E globuz z-vol1_issue2

January-March 2010

Volume I Issue II

e-GlobuzZInternational Business Society @ SIMSR

How is the Industry?“SOUR” SWEET

S I MSR

K J Somaiya Institute of Management Studies & Research

Cover Story

Foreword

Dear Readers,

It gives me immense pleasure to bring to you the second issue of e-Globuzz, Jan-Mar '10. We hope you liked our first issue, Nov-Dec '09.The International BusinessSociety (IBS@SIMSR) organized during the last four months some importantevents like an interactive session with international experts on WTO for studentsand faculty.We interacted with a delegation of Management faculty and studentsfrom Deakin University, Australia. We had the privilege of hosting an interactivesession with Mr. O K Kaul, Executive Director,TATA International Limited, for ourstudents and faculty. In fact, this issue includes highlights of Mr. O K Kaul'sinterview taken by our students of International Business this week. We also hadan interactive session with Mr. Walter Stechel, the Consul General for FederalRepublic of Germany (FRG) in India. As a part of the International Businesscelebration at Samavesh '09, we had the privilege of having with us eminentspeakers from ECGC and TATA International Limited, who gave us meaningfulinsights on country risk evaluation and international transfer pricing.

These sessions hosted by IBS@SIMSR attended by a large cross section of SIMSRstudents and faculty went a long way in complementing the classroom learning atSIMSR with the expertise of industry leaders, international professionals,students and faculty from universities abroad.

Continuing with the format of the inaugural issue of e-Globuzz, which was highlyappreciated, we have covered in this issue, Mr. O K Kaul's interview and articlescontributed by SIMSR students, Corporate Executives and Industry Experts onvarious aspects of international trade, international marketing, internationalfinance, international logistics and world affairs, complete with a popularcrossword.

Our next issue is planned in July '10, which we trust gives you enough time to sendus your articles for the third issue of e-Globuzz. We also look forward to yourfeedback and continued support.

Till then we will miss you.

Prof C P Joshi

Faculty Mentor

6Cover Story

The Confectionery SectorHow “ ” is the SWEET Industry?SOUR

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Business Leader in Focus: Aiko Toyoda

Company in Focus: Wal-Mart

Cover Story: How “Sour” is the Sweet Industry?

The Confectionery Sector

International Marketing: Marketing of Avatar

Crossword # 02

Country in Focus: Germany

International Logistics: Green Supply Chain

Interview with Mr. O.K. Kaul, ED, TATA International

Debate – Copenhagen: Success or Failure for India?

Book Review: The New Age of Innovation

Did you know these terms?

USA Health Reforms

International Business News

He likes to race cars and just completed a 24-hour endurance competition

with three other team members in a Toyota supercar at Germany's famed

Nürburgring, a Grand Prix-style race. When the 52 year old Toyoda

Nicknamed as "Prince" by Japanese media took over the post from Toyota

President, Katsuaki Watanabe, in June 2009, the company expected

Toyoda to inject an international approach to correct the miserable

performance of the company's overseas operations which led to the first

major losses in 70 years and he may not have expected the kind of

situation he is facing.

While getting his law degree from Tokyo's prestigious Keio University, he

dreamt of playing Olympic field hockey. Instead, he went on to get his

master's degree in business administration at Babson College in

Wellesley, Mass. He set out on a career away from autos by joining an

investment bank and working as a management consultant, living on

Manhattan's Upper East Side, then moving to London. At Toyota his

musings about a possible career were met with a lukewarm response

from his father, Shoichiro Toyoda, who told his son: "No one wants to be

your boss." But he believed he could make a unique contribution because

he was a young president by Japanese standards.

But, seven months into his job and one month into the worst crisis in his

company's history, the grandson of the company's founder is facing strong

questions from all corners of the world for manufacturing of defective

vehicles. The company is under scanner over the company's handling of

customer safety concerns and its series of recalls over potentially faulty

accelerators and braking systems. Mr Toyoda is facing harsh criticism for

shattering the Japanese manufacturer's management. Mr Toyoda, a

corporate implant of mighty Japan, groomed from birth for leadership,

educated abroad has followed steady ascent through the ranks of the

company reflecting a man with a decent grasp of the business, a hands-on

approach to management and a relatively high level of international

sophistication.

If Toyoda is fazed by the challenges awaiting him, he never betrays it. The

all criticism does not mean, he will fall and resign. The much talked

accelerator problems were generated under the control of his two

predecessors. Mr Toyoda very nearly predicted a crisis of some sort when

he said last June that the company had grown too fast. When he

reiterated there was a faint glint behind the apology; it may never work,

but he may have it in mind to trim the behemoth his forebears created.

The toughest task ahead of Mr. Toyoda is to regain and maintain the faith

in brand. In case of Toyota the quality of its product, the honesty of its

claims and continuous improvement are at its core, and the recent recalls

have shaken the foundation of the brand. The company has already

started taking essential steps by the recall of vehicles worldwide,

maintaining communication through democratic channels (e.g. Twitter)

to maintain a dialogue with its customer base reinforces its intent to make

good. He vows to rein in overcapacity, reorganize operations to

strengthen control, and get the company back to basics. He especially

wants to re-instill dedication to one of the pillars of Toyota's production

system: , meaning "go and see for yourself." These strong

moves show a commitment to its brand positioning values and promise.

genchi genbutsu

by

Anirudha Kandharkar,

PGDM IB 2009-11

Aiko Toyoda - President, Toyota Motors

Business Leader in Focus

TOYOTA

e-Globuzz, Volume I, Issue II Jan-March 2010 Page 1

He vows to rein in overcapacity,reorganize operations to

strengthen control, and get thecompany back to basics. Heespecially wants to reinstill

dedication to one of the pillarsof Toyota's production system:

genchi genbutsu, meaning“go and see for yourself."


Company in FocusCompany Overview

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Financial Performance:

Global Presence:

Wal-Mart, Partners and Society:

:

If you feel that your purchases have become convenient and cost

effective, then here is the company to know about. Wal-Mart

Stores, Inc. was established in 1962 and only to change the way

retail industry operates all over the globe. Its unique strategic

position is the outcome of hard work of the founder Mr. Sam

Walton David, and subsequent President and Chief Executive

Officers, Mr. David Glass, Mr. Lee Scott and recently appointed Mr.

Michael T. Duke “My Dad created Wal-Mart to help people save

money so they can have a better life. This mission remains as

relevant now as it was in 1962”, says Rob Walton, Chairman of the

Board for Wal-Mart. In sync with it the company focuses entirely

on EDLC-EDLP, that is, Everyday Low Cost- Everyday Low Prices.

Walton opened his first Wal-Mart in Rogers, Arkansas. The

company went public in 1970 and added more stores every year. In

1990, Wal-Mart surpassed key rival Kmart in size. Two years later, it

surpassed Sears. The store formats include the Discount Stores,

Super Centers and the Neighborhood Markets. Their way to

success was by balancing the deliverance of value, variety and

quality to satisfy customers and build long term relationships with

suppliers, and its employees whom they refer as-'associates'. Wal-

Mart efficiently deployed technology for operational efficiency in

its logistical and marketing processes. Wal-Mart has sustained

firmly on its business model. Wal-Mart's cost leadership position is

derived from firstly, the economies of scale. Thus thinner margin is

compensated by volume. Secondly, economies of scope, wherein

emphasis is laid on categories in which the Wal-Mart's brand has

authority and can offer a full line of products. Third is the stability

and consistency of the management.

