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Vol 2, Sept 2011

IBS Hyderabad

Editors Desk

From The Editors Desk


Neha Sharma

Inside the Issue:


1. The Shrinking Denominator - Rajlakshmi Mitra 2. Financial Crunch at Air-India - Puneet Gupta 3. Improving IndoUS Ties - Rahul Bhargava 4. SpotifyA Tryst with Technology - Shiv Mundhra 5. Neural Networks in Business - Juhi 6. Mobile Marketing - Keerthichand 7. If its in Your Psyche, Its in the Market - Mansimran Kaur 8. Rockonomics - Charu Attri

Hey There, Its almost the end of this semester with a flurry of assignments, presentations and project submissions doing the rounds all across campus. However, Club Ecobizz has been working round the clock to ensure that youre ahead of the competition by covering relevant issues and in-depth analysis of trends. Ranging from Currency Depreciation, The Air India Crisis, Indo-US Ties to an economic viewpoint on Neural Networks and Consumer Psychology along with trends such as Mobile Marketing and Rockonomics. To close on this Semester, We wish the Junior Batch all the very best for their first set of End-Terms and the Senior Batch a whole lot of luck for the upcoming Placements as the theyre pretty accustomed to the End-Terms already! Heres hoping that you have a great and enriching read! Warm Regards, Neha Sharma Editorial Head

*Newsletter Published by Piyush Agarwal September Vol 2, 2011. The Ecobizz Newsletter

IBS Hyderabad

Economics

The Shrinking Denominator


- Rajlakshmi Mitra

We

are living in an era of ch eap currencies. Gone are the days when devaluation was taken up to balance the deficit of payments, to speed up manufacturing sector, create employmen t opportunities thereby providing social and economic growth. Putting it in a better way, depreciating currency is not a reliable measure to improve economy, unless and until Govern men t executes proper economic planning so that th e amount of devaluation stabilizes th e external value of money. But the present situation deliberately deviates from the execution of th e fact that devaluation of currency is unreliable. In fact, it seems as if it has become a practice and not remained a necessity anymore. As more and more countries are bleeding in debt, the easiest way the Govern ments find to cope is cheapen their currencies and create more mon ey. Dont they realize that creating more and more money dilutes its buying power? If they do realize this fact, then why are countries indulged in this global currency war? Have th ey ignored the fact that there are many dangers associated if value of money is reduced too quickly? I dont think there is any dearth of world class economists who may not be acquainted with the fact that rapidly depreciating currency leads to lack

This depreciation of currency has come up as a result of a thread of events.US is under huge debt and fiscal deficit. The fiscal deficit has been over 10% for three years and net debt has risen by 24% points of GDP over three years!

of in vestor confidence and termination of foreign investments in the country which would ultimately make it impossible to finance the curren t trade deficit! In spite of all this, this practice continues. Wh y?? The only argument made by many is, US and other economies can recover by improving upon exports, and a devalued currency would help doing that. More and more countries are realizing the trade advantage from weaker currencies and have plunged in this currency war. They are reluctant to appreciate their currencies because of the fear that doing so will not only lead to loss of their permanent share in market but also their competitiveness in market share. China had been gaining unfair trade advantage through its weak currency, but has been pressurized by European Union countries to raise its currency. The US debt is so large that simple measures like increasing tax, reducing deficit cant resolve the situation. Also effective measures like reducing entitlements and withdrawing overseas troops cant be implemented if the political situation of US is considered. As a result, US is pumping huge reserves of liquid money in its commercial banks.US banks toda y hold $1.6 trillion excess reserved money, which was $1 trillion a year ago. Whereas, only $77 billion is the amount required to reserve. Almost an
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Economics
inflation. Presently, prices of gold, oil, wheat, sugar, soybeans are touching new heights. How is the common man supposed to survive? Why is he paying the price of this currency war without any fault of his? A commodity price is taken as ratio of demand in the numerator and the value of currency in the denominator. While th e population is proportionately increasing day by day, causing the demand to rise manifold, keeping th e denominator high, the value of dollar and euro is drastically decreasing. The denominator is shrinking!!!! As a result there has been a huge gap in meeting the demands of the people. World economies should gear up, realize that depreciating currency is not the only way to grow economy. Economic growth is incomplete unless and until the demand of the crowd is optimally met.

unimaginable situation for any developing coun try to hold such huge amount of liquid money. The effect has been more disastrous. With huge debt and economy paralyzing gradually, unemployment rate has risen. Consequently, the biggest fear is that, if the unemployment rate contin ues to rise, in vestors will los e con fidence, businesses will be unwilling to take risks, thereby elevatin g th e tendency to hold assets in liquid forms, etc. So, if US economy continues to perform badly in th e second half of the year, US Government will be forced to print money and devalue its currency. Well, there are signs of recovery from the debt crisis, but the impact on th e globe is going to last long. The long lasting effect of which I a m talking about is while the countries are involved in this rat race of cheapening currencies to gain trade advantage, arent they focusing on the flipside of the situation? Arent they aware of th e fact that steep decline of currency gradually leads to inflation? US will come out of the crisis some day or the other as it has that much of capability to do so but, if this continues, will other countries be able to overcome th e vicious trap of inflation? As the currency deteriorates, import of goods and services become more expensive, hence causing
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Strategy

