank‟s Reform-Linked Package Runs into Problems‟, New
Delhi, September, p 65.
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The Bank also lent to social forestry, mainly with a view to reduce the drudgery of rural folks
walking long distances to fetch fuel wood and also to prevent indiscriminate felling of trees by
local villagers in their search of fuel wood. A Wood Balance Study for Karnataka concluded that
there was no evidence to suggest either a fuel wood crisis or to presume that this lead to
deforestation. Nevertheless a loan was given to the Karnataka Forest Department for social
forestry, which was used to raise eucalyptus plantations, inviting ire from the NGOs.23
THIS CLASSICALLY ILLUSTRATES THE BANK’S PREDISPOSITION
It gives primacy to economic efficiency and growth objective even in projects where the focus is
on redistribution to the poor. The Bank‟s argument in this case was that the higher market value
of eucalyptus, an input to paper industry, enhances the income of the grower, and enables him to
buy the fuel in the market, and makes the project economically viable for the Bank. However,
the target audience is totally missed in the process, as the poor fuel wood gatherers have neither
the land to grow the plantation and realise the income nor the ability to buy the fuel in the
market.24
In spite of supporting such ideas as Joint Forest Management (JFM) involving the villagers, etc,
the Bank has been suffering a capture effect by having to implement its ideas through the
government departments whose role, it is its mission to minimise. The forest departments mouth
various jargons like „participatory management‟, „stakeholder interest‟, etc, and go through the
motions of JFM, but inherently remain deeply suspicious of the efficacy of such new fangled
ideas, and embrace the NGOs only to disarm them by co-opting them, and use them for low cost
outsourcing! Similarly, the entire funds provided for the fuel wood plantation under social
forestry have very little to show for it in terms of actual plantation.
The Bank‟s paradoxical attitude of befriending the government departments and persuading them
to extinguish themselves, arises because mainly it lacks the flexibility and agility to deal with
smaller institutions. Commenting on the Bank‟s outreach in India, the OED report says “outreach
has improved, but still falls short...Bank needs to make a greater effort to reach the vernacular
press and to harness the potential of television, especially in local language.” The area of „micro
credit‟ provides for development with a human face, but much as the Bank wants to get involved
in this effort, it has not made any mark in India, mainly because of this inability to network with
smaller institutions.
Traditionally, the Bank‟s biggest portfolio has been in the power sector, for project based
lending. Here, it has a rather impressive record, particularly in funding central sector generation
with National Thermal Power Corporation (NTPC) as the main beneficiary.25
It also funded a
major share of the national grid thus restoring the importance to transmission. Even at state level
major power projects, as well as system improvement projects had been financed to good results.
Paradoxically, the World Bank‟s record in this sector, in the pre-reform era, under central
23 Ibid 24 Bhaumik, S, S Bose, D Coondoo (2003): „The Emerging Indian Bond Market: Evolution, Problems and
Prospects‟, Journal of Global Financial Markets, Spring. 25 Purukayastha, Prabir (2001): „Power Sector Policies and New Electricity Bill: From Crisis to Disaster‟,
Economic and Political Weekly, June 23, pp 2257-62. Ranganathan, V (1990):‟
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planning by the Planning Commission, and power sector planning by the Central Electricity
Authority and through the project based approach has been much better than its performance in
the reform era, a reform the Bank itself initiated under the „institutional strengthening‟ based
approach.26
FOR A BIT OF BREAD AND BUTTER….. THEY CAME
The reforms were indeed badly needed. But the manner in which it went about the reforms only
added confusion to an already complex situation. This was due to a constellation of factors: the
consultants had a superficial „cut and paste‟ attitude to reforms, chanting mantras of unbundling,
corporatisation and privatisation, and setting up of regulatory commissions; adequate homework
involving the various stakeholders was not done; and quite possibly, the reform process was also
agenda driven, of creating a market for global power equipment sellers through the mechanism
of independent power producers (IPPs).
According to International Energy Agency‟s forecasts, electricity demand in OECD countries
had reached a plateau at 3 per cent growth and two-thirds of the incremental demand was to
come from the developing countries, notably from China and India. This lead to a scenario of the
north as the supplier of equipment and south as the consumer. The equipment had to be sold and
also the payment received. Reforms, seen in this context, would be to create market for power
equipment to satisfy the demand, and tariff reforms to make the buyer of equipment a financially
viable entity.
Such an agenda then automatically gives primacy to opening up the generation, rather than deal
with the cancer of corruption and inefficiency at the distribution end.27
Distribution reforms are
also messier, requiring political will to confront engineer‟s associations and an area where the
foreign investor is much less interested. Thus the reforms started at the generation end.
SOME OF THE MAJOR LACUNAE OF THE REFORM PROCESS ARE
Lack of understanding of the enormity of the reform process and a piecemeal, quick-fix and
vacillating approach. Contrasting with UK‟s reforms, one of the Bank‟s own consultant wrote in
India [Power and Infrastructure Reporter 2001]: “In the UK with the new Electricity Act, for
pool based competitive trading, some 300 contracts were written...most organizations had to
recruit some new staff, business people, not electrical engineers, to help them cope with
privatisation...and the ministry of energy employed consultants to reinforce their efforts, indeed
the cost of advisors ran into 100s of million pounds.
In all it was a major effort lasting for two years before the date of privatisation”.
An overemphasis on privatisation and underemphasis on competition: With the exception of
Putnam Hayes and Bartlett who, acting as consultants for UPSEB, further unbundled
transmission into a wires monopoly and a trading entity and introduced different types of
26 Darbha, G, S Dutta Roy and V Pawaskar (2000): „Estimating the Zero Coupon Yield Curve‟,
http://www.nseindia.com/debt/debtprodportindex.htm. 27 Sinha, Sidharth (2001): „Power Sector Privatisation: Lessons of Orissa‟, Indian Institute of
Management, Ahmedabad, September 6, mimeo.
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contracts for the IPPs, the state gencos and central gencos to get over transition problems en
route to wholesale competition, none of the other reform consultants of the Bank had ever
thought of wholesale competition in the power sector.28
Setting up regulatory commissions before privatisation and making them toothless before the
public sector licensees; staffing them with retired civil servants who have neither the expertise
nor independence from government. In a masters programme in public policy, for a question on
the effectiveness of the regulator to control public monopoly, most civil servants themselves
wrote these as the answer: “erosion of independence, capture by government, regulators taking
orders from the government to protect their chair, lack of expertise, etc.”29
In contrast, in UK, the
regulator was appointed only after privatisation. The Bank started the reforms with the state of
Orissa. The rationale of choosing Orissa was that it was not stymied by the agriculture tariff
subsidy problem with only about 10 per cent of energy being supplied to agriculture as against
30 to 40 per cent in other states. Secondly, it was also likely to have less opposition from the
staff unions, since most of the engineers were in fact from the government and hence statutorily
immune to job loss fears. The motions of unbundling, corporatisation and setting up of the
regulatory body were gone through. In the first instance, distribution was given to the private
sector on a management contract, as a prelude to privatisation and also to test the waters.
This turned out to be a failure as enhancement of revenue by plugging the leakages did not
materialise.30
NEVER AN ABSOLUTION
Undaunted, the Bank counselled outright privatisation selling 51 per cent of shares of the
distribution zones. Coincidentally the same BSES of Mumbai with whom the management
contract was abrogated, was awarded three zones and AES, a US firm, the remaining zone. AES
took that zone as it was also an Independent Power Producer (IPP) in that area and it thought that
control over distribution would mitigate some of the payment risks in generation. Later AES
realised to its chagrin that unbundling generation, transmission and distribution, with a public
sector Gridco in-between would annul this advantage of payment risk mitigation. The
privatisation process was marked by insufficient investor interest, with only three bidders finally
submitting the bid [Sinha 2001]. The main reasons for insufficient investor appetite cited by the
consultant [Frontier Economics] were: high level of losses and collection risk; problems of
inherited staff; low size of the system that that could not support the estimates of fixed costs (e g,
3 to 4 expatriate employees in India); tariff uncertainty (the regulator never made clear what
28 Fisher, M, D Nychka and D Zervos (1995): „Fitting the Term Structure of Interest Rates with Smoothing
Splines‟, Finance and Economics Discussion Series No 1995-1, Board of Governors of the Federal Reserve System. 29 Ranganathan, V and S Kumar (1991): „Economics of Wind Energy: A Reappraisal‟, International
Journal for Energy, Environment and Economics, Nova Science Publishers, NY 1 (4). 30 The RBI reports a list of securitywise annual (and monthly) yields as well as weekly minimum and maximum
yields for securities maturing at different times, e g, securities maturing in the year 2000-01, 2001-02, etc, and also reports monthly yields with a maturity band of one year. Similarly for treasury bills RBI provides weekly minimum
and maximum yields and average yields for a range of residual maturities, e g, up to 14 days, 15-90 days, etc (see
RBI‟s Report on Currency and Finance or Handbook of Statistics on the Indian Economy, the central bank‟s
monthly bulletin and the Weekly Statistical Supplement.) Central banks of many other Asian countries also do not
report any such maturitywise yields and often just report yields of certain benchmark securities.
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investment would be allowed under the rate base for earning returns); poor information from
government of Orissa31
and GRIDCO and returns being too low for the risk. It is interesting to
note that investors did not see the big losses as opportunity for better returns through
improvements, which is the basic argument for privatisation. During the operations for 1999-
2000 and 2009-10, all the privatised sectors were making losses.
CONCLUSION
Over the years, the Bank has made two significant departures in its policy of lending: it changed
its policy of lending to government and public sector and concentrated on private sector, and it
changed its approach from a project-based lending to sector based lending, ostensibly to develop
institutional capacity. The result in both cases, as witnessed in the case of the power sector, has
been worse, with a great stagnation of investment, due to uncertain policy environment and
without any institutional capacity building. In short, the Bank‟s intellectual and physical
contribution to India‟s development has not been as much as it thinks it is. Its impact on reducing
poverty has been insignificant and the efforts initiated in the last five years have yet to bear fruit.
This has been partly acknowledged in the report of the Operation‟s Evaluation Department of the
Bank. Even some areas which the report praises as successful “Results have been strongest in
power” have actually been deeply disappointing. It is time the Bank does some introspection and
reforms its strategies.
After the study of the policies of the Reserve Bank and the World Bank we find that the policies
overall are more or less similar in nature going forward and looking to building an approach
which is essentially welfarist in nature. It is also to be considered that the World Bank takes up a
keen interest in dealing with the poverty alleviation programmes in India.
But if we go to the underlined meanings we will find that the policies are fundamentally different
on account of the control which are generally held by the developed nations in the World Bank.
Often India has been made to bow down to the demands of the World Bank in order to come out
of the fact that the system will be ceasing economically. This is the basic difference we can see
in the case of the World Bank and the RBI.
The policies of the RBI has always tried to bring on a welfarist strategy by using pro capitalist
means while the World Bank while putting on a socialist façade has been constantly dealing with
that of the capitalist wings of creation.
Hence we see the basic and stark difference of the two which can be made right by adopting a
stringent international policy so as not to let the developed countries dictate the terms.
31 The Hindu (December 4, 2001): „Paneerselvam Rules Out Roll Back‟, Bangalore, p 6.
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DIVERSIFICATION - STRATEGIES FOR MANAGING A BUSINESS
P. KANNAN*; DR. R.SARAVANAN**
*Head, Department of Management Studies,
N.P.R. College of Engineering & Technology, Natham.
*Research Scholar,
Anna University of Technology Coimbatore, Coimbatore, Tamil Nadu, India.
**Director, School of Management,
Sri Krishna College of Technology, Kovaipudur, Coimbatore- 641042,
Tamil Nadu, India.
ABSTRACT
When thinking about building a diversified portfolio, remember the old adage, “Don’t put all
your eggs in one basket.” Diversification is not only about the number of investments in your
portfolio, it’s also about the relationships among those investments. Diversification becomes an
attractive strategy when a company runs out of profitable growth opportunities in its core
business. In a diversified company the strategy making challenge involves assessing multiple
industry environments and coming up with a set of business strategies, in which it operates.
Multinational diversification strategies feature a diversity of business and a diversity of national
markets. Despite the complexity of having to devise and manage so many strategies, these
strategies have considerable appeal and more competitive potential. The study focuses on the
manner in which diversification strategy is applied for different sectors like IT, FMCG etc. It
deals with the core concept of diversification strategy to succeed by companies.
KEYWORDS: Investments, Related Diversification, Strategy, Unrelated Diversification.
______________________________________________________________________________
INTRODUCTION
Diversification is a form of growth marketing strategy for a company. It seeks to increase
profitability through greater sales volume obtained from new products and new markets. A
diversification strategy stands apart from the other three strategies such as merger and
acquisition, internal start – up, Joint – Venture. These are usually pursued with the same
technical, financial, and merchandise resources used for the original product line, whereas
diversification strategy usually requires a company to acquire new skills, new techniques and
new facilities. Therefore, diversification is meant to be the riskiest of other strategies to pursue.
Whenever a single business companies faced with diminishing market opportunities and
stagnating sales in its principal business, it is the indication for diversification. And a
Management quote about diversification is given by Andrew Campbell as below,
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“Fit between a parent and its business is a two – edged sword; a good fit can create value and a
bad one can destroy it.”
WHEN TO DIVERSIFY – KEY FACTORS
Whenever a single business companies faced with diminishing market opportunities and
stagnating sales in its principal business, it is the signal for diversification. The other key factors
are,
a) When it has a powerful and well-known brand name that can be transferred to the product
of other business.
b) When diversifying into closely related business opens new avenue for reducing costs.
c) When it can expand into industries whose technologies and products complement its
present business?
Judgments about the timing of a company’s diversification effort are best made instance by
instance, according to company’s own unique situation.
CORE CONCEPT PATH
Once the decision is made to pursue diversification, the firm must choose whether to diversify
into related business, unrelated business. Businesses are said to be related when their value
chains possess competitively valuable cross – business value chain matchups. Business are said
to be unrelated when the activities comprising their respective value chains are so dissimilar that
no competitively valuable cross – business relationship are present. Most companies favor
related diversification strategies because of the performance enhancing potential of cross –
business synergies. However, some companies opted to try to build shareholder value with
unrelated diversification strategies.
CASES FOR DIVERSIFYING INTO RELATED BUSINESS
To present opportunity for the following,
a) Combining the related activities of separate businesses into a single operation to achieve
lower costs.
b) Transferring valuable expertise, technology, marketing capabilities, managerial
knowledge etc.,
c) Exploiting common use of a well – known brand name.
d) To create valuable resource strength and capabilities.
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RELATED DIVERSIFICATION BUSINESS ACTIVITIES
Related diversification thus has a strategic appeal from several angles. It allows a firm to reap the
competitive advantage benefits of skills transfer, lower cost, common brand names, and stronger
competitive capabilities over a broad business phase. It also provides sharper focus for managing
diversification and a useful degree of strategic unity across the company’s various business
activities.
COMPANIES THAT HAVE DIVERSIFIED INTO RELATED BUSINESS
Samples of companies that have pursued a strategy of related diversification are illustrated
below.
TABLE 1 COMPANY IN RELATED DIVERSIFICATION
JOHNSON & JOHNSON
Baby products
First – aid products
Medical devices
Surgical & Hospital products
Contact lenses
Personal Care products
PEPSICO
Soft drinks
Fruit juices (Tropicana)
Other beverages (Aquafina bottled water etc.,)
Sports drinks (Gatorade)
Snack foods (Lays, Chee – tos etc.,)
Breakfast products
GILLETTE
Blades and Razors
Tooth Brush (Oral B)
Toiletries products
Hair dryers,
Shavers.
PROCTER & GAMBLE
Hair care products
Household cleaning/care
Beauty care products
Laundry products
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FIGURE 1
REPRESENTING VALUE CHAIN ACTIVITIES
Table 1 it is inferred that the factors the companies adopted while going for related
diversification.
From the above samples, the Core areas that the companies pursue as under:
Transfer of technology, Marketing Capabilities, Managerial Knowledge
Shared Skills and Competencies
Exploitation of by – Products – Reduction in unit cost
Reduces risks
SUPPORT ACTIVITIES
operati
ons
COMPETITIVE VALUE CHAINS OF A (BUSINESS A) AND B (BUSINESS B)
Distrib
ution
Customer
services
Techno
logy
Supply
chain
Sales &
marketing
Operati
ons
Distrib
ution
Customer
services Techno
logy
Supply
chain
Sales &
marketing
SUPPORT ACTIVITIES
A
B
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CASES FOR DIVERSIFYING INTO UNRELATED BUSINESSES
Companies that pursue a strategy of unrelated diversification generally exhibit a willingness to
diversify into any industry where there is potential market for a company to realize consistently
good financial results.
CRITERIA TO KEEP OR DIVEST EXISTING BUSINESS
a. Whether the business can meet corporate targets for profitability and return on investment
b. Whether the business will require substantial infusions of capital to replace out-of-date
plants and equipment, fund expansion etc.,
c. Whether the business is in an industry with significant potential growth
d. Whether the business is big enough to contribute significantly to the parent firm’s bottom
line
UNRELATED BUSINESS ACTIVITIES
FIGURE 2
REPRESENTATIVE VALUE CHAIN ACTIVITIES
SUPPORT ACTIVITIES
Production
ABSENCE OF COMPETITIVE VALUE CHAINS OF A (BUSINESS A) AND
B (BUSINESS B)
Dealers Product
R & D
Advt &
Promotion
Assembly Customer
services Supply
chain
Distribution
SUPPORT ACTIVITIES
A
B
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From the below illustration of unrelated business activities says that, “A strategy of unrelated
diversification involves no deliberate effort to seek out businesses having strategic fit with the
firm’s other business.”
COMPANIES THAT HAVE DIVERSIFIED INTO UNRELATED BUSINESS
A sample of companies that have pursued a strategy of unrelated diversification are illustrated
below.
TABLE 2 COMPANY IN UNRELATED DIVERSIFICATION
WIPRO
Electrical appliances
Information technology
Computer accessories
Toilet soap (santoor)
GE medical system
Baby care products
TATA GROUPS
Home appliances
Financial services
Watches
Telecom services
Information technology
Tea products
LG
Mobile Phones
Television, Radio
Projectors
Home appliances
Lamps
Note books
RELIANCE
Telecom services
Power
Petro – chemical products
Mobile phones
Construction
Textiles
Mutual funds ,
money
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From the above table it is depicts that the following are the merits of Unrelated
diversification strategy for the above companies:
Superior skills of top management people
Business risks is scattered over a set of diverse industries.
Company’s financial resources can be employed to maximum advantage investing in
industries offers the best profit prospects.
Building share-holder value
Increasing Profitability by exploiting general organization competencies
DISCUSSION & FINDINGS
From the above analysis of both diversification strategies the below are the findings
Why is related diversification only marginally profitable than unrelated?
How can diversification dissipate rather than create value?
Michael Porter’s research(1)
suggests that average related company is at best only marginally
more profitable than the average unrelated company.
He found that most of the companies had divested many more diversified acquisitions than
they had kept. He and its team have concluded that the corporate diversifications strategies
pursued by most companies can dissipate value rather than creating it.
Accomplishments of unrelated diversification business are,
Cutting unrelated cost
Concentrating on core areas
Seeking external markets
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KEY BARRIERS OF UNRELATED DIVERSIFICATION
WHY RELATED DIVERSIFICATION MOSTLY PREFERRED BY THE
COMPANIES?
Boost profitability in numerous ways
Involved fewer risks
Top management has related knowledge about parent business
KEY BARRIERS OF RELATED DIVERSIFICATION
Barriers for
Unrelated
Diversification
Planning
controls
Specialist
business
advisor
Lack of
Skills
Regulatory
controls
Capacity to
develop a
business case
Barriers for
Related
Diversification
Regulatory
controls
Planning
controls
Validity of
Marketing
Research
Skilled
Personnel Access to
finance
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RESULTS
Diversification
Strategies Characteristics Growth Profit Risk
Related
Diversification
Operates in a few
related industries Low High Low
Unrelated
Diversification
Operates in many
unrelated
industries
High Low Medium
DIVERSIFICATION STRATEGY MATRIX
Growth
High Low
High
Profit
Low
INFERENCE
When companies mainly focusing on profit, they can prefer unrelated or mixed
diversification strategy.
When companies mainly focusing on growth, they can prefer related diversification or
mixed diversification strategy.
When the company’s growth and profit are at low, suggest that they can go for
disinvestment the business operations.
CONCLUSION
It is very tempting for a business leader to diversify with related or unrelated business
activities carried out in a company. But it must be understood that it is a very complex task.
Hence any such move must be planned & executed with great care. And diversification strategy
matrix is given above for the business leader to help in choosing the strategy for diversifying the
business activities.
Mixed
Diversification
Related
Diversification
Unrelated
Diversification Divestment
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REFERENCES
(1) Charles W.L.Hill and Gareth R. Jones on Strategic Management, Volume- 06, Biztantra
Publication.
(2) Arthur .A. Thompson, A. J. Strickland, John. E. Gamble on Crafting and Execution
Strategy, vol.14, Tata McGraw-Hill Publication.
(3) George Stone House, David Campbell, Jim Hamill, Tony Purdie on Global and
Transnational Business, 2nd
Edition, Wiley Publication.
(4) Sukul Lomash abd P K Mishra on “Business Policy and Strategic Management”
3rd
Edition, Vikas Publication.
WEBSITES
1. http://ideas.repec.org/p/imf/imfwpa/06-50.html
2. http://www.fao.org/docrep/006/ad689e/ad689e07.htm
3. http://www.investopedia.com/articles/02/111502.asp
4. http://www.mydigitalfc.com/personal-finance/why-diversification-strategy-
didn%E2%80%99t-work-crash-353
5. http://dkmt.regionalnet.org/docu/t4.htm
6. Company websites for the following:
i. Johnson & Johnson
ii. Gillette
iii. Protector & Gamble
iv. PepsiCo
v. Tata Groups
vi. Reliance
vii. Wipro
viii. LG
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EMERGENCE OF CORPORATE GOVERNANCE IN INDIA
C.UDAYA KUMAR RAJU*; M. SUBRAMANYAM**; HIMACHALAM DASARAJU***
*Research Scholar,
Department of Commerce, Sri Venkateswara University,
Tirupati - 517502, Andhra Pradesh, India. **Research Scholar,
Department of Commerce, Sri Venkateswara University,
Tirupati – 517502, Andhra Pradesh, India. ***Professor & Chairman BOS,
Department of Commerce, Sri Venkateswara University,
Tirupati - 517502, Andhra Pradesh, India.
ABSTRACT
The present paper is a theoretical exposition focusing on regulatory mechanism on corporate
governance in developing economies. In India, lots of serious efforts have been made at
overhauling the economic system since liberalization. As a part these initiatives, the SEBI
instituted the Clause 49 of the Listing Agreements dealing with corporate governance in India.
The corporate governance in India is undergoing a process of change with a move towards more
market-based governance. India, with its vast population has emerged as one of the most
attractive country for the multi nationals as they scourge around the world to woo the customer.
These organizations in their attempt to attract the customer have indulged in number of
malpractices damaging the geographical, socio, and political climate of the destination country.
India has the best corporate governance laws but poor implementation together with socialistic
policies of the pre-reform era has affected corporate governance. Concentrated ownership of
shares, pyramiding and tunneling of funds among group companies mark the Indian corporate
landscape. Boards of directors have frequently been silent spectators with the DFI nominee
directors unable or unwilling to carry out their monitoring functions.
KEYWORDS: corporate governance, regulatory mechanism, audit committee, SEBI, DFI,
Clause 49.
______________________________________________________________________________
INTRODUCTION
The corporate governance is a multi-faceted subject which ensures the accountability of certain
individuals in an organization through mechanisms that try to reduce or eliminate the principal-
agent problem. It focuses on the economic efficiency, with a strong emphasis on shareholders'
welfare. There are yet other aspect to the corporate governance subject, such as the stakeholder
view and the corporate governance models around the world.
The history of the development of Indian corporate laws has been marked by interesting contrast
(Goswami, 2002) In terms of corporate laws and financial system, therefore, India emerged far
better endowed than most other colonies. The 1956 Companies Act as well as other laws
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governing the functioning of joint-stock companies and protecting the investors‟ rights built on
this foundation. The beginning of corporate developments in India were marked by the managing
agency system that contributed to the birth of dispersed equity ownership but also gave rise to
the practice of management enjoying control rights disproportionately greater than their stock
ownership. The turn towards socialism in the decades after independence marked by the 1951
Industries (Development and Regulation) Act as well as the 1956 Industrial Policy Resolution
put in place a regime and culture of licensing, protection and widespread red-tape that bred
corruption and stilted the growth of the corporate sector. The situation grew from bad to worse in
the following decades and corruption, nepotism and inefficiency became the hallmarks of the
Indian corporate sector. Exorbitant tax rates encouraged creative accounting practices and
complicated emolument structures to beat the system.
In the absence of a developed stock market, the three all-India development finance
institutions (DFIs) the Industrial Finance Corporation of India, the Industrial Development Bank
of India and the Industrial Credit and Investment Corporation of India together with the state
financial corporation‟s became the main providers of long-term credit to companies. Along with
the government owned mutual fund, the Unit Trust of India, they also held large blocks of shares
in the companies they lent to and invariably had representations in their boards. In this respect,
the corporate governance system resembled the bank-based German model where these
institutions could have played a big role in keeping their clients on the right track. Unfortunately,
they were themselves evaluated on the quantity rather than quality of their lending and thus had
little incentive for either proper credit appraisal or effective follow-up and monitoring. Their
nominee directors routinely served as rubber-stamps of the management of the day. With their
support, promoters of businesses in India could actually enjoy managerial control with very little
equity investment of their own. Borrowers therefore routinely recouped their investment in a
short period and then had little incentive to either repay the loans or run the business. Frequently
they bled the company with impunity, siphoning off funds with the DFI nominee directors mute
spectators in their boards.
This sordid but increasingly familiar process usually continued till the company‟s net
worth was completely eroded. This stage would come after the company has defaulted on its loan
obligations for a while, but this would be the stage where India‟s bankruptcy reorganization
system driven by the 1985 Sick Industrial Companies Act (SICA) would consider it “sick” and
refer it to the Board for Industrial and Financial Reconstruction (BIFR). As soon as a company is
registered with the BIFR it wins immediate protection from the creditors‟ claims for at least four
years. Between 1987 and 1992 BIFR took well over two years on an average to reach a decision,
after which period the delay has roughly doubled. Very few companies have emerged
successfully from the BIFR and even for those that needed to be liquidated, the legal process
takes over 10 years on average, by which time the assets of the company are practically
worthless (Rajesh Chakrabarti, 2009 ).
Protection of creditors‟ rights has therefore existed only on paper in India. Given this
situation, it is hardly surprising that banks, flush with depositors‟ funds routinely decide to lend
only to blue chip companies and park their funds in government securities. Financial disclosure
norms in India have traditionally been superior to most Asian countries though fell short of those
in the USA and other advanced countries. Noncompliance with disclosure norms and even the
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failure of auditor‟s reports to conform to the law attract nominal fines with hardly any punit ive
action. The Institute of Chartered Accountants in India has not been known to take action against
erring auditors. (Franklin Allen, Rajesh Chakrabarti, Sankar De October 27, 2007)
While the Companies Act provides clear instructions for maintaining and updating
share registers, in reality minority shareholders have often suffered from irregularities in share
transfers and registrations – deliberate or unintentional. Sometimes non-voting preferential
shares have been used by promoters to channel funds and deprive minority shareholders of their
dues. Minority shareholders have sometimes been defrauded by the management undertaking
clandestine side deals with the acquirers in the relatively scarce event of corporate takeovers and
mergers. Boards of directors have been largely ineffective in India in monitoring the actions of
management. They are routinely packed with friends and allies of the promoters and managers,
in flagrant violation of the spirit of corporate law. The nominee directors from the DFIs, who
could and should have played a particularly important role, have usually been incompetent or
unwilling to step up to the act. Consequently, the boards of directors have largely functioned as
rubber stamps of the management. For most of the post-Independence era the Indian equity
markets were not liquid or sophisticated enough to exert effective control over the companies.
Listing requirements of exchanges enforced some transparency, but non-compliance was neither
rare nor acted upon. All in all therefore, minority shareholders and creditors in India remained
effectively unprotected in spite of a plethora of laws in the books. (Sunanda Chavan September
28th, 2010)
CHANGES SINCE LIBERALIZATION
Since its financial liberalization began in 1991, India has undergone significant
corporate governance reform. (Aggarwal, Reena, Leora Klapper, and Peter D. Wysocki ,2005)
By the time of Independence in 1947 India had functioning stock markets, an active
manufacturing sector, a fairly developed banking sector, and comparatively well developed,
British-derived corporate governance. However, from 1947 through 1991, the Indian government
pursued socialist policies. The state nationalized most banks, and became the principal provider
of both debt and equity capital for non-state controlled firms. The government agencies who
provided this capital were evaluated based on the amount of capital invested rather than return on
investment. Competition, especially foreign competition, was suppressed. Private providers of
debt and equity capital faced serious obstacles to exercising oversight over managers due to long
delays in judicial proceedings and difficulty enforcing claims in bankruptcy. Public equity
offerings could be made only at government-set prices.
Indian corporate governance deteriorated, and Indian firms looking for outside capital
had to rely primarily on government sources (Bhattacharyya & Rao, 2005; World Bank, 2005).
The Indian economy performed poorly. In 1991, the Indian government faced a fiscal crisis. It
responded by enacting a series of reforms including reduction in state-provided financing, bank
privatization, and general economic liberalization. The Securities and Exchange Board of India
(SEBI) India's securities market regulator – was formed in 1992. By the mid-1990s, the Indian
economy was growing steadily, and Indian firms began to seek equity capital to finance
expansion into the market spaces created by liberalization and the growth of outsourcing. The
need for capital, amongst other things, led to corporate governance reform.
