e-globuzz jan march'14

e-GlobuzZ Volume IV Issue II

11 International Business Society @ SIMSR 1



FOREWORD Dear Readers,

It gives us great pleasure to bring out the Volume IV Issue II of e-GlobuzZ, the quarterly e-

periodical of IBS@SIMSR.

In this issue we have focused on countries like Kazakhstan, Argentina, Turkey, Iran, Qatar

and Venezuela across various continents like South America & Asia. These articles on

emerging country markets have been written by SIMSR students and we are sure you will

find them comprehensive and insightful. One of the fundamental requirements of International Business is to have

an in depth understanding of various countries in terms of their factor conditions, political and economic risk,

opportunities for trading and cross border investments, and appropriate country entry strategies MNEs could use for

building market leadership in these countries and the neighboring regions including the relevant trade blocs.

In addition to the articles on countries we have included an article on current affairs like the ongoing crisis in

Ukraine. We have also covered an article on opportunities for Inbound FDI in the emerging Indian automobile sector.

One of the highlights of this January-March quarter was Commercio 2014, held on 15th Feb, 2014 as a part of the

prestigious SIMSR event Melange, 2014. Commercio, 2014 was the third annual inter B school competition on

country analysis and strategies which IBS@SIMSR commenced with the Melange, 2012. Commercio, 2014 like in

prior years brought together talented teams from 25 leading B schools across India. Of these, IMI Delhi, NITIE,

Mumbai, SJMSOM (IIT, Bombay) and NMIMS, Mumbai were among the finalists in addition to the SIMSR teams.

Commercio 2014 turned out to be a great learning experience for all the SIMSR students and participating teams as

well.

We will be meeting you again in August 2014 for our Independence Day issue (July-September, 2014) on 15th Aug,

2014 due to the ensuing summer break from mid April to June, 2014.

In the mean time we invite our esteemed Faculty, SIMSR students and Alumni to write articles for the forthcoming

Independence Day issue of e-GlobuzZ.

Happy reading! ...

Prof. C. P. Joshi

Faculty Mentor, IBS@SIMSR

Area Chairperson (General Management) & Program Coordinator (PGDM and PGDM– International Business)



CONTENTS



Country in Focus - QATAR

Q atar, a former pearl-fishing centre and once

one of the poorest Gulf states, is now one of

the richest countries in the region, owing to

the exploitation of large oil and gas fields since the

1940s.

Ascribed Features :

Location: The Qatari peninsula just 100 miles (161 km)

north into the Persian Gulf from Saudi Arabia. Much of

the country consists of a low, barren plain, covered

with sand.

Population: 2 Million (2013). Since 2004 its population

has increased more than double.

Climate: Pleasant winters and hot, and humid

summers.

Religion: 81.5% - Islamic , 8.5 % – Christianity .

History: Qatar gained independence from the United

Kingdom on 3 September, 1971 and is an absolute

monarchy that has been ruled by the Al Thani family

since the mid-19th century

Gas and Oil: Qatar has the world's third largest natural

gas reserves and oil reserves in excess of 25 billion

barrels which has fuelled Qatar to become world's

richest country per capita and achieve the

highest human development in the Arab World.

Acquired Features :

Membership: Qatar is a member of the WTO, OPEC,

ILO, IMF, Arab League and is also a founding member

ofthe Gulf Cooperation Council

Infrastructure: Qatar is currently undergoing

transformation under the National Vision 2030, in which

it expects to achieve an advanced, sustainable, and

diversified economy.[18] In order to promote tourism,

Qatar has invested billions into improving infrastructure.

It held the 2006 Asian Games and will be the host of

the 2022 FIFA World Cup, becoming the first Arab

country to host either of the events.

Corporate structures available for investors are the

Qatar Financial Centre (QFC), Qatar Science &

Technology Park (QSTP)

Life Expectancy : 78.54 years for males , 77.95 years for

females

Technology : The major investments are in Internet

presence, distributive networking (networks and

intranets) and computerization of administrative tasks.

Political Environment :

The political system of Qatar is a constitutional

monarchy, with the Emir of Qatar as head of

state and head of government, hence in possession of

full control over the country. On 25 June 2013,

Sheikh Tamim bin Hamad Al Thani became the Emir of

Qatar after his father handed over power in a televised

speech. Though Qatar is undergoing a gradual process of

political liberalization, the Emir continues to hold

ultimate power. While political risk does not directly

- Aditya Sharma, Shivek Dhar, Shrikant Joshi (PGDM-International Business, 2013-15)

http://en.wikipedia.org/wiki/Peninsula

http://en.wikipedia.org/wiki/Sand

http://en.wikipedia.org/wiki/Absolute_monarchy

http://en.wikipedia.org/wiki/Absolute_monarchy

http://en.wikipedia.org/wiki/List_of_countries_by_natural_gas_proven_reserves

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

http://en.wikipedia.org/wiki/Human_development_index

http://en.wikipedia.org/wiki/General_Secretariat_for_Development_Planning

http://en.wikipedia.org/wiki/Qatar#cite_note-18

http://en.wikipedia.org/wiki/2006_Asian_Games

http://en.wikipedia.org/wiki/2022_FIFA_World_Cup

http://en.wikipedia.org/wiki/Tamim_bin_Hamad_Al_Thani



impact Qatar, regional stability is the concern for future

growth.

Economic Factors :

Qatar was the world’s fastest growing economy during

2008-12, with a real GDP growth rate of 12.0%. Its

economy is fully dependent on oil and gas exports.

Around 58% of the GDP is constituted by oil and gas. The

current account surplus rose sharply (32.0% of GDP) on

record-high gas and nonoil exports. It has very low

unemployment rate of 0.5%. It is the world’s richest

country in terms of GDP per capita. There is no personal

income tax system. Tax is only collected from business

income.

Cultural Factors :

Demographics: Arab 40%, Pakistani 18%, Indian 18%,

Iranian 10%, other 14% .

Religion: Islam (state religion, claimed by virtually all of

the indigenous population) .

Languages: Arabic (official) , English (widely spoken) .

Polygyny is religiously and legally sanctioned. The

preference is to live with or at least near the members of

the husband's family.

Legal Factors :

Qatar's legal system is a mixture of the Civil and Islamic

laws. Qatar has a well established code of laws and trials

are generally thought to be fair. Qatar has produced a

viable dualism in its legal system different from that of

the other Gulf States. Many cases of ill-treatment of

immigrant labour have been observed. Preferential

treatment is given to bids that include a high percentage

of local content.

Bilateral Relations: India - Qatar

India has a long history of friendly relations with Qatar

marked by commercial ties. The relationship today is

rich, close and multi-dimensional. There is a growing

synergy in the hydrocarbon sector. More recently, a

number of steps have been taken to further strengthen

and expand bilateral relations. The various occasions for

high-level dialogue on business matters and regular

exchange of delegations have established a sound basis

for a constructive, mutually beneficial relationship.

Bilateral Trade :

India is the 3rd largest export partner of Qatar: The value

of the two-way trade between the two countries in 2010

-11 exceeded US $ 7 billion. For Qatar, India is the 3rd

largest market for its exports, accounting for more than

8% of its global exports (2011). In terms of imports by

Qatar, India ranks 11th and is the source of around 4% of

Qatar’s total imports (2011). The figure below depicts

export- import in numbers.

Trade in the current year: During the financial year i.e.

April-Dec, 2012-13, exports were around US$ 500.49

million whereas the imports for Qatar were around US$

12550.97 million. The total trade was US $ 13051.46

million.

Top items of Exports from India: Machinery and

equipment, transport equipment, textiles, food

products, ores and minerals etc.

Top items of Imports by India: Petro-chemicals, LNG,

fertilizers, Sulphur and Iron Pyrites.

