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Business Zone

Digital
Digital

From Owning Profits to Owning Network: Shift in paradigm for Digital businesses

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Over the last few days, there has been a lot of buzz around social media businesses fetching insanely high valuations including  Facebook’s acquisition of WhatsApp for $19 billion. On one hand, the conservative traditional investors are perplexed with the high valuations of social media companies, on the other hand some traders with investments in social media are laughing their way to the bank. The fact is that ‘Social Media’ businesses differ from ‘Traditional’ Businesses both in terms of ‘Value’ they create and in terms of the methods used for ‘Valuing’ these companies. While products and services of traditional businesses serve tangible needs of the market, digital social businesses mostly create new needs either by enhancing user experience, or by  seducing users with an unique experience or an emotional appeal. Traditional businesses generally have a fixed organization structure, start from a local market and later expand to global markets. In contrast, digital/social businesses are global from day one and thrive on collaborative structures based on interaction with online communities; if such companies manage to capture imagination, growth can be instantaneous. Candy Crush, the mobile phone game has been downloaded more than 500 million times since its launch in 2012 and is…

Digital

So What Type Of A Social Media User Are You?

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. While it is a commonly known fact that the number of people accessing internet is growing, some key facts worth noting are : More than one third of the world’s total population have internet access. The number of cell phones is expected to surpass  the global population of 7 billion in 2014. Nearly 73% of online adults now use a social networking site of some kind. To think about it, with the penetration of internet and global mobile outreach growing by the day, sites such as Facebook Twitter, LinkedIn and other networking websites are becoming an integral part of our daily lives. So much so, that we check our Facebook, Twitter accounts right in the morning even before we start our work, during the day we post to these accounts and we also log in before we retire for the day to  keep ourselves updated on what’s happening around. In fact, social media has become a phenomenon that has changed the way in which we which we seek & share information and interact with our friends, colleagues and other people across the world. . Organizations maintain their online presence on Facebook , Twitter, Flickr , Google+, Pinterest , MySpace , Digg and other…

Business Zone

CAG audit of private telecom companies – Governance or Interference?

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  In a verdict yesterday, the Delhi High Court allowed the Comptroller and Auditor General (CAG) of India to audit the accounts of private telecom companies under the Telecom Regulatory Authority of India (TRAI) Act. This his kind of ruling was unthinkable even a few years back as CAG was and is still largely seen as an auditor of companies owned by the government. As natural resources such as spectrum, gas/oil fields, coal, etc cannot be easily priced,  the government has a big stake in these sectors and many of these companies that are involved in the production sharing of natural resources or profit sharing from natural resources  enter into a public-private partnership (PPP) with the Government of India, so it appears logical that industries and sectors that deal with precious natural resources come under the ambit of CAG. CAG doing audit of such private companies will have the several ramifications on the overall dynamics of the industry.

Markets And Economy

Salary Comparison for Project Management Professionals in 2013

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The median salary of Project Management Professionals has been found to vary with a number of key demographic factors, as per a ‘2013 Salary Survey’ report published by Project Management Institute, PMI, US.  These include factors such as: Country of employment Number of years experience in project management Position / Role Average size of projects managed, including average project budget and average project team size We present the comparison of salary information for 10 countries from the PMI report. Country of Employment The median salary for project management professionals vary widely from country to country.  The country with the highest median salary ($134,658 USD) is Australia, whereas India and China are amongst the countries with the lower range of median salary (around $27,000 USD). Position Within the various levels of project managers, salary appears to increase with added responsibility as a person proceeds from being a Project Manager, to a Program Manager, to Portfolio Manager, to the Director of a Project Management Office. There are some exceptions to this order though. In Germany the salary of Director of PMO is less than the salary of Portfolio Manager. The differential salary increase between different levels appears to be low in Japan, China and…

Markets And Economy

Beginning of Fed Taper – Impact on India and other Emerging Markets

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  Two major events scheduled on the 18th of December, were seen as deciding factors for the stock market movement in India by the end of 2013. First was the announcement of monetary policy by the Reserve Bank of India (RBI) governor. Raghuram Rajan beat the market expectations of a hike in interest rates and surprised the markets pleasantly with no changes to the current monetary policy. RBI kept the repo rate unchanged at 7.75 % , the reverse repo at 6.75%, the cash reserve ratio at 4% and the marginal standing facility and the bank rate at 8.75%. Markets reacted favorably to the announcement. Later on the same day, US Federal Reserve Chairman Ben Bernanke initiated pullback from Quantitative Easing (QE) before the end of his term in 2014, with Janet Yellen taking over as the Chairperson of Federal Reserve. As the size of the taper, $10 bn was in line with what the market had expected back in September, 2013,  the announcement saw the US markets shooting up.  

