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Embrace – Warp to Entrepreneurship: Marketing Conference

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In the recent years, an invincible startup movement has unfolded within our country. India has caught the eyes of the world as it is now home to second most tech startups after China and the ranking in number of total startups puts our country in top 5, globally.
IILM Graduate School of Management and Bizzino strategist presented “EMBRACE” the Marketing Conference on 27/2/2018. The conference aimed at providing students, access world class technology veterans, startup ecosystem, startup founders and their stories and more.


INAUGRAL SESSION
After a brief introduction to the conference, the inaugural session began with inspiring words from Dr. Sanchita Ghosh, Area chair Marketing, and Prof. Arun Gupta, Area chair Entrepreneurship.
The session started with the address from our key note speakers, Mr. Anupam Saronwala and Mr. Sameep Singhania. Mr. Saronwala is an expert of Internet of Things (IOT). He emphasized on the importance of exposure to new technologies for a start up to thrive and survive. He said that convincing investors to finance the venture is very critical and is becoming difficult with each passing day. However, he considered three areas, which if given substantial thought and actions taken accordingly, funding would not be a problem. 
The first area was the team. While building the team, an entrepreneur should have people from multiple disciplines and everyone should have domain expertise. The next was that the target market size should be large enough to boil down to a good amount of target customers. 
He then introduced the audience with the third and the most important point that an entrepreneur should be aware of the fact that his product/service can be easily replicated, if not patented. So there must be a differentiator in the product/service which minimizes the chances of duplication.
The enthusiastic pace set by Mr. Anupam was followed by that of Mr. Sameep Singhania, who through his insightful explanations proved his expertise in the area of block chain development and consultant. He helped the audience understand how block chain functions. He clarified that bitcoin is just one of many applications of block chain. He further added that this is going to be the future of technology, one that will become a necessity for every business. 
As this is an area where youngsters are really interested in so the address was interactive and Mr. Singhania facilitated the understanding of all concepts that came up in the form of questions from the young minds or the future entrepreneurs who were attending the conference.


SESSION 2: PANEL DISCUSSION
The Inaugural session set the theme for the conference. The first speaker of the second session was Mr. Pranav Jha, who runs a startup community on facebook named “Startup Noida”. He emphasized on the power of digital groups, Facebook pages and communities. He added how influence marketing starts off as an activity and then it becomes a trend and that it is possibly the best way of creating awareness about the startup and captures the attention of angel investors.
This was followed by the interaction with Mr. Shashank Singhania, a digital marketing consultant. He threw light on the concept of native marketing and how its use is spreading across digital platforms. He further added that even though some digital products are free, it is difficult to get people to try them. He explained how becoming digital is important for a business as a digital technology can facilitate tracking any information. He then introduced a concept of smart marketing in which fake reviews of a product is added by the company itself to facilitate sales.
Then we had our last panelist for the conference, Mr. Harpreet Singh, who started his address by introducing the concept of startup ecosystem. Then he mentioned some of the common challenges almost every startup faces at the time of its initiation and first few months of survival. He said that it is difficult to find the right mentors and right manpower and dealing with customer non acceptance and family pressure is no easy task. He informed the audience of the A-Z list for the success of a startup where A stands for Attitude and Z stands for Zeal of the entrepreneur. He ended his address by quoting a very famous dialogue of movie 3 Idiots ‘Chase excellence, success will follow’.
This marked the end to the conference after a brisk question answer round between the panelists and the students.

Faculty-Development-Programme-on-Artificial-Intelligence

Faculty Development Programme on Artificial Intelligence

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A faculty development programme (FDP) on Artificial Intelligence (AI) was conducted at IILM Lodhi Road campus on 26th & 27th of October 2017. 60 faculty members from the IILM campuses at Lodhi Road, Gurgaon and Greater Noida attended the two day long programme. The programme was conceived and coordinated by Prof Rajkishan Nair. As a pre-requisite to attending the FDP, all the participants had to audit the edX course on AI.

The FDP was divided into three sessions, spread over two days. The first day kick started with a summary of the edX course on AI. The first session revolved around a discussion on the first 100 years report on AI from Stanford University. It discussed the growth and evolution of AI and its impact on our lives and specifically on business. A lot of short videos interspersed all the sessions which were highly interactive. The pre-lunch session ended with two case-study discussions from one of the pre-readings.

The second session, post-lunch, discussed the impact of AI on education & specifically on management education. Participants shared their perceptions and concerns regarding how AI and the Fourth Industrial Revolution is already changing the nature of jobs and the required skills sets of the 21st century workforce and how it would possibly impact the education system. The various aspects of challenges that management educators are likely to face subsequent to the aforementioned changes were discussed in detail.

The third session on the second day morning was delivered by Mr. Pankaj Bhardwaj from TCS. He shared his experiences with Business Intelligence and discussed how AI is changing the business intelligence landscape.

The fourth session was on Blended Learning Models and how blended learning courses enhance learning better. The FDP ended with an assessment exercise based on a brief case analysis on AI.

The-rise-of-Indigo

The rise of Indigo

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Indigo is india’s biggest profitable airline with roughly 40 percent market share . The airline has risen in last 10 years. It has got 135 modern and new aircrafts. The story of indigo is all the more exciting as the established airlines like air india, jet airways and kingfisher have made huge losses during last 10 years. Kingfisher has gone for bankruptcy and is closed down Air India has debt burden of 50000 crores. And the government is planning to privatise it. Jet airways could be saved because of timely investment by Ethihad. What has gone right for the indigo? Obviously many things. That’s why it has gained strength in a very difficult market. The key word here is business model innovation and coherent strategy where each part of the action is linked to the other to create unique positioning in the customer’s mind.

