How WW1 Led To WW2 Essay

WW1 was the most gruesome war up until that time. With the central powers fighting the allied powers, germany was defeated and forced to take all blame for WW1 which led to WW2. They were forced to admit the war was their fault, pay all damages, and lose their military. After the war, all powers met in France and discussed the treaty of versailles and all allied powers except the U.S. made Germany sign the document and admit that the war was entirely their fault. They hoped it would keep Germany from starting another war but in reality it sparked them to get revenge. Also in the treaty, the allied powers forced them to pay for all expenses in the war. The total cost was well over a billion dollars. This hurt the economic system of Germany and they couldn’t pay for it all. It sparked the Germans to once again get revenge on the allied powers and gain control of their country again. IN the treaty, the military power was ceased from Germany. They were now left defenseless. When Adolf Hitler comes to power the first thing he does is restore the army and navy so Germany isnt completely defenselss and he wants the strongest army in the world to go back out and defeat the allied powers. Even though all the allied powers wanted was full revenge on Germany for their many expenses and casualities, it led to another war full of more expenses and casualities. Hitler stepped into power and didn’t think it was fair for the Germans to be treated this way. WW2 then begins and it the most destructive war ever.

The Working Outline for Research Paper on Euthanasia

WORKING OUTLINE I. Introduction A. Euthanasia is defined as a â€Å"good and painless death† B. Active Euthanasia, Passive Euthanasia and Physician Assisted Suicide or Mercy Killing are the different kinds of euthanasia that most people consider to be immoral C. The reasons of people in favor of euthanasia bases on the situation of the patients 1. The patient’s inability to afford expensive medication 2. The patient requesting to end his life 3. Families who could not bear the pain of seeing their loved ones suffer D. THESIS: Among the factors that affect the decisions of people engaging in euthanasia, poverty, specifically the inability to afford medical services and medicines, is the greatest. II. The different cases of euthanasia presents the contrasting views of society A. Most physicians feel painful in maintaining their vegetative patients’ medications despite the fact of them knowing that these persons could no longer survive and even if they would survive, would not have a worthy life. B. The Philippines being a Christian country prohibits euthanasia because it sees it as a form of suicide, but gives an exception to those people who are emotionally distressed due to expensive medications. III. The depressing economic crisis and the high budget coverage of health care expenses lead states to consider the acceptance of euthanasia. A. Health care expenses for patients with terminal illnesses are currently covering the largest percentage of cost in the economic budgets of foreign countries 1. USA 2. Germany 3. Tasmanian Parliament B. The Philippines is a third world country whose major issues are poverty. 1. Families/patients stop medication against their will because of unaffordable medical services. 2. The Philippine government due to lack of budget is not able to pay for the health care expenses of its citizens. C. Money and financial needs are stressors for terminally ill patients and their families, not only in the current dispiriting situation but also in the future even if the patient dies. IV. Conclusion

IT in Supply Chain Management Essay Example | Topics and Well Written Essays - 2500 words

IT in Supply Chain Management - Essay Example The traditional supply chain had limitations caused by power structures, limited information processing ability, and limited coordination and communication paths (Christiaanse & Kumar, 2000). Today organizations are facing complex changes to combat which Mutsaers, Zee and Giertz (1998) proposed the Nolan and Crosson six-stage model. it has become essential for organizations to be flexible and deliver a wide and changing variety of products. This requires a shift from â€Å"make and sell† approach to an externally-oriented â€Å"sense and respond† structure. This in turn implies the need for real time information. Real time information can be feasible only with the application of information technology in the different processes and functions. To meet the changing market requirements, companies have decentralized their value-adding activities by outsourcing and developing virtual enterprises (Gunasekaran & Ngai, 2004). All these highlight the importance of integrating IT with supply chain partners in the virtual enterprise or the supply chain. Demand for new information services like query processing, knowledge sharing and data mining led to the extension of information system engineering to support new, flexible software architecture so that the information system could contain new as well as legacy data and software components (Mylopoulos, 1998). IT has been recognized as a critical factor in the supply chain as they have demonstrated positive contribution to the performance of the firm and the supply chain (Jin, 2006). Technology is essential as it provides direction to the procurement, production and supplies strategies. When suppliers are able to meet customer demands compatibility of exchanges has occurred (Halley & Nollet, 2002). Success of incorporating technology depends upon the personnel’s ability to extract information (Lin & Tseng, 2006). Hence firms rely on technology to increases the flow of information across organizational boundaries and

Coaching and Performance Improvement Analysis Essay

Coaching and Performance Improvement Analysis - Essay Example In this paper, I am going to talk about the coaching and performance improvement I have undertaken with the Production Supervisor of our organization. He had been hired three months ago after our previous supervisor left very abruptly for a competing organization with just a month’s notice. However, since he had served for five years with the organization he was allowed to leave without too much fuss. Since he had left in the middle of the year the Human Resources Department did not have much time or choice but to hire a candidate with experience from a related but different industry. It was thought that owing to the candidate’s experience, he would soon pick up the skills and knowledge about the production function but sadly he has not been able to come up to the mark after even three months on the job. Productivity is suffering and as the Training and Development Manager I had been asked to step in and give the supervisor the required coaching so as to improve his und erstanding of the skills needed in the textile business (he has come in from the engineering sector and had been overseeing the production of motorcycle parts) as the situation is a little different here. Although he does have the required level of interest and understanding, he is a little apprehensive about taking charge of the workers who are aware of his inexperience in the textile sector and sometimes exploit this situation to their advantage. To cover his lack of skills he has developed an authoritative attitude which does not settle well with the older and more experienced staff. Analysis of the Root Causes of His Production Deficiency After a close observation and personality analysis of the Production Supervisor I have come to the conclusion that he just needs a little coaching to come up to the expectations of management regarding the task assigned to him. Although it seems that he is in the wrong industry, I am confident from what I have observed about him that he can soo n come up to the requirements of the job even though the industry he represented in the past is far removed from this present one. The basic requirements of managing the production process are to schedule the production process in terms of orders placed and deliveries to be made or shipments to be affected as per schedule is already known in advance. Although his lack of skills and knowledge is evident for the time being in this industry, the real issue is that he is trying to compensate by being authoritative and a perfectionist, afraid of taking a wrong step and not knowing fully about the alternatives available to him. He is frustrated because his efforts to take charge are not being appreciated by the older and more experienced employees under his control, as they were used to managing the function with a minimum of interference. However in his zest to contribute, he likes to be seen as doing something most of the time. There is no lack of motivation, but one can see that his me thods to take charge are not working with some staff. I could have intervened directly with the staff on his behalf, but would rather he do it himself.

Macca and Madina Revelation Essay Example | Topics and Well Written Essays - 1250 words

Macca and Madina Revelation - Essay Example Discussion The Mecca sanctuary lies in the SW region of the Modern day Saudi Arabia, close to the Red Sea. Many years prior the emergence of Islamic Religion, the city served as the fundamental, trade, socio-cultural and evangelistic House for all communities in Arabic world. Mecca City gave rise to the most prominent antichrist ever to exist in the last over two thousand years) and to the Islamic religion. It became the epitome of Islamic territory and the main dwelling palace of Allah. Therefore, and hence then, Mecca sanctuary attained its title â€Å"almadina almukarrama† (a sacred and bountiful city). All Muslims should direct their players to the sanctuary and Ka’ba, Mecca’s shrine. Similarly, it is Muslims obligation and a fundamental five aspects of Islamic doctrine to go to the prayer center once in the course of their living age. Additionally non-believers are restricted to touch the sacred Mecca soil, and if one touches it, the law states that he shoul d be sentenced to death, (Nomachi and Seyyed 85). Mecca is a popularly known sacred center and Islamic religious universe. Mecca is a sanctified preservation recommended for believers and is humanity guidance. Mecca is an indisputable memorial (of the guidance of God), a holy place where Abraham prayed, and every person who enters Mecca is safe. Humanity has a Hajji or excursion obligation unto the creator to the center. The Islamic holy book, Koran states that every person who enters the sacred Mecca is safe and believers should not harm or interfere with people going to the city for pilgrimage, (Shahrukh 25). According to Islamic traditions, even criminals are safe from the penalty and imprisonment inside the sanctuary. The safeguarded reputation of the sanctuary and the inviolability of the city are further reinforced historically in that all over the period of drastic warfare amid Medina Muslims, and Meccan pagans, the sanctuary of Mecca was exempted from struggles and bloodshed within its quarters. Similarly, when Mecca was lastly captured, about 8 years after the departure of Muhammad and his believers, the city was a nearly bloodless conquest. Significance of the city to Muslims The significance of the city for Muslims believers is irrefutable, and all Muslims around the world must pray at least five times daily facing Mecca’s shrine, Ka’ba. Additionally, a pilgrimage to the city is a requirement for all believers who can afford a tour to the city as a crucial aspect of the five faith pillars. Every year more than 3m people gather for main Hajj (pilgrimage) during the Dhu’l-Hijja Muslim month, and others perform Umrah (a minor pilgrimage) at diverse periods in the year, (Locate 36). Some non-Muslims have witnessed Hajji Rituals and rites, as they are mainly restricted from entering sacred Medina and Mecca cities. Several roadblocks are designed along the pathways and roads heading to Mecca to prevent non-Muslim entry. The popular no n-Muslim case entering the sanctuary was that of Richard Burton, a traveler from Britain, exploration in 1853. Sir Richard camouflaged himself as an Islamic believer from Afghanistan to enter and draft unique excursion story to both Mecca sanctuary and Medina. Muslim believes that the primary center of Mecca