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The industrial policy and corporate studies expert attached to the Delhi-based Institute
for Studies in Industrial Development (ISID), the present economic climate demands the
initiation of new regulatory mechanisms. He suggests the introduction of audit by the
Comptroller and Auditor General for all large corporations; making public information on all
companies small or large, public or private, listed or unlisted; bringing back development
financial institutions; reassessing the role of portfolio investors; and strengthening the policing of
politicians through genuine LokAyuktas (FrontlineVolume26-Issue03::Jan.31-Feb.13,2009
India's National Magazine from the publishers of The Hindu)
The corporate frauds that have come to the fore since Independence can be broadly
classified into three phases and categories: those perpetrated during a period when regulatory
mechanisms were virtually non-existent; those that can be termed as „regulatory capture‟ because
they were advanced using the very regulatory norms that were supposed to ensure a strict and
exacting regime; and those that came up in an unbridled manner in a climate of liberalisation.
Chronologically, the first phase consisted of the decade and a half following Independence. The
second phase extended to a period of nearly two and a half decades between the mid 1960s and
the early 1990s. The third and current phase started in the early 1990s with economic
liberalization.
The phrase corporate governance is relatively new in India. It gained prominence in
the early 1990s as a number of scams. Securities scam of 1992, disappearance of a number of
companies after raising many through the stock market during the 1993-1994, etc. shattered
investor‟s confidence, these were also cases of unscrupulous corporate issuing preferential equity
allotments to their controlling group at steep discounts to the market price. All these episodes
strengthened the case for corporate governance. Over the years, financial crises in the East Asian
countries in 1997, corporate scandals in the USA in the beginning of this decade have intended
to keep this issue in limelight and new guidelines have been developed. With the advent of
Sarbanes-Oxley standards in USA. The need for disclosure of information has become
paramount through such compliance. Comes with increased bureaucratization and hence higher
costs as well.
These scandals were believed to have been made possible by the absence of well-
defined regulatory mechanisms, and efforts were made to strengthen such mechanisms.
According to observers of the financial sector, the 1960s was a period in which the government
initiated several measures to put in place stringent regulatory mechanisms to control the sector.
Among the notable initiatives of this period was the defining of norms for industrial licensing
and allocation of bank credit.
Further companies have realized that good corporate governance is a pre-requisite for
accessing finds from competitive capital markets in an increasingly integrated international
economy leading to more transparent disclosures. For that to strengthen the regulatory
mechanism appointed several committees. (Arun Balakrishnan, C&MD, HPCL,
25th
June, 2008)
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EVOLUTION OF CORPORATE GOVERNANCE IN INDIA
The Indian ethos of corporate governance as articulated by Mahatma Gandhi in his writings.
He believed that management is a trustee of shareholders capital and business is a trustee of all
resources, including the environment. As trustees the primary goal of management is to protect
the interest of the owners and also, not to exploit resources for short term profits. In India, the
initiative on corporate governance was not a result of any major corporate scandal, like Enron,
World Com, etc. It started as a self-regulatory move from the industry rather than the rule of law.
(Prof. Uday Salunkhe, Prof. P.S. Rao, and Prof. Amitha Sehgal,2011)
The need for Corporate Governance has become highlighted by the scams brought high
almost as an annual feature ever since the liberalization of the economy in 1991, To cite a few
Harshad Metha, ketan Parikh scam, UTI scam, the vanishing company scam, the Bhansali scam
and so on (Omkar Goswami, 2002).Lessons should be learning from the countries like USA and
UK where companies exposed to lot of hardships and failures due to misgovernance and
unethical business practices. The Errors issue was examined by number of committees at
different levels in the U.S and at the end of all these examinations, they came with a better
model. In the Indian corporate scenario, it is imperative to induct good global standards so that at
least the scope for scams should be minimized. The single most Important development in the
field of Corporate Governance and Investor protection in India has been the establishment of the
Securities and Exchange Board of India in 1992 and its gradual empowerment since the time it
was established primarily to regulate and monitor stock trading, it has played a crucial role in
establishing the basic minimum ground rules of corporate conduct in the country. Concerns
about corporate governance in India were, however, largely triggered off by a spate of crises in
the early 1990‟s as already noted. This concerns about Corporate Governance stemming from the
several corporate scandals, coupled with a perceived need to open up to the forces of competition
and globalization, gave rise to several investigations into ways to fix the Corporate Governance
situation in India. One of the first such end eavours was the confederation of Indian Industry
(CII) code for Desirable Corporate Governance, developed by a committee chaired by Rahul
Bajaj, this committee was formed in 1996 and submitted its code in April 1998. Later the
Securities and Exchange Board of India (SEBI) constituted two committees to look into the issue
of Corporate Governance. The first was chaired by KumarMangalam Birla, which submitted it‟s
report in early 2000, and the second by Narayana Murthy, which submitted it‟s report three years
later. These two committees have been Instrumental in bringing about for reaching changes in
Corporate Governance in India through the formulation of clause 49 of listing Agreements.
Concurrent with the Initiatives by the SEBI, the Department of Company Affairs, the Ministry of
Finance of the Government of India also began contemplating Improvements in Corporate
Governance. These efforts include the establishment of a study group to operationalize the Birla
Committee recommendations in 2000, the Naresh Chandra Committee on Corporate Audit and
Governance in 2002, and the expert committee on Corporate Law (The J.J.Irani Committee) in
late 2004. All these efforts were aimed at reforming the existing Companies Act of 1956 still
forms the backbone of corporate law in India.
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RECOMMENDATIONS OF VARIOUS COMMITTEES ON CORPORATE
GOVERNANCE IN INDIA
CII CODE RECOMMENDATIONS (1997)
BOARD OF DIRECTORS
1. No need for German style two-tiered board.
2. For a listed company with turnover exceeding Rs. 100 crores, if the Chairman I also the
MD, at least half of the board should be Independent directors, else at least 30%.
3. No single person should hold directorships in more than 10 listed companies.
4. Non-executive directors should be competent and active and have clearly defined
Responsibilities like in the Audit Committee.
5. Directors should be paid a commission not exceeding 1% (3%) of net profits for a company
with (out) an MD over and above sitting fees. Stock options may be considered too.
6. Attendance record of directors should be made explicit at the time of re-appointment.
Those with less than 50% attendance should not be reappointed.
7. Key information that must be presented to the board is listed in the code.
AUDIT COMMITTEE
Listed companies with turnover over Rs. 100 crores or paid-up capital of Rs. 20 crores
should have an audit committee of at least three members, all non-executive, competent and
willing to work more than other non-executive directors, with clear terms of reference and access
to all financial information in the company and should periodically interact with statutory
auditors and internal auditors and assist the board in corporate accounting and reporting.
Reduction in number of nominee directors. FIs should withdraw nominee directors from
companies with individual FI shareholding below 5% or total FI holding below 10%.
DISCLOSURE AND TRANSPARENCY
1. Companies should inform their shareholders about the high and low monthly averages of
their share prices and about share, performance and prospects of major business segments
(exceeding 10% of turnover).
2. Consolidation of group accounts should be a) Companies should inform their
shareholders about the high and low monthly averages of their share prices and about share,
performance and prospects of major business segments (exceeding 10% of turnover).
3. Consolidation of group accounts should be optional and subject to FI‟s and IT department‟s
assessment norms. If a company consolidates, no need to annex subsidiary accounts but the
definition of “group” should include parent and subsidiaries.
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4. Stock exchanges should require compliance certificate from CEOs and CFOs on
company accounts
5. For companies with paid-up capital exceeding Rs. 20 crore, disclosure norms for domestic
issues should be same as those for GDR issues.
CREDITORS’ RIGHTS
1. FIs should rewrite loan covenants eliminating nominee directors except in case of serious
and systematic debt default or provision of insufficient information.
2. In case of multiple credit ratings, they should all be reported in a format showing relative
position of the company
3. Same disclosure norms for foreign and domestic creditors.
4. Companies defaulting on fixed deposits should not be permitted to accept further deposits
and make inter-corporate loans or investments or declare dividends until the default is
made good.
BIRLA COMMITTEE (SEBI) RECOMMENDATIONS (2000)
BOARD OF DIRECTORS
1. At least 50% non-executive members
2. For a company with an executive Chairman, at least half of the board should be
independent directors, else at least one-third.
3. Non-executive Chairman should have an office and be paid for job related expenses.
4. Maximum of 10 directorships and 5 chairmanships per person.
AUDIT COMMITTEE
A board must have an qualified and independent audit committee, of minimum 3 members, all
non-executive, majority and chair independent with at least one having financial and accounting
knowledge. Its chairman should attend AGM to answer shareholder queries. The committee
should confer with key executives as necessary and the company secretary should be he
seceretary of the committee. The committee should meet at least thrice a year - one before
finalization of annual accounts and one necessarily every six months with the quorum being the
higher of two members or one-third of members with at least two independent directors. It
should have access to information from any employee and can investigate any legal/professional
service as well as secure attendance of outside experts in meetings. It should act as the bridge
between the board, statutory auditors and internal auditors with far-ranging powers and
responsibilities.
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REMUNERATION COMMITTEE
The remuneration committee should decide remuneration packages for executive
directors. It should have at least 3 directors, all nonexecutive and be chaired by an independent
director. The board should decide on the remuneration of non-executive directors and all
remuneration information should be disclosed in annual report. At least 4 board meetings a year
with a maximum gap of 4 months between any 2 meetings. Minimum information available to
boards stipulated.
DISCLOSURE AND TRANSPARENCY
1. Companies should provide consolidated accounts for subsidiaries where they have majority
shareholding.
2. Disclosure list pertaining to “related party” transactions provided by committee till ICAI‟s
norm is established.
3. A mandatory Management Discussion & Analysis segment of annual report that includes
discussion of industry structure and development, opportunities, threats, outlook, risks etc.
as well as financial and operational performance and managerial developments in HR/IR
front.
4. Management should inform board of all potential conflict of interest situations.
5. On (re)appointment of directors, shareholders must be informed of their resume,
expertise, and names of companies where they are directors.
SHAREHOLDERS’ RIGHTS
1. Quarterly results, presentation to analysts etc. should be communicated to investors,
possibly over the Internet.
2. Half-yearly financial results and significant events reports be mailed to shareholders
3. A board committee headed by a nonexecutive director look into shareholder
Complaints/grievance
4. Company should delegate share transfer power to a officer/committee/registrar/share
transfer agents. The delegated authority should attend to share transfer formalities at least
once in a fortnight.
The Committee in its report observed that “the strong Corporate Governance is
indispensable to resilient and vibrant capital markets and is an important instrument of investor
protection. It is the blood that fills the veins of transparent corporate disclosure and high quality
accounting practices. It is the muscle that moves a viable and accessible financial reporting
structure.”
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NARAYANA MURTHY COMMITTEE (SEBI) RECOMMENDATIONS (2003)
BOARD OF DIRECTORS
1. Training of board members suggested.
2. There shall be no nominee directors. All directors to be elected by shareholders with same
responsibilities and accountabilities.
3. Non-executive director compensation to be fixed by board and ratified by shareholders and
reported. Stock options should be vested at least a year after their retirement. Independent
directors should be treated the same way as non-executive directors.
4. The board should be informed every quarter of business risk and risk management
strategies.
AUDIT COMMITTEE
Should comprise entirely of “financially literate” non-executive members with at least
one member having accounting or related financial management expertise. It should review a
mandatory list of documents including information relating to subsidiary companies. “Whistle
blowers” should have direct access to it and all employees be informed of such policy (and this
should be affirmed annually by management). All “related party” transactions must be approved
by audit committee. The committee should be responsible for the appointment, auditor.
1. Boards of subsidiaries should follow similar composition rules as that of parent and should
have at least one independent director s of the parent company.
2. The Board report of a parent company should have access to minutes of board meeting in
subsidiaries and should affirm reviewing its affairs.
3. Performance evaluation of non-executive directors by all his fellow Board members should
inform a re -appointment decision.
4. While independent and non-executive directors should enjoy some protection from civil
and criminal litigation, they may be held responsible of the legal compliance in the
company‟s affairs.
5. Code of conduct for Board members and senior management and annual affirmation of
compliance to it
DISCLOSURE AND TRANSPARENCY
1. Management should explain and justify any deviation from accounting standards in
financial statements.
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2. Companies should move towards a regime of unqualified financial statements.
Management should provide a clear description, followed by auditor‟s comments, of
each material contingent liability and its risks.
3. CEO/CFO certification of knowledge, veracity and comprehensiveness of financial
statements and directors‟ reports and affirmation of maintaining proper internal control as
well as appropriate disclosure to auditors and audit committee
4. Security analysts must disclose the relationship of their employers with the client company
as well as their actual or intended shareholding in the client company.
Narayana Murthy committee to review the performance of Corporate Governance and to
determine the role of companies in responding to rumour and other price sensitive information
circulating in the market in order to enhance the transparency and integrity of the market. The
Committee in its Report observed that “the effectiveness of a system of Corporate Governance
cannot be legislated by law, nor can any system of Corporate Governance be static. In a
dynamic environment, system of Corporate Governance need to be continually evolved.”
Based on the recommendations of the Committee, the SEBI had specified principles of
Corporate Governance and introduced a new clause 49 in the Listing agreement of the Stock
Exchanges in the year 2000. These principles of Corporate Governance were made applicable in
a phased manner and all the listed companies with the paid up capital of Rs 3 crores and above or
net worth of Rs 25 crores or more at any time in the history of the company, were covered as of
March 31, 2003.
With a view to promote and raise the standards of Corporate Governance, SEBI on the
basis of recommendations of the Committee and public comments received on the report and in
exercise of powers conferred by Section 11(1) of the Securities and Exchange Board of India
Act, 1992 read with section 10 of the Securities Contracts (Regulation) Act 1956, revised the
existing clause 49 of the Listing agreement vide its circular SEBI/MRD/SE/31/2003/26/08 dated
August 26, 2003. It clarified that some of the sub-clauses of the revised clause 49 shall be
suitably modified or new clauses shall be added following the amendments to the Companies Act
1956 by the Companies (Amendment) Bill/Act 2003, so that the relevant provisions of the
clauses on Corporate Governance in the Listing Agreement and the Companies Act remain
harmonious with one another.
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SUMMARY OF CLAUSE 49
Characteristic Clause 49
Director
Independence
Requirement – 50% independent directors if Chairman is executive
director or 33% if Chairman is a nonexecutive.
Definition – no material pecuniary relationship with company, not related to
Board or one level below Board and no prior relationship with the Company
for the last 3 years.
Nominee Directors of Financial Institutions - considered independent.
Board
Requirements
&
Limitations
Meet 4 times a year (maximum 3 months between meetings)
Limits on number of committees a director can be on (10), but only 5
for which director can be Chair of committee.
Code of Conduct (Ethics) required.
Audit
Committee
Composition
At least 3 directors (two-thirds must be independent).
All financially literate.
At least one having accounting or financial management experience.
Audit
Committee
Role & Powers
Minimum 4 meetings/year (gap between meetings not exceed 4
months).
Broad role – review statutory and internal auditors as well as internal
audit function, obtain outside legal or other professional advice, and review
whistleblower program if one exists amongst other things.
Disclosures
Related party transactions,
Accounting treatments and departures,
Risk management,
Annual report include discussion of internal controls adequacy,
significant trends, risks, and opportunities,
Proceeds from offerings,
Compensation for directors (including nonexecutives and obtain
shareholders‟ approval),
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Details of compliance history for last 3 years.
Corporate governance reports (and discloses adoption, if any, of
mandatory and non-mandatory requirements).
Certifications
CEO & CFO:
financial statements
effectiveness of internal controls
Inform audit committee of any significant changes in the above.
Auditor or Company Secretary:
Compliance with corporate governance
Subsidiary
Companies
At least one Independent director of Holding Company should sit as a
director on Board of material non-listed Indian subsidiary.
Significant transactions report to Holding Company Board (along with
subsidiary board‟s minutes).
Other
Recommendations:
Whistleblower policy is optional
Independent directors loses status as “independent” if served 9 years at
company
Training board members
Evaluate nonexecutive board performance.
In the Indian context, once clause 49 came into effect in 2005 end, the regulatory content for
corporate governance changed significantly, additionally, with much greater inflow of foreign
institutional investments (FII) into the Indian capital markets, there has been an increasing
demand for transparency and disclosure from Indian firms to be in line with best practices in the
developed world.
The new guidelines on corporate governance issued at the year of 2007 for the state owned
enterprises in India are quite similar to the clause 49 requirements. These include guidelines with
respect to role of the board of directors and management, audit committee, code of conduct and
business ethics etc. These guidelines are voluntary however, the department of public enterprises
may grade state owned enterprises on the basis of the compliance with the guidelines. While
there is no denying that these guidelines promote the objective of good corporate governance
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however certain challenges remain.(Arun Balakrishnan, C&MD,HPCL). There is no denying the
fact that clause 49 and the new guidelines provide an ideal for corporate governance. This is
essential as the Indian economy and companies operate in an integrated international economy.
However as is the case with any statute, it is quite often implementation which determines the
effectiveness.
REGULATORY MECHANISMS OF CORPORATE GOVERNANCE
In our country, there are some major mechanisms to ensure corporate governance:
COMPANIES ACT
Companies in our country are regulated by the companies Act, 1956, as amended up to date. The
companies Act is one of the biggest legislations with 658 sections and 14 schedules. The arms of
the Act are quite long and touch every aspect of a company's insistence. But to ensure corporate
governance, the Act confers legal rights to shareholders to
1. Vote on every resolution placed before an annual general meeting;
2. To elect directors who are responsible for specifying objectives and laying down policies;
3. Determine remuneration of directors and the CEO;
4. Removal of directors and
5. Take active part in the annual general meetings.
SECURITIES LAW
The primary securities law in our country is the SEBI Act. Since its setting up in 1992,
the board has taken a number of initiatives towards investor protection. One such initiative is to
mandate information disclosure both in prospectus and in annual accounts. While the companies
Act itself mandates certain standards of information disclosure, SEBI Act has added substantially
to these requirements in an attempt to make these documents more meaningful. The main
objective of SEBI regulation is shareholder value maximization by putting corporate governance
structures in place and through the reduction of information asymmetry between the managers
and the investors of the company. Jensen (2000) also argues in favour of shareholder wealth
maximization as the main objective function of any company.
RESERVE BANK OF INDIA (RBI)
The RBI, established in 1935, is the central bank of India and is entrusted with monetary
stability, currency management and supervision of the financial and payments systems. Its
functions and focus have evolved in response to India‟s changing economic environment. It acts
as the banker to the state and national governments, the lender of last resort and the controller of
the country‟s money supply and foreign exchange. The RBI supervises the operations of all
banks and NBFCs in the country. It is responsible for monetary policy, setting benchmark
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interest rates, managing the treasury operations (both borrowings and redemption) for the
government and as custodian and controller of the foreign exchange reserves
DISCIPLINE OF THE CAPITAL MARKET
Capital market itself has considerable impact on corporate governance. Here in lies the
role the minority shareholders can play effectively. They can refuse to subscribe to the capital of
a company in the primary market and in the secondary market; they can sell their shares, thus
depressing the share prices. A depressed share price makes the company an attractive takeover
target.
NOMINEES ON COMPANY BOARDS
Development banks hold large blocks of shares in companies. These are equally big debt
holders too. Being equity holders, these investors have their nominees in the boards of
companies. These nominees can effectively block resolutions, which may be detrimental to their
interests. Unfortunately, the role of nominee directors has been passive, as has been pointed out
by several committees including the Bhagwati Committee on takeovers and the Omkar Goswami
committee on corporate governance.
STATUTORY AUDIT
Statutory audit is yet another mechanism directed to ensure good corporate governance.
Auditors are the conscious-keepers of shareholders, lenders and others who have financial stakes
in companies. Auditing enhances the credibility of financial reports prepared by any enterprise.
The auditing process ensures that financial statements are accurate and complete, thereby
enhancing their reliability and usefulness for making investment decisions.
CODES OF CONDUCT
The mechanisms discussed till now are regulatory in approach. They are mandated by
law and violations of any provision invite penal action. But legal rules alone cannot ensure good
corporate governance. What is needed is self-regulation on the part of directors, besides of
course, the mandatory provisions.
GLOBAL BEST PRACTICES
A number of supranational organisations have drawn codes/principles of corporate
governance. The most well known is perhaps the OECD principles of corporate governance of
1999. It is instructive to summarise the five basic pillars of OECD code, viz.,
i. Protecting the rights of shareholders;
ii. Ensuring equitable treatment of all shareholders including having an effective grievance
redressed system;
iii. Recognizing the rights of stakeholders as established by law;
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iv. Ensuring the timely and accurate disclosure regarding the corporation including the
financial situation, performance, ownership and governance of the company; and
v. Ensuring the strategic guidance of the company, effective monitoring arrangement by the
board and the board‟s responsibility to the company and the shareholder. While the OECD
principles went a long way in emphasizing the basic tenets of corporate governance.
(Shyamala Gopinath, 2004)
SYSTEMIC PROBLEMS OF CORPORATE GOVERNANCE
Demand for information: A barrier to shareholders using good information is the cost of
processing it, especially to a small shareholder. The traditional answer to this problem is the
efficient market hypothesis (in finance, the efficient market hypothesis (EMH) asserts that
financial markets are efficient), which suggests that the shareholder will free ride on the
judgements of larger professional investors.
Monitoring costs: In order to influence the directors, the shareholders must combine with
others to form a significant voting group which can pose a real threat of carrying resolutions or
appointing directors at a general meeting.
Supply of accounting information: Financial accounts form a crucial link in enabling
providers of finance to monitor directors. Imperfections in the financial reporting process will
cause imperfections in the effectiveness of corporate governance. This should, ideally, be
corrected by the working of the external auditing process.
Above attempts made by the various regulating bodies shown a rising level of concern in
the manner in which the corporate manage themselves and their geo political environment. As
more and more multi nationals chip in to utilize cheap Indian labors – the regulating bodies will
not have the only onus of task building, but will also have to ensure means to implement the
regulations. Not only this, as more and more stakeholders make an attempt to maximize their
profits, the investors (especially the smaller ) will have to be wary of the crafty speculators who
can ruin the market confidence and decimate them. Investor training therefore is an important
area of immediate action. Organizations cannot create long term value without having
appropriate corporate governance policies in place, as the need of the hour is to not only manage
earnings, but also to create value. It becomes of utmost importance especially for a country like
India, as it comprises of the various odd sections of the society standing at juxtaposition to each
other. Moreover, with the change in the context there is also a need to evolve the governance
policies suiting the geo political, social and economical environment of that state.
In the last few years the thinking on the topic in India has gradually crystallized into the
development of norms for listed companies. The problem for private companies, that form a vast
majority of Indian corporate entities, remains largely unaddressed. The agency problem is likely
to be less marked there as ownership and control are generally not separated. Minority
shareholder exploitation, however, can very well be an important issue in many cases. The
development of norms and guidelines are an important first step in a serious effort to improve
corporate governance. The bigger challenge in India, however, lies in the proper implementation
of those rules at the ground level. More and more it appears that outside agencies like analysts
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and stock markets (particularly foreign markets for companies making GDR issues) have the
most influence on the actions of managers in the leading companies of the country. But their
influence is restricted to the few top (albeit largest) companies. More needs to be done to ensure
adequate corporate governance in the average Indian company. Even the most prudent norms can
be hoodwinked in a system plagued with widespread corruption. Nevertheless, with industry
organizations and chambers of commerce themselves pushing for an improved corporate
governance system, the future of corporate governance in India promises to be distinctly better
than the past.
REFERENCES
1. Goldman Sachs. (2003) “Dreaming with BRICs: the path to 2050”, Global Economics
Paper, No 99, October.
2. Joshi, V. (2004) Corporate Governance : The Indian Scenario. Foundation Books.
Organization for Economic Development and Co-operation, Code on Corporate
Governance, OECD, Paris September, 1999.
3. Reports on Corporate Governance, (2004), Economic India Info Services. Academic
Foundation.
4. Chhibber, P.K., and S.K. Majumdar (1999), Foreign Ownership and Profitability: Property
Rights,Control, and the Performance of Firms in Indian Industry, Journal of Law and
Economics, 42, 209-238.
5. Claessens, Stijn, Simeon Djankov, Joseph P. H. Fan, and Larry H. P. Lang,
2002.Disentangling the Incentive and Entrenchment Effects of Large
Shareholdings,Journal of Finance 57 (6): 2741–71.
6. Goswami, Omkar, 2002, “Corporate Governance in India,” Taking Action Against
Corruption in Asia and the Pacific (Manila: Asian Development Bank), Chapter 9.
7. Gregory, Holly J., 2000, International Comparison of Corporate Governance: Guidelines
and Codes of Best Practice in Developing and Emerging Markets, Weil, Gotshal & Manges
LLP.
8. Gregory, Holly J., 2001, International Comparison of Corporate Governance: Guidelines
and Codes of Best Practice in Developed Markets, Weil, Gotshal & Manges LLP.
9. Jensen, M.C., and W.H. Meckling (1976), Theory of the Firm: Managerial Behavior,
Agency Costs and Ownership Structure, Journal of Financial Economics, 3, 305-360.
10. Johnson, S., P. Boone, A. Breach, and E. Friedman 2000. Corporate Governance in the
Asian Financial Crisis, Journal of Financial Economics, 141-186.
11. La Porta, R., F. Lopez-De-Silanes, and A. Shleifer 1999. Corporate ownership around the
world, Journal of Finance, 54, 471-518.
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12. La Porta, R., F. Lopez-de-Silanes, A. Shleifer, R. Vishny 2000. Investor Protection and
Corporate Governance, Journal of Financial Economics, 58, 3-27.
13. La Porta, R., F. Lopez-de-Silanes, A. Shleifer, R. Vishny 2002, Investor Protection and
Corporate Valuation, Journal of Finance, 57, 1147-1170.
14. Shyamala Gopinath, 2004” Reserve Bank of India Bulletin” pp 1106
15. Prof. Uday Salunkhe, Prof. P.S. Rao, and Prof. Amitha Sehgal,date 01-10-2011online.
Evolution Of Corporate Governance In India & It's Influence On India's Capital Market
16. Franklin Allen, Rajesh Chakrabarti, Sankar De* India's Financial System October 27,
2007
17. Sunanda Chavan Corporate Governance in India - September 28th, 2010
18. Aggarwal, Reena, Leora Klapper, and Peter D. Wysocki (2005), "Portfolio Preferences of
ForeigInstitutional Investors," Journal of Banking and Finance, vol. 29, pp. 2919- 2946.
19. World Bank Report (2005), India: Role of Institutional Investors in the Corporate
Governance of their Portfolio Companies.
20. Bhattacharyya, Asish K and Sadhalaxmi Vivek Rao (2005), “Economic Impact of
„Regulation on Corporate Governance‟: Evidence from India,” a
http://ssrn.com/abstract=640842.
21. FrontlineVolume26-Issue03::Jan.31-Feb.13,2009 INDIA'S NATIONAL MAGAZINE
from the publishers of THE HINDU)
22. Arun Balakrishnan, C&MD, HPCL,25th june , 2008. New Guidelines on SOE Corporate
Governance in India.
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SOCIAL MEDIA MARKETING IN INDIA – CREATING NEW
GROUNDWORK IN MARKETING INNOVATION
KHUSHBU PANDYA*
*Department of Management,
Sumandeep Vidyapeeth, Piparia, Waghodia,
Vadodara, Gujarat.
ABSTRACT
Social media has risen to a great level in India since last few years. Marketers in the west have
already taken advantage of Social Media. But Indian marketers are still lagging behind in this
foray. According to a survey done by DEI Worldwide in 2008, among US consumers,
“companies not engaging in social media as part of their online marketing strategy are missing
an opportunity to reach consumers”. Social Media Marketing (SMM) is emerging as an
innovation in the marketing field. In India SMM is catching fire since last 3 to 4 years. But still
some companies are finding ways and means to manage it professionally. Hence, the need arise
to study the state of social media use in marketing activities by Indian companies. By scouting
the secondary data this study presents the state of social media marketing in India.
This study is an attempt to create awareness among Indian marketers about the power of SM
Environment spreading at large. The study has used secondary sources of information from last 5
years and it is an exploratory in nature. This study answers one major research question – What
is the state of social media marketing in India? And so to unravel this question, the study
provides all major facts, figures, major research findings and some popular case study examples.
Major findings show that social media platforms do have an impact on business and marketing.
SM, primarily, is to be used for engaging consumers.
KEYWORDS: Social Media, Social Media Marketing, Social Media Platforms.
______________________________________________________________________________
INTRODUCTION
The base for any media to succeed is to make Conversation impactful. Social media marketing
(SMM) is the new method of marketing, which is based on the common principle of Word of
Mouth (WOM). SMM is the latest innovation in the marketing world. It is been found that India
is the world‟s 7th
largest internet market growing at 11.2% (Comscore). The research also found
some other interesting facts. There are 21 million people in India who are estimated to visit
social media sites regularly, which is 60.3% of the total active Indian internet audience. More
than 90% of Indian online users belong to 18 -45 age group, which has high purchase power and
high disposable income. A typical social media site visitor in India spends 110.4 minutes on the
site and makes 10.4 visits per month to a social network. In a nutshell, the social media websites
in India are growing by almost 100% year after year. What do these facts reveal? The answer is
simple. The amount of growth social media sites are experiencing is not to be seen anywhere.