Indigo is low cost airline. For any low cost airline to survive , it has to bring down the cost operations to the minimum without affecting the quality and as well safety of passengers. Indigo bought single type of aircraft that was A 320 . The single type of aircraft brought down the cost of maintenance as well training to the staff members. The turn around time for one flight to another is also minimum. The company and its staff members reap the benefits of experience curve economy. As you gain experience doing same same things over and over again, your productivity and efficiency increase. The idea is to keep the aircraft flying for maximum number of hours to gain more revenue

Indigo gave bulk order to the Airbus industries and got maximum possible discount. That brought the the most essential fixed cost of buying aircrafts. The aircrafts are owned by the subsidiary company of the indigo which has leased the aircraft to indigo . While giving rent to its subsidiary, the cost of buying plane does not show up on its accounts. This is business model innovation which has made the airline profitable after first two years of its operations.

Indigo work force is young and aggressive. It has been able to ensure that flights are on schedule. Flights getting delayed have been very common in India By improving processes, it has been able to get almost 98 percent of flights on time. Punctuality has been the biggest driving factor for the growth of the airline. There many small process innovations which have made indigo such a powerful airline.

The airline spends good amount of time and money on training of the staff. That shows up in the operations. The rise of indigo has proved that if companies can get their acts rights and innovative , they can manage the tough external environment too.

In my workshops with executives on innovation , I try to emphasise that innovation should not be misunderstood with new product launch and research and development, it has got far wider meaning of doing new things, improving processes, doing business model innovations and looking at the innovative pricing to crate unique positioning of the company’s product in the minds of customer. The rise of indigo reinforces this view .

What-Lies-Ahead-for-the-Indian-Youth

What Lies Ahead for the Indian Youth

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India has the world’s highest youth population. According to 2011 Census, 62.5% of its 1.2 billion people are in the working population age of 15-59. On the other hand, Japan is the world’s oldest nation, with 25% of its population is above 65 years of age and by the year 2040, this is going to rise to 36%. In contrast, the proportion of dependents in India is going to witness a fall in the next two decades (often called demographic dividend), and this implies that the young population would be actively engaged in employment. This also implies a growing pool of buyers for goods and services who would engage in conspicuous consumption. During his visit to New York in 2014, Prime Minister Mr. Narendra Modi had proclaimed that India is blessed with “Democracy, Demographic Dividend and Demand”.

But one must not forget that the demographic dividend won’t last forever and in order to reap demographic dividend, India would need to scale up the skills and industries. A report by World Economic Forum (WEF) titled “The Future of Jobs” mentions the top 10 skills that would be required in 2020. These are: complex problem solving; critical thinking; creativity; people management; coordinating with others; emotional intelligence; judgement and decision making; service orientation; negotiation and cognitive flexibility.

These skills would become necessary to work in the milieu of so called the fourth industrial revolution. The first three industrial revolutions pertained to usage of steam, usage of electricity and usage of electronics and IT.  In essence, the fourth industrial revolution is a digital revolution. According to WEF report, this incorporates usage of robotics, self-driven vehicles, advanced materials, biotechnology and genomics. Yes, the boffins at WEF might have consulted all the screenplays of Steven Spielberg!

In 2015, Indian government launched Skill India campaign, which aims to train the youth in various blue collar skills and enhance entrepreneurship by the year 2020. But India experiences huge skills gap. According to the survey of Labour Bureau, only around 7% of persons aged 15 year and above received vocational training. In order to encourage entrepreneurship in India, the policymakers initiated the National Policy on Skill Development and Entrepreneurship 2015. They hope to enhance skills in three main areas, viz. soft skills, entrepreneurship, and digital literacy.

India’s Indian Information Technology (IT) service sector employs 4 million people, but the sector is experiencing slowdown in employment. According to The National Association of Software and Services Companies (NASSCOM), a trade association of IT and Business Process Outsourcing (BPO) industry, 150 thousand new positions were created in the IT sector in 2016, compared to 230 thousand positions in 2013. The same association predicts that field such as data analytics and connected devices will account for at least 38 per cent of Indian IT industry revenues by 2025.

At the time of this writing, I have been watching Live Stream of annual meeting of Berkshire Hathaway and its CEO Warren Buffet (one of the richest person and investor) has many investments. Among these, he owns a railroad company and an insurance company in USA. He mentioned in Q&A session that technologies like self-driving cars would make insurance industry redundant and artificial intelligence (AI) would disrupt the current economic system as there would be an adjustment in the economy that needs fewer human workers.

India as a growing economy and it is betting on IT industry as its future engine of growth, it cannot remain immune to these change. Indian youth needs to sharpen the skills and be ready to face the rapid future economic and technological disruptions.

Book Review The Curse of Cash by Kenneth S Rogoff. Princeton University Press Published August 2016.

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The Curse of Cash        

Kenneth S Rogoff                                                             

Princeton University Press

August 2016.

  • ISBN-10:0691172137
  • ISBN-13:978-0691172132

 

Book Review by Gurpreet Singh Bhatia

Associate Professor, Economics, IILM Institute for Higher Education, New Delhi

Email: gurpreet.bhatia@iilm.edu

 

The author begins with the hypothesis that the time has come for advanced countries to rethink the role of cash in their economies. The author had suggested to the authorities in the US that phasing out high denomination note of $100 would help cull underground economy. The similar idea of phasing out high denomination notes of €500 has been put forward by policy makers to the European Central Bank.

The research provides evidence that in developed countries, the underground economy accounts for majority of cash holding and the economy is characterized by a high demand for small bills for use in retail transactions, but this demand appears to be diminishing over time, due to increased debit card usage.

Using the scanner data of US retail transaction, researchers have found that low-income households use small bills for cash purchases in stores. The author enlightens the audience of the fact that in European counties, majority of the people use cash for buying items less than €20, and a very small proportion of population uses cash to buy items that cost more than €1000.

Chapter four begins with the conjecture that even in developed countries in some countries like the US, many poor and low-income individuals rely heavily on cash.

The countries with very low currency to GDP ratio include a mix of countries that have taken action to phase out cash (Norway, Sweden, and Denmark) and high-inflation countries, where holding cash is expensive, because it quickly depreciates in real value. The currency ratios for Canada and the UK are both roughly half that of the US.

Chapter 3 titled “Size and Composition of Global Currency Supplies, and the Share Held Abroad” gives mind boggling facts about currency in circulation around the world, and about the proportion of high denomination currency held by citizens.

