1987 32nd 2019 National Foundation of Indian Engineers Anniversary Monthly House Journal NAFEN Vol.: XXIX No.: 01 April, 2019 Web site: www.nafenindia.com

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“Domestic Markers Revenues Hit by Chinese Cos” Source: - The Economic Times, New Delhi, 8th April, 2019 KOLKATA: ’s top three mobile phone makers posted an accelerated fall in revenue in FY18, accounting for less than a quarter of the sales value generated by their Chinese rivals, the latest regulatory filings show.

The combined revenue of Micromax, Intex and Lava, which make and feature phones, fell 22% to Rs 10,498 crore in 2017-18, according to Registrar of Companies filings accessed from business intelligence platform Veratech Intelligence. In contrast, the combined turnover of the top three Chinese brands —, and Vivo — stood at Rs 46,120 crore, almost doubling from FY17.

Intense competition led to price under-cutting and dented the bottom line of the Indian companies, which took a combined hit of almost 70% from a year earlier for a combined profit of Rs 187 crore. In comparison, only Xiaomi was profitable at Rs 293 crore, while Oppo posted a net loss of Rs 358 crore and Vivo’s loss was ?120 crore.

The revenue decline of Indian phone makers will likely get more pronounced in FY19, with JioPhone, the from the Reliance stable, gaining leadership due to affordable data bundling and the Chinese brigade strengthening its dominance in smartphones.

“The trend of Indian brands losing their market share due to strong competition from Chinese brands will continue in 2019,” said Karn Chauhan, an analyst with Hong Kong-based Counterpoint Technology Market Research. “Still, Micromax and Lava are the only brands which can do well in the entry- level smartphone segment. Reliance Jio is another local brand to keep a close eye on.”

Micromax Informatics’ revenue from operations dropped 22% to Rs 4,345 crore in 2017-18, while profit declined 72% to Rs 103 crore. Lava International’s revenue in the same period took a hit of 10% to Rs 3,290 crore and net profit fell 46% to Rs 71 crore. Intex’s revenue from operations shrank 32% to Rs 2,862 crore, while profit plunged 90% to Rs 13 crore.

The Indian brands got sandwiched between Xiaomi in smartphones and Reliance Jio in feature phones, according to Subhash Chandra, MD of Sangeetha Mobiles, south India’s leading cellphone retail chain with over 575 stores.

“Whatever is selling today is only because a retailer takes interest in promoting them due to slightly better margins as compared to the Chinese brands,” he said.

Micromax was the fifth-largest smartphone brand in India in 2018, while Lava occupied that spot in the feature phone segment, according to Counterpoint Research. However, the share of both in these two segments was stagnant in 2018 over the previous year — 5% for Micromax and 7% for Lava.

(Your comments & Views on the above along with your name and email address are Welcome on [email protected])

NAFEN DIGEST April, 2019 Page No. 1 “Importance of Leadership in Present As a leadership, you need to interact with followers, Business Scenario” peers, seniors, and other people whose support you By need to accomplish your objectives. To gain their Amit Kumar Srivastava support, you must be able to understand and motivate Lecturer them. To understand and motivate people, you must Gyan Institute of Management & know human nature .Human nature is the comman Technology qualities of all people have similar needs .As a leader you must understand these needs because they are powerful

Lucknow. motivators.

Leadership and Communication Continued with last Edition:- Many of the problems that occur in a organization are Effective communication by leadership in three critical areas the direct result of people failing to communicate. Faulty was the key to winning organizational trust and confidence: communication causes the most problems. It leads to

confusion and can cause a good plan to fail. Helping employees understand the company's overall Communication is exchange and flow of information and business strategy. ideas from one person to another. It involves a sender transmitting an idea to a receiver. Effective Helping employees understand how they contribute to communication occurs only if the receiver understands achieving key business objectives. the exact information or idea that the sender intended to transmit. Sharing information with employees on both how the company is doing and how an employee's own division is Studying the communication process as important doing relative to strategic business objectives. because you coach, coordinate, counsel, evaluate, and supervise through this process. It is the chain of So basically, you must be trustworthy and you have to be understanding that integrates the members of an able to communicate a vision of where you are going. organization from top to bottom, bottom to top, and Notice how the "principles of leadership "in the next section side to side. closely ties in with this.

Leadership and motivation The process of great leadership

A person's motivation is a combination of desire and The road to great leadership (5) (common to successful energy directed at achieving a goal. Influencing leaders): someone's motivation means getting them to want to do what you know must be done. A person's motivation Challenge the process-First; find a process that you believe depends upon two things: needs to be improved the most.

