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 7
Contents:
Global
business update
31 March 06 –06 April 06
Global
Environment:
1 Gold price reaches 25-year
peak
2 China, US and EU in tariffs row
3 Mixed March for U.S. auto sales
4 Japan eyes huge Asia trade bloc
5 EU to get tough on energy reform
6Venezuela takes back oil fields
Global Corporate:
7.Google sells $2.07bn of its
stock.
8. Delphi primed for GM court battle
9. Nokia says industry will grow 15%
10 .GM to sell finance arm for $14bn
11.Wal-Mart's RX for health care
12.Arcelor strengthens bid defence
13 World's largest 2,000 companies :Citigroup leads the pack, but oil giants
make strong showing
Global Outsourcing:
14 Outsourcing: Minimizing the Data Security Risks with Secure Collaboration.
15 Everest Research Institute Examines Offshore Adoption Trends
in HR Outsourcing Market Update Report.
16.From BPO to EPO
17.Choices: BPO or KPO?
Global Environment :
1 Gold price reaches 25-year
peak
The price of gold has hit its highest level for 25 years, reaching more than
$588 (£338) an ounce. Investors believe that precious metals are a sound
investment and could outperform stocks and bonds. The price of spot gold rose to
$588.70 an ounce before settling later on Thursday at $587.45. Gold's
performance mirrors rises by other precious metals. Silver saw its highest level
in 22 years, while platinum reached an all-time high. The price of gold has gone
up by as much as $71.10 an ounce or just under 14%, since the end of 2005.
"Certainly, it looks like we are targeting $600 in the near term. It may
happen in London overnight," said Darren Heathcoat, head of trading at N M
Rothchild in Sydney. Gold, like other precious metals, is appealing to investors
who are concerned over unpredictable conditions in the Middle East, dollar
instability and inflation. Platinum hit an all time high of $1,095 an ounce,
while palladium hit $355.80 an ounce, before settling at $350.30, its highest in
four years.
31 March 2006,www.bbc.com.
2 China, US and EU in tariffs
row
China has said it "regrets" a decision by the US and European Union (EU)
to step up a row over car parts imports. The US and EU have accused China of
imposing illegal tariffs to prevent foreign components being imported for use in
Chinese car assembly plants. The two have now turned to the World Trade
Organisation (WTO) to open up the $19bn (£10.8bn) auto parts market. The row is
the latest in a series of disputes triggered by China's growing muscle in the
global trade market. Brussels and Washington have now taken formal steps to
resolve the row. As a result, China now has 10 days to respond to the request
from the EU and US - if the matter is not resolved within 60 days a formal WTO
panel could step in to rule on the dispute."The Chinese side expresses
regret over this and is earnestly studying the request for consultations by the
EU and the United States," Ministry of Commerce spokesman, Chong Quan said
in a statement on the department's website.
31 March 2006,www.bbc.com
3 Mixed March for U.S. auto
sales
Detroit's Big Three automakers turned in a mixed March as General Motors and
Ford Motors put up another month of sales declines, while crosstown rival
DaimlerChrysler kept gaining on their heels. GM, the world's No. 1 automaker,
said U.S. March sales of cars and light trucks tumbled 14 percent from a year
earlier to 365,375. Retail sales fell 17 percent compared to strong year-ago
deliveries, and fleet sales tumbled 5 percent. But the Cadillac Escalade and
Chevrolet Tahoe, two of the models the automaker is counting on to help revamp
its ailing North American operations, posted double-digit sales gains.
(CNNMoney.com)
4 Japan eyes huge Asia trade
bloc
Japan has plans for a huge Asian free trade bloc of 16 nations that would help
integrate economies in the region. The grouping would include about half the
world's population and be larger than both the EU and North American Free Trade
Agreement (NAFTA). The agreement would include China and India, the world's two
fastest growing economies. It would also include the Association of
South-eastern Nations (ASEAN), Australia, New Zealand and South Korea. Takeshi
Fujimoto, deputy director of Japan's Ministry of Economy, said the proposal is
set to be made public on Friday. Mr Fujimoto, who is keen on further
integration, said "we want to conclude negotiations by 2010." Based on
the ministry's estimates, the trade pact would increase Japan's gross domestic
product (GDP) by about 5 trillion yen ($42.5bn), and the GDP of all those
countries involved by about 25 trillion yen.