The author discusses the size and composition of global currency supplies, and the share held abroad. The author conjectures that if Marco Polo were able to return to China today, one of the few familiar items he would discover would be the paper currency.

The author begins with the historical perspective of currencies, and informs that China was the first country to introduce paper currency. The author says that after WWII, international community gave up the idea of reestablishing gold standard in favor of Bretton Woods system of fixed exchange rates with the US dollar as the pivotal currency, and the US dollar became the de facto world currency.

The author raises an important point of society´s need to balance an individual’s right to privacy with society’s need to enforce its laws and regulations? For example, shifting from cash economy to digital payment economy exposes citizens to the possibility of being included in the database at the cost of personal privacy.

It is a misperception that the advanced economies are doing away with cash. In fact, the use of cash in advanced economies is increasing. And it is not just the United States that has a gigantic currency supply dominated by big bills. The problem is nearly universal in advanced economies.

In chapter six, the author explains the concept of seigniorage. It occurs when the government prints money and spends it at face value. It makes profits because the cost of printing is only a very small proportion of the face value of currency.

All countries except Sweden have earned from seigniorage. Sweden´s profits from printing of currency is negative because in that country, public’s use of notes and coins has declined since 2007, both as proportion of GDP and also in absolute terms.

The central banks have the privilege to print money and recover their operating costs, but the central banks must exercise considerable amount of discretion on where to draw the fine line between necessary expenditures and non-trivial ones. It is important that central banks maintain independence.

In chapter 7, Rogoff provides the reader with a comprehensive plan on how to phase out paper currency in the US context. The author suggests that the currency be phased out in four steps.

The fourth stage focuses on real time clearing, where the government helps facilitate development of the quick payments.

Chapter eight is on the concept of zero bound constraint where the economies experience lower interest rate coupled with low growth.

In the recent years, the OECD countries have witnessed a near zero interest rate (the interest rates have been even negative in countries like Germany and Japan).

Chapter 9 focuses on inflation targets, GDP and fiscal policy. The author suggests that the central banks raise target inflation rates from an average of 2% to 4%. The reason is that money in neutral in long run. When the central banks lower interest rate, consumers and procurers adjust to prices in the long run and the only way the economy could be kick started is by increasing the target inflation rates.

Rogoff suggest that instead of targeting inflation, a better idea would be to target GDP and enhance it through reducing income tax and increasing value added tax, thereby increasing inflation effective demand, therefore providing stimulus.

The last part of this book deals with digital currency. Rogoff questions the feasibility of replacing paper currency with digital currency in emerging market like India where majority of population is engaged in agriculture in rural areas where the infrastructure fir digital currency is not yet developed. On the positive side, phasing out cash in favor of digital currency in emerging markets would have positive effect by reducing corruption and underground economy.

The author stipulates that cryptocurrency like Bitcoin could be a currency of the future. After all, Bitcoin could function as unit of account and medium of exchange, withe same functions of paper currency.

In conclusion, this is an important and coincidentally, a timely book in context of current demonetization being implemented in Indian economy. It would behoove the policymakers and researchers in India to pay heed to the recommendations provided by Kenneth Rogoff, specifically related to emerging economies.

 

 

Workforce Diversity and Organizational Culture

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Organizational Culture, as conceptualized by Schein, can be understood as a layered phenomenon with the surface level artefacts visible in an organization as the topmost layer, the espoused values that fuel those just underneath and most importantly the assumptions and beliefs that underlie the above two layers. Culture is the invisible yet powerful force that drives morale, engagement and performance. Needless to say that the culture of an organization comes from its people and is both top-down as well as bottom-up, resulting from the numerous interactions (or the lack thereof) among its people. The diversity in the workforce is therefore, a strong influence sculpting the culture of organizations of today.

schein

Experts are of the opinion that in the glocal world that we live in today, diversity is the key to maximize organizational effectiveness. But what does this diversity really refer to? Is it the variety or multiplicity of demographic features that characterize a company’s workforce, in terms of race, gender, culture, religion, national origin, handicap, sexual orientation and age? Or are we referring to the more intrinsic differences that exist between individuals that surpass the group level differences? Whatever the definition may be, it is true that in any workplace today, we are surrounded by people who often think and work differently. It begins with how people perceive themselves and others and the variations therein, which directly influence people’s interactions and communication within the organization.

The challenge for organizations really is to manage this workforce diversity to benefit from it, to make it advantageous. It is ‘Easier said than done!’

What exactly are these advantages that researches keep talking about?

There are several benefits for an organization that embraces diversity in its culture:

  • Increased adaptability – Organizations employing a diverse workforce can supply a greater variety of solutions to problems that arise on a day-to-day basis. Employees from diverse backgrounds bring individual talents and experiences in suggesting ideas that are flexible in adapting to fluctuating markets and customer demands.
  • Broader service range – A diverse collection of skills and experiences (e.g. languages, cultural understanding) allows a company to provide service to customers on a global basis. IBM is one organization that created several minority task forces focusing on groups such as women and Native Americans. In the ensuing years these task forces expanded IBM’s multicultural markets growing from $10 million to $300 million in revenue in just 3 years.
  • Greater Creativity – A diverse workforce that feels comfortable communicating varying points of view provides a larger pool of ideas and experiences. The organization can draw from that pool to meet business strategy needs and the needs of customers more effectively.

All of these benefits have a clear impact on the bottom-line of a company.

Challenges of Diversity in the workplace

While the benefits of diversity are evident, this path is not devoid of challenges for the organization.

  • Unconscious bias is one of the most significant barriers for an organization on the path to embracing diversity. Simply because it is unconscious makes it all the more challenging to overcome. While each individual comes with their own set of unconscious biases, there are some that are common such as those stemming from stereotypes related to women and people from certain cultural and ethnic backgrounds.
  • Communication is another important challenge in organizations often resulting from basic differences in the style of communication as well as different meanings associated with non-verbal signals. For example, high-context cultures such as India, Japan and China, rely on implicit communication whereas low context cultures such as USA rely largely on explicit verbal communication. Such differences, when not understood, often lead to miscommunication among teams/employees.
  • Resistance to change – Any change is often met with resistance, it is a human tendency. There are employees who refuse to accept the fact that the social and cultural makeup of their workplace is changing. The “we’ve always done it this way” mentality sometimes silences new ideas and inhibits progress.
  • Implementation of diversity in the workplace policies –This can be an overriding challenge to all diversity advocates. Policy level change marks the beginning which then needs to be implemented across the organization. It is important to recognize and accommodate at the policy level cultural and religious holidays, differing modes of dressing, dietary restrictions and needs of individuals with disabilities.

