Global
Business |Update|
(A weekly update on Global Business )
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2686 6968
Issue 2
A.
Global Environment
1.Indian growth
story to continue
A surging industrial sector, modest inflation and rising investment will help
India's economy grow 8.1% in the year to March 2006, a report has said. In its
annual economic survey, India's Ministry of Finance said the current level of
growth was "likely to continue for some years to come". Despite
surging oil prices over the last year, the country's main inflation measure
would stay below 5%, it added. But the report warned that a lack of
infrastructure was holding back growth. "India's growth prospects are
intricately intertwined with the rapid development of physical infrastructure
such as power, roads, ports and airports," it said. It said industrial
growth was being constrained by inadequate output from the coal, electricity,
steel, cement and oil refining sectors. India's economy has now grown at an
average rate of 7% over the last four years, mainly driven by the services and
industry sectors, but farming output has added impetus recently after some good
monsoon rains
27 Feb 06 : bbcnews.com
2.US
sees decline in housing sales
Sales of new homes in the US dropped for the second time in three months in
January, putting pressure on the Federal Reserve to ease interest rates. The
Commerce Department said that sales of new single-family homes dropped by 5% to
a seasonally-adjusted rate of 1.23 million last month. The figures provided
further evidence that the five-year housing boom was slowing, analysts said.
They blamed the drop in sales on rising mortgage rates. January's 5% fall in
home sales followed a revised 3.8% rise in December and a 7% drop in November.
However, the average price of a new home rose in January to $238,100, compared
with $229,000 in December. Economists had expected strong home sales after
recent figures showed the US had recorded the fastest pace in construction of
new houses for more than 30 years.
27 Feb 06 : bbcnews.com
3.Indian
budget pushes for growth
India's Finance Minister delivered his "common man's budget" on
Tuesday, setting the economy an ambitious annual growth target of 10%. He said
India was on target to cut its fiscal deficit - the difference between what it
spends and earns each year.
Two out of three Indians still live on less than a dollar a day and his budget
focused on agriculture, healthcare and education for the masses. Education
spending is to rise by 31.5% and health spending by 22%. Analysts welcomed the
news that the Union Budget would seek to cut the fiscal deficit to 3.8% of gross
domestic product (GDP) next year from a better-than-expected estimate of 4.1%
this year - relying on the extra tax revenues from India's booming economy.
"For the first time, India has seen the government deliver on trying to
keep fiscal deficit under control and that is the most positive aspect of this
budget," said Hemen Kapadia,
28 Feb 06 bbcnews.com
4.Japan
ponders post-deflation plan
Rising consumer prices mean Japan's central bank is almost
certain to begin tightening its monetary policy in April, a survey of analysts
has found. More than 90% of the 88 market watchers polled by Reuters said the
Bank of Japan (BoJ) would act by 28 April. They expect the BoJ to cut the amount
of money pumped into the banking system and then start raising interest rates,
currently at 0%, later in the year. The BoJ has used its monetary policy to help
lift growth in Japan's economy. Falling prices, known as deflation, have hit
corporate profits and salaries and plunged the Japanese economy into a six year
slump. The Bank of Japan has followed its "quantitative easing" policy
for the past five years - keeping the cost of borrowing low by holding interest
rates at zero and making it easier for banks to lend money by pumping extra cash
into the banking system. It has said it would maintain this policy until
year-on-year consumer prices stabilise at zero or higher.
27 Feb 06 : bbcnews.com
5.EU
proposes technology flagship
The European Commission has unveiled plans for a world-class institute of
technology intended to boost the EU's economic competitiveness. It would consist
of a small central core organising EU-wide research teams. The move is a
response to surveys which show that only a handful of European universities can
compete with the world leaders, which are mostly in the US. The Commission has
also noted that China and India are the "coming players in the knowledge
game". Critics of the European Institute of Technology (EIT), as it has
been labelled, fear it will divert money away from another new programme to
sponsor top-level research.
"Excellence needs flagships - that's why Europe must have a strong European
Institute of Technology, bringing together the best brains and companies, and
disseminating the results throughout Europe," Commission President Jose
Manuel Barroso said on Wednesday. He said it would teach graduates and doctoral
candidates, carry out research and be active in innovation.
