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 99
Global Business Update
(14th Jan.’09---20th
Jan.’09)
Contents
Global Corporate
1 US firm files complaint about IBM
2 RBS shares plunge on record loss
3 Strike at Alitalia hits flights
4 Fiat and Chrysler create alliance
5 New York Times set for investment
6 German retailer cuts 15,000 jobs
7 JJB bank deal to cost £8m in fees
Global Outsourcing
8 China IT outsourcing has opportunity to grow
9 Newspapers Move to Outsource Foreign Coverage
10 VendorSeek Launches Call Center Outsourcing Channel on TMCnet
11 Lovells Considers South Africa Admin Outsourcing
12 India Min Requests Giving Satyam's New Board Time to Revive Co
13 After Satyam Crisis, Survey Shows Outsourcing Customers' Concerns
14 Boeing to Rein in Dreamliner Outsourcing
Global Economy
15 Big fall in UK inflation to 3.1%
16 UK jobless 'to reach 3.4 million
17 Oil demand to fall again in 2009
18 Zimbabwe rolls out Z$100tr note
19 Bank warns of continuing slowdown
20 Food inflation up sharply in 2008
21 Economic woes to persist in next fiscal: PM
22 WB to give $3 bn to India for bank recap
Global Markets
23 Oil dips below $33 after gas deal
24 Nikkei climbs 2.6% on BoA rescue
25 Asia stocks tumble on global banking woes
26 Lehman hopes for bankruptcy exit within 2 years
27 Apple should prepare for life without Jobs
Global Corporate
1 US firm files
complaint about IBM
US computer company T3 Technologies has said it has filed
a complaint against IBM with the European Commission. It accuses IBM, the
world's largest technology services company, of abusing its monopoly power in
the mainframe industry. Mainframes are high-end computers used mainly by large
organizations. T3 said IBM had tied the sale of its operating system to its
mainframe hardware. IBM declined to comment as it had not seen the complaint.
As IBM has not seen any complaint it is inappropriate to comment on specifics
relating thereto, a spokesman said. T3 also contends that IBM withheld patent
licences and certain intellectual property. Only IBM now offers IBM-compatible
mainframes and... Controls over 99% of all existing IBM-compatible mainframes
in use today," T3 said in a statement on its website.
20th January 2009,
www.bbc.co.uk
2 RBS shares plunge
on record loss
Royal Bank of Scotland shares have plunged 67% after the
bank said it was heading for a record loss. The bank said it expects to report
a deficit before write-downs of between £7bn and £8bn for 2008. It will also
write down assets, largely related to its takeover of ABN Amro in 2007, of up
to £20bn in 2007. RBS's final deficit is set to beat Vodafone's 2006 loss of
£15bn, the current UK record. The bank also said jobs would go because of the
downturn. The firm's shares ended Monday trading down 23.1 pence to 11.6p. As
part of the government's package to rescue British banks announced on Monday,
the Treasury said it would swap £5bn of preference shares for ordinary shares
in the bank, taking its stake in RBS to nearly 70%.
18th January 2009,
www.bbc.co.uk
3 Strike at Alitalia
hits flights
Strike action has forced the newly-privatised Alitalia to
cancel flights less than a week after its relaunch. The Italian airline said
it had cancelled 22 flights due to a four-hour strike, which began at 0900
GMT. The walkout was called to protest against new contracts and hiring
policies at the new Italian carrier. Alitalia has been taken over by a group
of prominent Italian business leaders which formed an alliance with Air
France-KLM. Unofficial protests at Rome and Milan airports marred the launch
of the new Alitalia last Tuesday, causing some delays and cancellations, but
Monday's strike is the first official walkout of the new era. The SDL union
has said it may call a further 24-hour strike at an unspecified date.
15th January 2009,
www.bbc.co.uk
4 Fiat and Chrysler create alliance
Italian carmaker Fiat and US giant Chrysler have agreed to
create a global strategic alliance, the companies said in a statement. Under
the terms of the deal, Fiat will get a 35% stake in Chrysler. In return, the
US firm will get access to Fiat's fuel-efficient vehicle technologies. It is
hoped the agreement will lead to "substantial" savings for Chrysler. The
United Auto Workers union (UAW) welcomed the deal, saying it could help
preserve US manufacturing jobs. The alliance offers Chrysler new opportunities
to compete in the US market and the global marketplace," UAW president Ron
Gettelfinger said in a statement. Carmakers around the world have seen their
sales plummet amid the ongoing global economic slowdown. Chrysler has received
an emergency loan from the US government worth $4bn, while Fiat has said it
needed a partner because it was too small to continue on its own. Fiat chief
executive Sergio Marchionne said the deal represented a key milestone in the
rapidly changing landscape of the automotive sector. Chrysler chairman Bob
Nardelli said that the alliance creates the potential for a powerful, new
global competitor. The completion of the deal is subject to approval from
regulatory authorities, including the US Treasury.