All the above challenges, while real, can be overcome by building awareness and skills through sensitization training programmes and coaching sessions across all levels. Most importantly the top management, the leaders need to be good role models, displaying their support for diversity, respecting people from all backgrounds equally.

BREXIT

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On June 23, 2016, in one of the most epochal referendums in European history if not modern history, Britain the 5th largest economy in the world voted to quit the European Union (EU) by a margin of around 1.3 million votes, defying predictions from all economic, political & academic quarters. The impact of Britain’s Exit from the EU is already being felt by financial markets across the EU and the globe.

Brexit- A snapshot:
‘Brexit’ is a combination of the words “ British” and “Exit” and referred ( when it was coined- by the Economist magazine in June 2012- “ A Brixit Looms”- http://www.economist.com/blogs/bagehot/2012/06/britain-and-eu-0 ) to the departure of Britain from the EU. The origins of the EU dates back to 1957 as a six nation economic and political alliance. Britain joined the alliance only in 1973 but has faced a lot of opposition and skepticism against its continuation within the EU ever since. In 1975, in the first referendum on the same issue (whether Britain should continue with EU), 67% of those who voted preferred to ‘Remain’. Meanwhile, EU has today grown into a “gigantic transnational entity of 28 countries, with most countries moving into a common currency ‘Euro’. However, Britain still uses pound as its currency and does not participate in the Schengen border-free zone, which allows passport- free travel within the EU.
Why Brexit?
As part of his 2015 re-election campaign, British Prime Minister David Cameron had promised to hold a referendum on Brexit. Many from the ruling Conservative Party and the U.K. Independence Party believe that the EU infringes on British sovereignty and its national interests on issues such as trade, immigration, financial and labor regulation, social spending and a host of related issues .
•According to Brexit supporters, increased migration from other European countries into UK using the ‘freedom of movement clause’ has put a heavy burden on natural resources and increased welfare expenditure. The ‘Remain’ supporters argue to the contrary saying that the addition to the national economy from the migrants is more than they take out.

•45% of UK trade is with the EU, therefore, the ‘Remain’ side says, access to the single European market, free of tariffs and border controls, is critical for the U.K. However, the Brexit supporters are confident that since the the EU needs British markets, individual trade deals with European countries can be easily negotiated.

•While Brexit supporters claim that there will be a jobs boom without the restrictions that EU regulations impose, the opposers argue that as three million jobs in the UK are tied to the EU there could be a jobs crisis if the U.K. leaves the EU.

•One side is of the opinion that cooperating with the EU will make the UK safer, while the other side believes that the security risk will in fact increase if the U.K. does not have control over its borders.

•Another argument in support of the Remain campaign was that leaving the EU will jeopardize the dominance of London, the Europe’s financial centre, as banks will move out. Whereas, the Brexiteers argue that London’s status is unassailable as it is already a global power base!

Possible Impact of Brexit on UK and EU:

A major impact could be on UK laws ( a 2010 study attributes 17% of UK laws to its EU membership), especially relating to fishing, agriculture, trade and environmental policies, criminal justice, data protection, immigration and broadcasting, and human rights . For example, in agriculture British farmers would be deprived of EU subsidies. “British farmers have to meet the EU standards of quality control to export to member countries. EU’s agriculture policy lays down the law on GM crops, animal husbandry and even how much of his field a farmer must leave fallow to get subsidies” . With Brexit, it remains to be seen how Britain negotiates with EU on these issues on a case- by- case basis. On the economy front, it has been pointed out that since prices in the EU are 20% higher than global market prices, exiting the EU will enable Britain to reduce prices by 8% . The political fallouts of Brexit are yet to take shape, the only major indication so far being the declaration of David Cameron that he will step down as the Prime Minister with effect from October this year.
UK is one of the largest contributors to the EU’s monetary resources spent on administration of the EU in member countries, aid activities outside the EU, grants for asylum, education and culture, on preserving and managing natural resources (this includes, agriculture, fishing, mining and so on), helping poorer countries in Europe and in grants to research in science and technology and in helping small businesses. The Brexit, it’s strongly believed, would rock the EU — already shaken by differences over migration and the future of the eurozone — by ripping away its second-largest economy, one of its top two military powers and by far its richest financial centre. Moreover, as Dr. Jonathan Portes of the National Institute of Economic and Social Research points out, “ If Brexit wins we can account on a lot more referendums” !!
Possible Impact on India
India’s concerns over Brexit are multi-dimensional. Listed below are some of them.
•The welfare of a nearly 3 million strong diaspora of Indian-origin UK citizens.

•The interests of a large moving population of Indians who come to Britain ever year as tourists, business people, professionals, students, spouses, parents and relatives.

•Many Indian companies (around 800 companies- more than the combined number in Europe) are listed on the London Stock Exchange and many have European headquarters in London- Brexit could reduce the advantage.
•“Brexit can affect India’s flagship IT sector given that the UK accounts for 17% or one-sixth of the sector’s global exports that topped $100 billion (approximately Rs.6.70 lakh crore). For one, Brexit will increase overhead costs, setting up new headquarters, perhaps in both Europe and Britain” .

It may be noted that there is a tone of optimism in Indian circles as evidenced by statements by industry heads, policy practitioners including the RBI Governor and the Union Finance Minister.
The rise in uncertainty brings both risks and opportunities for India. “Brexit is neither good nor bad for India. It’s mostly how the country responds to the new situation”

Bonds and Masala Bonds

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Bonds are instruments of debt – typically used by corporates to raise money from investors. Masala bonds, on the other hand, have to be explained in the context of Indian corporates raising money from overseas investors. Before masala bonds, corporates have had to rely on avenues such as external commercial borrowings or ECBs. The challenge with the likes of ECBs is the entity raising money is faced with a currency risk – they have to be raised and repaid in dollar terms. A year is a long time in forex markets – currencies fluctuate sharply. So, imagine the risk a bond issuing entity, especially one with largely rupee earnings, if issue and repayment are years apart.