Of the total business 63.7% is contributed by Wal-Mart's

operations in the USA where Texas and Florida have highest

concentration of stores, 24.6% sales come from International

operations where Mexico(1197), Central America(502) and

UK(358) have maximum number of stores, and remaining 11.7%

comes from the Sam's Club.

With a clear intention to focus on price leadership in every market

to drive global leadership, it has set up 3615 international stores,

in total of 7873 stores. It entered various markets recently by way

of joint- ventures, and acquisitions. Some of its recent moves

include opening a Hong Kong regional office to facilitate long-term

opportunities in Asia with focus on Japan, India and China. In

October 2007, the Company acquired the majority of the common

shares and all minority preferred shares in its own Japanese

subsidiary, The Seiyu Ltd. In January 2009, the Company acquired

approximately 58.2% of the outstanding D&S shares Distribución y

Servicio, Chile.In February 2007, the Company announced the

purchase of a 35% interest in BCL. BCL operates 101 hypermarkets

in 34 cities in China under the Trust-Mart banner. In August 2007,

the Company announced an agreement between Wal-Mart and

Bharti Enterprises, to establish a joint venture called Bharti Wal-

Mart Private Limited to conduct wholesale cash-and-carry and

back-end supply chain management operations in India, in

compliance with Government of India guidelines. In addition,

Bharti Retail entered into a franchise agreement with an Indian

subsidiary of Wal-Mart to provide technical support to Bharti

Retail's retail business.

Wal-Mart created more than 63,000 jobs worldwide in 2009. Its

“Sustainability 360” is the Companywide effort to take

sustainability beyond their direct footprint to encompass Wal-

Mart's associates, suppliers, communities and customers. As the

purchasing agent for the customers, Wal-Mart's goal is to

encourage improvements in sustainability and ethical practices

among suppliers. The Wal-Mart Foundation is dedicated to

supporting programs that help people live better, primarily by

expanding access to education, health care, and job opportunities,

as well as by promoting responsible sourcing. Wal-Mart is an

economic force, a cultural phenomenon and a lightning rod for

controversies. Be its unprecedented power to shape labor

markets globally or changing the way entire industry operates, and

pressurize the suppliers to sell at cheaper prices. Wal-Mart has

explored new sectors of retail, used technology favorably and

adopted a frugal corporate culture to clearly be the leader in retail

and make its Frugality, the global in thing.

by

Anchal Sachan

PGDM IB 2009-11


Country in FocusGERMANY

Located in the heart of Western Europe, Germany is the continent's

most industrialized and populous country. It is a federal

parliamentary republic of sixteen states ( ), and is a major

power with the world's fourth largest economy by nominal GDP and

the fifth largest in purchasing power parity. Germany is recognized

as a scientific and technological leader in several fields.

The Great Depression, which began in 1929, led to a polarization of

German politics and to an upsurge in support for the Communist

and Nazi parties. In 1933, the Nazis under Adolf Hitler gained power.

The Nazis imposed a totalitarian regime and followed an

expansionist foreign policy that led to World War II. After Nazi

Germany's defeat, the country was divided into democratic West

Germany and communist East Germany. In 1990, East Germany was

reunited with West Germany

Germany is a federal, parliamentary, representative, democratic

republic, with rights guaranteed by the Basic Law, or constitution.

The Chancellor is the head of government and exercises executive

power, where as The President is the head of state, invested

primarily with representative responsibilities and powers.

The Judiciary of Germany is independent of the executive and the

legislative branches. Germany has a civil or statute law system that

is based on Roman law with some references to Germanic law

Germany is the largest national economy in Europe. In 2008

Germany's GDP was about US$2.9 trillion on a purchasing power

parity (PPP) basis and nearly US$3.65 trillion at current exchange

rates. Germany is the world's second largest exporter with $1.170

trillion exported in 2009. Most of the country's products are in

engineering, especially in automobiles, machinery, metals, and

chemical goods. Germany is the leading producer of wind turbines

and solar power technology in the world.

Germany has a modern financial market sector and transparent and

effective laws and policies to promote competition. It has strict

domestic anti-corruption and anti-bribery laws and is considered

one of the least corruption-plagued countries of the industrialized

world. Foreign and domestic entities have the right to establish

and own business enterprises, engage in all forms of remunerative

activity, and to acquire and dispose of interests in business

enterprises.

Brief History

Government and Legal System

Economy

Investment Climate

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Länder

Protection of Property Rights

Culture

Foreign Relations

Conclusion

Intellectual property is well protected in Germany. Germany is a

member of the World Intellectual Property Organization and a party

to most of the major international intellectual property protection

agreements.

Germany, in general, is a very conservative country and this feature

is also reflected in their way of business. They have very distinct,

somewhat formal, ways of working. Prescribed rules, distinct

etiquettes are what they adhere to. Besides their conservatism,

their innovation, productivity and excellence are distinct

characteristics of German business. The Germans emphasize on

individualism, masculinity, and uncertainty avoidance. Power

distance and long-term orientation are both ranked considerably

lower than the others. This illustrates Germany's belief in equality

and opportunity for each citizen, as well as its ability to change and

adapt rapidly.

Germany has played a leading role in the European Union since its

inception. It is also a partner of NATO and is fully protected by NATO

agreements. As one of the world's leading industrial nations,

Germany has partnerships and special agreements with countries

all around the globe. That makes it a safe place to do business in. In

the area of development aid, Germany is one of the largest net

contributors of the UN and has several development agencies

working in Africa and the Middle East.

From manufacturers of complex nanotechnology solutions to

energy efficiency consultancies, Germany has become a pacesetter

for modern products and services on highly competitive

international markets. It has the capability to become Europe's

most successful economy. Already today, Germany has attracted

the highest concentration of American investment in Europe

totalling more than 130 billion euros and directly creating more

than 800,000 jobs. In the year 2020 no international company will

be able to ignore Germany as a business location. As the continent's

entrepreneurial hub, the country is the best address for every

investor in Europe.

by

Lubna Akhtar

PGDM IB 2009-11


International Logistics - Green Supply ChainAnil Kumar, Sr. Consultant, IBM Global Business Services SAP Practice

What is the one of the questions that is one of the top priority of all

executives across the globe apart from the economic scenario?

According to a recent ' study by '

, sustainability and corporate social responsibility

feature amongst the top three priorities of the consumer goods

industry. A similar finding is resonated in the IBM Institute for

Business Value study.

Many of us would be thinking why companies and businesses are

thinking about Green Initiatives, when they should be focusing

their energies on growth and other strategic issues. Energy and

water efficiency not only helps the planet, but also saves on bills.

The technology employed to optimize logistics not only reduces

fuel usage and toxic emissions, but makes for a leaner, more

efficient and cheaper supply chain. Aligning an organization's

“green strategy” with its overall business strategy is paramount.

This begins with a clear understanding of the overall corporate

objectives and priorities, followed by carefully defined programs,

goals and tasks that address environmental and stakeholder

views. It creates a positive perception about the company and

companies are better prepared to meet the regulations as and

when they come. Sustainability makes perfect business sense.

By driving operational efficiencies and adopting Lean and Green

Supply Chain Management practices, companies are trying to

reduce their carbon foot print. Below are the key areas where

companies are channeling their efforts to turn their supply chains

greener:

– Companies are redesigning

products to reduce energy consumption in the production and

distribution. Innovations in product design are leading to

reduction of some of the processes leading to Greener products.