Bilateral Investments :

Hydrocarbons : India has signed an agreement to

purchase 7.5 million tonnes of LNG every year from



Qatar for a period of 25 years; the first shipment took

place in 2004. The full supplies of 7.5 million ton have

begun from January, 2010.

Information Technology : Wipro has executed a project

for Doha Bank for providing enterprise application

integration and security consultancy services. Wipro is

presently providing IT consultancy to Qatar Petroleum in

their Ras Abu Aboud Development Project. Mahindra

Consulting have successfully executed SAP

implementation project with Qatar Petroleum. Mahindra

Consulting has also been providing SAP technical and

functional consulting services to RasGas in areas of

logistics management and maintenance management.

TCS is executing projects for Qatar Petroleum and Qatar

Telecom. NIIT and APTECH are successfully running their

IT training institutes in Qatar.

Infrastructure : The Qatari side had highlighted its

interest in getting access to the public sector undertaking

disinvestments in India via the anchor investor route.

With Qatar becoming the host for 2022 FIFA World Cup

and massive investment likely in infrastructure, Indian

companies with a global profile are planning to secure

lucrative deals in the engineering, procurement and

construction contracts (EPCs).

Conclusion:

The Qatari pharmaceutical industry will benefit from the

forthcoming implementation of the National Health



Insurance program, which envisions covering all the

residents and visitors in the country under the scheme.

Moreover, the potential signing of a free trade

agreement between the GCC and India, thus paving the

way for less expensive imports of generics, can alter the

structure of the pharmaceutical industry in the country.

Hence, as per the above analysis it could be concluded

that Qatar is emerging as a new market for healthcare

sector. It has also outperformed other Middle Eastern

countries in terms of trade, GDP growth etc. Qatar is now

planning to diversify its portfolio in order to reduce its

dependency on oil. So, it provides a huge opportunity for

India, as we provide pharmaceutical products &

healthcare services at a much lesser price as compared

to other countries.



Country in Focus - Iran

I ran, also known as Persia till 1935, is officially

the Islamic Republic of Iran since 1980. It is a

country in Western Asia with Tehran as it. The

motto of Iran is "Independence, Freedom, and Islamic

Republic“. The currency of Iran is the Iranian rial and, as

of 2014, remains the world's least valued currency unit.

The Official language is Persian and official religion is Shia

Islam.

Factor Conditions :

Iran is located in the Middle East, between Iraq and

Pakistan, bordering the Gulf of Oman, the Persian Gulf

and the Caspian Sea. The bordering countries of Iran

include Armenia, Azerbaijan, Afghanistan, Iraq, Pakistan,

Turkey and Turkmenistan. It is the only country that has

both Caspian Sea and Indian Ocean as coastline. Iran is

strategically located on the Persian Gulf and Strait of

Hormuz which are crucial maritime pathways for crude

oil transportation. Two-thirds of the country is either

mountains or desert with climatic conditions ranging

from subtropical to sub polar.

Some of the natural resources of Iran are petroleum,

natural gas, coal, chromium, copper and iron ore. Iran

has the largest natural gas supply in the world and the

fourth-largest oil reserves. Iran is a major regional and

middle power, exerting influence on the world through

its reserves of fossil fuels. Iran's scientific progress is the

fastest with great strides in aerospace, nuclear science,

medical development, stem cell and cloning research.

Iran is an energy superpower. Iran is in a constant battle

to use its energy resources more effectively in the face of

subsidization and the need for technological advances in

energy exploration and production. Iran is a member of

the United Nations (UN), Non-Aligned Movement (NAM),

Organization of the Islamic Conference (OIC),

Organization of the Petroleum Exporting Countries

(OPEC) and Gas Exporting Countries Forum (GECF).

History :

From 224-651 AD the Sassanid dynasty rules Persian

Empire during which Zoroastrianism was the dominant

religion. In 636 AD - Arab invasion brings start of Islamic

rule. There was dynasties rule from 1501–1979. Iran was

known as Persia till 1935, was one of the greatest

empires of the ancient world, maintaining a distinct

cultural identity within the Islamic world. It became an

Islamic Republic in 1979, when clerics assumed political

control under supreme leader Ayatollah Khomeini.

During 1980-1988 Iran fought a war against Iraq.

Culture :

The culture of Iran is a mix of ancient pre-Islamic culture

and Islamic culture. Iran has a high context culture where

the emphasis is on interpersonal relationships and

developing trust. It is a collectivist nation where family,

- Ankit Bagadia, Vishnu Manasa Kanchiraju, Sanghmitra Varma (PGDM-International Business, 2013-15)

Population of Iran 77,176,930 (2013 estimate)

17th most populous nation

Median Age 27.8 years

Literacy rate 77%, ranked 160th

HDI index 0.742, ranked 76th

Population below poverty line 18.7%

Population of Iran 77,176,930 (2013 estimate)

17th most populous nation

Median Age 27.8 years

Literacy rate 77%, ranked 160th

HDI index 0.742, ranked 76th

Population below poverty line 18.7%



hierarchy, honour, networks and consensus is given more

importance. Iran follows idealism where the culture

prefers to establish overall principle before they try to

resolve small issues. It has a polychromic culture with

ascribed group memberships.

Political Structure :

The political system of the Islamic Republic is based on

the 1979 Constitution, and comprises several intricately

connected governing bodies. The Leader of the

Revolution (‘Supreme Leader’, of which there have been

two: the founder of the Republic, Ayatollah Ruhollah

Khomeini, and his successor, Ali Khamenei) is responsible

for delineation and supervision of the general policies of

the Islamic Republic of Iran. The Supreme Leader is

Commander-in-Chief of the armed forces, controls the

military intelligence and security operations; and has sole

power to declare war or peace. The heads of the

judiciary, state radio and television networks, the

commanders of the police and military forces and six of

the twelve members of the Guardian Council are

appointed by the Supreme Leader. The Assembly of

Experts elects and dismisses the Supreme Leader on the

basis of qualifications and popular esteem. Iran's

syncretic political system combines elements of a

modern Islamic theocracy with democracy. The official

religion of Iran is Shi’a Islam. The figure describes the

composition of the Electorate.

The Constitution defines the President as the highest

state authority after the Supreme Leader. The President

is elected by universal suffrage, for a term of four years.

Presidential candidates must be approved by the Council

of Guardians prior to running. After being elected, the

president must be appointed by the Supreme Leader.

The President is responsible for the implementation of

the Constitution and for the exercise of executive

powers, except for matters directly related to the

Supreme Leader. The President appoints and supervises

the Council of Ministers, coordinates government

decisions, and selects government policies to be placed

before the legislature. Currently, 10 Vice-

Presidents serve under the President, as well as a cabinet

of 21 ministers, who must all be approved by the

legislature. Unlike many other states, the executive

branch in Iran does not control the armed forces.

Although the President appoints the Ministers of

Intelligence and Defense, it is customary for the

President to obtain explicit approval from the Supreme

Leader for these two ministers before presenting them to

http://en.wikipedia.org/wiki/Constitution_of_the_Islamic_Republic_of_Iran

http://en.wikipedia.org/wiki/Supreme_Leader_of_Iran

http://en.wikipedia.org/wiki/Supreme_Leader_of_Iran

http://en.wikipedia.org/wiki/Guardianship_of_the_Islamic_Jurists

http://en.wikipedia.org/wiki/Guardian_Council

http://en.wikipedia.org/wiki/Assembly_of_Experts

http://en.wikipedia.org/wiki/Assembly_of_Experts

http://en.wikipedia.org/wiki/President_of_Iran

http://en.wikipedia.org/wiki/Universal_suffrage

http://en.wikipedia.org/wiki/Council_of_Guardians

http://en.wikipedia.org/wiki/Council_of_Guardians

http://en.wikipedia.org/wiki/List_of_Iranian_officials

http://en.wikipedia.org/wiki/Vice_President_of_Iran

http://en.wikipedia.org/wiki/Vice_President_of_Iran



the legislature for a vote of confidence.