Markets And Economy

Ten Most Traded Currencies in the World in 2013

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  Notwithstanding the fact that trading foreign exchange on margin carries a high level of risk, the world’s largest market with 24-hour market action is the currency trading market. There are more than 190 countries in the world with currencies that can be traded, of course, subject to government restrictions. The value of daily foreign exchange trading exceeds the value of annual international trade in goods and services by more than one hundred times. The cumulative share in daily currency trading of the top ten currencies is about 180 percent and the rest of the currencies in the world have a share of 20 percent.  (Since two currencies are involved in each transaction, the sum of the percentage shares of individual currencies totals 200% instead of 100%.) As per reports of The Bank for International Settlements, which is an international organization of central banks, these are the top ten traded currencies of the world in 2013.

Markets And Economy

Understanding random market behaviour

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 By Somali K Chakrabarti For an investor, the pain of selling a stock at a loss far exceeds the pleasure of selling the stock at an equal amount of gain. Strange but true! Such behavioral aspects of investing and many more are brought out in the study of behavioral finance, that was introduced in the late 1980s, owing to anomalies in stock price prediction by the two main existing theories of academic finance, i.e. Modern Portfolio Theory’ and ‘Efficient Market Hypothesis’. According to the ‘Efficient Market Theory’, put forth by Eugene Fama, financial markets are believed to be efficient and investors are understood to make rational decisions. Further, market participants are supposed to be sophisticated, informed and known to act only on available information. Since market participants are believed to have equal access to information, it is implied that stock prices always reflect the best information about fundamental values of the stocks. According to the efficient market theory and Capital Asset Pricing Model (CAPM) the price of a stock is the Present Value (PV) of all the entire future earnings of the company i.e. the future dividend paid by the company.  The ‘Modern Portfolio Theory’ pioneered by Harry Markowitz suggested that an…

Strategy

Diversification Dilemma

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Diversification has given way to focus in developed countries like the United States and the United Kingdom,  and has often been correlated with lower performance. In contrast, diversified business groups have been hugely successful in most emerging markets, particularly in Asia. Since the mid 1980s, strategists in countries like the United States and the United Kingdom have mostly advocated the use of focused strategies for businesses and have advised companies to ‘stick to their knitting’. Many diversified conglomerates in these advanced economies have been dismantled since 1980s to focus on one or a few core businesses. A look at the motives with which companies diversify reveals some of the reasons why diversification by conglomerates yields benefits in the developing markets as against the discount associated with diversified conglomerates in the developed economies. Growth is a primary motive for diversification However growth does not always translate into higher profitability. Since management status and power is correlated more closely with the size of assets under management, management (the ‘agent’) may have the incentive to diversify for pursuing growth in preference to profitability, which is not in the best interest of shareholders. Reducing risk Having different businesses in their portfolio can potentially balance differences…

Industry

Bottlenecks plaguing the coal sector in India

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The import of coal has been one of the significant factors contributing to the Current Account Deficit (CAD) in India that touched 4.8 per cent (approx USD 88 billion) of India’s Gross Domestic Product (GDP) in 2012-13 period. Rising imports, coupled with fall in value of rupee, resulted in a drain of foreign exchange from the country. It is surprising to note that although India has the fifth largest reserves of coal in the world totaling up to 235 BT in 2011, the gap between production and consumption of coal has been increasing over the years from 72 MT in 2009 to 82 MT in 2011.   India imported around 135 MT of coal in the 2012-2013 and is currently the second larger importer of coal after China. Here we look at some of the issues pertaining to the coal sector in India. Issues related to import of coal India needs to import substantial amount of coal from countries like Australia, New Zealand, South Africa and Indonesia. Indonesian coal accounts for a bulk of India’s thermal coal imports, while steel-making coking coal is imported largely from Australia and South Africa. Owing to the increase in environmental concerns, coal exporting countries such…

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