Global Business |Update|
(A weekly update on Global Business )
Skyline Business School
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Issue 103

Global Business Update

(11th Feb.’09---17th Feb.’09)

Contents

Global Corporate

1 Virgin Atlantic eyes 600 job cuts

2 Rolls-Royce bullish in recession

3 Over 1,000 jobs to go at airport

4 Chinese investment in Rio Tinto

5 Further US cutbacks at Toyota

6 Npower refunds 200,000 gas users

7 Microsoft to launch retail chain

Global Outsourcing

8 VISTX Announces Strategic Partnership With InnoVest Group, LC

9 Politics and Economics of Offshore Outsourcing

10 Value of outsourcing deals to dip for Indian IT firms

11 Electronics outsourcing revenue to drop 9.9%

12 Michigan benefits from data center outsourcing

13 Cognizant Expects To Finish 2009 Strong

14 India's 1st rural BPO set to hire 500 more youth

Global Economy

15 Oil rises on stimulus plan hopes

16 World Bank gives China $710m loan

17 US retail sales unexpectedly rise

18 UK jobless total at 1.97 million

19 Bank says UK 'in deep recession'

20 Oil declines on economy worries

Global Markets

21 IMF chief warns of ‘back door protectionism’

22 Stimulus packages could hurt ratings of Asian economies

23 US stocks fall as world finance ministers meet

24 Japan economy in biggest dive since 1974

25 Asia stocks tumble on worsening economies

Global Corporate

1 Virgin Atlantic eyes 600 job cuts
Virgin Atlantic has said it is consulting with staff over the possibility of making up to 600 redundancies across the business. The airline said it was reshaping its business to ensure it remained strong during the economic downturn. No airline is immune from the recession, said Virgin Atlantic chief executive Steve Ridgway. The airline said it was talking to staff and unions in order to find ways to avoid compulsory redundancies. Mr Ridgway added airlines had to reduce their costs because of the current fall in demand for travel. We need to stay healthy so we're ready to grow again when economic conditions allow, he said. Virgin Atlantic employs about 8,500 people worldwide.
12th February 2009, www.bbc.co.uk

2 Rolls-Royce bullish in recession
Aircraft engine manufacturer Rolls-Royce has said it is confident about its long-term prospects, despite the challenges of the current recession. Its comments came as it reported a 2008 pre-tax profit of £880m, up 10%. The Derby-based company's annual revenues increased 22% to £9.1bn, while its order book rose by 21%. Rolls-Royce said it was too early to say what effect the downturn would have, but predicted 2009's profits would be similar to those in 2008. The group's financial position remains strong and investors continue to enjoy a progressive dividend payment, said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers. Management continues to deserve credit for both the current business model and retaining faith in the virtues of manufacturing.
10th February 2009, www.bbc.co.uk
 

3 Over 1,000 jobs to go at airport
An aircraft maintenance firm has said it plans to close its operation at Dublin Airport with the loss of up to 1,135 jobs. SR Technics said it had been forced to make the decision after losing four key contracts. Meanwhile, Ryanair has announced cuts in its summer schedule at Dublin Airport, saying they will result in the loss of 200 jobs. These will be among pilots, cabin crew and engineers. SR Technics said 200 jobs could be saved if it can outsource its line maintenance contracts. The company said the decision to close the Dublin facility would not impact on its operations in Cork. We are announcing this deeply regrettable and difficult step only after an exhaustive evaluation of all strategic options for our group-wide operations, said chief executive of SR Technics Bernd Kessler
13th February 2009, www.bbc.co.uk

4 Chinese investment in Rio Tinto
Anglo-Australian miner Rio Tinto has announced that China's state-owned Chinalco is to invest a further $19.5bn (£13.6bn) in the business. The move - China's largest investment in a foreign company - could see Chinalco increase its stake in Rio to 18% from the current level of 9%. The news came as Rio reported a 7% fall in 2008 profits to $9.2bn. Global commodity prices hit record highs last summer before falling back sharply as the world economy slumped. The deal will also allow Rio to reduce its debts, which are estimated at $39bn. Chinalco's $19.5bn investment is made up of $12.3bn being spent on stakes in nine of Rio's mining assets, and $7.2bn on Rio bonds that can be converted into shares. The announcement comes three days after Rio said non-executive director Jim Leng, who had been about to take over as chairman of the firm, had resigned.
12th February 2009, www.bbc.co.uk