FINANCIAL CRUNCH AT AIR INDIA


- Puneet Gupta

AI selects Booz, Rothschild for cost restructuring, AI may announce 50% incentive cut, Pilots refuse to meet with Air India management, AI asks employees to accept salary cuts. These are the news headlines that have been flooding the media and all major newspapers in the past few days. The oldest and largest airline in India serving Asia, Australia, Europe, and North America, is facing financial crunch and constantly incurring losses. It seems that the MAHAR AJA (Mascot of Air India) is losing its shine under the black clouds and unabl e to control i ts kingdom. India is emerging as a global player in th e aviation industry. Increasing per capita income, low air fares by differen t carriers, major business and tourist destination have accelerated th e growth of Indian aviation. This kind of a scenario offers ample opportunity to Air India to encash on this opportunity by providing its best services but due to its financial instability, it has not been able to avail these opportunities. But now the question is how Air India can ensure its survival in such a competitive market where every player in the industry is executing its operations at its best. Before we offer remedies, I think the possible reason for its downturn should

be discussed. REASON FOR DOWNTURN The foremost reason for its downturn is inefficiency in its operations but the management attributed other reasons for its financial mess. According to them, rising fuel prices, high interest rate for loan paymen ts with low returns are the major reasons for thei r downfall. Further the fuel suppliers also backed out in supplying oil to AI which lead to the cancellation of many domestic as well as international flights affecting the brand as a whole. From the last few months oil prices have been on rising side affecting the supply of it to AI. It reported a cumulative loss of 22,165 crores and estimating Rs 6,994 crore losses in 2010-11. Moreover the political interference on a daily basis was hampering the growth of AI. Even th e bailout packages by th e Indian govern ment didnt make any great difference. As a result the question of its revival becomes the most frequent question asked among the analysts. IMPACT ON ORGANISATION AS A WHOLE The impact of bein g operating in losses could be seen in the form of strikes by employees as it was
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Maharaja, which used to be always in skies and dreamt high is facing financial crunch due to which many problems crop up. Turnaround and financial restructuring are being planned to survive in the market for long run but ultimately it is their efficiency which can save it from this crunch.

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Strategy
The company has to take some efforts to overcome the problems . Since th e major reason for increasing the cost is Aviation Turbine Fuel (ATF), the focus should be to optimize the fuel cost. For that it has to reduce the number of flights to non profitable routes and combine flights to certai n routes like Delhi Mumbai Chhattisgarh. Secondly, it should offer superior services to gather more and more traffic and maximize its revenue. Another problem that is being faced by Al in its working is its capital shortage, due to which it is constantly taking funds which increases the interest costs. The aircrafts which are obsolete should be disposed off and replaced it with modern aircrafts to bring efficiency. An other solution could be to follow the norms in order to become a member of star alliance which will drastically reduce their costs and increase the overall efficiency. Airlines such as LUFTHANSA, SCANDINAVIAN have been enjoying this status where these airlines have been recognized as worlds most reputed airlines. Star alliance provides con nectivity throughout th e world attractin g more customers for their member airlines. In the lon g run, it should optimize its staff by lay off (if necessary). Moreover, it should reduce its debt burden to maintain its credibility and recapture its lost market share and finally th e govt. should also extend its support time to time and ensure its survival. Many domestic flights are planning to go international, even some airline such as INDIGO has started creating tough competition for loss suffering unit and take away its market share. There has to be a collective effort from management as well as employees side to carry forward the legacy which was once started by J.R.D. Tata. If adequate steps are not taken, then we wont be able to see MAHAR JA in the skies a gain in future

not able to provide remuneration to its employee on time. There was a lot of hype related to cancellation of flights. It lead to coordination problems with the management as there was 50% cut in PLI (Production Linked Incentive) and three months salary to its employees also remained unpaid. There was no harmony between the employees and the management which further added to the misery of MAHARAJA Recently Al was given the opportunity to become a member of star alliance (worlds largest airline) but that could also not be exploited due to non fulfillment of norms which furth er added to their misery because it could not provide highest in dustry standards of customer service, security and technical infrastructure. Since Al represents the nation to the rest of th e world, it is the responsibility of the Govern men t of India to ta ke some precautionary measures and help Al to come out from the severe crisis that is currently being faced by MAHAR AJA. In time of crisis, people tend to spend less and save more of th eir money which indirectly affects airline industry. The government is looking for its turnaround and financial restructuring to bring it back on the right track. In th e revival plan, th e Govt. decided to provide 6600 crore of capital to Al to clear off its dues but Deloitte (consultancy firm) made n egative comments about its turn around strategy and found some flaws in it. According to th em, it has overplayed its revenue and growth projections (assumption that fuel price would n ot raise) are also not justified. So now the onus lies on the management to take it to the skies and make it fly once again. REMEDIES