17th January 2009,
www.bbc.co.uk
5 New York Times set
for investment
The New York Times is set to receive a $250m (£180m)
investment from Mexican billionaire Carlos Slim to help the paper finance its
business. Faced with having to pay back substantial debts, the loan from the
telecoms magnate will give the paper some financial breathing space. In
return, Mr Slim's stake in the paper will be increased, making him the second
largest shareholder. Mr Slim is the world's second richest man, according to
Forbes magazine. The biggest shareholder in the paper is the Ochs-Sulzberger
family, which has controlled it for 100 years. The paper's chief financial
officer James Follo said Mr Slim's interest is purely financial. The New York
Times has a circulation of around a million, making it the third biggest
selling newspaper in the US.
15th January 2009,
www.bbc.co.uk
6 German retailer
cuts 15,000 jobs
The economic slowdown has forced Germany's largest
retailer, Metro, to cut 15,000 jobs or 5% of its workforce. The cuts are a
part of a plan, called Shape 2012, to increase profits by 1.5 billion euros
(£1.4bn;$1.9bn) within the next three years. The company, which owns
supermarkets, cash-and-carry outlets and electronics retailers, said it hopes
to avoid compulsory redundancies. It employs 300,000 people and has 2,200
stores in 32 countries. The plan will reduce costs by simplifying the group's
structure and improving productivity and efficiency. The company said it hoped
the job cuts would come from natural wastage. The aim is to ensure profitable
growth of the company in the long term, said Dr Eckhard Cordes, Metro Group
chairman.
14th January 2009,
www.bbc.co.uk
7 JJB bank deal to
cost £8m in fees
Struggling British sportswear retailer JJB Sports said it
has paid £8m in fees as part of a deal it struck with its lenders last month.
The payment to Barclays, HBOS and Kaupthing was expected to be made in
February and April, it said on Monday. The December deal meant the £20m loan
from Iceland's Kaupthing does not need to be repaid until the end of January.
News of the extra fees sent its shares down 29%, valuing the firm at £17.8m -
or less than two weeks' sales. The Wigan-based retailer has suffered from
tighter profit-margins and lower sales. It said this month that losses could
reach £10m this year and revealed that like-for-like group sales - which strip
out new store openings - fell 6.8% in the five weeks to 11 January.
19th January 2009,
www.bbc.co.uk
Global Outsourcing
8 China IT
outsourcing has opportunity to grow
China's IT outsourcing industry remains well behind
India's but has made great strides in recent year and the economic crisis
presents an opportunity to close the gap, consultancy McKinsey & Co said on
Wednesday. If you really want to jump start the growth, if you want to grow
double or triple ... don't miss a huge opportunity here, Alex Peng, a McKinsey
partner, told reporters. Presenting a report on China's outsourcing sector,
McKinsey said it figures the global outsourcing sector shrunk by 39 percent in
the first nine months of 2008 to $11 billion in total contracts, but will
benefit as companies around the world desperately look for ways to reduce
costs. However Chinese companies are hindered by weak English-language skills
and perhaps weaker intellectual property rights protection, areas where India
excels.
15th January 2009,
www.reuters.com
9 Newspapers Move to
Outsource Foreign Coverage
Two major newspapers publishers are taking steps to
outsource international coverage, as falling revenue is causing more U.S.
papers to shrink their foreign and national footprint. Tribune Co., which owns
the Los Angeles Times and Chicago Tribune, is in talks with the Washington
Post Co. about a deal to pay the Post for foreign and national coverage for
Tribune's eight major dailies. Meantime, the New York Daily News has reached
an agreement with a Boston-based start-up called GlobalPost to use the
company's network of part-time foreign correspondents. Together, the
agreements could substantially overhaul the foreign news operations of three
of the 10 largest U.S. newspapers. Talks between Tribune and the Post Co. have
been under way for more than a month, but no agreement has been reached,
according to people familiar with the matter. One possibility is that
Tribune's eight major dailies could close dozens of news bureaus, in favor of
publishing the Washington Post's stories from areas where Tribune doesn't have
operations.