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Besides the growth, opportunities lie within the high profile target audience with the age group
majorly consisting 18 – 45 age group. Also on social networking sites, it is all about a
conversation. Everything is an experience on this platform and it is the job of marketers to make
the experience wonderful. Marketing via Social Media has become more and more interesting as
the days are passing by.
There is an excellent example to prove the above statement. India is called the country of three
C‟s: Cricket, Cinema, and Congress. India loves Cricket and its cricket stars. India is among the
few countries where its own film industry, better known as Bollywood beats Hollywood. Also,
Congress has been a long time darling of India as far as politics is concerned. It goes without
saying, that India follows what the three C‟s follow. It came as no surprise to me when India‟s
top movie stars like Shahrukh Khan, Priyanka Chopra, Abhishek Bachchan etc. joined Twitter to
market their movies. But, the fact that Bollywood‟s highest earning movie, 3 Idiots releases on
YouTube just three months after its Global release does signal Bollywood‟s new found love in
YouTube. Congress embraced this new age media by creating fan pages for Rahul Gandhi and
the Indian Prime Minister, Dr. Manmohan Singh. Shahi Tharoor has over 600,000 followers on
twitter and his „human‟ tweets make sure, he is in the news at all times. Our own Honourable
Chief Minister Mr. Narendra Modi won a prize for social media. Last but not the least, IPL 3.0
will be telecasted live on YouTube. This can be considered the ultimate tribute of the IPL to the
new age Indian who loves YouTube as much as he loves cricket.
STUDY OBJECTIVE & METHODOLOGY
The objective of this study is to know the state of social media marketing in India. How the
Indian companies respond to this new media? This study provides significant facts and figures
based on relevant research studies and literature. The study has used secondary sources of
information from last 5 years and it is an exploratory in nature. To unravel research question of
this study, it provides all major facts, figures, major research findings. Research question is also
supported by some popular case studies which leveraged upon social media for marketing
purposes.
SOCIAL MEDIA MARKETING by INDIAN BRANDS
Social Media Marketing is been practiced by bunch of Indian Companies. In this study, some
successful organisations are presented as case studies for clear understanding of the scenario in
Indian perspective. These organisations are practising Social Media Marketing successfully and
are the benchmark for other brands.
Unit Trust of India, popularly known as UTI, recently marked their presence on social media to
engage with their consumers. The leading mutual fund company – with over 1 crore investor
portfolios – has taken the digital route to promote the “Language of Investment” by addressing
user queries and helping them achieve a stable financial life. The mutual fund giant has set up
official accounts on social media platforms like Facebook, Twitter and YouTube to spread its
message “Kisney Sikhai India ko Investment ki Bhasha” indicating that UTI MF has taught India
the Language of Investment. It conducts activities that lead people to think about investments,
wealth management, smart ways to getting rich, etc. In order to attain user views about the
different aspects of finance and investment, UTI MF announces polls to test their knowledge on
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its fan page “UTIMF – Let‟s Plan to Get Rich” (See Figure 1). Besides, it provides investment
tips, engages with users from across the world, and provides suggestions for investment
on Twitter. The company also has an official YouTube channel featuring its advertisements.
Being one of the oldest firms in the mutual fund industry, the latest move by UTI MF just goes
on to show how important “social media” is in today‟s marketing context. Platforms like Twitter,
Facebook and YouTube have become an essential tool to communicate with users from across
the world. The move also implies that Indian corporate firms are now ready to take up the
challenge and be present amongst their consumers online.
FIGURE 1
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Not so long ago, social media was a hot-spot for companies belonging to the hospitality, travel &
tourism and the financial services industry. But now that the time spent by average users on the
social media sites has increased significantly, we have several companies from other industries
stepping on the gas and rolling out their official platforms on popular sites like Facebook,
Twitter, YouTube, etc.
Just recently, Videocon d2h, a popular Direct-to-Home (DTH) service provider in India,
launched its official account on Facebook, Twitter and Orkut to engage with users. As the brand
is quickly catching up in the Indian market, going social is probably the best way it can further
build relationships with the users by addressing their queries, interacting with them, launching
campaigns and educating them about their products & services. The response so far that it has
generated is tremendous with active user participation and constant brand engagement.
While the DTH market is large and is entertainment – oriented, brands certainly have
tremendous scope on the social media platform to convert users into ultimate consumers and
communicate with the existing ones. There lies an opportunity to use the medium as an effective
CRM platform by regularly monitoring the brand across the Web and adding another touch-point
for Customer Care Support. Following are some snapshots of how Videocon d2h is actively
addressing user queries and building relationships with its consumers on Facebook
(See Figure 2).
FIGURE 2
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Cleartrip, launched in July 2006, is one of the leading online travel companies in India. It is
based on a straight forward premise of “making travel simple” for its customers.
FIGURE 3
Cleartrip uses Blogs, Customer Support Forum, Twitter, and Facebook to announce product
launches, share interesting information/statistics related to the travel industry, educate the
customer about this segment, and share our opinions on happenings in the online travel segment
and the online world at large. Cleartrip is among the early adopters of Social Media Tools. The
brand‟s approach towards SMM is very simple. It avoids the cardinal sin of using the platform to
deliver a sales pitch. Because they believe that it‟s counter-intuitive, because marketers want to
sell; but the key to success here is not to be selling, but to be building relationships and
encouraging conversations (chatter) around the brand. On Twitter, for instance, Cleartrip far
outstrips its competitors as the most referenced and recommended online travel brand. This
“chatter” demonstrates that Cleartrip has a high degree of engagement with their customers.
According to a research by MarketingProfs Research, Nearly half of the marketers surveyed
reported that their company maintains a corporate profile on one or more social media networks.
Among that half, Facebook, Twitter and LinkedIn (in that order) were the most popular. Despite
consumer usage of social media decreasing with age, usage of social media for work purposes
actually increases with age among the marketers in the study. Only 15%
of social media marketers report that their blogging, posting or networking responsibilities are
included in their job descriptions, yet more than 50% of marketers indicate that they
use social media for work purposes. Email and traditional PR are still the most-used
forms of “earned” media, with more than twice as much use as blogs or viral videos. The most-
used tactic among Twitter-using marketers is to broadcast links in the hopes of driving traffic,
yet the most successful use of Twitter for marketing purposes is monitoring for real-time PR
problems. Most marketers report that their measurement of return on investment (ROI) for their
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participation in social media is mediocre or average. However, over half are using some
form of tracking.
According to the well known Social Media Expert and a Founder at Blogworks.in „Rajesh
Lalwani‟ – The key right now is growth, not monetisation. As the number of users grows and the
communities consolidate, commercial opportunities will only grow in the coming months.
Growing participants is more important right now than brand awareness and sentiment. Right
now, we need to build to a critical mass of users, and then e-commerce will grow rapidly.
Social media was originally just a feel-good move for many people. Today though, there is a
focus that is moving from brand awareness to leveraging social content. There has been a lot of
growth in scale through the changing access to technology and through the growth of user
generated content,” As reported by exchange4media and Blogworks, in collaboration with The
Nielsen Company, 78 per cent of the respondents use social media for B2C. Marketing, online
reputation management and lead generation are the key areas that companies are using social
media for.
SOCIAL MEDIA MARKEING PROSPECTS IN INDIA
Social Media Marketing is possible when there is an active participation among the people in
general. It is very much important to have interested consumers for active conversation. This
population can be referred to as “Active Internet Users”. According to the research data released
by Global Web India in March 2010, India is the country which comes 3rd when it comes to
social networking and photo sharing (See Figure 3). While United States and China are the
biggest market, the next level of growth is expected out of India. As the country is poised for a
3G launch and with 500+ mobile phone penetration across the billion plus people populated
country, it‟s only a matter of time that the adoption of internet and social media comes via
mobile and other devices as well.
FIGURE 4
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Facebook is the most growing viral media for marketers because of the gaining popularity among
people. Figure 5 shows the statistics of Facebook India as of Feb 2011. Compared to last month
(Jan 2011), Facebook recorded an increase of more than 1 million (11.22 lakhs) users.
Number of users on Facebook in India 21 726 960
Number of male users on Facebook in India: 15,338,760
Number of female users on Facebook in India: 6,216,600
Penetration of Facebook in India to population: 1.85%
Penetration of Facebook in India to online population: 26.82%
The Graph showing the Age wise distribution of Facebook in India
Source: Facebook.com
Since Social Media is at an evolving stage, some companies do falter in trying to come to terms
with the rabble against them. The chatter of the consumer does get to them. Some still believe
that by thundering “SILENCE” like a primary school teacher, the noise that consumers are
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making will die down. Those who try arm twisting techniques do not understand the might of the
internet savvy consumer. Nothing is going to silence him. He is going to go hammer and tongs at
a brand if he is not provided the desired service and quality. But most brands are sensible to
realize the growing power of the online consumer and try to engage him rather than antagonize
him.
SMM SERVICES
Social Media Marketing Services are the services which helps the organization in enhancing the
usability of the company‟s website using integration with social tools and application; improve
site likability; allow easy sharing of site content on popular social sites; increase visibility on
custom and niche search engines (Technorati etc.); easy tracking of updates on your website;
encouraging discussions on the site and a whole lot more. SMM Services helps positioning one‟s
business on social networks to improve online brand visibility, brand protection / reputation
management, leads and /or sales generation and increase quality inbound links. Some of the
major SMM Services are:
Social media audit
Social media optimization
Optimized blog development, design, maintenance and promotion
Brand management using social media monitoring
Social media profile creation and management (Twitter, Facebook, YouTube, etc.)
Community building and monitoring
LinkedIn Direct Ads
Facebook Advertisement
Social bookmarking
Social media distribution: leveraging social channels besides the regular channels to
promote press releases and newsworthy content
Everybody is a winner in the Social Media space, no doubt about it. But one thing that is to be
remembered by the Brand Managers that average consumer is far more vocal today. He does not
need a Letter to the Editor to voice his opinion. His voice is far stronger than what it is today. All
he needs to do is sneeze which will create a viral effect. One blog on any platform can make or
mar your image. So just don‟t sit there and bombard him with marketing initiatives. Listen to
him and talk to him. That‟s how he likes it.
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REFERENCES
1. Banas. P (2010) Top 10 examples of Brand Leveraging on Twitter, Available at
insightbuzz.com
2. Chadwick Martin Bailey and iModerate Research Technologies (2010). Social Media affects
Consumer Buying Behavior, CMB Consumer Pulse, Available at viralblog.com
3. Copeland. C (2009). The Influenced: social media, search and the interplay of consideration
and consumption, published by GroupM Search, Avilable at www.groupmsearch.com
4. Exchange4india. Com and Blogworks (2010). India social media survey brands and
corporate, Edition 1, Available at blogworks.in
5. Forrester Research, Inc. (2009). North American technographics empowerment online
survey, Q4, Forrester Social Technographics Report
6. Interactive Advertising Bureau (2009). Social Media Ad Metrics Definitions, Available at
http://www.iab.net/ugc_metrics_definitions
7. John. R (2009) I Network, I Buy; Financial Chronicle Story on Social Media and Consumer
Behavior, Available at gauravonomics.com
8. OTX Research and DEI Worldwide (2008). The Impact of Social Media on Purchasing
Behavior, Available at insightbuzz.com
9. Unica Corporat ion (2010). State of Market ing 2010, Available at
www.unica.com
10. Vanina. D (2008). Social media strategy, Available at vaninadelobelle.com
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0
CORPORATE GOVERNANCE IN INDIA:
EVOLUTION AND CHALLENGES
DR. ANSHUL SHARMA*; MS. POOJA GUPTA**
*Assistant Professor,
S.D.College of Management, Israna, Panipat.
**Lecturer,
S.D.College of Management,
Israna, Panipat, Haryana.
ABSTRACT
Good governance means that processes and institutions produce results that meet the needs of
society while making the best use of resources at their disposal. Good corporate governance
(GCG) is a mandatory requirement in today‘s corporate world by every stakeholder groups.
Failure of giant corporate groups in last two-three decade strengthens the demand further. And
surprisingly, in some of such failures, accounting as a discipline is held liable. The way
accounting is practiced or the interpretations that may give different prescriptions in similar
situations are some dark areas that may open some scope for the corrupted accountants. Still, the
author believes that such claim against accounting is undue and unfounded. The paper is an
earnest effort to uncover the issue and to protect it from such unfounded critics. It covers the
concept of corporate governance, its legal framework, its current status and how accounting may
be practiced to protect corporate from corruption by establishing governance. This study
describes the Indian corporate governance system and examines how the system has both
supported and held back India‘s ascent to the top ranks of the world‘s economies. While on
paper the country‘s legal system provides some of the best investor protection in the world,
enforcement is a major problem with slow, over-burdened courts and significant corruption. It
finds that better corporate frameworks benefit firms through greater access to financing, lower
cost of capital, better firm performance, and more favourable treatment of all stakeholders
KEYWORDS: Corporate Governance, Compliance, Government Policy, Natural Law Ethics,
Regulation and Virtue Ethics.
______________________________________________________________________________
INTRODUCTION
Corporate Governance in its most simplified iteration refers to the manner in which corporate
bodies are managed and operated. Until the latter part of the 1900‘s the expression good
corporate governance was invariably used to describe how well a business was directed and
managed from the perspective of its controllers or managers. This was no doubt a truism in the
context of privately owned companies in which the operators and shareholders were usually one
and the same persons and there was no conflict between the persons managing or controlling the
company and the ultimate beneficiaries. However the same could not be said in respect of
publicly owned enterprises in which the managers and controllers are not the sole beneficiaries
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1
of the enterprise. In such circumstances situations do arise wherein the objectives of the
controllers or managers of the enterprise and the shareholders as a whole regarding the manner in
which a company is directed and managed does not necessarily coincide.
This impasse invariably gives rise to tensions between the controllers/managers and
shareholders, which can sometimes have disastrous consequences not only for the company itself
but also the commercial and economic environment the company, operate in. These tensions are
sometimes aggravated through the lack of transparency and communication between the parties.
In this background good corporate governance in modern terminology has been often described
as the mechanism of addressing and easing the tensions which arise between the controllers or
managers and other stakeholders of a company. The expression stakeholders being an indication
of the development that has been witnessed in corporate cultures wherein a corporate citizen is
deemed to owe obligations not only to its owners but to its employees, creditors and in some
instances generally to society at large.
Corporate governance in the context of a modern corporation has become synonymous with the
practices and processes used to direct and manage the affairs of a corporate body with the object
of balancing the attainment of corporate objectives with the alignment of corporate behaviour to
the expectations of society and accountability to shareholders and other stakeholders.
Corporate governance encapsulates -
• The management of the relationships between a corporate body‘s management, its board, its
shareholders and other stakeholders.
• The provision of the structure through which the objectives of the company are identified and
the monitoring of the means used to attain these objectives including the monitoring of
performance in this regard.
• Bringing more transparency to bear on the decision-making processes of the company.
• The provision of proper incentives for the board and management to pursue objectives that is in
the interests of the corporate body and shareholders.
• Encouraging the use of resources in a more efficient manner.
• The management of risk and the minimisation of the effects of commercial misadventure.
Corporate governance covers a large number of distinct concepts and phenomenon as we can see
from the definition adopted by Organization for Economic Cooperation and Development
(OECD) – ―Corporate governance is the system by which business corporations are directed and
controlled. The corporate governance structure specifies the distribution of rights and
responsibilities among different participants in the corporation, such as, the board, managers,
shareholders and other stakeholders and spells out the rules and procedures for making decisions
in corporate affairs. By doing this, it also provides the structure through which the company
objectives are set and the means of attaining those objectives and monitoring performance‖.
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GOVERNANCE STYLES LINKED TO EVOLVING PERFORMANCE PRIORITIES
Rationalization
Time
Expense
s
Revenues
Growt
h
Influenced Board Trusted Board Sovereign Board Controlled Board
Perfo
rman
ce
Harvest Phase
(Distribution)
Production Phase
(Profitability)
Formation Phase
(Sales Growth)
Investment Phase
(Valuation)
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The concept of "governance" is not new. It is as old as human civilization. Simply put
"governance" means: the process of decision-making and the process by which decisions are
implemented (or not implemented). Governance can be used in several contexts such as
corporate governance, international governance, national governance and local governance.
Since governance is the process of decision-making and the process by which decisions are
implemented, an analysis of governance focuses on the formal and informal actors involved in
decision-making and implementing the decisions made and the formal and informal structures
that have been set in place to arrive at and implement the decision. Government is one of the
actors in governance. Other actors involved in governance vary depending on the level of
government that is under discussion. In rural areas, for example, other actors may include
influential land lords, associations of peasant farmers, cooperatives, NGOs, research institutes,
religious leaders, finance institutions political parties, the military etc. The situation in urban
areas is much more complex.
Recently the terms "governance" and "good governance" are being increasingly used in
development literature. Bad governance is being increasingly regarded as one of the root causes
of all evil within our societies. Major donors and international financial inst itutions are
increasingly basing their aid and loans on the condition that reforms that ensure "good
governance" are undertaken. It is participatory, consensus oriented, accountable, transparent,
responsive, effective and efficient, equitable and inclusive and follows the rule of law. It assures
that corruption is minimized, the views of minorities are taken into account and that the voices of
the most vulnerable in society are heard in decision-making. It is also responsive to the present
and future needs of society.
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CHARACTERISTICS OF GOOD GOVERNANCE
PARTICIPATION
Participation by both men and women is a key cornerstone of good governance.
Participation could be either direct or through legitimate intermediate institutions or
representatives. It is important to point out that representative democracy does not
necessarily mean that the concerns of the most vulnerable in society would be taken into
consideration in decision making.
RULE OF LAW
Good governance requires fair legal frameworks that are enforced impartially. It also
requires full protection of human rights, particularly those of minorities. Impartial
enforcement of laws requires an independent judiciary and an impartial and incorruptible
police force.
TRANSPARENCY
Transparency means that decisions taken and their enforcement are done in a manner that
follows rules and regulations. It also means that information is freely available and
directly accessible to those who will be affected by such decisions and their enforcement.
It also means that enough information is provided and that it is provided in easily
understandable forms and media.
RESPONSIVENESS
Good governance requires that institutions and processes try to serve all stakeholders
within a reasonable timeframe.
CONSENSUS oriented
There are several actors and as many view points in a given society. Good governance
requires mediation of the different interests in society to reach a broad consensus in
society on what is in the best interest of the whole community and how this can be
achieved.
EQUITY AND INCLUSIVENESS
A society‘s well being depends on ensuring that all its members feel that they have a
stake in it and do not feel excluded from the mainstream of society. This requires all
groups, but particularly the most vulnerable, have opportunities to improve or maintain
their well being.
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EFFECTIVENESS AND EFFICIENCY
The concept of efficiency in the context of good governance also covers the sustainable
use of natural resources and the protection of the environment.
ACCOUNTABILITY
Accountability is a key requirement of good governance. Not only governmental
institutions but also the private sector and civil society organizations must be accountable
to the public and to their institutional stakeholders.
THE IMPORTANCE OF CORPORATE GOVERNANCE
The subject of corporate governance commenced attracting attention at national level in more
developed markets in the late 1900‘s. This was in the wake of some spectacular business
collapses, which appeared to be largely attributable to the lack of proper corporate governance.
The above coupled with the globalisation of economies and financial and investment markets in
the 1990‘s lead to the convergence of national initiatives on the subject. This development was
accelerated with the onset of the Asian crisis in mid 1997 after which the subject attracted
significant attention internationally especially in the context of emerging markets. Whilst the
causes of the crisis are still the subject of contention and debate there is an overall consensus that
the lack of proper corporate governance in companies operating in the affected economies
contributed significantly to the onset and spread of the contagion.
In this background a concerted international effort was initiated to improve the levels of
corporate governance especially in emerging market economies. This initiative was no doubt
spurred on amongst other factors by the recognition that the degree to which corporations
observe basic principles of good corporate governance will be an increasingly important factor
for investment decisions in the future.
THE PRINCIPLES OF CORPORATE GOVERNANCE
The principles advocated in these codes are essentially non-binding and embody the experience
and views of member countries of these organisations on the subject. While a multiplicity of
factors affect the governance and decision-making processes of firms, and are important to their
long-term success, the principles focus primarily on governance problems that result from the
separation of ownership and control.
The principles of corporate governance cover the following areas:
1. The rights of shareholders;
2. The equitable treatment of shareholders;
3. The role of stakeholders;
4. Disclosure and transparency;
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5. The responsibilities of the board.
COLLECTIVE RESPONSIBILITY TO MONITOR CORPORATE GOVERNANCE
The Commission envisages the ensuring of proper corporate governance practices as a collective
responsibility cast upon all persons involved in the operations of a corporate body.
For instance controlling shareholders, who may be individuals, family holdings, bloc alliances,
or other corporations acting through a holding company or cross shareholdings, can significantly
influence corporate behaviour. In the same vein institutional investors are in a position to
demand acceptable standards of corporate governance in the companies they invest in.
Individual shareholders usually do not seek to exercise governance rights but can be concerned
about obtaining fair treatment from controlling shareholders and management. Creditors too can
play an important role in governance and have the potential to serve as external monitors over
corporate performance. Employees and other stakeholders play an important role in contributing
to the long-term success and performance of the corporation, while governments establish the
overall institutional and legal framework for corporate governance.
Consequently all these persons in a position to influence a corporate body should endeavour to
encourage compliance with corporate governance practices. In this context there are three
important groupings of persons whose co-operation the Commission considers integral to
achieving acceptable corporate governance practices. They are the directors and managers of a
corporate body and its shareholders and other stakeholders and auditors.
THE BOARD OF DIRECTORS
Investors in equity have certain property rights over which they must have control and which
should be protected. However a corporation cannot be managed practically on a day to day basis
by shareholder referendum. In the light of these realities the responsibility for corporate strategy
and operations is placed in the hands of the board of directors of the corporation and a
management team that is selected, motivated and, when necessary, replaced by the board.
In the above context the implementation of good corporate governance hinges on the competence
and integrity of the board of the body corporate.
The board is required to fulfil certain key functions, including:
• Reviewing and guiding corporate strategy, major plans of action, risk policy, annual budgets
and business plans; setting performance objectives; monitoring implementation and corporate
performance; and overseeing major capital expenditures, acquisitions and divestitures.
• Selecting, compensating, monitoring and, when necessary, replacing key executives and
overseeing succession planning.
• Reviewing key executive and board remuneration, and ensuring a formal and transparent board
nomination process.
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• Monitoring and managing potential conflicts of interest that may arise amongst management
board members and shareholders.
• Curtailing the misuse of corporate assets and abuse in related party transactions.
• Ensuring the integrity of the corporation‘s accounting and financial reporting systems.
• Ensuring the credibility of the independent audit and the existence of appropriate internal
control systems.
• Ensuring the monitoring and management of risk
• Ensuring compliance with the law.
• Monitoring the effectiveness of the governance practices under which the body corporate
operates and making changes as needed.
• Overseeing the process of disclosure and communications.
INDEPENDENCE FROM MANAGEMENT
In order for boards to effectively fulfil their responsibilities they must have some degree of
independence from management. Board independence usually requires that a sufficient number
of board members should not be employed by the company or be closely related to the company
or its management through significant economic, family or other ties. It does not mean though
that shareholders are discouraged from being board members. However it does imply that a
balance must be maintained between controlling shareholders and managers and other persons
with ownership or proprietary interests in the company.
Independent or non-executive board members can contribute significantly to the decision-making
processes of the board by bringing an objective view to bear on the evaluation of the
performance of the board and management in particular. In addition, they can play an important
role in areas where the interests of management and shareholders may diverge such as executive
remuneration, succession planning, changes of corporate control and the audit function.
THE ROLE OF THE CHAIRMAN
The chairman as the head of the board can play a central role in ensuring the effective
governance of the corporate body and functioning of the board. The separation of the roles of the
chairman and the chief executive is advocated as a mechanism of ensuring an appropriate
balance of power, increasing accountability and enhancing the capacity of the board for
independent decision making.
GENERAL RESPONSIBILITIES OF DIRECTORS
Directors should devote sufficient time to their responsibilities. Service on too many boards can
interfere with the performance of board members. Companies must consider whether excessive
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board service interferes with board performance and this should be a fact taken into account at
the time of nomination.
Specific limitations on the size of the board of a corporate body are not advocated. However it is
necessary to emphasise the need to ensure that members of the board enjoy legitimacy and
confidence in the eyes of shareholders as regards their commitment to discharge the functions
and obligations imposed on them.
SHAREHOLDERS AND STAKEHOLDERS
Shareholders must have the right to influence the corporate body on certain fundamental issues,
such as:
• The election of board members;
• Changes in capital;
• Amendments to the regulations of the company;
• Approval of extraordinary transactions; and
• Other issues as specified in corporate law and the regulations of the corporate body.
Additional rights accruing to shareholders include the approval or election of auditors and the
approval of the distributions of profits.
AUDITORS
Financial and annual reports are increasingly becoming the most extensively used methods for
the conveyance and dissemination of corporate information to shareholder and investors. These
reports are a medium for disclosing not only the financial status of a company and its
performance but also information pertaining to ownership, governance, and business ethics and
in some instances the environment and other public policy commitments.
PRINCIPLES
Key elements of good corporate governance principles include honesty, trust and integrity,
openness, performance orientation, responsibility and accountability, mutual respect, and
commitment to the organization.
Commonly accepted principles of corporate governance include:
RIGHTS AND EQUITABLE TREATMENT OF SHAREHOLDERS: Organizations
should respect the rights of shareholders and help shareholders to exercise those rights.
They can help shareholders exercise their rights by effectively communicating
information that is understandable and accessible and encouraging shareholders to
participate in general meetings.
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INTERESTS OF OTHER STAKEHOLDERS: Organizations should recognize that
they have legal and other obligations to all legitimate stakeholders.
ROLE AND RESPONSIBILITIES OF THE BOARD: The board needs a range of
skills and understanding to be able to deal with various business issues and have the
ability to review and challenge management performance.
INTEGRITY AND ETHICAL BEHAVIOUR: Ethical and responsible decision
making is not only important for public relations, but it is also a necessary element in risk
management and avoiding lawsuits. Organizations should develop a code of conduct for
their directors and executives that promotes ethical and responsible decision making.
DISCLOSURE AND TRANSPARENCY: Organizations should clarify and make
publicly known the roles and responsibilities of board and management to provide
shareholders with a level of accountability. They should also implement procedures to
independently verify and safeguard the integrity of the company's financial reporting.
ISSUES INVOLVING CORPORATE GOVERNANCE PRINCIPLES INCLUDE
internal controls and internal auditors
the independence of the entity's external auditors and the quality of their audits
oversight and management of risk
oversight of the preparation of the entity's financial statements
review of the compensation arrangements for the chief executive officer and other senior
executives
the resources made available to directors in carrying out their duties
the way in which individuals are nominated for positions on the board
SYSTEMIC PROBLEMS OF CORPORATE GOVERNANCE
Demand for information: In order to influence the directors, the shareholders must
combine with others to form a significant voting group which can pose a real threat of
carrying resolutions or appointing directors at a general meeting.
Monitoring costs: A barrier to shareholders using good information is the cost of
processing it, especially to a small shareholder. The traditional answer to this problem is
the efficient market hypothesis (in finance, the efficient market hypothesis (EMH) asserts
that financial markets are efficient), which suggests that the small shareholder will free
ride on the judgements of larger professional investors.
Supply of accounting information: Financial accounts form a crucial link in enabling
providers of finance to monitor directors. Imperfections in the financial reporting process
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will cause imperfections in the effectiveness of corporate governance. This should,
ideally, be corrected by the working of the external auditing process.
INTERNAL CORPORATE GOVERNANCE CONTROLS
Internal corporate governance controls monitor activities and then take corrective action to
accomplish organizational goals. Examples include:
MONITORING BY THE BOARD OF DIRECTORS: The board of directors, with its
legal authority to hire, fire and compensate top management, safeguards invested capital.
Regular board meetings allow potential problems to be identified, discussed and avoided.
Whilst non-executive directors are thought to be more independent, they may not always
result in more effective corporate governance and may not increase performance.
INTERNAL CONTROL PROCEDURES AND INTERNAL AUDITORS: Internal
control procedures are policies implemented by an entity's board of directors, audit
committee, management, and other personnel to provide reasonable assurance of the
entity achieving its objectives related to reliable financial reporting, operating efficiency,
and compliance with laws and regulations
BALANCE OF POWER: The simplest balance of power is very common; require that
the President be a different person from the Treasurer. This application of separation of
power is further developed in companies where separate divisions check and balance
each other's actions.
REMUNERATION: Performance-based remuneration is designed to relate some
proportion of salary to individual performance. Such incentive schemes, however, are
reactive in the sense that they provide no mechanism for preventing mistakes or
opportunistic behaviour, and can elicit myopic behaviour.
EXTERNAL CORPORATE GOVERNANCE CONTROLS
External corporate governance controls encompass the controls external stakeholders exercise
over the organization. Examples include:
competition
debt covenants
demand for and assessment of performance information (especially financial statements)
government regulations
managerial labour market
media pressure
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takeovers
CORPORATE GOVERNANCE INITIATIVES IN INDIA
Soon after independence, India, like most underdeveloped economies, was caught in a low-
income-level trap, which occurred at low levels of physical capital, both productive and
infrastructural, and was maintained by low levels of accumulation and by Malthusian population
growth. That implied a powerful case for government activism as a way of breaking out of the
trap. Accordingly, the Government of India adopted a model of economic development that
could be best described as ―mixed economy‖. The state operated from the ―commanding heights‖
and aimed at the highest level of socio-economic good for the largest number (Dewan, 2004a).