5 Further US cutbacks at Toyota
Toyota, the world's biggest car maker, is to cut pay for executives in the US and further reduce production at some factories in the US, Canada and Mexico. Toyota is introducing a range of measures - including pay cuts, voluntary redundancies, bonus cuts and shorter hours - to reduce costs. The firm has already said it would post the first group-wide annual operating loss in its 70-year history. Car companies are cutting back as a global slowdown reduces demand. We hope the new measures will help us adjust while protecting jobs, said Jim Wiseman, vice president of Toyota Motor Engineering and Manufacturing late on Thursday. Executives could see their take-home pay fall by 30%, including a 5% pay reduction and the elimination bonuses. The company is to shut production for between two and eight days in April at some US plants. There will also be a shorter work week at some plants.
16th February 2009, www.bbc.co.uk

6 Npower refunds 200,000 gas users
The energy supplier Npower has been told to repay £1.2m to 200,000 of its gas customers. The regulator Ofgem said they had paid more than expected when their gas tariffs were changed by the company in the course of 2007. Ofgem said many customers benefitted, but those households which did not use much gas were made worse off. An Npower spokesman said refunds were the right thing to do and letters would be sent to those affected. Those who are still with Npower will receive a credit on their next bill while former customers will be sent a refund, Npower said. Ofgem said the problem arose with the application of Npower's two-tier tariffs - the standard arrangement in the energy industry. Under these the first chunk of gas consumption is charged at a higher level than subsequent usage. A spokesman for the regulator said that when the company cut its overall level of charges, it did make clear to customers that some of them might simultaneously be moved from its new lower level tariff back to the higher one.
11th February 2009, www.bbc.co.uk

7 Microsoft to launch retail chain
Computer software giant Microsoft has announced plans to open its own stores, at a time when many other retailers are struggling in the economic downturn. The company plans to sell computers installed with Microsoft software and other products, Microsoft chief operating officer Kevin Turner said. The stores will also promote new operating system Windows 7 and updates of Windows Live and Windows Mobile. Ex-Wal-Mart executive David Porter will head the new retail division. The company's rival Apple already has high-profile stores located around the world. This is an exciting time with our strong line-up of upcoming product releases, Mr Turner said in a statement. There are tremendous opportunities ahead to create a world-class shopping experience for our customers. Mr Porter, corporate vice-president of retail stores, will devise a strategy outlining when the stores would be launched and where they would be located.
17th February 2009, www.bbc.co.uk

Global Outsourcing

8 VISTX Announces Strategic Partnership With InnoVest Group, LC
VISTX Corporation, an Arizona-based Business Performance Improvement Specialist, today announced formation of a strategic partnership with InnoVest Group, LC, a McLean, Virginia-based management consulting and professional services firm, to provide Enterprise Project Management, Organizational Development and Business Process Improvement tools, practices and resources to InnoVest's clients globally. VISTX is an industry-leader in providing Project Management, Portfolio Management, Change Management, Organizational Learning, Customized Training, Compliance and Quality Program Management in the Manufacturing, Financial, Transportation, Pharmaceutical, Healthcare, and Technology Sectors.
12th February 2009, www.msnbc.com

9 Politics and Economics of Offshore Outsourcing
There are two hot topics in the offshore outsourcing industry today-first, what the likely impact of the recession will be and second, what will be the likely impact of Barak Obama's presidency. While the former has attracted some good intellectual debate, with sound arguments and evidence to support both sides of the story, the latter has received pretty naive coverage, mostly from senior executives of offshore outsourcing or advisory firms desperate to allay their customer's concerns. One fundamental question that they fail to address is why Obama should care about offshore outsourcing. If it was so simple and so straightforward that offshore outsourcing is good for corporations, good for countries, good for economies, then why would Obama even consider doing anything about it?