They are rupee-denominated bonds issued to overseas buyers. This is how it is different from other instruments. With a masala bond, a corporate could issue Rs. 10 billion worth of bonds with the promise of paying back Rs. 11 billion in one year. But as the Indian rupee has limited convertibility, the investors will lend the dollar equivalent of the Rs. 10 billion. After one year, the Indian corporate needs to pay back the dollar equivalent of Rs. 11 billion. The currency risk is with the investor.
The International Finance Corporation (IFC), the investment arm of the World Bank, issued a Rs. 1,000 crore bond in November last year. The purpose of the issue was to fund infrastructure projects in India.

IFC named them ‘masala’ bonds to reflect the Indian angle to it. This kind of naming has been done before. There was even much speculation about what the rupee-denominated bonds would be called before ‘masala’ was confirmed. Samosa, Ganga, and Peacock were apparently some of the names doing the rounds.
Why should investors look at masala bonds?
The Finance Ministry has cut the withholding tax (a tax deducted at source on residents outside the country) on interest income of such bonds to 5 per cent from 20 per cent, making it attractive for investors. Also, capital gains from rupee appreciation are exempted from tax.
Globally, there is ample liquidity thanks to lower interest rates in developed markets, but there are very few investment options due to weak economic conditions globally. India is that rare fast-growing large economy, and masala bonds is one way for investors to take advantage of this.
What do masala bonds mean to the issuer?
An important consideration for issuers is the access to cheaper funding than what’s available in the domestic markets, according to ratings firm S&P. For corporates, who would be the main issuers, masala bonds will be one other key source of funding apart from banks and local debt markets. Another ratings firm India Ratings and Research says such bonds would lower the cost of capital over a period of time – the cost remains one of the highest in Asia. This also makes sense given that Indian banks are reluctant to lend to sectors facing weak demand and heavy debt.

Benefits of Masala Bonds

It helps the Indian companies to diversify their bond portfolio. For example,earlier companies used to issue only corporate bonds. Masala bonds is an addition to their bond portfolio.
It helps the Indian companies to cut down cost. If the company issues any bond in India, it carries an interest rate of 7.5%-9.00% whereas; Masala Bonds outside India is issued below 7.00% interest rate.
It helps the Indian companies to tap a large number of investors as this bond is issued in the offshore market.
Masala bonds will help in building up foreign investors’ confidence in Indian economy and currency which will strengthen the foreign investments in the country.
An offshore investor earns better returns by investing in Masala bonds rather than byinvesting in his own country.For example, if he had invested in the bond offered in his own country the US, the bond yield is hardly 2% whereas if he invests in rupee denominated Masala Bond the yield ranges from 5.00% to 7.00%.
An investor will benefit from his investment in masala bondsif the rupee appreciates at the time of maturity. For example,Price of a bond in Rupee terms is Rs. 1050, INR/USD rate on investment date is Rs. 70, Amount Invested in USDis $17.5, Redemption Amount in Rupee terms is Rs. 1800, INR/USD rate on Redemption date is Rs. 60, so Redemption amount in USD would be $30. The investor pays $17.5 and receives $30, i.e., the investor is earning a profit of $12.5 on his investment.

Risk
As it is rupee denominated bond the risk will be borne by the investor. The issuer does not carry any currency risk by issuing this bond in the foreign market.
For example:
Price of a bond in Rupee terms: 1050
INR/USD rate on investment date: 60
Amount Invested in USD ($): 17.5
Redemption Amount in Rupee terms: 1110
INR/USD rate on Redemption date: 70
Redemption amount in USD ($): 15.85
The investor pays $17.5 and receives $15.85. The loss of $1.65 on his investment due to fluctuation in exchange rate has to be borne by the investor.

Conclusion
Masala bond will help the Indian corporates to reduce its interest cost burden on the debt amount on its balance sheet. The more of foreign funds can be used for infrastructural development in the country. Overall, the development of a Masala bond market would be positive for Indian firms, opening up potentially significant new sources of funding over External Commercial Borro wings (ECB).