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Emerging Markets

Improving Indo-US ties


- Rahul Bhargava

Every

time I come across anything about th e diplomatic talks between th e delegates of both the nations, I wonder what they really talk a bout. Nirupama Rao shaking hands warmly with her counterpart draws attention. I cannot control my eagerness to know what agendas are being discussed and in what contexts and direction. Then the very next day comes the news with quotes and speeches highlighting the discussed agendas which enables me to form a perception about the success or failure of the official talks. But the perception keeps on changing as th e da y wears on when I analyze the different opinions held by the experts, journalists, editors and ex-diplomats via news channels and internet. I share my opinion with friends, parents and colleagues. At the end of the day I draw a conclusion which may be against or favorable to th e desired outcome and I put it forward. Th e democratic structure encourages millions at different thinking levels to do th e same. From think-tank parliamentarians to experts and from scholars to an illiterate fruit ven dor comes a divergent view which creates a need to debate whether the ties between the worlds greatest democracies are improving. Lets initiate this debate! Richard Nixon was the first US president to un dertake a visit to India in his first term in office and that too in way back in 1969. Four decades hence, in November 2010 Barack Obama became

the second US president to visit India in his first term. The highligh t of the visit was that he addressed a joint session of the Parliament of India. Addressing the session, Obama extended his support calling India-U.S. relationship a defin ing partnership of 21st century and cited India as a strong contender for the permanent membership of United Nations Security Council. When nations talk they discuss mutual benefits with respective interests. US too had some motives . Th e US President visited India as an array of prickly bilateral issues confronted him, including differences over the proper regional roles to be played by China and Pakistan; the status of conflict in Afghanistan; international efforts to address Irans controversial nuclear program; restrictions on hightechnology exports to India, outsourcing, and so on. Oba ma's India visit changed US approach towards India perma nently. US saw India as a prominen t future power and declared it as an important ally. Ma y be its too early to say whether US treats India with the same trust as it treats its main allies Britain, Australia and Japan. Obama's India visit for sure can be seen as the most successful US Presidential Visit. However th ere are certain issues related to th e foreign policy which are susceptible. India ques tions US approach towards South Asia especially the subcontinent. India criticizes the Oba ma ad7

Hillary Clintons visit earlier this year in July signifies that the U.S. views India as a growing world power today with which it shares common strategic interests mutually beneficial to both the nations.

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ministration for linking the Kashmir dispute to the instability in Pakistan and Afghanistan. To be frank, th e Obama administration is barking up the wrong tree. To some ex tent we can advocate that there is a slight downturn in India-U.S. relations followin g th e election of Obama as the President of the United States primarily due to Oba ma administration's desire to maintain its relationship with Pakistan till its forces are operational in Afghanistan to keep a watch on them and also to improve relations with China. However, the leaders of th e two countries repeatedly dis miss these concerns. Coming to Trade R elations, the United States and India do share common interests. IT services, machinery, diamonds, chemicals, iron and steel products, coffee

Emerging Markets
pear. Oba ma administration's move to limit H-1B visas with respect to foreign workers has been condemned by the ministry of External Affairs. S.M. Krishna stressed that India would debate a gainst U.S. "protectionism" at various international forums. Moreover, India's then Commerce Minister, Ka mal Nath indicated to move against the outsourcing policies of th e US. The fact of the matter is United States has sough t to stren gthen its relationship with India as it recognizes India as its key strategic partner to serve its interests. India and US also stands unite to fight terroris m and aspire to create a strategically stable subcon tinent.

, tea, and oth er edible food products are the ma jor exports to the U.S. whereas aviation equipment, engineering materials and machinery, instrumen ts used in optical and medical sectors, fertilizers, and stones and metals are the major imports from them. American direct investmen t of $9 billion which accounts for 9 % of total foreign investmen t in India establishes a fact that the US is Indias largest investmen t partner. Th e US has in vested heavily in the coun trys major sectors like power generation, telecommunications, ports, petroleum and mining. But matters are a bit complicated than they ap-

The deals for the purchase of artillery like Boein g C-17 military transfer aircraft during Obama's November 2010 visit, makes the U.S. one of th e top three military suppliers for India, followin g Israel and Russia. These are positives but on th e other hand India keeps on expressing its concerns that US's non-military aid to Pa kistan will be used to build up military against India rather than counterin g insurgency. India also blamed the US for delaying the full implementation of indo-US nuclear deal. India advocates that th e US has pressurized India to sign the agreemen t through Compreh ensive Test Ban Treaty (CTBT). Analyzing the above findings we can say that it is leading to a mixed bag of opinions where on e
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may feel that the ties between two nations are getting broader and better but the other may feel that it is the opportunistic attitude of the US to counter the economic slowdown as US measures India as the potential market for investment that resulted in Obama announcing removal of export control restrictions on several Indian companies and concluded trade deals worth $10 billion in order to create 50,000 jobs in the U.S. during his visit. Its a simple logic. India has changed its foreign policy of maintaining strategic and military relations with the Soviet Union after its dissolution which India had developed during the cold war. This surely has improved the ties with the U.S. which is always desired between an y two nations. But the problem lies in the neighborhood! The US also finds itself in a mess where China advocates itself as an all weather friend of Pakistan; for India th ere are tensions over boundaries with Pakistan in J&K plus rift between China & India with respect to Tibet and Arunachal Pradesh. The planets superpower US seems to be the viable option to gain support from at this juncture. What India can do is that it can use for itself th e so called superpower of the US by asking the US to initiate th e diplomatic talks with both China and Pakistan. To conclude, the best policy at this stage would be to resume the talks with Pakistan and control China which necessarily requires US interven tion or support to be diplomatically precise!