This development paradigm, a ―big push‖ of sorts, accorded a strategic position to the public
sector in the economy. It was in line with the first Industrial Policy Resolution of 1956 which
sought to achieve a self-reliant economic and social growth. The private sector was also
encouraged to prosper, but played second fiddle to the public sector.
It was the policy of mixed economy that initiated the creation of large number of SOEs. The
policy was to address the aspiration of a new nation towards quick industrialization. The basic
argument has been that Indian industrialization has to be anchored on the core sectors that were
highly capital intensive with long gestation periods.
Since the private sector of the nascent economy was not strong enough to invest in such sectors,
state initiative was imperative. Later, the policy got mixed up with trade union pressure for
nationalization of many enterprises. By the last decade of the last century SOEs in India were
spread over from core sectors like steel, power, and machinery to many consumer goods that
included even bakery products (Nath, 2004). The reversal of fortunes for SOEs occurred in the
eighties, which saw a gradual opening up of the Indian economy. But it was in 1991 when the
Government of India decided to give a further impetus to accelerate the process of liberalization
and opening up of the economy, which boosted the chances of private enterprises. Yet, according
to Nair, although India‘s growth accelerated, this performance could not be sustained in later
years.
The average growth rate during the five-year period 1997-02 was only 5.4 percent as against the
targeted 6.5 percent (Nair, 2003). However, economic growth rate picked up later, to more than 8
percent during the years 2004-05 and was expected to slow down to around 6.5 percent
beginning 2006. The erratic economic behavior suggested that the reform was not simply about
―getting the price right‖ but ―getting the institutions right‖.
Realizing that good governance plays a crucial role in developing an efficient economy, the
Indian government embarked on a course that put emphasis on corporate behavior. A 2004 study
of the World Bank recognized this effort and acknowledged a marked improvement in corporate
governance in India (Economic Times, 16 May 2005). Several major corporate governance
initiatives have been launched in India since the mid-nineties. The first was by the Confederation
of Indian Industries (CII), India‘s largest industry and business association, which came up with
the first voluntary Code of Corporate Governance in 1998. The confederation was driven by the
conviction that good corporate governance was essential for Indian companies to access
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domestic as well as global capital at competitive rates. The code focused on listed companies.
While this code was well received and some progressive companies adopted it, it was felt that
under Indian conditions a statutory rather than a voluntary code would be more purposeful.
Consequently, the second major initiative in the country was undertaken by the Securities and
Exchange Board of India (SEBI) which envisaged that corporate norms would be enforced
through listing agreements between companies and the stock exchanges. In early
2000, the SEBI board incorporated new regulations into Clause 49 of the Listing Agreement of
the Stock Exchanges. This clause has been further revised in 2002, and again, in 2004. Clause 49
lays down guidelines for composition of the board including the number and qualities of
independent directors, remuneration of board members, code of conduct, and the constitution of
various committees (including audit), disclosures, and suggested contents of annual reports.
THE VALUE OF GOOD CORPORATE GOVERNANCE
Many institutional investors perceive corporate governance as a tool for extracting value for
shareholders from under-performing, undervalued companies. This approach has been very
successful for Lens Inc., California Public Employees' Retirement System (CalPERS), Hermes
and Active Value Advisors, to name but a few. Targeting companies that are under performing
according to one of the main market indices, and analysing those companies‘ corporate
governance practices, can lead to improvements that unlock a company's hidden value. These
improvements often include replacing poorly performing directors and ensuring that the
companies comply with perceived best practice in corporate governance.
Corporate governance can also be used to help restore investor confidence in markets that have
experienced financial crises. This has happened in the last few years in Japan, Malaysia and the
Russian Federation, for example. In these countries, as in a number of other countries that have
similarly been affected by a lack of investor confidence, particularly overseas investor
confidence, new or improved corporate governance practices have been introduced. Key features
of these changes include improving transparency and accountability.
While many studies have examined the possible link between corporate governance and
corporate performance, the evidence appears to be fairly mixed. In an early, much-quoted study,
Nesbitt (1994) reported positive long-term stock price returns for firms targeted by CalPERS.
Nesbitt‘s later studies show similar findings. More recently, Millstein and MacAvoy (1998)
studied 154 largely publicly traded United States corporations over a five-year period and found
that corporations with active and independent boards appeared to perform much better in the
1990s than those with passive, non-independent boards. However the work of
Dalton, Daily, Ellstrand and Johnson (1998) showed that board composition had virtually no
effect on firm performance, and that there was no relationship between leadership structure and
firm performance. Patterson (2000) of The Conference Board produced a comprehensive review
of the literature relating to the link between corporate governance and performance, and states
that the survey does not present conclusive evidence of such a link.
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CORPORATE GOVERNANCE RATING SYSTEMS
With increasing emphasis on corporate governance across the globe, it is perhaps not surprising
that a number of corporate governance rating systems have been developed. Two firms that have
developed such systems are Deminor and Standard & Poor‘s. The rating systems cover several
markets: for example, Deminor has tended to concentrate on European companies, while
Standard & Poor‘s has used its corporate governance rating system in quite different markets,
such as the Russian Federation. These corporate governance rating systems should benefit both
investors (both potential and current ones) as well as the companies themselves. Deminor's
corporate governance ratings are based on four main categories in which each company receives
a rating from 5 to 1, with 5 representing best practice and 1 the most questionable standard. The
categories are:
1. Rights and dut ies of shareholders
2. Absence of takeover defences
3. Disclosure
4. Board structure.
INVESTORS: OPPORTUNITIES AND TRENDS
For shareholders, effective corporate governance structures have become an important criterion
for selecting the companies in which they wish to invest. Basically there are two approaches. The
first focuses on the analysis of corporate governance structures. As investors interested in the
long term, pension funds examine the extent to which a company has implemented the
recommendations contained in the most important codes. This analysis is the starting point for a
comparison of various companies with respect to good corporate governance. The results
influence investment decisions. Companies with poor structures are avoided.
The second, far more effective approach consists of acting as shareholders who exercise their
proprietary and other rights. Shareholders have the right to demand information from the
company at any time about important questions in connection with management.
GOOD CORPORATE GOVERNANCE AS AN OPPORTUNITY FOR COMPANIES
AND INVESTORS
The long-term success of a company depends on sensible measure of good corporate governance.
However, good corporate governance also requires that all stakeholders, and especially
shareholders, exercise their participatory rights. In particular, shareholders should be aware that
they elect the board of directors who decide on company strategy and monitor the
implementation of that strategy. Being annoyed with the board because of a large financial loss is
of little use if, when electing the board, one did not constructively address the question of
whether the board of directors standing for election had the necessary qualifications,
independence and time to do its job properly.
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CORPORATE GOVERNANCE AND THE ECONOMY
Effective corporate governance is at the core of an efficient market economy. Shareholders and
other financial stakeholders must have access to information and the ability to influence and
control management, through both internal governance procedures and external legal and
regulatory mechanisms, in order to ensure that a company‘s assets are being utilized in the
interests of all financial stakeholders. This is important in both developed and developing
economies.
In developed markets, large institutional investors pay considerable attention to corporate
governance practices. Some US pension funds, such as the California Public Employees'
Retirement System (CalPERS) and the Teachers Insurance and Annuity Association College
Retirement Equities Fund (TIAA/CREFF), actively pursue corporate reform through their
positions as major shareholders. Every year, for example, CalPERS publishes a list of the best
and worst US corporate boards in an attempt to promote change. As institutional investors own
more than 50 per cent of the equity of US companies, companies are becoming much more
sensitive to the desires of these shareholders.
The market rewards those companies that do change. Some studies have shown that efforts by a
company to improve the quality of its board have a significant and positive effect on share price.
Similarly, companies that continue to engage in activities that place the interests of management
over those of shareholders tend to trade at a discount relative to other companies in their sector.
In emerging economies, the quality of corporate governance can vary enormously. Indeed, poor
governance or corrupt governance (―crony capitalism‖) negatively affects the returns on
investment in many countries and also contributes to larger, systemic problems at national and
regional levels. The scarcity and poor quality of publicly available information, along with
limited legal and regulatory recourse, frequently complicates efforts by financial stakeholders to
ensure that management is acting in their interests. The sometimes legal expropriation of outside
investors is a major problem of corporate governance. Although expropriation is not exclusive to
emerging economies, it is certainly much more prevalent there. Examples of expropriation
include cash flow diversion (transfer pricing), dilution of minority shareholders, asset stripping
and delay (or non-payment) of dividends.
One of the aims of good governance should be to introduce checks and balances to create the
conditions necessary to facilitate external finance. This view is apparently supported by a
number of studies, including a recent one by Credit Lyonnais Securities (CLSA) Emerging
Markets, which found that the shares prices of companies with high corporate governance
standards have been more resilient during market downturns.
RECENT DEVELOPMENTS IN CORPORATE GOVERNANCE IN INDIA
Liberalization of the Indian economy began in 1991. Since then, we have witnessed wide-
ranging changes in both laws and regulations, and a major positive transformation of the
corporate sector and the corporate governance landscape. Perhaps the single most important
development in the field of corporate governance and investor protection in India has been the
establishment of the Securities and Exchange Board of India in 1992 and its gradual and growing
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empowerment since then. Established primarily to regulate and monitor stock trading, it has
played a crucial role in establishing the basic minimum ground rules of corporate conduct in the
country. Concerns about corporate governance in India were, however, largely triggered by a
spate of crises in the early 1990‘s—particularly the Harshad Mehta stock market scam of 1992--
followed by incidents of companies allotting preferential shares to their promoters at deeply
discounted prices, as well as those of companies simply disappearing with investors‘ money.
These concerns about corporate governance stemming from the corporate scandals, coupled with
a perceived need of opening up the corporate sector to the forces of competition and
globalization, gave rise to several investigations into ways to fix the corporate governance
situation in India. One of the first such endeavors was the Confederation of Indian Industry Code
for Desirable Corporate Governance, developed by a committee chaired by Rahul Bajaj, a
leading industrial magnate. The committee was formed in 1996 and submitted its code in April
1998. Later the SEBI constituted two committees to look into the issue of corporate governance--
the first chaired by Kumar Mangalam Birla, another leading industrial magnate, and the second
by Narayana Murthy, one of the major architects of the Indian IT outsourcing success story17.
The first Committee submitted its report in early 2000, and the second three years later. These
two committees have been instrumental in bringing about far reaching changes in corporate
governance in India through the formulation of Clause 49 of Listing Agreements.
LEGAL AND ETHICAL COMPLIANCE MECHANISMS
LEGAL COMPLIANCE MECHANISMS
The difficulty with legal compliance mechanisms is that many abuses that have enraged the
public are entirely legal, for example, companies can file misleading accounting statements that
are in complete compliance with generally accepted accounting principles (GAAP). France et al
(2002) point out that laws regulating companies are ambiguous, that juries have a hard time
grasping abstract and sophisticated financial concepts (for example, special-purpose entities or
complex derivatives), well-counseled executives have plenty of tricks for distancing themselves
from responsibilities (Enron and the individual officers all deny they‘ve broken any laws), and
the fact that criminal law applies only to extreme cases so violations are hard to enforce. Based
upon in-depth interviews with 30 graduates of Harvard MBA program, Badaracco and Webb
(1995) revealed several disturbing patterns. First, young managers received explicit instructions
from their middle-manager bosses or felt strong organizational pressures to do things that they
believed were sleazy, unethical, or sometimes illegal. Second legal compliance mechanisms
(corporate ethics programs, codes of conduct, mission statements, hot lines, and so on) provided
little help in such environments. Third, many of the young managers believed that their
company‘s executives were out-of-touch on ethical issues; either they were too busy or because
they sought to avoid responsibility. Finally, the young managers resolve the dilemmas they faced
largely on the basis of personal reflection and individual values, not through reliance on
corporate credos or company loyalty.
Although the accounting profession has always had a strong focus on internal controls, recent
spectacular business failures, which have undermined auditors‘ credibility in their reporting
function, have eroded public confidence in the accounting and auditing profession. Brief et al
(1997) found that 87% of accountants surveyed were willing to misrepresent financial statements
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in at least one case when presented with seven financial reporting dilemmas. This has led to new
and more stringent applications of standards3.
The problems of the professions (law, accounting, medicine) we are witnessing today are not
endemic to the industry. They are part of the problems we are witnessing today in the wider
society: sports, business, government and politics, education, and so on. Many of us, however,
are concerned about the lack of ethics in the business world, particularly in the financial system,
since there are greater incentives for unethical conduct. As a result of many scandals, there has
been a renewed interest and focus on legal compliance mechanisms.
ETHICAL COMPLIANCE MECHANISMS
Trevino et al (1999) study found that specific characteristics of legal compliance programs
matter less than broader perceptions of the program‘s orientation toward values and ethical
aspirations. They found that what helped the most are consistency between policies and actions
as well as dimensions of the organization‘s ethical climate such as ethical leadership, fair
treatment of employees, and open discussion of ethics. On the other hand, what hurts the most is
an ethical culture that emphasizes self-interest and unquestioning obedience to authority, and the
perception that legal compliance programs exist only to protect top management from blame.
With respect to the issues of ethical leadership, Collins (2001) examined the character traits of
effective business leaders in the culture of eleven companies that transformed themselves from
good solid businesses into great companies that produced phenomenal and sustained returns for
their stockholders. Every one of the companies he profiled during the critical period in which it
was changing from good to great has what he termed ―Level 5‖ leadership which was his top
ranking for executive capabilities. Leaders in all companies exhibited the traits of fanatical drive
and workmanlike diligence, but Level 5 leaders were also people of integrity and conscience
who put the interest of their stockholder and their employees ahead of their own self-interest.
CONCLUSION
From the above discussion it should be clear that good governance is an ideal which is difficult
to achieve in its totality. Very few countries and societies have come close to achieving good
governance in its totality. However, to ensure sustainable human development, actions must be
taken to work towards this ideal with the aim of making it a reality. Additionally, the corporate
governance ratings systems discussed in this paper all include disclosure and transparency as
core attributes of good corporate governance and rightly so. Without transparency and
disclosure, shareholders and stakeholders would not be able to assess how the company was
being managed, and hence no meaningful accountability would exist. Failure in corporate
governance is a real threat to the future of every corporation. With effective corporate
governance based on core values of integrity and trust (reputational value)companies will have
competitive advantage in attracting and retaining talent and generating positive reactions in the
marketplace – if you have a reputation for ethical behavior in today‘s marketplace it engenders
not only customer loyalty but employee loyalty. Effective corporate governance can be achieved
by adopting a set of principles and best practices. Even among large companies, shareholdings
remain relatively concentrated with ―promoters‖ and family business groups continuing to
dominate the corporate sector despite the above corporate governance shortcomings, the Indian
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economy and its financial markets have started attaining impressive growth rates in recent years,
and display an exceptionally high level of optimism. The reason is that India is now clearly and
strongly committed to sustaining and rapidly furthering the major economic reforms and the
liberalization started in the early nineties.
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GLOBALIZATION & NEW POLITICAL-CULTURAL IDENTITY
RAHMAT ABBASTABAR MOGHRI*; G.T.RAMACHANDRAPPA**
*Research Scholar,
Department of Political Science. University of Mysore, Mysore.
**Reader Dos,
Department of Political Science,
University of Mysore, Mysor.
ABSTRACT
lobalization phenomenon, nowadays, is one of the most important discourses in different
scopes of human life. Globalization in influenced of modernism and post modernism
foundations, has excellent affective in change and evolution of nations and state’s political and
cultural identities. Traditions, language, religion and cultural and religious ordinance, nationality,
territory, freedom, independence, political insight, government, sovereignty, etc. are former
political and cultural identity in every country. Globalization with deletion limitation of three
elements space, time and place as determinant elements in formation of political and cultural
identities, has caused redefinition and creation of new political and cultural identities which have
been caused appearance of political and cultural movements in last few decades special in late
years. In this article, first will definition the characteristics and elements of political and cultural
identity in globalization age, and then will emphasis on hypothesis: globalization in base of
modernism and post modernism principles has created new form of political and cultural
identities which in influenced of this, many of modern political and cultural movements and
mobilities has been formed in the world.
New identity in globalization age, is neither merely traditional nor liberal completely but is based
on human new knowledge of himself and factors and elements of his around, with, in opposite of
past, characteristics like dynamic, flexible, knowledgement and blissfulment. This identity able
with globalization instruments to creation new political and cultural mobility in world wid.
KEYWORDS: Identity, Politics, Culture, Globalization, Political and Cultural Movement and
Mobility.
______________________________________________________________________________
INTRODUCTION
In beginning of twentieth century and especially from 1960 decade, the human life has been
faced more evolutions. Different scopes of human life and political, economic, social and
cultural structures have been changed. Various and different scopes of sciences such as
sociology, culturalogy, political science, international relations, economic and commerce have
reconsiderated in influenced of globalization phenomenon from second half of twentieth century.
These evolutions in global level have changed world order and have formed global new order.
The abroad accelerator wave of globalization (according to Toffler’s opinion: third wave of
G
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knowledge) has been caused deep widespread evolutions in knowledge and epistemology system
of societies.
Globalization with creation of new social, political and cultural contexts and with engage
informational communicational advanced instruments has caused changing in human knowledge
and creation new political – cultural identity in national and global level. In globalization age,
the kind of human identity and his attitude toward himself and the world has been dominated
supply for human behavior. The politics have been based frequently on the identity instead of
interest, class and power. The politics and culture which creating identity in globalization are not
single scope, single polar and merely left or right, but all cultures and politics, even regional and
native, have been exited from border and are in center of new political – social formation.
Globalization has caused redefinition of main elements of identity making and has interned new
actors in political and cultural decision making.
The author in this article will try to specify some questions such as; what is
globalization? What are dimensions of globalization? What are consequences of globalization in
different scopes, special in political and cultural dimensions? Why and how new political and
cultural identities have been formed in influenced of globalization phenomenon in national and
global level? And which movements and actors have been created in influenced of new identities
in national and global scopes?
The author believes that; Globalization has changed insight and knowledge of nations by
modern informational and communicational instruments and by post modernism foundation, and
has caused enter new actors in management, decision and identity making system in national and
global level.
CONCEPTUAL SPECIFY
GLOBALIZATION
Nowadays the word globalization has been a current term in various contexts in the
world. And it caused mental disturbance for many literates and scholars in politics, economic and
culture contexts. The word globalization is equivalent ''mondialisation'' in French, and
''globalisieruny'' in German, and''globalisacion''in Spanish and Latin American language.
The word globalization has been used first time by ''Marshal Mc luhan'' in his book '' war
and peace in global village '' in 1970(McLuhan, 1964: 54). This term has been seen in other
sciences such as: political and social science, and caused new theory codification.
The term globalization is a buzzword, because it is a multidimensional and complex
concept, and has many definitions in various scopes. So, scientific and exact definition of
globalization is very difficult. As yet, globalization has been defined as: ''world compaction'', ''
affiliation different part of world'', ''increases global affiliation and connection'', ''westernization
process and world similarity''(Taylor, 2000: 49-70),''world economic contraction''(Hirst, 1996:
48), ''extensiveness of impress and impressibility of social reactions'',''deallocation of states and
decrease limitation state's activity in relation to other countries''(Sander,1996: 27). The common
point of all definition of globalization is that; globalization is a process that impress on politics,
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economic, social and cultural, human and state's life in material and spiritual scopes. And next
common point is that, globalization is not only a simple concept, but also is a process that begun
in the past and now is continuing and increasing its speed and impress every day.
Finally, my definition picked up from many thought and theory about globalization is:
Globalization is a process compaction of time and spaces that people in the world, awareness or
ignorantly, are interaction in a global single community. And many of geographic, political,
economic, and cultural limitations disappear, and this causes confirmation, reformation or
alteration of human thoughts and experiences in different scopes.
Mainly, some essential factors that have impressed globalization are follows:
Technologic development and increase of science and communication, because of scientific
advancement and new explorations that have been occurred in twentieth century.
Development of free market, globalization of markets and global economic, because of
development of export, extension of railing and marine transportation (Luke, 1995: 99-100).
Spread and globalization of many political, social and cultural matters, such as environment,
global wars, human rights, terrorism and peace.
Formation some supranational organizations and regional agreements, such as, Europe society
(1992), NFTA, nation society and UN.
Some important political and economic events, like soviet fall, and china economic
experiences that have happened in eighty decade.
Increase of human experiences and knowledge in various scopes (Shahramnia, 2006: 56).
Most of authors and scholars specified globalization in four political, economic, social
and cultural dimensions. And some addicted technical, observer on the third industrial revolution
(Nash, 2001: 10). "Malcolm Waters" also argued globalization has three economic, political and
cultural dimensions (Waters, 2000: 18). In my opinion, there are five dimensions in globalization
that are follows:
I. TECHNOLOGIC DIMENSION: Communication technology has been created in this
dimension and caused strongly flow of information and created other scopes, by computer
networks.
II. ECONOMIC DIMENSION: Economic globalization with its many faces and scopes,
effective considerable on other dimensions of globalization. Some of its scopes are: trade
globalization, external investment, international division of labor, economic free market,
multinational companies, and work force emigration (Scout, 1993: 21).
III. POLITICAL DIMENSION: Political globalization is; the political matters that only have
belonged internal of nation-state scope in influenced of international evolutions, they have
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changed and they are globally maters now. Some of them are: globalization and nation-state,
politics globalization and political new actors, common political problems in the earth, human
rights, modern political culture (Safaei , 1999,: 528-528).
IV. CULTURAL DIMENSION: Globalization of culture refers to compaction of time and
space, and formation new conditions for cultural globalization. In this condition, the people
and societies in the world will communicate in culture and mutual effectiveness together. Some
new cultural matters that should be attention in era of globalization are: global culture and
identity (Oxford, 2009: 6), development of communication (Sklair, 1998: 302),
consumptionalization and formation of national, local and ethnic culture.
V. SOCIAL DIMENSION: Some effectives of globalization on social dimension are:
formation of supranational and hybrid identities, creation of cosmopolitanism interests,
formation of social movements of modernization, increase of emigration, special pay attention
to global environmental problems, formation of supranational social organizations.
Some of the main and basic characteristics of globalization in its different dimensions are
follows:
Development of advanced information and communication technology.
Facilitate and increase the speed of communication between individuals and various societies
in the world.
Increasing interdependence among humans around the world.
Universalism and globalization of humanity values, such as: human rights, democracy,
liberalization, peace, security and justice.
Washy and liquidation of borders, and political and geographic limitations.
Pay attention seriously to humanity common problems and solution them. Such as:
environment, Air pollution, terrorism, global poverty, and apartheid and gender bias.
Supranational identity and cultural formation, and creation social spaces in global level.
Economic development in based on competitive free market, by World Tread Organization
(WTO) and other organizations.
Washy and cut off state control on local and national economics.
Appearance new actors in political and economic scopes, through increase of multinational
corporations.
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Formation of supranational classes and preferment struggles of classes, from local and
national level to global and international.
Formation of new international division of labor in various scopes, by multinational
corporations and some developed countries.
Increase of social mobility, and developed scientific, technologic, commercial, and
immigrations.
Extension and spread of global consumption pattern and human integration by
McDonaldization, Cocacolation and etc.
Formation radical and modernity movements, with different orientations.
Appearance and extension of new political culture in global level, that including humanity
common values.
Globalization is inevitable and based on western powers and developed countries
(Shahramnia, 2006: 118-124).
IDENTITY
The identity term means human insight and knowledge of nature and political, cultural and
social properties of himself and the world, and has characteristics like difference, fixity and
stability, locative, collectivity and time. Identity has two paradoxical evidently dimensions. First
is similarity and symphonic and second is difference from others. In Emanuel Castells’s
explanation, the identity is wellspring of meaning and experience for people. Identity is idea
making process according to a collection of political and cultural characteristics (Castells, 1989:
7). Basically, the identity is creating in contact to others (Golmohammadi, 2002: 20).
There are two kind of identities; subjective or privative and plural. Subjective identity is
related to human privative knowledge system, and plural identity is concern to political – cultural
belong of individual to particular group or cast. Another classification of identity is regional,
national and global. The native, local and regional identity in traditional societies and national
and global identities in modern and industrial societies have more power, solidarity and higher
function. The claim of this research is all kind of identities in all scopes will be catch of change,
evolution and redefinition in influenced of globalization’s consequences. Development and non
development is very important factors in stability and instability of societies’ identity.
There are many affective factors and elements in creation identities in various levels.
Some of them are such as; environmental and mental factors, historical, cultural, political, social,
economic and globalization phenomenon. The interaction and adaptability of these factors with
together are most important in identity making process. Political and cultural elements rather
than others have more potential in increase and advance of man identity especially in
globalization age, as in traditional societies because of their neglect or delusion of these factors
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have faced identity crisis. The supplies and factors of identity are making identity by four
elements; by traditional advantages, sensation and sentimental, linkage to thoughts, and linkage
to power relations (ghoraishi, 2002: 52).
As passed above, globalization is phenomenon and process that relative to extension of
communications, reconsideration and deformation in different subjects especially in human,
political and cultural issues. Identity is based on others, so it has been globalized by extension of
globalization phenomenon. Thus, the identity has globalized it’s communicate span by extension
globalization communication, and has interaction relation to distance phenomenon. These
interactions between identity and globalization have transformed the humanity knowledge about
himself and the world, and of course may be in some times eventuating to alienation (Ibid: 47).
The globalization phenomenon, in one hand, assimilates and standards cultures identities,
and in other hand, it includes communicate, accession and independent interaction among human
and nations and societies, and makes context for more extension of cultures and identities. Since
identities have construction nature, the foundations of identity making will have common faces
by impaction and singleton world, and will formed common identities in global aspect. In
globalization age, the gathering in modernism and post modernism thoughts and opinions,
secular and in secular schools, Islamic and non Islamic thoughts, will formed new knowledge of
identity in political and cultural scopes, as whilst human are able to abide on local and national
identity, and also able to catch new global identity. Hence, the human, in globalization age, have
various and plural identities which all have being of single knowledge.
The traditional identity making was based on time, place and space. Globalization with
strong instruments of communication and world integration and compaction of time and space,
has changed elements of identity making and has caused redefinition of them. In traditional
societies, the time and space were adopted with together and they had accessible relation, and all
functions and definition have been formed by time and space. Place, with characters of
difference and ridge has created a kind of stability and correlation sense, and restricted the space
which was instable and mobile. Globalization with separate space from place has caused
presentment, so place will be empty and singsong and space will has more extent. Globalization
also compacts time and space, and time has missed its function of correlation to place and will
created so many seconds which Castells explanted it as “time without time (Castells, 1989).
GLOBALIZATION AND IDENTITY
Two attitudes, process and project, about globalization phenomenon have created two
theories about its affection on different issues and particularly on identity. First outlook is related
to skeptical (like Boderio and his followers) whom believe globalization in political – cultural
identity making has completely negative consequences. Some of them are; cultural unsafely,
alienation, identity crisis, brain drain, deletion of cultural variety and growth of cultural single,
formation of new form political and cultural colonialism, and westernization (Golmohammadi,
2002: 377). Skeptical post modernists argue that, identity is construction which has based on
individual interpretations, paradoxical and in pragmatism, so it not possible to formation
absolutely a strategy in base of reality, truth and scientific (Henrico, 1984: 1-3). This outlook is
reference to pluralism theory of post modernism; that isn’t possible formation of stable and
common identity.
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Second outlook is concern to affirmative group (Lutar, Foucault, Muffe, Laklao). They
believe that globalization has positive consequences in political – cultural identity making. Some
of them are; more interactions among political – cultural elites in different societies, political –
cultural development, growth of authoritive manpower with national and global identity,
reinforcement local and regional political and cultural identity in parallel increasing global
identity, creation contexts for introduction of multiple and different cultures and identities in
world wide.
The various, different and plural cultures and politics, and new and common political –
cultural identity of humanity have been formed by broken and cancelation barriers of time and
place. These global new identities are expressive of main principles of human rights, and they
will be gradually global scales. New identity has global legitimacy and people in the world wide
interaction with together by new identity. In fact, a kind of global knowledge and awareness has
been formed among people in the world wide, so all local, national and global identities with
common knowledgment will contraction together (Pahlavan, 2001).
Globalization with advanced instruments of information and communication has created
revolution in political – cultural insight of nations and has formed the foundation of their new
identity. These new insights and identities reject every political – cultural despotism and political
absolutism and totalitarianism system, and established new cultural – political identity on
schools, religions and thoughts which are standards for human good life. Globalization by
foundations of post modernism controverts monopolistic and monoculture and rejects the claim
“Absolute trust” of some political system and publishes new knowledge and identity in global
level. Nowadays, the discourse of cultural pluralism in influenced of globalization phenomenon
has been new and dominant thought and model of individual and plural behavior of nations and
states. According to this new discourse, instead of decision making of similarization for various
political and cultural groups, it possible to recognize equal political, social and cultural rights for
all groups without any threat for political – cultural unique (Sinaei, 2005).
Globalization by bring out cultures from narrow bond of time and place, and by span
activities of cultures, has smoothed context of publish of micro and macro cultures in global
level and has caused formation of new political – cultural identities. New political – cultural
identities in national and global level has caused that political authoritarian system for exit of
new identity challenges and solve of legitimacy crisis, has decided to reform their political
system and created situating conditions for more participation of intellectual and cultural
minority in political decision making. Globalization and formation of new political – cultural
identities, and expand discourse of cultural pluralism, and extension wave of democracy in
global level, have caused authoritarian governors for preserve their political legitimacy,
responsible people’s requests, and reduce their authority, and increase more participation of
people (Ibid).