Reduced energy usage through

streamlined production and greener supplier networks are

helping companies become manufacturing Greener products.

– By consolidating

logistics and shipment dispatch companies are reducing their

carbon foot print. Route planning has made the supply chain

greener.

Well, how does all this translate into business and what have been

the results so far. Let us examine a few examples on how

companies have used Sustainability, Green initiatives and CSR to

achieve spectacular business results.

Many times sustainability helps you beyond the usual cost saving.

When a company champions of a cause, customers associate it

with something good and are willing to pay premium price for

their products. Consider the case of US clothing and adventure

gear maker, Patagonia. Patagonia turned its fortunes by adopting

an eco friendly product range by switching to organic cotton and

changing the packaging to reduce impact on environment and a

lot of other such initiatives. Patagonia's products not only became

a big hit with the consumers but also allowed the company to

charge a premium price. This strategic change turned Patagonia

from near bankruptcy in 1996 to a company with thirty nine stores

in seven countries and $ 270 million in revenue in 2006.

In US, Wal Mart has redesigned its stores to reduce energy and

water consumption. It has started harvesting sunlight to reduce

the usage of electricity in its stores. This has not only made the

stores Greener but also has helped Wal Mart in reducing the

overall cost of its operations.

IT companies have also joined the bandwagon and are coming up

with innovative products which have reduced energy usage. IBM

through its smarter planet initiative is working with organizations

both public and private to help them turn smarter and more

efficient.

Sustainability and CSR can also help companies in creating a brand

presence. Consider the example of the ' campaign

by Aircel. By associating itself with the noble cause of saving the

tigers, Aircel has created a unique brand presence in the minds of

the consumers. So when we think of saving the tigers, Aircel's

name is always there in the back of our minds.

In Bihar's rice belt, a group of individuals have founded a company,

Husk Power Systems, which caters to the energy needs to the

villages. The company uses rice husk to produce sustainable and

renewable energy and is electrifying the remotest villages in Bihar.

Sustainability and Clean Technology have become the focus of the

governments and enterprises worldwide. From energy efficiency

and renewable energy to efficient and lean manufacturing and

supply chains, clean technologies have opened huge market for

innovation. The entire Clean Technology industry is estimated to

be worth more than trillions of dollars. Organizations and

countries which are prepared to take on this new opportunity will

emerge as leaders in the coming decades. So, start thinking how

you can contribute and catch up on the business opportunity that

is good for the world.

Top of the Mind' The Consumer

Goods Forum'

Save our Tigers'Product Design and Redesign

Green Manufacturing –

Route Planning and Shipment Consolidation


USA Health ReformsPuneet Kumar, Business Analyst, Accenture USA

US Health Reform

Plan:

Impact onUSA Economy

Impact on Private Insurers:

NAIC Response:

United States's health care reform plan is one of the most

important bill which will have a major impact on US health care

system, private health care insurers and on US economy in near

future. US badly needs to revive its poor health care system filled

with insurance frauds, skyrocketing premiums, uninsured

families, unaffordable medical bills and personal bankruptcy. On

February 22, 2010, President Barack Obama launched a new

health care reform plan that is mainly modeled after

. It will regulate the health insurance

industry under a seven-member Health Insurance Rate Authority

that could deny or limit substantial premium increases. This has

traditionally been a state responsibility. Like the Senate Bill, it will

create an exchange that allowed families and small businesses to

shop for insurance plans. It will restrict on federal funding for

abortion, but cuts back taxes on the high end health plans.

Reasons for Reform: Health insurance premiums have doubled in

last 8 years, rising 3.7 times faster than wages, and increasing co-

pays and deductibles threaten access to care.This forces families

to sit around kitchen table and decide whether to pay rent or

health premium. Many insurance plans cover only a limited

number of doctors' visits or hospital days, exposing families to

unlimited financial liability. Unaffordable medical bills are

responsible for more than 50% of all personal bankruptcies today.

Lack of affordable health care is compounded by serious flaws in

health care delivery system. One-quarter of all medical spending

goes to administrative and overhead costs, and reliance on

antiquated paper-based record and information systems

needlessly increases these costs.

The rising health care cost will devastate the federal budget in

future. The US health care system contributes $2.5 trillion or

nearly 18% to GDP, the highest percentage in the developed

world. Health care reform is needed to stem the economic costs

of frauds. Between 3-10% ($60-$200 billion) is lost to fraud. If

those same percentages are applied to the proposed $436 billion

Medicare program, the cost of Medicare fraud is $14-30 billion.

Without health care reform, government spending on Medicare

and Medicaid is unsustainable. These costs will rise from 6%

(current) to 15% of GDP by 2040.That's because Medicare payroll

taxes and premiums cover only 57% of current benefits. The

remaining 43% is financed from general revenues. Because of

rising health care costs, general revenues would have to pay for

62% of Medicare costs by 2030.

The Insurance business is dominated by a small group of large

companies that has been gobbling up their rivals. In recent years,

for-profit companies have bought up not-for-profit insurers

around the country. There have been over 400 health care

mergers in the last 10 years and just two companies dominate a

full third of the national market.These changes were supposed to

make the industry more efficient, but instead premiums have

skyrocketed.This bill if gets passed will hurt the firm's bottom line

and lead to much more competitive market. Health insurance in

itself is not a quiet profitable line of business as critics seems to

think. For every dollar paid as premium, 83 cents goes out in

medical costs – doctors, hospitals, and drugs. However consider

WellPoint, the biggest private health insurer on Wall Street,

which paid out 83.6% of revenues in expenses but the net profit

after tax deduction came out to be princely 4.1%. Returns on

assets are also key measure in profitability and are typically

pretty modest. The health-care reform was dominated by the

issue of the so-called "public option" - whether the government

should offer an insurance plan that competes with those offered

by private insurers. But that is out of picture now as per the new

plan. If public option of health insurance would have come into

picture then this 4.1% profit would have made quiet a significant

difference between government and private sector.

State regulators are working closely with congressional drafters

to make certain that the legislation preserves the critical role of

state regulators and continues the use of objective standards in

rate review process. State regulators are pleased that President's

proposal emphasizes state-based reforms but are concerned for

about the inadequacy of the individual mandate which could lead

to a dysfunctional market place and higher rates for consumers.

The members of the NAIC are strongly opposed to any bill in

which the federal government allows insurance carriers to sell

their products in our states using the regulatory rules of another

state. This misguided proposal would increase premiums for

those who need insurance the most and eliminate important

consumer protections. It would also fragment the insurance

market and expose consumers to increased fraud and abuse.This

concept must be rejected and the decision whether to allow, and

under what conditions to allow, interstate sales of insurance

should be left up to the individual states.

the Senate

Health Care Reform Bill

· Insurance will be more affordable

· Sets up new competitive health insurance market

· Greater accountability to health care by keeping

premiums down and prevent insurance industry

abuses and denial of care

· End of discrimination for patients with pre existing

conditions

· Stability in economy by reducing the deficit by more

than $100 billion over next ten years and about $1

trillion over second decade

:


Cover Story - Sector in Focus

Confectionery SectorConfectionery SectorMarket Overview:

Market size and growth:

Major Players:

Confectionery is undeniably a part of

everybody's everyday life.All of us reach for chocolates and

candies at virtually every meal and many times during the

day. Almost two-thirds of all confectionery consumption is

driven by "emotional" as opposed to functional "need

states"--presenting endless consumption opportunities to

the buyers and myriad branding opportunities to

manufacturers. Not surprisingly, the global confectionery

market is expected to reach $152.37 billion by the end of

2010.