Unlocking the value of HR in Merger and Acquisition

Faculty

Since 1980s, Dramatic changes in the global business environment have been driving a wave of Merger and Acquisition in the world. Although they are undertaken for good reasons, many fail to meet their objectives, in part because HR issues are generally poorly understood, under managed, and often discarded at the outset as irrelevant to strategic planning process. Plenty of attention is paid to the legal, financial and operational elements of Merger and Acquisition. In today’s economy, the management of the human side of change is the real key to maximizing the value of a deal which was neglected earlier. The uncertainty during Merger and Acquisition activity divert the focus of employees from productive work issues like job security, career path, working in new departments, working with the new teams, integration of corporate cultures, retention level of compensation, payroll benefits and reward strategy etc. As M&A activity continuous to step up globally, companies involved in these transactions have the increased involvement & responsibility of HR professionals. In implementing an M&A, most of managers focus on financials. But success depends on how you deal with people issues and cultural integration. It depends on the people who drive the business, their ability to execute, Creativity and innovation. It is of utmost importance to involve HR professionals in M&A discussion as it has an impact on key people issues. By doing so, they will achieve a much better outcome and increase the chance that the overall deal is a total success.
Many companies report that their mergers are successful but admit the end results aren’t as successful as they could have been. Recent studies place the success rate of merged companies at 30 to 60 percent, depending on what criteria you measure. No matter how flawless a deal seems on paper, the results are often disappointing. Most merged organizations lose 1 to 10 percent of their market value in the first year after the merger. There’s a lot to learn about managing the transition period, optimizing short-term performance, keeping the highest percent of talent, and integrating processes and systems. Companies that don’t address those issues may suffer a loss of profitability, top talent, and confidence in leadership decisions. Although a multitude of factors can contribute to a disappointing merger or acquisition, success depends ultimately on the effective use of people. A recent report from the Bureau of Business Research shows that organizational and cultural problems are more likely to derail a merger than are financial factors. Only 28 percent of companies said they did a good job of assessing the culture of their merging organizations before the deal, only 26 percent said they had put the right people in the right roles during the merger, and a scant 15 percent said they had successfully communicated the vision and goals after the union. Beginning at the start of the process, HR must orchestrate its role in due diligence.
Role of HR Identifying the role HR should play and the tasks in which HR should engage is a good start. However, successfully executing the role is something altogether difference. It’s essential to assess the valued human assets that never show up on a balance sheet, in order to determine the true value of the deal and its likelihood of success. Looking at just one key issue, leadership, it’s essential to evaluate the strengths and weaknesses of the players, individually and collectively, to ensure that the management talent required to define the future of the new company is there to steer the chosen course. The HR manager, on the other hand, has an opportunity to influence events so that each company comes out ahead — but, to do that, the HR manager must preserve their own position. Even at the highest level of the company, HR can have a role. The new leadership team will need to work together on a daily basis, despite cultural and personality differences, power issues, and other barriers. HR can act as a facilitator, and also as a coach to individual executives. Personal and team assessments can be helpful in enabling team members to work together constructively. Some questions to ask during this phase are: What are each organization’s key strengths, weaknesses, opportunities, and threats? What is each organization’s strategy? How will they be merged? Is there a communication strategy to keep employees and customers informed? Are the cultures for the two organizations compatible? Is there a plan for merging the cultures? Will one be dominant, and, if so, how will people operating under the other culture be brought on board? Identifying the role HR should play and the tasks in which HR should engage is a good start. However, successfully executing the role is something altogether different. In this light, HR as an internal consulting group during a merger or takeover, along with quality or process engineering teams deal with several issues. Some key issues in mergers follow:

Effective Communication by Being Upfront and Honest:
As people look inwards to try to find their place in the merged company and attempt to see their future in it – or outside it – productivity drops. The grapevine can become a major source of headaches. Constant, consistent, and honest communication from leaders and HR is essential. Communication must begin with the first announcement. Then it is fragmented with different messages and information flowing to investors, employees, managers, and customers. Messages to all stakeholders must be well planned and consistent. There can never be enough repetition. The message must be heard again and again to be fully understood. Two-way communication always helps comprehension. All avenues should be used: written, one-on-one meetings, and small- and large-group meetings. People need a chance to probe, discuss, ask questions, and arrive at a personal level of understanding that they can’t get from a piece of paper. The overriding question is, “How does this affect me?” Speed in communication goes along with speed in the total integration. The goal of communications should be not only to inform, but also to engage employees’ hearts and minds. By presenting a clear vision of the future and gaining commitment to it, the new company begins to build the loyalty that’s crucial to survival.

Growth and Development of Preliminary Organisation Design:
The role of HR is to identify key human assets in the target company, development of preliminary organizational designs and identification of the top three levels of management creating development plans for people to prepare them to achieve the anticipated corporate growth. Other issues needing attention to maximize the growth synergy are deployment of appropriate resources in the new company, development of total reward and recognition programs for the combines companies, team development, and integration of benefit and compensation programs–ensuring they are competitive to attract and retain desirable employees. When mergers are contemplated, synergy and value often depend on the effective transfer of knowledge. As knowledge becomes an increasingly important corporate asset, it’s critical to capture the best practices of each company for maximum return. It starts with the relatively easy task of identifying the people and processes needed to keep the business operating as usual. It moves to training on systems, specific job skills, and procedures. Ultimately, it involves capturing the tacit knowledge and informal networks that enable an organization to get things done.

Power and conflict:
It is essential to bring conflict out to the surface and deal with power issues honestly. If one group is obviously in charge, that should be admitted early on so people don’t waste time with second-guessing. Often, people get wrapped up in turf wars which are destructive to both sides, rather than trying to figure out roles for both sides and have a win-win situation.

Integration of Corporate Culture.
Organizational culture is an organization’s shared values, beliefs, and preferred ways to behave – is a key to success, and though many talk about it, few seem to have the skills to grapple with culture and work with both organizations to assure a good fit. Many organizations use a brief cultural fit survey to assist them during mergers. To understand the similarities and differences between the cultures of the two companies involved, we have to look at the history of each company, its reputation in the industry, and its products and services. Although those are fixed, other factors that influence how a company operates and how employees, customers, and other stakeholders interact are critical to the effective functioning of the newly formed organization. Even location can affect the fit. A West Coast group of techies may have great difficulty merging successfully with an old-guard southern firm or a staid New England operation. Another issue to consider is where authority lies and how decisions are made. Are the companies bureaucratic or freewheeling? Formal or informal? Finally, there’s the emotional element. How do employees feel about the company, management, and the future? How much job satisfaction do people feel? How open are they to the new strategy? Also it’s important to identify the norms, the value systems, and beliefs. Practices regarding casual dress, attitudes about long hours, and how offices are apportioned are deeply ingrained and must be dealt with. One can’t consider culture compatibility without touching on the different views that the acquirer and the acquired have about the new company.

Retaining key talent
There is no one way to retain people during a merger or acquisition. We can make offers to certain people and if they accept and want to stay, that’s fine, if they don’t, that may also be fine. But when we are talking about key people, the picture changes. Key people don’t always mean top executives. Executives may be key in some respects, but there may be other employees who are more important to the workings of the enterprise. If we lose them, we can end up spending a lot of money and still be unsuccessful. Whether they’re technology specialists, marketing people, or top management, we must make certain they’ll stay. The next question: How long do we need them? Some talent may be needed only during the transition period, after which their responsibilities can be handed off. Others may be needed for much longer. Each person must be considered, and a plan must be put together for that person. The kind of agreement that’s drawn up and how far it goes to keep key talent will differ from organization to organization. But it’s best not to give away too much or keep someone who will never adapt to the new structure, simply because he or she is talented or highly thought of. We may have to let people go as a trade-off against disruptive attitudes or constant conflict. The appropriate fit of any one person in the new culture can be as critical to success as talent. A fair and equitable bonus must be in plan to make the talents feel special, and stay for the longer period. By this talented people tend to welcome the challenges of a new role, and they enjoy career growth and added responsibility.