Legislative :

The current legislature of Iran is Unicameral (since

Iranian Revolution). The Parliament (Majlis) comprises

290 members elected on for 4 years term. The Guardian

Council comprises 12 jurists (6 elected by the Majlis & 6

by Supreme Leader). The Expediency Council is the

advisory to Supreme Leader, and it also mediates issues

between Majlis & Council of Guardians.

Judicial :

The Supreme Leader appoints the Head of Judiciary, who

in turn appoints the Head of Supreme Court & Chief

Public Prosecutor. There are several types of courts

including public courts that deal with civil and criminal

cases, and "revolutionary courts" which deal with certain

categories of offenses, including crimes against national

security. The Special Clerical Court handles crimes

allegedly committed by clerics.

Economy :

Iran's economy is a mixture of central planning, state

ownership of oil and other large enterprises, village

agriculture, and small-scale private trading and service

ventures. The World Ranks of Iran based on various

Economic Indicators is as given below:

PPP - 17th (Value: $988.437 billion)

GDP - 21st (Value: $548.590 billion)

GDP per Capita :

Nominal - 76th (Value: $7,207)

PPP - 75th (Value: $12,986)

GNI per Capita- $6,913

CPI- 466 (2011) (2000=100)

Ease of Doing Business Rank- 145th (World Bank)

HDI- 76th (0.742)

Inflation (CPI)- 40%

Other prominent industries of Iran are:

Petroleum, Petrochemicals, Fertilizers, Caustic Soda, Car

Manufacture, Pharmaceuticals, Electronics, Telecom,

Energy, Power, Textiles, Home Appliances,

Construction, Cement and other Construction

Sector wise GDP contribution

Total Exports, Imports & Trade Balance

http://en.wikipedia.org/wiki/National_security

http://en.wikipedia.org/wiki/National_security

http://en.wikipedia.org/wiki/State_ownership



Materials, Food Processing (particularly sugar refining

and vegetable oil production), Ferrous and Non-

Ferrous metal fabrication and Armaments .

Trade Barriers in Iran :

1. High Import Tariffs - Currency Fluctuations

2. Investment Regulations - Foreign Relations and Trade

Sanctions

3. Environmental Restrictions - Safety Regulations

4. Immigration Policies - Sanctions and other

restrictions

Risk Analysis:

Strengths :

Second largest OPEC oil producer.

Large natural gas reserves (ranked second after

Russia).

Very low foreign debt.

Weaknesses :

Nuclear programme the cause of UN sanctions,

toughened by USA and EU.

Economic and financial situation still dependent on

hydrocarbon revenues.

Political and social tensions.

Unfavourable business climate and insufficient

investment.

Risk Assessment :

Recession caused by the tightening of international

sanctions, with persistent high rate of inflation .

Widening of fiscal and current account deficits .

Internal political tensions and further tightening of

international sanctions, affecting the

business environment .

Factor conditions

Include raw materials, knowledge resources, physical

resources, human resources, technological resources,

capital resources, infrastructure, innovation power and

manager’s capabilities.

Demand conditions

Determine the circumstances of domestic demand for

products of an industry. Increase in demand has a great

influence on competitiveness. Porter (1990) believes that

a big growing domestic market encourages the producers

to develop technology and efficiency.

Related and Supporting Industries

Include raw materials suppliers, equipment and tools,

distributors and retailers, research organizations,

product distribution systems, financial organizations such

as banks and stock market, transportation systems, and

industries which use specific technology, raw materials,

and laboratory facilities.

Firm Strategy, Structure, and Rivalry

The conditions of the macro level of society and also the

way organizations and firms are founded, managed, and

organized highly affects competitiveness. Thus, strategies

and structure used for managing a firm or an industry has

direct influence on performance and competitiveness.

Government

Government as a major power can always affect

competitiveness positively or negatively by its

intervention in politic, economy, and society and also by

setting rules. Monetary, financial and business policies,

supporting policies, administrative policies, import and

export rules, exchange rate, money supply, inflation rate,

government costs, macro and micro economics policies,

Balance of Payments- Current Account



formal and informal political agreements, and

establishing or cutting political and economic relations

with other countries are the most obvious governmental

issues which can affect the competitiveness of firms,

industries and countries.

Chance

Events or occurrences that are outside of control of the

firms, industries or even governments are called chance.

Disasters, wars, economic sanctions, oil shocks, economic

or political crises, and great technological innovations are

examples of chance.

Conclusion

As a part of the modern economy Iran is known for its

natural gas reserves, but on the contrary the barriers to

trade and the reasons behind country being in the news

all cater and direct to the increasing concerns the

country is facing. Prominently the country can boost its

economy with certain regulations in effect, but only time

will tell what Iran has in reserve for the Global Economy.



Country in Focus - Venezuela - Divya Kaul, Abhilasha Ubhare, Nisha Dmello (PGDM-International Business, 2013-15)

V enezuela is a country that lies on the

Northern coast of South America. Despite

having many similarities with other South

American nations like Brazil and Colombia (in terms of

natural resources, which is an invariant factor condition,

other cultural features and membership of Trade Blocs),

Venezuela still stands as quite a peculiar country, if

viewed objectively through the lens of opportunities in

International Business. Through this article, we attempt

to study and bring to the surface the uniqueness of

Venezuela.

Introduction

Officially called the Bolivarian Republic of Venezuela,

Venezuela is a federal presidential republic consisting

of 23 states, the Capital District (covering Caracas),

and Federal Dependencies (covering Venezuela's

offshore islands). With Spanish as its national language,

Venezuela is among the most urbanized countries

in Latin America.

Hofstede's 5D model for Venezuela

The population consists of Spanish, Italian, Portuguese,

Arab, German, African and indigenous people. It has a

high context, collectivist and conservative culture with

high power distance, uncertainty avoidance and

masculinity index.

Factor conditions

Natural resources: Venezuela has one of the largest oil

and natural gas reserves in the world. Its total energy

consumption is driven by oil, gas, hydro electricity and

coal. There is a thriving fishing industry all along the sea

coast. The state holds a large interest in the basic

industries and in the oil sector, since both are considered

of strategic importance for the nation.

Favourable geographic location: The country bordering

the Caribbean Sea and the North Atlantic Ocean,

between Colombia and Guyana, Venezuela is on major

sea and air routes linking North and South America. The

nearby Panama Canal provides a shortcut to the pacific

to trade with the Asian countries. Ports and terminals

include La Guaira, Maracaibo, Puerto Cabello, Punta

Cardon.

Demographic Profile: Venezuela’s population is

28,459,085 (July 2013 est.) and 39.% of the people fall in

the age bracket of 25-54 years, which is usually

considered as the most productive bracket in terms of

contribution to GDP.

Urbanization: 93% of total population (2010) is urban

and rate of urbanization: 1.7% annual rate of change



(2010-15 est.). Venezuela has good health parameters

and literacy rate of 95.5%.

Technology

Today, 2.69% of Venezuela's GDP is aimed at science and

technology. With the creation of the Infocentros (centres

of information) and the National Technological Literacy

Plan, the access of the population to information and

communication technologies was boosted.

History and salient features

As we understand the history and past actions determine

the present conditions and activities, as per the concept

of Path Dependence, Venezuela’s history offers much

insight to understanding its present scenario.

Earlier a Spanish colony, Venezuela proclaimed

independence in 1811 as a part of Gran Colombia and

seceded in 1830 to form an independent country.

Worsening social indicators and increasing political

instability, resulted in two major coup attempts in 1992,

led by a former paratrooper, Hugo Chavez. As a reaction

against the established political parties and the

corruption and inequalities their policies created, Chávez

was elected president in 1998.His term was characterized

by radical reform, political unrest and deep divisions.