22 Feb 06 : bbcnews.com
6.Japan
in surprise trade deficit
Japan has posted its first monthly trade deficit in five
years, and its biggest in 23 years. The trade balance fell to a 348.9bn yen
($2.95bn; £1.7bn) deficit in January against surpluses of 911.9bn yen in
December and 193.9bn yen a year before. Announcing the figures, the government
said soaring oil prices and revived domestic spending had boosted imports. The
Japanese deficit was the largest since January 1983 and only the third in two
decades. But analysts and government officials said there were positives to be
taken from the figures, as they show strong domestic demand. Data also showed
that exports continue to rise. While imports expanded 27% to 5.36 trillion yen,
exports in January also rose strongly, by 13.5% to 5.01 trillion yen. "We
see this as a temporary deficit and expect surpluses to resume from here
on," said Daisuke Yamazaki, economist at Goldman Sachs. A separate set of
figures also indicated that Japan's economy is continuing to strengthen, with
the index of production activity in all industries rising to its highest level
since 1988. "Aside from the effects of high oil prices, growth in imports
in general can be interpreted as a sign that domestic demand is robust, another
reason to say the Japanese economy is on the right track," said Koji
Kobayashi, senior economist at Mizuho Research Institute.
23 Feb 06 : bbcnews.com
B.
Global Corporate
7.French
deal creates energy giant
French energy firms Suez and Gaz de France have unveiled merger plans which will
create Europe's second-biggest energy firm after France's EDF. The new 72bn euro
($85.3bn; £48.9bn) operation will be 34%-owned by the French state and is
expected to deliver annual cost savings of 500m euros. Italy has complained
strongly that the merger is aimed at blocking a possible takeover of Suez by
Italian firm Enel. Prime Minister Silvio Berlusconi called on the European Union
to intervene. Italy's Economy Minister Giulio Tremonti is expected to meet with
the EU's Competition Commissioner Neelie Kroes in Brussels on Tuesday. Other
Italian government officials also have also been voicing their concerns about
French protectionism. In an interview with La Stampa newspaper, Italian Industry
Minister Claudio Scajola said Italy would ask the European Commission to examine
the French government's backing of the merger. "We are facing an enormous
violation of the EU rules and the rules of the free markets," said Mr
Scajola, adding that Italy would only turn to retaliatory measures as a last
resort. However, European Commission spokesman Oliver Drewes said on Monday that
France's backing of the merger did not appear to violate EU rules on the free
movement of capital.
27 Feb 06 : bbcnews.com
8.Turner
to quit Time Warner board
CNN founder Ted Turner has announced he will not be seeking re-election to the
board of US media giant Time Warner. Mr Turner said that "after much
deliberation" he had decided to step down from the company's board. The
media mogul created the CNN news channel as part of his Turner Broadcasting
business, which he later sold to Time Warner. Mr Turner, who was Time Warner's
vice chairman until 2003, said he would step down at the firm's next annual
meeting. Mr Turner remained Time Warner's largest single shareholder for some
time after the sale of his group for $7.5bn (£4.3bn) in 1996. "It is after
much deliberation that I have decided not to stand for re-election at the annual
meeting," he said. Time Warner chief executive Dick Parsons described Mr
Turner as a "visionary leader". "Ted Turner's legendary record as
a media pioneer and executive at Turner Broadcasting and Time Warner speaks for
itself," he said.
24 Feb 06 : bbcnews.com
9.Enron
money man 'raided reserves'
Enron boosted its earnings by dipping into reserve accounts, a former chief
accountant at a unit of the scandal-hit energy company has testified in court.
Wesley Colwell claimed that he shifted $14m (£8m) from one account onto Enron's
balance sheet so that the firm could beat Wall Street profit targets.
Prosecutors are trying to prove that Enron's former bosses manipulated accounts
to boost its share price. Enron collapsed in 2001 with debts of $40bn, shaking
the US corporate world. Enron founder and former chairman Kenneth Lay and
ex-chief executive Jeffery Skilling are on trial in Houston accused over their
roles in what prosecutors call a massive fraud. Mr Lay faces seven counts of
fraud and conspiracy, while Mr Skilling faces 31 counts of fraud, conspiracy,
insider trading and lying to auditors about Enron's financial position. Both men
have denied the charges and argue that they knew nothing of what was going on in
the company because the fraud was being carried out, and hidden, by people
working underneath them.
27 Feb 06 : bbcnews.com
10.India's
Spicejet takes 10 Boeings
Indian budget airline Spicejet has agreed to take up a pre-order for 10 Boeing
737 planes and look at taking 10 more in a deal worth $1.4bn (£802m). The New
Delhi-based carrier, launched in May 2005, said the first order would include
five 737-800 planes and five longer-range 737-900ER aircraft. A Boeing spokesman
said the deal was expected to be finalised by mid-2006. Spicejet, competing in a
tough domestic market, said earlier this month that it expected to break even by
next month. At the time of its launch it had just two leased Boeing 737-800s Its
competitors in an ever-competitive domestic market are Indian Airlines, Jet
Airways, Go Air and Air Deccan.