16th January 2009,
www.tutorial-reports.com
10 VendorSeek
Launches Call Center Outsourcing Channel on TMCnet
Technology Marketing Corporation today announced that the
Call Center Outsourcing channel, sponsored by VendorSeek, has been launched as
the newest addition to the TMCnet channel program. The Call Center
Outsourcing channel promotes offsite call center services and includes an
overview of VendorSeek's products. In addition, visitors can find valuable
resources such as white papers, feature articles, free quotes and industry
news. TMCnet’s channels are micro-targeted information portals where readers
can find topic-specific news, articles, feature stories and product reviews.
TMCnet has over 100 channels covering important topics in the IP
Communications, VoIP, IP Telephony, CRM, Call Center and Information
Technology industries. VendorSeek.com offers a business-to- business
matchmaking service that connects business consumers with pre-qualified
vendors based upon the dynamics of the purchaser’s needs and the specific
nature of the services that the seller provides.
14th January 2009,
www.tutorial-reports.com
11 Lovells Considers
South Africa Admin Outsourcing
Lovells is in the middle of a pilot that could
potentially see all of its documentation work outsourced to South Africa in a
bid to cut costs. The top 10 U.K. law firm has been outsourcing administrative
work from its real estate practice, such as digital dictation, to Cape
Town-based company Exigent on a trial basis since October. If deemed
successful, Lovells is likely to look at outsourcing documentation work from
other practice areas. Separately, the firm is also considering outsourcing
aspects of its IT and finance departments. All of the work is currently
carried out in-house.
17th January 2009,
www.tutorial-reports.com
12 India Min
Requests Giving Satyam's New Board Time To Revive Co
India's corporate affairs minister Friday appealed for
time for fraud-hit Satyam Computer Services Ltd.'s (SAY) new board to come to
grips with the outsourcing giant's financial woes on the eve of a meeting of
the directors. Let the new board take over control - give them some time so
they can do their best in order to revive the company and take out the company
from the crisis, Corporate Affairs Minister Prem Chand Gupta said in New
Delhi.
17th January 2009, www.tutorial-reports.com
13 After Satyam
Crisis, Survey Shows Outsourcing Customers' Concerns
A whopping 61% of companies have new concerns about, or
wouldn't work with, India-based IT services companies in light of the
financial fraud that has rattled Satyam, according to an InformationWeek
Analytics survey of 221 business technology pros whose companies have done
business with Indian services companies. Yet, most respondents say they'll
continue working with Indian outsourcers. Still, more companies plan to
decrease their use of Indian IT outsourcing services in 2009 than increase it,
a reversal from our survey last year. And there's this: 56% of respondents
believe less in Indian outsourcers' value proposition than they did two years
ago. The survey, conducted last week with the news of Satyam's fraud still
fresh, reveals that 38% of respondents plan to decrease their involvement with
Indian firms this year. On the flip side, 31% say they'll do more work with
them.
18th January 2009,
www.informationweek.com
14 Boeing to Rein in
Dreamliner Outsourcing
Boeing (BA), beset by repeated snarls that have delayed
commercial deliveries of its 787 Dreamliner into early 2010, is rethinking the
global outsourcing model that critics say has caused much of the nearly
two-year holdup. The company is making plans to bring more work back in-house.
Frustrated by production and design snafus that Boeing engineers say have led
the company repeatedly to send staffers out to suppliers to iron out
difficulties, the company's top executives are suggesting they will rely less
on their outside suppliers. While the forthcoming version of the Dreamliner,
the 787-8, may be affected by the plans over time, efforts to scale back on
outsourcing are expected to be more aggressive on future versions of the
plane, especially the 787-9, scheduled for delivery in 2012.
19th January 2009,
www.msnbc.msn.com
Global Economy
15 Big fall in UK
inflation to 3.1%
Consumer price inflation dropped sharply in December to
an annual rate of 3.1% from November's figure of 4.1%. The biggest factor was
the cut in VAT from 17.5% to 15%, announced in the pre-Budget report on 24
November, the Office for National Statistics said. But high food, gas and
electricity prices prevented the rate from falling as fast as economists had
predicted. The headline Retail Prices Index (RPI) measure fell to 0.9% from
November's 3% rate, the biggest fall in 28 years. The biggest discounts were
in clothing and footwear, with prices down 10.3%. Transport costs also fell as
a result of lower petrol and diesel prices, although air fares and coach fares
were both up more than they had been in December 2007. BBC chief economics
correspondent, Hugh Pym, said: "The VAT cut was the largest contributor to the
fall in the inflation rate.This will be reversed at the end of this year when
the VAT effect 'falls out' of the inflation figures.
