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 92

Global Business Update
(26th Nov’08---2nd Dec.’08)

Contents

Global Corporate

1 Panasonic slashes profit forecast

2 ArcelorMittal looks to cut jobs

3 TUI Travel reports jump in profit

4 Nokia to end phone sales in Japan

5 Amway India eyes over Rs 1,000 cr turnover

6 Maruti car sales dip 27 pct in Nov

7 Birla Power aims Rs 500 cr turnover by FY12

8 NIIT-Adobe partner to launch Multimedia curriculum for Schools

Global outsourcing

9 DuPont workers getting $3 million back pay

10 Value drops for top outsourcing deals worldwide

11 IBM, AT&T win Georgia outsourcing deal

12 Deutsche Bank to expand outsourcing in Philippines

13 Outsourcing to India to go up: D&B

14 U.S. Credit Crisis Has Been Boon for India’s Legal Process Outsourcing

15 Mumbai attack: No impact on outsourcing firms’ operations

16 Terror strike: Drug firms may lose outsourcing deals

Global Economy

17 Hopes rise for deep ECB rate cut

18 Europe announces 200bn euro plan

19 Big drop in US consumer spending

20 Governor warns banks on lending

21 Oil falls ahead of Opec meeting

22 Economy boost for Spain and Italy

23 World economy 'weakest since 30s'

Global Markets

24 Strict debt fund rules on anvil

25 Oil falls towards USD 53 per barrel

26 HCL surges 10 pct in early trade on Axon deal

27 Stocks gain; banks up on rate cut hope

28 Economic worries weigh on Asian markets

29 £1.8bn StanChart rights issue well received

30 Fears over UK borrowing levels

Global Corporate

1 Panasonic slashes profit forecast
Japanese consumer electronics firm Panasonic has cut its annual profit forecast by 90% because of the global economic downturn. The company now expects to report net profits of 30bn yen ($315m, £210m) for the year ending in March 2009. Panasonic made a net profit of 281.88bn yen a year ago and had originally forecast a 310bn yen profit this year. It said conditions were "deteriorating sharply" because of falling consumer spending and tougher competition. The company also cut its sales forecast by 7.6% to 8.5 trillion yen. Panasonic cited the rise in the value of the yen as another reason for weaker profits. A stronger yen cuts the exporter's overseas earnings.
27th November 2008, www.bbc.co.uk

2 ArcelorMittal looks to cut jobs
ArcelorMittal, the world's largest steelmaker, is to offer voluntary redundancy to up to 9,000 employees, around 3% of its total workforce. The 'voluntary separation programme' is part of the company's aim to cut costs by $1bn (£648m;775bn euros) in response to falling global demand for steel. The focus will be primarily on sales and administrative employees, rather than factory workers. Arcelor has already announced output cuts of 30% in the fourth quarter. The global economic reality means that it is only sensible to adopt such measures, said Bernard Fontana, Arcelor's executive vice president. The proposals are being presented to its Select Committee of the European Works Council at a meeting at 1300 GMT. Separately, the steel giant agreed late on Wednesday with the United Steelworkers Union to offer voluntary redundancy to around 500 workers, having warned last week that it might lay off 2,444 workers in the US.
26th November 2008, www.bbc.co.uk

3 TUI Travel reports jump in profit
Europe's biggest travel firm, TUI Travel, has said its full-year pre-tax profit rose 43% to £319.7m ($489.5m) as a result of cost cuts. The group was created last year through the merger of German operator TUI AG and Britain's First Choice. It said its profit margins improved after it cut loss-making flights and sold fewer holidays at higher prices. It added that winter bookings were going well despite a 10% increase in average prices due to reduced capacity. Our customers continue to regard their main holiday as an essential, not a luxury, which they are reluctant to forgo, said TUI Travel's chief executive Peter Long.
28th November 2008, www.bbc.co.uk