The strength of certain needs. For example, you are Inspire a shared vision-Next, share you vision in words that hungry, but you must have a Task completed by a can be understood by your followers. nearing deadline. if you are starving you will eat. If you are slightly hungry you will finish the task at hand. Enable others to act-Give them the tools and methods to solve the problem. The perception that taking a certain action will help

satisfy those needs. For example, you have two burning Model the way-when the process gets tough, get your needs-The desire to complete the task and the desire to hands dirty. A boss tells others what to do…a leader shows go to lunch. Your perception of how you view those two it can be done. needs will determine which one takes priority .If you believe that you could be fired for not completing the Encourage the heart-Share the glory with your followers' task; you will probably put off lunch and complete the heart, keep the pains in your heart. task. if you believe that you will not get into trouble or

perhaps finish the task in time, then you will likely go to Impact of leadership in organization lunch .

Leadership and human behavior Leadership Secrets

NAFEN DIGEST April, 2019 Page No. 2 1. DECISIVENESS IS KEY Cooperation means working together. The principle of (LALIT KHAITAN, Chairman and Managing Director, cooperation is as old as human Society. It is truly the Radico khaitan) basis of domestic and social life. Cooperative effort is ultimately the group instinct in man, which enables him 2. VISIONARY LEADERSHIP to live together and help each other in times of stress (B.MUTHURAMAN, Managing Director, Tata steel) and strain. Unconsciously, the principle has always penetrated the life of human race. The history of modern The ability to create a shared vision among team civilization is in fact, the history of cooperation, for members is the primary trait of a true leader. without it social and economic progress would have been impossible. 3. RELATE AND RULE (N.LAKSHMI NARAYAN, CEO AND President, Cognizant Technology Solutions) In the primitive societies the germs of cooperation could be observed in religious institutions and traditional Good leadership is the ability to recognize all the customs. The working of these customs and institutions factors that would make the leader succeed in throw light on the instinct and tradition of mutual motivating the group. assistance, joint possession and joint management, which are found in the thinking and in the life of the 4. TAKE RESPONSIBILTY people in all ages and all countries. In India, for instance, (R.V.SHASTRI, Chairman and Managing Director, the principle of cooperation has been practiced from Canara bank) times immemorial. The spirit of village communities of India was almost entirely cooperative. A leader is only as good as his team. Leadership involves two steps: helping subordinates take In the modern technical sense the genesis of cooperative advantage of their talents, and then fine tuning their movement and its applications in the economic field can performance. Good leaders always take responsibility be traced after the industrial revolution which took place for both the success and failure of their teams in England during the second half of eighteenth and the first half of the nineteenth century. Today, cooperatives Conclusion are the most important type of voluntary organization throughout the world. In some countries, they are Leadership has paramount importance in present principal form of organization in agriculture, marketing competitive business environment, because with the help of and provision of credit and distribution of consumer leadership a company will face all the problems very goods. efficiently.

On an overall assessment, it can be concluded that

cooperatives are rendering fruitful services to the society

concerned especially to women. The survey reveals that

the women are able to enrich their lives. They are fully satisfied with services rendered by these cooperative ◊◊◊◊◊ societies. They got recognition in the society and also economic interdependence in the family. Hence, it is needless to say that cooperatives are playing a very important role in the empowerment of women through

