Global Business |Update|
(A weekly update on Global Business )
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2686 6968


Issue 91
 

Global Business Update

(19th Nov’08---25th Nov’08)

Contents

Global Corporate

1 Honda Swindon closing for 50 days

2 Peugeot Citroen cuts 2,700 jobs

3 Toyota upbeat about latest model

4 Gap profits higher than expected

5 Citigroup plunges on uncertainty

6 Italian telecoms talks collapse

7 Honeywell appoints Anil Gupta as India president

8 Honda to hike car prices by up to Rs 1.5 lakh from January

Global Outsourcing

9 India's Infosys brushes off Obama outsourcing worries

10 Mitsubishi Motors Has Extended Its Strategic Outsourcing Contract With IBM

11 Diebold Enhances Total Outsourcing Solution With Security Offerings

12 Fluor Extends Strategic Outsourcing Contract With IBM

13 Meltdown boosts legal outsourcing

14 Patent Services Outsourcing to India Hits $46 Million

15 Outsourcing made easy with DMC Software Solutions

16 IBM Awarded $873M Outsourcing Contract From State Of Georgia

17 SME entrepreneurs turn to outsourcing

Global Economy


18 Oil prices seen steady below $50

19 Eurozone business activity falls

20 Retail sales bring scant comfort

21 IMF approves $2.1bn Iceland loan

22 Economy boost may mean pain later

23 EU reaches deal on farm reforms

24 EU warns against car subsidy race

Global Markets


25
CSE index slides 100 points

26 Wall Street falls on Citi job cut news

27 Rupee at all time low of 50.50 vs dollar

28 Gold rises above Rs 12,000

29 Oil eases below USD 50 per barrel

30 Nikkei pressured by Asian stock falls

Global Corporate


1 Honda Swindon closing for 50 days
Honda has announced plans to cut production at its plant in Swindon, which will close for 50 days next year. Honda said it plans to make 61,000 fewer vehicles in Japan and Europe as it struggles to cope with slowing global demand. It will make 21,000 fewer vehicles at the Wiltshire plant, home to the popular Civic model. The 50-day shutdown will mean the Swindon plant will close for the whole of February and March 2009. The company said that there are "no plans for redundancies" at the Swindon plant. This is unexpected bad news, said Jim D'Avilia, labour union Unite's regional officer. The union, staff and the company need to work together to minimise any financial hardship and to find ways to protect pay and long-term job security, he added. The car maker had already announced plans to stop production at the plant for 13 days during the two months. The extension of this period means that no vehicles will be produced in Swindon during February and March.
21st November 2008, www.bbc.co.uk


2 Peugeot Citroen cuts 2,700 jobs
French car company Peugeot Citroen has announced plans to shed 2,700 jobs because of falling demand in Europe. It predicts sales volumes will fall by at least 10% in 2009, following a 17% drop in the last quarter of this year. The company said the job cuts would affect assembly-line workers, managers and office staff. In October this year, Peugeot Citroen cut its profit forecast for 2008 and started "massive" production cuts in the wake of a global downturn. The carmaker also plans to move 900 workers from its French factory in Rennes to other sites, under a plan which is to be presented to its works council on 2 December. Peugeot Citroen human resources director Jean-Luc Vergne said urgent action was needed in order to protect the future of 200,000 employees. The group's sales fell 5.2% in the third quarter.
20th November 2008, www.bbc.co.uk


3 Toyota upbeat about latest model
Japanese car firm Toyota has unveiled its new Avensis model only two months after the night shift making the Auris was temporarily suspended. The third generation of the Avensis will be built at Burnaston, Derbyshire which employs more than 4,000 people.Toyota UK corporate affairs director Clive Bridge said the challenging economic climate was the best time to bring out a new model. When times are difficult you want your best product on show, he said. At the beginning of November, Toyota shocked analysts by announcing much lower than expected quarterly profits and slashing its earnings forecast for 2008. Net profits fell by 69% in the three months to September as the company was hit hard by a slowdown in consumer spending in the US.
21st November 2008, www.bbc.co.uk

