03.04.2008

• Market capitalization
• I know we have covered this concept earlier in our blogs. But for the benefit of new readers who are joining in substantial numbers in our group, let us revisit this in simple terms.
• It represents the value of a public listed firm on a particular day which is derived by multiplying the stock price with the number of issued shares. A change in market cap, therefore, indicates the change in the value attached to the firm by the investors.
• What impact can our Indian companies’ global forays have on trade unionism?
• To understand this, we need to look at CPM led trade union’s decision to shed its traditional aversion for the West and invite Unite, the largest trade union of the JLR factories in the UK, for a convention that it is organising under the aegis of SIGTUR (which is a conglomeration of trade unions across Asia, Australia, Africa and Latin America) later this month.
• Interaction with such Western trade unions is expected to give a better understanding to CITU of the Western trade unions’ negotiation tactics with new owners like the Tatas.
• So, is globalization not benefiting the Left and/or trade unionism? I would say, surely.
• Cell phone on flights
• Use of mobile phones in airplanes is banned because they interfere with the plane’s communication systems.
• However, technology providers have circumvented the problem by coming out with picocell (micro network) within an aircraft. The mobile signals are sent to satellites and from there to the ground systems to complete the calls or transfer data.
• Air France became the first airline to commercially launch the service.
• Microsoft liable to pay tax in India
• I know of many a friend who keeps calling companies names without verifying facts or at least knowing the details.
• I would suggest a strong read of today’s news item in ET about this subject and come out with your opinion on whether or not Microsoft is a bad tax payer.
• The link is here. A cue for those of you who have an eye for detail: it is the distinction between royalty and sale.
• Amazon launches SMS shopping
• Amazon TextBuyIt lets people text the name of a product, its description or its UPC (Universal Product Code) and buy it by texting back the number 1 or 2.
• On cosmic rays
• Cosmic rays are so dangerous and so poorly understood that people are unlikely to get to Mars or even back to the moon until better ways are found to protect astronauts, say experts.
• The Earth’s bulk, atmosphere and magnetic field protect life from the solar radiation and the cosmic rays that travel through space. Astronauts have just a thin layer of shielding to protect them from cosmic rays.
• Want to understand why oil bonds are not of much help to the oil companies? Or how they still keep bleeding these companies?
• Then read today’s ET editorial here.
• How does the SLR status conferred on these bonds help oil companies?
• This makes them worthwhile for purchase by the banks. Banks can count them towards their statutory needs. To sell non-SLR bonds, oil companies would have to offer huge discounts and book losses, which makes them almost illiquid.
• Hence the need for the SLR status.
• The TATA-JLR deal is occupying lot of media attention. Many experts are coming out with advice on how the integration should be done. One more in the series today.
• It is about managing global brands. The key to managing global brands lies in fusing two different kinds of abilities.
• At one level, is the task of understanding global markets and their mechanisms. In this case, the two brands lie in different segments with their distinctive styling, technological and marketing needs.
• Fluency in the language of the market is a prerequisite for any manager of a global brand. The developed world has a much more sophisticated vocabulary when it comes to technology, styling and distribution. The Tatas will quickly need to learn the rules of this game which is new to them.
• The other ability is perhaps a much more elusive one. It is the softer understanding of brands and people and the connection that must be forged between them. Jaguar is a brand that was strong enough in the consumers’ mind to resist the efforts by Ford to downgrade it; it revealed a stubborn resistance to being tinkered around with and yet in its original formulation finds fewer and fewer takers with every passing year.
• The key here is to first understand the brand in all its nuance and texture; to map the culture in which it is embedded. Existing brands, especially ones with heritage, have a source code and an implicit structure that guides as well as limits their manoeuvrability. They come to occupy not just spaces in the market but create room for themselves in the culture, making change in their positions difficult.
• Is the pay commission award too steep?
• TT Ram Mohan argues that it is not. Another SSSA Aiyar? Nay. Look at his solid reasoning. I am impressed. How many of us have read the report in full? Read his full article here. But some excerpts:
• What is the pay hike like?
• The SPC estimates the annual gross impact of its recommendations to be Rs 9,242 crore for the Union government (excluding the Railways). Pay, allowances and pension of the Union government amounted to Rs 68,290 crore in 2007-08. Hence the average increase in government compensation is 13.5%.
• The annual impact (including the Railways) amounts to Rs 12,561 crore. (This does not take into account possible savings of around Rs 4,600 crore). Arrears amounting to Rs 18,060 crore are to be paid over two years or about Rs 9,000 crore each year.
• How is the fiscal impact going to be on the Centre?
• The fiscal impact on the Centre in 2008-09 is thus around Rs 21,000 crore — or about 0.4% of GDP. This will taper off and become negligible over the next three years or so. The impact on the states is not likely to exceed 0.5% of GDP either.
• Compensation in central government as a proportion of revenue receipts has been falling over the years. It rose from 28% in 1996-97 to 38% in 1998-99 following the Fifth Pay Commission (FPC). It declined thereafter to an average of 24% in the period 2005-07. The decline of 14 percentage points in the ratio over the past decade means that government has effectively been downsized by over a third, as the FPC had recommended. It may not be downsizing by asking people to leave. But, in financial terms, it is indeed downsizing.
• How would its impact be negligible?
• The SPC recommends annual increments of 2.5%. Add dearness allowance growth at 4.5%. Add another 2.5% towards increase in manpower. That gives us growth in compensation of 9.5%. Revenue receipts are growing at 17%. So the ratio of compensation to revenue will continue to decline in the years to come.
• Microsoft wins the battle for open document format
• Remember the hotly contested debate about document formats? OOXML vs. ODF?
• That battle is ultimately won by Microsoft. So it will be its Open XML format that will be internationally recognized standard for electronic documents.
• This will allow Microsoft to bid for lucrative government contracts that require vendors to use open formats.