“Women Empowerment Through various schemes. Cooperative Societies” By Introduction Dr. A. Vinayagamoorthy Reader Cooperation means working together. The principle of cooperation is as old as human Society. It is truly the Department of Commerce, Periyar basis of domestic and social life. Cooperative effort is University ultimately the group instinct in man, which enables him Salem-11 TN to live together and help each other in times of stress and strain. Unconsciously, the principle has always Abstract penetrated the life of human race. The history of modern civilization is in fact, the history of cooperation, for NAFEN DIGEST April, 2019 Page No. 3 without it social and economic progress would have been From the economic stand point, cooperatives are impossible. engaged in securing for their members services of various socio-economic activities in the consolidation of holdings, the establishment of irrigation schemes, the Concept contouring of land, the procurement of technical knowledge, the administration credit, the buying of In the primitive societies the germs of cooperation could be fertilizers, pesticides, seeds, electricity and machine observed in religious institutions and traditional customs. services, of consumers' goods and services, the The working of these customs and institutions throw light processing and marketing of produce, the provision of on the instinct and tradition of mutual assistance, joint insurance, health and medical care or education. possession and joint management, which are found in the Cooperation has also played an important role in thinking and in the life of the people in all ages and all checking monopolistic tendencies. countries. In India, for instance, the principle of cooperation has been practiced from times immemorial. The spirit of The social purposes of Cooperation are more diverse village communities of India was almost entirely than economic purposes. They may be to provide a cooperative. The villages have throughout the ages worked unique education in democracy, responsibility and together on an informal corporate basis with regard to their toleration to train for political power to evolve an religious and social and cultural life. industrial relationship in which the element of authority is much more evenly distributed than in private business In the modern technical sense the genesis of cooperative to preserve a strong friendly or family spirit and a sense movement and its applications in the economic field can be of pride and power which is impersonal to encourage a traced after the industrial revolution which took place in general advance rather than the advance of particular England during the second half of eighteenth and the first individuals to secure rational, constructive and unifying half of the nineteenth century. Today, cooperatives are the approaches to social and economic problems to prevent most important type of voluntary organization throughout under-employment to secure the moral as well as the the world. In some countries, they are principal form of physical satisfaction of pure, quality, correct weight, organization in agriculture, marketing and provision of honest measure, fair dealing in trade or to achieve better credit and distribution of consumer goods. The movement physical and mental health. The distinguishing now covers about 98% of the villages and 62% of the total characteristic and social features of Cooperative rural population. The caste, color, Religion etc., have not societies may in many circumstances make these been any bar for the development of the cooperative essential to the achievement of their purposes. movement. The working of the cooperative movement all over the world clearly demonstrates that there is hardly any Women are not only acting as a primarily obedient economic need that cannot be met by organizing daughters, wives and mothers in the society, but also cooperative societies and hardly any form social or political they are acting as Women entrepreneurs in the modern organization with which they cannot be reconciled or society to make themselves independent and support integrated. The cooperative societies have helped to family in the economic background and to keep social improve security of tenure of land; to consolidate holdings; prestige. The rapid growth of women owned business is to promote conservation of natural resources; to facilitate one of the most important economic developments of land settlement to foster the all important growth and recent times. They have started their business at more speed of technical knowledge for better farming to secure than twice the rate of men. A majority of women owned savings and administer credit; to reduce the charges made business are small retail or service firms and tend to be for production requisites and use of the larger capital items owned by one person. The areas chosen by women are for farm and small scale industrial production to reduce retail trade, restaurants, and hotels, education, cultural, charges for consumer goods and services including housing cleaning, insurance and manufacturing. The to improve the marketing of farm products to minimize Cooperatives play an important in uplifting their lives risks and to lower the costs of insurance. They have through various schemes. promoted education both general and vocational. They have provided effective training in democracy and self - At present 130 cooperative societies are functioning government. They have been neither class-bound nor state- exclusively for women under the control of social welfare bound. They have maintained or increased that sense of department apart from the schemes like micro credit interdependence so important for social progress. plan, personal loan, salary loan, entrepreneur loan etc.