4 Gap profits higher than expected
American clothes retailer Gap has defied Wall Street forecasts and reported higher-than-expected third-quarter net profits. Net income for the quarter ended 1 November was $246m (£163.7m), or 35 cents per share, up from $238m reported a year earlier and ahead of expected. Sales fell 8% to $3.56bn but profits were helped by widespread cost cuts and a reduction in inventory. Chief executive Glenn Murphy said the fourth quarter would be challenging. Wall Street had predicted earnings of 34 cents per share on $3.55bn of sales. Americans are cutting down on non-essential spending as high fuel, food and mortgage costs eat into their disposable income. Gap, which also operates Old Navy and Banana Republic, has tried to improve its products in order to boost revenues and entice customers. The company has cut packaging, payroll and supply costs in an effort to beat the economic slump and entice cash-strapped shoppers.
19th November 2008, www.bbc.co.uk

5 Citigroup plunges on uncertainty
Shares in Citigroup, one of the biggest banks in the US, plunged on Friday amid uncertainty about the firm's future. The firm's stock rose in early trading but later tumbled to end the day 20% lower at $3.77 as investors awaited the outcome of a meeting of board members. The Wall Street Journal reported that Citigroup was considering selling parts of the firm. There are also rumours it might merge with another firm. Earlier in the week the firm announced 52,000 job losses worldwide. These cuts came on top of previously announced reductions of 23,000 positions. The total of 75,000 job cuts represents a loss of about 20% of the firm's staff, leaving it with 300,000 jobs worldwide "in the near term". Chief executive Vikram Pandit told employees on Friday that the firm did not want to change its business model, Reuters reported, citing two employees. Shares in the firm have fallen sharply since the start of the year and are trading more than 80% down since January.
23rd November 2008, www.bbc.co.uk

6 Italian telecoms talks collapse
Hutchison Whampoa subsidiary 3 Italia failed to reach a merger agreement with Telecom Italia because of disagreements about price, 3 Italia's chief said. The two firms were in merger talks but disagreed on price and market competition issues, Vincenzo Novari told newspaper Il Sole 24 Ore. Had merger talks been successful, 3 Italia would have been broken up, said Il Sore. 3 Italia could now be sold to a Middle Eastern sovereign fund. It may remain as an independent entity, or a non-European telecoms operator may buy a 50% stake, Mr Novari said. Mr Novari said the merger with Telecom Italia was now the "least probable" option.
22nd November 2008, www.bbc.co.uk

7 Honeywell appoints Anil Gupta as India president
Honeywell on Monday announced the appointment of Anil P. Gupta as President for Honeywell International India Limited. Anil joins Honeywell from General Electric where he was Marketing Executive with the Utility Coal & Gasification segment of GE Energy located at Schenectady, New York, USA. India is a significant growth pillar for Honeywell, said Shane Tedjarati, President & CEO, China and India. “Anil’s rich experience in developing and executing international business strategies, combined with his entrepreneurial spirit and strong business acumen makes him a great fit for Honeywell. We will look to Anil to provide direction to Honeywell’s businesses in India and help drive continued growth in this very important market.
24th November 2008, www.economictimes.com


8 Honda to hike car prices by up to Rs 1.5 lakh from January
The weak rupee is showing its ugly face. Honda is set to hike car prices across models by Rs 10,000 to Rs 1.5 lakh from January next year to factor in increased production cost due to depreciation of the rupee and expensive raw materials. Jnaneswar Sen, marketing vice-president for Honda Siel Cars, told TOI that the rupee depreciation has impacted the company’s production costs, forcing it to go for a price hike despite a slowdown in the market. Many of the parts are imported and the rupee’s depreciation has made them expensive. Thus, we will be revising car prices with effect from the first week of January, Sen said. The highest impact would be on the sports-utility vehicle CR-V, which is imported to India as a completely-built unit (CBU). “The price of the CR-V will go up by at least Rs 1.5 lakh,” Sen said.
24th November 2008, www.economictimes.com