Much of this recent growth has come from developing

regions and countries, aided by the spread of multinational

companies and their brands, as well as a growing base of

increasingly affluent consumers in places such as Russia,

China and India. In the developed world, much of the

market's recent growth can be attributed to niche sectors,

such as low-fat, low-sugar, organic and fair trade products.

Mergers and acquisitions in this sector have also

contributed immensely to growth and penetration in the

developing markets. In 2012, the confectionery market in

the BRIC (Brazil, Russia, India, China) nations is forecasted

to have a value of $25.6 Billion.

The confectionery sector is highly dependent on two

primary ingredients; Sugar and Cocoa. Unfortunately,

these commodities are subject to high price volatility

which, in turn, puts an upward price pressure on production

costs and consumer prices. This seriously affects the

industry's sales volumes and profit margins.

The confectionery industry is

categorized as follows:

· Chocolate confectionery: molded bars, boxed

chocolate, chocolate countlines, novelties and

chocolate straightlines.

· Sugar confectionery: caramels and toffees, hard

boiled sweets, gums and jellies, medicated

confectionery, regular mints, and power mints.

· Gum: sugar free gum, regular chewing gum,

functional chewing gum and bubblegum

· Cereal bars: sports and energy bars and other bars.

The market for confectionery is valued according to retail

selling price (RSP) and it includes applicable taxes. By the

end 2012, the global confectionery market is expected to be

worth USD 161.39 billion in terms of value, with an

expected CAGR of 3% between 2007 and 2012, while the

market, by volume, will total 16.18 billion kg, with an

expected CAGR of 2.2% during the same period.Out of the

broad categories in the confectionery industry, chocolate

confectionery is the largest sector, accounting for almost

60% of total sales in value terms. By volume, however,

sugar confectionery accounts for the majority of sales, with

a share of 51% and gum holds only a 14% stake but is the

fastest-growing segment. The per capita consumption of

confectionery in most of the developed countries averages

almost 11 kilograms. Also, per capita consumption of

chocolate confectionery tends to be higher in northern

European countries, while the Scandinavian markets

command high per capita rates for sugar confectionery.

The per capita consumption of chocolate is highest in

countries like Switzerland, Germany, Austria, United

Kingdom and Belgium.

The global confectionery market remains

relatively fragmented, with big names like Hershey, Kraft-

Cadbury, Mars, Nestle, Ferrero, Lindt, Lotte Confectionery,

Perfetti Van Melle, Meiji Seika Kaisha etc.accounting for

less than half (45%) of value sales. Some of the brands

under established names are M&M by Mars, Cadbury's

Dairy Milk and Trident, Wrigley's Orbit, Mars's Snickers,

Hershey's Kisses, Kraft's Tobolerone, Meiji Seika Kaisha's

Meiji etc.

In recent years, this sector has seen many mergers and

acquisitions. Companies have been buying high growth

segments and utilizing their existing distribution channels

not only for market penetration but also increasing their

geographical spread. A special mention of the two recent

big deals sealed cannot be missed in this segment. The

Kraft-Cadbury deal has put Kraft on the top position in the

chocolate and confectionery segment. The group will have

40 confectionery brands, each having an annual sale of

$100 million. This deal will help Kraft reach leading

positions in developing markets, including BRIC nations

and Mexico. Another deal between Mars and Wrigley in

2008 boosted Mars position in the global market through

its acquisition of The Wrigley Company, the leader in the

chewing and bubble gum subsector.

How “ ” is the Sweet Industry?SourHow “Sour” is the Sweet Industry?


Growth Drivers and MarketTrends:

1. Consumer's purchasing power

2. Innovation

3. Healthy lifestyles

4. Sugar confectionery remains an important

category

5. Kids Confectionery

6. Imported confectionery items

7. Seasonality

8. Increase in supermarkets /hypermarkets

: Demand for

premium varieties is not only increasing in

developed nations, but is also witnessing a growth

in developing countries owing to stable economic

growth, rising middle class incomes and increasing

spending power.

: New Product Development taking

local factor into consideration in the form of flavour

extensions, innovative packaging and variety of

new combinations are being developed by

manufacturers to cater to the taste buds of the

masses.

: Consumer concerns over

portion sizes and emerging natural and wellness

trends is forcing companies to come up with

offerings providing functional health benefits such

as oral health care, skin care, low sugar, low fat, low

calorie and low carbohydrate kind of products.

Companies in certain countries have introduced

nutritional labeling for their brands displaying

calorie content on pack fronts and guideline daily

amounts (GDA) on the reverse.

: Sugar confectionery is still the most

dominating and important confectionery category

due to its lower unit price than chocolate and gum.

In addition, consumer awareness of the dangers of

sugar-based confectionery on oral health is still

relatively poor among consumers in these

countries. They have a strong holding in developing

regions for cultural reasons, in addition to ease of

local manufacture, transportation and shelf-

stability of sugar products.

: Primarily, kids remain the

main target group for confectionery items. To

create a buzz among target consumers is a very

tedious and capital intensive activity. A kid these

days is very selective and has approximately 14

brands in his/her preference set (lack of product or

brand loyalty), luring him/her towards products is

extremely difficult. Companies come out with many

“firsts” in sales promotions (freebies such as tazos,

giga cards, temporary tattoos, magic candles) to

expand and sustain market shares.

: Consumers are

choosing chocolate according to region and the

level of cocoa solids, an approach similar to that in

wine and cheese tasting. Single-origin chocolate

will experience high growth over the next five years.

All the big global players in confectionery sector

export in large quantities as confectionery is

becoming a part of developing nations' growing

appetite forWestern food products.

: Sale of confectionery items is

induced by festivities or other social occasions.

Hence, special packaging for promotional activities

including “one-off” promotions — is increasingly in

demand. Companies engage in special limited

editions products and packaging to promote their

products and build brand strength thereby grabbing

not only the share of consumers' wallet but also

their minds.

: With


2010 2011 2012Region

Western Europe

North America

Asia Pacific

Latin America

Middle East and Africa

OVERALL

53.75 54.50 56.12

17.80 18.83 19.84

38.21 39.19 40.15

26.45 27.25 28.07

10.98 11.32 11.67

5.18 5.36 5.54

152.37 156.86 161.39

Source: Datamonitor

Global Confectionery Value Region-wise Forecast, 2010-2012 (USD billion, nominal prices)

Eastern Europe


the booming retail sector, confectionery products

have managed to get an increased presence on

shelves and also in inducing impulsive buying, thus

gaining much greater visibility, enhanced sales and

increased penetration.

: Heavy fluctuation in the

price of cocoa is adversely impacting the profit

margins of companies operating in this sector, as

chocolate based confectionery generates higher

sales revenues compared to other two components

of this sector. The recent hike in sugar price has

become another area of concern for the companies,

thereby bringing tremendous pressure on these

players.

: All most all the global

players have been integrating horizontally by

acquiring or merging with other food giants in sub

sectors like Kraft bought Danone biscuits, Nestle

bought Kraft's Pizza business, thus expanding their

product portfolio and increasing reach by using

existing distribution networks.