21 Feb 06 : bbcnews.com
11.BMW
invents steam-powered hybrid system
Turbosteamer turns engine heat into steam which is used to boost
power and
efficiency.Engineers at BMW have created a new type of hybrid powertrain for
cars. Instead of electricity, though, this system relies on steam power to boost
the engine's performance and save fuel. About 35 percent of the energy created
when an engine burns gasoline is lost as heat, according to the book "The
Isaac Newton School of Driving: Physics and Your Car," by Barry
Parker.BMW's Turbosteamer system relies on a heating unit that replaces the
muffler. It heats water to temperatures up to 550 degrees. The resultant steam
is then carried to what is essentially a small steam engine. With much of its
heat energy converted to motion in the engine, the cooler steam -- now about 150
to 200 degrees -- goes through a system that combines the steam's heat with heat
from the car's regular cooling system. That second system is used to operate
another, lower temperature, motor that further boosts the car's power.A more
refined system may be ready for production in about 10 years, the company said
25 Feb 06 CNNMoney.com
12.Mittal
to Arcelor shareholders: Look at the price!
Mittal Steel on Sunday kicked off a "charm offensive" to seduce
Arcelor stockholders, saying their shares are already worth 36 percent more than
their previous all-time high since Mittal's $23 billion hostile takeover bid. In
addition, the takeover of the world's second-largest steelmaker by the world's
number one would accelerate growth, reaping even more profits for shareholders
as the combined company would gain access to untapped markets in China, India
and elsewhere, Mittal's chief financial officer said. A combined Mittal-Arcelor
would realize $1 billion in synergies within three years of a merger, as well as
improve margins and control costs through mining integration, Aditya Mittal
said. Responding to Arcelor's call for shareholders to resist the bid, he said
they had only to look at how the markets have viewed Mittal's move.
25 Feb 06 reuters.com
13.Google
Takes On Web-Design Market
Google's Page Creator, which launched today, is yet another tool in the
company's arsenal of web-based services -- this one aimed squarely at the web
site design market.Intended as a simplistic way for less-technical people to put
up a web page, the free service will compete with products from Microsoft ,
Apple Computer, Adobe and even News
Corp.'s MySpace. Individual pages will be hosted at
“username.googlepages.com” and each user will be able to store up to 100
megabytes of information, including images. Pages created with Page Creator will
be crawled by Google within a few hours, making the content immediately
searchable. This is an advantage over other web-site hosts, which can take days
to be included in Google's search results.Google has often noted its desire to
make all the world's information searchable, and Page Creator fits with that
goal, especially if it is eventually integrated with content uploaded to the web
with the company's other properties like Blogger, Base and Picasa. If combined
with Gmail and Google Talk, the service could take on a social-networking
flavor, which analysts note Google lacks when compared with Web portal
competitors like Yahoo! . In order to compete with a social site like MySpace,
however, Page Creator's customization options will have to increase. In the
current beta version, only four basic templates and 41 designs are available,
though Google is actively soliciting feedback from beta testers on its site.
Msnbc.com 27th Feb06
14.Amazon
buys Shopbop fashion site
Online retailer Amazon has bought internet fashion company Shopbop.com, as it
continues to expand the goods it sells to consumers. Amazon did not disclose the
amount it paid for the Wisconsin-based company. Shopbop sells women's clothes,
shoes and accessories from 75 designers such as Marc Jacobs and Juicy Couture.
Since it started 10 years ago, Amazon has changed from a book seller into one of
the world's biggest online retailers selling everything from DVDs to gems.
Amazon said that Shopbop will continue to operate as a "stand-alone
site".
28 Feb 06 : bbcnews.com
C.
Global finance
15.Crude
dip and M&A propel gains on Wall St
Falling crude prices and a fresh wave of merger and acquisition activity helped
put the bulls back in the driving seat on Wall Street on Monday.After ending
last week with two consecutive days of losses, the Dow Jones Industrial Average
closed up 0.3 per cent to 11,097.55. Despite losses in the energy sector, the
S&P 500 advanced to a new five-year high, gaining 0.4 per cent to 1,294.12,
while the Nasdaq Composite, powered by gains in technology stocks, raced ahead
0.9 per cent to 2,307.18.Retailers were the best performing industry group on
the S&P, with Lowes leading the way after the home improvement retailer said
fourth-quarter profit rose 37 per cent. Investors shrugged off news of a sharp
decline in new home sales to send the stock 5.8 per cent higher at $69.30.