12th February 2009, www.computerworld.com

10 Value of outsourcing deals to dip for Indian IT firms
Indian outsourcers will have to face stringent client scrutiny and probably renegoniate service contracts, post Satyam fiasco, according to analsyts at the Nasscom Leadership Summit here. Peter Redshaw, vice-president (IAS Banking & Investment services), Gartner said their Indian companies could see a dip in the cumulative values of outsourcing deal sizes. The analysts also said that while the outsourcing market would depress in value terms, the volume of the deals outsourced to India would only increase in 2009. Acording to Nasscom, Indian IT-BPO industry (software and hardware included) is estimated to garner revenues of around $71 billon in FY2009. The worst affected would be the banking, financial services and insurance (BFSI) segment, particularly the banks that have large outsourcing contracts with Indian partners.
13th February 2009, www.business-standard.com
 

11 Electronics outsourcing revenue to drop 9.9%
The recession is taking its toll on the electronics contract manufacturing industry as electronics outsourcing revenue will fall nearly 10% in 2008, according to researcher Suppli. Global contract manufacturing industry revenue includes sales by electronics manufacturing services (EMS) providers and original design manufacturers (ODMs). The researcher says combined sales of EMS providers and ODMs will drop 9.9% to $270.8 billion in 2009 from $300.7 billion in 2008. Last November, iSuppli forecast contract manufacturing revenue would grow 2.2% in 2009. It’s not pretty, says Adam Pick, principal analyst, EMS/ODM for iSuppli, based in El Segundo, Calif. Stalwarts of the electronics marketplace— including leading brands, manufacturers and component suppliers—have issued lackluster guidance, or in Sanmina’s case, no guidance at all” He says a rally by some ODMS seems to be losing steam as Taiwanese manufacturers are seeing sales drop and inventories rise.
11th February 2009, www.purchasing.com

12 Michigan benefits from data center outsourcing
The trend toward outsourcing the hosting and management of business-critical IT functions is adding up to big business for Michigan companies that operate data centers. Business Review recently reported that Southfield-based Secure-24 Inc. is building a $5 million data center in Plymouth Township, capitalizing on its clients' needs for cost-effective software hosting and to meet strident federal compliance laws. And Ann Arbor-based Online Tech Inc. said it added 10,000 square feet of data center space in 2008 with a third data center along with 10 employees. For businesses, the ability to outsource the hosting of enterprise resource planning (ERP), customer relationship management (CRM) or supply chain management software to offsite data centers adds up to money saved on IT staffs and server banks. Ness said data centers can cost between $1,000 and $2,000 per square foot to construct, equating to 10- to 20-year investments.
13th February 2009, www.tutorial-reports.com

13 Cognizant Expects To Finish 2009 Strong
Cognizant Technology Solutions has held up well despite reduced capital spending budgets among customers for its outsourcing services. Even though the tech company warned that sales growth will be minimal in the near-term, its business is expected to do well as companies seek to drastically cut costs. Cognizant said its clients continue to see value in its company-tailored services -- especially as business conditions deteriorate. The Cognizant value proposition stems from our deep understanding of the industry-specific and cyclical issues our clients confront. Our 2008 results demonstrate that even in the face of significant economic headwinds, clients turn to Cognizant as a trusted advisor to help them improve business performance and tap into new growth opportunities in an evolving economy," said President Francisco D'Souza
15th February 2009, www.forbes.com

14 India's 1st rural BPO set to hire 500 more youth
He was selling puppies till a year ago in the backward Krishnagiri district of Tamil Nadu. But when India’s first rural BPO, Fostera, set up shop on a narrow lane at Sanasandiram village in his district, R Muraliraj turned into a confident call centre guy. Over the next three months, Fostera (short for fostering rural technology), floated by the Krishnagiri district administration over a year ago, will hire about 500 young people from Tamil Nadu's hinterlands for monthly salaries ranging from Rs 5,000 to Rs 8,000. The BPO, which was working just one shift, is switching to three shifts a day to manage the tide of offers, says Fostera CEO MR Ashok Kumar.
16th February 2009, www.timesofindia.com

