Pratibimb | November 2011 | 1
A Students’ Initiative
The Reflection of Management
FINANCE | GENERAL MANAGEMENT | HUMAN RESOURCE | MARKETING | HEALTHCARE | OPERATIONS | SYSTEMS
Volume II, Issue V November 2011 A Monthly e-Magazine
A Student’s Initiative
Pratibimb | November 2011 | 2
Mission
T.A. Pai Management Institute (TAPMI) is a premier management institute situated in
Manipal and is well known for its academic rigor & faculty-student interaction. The
Institute has been recently ranked amongst top 1 per cent of B-schools in India & 4th
in the South Zone by The Week Magazine.
Founded by the visionary, Late Shri. T. A. Pai, TAPMI’s mission is to provide much
needed impetus to the task of building professional management capability in the
country. In the process, it has also played a role in strengthening the existing
educational and health infrastructure of Manipal.
We are committed to excellence in post-graduate management education, research,
and practice by nurturing and developing global wealth creators and leaders. We
shall continually benchmark ourselves against the best in class institutions. We shall
foster continuous learning and reflection, achievement-orientation, creative
interdependence and respect for diversity with a holistic concern for ethics,
environment, and society.
About TAPMI
TAPMI has been conferred with Best Academic Input (Syllabus) in Finance
among B-Schools across India. The award will be presented at the 19th Dewang Mehta
Business School Award, Mumbai. The Award is supported by Ms. Shaila Mehta-
Director, Onward Foundation for Dewang Mehta awards. The Chairman of the Jury is
Dr. Prasad Medury, Partner, Amrop International and the Patron is Mr. Harish Mehta,
Chairman & Managing Director, Onward Technologies Ltd.
Recent Update
T. A. Pai Management Institute Manipal, Karnataka
Pratibimb | November 2011 | 3
About Pratibimb
Pratibimb – The TAPMI’s e-Magazine - is the conglomeration of the various spe-
cializations in MBA (Marketing, Finance, HR, Systems and Operations). It is pri-
marily intended to provide insights into the plethora of knowledge that relate to the
various departments of Management and to give an opportunity to the students of
TAPMI and the best brains across country to exhibit their creative cells. The maga-
zine also strives to bring expert inputs from industries, thereby bringing the aca-
demia and industry together.
Pratibimb the e-Magazine of TAPMI had its first issue in December 2010. The is-
sue comprised of an interview of denoted writer Ms. Rashmi Bansal along with a
series of articles by students and industry experts like MadhuSudan Rao (AVP-
Delivery, Mahindra Satyam) & Ed Cohen who is a global leader and chief learning
officer who led Booz Allen Hamilton & Satyam Computer Services to the first rank
globally for learning & development . It also included a hugely successful and en-
grossing game for finance geeks called “Beat the Market” to bring out the applica-
tion based knowledge of students by providing them the platform where they were
expected to predict the stock prices of two selected stocks on a future date. The
magazine is primarily intended for the development of all around management
knowledge by providing unbiased critical insights into the modern developments.
TAPMI believes that learning is a continuous process and is not limited to the four
walls of the classroom. This viewpoint is further enhanced through Pratibimb
wherein students manage and contribute to create a refreshing learning environ-
ment outside the classrooms which eventually leads to a holistic development pro-
cess. The magazine provides a competitive platform and opportunity to the stu-
dents where they can compete with the best brains of the country. The magazine
also provides a platform for prominent industry stalwarts to communicate their
views and learning about and from the recent developments from their respective
fields of business which in turn helps to create a collaborative learning base for its
readers.
Pratibimb is committed in continuing this initiative by bringing in continuous im-
provement in the magazine by including quality articles related to various manage-
ment issues and eventually creating a more engaging relationship with its readers
by providing them a platform to showcase their talent.
We invite all the best brains across country to be part of this initiative and help us
take this to the next level.
Pratibimb | November 2011 | 4
I am pleased to state that the team members of PRATIBIMB have continued their sincere efforts to bring out this seventh issue in November 2011. The previous six issues had a number of management articles written by students of various B-Schools and also from students and faculty of TAPMI. This student magazine is also accessed and appreciated by our alumni and industry and business readers. The magazine provides a platform for our students to use their creativity, imagination and language skills to reflect upon various management areas i.e. operations, marketing, system, HR, finance and entrepreneurship as well as in areas of their interest. It also fosters research culture among students. Research orientation and sharpening analytical mind are crucial for their academic orientation. Generally literary work, research article writing and publication should become part of students’ learning goals while they are in the campus. This would perhaps sow seeds for pursuit for academic career by a few management students after their initial experience in industry and business. It has been observed that on comparison with fast developing country i.e., China in Asia, the focus on research and publishing from Indian students and faculty in management journals and pursuit of Ph.D. programme in leading universities has been moderate in recent past. This situation needs to be improved. To this extent our students and faculty can best express themselves about their creative thoughts, opinions, knowledge and interests by contributing to PRATIBIMB. Let PRATIBIMB grow in content and variety with thoughtful articles in months to come. I congratulate the persistence and continued efforts put in by the team members of PRATIBIMB for timely publishing this volume. I wish them higher performance, joy and success in their endeavor.
Dr. A. S. Vasudev Rao
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Pratibimb | November 2011 | 5
editor’s corner Rohit Kumar, Chief-Editor
Ramanuj Vidyanta, Editor-Branding
Sarvesh Joshi, Editor-Creative Designer
Sub-Editors
Abhishek Anupam
Abhishek Dubey
Bijoy Alokkan
Kapil Saraswat
Manish Mishra
Pranaynehru T
Shivesh Sinha
Sriparna Neogi
Sushmit Sinha
Vandana Soni
Faculty Advisors
Prof. Chowdari Prasad,
Dean (Planning & Development), TAPMI
Dr. Jaba M. Gupta,
Associate Professor and Chairperson - eGPX, TAPMI
Special Thanks
Mr. Benny Augustine
Director - Human Resources, Unisys India
Prof. Vrishali N Bhat, TAPMI
Prof. Vinod Madhavan, TAPMI
Alumni Affairs Committee, TAPMI
Dear Readers,
We are pleased to release November issue of
Pratibimb.
The highlight of this issue is the interview with Mr.
Benny Augustine, Director - Human Resources,
Unisys India who shared his views on HR related
issues with us.
We are thankful to all the students from various
colleges who put in great efforts in writing articles on
various issues/topics and worked hard to send entries
for “Beat The Market” and “Route To Market”. The
articles have been selected by the Editorial Team
whereas “Beat The Market” has been judged by Prof.
Vrishali N Bhat and “Route To Market” has been
judged by Prof. Vinod Madhavan. We thank judges
for their precious time.
We also thank all those who helped us in improving
Pratibimb through their feedbacks. We would like to
take this opportunity to extend our gratitude to all
faculties and students at TAPMI for their continued
support, guidance, motivation and inspiration to take
Pratibimb to the next level.
Please continue to send in your valuable suggestions /
feedbacks at [email protected] so that we
can make improvements in the coming issues.
Happy Reading!!
Rohit Kumar
Pratibimb | November 2011 | 6
contents
Are Indian Stock Markets held to ransom by Foreign Investors? 7
Akash Jauhari | Karan Verma, IMT-Ghaziabad
European Debt Crisis: The Current Situation, its consequences & the way ahead 10
Deepak Panwar, FMS Delhi
Implementation Issues in Infrastructure Sector In India 13
Jigyasa Nabh | Yukti Gupta, NMIMS
Interview with Mr. Benny Augustine 16
Director, Human Resources — Unisys India
Is Africa the new market for the future? 19
Shaikh Ashfaque Kasim, JBIMS Mumbai
Social Networking: Adding new dimension to HRM 23
Sauvik Sarkhel, XIM Bhubaneswar
World of Stealth Advertising! 25
Sumedha Sobti, IIM Kozhikode
Global Financial Instability 28
Nishaat Farheen | Pooja Lunia, TAPMI Manipal
Pratibimb | November 2011 | 7
Are Indian Stock Markets held to ransom by Foreign Investors?