Emerging Markets
QuotesOut and About the World
We have not made any new policy decision. The Supreme Court asked us how we calculate the poverty line, we gave the factual explanation Montek Singh Ahluwalia, Chairman - Planning Commission "The euro is much, much more than a currency. The euro is the guarantee of a united Europe. If the euro fails, then Europe fails." Chancellor Angela Merkel. "We're nearing the end of rate hike cycle, but only when we see a moderation in inflationary pressure and sluggishness in growth, we'll see the RBI reducing rates," chief investment officer Vetri Subramaniam We see community organizations as major service providers and economic drivers rather than as recipients or distributors of charity, and coordinators of volunteers. Today they constitute whats referred to as the social economy - Julia Gillard The overall picture is downbeat but for the performance of steel and cement, which indicate positive moods, said Madan Sabnavis, Chief Economist with Care ratings "During the meeting, we discussed our economic situations,, macroeconomic policies, and policies and cooperation in areas such as investment, infrastructure construction, high technology, energy conservation and environmental protection." - Chinese Premier Wen Jiabao
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Technology

SPOTIFY- A Tryst with Technology


- Shiv Mundhra

Spotifys a differen t kin d of service, it allows you to strea m music even t if you dont own it. So perhaps Spotify will think iCloud is really just second hand news- BBCs Rory Cellan-Jones. Music is life and life is Music, on e of the firm notation which I believe strongly in. It takes you to an emotional level which is not matched to any other source of entertainment. Listening online music is one of the best ways to stay in th e perfect mental state. With the growth of Internet the demand for online music is gradually increasing which increases the demand for th e streaming music services.

Music streaming services are becomin g gradually more important with th e growth of the Internet because most of th e users do not have fast access to download large multimedia files quickly. Through Streaming, the client browser or plug-in can start displaying data before the entire file has been transmitted.

Its time to leave the pirating to Jack Sparrow..!! The new planet of music industry is on the GO..! Discover it with SPOTIFY.

I have been using Spotify for over a year now and I believe it has redefined streaming music. Now I think its redefining personal and social music. Their latest iteration of their desktop application integrates beauti fully with Facebook. You can see a friends profile, which includes their favorites artists and saved playlists. Andrew Mager

There is a new planet of music waiting, SPOTIFY. Europes extrava gantly successful streaming music product has just shown us th e future. Just like oth er strea ming music players like Pandora, Grooveshark, Last.fm, MOG.com and Lala, Spotify delivers a huge music collection which one can listen through Internet, Mobile device, Desktop client or in Offline mode. Spotify created in October 2008 by Daniel EK and Martin Lorentzon in Sweden. The service has approximately ten million users as of 15 September 2010 and about one million of whom were paying members (source: Spotifywiki). Cofounder Daniel Ek said he wanted to create something better than pirating music which is fast, simple and free to an extent. Spotify will let the user stream all one wants from a library of 15 million songs at no cost. It is currently accessible with Microsoft Windows, Mac OS X, Linux, Telia Digital TV and mobile devices running iOS (iPod/iPhone), An droid, Windows Mobile, S60 (Symbian), webOS and Sonos. It is increasing its network through out and as of now the service is available in Finland, France, Netherlands, Spain, Sweden , UK, US and soon Den mark because it takes time to arrange licensing agreements with record labels and local publishing right societies. One might not even be aware of the rival that is
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attacking the music titan of the past decade when iTunes is about to mature completely and rapidly. The same was being accomplished by iTunes during early 2000s when it set the stage to decimate Tower Record -a retail music chain which currently exists as an international franchise and an online music store. For those who are not aware, Spotify is a digital right management based streaming service that allows users to strea m selected music from a range of record labels. It has a wonderful selection and is compatible with th e computer, s mart phone, tablet & android phones and is backward compatible to play music from existing iTunes library. Just think of Spotify as your new music collection. It enjoys complete advantage over iTun es in deliverin g music with its relative pricing. Although iTunes and Spotify deliver music over the net, Spotifys price is far below the level of iTunes. For $10 a month, you can enjoy unlimited music as long as you are listening through Spotify music player. It has associated its business model around low pricing. ITunes does not stream music; it requires you to download songs to your iOS before you can listen whereas Spotify is one of th e top online services for streamin g music. With Spotify, all the music starts streaming right away without any cost. The unique service Spotify offers is that you can use its Offline Mode which allows you to dial an album to listen thousands of music tracks without connected to the web at no extra cost. Along with the subscription plans, the service also offers the chance to listen before on e can make purchase with th e Spotify Free account. Through Scan and Match service Spotify scan the tracks on your computer and then download those to your mobile device without synchronize your device with the computer. Spotify also allows you to listen song even when they dont own it, thereby help you to create your own better playlists and this playlist on your computer will s ync to all your mobile devices making it easy to take your playlist on th e go. Th e social feature of iTunes Ping is just a wash at present whereas Spotify makes the best use of social networking. You can listen to th e same songs your friends are at ,free of cost through Facebook which is built in to the desktop application. You can also share your favorite playlists with your friends over Facebook, Twit-