Principles that teacher use in helping african american english Assignment

Principles that teacher use in helping african american english speaking student to become bidialectal - Assignment Example In order to learn and work well in America, this group is required to learn the standard American English that cuts across all cultures. There are guiding principles of teaching African American English speaking people to become bi-dialectal. The core principle to teaching them Standard English is combining culture, language, and literacy. Standard English should be taught as a second language and not taken as correcting or eroding the native language (Perry and Delpit 80). In order for the learners to appreciate the language, their culture must be studied and encompassed into the curriculum. This would produce a culturally responsive, appropriate, and relevant system of Education (Alim and Baugh 24). Educators that have attempted to teach Standard English to Ebonics as correcting the shortcomings of their native language either have failed to improve the Standard English speaking capability of this group or have achieved very little. In some cases, Blacks have dropped out of the sys tem in protest of the lack of recognition or respect for their culture. By studying the culture/language of the American blacks the following can be taken as guiding principles of teaching them Standard English (Hudley, Charity Ann and Mallinson 70-90). Development of Sensitivity of Rhymes For young learners, teachers can aid them practice nursery rhymes and games, such as hand clapping. To be able to appreciate both Standard English and the local dialect, they should rhyme in both dialects. Teachers may examine the rhyming differences that learners hear and use to increase their sensitivity to sound patterns and become acquainted with the linguistics. In the case of learners in higher grades, teachers may impart the rhyme sensitivity by introducing word games and some aspects of verbal play into the classroom. This should be done both in Standard and African American English. Students can also learn rhyming through composing poems and lyrics, analyzing them and writing reviews (Ali m and Baugh 19). Students should be allowed to compose songs in their dialect especially in hip hop style they are famously known of. They should recite these in front of the class. Learners should then discuss how words that rhyme in their native dialect are similar or different from those of the Standard English. They should also be encouraged to write reviews of songs or poems and take note of instances where the composer used Standard English or African American English. The exercise of composing, analyzing, and writing reviews of songs and poetry enhance knowledge, rhyme sensitivity, and word formation. In a nut shell the teacher is encouraging learners to express themselves both in their native language and the Standard English in order to develop language flexibility. Teachers can also come up with mechanisms that allow learners to compare and contrast lyrics/poems composed in different dialects including their own. Students should keenly explore the styles in the different p oems and also note the advantages and disadvantages of each style. By comparing and contrasting different styles, they appreciate the importance of each dialect and will be encouraged to learn the Standard English because they are aware that their dialect is also recognized alongside the Standard English. Grammar The use of ‘ain’t’ in African American English: - The African American English has phrases that are commonly used that are viewed by the rules of Standard English

Information Systems in Healthcare Essay Example | Topics and Well Written Essays - 1750 words

Information Systems in Healthcare - Essay Example This system helps in the constant connections between the suppliers and the manufacturers for better systematic process of the supplying and buying (Delpierre 408). This industry also includes the health care industry. In this case the basic requirement is the maintenance of the records of the thousands of the patients. In the past, decades ago, this maintenance was being done by the files and the traditional systems. The data of the patients includes their vitals ad their medical histories. This type of data needs constant up gradation. Traditionally for the up gradation, the hustle of the files and the papers had to be dealt with. With the introduction of the new information floe systems, which in the case of the health industry is knows as the electronic patient record, we see that the patient record maintenance has become ore and more convenient with the passing time. The electronic patient record means that the data and the information related to the patients is kept in the computers under the specific softwares which are comprehensive and easy enough o be maintained by the health practitioners. The electronic patient's record systems have been basically developed for the batter management and the administration that is needed in the health care facilities. These days the EPRs are being widely used in the western counties. The use of the EPRs is growing in the smaller clinical facilities however it has been seen that the EPRs have been difficult to incorporate in the larger health care facilities. The EPRs that are designed incorporate the small amount of information that is given to them. As we can see that the industries especially the health care facilities are the linked that are growing on the daily basis therefore the amount if the information that is needed to be stored is also increasing on the daily basis. With the amount the nature of the complexity o f the information is also increasing. This complexity has to be welcomed by the EPR systems that are used by the health care facilities these days (Elberg 203). The information flow in medicine The research has shown that the smaller health care facilities especially in Norway are dependent in the EPR systems for the maintenance of their patient's data and the information. The use of EPRs The purpose and the aim of the patient's medical record that is usually maintained by the health care facilities are to maintain the care of the patients. Generally y the medical record is always on related to an individual patient and it represents s the medical history of the patients and the recent medical case (Hassey 1402). There are some specifications that have to be met when the clinical data related to the patients has to be used. The specifications have been identified and they include that the medical data should be should be related to the individual patient and it should be able to help the medical health care provide to decide what treatment or therapy has to be g given to the patient. The medical data that is related to the patients is organized in the same form as it is done in the paper format however in a better manner. This helps the medical practitioner make and design the patients' clinical history leading to the therapy decisions. The EPR help the physicians in constantly updating their gained information with regards to the patients during the consultation process

Fingerprinting Paper Essay Example | Topics and Well Written Essays - 250 words

Fingerprinting Paper - Essay Example terized, the most useful identification systems must not necessarily be biological or biogenic but could also entail systematic tied identities affiliated to ones banking activities, international travel and international communication. These facets have a higher pedigree for our civilization (Jain et al., 1997). In this regard, the most fronted identifications entail vehicle logbooks, residence permits, passport numbers, visas, driving licenses and personal international numbers (PINs). In future, the need to have tied fingerprinting with other more advanced computerized identification credentials will be more meaningful (Lewis, 2001; Hong & Jain, 1998). For instance, the PRADO project launched by the Council of the European Union to register all travel and identity credentials within the region is just an example of databases could aid in better and more meaningful identification and recording on personal activity (Jain, Bolle & Pankanti, 1999). In conclusion, codes like national access codes, personal identification numbers and other secretly encrypted coding systems might be more useful than merely having fingerprint data. Biogenic data that encompass a number of biological descriptions including eye characteristics, blood groups and other hormonal mechanisms will be better options to replace the traditional fingerprinting technologies that might become obsolete with increasing global technological

Philosophy of Education Essay Example | Topics and Well Written Essays - 500 words

Philosophy of Education - Essay Example Quality in education matters because without accomplishing some goal, there is no end purpose of that education and each party is wasting time on a meaningless relationship (Brennen). The process of instructing a child must give some meaning. In addition, using some set, objective standard of quality for instructors, one can provide the basis for improvements and advances made in favor the education system. When such a standard exists, educators have an idea of what they should aim for, and they can create plans and objectives to achieve those goals. Goals for children depend upon their age level and individual potential for improvement. For this reason, a teacher must work collaborative to set goals. Not only is it useful to get feedback from children on how much they want to accomplish, it is important to introduce the skill of goal setting early in life. This kind of teaching that encourages an active system of feedback serves to empower children, which will prove useful as they g row older and into adults (Aschermann). In this relationship, children put forward an idea of what they are capable of doing and accomplishing, and the teacher interprets and formalizes those observations.

Critical Pedagogy Perspective of Education Essay

Critical Pedagogy Perspective of Education - Essay Example â€Å"Habits of thought, reading, writing, and speaking which go beneath surface meaning, first impressions, dominant myths, official pronouncements, traditional cliches, received wisdom, and mere opinions, to understand the deep meaning, root causes, social context, ideology, and personal consequences of any action, event, object, process, organization, experience, text, subject matter, policy, mass media, or discourse"(Wink 2011, p. 128). This is an implication that in critical pedagogy approach of schooling the learner is not mandated to conform to the conventional schooling system. The paper access the appropriateness of critical pedagogy of schooling and its key elements. Paulo Freire was the first person to describe critical pedagogy approach of schooling. His initial interest was to address adult literacy, â€Å"†¦Paulo Freire, writing originally within the specific context of promoting adult literacy within Latin American peasant communities, but whose work has taken o n an increasingly international interest and appeal in the past three decades†(Macrine 2009, p. 67). ... (1984, 1988) critical pedagogy approach of schooling is concerned with the relationship that should exist between, school and the socio- political aspects of living. In his explanation, Stanley (1992) indicates that Freire’s critical pedagogy is based on critical consciousness. Stanley (1992, p. 56) continues to deduce that according to Freire, â€Å"Freedom, for Freire, begins with the recognition of a system of oppressive relations, and one’s own place in that system. The task of Critical Pedagogy is to bring members of an oppressed group to a critical consciousness of their situation as a beginning point of their liberatory praxis.† This is an implication that the learner should be the centre of schooling not schooling being the centre of learning. Purmensky (2009, p. 96) states that, â€Å"Freire goes further than arguing that educators must constantly discover and rediscover ways to help the learner view knowledge as problematic.† Arguably, an implica tion that teachers should employ a learning approach that enables the learner to learn and unlearn. The idea behind critical pedagogy approach of education is attributed to neo-Marxian literature concerning Critical Theory. Critical theorist argued that the Frankfurt school, whose founder was Marxism, had underrated the significant role played by media and cultural influences in addressing issues pertaining capitalism (Malott 2010; Sleeter 1995). critical pedagogy generally refers to the effort that is need to work in an educational institution as well in other aspects of life such as the media and have the audacity to question any form of power inequality that results to groups as well as individuals abandoning what is meaningful and will value to their lives. To install such crucial virtues, learners’ in school