Introduction
On October 18th 2010, the Indian investors and
analysts witnessed the issue of an IPO, which
defied all existing parameters of the Indian Stock
Market. It was the IPO of the state owned
enterprise -
Coal India ltd. which got subscribed over 15
times, raising a capital to the tune of Rs 150
billion, through aggressive applications from both
institutional and non institutional investors. The
startling reality that came to the fore was that out
of 770 applicants in the institutional segment, 600
were Foreign Institutional Investors (FIIs), which
would mean that after allotment of shares, FIIs
would be sitting on a whopping cash balance of $
26 billion. The sheer volume of FIIs stake which
not only gave sleepless nights to brokers across
the nation, but also stamped the authority of
foreign investors in contemporary security
markets.
This is the tale of the Indian Stock Markets, which
see-saw between quantifiable fundamentals and
volatile sentiments, and tread on a tight rope
stretched between the very opportunistic FIIs at
one end and the ever cautious yet so vulnerable
domestic investors on the other. The great Indian
growth story has always been an eye-candy for the
foreign investors. The 1991 Liberalisation was the
first step, and the subsequent relaxation of cap on
foreign investments in 2005 set the floodgates
open. In no time, the FIIs transformed into a major
player accounting for over 21% share of the
markets.
FIIs inducing instability to Stock Markets
Many experts consider FIIs to be "Fair Weather
Friends", who come in hordes when there is
money to be made and leave abruptly at the first
sign of impending trouble in the host country,
thereby inducing undesirable risk and uncertainty
into markets. This is evident from FII behaviour in
the last eighteen months. Better fundamentals of
Indian economy as compared to the western
economies, attracted and prompted FIIs to invest
aggressively here, raising the total to a
astronomical figure of $ 20 billion. This almost
singlehandedly took the Sensex to the 20,000
mark again. However, in November 2010, few
local factors like inflation, lower IIP and internal
politics resulted in a major square off of FII
positions in no time, thereby pushing the market
into a sluggish and corrective mode.
There are other disturbing instances when the FIIs
by Akash Jauhari | Karan Verma, IMT-Ghaziabad
Pratibimb | November 2011 | 8
triggered a blood bath at Dalal Street. On 16th
Oct, 2007 Finance Minister Mr. P. Chidambaram
made a statement expressing his apprehensions
over the usage of offshore derivative instrument:
P-notes, through which FIIs made about 60% of
their investment in India. Little did the market
analysts or the Finance Minister realise that this
seemingly ordinary statement would have the
potential to inflict a deadly free fall of the market
indices. The markets crashed by a staggering 9%
within few hours, registering one of the biggest
absolute fall in Indian stock market history. The
consequences were so severe that the markets had
to be closed down for an hour and Mr.
Chidambaram had to call a press conference to
rephrase his statements. It was yet
another rude shock to the domestic
investors that woke them up to the rising
dominance and influence of the FIIs on
Indian Stock Markets.
The Alternate View
There is another set of experts who
believe that FIIs are life blood for an
emerging economy like
India. They augment domestic saving
without increasing foreign debt, provide
vital liquidity to Indian companies to
sustain growth, reduce cost of equity
capital and help reduce deficit of
Balance of payments (BOP). Also these
experts believe that FIIs, like any other
investors buy or sell according to
prevailing sentiments in the market,
rather than creating any sentiments that drive the
markets.
Hence there lies a conflict between the pros and
cons of FIIs and the all important question
regarding the role of FIIs in deciding the fate of
our stock markets.
Research Objective
Through this research we make an effort to
substantiate the influence of FII’s in inducing or
causing volatility to Indian stock markets. The
alternate hypothesis is that the FIIs simply react to
existing situation in stock markets, possibly
exacerbating it, rather than causing it. In simple
words, this study is to test whether FIIs drive the
Indian stock markets, or like other domestic
investors, are just driven by it.
The research is exploratory and causal in nature.
A time frame of seventy eight months i.e. from
Jan 2005 to Jun 2011 is considered. BSE 500
monthly average closing index value is taken as a
proxy for stock markets in India and net FII flows
to BSE for corresponding period is taken as
representative for FII investment activities. Data
sources include BSE India, SEBI and RBI
websites. Granger Causality test is employed to
attain the conclusion.
Data analysis & Statistics
From the above charts it is clear that net FII
investments at BSE show a similar pattern to the
BSE 500 index monthly average closings. The
correlation coefficient between net FII inflow to
BSE and change in BSE 500 index is 0.59, which
shows a positive relation of moderate strength.
Pratibimb | November 2011 | 9
However, a positive correlation, in itself, does not
imply causality. As both directions of causality are
equally possible, auto regressions are run to test
Granger test of causality between the two
estimated variables.
The estimated variables for further analysis are
taken as – change in net FIIs over previous month
figure (Y), and change in BSE 500 monthly
average closings (X). The regression coefficient
between Y and X is found out to be 0.37, and
those between X & X lag, and Y & Y lag also
being positive, 0.05 and 0.14 respectively. This
brings us to second step of Granger causality
analysis, which has two tests in itself.
Test-I
Ho: Monthly BSE 500 index change does not
Granger causes monthly net FII’s flows to the
Stock
Net FII flows to BSE
[In this autoregressive analysis, net FII flows are
the dependent variable with its own lagged terms
and lagged values of BSE 500 Index returns as the
two independent variables in unrestricted
equation].
Test-II
Ho: Monthly Net FII’s flow does not Granger
Cause monthly returns of BSE 500 index.
[Here, BSE 500 Index return is the dependent
variable with its own lagged terms and lagged
values of net FII flow as the two independent
variables in unrestricted equation].
Test II hypothesis that FIIs do not drive BSE 500
index is rejected both at 5% and 1% level of
significance. Test I hypothesis, on other hand, is
rejected only at 5% significance. However,
comparison of the test results suggests that there is
a stronger support for causality running from FII
net flows to index returns and a milder evidence of
reverse causality. Thus the study indicate that FII
flows are more of a cause than an effect of stock
market returns and fluctuations for the given time
period.
Conclusion and Recommendations
The empirical study conducted for the time frame
from Jan 2005 to Jun 2011, supports the “FII
inducing volatility and driving the market indices”
theory to a substantial level. Compared to security
markets in developed economies, Indian markets
being narrower and shallower, allows foreign
investors with access to significant funds, to
become the dominant player in determining the
course of markets. Because of their over sensitive
investment behaviour and herding nature, FIIs are
capable of causing severe capital out flight
abruptly, tumbling share prices in no time and
making stock markets unstable and unpredictable.
In the process, more often than not, the domestic
individual investors are on the receiving end,
losing their precious savings in such speculative
trading.
India as an emerging economic power needs
formidable Domestic Institutional Investors which
can pump in liquidity even during cash crunch
circumstances thereby fuelling the development.
With savings to the tune of roughly 35% of GDP,
India can use this to its strength by formulating
policies which ensure that domestic funds like
Pension Funds, Provident Funds and other Large
Corpus Funds have a greater exposure to the
equity market. The foreign investment in India
should be encouraged, but only from a strategic
long term perspective. Derivative instruments
which facilitate long term foreign investment with
specified lock in periods should be introduced.
Sustained long term foreign investments would
not only contribute to India's growth but also help
in curbing volatility, maintaining currency
stability and creating environment for inclusive
economic development.
Pratibimb | November 2011 | 10
European Debt Crisis: The Current Situation, its consequences & the way ahead
European Sovereign Debt Crisis is the current
economic situation in which the entire Eurozone
will not be able to pay its debt obligation, if the
economic situation does not improve in the future.