Economic and Social Benefits A survey, which has been conducted among the women beneficiaries of cooperative sector in Kanyakumari NAFEN DIGEST April, 2019 Page No. 4 district in this regard; reveals the following This average age is 45, having different education from school to post graduates, doing various activities like agriculture, business, ◊◊◊◊◊ tailoring and other employment, and the average income is Rs.40000. They have availed loan under various schemes for women and the average lag in getting loan is 125 days. The average amount taken by them is Rs.37, 500 with the “Understanding Working Capital average interest rate of 15%.They have utilized the loan Management” under various purposes like self employment, agriculture, business, family expenditure etc. The impact of getting loan By has been analyzed with the help of the following formula by Dr. Sorab Sadri considering the respective items both before and after Research Professor & Director availing the loan. Rai Business School Navi Mumbai The result or impact in getting loan and the utilization of the & same lies in the increase in the income and the reflection on Dr. Sharukh N Tara increase in the expenditure, assets, home appliances, reduction in the loan and improvement of the standard of Senior Faculty in Finance and living. The survey that has been conducted on studying the Governance impact of loans through cooperatives to women reveals the Allana Institute of Management Studies following. Out of the sample beneficiaries, 94%are able to & Research, Mumbai increase their income, 34%have reduced their loan 56% are Visiting Faculty in Finance able to increase their expenditure pattern, for all the Rai Business School, Navi Mumbai respondents (100%), increase their assets in the way of business, agricultural equipments, land, building and the As we move from HR Strategy to Strategic HR, there is a like are possible, 62% are able to increase their livestock, growing need felt that people managers of the future are 86%are able to increase t the home appliances like mixie, going to be increasingly called upon to understand grinder etc., 52% have shifted their standard of living from financial management, information technology and low to average,30% from average to high and 12% from production systems. There is no denying this contention low to high with overall improvement of 94%. since every manager has to thrive on the cutting edge of global competition in the new world order and the WTO Regarding the attitude of the respondents towards the regime. And so his knowledge has to be well rounded. preference of cooperative banks, they do prefer it mainly This short paper is based on the authors interaction with because of the easy installment facilities which is followed the management teacher's fraternity in India ever since by the services rendered by them, the prevalence of less 1991 and the experience based conviction that both formalities, less interest rate, more subsides, counseling accountancy and mathematics remains a chimera that they got, training facilities and the availability of more the average HR Manager is only too happy to side step. It branches. is a well-documented fact that as more and more senior managers are expected to be multi-skilled and multi- Conclusion functional it has been observed that H R Managers are the ones usually left behind. They speak of On an overall assessment, it can be concluded that benchmarking but seldom practice it themselves. They cooperatives are rendering fruitful services to the society talk of funds management but there is invariably a blind concerned especially to women. The survey reveals that the spot about this in their mind's eye. Yet assessing the women are able to enrich their lives. They are fully satisfied impact of HR interventions and also balancing the with services rendered by these cooperative societies. They training budget needs at least a rudimentary knowledge got recognition in the society and also economic of working capital management. interdependence in the family. Hence, it is needless to say that cooperatives are playing a very important role in the On the other hand going through some of the empowerment of women through various schemes. assignments submitted by students specialising in HR at the MBA level convinces me of their abject ignorance of Finance. How can these students ever go in for successful Strategic HR interventions in the corporate world remains a major worry for teachers like us? That is what got us thinking and hence this paper is addressed NAFEN DIGEST April, 2019 Page No. 5 to these managers in waiting as well. To begin with let the Money is a matter of functions four, HR Manager (in practice or in waiting) appreciate that the A medium, a measure, a standard, a store. dark and dismal science of economics is certainly not dark neither is it dismal. It is fairly exact and very exciting So the question rises as to what is working capital? provided the tools are in the hands of the right craftsman Imagine a four-legged table with a glass top. This is the and the teacher knows his subject. We have always opined euphemistic structure of working capital. The first leg that people who are ill schooled in this fine subject should symbolizes cash and bank balances, the second leg have sufficient self-respect and refrain from teaching it. The symbolizes Inventories, the third leg symbolizes younger generation deserves this. We shall therefore begin Receivables and the fourth leg symbolizes Investments. with understanding some Economics (which we consider the The glass top symbolizes the allocation and utilization of jewel in the crown of social sciences) and move through scarce available resources so that corporate objectives common sense into one aspect of Financial Management are met. The tabletop made of brittle glass has to (which is a specialisation we consider to be bedrock of all support some very heavy iron weights and to top it all managerial sciences). In both instances mathematics is a there is a glass of whisky on it. The glass of whisky is language that the craftsman must understand and learn to stable so long as the four legs are equal and the top is use judiciously. From a teacher's viewpoint the author's even in surface. If any leg were to be longer than the rest advice to HR Managers (in practice and in waiting) is to get or shorter than them the whisky would spill. If the table their theory right since once theory is perfected reality were weak and cannot support the weights then also the would be unable to hold out. Case studies are an excellent whole structure would collapse. tool for teaching a subject provided the theory has been understood. If not, they degenerate into story telling Let us assume that the glass top supports all this weight sessions where the mouth starts to function long before the and in addition your wife brings a heavy steel dish full of brain is engaged into gear. This paper merely attempts to grilled chicken. The dish is inordinately heavy so the glass simplify the theory behind working capital management for top would shatter. Then you will surely lose the chicken, HR Managers in particular and non-Finance Managers in break the tabletop and more importantly waste the good general. whisky. To add it all you have to listen to your wife's admonishments. Some basic definitions in Economics must first of all be understood. Now replace the wife with the shareholders and the iron weights with your short-term liabilities. The dish of  Production is the creation of value. chicken with additional business you never expected but  Consumption is the destruction/conversion of the now has to be financed and which the four legs which state of that value. stand for your assets would have to support. The glass of  Distribution is the process that links the above two. whisky is replaced with profits. Now very simply, putting the right weight, having a balanced table and enjoying Some basic premises of the Economic science also need to your whisky and chicken in peace is what working capital be cited management amounts to. Keeping the wife pleased is a bonus.  All value is created by labour  Capital is man made aid to production In short, it boils down to the management of funds in the  Investment is the process of capital creation. short term as opposed to managing long-term capital such as shares and debentures. So you cannot say "I am investing two years of my time and Rs 2 Lakhs as fees in getting an MBA Degree." What you are The HR Manager must appreciate that short-term capital doing is making a financial outlay in the hope that the piece has to be repaid within a short period such as a year so of paper (Diploma /Degree) that you get at the end of the its management is volatile. Working capital is after all the two-year period can be traded for a job in the labour sum total of current assets, which are used to pay back market. What you get by way of knowledge is abstract current liabilities and generate profits. The goal of commodity and it can well be argued that both the teacher proper working management is to see that the current and the taught are partners in the expansion of knowledge. assets and current liabilities are maintained in such a Machinery, goods in process, inventory and buildings on the way that a satisfactory level of working capital is other hand are capital. Money is not capital. In fact maintained. It relates to funds in the short term or a Crowther's famous poem is very helpful to recall at this period normally one year and it is always transformed stage. from cash into other assets and back into cash within a business cycle. NAFEN DIGEST April, 2019 Page No. 6 COTTON TEXTILES 60-70% Now let us see what the cash we need has to do with the TRADING 80-90% normal operating time often called the process cycle time. Some types of businesses may have a longer operating cycle The ideal mix thus depends on the nature of the and this could be well more than a year or even a decade as industry. Now we shall very briefly take each component in the case of distilleries. Other businesses may have a short of working capital and see what are the best practises operating cycle as a fast food store. adopted by industry in managing them.