Technology
ter, Flickr and e-mail, just send them a link to a track or playlist and right away they can listen to it. Spotify integrates with last.fm service, henceforth by activating last.fm every song you listen to will be sent to last.f m so that you can get recommendations for new tracks. Spotify integrates with Shazam, the iPhone application which can recognize son gs just by listening to it. Now if you hear a new song you like, just by Shazam you can download it with no extra cost. In order for Spotify to continue the success story, the music industry needs to get completely on board with their music existing in the cloud. On e of the users of Spotify says I am listening to on Spotify and as a consumer I don t see why I should even want to. There is the option to buy, of course, but after playing around with Spotify for two days I never once felt compelled to p urchase a song. I know theyll be there waiting for me the next time we log on, so why should I bother clogging up precious memory space on my computer by actually buying them. To this I would say that the music industry needs to find a way to become completely comfortable with the idea of legal strea ming because after two days of poking around Spotify, it is clear that this is going to be the future of music industry and this is what the music industry should look like. Its n o wonder some of th e companies are holding out but as someon e on the consumer end of th e spectrum Spotify is a wonder to behold.

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Marketinomics

Neural Networks in Business


-Juhi

We have heard about World War I, World War


II and sometimes about fictitious World war III, but have you heard about World war IV. Yes, I m not mistaken, you heard it right. World War IV has been already started where battlefields are world trade and manufacturin g. Everyone is trying hard to forecast the market precisely or else to be as closer as it could be to the forthcomin g market. Till date, a lot of work has been done on ways to predict the market. However none of the techniques have been successful enough to beat the market. Market analysis techniques such as technical analysis, fundamental analysis and regression have done a good job in predicting the market but due to increase in competency level and number of players involved, need of the hour is accuracy and consistency. The demand of the precision has lead to the expansion of the application of on e of the concept which previously used to revolve around neural processing of the brain. Neural Network is named and designed after th e human cells (neuron) and its massive interinterconnected network. Like neurons which contribute to human intelligence and perform intelligent operation developed by experience, neural network also contribute to artificial intelli-

gence and is developed by experience. Its a chaotic world out there! Chaos is said to be exhibited when there is a nonlinear mappings between input and output i.e. when system runs randomly. Traditional techniques were not able to capture this non-linearity. This n eed has led to the advent of neural network in business. Each neuron represen ts a traders decision process and so neural network represents the complex entangled decision process network of the market i.e. their interaction. Technical analysis which uses historical data (past prices) to determin e future market works a step less than neural network .A step which is the major and most important part of Neural network. Nowadays 90% of traders use technical analysis due to unavailability of any other better option. Th e weak point in this method is its subjectivity and its timedelay nature. Different people interpret its final result (charts, bar graph etc) differently and loose many potential data of stock movemen t which occur in between analysis. These bar graphs and charts along with some other raw data become one of the inputs of n eural network. Neural network works on the formula of finding trend and pattern in the data by learning how to combine all the methods effectively in the most
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Neural Network has generated a hope in the mind of researchers and investors to unravel the market mysteries for which current methods were insufficient. Researchers define market as a system which exhibit chaos

September Vol 2, 2011.

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Marketinomics

efficient manner. Some argue that expert system can be used in the same fashion as NN. It is found that expert s ystems need information explicitly to work properly but as market exhibits chaotic characteristic (partially deterministic and partially random) there might be some chance of required in formation to be missing or incomplete and in that situation expert system can give drastic results. NN can handle such dynamic data better by its educated guesses. Market scenarios are very complex due to large data set, massive networking and large number of exchanges happening in just a fraction of second. This all cause experts (human) itself have difficulty in completely understanding it. Formulation of market scenario is difficult thats why applyin g expert systems to the stock market become a problem .Here NN comes into picture, as it itself extract rules (on which it will work) from th e current data and its experience without having them explicitly stated. The idea of artificial NN came around 1943 but it was conceptualized fully in 1949. John von Neumann whose contribution can be seen on various platforms has contributed here also. Imitation of the perceptron-mechanism which fly uses to flee when risk comes nearby it with the operation of the eye-to the neural n etwork function had been build in hardware and is the oldest NN still in use today. With th e advent of computers , this

idea took a great jump. Th e first NN to be applied to a real world problem is Madaline, which was used as adaptive filter. These successes caused a fear a mong people that these thinking machine without having any morals and values can overtake or hamper the societal well-being of human. With th e born e of this feeling, further research in this area came to halt. But this idea was not fully extinguished as seen in Japan but as said a spark neglected ma kes a mighty fire. Seeing Japan, Us defense started the work which was left in between and all these effort had led to what we are talking here about. Its application encompasses many fields now. Some of the uses of NN are: predicting costs, forecast revenue, processing documents, tracking commodity markets and Futures , foreign exchange trading, financial planning, company stability, risk management ,target marketing, customer research and bankruptcy prediction. Banks and other financial institution use to check their credit (loan) -cash match to estimate bankruptcy probabilities .It is also used to plan the constituents of a profitable portfolio in real-time. This all uses are in addition to its previous usage in biological and technological field like recognition of spea ker, diagnosis of h epatitis,3-D object recognition , un dermine detection and many more. By comparison, neural n etworks really have n o rules. Instead these systems look for patterns.
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The patterns consist of a number of inputs such as price history, technical indicators, fundamen tal data or even information from other markets. If a trader can pin down some kind of pattern , they are in business. Till now the best solution is integrating the ex pert system and Neural network. Neural network can perform its own prediction and expert systems which can validate the prediction. Th e only problem faced by NN is that it cannot ex plain its result which can be overcome by th e integration. All the methods predict future stock movemen t from using past information. The difference lies in their assumption. NN does not follow any such assumptions but derive its en tire base from data itself. To have a NN which matches our ex pectation, first NN is trained as humans are trained. The only difference is that for humans time is the constraint but for NN it is the data. Types of data fed in NN over and above th e tra ditional methods are Fundamentals-volume, yield, price/earnings, Technical-moving averages, volume trends , Market indices, International Indices , Gold price/Foreign Exchange rates, Interest Rates Economic statists-exports, imports, Previous experiences.