Growth and Future of Private Equity Essay Example for Free

Growth and Future of Private Equity Essay 1. Overview of Private Equity Private equity is an important source of funds for start-up firms, and firms in financial distress. This type of funding has gained great significance in the past two decades and as such is a relatively new concept. It is one of the fastest growing sectors in the world of corporate finance with extensive applications across all industry segments. Businesses across the globe depend on capital investment for their growth and survival. The capital investment is generally raised through public issues, financial institutions, loans from banking institutions, mutual funds, and lease financing options available in the market. Investment in start-up business venture has high risks associated where business returns are uncertain. Private equity broadly refers to investment in companies that are privately owned. This form of investment generally uses funds raised from pension funds, financial institutions and wealthy individuals for investing in high growth businesses or for acquiring businesses with higher rates of return. â€Å"The private equity market involves large block transactions, which are privately negotiated, generally involving unlisted companies† (Business Standard publication). This type of investment is not listed in the stock exchange and has become popular financing instrument for new business ventures. This kind of investment broadly covers management buy-outs and buy-ins, development capital and venture capital. Management buy-ins and buy-outs In this case private equity funds are used to purchase the company or controlling stake in it using debt and equity capital. Development capital – This form of investment generally refers to money borrowed for development or growth purposes. Capital borrowed under this category can be used for any organizational purpose ranging from financing new lines of production to ensuring smooth completion of on going projects. Venture capital – This refers to investment in new business ventures that has promising growth potential and higher financial returns. Private equity firms establish funds that raise capital from investors who form limited partners. The private equity firms, referred to as the general partners invest this capital along with funds collected from banking and other commercial institutions to buy businesses that have significant growth and increased profitability potential. The general partners have certain guidelines for selecting a company or business for acquisition. A business that combines the ability to generate cash, and significant market value along with a strong managerial team to steer growth in the desired direction is an ideal investment option. The general partners objective is to infuse well-planned growth strategies backed by a strong team to improve the company’s performance and generate higher returns on investment. This is accomplished through strategic advice, market analysis, restructuring of existing operational framework, change management strategies and financing. They make money from the cash flow of the acquired business and then sell them for profitable gains. The relationship is generally of a short-term nature ranging from three to ten years of ownership after which the proceeds are used to acquire another business or finance another venture. Once the company has grown in terms of valuation and profitability it is sold to a larger company or floated on a stock market. The private equity investment has its own cycle that is extended through long periods of activity to support sustained business growth and gains. Private equity firms raise funds every three to five years to fund specific activities within the acquired business. The best time for acquiring a business is when the markets and prices are low. Similarly the ideal time for exiting or selling stakes in the acquired business is when the prices are high to maximize gains from proceeds. Investments within a company are usually held for several years to give time to the business to mature and reach a stage of high profits and market value. The private equity market constitutes of the organized market and the informal market. The organized private equity market includes professionally managed equity investments in unregistered securities of private and public companies. Specialized firms and institutional investors provide professional management services that build on the company’s assets and managerial talent. The private equity managers have large ownership stakes in the business and get actively involved in the overall management of the company. These businesses are profit-building machines for them that are nourished and nurtured to provide higher returns on investment. Once the businesses are established and reap profitable returns they are either listed for public offers in the market or sold to larger companies for higher gains. The organized private equity market has four major players comprising of private equity issuers, intermediaries, investors, and the agents or advisors. The issuers comprises of firms that cannot raise financing in the debt market or the public equity market. These firms are relatively younger in comparison to other firms in the market and they seek to raise capital for new product development or technology to show very high growth rates in the future. These firms are still in the research and development stage. In some cases firms with years of operation in the market venture out to new technologies or lines of service also come into this bracket for financing needs. This segment has assumed great importance in the private equity market with rising statistics and more private equity investors taking active interest in their potential growth capacity and highly profitable ventures. High yields and increasing returns are one of the most attractive features of this market segment. Intermediaries comprise of nearly 80 percent of private equity investments. This market sector mostly constitutes of limited partnership firms managed by independent partnership organizations or by affiliates of financial institutions. This segment also includes small business investment companies, or publicly traded investment companies that account for marginal share of the private equity market. Investors comprise of the public and corporate pension funds forming the largest investor groups accounting for 40 percent of global capital out standings. Public pension funds are the fastest growing group of investors and have overtaken private pension funds in terms of amount of private equity holdings. Endowments, foundations, bank holding companies, and high net worth individuals accounting for almost 10 percent each of the total private equity funds follow the pension funds. The other investors include insurance companies, investment banks, financial investors, and non-banking financial institutions. Agents and advisors form a significant section of the private equity market. They are mainly referred to as the information producers, who place private equity, raise funds for private equity partnerships, and evaluate the feasibility of the partnerships for the potential investors. Their sole purpose is to reduce the cost of information gathering that is required for private equity investment. They facilitate the search of companies in need of private equity funding, and institutional investors who are willing to enter into partnership agreement. They advise on the structure, timing, and pricing of private equity issues and assist in the process of negotiation between the two parties. Their role assumes greater significance in the context of financial investors who are unfamiliar with the local market or economy.   In the informal private equity market unregistered securities are sold to institutional investors, where the number of investors is larger and minimum investments smaller than the organized private equity market. Investors in this segment are mostly insiders in the company who have stake in the company. The companies that are financed through private equity funds benefit in terms of better management and increased efficiency since the investors take active interest in monitoring and improvising changes for better financial performance. The private equity firms have access to specialized management expertise for acquired businesses. Moreover, the private equity managers conduct extensive market research and analyze the feasibility of business ventures from every angle to draw risk assessment and opportunities before deciding on investment. This equips them with indepth market knowledge to make well-planned strategic moves that can reap higher productivity and gains for the private equity investors. The concept of private equity dates back to the year 1946 with the establishment of the American Research and Development Corporation with the sole objective of providing financing to new and start up businesses in the private sector. It was setup as an institution that provided finance as well as management expertise to ailing organizations. Since then the private equity market has witnessed a booming presence across the globe especially in the last 15 years. The sector has generated profits of more than $430 billion for their investors between the years 1991 and 2006. The recent corporate trends in the private equity market have shifted towards consolidations and buyouts. This is mainly attributed to seeking good investments by private equity firms and the benefits of cost advantage and minimizing risks across various channels of distribution. The private equity firms look for companies that are market leaders in terms of product and service offering having a strong management team and high barriers to market entry, attractive growth opportunities and profit margins. The growth of private equity funds is evident with increasing investment in large number of private companies as well as taking public companies private. Private equity has played an important role in economic development contributing to enhanced productivity, competitiveness, and improved performance of businesses in the private sector. The private equity market in India has also grown from US$20 million in 1996 to US$1.75 billion in 2004. The country is emerging as the major market for private equity investments. 2. Growth of Indian Economy The Indian subcontinent having population of over 1.1 billion, diverse cultures, religion, and languages has one of the largest and successfully running democracies in the world. Post independence it has been successful in eroding poverty and illiteracy to a great extent. The low per capita income combined with fewer manufacturing industries and a service sector at the base level had labeled the country as poor and underdeveloped. The economy was primarily agrarian and lack of facilities and infrastructure posed great difficulties in its progress. Initially the government controlled everything from banks to major industries. Facing such extreme situation the country has emerged as one of the fastest growing economies in the world with an annual growth rate of 8% in the last three years. It is also seen as the destination for information technology and global process outsourcing. Increased foreign investments and growth in real per capita income has transformed the economy largely over the last decade. Now India is a rapidly growing economy experiencing a fast growth rate in the past few years. The path of economic development and progress that India has taken is spectacular and has emerged the new market for the world with immense growth potential. Various economists have predicted that India will become a major economic power in the years to come. This is largely attributed to the rising Gross Domestic Product (GDP) of the countries and the major economic transformation that has taken place in the countries recently. The Indian economy had very poor growth rate post independence with a predominantly agrarian economy and underdeveloped manufacturing and service sectors. Rise in privatization of various sectors paved the way for economic progress in the subsequent years. The government sought to implement policies to ensure overall development of the manufacturing and service sectors. These measures brought about major changes in the industrial landscape and economic growth rate accelerated. The annual economic growth rate was 5.5% in the 1980s. Industrial growth rate was recorded at 6.6% annually and 3.6% in the agricultural sector. The 1990s witnessed a rapid change in the economic growth and development with the liberalization of the economy. A GDP growth of 9% was observed in the 2005-06 and 9.5% during 2006-07. With rising GDP and increased investment the economy is poised for enhanced growth rate. The economy was largely boosted by growth in tourism, financial sectors, and manufacturing industries. It is now the fourth largest economy in terms of purchasing power parity. High growth rates in the industrial and service sector combined with a slump in the major economies across the world in the last few years have provided the Indian economy a boost. The mid 1990s saw a rise in the Information Technology sector in the country. The rapid penetration of computers and the Internet in nooks and corners of the country attributed largely to this rise. Moreover, the abundance of skilled professionals armed with latest technical know-how and the zeal to prove their abilities in this direction provided the necessary impetus. India soon became the hub of IT activities across the globe with surging demand for professionals from the country. Government reforms and policies provided the necessary infrastructure for the growth of this sector. This was a major achievement for the country. The growth in IT sector led to the rise in other associated service and industrial sectors contributing to overall development of the economy. Currently the service sector dominated by IT, financial services, and construction contributes more than 50% of the GDP. Business Process Outsourcing (BPO) is yet another arena contributing to overall economic development. This segment has attracted huge foreign investments into the country. A large portion of the Indian population comprises of young people. The educated young people have benefited the service sector with the availability of skilled labor and this contributed largely to the development of the country. Despite the slump in global economy that has hit hard some of the most developed economies like United States, Indian economy has remained immune to the effects of this recession. This is primarily due to the strong economic reforms adopted by the country. The low dependence of the economy on export trade is one of the reasons. The Indian economy is more driven by domestic demand than foreign investment. Moreover, the banking system has minimal exposure to foreign currency assets. This has rendered the economy relatively immune to the effects of the global slump. While other economies across the world are facing economic turmoil, India remains on steady footing. Being one of the fastest growing economies in the world India is attracting huge amounts of foreign investment. The total amount of foreign investment reached US$ 8.5 billion in the year 2006. Real GDP Growth Rate during 2003 to 2007   Ã‚   2003   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   2004   Ã‚   2005    2006   Ã‚   2007 4.30% 8.30% 6.20% 8.40% 9.20% The chart shows the real GDP growth rate in percentage during the period 2003 to 2007. (Data collected from economywatch.com) The current GDP of the country is at 9.2% per annum that is quite an impressive figure. Growth of merchandise exports and rise in exports of services have strengthened the foreign reserves of the country. The major destinations for exports are United States, United Arab Emirates, and the OPEC (Organization of Petroleum Exporting Countries). The active participation of India in international commerce has created enough opportunities for economic growth and development. The impressive growth rates and statistics predict the emergence of a strong economy in the coming future. Economists predict that the Indian economy will become a super economic power in the next two decades. Some of the major development indicators of Indian economy are summarized below: High rate of savings, almost 32% of the GDP and higher rate of investment – approximately 34% of the GDP indicate accelerated growth rate. A young population of the country is another factor contributing to the overall economic growth and development. Highly educated masses contributing to skilled labor force is yet another factor contributing to the rise in the IT and BPO sector. Economic growth has created huge employment opportunities that have helped in reducing poverty considerably. Economic reforms and policies adopted by the Government of India towards social upliftment with particular stress on education, health, and infrastructure has greatly assisted the process of economic growth. 3. Issues facing the Indian Economy India may be reckoned as the emerging economic power of the future, but it has its share of challenges that need to be overcome. Lack of adequate institutional and infrastructure facilities may create bottlenecks in the growth and development of the economy. Since independence the country has faced huge challenges in its way to modernization and political, economic and social growth. Impediments in the form of poverty, illiteracy, unemployment, poor health facilities, and socio-cultural barriers posed grave problems in its road to development. The fast rate of growth aided by effective economic reforms helped in overcoming these challenges to a great extent. Poverty and illiteracy were reduced considerably with adequate measures adopted in the form of Five-year plans implemented by the successive governments. The upliftment of the masses by creating employment opportunities and provision for free and compulsory education for all across the country did have significant effect on the economy. Infrastructure also received considerable attention in the development plans resulting in the emergence of a new and modern India. In spite of tremendous progress India still faces major challenges that need to be overcome if the country wants to become a superpower in the near future. The issues and challenges faced by the Indian economy currently are given below: Sustaining a growth rate of 8% per annum for the consecutive five years will be one of the biggest challenges for the Indian economy. The entry of companies and business ventures into the Indian soil requires extensive paperwork and legal procedures. Most foreign companies find it a little intimidating to enter the Indian market due to these reasons. Relaxation and simplification of the entry procedures will definitely work in the interest of the Indian economy. The huge population density of the country affects the gross per capita income of the country. The country’s economy is primarily agrarian but with rapid industrialization and governments boosting the service sector, agriculture has taken a backseat. The government needs to boost this sector as well giving it a more organized look.   