The issue regarding the Europe crisis talks about
the 17 European countries which have common
currency ‘Euro’. The seeds of Europe debt crisis
which the world is facing today were sown way
back in 1999 when the proposal for common
currency ‘Euro’ for the trade benefit and inclusive
economic growth of the entire Europe was
implemented. Greece entered the Euro zone in
October 2000 based on its economic compatible
condition although even then Greece had a high
budget deficit and it is still blamed for under
reporting its critical figures in order to get in the
Euro zone. In late 2000 due to financial crisis the
Greece largest industries, tourism and shipping,
were badly affected. The Greece had joined the
group knowing that it would be easier for it to get
the debt with a globally strong currency Euro. The
Greeks continued lavish spending (events like
Athens Olympic which are reported to cost Greece
several times more than the estimated cost, public
care) combined with long following trade deficits
and large tax evading population lead the Greece
budget deficit and public debt to rise to
insurmountable amount. And now the deficit
percentage and the debt to GDP ratio for the
Greece are highest among all the European States.
Adversaries like housing bubble in Spain and
speculation by traders in Portugal leads to similar
situations in these countries as well. These
European peripheral countries (PIIGS) borrowed
by Deepak Panwar, FMS Delhi
Pratibimb | November 2011 | 11
enormous amount of debt in Euros and hence have
huge sovereign debt obligations.
For example, Greece has a total debt of $540
billion dollars, 125% of its GDP (Fig3). In order to
raise money to pay its debt obligations, the Greece
increased the interest rate on its bonds to 15%
(Fig2).But because of the already piled up huge
debt obligation, there is huge risk involved in
investing in Greece sovereign bonds as they might
default, therefore nobody is buying Greek bonds.
Greece’s ten year bonds have been reduced to junk
status by Moody’s which downgraded them to CA
rating, just one rating above default. Other PIIGS
economies are facing the similar problem .The
markets expressed concerns over PIIGS ability to
repay its debt which it has taken from stronger
economies like Germany, France, UK, US and
others. This creates another problem ‘the
contagion effect’.
Fig. 3 shows the Debt/GDP ratio of PIIGS
CONSEQUENCES: WORST CASE
SCENARIOS IF GREECE DEFAULTS
The world around: All the major countries have
provided enormous debt to Greece .If Greece
defaults on its debt; this will have cascading
effects on other economies. Most probably then
other PIIGS economies will also default. The
banks of those countries which have provided the
debt to PIIGS will face tremendous liquidity
crunch and the people will face huge credit crunch
where they would not be able to borrow money.
This would lead to low production, less
development, reduced trade and a situation leading
to global economic depression.
INDIA: India’s developing economy is dependent
on FDI and FII. If Greece defaults on its debt all
the liquidity in the region would vanish. All the
companies and banks that have invested in these
bonds would be in severe need of liquidity. In
order to raise money, they will liquidate their
stocks and securities in which they have invested
in India and other markets around the world. All
the stock markets would suffer heavily and the
markets of the developing countries like us may
crash. Indian companies that were seeking to raise
money in foreign markets due to rise in interest
rates in India will not be able to find any lender in
international markets.
THE WAY AHEAD
Bailout: Though for now the Greece has been
Pratibimb | November 2011 | 12
temporarily saved from defaulting through a
bailout package of 109 Billion Euros or $155
Billion by EU and the IMF. They have provided
them the soft loans at the relatively very low rate
of 3.5% and with a term period of 15-30 years.
But it is still not a permanent solution, Greece
needs continuous flow of surplus funds to pay its
debt obligations and EU members themselves are
suffering from the contagion effect. Therefore,
expectation of bailout funds from them does not
seem to be a plausible solution.
China: With a tremendous foreign reserve of $3.2
trillion, China may come into picture as its trade
exports cover very large part of EU. And if the
euro depreciates then it would affect the profit
margins of China. China with its enormous foreign
reserve can help Greece to pay its debt obligation
and can get long term returns at high interest.
Greece opting out of Euro zone: One of the most
advised opinions for Greece is to opt out of EU
and restart with its older domestic currency
‘Drachma’. With this it would be able to devalue
its currency and start doing the business with the
other countries providing the products and
services at cheap value because of its undervalued
or depreciated currency. The sustained trade
surplus and increased domestic consumption are
the only plausible ways through which it can pay
its debt obligation.
Definitely, Greece carries only a part of the
Europe debt and solving the Greece debt crisis
will not be the answer for the entire Europe. But
Greece has the highest debt to GDP ratio and is
closest to default. Therefore solving the Greek
Domino Effect would definitely bring confidence
in the European economies and the way ahead for
the Eurozone to look out for.
Well, whatever the case may be and whatever the
situation may arise in future, one can say with
certainty that if EU occurs to exist, stricter
regulations and better transparency will be placed
and the stability norms will never be flouted.
Beat the Market
As Jim Cramer, a former hedge fund manager, and a best-selling author put it, “As long as you enjoy
investing, you'll be willing to do the homework and stay in the game… I mean I'm not smarter than the
market, but I can recognize a good tape and a bad tape. I recognize when it's right and when it's wrong and that's what my
strength is.”
Stock markets have never been predictable, you may apply the best of logic and reasoning, but there could be a possibility that
you may falter if the emotions of the investors take control.
Beat the Market is a game designed to prove your mettle in stock market analysis. This time onwards, we will provide you the
name of one listed company from NSE. You need to analyze stock movements of this company till 4th Nov, 2011. On the basis of
fundamental and technical analysis you need to give us your share price estimate of this stock as on 21st Nov, 2011. Fundamental
& Technical analysis will carry 70% weight while 30 % weight will be given to Accuracy of the estimated prices in the final score.
The winning entry will receive a letter of appreciation and prize money of Rs. 1000 /-
Rules:
Company to be analyzed is JUBLFOOD
You may analyze in a team of not more than 2 members
The file should not be more than 7 pages long including cover page, the cover page should contain the team name, team
members name, Institute name, contact number
File name should be BTM_<TEAM_NAME>_<INSTITUTE_NAME>
Upload entries at http://www.tapmi.edu.in/student-life/pratibimb/participants-submission by 8:59 am, 10th Nov, 2011
The winning entry of ‘Beat the Market’, October 2011 edition is of Shivaram Kulkarni from TAPMI, Manipal !!
Congratulations!! We thank all the participants for their effort. The entries of this contest have been judged by Prof. Vrishali N
Bhat, TAPMI.
Pratibimb | November 2011 | 13
As suggested by Prime Minister’s Economic
Advisory Council, Indian economy is to grow at
8.6% in 2010-11. With the recent expansion in
industry, commerce and per-capita income has led
to spiraling demand for infrastructure services
which is yet to be matched by a proportionate
increase in supply of such services. The economic
cost of insufficient infrastructure is enormous.
Traditionally, government owned enterprises have
provided infrastructure services which have been
disappointing: with limited increase in coverage,
deficient quality of service and low operational
efficiency. To avoid
all this, private
sector has shown
participation to a
huge extent. The
contribution of the
private sector in
total infrastructure
investment is
expected to rise to
36% by the end of
11th plan (2007-2012).
A lot of issues hamper the infrastructure sector
right from development, construction to the
operation stage of the project. Big problem is the
very nature of the infrastructure projects which
take years to start paying the benefits. The large
gestation period opens enormous gateways for
issues like inflation, bureaucracy, government
intervention, and change in technology. More
implementation issues are discussed as follows.
SELECTION OF CONTRACTORS
The results of improper planning and monitoring
may lead to execution delays, increasing project
costs and even result in renegotiation. It also
remains an essential duty of the government to
award contracts to the eligible contractors. Proper
evaluation of contractors on basis of full technical
and financial analysis through submission of
documents like
request for
qualification,
request for
proposal and
project
information
memorandum
should be done.
