Master of International Business Jamia Millia Islamia University

1. Volume 1, Issue 6
November 2011
MI`Bytes
BUSINESS LETTER
Crises in Crises
THE Impact of crises DEFICITS. By 2009, com- some financial institutions
should be very local, Indian bination of international and clearly profited from the
companies and citizens do local meltdown (the world growing Greek government
debt but reality is very dif-
not have any worthwhile financial crisis and uncon-
ferent from the interpreta-
investment in countries or trolled government spending tion.
banks where debt crisis has respectively) pushed coun-
In April 2010 Greek govern-
been spreading like havoc. try in great trouble. Early
ment asked EU/IMF for
“The impact on export 2010 it was revealed that
bailout package. IMF said it
should be minimal as our the, Government had been
was “prepared to move ex-
export to be trouble econo- consistently and deliberately
peditiously on the request”
mies are not significant; misrepresenting the coun-
but Greek debt rating was
panic does not lasts in per- try‟s economic statistics to
decreased to BB+ by S&P
petuity it lasts for short peri- keep with the monetary un-
and estimated that investor
ods of time one way or the ion guidelines. This had
would lose 30-40%of the
other” said PRASHANT enabled Greek Government
money. Stock market and
JAIN (Chief investment , to spend beyond their
euro currency declined in
HDFC MUTUAL FUND) means, whilst not disclosing
the response.
the actual deficit from the
Debt crisis started from world. In 2010 situation In may 2010 series of AUS-
GREECE, where the gov- became more grime when TERITY measures was pro-
ernment was trying to opti- deficit estimated to 13.6% posed, but in Nov. 2010
mize the foreign capital (one of highest in world) problem became murky,
after the removal of and public debt hit around which gave signal to harsh
Inside this issue: RIGHT WING 120% of GDP. The commis-
DEBT CRISIS. Same in the
MILITARY JUNTA. The league was SPAIN, PRO-
sion and finance ministers TUGAL AND GREECE,
government wanted to bring late last year found Greece
Corporate Speaks 2 now in “credibility prob-
disenfranchised left -leaning had failed to take „effective lem” and the reason is very
portion of the population action‟ to curb its budget clear i.e. lack of ability to
News Bits 3 into the economic main- repay adequately due to this
deficit, which is the result of
stream. During the period of decline tax revenue. All low growth rate and less
Liquid vs. Profit 3 2000-2007, growth rate of FDI.
situations being against it
the country was 4.2% as and with no any effective
Crises in Crises 4 foreign capital flooded in policy the made situation
the country. Strong econo- Cont. on page 4
worse.
my allowed government to
About Us 4 run large STRUCTUAL Although in the short run

2. Page 2 MI`Bytes
CORPORATE SPEAK
Mr. RAJEEV SHARMA,
DY. GENERAL MANAGER,
MITSUBISHI ELECTRIC INDIA
Q1: The earthquake in Japan has affected your company. What has been the strategy to
overcome losses incurred by the damage?
Ans: Our plant, too, was hit by the earthquake and the vendor and ancillary units were affected
most. We have shifted our production to Kyoto where plants are at 80% capacity. We have also
shifted our 20-25% production to Malaysia, Thailand and Korea and rationalization saved us.
Q2: How is the company positioned at the moment and how far is the growth trajectory
going?
Ans: We have an increasingly huge demand but are suffering from supply; inventories are low,
this year, however, we intend to do business Rs.300cr. By March 2016, business of MEI shall
be Rs 1000cr.
Q3: MEI, being a giant and highly innovative, quality driven company, has refrained
from entering into consumer durable goods. Why?
Ans: MEI is an innovative and quality driven company, we strive more for quality, technology
and after sales services. Till we are not in position to provide after sales services, we do not
enter. For the time being we are into B2B sales, since we only have the infrastructure for B2B.
But with the current infrastructure we cannot penetrate into a hard core consumer market
as we are a wholesale company under FDI rules.
Q4: To enter into Indian market, have you customized your products to some extent?
Ans: To some extent, yes, we have customized our products, keeping in consideration with the
Indian customer demand. Since we cater primarily to a premium segment of the market we try
finding out features needed by consumers, and after doing a market research we then ei-
“Our thinking is to ther drop certain of those features or add them as per requirement. For instance, we have 500
models of Air Conditioners but in the Indian market we offer only 2 of those models.
have a global view Q5: How do you position your company in raising an Indian brand presence in such a
fierce, competitive market?
with a local Ans: We brand our selves as a technology-oriented company, a pioneer in reliable technology
approach” and a company which works out on future. In Eco-product Exhibition, Delhi, we presented our
selves as an eco-friendly company and have put a target of being a zero-emission company by
2021.
Q6: Word is Hitachi and Mitsubishi Heavy Industries are on a merger. From governance
point of view companies may face significant challenges since time and again mergers in
Japan don’t work out in the end.
Ans: Yes, actually a 50-50 doesn’t work. In a merger there will be challenges as the work-
culture philosophy of both companies differ, so our strategy is not to merge as a whole. Some
“Government investment is plants from both companies will be merged.
round to US$90bn in Q7: Generally Indian distributors do not have standardized procedures as needed by a
DMIC ” company like MEI, so how do you keep up with those distributors.
Ans: Our objective is to have a global view with a local approach. We had some difficulties at
the distributors end and being a sales company we set the parameters for distributors which
were quite easy to follow. At the same time, we found our distributors far ahead of us in fields
like servers or information communication.
“India aims to achieve a Q8: Are there any plans to capitalize on Delhi-Mumbai Industrial Corridor?
turnover of US$400bn from Ans: Being a Japanese funded corridor, we are closely related to this project. In DMC there
domestic electronics manu- are 2 projects which are going simultaneously, the Dedicated Freight Corridor (DFC) and
facturing by 2020 ” Delhi-Mumbai Industrial Corridor (DMIC). In DFC we supply locomotives which are capable
of 80kmph and a load-carrying capacity of 8 times more than the existing capacity. In DMIC
we are developing an entire industrial area in Gujarat and are in the process of making a
Smart City too.
Q9: Your advice to our IB students in today’s global, socio-economical environment.
Ans: Believe more in learning where the mantra is hard work. Don’t run after money, chase
excellence and things will follow suite.