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EFFECTIVE FACTORS IN FORMATION OF NEW POLITICAL – CULTURAL
IDENTITY
AFFIRMATIVE FOUNDATIONS OF POST MODERNISM THEORIES
History effort for drawing political – cultural identity in post modernism age is concern to
expand social – cultural change in 1960 in Europe countries. In this time, the Marxism classic
theories in cast fighting scope couldn’t specify the nature of complex contemporary struggles in
power, political domination, formation of new political identities, subject and social movements.
After appearance of new political movements such as nationalism, feminism, peace,
civilization, etc. special theory has been formed for checking and analyzing them. The post
modernists, for new political – cultural identity making, have remade subject, social, culture, and
have reconsiderated the models of power and struggle analyzing (Best & Cerner, 1997: 286).
Post modernists in contrast to objectivism of cultural identity and modern social framework,
have discussed issues like construction of identity, pluralism of cultures, identities, meaning, and
new foundational societies, as “Robert J Doan” reads it; “Creation new territory of cultural
politics” (Doan, 2006: 22). They reject absolutism of modernity and create new identity in
specific view, emphasis on correlation of groups and societies in base of their interests (Nazari,
2006: 120). According to post modernism theory, the absolutism identity and hegemony and
imperialistic logic of modernity age have been finished and self knowledge and new identity age,
and also extension of nationalism movements, democracy and Islamic awakening and mobility
are beginning (Rosina, 1991: 146).
Post modernists in analyzing and specify of new political – cultural identity have some
important statements that are follow:
1- Identities are discourse construction and have communicational nature. It means that, the
human identities are continuing constructing and reconsideration (Paul Said, 2003: 80), and so
human in insight of widespread network of communication in globalization age, and in
influenced of different factors and in various environments, will catch new insight and identity.
In Foucault’s opinion, globalization is kind of new normalization. Globalization is arena of
different discourses which creating new identities (Hath, 1981: 101).
2- Identities generally have cultural face. Basically, post modernism is as a cultural paradigm.
So, in identity making it emphasizes on cultural element instead of political, economic and
business. With creation and extension of globalization, the creation scopes of identity also catch
more evolution. In traditional and even modern societies, the identity creator factors were family,
church, institutions and ministrations, but in industrial and post modern societies, the instruments
of communication and information are responsible of this task (Doan, 2006: 221). Hence, the
channels of identity making are cultural instruments and institutions.
3- Identities are based on distinct and difference. Identities are forming in relation to others. Post
modernists are imagine that, human identity is forming by creation difference between him and
others, and by creation dichotomy like; black/white, man/woman, relative/abroad (Ghasemi,
2004: 26). Globalization by extension of communication and compaction of time and place, has
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submitted many others, and thus changed self knowledge of human identity, and has created new
political – cultural identities.
4- New identity making is based on identity politics. Identity politics is a guideline which people
redefinition themselves by membership to groups which were in border of decision and identity
making (Doan, 2006: 35). In identity politics, the people belong themselves to groups which are
punished and are under dominant of imperialist’s power. The appearance of identity politics not
only created contexts for appearance new political – cultural identities in public scope, but also is
a new form of political participation and attention to interns of groups which were bordered, and
has created civil nationalism (Pakolesky, 2001: 384). The appearance of some movements like
feminism, labor, gender, environmental, etc. are shambles of formation of new political –
cultural identities (Best, 1997).
CREATION AND EXTENSION OF POST MATERIALISM VALUES
Another factor in formation of new political – cultural identities in influenced of
globalization phenomenon is value evolution and appearance of modern values in the world and
especially in western post industrial societies. “Ronald Inglehart” argues that, globalization in
addition to intellectual, cultural and identity alteration of societies, also has created new form of
social foundation political contrast, the reasons of election and support to political parties, and
catch ways to political goals (Inglehart, 1994: 2). Because of evolution from secular values to
post material, and creation new political – cultural knowledge, many of new political – cultural
issues came to center of decision making, and have caused main stimulation of many politics and
movements. The formation of new values have farted parties and created new parties, and
changed characters of evolution of people’s bliss. New knowledge and post materialism have
changed the nature of religious attitudes, sexuality rules, cultural, mural and behavior norms in
western and nonwestern societies (Karimi, 2007). “Haber Mass” is believe that, the appearance
of new political, cultural and social groups and movement, are consequences of
commoditization, growth of disposability economy, publication of bureaucratic welfare state
after World War II. He argues that, the philosophy goal of new social movements is defense of
life world (family and social values) (Ibid).
EVOLUTIONS IN INDUSTRIAL CAPITALIST SOCIETIES
The express and widespread evolutions and experiences in industrial societies, by
development and technology instruments from 1970, have eventuated deformation basically in
identity knowledge of people, and have formed new political – social forces which their goals
were not power and interest but were redefinition of selfhood, society, world and nature (Ibid).
“Alen Touraine” argues that, structural change and alteration in industrial societies have created
new identity structures and actors which will be intellect and thought producers instead of
financiers and even labors. So, knowledge and information are supply of identity making in post
industrial societies. Touraine by historicity concept, redefinition nature and human, and
introduces new movements as main actives in identity politics (Jalaeipor, 2002: 57). “Clause
Offe” is also believed that, relative welfare of social democracy, increase of education, and
express growth of service section are factors formation of new identities (Nesh, 2003: 134).
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GLOBAL SYSTEM EVOLUTIONS
The macro and widespread global system evolutions in influenced of globalization
process are basic causes formation of new identities. “Emanuel Castells” with discuss network
society as related between creation new identities, modern movements and globalization. In his
opinion, the revolution of informational technology and remaking structure of capitalism system
has grounded new form of society which formation of global new identity and universalization
important and strategic activities are symbols of new society. The new society changes culture
and new institutions (Castells, 2001: 17). With global evolutions and extension of informational
age, the political systems of industrial era have been faced to legitimacy crisis, and yet, labor
movements, political parties and nation – state’s institutions are not social independent and
affective agents, and instead of them, the ecologists, feminists, religious, localisms, nationalists,
partisans of human rights, supporters of environmental are actives of new society and new age.
Because, they are agents that have identity program and their goals are change of signs,
meanings and cultural cods (Ibid: 425).
The collection of these factors have formed new identities and then have been created
movements in the world which are enjoy especial characteristics; 1- Non instrumental. 2- Target
toward civil society. 3- Open, flexible and dynamic (Kenny, 2004: 131). 4- Rest on public media.
5- Belonging to social middle class. 6- Based on direct democracy. 7- Emphasis on public
identity (Cohen, 1985: 667). 8- Critic to cultural and moralist values of society. 9- Redefinition
and reinterpretation to values, norms, selfhood, and society. 10- Construction of new identities.
CONCLUTION
Globalization with its revolutionary speed in extension of communicational interaction,
and compaction of time and place, and increase of technology evolution has changed many of
political, social and cultural relations, and has caused creation new form of social and political
systems. Sciences, in all disciplines, have been faced to reconsideration and deformation.
Political systems of state has missed its function in identity making, and have been created new
actors in local, regional, national and global level. Globalization has caused redefinition of many
concepts such as selfhood, society, nature, political – social relations, political systems, supplies
of identity making, etc. New political – cultural constructed of identity has caused creation of
movements which are responsible for intellectual and behavior identity. Hence, in globalization
age, the traditional identities are affectless and new actives with different identity are main actors
in subjective and social scope.
REFFERENCES
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Goraishi. Fardin, (2001), Globalization and Evolution in our Notion, Journal of National
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Henrique. Julian & Others, (1984), Changing the Subject: Psychology, Regulation, and
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Pahlavan. Changiz, (2001), Culturalogy; Speeches in Contexts of Culture and Civilization,
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Best. Steven & Douglas. Kellner, (1997), Postmodern Theory: Critical Interrogations, New
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Doan. Robert. J, (2006), Social Critic of Post modernism; Identity Crisis, Translated by Saleh
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Rosenau. Paulline Marie, (1991), Postmodernism and the Social Science, New Jersey,
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Gasemi. Mohammad Ali, (2004), Identity in Post modern’s Space, Journal of Guideline
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Best. Steven & Douglas. Kellner, (1997), The Postmodern Turn, London, The Guilford
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Engelhat. Ronald, (1994), Cultural Evolution in Industrial Advanced Countries, Translated
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Karimi Male. Ali, (2007), New Identities in Globalization Age, Journal in Law and Political
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Jaleipor. Hamid Reza, (2002), Sociology of Social Movements, Tehran, Nei Press.
Castells, Emanuel, (2001), Information Age; Social, Economy, Culture, Translated by Hasan
Chavoshian, Tehran, Tarh No Press.
Kenny. Michael, (2004), The Politics of Identity, London, Cambridge Polity Press.
McLuhan. M, (1964), Understanding Media, London, Roulade.
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Taylor. P.J. (2000), Inaction of the world, Americanization. Modernization and globalization,
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Hirst.P. Thopson.G, (1996), Globalization in question : The international economy and
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London, rout ledge.
Shahramnia. Amirmasoud, (2006), Globalization and democracy, Tehran, Negahe Moaser
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Luke .W, (1995), New world order or neoworld orders: power, politics and ideology in
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Tehran, Kavir Press.
Waters .Malcolm, (2000), Globalization, Tehran, Organization of Industrial Management
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Schoit. Jan A art, (1993), International relation of social change, Bucking ham, Open
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Safaei. Sohila,(1999), The process of globalization on human rights and it's challenge,
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Oxford. Barry, (2009), Global organization, economic, politic, culture, Tehran, International
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culture of globalization, Durham, Duke University Press.
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100% FDI IN SINGLE-BRAND RETAIL OF INDIA- A BOON OR A BANE?
J.J.SOUNDARARAJ*
*Assistant Professor,
PG & Research Department of Commerce,
Loyola College, Chennai- 600034.
ABSTRACT
One of the most important developments during the last two decades is the notable growth of
FDI in the global economic landscape. This unprecedented growth of global FDI from 1990
around the world make FDI an important and vital component of development strategy in both
developed and developing nations and the policies are designed in order to stimulate inflows of
FDI. Perhaps, FDI provides a win-win situation to both host and home countries as well. The
home countries take the advantage of vast market potential accelerated by industrial growth,
whereas host / targeted countries want to acquire technical know-how and managerial skills and
supplement domestic savings and foreign exchange. According to AT Kearney‟s Annual Global
Retail development Index for the year 2010, it is found in the annual study, made among 30
Countries based on their retail investment attractiveness, India has been placed at third rank
which is next to China and Kuwait. It is also mentioned that the Indian retail market is worth
$410 billion as of now and only 5% sales are through organised retail whereas, the rest is in the
unorganised retail. Such a major unorganised segment of Indian retail could be perceived to be
the opportunities for domestic and international Companies. Moreover, it is estimated that the
Indian retail will grow very fastly to become worth of $535 billion in 2013, with 10% from
organised retail due to the effect of growing middle class which will demand better shopping
environment and quality brands. The Indian Government has now allowed 100% FDI in the
single-brand retail in addition to 100% FDI in the cash and carry B2B / wholesale segment that
already exists. Till today, FDI in Indian multi-brand retail has not been permitted due to the
resistance from the opponents and the allies of the central govt. Perhaps, the UPA government
might take it up again after the five state assembly elections that are scheduled between January
30, 2012 and March 03, 2012. This paper primarily makes an attempt to critically evaluate
whether allowing 100% FDI in Single-brand retail of India is a boon or a bane.
KEYWORDS: Retail; Organised Retail; Unorganised Retail; Retailer; Multi-Brand Retail;
Single-Brand Retail.
______________________________________________________________________________
INTRODUCTION
The High Court of Delhi in 2004 defined the term „retail‟, as a sale for final consumption in
contrast to a sale for further sale or processing (i.e. wholesale). It is a sale to the ultimate
consumer. Thus, retailing can be said to be the interface between the producer and the individual
consumer buying for personal consumption. This excludes direct interface between the
manufacturer and institutional buyers such as the government and other bulk customers.
Retailing is the last link that connects the individual consumer with the manufacturing and
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distribution chain. A retailer is involved in the act of selling goods to the individual consumer at
a margin of profit.
The marketers can very well take efforts to create demand for their market offer, but
eventually it is only the retailers who meet out the demand appropriately. In case, the retailers do
not stock the brands, demanded by the customers, all the efforts of the marketers go waste. Such
an important last link in the supply chain is occupied by the traders called „Retailers‟. There are
two sectors in Indian retailing namely, organised sector and unorganised sector. As far as the
Indian consumer market is concerned, 95% of the retailing is in the form of Informal /
Unorganised. It is the situation that primarily creates an opportunity for the giant domestic and
Multi-national companies to enter into the retailing in India. Entry of RIL (Reliance Industries
Ltd) into the retail industry of India is an apt example and evidence for the previous point.
It is obvious that retailing is the largest private sector industry in the world economy and
as per the survey by AT Kearney, it is found that India is the third most attractive Country next
to China and Kuwait in the world from the view point of the multi-national corporations which
are interested in making investment in the retailing of India. The Indian Government has already
opened up the gateway for 100% FDI in single-brand retailing and cash and carry wholesale. In
relation to the most important segment of retailing, namely multi-brand retailing, the government
is seeking FDI options in such a way it is permitted without affecting the existing social
framework. The above discussed aspects motivated the researcher to do a critical evaluation of
the choice and consequences of 100% FDI in single-brand Retail.
INDIAN RETAILING- AN OVERVIEW
Retailing is considered to be the largest private sector in India and moreover, it is second
to agriculture in terms of provision of employment. Indian retailing provides employment to
more than 4 crore people. The retail industry is divided into two sectors namely, organised or
formal and unorganised or informal. In simple terms, it could be said that Organised retailing is
one in which the trading or merchandising is carried out by licensed or authorized retailers who
are registered for sales tax and other taxes. The companies‟ owned super markets, hyper markets,
retail chains and other privately owned retail stores or departmental stores come under this
organised retailing. The revenue, generated by these enterprises is accounted for by the
Government. It is worth to mention few brands and companies that are presently marching in the
Indian Organised Retailing. They are, namely Foodworld, Spencers‟ daily, More super markets,
Big Bazaar, Hypercity, Shoppers stop, Khadims, Lifestyle, Pantaloons, Westside, Trent, Reliance
super, Reliance trends, Reliance footprints, and entertainment chains like, Adlabs, Fame, PVR,
Inox and Fun Republic. To spell out few Indian companies that have invested a big money in
Indian Organised Retailing are namely, Reliance, Future Group, Aditya Birla Group, TATA, and
Bharti etc. Regarding the Unorganised retailing, it stands for 95% of the Indian retailing and is
occupied by the sole-owner managed general provision stores, paan shops, convenient stores,
hand cart and pavement vendors etc. In relation to the provision of employment, the Organised
sector has employed 50 lakh people whereas, the unorganised has employed 3.5 crore people in
India. It is found that India has highest density of shops in the world (AC Nielson and KSA
Technopark, India). It is also estimated that the retail contributes about 10-11% to the GDP of
India. The value of the Organised retail is Rs. 35,000 crores and of the Unorganised is Rs.
9,00,000 crores approximately. The Organised retailing is growing at a rate more than 30%. It
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implies that slowly the unorganised segment is being converted into Organised. Regarding the
investment, made by some of the Indian giants, it is learnt that Reliance has already invested
$3.4 billion and emerging as the largest contemporary Indian conglomerate; Hypercity Retail of
K.Raheja group plans to open up 55 hypermarkets before 2015; Bharti enterprises plans to spend
$5 billion by 2015 in their retail business. The present state and future plans of companies in this
Indian retail industry will certainly ensure an abnormal growth rate than the present.
According to AT Kearney‟s Annual Global Retail Development Index for 2010, it is
found in the annual study, made among 30 Countries based on their retail investment
attractiveness, India has been placed at third rank which is ahead of Brazil, Saudi Arabia and
others.
TABLE-1 TOP FIVE RETAIL INVESTMENT COUNTRIES
2010
Rank
Country Market
Attractiveness
(25%)
Country
Risk
(25%)
Market
Saturation
(25%)
Time
Pressure
(25%)
GRDI
Score
1 China 50.6 85.8 32.9 86.6 64.0
2 Kuwait 75.4 94.3 56.2 24.5 62.6
3 India 35.4 51.3 62.2 97.8 61.7
4 Saudi Arabia 65.3 86.5 50.7 31.0 58.4
5 Brazil 73.5 74.3 46.6 36.9 57.8
Source: GRDI (Global Retail Development Index) 2010, AT Kearney Analysis
It is also learnt from the analysis of AT Kearney that the Indian retail market is worth
$410 billion as of now and only 5% sales are through organised retail whereas, the rest is in the
unorganised retail. Such a major informal segment of Indian retail could be perceived to be the
potential opportunities for domestic and international Companies. Moreover, it is estimated that
the Indian retail will grow very fastly to become worth of $535 billion in 2013, with 10% from
organised retail due to the effect of growing middle class which will demand better shopping
environment and quality brands.
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CHART-1
Source: GRDI (Global Retail Development Index) 2010, AT Kearney Analysis
The companies which have entered into the retailing in India have started introducing
innovative formats in stores. Future group has set up community family shopping centre in
Bangalore city. Wedding malls have been developed to offer every aspect of wedding
requirements. Wal-Mart is working innovatively to change the agricultural supply chain model in
India in order to improve the productivity and quality of goods by launching direct farm produce
sourcing method. Foreign companies, established in the global retail continue to show greater
interest in India to open hyper markets and Malls. In apparel, Zara from Spain opened its first
store in India in 2010. Polo Lauren and Diesel brands are expanding their retail business in India
fastly. Though the real estate is cheaper in India comparing many developed nations, the
companies are unable to find suitable locations in Tier-1 Cities. Therefore, they have started
opening shopping centers in Tier-2 Cities of India. For example, More, Spencer‟s, Mega Mart
and Shoppers stop have already opened up their stores inTier-2 cities.
SOURCES OF FDI IN INDIA
India has broadened the sources of FDI in the period of reforms. There were more than
130 countries investing in India in 2011 as compared to 15 countries in 1991. Thus, the number
of countries investing in India has been increased after reforms. After India adopted
liberalization of economy, Mauritius, South Korea, Malaysia, Cayman Islands and many more
countries predominantly appears on the list of major investors apart from U.S, U.K, Germany,
Japan, Italy, and France which are not only the major investor now but during pre-liberalisation
era also.
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TABLE-2 MAJOR SOURCES OF FDI (IN %) IN INDIA
(FROM APRIL 2000 TO APRIL 2011)
Mauritiu
s
Singapor
e
U.S.A U
K
Netherlan
ds
Japa
n
Cypru
s
German
y
Franc
e
UAE
41.56 % 9.84% 7.17
%
5
%
4.32% 4.15
%
3.75% 2.30% 1.87
%
1.44
%
Source: Complied & computed from the various issues of Economic Survey, RBI Bulletin,
Ministry of Commerce
The data in table-2 presents the major investing countries in India during 2000-2011.
Mauritius is the largest investor in India with 41.56% of total FDI during the period. This
dominance of Mauritius is because of the Double Taxation Treaty i.e, DTAA- Double Taxation
Avoidance Agreement between the two countries, which favours routing of investment through
this country. This DTAA has been made out with Singapore also. Singapore is the second largest
investing country in India. While comparing the investment made by both Mauritius and
Singapore, one interesting fact comes up which shows that there is a huge difference between
FDI inflows to India from Mauritius and Singapore. The other major countries are U.S.A with a
relative share of 7.17% followed by UK, Netherlands, Japan, Cyprus, Germany, France and
UAE.
CHART-2
Source: Complied & computed from the various issues of Economic Survey, RBI Bulletin,
Ministry of Commerce
SHARE OF TOP 10 COUNTRIES IN FDI INFLOWS ( 2000-2011)
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
COUNTRIES
FD
I C
ON
TR
IBU
TIO
N I
N %
Series1 41.56% 9.84% 7.17% 5% 4.32% 4.15% 3.75% 2.30% 1.87% 1.44%
MauritiusSingapor
eUSA UK
Netherlan
dsJapan Cyprus Germany France UAE
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Thus, it is understood that only these ten countries account for 81.4% of the total FDI
inflows in India during 2000-2011. India needs enormous amount of financial resources to carry
forward the agenda of transformation from the planned economy to the opened economy, to
tackle imbalance in BOP, to accelerate the rate of economic growth and to have a sustained
economic growth.
DISTRIBUTION OF FDI WITHIN INDIA
FDI inflows in India are concentrated around five cities namely, Mumbai, New Delhi,
Bangalore, Ahmedabad, and Chennai. Mumbai received heavy investment from Mauritius
(29%), apart from U.K. (17%), USA (10%), Singapore (9%), and Germany (4%). The key
sectors attracting FDI inflows to Mumbai are services (30%), Computer software and hardware
(12%), power (7%), metallurgical industry (5%) and automobile industry (4%). Delhi received
maximum investment from Mauritius (58%), apart from Japan (10%), Netherlands (9%), and UK
(3%). While the key industries attracting FDI inflows to Delhi region are telecommunications
(19%), services (18%), housing and real estate (11%), automobile industry (8%) and computer
software and hardware (6%).
CHART-3
Source: Compiled and computed from the various issues of SIA Bulletin, Ministry of Commerce,
GOI
Heavy investment in Bangalore came from Mauritius (40%) alone. The other major
investing countries in Bangalore are USA (15%), Netherlands (10%), Germany (6%), and UK
(5%). Top sectors reported the FDI inflows are computer software and hardware (22%), services
(11%), housing and real estate (10%), telecommunications (5%), and fermentation industries
(4%). Chennai received FDI inflows from Mauritius (37%), Bermuda (14%), USA (13%),
Singapore (9%) and Germany (4%). The key sectors attracting FDI inflows are construction
activities (21%), telecommunications (10%), services (10%), computer software and hardware
DISTRIBUTION OF FDI WITHIN INDIA (2000-2008)
0
5000
10000
15000
20000
25000
30000
Mumbai New Delhi Bangalore Ahmedabad Chennai
REGIONS
Am
t IN
MIL
LIO
N (
US
$)
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(7%), automobile industry (7%). As far as technical collaborations are concerned, Chennai
received 660 numbers of technical collaborations during 1991-2008.
FDI IN INDIAN RETAILING
It is good to look at the present state of FDI in Indian Retailing. The Indian Government
has so far permitted 100% FDI in cash and carry B2B format business and single-Brand Retail.
Cash and carry form of trade allows sale of goods to the member Institutions like, offices, hotels
and retailers. The consumers who buy goods for personal consumption are not permitted to be
served by the enterprises that are funded by FDI in cash and carry business format. Regarding,
single brand retailing, FDI to the tune of 100% has been permitted in India from 10th
January
2012 with certain conditions. However, the initiative of the Central Govt. to allow FDI in multi-
brand retail segment has not yet been materialised. Presently, the central government is looking
at the ways and modality of allowing FDI in the multi-brand retail segment. According to the
Finance Minister Mr. Pranab, who delivered his address at the 106th
annual session of PHD
Chamber of Commerce and Industry in New Delhi on 23rd
December 2012, FDI in multi-brand
retail is still in the „mind of the government‟ and it would be pursued once consensus emerged
among political parties and other stakeholders.
It is the general perception of the business people and also majority of the public that the
central Govt. is holding up the proposal of FDI in multi-brand retail of India till the state
assembly elections of five states – Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur that
shall be completed by March 3, 2012.
HOW DO FEW TOP RETAILERS OF THE WORLD LOOK AT INDIAN CONSUMER
MARKET?
It is certain that Indian consumer market is perceived to be an attractive and profitable
destination for many foreign companies. However, it is more appropriate to look at the details of
the fact. Among the many multi-nationals that are interested in Indian retail, few companies such
as, Wal-Mart, USA; Carrefour, France; Metro, Germany; Tesco, UK; and Costco, USA show
greater interest. Wal-Mart, USA with the retail sales of $ 256.33 Billion as of 2003 is very
particular to enter India. In fact, it has already entered in B2B format of India in collaboration
with Bharti enterprises. Carrefour, France which is a global retailer with the sales of $79.80
Billion in 2003 shows interest in entering India. Metro, Germany which has already entered into
India in the cash and carry format, now much interested in getting into the Indian multi-brand
retail segment. Tesco, UK is already in touch with the Indian Government to enter into India.
Similarly, Costco of USA is also in touch with the government to get an entry into India.
ENTRY STRATEGIES, USED BY THE FOREIGN FIRMS TO ENTER INTO INDIA
This part of the paper analyses the entry strategies that have been already utilised by the
foreign companies to enter into India. Franchising:- In this mode, the international companies
give the right of using the name and technology to their local partners in the foreign markets and
in return, they collect the consideration of Royalty. Nike, Pizza Hut, Tommy Hilfiger, Mark &
Spencer and Mango are few brands which have utilised this mode. Manufacturing:- If a foreign
company sets up its own production and also has the permission to establish retail counters in
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India, it has utilised Manufacturing mode of entry. Bata India, Coca Cola India, Pepsi India and
Perfetti India are few examples for this mode of entry. Wholesale Trading:- entry permitted to
involve in cash and carry business in B2B market. Wal-Mart and Metro are good examples here.
Distribution:- In this case, the multi-national companies establish local distribution centres
through which they supply products to Indian retailers.
CONDITIONS ON 100% FDI IN SINGLE-BRAND RETAIL
Unlike FDI in Multi-brand retail, which faced a lot of resistance from the opponents and
some of the allies of the UPA Govt, FDI in Single-brand retail has been approved easily.
According to the amendment made in „Circular 2 of 2011 – Consolidated FDI Policy‟, FDI in
Single-brand retail trading would be subject to the following conditions:
1. Products to be sold should be of a „Single-brand‟ only.
2. Products should be sold under the same brand internationally i.e. products should be sold
under the same brand outside India as well.
3. „Single-brand‟ product retail trading would cover only products which are branded during
manufacturing.
4. The foreign investor should be the owner of the brand.
5. For any FDI beyond 51%, mandatory sourcing of at least 30% of the value of products sold
would have to be done from Indian „small industries / village and cottage industries,
artisans and craftsman‟. Small Industries would be defined as industries which have a total
investment in plant & machinery not exceeding US $ 1.00 million.
6. The application seeking permission from the government for FDI in retail trade of single-
brand should be submitted to the Secretariat for Industrial Assistance in the Department of
Industrial Policy and Promotion. The application will specifically indicate the product /
product categories which are proposed to be sold under single-brand. Any addition to the
product / product categories to be sold under single-brand would require fresh approval
from the government.
7. Applications would be processed in the Department of Industrial Policy and promotion to
determine whether the products proposed to be sold satisfy the notified guidelines, before
being considered by the FIPB for government approval.
This is a great announcement for many foreign brands which have already entered into India as
well as those who desire to enter (Like IKEA, GUCCI etc).
BENEFITS OF ALLOWING 100% FDI IN SINGLE-BRAND CATEGORY
There are certain benefits, identified by the researcher on allowing FDI in Indian single-
brand retailing. They have been detailed as follows:
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SUPPORTS THE GROWTH OF INDIAN SMALL INDUSTRIES: If the consumers in India
buy goods at foreign single-brand outlets, established in India and enjoy the shopping
experience, in reality, they would be actively contributing towards significant money transfer to
a multinational based out of the USA, which after retaining profits, would end up sending
majority of this money to China, where most goods are being manufactured. The government
appears to be cognizant of this very issue, which is why they proposed that at least 30 per cent of
the procurement of manufactured / processed products shall be from "small industries"
(presumably this refers to "small industries" in India). This aspect will lead to support the growth
of the small industries in the country.
SUPPORTS IMPROVED STANDARD OF LIVING: Allowing FDI in Indian Single-Brand
Retail will certainly bring in more sophisticated and luxurious goods and services to the country.
Availability of such goods backed with good promotional support will definitely motivate /
induce the Indian buyers to buy and consume them. It will be certain that the standard of living
of the consumers will be improved. In addition to the above, the people who shall be employed
in the multi-national retail enterprises will be paid attractive salaries and wages that will also
stand for their increased affordability. The organised retail also provides other add-on services
along with the products sold. All these new changes, that shall be resulted by allowing FDI in
single-brand retail will surely support improved standard of living.
ENHANCED COMPETITION AND REDUCED PRICES: Entry of the many other multi-
national corporations will obviously promise intensive competition between the different
companies offering their brands in a particular product market. When the manufacturing
companies will take efforts to increase their market share or to accomplish their other marketing
objectives, competition among them will be activated. Such a competition will result in the
availability of many varieties, reduced prices, and convenient distribution of the marketing
offers.
ENHANCED SHOPPING ENVIRONMENT AND EXPERIENCE: Consumers in India
mostly suffer from unhygienic experiences, erratic price and irregular availability in daily food
and FMCG products. Many established foreign retail giants that are known for low pricing,
creation of pleasant shopping environment, maintenance of hygienity, better customer care,
effective inventory management and storage facilities shall efficiently contribute for eradicating
the said problems and make the shopping very productive and a happy experience to the
customers in India.
EXPLOITATION BY THE MIDDLEMEN SHALL BE STOPPED: Small farmers are
suffering from the middlemen who are depriving them a fair price. The foreign retail giants shall
involve in direct manufacturing and sourcing of their market offer from Indian small industries
as well. These activities that shall result by allowing 100% FDI in single-brand retail of India
will certainly control the exploitation by middlemen.