Some of his popular economic reforms included

nationalisation of many sectors of the economy,

especially the oil sector, and expansion of social

programmes aimed to help the poor benefit from

inflation, running at 27.2% in 2010. In January 2010, his

government devalued the Bolivar in an attempt to boost

oil revenues and simulate domestic production.

Economy

Coming to the economic insights, 13% of the people are

engaged in agriculture. Venezuela is the world´s tenth

largest exporter and the thirteenth largest producer of

oil. Oil accounts for about 90% of the export income, 50%

of government earnings, and 30% of the gross domestic

product, Imports include raw materials, machinery,

transportation equipment, and construction material,

Venezuela is the fifth largest member of OPEC by oil

production. The Gross Domestic Product (GDP) in

Venezuela was worth 382.42 billion US dollars in 2012.

The GDP value of Venezuela represents 0.62 present of

the world economy.

GDP growth rate was maximum in the years 2003-2008

when oil prices were rising .But then it drastically reduces

after the 2008 recession from 5.3% to -3.2% in 2009 as

Venezuela was severely hit by the recession as US

formed its main trading country

Venezuela recorded a Current Account surplus of 7.10

percent of the country's Gross Domestic Product in 2012

and Balance of Trade in Venezuela averaged -1826.19

VEF Million from 1998 until 2013, reaching an all-time

high of 1326 VEF Million in the second quarter of 2003

and a record low of -6470 VEF Million in the fourth

quarter of 2012. Venezuela's balance of payments



experienced wide swings in the 1980s after enormous

success in the 1970s .Fluctuations, largely negative,

depended primarily on the prevailing value of exports

and the level of the country's foreign debt payments.

Bilateral Economic Relations:

The United States is Venezuela's most important trading

partner. U.S. exports to Venezuela include machinery,

organic chemicals, agricultural products, optical and

medical instruments, autos and auto parts. Oil dominates

U.S. imports from Venezuela, which is one of the top five

suppliers of foreign oil to the United States. About 500

U.S. companies are represented in Venezuela. U.S.

foreign direct investment in Venezuela is concentrated

largely in the petroleum, manufacturing, and finance

sectors.

In 2013, the Department of State announced the re-

imposition of non proliferation sanctions on the

Venezuelan Military Industry Company (CAVIM) and

other foreign entities and individuals under the Iran,

North Korea, and Syria non proliferation Act (INKSA).

Venezuela has in recent years expelled a number of

senior U.S. diplomats. The two countries have not had

representation at the ambassadorial level since 2010.

Both nations continue to maintain diplomatic relations

and embassies in one another’s capitals.

Other than US, Venezuela has trade relations with major

South American countries, Iran and China as well.

According to the 2014 Index of Economic Freedom (by

www.heritage.org), over the 20-year history of the Index,

Venezuela’s economic freedom has deteriorated by 23.5

points, the worst decline of any country.

Regulatory Efficiency: No minimum capital is required to

establish a business, but the process takes 17 procedures

and over 100 days. Completing licensing requirements

costs about the level of average annual income and takes

more than 10 months.

This leads Venezuela to be not considered as highly

attractive in terms of Regulatory Efficiency.

Open Markets: Venezuela’s average tariff rate is 8.6

percent. Non-tariff barriers restrict imports of cars and

agricultural products. It may take several weeks to

import goods. Restrictive currency controls,

expropriation of private property, and other government

measures discourage foreign investment. The financial

sector, dominated by banks, remains controlled by the

state through directed credits and threats of confiscation

and long-term finance is scarce.

Risk:

Country Risk is one of the most pertinent factors in

determining overall country attractiveness as a

destination for operations in International Business.

Venezuela, a CRT-5 country, has a moderate level of

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economic risk and very high levels of political and

financial system risk. The Country Risk Tier (CRT) reflects

A.M. Best’s assessment of three categories of risk:

Economic, Political and Financial System Risk.

Venezuela’s economy grew at 5.5% in 2012 and is

expected to be roughly flat in 2013 as the formal

economy has become largely stagnant.

Economic Risk: Moderate- Oil accounts for about a third

of Venezuela’s GDP. Its economy is therefore vulnerable

to oil price shocks.

Political Risk: Since the political and social conditions in

Venezuela have continued to be tumultuous, the risk

associated with it is also very high.

Financial System Risk: The state is heavily involved in

the financial sector and risk of expropriation exists. Price

and exchange rate controls, in combination with

corruption, allow for limited economic expansion.

Therefore, this risk is categorized as ‘High’.

Business Opportunities:

Venezuela remains highly dependent on oil revenues,

which account for roughly 90% of export earnings, more

than 50% of the federal budget revenues, and around

30% of GDP.

Major sectors which MNEs can target are Oil and Gas

Sector, IT Sector, Mining, Agriculture Tourism Industry

and telecommunication Industry. Out of the total

sectors, when these industries are judged on the basis of

Porter’s Five Forces, their overall attractiveness falls in

the moderate-high category. Because of nationalization

of various sectors and ambiguous regulations, most other

sectors remain unattractive and hence tapped below

their potential.

To sum up, the following representation of the

competitive advantage of Venezuela in the form of



Porter’s Diamond clarifies the interrelationships between

factor conditions, demand conditions, supporting

industries and the Government.

Challenges:

Major challenges include: Inflation – 30%, high crime

rate, energy crisis, fluctuating oil prices, declining oil

production, strained relations with partners: US and

Columbia and the 8.6% unemployment rate.

As recently as in February, 2014, widespread discontent

among the people (mostly students), regarding release of

political prisoners, has gained momentum in view of

human rights. Therefore, the social and political

conditions appear to be quite volatile.

Conclusion :

Crude oil sales remain the financial pillar of the late

Chavez's self-styled socialist revolution.

PDVSA is one of the world's biggest energy

companies, but its production and exports have

stagnated over the years, despite government

promises and ambitious targets for increases.

Current concerns include: a weakening of

democratic institutions, political polarization, a

politicized military, drug-related violence along the

Colombian border, increasing internal drug

consumption, overdependence on the petroleum

industry with its price fluctuations, and irresponsible

mining operations that are endangering the rain

forest and indigenous people.



Country in Focus - Turkey

T urkey is the world's 37th-largest country in

terms of area (783,562 km2) and has a varied

geography rich in mountains, plains, caves,

seas and many other natural formations and beauties. It

is encircled by seas on three sides: The Aegean Sea to the

West, Black Sea to the North and the Mediterranean to

the South. Turkey is also blessed with a wide range of

climatic diversity. The Aegean and Mediterranean coasts

have cool, rainy winters and hot, moderately dry

summers while the Black Sea coast receives the greatest

amount of precipitation. However, most of Turkey lies

within an earthquake zone, and recurrent tremors are

recorded.

Its location at the crossroads of Europe and Asia makes it

important from geostrategic viewpoint. This strategic

location has also made this country a cradle of cultures

and civilizations. The lifestyle and trading patterns of the

country is defined to a great extent by the remnants of

Bronze Age and ancient Anatolian civilizations.

Since the liberalization of the Turkish economy during

the 1980s, the country has enjoyed stronger economic

growth and greater political stability. The national and

local authorities in Turkey have been implementing

numerous infrastructure projects through Public and

Private Partnership (PPP) and it has been attracting

considerable foreign direct investment (FDI) in recent

years in sectors like education, energy, defense, health,

transportation and other public services.

Turkey is a founding member of the United Nations

(1945), the OECD (1961), the OIC (1969), the OSCE

(1973), the ECO (1985), the BSEC (1992), the D-8 (1997)

and the G-20 major economies (1999). A Customs Union

agreement was signed with the EU in 1995 and Turkey

was officially recognized as a candidate for full

membership on 12 December 1999, at the Helsinki

summit of the European Council. All the negotiations

were started on 3 October 2005, and the process, should

it be in Turkey's favor, is likely to take at least a decade to

complete. The membership bid has become a major

controversy of the ongoing enlargement of the European

Union.