20th January 2009,
www.bbc.co.uk
16 UK jobless 'to
reach 3.4 million'
Unemployment will soar to 3.4 million as the financial
crisis deepens, forecasters predict ahead of official jobless figures this
week. The Ernst & Young Item Club says the number of those out of work in the
UK will pass 3.25 million by the end of 2010, and hit 3.4 million in 2011. All
of the economic statistics are now in free-fall, it said in its forecast. It
warned the next 12 months would see the UK economy suffer its largest
contraction since 1946. The UK's gross domestic product would shrink by 2.7%
in 2009 and another 0.5% the following year, the Item Club said in its latest
report on the UK economy. The official unemployment total reached a 10-year
high of 1.86 million last October and some analysts expect the figure to
increase to two million when new figures are published on Wednesday.
18th January 2009,
www.bbc.co.uk
17 Oil demand to
fall again in 2009
Global oil demand is due to fall for the second year in
succession in 2009, the first consecutive annual declines in 26 years, a
report has predicted. Demand will decline this year by an average 940,000
barrels per day to 85.3 million, a 0.6% fall from 2008, said the International
Energy Agency (IEA). The IEA, which represents the main oil consuming nations,
said the expected fall was due to the global slowdown. It said the world
economy will now grow 1.2% in 2009, half its past estimate. The IEA had
previously predicted that global oil consumption would recover slightly this
year, after 2008's 0.3% fall, led by demand in the developing world. It now
warns that demand will also cool, particularly in China, where the rate of
Chinese economic growth will slow to 6.5%, its weakest level in eight years.
16th January 2009,
www.bbc.co.uk
18 Zimbabwe rolls
out Z$100tr note
Zimbabwe is introducing a Z$100 trillion note, currently
worth about US$30 (£20), state media reports. Other notes in trillion-dollar
denominations of 10, 20 and 50 are also being released to help Zimbabweans
cope with hyperinflation. However, the dollarisation of the economy means that
few products are available in the local currency. On Thursday, the opposition
leader said he was still committed to power-sharing intended to rescue the
failing economy. Since September, when the deal was signed, talks have stalled
over who should control key ministries. Movement for Democratic Change (MDC)
leader Morgan Tsvangirai said he was due to hold talks with President Robert
Mugabe "within this coming week" to try to resolve the political crisis.
15th January 2009,
www.bbc.co.uk
19 Bank warns of
continuing slowdown
It remains uncertain how long it will take the economy to
start to recover, Bank of England governor Mervyn King has warned business
leaders. He said recent policy actions would boost demand, output and
employment, but added economic policy lags were notoriously long and
unpredictable. Addressing the CBI during his first major speech of 2009, he
added that a "pronounced contraction" was under way. He said the priority was
to fix the banking system so lending could resume. The contraction of lending
to ordinary viable businesses - your businesses - is threatening to drive the
economy further into recession, he said in his speech to the CBI in
Nottingham. On Monday the government announced a second package of measures
aimed at encouraging banks to lend more.
18th January 2009,
www.bbc.co.uk
20 Food inflation up
sharply in 2008
Food prices rose sharply in 2008, after years of food
price deflation, research from Verdict shows. For the twelve months to the end
of December food price inflation hit 11.9%, while the monthly increase from
November reached 1.4%. But the good news for consumers is that the pace of
food inflation is easing," said Verdict. The survey comes as data on Tuesday
is expected to show inflation eased considerably in December. According to a
Reuters poll, the annual inflation rate is tipped to fall to 2.7% in December
from 4.1% in November.
20th January 2009,
www.bbc.co.uk
21 Economic woes to
persist in next fiscal: PM
Prime Minister Manmohan Singh said the country will have
to live with economic woes through the next fiscal because the Government
policy measures cannot fully insulate the domestic economy from the impact of
the global downturn. However, the easing of inflation has given monetary
flexibility to deal with the difficult economic environment, the Prime
Minister said. Growth in the current year will be lower than the last year ...
Our problems will not be over in the current year. The difficult period will
continue into 2009-10," Singh said at the Economic Times Awards function here.
He said the Government would have to continue with the supporting environment
next year as well. "Both monetary and fiscal policy will have to be tailored
to that objective.
18th January 2009,
www.financialexpress.com
22 WB to give $3 bn to India for bank recap
India expects to get USD three billion from the World Bank in
two tranches by March 31, 2010, to help it recapitalise public sector banks,
besides National Housing Bank and EXIM Bank. The World Bank may most probably
give the first phase of the loan by June this year, a senior finance ministry
official said here. He said 17-18 public sector banks as well as National
Housing Bank and EXIM Bank require more capital. In total, Rs 20,000 crore is
needed to recapitalise these entities. However, some of them may not need
government help as they may raise money through public issues after the
capital markets recover and raise other kinds of funds. Earlier, the then
Finance Minister P Chidambaram had said the government will inject fresh
capital in seven public sector banks to improve their financial health and
help them achieve a capital adequacy ratio of over 12 per cent.