Global Outsourcing


9 India's Infosys brushes off Obama outsourcing worries

Infosys Technologies, India's second-largest software firm, brushed off concerns Monday that the election of Barack Obama as US president could mean a drop in outsourcing work. During his campaign, Obama said he would offer incentives to companies that created jobs at home and halt tax breaks to those that ship work abroad. However, Kris Gopalkrishnan chief executive officer of Infosys, considered an industry bellwether, said similar promises were heard during previous presidential campaigns and nothing had come of them. During the past decade, firms outsourced software development, technical help and other services have benefitted India which has a huge pool of talented English-speaking graduates. Gopalkrishnan said there were signs from some clients that they might decrease their outsourcing budgets but there are also indications from some clients that they may increase their allocations offshore. The flagship outsourcing sector, which generates 40 billion dollars in annual export revenues, traditionally views bad economic times as offering potential as Western firms cut costs by moving work to cheaper destinations. The sector has said it expects a similar outcome this time.
19th November 2008, www.tutorial-reports.com


10 Mitsubishi Motors Has Extended Its Strategic Outsourcing Contract With IBM
IBM today announced that Mitsubishi Motors Corporation (MMC) has extended its strategic outsourcing contract with IBM Japan for an additional five years. The entire operation and maintenance of the company's information system will be entrusted to IBM Japan. The agreement was signed in September 2008 and will be in effect until September 2013. In addition to the management of existing IT infrastructure, application operation and maintenance, and end-user support services, the new contract will include assistance of application planning.
19th November 2008, www.tutorial-reports.com


11 Diebold Enhances Total Outsourcing Solution With Security Offerings
Driving innovation to help strengthen the financial services industry, Diebold, delayed quote dataAdd to portfolio is enhancing and broadening its outsourcing solution through the addition of security-related solutions and consulting. Outsourcing with Diebold can help deliver cost savings, streamline operations and increase the return on investment at the self-service channel. With the addition of security, Diebold now can enable financial institutions to take advantage of a true end-to-end solution under an operating model that allows for the addition of new security solutions with continually updated technology, without the traditional upfront expense. This allows financial institutions to rely on a professional outsourcing alliance with Diebold as an integral component of their security strategies.
20th November 2008, www.marketwatch.com


12 Fluor Extends Strategic Outsourcing Contract With IBM
IBM today announced that it has signed a three-year, approximately $130 million contract extension with Fluor Corporation for information technology (IT) outsourcing services. As part of the agreement, IBM will continue providing help desk, data center and server services, network management, desk side support, SAP hosting, IT security and disaster recovery services. IBM's global delivery network and resources will provide services to Fluor's 74 country locations around the world with centers in Canada, the United States, India and Poland providing primary support. "Fluor has experienced tremendous growth over the last several years and with our flexible, resilient, and secure IT infrastructure, we have been able to rapidly scale and support this development around the globe," said Ray Barnard, Fluor Corporation's Chief Information Officer. "Our relationship with IBM has been a valued asset to our business and we look forward to continuing our partnership.
20th November 2008, www.marketwatch.com


13 Meltdown boosts legal outsourcing
The global meltdown has turned a boon for legal services industry in the city. With many companies in the US and Europe trying to cut costs, they are searching for cheap and good quality legal aid through legal process outsourcing companies (LPOs). Around 100 LPOs have come up in the city in the last one year, a CEO of an LPO told TOI. Interestingly, around 70 per cent of them mushroomed in the past five months of the global crisis. Further, the growth of the industry under the prevailing circumstances is expected to be between 50 and 100 per cent. There is tremendous growth in the market because the industry is more stable with clients from the US and UK thinking that LPOs are a good option to reduce costs and get good quality legal services, Quislex (LPO), CEO, Ram Vasudevan told TOI. Companies save 50 to 75 per cent of their costs on legal services once their work is outsourced.
21st November 2008, www.tutorial-reports.com


14 Patent Services Outsourcing to India Hits $46 Million
Revenue from patent work performed by legal professionals in India was about $46 million last year and may more than quadruple to an estimated $206 million by the end of 2012, according to a report released this week by an Irish market research group. The Indian patent services industry has grown significantly in the past three to four years to include about 50 vendors with 1,500 professionals, according to a release about the new report. The vendors have grown in number with the increased outsourcing of patent work by U.S. and European law firms and companies. The area lends itself to such overseas outsourcing because it typically entails "manpower intensive and process-driven services," the release said. The report estimates that the industry could ultimately grow to become a $2.2 billion market by building on work from existing clients and, perhaps, partly by gaining future business from patent offices themselves.
22nd November 2008, www.tutorial-reports.com