Political and Legal Framework

Turkey has developed a strong tradition of secularism

since its foundation as a republic in 1923 and follows a

Socialist Planned Economy. The President of the

Republic is the head of state for a period of 7-years and

has a largely ceremonial role. The Executive power is

exercised by the Prime Minister and the council of

Ministers. But Turkey’s government is no longer a shining

example because of allegations of sleaze and its

increasingly authoritarian rule. Turkey's

constitution governs the legal framework of the country.

- Laxmi Deshpande, Niharika Deo, Manisha Tripathy (PGDM-International Business, 2013-15)



It sets out the main principles of government and

establishes Turkey as a unitary centralized state.

Economic State

Turkey has the world's 15th largest GDP-PPP and 17th

largest nominal GDP. From 1923 till 1983, the Turkish

economy has adhered to a quasi-statist approach.

However post the 90s, a series of reforms were designed

to shift the economy from a statist, insulated system to a

more private-sector, market- based model.

While many economies have been unable to recover

from the recent global financial recession, the Turkish

economy has been standing out as the fastest growing

economy in Europe, and one of the fastest growing

economies in the world. It has also been a part of EU

Customs Union since December 31, 1995.

Economic & Political Risks

Turkey has a reliance on volatile capital like portfolio

investments, short-term external loans and non-resident

deposits. The continuation of the European crisis could

bring an end to these sources of finance. The country is

now in open crisis with Syria whilst tensions with the

Kurd minority remain high. Also, as corruption scandal

drags on, it could weaken the government and

undermine its ability to take timely policy measures that

would maintain economic stability. It has been noted

that tensions between the government and judiciary has

strained institutions in Turkey.

Human rights in Turkey have also been the subject of

some controversy and international condemnation.

Between 1998 and 2008 the European Court of Human

Rights made more than 1,600 judgments against Turkey

for human rights violations (more than any other

member state of the Council of Europe). Particularly

regarding the right to life, freedom from torture, other

issues such as Kurdish rights, women's rights, and press

freedom have also attracted controversy. Turkey's

human rights record continues to be a significant

obstacle to future membership of the EU.



Porter’s Diamond for National Advantage .Turkey is a

middle-income developing income country, which has

recently opened up its economy to the international

market. Thus there are four attributes of Porter’s

Diamond model that play a major role in shaping the

context that allows domestic firms to gain and sustain

competitive advantage.

With regard to the factor conditions, the Turkish glass,

construction and automobile industries derive

considerable advantages from basic and generalized

factors like lower labor and raw materials costs.

When we consider the second determinant, home

demand conditions, we see that Turkey is a developing

country with a large and rapidly growing population. This

means that many industries are far from being mature

and face a considerable potential increase in demand.

Income levels are, however, still rather low, restricting

this potential. The flat steel industry has kept some part

of the production for exports, despite the fact that

domestic production cannot meet domestic demand. The

main motive is the anticipation that exporting may

contribute to quality improvement.

One of the strongest hypotheses proposed by Porter is

that the internationally competitive industries of a nation

tend to cluster together. The highly competitive

industries like glass and construction prove it to boot.

While there are many significant opportunities for U.S.

companies in Turkey, there are also obstacles impeding

entrance into the market. One of the most successful,

proven ways to access the market quickly is to work with

an experienced local partner (JV). The local partner can

provide knowledge of the local regulatory framework,

language assistance and valuable business contacts.

With regard to the last determinant, which Porter calls

‘firm strategy, structure and rivalry two major issues

arise. The first one is that entrepreneurial and

managerial skills are amongst the leading assets of the

Turkish firms, for almost all industries studied. The

second issue relates to the other element included in this

category: the intense domestic rivalry in the

internationally competitive industries of a nation. The

construction and leather clothes industries, in particular,

have benefited from the emergence of geographically

proximate new markets, especially the Russian

Federation.

The jury is still out on what Turkey manages to

achieve in future.



Country in Focus - Argentina

A rgentine leadership in world commerce is the

result of adaptations to different disturbances,

through innovation and adaptation in the

institutional, organizational and technological

environments. The purpose of this article is to analyze

various factor conditions of the country, its political, legal

and economical conditions and analyze favorability of

any business based on Porter’s Diamond Theory.

Invariant Factor Conditions:

Location: Argentina is located in southern South

America, with the Andes Mountains on the west and the

South Atlantic Ocean to the east and south between

Chile and Uruguay. Area is 2,780,400 km; Water

percentage -1.57.

Coastline: Total 4,989 km long Atlantic coast varies

between areas of sand dunes and cliffs.

Natural Resources:

Agriculture: With over 54 million head of cattle,

Argentina’s beef is renowned around the world. Annual

production of cereals and oilseeds exceeds 70 million

tonnes, which makes Argentina one of the main

exporters of these products and their derivatives.

Mendoza on the western border makes Argentina

world’s fifth-largest producer of wine.

Mining: Some of the minerals mined at present are

copper, tin, lead, zinc, gold, silver, manganese and

uranium.

Gas and Oil: Together with mining products it makes

out for 15% of total exports. It produces about 900,000

barrels of crude oil/day.

Forest: The provinces of Misiones, Corrientes, Entre

Ríos, and Buenos Aires form the country's eastern border

with Uruguay and Brazil, and comprise 80% of the total

cultivated area. Forests are composed of the following

species- 50% Pine, 30% Eucalyptus, 16% Willow and

aspen, 4% Other broad-leaved trees.

Population: 2013 estimate 41,660,417; 2010 census:

40,117,096(32nd); Population Density: 14.4/sq km

(212th); Population growth rate: 0.98% (2013 Est.)

Acquired Factor Conditions:

Infrastructure: The nation has 215,434 kms of roads,

including 734 kilometers of expressways or highways, but

only 63,553 kms of the country's roads are paved. There

is an extensive rail system that transports both freight

- Sayoni Maitra, Daniel Dsouza, Asmita Shankar (PGDM-International Business, 2013-15)



and passengers around Argentina, with a total of 38,326

kms of track. Argentina has 10,950 kms navigable

waterways. There are 1,359 airports in Argentina,

although only 142 have paved runways.

Technology:

Biomedical Industry: Argentine research has led to the

treatment of several forms of cancer. First artificial heart

implantation & coronary bypass surgery successfully

performed in a human being in here.

Nuclear Program: Argentina was the first country in

Latin America to design and build a research reactor with

homegrown technology, the RA-1 Enrico Fermi.

Satellite: Argentine built satellites include LUSAT-1

(1990), Víctor-1 (1996), PEHUENSAT-1 (2007) developed

by CONAE, the Argentine space agency, of the SAC series

for cosmic ray observatory.

Space Research: Argentina has its own satellite

program, nuclear power station designs (4th generation)

and public nuclear energy company INVAP, which

provides several countries with nuclear reactors.

Established in 1991, the CONAE has since launched two

satellites successfully.

Membership of International Organizations & Trade

Blocs:

United Nations (UN), Conference on Disarmament (CD),

International Atomic Energy Agency (IAEA), Organization

for the Prohibition of Chemical Weapons2 (OPCW),

Comprehensive Test Ban Treaty Organization Preparatory

Commission, World Bank Group (WBG), World Trade

Centre (WTO), Organization of American States (OAS),

Mercosur, Union of South American Nations (UNASUR),

Community of Latin American and Caribbean States

(CELAC), Organization of Ibero-American States (OEI)

Treaties or Agreements: Nuclear Non-proliferation

Treaty (NPT), Comprehensive Nuclear Test Ban Treaty

(CTBT), Partial Test Ban Treaty (PTBT) .