4 April 2006, www.bbc.co.uk.
5 EU to get tough on energy
reform
The European Commission is to take legal action against member states for
failing to take steps to open up their energy markets to competition. Brussels
has confirmed that it will begin "infringement proceedings" against
some EU members on Tuesday to penalise them for moving too slowly. EU members
have until July 2007 to fully liberalise their markets as part of a proposed
common energy strategy. The UK says uncompetitive EU markets have helped to push
up gas prices. The UK's Liberal Democrats recently estimated that British
consumers were paying £10bn ($17.3bn; 14.3bn euros) more than they should be
for gas and electricity because of failings in the European energy market. UK
business organisations have also blamed inefficient practices on the continent
for companies' rising energy bills.
3 April 2006 , www.bbc.com
6
Venezuela takes back oil fields
Venezuela has taken control of two oil fields operated by French firm Total and
Italy's Eni. The government said it had taken the step after the failing to
agree a deal with the two firms which would give it a majority stake in new
ventures. President Hugo Chavez has been working to strengthen state control
over oil production in the country. So far, 16 oil firms have agreed to change
their operations into joint ventures with state oil firm PDVSA. US based
Chevron, Royal Dutch Shell and Spain's Repsol are among the companies that
signed the agreement on FridayTotal's Jusepin field produces about 30,000
barrels of oil a day, while Eni's Dacion field produces almost 60,000 barrels
per day (bpd). Eni has vowed to fight the takeover which it declared illegal.
"Eni believes that this action by PDVSA is a violation of Eni's contractual
rights," it said in a statement. The company added it was considering
possible legal action and would be seeking compensation. Total confirmed its oil
field had been taken over, but declined further comment.
3 April 2006, www.bbc.com
Global Corporate:
7 Google sells $2.07bn of its stock.
US search engine company Google has raised $2.07bn (£1.2bn) through its second
share sale in seven months. Google, which first listed on the stock market in
August 2004, sold 5.3 million shares priced at $389.75 each. The shares were
sold to funds that track the Standard & Poor's 500 index because Google has
replaced oil firm Burlington Resources in the benchmark.Google is planning to
use the cash from the sale to fight off stiff competition from rivals Yahoo! and
Microsoft. A recent report found
that four out of 10 web searches conducted in the US are now done using the
Google search engine, giving the company a 42% market share in February. That
makes Google the world's most-used search engine and rivals have renewed efforts
to eat into its market share. To stay ahead of the competition, Google is
expanding into new areas and has bought other companies to broaden its access to
the online advertising market. Google's share price has suffered in recent weeks
- the stock has lost more than 6% this year - as investors questioned whether it
could keep revenues growing as quickly as it has done in the past. However,
despite the concerns, Google's shares have performed remarkably well since it
listed on the stock market and have doubled in value during the past 12 months.
On Friday, Google shares closed $1.56 higher at $390.
2 April 2006, www.bbc.com
8 Delphi primed for GM court
battle
Delphi, the troubled car parts firm once owned by General Motors, is seeking
legal authority to invalidate supply contracts with the car giant. Delphi, which
is in bankruptcy protection, is trying to reduce its liabilities as it attempts
to restructure its business. Delphi said it would seek a court order to annul
"unprofitable" GM contracts and scrap labor agreements. The firm also
plans to cut 8,500 jobs and close a number of factories. Some analysts have
speculated that GM's financial liabilities stemming from its relationship with
Delphi could force it into bankruptcy. Earlier this month, GM warned that its
Delphi-related liabilities - also including pension and healthcare costs - could
rise as high as $12bn.