Conclusion:

Mergers and Acquisitions don’t follow a carefully laid-out linear progression. As much as we might desire a logical, well-ordered approach, when two groups combine, the process takes on a life of its own. Initial plans and assumptions have to be adjusted, and focus can be lost as critical and immediate problems rear their ugly heads. Executives are often pulled away to deal with the next business issue, reducing their visibility and giving the impression they’re no longer concerned about the merger. If the HR professionals can manage a degree of uncertainty in their responsibilities making the business direction clear, the chances of long-term success will be more.

International Day of the Girl Child: Six Missions, One voice in support of Women’s Rights.

Faculty

International Day of the Girl Child: Six Missions, One voice in support of Women’s Rights.

The United Nations declared October 11th as the International Day of the Girl Child adopted by United Nations in 2011. The International Day of the Girl is an opportunity to highlight the needs and rights of girls and to advocate for greater action and investment to enable girls to reach their full potential throughout their lives. Girls face discrimination and violence in many parts of the world simply because they are girls. They face unique challenges such as early and forced marriage, violence, poverty and other barriers. With this perspective in mind, the United Nations declaration is “to help galvanize worldwide initiatives to better the lives of girls, providing them an opportunity to showcase their talents and reach their full potential.” Taking this up at an international level gives it the needed impetus and focus that it deserves. To celebrate this day, IILM Institute for Higher Education proudly hosted a panel the prestigious ‘Chat with Diplomats’ event, on the occasion of the “International day of the Girl Child”, in partnership with the High Commission of Canada.

The panel discussion was represented by six missions, one voice in support of women’s rights. The esteemed panelists were the Deputy High Commissioner of Canada, Jess Dutton; American Ambassador, Richard Verma; Mexican Ambassador, Melba Pria; Deputy High Commissioner of Australia, Chris Elstoft; His Excellency Ben Joubert, The Ambassador of South Africa and Ambassador of Finland, Nina Vaskunlahti.

Mr. Matt Friesen, Head of Advocacy, Canadian High Commission shared how the Canadian High Commission had organized the campaign ‘Run for Her’ which had more than 400 participants and how they had been looking at creative and innovative ways to celebrate and commemorate the International Day of the Girl since its inception five years ago. As part of this initiative, they had organized a Pan India competition entitled ‘Canadian High Commissioner for the day Challenge’, where Ms. Medha Mishra, an Engineering student from Jaipur who won the competition was honored during the event. Medha underlined her commitment to this cause stating that women ‘can achieve stuff’, in a few succinct words. Post this, Mr Matt Freisen introduced the topic of the panel discussion ‘Glass ceiling or a Sticky Floor’ and invited the diplomats to express their views. He opened the discussion by pointing out as to women often do not get the same opportunities that men get simply because of their gender. He emphasized the need to wrestle with this issue by asking questions like: why are most of the heads of government men, why are most CEOs men, why are most Board rooms male dominated? He added that women continue to face challenges in education opportunities and in career advancement processes. He indicated how this group, a perfect mix of people from diverse geographical backgrounds and representing both genders, was ideal for initiating such a dialogue. He then invited the diplomats to share their views one by one and moderated the event.

The Deputy High Commissioner of Canada, Jess Dutton, the first speaker of the panel, drew attention to the fact that ‘gender equality is not a just a women’s issue, it’s an issue that’s very important for men as well ’and encouraged everyone to work together to ensure that one day gender equality will be achieved for all. He also emphasized the need to celebrate the achievements in the area of gender equality while simultaneously keeping in mind that there is still have a long way to go. Citing examples from Canada, such as giving parental leave instead of maternity leave and the 50-50 gender balanced cabinet in Canada, he demonstrated the initiatives taken by the government to support this cause. In comparison to corporate Canada 48% of the workforce is women. And almost 1 million are self-employed. However, only 16% of the corporate board seats in Canada are held by women and there is a surprising wage gap in Canada, for every dollar that a man earns, a woman earns 72 cents for the exact same job, highlighting the difference in pay structure based on gender. Sharing experiences of his mother, he drew parallels with today’s organizations to demonstrate the progress that have been made. He then cited examples from India and commended the fact that India have women fighter pilots in the Indian Air Force and there are several women bureaucrats, business people, journalists, scientists, entrepreneurs joining this list. He made a reference to India celebrating the Girl Child day every year on 24th January. He then juxtaposed with the story of a 15 year old girl from Bihar, with 2 children, abandoned by her husband, who is now attending school in order to complete her education and be and independent woman. Sharing these examples, he encouraged the audience, the future leaders of India to look out for and help such girls, not only in India, but all over the world.

Mr Richard Verma, The American Ambassador, started by expressing his gratitude to the people from his family and on the work front who were his role models and had inspired and influenced him. He specifically mentioned the role his grandmother and mother have played in being mentors for him. He appreciated how these strong women, despite of having difficult circumstances, worked very hard to provide good life and education to their children. Further he highlighted the role of leaders in bringing about gender parity in the economic, legal and political systems. Mr Verma also stated that while holding leadership positions, it’s important for the leaders to ensure gender parity and make things better for women to climb up the ladder. He added that education, economic opportunity and a fair legal system are essential to ensure level playing field for both genders. He further reiterated the need to encourage breaking the stereotypes and bringing more people to work for gender equality. He stressed on the fact that women empowerment requires collaborative effort and no one country can work in seclusion in order to achieve this.