For example: As
in the case of
Chennai’s solid
waste management, at the end of the first
concession period, a private consultant re-
tendered the contract and awarded the concession
to a different firm. However, this transition
process was not planned or monitored well
enough and resulted in a period of time where
neither firm claimed responsibility for processing
Fig. 1 Growth in April 2011 (Source: Dept of Economic Affairs)
Implementation Issues In Infrastructure Projects
by Jigyasa Nabh | Yukti Gupta, NMIMS Mumbai.
Pratibimb | November 2011 | 14
the city’s waste, which in turn led to a piling up of
garbage along the streets.
COMMUNITY PARTICIPATION
Social issues like displacement of poor people,
inequitable jobs and incomes and environmental
degradation can result in implementation
problems. Positive community participation plays
a very important role especially in production of
electricity through biogas plants. Also, there may
be cases where intended users may resist tariff
increases as a result of privatization.
For Example: In the case of Coimbatore bypass
road, the government of Tamil Nadu has decided
to toll a neighboring bridge and include the toll
revenues as part of the financial equation for the
bypass road project. However, users of the bridge
were upset at a toll being charged for a facility
that they had used for free previously, and refused
to pay.
VIABILITY GAP FUNDING
Lack of viability gap funding for infrastructure
projects, which are socially and economically
viable but either carry a high risk or inadequate
IRR, could terminate projects. According to the
policy, upto 20% of financing needs of projects
with high economic rate of return could be met
with VGFs.
For Example: The 22.5Km long proposed
Mumbai Trans Harbor Link, costing over $1
billion is not feasible without at least 30 percent
VGF. Similar is the case with large sections of
national and state highways.
ENVIRONMENTAL CLEARANCE
Clearance by Ministry of Environment and
Forests is required for submission of Environment
Impact Assessment report by the EPC contractor.
For example: In the ports sector, Rs 3600 crore
container terminal project at Chennai; coal
terminal and iron ore exports at Marmagao Port;
Rs 1000 crore project at Kandla port are awaiting
environmental clearances.
LAND ACQUISITION
The provisions of National Land Acquisition and
Rehabilitation and Resettlement Bill, offers more
benefits to Project Affected Parties in the form of
mandatory employment provisions, subsistence
and annuity based allowances etc. thus resulting
in more complexities for the successful
completion of projects.
For Example: Multi-modal International Hub
Airport at Nagpur, envisaged as an international
cargo and passenger airport in a multi-product
special economic zone (SEZ), has not taken off
yet due to issues related to compensation and
funding of the PAPs.
DEBT FINANCING
The corporate debt market is highly undeveloped
in India. Stringent regulatory norms and illiquid
bond market forces the sponsors to turn to banks
for funding. The tenor of available funds from the
domestic market is typically short term of
approximately 2-3 years whilst the funding is
needed for a much larger duration resulting in
Asset-Liability mismatch for the banks. Also,
unavailability of long term funding can lead to
larger repayments during initial years which
adversely affect affordability of services.
Infrastructure projects also pose risks in form of
information asymmetry to project financers.
For Example: In the case of Delhi Noida Toll
Bridge project (1997), the initial traffic
projections did not materialize leading to the debt
re-structuring. Shortfalls in the returns from the
project resulted in a corresponding increase in
project cost. As a result, the initial capital cost of
Rs. 408 crore, as determined by the
concessionaire, had risen to Rs. 953 crore as on
March 31, 2006.
Pratibimb | November 2011 | 15
FOREIGN EXCHANGE RISK
Internal or external macroeconomic shocks such
as the sharp devaluations in Mexico in 1994,
Brazil in 1999, and Argentina in 2001—
significantly undermined the financial equilibrium
of firms that were borrowing money from US.
Since revenue is collected in local currency but
investments equity, and debt are usually in foreign
currency such as U.S. dollars, it poses a threat to
the financial viability.
For example: Delhi-Gurgaon expressway’s
finance was arranged by SREI International
Finance Ltd. at an estimated costof Rs10bn.
SREI's shareholders include the International
Finance Corporation, Washington, (a World Bank
Group Company), FMO (owned by the
government of Netherlands) and DEG (owned by
the German government.
BUREAUCRACY AND CHANGE OF
GOVERNMENT
Public Sector always has an upper hand when it
comes to evaluating the performance of Private
contractor in a PPP. The private sector is often
reluctant to engage with the public sector due to
the fear that after the end of the ruling party’s
term, a new government could renege on the
contract, and that dispute resolution mechanisms
are excessively bureaucratic and biased.
For example, in a recent toll bridge project in
Karur in Tamil Nadu, the new government
cancelled the concession agreement on a flimsy
pretext of a damaged approach road without
compensating the concessionaire.
SUPPLY OF RESOURCES
One major operating risk in the power sector is
the fuel supply risk. Hence, it is in best interest of
the producer to negotiate satisfactory fuel supply
agreements, which would also help in getting easy
finance for its projects.
For Example: The Mundra UMPP granted to Tata
Power, is based on imported coal, of which a
significant portion is likely to be sourced from
Indonesian coal producers. The company is likely
to allocate only a portion of the coal from those
fields for Mundra, while the remaining coal is
slated to come from similar deals that the firm is
scouting for in Australia and South Africa to
diversify the fuel risk.
Besides above mentioned issues, there are a few
more issues like obsolete technology, financial
burden from the past, renegotiation, unreliable
demand estimates, price cap regulation causing
problems in achieving financial closures, lack of
Government support during change in goal post
etc. which can impede the implementation of the
project. These implementation issues if dealt with
proper monitoring and control can give a boom to
the GDP of the country as it enters a high growth
phase. Looking at the current scenario and future
growth potential, we expect Indian Infrastructure
Sector to outperform the trends in long term
thereby providing excellent investment
opportunities in the sector.
Pratibimb | November 2011 | 16
In this issue, we talk to Mr. Benny Augustine,
Director - Human Resources, Unisys India. Mr.
Benny Augustine has over 18 years of experience
in leading Human resource function.
During his interaction with Pratibimb, he shared
his views and experiences on HR related issues
with us. We are extremely thankful to him for his
precious time. Mr. Benny Augustine in
conversation with Pratibimb:
Q1. How do you manage to retain the best
employees given the high rate of attrition in the
Indian IT sector?
Ans: Employees leave the company for 3 major
reasons:
Compensation
Growth
Relationship with immediate supervisor or
manager
If the employee is assured of personal growth he
would not leave the organisation. If the employee
grows in the organization his salary increases
automatically. But some employees may still leave
due to other external factors such as relocating due
to personal reasons like marriage or some choose
to discontinue their job and choose an alternative
career. Nonetheless so long as the job offers
growth the employees will definitely continue
with the company.
Q2. Some companies have come up with a new
policy where they are allowed to bring their
personal laptops and flash drives to work.
What is your take on this?
Ans: Consumer technology has vastly changed the
way we communicate and access information,
allowing us to do it anywhere, anytime.
Inevitably, we now expect this flexibility to extend
to our work. Employees want to use the same
powerful devices and applications in their
professional and personal lives to stay connected
and productive.
The use of consumer-style technology in the
workplace is increasing rapidly. This
Consumerization of IT is more than simply
allowing employees to use smartphones in the
workplace or to bring their own personally-
purchased PCs and devices to work, also known as
“bring your own technology” (BYOT).
Consumerisation also includes the use of
applications such as Facebook, Twitter, wikis,
blogs and other social media with consumer roots
in the workplace for communicating and
collaborating with colleagues, partners, citizens
and customers.
The Unisys Consumerization of IT study,
conducted by IDC, looked at the trend from the
point of view of both employees and employers
from large organizations (94% with more than
1000 employees globally). It is based on two
separate but related surveys across nine countries.