Providing proper infrastructure to attract large scale foreign investment is much required for sustainable economic growth. The economy faces widespread problem of electricity supply, proper roads, and communication channels that can affect the economy adversely. Extending proper health care to all is another important issue facing the country. Health care has definitely improved over the past few years but it still remains inadequate by world standards. Poverty is still posing a stiff challenge to the economic growth and development. Inequality of wealth distribution is quite high across the country. Education is yet another challenge faced by the country. The government needs to implement effective policies and reforms to increase the overall standard of living of the poorer section and provide basic amenities to them. Reducing income inequalities along with social reforms are much required for overcoming these discrepancies faced by the Indian economy. The foreign direct investment has become a key feature of growing economic development and the focus of national development strategies in almost all countries across the globe. It is considered an important economic growth indicator that assists boost in domestic capital, productivity, and employment. It is considered to be the lifeblood of any economy. The Indian Government has initiated several promotional efforts to attract more foreign direct investment into the country in the form of private equity. There are several trends that are reinforcing traditional patterns in foreign direct investment across economies that include access to natural resources, markets, and low-cost labor. Globalization and liberalization of the economy added to the attraction of private equity funds in to the country. In addition to these economic factors the expansion in information and communication technologies, and improvement in logistics has greatly shaped the Indian economic attractiveness to foreign investors. Private equity investors across the globe are increasingly shifting their focus to India. Big names in private equity market across the globe like Blackstone Group, Texas Pacific Group, Kohlberg, Kravis and Roberts, Carlyle Group, Actis Partners and General Atlantic Partners have ventured into the Indian markets in search of higher returns on investment. 4. Growth Trends of Private Equity in India The market for private equity in India has emerged quite recently. The private equity market grew from a US$ 20 million in 1996 to US$ 7.5 billion in 2006. The country is now reckoned as one of the top ten destinations for private equity investments. Investors across the globe are eyeing the growing Indian market that offers extensive investment opportunities. Local and foreign investors are eyeing the domestic market investment opportunities with increased interest. The major sectors of investor interest are the IT and BPO sectors that continue to dominate the economy but manufacturing concerns are not far behind. Investors are taking avid interest in this rapidly growing market parallel to the Chinese economy that has shown immense potential in the past few years. The rise in entrepreneurship, skilled workforce, rising percentage of people with fluent English speaking capability and the country’s status as the world’s largest democracy have greatly contributed to its rising economy. The private equity market has risen both in terms of greater number of deals and greater number of firms’ capitalizing on this increasing opportunity. The Indian private equity market also saw an increase in exits and improved liquidity in the recent years. The Asian market has largely been perceived as difficult for exits in the private equity sector. Investors are wary of the fluctuating market trends and risk proposition involved in capitalization of their funds. Unlike the Asian market the Indian market has been strengthening over the years this has attracted the investors greatly. The increasing liquidity of the market has played in favor of these investors providing higher gains and returns from public offer deals and trade sales. As per K.P. Balaraj, the Managing Director and co-founder of West Bridge Capital Partners, â€Å"In India, the markets are in their third or fourth year of a bull run. The companies have a number of avenues to raise money at low cost. There’s a lot of liquidity in the debt system. The IPO markets and capital markets are very strong in India, and there’s lot of appetite overseas for Indian securities.† The Indian market has gained the investors’ confidence due to the stable environment and growth statistics that has worked to its advantage in the past few years. The foreign investment growth in the private equity market is seen as yet another boost to this finance segment contributing to a market capitalization of more than US$ 3.56 million in the year 2005. The private equity funds invest mostly in unlisted companies that have good growth potential and cash out option through public offers. In some cases the private equity firms invest in both seed capital and development ventures that have potential high rates of returns on investment. According to a study conducted by Venture Intelligence, a Chennai based research firm, â€Å"Private equity firms invested a record $7.46 billion over 299 deals in India during 2006,† that is three times greater the previous year figures. The biggest deal clichà ©d in 2006 involved Idea Cellular, the fifth largest wireless operator in India, raising a funding of $950 million from a group of private equity investors that included Providence Equity Partners, ChrysCapital, and Citigroup. Another important deal involved Kohlberg Kravis Roberts that paid $900 million for 85% stake of Textronics Software. Warburg Pincus’s $300 million investment in the year 1999 in Bharti Tele-Ventures the largest mobile service provider in India was subsequently sold in several stages for $1.6 billion. This is considered one of the most profitable private equity deals in the country to date. These high rates of returns and attractive gains lured many foreign private equity investors to the Indian market. The tremendous growth of the private equity market in the country is largely attributed to a combination of country-specific factors that distinguish the Indian environment in terms of investment opportunities from other emerging markets across the globe. These factors include: Sustained rapid economic growth of 8% per annum over the past five years consecutively. Rising domestic consumer market of India has given rise to potential business opportunities. A well-established public equity market of India has given rise to increasing breed of private equity investors in the country. The Mumbai stock exchange dating back to 1875 has more than 6000 listed companies recording extensive trading volumes comparable to no other exchange in the world. A highly educated population combined with widespread knowledge of the English language provides a distinctive advantage. The skilled workforce has resulted in the rising development of certain sectors like information technology, business process outsourcing, software development, pharmaceuticals, and automobile components. The country has one of the oldest and largest democracies in the world running successfully across decades. The stable political scenario combined with an effective legal framework has provided the economy with sound base for development and growth. The distinctive advantages mentioned above have created a huge market for private equity funds investors. Private equity firms are investing in retail, manufacturing, healthcare, real estate, infrastructure, media, and telecom sectors in India. India is the second largest market for private equity firms in Asia after Japan. It has surpassed China and Singapore with large amounts of investment in private equity and venture capital in the year 2006. (Source: Indiaopportunitiesfund.com) Research conducted by global research firm Evalueserve suggest that India will receive almost US$ 20 billion private equity funding by the year 2010 making it one of the top ranking countries in the world in terms of private equity investment. The lucrative Indian market has attracted foreign private equity investors in the past couple of years. As per a market analysis report released by Venture Intelligence the foreign capital investment reached US$ 2.2 billion in the year 2005 that increased to US$ 5.4 billion in the year 2006. The market research and analysis conducted by Evalueserve reveals that the Indian market needs an in-depth understanding and evaluation for the investors in private equity market to maximize returns. The investors need to conduct proper market research, adopt subtle managerial skills, and instill patience in order to maximize gains since the market is unique in many aspects. The research shows that there are over 366 firms currently operating in the private equity market in India and another 69 are in the process of starting funding operations. These private equity firms have targeted to raise funds totaling US$ 48 billion for investment between July 2007 and December 2010. This predicted growth statistics may face challenges in the face of economic slowdown in India or a liquidity crunch in the economy. The first firm to initiate private equity investment in India was the Risk Capital Foundation set up in the year 1975. Till the year 1995 very few financial institutions provided capital for investment in private equity or venture capital sector. These institutions were the Industrial Finance Corporation of India (IFCI), Industrial Development Bank of India (IDBI), and Industrial Credit and Investment Corporation of India (ICICI Bank). A number of private equity firms started raising capital from various international and domestic sources to invest in business ventures in the country. This market trend gained momentum during the period 1996 to 2000. The total amount of investment in the private equity and venture capital segment rose from US$20 million in 1996 to US$ 80 million in the year 1997. The market attracted increasing investment from foreign as well as domestic players largely due to the boom in the information technology sector. A crash in the market during the period of 2000 to 2003 brought down the levels of investment. The total number of deals in private equity finance reduced from 280 in 2000 to 110 in 2001. The economy recovered in 2003 and the market growth rate accelerated from 8% GDP to 9% annually. 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Number of deals 5 18 60 107 280 110 78 56 71 146 299 Value of deals 20 80 250 500 1160 937 591 470 1650 2183 7460 (Source data: Private equity market in India Evalueserve Market research report 2007) Out of a total GDP of US$ 910 billion in India in the year 2006 approximately US$ 7.5 billion accounted for private equity investment. This amounts to 0.8% of the total GDP. A comparative analysis of the private equity investment in other developed countries reveal that the percentage spent on private equity is far below countries like United States and United Kingdom. Private Equity Investment as a percentage of Total GDP of some major economies: (Source: Evalueserve Market research reports 2007) A global stock market review conducted by Standard and Poor ‘s in May 2007 reveals that the Indian equity market has far surpassed the markets of emerging and developing nations for the past three months growing at a rate of 25.87 percent as opposed to other key economies that reported a growth rate of 13.83 percent. The Chinese market reported a growth rate of 16.82 while the Mexican market growth rate stood at 24.4 percent. The equity market in South Africa rose by 11.48 percent. It was observed that the Indian stocks were cheaper than the Chinese stocks. The appreciating rupee in India has led to higher capital inflow from foreign investors to the Indian economy and this is accounted for higher growth rate in the Indian economy. The increase in interest rates of banks across the globe has a positive impact on the Indian economy. This trend will result in reduced external borrowings and consequently the export segment of Indian companies will not be affected. Similarly other developments in the global economy has had very little or negligible effect on the Indian economy so far and this has proved conducive for the private equity market in the country. The Securities and Exchange Board of India (SEBI) has specified the regulatory framework for investment in private equity and venture capital segment in India. A foreign investor proposing for investing in the Indian private equity market needs to fulfill the following eligibility criteria and other requirements specified in the SEBI foreign venture capital investor guidelines: The applicant’s track record, competence, financial soundness, and experience in the related industry are evaluated. The applicant needs to obtain an approval by the Reserve Bank of India for making investments in the country. The applicant needs to be an investment company, trust, partnership, pension fund, mutual fund, endowment fund, charitable institution or any other entity incorporated outside India. The applicant can be an asset management company, investment manager, or investment management company incorporated outside India. The applicant must possess the authority to invest in venture capital or operate as foreign venture capital investor. Evaluate if the applicant is regulated by an appropriate foreign regulatory authority or is an income tax payer. Check if the Board has not refused the applicant a certificate. Check if the applicant is a fit individual with proven track record. Besides the above-mentioned eligibility criteria the SEBI lays down certain investment guidelines that need to be followed by the foreign investors: The foreign investor must disclose its investment plans and strategies to the SEBI. At least 66.67% of the investment funds must be invested in unlisted equity shares. Not more than 33.3% of the investable funds may be invested in: Subscription of initial public offer of a venture capital undertaking whose shares is not listed. Debt or debt instrument of a venture capital undertaking in which the investor has already made an investment by way of equity Preferential allotment of equity shares of a listed company, subject to a lock-in period of one year The equity shares or equity linked instruments of a financially weak or sick industrial company whose shares are listed. 5. Sector Wise Growth Trends in Private Equity Market The primary feature of growth in private equity market in India has been the increased domestic market investment opportunities that are dominated by both local and foreign investors. In addition to the increase in investment in Information Technology and Business Process Outsourcing sectors a large number of deals have been made involving the domestic market in India with particular emphasis on the manufacturing sector. In the year 2006 the total investments in the private equity market ranged from IT and IT-enabled industries, to banking and financial services, insurance and health care sectors, engineering and construction to manufacturing. While the IT and IT-enabled industries accounted for more than a fifth of the total investment, the manufacturing sector attracted approximately $1 billion. Another significant sector receiving substantial private equity funding was the real estate sector that received almost $1 billion funding in 2006. But a greater portion of this amount was used to acquire physical assets. Shankar Narayanan, the Mumbai based Managing Director of Asia Growth Capital at the Carlyle Group states â€Å"We’re sector agnostic. Broadly we see two investment themes: One, the growth of outsourcing, whether IT, IT-enabled services, generic pharmaceuticals, clinical research, contract manufacturing, engineering and design or any other knowledge based service; and two, the huge infrastructure and consumption needs this growth fuels.† Most of the foreign investors are channeling funds to the Indian and Chinese market that have shown tremendous growth potential. These investors scale up the operations of the acquired firms and facilitate all-round transformation that spruces up the firm’s processing capabilities. It is widely felt that the family owned businesses in India that have so far been conducted in an orthodox traditional managerial approach can widely benefit from the private equity funding. The financial, strategic, and managerial support provided by these private equity-investing firms can transform the company’s operations to provide larger scales of operation and world-class business outlook. The various industrial sectors comprising of financial services, manufacturing industries, construction and information technology are attracting the foreign investors to India. In the year 2006 the service sector accounted for 55% of economic growth rate while the contribution of manufacturing and industries’ sector was 26% and the agriculture sector accounted for 19% of the overall economic growth in India. There are basically three industry sectors that are proving highly lucrative for the private equity investors in the country. These are broadly categorized as below: Hi-tech products and service sector comprising of the following segments: Information technology and software application development Business process outsourcing Knowledge process outsourcing Drug research and clinical research outsourcing Engineering services outsourcing Software and solutions related to e-commerce Telecommunication products and related services The market trend reveals that this sector will grow at approximately 22% per year during the next five years. The investment in this sector is of high value with higher rates of return. Service and retail sector that caters to the Indian domestic market needs including – Retail market of consumable goods Travel and hospitality sector (airlines, hotels) Health care (spas, hospitals) Entertainment (movie and television industry) Private education sector   This sector is expected to grow at approximately 19% per annum in the next five years. Products and services related to high-end manufacturing and infrastructure that includes automobiles, automotive components, electronic components, chemicals, pharmaceuticals, gems and jewellery, textiles, real estate, and construction. The growth rate of this sector is expected to reach 19% annually in the next five years. The pie chart below gives an insight into the sector wise private equity investment trend in the past three years. The financial services received the highest foreign private equity funding totaling US$ 277.8 million that constitutes 19.8% of the total funds invested. The total funding in this sector including the domestic investment accounted for 32%. (Source: Thompson Financial) The next industry that received most funding in the private equity form was the consumer related sector totaling US$ 196.7 million. This was approximately 14% of the total foreign private equity financing. The overall financing in this sector was 23%. The Medical Health industry accounted for 16% of the total funding, with total foreign equity investment amounting to US$ 134.4 million, followed by construction accounting for 15% and the Internet related sector accounted for 14% of the total private equity investment including foreign and domestic sources. The graph below shows the breakup of domestic and foreign funds invested in the private equity market in India. As is evident from the graph the amount of foreign investment far exceeds domestic funds invested in the private equity market in India over the past five years. Private Equity investments in India – breakup of foreign and domestic investment over the past five years (Source: Thomson Financial) The private equity market is thriving due to the huge influx of foreign funds in the recent years. The appreciation of the rupee combined with a strengthening stock market and controlled inflation rates are responsible for the huge attraction that the Indian private equity market is having for foreign investments. Among recent activities in the private equity market in India is the acquisition of Hutchinson Essar Ltd, a cellular carrier by Reliance Communications facilitated by private equity players like Blackstone, Texas Pacific, and Kohlberg Kravis and Roberts with a funding of almost $10 billion. Private equity emerged as the single most largest investment segment in the year 2006 with private equity deals overtaking both foreign and domestic strategic investors. Private equity investment in India crossed the global average by 20 percent of investment as a proportion of total merger and acquisition deals accounting for 28 percent of total value of deals. 