Culture



Political System:

Argentina has a Bicameral National Congress. It follows a

multi party system and elections takes place regularly.

Cabinet is appointed by the President who is the head of

the state and the head of the Government.

Political Risk:

Argentina is rated higher on Political Risk. Political

tension particularly involves labor unions which

contribute to political instability in Argentina. State

intervention is in the form of nationalization, tighter

capital controls with limited access to international

currencies, repatriation of capital and price fixing have

greatly diminished Argentina's Economic outlook. High

crime & Poverty rates remain the key social issues.

Country faces extreme social and political polarization

over President’s current policies.

Legal System:

Argentina follows a civil law system based on West

European legal systems. The two pillars of the civil

system are the Constitution of Argentina (1853) and the

Civil Code of Argentina (1871). The Argentine

Constitution of 1853 was an attempt to unite the

unstable and young country of the United Provinces of

the Rio de la Plata under a single law, creating as well the

different organisms needed to run a country. The Civil

Code was written by Argentine jurist Dalmacio Vélez

Sársfield, and started being effective on January 1, 1871.

Beyond the influence of the Spanish legal tradition, the

Argentine Civil Code was also inspired by the Draft of the

Brazilian Civil Code, the Draft of the Spanish Civil Code of

1851, the Napoleonic code and the Chilean Civil Code.

Economic Analysis:

The GNI per capita i.e. PPP (US dollar) in Argentina was

last reported at 17250 in 2011, according to a World

Ho

fstede’s C

ultu

ral Typo

logy:



Bank report published in 2012. Currently Argentina is

ranked 45th out of 187 countries in the world, based on

its HDI that is 0.811 as per the data available till 2012.

The Current account balance in Argentina was last

reported at 21185854.38 in 2011, according to a World

Bank report published in 2012. Argentina’s economic

freedom score is 44.6, making its economy the 166th

freest in the 2014 Index. Its overall score has decreased

by 2.1 points, reflecting substantial declines in

investment freedom, business freedom, labor freedom,

and the management of government spending.

Bilateral Trade with India:

Indian investment in Argentina is estimated $930 million

with 13 Indian Companies establishing operations. There

has also been investment by Non-Resident Indian

Companies in Argentina. Total Argentinian investment in

India stands at $ 120 million. A unique Regional Action

Plan was started in August 2012, to promote India´s

commercial and economic interests in Argentina.



Financial Risk:

Argentina has been rated high on financial risk. New

regulations require insurance companies to repatriate all

capital, make mandatory investment in infrastructure

project in Argentina. And only use domestically

domiciled reinsurance companies has hampered the

industry’s ability to manage liquidity and risk. Argentina’s

Fiscal balances will require additional funding or

significant budget cuts. Without access to international

capital markets it will become increasingly difficult for

the country to meet its debt obligations.

Based on the above analysis the following industries have

ample opportunities in Argentina –

1. Agriculture business and dairy cereals, Soybean, fats

and oils, beef and related products and dairy products

2. Minerals- Base metals, glassware, Crude oil, fuels

3. Others- Automobiles and auto parts, electronic goods

Analysis based on Porter’s Diamond Theory:



Analysis of the favorability of Soybean industry based

on the above model:

We have chosen Soybean industry to discuss its

favorability using Porter’s Diamond Theory. The

efficiency found at industrial level along with the

evolution of technical environments they are based are

the key drivers that explains the opportunities in

Soybean sector. So summarizing, the above diagram

explains all the competitive advantages gestated based

on the four attributes proposed by Porter and it

ascertains that the country has the best opportunities to

achieve international success in Soybean industry.

Porter’s Diamond for Soyabean cultivation in Argentina



Country in Focus - Kazakhstan

- Prabhat Mishra, Vineet Mohandas, Sudhanshu Mishra (PGDM– International Business, 2013-15)

K azakhstan officially known as the Republic

of Kazakhstan, is a

contiguous transcontinental country

in Central Asia, with its smaller part west of the Ural

River in Eastern Europe. Kazakhstan is the world's

largest landlocked country by land area and the ninth

largest country in the world .It has a territory of

2,727,300 square kilometers. It has borders

with Russia, China, Kyrgyzstan, Uzbekistan,

and Turkmenistan and also adjoins a large part of

the Caspian Sea. The terrain of Kazakhstan includes

flatlands, steppe, taiga, rock canyons, hills, deltas, snow-

capped mountains, and deserts. With 17 million

people, Kazakhstan has the 62nd largest population in

the world, though its population density is less than

6 people per square kilometer. The currency of the

country is the Kazakhstani Tenge. The capital is Astana.

History:

Established on August 26, 1920, it was initially

called Kirghiz Autonomous Soviet Socialist Republic and

was a part of the Russian SFSR. On April 15–19, 1925, it

was renamed Kazak ASSR and on December 5, 1936 it

was elevated to the status of a Union-level

republic, Kazakh Soviet Socialist Republic. On December

10, 1991 the Kazakh SSR was renamed the Republic of

Kazakhstan. It became independent on December 16,

becoming the last republic to secede before the final

collapse of the Soviet Union. Nursultan Nazarbayev, has

been leader of the country since 1990.

Cultural Traits:

Kazakhstan is a high context country. It is a collectivistic

country wherein people like to keep strong relations with

family and colleagues. It has a masculine culture, but it is

relatively moderate as compared to former Soviet

countries like Russia. It can be described as a country

following the principle of pragmatic idealism. Its power

distance index is comparable to Western nations. Kazakh

culture can be characterized as polychromic

Legal and Political Environment:

Kazakhstan is officially a presidential republic i.e. a

constitutional republic with a strong presidency. The first

and the only president in Kazakhstan since its

independence in 1991 has been Nursultan Nazarbayev.

He functions as the head of the state and holds all of the

nation’s executive authority. The president is also the

commander in chief of the armed forces and may veto

legislation that has been passed by the parliament.

Kazakhstan has a bicameral parliament. It is composed of

the lower house, also known as the Mazhilis, and the

upper house also known as the Senate. The Mazhilis is



formed on the basis of a proportional system of

representation consisting of 98 deputies, where the

majority is appointed by the ruling Nurotan party, which

Nazarbayev heads.

The judiciary remains, both institutionally and in practice,

highly dependent upon the will of the executive and the

economically powerful. Even though it says that rule of

law is present in Kazakhstan but in reality the rule of man

is being followed as all decisions taken by the courts can

be vetoed by the president who wields absolute power.

Corruption such as bribery is still widely encountered in

the business transactions.

Economic Environment:

It’s the largest economy in Central Asia and oil and gas are

its leading economic sector. It is a leading producer of

many mineral commodities, including uranium,

ferrochrome, titanium, sponge, cadmium, magnesium,

rhenium, copper, bauxite, gallium and zinc. It is one of the

leading uranium producing countries in the world

producing 35% of the total global production, and it owns

the world’s second largest uranium reserves

after Australia.

GDP:

According to GDP (PPP) Kazakhstan is ranked 54th in the

world & is ranked 64th according to GDP growth rate.

Agriculture & Industry:

The key agricultural products grown are grains (mostly

spring wheat and barley), potatoes, vegetables, melons;

livestock. The key industries are oil, coal, iron ore,

manganese, chromites, lead, zinc, copper, titanium,

bauxite, gold, silver, phosphates, sulphur, uranium, iron

and steel; tractors and other agricultural machinery,

electric motors, construction materials.

Exports and Imports:



Its main export commodities are oil and gas, ferrous

metals, chemicals, machinery, grain, wool, meat & coal

and main imports are machinery and equipment, metal

products & foodstuffs.

Export wise Kazakhstan is ranked 44th in the world and

import wise its is ranked 56th in the world.

Porter's Diamond model:

Factor Conditions:

It has 3% of the world’s raw materials and natural

resource base such as oil, uranium, coal etc. The literacy

rate is 99.7%. Grains and animal livestock are in

abundance.