Confectionery brands rely on

advertising for brand building. In fact, TV advertising spend

is second highest for the confectionery segment. To enhance

visibility, companies engage in ATL activities and focus on

BTL as well in order to complement the overall marketing

programme. Confectionery sales are primarily retail sales

thus laying emphasis on point of purchase promotions like

posters, danglers, jars, 3-tier,5-tier stands, as confectionery

purchases are generally driven by impulse. Innovations,

limited editions and brand extensions including flavour and

texture developments such as Snickers Cruncher (from

Mars) or KitKat Orange (from Nestlé) are being launched to

sustain consumer interest.

There is lot of pressure on

companies to ensure retailers stock their products all the

time to bring about deeper market penetration and thus

enabling more products to reach more consumers. There is

heavy reliance on convenience stores and other formats of

organised trade. In developing nations however small retail

outlets and other unorganized formats like small grocery

stores, tobacconists result in the bulk of the sales. Supplying

to fragmented retail channels in developing nations is quite

costly, so it becomes absolute necessary for companies to

develop a comprehensive distribution network.

1. Highly competitive market due to fragmentation

2. Plethora of spurious products available

3. Huge investments in innovation and new product

development

Chocolates will remain the more

promising area of opportunity for confectionery giants

because it lends itself better to the increasingly accessible

(high-end, high income) markets. Sugar confectionery will

be next, with the best opportunities being captured by

unique novelty/specialty candies. Gum is the challenging

category going forward, as price points are low, volumes are

small, distribution costs are high, and competition is fierce.

Sugar-free confectionery demand is expected to grow

rapidly as there is a considerable increase in health

conscious population. In future, the main trend in

confectionery will be of experimenting with flavours and

variety, specifically a growing demand for health benefits

and 'better for you' ingredients, boosting the `natural'

credentials of brands through the removal of artificial

colours and preservatives and replacing them with

ingredients such as fruit juices etc. Eco-friendly

manufacturing efforts, like recyclable packaging, will

influence product development and consumer purchasing.

Another factor that companies need to look into is their

communication strategies. Since in many countries,

objections have been raised regarding advertising to kids, so

future growth can be dependent on creating sweets that are

as popular with adults as children.

by

Astha Pasricha

Sukhmani Grewal:

PGDM IB 2009-11

9. Prices of factor inputs

10. Horizontal Integration

Promotional Strategies:

Distribution Strategies:

Issues/ challenges

The Road Ahead:


AVATAR built

successful

connections

and

conversations

with the

visitors on

Facebook (close

to 1.3 million

fans), MySpace

(close to

800,000

friends) and

Twitter (over

25,000

followers)e-Globuzz, Volume I, Issue II Jan-March 2010 Page 9

International Marketing

Marketing of ‘AVATAR’The movie Avatar directed by famous James

Cameron who made a comeback after 12 yrs

was a smashing hit at the box office.

According to the Los Angeles Times, the cost

of making and marketing this magnum opus

from the “Titanic'' director James Cameron

was $430 million, though some have

suggested $500 million. This state-of-the-art

blockbuster which is about an evil 22nd-

century corporation raping a pure-utopian

planet, brought healthy profit to its makers,

with more to come in line with DVDs, action

figures, books, video games, and sequels

This movie has revolutionized the 3D industry.

In India, Reliance Big TV bagged the deal and

entered into strategic alliance with Fox Star

Studios. As by its very nature movies have a

short life time as they need to make an impact

in the first week of their release or they are

swiped from the minds of consumers. With

world entering into digital era, it opens the

opportunity for the marketers to a wide

population but this needs to be carefully fine

tuned to its last detail.

A lot has been talked about the success of the

movie. But the strategy and the effort that

went into the making of a trendsetter is worth

revealing. Marketing of the movie was done

at International level with attention paid to

every miniscule detail.

The comeback of a great director James

Cameron itself created curiosity among the

viewers. The audience was waiting eagerly to

see the brainchild of James on which he has

spent so much of time. This in itself drew a lot

of attention and created a buzz. August 21,

2009 was celebrated as Avatar's day with 100

IMAX 3-D theaters worldwide showcased 16

minutes of footage for the movie. The same

day Ubisoft made a debut with a trailer for a

videogame based on the film and Mattel

unveiled action figures inspired by the film's

characters. A day earlier, the teaser for the

very same film broke a record on Apple.com

after bong streamed more than four million

times on its first day.

The website of the movie was itself creative

that it had all the elements of pull strategy.

Visitors had access to more than the standard

fare of trailers, images and background

materials. The website offered side-scrolling

square boxes that showcase many of the

digital initiatives that make this movie stand

out. Fans had access to the story, character

bios, the music, and wallpaper downloads;

and they also had opportunities to contribute

content and showcase their interest in the

film -- including Pandorapedia, a wiki for all

things "Avatar," and the previously discussed

blogging community. Moreover the self crash

of the site by the viewers trying to book

advance tickets in August added fuel to the

fire and in way was related to the concept of

the movie, that is, Humans trying to destroy

home tree.

Avatar also exploited Social network sites as

they are popular marketing tool nowadays for

launch of any new product in the market and

they also have the potential of roping in a

large number of viewers. It built successful

connections and conversations with the

visitors on Facebook (close to 1.3 million fans),

MySpace (close to 800,000 friends) and

Twitter (over 25,000 followers). Due to its

wide reach, these sites were able to create

enthusiasm among the viewers and the

marketing team of Avatar fuelled it by adding

“Tweet to Listen" promo that required fans to

send a message onTwitter in order to listen to

music from the film. Avatar social media

strategy also extended toYouTube with close

to 11 million viewers, Flikr with 1 million

viewers and TypePad blogging community

(close to 4,000 members).

Avatar also had interactive trailers added to

the success of the movie. It had 11 points of

interaction and provided viewers with one

click access to each character. Mattel created

"Avatar" toys that buyers could activate and

"bring to life" through webcams and special

product tags, while Coke Zero produced

custom cans that opened up the world of

Pandora atAVTR.com.

The end result is that "Avatar" is now the

biggest box office movie of all time. The

movie has eclipsed $2 billion in total ticket

sales, driven largely by 3-D revenues and

international interest.

by

Shilpi Tayal

PGDM IB 2009-11


Q&AExcerpts of talk of

Mr O K Kaul, Executive Director, TATA International

with Shashi Shekhar and Manish Raj of PGDM IB 2008-10

& Sukhmani and Vikash of PGDM IB 2009-11, SIMSR

Mr. OK Kaul joined the leather business of Tata

International in 1975.He was promoted to vice

president of the Leather & Leather Products division in

1993 where Tata became the first leather company in

Asia to be certified with ISO 9000 and ISO 14000. O K

Kaul was later appointed as President of the Leather &

Leather Products Business. In April 2009, he was

appointed executive director of Tata International Ltd

Worldwide encompassing leather & leather products,

engineering and new business opportunities.

Mr. O.K. Kaul

Tata International has many businesses ranging from

aluminium, steel, auto components, solar

engineering to trading and modular housing. It's

primarily a trading organization. We do “Opportunity

Trading” – Somebody somewhere wants something,

Tata International fulfils it. Since Tata International

has a strong foothold and sound infrastructure in the

African continent; we act as distributor for Tata

Motors and not its competitor. After all we all fall

under one umbrella-Tata Group. Our role is to

promote small companies and is involved in total

supply chain. Tata International works with a trading

mindset adding value at each stage of the value chain.