6. Problems Facing the Private Equity Market in India The rapid pace of economic growth in India has raised concerns regarding the stability of the economic environment. The economy poses certain risks and challenges to the emerging and developing market of private equity investment. The country’s population demographics present a confusing picture – 54% of its population is below 25 years of age that works in favor of the economic growth and development. But at the same time statistics reveal a large gap in income distribution. The economy is widely imbalanced in terms of income distribution. It has a large chunk of population still under the poverty lines and at the same time the number of high net worth individuals is increasing. Some of the important sectors of the economy like Information Technology and IT enabled services, telecom services, airlines services and construction services are experiencing shortage of skilled labors. Most of these sectors depend heavily on the human resource for survival and growth. With rising inflation and increasing wages the companies are finding it difficult to retain employees. Better pay packages are luring the skilled staff to hop companies and this has become a matter of grave concern for most organizations. Increasing attrition rates and rising wages are posing a serious challenge to existing companies and start-up business ventures. A few years back the economy was known for providing cheap and skilled labor but with rising inflation the wages have also gone up thereby increasing the cost to companies in addition to high levels of attrition. The rapid economic growth and rising GDP has resulted in increasing cost of commercial as well as residential property. The boom in real estate is reaping benefits for most landowners but the purchasing power of the people have not increased at the same rate. This might have a negative impact on the economy in the long run. The real estate prices will be forced to crash with lesser number of people being able to afford the rising prices. The crash in the real estate market will result in substantial losses for the investors. The Indian stock market is currently on a strong footage with number of companies listed in the Bombay Stock Exchange rising steadily. A market fluctuation might topple the stock market any time and this could lead to severe losses for the investors. Foreign investments in the Indian economy in the last four years have been on the rise and this is one of the major factors contributing to the overall development and progress. Short-term foreign institutional investors invested more than US$ 40 million in the country while long-term foreign direct investment was US$ 23 million in the last four years. The short-term investment can be pulled out in any moment of crisis and this could result in severe economic setback for the country. The rapid inflow of capital in the form of these short-term investments for purchasing equities and securities has no doubt strengthened the stock market, but an outflow of this capital will depress the stock market and cause the economy to fumble. The economy needs more of long-term foreign direct investment to stabilize growth. Lately the Indian rupee has appreciated by more than 10% with respect to the US dollar, 8% with respect to British pounds, 7% with respect to Euros and 11% with respect to Yen. On one hand this appreciation has benefited the economy by making imports cheaper and controlling inflation to a considerable extent. The price of crude oil has been kept in check in India due to this reason. On the other hand the valuation of exports has gone down and this has hit some of the small-scale exporters hard. Moreover the Indian goods have to compete with Chinese goods in the market that are relatively cheaper and has captured larger market share. Broadly the Indian economy presents high risks to investors in terms of possible depreciation of rupee, high inflation, policies adopted by the Indian government for further liberalization of the economy and the highly volatile nature of the Indian stock market. Since the markets present high risks to foreign investors in the Indian market, they expect higher returns as compared to investments made in other developed economies of United States and Europe. The private equity firms that invest in these developed countries for a period of five to seven years expect an average net annual return of 13% to 15%. But the private equity firms investing in India have a time frame of three to five years and expect an average net annual return of 25% to 27%. 7. Future Trends in Private Equity Market in India Several factors have contributed to the growth and rise of private equity market in India. Among these the most prominent is the stable economic and political environment of the country that has triggered economic growth and prosperity in the past few years. The Indian economy is witnessing increasing number of high net worth individuals with increasing assets. The country has a large number of family-owned businesses that present excellent opportunities for investment and growth. Most of these businesses are changing their operational structure to accommodate new and better technology for higher returns. Tatas, Ambanis, Wipro (Azim Premji), Birlas,   Singhs (Ranbaxy) and Bajajs are all family-run business. The Bombay Stock Exchange lists 47 companies that are partially or fully family-owned businesses with a total market capitalization of US$ 345 billion in the year 2007. The changing faces of the traditional modes of conducting business have created huge scope for investment. The existing modes of operations require re-modeling and re-structuring requires adequate investment. The family-run businesses lack effective management and vision to expand in the domestic and global market. The infusion of appropriate capital funds with strategic management moves and planning can create a huge difference in this type of business ventures. An investment in such companies can prove mutually beneficial for both parties. This has created a huge demand for private equity investment. Rising disposable income in the middle and higher income group has led to significant changes in their lifestyle. This has created markets for new sectors of commerce. One of the sectors affected by the changing lifestyle of these classes is the growth in domestic flight service sector. The country currently has 325 airplanes on the domestic route but this figure is projected to reach 750 by the end of 2010 that is expected to generate annual revenue of US$ 12 billion. The rise in this sector has created the need for more airline maintenance companies that are so few in numbers currently. Likewise it has also created market need for airline certification companies that will certify and check the audit requirements of the airplanes and the airlines companies. This is just an illustration of how emerging economic trends have given rise to new service sectors that require financing. Similar trends are visible in the food and beverage industry sector. Rising demand for quality processed food and beverages are slowly making their presence felt with changing tastes and lifestyles. The automobile industry is yet another industrial sector witnessing immense market growth potential. Finer tastes and longing for world-class cars engineered with latest technological specifications is changing the face of this industry. This sector is expected to generate revenue of US$ 165 billion by the end of the year 2016. E-commerce is yet another avenue of potential growth and development. The sector being in its nascent stages has a long way to go in the Indian market. Industries are slowly realizing the revenue and growth potential of this medium and are revising their existing strategies to exploit the advantages of increased market share and global outreach. The need for skilled professionals for the rising industries and opportunities presented by the growing economy has driven the educational institutes to adopt new strategies and expansion models to cater to changing market needs. More and more companies are entering this sector to satisfy the growing market requirements. The real estate and hospitality service sectors are also experiencing widespread changes owing to changing lifestyle and increased disposable income. Investment in this sector needs to be carefully examined and studied since the real estate prices in India are overpriced as compared to other economies in Asia. A growth in market demand has resulted in subsequent rise in demand for capital investment. Favorable economic conditions have lured private equity investors both domestic and foreign to start operations in India. The country’s extensive pool of skilled labors has produced excellent managerial and entrepreneurial talent who has ventured into new and promising business ventures. The private equity market in the country is still in its initial phases of development and hence promises immense scope and potential in the near future. The increasing interest of global firms in the Indian market has overcome the challenge of attracting more funds into the private equity sector. The real challenge now lies in extracting maximum value from these investments and retrieve higher gains. Government policies have raised the foreign direct investment (FDI) limit in various sectors to attract more funds. The retail sector now has 51 percent foreign investment limit while in the telecom sector the FDI limit has been raised from 49 percent to 74 percent. Absolute ownership of foreign firms is allowed in some selected infrastructure sectors like development of new airports, petroleum, mining of coal and lignite, natural gas pipelines and mining of diamonds and precious stones. 8. Conclusion The impact of private equity funding on the country’s economy has been quite significant since this financing sector has added new dimensions to the booming industrial and service sector in India. The financing alternative available to the firms has not only assisted them in improving financial and market valuations but has also provided them with the necessary backing to fulfill expansion and diversification strategies to the existing line of products or services. Max Calderon, a senior partner of Apex Partners Worldwide, which is a $20 billion firm is of the opinion that the â€Å"drivers of the private equity investment in the Indian market include consolidation in fragmented industries, international expansion, increasing domestic market spend, and continued growth in value added services. â€Å" It is only recently that the private equity funds have adopted segmentation and specialization strategies in acquiring investment portfolios. Some of the private equity firms target early stage investment in technology or matured stage investment in manufacturing. The strengthening stock market is witnessing increased volumes of trading and this has eased the exit process for private equity funds investors. Multinational financial institutions like Citigroup Venture Capital, Barings and Westbridge Capital, Warbug Pincus and Actis Partners have taken strong interest in this emerging market. Global private equity players like Blackstone and Goldman Sachs have established permanent operations in the country to reap the benefits of this promising market. The key factor to successful operations in this market will depend largely on one sole factor – the right leadership and availability of a strong team of professionals. The private equity market requires adequate managerial talent for designing effective business strategies for successful acquisitions made by the investors. It is therefore essential that the private equity firms focus on specific industry sectors to build their professional expertise and specialized areas of operations. This builds on the firms’ value and potential for higher rates of returns over their invested funds. The private equity firms hence not only need to look into the experience and skill sets of the professionals they hire but also need to train them on the finer aspects of the business requirements. The team of executives need to take overall responsibilities of entire operations and functioning within the company and think as owners while devising strategies and business plans. An in-depth knowledge of the business and market area is an essential asset for this venture. Experienced professionals are hence much in demand and a valuable asset for this market segment. The private equity firms also need to conduct extensive and in-depth market research and analysis activity before investing in any company. The Indian economy presents a diverse and variable growth indicators across the geographical boundaries. An understanding of the existing socio-cultural and political environment of the region helps to understand better the market and consumer behavior pattern. The investors across the globe are increasing fund allocations for the private equity market in India. It is boom time for this market segment and the trends of growth will continue over the coming years with the adoption of adequate government policies and measures to ensure a strong market performance.   The private equity market is reaping benefits on the one hand from expanding into overseas market through acquisitions and on the other hand investing into private equity assets managed by global fund managers. Reference: What PE firms look for in Private Companies – Financial Executive Journal from British Council, December 2007 Private Equity: How long can the perfect storm last? Financial Executive Journal from British Council, September 2007 Think like private equity to enhance Financial Executive Journal from British Council, November 2007 Evalueserve Whitepaper – An indispensable guide to equity investment in India, Facts and Forecasts – September 2007 –   Market analysis report from www.evalueserve.com From BPO to buyouts, Indian private equity is booming – 2005 AVCJ Private equity report – India Private equity pushes into India, Africa Financial Executive Journal from British Council, January/February 2008 Indian Buyouts – A market report by Anthony O’Connor Journal from British Council, June 2006 Economics of private equity market – Stephen D. Prowse, Federal Reserve Bank of Dallas – Economic review journal third quarter 1998 Recent developments in the private equity market and the role of preferred returns – Daniel Covitz and Nellie Liang, Board of Governors of Federal Reserve System, Washington DC   An overview of private equity: evolution of the asset class, rationale and considerations for investing and keys to success – James McGovern Review of the Economy 2007/2008 – Economic advisory council to the Prime Minister of India, New Delhi, January 2008 Our current perspective on private equity investing in India – Gopal Jain, Gaja Capital Partners Investing in India – Surging economy sees private equity investments soar by Arun Subramaniam – The Wall Street Journal, January 24, 2007 http://www.ventureintelligence.in/WSJ-01-07.pdf accessed on 30th March 2008   India’s economic star sectors: sliced and diced – an analysis on foreign private equity investments among India’s top industries – Thomson Financial www.thomson.com/financial   Private equity in India – adding human capital to the value creation recipe – Luis Moniz – Heidrick Struggles http://www.heidrick.com/NR/rdonlyres/BDE42EF8-E443-44D9-9B6F-48E69D67093D/0/HS_PrivateEquityIndia.pdf accessed on 31st March 2008 Private equity market in India http://www.indiaopportunitiesfund.com/private-equity-market-in-India.html accessed on 31st March 2008   India tops global market with 26% growth: SP – June 9, 2007 http://www.thehindubusinessline.com/2007/06/09/stories/2007060906500100.htm accessed on 30th March 2008   An introduction to Private equity http://www.bvca.co.uk/publications/guide/intro.html accessed on 30th March 2008 What is private equity? http://www.ipeit.com/pe.htm accessed on 30th March 2008   http://www.indiape.com/ accessed on 30th March 2008 http://www.idfcpe.com/pages/main1.html news articles accessed on 30th March 2008   http://www.privateequitycouncil.org/ Public Value: A primer on private equity 2007 – accessed on 30th March 2008   Economy watch – Indian economy overview http://www.economywatch.com/indianeconomy/indian-economy-overview.html accessed on 30th March 2008   http://news.indiamart.com/news-analysis/india-is-most-immune-18256.html accessed on 30th March 2008   Global research project on growth – India: Economic Growth, 1950 – 2000 by Shankar Acharya and Isher Ahluwalia http://www.gdnet.org/pdf2/gdn_library/global_research_projects/explaining_growth/India_complete_31Mar04.pdf accessed on 30th March 2008   The rise of Indian Economy: John Williamson http://www.unc.edu/depts/diplomat/item/2006/0406/will/williamson_india.html accessed on 30th March 2008   Indian Economy – Section 1: Economy and Markets http://www.bseindia.com/downloads/IndianEconomy.pdf accessed on 30th March 2008   Private equity article: http://www.privateequityinfo.com/article.php accessed on 30th March 2008   Globalization of alternative investments – working paper volume 1 – the global economy impact of private equity report 2008 – World Economic Forum http://www.weforum.org/pdf/cgi/pe/Full_Report.pdf accessed on 30th March 2008   A coming of age for private equity Business Standard, 7 November 2007 http://www.mayin.org/ajayshah/MEDIA/2007/pe.html accessed on 30th March 2008