Demand Conditions:

Since basic resources of energy are available, related

processing industries can be set up as per demand. There

is a lot demand for infrastructure.

Firm Strategy, Structure and Rivalry:

It’s easy to enter in Kazakhstan through the FDI route.

Government provides ample support to industries. Oil

refineries can play a major role in future. Firms can export

hides and animal products.

Related and Supporting Industries

Animal husbandry is one of the supporting industries in

the country. Banking Sector is also developed. Many MNC

banks are set up. Oil industries too are in abundance.

Trade Barriers and Economic Scenario:

Landlocked, with restricted access to the high seas,

Kazakhstan relies on its neighbors to export its products,

especially oil and grain. Although its Caspian Sea ports,

pipelines, and rail lines carrying oil have been upgraded,

civil aviation and roadways continue to need attention.

Telecoms are improving, but require considerable

investment, as does the information technology base.

Supply and distribution of electricity can be erratic

because of regional dependencies.

The subsequent and sharp fall of oil and commodity prices

in 2008 aggravated the economic situation, and

Kazakhstan plunged into recession. While the global

financial crisis took a significant toll on Kazakhstan's

economy, it has rebounded well, helped by prudent

government measures. GDP increased 7.5% year-on-year

in 2011, and 5.0% in 2012. Rising commodity prices have

helped the recovery. Despite solid macroeconomic

indicators, the government realizes that its economy

suffers from an overreliance on oil and extractive

industries, the so-called "Dutch disease." In response,

Kazakhstan has embarked on an ambitious diversification

program, aimed at developing targeted sectors like

transport, pharmaceuticals, telecommunications,

petrochemicals and food processing.

In 2010 Kazakhstan joined the Belarus-Kazakhstan-Russia

Customs Union in an effort to boost foreign investment

and improve trade relationships and is planning to accede

to the World Trade Organization. The future has a lot in

store for this country.



India - An Emerging Automobile hub

- Sachin Mittal (PGDM-International Business, 2013-15)

The automobile industry is one of India’s major sectors.

Unfortunately, it is seeing slump in domestic car sales

following the sharp depreciation in Indian Rupee.

However exports of India-built vehicles are showing an

upward trend as seen in the graph.

India is emerging as an export hub of global auto firms

not just for small cars but also for big cars such as mid-

size sedans and UVs. Giants like Suzuki, Hyundai & Ford

have turned their Indian operations into bases to

produce for markets abroad. Nissan is exporting India-

built premium sedan Sunny since January 2012. Europe’s

largest car maker Volkswagen has also been selling

‘Made in India’ Vento across three continents and

recently started to shipping to Mexico also.

What are the possible reasons for such an increasing

trend in exports in contrast to the reducing domestic

sales of cars?

Well, looking at the export market is an opportunity

when domestic market is in downturn. This opportunity

may be acting as a major factor towards turning of India

into an export hub. Seeing the opportunity, Global car

companies are planning to turn India into export an hub

targeting vehicle shipments to US & Europe to hedge

against the shrinking domestic demand. One classic

example being opening of $1 billion factory this year by

Ford Motors to bring annual capacity to 440000 vehicle

per annum despite selling only 77000 vehicles in India

during the last financial year as a move towards

exporting to 50 markets from its two Indian facilities.

Post recession, the west is more focused on value. So it is

almost likely that mid range cars made in India like Ford

Ecosport can find good market in America & Europe as

said by Paul Blokland of Segment Y Automotive

Intelligence, an India-based research group. Especially in

Europe, people are moving towards public transport and

auto facilities are being predicted on the verge of closing

down due to slump in the market, falling labor wages &

labor

laws. Weak economy, high petrol prices & ageing

population may be acting as major enablers in Europe to

support mid range cars manufactured in India, in pursuit

of value.

Moreover, manufacturers use exports not only as an

opportunity to mitigate risk arising out of volatile

currency, but even to balance the demand in the

domestic market.

India is turning into an export hub because of the several

competitive advantages it has over the other nations.

India enjoys tremendous advantage of cost

competitiveness due to cheap labor availability. The cost

at the carmaker's end as well as supplier's level is highly

competitive, which gives India an edge over others.

Automobile firms from across the world can save

operation costs in India, which gives them a competitive

advantage over western nations. Extension of the

discounted import duty on some of the particular hybrid

automobile parts has helped the industry in attaining



better cost-efficiency. Also, there is plethora of educated

and skilled manpower in India who speak English, and

they can be employed for lower wages/salaries in

comparison to the western market.

Being competitive in exports is not enough, but

sustainability is required to maintain long term profits.

One major initiative by the government is the permission

of 100% FDI in the sector. Development of “Automotive

Mission Plan” by Ministry of Heavy Industries and Public

Enterprises is another step to accelerate & sustain the

growth in automobile sector over the period 2006 to

2016. Government has also undertaken “National

Automotive Testing and R&D Infrastructure” Project

which is aimed at creating a dedicated testing, validation

and Research & Development infrastructure across the

country. Government has also extended the weighted

deduction of 200% in R&D expenditure by 5 years in the

Union budget (2012-13) under Income Tax Act. The

weighted tax deduction of 150% for expenses on skill

development has also been introduced as a help to auto

industry to enhance their products and performance.

Conclusively, factors like optimal business environment,

accessibility of inexpensive proficient workforce and

supportive government policies have played a major role

in transforming India into a global automobile hub. But

on revisiting the factors which are behind the increment

of exports of Indian vehicles, we will see that those

factors are largely external environment conditions like

slump in domestic market & need for value by western

countries; which are not in the control of the Industry.

Hence, I think Indian automobile industry needs to focus

continuously on matching its competencies or resources

with the changing environmental needs to have value

and long term sustainability in the global market.



Path Dependence: View at Ukraine Crisis from Historical Perspective

- Hardik Dhagai (PGDM-International Business, 2013-15)

It is necessary to understand the past in order to predict

or understand the future. We will look at Ukraine crisis

from historical perspective.

Vladimir Putin’s Ideology

Vladimir Putin, born in the Soviet Russian city of

Leningrad, studied law and joined the Committee for

state security of Russia popularly known as KGB. It was

the main security agency for Soviet Union from 1954,

until it collapsed in 1991.

Putin’s job was to gather intelligence data and to

coordinate with the German Ministry of State Security,

which is one of the most effective and

repressive intelligence and secret police agencies that

ever existed, and to track down and recruit foreigners in

Dresden to send them undercover to the United States.

This job helped him build and maintain good

relationships with Berlin.

This past of Putin is disturbing for many Russian Liberals.

Putin had many authoritarian associations and has

nostalgia for the USSR. He also describes the collapse of

Soviet Union as "the greatest geopolitical catastrophe" of

the 20th century and stated that “Russia will decide for

itself the pace, terms and conditions of moving towards

democracy”. These statements clearly indicate that Putin

has had an authoritarian mindset.

Putin claimed that to expand the sphere of its influence,

a country must be strong (military strength) and

successful (politically and economically). He aspired to

empower Russia to become a global economic player and

therefore, Putin’s policies have emphasized the

importance of having customs union with other

countries. As a result of this, Russia sees Ukraine as an

important element in its regime of influence expansion.

Strategy of Putin to Integrate Ukraine

The idea of integrating Ukraine was shaped during the

Orange Revolution of 2004. Moscow had gained a strong

influence over Viktor Yanukovych, the ousted Ukrainian

President, by supporting him when his election was ruled



to have been fraudulent.

Trade was another arrow in Russia’s quiver to keep

Ukraine unstable. Ukraine is dependent on Russia for

60% of its energy supplies and in order to increase

Ukraine’s dependence, Russia offered natural gas to

Ukraine much below the market price. Also, when Viktor

Yanukovych was accused of misappropriation, $70 billion

was sent out of the country via Ukraine’s financial system

to off shore accounts during the 3 years of his rule, due

to which $37 billion of state loans disappeared. The

country had only $12 billion in its reserves which was not

sufficient to fund the heavy gas bills and Ukraine was on

the verge of bankruptcy.