AN OPPORTUNITY FOR INDIAN COMPANIES / RETAILERS TO LEARN ABOUT
NEW STRATEGIES: Countries like China, Vietnam and Chile that initially hesitated but have
since opened 100 per cent FDI in retail are today enjoying the investments, job creation,
introduction of technology and infrastructure. Consumers are benefiting from better pricing and
better quality of products. As per Chinese analysts, entry of Walmart and Carrefour has changed
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the way Chinese companies manage business. Local Chinese retailers like Shanghai Bailian
group, Suning, Gome and Dashang still dominate the retail market as they have quickly learnt
how to set up new supply chain systems. In fact, small retail outlets have risen in China from 1.9
million to 2.5+ million since 2004. US market researcher RNCOS has projected that Vietnam‟s
retail market sales will increase from $39 billion in 2008 to $85+ billion by 2012. In 2009 alone,
FDI in Chile was $6.21 billion. Similarly Argentina, Brazil, Indonesia, Malaysia, Russia,
Singapore, and Thailand have allowed 100 per cent FDI in multi-brand retail since 1990s.
According to a Columbia University study, 10 years after Indonesia opened FDI, small traders
continue to retain 90 per cent of the business. Therefore, the similar progress could be expected
in India also after 100% FDI in single-brand is allowed.
INTEREST OF THE SMALL TRADERS IS NOT AFFECTED BY THE FDI POLICY OF
THE GOVT.
The loudest and most vocal opponents of FDI in retail are small traders who say they will go
bust. They staged similar, violent protests when the first Indian retail chains, opened.
There have been many surveys over the years of the impact of organised retail on the small
trader with varying conclusions. Generally they agree that in the initial few months, small traders
in the vicinity of modern stores took a hit but once the novelty wore off, things went back to
earlier. In a quick straw poll, conducted by an organization in 4 major cities of the country, it
was found that the Indian „Dukaandaar‟ after almost a decade of organised retail is largely
unruffled. Therefore, the new FDI policy for single-brand retail shall not affect the small retailers
in a large scale.
CONTROLLING INFLATION: It could be understood that the large organised retailers could
directly purchase their merchandise from the producers at most competitive prices. The absence
of middle men will help the organised retailers to set competitive but yet profitable prices for
their market offer. This is one way by which inflation could be controlled efficiently.
ENCOURAGE THE MOBILISATION OF FOREIGNERS INTO INDIA: Allowing FDI in
Indian retailing will obviously encourage the mobilisation of foreigners into India. The
foreigners who come to India may prefer to buy the offers of both the domestic and multi-
national companies. Moreover, the availability of the global brands and better quality products
shall encourage many foreigners to come into India for the purpose of employment or doing
business in manufacturing and other sectors.
BOON TO HOSPITALITY AND TOURISM INDUSTRIES IN THE COUNTRY:
The foreign companies will bring to India all the products and services they market in their
countries, provided they are permitted. Such a situation will be a boon to the Indian tourism and
hospitality industries that helps them to attract many foreigners to visit India. Since all the usual
products and services what they consume in their home countries are made available here in
India, visiting India will not be a problem for them. Therefore, it could be well said that the
availability of the global brands is a boon to the Indian hospitality and Tourism Industries.
INCREASE IN EXPORTS FROM THE COUNTRY: When the foreign companies are
permitted in Indian retail market, they will contribute for increase in exports. Those foreign
companies may find sourcing in India. It is evidenced that Wal-Mart in 2006, sourced operations
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worth $600 Million in India. In 2010, it sourced goods worth $125 Million from the State of
Punjab alone. If similar sourcing of various other products, done in India by even few other
world giant retailers, the export from India will surely contribute for trade surplus. It is what has
happened in China after 1994.
EFFICIENT ENFORCEMENT OF LAWS: The presence of International companies in
Indian Retail will facilitate effective enforcement of Tax Laws and increase in tax revenue. Tax
evasion could be stopped when more of the retail is in organised format.
OVERALL GROWTH OF THE COUNTRY: FDI in Indian retail will obviously result in the
growth and expansion of the market and change in consumer spending pattern and also increase
in their spending that eventually lead to higher GDP in the country.
CREATION OF MORE AND BETTER EMPLOYMENT OPPORTUNITIES: The entry of
foreign companies into Indian Retailing will not only create many employment opportunities but,
will also ensure quality in them. This helps the Indian human resource to find better quality jobs
and to improve their standard of living and life styles on par with that of the citizens of
developed nations.
THREATS OF ALLOWING 100% FDI IN SINGLE-BRAND CATEGORY
While on one hand, India can enjoy a good number of benefits by allowing FDI in Indian
single-Brand retail, on the other hand it is a fact to be accepted that there are few threats also
arise. This part of the paper shall identify and detail such threats.
DOMINATION OF ORGANISED RETAILERS: FDI in single-brand retail will strengthen
organised retail in the country. These organised retailers will tend to dominate the entire
consumer market. Much organised retailers might even easily involve in syndication among
them on certain activities which will be against the interest of consumers and government as
well. This is another threat of FDI in multi-brand Retail in India.
INDIRECTLY LEADS TO INCREASE IN REAL ESTATE COST: It is obvious that the
foreign companies which enter into India to open up their malls and stores will certainly look for
places in the vantage points of the cities. There shall be a war for place, initiated among such
companies. It will result in increase in the cost of real estate in the cities that will eventually
affect the interest of the ordinary people who desire to own their houses within the limit of the
cities.
DISTORTION OF CULTURE: Though FDI in Indian retail will indirectly or directly
contribute for the enhancement of Tourism, Hospitality and few other Industries, the culture of
the people in India will slowly be changed that is not for good. The youth of India shall easily
and more interestingly imbibe certain aspects and lifestyles from the foreigners who would in
high number come into India. So, there is a danger of negative changes in the rich Indian culture.
PROMOTION OF UNHEALTHY COMPETITION AMONG THE ORGANISED
RETAIL PLAYERS: Since there will be tremendous growth of organised form of retail
especially through FDI in retail, it will definitely lead to stiff competition among the domestic
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and other companies. The resources that will be spent by the companies to compete with one
another will be eventually charged on the heads of the final consumers. This will make the
products costlier.
CREATION OF MONOPOLY IN THE LONG-TERM: The foreign companies, which shall
be permitted through FDI in retail, will initially spend huge sum of money to chase the domestic
companies out of business. It will not be affordable to any domestic company to face the
competition from the multi-nationals in the retail market. The foreign giants will offer the
products in the beginning at subsidized rates in order to capture a large market share. They can
sustain for a longer period even in loss, but the same is not possible for domestic companies in
retail. Once, the domestic companies are suppressed fully and sent out of the market, the foreign
companies will play like Monopoly in different locations of the Indian consumer market. This
will only result in the exploitation of the interest of final consumers.
NEGATIVE INFLUENCE ON THE TRADE BALANCE: As many foreign companies which
will involve in Indian Retail will source majority of their products globally and show interest in
investment in much profitable countries, it will only affect the trade of India negatively in the
long term.
DISTORTION OF URBAN DEVELOPMENT: The present slow and steady urban
development will be affected much by the entry of foreign companies in Indian retail. Those
companies will be interested in locating their stores and malls only within the limits of the cities.
They will never contribute for the structured development of the cities. Rather, they will
contribute for polluting the environment of the cities. This has been evidenced by allowing FDI
in automobile sector of India.
SUGGESTIONS
Many foreign companies have already entered into Indian market through the available
modes such as, Franchising and Exporting. They are much eager to change their entry to FDI that
would strengthen their operations in India. What is really needed for the growth of any country is
the promotion of consumption. Effective consumption will lead to greater economic growth of a
country. It is also not fair to deny the Indian consumers preferring better and modern products. It
is the belief of the researcher that allowing FDI in Indian single-brand retail by considering the
following suggestions will bring in more of benefits than threats to the country.
FDI should be initially allowed in less sensitive sectors and also in the sectors wherein
the domestic companies are established strongly.
In order to facilitate the establishment of infrastructure, FDI should be initially permitted
in Tier-II Cities of the country.
The new shopping centers, to be opened by the foreign companies should not add to the
congestion of the cities.
Since countries like Thailand and Malaysia have suffered badly out of the sourcing done
by Multi-nationals, permitted in the retail of their market, India should take a note of
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certain lessons from those countries while framing policies for allowing FDI in single-
brand retail.
Try to emphasise on more sourcing of products locally.
In order to avoid the foreign companies to make use of „predatory practices‟, allow the
companies to first set up stores in the form of super markets or departmental stores.
The government should take initiatives to improve the manufacturing sector that grows at
a very lesser rate of 3.7%. If the manufacturing is strengthened, the displaced employees
of the retail industry could be well accommodated there.
Indian government should bring out another condition by which the foreign retail giants
should require to spend a portion of their profit to take care of certain social welfare
activities such as, controlling pollution, generation and conservation of energy, etc.,
The conditions for allowing FDI in single-brand retail should also emphasise upon the
provision of employment opportunities to Indians that would enable India to reduce the
crucial unemployment problem.
CONCLUSION
It is obvious that India, being a member in WTO, it has to allow FDI in multi-brand retail
also. India could only delay the permission to FDI but not to disallow it. In this juncture, India
Should find out suitable ways as suggested in this paper to allow FDI so that it can enjoy more of
the benefits than threats. Even the threats of FDI could be handled properly if allowing FDI is
planned out very strategically. Since, many people involved in Indian retail traditionally shall be
displaced by the entry of foreign giants, the government should take efforts to strengthen the
industries like manufacturing which will accommodate those displaced employees. The advent of
FDI in retail sector is bound to pull up the quality standards and cost-competitiveness of Indian
producers in all these segments. It will benefit not only the Indian consumer but also open the
door for Indian products to enter the wider global market. Moreover, as any decision that affects
the consumption of the consumers will only stop the economic growth of a country, it is
concluded that the decision, taken by the Government to allow 100% FDI single-brand retail of
India is a boon to its economy.
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TRAINING NEEDS IDENTIFICATION OF NURSING STAFF –
A CASE STUDY OF A HEALTH CARE ORGANIZATION
DR. V.RAMA DEVI*; M.MALLIKA RAO**
*Professor,
KLU Business School, KL University, Vaddeswaram, Guntur (dt.) - 522502, Andhra Pradesh.
**KLU Business School, KL University,
Vaddeswaram, Guntur (dt.) - 522502, Andhra Pradesh.
ABSTRACT
The delivery of valuable health care depends on an expanding team of trained health care
professionals. As people are critical assets for the organization, the development of this asset is
essential for the continued health and prosperity of the organization. The training needs
assessment is a critical activity for the training and development function. It is against this
backdrop the paper is addressed to study training needs identification of nursing staff in a Health
care organization. The study was conducted through a survey among 110 nursing staff and 30
DMOs using structured questionnaires. The findings of the study revealed that the training need
gap is relatively more for enthusiasm in learning followed by Team Spirit and clinical skills. The
training need gap is the least for communication, followed by planning & organizing skills.
There should not be any compromise in the quality of services to be provided to the patients as
the health care organizations deal with the valuable life of the people and the need for trained
professionals in health care sector can hardly be overemphasized.
KEYWORDS: Health care, Training needs assessment, Training need gap, Training and
development.
______________________________________________________________________________
INTRODUCTION
Today the health care industry is considered one of the largest industries throughout the world. It
includes thousands of hospitals, clinics and other types of facilities which provide primary,
secondary and tertiary levels of care. Delivering this care requires health care workers,
including physicians, nurses, and other allied health professionals, as well as community-based
health workers especially to provide services in medically-underserved area.
There is increasing acceptance of the idea that value is the key to success for practically
all organizations, including health care organizations. Proponents of this idea emphasize that
only the delivery of superior value can create customer loyalty, and only loyalty can optimize
profitability. Promising value is what attracts customers and delivering value, is what keeps them
coming back. The delivery of valuable health care depends on an expanding interdisciplinary
team of trained health care professionals.
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SIGNIFICANCE OF TRAINING
With the increasing demand for improved productivity and quality of service in organizations,
strategies for improving the work performance of personnel have become increasingly important.
If an organization's greatest asset is its people, then the development of this asset is critical to the
continued health of the organization. The need for improved productivity has become universally
accepted and that it depends on efficient and effective training is not less apparent. Thus the role
played by staff training and development can no longer be over-emphasized.
Usually, before training or development programs are organized, efforts should be made through
individuals and organizational appraisals to identify the training needs. The training needs
assessment is a critical activity for the training and development function. It is against this
backdrop the paper is addressed to study training needs identification of nursing staff in a Health
care organization.
LITERATURE REVIEW
Organizations that develop and implement training without first conducting a needs assessment
may end up over training, under training, or just missing the point all together. Training can be
expensive; therefore it is critical that training be tailored to meet the specialized needs of the
organization and the individual trainees (Brown, 2002). Training needs assessment can provide
important data on the training needs of an organization. Salas and Cannon-Bowers (2001) felt
that needs assessment is the most important step in deciding who and what should be trained. In
addition to justifying the costs of training and providing important data for the organization,
taking part in a needs assessment can actually improve employee's (participants) satisfaction
with training.
Identification of training needs, design and implementation of training programmes, transfer of
training, and evaluation of programme benefits are key activities (Krishnaveni & Sriprabaa,
2008) in addition to studying general training variables such as types of training, selection of
trainees, selection criteria, evaluation instruments, etc. The Training Need Analysis is a
significant first step in the successful designing and implementation of training programmes.
TNA is a primary phase in the designing and development of training programmes (Dierdoff &
Surface, 2008). Conducting systematic needs assessment can significantly impact the overall
effectiveness and quality of training programmes (McGehee & Thayer, 1961).
In a training needs analysis for a specific company employee, the person conducting the analysis
(who will usually be a qualified trainer) should be able to describe what that employee is able to
do in the job in sufficient detail to be understood by all those concerned with
the training process, such as the trainees themselves, the eventual trainers and the company
management (Freeman, Jean M, 1993.) Staff working in the companies sometimes requires
individualized training to accomplish their duties more effectively. The form and content of any
tailor made training for them will depend on their special training needs. To determine
those needs, an analysis should be made in each case of the tasks that the person concerned
already carries out in his or her work, and the additional skills and knowledge required to reach a
higher standard of work. The gap between the two can then be filled by appropriate training.
(Cellich, Claude; Roberts, Alan, 1993)
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OBJECTIVES OF THE STUDY
1. To highlight the significance of training to the organizations
2. To study the importance of training needs assessment
3. To identify the training needs of nursing staff in a health care organization
METHODOLOGY
In order to identify the training needs of nursing staff two structured questionnaires – one for the
nursing staff and another for DMOs -were designed and administered. The inputs for preparing
the questionnaire were taken from the following:
1. The performance appraisal format of the nursing staff from the department of HR.
2. The observations being made on the main points suggested by the trainer.
3. Certain studies that were conducted in the same area.
One questionnaire was administered to a sample of 110 nursing staff out of 600 population. The
sample was chosen using stratified random sampling technique. Another questionnaire was
administered to a sample of 30 DMOs.
RESULTS OF THE STUD
Nursing and DMOs responded on a scale of 7-1. The responses of nurses indicate the perception
of their skills whereas the responses of DMO’s indicate their perception of skills possessed by
nurses.
LEVEL OF PATIENT CARE
The patient is the centre of the nurse's concern. Nurses care for patients continuously, 24 hours a
day. They help patients to do what they would do for themselves if they could. Quality has
become a major focus within health care, especially in the areas of quality assurance and patient
safety. As this focus increases, nurses' involvement in quality improvement activities is likely to
expand in coming years. The patient care in the present study includes different dimensions like
to listen attentively to the patients, being pleasant and polite with the patients, establishing a
relationship with patients, assessing patient’s physical needs, bed side manners, adherence to
doctors’ orders and handling emergencies.
It is observed that 14% of the nursing respondents perceived that their level of patient care skill
is outstanding and remaining respondents perceived as very good/good. Whereas DMOs
perceived that the nursing staff have good/very good patient care skills. Though it is a healthy
sign, there is always scope for strengthening the skill as patient care is the core function of the
nurses.
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ADMINISTRATIVE DUTIES:
The nursing staff also perform certain administrative duties like inputting data into written or
computerized records, using technical equipment and undertake other administrative duties.
Though performing administrative duties is not the main part of their job, still they need to be
proficient in these duties. Majority of the nursing respondents (70%) felt that their skill in
discharging administrative duties is only good. It appears that there is some scope for
improvement in this skill which can be taken care of by the training programme. DMOs feel that
the nursing staff are either good or very good in performing the administrative duties.
MANAGERIAL/SUPERVISORY SKILLS:
The staff very often needs to train junior staff or students and also feel responsible and
accountable. They should also have managerial/supervisory skills. 27% of the nursing
respondents felt that their managerial/supervisory skills are outstanding while DMOs did not
perceive them to be outstanding in this dimension. Rest of them have perceived to be either very
good /good in this skill.
CLINICAL SKILLS:
Clinical skills include interpreting patient data, interpreting results from clinical investigations,
undertaking clinical examination of patients and writing clinical, shift and other reports. Majority
of the nursing respondents and DMOs perceived that the clinical skills are good but not
outstanding. This area deserves attention because the clinical skills are very important for the
nursing staff in order to perform their functions effectively.
PLANNING & ORGANIZING SKILLS
We need to be planned and organized to produce good results. It applies in any profession. The
dimensions that are included in planning & organizing skills are prioritizing work according to
patient's needs, organizing skills, cost awareness, having consciousness and planning patient’s
discharge. The level of planning and organizing skills of the nursing respondents are considered
to either very good or good by majority of both nursing and DMO respondents.
ENTHUSIASM IN LEARNING
Knowledge has no bounds. Learning is a continuous process. People who are enthusiastic
learners can perform well and grow fast. Enthusiasm in learning here includes taking initiative in
learning, participation in academic program and ward teaching. The observation is that majority
of the nursing and the DMO respondents feel that their enthusiasm in learning is good but not
outstanding.
PERSONAL BEARING
The importance of personal bearing in nursing profession cannot be undermined. They need to
properly groom themselves, have positive attitude and pleasant manners, disciplined in work,
maintain punctuality and maintain regularity. For nursing professionals personal grooming is
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very important. Surprisingly neither nursing respondents nor the DMO respondents perceived
them to be outstanding in personal bearing.
COMMUNICATION
The nursing staff should be able to communicate well with patients, attendants, superiors and
other staff. Many times the problem arises because the nursing staff fails to understand what the
patient or the attendant is communicating and vice-versa. This is a major problem. The nursing
staff should have good communication skills and have command over language. A significant
percentage (41%) of the nursing respondents felt that their communication skills are outstanding.
But none of the DMOs perceived the same. They considered the nursing staff communication
skills to be either very good or good.
TEAM SPIRIT
The order of the day is team work as it will have synergy. People can perform better as a team.
One needs to be a team member and should also know how to lead the team in certain situations.
The perception of team spirit is just similar to communication skills. Many of the nursing
respondents considered themselves to be outstanding team players but the perception is not the
same by DMOs. They considered them to be just good team players.
TRAINING NEED GAP
Training need gap is calculated not just based on the skills possessed by the employees. It takes
two dimensions. One –the importance of a skill for successful performance of the job and second
the extent to which the employee has that skill. Certain skills are more important when compared
to others. If the skill is more important and the employee does not have that skill, the training
need gap will be more. On the other hand if the skill is less important and the employee does not
have that skill the training need gap will be less. The respondents were asked to rate the
importance of a skill and the extent to which they have that skill. Based on this, the training need
gap for different skills is calculated and the mean scores are presented in Table 1.
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TABLE 1
MEAN SCORES OF TRAINING NEED GAP OF DIFFERENT SKILLS
Sr.No. Skill/Knowledge Training need gap mean
score
1 Patient care 0.88
2 Administrative duties 0.69
3 Managerial/supervisory skills 0.76
4 Clinical skills 1.01
5 Planning & Organizing skills 0.58
6 Enthusiasm in learning 1.20
7 Communication 0.50
8 Personal bearing 0.76
9 Team Spirit 1.06
(Source: Survey)
It is observed from the table that the training need gap is not much for all the skills. Of all the
skills, the training need gap is relatively more for Enthusiasm in learning followed by Team
Spirit and clinical skills. These areas need more attention from training point of view. The
training need gap is the least for communication, followed by planning & organizing skills.
CONCLUSION
Training helps the employees to equip themselves with better knowledge and skills. The training
needs for the nurses have to be properly identified and they could be sent to some workshops and
increase their awareness on the new updates in the technology in the field of medicine. They
should also be trained internally. There should not be any compromise in the quality of services
to be provided to the patients as the health care organizations deal with the valuable life of the
people and the need for trained professionals in health care sector can hardly be overemphasized.
REFERENCES
1. Brown, J. (2002). Training needs assessment: A must for developing an effective training
program. Public Personnel Management, 31(4), p.569.
2. Cellich, Claude; Roberts Alan (1993). Analyzing export training needs for company staff.
International Trade Forum. 2, p 20.
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3. Dierdoff, C. Erich, & Eric A. Surface (2008). Assessing training needs: Do work
experience and capability matter? Human Performance, 21, pp 28-48.
4. Freeman, Jean M. (1993) Human resources planning -training needs analysis.
Management Quarterly, 34(3), p32.
5. Krishnaveni, R., and Sripirabaa, B. (2008).Capacity building as a tool for assessing
training and development activity: an Indian case study. International Journal of Training
and Development, 12(2s), pp121-134.
6. McGehee, W., & Thayer, P.W. (1961). Training in business and industry. Newyork:
Wiley publications.
7. Salas, E., & Cannon-Bowers, J. A. (2001). The science of training: A decade of progress.
Annual Review of Psychology, 52(1) , pp 471-499.
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AN EXPLORATORY STUDY ON MEASURING IMPACT OF INTERNET ON
STUDENTS’ ACADEMIC LIFE OF S.P. UNIVERSITY
RINA DAVE*
*Faculty, Semcom,
Vallabh, Vidyanagar.
ABSTRACT
The rapid growth of end-user computing, low-cost communications and network software now
exert a powerful influence on how students use and communicate information. This research
survey was conducted to find habits of Internet users at the S.P. University of V.V. Efforts are on
to find the search requirements related to the use of the Internet information. Data were collected
by using a questionnaire and follow-up interviews with Internet users from students. It is
revealed that the students are getting quality information through the Internet. They use the
Internet in different ways, such as accessing to online journals, downloading software or text,
chatting, discussion, E-mail services and for finding related references. It was unveiled that the
Internet services are normally used for projects. Also it is observed that the Google and Yahoo
search engines are more widely used compared to other search engines. The analysis reveals that
majority of Internet users always find useful information on the Internet and believed that quality
information is available on the Internet and finally, the studied population use print, online and
offline form of information for updating their subject knowledge.
______________________________________________________________________________
INTRODUCTION
Though college students as a group have grown up using tools such as instant messaging, chat
rooms and electronic mail, little has been done to determine academic effect, on college students.
Is it readily used or do many students depend on the more traditional method of communicating
over long distances—the telephone? Has the Internet and electronic mail helped improve social
connectedness for college students? Are college students more comfortable with the Internet than
others? What can be learned from college students’ Internet use about the shape of Internet use to
come? The Internet plays a crucial role in the access of information resources. "Sources of
information and other opportunities available via the Internet are increasing exponentially. This
comes with the steady increase in Internet use for education" (Edwards & Bruce, 2002) and
research. Also, with the growth of information on the Internet and the development of more
sophisticated searching tools, there is now the more likely possibility of finding information and
answers to real questions. But, within the morass of networked data are both valuable nuggets
and an incredible amount of junk (Tillman, 2003).
When you are looking for information, where is a better place to go than a library? The Internet
has some incredible electronic libraries ready for you. On a small screen of the personal
computer this digital world of the library is available for users. This library in terms of digital
format consists of various electronic resources, such as electronic books, electronic journals, and
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electronic reports. These resources are available either in CD-ROM format or available online on
the Web and constitute the core of the electronic library collection. A new class of digitized
documents has been added to the electronic resources category, comprising those documents
either originally published in print or other formats converted into the digital format.
Many host servers offer free space to web sites; (many of them are free of cost and) government
web sites are often a treasure house for those people who are seeking reports and policy papers.
Now most of the popular newspapers and magazines have their E-versions providing full text of
news items and feature articles (Patil et al., 2004). As a result, it has become difficult to decide
about the quality and authenticity of such information available in digital form. In addition, a
user or information searcher needs to have basic skills in finding relevant information in the
Internet's ocean of information. "Web search services are now a major source of information for
a growing number of people. We need to know more about the information searching habits by
users to improve the effectiveness of their information retrieval" (Spink, Bateman, & Jansen,
1999).
In the light of this study, efforts are on to find the search requirements, related to the use of the
Internet information.
LITRECTURE REVIEW
Information searching habits of Internet users is multi-faced and the literature available is
extremely broad ranging. An attempt has been made to cover number of works that go beyond
discussions of the information seeking behavior itself and its direct applications to closely related
topics such as Internet use. This broad review also includes topics like Web searching, search
engines, the Internet resources, evaluation of information quality, electronic media, and Web
information retrieval.
Biradar (2006) conducted a study on internet usage by the students and faculties in Kuvempu
University. The results indicated that 42.1 % Students use internet twice a week and 31.25%
faculties use it every day. The majority of students as well as faculties use internet for study/
teaching purpose. The favorite place for using internet is library followed by commercial places.
A thumping majority of respondents are satisfied with internet sources and services.
Mishra, Yadav and Bisht (2005) conducted a study to know Internet utilization pattern of the
undergraduate students of G B Pant University of Agriculture and Technology, Pantnagar. The
findings of the study indicated that a majority of the students (85.7%) used the Internet. Out of
the Internet users 67.7% were male students and 32.3% female students. The findings of the
study also showed that 61.5% of the males and 51.6% of the females used Internet for preparing
assignments. A majority of the respondents i.e. 83.1% male and 61.3% female respondents
indicated that they faced the problem of slow functioning of Internet connection.
Kumar and Amritpal Kaur (2004) studied the use of internet by teachers and students in Shaheed
Bhagat Singh College of Engineering & Technology, Ferozepur (Panjab). They found that 46.7%
teachers and 36.7% students’ daily use the internet. About 90% respondents use internet at their
college. Yahoo is found as the favorite search engine. Only 31.7% respondents were fully
satisfied, whereas 36.7% were partially satisfied with internet facilities.
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Chang and Perng (2001) carried out a research work on "Information search habits of graduate
students at Tatung University". The purpose of their study was to investigate the information
requirements and search habits of graduate students at Tatung University in Taipei City, Taiwan.
They show that 90% of the subjects conducted information searches using outside sources in
addition to the university library. They also reported making extensive use of the Internet in the
recent past, mostly World Wide Web-based databases, electronic journals, and search engines.
Dong work emphasized the evaluation of the Internet. He reported the examination of the using
the Internet resources and the evaluation of their usefulness from the Chinese students' and
academics' point of view (Dong, 2003). Hölscherl and Strube (2000) conducted a study about
Web search behavior of Internet experts and newbies. They found the differential and combined
effects of both Web experience and domain knowledge. Spink and Jansen (2004) discuss the
changes in Web search trends from 1997 to 2003 that explored how people search the Web. They
show some patterns and trends in general Web searching. In summary, most Web queries are
short, without query reformulation or modification, and have a simple structure.
RESEARCH METHODOLOGY
OBJECTIVES OF THE RESEARCH STUDY
The goal of this study was to learn about the Internet’s impact on college students’
daily Lives.
To determine the impact of that use on their academic and social routines.
To find the satisfaction derived by the researchers with the Internet and electronic
media.
To find out the importance of electronic information;
SOURCES OF INFORMATION
A major portion of secondary data was collected form articles and research paper that have been
published in various sources like magazines, reputed research journals and business newspapers.
COLLECTION OF PRIMARY DATA
The necessary primary data were collected only from students of different streams of various
institutions of S.P.University.
REPRESENTATIVE SAMPLE
The respondents selected in the research study were only students who have been studied in
different streams of S.P.University.
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RESEARCH TOOL
The researcher has used structured non-disguised questionnaire supported with sampling media
in form of personal interviewing technique.
DATA ANALYSIS AND INTERPRETATION
A BRIEF ABOUT QUESTIONNAIRE
A structured questionnaire was specifically used which covers 11 different questions. In all, 100
questionnaires were distributed among students of S.P.University V.V.Nagar. The researcher has
mainly provided this questionnaire through personal interviews. Finally, 75 responses were
considered for the purpose of data analysis and interpretation. The collected data were edited. It
has been presented in tabular form to provide comprehensive result on research study.
(REFER ANAXTURE I)
The goal of this study was to learn about the Internet’s impact on college students’ daily lives,
and to determine the impact of that use on their academic and social routines.
TABLE – 1: FIRST TIME USERS OF INTERNET
The study indicated that the 79 per cent of students started using internet after completing 10th
Standard followed with 21 per cent after joining college.
TABLE – 2: REASONS FOR USE OF INTERNET
Score Total
1 2 3 4 5
e-mail 26(37.14) 18(25.71) 3(4.29) 13(18.57) 10(14.29) 70
Communicate
socially
1(1.43) 10(14.29) 28(40.0) 18(25.71) 13(18.57) 70
Entertainment 14(20.0) 14(20.0) 16(22.86) 16(22.86) 10(14.29) 70
Frequency Percentage
After completing 10th std. 53 79.10
After joining college 14 20.90
Total 67 100
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Web surfing 10(14.29) 23(32.86) 9(12.86) 16(22.86) 12(17.14) 70
Chatting 19(27.14) 5(7.14) 14(20.0) 7(10.0) 25(35.72) 70
The above Table-2 revels that 38 per cant of respondents use Internet for the electronic mail
while only 1 per cent of respondents access internet to communicate socially i.e. with relative
and family members and 20 per cent of respondents reported that they use it for Entertainment
mostly. Only 15 and 27 per cent of respondents agreed that most primarily the use if Internet is
web surfing and chatting respectively.
TABLE – 3
Frequency Percentage
Yes 67 95.71
No 3 4.29
It was found that 96 per cent of respondents believe that Internet has enhanced their academic
experience.
