The Sanmar Group - Matrix

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Sanmar in the Press
Matrix

Contents

	The Aware Professional
	Sanmar goes to school
	By J Ramdas

‘The Aware Professional’ (TAP) is a corporate knowledge programme developed by IMA-India, an associate of The Economist Corporate Network, dedicated to the provision of business information, insights and analysis. IMA-India has been conducting the TAP programme for the Sanmar group since last year.

The programme has been designed to equip executives and managers to understand and interpret several factors, internal and external, impinging on their businesses and optimise the benefits arising out of these in a rapidly changing environment. The TAP programme consists of four modules:

1.	The Survival Guide to Economics for Business – a focus on the Indian economy and applicable economic concepts
2.	The Best Practices Series – preparing for competition in a global market place
3.	The Leadership Manual – professional excellence through professional development
4.	A Corporate Ready Reckoner – some insights into India’s social and political environment

The programme is held for a whole day, once a month at the SEC auditorium at Karapakkam. Around sixty participants from the different businesses of Sanmar group attend TAP.

A brief insight into some of the sessions under the TAP programme is given below. (The next issue of Matrix will cover the remaining sessions).

Overview of the Indian economy

Adit Jain
Managing Director, IMA-India
July 20, 2001

Adit Jain spoke about Indian politics and the political economy.

	In a coalition era, the ability to work with allies is an imperative
	Reforms need more consensus and have to be driven by the state governments rather than the Centre
	The process of reforms is increasingly driven by international commitments (WTO, IMF etc.); pressures from foreign governments, and lobbying by industry
	India’s foreign policy is being drafted based on economic considerations
	India’s foreign exchange reserves are strong, there is stable inflation, the current account imbalance is at a reasonable level, and our economic growth has been between 5 and 6% in 2001-02. But the high fiscal deficit, low growth, and subdued consumer and investor sentiment are the downsides
	Three corridors of growth served by a better social and physical infrastructure are emerging – Mumbai-Vadodara, Delhi-Chandigarh and Chennai-Bangalore

The challenges to Indian business are:

	Import duties will keep coming down
	Markets will become more liberal
	Increased competition
	The threat of the ‘China factor’
	Need for product innovation
	Need for companies to focus on bottom line growth since top line growth is likely to be constrained
	Need to increase productivity through technology
	Cost cutting, integrating the supply chain, innovation, and creation of learning organisations

India’s interest and exchange rates

A V Rajwade
Expert on Foreign Currency Markets
August 17, 2001

India has moved

	from regulation to market
	from protection to price competition
	from administered to market determined interest and exchange rates
	from high import duties to lower import duties, and freer imports

The greater the volatility of the exchange rate, the greater the risk. Hence, there needs to be a policy for currency risk management. Risk management involves:

	Risk appreciation and identification
	Risk measurement
	Risk control

The exchange rate is determined by

	Inflation
	Interest rate
	Demand-Supply flows in the market
	Arbitrage between interest differential and forward margins
	Volatile flows like portfolio investment flows, and the oil import bill
	RBI intervention through ‘verbal measures’, exchange control measures, monetary measures, and actual sales and purchases in the market.

Rajwade felt that substantive capital account convertibility was unlikely in the near future. The prevailing rates are low by historical standards but higher than Chakravarthy Committee recommendations. There is a realisation that high interest rates worsen the fiscal deficit.

How deep is the recession?

Pronab Sen
Economic Adviser, Planning Commission
September 14, 2001

There has been a slowdown in all sectors of the Indian economy, but going by the definition of ‘negative growth’ for two successive quarters, we have no recession.

The causes of this situation are:

	Excess capacities created between 1994 and 1997
	Insufficient public investment
	Periodic turmoil in the financial markets
	Failure of agriculture in 1999 and 2000
	Increase in international petroleum prices
	Slowdown in the global economy
	Competition from global firms leading Indian companies to postpone or cancel investment plans
	Real appreciation of the rupee
	The loss of investor confidence

What needs to be done?

	A revival in consumer demand has begun. But investment demand is yet to pick up
	Pump priming bythe government – government investment in infrastructure and new projects to bring about investment and consumer demand
	No need to push disinvestment hard, since during a downturn, it can make things worse due to job losses etc.
	Rupee depreciation by a further 1.5%. The extent of depreciation is based on the difference between domestic and international inflation, and reflects the percentage by which a currency should depreciate to maintain status quo. The problem lies in deciding on an appropriate measure of inflation. The Wholesale Price Index (WPI) has a range of irrelevant goods. A more appropriate measure is inflation pertaining to the manufacturing sector.