15 Outsourcing made easy with DMC Software Solutions
Well respected Sage, Dell and Microsoft Gold Business Partner, DMC Software Solutions, is providing businesses with greater options when re-evaluatiing the importance of the IT department with DMC’s TotalCare and Software as a Service. When reassessing the importance of their IT departments, businesses are being provided with greater options by using TotalCare and Software as a Service programs from the well respected Sage, Dell and Microsoft Gold Business Partner, DMC Software Solutions. In the current economic climate one of the questions that will inevitably arise is, should we cut back or freeze spending? All business aspects should be assessed but with costly ad-hoc maintenance internal IT resources are usually under close scrutiny. Mike Ramsay, DMC Software Solutions Managing Director comments, “The IT department should be at the heart of the company. Without it business processes are slowed, decisions are hampered and, although initial outlay is cut, emergency maintenance is costly. In reaction we have developed TotalCare IT support.
22nd November 2008, www.tutorial-reports.com


16 IBM Awarded $873M Outsourcing Contract From State Of Georgia
International Business Machines said that it received an $873 million contract from the state of Georgia for information technology outsourcing services. Under the contract, IBM will work with Dell to combine 11 independent IT groups into one and provide various data center services like mainframe and midrange system management and security services. The contract runs over eight years and has two one-year extension options. Printing services under the agreement will be provided by printer and copier maker Xerox Corp.
23rd November 2008, www.tutorial-reports.com


17 SME entrepreneurs turn to outsourcing
Michael Oyugi, an event’s organiser in South B estate in Nairobi,  says his business would not have survived were it not for outsourcing. When he started the business two years ago, he invested over Sh1 million in tents, chairs and tables and for the other services like floral and transportation, he opted for outsourcing. Reliance on other professionals has enabled him to cut on costs. He says despite growth he sees no sense in buying a van for the company just yet. He is not alone: Outsourcing is not only common in the corporate world, but has started gaining acceptance in the small and medium enterprise (SME) sector.  Some entrepreneurs have embraced the concept despite the general mentality that subcontracting peripheral operations is for big organisations. Business development experts say most SMEs are missing out on the array of benefits that come with outsourcing.
25th November 2008, www.tutorial-reports.com


Global Economy


18 Oil prices seen steady below $50
Oil prices steadied on Friday after hitting their lowest level in three-and-a-half years. US sweet crude climbed 51 cents to $49.93 a barrel after hitting a low of $48.25. London Brent crude gained $1.11 to settle at $49.19 a barrel. The last time prices were below $50 was in May 2005. Fears are growing that a recession will hurt demand for fuel. Falling oil prices has led to speculation that oil cartel Opec could cut output at a meeting next week.

Members of Opec are to meet on November 29, after opting to cut output by 1.5 million barrels per day in October. Fears are growing that a global recession could dampen demand for oil. On Wednesday, the Federal Reserve said it expected the US economy to shrink in the first half of next year, adding to fears over lower demand for fuel.
22nd November 2008, www.bbc.co.uk

19 Eurozone business activity falls

Business activity in the 15 countries sharing the euro has fallen in November to a ten-year low, the purchasing managers' index (PMI) has shown. The index, compiled by research group Markit, dropped to 39.7, from 43.6 in October. The figure was worse than analysts' forecasts, which put the level for November above the 42 mark. According to Markit, manufacturing and services in the eurozone have contracted for six months in a row. Markit said the deterioration in economic climate was felt by all sectors, with output, new orders, outstanding business and purchasing activity all falling to record lows. The companies surveyed by Markit blamed the downturn on falling demand. They also mentioned unfavourable exchange rates as a factor which was affecting exports to non-eurozone trading partners.
19th November 2008, www.bbc.co.uk