Tata International runs on a model where it

empowers all its employees to operate as

entrepreneurs. We run Strategy workshops and

sessions wherein each vertical proposes its Business

Plan for the next five years, this is then discussed with

the whole team. Feedback is taken from other

verticals, the technical team and the senior

management on the feasibility aspects of the business

plan and only then is it taken forward. This may be

confusing for an outsider but this enables in quick

decision making and allows for flexibility.

Mr O.K. Kaul: We entered the retail space last year in

the bicycles segment in the north east India. We are

also considering into entering the leather shoes

Mr. O.K. Kaul: TSMG is Tata Group's consulting arm.Tata International provides its local domainknowledge to TSMG in the countries where TIL ispresent. Tata International Ltd scans the country andexplores market opportunities and risks. The alliancebetween TSMG and Tata International enhances thereach of TSMG in these international markets.Additionally, Tata International provides businessdevelopment and infrastructure support to TSMG forproject execution, local business knowledge andidentifying opportunities in these geographies.

segment to begin with and then diversify into leatheraccessories and garments. The move to enter retailspace is triggered by the simple fact that the sheerconsumption drives promising growth rate to Indianretail industry. As of now we are limiting it to Indianmarkets, however we will expand our operations to fewneighbouring countries, but not in the immediatefuture.

SIMSR STUDENT: Tata Group has several companies in

diversified businesses under its umbrella. How you do

you manage to tap group synergies for growth in

International Business? Have you ever felt that the

presence of so many companies has proved to be

disadvantageous to the prospects of Tata

International?

SIMSR STUDENT: Will we see Tata International

entering into retail and FMCG sector in the near

future? If so, is it going to be India specific or abroad as

well?

SIMSR STUDENT: How do you view the marketing

alliance in Tata International entered with Tata

Strategic Management Group?

Students should dirty their

hands in the industry rather

than just focusing on

powerpoint presentations

from day one. They should get

involved in the entire vicious

circle of activities.

Management education adds

value when you have prior

work experience. Internship

should focus on deliverables

rather than just getting a

certificate. And to achieve

deliverables, two months is

too short a time.


SIMSR STUDENT: How do you view Agriculture as a

potential lucrative sector and how can Tata

International leverage its competencies to tap this

sector at a global scale for International markets?

SIMSR STUDENT: Tata International is an end to end

SCM Solution provider in India through its Joint venture

DIESL. Will we see the value chain expanding to tap the

global logistics market of 3.5 trillion USD?

SIMSR STUDENT: What do you think have been the

effects of the Copenhagen summit on international

business environment?

SIMSR STUDENT: What is your view on Technical

Barriers to Trade (TBT) as non-tariff barriers to restrict

leather exports from developing countries like India,

since average and bound tariffs for leather still remain

high for developed countries, while for other categories

it has fallen with the advent of WTO.

SIMSR STUDENT: What in your opinion could be the key

changes you would like to see in the current

management education in India?

Mr. O.K. Kaul:. With the population increasing manifold

and the demand for food soaring, the agriculture sector

demands a lot of attention from both the government

bodies and corporate sector. Tata International wants to

create a business model whereby it can partner with

universities to conduct R&D programs to enhance

productivity in this sector. This project is still in the

nascent stage and it purely depends on the availability

of land and productivity potential. So if there is land

available for R&D in Latin America or Africa, we would

go there and conduct soil-crop fit testing and other

relevant tests. We could collaborate with either foreign

universities or Indian universities and other IT firms to

help us carry out this project. These projects are long

drawn and require time and effort to be brought to

maturity to meet its objective.

Mr. O.K. Kaul: Yes, expansion is certainly on the cards.

Our next step is to make our global presence felt. Drive

as we call it and DIESL as you call, is growing very fast

and so is the logistics sector. It has few organised players

and the unorganised ones are integrating with

organised players to increase value. Moreover, the

logistics sector is directly related to the growth in the

retail, hospitality and services sector. Thus with the

strengthening of these sectors, Logistics and our role to

provide value addition to these sectors has immense

scope.

Mr. O.K. Kaul: The greatest achievement of this summit

has been that it has been able to create awareness

among people, governments and the corporate sector.

It has helped people to have a GO GREEN mindset.

Companies have started thinking in this direction and

gauging opportunities to benefit from it too. Issues

related to global warming, carbon emissions and

related aspects such as carbon credits are being talked

about. Tata as a group has worked diligently on these

areas and has given its best to make the world a better

and greener place to live in. For instance, in the African

continent people prefer to deploy solar panels in the

new residential and office buildings. We have boarded

the wagon long back to address this.

Mr. O.K. Kaul: This is specifically a problem with leather

industry since there have been oppositions by the PETA

and other similar organizations. Leather industry is

fragmented and issues such as child labour and

degradation of environment have been raised several

times. There is a need now for organised players to

come together and be vociferous about their practices.

Tata has never been media shy and has been proactive

to communicate its practices and norms to the people.

But we need to be more aggressive to showcase our

norms and practices. To sum up, Corporate initiative is

the key in this regard and role of WTO can only be

leveraged if the organization takes the first step.

Mr. O.K. Kaul: Keep yourself updated. READ. Students

should dirty their hands in the industry rather than just

focussing on PPT presentation from day 1.They should

get involved in the entire circle of activities in the total

value chain. Management education adds value when

you have prior work experience. Internship should focus

on deliverables rather than just getting a certificate. And

to achieve deliverables, two months is too short a time.

Neither the intern nor the company employee has the

motivation to give the best or take the best. American

Universities have mastered these very effectively and

result is clearly evident all over the world. We have to

take a cue and emulate the same here.

Solution # 01


Debate: COPENHAGEN - Success or Failure for India?

Before going to the 15 Conference of Parties (COP) at the Danish capital i.e. Copenhagen Summit, India had three

key objectives. They were: No legally binding emission cuts;No peaking year; No international review of domestic

funded mitigation actions.Also Indian govt said that the outcome of the talk must be within UN framework

convention on climate change (UNFCCC), countries especially developed polluting countries who are put inAnnex-I

of Kyoto Protocol (KP) should stick to it even after its expiry in 2012 and also should abide by the Bali action plan on

long-term cooperative action.

Looking at the outcome of the conference which sets global warming target of

below 2 temp rise than that of 1990 and $100B annual financing by

Annex-I countries to the developing & poor countries to

fight the climate change, one can observe that it does

not meet the expectations of t h e w o r l d . T h e

CopenhagenAccord does not put any legally binding

emission cuts on any country, does not provide any

mechanism on how to achieve the temperature

target and how to raise & finance the fund to

developing & poor nations. Thus, it failed to stick or

strengthen the KP.Also the a c c o r d w a s m a d e

between few (26) countries including India inside closed

room and was not accepted by all the193 participating parties.

Coming to the positives from this summit, One of the most valuable

outcome has been the guarantee of the continuity of UNFCCC negotiations,

which will now continue atleast for a year despite the accord. Another success for

developing countries like India was that they

ensured that primary agenda of developed countries

to dilute the KP principle of “ c o m m o n b u t

differentiated responsibilities a n d r e s p e c t i v e

capabilities” were pushed back.Their attempts to dump the KP and alter significantly the terms ofUNFCCC were not

succeeded at the formal level. The developing countries' position that their voluntary mitigation actions, which are

not financially assisted, will be reported only through periodic national communication and will be reviewed only

domestically has been partially preserved.