Melba Pria, the Mexican Ambassador, started her discussion by emphasizing her concern about the need for one day for the Girl Child in the 21st century. She raised questions about how glass ceiling is viewed. The glass ceiling actually the barrier that women face anywhere in the world in their ascending career and Sticky floors mean the downward force that keeps women at middle or low level. She passionately talked about the obstacles that come a women’s way in form of the self-censorship that women are socialized with, the prejudices that women face simply because they are female, the gender based discrimination and sexism that is prevalent. She highlighted that the glass ceiling is a powerful and invisible barrier that hinders the ascending career of women. Comparing the situation in the two countries she mentioned that in though in India 46% of women are highly educated, only 27% of those women are counted as workforce and get paid, whereas in Mexico, 48% of the women are regarded as workforce. She gave figures to driver home her point that though in Mexico 18% are Financial Officers, 14% Corporate Controllers, 12% Chief Marketing Officers, but only 4% CEO’s!. Reflecting on the reasons behind gender discrimination, she shared the Mexican saying that ‘Women usually have three jobs – they are in their jobs 100% of the time they are mothers and daughters, and then they are lovers and wives, to their husbands’. She highlighted that Canada has 27% of its parliament being women, 48% of the Mexican parliament is women and only 12% of India’s parliament is women. Adding on a lighter note she said, “I wonder if men can say the same thing”. Drawing on the experience of Ms. Bianca Trevino, of being assertive about her right to enter the exclusive club of the Mexican Council for Businessmen, Her Excellency Melba Pria brought out the lack of and therefore the need for more successful women role models for the women workforce to look up to. Citing the McKenzie report she shared how closing the gender gap can help increase the GDP of India by 60% by 2025. Stating that women are the largest untapped resource in the world, she enumerated solutions for dealing with this challenge: Break the political leadership ceiling, and conquer the traditional male associated fields. Mentioning the book Why So Slow, by Virginia Valian she too emphasized the need to acknowledge how far we have come, while being conscious of the way forward. She ended her speech beseeching the audience to be aware that ‘this is not a fight against men, it’s not a fight between men and women, and it is the fight of both genders for equality and fairness’.

Chris Elstoft, The Deputy High Commissioner of Australia, began his address by sharing that though in his early years when he was growing up, he was not concerned about the ‘He-for-She’ cause. But with the birth of his daughter, there has been a major change in this perspective and now he is very passionate about and engaged with women’s issues. Taking the example of his own eight year old daughter, Mr. Elstoft shared how she believes she is equal to her brothers in every which way, and has the same opportunities that are available to them, but he is deeply aware of the situation that there are differences that exist in society. He added that ‘her safety is not the same as her brothers’, her prospects in the workplace are also not the same. He talked about the initiative that was started about 2 years ago, where they tried to analyze and answer the question as to why, women who constitute 50% of the workforce till a certain level in foreign service drops down to 30-32% by the time thy enter the senior executive rank? What is it about their organization that sees this massive crash in the numbers of women who are entering the leadership cadre? There are a number of tangible barriers that hold women back.  One is that foreign ministries in particular struggle with is because of the demands that are placed on their staff. They staff around from country to country, dragging their families’ with them, which becomes difficult for women whose husbands are unwilling to move for their wife’s career, the way promotions and recruitments are  done, and some issues around culture. To help women reach higher leadership roles in the organization, a number of changes have been introduced, such as making the workplace more flexible, enabling part time work, working from home, remote work, using IT solutions to facilitate people being more productive but also being able to balance work and family to name a few. Above all, he emphasized that they are trying to drive a more inclusive style of leadership culture throughout the department. He ended by saying that having a parity of genders in organizational leadership is not only the right thing to do but it is also the smart thing to do.

His Excellency Ben Joubert, The Ambassador of South Africa started his talk by acknowledging the major role women have played in attaining freedom as well as being the real democracy in South Africa. After their constitution got signed in 1996, there was a law passed which stated equal opportunities or equal employment. Those are affirmative laws which give specific allowance for 50% of women in workplace. South Africa is a country which gives lot of attention to issues of women and child rights, there are many initiatives when it comes to that, one is celebrating their women’s day on 9th August every year. This day was specifically chosen because of the march of the women 60 years ago. At the same time he expressed his concerns regarding the fact that despite having various laws on paper, women were unable to get equal opportunities. He also mentioned various initiatives started by their Government in order to facilitate women empowerment but at the same time, he criticized the need to have so many initiatives even today, in order to get women on equal pedestal with men, he said- “when we look at these initiatives they are there because women are not in a place where they need to be in society and workplace. If you have more initiatives it means you have more serious challenge to address.”

Nina Vaskunlahti, The Ambassador of Finland, emphasized the need for a higher women representation in their political arenas because of the different perspectives that women add. She shared that in Finland, approximately half of the members in Finnish Parliament are women and they actively work along with their male counterparts in organizing political events. Ms. Vaskunlanhti stressed on the fact that women empowerment is not sole responsibility of women, it order to achieve equality, men need to be active members of the same.  She also mentioned the importance of having role models and gave example of Finnish Defense minister- “In 1990 Finland got its first Defense female minister, she was first female defense minister in the whole world.  A finish minority made it even more interesting. It was position taken by minority. So breaking the glass ceiling twice. First coming from minority then being a women and she did a pretty good job as minister of defense and she also opened possibilities for girls to enter military services until then it was a profession compulsory for boys but then it became sort of possibility for girls”. In conclusion she advised, “To be bold, to be brave, to be themselves” in order to break the glass ceiling.

All the panelists spoke about how important it is to invest in the education of the girl child, because when they are educated, healthy and informed they not only empower themselves, but also their families and the communities around them. The issues ranged from education to reducing gender disparity and increasing women involvement in leadership roles across organizations and politics. This initiative is a small step in this direction.

The event ended by Dr. Bhaskar Chatterjee, Senior Director, thanking the panelists for sharing their views on a subject that is relevant to all people and all geographies. He briefly talked about IILM’s contribution towards responsible management. He shared that IILM offers 10% fee waiver to all its girl students across its three campuses in Delhi NCR and offers flexible work arrangements to all women employees. IILM Institute is a member of the United Nations Global Compact Initiative “PRME” and has earned the coveted ‘Champion Business School’ status. It has a global study programme which connects its students and faculty with institutions of repute in Germany, France, Spain, Canada, the United Kingdom and Switzerland.

The evening ended with informal interactions between Diplomats and the students and faculty of IILM over high tea, leaving us all motivated to take this cause forward.