They are trained to minimize th e error by providing input pattern and using Back-propagation technique (use weights of each unit in such a way that the error between desired output and actual output is reduced i.e. error derivative of weights).These all are becoming too calculative but heres the benefit. All the calculation and the thinking part (analysis) are done by NN system integrated with Expert system. You have to just update it with most recent data to make it at par with or above Natural NN- Paul Tudor Jones, Liz Cheval, Gary Klopfenstein and John Henry. Work has been done to contradict Efficient Market Hypothesis (EPH) which state that market always beats traders as soon as any opportunity is discovered it is used by all and this in turn makes opportunity to be so obvious that opportunity ceases. It is hoped that NN will outperform the market or index a verages. In recen t days most developmen t in NN is proving that this principal works. But still much work is left out to take it to n ew heigh ts which require them to be put on specialized chips. Companies are working on 3 models of n euro chips- digital, analog and optical. These all look very promising. Traders are apprehensive about it and are eager to use it to its full advantage.

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Marketing

MOBILE MARKETING
- Keerthichand

Have

you ever wondered the word mobile which means movement would be replaced by an instrument that would help people communicate with each other over lon g distances? Yes, I am talking about the favorite toy which has become one of the basic amenities of everybody in this fast-paced world-THE MOBILE . So, is mobile marketin g all about marketing through mobile phones? Well, as a matter of fact, we can say that it is true to an extent in relation to the contemporary perception about the definition of mobile marketin g, but a more traditional school of thought regarding mobile marketing is that it is marketing on the move. To be precise, the Mobile Marketing Association updated its definition of Mobile Marketing as Mobile Marketing is a set of practices that enables organizations to communicate and engage with their audience in an interactive and relevant manner through any mobile device or network.

of people towards a particular product or a service. The first essential step in this regard is to make the customer aware of the existence of th e product or service. In these con temporary times, when almost every person is on the move, it is also necessary for th e business to be on the move. So, in this scenario, cell phone advertising serves as a boon to th e business. The audience can be reached virtually twentyfour h ours a day and they can be reached anywhere that they take their cell phone. Hence, it is quite evident that this sort of advertising has got enormous potential in its functioning and implementation. Initially, when the trend of mobile marketing first hit the markets it did not appeal much to the majority because they were unfamiliar to this sort of advertising and did not feel comfortable with th e inboxes of their mobiles being flooded with th e ads of various products and services advertised by various companies. But, as time progressed people slowly started getting accustomed to this trend as th ey could see that they would be missing out exciting offers of totally new, refreshing ,trendy products and qualitative services if th ey ignore the typical
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Mobile marketing with the use of mobile phones became a huge hit in the markets. People of all age groups and strata of the society use one mobile or the other so extensively that they can be considered almost integral parts of their bodies

So, it is very much evident that mobile marketin g has many forms about it and undoubtedly th e use of mobile phones in this mode of marketin g is just one of its forms but, definitely the most effective and prominent one. The bottom-line of any mode of marketing is to draw th e atten tion

September Vol 2, 2011.

The Ecobizz Newsletter

IBS Hyderabad

Marketing

three or four liner ads sent in the form of an SMS or a small video sent as an MMS. So, at th e end of the day, this trend percolated into the minds of people to such an extent that they started liking it and also started to be on th e look-out for th eir mobile updates regarding th e new launches of a product, special offers, in formation about discount sales or a new and interesting service. Before the advent of mobile phon es, advertising was carried out on a massive manner through TELEMAR KETING, which means advertising of various products and services through the medium of television and radio. As radio became obsolete with time, most of the telemarketin g was done via television. Television reached a huge base of customers as many people glued themselves to th e idiot box es. However, with the emergence of corporate world, people belonging to the higher strata of the society could hardly find time for television viewing .So in order to create visibility the sales-

persons of various companies had to visit offices to create a buzz in the corporate class and sometimes had to bear the brunt of humiliation from the officials in the light of creating disturbance at inopportune momen ts. To top it all, a lot of money had to be invested in carrying out promotional activities in this fashion, which most of th e times did not go in line with the budget allotted for promotion of th e particular product or service. Apart from this even the advertising carried out through television made huge holes in the pockets of the company that resorted to advertising. So in my view in these turbulent and troubled times the advent of mobile phones and th e subsequent emergence of mobile marketing turned out to be a panacea to overcome the various problems associated with advertising. Thus, we can say that the cost associated with mobile marketing is much less compared to that of telemarketing. Technology has played its role in facilitating th e popularization of mobile marketing. Location16