To stabilize the economy Yanukovych declared

integration of Ukraine with Russia and rejected

integration with EU. Russia also offered them economic

aid of $15 billion and natural gas supplies at a subsidized

price, which turned out to be the link of integration of

Ukraine and Russia.

This event led to a political crisis in Ukraine that ousted

Yanukovych, thus shattering Russia’s dream of

integration with Ukraine. Taking advantage of this

political crisis in Ukraine, Moscow declared new

authorities in Kiev, the capital of Ukraine, as fascist and

sent troops to eastern Ukraine ‘to protect’ ethnic

Russians. Russia increased political pressure on Crimea

by threatening to cut out gas exports if the debts were

not paid off.

Risk Involved in Ukraine Division

There is a difference in East Ukraine and West Ukraine

Ideology due to cultural – linguistic divide. Russian is

widely spoken in parts of the east and the south. It is also

the main language in some places, like the Crimean

peninsula. This is due to heavy immigration of Russians

during the Soviet Era. In the western part of Ukraine

people speak Ukrainian, are nationalists and identify with

Central Europe.

Vladimir Putin wanted to start his first acquisition by

taking over the Crimean peninsula. He claimed to protect

ethnic Russians. This step was unacceptable to the

United States, EU and IMF and they severely condemned

this action. They also insinuated various sanctions to be

imposed against Russia if it does not withdraw its troops.

And hence, it is quite evident that history helps

understand how have countries evolved and how will

they evolve in future.



Samavesh

T he annual event which can best be described

as the meeting of minds of seasoned thought

leaders of the industry and the budding

managers at SIMSR, took place on December 21st 2013.

It opened with a session on International Business hosted

by International Business Society @ SIMSR which

witnessed the presence of stalwarts like Mr. M G

Parameshwaram, CEO, FCB Ulka, Mr. Dinesh Kumar,

founder CBay Systems, Mr. K. Rambhushan, Head M&A,

Barclays Bank and Mr. Clarence Fernandes - India

Representative, Rwanda Development Board. Our

Director Prof. Dr. S C Ailawadi was also present.

It began with the campus prayer and welcoming of all

guests by Prof. C P Joshi, Professor & Area Chairperson

(General Management) & Program Coordinator PGDM &

PGDM (IB) and Faculty Mentor of IBS@SIMSR. Prof. C P

Joshi introduced to the guests the purpose of

IBS@SIMSR, a student led initiative, established on 18th

November, 2009 to complement the classroom learning

by interaction with industry experts and senior

executives of the companies with substantial

international operations worldwide. Prof. C P Joshi also

spoke about e-GlobuzZ, the quarterly e-publication which

was also launched at the inauguration of IBS@SIMSR on

18th November, 2009 as a quarterly e-periodical.

Mr. M G Parameshwaram made an outstanding

presentation on the trends and challenges in global

communication for MNEs in various industry sectors. He

shared his insights on how MNEs choose between the

strategies of Adopt – Adapt – Create when they make

their advertising and other promotion decisions for a

brand.

Sayoni Maitra (PGDM - International Business, 2013-15)

Inaugurating Function of Samavesh 2013; In the front row Director Dr. S Ailawadi, Prof. C P Joshi,

Mr. M G Parameshwaram, CEO, FCB Ulka, Prof. D G Jha and Mr. Rajiv Vaishnav, VP, NASSCOM



Mr. Dinesh Kumar shared his views about the importance

of innovation in economic downturn and gave examples

of companies in this context to illustrate his points

better. His presentation was very well received and

appreciated by the audience comprising of SIMSR

students and Faculty.

Then Mr. Clarence Fernandes spoke at length about the

changing face of Rwanda, an increasingly important

emerging country on the Africa continent over the last 20

years. His presentation included statistics and anecdotes

strengthening the case for larger trade and cross border

flow of investment between Rwanda and India. He was

accompanied by Miss Winnie Umutesi, an official of

Rwanda Development Board based at Pune, who

specially came to SIMSR to address our students at this

event.

Mr. K. Rambhushan made an excellent presentation on

emerging opportunities on trade and the cross border

M&A for the MNEs and highlighted the various risks and

pitfalls the managers of MNEs need to guard against for

cross border M&As and other international operations.

Prof. C P Joshi Faculty Mentor IBS@SIMSR thanked all the

five speakers for their excellent insightful presentations

which went a long way towards achieving the objective

of IBS@SIMSR to complement classroom learning by

interaction with Industry experts.

Prof. Nilkantan, Mr. Dinesh Kumar, Prof. C P Joshi, Mr. K. Rambhushan, Miss Winnie Umutesi,

Mr. Clarence Fernandes and Prof. Debraj Ghoshal with all the student members of IBS@SIMSR



Commercio

T aking forward the purpose of IBS@SIMSR to

bring education and industry together we

organized the inter B School competition

Commercio’14 as a part of Melange’14 on 15th February,

2014.

Melange’14, being SIMSR’s annual festival was a splendid

show this year where students from premier B Schools

across India participated to unleash their talent in terms

of managerial and analytic skills, creativity and innovative

business ideas.

As a committee with a mandate to deliver the best to the

students, IBS@SIMSR leveraged this opportunity to

conduct a prestigious event like Commercio which

undoubtedly offered a platform to the participants to

formulate country entry strategies for emerging markets

based on an in depth analysis of the chosen countries.

This country analysis was based on various country

related parameters like political, legal, economic and

cultural environment and strategies for MNEs to enter

that country using Porter’s Diamond Theory.

The event commenced with campus prayer in presence

our honorable Director Dr. Satish Ailawadi, Prof. C. P.

Joshi, the Area Chairperson, General Management and

Program Coordinator for PGDM and PGDM-International

Business and Prof. Dr. Thomas Mathew, of General

Management Area at SIMSR. The keynote address was

- Sayoni Maitra (PGDM-International Business, 2013-15)

Prof. C P Joshi Faculty Mentor- IBS@SIMSR welcoming the finalist teams, the judges Dr. S Ailawadi, Director

SIMSR and Prof. Dr. Thomas Mathew of General Management Area at SIMSR and the students



delivered by Prof. C. P. Joshi. The competition was

judged by our Director Prof. Dr. S Ailawadi and Prof. Dr.

Thomas Mathew.

Like in prior years, this year also Commercio continued to

draw exceptional talent from prestigious business

schools like IIFT, Kolkata, IIM Indore (Mumbai Campus),

NITIE, S P Jain, SJMSOM (IIT Bombay), IMI Delhi & SIMSR,

Mumbai across the country. The final round was a

presentation followed by a question and answer session

with the judges. The finalists were evaluated based on

the uniqueness of the country as portrayed in their

analysis and the basis for choice of sector based on an in-

depth analysis. The presentations made by all the eight

finalist teams were impressive and insightful. Due to the

tough competition, the judges had a difficult time

selecting the winning team and the two runner-up

teams.

The winning team was from our own SIMSR, second

team was from NITIE & the third team was from

SJMSOM. The event concluded with presentation of

Certificates and the Awards followed by the vote of

thanks given by our Prof. C. P. Joshi Faculty Mentor-

IBS@SIMSR.

Prof. Dr. S Ailawadi, Director SIMSR and one of the judges giving concluding remarks in the presence of Prof. Dr.

Thomas Mathew, the other judge and Prof. C P Joshi Faculty Mentor – IBS@SIMSR and the finalist teams and the

students

e-globuzz jan march'14

Documents

simsr students

simsr teams

international business

various countries

quarterly eperiodical

country analysis

richest countries

emerging country markets