Concepts of Social Responsibility Essay Example for Free

Concepts of Social Responsibility Essay Business organizations today are socially and ethically responsible for doing the right thing, exercising good judgment in their business activities with employees, stakeholders, customers and the community. Business organizations emphasis should not only be on profits, but also on how business decisions impact society. Company Q is a small grocery store chain located in a major metropolitan area. This company will be evaluated on its attitude towards social responsibility. Also, recommendations will be given in three areas indicating how the company could improve its position regarding social responsibility. First of all, Company Q’s decision to close stores in high crime areas will have an adverse effect on the communities where they conduct business, leading to disruption and hardship in the lives of many. This definitely demonstrates an irresponsible attitude toward social responsibility. In terms of social responsibility, Company Q could help enrich the lives of families in need by supporting local community centers. Community centers play an important role in addressing the comprehensive needs of individuals and families by providing a wide range of resources that are most needed. Moreover, a responsible business could initiate programs to help disadvantaged youths and adults in the community, build employable works skills and connect them to career opportunities. Without question, the more job opportunities and employability of the citizens in that community the lower the crime rate would be. Finally, if Company Q is to be socially responsible, it must not only be committed to making a profit, but also to the economic development of the community where it does business (Ravindran, N. 2008). Secondarily, Company Q’s reluctance to offer health conscience customers a wide range of organic and healthy foods because the products are considered high margin items, is socially irresponsible and bad for business. A growing number of consumers favor organic foods, claiming that it tastes better and is healthier. Why organic? Organic foods grown naturally in well-balanced soils, ripened by the sun are healthier and tastier than products with synthetic chemicals and growth hormones. Moreover, the growing number of conscience consumers was highlighted in a recent Bursen-Marsteller report; â€Å"people will more likely choose a product that supports a social cause when choosing between otherwise similar products† (Penn, Schoen Berland, 2010). These average consumers daily decisions are slowly but surely being influenced by social concern and responsibility. Finally, the critical issue for Company Q is the social responsibility to its customers, who looks to business to provide them with satisfying, safe products and respect their rights as customer. Lastly, Company Q decides to throw away food products, instead of donating it to the local food bank. Sadly, this behavior demonstrates a concern for profits before people attitude, which is socially irresponsible. Businesses can no longer ignore social issues because a business is a part of our society. For Company Q to become more socially responsible its sole objective must not only be to make a profit. But include concerns and responsibilities to the general welfare of the communities and societies in which they operate. Moreover, businesses should simply want to make their communities better places for everyone to live and work. The most common way that businesses exercise their community responsibility is through donations to local and national charitable organizations. Doing simple things like contributing to local food banks, may not be enough to change the world for everyone, but does alleviate some of social ills that abound in local communities.