Shares in rival Home Depot rode on the coat-tails of Lowe’s upbeat guidance
for the coming year, gaining 2 per cent to $42.46.
Msnbc.com 27th Feb 06
16.Electrolux
shares rise on Nuremberg strike deal
Shares Electrolux, the world's biggest white goods maker, rose on Tuesday after
news that firm had ironed out a deal to end the strike at its AEG plant in
Nuremberg, Germany."We have a deal, that is as much as I can say,"
Electrolux spokesman Anders Edholm told Reuters, adding that a press statement
would be released later on Tuesday.Workers have been on strike at the German
plant since late last month over the white goods group's plans to close the
factory, cutting around 1,750 jobs, and move production to Poland and
Italy.Electrolux shares rose 0.5 percent to 221 crowns by 0854 GMT after having
traded at 219 crowns ahead of the news.
Tue Feb 28, 2006 reuters.com
17
Fed in call for 'stand-by' Treasuries bank
The US Federal Reserve has asked Wall Street dealers to develop a
"stand-by" bank that would step in if one of the two leading
Treasuries clearing banks encountered problems.The Fed and the US Treasury
depend on the Treasuries securities market to implement monetary policy and fund
the US government. But the market, in which $545bn is traded daily, depends on
two banks, JPMorgan Chase and Bank of New York, to clear its trades. This
situation concerns regulators.Don Layton, who retired recently as vice-chairman
of JPMorgan Chase and will lead the project, said: "If one of these two had
troubles of any kind, literally half the government securities market would not
be able to function, not only in the sense of trading, but dealers wouldn't be
able to finance their inventory."The project is being developed by the Bond
Market Association, an industry body representing leading Wall Street firms and
fund managers.The two clearers also act as intermediaries and custodians in the
"tri-party repo" market, where investors and banks borrow and lend the
equivalent of $1,900bn a day to fund their other activities.Ft.com 28 feb 06
18
U.S. stocks gain as oil drops; Lowe's, SanDisk up
U.S. stocks rose on Monday, pushing the Standard & Poor's 500 index to its
highest in more than 4 1/2 years, as a steep fall in oil prices and
stronger-than-expected earnings boosted optimism for corporate profits.Home
improvement chain Lowe's Cos. Inc. reported solid results, while a
higher-than-expected forecast for 2006 operating earnings from
telecommunications company Verizon Communications Inc. also lifted sentiment.The
Nasdaq was buoyed by shares of SanDisk Corp. after Citigroup raised its rating
on the memory products maker's stock to "buy" from "hold,"
according to a MarketWatch report on Monday. SanDisk's stock jumped 8.4 percent
to $61.08."Stocks have been following oil prices up and down," said
Martin Yokosawa, senior portfolio manager at Oberweis Asset Management.
"And in the meantime, if a company comes with strong numbers, investors
stick to it."The Dow Jones industrial average was up 35.70 points, or 0.32
percent, at 11,097.55
Feb 27, 2006 reuters.com
D.
Global Outsourcing
19.Outsourcing:
The Japanese Are Coming
Who would have thought it, but Japanese firms are keenly adopting the trend by
outsourcing services to India. The
newest convert to outsourcing to India movement is Japan’s Hitachi Ltd., who
is in the midst of collaborating with Satyam, a business house based in
Secunderabad, India and Intelligroup, a US company whose owner is from India. Together, they plan to open software development and systems
maintenance centres in the Indian cities of Bangalore and Hyderabad . Planning
to expand its current workforce numbers in India from 200 to 1,000 in two years,
Hitachi’s Indian centres will focus on US and Europe based Japanese firms,
providing software and engineering support to clients.Expanding its outsourcing
operations as a strategic step for its overseas business, Hitachi hopes to boost
revenue from foreign operations by 40% of its information and communications
business by 2007.And, before Hitachi decided to jump on the outsourcing
bandwagon, October last i.e. 2005, Nippon Yusen KK outsourced a part of an ocean
liner business system development to Tata Consultancy Services (TCS), the
technical arm of India’s Tata Group.