An Interview with
Mr. Benny Augustine
Director – Human Resources, Unisys India
Pratibimb | November 2011 | 17
One surveyed more than 2600 employees and the
other polled more than 560 executives and
managers.
The study found that employers recognize the
potential of consumerization. However, they are
aware also of the risks of allowing consumer-style
technologies into their IT infrastructure but many
are yet to take steps to proactively manage the
phenomenon in their workplace.
The use of consumer-style devices and
applications in the enterprise can result in
increased security risks if they are not managed
appropriately. Enterprise IT departments need to
pick up the pace in deployment and support for the
new technologies, harness the power of
applications, and do so with the same safeguards
and reliability required for their existing mission-
critical systems.
If organizations are not aware of the technologies
being used in their workplace and how their IT
infrastructure is being used, they risk not having
adequate security measures in place and not being
able to provide adequate IT support for
employees. There may also be legal issues created
concerning employers’ rights to access business
data on employee-owned devices and HR issues
created concerning employees’ appropriate use of
these technologies.
It is important that employers get a lay of the land
– find out what technologies are being used, and
what employees want to use in order to be more
productive. Evaluate those from both the
technology and people perspectives. Then, go on
to determine what technology would make the
different roles in the workforce more productive.
Work out how the organization can support the
usage of the technology – the wider the range of
technologies requiring support, the greater the
strain on the IT department.
From the people perspective, it is important to
ensure that corporate policies cover warranties and
insurance for employee-owned devices, company
expectations with regards to access to and sharing
of company data, and IT security requirements.
Finally, educate employees to make sure they
understand what is expected from them in terms of
the use of the technologies and their behaviour.
Q3. What are the kind of flexibilities provided
to employees in Unisys in terms of job timing
and durations?
Ans: Unisys supports employees and facilitates
work-from-home schemes and even provides part-
time job opportunities. This is done such that the
goals of the organisation and the needs of the
employees are both met. Some employees are
allowed to work 2-3 days a week and some work
for fewer hours a day. Many of these are handled
on a case to case basis depending on the job
requirement and the employees’ comfort. But most
of the jobs in Unisys are still done on a full time
basis.
Q4. When employees work from home, how do
you motivate such workforce and make them
believe that they are a part of the organisation?
Ans: From a monthly update from the MD’s desk
to department level newsletters, we have plenty of
organizational communication directed at
employees to keep them motivated and feel
connected to the organisation. We have conference
calls and managers contacting home-based
employees on a regular basis. This helps the
organisation in taking stock of the progress made
and to resolve any existing issues. Add to that
these employees are always welcome to come to
office on a weekly basis and seek help if need be.
Q5. You have had the experience of co-
ordinating teams in Germany and Singapore.
Did you find any difficulty in handling these
teams when you were based out of India?
Ans: Apart from some cultural shift there was not
much change in the outlook of the employees
towards work. We used to keep in touch with all
the employees using telephone and video
conferencing. So long as you are connected and
provide support there is little that can go wrong.
Q6. What is the one major challenge HRs in
Pratibimb | November 2011 | 18
Indian IT industry faces?
Ans: The one main challenge the IT industry faces
is getting the people with the right skills and
retaining them.
Q7. How do you encourage and nurture
innovation in your organisation?
Ans: The organisation as a whole has an open
mind towards receiving and implanting innovative
ideas. All suggestions are accepted and
acknowledged. This nature has been woven into
the company culture and anybody is welcome to
share his/her opinion and ideas with their
superiors. Employees can send a mail or can even
go personally and talk to their managers. In fact,
we have a dedicated portal where employees can
officially submit their ideas about anything at all –
from facility improvement suggestions to business
best practices.
Q8. How do you ensure increased participation
of employees in the organisation?
Ans: This is an inherent part of the culture of an
organisation. In Unisys, we have a recognition
based culture where commitment is richly
awarded. No culture can be built overnight.
Providing learning opportunities and chalking out
well defined goals for the employees help in
improving employee participation in the growth of
the company.
Q9. There is a belief that increasing diversity in
companies, by improving gender ratio, will help
improve the functional effectiveness of the
companies. What are your thoughts on this?
Ans: Diversity is critical to bring in more
creativity and innovation. Diversity is not
restricted to just gender, having people with
different backgrounds and point of views help
improve the organisational thought process. Just as
a salad with an assortment of vegetables looks and
tastes more appealing, an organisation with rich
diversity works with greater effectiveness.
Q10. How do you instil ethical beliefs in your
organisation?
Ans: We have a strong ethics programme in our
organisation. A mandatory online ethics training
programme is implemented in Unisys. All new
employees undergo this training programme
during their induction phase and all employees are
expected to take a refresher every year. In addition
to all this, senior managers in Unisys always walk
the talk. This brings in clarity and makes all the
processes transparent. This instils the right attitude
amongst employee towards work and nurtures
healthy competition.
Q11. What do you believe, will help a fresh
MBA graduate to make it in the world of
business?
Ans: His/her understanding of the fundamentals
should be sound and he/she should have the right
attitude towards work. He/she should be flexible
and should have an inclination towards learning
and facing new challenges. He/she should be
ready to take charge and be able to eventually lead
a team.
Pratibimb | November 2011 | 19
This is not the first time that Africa has been in the
eye of the storm. The world once witnessed the
wild scramble for colonial domination of Africa,
by Europeans. Once they realized the immense
opportunities offered by the vast resources (in the
form of natural resources and manpower) available
in Africa, it was viewed as a potential gold mine
waiting for Europeans to tap into. History seems to
repeat itself.
Most people would frown at the idea of investing
money on a business venture in Africa (excluding
maybe South Africa and Egypt). The continent is
riddled with problems that can break the back of
anyone who has the audacity to enter this arena.
UN High Commissioner for Human Rights Navi
Pillay tells of her experiences of whole
communities being annihilated by hatred. At other
times it is in the avatar of a demon called inflation.
Businessmen are waiting for Africa to be in an
economic situation where there is sufficient
number of economically viable consumers, when
the economic situation of the country is conducive
to new business development, when sufficient
infrastructure support is provided by the state, etc.
Countries like Egypt and South Africa are already
at this stage and more are on their way to that
position. But a large part of Africa is still a long
way away from that stage. We can see the
opportunities that are open to us presently in the
development of Africa. We can sustainably
cultivate our business goal simultaneously with the
improvement of the African states.
Any development in Africa can only be built on a
foundation of political stability. That is a difficult
task in itself, with the region facing abysmal social
and economic divide, dysfunctional governance,
and rampant corruption at both administrative and
political levels and alienation of one indigenous
tribe by another. The UN is the sole entity which
is perfectly suited to lead this task by promoting
human rights, development, peace and security by
activities like setting up of democracy and an
impartial legislative system. This task can be
assisted to a large extent by private enterprises.
For example, supply of voting machines, election
management, infrastructure, development related
consultancy and construction expertise, provision
of education, etc are prime sectors which offer
opportunities in sustainable development. The
keyword here is “sustainability”. These tasks
should not be just about making money but also to
uplift the entire society as a whole by the
provision of employment opportunities to the local
community. Basically what you need to do is to
align your business goal with the betterment of the
society.
Is Africa the new market for the future?
by Shaikh Ashfaque Kasim, JBIMS Mumbai
Pratibimb | November 2011 | 20
Mother Nature has endowed Africa with an
abundance of natural resources in the form of
forests, wildlife, minerals and manpower. Access
to these resources through partnerships with the
African states supported by sustainable business
models will significantly reduce the financial
insecurity that most of the countries in Africa
encounter today. But some countries in Africa
have already gone down this road, for example,
through extraction of crude oil. But their state has
not improved much. This is due to the fact that
those countries do not have any policy for
mobilization of domestic and external financial
resources to direct them towards domestic
investments like infrastructure, education, etc and
in turn build productive capacity. Other policy
issues include dependence on a single source of
income. This might be enough for short term
growth, but economic diversification of the
sources of growth and income should be the
mantra for sustainable growth. This will help them
to absorb the impact of shocks on their fiscal
performance from external or internal factors. This
will in turn open up more opportunities for
business enterprises to pursue and also help the
local population to earn a living across
generations.