Inventory is one of the most important components of working capital and its proper management cannot be under stressed. Fundamentally, inventory consists of raw material, work in progress and finished goods. The proportion of inventories to fixed assets is quite high ranging from 25% to 45% in the manufacturing sector (in cement it is around 25%). Hence inventory management is crucial for all managers irrespective of functional specialization. Since a number of industrial relations disputes in manufacturing industries are linked to

production bonus and incentives relating to inventory Working capital could be either in terms of gross or net irrespective of the market need for inventory, the HR value. Whereas Gross working capital is the total of current Manager must understand this point well. Every member assets, Net working capital is the total of current assets of the organization feels its impact and yet scant respect minus current liabilities. As a rule of thumb the best is paid to it. This is most unfortunate. A serious study of possible practice is to see that there is sufficient liquidity to sick companies will support this contention. Hence those pay back current liabilities without blocking too much funds. managers who are involved with Strategic HR should The trade off between profitability and risk is the key to take note of some of these important criteria for insuring working capital management. Anyone working with a fixed proper management. training budget would find this easy to understand. Too little working capital increases profit but reduces liquidity, 1. Maintaining a proper level of stock as current assets are more expensive than fixed assets. For 2. ABC analysis to control high value items more instance if a management feels that worker training is a cost intensively as compared to low value items. they will apportion less funds for it. If on the other hand a 3. Proper ordering policies. management sees it as an investment in manpower, the 4. Pricing of raw material work in progress and funds allocated would increase substantially. finished goods.

5. Control over wastage and obsolescence. If at a point of time the organisation does not have sufficient funds to meet its short-term debts such as Further research by industrial economists sheds light on creditors and salaries as well as day-to-day expenses it may some practises adopted by various industries, which are become technically insolvent. On the other hand, if it is shown through extracts from their balance sheets. Let us very conservative it will have a surplus of working capital, quickly glance at some of these important indicators. which will adversely affect profits. So it is easy to appreciate that the ratio of fixed assets to current assets is a good Accounts receivable : This also forms an important part measure of the balance to be maintained. of working capital and depends on the credit policy

adopted by the firm namely There is no specific thumb rule. It varies from industry to industry and the nature of business. Some industry norms 1. How much credit to be given are given below. 2. For how long is it given

3. Discounts for early payment Proportion of current assets to fixed assets 4. Collection and recovery efforts

INDUSTRY PROPORTION Cash management: This as mentioned is the most liquid HOTELS 10-20% of all assets and is required to ELECTRITY DISTRIBUTION 20-30%

ALUMINIUM & SHIPPING 30-40% IRON STEEL & CHEMICALS 40-50% (Continued in Next Issue) NAFEN DIGEST April, 2019 Page No. 7 A R T I C L E S Readers are requested to send articles for publishing in NAFEN DIGEST

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