31 March 2006, www.bbc.com.
9
Nokia says industry will grow 15%
Nokia predicts that the global mobile phone market will grow 15% this year,
driven by increased sales in developing markets in Asia and Africa. The Finnish
giant had previously estimated that the overall world market would expand by 10%
in 2006. It predicts that Asian and African countries will account for 80% of
the industry's growth this year. Nokia, the world's largest phone-maker, did not
give any details of its own sales targets for 2006. Speaking at the firm's
annual general meeting, its chief executive Jorma Ollila would instead only say
that the firm was "well placed for some new innovative leaps". Nokia
currently has a global market share of 34%, ahead of Motorola's 18%, Samsung's
11%, and LG and Sony Ericsson which have 6.6% each.
30 March 2006,www.bbc.com
10 GM to sell finance arm for
$14bn
General Motors has announced it is to sell a majority stake in its highly
profitable financing business to a hedge fund-led group for $14bn (£8bn). The
struggling car giant had been in talks with Cerberus Capital Management about
selling GMAC - which made a $2.8bn profit in 2005 - for weeks. GM is trying to
raise money to shore up its finances, which have been hurt by weak sales and
large pension costs. It also faces huge liabilities from bankrupt car parts firm
Delphi. GM made a $10bn loss last year and is cutting 30,000 jobs in an effort
to make its business more competitive. It will raise $7.4bn upfront from the
sale of 51% of GMAC to a group including Cerberus, Citigroup and Japan's Aozora
Bank
30 March 2006,www.bbc.com
11 Wal-Mart's RX for health care
The retailer is opening cheap, convenient clinics in its superstores -- and
calling on Washington to fix the really big problems.
NEW YORK (FORTUNE) - When Wal-Mart announced recently that it would open medical
clinics in supercenters across the country, the news coverage went something
like this: Get ready for a battle of the titans. America's most admired, most
vilified, most shopped-at retailer is finally taking on the $2-trillion-a-year
U.S. health-care market, a hulking giant just begging to be whipped into shape
by Wal-Mart's vaunted efficiency and everyday low pricing. Not exactly. Stop by
the Wal-Mart (Research) in a place like Owasso, Okla., five miles northeast of
Tulsa, and you do see signs of something interesting going on. Between the Smart
Styles hair salon and the Kids Fun Center is the new RediClinic, three freshly
painted, stark-white rooms staffed by nurse practitioners licensed to prescribe
drugs.
April 3, 2006, www.cnn.com
12 Arcelor strengthens bid
defence
Steel firm Arcelor has announced it is to increase its 2005 dividend and
distribute a further 5bn euros (£3.4bn; $6.1bn) to shareholders. The move is
part of Arcelor's attempts to fend off a $25.1bn takeover bid from rival Mittal
Steel. Arcelor added it would transfer the shares it owns in Canadian firm
Dofasco to a foundation, which would make any sale of Dofasco harder. Mittal has
pledged to sell Dofasco if it succeeds in buying Arcelor. Arcelor's board has
opposed Mittal's bid from the outset and the company's chief executive, Guy
Dolle, has been trying to convince investors of the company's need to remain
independent. Some politicians have also opposed the deal for fear of job losses.
The company's workforce totals 98,000 worldwide. A merger between Arcelor and
Mittal Steel would create a company with about 10% of the world's total steel
output. Mittal has valued the French company at considerably more than its
market value. The original offer made in January was for 20.8bn euros while the
company's market value currently stands at 14.2bn euros.
4 April 2006, www.bbc.co.uk
13 World's largest 2,000
companies :Citigroup leads the pack, but oil giants make strong showing
The Forbes 2000 is not only a comprehensive list of the world's largest, most
powerful, public companies, but also unique in its way of measuring corporate
size. Our logic for using sales, profits, assets and market value in a composite
ranking: A list based on a single metric provides a lopsided view of which
companies are most important to the world's economy. Selecting the largest
companies strictly on sales would put Google, with $6.1 billion in revenues, way
down in rank, even though it is the world's 36th largest company measured by
market capitalization. So why not rank corporations just on market value? All
you have to do is go back to a year like 2000, when tiny startups, with little
in the way of sales, assets, employees, or even a viable business, were suddenly
valued as if they were blue chip corporations. An asset-ranked list has an
obvious shortcoming: financial service companies would dominate. And a list
ordered solely on corporate profits would completely miss big cyclical companies
like General Motors and Ford Motor during downturns.
www.msnbc.com
Global Outsourcing:
14 Outsourcing: Minimizing the Data Security Risks with Secure Collaboration
With the promise of cheap labor and increased efficiencies, outsourcing of
product manufacturing and business processes has become increasingly attractive
for a wide range of industries.