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Marketing

based services (LBS) that are offered by certain cell phone networks facilitate in custom advertising reach a huge base of mobile phone users wh o are the subscribers from a particular location . GPRS internet and the technology of QR codes facilitated th e promotional campaigns of various companies through social networking and free online services. Well, most of us could notice that th e contemporary world has turn ed to be a repository of many individuals highly enthusiastic about games and those who are passionate regarding gamin g. So, capitalizing on this mad rush for games, brands are resortin g to delivering promotional messages as part of mobile ga mes or are even going to th e length of sponsoring entire games to drive con sumer engagement. This is known as Ad -funded mobile ga me or mobile advergaming. In a nutshell, we could elucidate many aspects in length and breadth that portray the rosy side of mobile marketing however, on the other side there are certain privacy concerns in this regard because most of the times mobile advertising is

carried out without prior permission from th e customers leading to privacy violations. I personally feel that howsoever attractive and lucrative may be the features provided through mobile advertising if consumers do not have con fidence about the protection of their privacy, this lack of faith from consumers fron t would prove to be a hindrance to the widespread deployment. Therefore, at the end of the day professionals who design the implementation of mobile advertising must be capable of striking a balance between consumers privacy and creation of buzz about their brand. The balance should be attained to such a degree that the iridescent feath ers of mobile marketing must glow to such a level of radiance that they such nullify the lacunas which may arise in the wake of intrusion into customers privacy.

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IBS Hyderabad

Marketinomics

If its in Your Psyche; its in the Market


- Mansimran Kaur

The

marketing theories have it that customers indulge in shopping because of the needs arising out of different external stimuli. Now thes e needs are satisfied by different products the market has to offer. A mammoth role in this mechanism is played by the price of the product. A lot of sellers in the market go in for psychological price setting strategies and a lot of mechanics goes behind settin g such price levels. Some consumers happen to believe that higher price is positively correlated with the quality of the product that is displayed in the best shelf position in the most popular hypermarket. This psyche is what drives th e buying pattern of any consumer. This is what is encouraging the consumers to become more brand conscious and indulge in impromptu and luxury buying. Such buying behavior has proved to be advantageous for posh chain of stores but the s mall businesses must be alert and choose a right pricing strategy keeping intact their quid pro quo.

A tug of war between the traditional laws of economics and the contemporary human mind seeking improved quality is visible in all aspects of life.

for higher priced apparel crisply ironed and hung in a lifestyle showroom as compared to its close substitute which is put to sale at a local market at a considerably lower price. This is because we often feel that the apparel in the mall has a higher value attached to it and is high on its quality contents. Another more interesting situa tion is when we choose the higher priced Coca Cola bottle as in place of R C Cola when both of them have the same composition cater to th e same target market and have positioned their respective brands in the same way. Though the law of demand speaks that, the lower the price of a product, th e higher is the demand for that product. But talking about the real life scenario there is an absurd situation where consumers, when perceive that the price of a good is too low reduce the quantity of units bought by them. This situation is hard to believe but is a fact and this may lead to an upward sloping demand curve which says that as th e price of a good falls, the quantity of units sold decreases. And this may lead to an upward sloping demand curve which says that as the price of a good falls it lowers its quantity of units sold. What determines the degree of reduction in a products price? Wh ether the price is too low is determined by the price of the products in th e same category .If the mean price range of soft drinks is Rs.50 per 2 liter then any soft drink priced below the benchmark price will lead to considerable reduction in its sales figures.
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Pricing is more than just about numbers; it is a play on perception. In many cases, the psychology of pricing is more important than the actual price itself. The above lines very well explain the fact that th e price of th e product has a lot to do with what customers perceive of the product and not simply explain the traditional working of economics. This behavior is common to us all. We often go

September Vol 2, 2011.

The Ecobizz Newsletter

IBS Hyderabad

Marketinomics
rary price cut policy but ends up losing its sales because it has made a mark in the consumers minds that the goods being sold h ere are not durable and of the best quality. To look at a real life market situation a lot of foreign subsidiary brands like Cantabil, Tippy Cooper are offering their goods at a discount of 70%, 80% and sometimes even higher than this. This strategy is a mere reduction in prices to sail through the market jam packed with sellers offering substitutes of the same good. This kind of demand situation can lead to a backward bending demand curve violating the law of demand absurdly. In my opinion what is preva lent in todays market situation is the consumer psyche rather than the law of demand determin ing the market clearing price of the good. Law of demand speaks only about the quantity but th e consumers are more conscious about the quality which makes them behave in a way violating th e traditional mechanics of economics.

To understand the ps yche of consumers we must recognize that offerin g discounts or temporary price cuts will lead to increase in the sales and this in no way will violate th e law of demand. We must understand that there is a difference between a price of the product being too low and price of a product being temporarily cut keepin g in mind the promotional strategies. Its strange but true that depending upon how low is the price ,our demand for the good will first increase but if th e price of a good further declines then a reduction in quantity of the good is evident just because of the psychological rea son of being perceived of it as a poor quality good. There also arises a situation where it is hard to distinguish between a promotional price cut and a price that is low enough to transfer a considerable amount of your sales to your competitor. Sometimes it may happen that offering high discount rates makes your store to be termed as the aam aadmi store losing out on the part of market segment that consists of the upper middle class and the business class customers. In such a situa tion though the company is following a tempo19 September Vol 2, 2011. The Ecobizz Newsletter

IBS Hyderabad

Trends

Rockonomics
- Charu Attri

The top 10% of artists make money selling records, the rest go on tour. Scott Welch, manager of Alanis Morisette and LeAnn Rimes.