0
5
10
15
20
25
30
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un
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e s
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ent
Web
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1
2
3
4
5
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TABLE – 4: ACCESS OF INTERNET FOR ACADEMIC PURPOSE
Score Total
1 2 3 4 5
Research
work
43(61.43) 12(17.14) 7(10.0) 3(4.29) 5(7.14) 70
On line
journal
3(4.29) 22(31.43) 15(21.43) 18(25.71) 12(17.14) 70
Download
software
12(17.14) 7(10.0) 26(37.14) 10(14.29) 15(21.43) 70
Download
text
8(11.43) 16(22.86) 15(21.43) 22(31.43) 9(12.86) 70
Discussion 4(5.72) 13(18.57) 7(10.0) 17(24.29) 29(41.43) 70
The above study reveals that 61 percent of respondents use internet for research work followed
with 17 per cent had given second important reason for Net using. While use of Internet for
referring online Journals and magazines 4 per cent of respondents gave first important reason 31
per cent had given second stimulating factor of it.17 and 11 percent of respondents reported that
they Internet mostly for Downloading Software and Text. 4 per cent of them reported that the use
of internet for online discussion as primary reason for the access of Internet.
TABLE – 4: COMMUNICATION WITH FACULTY MEMBERS
Frequency Percentage
Face to face 57 81.43
Via e-mail 9 12.86
Never communicated through e-mail 4 5.71
Total 70 100.0
Majority of respondents responded that mainly they with faculty members face to face followed
with 13 per cent agreed e-mail is the is means of communication.
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TABLE – 5 : INTERNET AS SOURCE OF INFORMATION
Frequency Percentage
Use internet more than library 37 52.86
Use internet and library same 21 30.0
Use internet less than library 12 17.14
The revealed that student 53 per cent of students use Internet as source of information more than
library while 30 per cent use equal to library.
TABLE – 6: FREQUENCY OF USE OF INTERNET
Frequency Percentage
1-2 hours in a day 34 48.57
4-7 hours in a week 36 51.43
The table shows that 49 per cent of respondents spent 1-2 hours daily on Internet for various
purposes.
TABLE – 7: MODE OF COMMUNICATION
Score Total
1 2 3
Cell phone 54(77.14) 3(4.86) 13(18.57) 70
Telephone 9(12.86) 40(57.14) 21(30.0) 70
e-mail 7(10.0) 27(38.57) 36(51.43) 70
It was found that 77 per cent of total respondents communicate threw with Cell Phone while for
13 per cent Land Line Telephone was the important means of communication.
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TABLE – 9: INTERNET ACCESS
Frequency Percentage
Cyber cafes 33 47.14
Home 26 37.14
Through the facility at the college 11 15.72
Total 70 100.0
Table 9 shows that 11 users (16 percent) access the Internet through the facility in the Faculty. 26
(37 percent) respondents access it at home, 33 (47 percent) respondents access the Internet at
cyber cafes.
TABLE – 10: SEARCH ENGINE
Score Total
1 2 3
Yahoo 28(41.18) 29(42.65) 13(16.18) 70
Google 33(47.14) 30(42.86) 7(10.0) 70
MSN 7(13.73) 30(21.57) 33(64.71) 51
Other 3(13.64) 0(0.0) 19(86.36) 22
0
5
10
15
20
25
30
35
Yahoo Google MSN Other
1
2
3
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The above table gives the details about the usages of search engines mostly used by the students.
The findings revel that Yahoo and Google are the most popular and widely used
TABLE-10: ACCESSIBILITY OF INTERNET
Frequency Percentage
Always comfortable with
internet
57 81.43
Always finds useful
information
57 81.43
Always finds answers to
quires
43 61.43
Internet has replaced the print
media
37 52.86
Best source of information 62 88.57
Subject search sometimes
problematic
51 72.86
Useful information on general
topic
64 91.43
Here a series of questions were framed to find out the Internet usefulness and quality
information. It is shown in the below mentioned tabulated format.
The analysis reveals that 57 (81 per cent) respondents always find useful information on the
Internet, 43 (61 per cent) respondents indicated that research-oriented information is available on
the Internet. 37 (53 percent) respondents agreed that electronic media replaced the print media.51
(73per cent) indicated subject search sometimes problematic whereas 64 (91.43) found that
useful information on general topics
RESEARCH FINDINGS
The goal of this study was to learn about the Internet’s impact on college students’ daily lives,
and to determine the impact of that use on their academic and social routines.
They must learn to integrate the Internet into new forms, patterns and habits of communication.
It is not surprising to find that college students use the Internet more for e-mailing and
Entertainment. In regard to academic work, the Internet has introduced considerable change for
college students. Today’s students still deal with professors in the classic way: face-to-face. And
the Internet is often used to supplement those encounters. In our own research, an overwhelming
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number of college students reported that the Internet, rather than the library, is the primary site of
their information searches.
Nowadays, the Internet has changed the way students use the library. Students tend to use the
Internet prior to going to the library to find information. Students spend a good portion of their
total Internet time on communication. The study revels that many college students spend
between one and two hours online per daily. Majority of students access Internet at cyber cafe
and at home. The findings revel that Yahoo and Google are the most popular and widely used for
the reasons like they are fast in access; Information contained on these search engines is updated
regularly; Links are provided to web sites in the world. Majority of students find comfortable
with Internet and believe threw Internet are able to find useful information .It is also been proved
that Internet is supplementing Print media.
CONCLUSION
Furthermore, unlike the general public, college students have mitigating circumstances that
directly affect how they use the Internet to communicate with others. College students are
expected to interact with professors and fellow students at a different level from what they had
previously experienced
The Internet provides a wealth of information. The students are using the Internet significantly
and it occupies an important place among various information sources. It is widely used by the
students for their research purposes and it plays an active role in searching of information.
Students still depend on print media. Electronic media has not replaced print media. The students
need to get skills for searching on the Internet. The information searching practice needs a
methodical training to gain the quality in information searching. Library professionals, on the
campus, may take initiatives to improve the information searching on the Internet process among
Internet users or digital resources users.
REFERENCES
Asemi A. Information searching habits of Internet users: A case study on the
Medical Sciences University of Isfahan, Iran. Webology, 2(1).
http://www.webology.ir/2005/v2n1/a10.html
Asemi, A. (2005). Familiarity and use by the students' of digital resources available in the
academic libraries of Medical Science University of Isfahan (MUI), Iran. International
CALIBER 2005: Multilingual Computing and Information Management in Networked
Digital Environment, February 3-5, Ahmedabad, India: INFLIBNET Centre with Cochin
University of Science and Technology (Kochi).
Chang, N.C., & Perng, J.H. (2001). Information search habits of graduate students at
Tatung University. International Information & Library Review, 33(4), 341-346.
Dong, X. (2003). Searching information and evaluation of Internet: a Chinese academic
user survey. International Information & Library Review, 35 (2-4), 163-187.
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Edwards, S. L., & Bruce, C. S. (2002). Reflective Internet searching: an action research
model. The Learning Organization: An International Journal, 9(4), 180-188.
Hölscherl, C. & Strube G. (2000). Web search behavior of Internet experts and newbies.
Computer Networks, 33 (1-6), 337-346.
Kalichman, S.C., Weinhardt, L., Benotsch, E., DiFonzo, K., Luke, W., & Austin, J.
(2002). Internet access and Internet use for health information among people living with
HIV-AIDS. Patient Education and Counseling, 46(2), 109-116.
Mishra (O P), Yadava (Neelam) and Bisht (Kamini). Internet Utilization Pattern of
Undergraduate Students. University News. 43(13); March 28-03 April 2005; pp. 8-
12.Robinson (Jannie W). Internet Use among African-American College Students: An
Exploratory Study. Retrieved from http://wwwlib.umi.com/ dissertations/fullcit/3156015.
Patil, S.K. et al. (2004). Nature and quality of digital information hunting: A case study
of the University of Pune. November 24-26. Pune, India: INFLIBNET.
Rajeev Kumar and Amritpal Kaur. Use of internet by Teachers and Students in
Shaheed Bhagat Singh College of Engineering and Technology: A Case study.
Journal of Library and Information Science. 29(1&2); June & December 2004;
pp. 81-94.
Spink, A., Bateman, J., & Jansen, B. J. (1999). Searching the Web: a survey of EXCITE
users. Internet Research: Electronic Networking Applications and Policy, 9(2), 117-128.
Spink, A., & Jansen, B. (2004). A study of Web search trends. Webology, 1(2). Article 4.
Retrieved March 28, 2005, from http://www.webology.ir/2004/v1n2/a4.html
Biradar (B S), Rajashekar (G R) and Sampath Kumar (B T). A study of internet usage by
students and faculties in Kuvempu University. Library Herald. 44(4); December 2006.
pp 283-294.
Xie (Iris), H. (2004). Online IR system evaluation: online databases versus Web search
engines. Online Information Review, 28(3), 211-219.
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ANAXTURE - I
WELCOME TO QUESTIONNAIRE
Q.1 When you started using Internet? [Please Put √]
1] After completing 10th Standard. ______________
2] After joining college.
______________
Q.2 Why do you access Internet [Give 1 to 5]
A] e-mail ______________
B] Communicate socially ______________
C] Entertainment ______________
D] Web surfing ______________
E] Chatting
______________
Q.3 Has the Internet communication enhanced your
academic experience?
A) Yes ________ B)__________
[Please Put √]
Q.4 For the academic purpose , you use Internet for, [Give 1 to 5]
A] Research Work ______________
B] On line Journals ______________
C] Download Software ______________
D] Down load Text ______________
E] Discussion
______________
Q.4 How do you contact with your professors? [Please Put √]
A] Face to face ______________
B] via e-mail ______________
C] Never communicated through e-mail ______________
Q.5 Internet as source of information.
A] Use Internet more than library
[Please Put √]
______________
B] Use Internet and library about same ______________
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C] Use Internet les than library ______________
Q.6 How much time you spend with Internet for
academic purpose?
[Please Put √]
A] 1-2 hours in a day ______________
B] 4-7 hours in a week ______________
Q.7 How do you communicate with your friends? [Give 1 to 3]
A] Cell Phone ______________
B] Telephone ______________
C] e-mail
______________
Q.8 How frequently do you look for e-mail? [Please Put √]
A] Daily ______________
B] Once in a week ______________
C] Twice in a week
______________
Q.9 From where do you access Internet? [Please Put √]
A] Cyber Cafes ______________
B] Home ______________
C] Through the facility at the college
______________
Q.10 Which search engine do you use normally? [Give 1 to 3]
A] Yahoo ______________
B] Google ______________
C]MSN ______________
D]Any other
______________
Q.11 Please put √ on following Statements
A] Always comfortable with Internet. Yes_______ No________
B] Always finds useful information. Yes_______ No________
C] Always finds answers to quires. Yes_______ No________
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D] Internet has Replaced the Print media Yes_______ No________
E] Best source of information Yes_______ No________
F]Subject search sometimes problematic Yes_______ No________
G]Useful information on general topic Yes_______ No________
PERSONAL INFORMATION
Name of the Student: _________________________
Course: __________________ Class: ________________
Age: __________yrs.
Residential Address: _________________
_________________
__________________
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GREEN PRODUCT LIFE CYCLE TO CALCULATE THE GROSS
DOMESTIC PRODUCT POLLUTION OF A COUNTRY
S. RAJASHEKHAR*
Ph.D. Scholar in Business Management,
Department of Business Management,
Osmania University, Hyderabad, India.
ABSTRACT
Gross domestic product is an indicator of economical growth of the country. This production has
creating the pollution problems along with the economical growth. There is no proper calculation
methods are there to measure the pollution. Green product life cycle is a tool to measure the
gross domestic product pollution. This is an effort to measure the pollution foot prints of an each
product from the productions stage to destruction stage of the product. Calculation of pollution
foot prints of product and per factory is enabling the organizations to improve their
organizational efficiency, to change in employee attitude to adopt an eco friendly processes and
methods.
This article deals with the social responsibility of business people in economical development
and as well as reducing the pollution. This is a proactive strategy of an organization to create the
trend towards the responsible business practices. Measuring countries gross domestic product
pollution is a proactive strategy and global responsibility of countries to meet legal imposition
of United Nations of Organization by 2020.
KEYWORDS: Gross domestic product pollution, social responsibility of business leaders,
proactive strategy, U.N.O. legal implications, global responsibility of countries.
______________________________________________________________________________
INTRODUCTION
Go green is the trend created by customers and organizations by preferring green products,
process and services to protect themselves from pollution, and to protect the bio diversity. In this
regard there is a mutual responsibility on all of us to discover and use the new eco- friendly
technologies or products to avoid the environmental problems like global warming, air, water,
land, space and sound pollution and its impact on health and other natural calamities etc. Product
manufactured in the hands of manufacturer and it is sold by business man to the market or a
product can be preferred by consumer according to his preferences product manufactured and
send to him by organizations.
Due to change in the customers preferences from non eco friendly to eco friendly products,
organizations has to review their existing concepts and strategies for sustainable business
growth.
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ENVIRONMENTAL PERSPECTIVE OF PRODUCT LIFE CYCLE
The green product life cycle approach deals with the all phases from raw material collection,
production process, package, distribution, consumption, wastage, recycle, reuse, and remove of
product with an environmental perspective. All these stages pollution should be measured. This
measurement gives the pollution emissions per unit of the product and to classify the products in
to various categories.
PHASES OF GREEN PRODUCT LIFE CYCLE TO CONSTRUCTING POLLUTION
EMISSIONS SCALES:
Pollution foot prints by extraction of raw material (direct or indirect pollution)
1. Pollution foot prints by Production Process
2. Pollution foot prints by package
3. Pollution foot prints by distribution
4. Pollution foot prints by consumption
5. Pollution foot prints by wastage
6. Pollution footprints by recycle
7. Pollution footprints by final removal/disposal of product.
IMPACT OF PRODUCT’S POLLUTION ON PUBLIC HEALTH AND BIODIVERSITY
1. Genuine green product’s impact: there is zero impact on bio diversity and on public health.
2. Semi green product’s impact: these products affect on public health and environmental
problems but these are the alternatives to the non green products. The impact is very high
compare to genuine green products, and impact is very less compare to non green products.
3. Non green product’s impact: these category products are very harmful to public health with
its product life cycle stages pollution. Air pollution is impact on lungs and causes to breathing
related products.
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We need doctors for environmental protection to maintain biodiversity of the globe. To reduce
the product pollution for public health and for sustainable business growth is the global
responsibility of the country.
MEASURING AND DECIDING THE POLLUTION STANDARD PER UNIT OF
PRODUCT OR FACTORY
The total number of products produced divided by the total pollution will give the product
pollution per unit.
Total pollution emissions
Per unit of product pollution = ------------------------------------------- (1)
Total number of products produced
CALCULATING THE FACTORY POLLUTION
To calculate the factory pollution requires calculating all the phases from raw material collection,
sources of raw material and production processes of production.
Total pollution emissions
Raw material pollution = ------------------------------------------- (2)
Total quantity of raw material used
If raw material is a paper then counting the number of trees cutting to produce a product and the
pollution increased by absence of those trees to be calculated and counted in the factory
pollution. Taking steps to develop an alternative eco-friendly material to replace the trees raw
material.
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In case of combustion pf raw material the air pollution is calculated.
Total air/water/sound/land/ other pollution emissions
Factory processes pollution = ---------------------------------------------------------------- (3)
Total number of products produced.
Total pollution emissions - total pollution reduction activities
Factory pollution = ------------------------------------------------------------------------ (4)
Total number of products produced.
Total pollution emissions are may be air pollution, water pollution, land pollution, sound
pollution and pother environmental pollutions.
FACTORY POLLUTION MEASUREMENT – AND ITS IMPORTANCE EMPLOYEE
ATTITUDE
Factory pollution measurement- to increase organizational efficiency
To reduce single unit product pollution
To adopt the clean technologies
As a proactive strategy for sustainable business growth
To attract the investors
To eco- friendly economic development
To identify the major pollution based companies and making responsible for their chief
executive officers Taking the measures to reduce the pollution for environmental justice
Accepting the pollution footprints by organizations, people, governments and customers is the
first step to eradicate the pollution foot prints towards environmental justice.
This approach helps the government to take decisions towards green product developments to
reduce the pollution. Green tax should be charged o non green products and on organizations.
From these taxes green budget separately announced allocated and spend the funds for
environmental protection and biodiversity. If carbon credits helps to eradicate the pollution then
only useful.
CALCULATING THE COUNTRY’S GROSS PRODUCT POLLUTION OR GROSS
DOMESTIC PRODUCT POLLUTION
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Total no. of products produced+ imported products-exports
G.D.P.P. = ------------------------------------------------------------------------- (5)
Total estimated pollution of all the phases of life cycle
COUNTRY POLLUTION MEASUREMENT TO CREATE A TREND TOWARDS
GREEN WORLD
To create the green world we need the individual and organizational social responsibility.
CONCLUSION
Gross product pollution helps in reduction of pollution problems in the country. Accepting and
fallowing green product life cycle by corporate and society responsibilities will helps to reduce
the pollution will provide the golden future to upcoming generations. We need eyes to see the
pollution problems of Nature, to take care for our future we need heart to love the nature, for our
humanity mature
In the court of the nature, man is the culprit, who destroying the biodiversity with non green
practices. Nature can decide the punishment to the culprit but each and every human being
going to experience the punishment it may be crush to the human race.
Nature is punishing us in the form of global warming, earthquakes, floods and draughts etc.
To accept the global responsibility is necessary to protect the earth from all global warming and
other problems.
REFERENCES
Products and the environment: an integrated approach to policy._ Frans Berkhout and
Derek Smith Source: European Environment, 9,174-185, 1999.
Evaluating the life cycle environmental performance of chlorine disinfection and
ultraviolet technologies. Taps K.Das Source: Clean techn environ policy4 (2002), 32-
33,DoI 10.1007/s10098-002-0139-X
Sustainable Product Policy in Europe ,Gred Scholl,IȫW,Heidelberg,Germany.
Source: European Environment, vol.6.183-193(1996), ccc0961-0405/96/060183-11.
Evaluating Pollution Prevention Progress (P2P).
An environmental tool for screening in product life cycle assessment and chemical design
Process. David W. Peenington, Jane Bare,Robert Knodel,Gregary carroll, Todd Martin
Source; clean tech environment policy5,(2003)70-86,DOI:10.1007/s10098-003-0188-9
http://www.sciencedirect.com
www.osmaniauniversity.ac.in
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INCLUSIVE ECONOMIC GROWTH IN INDIA:
ISSUES AND CHALLENGES
MR.CH.PRASHANTH*; DR.G.SHASHIDHAR RAO**
*Assistant Professor,
Department of Business Management, Ramappa Engineering College,
Warangal -506001, A.P., India.
**Reader, Department of Commerce,
C.K.M. Arts & Science College,
Warangal – 506006, A.P., India.
ABSTRACT
In the recent past, the focus of economic policy in India has shifted to issues of equitable growth.
This implies that the economy should not only maintain the tempo of growth but also spread the
benefits of growth to all sections of the population and geographical regions of the country. In
India, where rapid economic growth has become a national goal, analysis of the sources of
growth assumes special significance to formulation of the macroeconomic strategy and policies
that affect the future growth rate- as well as pattern. This study explains “How has the Indian
economy growing after independence. Using the latest data on labour and a model of capital
accumulation and productivity growth, we map out GDP growth on India economy until 2050.
The present paper analyses the trends and patterns of economic inequality across Indian states
since the early 1990s. The basic objective here is to understand the dynamics of growth in the
country which is resulting in regional imbalances and propose measures for alleviating the
problem. The inter-state inequality in per capita income and consumption expenditure show a
clear increasing trend during the first and second phase of structural reform. The composite
indices of economic development, constructed based on a select set of indicators exhibit high
correlations with that of social development. This is understandable as the capacity of the
governments at the state level to make interventions and bring about social transformations is
high in relatively developed states. The correlation of economic development with amenities,
although statistically significant, is relatively low, which suggests that the problems pertaining to
health, education, and access to other amenities cannot be effectively addressed just by focusing
on economic development.
______________________________________________________________________________
INTRODUCTION
In the recent past, the focus of economic policy in India has shifted to issues of equitable growth.
This implies that the economy should not only maintain the tempo of growth but also spread the
benefits of growth to all sections of the population and geographical regions of the country. This
change in approach is particularly important for the hilly regions of the country, as they
constantly struggle with underdevelopment, even when the rest of the economy is doing well.
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There has been a significant shift in the focus of economic policy in India in the last few years,
with issues of equitable growth getting more importance. This is clearly revealed in the change in
the Planning Commission‟s perspective – from „high growth‟ during the Tenth Five Year Plan to
„inclusive growth‟ in its Approach Paper to the Eleventh Five-Year Plan.
With sustained fertility decline and growing survival chances, India is likely to face many
new challenges in the realm of its population management strategies especially those relating to
life situations or the quality of human life and their key socio-economic determinants. Some of
the received economic literature in recent years clearly indicates a growing strain on many of
these factors affecting the quality of human life and its determinants. Such literature and data
sources also highlight the disparities and emerging mismatch between the post liberalization high
GDP growth in the country and the quality of life experienced by a large segment of population
in India (Dev and Ravi, 2007; UNICEF, 2005; NSS 61st round).
There is another very important area that needs intervention of the state and that is
environmental degradation. The ecology of the area is already in a fragile state due to unplanned
development in the past. There is a chance that rapid development without due recognition of
this problem may lead to the destruction of the natural resource base of the area. Since the
livelihood of the weaker sections in the hill areas is completely dependent on these natural
resources, their destruction will make the process of inclusive growth unsustainable in the long
run. Thus the state must ensure that the growth process in general and private participation in
particular does not destroy the ecology of the area.
GROWTH RATE, SAVINGS AND CAPITAL FORMATION
In India, attainment of higher rate of economic growth received topmost priority in
almost all the five year plans of the country. But the achievements of planning in India are far
short of its targets. Table 1 shows the targeted and actual growth rate of the economy since 1950-
2010. There are two distinct growth periods: a first phase from 1950 to 1980 (phase I) and
second phase from 1980 to 2004 (phase II) (Virmani 2004a). The first phase is characterized by
slow growth rate in GDP as comparison to phase II.
TABLE 1: TARGETED AND ACTUAL GROWTH RATES OF THE INDIAN
ECONOMY
Plan period Targeted Growth Rate Actual Growth Rate
1951-56 2.1 3.5
1956-61 4.5 4.2
1961-66 5.6 2.8
1966-68 __ 3.9
1969-73 5.7 3.2
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1974-78 4.4 4.7
1979-80 __ -5.2
1980-84 5.2 5.5
1985-89 5.0 5.6
1990-91 __ 3.4
1992-96 5.6 6.5
1997-2001 6.5 5.5
2002-06 8.0 7.6
2007-12 9.0
2006-07 9.7
2007-08 9.6
2008-09 6.8
Source: Planning Commission, Eleventh five year plan, Government of India, New Delhi, 2007
STEADILY GROWING SECTORS
A single scenario, i.e., the Realistic Scenario, captures the growth dynamics for the six
Sub sectors that exhibit steady growth for the period 1993-04 to 2005-06. In this scenario, the
sectors are assumed to grow at the same (constant) rate at which they have grown in the post-
reform period. The projections for output from these sub-sectors for the Eleventh Plan period are
represented graphically below. The corresponding average projected growth rates are also
provided.
ISSUES AND CHALLENGES
India currently faces several issues and challenges in the area of Financial Inclusion for
Inclusive growth. Salient among them are stated here below;
1. SPATIAL DISTRIBUTION OF BANKING SERVICES
Even though after often emphasized policy intervention by the government and the
concerted efforts of Reserve Bank of India and the public sector banks there has been a
significant increase in the number of bank offices in the rural areas; but it is not in tune with the
large population living in the rural areas. For a population of 70% only 45% of bank offices
provide the financial services
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2. REGIONAL DISTRIBUTION OF BANKING SERVICES
The analysis by the authors brings to the fore that there has been uneven distribution of
the banking services in terms of population coverage per bank office in the six regions viz;
Northern, North-eastern, Eastern, Central, Western and Southern regions of the country.
4. OVERCOMING BANKERS’ AVERSION FOR FINANCIAL INCLUSION
Even though no banker openly expresses his aversion for the financial inclusion process,
overtly it can be noticed that they are averse to it in view of the cost aspects involved in opening
of no frill accounts.
5. BANK BRANCHES
Bank branches are required to be increased as it has a direct impact on the progress of
financial inclusion. It is clearly established that as the bank branches increase number of bank
accounts also increase significantly.
6. POVERTY LEVELS
Poverty levels are having direct relationship with the progress of financial inclusion. The
authors have established in their study that as the poverty levels decrease financial inclusion also
increase. As such, there should be multi fold strategic approach in such poverty dominated areas
for financial inclusion.
Economic Survey 2009-10, Government of India, New Delhi, 2010. The economic
activity is being supported by a significant rise in domestic savings and capital formation.
Insufficiency of capital is considered as an important limiting factor for growth (Ahmad, 2007).
The step up in the growth rate of the Indian economy since 2003-04, has been driven by a higher
capital formation, supported by a sizeable increase in the rate of gross domestic savings. Over
the longer term, India‟s gross domestic savings and gross domestic capital formation have
increased substantially. Both savings and capital formation have grown steadily throughout,
rising from low levels of 9 percent of GDP during 1950s to 23 percent ranges in the 1990s. The
national savings rate surged further to 27 percent during 2000-04, buoyed by inflow of
remittances. Domestic savings and capital formation rates reached highs during 2005-06. Gross
domestic savings rose to 32 percent of GDP in 2005-06 from 31 percent in 2004-05. The
increase during the year was driven by higher private corporate and household savings. Due to
higher savings rate as well as the higher recourse to foreign savings, the gross domestic capital
formation increased to 33 percent of GDP in 2005-06, a substantial jump from 23 percent
recorded during 2001-02. Overall, the average gross domestic savings and gross domestic capital
formation was much high than that in 1980.
A STATE LEVEL ANALYSIS
Given the main objective of the paper to identify a set of lagging states for directed policy
intervention, it would be important to probe into the state level scenario in a disaggregate manner
by considering the performance of each state separately. In a study undertaken as a part of
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background research for the World Development Report, 2009, Ahmad and Narain (2008)
classify the Indian states into „high‟, „medium‟ and „low‟ income categories. The north-eastern
states that belong to a special category, thereby enjoy special grants from the Finance
commission, as well as other preferential treatment, constitute a separate category. The study
shows that most of the states that had low levels of per capita income recorded low income
growth, not only in the 1980s, but also in the 1990s. The low income category states and the
north-eastern states were noted to have registered growth rates of 2.5 per cent and 2.8 per cent
respectively during the 1980s, which was much below the national average. These went down
further to 2.3 and 2.5 per cent respectively during the 1990s. These states were in the bottom
rung even in the early 1970s8. The growth rates for the high and middle income states, on the
other hand, increased from about 3.4 and 3.2 per cent to 3.6 and 4.9 respectively during this
period.
INTER-STATE INEQUALITY IN PER CAPITA CONSUMPTION EXPENDITURE
UN-WEIGHTED COEFFICIENTS OF VARIATION
Source: Computed from NSS unit records CD data.
Considering the growth performance of individual states, one would note that the low
income states like Assam, Bihar (including Jharkhand), Madhya Pradesh (including
Chhattisgarh), Orissa, and Uttar Pradesh (including Uttarakhand) have reported very low average
growth rates during the 1980s, which has further gone down in the 1990s. A more alarming fact
about these states (excluding Rajasthan) is the instability in growth rates as assessed through
their coefficient of variation over time. Furthermore, these states have reported a decline in the
absolute figure of per capita income or no growth in at least two years during the 1990s, a
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problem not encountered in the middle or high income states. What compounds the problem of
the former is that there is marginal or no decline in their population growth rates and these
continue to be much above the national average.
The average per capita SDP and growth in SDP at constant prices for the late 1990s, the
middle of the present decade, and for the final years of the present decade, provide interesting
insights in to the dynamics of regional development (Table 2a). It may be noted that eight of the
backward states such as Bihar, Uttar Pradesh, Rajasthan, Assam, Orissa, Madhya Pradesh,
Chhattisgarh, and Jharkhand occupy the bottom positions in terms of per capita SDP during the
latest triennium, 2007–9. Uttarakhand is the only state, identified as backward by Ahmad and
Narain (2008) as a part of the state of Uttar Pradesh, wherein the average SDP is about the
national average. Considering the growth scenario in SDP, the less developed states reported low
figures in the late 1990s, especially during 1998–2000. The situation, however, seems to be
changing rapidly. Three of the states, viz., Madhya Pradesh, Rajasthan, and Orissa, showed high
income growth during 2004–6. The distinct change in the spatial thrust in growth in favour of
backward states has further increased in the subsequent period, as almost all these nine states
record high growth rates.