3. Volume 1, Issue 6 Page 3
LIQUIDITY VS. PROFITABILITY
A finance manager is always faced with a confusion between liquidity and profitability. He
has to strike a balance between the two terms.
Liquidity: It means the firm has adequate cash to pay off its bills and to make unexpected
large purchases. It also focuses on a firm having cash reserves to meet emergencies.
Profitability: It means that the accumulated funds of the firms are used so as to yield the high-
est return‟
Liquidity and profitability are very closely related. When one increases, the other decreases.
Apparently, liquidity and profitability goals of the finance manager are contradictory. For ex-
ample, if higher inventories are kept in anticipation of increase in price of raw materials, prof-
itability goal is approached but the liquidity of the firm gets endangered. Similarly, the firm
following a liberal credit policy may be in a position to push up its sales but its liquidity will
decrease. This is also a direct relationship between higher risk and higher return. Higher risk
one the one hand endangers the liquidity of the firm whereas, higher return on the other hand
increases its profitability. A company may increase its profitability by having a very high debt
-equity ratio. However, when the company raises funds from outside sources, it is committed
to make the payment of interest, etc., at fixed time and in fixed amounts and hence to that ex-
tent its liquidity is reduced.
Thus, the finance manager has to choose between risk and return and generally he chooses in-
between the two. He paves its ways through forecasting cash flows and analysing the various
sources of funds. Forecasting of cash flows and managing the flows of internal funds are the
functions which lead to liquidity whereas, cost control and forecasting future profits are the “Global 2000 companies now
functions of finance manager which lead to profitability. An efficient finance manager opt for
account for $32 trillion in
the level of operations where both risk and return are optimised. Such a level is termed as risk-
return trade off and every financial decision involves this trade off. At this level the market revenues, $2.4 trillion in profits,
value of the company‟s share would be maximum. $138 trillion in assets and $38
trillion in market value. All
Md. Ibrahim Badar metrics are up from last year
Master of International Business
with profits growing the most,
rising 67%. ”
MI’BYTES IN KOTRA LIBRARY
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trade and investment wing of Government of Korea, promoting bilateral trade between India
and Korea.
The library provides access to the major collections of Korea and overseas newspapers. The
collections also include popular magazines, trade papers and comics. Mi‟bytes is read by vari-
ous Indian and Korean visitors and is popular since the next edition has already been request-
ed! The newsletter is In Vogue with young, enthusiastic management graduates and it is quite
motivating to see its popularity growing amongst the masters in International trade.
We thank KOTRA for this gesture and would work even hard to improve our future editions.
Team Mi‟bytes.

4. CMS, MIB
ABOUT US
MI`bytes was started by students en devour to give themselves a
platform to share their analysis and report on business. Produced
Phone: 9891984210, 9871858982
E-mail: sahilbhat_12@yahoomail.com, by an editorial team known for its quality & innovation. We also,
soobianahmed@gmail.con
acknowledge the contributions of executives who run corporate
houses and by doing so we also integrate industry with MIB.
Crises in Crises
Cont. from page 1
EDITOR-IN-CHIEF:
In June 2011 S&P lowered have high deficit. ITALY we must not analyze things
Asst. Prof. SAYED WAJID ALI
the Greek sovereign debt to also has high debt , but aver- easily and so early, as
CCC (lowest in the world). age budget position is better MOODY‟S global rating
The crisis sent ripples than other countries. Crisis firm downgraded SBI by
around the world with major may reduce the confidence one notch to D+. Reason
in EUROPEAN countries.
STUDENT EDITORS: loss in stock markets and being lender‟s low tier –I,
So the disease is now con-
stock exchange. Side effect verting into syndrome. CAPITAL RATIO AND
SOOBIAN AHMED
of globalization is now more DETERIORATING
TULIKA SAIKIA Sovereign debt crisis in
NAMITA DHAMANI clear; after European crisis some EUROPEN countries ASSEST QUALITY.
SAHIL BHAT whole world is Shivering. and slow recovery in the US
Countries with constant will not impact the INDIAN
growth are now in crisis and IT industry fiscal, “we do
INTERVIEW BY:
investors are in dilemma. not see the INDIAN IT in-
MANIKA CHUGH dustry getting impacted by
sovereign debt crisis or slow MOHD. FURQUAN,
SOOBIAN AHMED Experts are now coming up
recovery in this geogra- Masters of International
SAHIL BHAT with ideas like GREECE
phies” said NASSCOM Business
should concentrate on his
own economy with their president SOM MITTAL.
own currency and engi- GLOBAL GDP is expected
neer an “orderly default”. to grow at 3.1 percent in
Where Greece represent
2011, following 3.9 percent
only 2.5% of the euro zone,
despite the size, danger is in 2010. But if we look on
basically about sending the export report, Indian
wrong signal to investors export continued its upward
who are already hesitating trend, posting 44.2 percent
in investment and the RELI- year growth, despite slow-
ANCE factor are gone with down in western countries
the wind .
especially in the western
Euro zone countries like market and euro zone. But
PROTUGAL , IRELAND