Global Economy

15 Oil rises on stimulus plan hopes
Oil prices jumped after a week of falling crude prices on hopes US President Barack Obama's stimulus plan will revive the economy and demand. US crude for March delivery rose $3.53 to $37.51 a barrel. Brent oil added $1.22 to $44.81 a barrel. It looks like a bounce on stimulus hopes, said Tom Bentz at BNP Paribas Commodity Futures. In earlier trade prices dipped below $34 as oil producers' cartel Opec warned that demand would fall in 2009. The House of Representatives has approved Mr Obama's revised emergency plan, including tax cuts and spending aimed at rescuing the US economy, and the Senate is expected to do so later. But analysts have questioned how much the oil price will benefit from it.
13th February 2009, www.bbc.co.uk

16 World Bank gives China $710m loan
The World Bank has said it is giving China a $710m (£487m) loan to help rebuild areas hit by last year's Wenchuan earthquake. The money will finance reconstruction projects in the infrastructure, health and education sectors in the two most-affected provinces Sichuan and Gansu. The earthquake, which hit on 12 May 2008, was China's worst for 30 years, measuring 7.9 on the Richter scale. Almost 90,000 people were killed and five million were left homeless. This project will assist many communities affected by the devastating earthquake to rebuild their lives by restoring essential services, said project manager Mara Warwick. Last year, China's leaders allocated 70bn yuan ($10bn; £7bn) to a reconstruction fund for the earthquake. It is estimated the disaster cost China $123bn in direct economic losses.
12th February 2009, www.bbc.co.uk

17 US retail sales unexpectedly rise
US retail sales unexpectedly increased by 1% in January, which economists suggest is due to New Year discounting. The rise was the first monthly gain in seven months, and followed a revised 3% fall in December. Analysts had expected a 0.8% decline last month. Excluding car and auto parts, sales in January rose by 0.9%. Petrol sales rose 2.6% as prices continued to fall. On an annual basis, sales last month were down 9.7% compared with January 2008, said the Commerce Department. The increase between December and January was the biggest since November 2007.
15th February 2009, www.bbc.co.uk

18 UK jobless total at 1.97 million
UK unemployment rose to 1.97 million between October and December, the highest level since 1997, figures show. The jobless number climbed 146,000 for the three-month period, data from the Office for National Statistics showed. For January, the number of those getting jobseeker's allowance added 73,800 to reach 1.23 million. The unemployment rate hit 6.3%, the highest since 1998, and comes as The Bank of England recently warned of a "deep recession" for 2009.
17th February 2009, www.bbc.co.uk

19 Bank says UK 'in deep recession'
The governor of the Bank of England, Mervyn King, has warned that the UK is "in a deep recession" in 2009 and said rate cuts may no longer work. In its latest forecast for economic growth and inflation, the Bank says that the UK economy will decline sharply in the first half of the year. And it says that there is a significant risk that the recession will be even longer and deeper than expected. The Bank forecasts the economy will shrink by 4% from mid-2008 to mid-2009. The governor gave a strong hint that the Bank will have to consider unconventional measures to boost the amount of money in the economy in the near future as interest rate cuts have been less effective.
16th February 2009, www.bbc.co.uk

20 Oil declines on economy worries
The price of crude oil has fallen amid continuing weak global demand, and high stock levels in the US. US light crude was $2.52 lower to $34.99 a barrel in Tuesday trading, while London Brent crude had lost $1.89 to $41.39 per barrel. Analysts said the fact Opec had still not fully implemented last year's output cut was another factor. The economic outlook will continue to dominate the first half of 2009, said Harry Tchilinguirian at BNP Paribas. The United States, eurozone and Japan are in synchronized recession. Opec is expected to announce further cuts in output after it next meets on 15 March. Oil prices hit record highs above £147 a barrel last summer, but have fallen back sharply since then as the global economy has suffered.
17th February 2009, www.bbc.co.uk