A Thousand bodies swaying along connected solely to the tun e they hea r and the baritone of this one person: Rock concerts truly are phenomena when it comes to the experience in its elf. Metallica is one band which has wide fan following in breadth, height and width. So th ere was no question as to House full and no doubt that all th e tickets have already been sold. All in all, expected results. But why would this band or any other band ;with a million devoted fans who buy any and every LPs, records and publishings; need to go touring and play in concerts? Sure it is about th e Adrenaline punch, the kick you get from playing live and the rush of being on stage. So why do it? Some researchers actually wen t out there and looked

Concert tour needs a lot of management in terms of fixed costs like stage management, price of the location, finding promoters to cover the costs etc. In other words it spells Dough issues !

into empirical data and researched the cost and revenue patterns of a concert, wh y artists (even the high profile ones like rolling stones etc.) need to do it and what goes on into making a concert a success. In 2002 some of the bands who toured showed the following earning patterns:The Rolling stones earned $39.6mn touring and nothing was earned in terms of recordings (recording new songs).

Aeros mith Earned $11.6mn from touring as opposed to $1mn from his recordings. Red Hot Chili Peppers $6.1mn from tourin g and just $3.4mn from their recording business Britney Spears $5.5mn (touring) and $1.8mn (recordings). Creed $10.9mn from touring and $1.1mn from recordings that year. Here are few interesting observations that surfaced about these bands and their earning points when they go in the
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September Vol 2, 2011.

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IBS Hyderabad
road to feed the appetite of all those who worship and thrive on this culture:As seen above top artists across all gen res of music be it Bluesy Rock and Roll to Rap or Jazz, all of them have quite many parties to share the profits earned from recordings such as their promoters , their manager, the record company to th e composers. In the data stated above on e can see that a majority of the artists earn less from their recording and new songs as opposed to the concerts and tours. Concert time: Y es, it feels unavoidable for a band to hit the road looking at the above analysis, but hold up, even a concert needs money to be doled out. Why? Fixed costs! You get a sponsor? That is great but before you get all happy about it remember that even they want a share. Then there is the advertising cost, th e cost for the stage setup and the outlook. In 2010 U2 won th e Billboard Touring award, for their U2 360 Degree Tour. They decided to hold concerts in stadiums all

Trends
across wherein the view was literally 360. To accommodate such an idea they went on to create a setup called The Claw wherein a four legged structure was used to increase the venues capacity and this helped U2 grab a huge chunk of audience. The structure cost of each one of these added up to about 15mn to 20mn. On top of that was the cost of th e woofers and speakers which were integral part of the structure. (U2 concert with The Claw at R ose Bowl) What do th e bands genuinely earn from is the ticket sold and the merchandise that fans pick up at such venues. It is actually believed that 100% of the merchandise earnings go to the band! Merchandising includes selling t-shirts, logos, posters, banners, stickers and even customized buttons with their name on it in case of take back the nigh t some ideas are as radical as selling the customized guitar stripes. So when tickets are sold the revenue earned is shared with the promoters but th e merchandise reve-

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need to be taken care of. If someon e wants to be a band manager then he has to look into all of them so as to transform a concert into memorabilia where th e fans soak up every moment. In short th e experience does come with a cost but th e earnings in terms of fan followin g and revenue can be ground breaking. I would like to sum up with instances of unbelievable amount pocketed by some performers fuelled by people who travel near and far jus t for that one live performance! Madonna- Sticky & Sweet Tour-$162,000,000 Bruce Springsteen & the E Street Band Magic Tour-$204,500,000 Bon Jovi -Lost Highway Tour-$210,600,000 (earnings in 2010 concerts of few artists and bands)

nue goes to the band. High quality and low quality seats . Based on the ben efits included and the positioning of the seat, differentiation of th e price can be easily done. This is done in case of high fixed costs wherein the marginal cost is below the average cost. So like in any movie theatre, we can see differen t prices for differen t kinds of seats in the arena e.g. VIP passes backstage passes (imagine product differentiation as in paying more to have a nice conven ient spot to park and enjoy th e concert without any qualms). Also VIP parkin g tickets for those who can pa y the premium. Also we all know higher th e level of loyalty the fan has higher he would be willing to pay for the ticket. Here the idea of huge consumer surplus comes into play wherein the hardcore fans are willing to pay a premium for the concert based on their level of perceived value. There are a million aspects to a concert that
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For Readers

Dear Readers,

I believe you appreciate the transformation of The Focus. Your praise and encouragement has always been a source of motivation for us. Therefore, in case you have any comments or suggestions for improvement please leave them in the COMMENTS section our website www.ecobizz.weebly.com or Stu-z. We at Ecobizz will be more than happy to incorporate your suggestions.

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23 September Vol 2, 2011. The Ecobizz Newsletter

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