Industrial marketing

Arun K Thiagarajan
President, HP India
October 12, 2001

Industrial marketing has changed dramatically over the last 4-5 years, forcing industrialists and marketers to rethink their strategies and approach to customers. Industrial marketing is increasingly becoming similar to retail. Organisations engaged in industrial marketing base their business models on three areas of specialisation:

Operational excellence – focus on execution and distribution, and giving the best deal to the customer in terms of price, reliability and service.

Customer intimacy – treating each customer as unique and using customer ideas to make advanced products.

Product and technology leadership – treating each product as unique and aiming to provide cutting edge technology to the customer.

Customer relations are impacted by the choice of the specialised area.

Technology is helpful in designing integrated systems - linking suppliers and customers with the organisation. This facilitates free flow of information, and allows changes to be immediately incorporated into the system.

An overview of Asian economies

Adit Jain
Managing Director, IMA-India
November 8, 2001

Post ‘September 11’, there are two possible scenarios that could emerge in the global economy. The situation could get marginally better (probability – 30%), or there could be substantial escalation of war, with the economies of the US, the European zone and Japan bearing the brunt of the after-effects. Emerging economies – South East Asia– could be worst affected since they depend heavily on the US for their exports.

In most Asian countries, exports constitute a substantial proportion of GDP. With the US and Europe under recession, there are not many buyers for goods produced in the Asian countries.

The Indian economy, despite the export slowdown, is expected to grow at 4.50%. But weakness in demand and investment would continue. Financial sector reforms are not progressing at the desirable rate. The chances of Government pump priming the economy is also low, as the fiscal deficit does not permit such a move.

China, having become a full member of WTO, has important implications in the region. It has:

1.	A large market
2.	Political stability
3.	Excellent infrastructure
4.	Highly literate and trainable workforce

Adit Jain also spoke about other Asian countries – Indonesia, Malaysia and Thailand.

Value Added Tax

Amar Raj Singh
Corporate Affairs, Coca Cola India
January 9, 2002

India is the only country in the SAARC region that has not yet implemented VAT. It is the only federal state trying to do so. The main problem in India in converting to VAT is that sales tax is a state subject, and hence consensus among states is important for its implementation.
An empowered committee of eight state Finance Ministers was formed, with the Union Finance Minister as the Chairman, and the West Bengal Finance Minister as the Convenor. This committee was empowered to recommend ways and means of implementing VAT.
Industry has five key concerns:

Amar Raj Singh

1.	Categorisation – the entire categorisation of items is still not officially published.
2.	Incentives – Under a VAT regime, sales tax exemptions and remissions break the VAT chain.
3.	Inter-state trade – There is no setoff on sales tax paid on inter-state trade. Hence any tax paid at the manufacturing base gets no credit. The issue of octroi/ entry tax has not been dealt with consistently across all states.
4.	Stock transfer – No setoff is proposed on stock transfer. This would have a cascading effect on the final price of goods.
5.	Process of implementation – There has been secrecy surrounding the working of the empowered committee. Industry must be taken into confidence for the implementation process.

The administrative mechanism of the states is inadequate to implement VAT.

A clear definition of the roles of industry and state governments is important for smooth implementation of VAT. The concerns of industry have to be addressed.

Turnaround at TISCO

R C Nandrajog
Vice President-Finance, Tata Steel
January 9, 2002

Opening up of the Indian economy changed the business environment significantly over the last decade. A seller’s market became a buyer’s market. More competition meant more efforts to improve quality, reduce costs, and improve distribution systems. Tata Steel, which flourished under a protective regime, had to change itself radically to survive in the changing market conditions.

Tata Steel’s first step was to change the values prevalent in the company. The values that needed to be inculcated were ‘trusteeship, integrity, excellence, credibility and respect for the individual’. The core values were then broken into strategic objectives and key business processes. The strategic objectives consisted of creating wealth, creating a learning organisation, creating a world-class organisation, and establishing industry leadership. Key business processes included market development, operations, planning risk and control, supply chain, HRD and social responsibility. Finally, Tata Steel aimed at becoming the most competitive steel producer in the world.

R C Nandrajog

Tata Steel modernised its plants, reduced costs significantly, and focussed on performance of employees – a ‘profile-person’ match enabling it to get the closest match for its managerial positions.

The results have been impressive – a noticeable improvement in customer satisfaction; improved logistics; focus on quality and SAP implementation along with Business Process Reengineering have helped Tata Steel become the lowest cost steel producer in the world today.

The author is Manager-Accounts, Sanmar Shipping Limited.