TABLE 2: PER CAPITA SDP AND GROWTH IN SDP FOR SELECT STATES
A. THREE YEARLY AVERAGES
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B. CORRELATION CO-EFFICIENT
Correlations gr9799 gr0305 gr0709 Pcsdp9799 Pcsdp0305 Pcsdp0709
Gr9799 1.000 -0.165 -0.269 0.247 0.174 0.144
Gr0305 -0.165 1.000 0.056 0.222 0.362 0.426
Gr0608 -0.269 0.056 1.000 -0.130 -0.053 0.027
Pcsdp9799 0.247 0.222 -0.130 1.000 0.971 0.940
Pcsdp0305 0.174 0.362 -0.053 0.971 1.000 0.992
Pcsdp0608 0.144 0.426 0.027 0.940 0.992 1.000
The CV (un-weighted) in the growth rate has gone down from 44 per cent in late 1990s to
35 per cent in the middle of the present decade due to high growth in less developed states, as
discussed above. It has gone down further to 24 per cent in the later years of the decade. The
most important point is that the weighted CV of the growth rates works out to be marginally
below the un-weighted figure, implying that more populated states had a marginal advantage
over the others, in the early 1990s. This advantage of the former seems to be evening out in
recent years, the inter-state growth differentials becoming less than before. There is no evidence
of the growth being higher in more developed states as the correlation between level and growth
in income is statistically insignificant (Table 2b). The importance of this more equitable growth
pattern notwithstanding, one must note that this, unfortunately, has not made a dent on the trend
of regional imbalance. The inequality in per capita SDP has gone up consistently including the
recent periods, by both weighted and un-weighted CV, as presented in Table 2a. Furthermore,
the Gini Index too has maintained a rising trend, as exhibited in the 1990s, as presented in Figure
3, along with the CVs.
The correlations between the rates of growth for the three yearly periods across the states
work out to be negative, although not statistically significant (Table 2b). This is because a high
growth rate has been recorded in recent years in many of the less developed states that recorded
low growth in earlier years, as discussed above. Three newly formed states – Chhattisgarh,
Uttarakhand, and Jharkhand have grown faster than the average in the present decade, marking a
departure from the trend in late 1990s. The Plan-wise growth figures, including those for the
Eleventh Plan, as projected by the Planning Commission (2008), confirm the above conclusions.
The growth rate of less developed states was less than 4 per cent, much below the average of the
developed states during the Eighth and the Ninth Plans (Table 3).
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TABLE 3: ANNUAL GROWTH RATES IN STATE DOMESTIC PRODUCT IN
DIFFERENT PLAN
Periods
S.No. State/UT
Eighth Plan
(1992–7)
Ninth Plan
(1997- 2002)
Tenth Plan
(2002–07)
Eleventh Plan
(2007-12)
Non Special Category States
5.4
4.6
6.7
9.5
1 Andhra Pradesh
2 Bihar 2.2 4.0 4.7 7.6
3 Chhattisgarh NA NA 9.2 8.6
4 Goa 8.9 5.5 7.8 12.1
5 Gujarat 12.4 4.0 10.6 11.2
6 Haryana 5.2 4.1 7.6 11.0
7 Jharkhand NA NA 11.1 9.8
8 Karnataka 6.2 7.2 7.0 11.2
9 Kerala 6.5 5.7 7.2 9.5
10 Madhya Pradesh 6.3 4.0 4.3 6.7
11 Maharashtra 8.9 4.7 7.9 9.1
12 Orissa 2.1 5.1 9.1 8.8
13 Punjab 4.7 4.4 4.5 5.9
14 Rajasthan 7.5 3.5 5.0 7.4
15 Tamil Nadu 7.0 6.3 6.6 8.5
16 Uttar Pradesh 4.9 4.0 4.6 6.1
17 West Bengal 6.3 6.9 6.1 9.7
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Special Category States
5.1
4.4
5.8
6.4
1 Arunachal Pradesh
2 Assam 2.8 2.1 6.1 6.5
3 Himachal Pradesh 6.5 5.9 7.3 9.5
4 Jammu & Kashmir 5.0 5.2 5.2 6.4
5 Manipur 4.6 6.4 11.6 5.9
6 Meghalaya 3.8 6.2 5.6 7.3
7 Mizoram NA NA 5.9 7.1
8 Nagaland 8.9 2.6 8.3 9.3
9 Sikkim 5.3 8.3 7.7 6.7
10 Tripura 6.6 7.4 8.7 6.9
11 Uttarakhand NA NA 8.8 9.9
All India GDP 6.5 5 7 9.0
Developed States 7.2 5.2 7.0 9.6
Special Cat States 5.7 5.8 7.3 7.3
Less Dev States 3.7 3.8 7.2 8.0
CV in Growth Rates 38.8 29.9 27.8 21.7
Source: CSO (base 1999–2000 constant price) as on 31.8.2007.
The figures for the former during the Tenth Plan period are similar to that of the national
average or that of the developed states. The same can be said about their projected growth rates
during the Eleventh Plan period, suggesting that there has been a paradigm shift in the growth
pattern in the country. Happily, the actual growth rates for the less developed states in the first
couple of years in this Plan have turned out to be even higher than projected. The same is true for
the Special Category States in the North-East. Their growth rates, too, were less than the national
average in the Eighth and Ninth Plans, but have caught up with it in the Tenth Plan period. More
importantly, these are expected to be above the national average in the Eleventh Plan. One can,
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therefore, stipulate that the strategy of inclusive growth and balanced regional development has
led to acceleration in the average growth rate of the less developed states, including those in the
North- East, and this would continue in future. Unfortunately, however, this has made little
impact on the trend towards accentuation of regional imbalances measured through per capita
SDP.
CONCLUSION
Indian economy has changed a lot over the past 60 years. Over the next 40 years the
changes could be dramatic. Using the latest demographic projection and a model of capital
accumulation and productivity growth, we map out GDP growth in the Indian economy until
2050. The result shows that if things go right, the Indian economy could become an important
source of growth to the world economy. Our projections are optimistic, in the sense that they
assume reasonably successful development Any kind of long term projection is subject to a great
deal of uncertainty, and we need to be mindful that India‟s growth transition is unlikely to be
smooth or devoid of shocks. The present attempt may not be conclusive in itself to estimate
potential GDP growth. The empirical estimation based on multivariate production function is
constraint by data availability.
There was a large restriction on foreign capital since 1951. If the whole restrictions are
removed on foreign capital, it increases the availability of foreign capital and further increases
the growth rate of economy. The growth rate is also affected by the fiscal and monetary policies
of the government, consumer spending of the people of the country, the increase in infrastructure
facilities, governance and external and internal policies made by the government. Our results
show that Indian economy has the potential to have the fastest growth over the next 30 and 50
years. According to Goldman Sachs (2003), the Indian economy GDP potential could be more
than 46.03 percent in 2050 as comparison to 2004-05. The strength of the external sector would
supplement the growth process. India‟s high growth rate since 2003 represents a structural
increase rather than simply upturn. We project India‟s potential growth rate about 9 percent
until 2050.
REFERENCES
1. Acharya, Shankar (2002), “India: Crisis, Reform and Growth in the 1990s”, Working
Paper No.139, Centre for Research on Economic Development and Policy Reform,
Stanford University
2. Bhattacharya, B.B. and S. Sakthivel (2004): „Regional Growth and Disparity in India:
Comparison of Pre- and Post-Reform Decades‟, Economic andPolitical Weekly, Vol 39,
No. 10, pp. 1071-7, March 2004
3. Amitabh Kundu and K. Varghese (2010), Regional Inequality and„Inclusive Growth‟ in
Indiaunder Globalization:Identification of Lagging States forStrategic Intervention,
working papers series, Oxfam India.
4. Dr. Vighneswara Swamy and Dr. Vijayalakshmi(2009), pp.6-10, Role of Financial
Inclusion for Inclusive Growth in India- Issues & Challenges,,work paper.
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5. World Bank (2009), World Development Report 2009: Reshaping Economic Geography,
Oxford University Press, New York
6. Bank for International Settlements. International Financial Statistics.
http://www.bis.org/statistics/bankstats.htm.
7. Datt, G. and M. Ravallion (2002), „Is India's Economic Growth Leaving the Poor
Behind?‟ Policy Research Working Paper 2846, The World Bank, Washington DC
Ombir Singh and Manju Dahiya, „Long Run Prospects for GDP Growth in India‟, work
paper.
8. Central Statistical Organization (CSO). 2009. National Account Statistics. New Delhi:
CSO.
9. 2005), “Policy Regimes, Growth and Poverty: Lessons of Government Failure and
Entrepreneurial Success”, Working Paper No. 170, Indian Council for Research on
International Economic Relation, New Delhi.
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GREEN MARKETING
MRS. FATI SHAFAAT*; ARIF SULTAN**
*Sr. Lecturer,
Technical Education & Research Institute (TERI), P.G.College, Ghazipur.
**Lecturer,
Technical Education & Research Institute (TERI),
P.G.College, Ghazipur.
ABSTRACT
Today there is growing interest among the consumers all over the world regarding protection of
environment. Worldwide evidence indicates people are concerned about the environment and are
changing their behavior. As a result of this, green marketing has emerged which speaks for
growing market for sustainable and socially responsible products and services. The past decade
has shown that harnessing consumer power to effect positive environmental change is far easier
said than done. The so-called "green consumer" movements in the U.S. and other countries have
struggled to reach critical mass and to remain in the forefront of shoppers' minds. While public
opinion polls taken since the late 1980s have shown consistently that a significant percentage of
consumers in the U.S. and elsewhere profess a strong willingness to favor environmentally
conscious products and companies, consumers' efforts to do so in real life have remained sketchy
at best.
One of green marketing's challenges is the lack of standards or public consensus about what
constitutes "green," according to Joel Makower, a writer on green marketing. In essence, there is
no definition of "how good is good enough" when it comes to a product or company making
green marketing claims. This lack of consensus—by consumers, marketers, activists, regulators,
and influential people—has slowed the growth of green products, says Makower, because
companies are often reluctant to promote their green attributes, and consumers are often skeptical
about claims. The popularity of such marketing approach and its effectiveness is hotly debated.
Supporter’s claim that environmental appeals are actually growing in number–the Energy Star
label, for example, now appears on 11,000 different companies' models in 38 product categories,
from washing machines and light bulbs to skyscrapers and homes. The difference is, however,
that green—rightfully so—is on the wane as the primary sales pitch for products. As resources
are limited and human wants are unlimited, it is important for the marketers to utilize the
resources efficiently without waste as well as to achieve the organization's objective. So green
marketing is inevitable. This paper will cover all the aspects regarding green marketing, its
issues, benefits, and practices by different companies.
KEYWORDS: Social Marketing, Green Marketing, Socially responsible Products &
Companies, Green Products.
______________________________________________________________________________
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INTRODUCTION
Consumers want to do the right thing when it comes to protecting the environment and their
health. Even in this economic climate, the green movement is gathering momentum, and it's hard
to miss the deluge of ads introducing new green products from well-known national brands.
These manufacturers are leading the way; studies such as the newly released BBMG Conscious
Consumer Report now show that nearly 80 percent of Americans agree they can make a positive
difference by purchasing products from socially or environmentally responsible companies. As
resources are limited and human wants are unlimited, it is important for the marketers to utilize
the resources efficiently without waste as well as to achieve the organization's objective. So
green marketing is inevitable.
Today in this turbulent and competitive environment where so many unethical practices are
going on in businesses which are regularly losing the interests of consumers. So society expects
business to act as responsible members of the social community as well as to provide goods and
services efficiently. By this the social responsibilities of any corporate houses has became an
important aspects of today's era, in which the conscious efforts are being made by an
organization to maximize its positive impact and minimize its negative impact on society as well
as a whole and on various groups and individuals within society. Business is marketing and vice
versa forcing corporate to go for social responsible activities in which it produces products and
render services for exchanging for money by which needs of man can be fulfilled and the needs
of the society can also be looked after.
In this situation when the consumers are becoming more concerned about what they as well as
business firms can do to protect the environment and the majority of society wants to help firms
clean up the air, water and land. They also must go for finding the new ways to dispose of
garbage, recycle and reuse of packaging. This expectation of the society gave the birth of Green
Marketing as a tool of performing corporate social responsibility.
MEANING
Green marketing refers to the process of selling products and/or services based on their
environmental benefits. Such a product or service may be environmentally friendly in it or
produced and/or packaged in an environmentally friendly way.
The obvious assumption of green marketing is that potential consumers will view a product or
service's "greenness" as a benefit and base their buying decision accordingly. The not-so-obvious
assumption of green marketing is that consumers will be willing to pay more for green products
than they would for a less-green comparable alternative product - an assumption that, in my
opinion, has not been proven conclusively.
While green marketing is growing greatly as increasing numbers of consumers are willing to
back their environmental consciousnesses with their dollars, it can be dangerous. The public
tends to be skeptical of green claims to begin with and companies can seriously damage their
brands and their sales if a green claim is discovered to be false or contradicted by a company's
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other products or practices. Presenting a product or service as green when it's not is called green
washing.
GREEN MARKETING- DEFINITION
According to the American Marketing Association, ―Green Marketing‖ is defined as the
development and marketing of products designed to minimize negative effects on the physical
environment or to enhance its quality. However, applying a concrete definition to such a
slippery concept, which has taken many forms and shapes over the years, has proven to be
anything but simple or manageable. And, as you have seen on our Source and Resource site thus
far, green marketing can include a variety of activities in diverse areas.
Green marketing refers to the process of selling products and/or services based on their
environmental benefits. Such a product or service may be environmentally friendly in it or
produced and/or packaged in an environmentally friendly way.
As per Mr. J. Polonsky, green marketing can be defined as, "All activities designed to generate
and facilitate any exchange intended to satisfy human needs or wants such that satisfying of
these needs and wants occur with minimal detrimental input on the national environment."
Green marketing involves developing and promoting products and services that satisfy customers
want and need for Quality, Performance, Affordable Pricing and Convenience without having a
detrimental input on the environment.
GREEN MARKETING CAN BE DEFINED IN THREE WAYS
RETAILING DEFINITION: The marketing of products that are presumed to be
environmentally safe.
SOCIAL MARKETING DEFINITION: The development and marketing of products designed
to minimize negative effects on the physical environment or to improve its quality.
ENVIRONMENTAL DEFINITION: The efforts by organizations to produce, promote,
package, and reclaim products in a manner that is sensitive or responsive to ecological concerns.
Green marketing is the process of developing products and services and promoting them to
satisfy the customers who prefer products of good quality, performance and convenience at
affordable cost, which at the same time do not have a detrimental impact on the environment. It
includes a broad range of activities like product modification, changing the production process,
modified advertising, change in packaging, etc., aimed at reducing the detrimental impact of
products and their consumption and disposal on the environment. Companies all over the world
are striving to reduce the impact of products and services on the climate and other environmental
parameters. Marketers are taking the cue and are going green.
Green marketing was given prominence in the late 1980s and 1990s after the proceedings of the
first workshop on Ecological marketing held in Austin, Texas (US), in 1975. Several books on
green marketing began to be published thereafter. According to the Joel makeover (a writer,
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speaker and strategist on clean technology and green marketing), green marketing faces a lot of
challenges because of lack of standards and public consensus to what constitutes "Green". The
green marketing has evolved over a period of time.
Green marketing is a vital constituent of the holistic marketing concept. It is particularly
applicable to businesses that are directly dependent on the physical environment; for example,
industries like fishing, processed foods, tourism and adventure sports. Changes in the physical
environment may pose a threat to such industries. Many global players in diverse businesses are
now successfully implementing green marketing practices.
EVOLUTION OF GREEN MARKETING
There is growing interest among the consumers all over the world regarding protection of
environment. Worldwide evidence indicates people are concerned about the environment and are
changing their behavior. As a result of this, green marketing has emerged which speaks for
growing market for sustainable and socially responsible products and services.
The green marketing has evolved over a period of time. According to Peatti (2001), the evolution
of green marketing has three phases-
First phase was termed as "Ecological" green marketing, and during this period all marketing
activities were concerned to help environment problems and provide remedies for environmental
problems.
Second phase was "Environmental" green marketing and the focus shifted on clean technology
that involved designing of innovative new products, which take care of pollution and waste
issues.
Third phase was "Sustainable" green marketing. It came into prominence in the late 1990s and
early 2000.
WHY GREEN MARKETING
As resources are limited and human wants are unlimited, it is important for the marketers to
utilize the resources efficiently without waste as well as to achieve the organization's objective.
So green marketing is inevitable.
As we have all witnessed, consumer and corporate environmental consciousness has dramatically
elevated in recent years. Related news, events, and proposed legislation seem to emerge and
change at warp speed. More apparent causes and effects of global climate change, depleting
fisheries, deforestation, and the current energy and impending water crises have all caused
people to reassess what they put in their cupboards, dishwashers, and gas tanks, along with what
they do with such things once they’ve been used.
Because of this intensified environmental awareness, it has become increasingly important how a
firm deals with such global challenges. Or, one might argue, it may be even more crucial how a
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firm is viewed in approaching such issues. In this manner, CSR environmental behavior and
―cleantech‖ investments have become essential to a company’s core operations, regardless of the
sector in which the company operates. That is, companies are not only sensing the rising
accountability demands of shareholders, the public, and governmental bodies, but also the
opportunities involved in a ―green products‖ market estimated at US$209 billion.
There is growing interest among the consumers all over the world regarding protection of
environment. Worldwide evidence indicates people are concerned about the environment and are
changing their behavior. As a result of this, green marketing has emerged which speaks for
growing market for sustainable and socially responsible products and services.
Thus the growing awareness among the consumers all over the world regarding protection of the
environment in which they live, People do want to bequeath a clean earth to their offspring.
Various studies by environmentalists indicate that people are concerned about the environment
and are changing their behavior pattern so as to be less hostile towards it. Now we see that most
of the consumers, both individual and industrial, are becoming more concerned about
environment-friendly products. Most of them feel that environment-friendly products are safe to
use. As a result, green marketing has emerged, which aims at marketing sustainable and socially-
responsible products and services. Now is the era of recyclable, non-toxic and environment-
friendly goods. This has become the new mantra for marketers to satisfy the needs of consumers
and earn better profits.
ADOPTION OF GREEN MARKETING
Most of the companies are venturing into green marketing because of the following reasons:
A. OPPORTUNITY
In India, around 25% of the consumers prefer environmental-friendly products, and around 28%
may be considered healthy conscious. There fore, green marketers have diverse and fairly
sizeable segments to cater to. The Surf Excel detergent which saves water (advertised with the
message—"do bucket paani roz bachana") and the energy-saving LG consumers durables are
examples of green marketing. We also have green buildings which are efficient in their use of
energy, water and construction materials, and which reduce the impact on human health and the
environment through better design, construction, operation, maintenance and waste disposal. In
India, the green building movement, spearheaded by the Confederation of Indian industry (CII) -
Godrej Green business Center, has gained tremendous impetus over the last few years. From
20,000 sq ft in 2003, India's green building footprint is now over 25 million sq ft.
B. SOCIAL RESPONSIBILITY
Many companies have started realizing that they must behave in an environment-friendly
fashion. They believe both in achieving environmental objectives as well as profit related
objectives. The HSBC became the world's first bank to go carbon-neutral last year. Other
examples include Coca-Cola, which has invested in various recycling activities. Walt Disney
World in Florida, US, has an extensive waste management program and infrastructure in place.
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C. GOVERNMENTAL PRESSURE
Various regulations rare framed by the government to protect consumers and the society at large.
The Indian government too has developed a framework of legislations to reduce the production
of harmful goods and by products. These reduce the industry's production and consumers'
consumption of harmful goods, including those detrimental to the environment; for example, the
ban of plastic bags in Mumbai, prohibition of smoking in public areas, etc.
D. COMPETITIVE PRESSURE
Many companies take up green marketing to maintain their competitive edge. The green
marketing initiatives by niche companies such as Body Shop and Green & Black have prompted
many mainline competitors to follow suit.
E. COST REDUCTION
Reduction of harmful waste may lead to substantial cost savings. Sometimes, many firms
develop symbiotic relationship whereby the waste generated by one company is used by another
as a cost-effective raw material. For example, the fly ash generated by thermal power plants,
which would otherwise contributed to a gigantic quantum of solid waste, is used to manufacture
fly ash bricks for construction purposes.
BENEFITS OF GREEN MARKETING
Today consumers are becoming more and more conscious about the environment and are also
becoming socially responsible. Therefore, more companies are responsible to consumers'
aspirations for environmentally less damaging or neutral products. Many companies want to
have an early-mover advantage as they have to eventually move towards becoming green. Some
of the advantages of green marketing are-
It ensures sustained long-term growth along with profitability.
It saves money in the long run, though initially the cost is more.
It helps companies market their products and services keeping the environment aspects in
mind. It helps in accessing the new markets and enjoying competitive advantage.
Most of the employees also feel proud and responsible to be working for an
environmentally responsible company.
Maintaining the ecological balance.
Maintaining the environment eco friendly.
Increasing awareness of consumers towards their planet.
Better utilization of natural resources.
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Performing the social responsibility.
THREE KEYS TO SUCCESSFUL GREEN MARKETING
Show potential customers that you follow green business practices and you could reap more
green on your bottom line. Green Marketing isn't just a catchphrase; it's a marketing strategy that
can help you get more customers and make more money. But only if you do it right.
For green marketing to be effective, you have to do three things; be genuine, educate your
customers, and give them the opportunity to participate.
1)BEING GENUINE means that a) that you are actually doing what you claim to be doing in
your green marketing campaign and b) that the rest of your business policies are consistent with
whatever you are doing that's environmentally friendly. Both these conditions have to be met for
your business to establish the kind of environmental credentials that will allow a green marketing
campaign to succeed.
2) EDUCATING YOUR CUSTOMERS isn't just a matter of letting people know you're doing
whatever you're doing to protect the environment, but also a matter of letting them know why it
matters. Otherwise, for a significant portion of your target market, it's a case of "So what?" and
your green marketing campaign goes nowhere.
3) GIVING YOUR CUSTOMERS AN OPPORTUNITY TO PARTICIPATE means
personalizing the benefits of your environmentally friendly actions, normally through letting the
customer take part in positive environmental action.
GREEN MARKETING MIX
Every company has its own favorite marketing mix. Some have 4 P's and some have 7 P's of
marketing mix. The 4 P's of green marketing are that of a conventional marketing but the
challenge before marketers is to use 4 P's in an innovative manner.
PRODUCT
The ecological objectives in planning products are to reduce resource consumption and pollution
and to increase conservation of scarce resources (Keller man, 1978).
PRICE
Price is a critical and important factor of green marketing mix. Most consumers will only be
prepared to pay additional value if there is a perception of extra product value. This value may be
improved performance, function, design, visual appeal, or taste. Green marketing should take all
these facts into consideration while charging a premium price.
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PROMOTION
There are three types of green advertising: -
Ads that address a relationship between a product/service and the biophysical
environment
Those that promote a green lifestyle by highlighting a product or service
Ads that present a corporate image of environmental responsibility
PLACE
The choice of where and when to make a product available will have significant impact on the
customers. Very few customers will go out of their way to buy green products.
CHALLENGES TO GREEN MARKETING
Green products require renewable and recyclable material, which is costly
Requires a technology, which requires huge investment in R & D
Water treatment technology, which is too costly
Majority of the people are not aware of green products and their uses
Majority of the consumers are not willing to pay a premium for green products
DIFFERENT EXAMPLES OF GREEN MARKETING PRACTICES
INTRODUCTION OF CNG IN DELHI
New Delhi, capital of India, was being polluted at a very fast pace until Supreme Court of India
forced a change to alternative fuels. In 2002, a directive was issued to completely adopt CNG in
all public transport systems to curb pollution.
ELECTRONICS SECTOR
The consumer electronics sector provides room for using green marketing to attract new
customers. One example of this is HP's promise to cut its global energy use 20 percent by the
year 2010. To accomplish this reduction below 2005 levels, The Hewlett-Packard Company
announced plans to deliver energy-efficient products and services and institute energy-efficient
operating practices in its facilities worldwide.
WAL-MART
Wal-Mart launched it’s highly visible environmental strategy in 2004. Since then, their goals
have encompassed everything from:
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Cutting energy usage at stores by 30% to reduce greenhouse gas emissions
Spending $500 million per year to improve truck fleet fuel economy
Working towards monitoring overseas suppliers to ensure they meet environmental
standards
FAIRMONT
Fairmont has attempted to position their brand as an industry leader in green practices through
several approaches, including:
Hiring a full time director of environmental affairs
Launching a 200-ton per year recycling program
Offering free parking for guests with hybrid cars
Retrofitting lighting with energy efficient bulbs
GENERAL ELECTRIC
In 2005, GE launched their Ecomagination campaign. Clarifying how the green positioning is
integrated with their overall business strategy, CEO Jeffrey Immelt notes that the campaign is
primarily ―a way to sell more products and services‖. To this end, GE has pledged to:
Double investments in clean R&D by 2010
Increase revenues from Eco magination products to $20 billion by 2010
Reduce their own greenhouse gas emissions by 1% over 7 years (when they would have
increased by 40%)
PHILIPS LIGHT'S "MARATHON"
Philips Lighting's first shot at marketing a standalone compact fluorescent light (CFL) bulb was
Earth Light, at $15 each versus 75 cents for incandescent bulbs. The product had difficulty
climbing out of its deep green niche. The company re-launched the product as "Marathon,"
underscoring its new "super long life" positioning and promise of saving $26 in energy costs
over its five-year lifetime. Finally, with the U.S. EPA's Energy Star label to add credibility as
well as new sensitivity to rising utility costs and electricity shortages, sales climbed 12 percent in
an otherwise flat market.
CAR SHARING SERVICES
Car-sharing services address the longer-term solutions to consumer needs for better fuel savings
and fewer traffic tie-ups and parking nightmares, to complement the environmental benefit of
more open space and reduction of greenhouse gases. They may be thought of as a "time-sharing"
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system for cars. Consumers who drive less than 7,500 miles a year and do not need a car for
work can save thousands of dollars annually by joining one of the many services springing up,
including Zip Car (East Coast), Flex Car (Washington State), and Hour Car (Twin Cities).
SOME OTHER CASES OF GREEN MARKETING ARE AS FOLLOWS
McDonald’s restaurant's napkins, bags are made of recycled paper.
Coca-Cola pumped syrup directly from tank instead of plastic which saved 68 million
pound/year.
Badarpur Thermal Power station of NTPC in Delhi is devising ways to utilize coal-ash
that has been a major source of air and water pollution.
Barauni refinery of IOC is taken steps for restricting air and water pollutants.
Low – Carbon Food Service by Bon Appetit
Green Building
Green Drivers Programme adopted by Novo Nordisk
Hotel Room Energy Management – Key-card enabled systems
Hybrid Trucks for municipalities in US
Greenputers
Mahindra Hariyali Project
Potato starch trays made by Dutch Paper Foam used in i-Phone reduces 90% carbon
footprint compared to plastic tray
CORPORATE INITIATIVES FOR GREEN MARKETING AS SOCIAL
RESPONSIBILITIES
a. Broadcaster New Delhi Television Ltd, or NDTV, in partnership with car maker Toyota
Kirloskar Motor Pvt. Ltd launched Greenathon on 7 February—a 24-hour live television
event to create awareness about environmental issues.
b. Reva Electric Car Co. developing a market for electric cars and thereby a sustainable
business—firms are gearing up to bring about a change in the way their businesses and
products are perceived.
c. Panasonic Corp. is working out a go-to-schools interactive campaign to spread
awareness among students on global warming and other environmental issues, to begin
with.
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d. Nokia India Pvt. Ltd has launched a campaign to recycle electronic waste. Consumers are
encouraged to dump old mobile phones and accessories, irrespective of brand, at any of
the 1,300 green recycling bins at Nokia priority dealers and Nokia care centres.
e. Henkel India Ltd launched "eco-learn"—a learning initiative to inculcate environmental
concern and sustainability.
f. Hindustan Unilever Ltd's, or HUL's, Surf Excel Quick Wash talked about how
housewives could save two buckets of water while using premium detergent powder to
wash clothes.
g. Reckitt Benckiser Group Plc. has launched a global campaign Our Home Our Planet to
help consumers save money and minimize their carbon footprint as part of its Carbon 20
programme.
CONCLUSION
Green marketing is based on the premise that businesses have a responsibility to satisfy human
needs and desires while preserving the integrity of the natural environment. This latter concern
has been ignored throughout most of recorded human history does not mean it will be
unimportant in the future. Indeed, there are significant indications that environmental issues will
grow in importance over the coming years and will require imaginative and innovative redesign
and reengineering of existing marketing efforts on the part of many businesses. Solutions to
environmental problems can be characterized into roughly three categories: ethical, legal, and
business (economic and technological). Green marketing and the promotion of responsible
consumption are related with business category.
A clever marketer is one who not only convinces the consumer, but also involves the consumer
in marketing his product. Green marketing should not be considered as just one more approach to
marketing, but has to be pursued with much greater vigor, as it has an environmental and social
dimension to it. Recycling of paper, metals, plastics, etc., in a safe and environmentally harmless
manner should become much more systematized and universal. Green marketing should not
neglect the economic aspect of marketing. Marketers need to understand the implications of
green marketing. If we think customers are not concerned about environmental issues or will not
pay a premium for products that are more eco-responsible, we should think again. The marketer
must find an opportunity to enhance their product's performance and strengthen the customer's
loyalty and command a higher price.
Green marketing is still in its infancy and a lot of research is to be done on green marketing to
fully explore its potential.
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REFERENCES
ARTICLES
Chopra, S. Lakshmi (2007), "Turning Over a New Leaf", Indian Management, Vol-64,
April-2007
Ottman, J.A. et al, "Avoiding Green Marketing Myopia", Environment, Vol-48, June-
2006
Charter M. 1992. Greener Marketing: a Responsible Approach to Business. Greenleaf
Sheffield. Fuller D. 1999, Sustainable Marketing: Managerial– Ecological Issues. Sage:
Thousand Oaks
CA. Greenpeace. 1994. The Greenpeace Book of Greenwash. Greenpeace International:
Amsterdam.
JOURNAL
Marketing Mastermind, January 2009, Green Products: Their Growth and Expansion
WEBSITES
www.greenpeace.org
www.coolavenues.com
www.google.co.in
www.ask.com
www.altavista.com
www.infoseek.com
www.greenmarketing.net