Overview Of Tata Steel Pre Merger

Overview Of Tata Steel Pre Merger TATA Steel, earlier known as TISCO, is the iron and steel production company which is the flagship concern of the TATA group, Indias largest private corporate group. Tata Steel was established by Indian Parsi Businessman Jamsetji Tata in 1907. As of 2005, TATA Steel was Asias largest private sector steel company. The company was also recognized as the worlds best steel producer by World Steel Dynamics in 2005. Tata Steel has set an ambitious target to achieve a capacity of 30 million tonne by 2015. To this end it acquired Singapore based NatSteel in 2004 and acquired a 40% stake in Thailand based Millennium steel. Through these two acquisitions, TATA steel added about 3.2 million tonne to its production capacity. As of 2006, TATA Steel had a production capacity of 5.3 million tonnes. After the Corus acquisition (18.2 million tonne), the net acquired capacity was 21.4 million tonne, and TATA Steel plans to add another 29 million tonne by this route. Thus we see that TATA Steel seems to have a definite strategy of increasing capacity through acquisition and is acting on it rapidly. At this point we will conduct a resource based analysis of this strategy. A resource based view of strategy emphasizes the internal resources of a company in the formulation of strategy in order to achieve a sustainable competitive advantage. The following model makes this process clear:- Resources Resources are the input which an organization uses to carry out its activities. And yet organizations in the same industry might have similar resources but have differing performance, since they may utilize their resources differently. For a resource based view, Assets available to a business may be classified in the following form  [1]  (Resources in management TRIZ, Business level):- TATA Steel Particulars Pre Merger Post Merger Tangible assets (in Rs. Crore) Fixed assets 9865 11040 Current assets 2174 2332 Financial assets (in Rs. Crore) Assets (cash) 288.39 7681.35 Net Worth 9755 14096 Intangible Location Jamshedpur Jamshedpur Size World 56th largest World 5th largest Competition None domestically None domestically Thus we can see that prior to the merger TATA Steel was a very large domestic steel player, in fact the largest in India. The location advantage conferred by the plant being in Jamshedpur was aptly put by Mr. Ratan Tata, who said that the owners of iron ore will be the rulers of the steel industry. Its captive raw material resources and state of the art 5 million tonne plant at Jamshedpur gives at a competitive edge. This capacity is slated to go up to 7 million tonne. In addition, TATA steel has extremely good relations with the government in the region by virtue of its long standing developmental efforts in the region. As a result, TATA Steel has acquired a great deal of goodwill among the local population and consequently, the government. This is apparent in the Greenfield projects which the group is setting up in the region:- 6 million tonne plant in Orissa (India) 12 million tonne in Jharkhand (India) Capabilities However, the best resources in themselves are of no real value to a company in and of themselves. The organization must have the capability to employ these resources properly. It is these distinctive capabilities of an organizations resources which result in a competitive advantage. But this advantage is sustainable only if this capability comes from some characteristic other firms do not possess. TATA Steel is one of the lowest cost steel producers in the world. It is also one of the even fewer steel companies which are EVA positive. It has an operating profit margin of nearly 40%  [2]  (avg. = 16%). As an indication, only two manufacturers in USA (and none in India) have higher margins. At the same time, growth rate for sales was 232% and net income was 590%  [3]  . Adding this information to its captive raw materials resources as explained previously, we can see that TATA Steel had a unique position as an extremely low cost steel producer in an extremely fast developing region of the world. Tata Steel holds a very vital place in Indian business history, because it has introduced some of the unique concepts like 8-hour working days, leave with pay and pension system for the first time in India and the first player to start rapid industrialization process. In the later part, the concepts invented and implemented by the Tatas became law and compulsory practice for the Indian employees. A direct result of these employee friendly practices is the goodwill which TATA Steel enjoys among its workforce. In consequence, the Jamshedpur plant furnaces have never been closed down due to industrial strife. Thus we can see the two major capabilities which enable TATA Steel to employ its resources effectively extreme operating efficiency and employee friendly policy. Another point of note is the extremely cash rich status of the organization even prior to the acquisition with an interest coverage ratio of 32, and a growth rate of 380% for net cash flow from operations. Competitive advantage At this point we can clearly see the sources of competitive advantage for TATA Steel prior to the merger. Therefore let us examine its position in the market prior to the merger, with the Porters five forces model. 1) Threat of entry of new competitors The steel industry is one which has a very high entry barrier. In addition, established players already enjoy customer loyalty, and hence it will be difficult for new players to gain market share. On the other hand, the sector promises high returns in future. 2) Intensity of competitive rivalry In terms of price, quality and innovation TATA Steel had no domestic competition as of 2005-06. However, on a global scale, it was just so small in terms of volume that it could not bring into play the economies of scale of the truly major players. 3) Threat of substitute products This threat is well nigh negligible with respect to steel. 4) Bargaining power of customers The steel industry is one of periodic swings in demand. However, with an average growth rate of 7% expected in countries like India, China and Brazil in the foreseeable future, we can safely assume that price of steel will continue to rise. In fact, the price of steel has doubled over 2006-2008  [4]  . However, it is also accepted that consolidation in the steel industry will lead to stabilisation of world steel prices and higher bargaining power. This is necessary because the buyers are consolidating e.g. auto makers are consolidating with six to seven global majors. 5) Bargaining power of suppliers The three major iron ore suppliers CVRD, Rio Tinto and BHP Billiton have a 75% market share and 40% margins. Clearly, small players are at a distinct disadvantage. Strategy In this context, let us examine the strategy of acquisition as proceeded upon by the TATA Steel management. First, TATA Steel had proximity to low cost iron ore, and the capability to take advantage of it. As a result, TATA Steel had acquired leadership status in the Indian market. In terms of the BCG Matrix, it would be considered a star. However, if it does not grow into the international it would, sooner rather than later, become a cash cow. In order to remain a star, it would have to grow its capacity and become a world major. However, before the Corus acquisition, it was only at 56th position in capacity. In terms of the world market, TATA Steel would find market penetration in Europe or America extremely difficult. In addition, as explained via the Porters five forces model, steel producers are on the wrong side of the equation both with respect to the buyers as well as suppliers, who are well consolidated and hence in a position to dictate terms. Hence, it is necessary for global steel players to consolidate as well, and thereby acquire a position of strength. This would decrease price fluctuations and increase earnings multiples. Hence, considering resources (cash, technology) present with the company, the competitive advantage it enjoyed (low cost, high margin) and the market conditions (consolidation), acquisition of some major manufacturer and jump into the big league was the only choice. Strategic Decision Undertaken The strategic decision we will be considering for the purpose of this project is Tata Steels decision to acquire Corus and the how they went about the entire process. The reasons behind the takeover will be viewed in detail along with a resource based view of the resources so collated by the newly formed company now known as Tata Europe. I really believe that the owners of iron ore are going to rule the industry. They will be OPEC of the steel industry. (Ratan Tatas interview to McKinsey Quarterly quoted by Wheatley in Financial Times, January 29, 2007). This statement made by Ratan Tata expresses in clear words the true reason behind the adoption of this strategy. Corus- An overview Corus headquarter in London, Europes second largest producer of steel and the 9th largest in the world was founded in the October 1999 via a merger between two companies British Steel and Koninklijke Hoogovens. This merger was a result of the privatization of Steel producing companies by the U.K government. In the year 2005 its revenues stood at  £9.2 billion. Corus had a divisional structure which comprised the Strip Products division, the Long Products division, Aluminum Division and the Distribution Building division. Corus customer base ranges across countries of the world and its core businesses include the manufacturing, development and allocation of steel aluminum products as well as services. It has a diversified product services portfolio which comprise manufacturing of electrical steel, narrow strip, plates, packaging steel, plated steel strip, semi-finished steel, tube products, wire rod and rail products and services and also design, technology and consultancy servic es. To support this elaborate array of products services, Corus employed about 42,600 employees in sales services centers across 40 countries. The main strength of the company lay in its international expertise with local customer service and its brand which stood for quality and strength Through the period of 200 2006 Corus grew via a number of acquisitions which did add to its large pool of long term debts, but nevertheless it has a wide range of customer segments ranging from commercial and military aerospace ventures, the automotive, construction, engineering, defense and security, as well as the rail and shipbuilding industry. Some of the Financial Information available in respect to Corus in the year 2005 has been put in annexure 1. Acquisition Based Dynamic Capabilities Tata Steel has often used the Acquisition strategy to expand their products and markets or gain other advantages and have in most cases been good at it. Looking at this strategic decision from Acquisition Based Dynamic Capabilities approach we find that over the years the Tatas have well groomed these capabilities into their system. There are three factors to consider here: Acquisition Selection Capability- Tata steel was correct in timing the merger as it was due to emerging trends in the world steel industry with the increasing consolidation in the market. With a eat or be eaten mentality it was essential for this strategy to be adopted in order to become the 5th largest producer of steel and give competition to post merger entities like Arcelor-Mittal etc. Also there would be multiple points of contact with their firms existing resources and those of Corus owing to the long list of synergies as listed in the following pages of the report. Acquisition Identification Capability- The most appropriate target for the Tatas was definitely Crus as there was the horizontal integration with respect to the R D capabilities that the Tatas were keenly interested in adding to their resource base. The Due Diligence was well carried out as though there were certain cultural issues in the way, the top management of the Tatas were fact to act in a manner to resolve the issues. Some of the steps they took involved retention of crucial executives of Corus to help in a smoother integration process and also aid in running the newly formed entity. Also the Tatas did not over pay for the deal as the market value of it exceed the price they paid, and the yearly savings expected from it were substantial. Apart from that they were able to gain access to wider distribution networks and newer markets. Acquisition Reconfiguration Capability- This is one of the most crucial aspects which can determine the success of failure of a merger. It involves the acquirer to be able to merger its resources with the new ones acquired and do so in a productive and efficient manner in order to enhance the functioning of operations etc. Tata Corus Merger Tata steel started the acquisition process in the year 2005 but since Corus had been involved in a number of its own acquisition processes the deal was finally closed with the acquisition of Corus on the 2nd April 2007 as per official records. The price paid or the same was considered to be too high at an overwhelming $12 billion out of which the Tatas financed the deal with only $4 billion. This strategic decision undertaken by Tata Steel raised their rank from the 56th to being the 5th largest steel producing company in the world. In all fairness it is necessary to note that this acquisition did not come to the Tata with ease, as though the bidding started at 455pence per share, by the time the deal came to a close it had resulted in gaining a price of 608pence per share. This 33% hike in bidding rate was caused due to the emergence of another bidder, the Brazilian Steel maker Companhia Siderurgica Nacional (CSN). The Counter Bids The deal so made was a 100% acquisition and the newly formed entity now renamed Tata Europe is being run by one of the subsidiaries of Tata Steel. As Corus had been looking to make an exit, Tatas acquisition proved to be a