20th January 2009,
www.financialexpress.com
Global Markets
23 Oil dips below $33
after gas deal
Oil fell more than 10 per cent, dipping below $33 a
barrel on Tuesday after Russia and Ukraine agreed a gas deal that would help
secure Europe's supply, while gloomy economic news presaged weaker demand for
oil products. Russia and Ukraine are both ready to fully resume transit of
Russian gas to Europe, they said. This meant that there would no longer be an
increased need for oil products to replace gas. US light crude for February
delivery was 3.07 lower at $33.44 a barrel by 1017 GMT, having previously hit
a new 2009 low of $32.70. There was no official settlement on Monday due to a
US holiday.
20th January 2009, www.financialexpress.com
24 Nikkei climbs 2.6% on BoA rescue
Japan's Nikkei average climbed 2.6 per cent on Friday, with
investors reassured by a US government rescue for Bank of America Corp
including a $20 billion injection and a guarantee for almost $100 billion of
potential losses on toxic assets. A retreat in the yen helped lift exporters
such as Honda Motor Co, while chip shares climbed after encouraging comments
from Intel Corp. A late wave of short-covering even lifted Hitachi Ltd out of
the negative territory where it had been after sources said it would likely
post an annual net loss of more than $1.1 billion. Basically investors have
been shown that the US government will do what is needed, said Tomomi
Yamashita, a fund manager at Shinkin Asset Management. The benchmark Nikkei
gained 206.84 points to 8,230.15 after briefly climbing over 3 per cent in the
last hour of trade.
16th January 2009, www.financialexpress.com
25 Asia stocks tumble on global banking woes
Asian shares slumped on Tuesday on concerns that increasing woes
in the global financial sector will deepen the world’s economic downturn,
highlighting the difficulties confronting incoming US President Barack Obama.
The tumble came after Royal Bank of Scotland on Monday unveiled the biggest
loss in UK corporate history, and after Britain launched a second bank rescue
plan that failed to restore confidence in the wobbly financial sector.
Sterling fell to its lowest in almost seven years and the euro dropped to a
six-week low, while US stock futures slumped, signalling a potentially tough
day ahead for Wall Street. The spreading caution benefited assets seen as
safer, such as the Japanese yen and regional bonds. The market is refocusing
on the bigger global picture, said Justin Gallagher, head of Sydney sales
trading at ABN AMRO, pointing as well to expectations for weak corporate
earnings results in coming weeks.
20th January 2009, www.livemint.com
26 Lehman hopes for bankruptcy exit within 2 years
Lehman Brothers Holdings Inc said on Wednesday it hoped to exit
bankruptcy protection in the next 18 to 24 months, but the judge overseeing
the case warned that more international coordination would be necessary to
meet that goal. We would like to be out of this situation with in 18 to 24
months, Bryan Marsal, the co-founder of turnaround firm Alvarez & Marsal and
current chief executive of Lehman, said at a bankruptcy court hearing in
Manhattan. Too many people are saying this case is going to take five to six
or 10 years. There’s no reason for this thing to be in bankruptcy for that
amount of time, Marsal said. Marsal has been heading a team of more than 500
to wind down operations at Lehman and said he believes the situation there is
now “stable,” compared with the chaos that occurred at the 150-year-old firm
when it filed for bankruptcy on 15 September. But US bankruptcy Judge James
Peck, who also on Wednesday approved the appointment of an examiner to probe
the investment bank’s collapse, warned that Lehman would have to think
globally to meet such a speedy timeline.
15th January 2009,
www.livemint.com
27 Apple should prepare for life without Jobs
Months of speculation about
Steve Jobs’ health now look to have been spot-on—the Apple Inc. chief is
stepping down until at least June for health reasons. Investors can hope that
he’ll make a comeback. But Apple still needs to outline a solid transition
strategy. The company should appoint a temporary chief executive while perhaps
leaving Jobs as chairman to reduce the disruption and set the stage for the
post-Jobs era. Investors will surely hope that Jobs’ absence from Apple’s helm
is temporary. But his departure seems hasty given that Apple just announced he
was battling a nutritional disorder. This could signal a potentially more
serious illness, such as the return of his pancreatic cancer from 2004. That
will spook Apple shareholders, who can thank Jobs for the company’s innovative
streak that’s led to hit products such as the iPhone and iPod. If the company
loses its product development know-how without Jobs, it can wave its growth
premium goodbye. That could bring Apple’s hefty price-earnings multiple down
to the level of, say, Dell Inc., whacking billions off its current market
capitalization.
17th January 2009,
www.livemint.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