Some of the other potential avenues for economic
diversification are as following:
• Infrastructure construction - The
government should reach out to the populace with
the delivery of basic services such as health care,
rural connectivity, drinking water supply, etc. The
idea is to connect the people with the state. Once
this happens there will be active community
participation in the development process. This will
provide opportunities to private construction
companies provide employment to the local
population and additionally reduce the lack of
market access and supply side constraints which
are limiting Africa’s export growth potential.
• Tourism –The core issue here is the lack of
a dedicated body with adequate monetary
resources combined with poor infrastructure and
under qualified staff. The direct and indirect labor-
intensive nature of tourism should be used as a
tool to address the problem of unemployment. The
governments should bring in private sector
involvement to bring in the necessary expertise
and investments to effectively exploit this sector.
• Agriculture – Majority of the poorest
people in Africa live in rural areas. They depend
on agriculture and related activities for their
livelihood. Agencies like the UN International
Fund for Agricultural Development (IFAD) are
already helping this sector by financing
agricultural development projects. But the
involvement of private enterprises in growing,
processing, packaging and transport will
strengthen this sector even further. But control
needs to be maintained by the governments to
satisfy the domestic demand before exporting to
foreign markets. Businesses like edible oil
manufacture offer huge prospects in Africa. For
example, India imports eight million tons of
vegetable oils a year with crude palm oil alone
making 6 million tons. This shows that there is a
huge scope in markets like India. Multinationals
have already shown big interest in this business.
But Africa, I feel can be competitive in this sector
having the advantage of its lower economics. But
initial investment will be required to set up the
necessary infrastructure
• Energy – One of the core ingredients for
any economy to grow is the availability of energy
sources. But the investment requirement to boost
energy infrastructure is so enormous and beyond
the financing capacity of most African economies.
This can be solved by regulation of the energy
sector and encouraging private sector participation
in the energy sector. African countries, blessed
with sunlight all year round, can tap into solar
power based free and clean energy to light up
remote and isolated homes that have no link to
their national electricity grid. This again opens up
opportunities of promoting sustainable
technologies in rural India to eradicate poverty
through ventures along the lines of Selco in India
by Dr. Harish Hande, Magsaysay Award (2011)
Winner with the support of appropriate financing
support.
Pratibimb | November 2011 | 21
• Education - Education has the power to
transform society in a single generation. It
provides the children with the protection that they
need from poverty, exploitation and disease and
give them the knowledge and skills and
confidence to reach their full potential. Agencies
like UNESCO and other private NGOs are running
education programmes across Africa. Private
Institutions can enhance this effort by supporting
the state in setting up the required infrastructure. If
private players are able to do a good job, there is
no reason why the effort doesn’t get funded by
the local government, humanitarian agencies or
NGOs.
But the question still remains why decades of
Western aid have done little to ease the suffering
in Africa? As I see the situation, financial aid has
never been the problem. It is the mismanagement
of the funds and the non-inclusion of the
sustainability factor who are the culprits.
African countries should collaborate for a
coordinated approach to monitoring based on
mutual accountability between African countries,
with the funds being distributed from a central
committee of African nations. Multiple private
players should be given the opportunity to
compete with each other to win the contract for
implementing the development projects based on a
fair basis. Private players are much more suitably
poised to effectively implement the project with its
domain specific resources and expertise.
Much work needs to be done to replicate an India
or China in Africa. All the ingredients are there.
All it now requires is the an effort in the right
direction.
Inviting Articles
We are inviting articles from all the B-schools of India. The articles can be on any field of business
from Marketing, Finance, Operations, HR to Systems.
You can send us articles on:
Recent developments or trends in any of these fields
Articles covering latest trends, innovative practices, strategies, etc. in the global perspective
We also invite articles on management thinker similar to the current section
Apart from above, creative works in relation to any of the fields will be equally appreciated
The best entry will receive a letter of appreciation and a cash prize of Rs 1000/-. The format of the file
should be MS Word doc/docx. Articles should not be more than 2500 words.
The last date of receiving all entries is 10th November, 2011. Please upload entries at http://
www.tapmi.edu.in/student-life/pratibimb/participants-submission with file name as BAC_<ARTICLE
NAME>_<INSTITUTE> by 10th November, 2011.
Best Article: Deepak Panwar, FMS Delhi
Congratulations!! The winner will receive a cash prize of Rs. 1000 & a letter of appreciation.
Pratibimb | November 2011 | 22
Mr. Jacob Jacob (PGDM 1994-1996)
Alumnus of the Month – November 2011 The Alumni Affairs Committee (AAC) is pleased to announce Mr. Jacob Jacob (PGDM 1994-96) as
the Alumnus of the Month (AoM) for November 2011.
Mr. Jacob is a seasoned HR professional with over 15 years of experience and his experience is varied
across HR Consulting, International HR & Start Up HR. His core strengths lie in the areas of Change
Management, Performance Management, Competency mapping & its applications, HR strategy &
Organizational Design. He currently serves Apollo Hospitals Enterprises Ltd as their Chief People
Officer.
At Apollo Hospitals Enterprises Ltd.,
Mr. Jacob is striving to create a
mechanism of robust service delivery
in Healthcare through innovative and
robust HR initiatives. Mr. Jacob has
also worked with organizations such
as Feedback Ventures, Emirates
Airline in Dubai & Oberoi Realty. He
has had good exposure in various
areas within the domain of HR which
include HR Strategy & Design,
Organization Culture assessment &
design of effective HR systems,
Development & implementation of a
Performance Management System, 360 Degree feedback design & implementation etc.
Mr. Jacob holds a Bachelors degree in Business Management with specialization in personnel
management from SDM College, Mangalore, prior to his PGDM at TAPMI. He has specialized in HR
from TAPMI and joined Core Healthcare, Ahmadabad through campus placement.
Mr. Jacob has spoken at various conferences and has presented various papers on topics such as
connecting people & performance. He was recently recognized as one amongst the most powerful HR
professionals in India by the World HR Congress and has also received the HR Leadership Award at the
Asia Pacific Summit.
On the personal front, Mr. Jacob likes travelling, watching movies and reading.
Mr. Jacob fondly recalls a lot of kaleidoscopic memories of TAPMI which include the spot quizzes in
QT which was never a favorite with him and the stress that it used to create and of course the wonderful
hostel life. He recollects how active the hostel would become after 10 pm every night.
The Alumni Affairs Committee wishes Mr. Jacob Jacob all the very best for his future endeavors.
by Alumni Affairs Committee
Pratibimb | November 2011 | 23
The advent of the social networking sites revolu-
tionized the way the youth connected themselves
with the whole world. These sites started with
making their place in the world by making a place
in the lives of the youngsters. But today they have
come a long way and are not just restricted to
providing a platform for the youngsters to make
friends, share similar interests, or any such other
activity, but they have also stated impinging with
the employers across the globe. They are increas-
ingly being used by HR managers for fulfilling
several professional purposes such as recruitment,
maintaining relationship with employees, and
sharing knowledge etc.
The use of social networking sites have become an
integral part of the recruitment procedure by many
HR managers.