In fact, analyst firm Gartner estimates that global spending on offshore
outsourcing services will still top $50 billion by 2007—and according to a
2004 Enterprise Systems study, the domestic outsourcing market is 70 percent
more. These numbers would be even higher if not for the realistic fear of lost
data, intellectual property and business knowledge, as well as the related costs
of unwanted international exposure these stories bring.
In most outsourcing situations, organizations need to share sensitive
data—much of it valuable intellectual property—with others. Keeping data
secure can be extremely difficult when the information is in someone else’s
hands, even if those hands belong to a seemingly trusted partner. Your outsourcing partner, no matter how long and successful
the relationship, might have non-secure communications methods (i.e. e-mail,
fax, instant messaging or traditional telephone lines) or unsavory employees
that don’t value the privacy of your data—or that of your clients—as much
as you do. Consider the following examples of security incidents taking place
within some of the fastest growing providers of outsourcing services to U.S.
entities: An Indian call center employee was fired last June after supplying
details on British bank accounts, credit cards, passports and drivers’
licenses to an undercover reporter for London’s Sun newspaper for more than $5
a name
March 28, 2006, www.offshorexperts.com
15 Everest Research Institute
Examines Offshore Adoption Trends in HR Outsourcing Market Update Report.
Human resources functions, led by benefits, payroll, employee data management
and HR information technology, are increasingly moving offshore, according to
Everest Research Institute's HRO Market Update -- Offshore Adoption. The new
report, which focuses on offshore adoption trends among buyers and suppliers of
HR outsourcing services, found that almost half (44 percent) of the more than 70
major HRO transactions currently in force have an offshore component. This
number is expected to increase as HRO suppliers continue to invest in their
offshore capabilities.
March 28, 2006 , www.offshorexperts.com.
16.From BPO to EPO
Considering India's growing competitiveness in the engineering services
sector and healthy growth in exports of domestic engineering services and
products, the Engineering Export Promotion Council (EEPC) has mooted a proposal
with the commerce ministry to convert India into a hub for engineering process
outsourcing (EPO). EEPC has also appointed AF Ferguson & Co, a leading
management consultancy firm, to develop a strategy paper to comment on the
potential for EPOs in India. Rakesh Shah, chairman, EEPC, said, "AF
Ferguson will carry out a study on the potential for EPOs in India, the role of
the government, the role of engineering services sector and other agencies, and
advise us on how to convert India into a hub for EPO." Mr Shah was talking
to the media on the sidelines of EEPC's export award function here on Saturday.
He said that currently, the engineering services sector in the country is highly
fragmented. "EEPC feels India has the capability to export engineering
worth $10bn in the next couple of years. However, the sector is highly
fragmented now.
March 28, 2006 , www.offshorexperts.com.
17.Choices: BPO or KPO?
I was at a meeting in Delhi in early March when I first heard the acronym KPO,
of course without being spelled out.From the context, I figured it meant
knowledge process outsourcing and started using it immediately. One cannot
afford to be slow on the draw with acronyms! The key point of the KPO argument
is that Sri Lanka should focus more on services like those provided by Amba
Research and place less weight on the simple export of call-center services. But
seriously, the subject is important. We've been talking about something like KPO
for some years, though without the acronym. Not because we were cleverer, but
because Sri Lanka faced greater barriers in expanding the outsourcing/offshoring
business, having fewer English-speakers than India. If outsourcing/offshoring is
seen solely in terms of call centers, the growth of the BPO industry should
start flattening in 2007-08 if not before. If seen solely as Colombo-based, the
growth should stall even sooner.
March 28, 2006 , www.offshorexperts.com
Compiled by Himanshu Gupta - BBA (MAHE)
L1,S2 - 1st Year
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2686 6968
www.SkylineCollege.com