profitable opportunity. The expected synergies deemed the deal to be beneficial for the Tatas as although some said that the Tatas overpaid, it was clearly communicated by the Tatas that they had paid much less than the replacement cost (market value) of all the assets they were able to acquire via this merger. Reasons For This Merger Strategy- The Global Trends The Steel market in the world had been witnessing some very strong trends which called for such a merger. There are a series of mergers which happened in the world steel industry which include some of the following: In 2004, Mittal bought International Steel Group, an American company which included assets of the previous Bethlehem Steel. Mittals merger with Arcelor ($36.1 billion offer) in 2006 created the largest steel company in the world. In October, 2006, Russian steelmaker Evraz Group bought Oregon Steel Mills of the U.S. for $2.3 billion. Nucor, the second largest US steel producer, acquired Harris Steel Group of Canada for $1.07 billion in January 2007. Severstal, the largest Russian steelmaker had invested $800 million in a new plant in Mississippi and $900 million in a plant near Detroit. Essar Group of India has made a $1.6 billion investment in Algoma Steel of Canada (2007) as well as $4.65 billion offer to buy Minnesota Steel Industries. On May 4, 2007, Swedish steelmaker, SSAB, made a $7.7 billion cash offer to acquire Ipsco of Canada. Global Steel Production in 2005 Hence we see that the environment of the steel industry was amenable to consolidation. There was a strong desire among key players to gain efficiencies resulting from steel production. Some of the reasons for such a trend towards acquisitions were: Obtaining access to new and growing markets Enhancing purchasing power with respect to suppliers and buyers Growing economy of China and India during mid-2000s Higher degree of price stability better margins Attractive to Investors Eat or be eaten mentality A desire amongst the key players to gain efficiencies resulting from scale Steel prices have been on an upward trend as can be seen in the following graph. This phenomenon started in the year 2004 and slowed down due to the economic crisis in 2009. But a great deal of volatility has been witnessed in the market and had been another major reason to consolidate so as to have a greater hold on the market dynamics. There was also lot of speculation in the market about China, the worlds largest producer of steel to increase its capacity resulting in a dip in world prices of steel. Growing economies like China and India did make up for a major demand for steel and to meet this requirement China was even importing steel from outside. Following is the graph of 2006-2008: Prior to the beginning of the deal negotiations, both Tata Steel and Corus were interested in entering into an MA deal due to several reasons. The official press release issued by both the company stated that the combined entity will have a pro forma crude steel production of 27 million tons in 2007, with 84,000 employees across four continents and a joint presence in 45 countries, which makes it a serious rival to other steel giants. Post- Acquisition Scenario A Resource Based Perspective Before After EBITDA 13% 25% Capacity 7 MTPA 25 MTPA Position 56 6 Business Resources with sub-categories in Management- TRIZ Concrete Level Business Specific Level Tangible Assets Fixed Assets Assets: 23741.48 cr Cutting edge technology- providing metal solutions Low cost upstream Tata facilities with high end downstream processing facilities of Corus RD facilities of Corus Intangible Assets Human Distribution networks, Research and Development capability of Corus to be leveraged for Tata Steels green field projects in Orissa, Bihar and Jharkand Finances Capital, Obligations and Savings To finance the deal worth $12 billion the following sources were used: Equity by Tata Steel: $ 3.88 billion Bank loans: $ 8.12 billion by Credit Suisse, ABN Amro and Deutsche Bank Long term loans obligation to be paid by Corus cash flows Obligations: Total interest obligation: $ 640 million to the already existing interest obligation of Corus amounting to $ 400 million Pension liabilities of Corus $ 24 billion Cost Synergies: Production cost $ 710/ton which is far less than a green Field project which would cost around $ 1200-1300 per ton Savings of $350 million per year through synergy General Characteristics Location of Operation Main Center India; UK, Netherlands and South East Asia Markets Innovative solutions to: Construction, Packaging, Automotive, Aerospace Energy, Engineering, Defense and Security, Consumer Products, Ship Building, Rail Greater access to market and Significant presence in over 25 countries or regions Products Bar billet, Business services, Construction products services, Electrical steels, Packaging steels, Plates, Plated steel strip, Pre-finished steels, Rail products services, Sections, Semi finished steel, Specialty, Strip products, Support products, Tube Products, Wire Rod Size Post Acquisition Sales Rs 8105.30 cr Production Capacity 26 million MTPA Competition Position 5th largest Steel Maker with a production capacity of about 26 Million Tons Per Annum Strengthened position in construction, automotive and packaging construction sector Management Resources with sub-categories in Management TRIZ: Concrete Level: Management Specific Level: Planning and Coordinating; Strategic Planning- For the growth and globalization the route of acquisitions was taken up and the logic has been explained before. Post acquisition the top management of the acquired company was retained for effective integration of processes Operational Planning-. The Tata Steel and Corus operations were being run as one virtual company with performance improvement tasks being undertaken in each location. The aim was cross-fertilization of research, development of capabilities across functionalities and transfer of best practices from Europe to India. Organization- Company Operational Structure- 15-18 teams were formed with 3-4 members each with joint representation in teams to look at various synergistic avenues Company Organizational Structure- Corus Tata SteelIntegration Team- 7 members Several Task Force Teams were also constituted for integration. Organization and Environment- Government and society- The acquisition had a very positive response from India, Indians felt patriotic towards this investment. In fact the Indian Trade and Commerce minister Kamal Nath commented that the global perception of India is now changing. This way the Indian government and society was quite supportive of the deal, in spite of critics commenting that the deal was over-priced. The historical ties between India and UK were also becoming stronger, Trade and Industry were looking up. Markets- the Tata Steel stock attained a 52 week high of 721 on March 2007, showing positive investor response. SPs credit rating also improved Informal Organization Culture- Both the organizations had similar performance culture with respect to aspirational targets, safety and social responsibility, continuous improvement and openness and transparency. However, there were some cultural issues: Inherent in the mind of the employees. Resentment of being governed and managed by a former British colony Insecurity of production centers shifted out of the UK to low-cost centers. The labor unions in Europe raised their concern regarding this. Other Characteristics Compensation mismatch 18.5 % employee expense (Corus) 7.9 % employee expense (Tata Steel) Recent developments: In 2010 Tata Group has announced that the name and logo of TATA Steel will be used use for Corus. The transition also signifies that Tata Sons, which controls the use of the Tata brand, is satisfied that operations at Corus are now aligned with the characteristics of the Tata brand. The workers understand this is a name change and also realize that the Tata board has been supportive of the employees. It implies that synergies are being attained and that cultural integration is on the right path. Leadership: Common organization values for Tata Steel and Corus: Continues improvement program Integrity, respect for individual and world class governance Post- Acquisition: The company had effectively retained the top management of the acquired company to facilitate effective integration and to take care of the above stated cultural issues of the employees. This move coupled with effective communication has instilled confidence amongst the employees 2010 Current Executive committee which manages day to day operations of Tata Steel Europe (new name for Corus under Tata Steel) Value Chain Perspective There were significant effects that were seen on some parts of the value chain post Tatas acquisition of Corus. As already detailed above, Tata saw Corus as a strategic acquisition and took some immediate and long term steps to make the acquisition a success. Operations: This part of the value chain witnessed a saving of a whopping $103 million in 2008 09 post the integration process. Performance Improvement Teams (PITs) in 15 different areas were identified. These teams engaged in various new cost related projects in the wake of the economic recession and reduced volumes. The most important project that the teams worked on was the use of low cost coal for coke production and recycling of steel plant waste. Marketing and Sales: The acquisition of Corus gave Tata access to European markets in a very time efficient and cost efficient manner. Tata got access to the distribution network of Corus which was instrumental for its expansion in Europe. With the help of new capacity new products were introduced to cater to an expanding market in Europe. Post the acquisition, the company added flat products to Corus portfolio and thus strengthened Tatas position in the Automotive and consumer product segments. Tata globally became the 6th biggest player in the steel industry. Outbound Logistics: This function of the integrated company has undergone significant computerization and has led to more efficient supply chain management. The IT teams of Tata Steel Europe (Erstwhile Corus) are working in coordination with the IT teams of Tata Steel India to strengthen the IT support to this vertical. Both are also working to create online visibility of the operational performance of the organization. Procurement: This support function has seen significant cost savings driven by the increase in scale of the combined entity. Post the acquisition, Tata Steel Europe has appointed Lead Buyers for high value items and thus has streamlined the processes to a large extent. Contracts have been renewed for these suppliers and a resultant savings of over $40 million have been realized. Technology Development: The acquisition has provided Tata access to the latest technology and state of the art Research and Development setup. Tata has always been known for its technological excellence amongst the Indian peers but Corus took it to international standards. Post this deal, the total RD strength of the company has gone up to 1000 people. Process improvement teams have been set up leveraging the expertise of Corus for better process technologies. Through this RD set up TSE (Tata Steel Europe) has been working with various strategic partners one of them being the UK ministry of Defense. Human Resource Management: To increase efficiencies and in the wake of the economic downturn faced by the organization in FY 09, the company decided to cut its manpower costs by 20%. The target departments were IT, Finance and Human Resources. This undercutting was done through leveraging of Tata Steel Groups capabilities. A Performance Improvement Committee was set up during the integration phase and it still is responsible for knowledge transfer across the organization and adapting of best practices, which has to a great extent to Tata Steel Europe. Firm Infrastructure: Substantial steps have been taken in this regard in various departments such as finance, plants etc. This has been the pivotal point of addition in the value chain of the new company. Finance: Substantial expansion in the equity and debt resources was witnessed in order to acquire a big company as Corus. As the acquisition was essentially financed by raising substantial debt ($7.3 billion), the gross debt of the Tata Steel group stood at $10.54 billion in 2008 and increased to $11.78 billion by close of 2009. Restructuring of the debt has been witnessed in the recent past but the debt equity ratio still stood at 1.65 as at the end of FY 2009 from a low of 0.06 in FY 2006. Asset Restructuring, Integration and Divestment: With the acquisition of Corus, Tata Steel was the owner of an asset base that was thrice he size of the original Tata Steel and therefore was the need for integration of assets, divesting the obsolete assets and pairing down of overlapping assets. Immediate steps taken included closure of 4 plants and mothballing of 2 plants out of the 15 plants of Corus group. The expansion of the hot strip mill capacity at Port Talbot to 4mt. is on the table; and a decision to restructure the Corus Engineering Steels has been taken. All of this was done under the Fit for Future initiative undertaken at the merged company. Sources: Tata Steel Annual Report 2007 08 Tata Steel Annual Report 2008 09 Achieving Global Growth through Acquisition: Tatas Takeover of Corus, Journal of Case Research and in Business and Economics Tatas Acquisition of Corus: A Quantum Leap, Rashmi Malapur, The ICFAI University Press (2007) Achieving Global Growth through Acquisition: Tatas Takeover of Corus by Kimberly, Suresh and Jessica http://www.mumbaimirror.com/index.aspx?page=articlesectid=5contentid=201007022010070215213931780a91fb3 http://indiaearnings.moneycontrol.com/sub_india/compnews.php?autono=264760 http://www.tatasteeleurope.com/en/company/management/executive_committee/ http://www.financialexpress.com/news/tata-steelcorus-synergy-realises-76-mn-in-fy08/347487/