20 Retail sales bring scant comfort

Sales on the UK's High Streets fell by a lower-than-expected 0.1% in October, figures from the Office for National Statistics have shown. The decline was much less than the 0.9% drop that analysts had predicted after sales fell by 0.4% in September. Retail sales grew at an annual rate of 1.9% compared with 1.7% in September. Many retailers have opted to hold pre-Christmas sales in a bid to boost spending at what should be their busiest time of year. Food sales rose 1% in October, but non-food sales fell 1.1%. Sales of household goods were down 1.5% and clothing sales fell 3.4%. The drop in non-food sales clearly suggests that discretionary spending is taking a hit, said Vicky Redwood at Capital Economics. Marks and Spencer is cutting prices in its clothing and homeware departments by 20% for one day only on Thursday, its first one-day sale for four years.
20th November 2008, www.bbc.co.uk

 21 IMF approves $2.1bn Iceland loan   

The International Monetary Fund (IMF) has approved a $2.1bn (£1.4bn) loan for Iceland, after the country's banking system collapsed in October. The loan is meant to help the country "restore confidence and stabilise the economy", the IMF said in a statement. Iceland is the first Western European nation to get an IMF loan since 1976. Following the IMF announcement, Finland, Sweden, Norway and Denmark said they would lend Iceland an additional $2.5bn. We stress that, as outlined in the IMF program, an ambitious multiyear fiscal consolidation program will help Iceland stabilise the economy, including the exchange rate, and reduce public debt over the medium-term, finance ministries from the four countries said in a statement. The contribution from each country has yet to be decided, but Finnish Finance Ministry spokesman Martti Hetemaki said Finland would need to borrow funds to provide the loan. The move comes after Iceland's Prime Minister Geir Haarde told Nordic countries that Iceland needed about $6bn to handle the meltdown.

20th November 2008, www.bbc.co.uk


22 Economy boost may mean pain later
The government is preparing to confirm that a huge and unplanned rise in government borrowing will have to be paid back in the years to come. It comes as the chancellor is expected to announce spending rises and tax cuts in his Pre-Budget report on Monday. The chancellor has to tell the country how far we've gone into the red, said BBC political editor Nick Robinson. BBC Business Editor Robert Peston said the chancellor will also have to say how the money will be paid back. Mr Robinson said: "Next week the chancellor has to tell the country how far we've gone into the red. He's preparing to reveal that we'll soon be borrowing over £100bn - that's 11 noughts at the end. A collapse in the tax the government receives from house sales and from the City of London means we're heading for an annual overdraft worth one twelfth of the country's annual income - a figure that will raise a few eye brows.
21st November 2008, www.bbc.co.uk

23 EU reaches deal on farm reforms  

EU farm ministers have agreed to reform agricultural policy by shifting more subsidies away from production and liberalising the dairy market. The deal on reforming the Common Agricultural Policy came on Thursday after marathon all-night talks. More subsidies will be transferred to conservation, reducing the traditional EU incentives for farmers to produce. Milk quotas will be raised initially, but later scrapped, in the biggest overhaul of farm policy since 2003. The measures will go into effect during 2009-2013. The changes build on a major CAP reform enacted in 2003, which broke the link between farm production and subsidies.
24th November 2008, www.bbc.co.uk

24 EU warns against car subsidy race

EU Competition Commissioner Neelie Kroes has told France and Germany not to start a "subsidy race" with the US to save the car industry. She said the European Union's existing mechanisms could help automakers, hard hit by falling demand. General Motors has been seeking support from the German government for its local subsidiary, Adam Opel GmbH. On Thursday the Congress told US carmakers to present a recovery plan if they want a $25bn (£17bn) rescue. Poorly-handled subsidies would not solve the car industry's problems, Neelie Kroes said. However, she added that auto makers could benefit from the European Union's funds for research and environment. European car makers have been reportedly seeking loans of up to 40bn euro (£33.6bn) , at preferential interest rates, to support production.
24th November 2008, www.bbc.co.uk

Global Markets


25 CSE index slides 100 points
The slide in Calcutta Stock Exchange (CSE) index continued and there was no sign of any respite on the last trading session of the week. The benchmark index, CSE-40, slid 100.22 points over the last close. The market on the previous trading session was down by 74.92 points. The index of the local bourse opened at 3735.76 points and during the day shed value and closed at 3635.54. The trading volume was higher at Rs 1.50 crore from trading of 16 scrips. Blueprint Securities remained firm at Rs 303.75. Bolton Securities was at 390.60. Modern Financial Services was at Rs 52.10. Prime Capital Markets was at Rs 278.80. RGF Capital Markets also stayed firm at Rs 345. Oasis Cine Communications stayed flat at Rs 288.80.
21st November 2008, www.financialexpress.com