The employers make great use of these social net-
working sites for selecting the suitable candidate
for their organization. The social networking sites
provide a large number of options to chose from
and also make the process easier and better. The
companies predominately depend upon these so-
cial networking sites to hire IT/ITES profession-
als. They help them to find the right candidate/s
based on their requirement of the skills as well as
location. Many HR managers affirm the fact that
these sites are extremely helpful when they are
seeking for the talent outside their own country. It
is a difficult task for an organization to find a can-
didate with a specific skill set for their office
based in some other country, but the social net-
working sites work wonders for the employers in
such situations by providing a platform to locate,
judge and select the right candidate for the organi-
zation. The social networking sites are also helpful
for the employers in reaching the people working
at the middle and senior management level who
have acquired a niche of skill set and are extreme-
ly proficient in their profession.
Some employers might not be using the social
networking sites considerably for the recruitment
purpose, but they are using these sites to check
the credibility of the candidates. They may con-
firm the basic things about the candidate through
his profiles on such sites.
Maintaining employee relationship
The social networking sites enable the HR manag-
er in developing a healthy relationship between
the employees and the organization. The social
networking sites work as a platform where em-
ployees can actively discuss about their experience
with the organization. They may also talk about
their expectations and/or grievances. The frequent
feedback from the employees enables the HR
Social Networking: Adding new dimension to HRM
by Sauvik Sarkhel, XIMB Bhubaneswar
Pratibimb | November 2011 | 24
managers to discuss and mutually sort out many
employee related issues.
Sharing the knowledge
The social networking sites not only help the HR
managers to manage the functions inside their or-
ganization, but they also provide them a platform
to interact with their counterparts across the globe.
The HR managers actively participate in such dis-
cussions to share their knowledge as well as expe-
rience in their field of expertise. These sites are
increasingly becoming popular among the HR
managers to discuss the current events, trends, and
innovations in the HR industry. The social net-
working sites are therefore, helping the HR indus-
try to take a new shape by gaining contributions
from the HR professionals across the globe.
The other side of the coin
Although the social networking sites are doing
wonders for the HR industry but as there are two
sides of a coin, there are certain drawbacks as well
of using this medium for the vital functions of the
HR professionals. The biggest challenge for the
HR managers lies in dealing with fake profiles
which might mislead them and make the hiring
procedure much more difficult. Sometimes em-
ployer may reject a potential candidate because of
his profile which the candidate have made for
maintaining personal relation but not profession-
al. It is important for the employers to be careful
while making use of the social networking sites for
the recruitment purposes.
What lies in the future?
Social networking sites are keen on corporate
world penetration and seem to be getting success-
ful as well. The transformation is not happening
with a great pace but the trend of usage of the so-
cial network media by the HR professionals is def-
initely going to stay and progress further because
of the number of benefits it provides.
Route to Market
The market has always been unpredictable for the companies. This holds more significance in the case of
international brands trying to enter new emerging markets. Every brand wants to be recognized globally so
that they can tap the new markets easily. The role of marketing managers in this age of globalization
becomes more important in providing the companies with correct strategy to enter new market. We give
our readers a platform to experience this challenge through “Route To Market”.
The primary objective that the participant is expected to fulfill is to provide a “Market entry strategy” for an
international brand/product into the Indian market. The overall strategy would be divided into three
stages:
Rules:
Brand for which entry strategy needs to be crafted is “V8 Natural Fruit Juice ”
Document size should not exceed 4 pages & a maximum of 2 members are allowed in a team
The participant is expected to justify his stand – point in each deliverable
Each stage should be clearly mentioned under sub – heading
Upload entries with file name as “RTM_<TEAM NAME>_<INSTITUTE NAME>” at http://
www.tapmi.edu.in/student-life/pratibimb/participants-submission by 11:59 pm, 10th Nov, 2011
The winner will receive a cash prize of Rs.1000 /-
Winning Entry of October Edition: “Team BIZWIZ” from ISB Hyderabad whose members
are Piyush Bhandari and Gautam Gulati.
Congratulations !! We thank all the participants for their effort. The entries for this contest have been
judged by Prof. Vinod Madhavan, TAPMI.
Pratibimb | November 2011 | 25
David Ogilvy rightly stated, “A good advertise-
ment is one which sells the product without
drawing attention to itself.”
Every day a zillion commercials flash across our
grey nodules, from advertisements to bill boards.
Did you ever realize that you actually drink, eat,
breathe advertisements while watching your favor-
ite movie or playing your favorite game online!
Let’s see what I mean with that. Well, when an
advertisement takes a masquerading form of im-
plicit/explicit representation of a brand name, log-
os or other trademark within media vehicles in or-
der to increase consumer interest and instant
recognition at the point of purchase, it is called
product placement or stealth advertising.
Clever marketing techniques come into picture
when the marketers make sure viewers don’t
switch channels during the long commercials. So
the trick is to contextually fit the product seamless-
ly in the scene yet not making it the focus of atten-
tion. It is smoothly woven into the viewing experi-
ence. This predominantly means adding a sense of
realism.
The buzz that product placements create for
consumers.
Many reasons make product placement a better fit
as compared to the usual long advertisements.
No interruptions make the viewing easy for
viewers as they needn’t switch channels dur-
ing their favorite TV soaps or during cricket
matches. The product pragmatically blends
in with the context most of the times.
Sense of celebrity endorsement gives the
viewers a sense of indulgence and involve-
ment while casually watching the product. It
also increases brand awareness if not brand
liking. So the next time consumers step in a
Rayban store to purchase a pair of glares,
they might want to try Predator sunglasses
adorned by Will Smith in ‘Men in Black’.
Subconsciously the product message seeps in
and it is not filtered or weeded out by the
viewer’s brain as in the case of usual adver-
tisements which seem to be defensive as the
viewer’s constantly change channel as and
when advertisements crop up.
Product placement fitting in the context of ad-
vertisements.
Video games like Crazy taxi have locations like
KFC and Pizza Hut to drive to. Series like How I
Met Your Mother show brand endorsements like
Gucci and Louis Vuitton. Rolex, Seiko and Omega
are the main watches sported in the James Bond
movies. Logos of life insurance policies get dis-
played during the cricket matches. Various prod-
ucts ranging from electronics like mobile phones
to laptops, from FMCG products to sportswear and
the medium changes from video games to songs,
reality shows to sport events, but TV programs and
movies top the charts in product placement where
there is interminable parade of designer label fash-
ions.
Consumer behavior and Semiotics
Long advertisements are becoming extremely per-
vasive; consumers tend to block them out due to
boredom. The subliminal perception affects the
mind with stimulus that product placements create.
by Sumedha Sobti, IIM Kozhikode
World of Stealth Advertising!
Pratibimb | November 2011 | 26
Marketers work on the concept of Semiotics in
order to create symbolic linkages from reel-life
characters and products to real-life characters (i.e.
consumers) and products.
Implicit: The attributes of the product are not explicitly described. E.g. The movie ‘You’ve Got Mail’
shows Tom Hanks and Meg Ryan using Apple Powerbook to exchange mails. The movie Superman dis-
plays a Marlboro van in a backdrop.
Explicit: The attributes of the product are explicitly described. E.g. Oreo, America's Favorite Cookie
would be shown in the popular TV show ‘Friends’ elaborating snacking-experience with friends.
With product placement, the traditional on-your-face-advertisements are being replaced by feel-good-
factor. One of the theories of product placement is Von Restorff effect/ Isolation effect which proposes
that the more a particular product is seen, the more likely a consumer is to recall the product or brand
while making purchases.
Sensory Stimulus Sensory Receptors Exposure Attention Interpretation
Implicit v/s Explicit product placement
Pratibimb | November 2011 | 27
Well, I don't know about you, but each time while watching a movie, I see a Jimmy Choo pair, I hear my
subliminal state saying 'Oh! My God!' So the next time you’re watching a movie, playing a game on X-
Box tilt sensor or you happen switch on your television to watch your favorite series, remember that lat-
er you might purchase what you see, and that my friend, thanks to product placement, could be attribut-
ed to ‘subliminal effect for impulse purchase!’