4 Nokia to end phone sales in Japan
Finnish mobile phone giant Nokia has said it will stop selling its handsets in Japan after struggling to grow its market share in the country. Nokia said it would continue selling its luxury Vertu brand in Japan, and would dedicate its Japanese business to research purposes. Samsung and LG have also faced problems in Japan - a market dominated by sophisticated domestic phones. Nokia said recently that it would cut costs because of the global downturn. In the current global economic climate, we have concluded that the continuation of our investment in Japan-specific localised products is no longer sustainable, said Nokia executive vice president Timo Ihamuotila. Nokia has nearly 40% of the global market for mobile phones, but it reportedly managed to take only 0.3% of Japan's market last year. According to research firm IDC Japan, foreign companies account for only 5% of the Japanese market, which is dominated by local firms selling phones with features such as TV broadcasting and electronic payment functions.
29th November 2008, www.bbc.co.uk

5 Amway India eyes over Rs 1,000 cr turnover
Amway India is all set to cross the projected Rs 1,000 crore turnover for this fiscal year ending December 2008, a top company official said in Kochi on Friday. This would mark a 40 per cent growth over the previous fiscal year when Amway recorded the Rs 800 crore turnover, Amway India Vice President (South) Anshu Budhraja said in Kochi. We have set ourselves a target of achieving a turnover of Rs 2500 crore by year 2012, he said. This year has been extremely buoyant for Amway, he said, adding that constant innovation, adaptation to market needs and efficient customer services has led to this kind of growth The year also saw significant changes in the Amway business model and launch of XL Energy drink and Energy bars, he said.
28th November 2008, www.bbc.co.uk

6 Maruti car sales dip 27 pct in Nov
Country's biggest car maker Maruti Suzuki India on Monday reported 27.4 per cent decline in car sales during November at 47,103 units compared to 64,885 units in the same month last year. Total vehicle sales during the month were down by 24.4 per cent at 52,711 units against 69,699 units in the same month last year, the company said in a statement. Sales of compact cars, comprising Alto, Zen Estilo, Wagon R, Swift and A-Star, were down by 26.6 per cent at 34,976 units compared to 47,641 units in November last year, the company said. Combined sales of sedans SX4 and Dzire during the month, however, grew by 40.3 per cent at 5,975 units compared to 4,260 units last year, it added. Domestic sales were down by 26.9 per cent at 47,704 units compared to 65,216 units in the corresponding month last year.
1st December 2008, www.financialexpress.com

7 Birla Power aims Rs 500 cr turnover by FY12
Yash Birla group firm Birla Power Solution is expanding its product portfolio and will increase production capacity as it aims to clock a turnover of Rs 500 crore by 2011-12.Birla Power is looking at Rs 500 crore turnover over the next three years by 2011-12. We are expanding the farm equipment segment (power tillers).... So except portable generators, we are investing in the inverter business, high kV diesel gensets and farm equipment segment," BPS Chief Executive Officer Kalyan Bhattacharya told PTI. The company had registered a turnover of Rs 220 crore during the previous fiscal, he added. It also plans to increase production at its Dehradun units to 5,000 units (for home UPS and inverters) from the current 3,000 units by last quarter of the current fiscal. We will utilise full capacity by the last quarter of the current fiscal. Demand has been good and we might actually look at increasing this to 10,000 at later stages, Bhattacharya said. However, he declined to comment on the investment details.
30th November 2008, www.business-standard.com

8 NIIT-Adobe partner to launch Multimedia curriculum for Schools
Global Talent Development Corporation NIIT, together with Adobe, has launched an NIIT e-GURU Web and Multimedia curriculum  for school children. Based on Adobe’s Creative Suite of Products, the curriculum will cover the Adobe Creative Suite Master Collection including Photoshop, Illustrator, Flash, Premiere, Encore, Soundbooth, AfterEffects, Fireworks, and Dreamweaver. NIIT e-GURU  comprises ‘Interactive Classrooms’ for teachers, ‘Math lab’ and ‘IT Wizard’ for students, and  Quick  School  an Education Resource Planning solution for school management. In 2007, NIIT had entered into a strategic global alliance with Adobe  to create talent pool for Design, Web, Mobile and Interactive Media for professionals.
1st December 2008, www.business-standard.com