By looking at the objectives of India & the outcome of the summit, I can easily say that India was able to meet its key

principles and was partially successful in others. Now after 3 months of the summit, the Copenhagen accord has

been endorsed by more than 100 nations, which provides a small boost to the accord.Thus, the summit was not the

last hope but it is “an important beginning” as termed byUNSecretaryGeneral Ban Ki-moon.

th

0

Success for India

by Abhay K Agrawal, Technologist, GE Energy


Debate: COPENHAGEN - Success or Failure for India?

As Kyoto protocol is about to expire in 2012, a strong conclusion was needed from Copenhagen, to address the globalclimate change. The Final document that emerged from the summit has no firm commitments in it at all. Instead theagreement simply stuck to the normal diplomatic nonsense about the necessity of tackling the problem, reflects theglobal failure.

India had set two distinct goals for itself when deciding its strategy for Copenhagen negotiations. First, it wanted toleave no room for the western media and politicians to paint India as obstructionist. Second, being firmly of the viewthat in the long run India will suffer disproportionately more from catastrophes resulting from global warming, itwanted to cut a deal that would lead to major reductions in carbon emissions worldwide.

Mr. Manmohan Singh went so far as to state in his maiden speech inCopenhagen that India will deliver on its promise of bringing downits 2005 emission intensity by 20 percent by 2020 even if anagreement were not reached in C o p e n h a g e n . T h i ssomehow initially managed to achieve its first goal. But itcan cost dearly to India. On one hand, it will not haveachieved the goal of avoiding e n v i r o n m e n t a lcatastrophes and on the other; it would have ended upcompromising growth and poverty alleviation.

Prime Minister Singh will need to carefully weigh thiscost of India's own mitigation commitments against thebenefits to be reaped from improved commitmentoffers from industrial countries in the negotiations for a finalclimate accord. He must remember that given just 4 percent share inglobal emissions, mitigation by India by itself has virtually no impact onfuture global warming. His commitments will acquire value only if major emitterscountries sign on to an ambitious mitigation agreement. Under existingtechnologies, cuts in emissions or their growth are almost sure to translate intocuts in energy consumption or its growth, which would in turn adversely impactIndia's GDP growth and poverty alleviation.

With India's initial stand, that given the country's lowper-capita emissions, India should not be subjectedto any mitigation commitments Singh went on step-by-step to raise the level of his c o u n t r y ' s v o l u n ta r ycommitments. After bringing down emission by 20 %, he proceeded to commit to the goal of holding the averagetemperature increases around the globe to 2°C. This was followed by the announcement of eight national missionsaimed at mitigation.

As a part of as yet non-binding Copenhagen Accord, Singh also accepted the U.S. demand for submission of mitigationplans & progress report on mitigation to the UNFCCC. In principle, this provision can be seen as a first step towards theconversion of what are currently “voluntary” steps towards mitigation into internationally mandated commitmentthat Singh has promised not to accept under any circumstances.

These progressively rising levels of concessions have not led to any improvement in the offer by the United States,which currently stands at cutting it's country's 1990 emissions by merely 3 percent by 2020. This meager U.S.response testifies to Singh's failure to achieve his second objective.

Failure for India

by Pratik Jha, Territory Manager, Hindalco Industries Ltd.

Book Review


THE NEW AGE OF INNOVATIONTHE KEY TO CREATING VALUE & THE FUTURE GROWTH

The book co-authored by C K Prahalad and M K

Krishnan is about co-creation of value by companies

and customers together.

The fabric of the book is woven from two threads,

expressed as formulas. N = 1 means focussing on “one

consumer experience at a time"; R = G means that

"resources from multiple vendors and often from

around the globe". N=1, is different from mass

customisation offered by companies. Moreover, the

range of skills needed for N=1 approach, can only be

achieved by building collaborative networks by

companies. Also, there are certain capacities,

capabilities and flexibilities that one needs to build in

one's business systems, in one's human capital and

one's geographical reach. Prahalad and Krishnan

write that all firms will access resources from a wide

variety of other big and small firms—a global

ecosystem. Company's internal focus should be on

gaining access to resources, not necessarily owning

them.

Further in the book, the authors emphasize the need

of information and communication technology (ICT)

architecture that can connect business processes and

analytics to data and application. In a rapidly

changing environment business process cannot be

static. There is a need for continuous innovation.

Continuous Analysis is required for insights for next

innovations in the organizations. They also

emphasize how legacy systems need to be replaced

to make the organization more flexible to

accommodate the N=1, R=G model. They present a

case of lot of Indian companies who have adapted this

model and have built flexibilities in their systems.

They make a case for the strategic importance of IT

and how organizations cannot afford to write it off as

a commodity.

Further they explain the mindset changes that the

managers need to go through to accept and be the

change that would enable the organization for this

new model. They talk about the new requirements in

talent management which again needs to be both

flexible and mobile.Authors also talk about the role of

leadership in bringing in these changes in the

organization.

The chapter on Efficiency and Flexibility highlights a

challenge that every company that has ever tried to

be both nimble and efficient has faced. There is a

distinct tension between the two and it is often not

resolvable. The chapter also discusses problems

moving from the old way to the new way. The final

chapter, An Agenda for Managers, promises that the

author's model is the one that will be the basis for

innovation and value creation. There are some good

advice like "learn by doing, take small steps" and "A

long-term focus with short-term actions is the

essence of organizational transformation."

They include examples of failures and mistakes. In

one powerful example, the authors discuss about a

"major auto supplier" in the U.S shifting the sourcing

of various parts toChina. Unexpectedly, what seemed

like a clear-cut business decision had a negative

impact on many levels: The logistics of air-freighting

parts from China wiped out any cost benefits, while

the resulting lack of flexibility and longer lead times

meant that the company's internal design process

also had to be entirely rethought. The example

provides a salient reminder of the importance of

stepping back and thinking about the big picture, to

consider the existence of less codified processes and

systems, and to identify and pre-empt the potential

consequences of any decision.

Although, the concept has been beautifully packaged

and presented, it is tough to fully agree with the

universality of this concept. At times the book gives a

feeling of being written for IT companies, especially

those having their primary base in India. It would have

been better if there were as many cases or examples

from old traditional companies who have

transformed or remodeled themselves to adapt to

the model proposed in the book.

SometimesThe New Age of Innovation veers into the

academic speak and formulaic structures so beloved

of college professors, and there's a fair amount of

management jargon that can be grating at times. But,

in the main, this is a fairly breezy and informal read

that provides a timely snapshot of a rapidly

transforming business landscape. As the authors

make clear, this transformation is neither optional nor

reversible. This book provides a valuable primer for

those wishing to stay on for the ride.

by

Parul Shrivastava

Mitul Shah

PGDM IB 2009-11


International Business News

India and the EuropeanUnion will be entering aFree Trade Agreement(FTA) by the end of thisyear which could open upnew export opportunitiesworth USD 9 billion forIndia. Daniele Smadja,Ambassador, Head of ECDelegation to India, saidthe exact date for signingthe pact would be decidedafter the final round oftalks in March. IndianP r i m e M i n i s t e rManmohan Singh and EUCommission PresidentJose Manuel Barrosowould be finalizing theagreement soonTerming India for its fastemergence as a majorpower in the region,Smadja said the countryfigured in the EU's list ofsignificant trading partners

as one of the first tennations. "Once the FTA isf i n a l i z e d , b u s i n e s sbetween the two will go upseveral folds." Tradebetween India and the EUcurrently stands at 78billion euro (USD 107billion), but is still less thanone-fifth the value of theEU's trade with China. Inr e c e n t y e a r s t r a d ebetween India and EUc o u n t r i e s h a d b e e ngrowing at 16% a yearcompared to EU's overallgrowth rate of trade of tenper cent on account of thegrowth performance ofthe Indian economy.