20.India's
Micro Tech and Sony Ericsson in Development Pact
Micro Technologies India Ltd., a Mumbai based IT-solution company has entered
into a Memorandum of Understanding (MoU) with global major Sony Ericsson and
undertaken to develop new high tech wireless products and solutions for its
market worldwide. In a statement made to the Bombay Stock Exchange, Micro Tech
said Sony Ericsson PBU M2M, a part of Sony Ericsson Mobile Communications and a
world leader in wireless telemetry product and solutions will jointly work with
it in the development and promotion of wireless and related solutions, using
available technological resources of both companies. The Indian company will
continue to develop products and solutions based on Sony Ericsson wireless
modules for the global market, while endeavouring to generate business volume
for both companies. On its part,
Sony Ericsson will be responsible for providing inputs for wireless modules
taken for development, as well as, releasing technical information about new
products.
21.Bush
rules out protectionism to check BPO effect
Washington: Hailing India's economic progress, US President George W Bush on
Wednesday said it needed to do more on liberalisation and lifting caps on
foreign investment even as he ruled out any protectionist measures to check the
adverse effect of outsourcing on his country.
Just over a week ahead of his visit, he said the expansion of India's economy
would mean "greater stability" for the South Asian region besides
bigger market for America's businesses, workers and farmers. "The area of
America's relationship with India that seems to receive the most attention is
outsourcing," Bush said addressing the Asian community. "It is true
that a number of Americans have lost jobs because companies have shifted
operations to India," he said, adding losing a job was
"traumatic" and "difficult" as it put strain on "our
families." "But rather than respond with protectionist policies, I
believe it makes sense to respond with educational policies to make sure that
our workers are skilled for the jobs of the 21st century," he said.
23 February , 2006 offshorexperts.com
22.Software
export worth $60 bn targeted in 2010
Information Technology industry has set an export target of $60 billion by 2010,
Tata Consultancy Services Ltd CEO and Managing Director S Ramadorai said on
Saturday.
Talking to reporters on the sidelines of the launch of pilot e-filing by the
Ministry of Company Affairs in Coimbatore, Ramadorai said the industry was
expected to achieve an export target of $26 billion during this year, as against
$17.8 billion till March 2005.
The export included software, hardware, BPO and ITES, he said, adding it was
also aimed at generating nine million jobs in the sector by 2010.On the move to
form trade unions in the sector, Ramadorai said NASSCOM and the Industry felt
the employees' well-being were taken care of very well. Against this background,
"we do not see any merit," (in forming trade unions), Ramadorai added.
28 February , 2006 offshorexperts.com
E.
Global Technology
23.Viruses
plague British businesses
Computer viruses are the single biggest cause of security problems for UK
businesses, a survey by the Department of Trade and Industry shows. The study
found almost 50% of the biggest security breaches suffered by companies in the
last two years were due to infection by malicious programs. In some cases
viruses crippled key systems such as e-mail for more than a day while companies
cleaned up. It also found that the worst outbreaks can take up to 50 days to
fix. The good news revealed by the survey was that the number of firms caught
out by viruses had dropped by almost one-third since the last time the study was
done in 2004. This reduced infection rate was put down to the fact that most
businesses now use anti-virus software to clean up e-mail traffic before it
reaches in-boxes. Chris Potter, a partner at PricewaterhouseCoopers and one of
the report's authors, said firms had got much better at keeping their anti-virus
software up to date and patching vulnerable systems. But, he said, it was hard
won experience. "They know how much this can hurt if they get caught
out."
28 Feb 06 : bbcnews.com
24.Microsoft
unveils Vista editions
Microsoft is planning six versions of the next incarnation of its Windows
operating system. Three versions of the software, called Vista, will be for home
users, two will be for businesses and one will be for emerging markets. One of
the home versions of Vista will include features that let users store and play
back TV shows. No fixed date has been given for the release of Vista but it is
expected to be launched by the end of 2006.Vista, which was known as Longhorn
during its long development, is a major re-working of Windows that makes
changes, among other things, to the way the operating system looks and how it
handles networking and sound. Microsoft said the six versions were designed to
match the demands different users have for its software. No details have been
given about the pricing of the separate versions. Vista Business will be the
basic version for companies of all sizes and includes tools that will help
organisations manage their PCs. The Enterprise version of Vista will have all of
the features in the basic version and add to them improved encryption including
a BitLocker system that will stop confidential data being viewed if a computer
is lost or stolen. The Home Basic version is intended for those who only want to
use their PC to browse the net, use e-mail and create and edit basic documents.
It will also include desktop search and security tools. Vista Home Premium
includes everything in the Basic version and adds the new graphical interface
called Aero.
Ft.com 28 Feb 06
Compiled by Madhur Ajmani
(Faculty Member)
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2686 6968
www.SkylineCollege.com