Global outsourcing

9 DuPont workers getting $3 million back pay
Eighty-four workers at DuPont’s Town of Tonawanda plant will receive a total of $3 million in back pay stemming from DuPont’s decision to outsource some work in 2001. Union and management leaders say they are hopeful the settlement, which was worked out with the National Labor Relations Board, will help the two sides move past a difficult period in their relationship. It’s a big settlement for us, said Dan Austin, president of Steelworkers Local 6992, which represents about 400 of the 668 employees at the River Road plant. Ron Lee, the plant manager, said in a statement: We felt that the settlement was a fair one and are pleased to have brought closure to this issue. The dispute began with a charge filed in 2001 with the NLRB by the Paper, Allied-Industrial, Chemical and Energy Workers union. The union later merged with the Steelworkers.
25th November 2008, www.buffalonews.com

10 Value drops for top outsourcing deals worldwide
The value of the top 100 outsourcing deals worldwide in 2007 decreased in value by 39. 2 percent from the top deals in 2006, according to a new study by IDC. Framingham, Mass.-based IDC says the top 100 outsourcing deals for 2007 had a total value of $58.6 million, compared with $96.2 billion in 2006. While not declaring the demise of the megadeal, we may in fact be witnessing a cyclical saturation of the market. Service providers will need to continue to invest in lower cost and more flexible delivery models, wisely expand their global footprint, and focus on emerging markets as the source of material growth in the years to come,” says Terrance STrom, research analyst at IDC. The study also determined that the average contract value in 2007 decreased across every geography with Asia/Pacific and Europe, the Middle East and Africa suffering the largest declines.
27th November 2008, www.bizjournals.com

11 IBM, AT&T win Georgia outsourcing deals
IBM Corp. and AT&T Inc. have won large, multiyear contracts to provide outsourced technology services to Georgia, reports the Associated Press. One eight-year, $873 million contract for information technology infrastructure services was awarded to IBM and a second five-year, $346 million contract for managed network services went to AT&T. Each was the sole bidder. EDS Corp. and Northrop Grumman Corp., which were prequalified to compete for both opportunities, dropped out of the competition. Georgia expects to save $180 million over the life of the contracts, Gov. Sonny Perdue said in a Nov. 20 statement.
26th November 2008, www.tutorial-reports.com

12 Deutsche Bank to expand outsourcing in Philippines
Deutsche Bank AG is transforming the Philippines into an even bigger outsourcing hub for its global operations to account for 60%-70% of its offshoring business, the Philippine Daily Inquirer newspaper reported Tuesday. For next year alone, it plans to increase its employees in the Philippines to 2,500 from the current 1,600, the report said, quoting Chris Sullivan, chief executive of Deutsche Knowledge Services Pte. Ltd. DKS is a regional outsourcing hub established in the Philippines by Deutsche Bank in 2004, and is one of its two professional service centers in Asia, with the other in India. Sullivan said Deutsche Bank has already migrated over 30% of its global processes to offshore hubs and it plans to increase that to 80%. Of the operations to be brought offshore, the Philippines would likely have a dominant share of about 60%-70%, he said.
27th November 2008, www.tutorial-reports.com

13 Outsourcing to India to go up: D&B
Here's some good news for the recession-hit Indian outsourcing Industry: The country is expected to remain the prime destination for outsourcing/offshoring, according to a Dun & Bradstreet (D&B) study. And mind you, India will retain its strong position in the outsourcing market not only because of the price advantage it offers, but largely because Indian outsourcing firms have now evolved into truly global companies that can offer best in class services at very competitive prices, notes the study. The study, titled ‘India's Top ITeS and BPO Companies 2008’, compares India with leading outsourcing destinations like China, the Philippines, Mexico, Malaysia, Brazil, Czech Republic and Chile. According to the report, outsourcing and offshoring to Indian BPOs is likely to become more important part of companies overall strategy as they focus on cost rationalisation in the current global meltdown. The study shows that India's ITes industry still holds a cost advantage, banking on low wages and salary cost. The country has the second lowest ITes/BPO salary base of about $7,500-8,500, just little above China's $7,000-8,000. The Philippines, on the other hand, has an average salary of $9,000-10,000. Besides, it has the added advantage of a large pool of ever-increasing technical graduates.
29th November 2008, www.tutorial-reports.com