Toyota's recall of almost 8million cars across theworld and the subsequentsuspension of sales andp ro d u c t i o n o f e i g htmodels with potentialfaulty accelerator pedalshas sent shock wavesthrough the industry.Toyota announced onFebruary 1st that it hadcome up with a cure forthe sticking pedals which,along with badly fittingfloor mats have beenblamed for at least 19deaths and more than2 , 0 0 0 i n c i d e n t s o f“ u n i n t e n d e d

acceleration”. Toyota hasput the cost of the recallsat $2 billion in the firstquarter alone. Toyota'ssales in America lastmonth plunged by 16%compared with a yearearlier, while those ofGeneral Motors rose by15% and Ford's by 24%,allowing it to reclaim thenumber-two slot in themarket it lost to Toyota in2 0 0 7 . M r T o y o d ap ro m i s e d a v i s i t toA m e r i c a , t h e c a rcompany's largest market,to see the damage toToyota's reputation for

himself.

Other carmakers, notablyFord and the ambitiousVolkswagen Group, haveclosed the quality gap anda r e o f f e r i n g m o r einteresting cars. It is theworld's best selling hybridcar and Japan's mostpopular new car of all.Around half of the carsaffected by this recall arePriuses in Japan. This willundoubtedly do no goodfor a company that isattempting to maintain itslead in hybrid cars ascompetitors line up tolaunch competing green

models. The charge sheetagainst the companylengthens dai ly too.Toyota probably faces anavalanche of class-actionlawsuits in America whichwill prolong the adversepublicity. What is clear forT o y o t a a n d o t h e rcompanies that may findthemselves in a similarposition is that swift anddecisive action may bepainful but less agonisingthan letting a problem boilover and then attemptingto clear up afterwards.

India-EU FTA to be

completed by Oct 2010Kraft takeover Cadbury

Cadbury, a leading sweetsa n d c h o c o l a t emanufacturing companyof the world has lost itsindependence after theyaccepted the deal withKraft, one of the foodgiants of the UnitedStates. As per the reports,the board members ofCadbury has decided tosell the brand to Kraftafter they modified thedeal and increased theamount of money. Thetakeover battle betweenKraft and Cadbury wasgoing on for severalmonths and the finaldecision ultimately camein favour of the KraftCompany.Though the US foodcompany, Kraft has beensuccessful in acquiring theownership of Cadbury,

they might have to facechallenges from Hershey.It has been reported thatKraft's next aim would beto persuade the majorstakeholders of Cadbury,as the time for counteroffer will remain open tillJanuary 25. They will haveto act cautiously asHershey might use thisopportunity and try to winthe ownership of thecompany. The takeovercreates fresh worries forCadbury workers in thisc o u n t r y, w i t h Kra f tpromising hundreds ofmillions of dollars inannual savings from thedeal, which analysts saymeans some of Cadbury's45,000 workers aroundthe world will lose theirjobs.

Toyota's ongoing troubles…It's not stopping...


HARMONIZED SYSTEMS

HUSBANDING

BUNKER ADJUSTMENT FACTOR

FORCE MAJEURE

LAYCAN

DUNNAGE

MALA FIDES

JETSAM

ALL RISKS CLAUSE

SNAKE LOADING

PRO FORMA INVOICE

FOUL BILL OF LADING

A provision that establishes international uniformity for product classifications.

Term used by steamship lines, agents, or port captains who are appointed to handle all matters in

assisting the master of the vessel while in port to obtain bunkering, fresh water, food and supplies,

payroll for the crew, doctors appointments, ship repair, etc.

A Fuel Surcharge expressed as a percentage added or subtracted from the freight amount, reflecting

the movement in the market place price for bunkers.

The title of a standard clause in marine contracts, exempting the parties for non-fulfillment of their

obligations, as a result of conditions beyond their control, such as earthquakes, floods, or war.

Stands for "laydays commencing / laydays cancelling" and is a spread of dates which provides for the

earliest date for the ship to arrive and for laytime to commence

Materials of various types, often timber or matting, placed among the cargo for separation, and hence

protection from damage, for ventilation

A seller's representation that goods are usable for a particular purpose, when in fact the seller knows

that the goods are not.

Articles from a ship or ship's cargo that were thrown overboard

An insurance provision, which provides

additional coverage to an Open Cargo

Policy, usually for an additional premium.

Loading products into a container in the

sequence with which the goods will be

unloaded and stored in at destination.

Draft invoice sent to an importer by the

exporter prior to order confirmation and

shipment to assist in obtaining import

licences or foreign exchange allocations.

A receipt for goods issued by a carrier

bearing a notation that the outward

containers or goods have been damaged.

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The process by which a country

becomes a member of an

international agreement, such as the

WTO or the European Community.

(9)

Official discussion with another

government carried out on

instructions. (8)

A document that establishes the

terms and conditions of a contract

between a shipper and a shipping

company under which freight is to be

moved between specified points for

a specified charge. (3)

The means companies select to

achieve their objectives. (8)

An intermediary storage facility

where goods are kept temporarily for

distribution within a country or for re

export. (8)

The Japanese process of continuous

improvement, the cornerstone of

TQM. (6)

The practice of charging or paying

exorbitant interest on a loan or other

transaction. (5)

Taxes on imported goods and

services, levied by governments to

raise revenues and create barriers to

trade. (6)

A government grant that gives

inventors exclusive right of making,

using, or selling the invention. (6)

A document issued by a bank at the

buyer's request in favor of the seller,

promising to pay an agreed amount

of money upon receipt by the bank of

conforming documents with a

specified time. (3)

An agreement among, or an

organization of, suppliers of a

product to limit production in order

to minimize competition and

maximize market power. (6)

The treaty, formally known as the

Treaty on European Union, signed in

1992 that led to the unification of

many European countries. (10)

Korean business groups that are

similar to keiretsu and also contain a

trading company as part of the

group. (7)

The act of seizing commercial

exchange with a particular country.

Such act is common during wartime.

(8)

In an acquisition or merger, when the

value of the combination is greater

than the sum of the individual parts.

(7)

A form of corporate acquisition in

which one firm absorbs another and

the assets and liabilities of the two

firms are combined. (6)

Collaborative groups of vertically and

horizontally integrated firms with

extensive share cross-holdings and

with a major Japanese bank or

corporation at the center. (8)

A community made up of Bolivia,

Colombia, Ecuador, Peru and

Venezuela. (6)

An arrangement which establishes

unimpeded exchange and flow of

goods and services between trading

partners regardless of national

borders. (3)

A simultaneous spot and forward

foreign exchange transaction. (4)

A treaty between two countries to

ensure that investments between the

two countries receive the same

treatment as domestic or other

international investments. (3)

A domestic tax assessed on the

manufacture, sale, or use of a

commodity within a country. Usually

refundable if the product is exported.

(6)

E globuz z-vol1_issue2

Business

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