26 Wall Street falls on Citi job cut news
US stocks slid on Monday as the global economic outlook worsened, with Japan becoming the latest major economy to slide into recession and Citigroup revealed plans to slash 15 per cent of its workforce. Contributing to the dreary economic picture, a Philadelphia Federal Reserve Bank survey showed private-sector economists believe the US economy fell into a recession last spring that will last 14 months, with the economy contracting sharply this quarter. Japan, the world's second-largest economy, reported data showing that it was in recession, adding to jitters on the deepening global deterioration. The lack of any concrete stimulus plans over the weekend from a summit of 20 of the world's largest economies further undermined investor confidence.
19th November 2008, www.financialexpress.com

27 Rupee at all time low of 50.50 vs dollar
Extending its losses in sync with the equity markets, the rupee tumbled by 42 paise against the dollar to 50.44/45, after hitting a new record low of 50.55 in early trade, strained by unabated capital outflows amid renewed worries over the US economy. The domestic currency at the Interbank Foreign Exchange (Forex) market recovered arginally to 50.44/45 a dollar from early record lows after the central bank intervened in favour of the Indian unit, dealers said. The rupee today resumed weaker at 50.50/51 a dollar against its previous close of 50.02/03 despite low global crude oil prices. Marketmen said sustained capital outflows from sliding equity markets weighed on the rupee sentiment. They said a fall in global markets, following indications of protracted recession as the US Federal Reserve slashed its economic growth forecast for 2009, impacted the market sentiments.
23rd November 2008, www.bbc.co.uk

28 Gold rises above Rs 12,000
India's December gold futures on the Multi Commodity Exchange of India Ltd (MCX) hit a key level of 12,000 rupees per 10 grams on Thursday for the first time in November on weak rupee and firm overseas markets. At 10:54 a.m., December gold was trading at 12,011 rupees per 10 grams, up 72 rupees. India imports most of its gold. A weak rupee makes imports costlier and pushes up domestic prices.
23rd November 2008, www.financialexpress.com


29 Oil eases below USD 50 per barrel
Oil eased below $50 a barrel on Monday, on scepticism that a further OPEC supply cut would be enough to prop up prices that have been pressured by weakening global demand as the economy slows. Venezuela said on Sunday the Organization of the Petroleum Exporting Countries should cut supply further, and Iran made similar remarks on Monday. OPEC oil ministers meet for informal talks in Cairo on Nov. 29. The demand scenario suggests we need another cut. But at the end of the day, there is a certain scepticism in the marketplace that OPEC is going to deliver at this weekend's meeting, Rob Laughlin, broker at MF Global, said. US crude fell 24 cents to $49.69 by 0942 GMT, after rising as high as $51.34. The contract dipped to a 3-1/2-year low of $48.25 on Friday. Brent crude was down 22 cents at $48.97.
24th November 2008, www.financialexpress.com

30 Nikkei pressured by Asian stock falls
Japan's Nikkei average extended its fall to 1.6 per cent on Tuesday, dragged down by a slide in Asian shares and worries about a weakening global economy that battered exporters such as Sony Corp. Bank shares slipped further on growing worries about the financial sector in the wake of massive job cuts announced by Citigroup, with Mitsubishi UFJ Financial Group down 5 per cent. But bargain-hunting on dips and talk of buying by public pension funds as the Nikkei approached the 8,000 level kept shares from sliding across the board despite more gloomy pronouncements on the economy by policymakers. Falls in other Asian markets was also pressuring the Nikkei, with the MSCI index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS down 3.5 per cent as of 0440 GMT. The benchmark Nikkei .N225 shed 135.47 points to 8,387.11, off earlier lows, while the broader Topix .TOPX was down 0.9 per cent to 842.62.
23rd November 2008, www.financialexpress.com

 

Compiled by:

Himanshu Gupta 
BBA (MAHE) L3,S2 - 3rd Year
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2686 6968
www.SkylineCollege.com