14 U.S. Credit Crisis Has Been Boon for India’s Legal Process Outsourcing
I’ve written a couple of times, most recently last week, about the ailing U.S. economy’s impact on Indian outsourcing providers. Though some of them insist that America’s economic troubles will benefit their business, the stock price of companies such as Wipro Technologies has dropped on concerns over cost cuts at some of their biggest customers, including U.S. financial institutions. While it will take some time to determine whether BPO services will benefit from the down economy, as many contend, at least one outsourcing sector is gaining lots of business right now. As The Wall Street Journal reports, Indian legal processing outsourcing companies are being hired to help U.S. banks prepare for lawsuits filed by homeowners, investors and shareholders in the wake of the subprime-mortgage crisis.
27th November 2008, http://www.itbusinessedge.com/blogs/sts/?p=515

15 Mumbai attack: No impact on outsourcing firms’ operations
The terrorist attack on the country’s financial capital has not impacted the services rendered by outsourcing firms as work at their delivery centres- located at least 30 km from the epicentre of the crisis- continues unhindered. Even if the current crisis worsens, off-shoring firms are confident that their customers will not be impacted; vendors say that they can move their customers’ processes to other cities within the country in a span of hours. Most IT & BPO companies have their delivery centres in places such as Mahape, Malad and Andheri which are in the suburbs of Mumbai. This terrorist attack was largely focused on the Southern part of Mumbai. Moreover, local trains – which are considered to be the lifeline of the city - were largely unaffected by the stand off between terrorists and the security establishment. Though people were apprehensive of using public transport, employee turnout was quite high.
28th November 2008, www.thehindubusinessonline.com

16 Terror strike: Drug firms may lose outsourcing deals
Indian drug makers may lose out on outsourcing contracts as overseas pharmaceutical companies defer their visits to the country in the wake of Mumbai terror attacks, according to industry experts. The drug industry could see short-term setbacks, especially in the field of outsourcing, said Sujay Shetty, head of Life Sciences, PricewaterhouseCoopers. ''Executives of global companies may be asked to refrain from coming to India and many planned visits have been cancelled. Already, CPhI India, one of the largest global industry exhibitions that provides the drug makers an opportunity to secure contracts, has been postponed. The three-day exhibition was scheduled to begin at Bombay Exhibition Centre today. P-MEC India, a prominent event for the pharmaceutical machinery and equipment industry that was scheduled to begin at the same venue yesterday, has also been postponed.
30th November 2008, www.tutorial-reports.com

Global Economy

17 Hopes rise for deep ECB rate cut
A steep fall in eurozone inflation and a rise in the jobless rate has raised hopes that the European Central Bank (ECB) will cut rates sharply next week. Analysts said the ECB could now cut rates by up to one percentage point from their current level of 3.25%. Figures from Eurostat showed inflation in the eurozone fell to 2.1% in November, from 3.2% the month before. Other figures showed the eurozone's unemployment rate rose to 7.7% in October from 7.6% in September. The lowest unemployment rate was 2.5% in the Netherlands. The highest rate was 12.8% in Spain. Howard Archer, at IHS Global Insight, said that falling prices and rising unemployment meant there was a compelling case for a one percentage point cut in rates when the ECB meets next week. The fall in inflation was largely due to a drop in the prices of food and energy.
28th November 2008, www.bbc.co.uk

18 Europe announces 200bn euro plan
The European Commission has unveiled an economic recovery plan worth 200bn euros (£170bn) which it hopes will save millions of European jobs. The EC expects member states to contribute 170bn euros while the European Union will give 30bn euros. The plan is aimed at boosting consumer confidence and stimulating spending. Some of the money will be used for job training, improving energy links and broadband access, and  developing less polluting cars. The Commission's proposals include at least five billion euros to help the car industry develop green technologies and a total of 2.2 bn to improve the energy efficiency of homes and factories. It said aid to small and medium sized businesses over the next two years would be increased from 10 to 30 billion euros. It also wants to ensure easier access to 1.8bn euros worth of EU funding for job training.
27th November 2008, www.bbc.co.uk