Pratibimb | November 2011 | 28
Global Financial Instability
Fears of a double dip recession are felt by
everyone, even those who are not even aware of
the reason behind the recession. Stock Markets of
most of the countries have become more volatile
indicating heightened awareness for global events.
News papers show signs of global distress. But
why is this happening?
The US
The subprime crisis which was a result of low
regulation and uncontrolled authority given to
banks to raise subprime house loans had send not
only the US but the entire world into a gloomy
recession.
With the failure of Lehman Brothers on 15th
September 2008, the concept of “too big to fail” is
no more held true and the fear of default has gone
deep within the minds of the people.
In 2008, the US had bailed out financial
institutions; which resulted in its total debt
reaching its debt ceiling. But US needs debt to
meet its fiscal deficit which has been increasing at
an alarming rate because of its ongoing wars, high
military expenses, high medical expenses etc. Had
US not been able to take more debt to support its
economy, the whole world’s economy would have
slowed down. So in 2011 the US had increased its
debt ceiling much to the relief of the global
markets. As can be seen from Table1 below, the
total debt as a percentage of GDP is around 93.2
% which is quite high.
Amidst all these, the stock markets have been
going up and down. The stock market even went
down when the US announced “The Operation
Twist” which was a measure to boost the economy
by reducing the fiscal deficit. By conducting
operation twist, the Fed wanted to reduce the long
term interest rates so that it can reduce its interest
expenses. But the short term rates were not
increased because the US had already committed
to keep it near zero. So, in effect the term structure
was becoming flat. This will make it even harder
for banks to make money.
Recently, banks like Bank of America, Citigroup
and Wells Fargo were downgraded because of
increased risks and lower contagion effect.
All these point to the fact that financial markets in
the US are unstable and have lost confidence in
the system.
The European Countries
The world had not even recovered, from the
aftermath of the US Lehman Brothers crisis of
2008, that it was faced with yet another financial
Global Financial Instability
by Nishaat Farheen | Pooja Lunia, TAPMI, Manipal
Pratibimb | November 2011 | 29
turbulence of European debt. While the US was
going through its own set of problems like
ballooned debt, high unemployment and low
growth rate, some European countries were on the
verge of complete bankruptcy.
Greece, Iceland, Spain, Portugal are some of the
European countries which have huge sovereign
debt which may lead to a default. Greece is on the
verge of defaulting as it cannot take more debt to
service its existing debt. So, to save Greece EU is
formulating a financial package. Also, there is
immense care taken so that other Euro zone
countries do not fall apart and the EURO
currency is sustainable.
As can be seen from the table below, the debt as a
percentage of the GDP is 142.8 % for Greece and
as high as 220.3% for Japan. Japan has taken
large debt to support reconstruction following the
earthquakes.
The Emerging Market Economies
The emerging market economies are not
insulated from these phenomena.
Countries like India and China depend to
a great extent on the US and the Europe
for their imports and exports. Also, the
economies of these countries are so
interconnected, thanks to globalization,
that a slowdown in one country can affect
other countries as well. From the past few
years data of World International Growth (refer to
figure2), it can be seen that GDPs of all countries
are closely correlated. Thus, if US or any
European country suffers a crisis then the effect
also gets transmitted to the emerging nations. But
owing to the stronger growth prospects, growth
rates of EMEs even after dipping will be higher
than that of the developed economies and thus
would continue to support the world’s GDP
growth rate. Despite the slowdown in their
economies, emerging markets would keep
attracting funds from FIIs as they would be able
Debt as a %
of GDP 2000 2007 2008 2009 2010 2011
US 57.3 64.4 69.4 84.2 93.2 93.2
Japan 142.1 187.7 195 216.3 220.3 220.3
Italy 109.2 103.6 106.3 116.1 119 119
Greece 103.4 105.4 110.7 127.1 142.8 142.8
Spain 59.3 36.1 39.8 53.2 60.1 60.1
Iceland 41 28.5 70.5 87.8 - 87.8
Table 1 : Debt as a percentage of GDP for various countries
Source: Trading Economics.com
Pratibimb | November 2011 | 30
to generate higher returns on investments in such
markets as compared to the developed markets.
But EMEs are facing some new challenges like
strong domestic demand, increased credit growth,
high inflation and sudden capital outflows. Like
many other countries, they are also exposed to the
risk of high oil prices which add to their worries.
In the present scenario, though EMEs are better
off than their developed counterparts, but
nonetheless they cannot run away from facing the
same problems like developed nations in the
future if the overheating continues in their
systems.
Financial Instability
Because of the above stated situations, we can say
that the global financial markets are faceing
tremendous pressure as the fear of defaulting runs
high .
What was before just a private phenomenon has
now become public with the rising need of bail out
governments. As reported by IMF in its report of
Global Financial Instability, September 2011, the
credit risk from high-spread countries is estimated
to have had a direct impact of about €300 billion
on banks in the European Union since the
outbreak of the sovereign debt crisis in 2010.
These risks got amplified due to interconnection
between different markets. The banks are not able
to raise funds even from other markets.
Investors’ sentiments have been hurt worldwide.
Capital investments has slowed down. Banks have
become more skeptical about creditworthiness of
borrowers because of uncertain economic
conditions. So, even
potential borrowers face
difficulty in getting loans.
Thus, the intermediation
link between issuer and
investor has weakened. All
these have led to high
global financial market
instability as the market is
not being able to perform its
role of intermediary.
This will hamper the
economic growth of
countries and thus the entire
world. Proper
intermediation leads to
multiplying effect on the
economy leading to economic development. When
crisis occurs, financial intermediaries especially
banks fail to do their job.
Stabilization of Global Financial Markets
To stabilize the financial markets around the
world, the problems in US and Europe must be
resolved. In order to do that, steps should be taken
to reduce the debt level of these nations as well as
to service the existing debt. Following are some of
the recommended strategies that could help in
stabilization of the financial markets worldwide.
Fiscal Consolidation
High fiscal deficit has been observed as a common
characteristic of all the economies under crisis.
Interest payment towards the existing debt forms a
major portion of Government expenditure for debt
ridden countries. This can be seen from the data of
Fiscal Deficit (as percentage of GDP) over the
past few years.
Fiscal consolidation refers to the cut down in
government expenditures so that at least it can pay
the interests on time and thus avoid any further
Fig. 2: Source: World economic outlook, 2011 of IMF
Pratibimb | November 2011 | 31
credit downgrading of itself.
Integrated Solution
As mentioned before that the countries are highly
inter linked, there arises the need for integrated
solution which can perform actions in coherence
and stabilize the whole financial system.
A probable step for solving this problem can be
formation of independent international regulatory
body. It should be free from the political biases. It
should reduce regulatory arbitrage and bring in
better transparency. It should introduce uniform
standards for different Rating Agencies. It should
be authorized to regulate inflows and outflows
across the globe and take necessary steps to avoid
crisis as and when required.
Enhancing Robustness of banks
Banks are the most important inter linkage
between the issuers and investors who perform the
channeling of funds in appropriate manner. Banks
are the first to get hit by any crisis as majority of
them are exposed to different fund markets. Thus
if a bank fails the whole economy poses the threat
of slowdown. So, steps should be taken to isolate
commercial banking from investment banking so
as to protect the depositors’ money. Another step
could be to put stringent regulations for
maintaining apt capital adequacy ratio. This would
include assigning proper risk weights to the assets
by the regulators.
Conclusion
If suitable measures are not taken immediately, the
world might get into another deep recession. And
moreover, further destabilization of the whole
global financial structure may take place. As per
the IMF report on Global Financial Stability for
Sep 2011, time is running out to tackle
weaknesses in the global financial system.
Source: Trading Economics.com
Fiscal Balance 2007-11
Pratibimb | November 2011 | 32
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Team Pratibimb
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T- +91 7204494284
www.tapmi.edu.in
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