19 Big drop in US consumer spending
US consumer spending fell by 1% in October, the largest decline since September 2001, in a further sign of the deepening economic downturn. Consumer spending, which makes up about two-thirds of economic activity in the US, had risen 0.3% in September. Meanwhile, new orders of durable goods - goods intended to last for at least three years - fell by 6.25% in October. The Commerce Department also said that the pace of new home sales in October fell to the lowest rate for 17 years. Sales dropped by 5.3% to a seasonally adjusted annual rate of 433,000, the lowest rate since January 1991. Other figures released on Wednesday showed that the number of new jobless claims last week fell to 529,000 from a 16-year high of 543,000 the week before. The falls in both in consumer spending and new orders of durable goods were bigger than analysts had expected.
26th November 2008, www.bbc.co.uk

20 Governor warns banks on lending
Mervyn King has warned that the UK economy will go into "a steep recession" if the commercial banks don't resume normal lending levels. Speaking to the Treasury Select Committee, the governor of the Bank of England said "this was more important than anything else at present". He said the government "may have to intervene directly" to ensure the banks start to increase their lending. Mr King added that nationalising banks could not be ruled out.   We will take whatever action is necessary to ensure that inflation is close to target in the medium term. In the more immediate term, Mr King said UK banks may require additional government funds than they have already received. However, he added that he hoped the current rescue package would start to work. So far the government has pledged to spend up to £37bn to buy stakes in three banks - Royal Bank of Scotland, Lloyds TSB and HBOS. The Bank of England has lent further billions of pounds to the wider banking sector. Mr King's testimony came a day after Chancellor Alistair Darling presented his pre-Budget report. The governor said he welcomed the chancellor's £20bn stimulus package, which includes a cut in Value Added Tax (VAT) to 15% from next Monday.
28th November 2008, www.bbc.co.uk

21 Oil falls ahead of Opec meeting
Opec ministers will gather in Cairo on Saturday, as oil prices remained below $55 a barrel amid fears that global demand is set to fall further. US light, sweet crude ended down a cent at $54.43 a barrel on Friday. In London Brent was up 20 cents at $53.49. Ministers from Iran and Qatar dampened expectations that a cut in production would be announced this weekend. Opec member Venezuela favours a cut in output of a million barrels a day to try to boost prices. The Iranian Oil minister, Gholam Hossein Nozari said a cut may be announced at the Opec meeting in Algeria on 17 December. Here we will prepare some data and maybe the final decision will be in Algeria, he said. His view was backed up by the Qatari energy minister, Abdullah al-Attiyah. Added Kuwaiti Oil Minister Mohammed al-Olaim said: "I don't think a decision will be taken at the meeting in Cairo. A decision could be taken at the meeting in Algeria.
29th November 2008, www.bbc.co.uk

22 Economy boost for Spain and Italy
Spain and Italy have announced plans worth billions of euros to kick-start their economies. Italy approved an 80bn euro ($102bn;£66bn) emergency package that included tax breaks for poorer families, public works projects and mortgage relief. Spain unveiled an 11bn euro plan aimed at creating 300,000 jobs. The announcements are the latest in a series of attempts by EU governments to shore up their economies as the financial crisis bites. Italian Prime Minister Silvio Berlusconi called on to Italians to keep on spending. We have helped citizens, the less well off, so that they can continue to consume, he said. The intensity and duration of the crisis depends on all of us. Spain's Prime Minister, Jose Luis Rodriguez Zapatero, said the money will be mainly invested in infrastructure and public works. Spain's unemployment reached 12.8% in October - the highest in the eurozone.
30th November 2008, www.bbc.co.uk

23 World economy 'weakest since 30s'
The United Nations says the world economy faces its worst downturn since the Great Depression. It expects world economic output to shrink by as much as 0.4% in 2009, due to a slump among developed countries - particularly the US and in Europe. This would mark the world economy's first year of contraction since the 1930s, the UN said. The report added there had been complacency about the impact of the financial crisis on poorer countries. The report contrasts with the International Monetary Fund, which is still expecting the overall global economy to grow in 2009. However, it recently cut its growth forecast to 2.2% from the previous estimate of 3%. The UN expects developed economies to shrink by up to 1.5%, while developing nations should expand by at least 2.7%. The UN's World Economic Situation and Prospects 2009 report gives three forecasts for growth next year - a baseline forecast of 1% growth, a pessimistic scenario of a 0.4% contraction and an optimistic scenario of 1.6% growth. This compares with growth of 2.5% in 2008 and 3.8% in 2007.
1st December 2008, www.bbc.co.uk