B'Cognizance » Biz Wiz

FACEBOOK WILL BUY EVERYTHING THAT COMPETES IT

ravi — Tue, 15 Apr 2014 08:38:19 +0000

On 19 February 2014, Facebook announced that it’s going to buy Whatsapp for $19 billion in cash and stock. Whatsapp has over 450 million users and 70% of them are active every single day. Whatsapp is one of the biggest social interaction messenger and has highest number of users. Near about 400 million photos and 10 billion messages each day are shared by WhatsApp users.

In a recent post, Face book founder Mark Zuckerberg stated that, “WhatsApp will complement our existing chat and messaging services to provide new tools for our community. Facebook Messenger is widely used for chatting with your Facebook friends and WhatsApp for communicating with all of your contacts and small groups of people. Since WhatsApp and Messenger serve such different and important uses, we will continue investing in both and making them each great products for everyone”.

According to a filing with the Securities and Exchange Commission, Facebook will acquire WhatsApp for about $4 billion in cash and 183 million Facebook shares, which are worth an estimated $12 billion. The deal also includes an additional $3 billion in restricted stock units for WhatsApp employees that vest in four years. Facebook observes that most of the young generation is using different social media for communication. 450 million people use WhatsApp; 300 million of them use it daily. Collaborating facebook with whatsapp makes the facebook a leading usage of mobile agents.

Seeing WhatsApp’s growth rate so high facebook has to do something for being a leader in social networking world. Having acquisition of WhatsApp facebook has become a powerful rival to telecom providers in mobile messaging. Many believe that Facebook just bought out a competitor. This leads to a question that “Facebook will buy anything that competes it?” firstly the Instagram and now Whatsapp. In many developing countries the primary reason of buying smartphones is that they want to use Whatsapp. As it saves money for sms and provide a very good means for having group talk and sharing media’s.
The more we discuss about this its make a clear sense why facebook buy Whatsapp. Asia and Africa continents are the fastest growing smartphone usage areas and facebook wants to attract them and make them use its products by providing them better service and features.

The future challenges for facebook will be how to manage such a huge amount of data flowing in whatsapp. Apart from this there are other challenges for them is the channel distribution for source of revenue, the mobile messaging asset etc. With enormous number of user facebook has to keep their service active and it requires the well designed infrastructure for data centers. Another challenge is that they have to include new features so that users cannot navigate to other social interaction applications and leave them.

Shivam Srivastava
Merchandising Officer
Vishal Mega Mart

INDIAN BUSINESS STARTUPS AND CHALLENGES FACED

ravi — Tue, 15 Apr 2014 03:43:27 +0000

A startup organization is an alliance newly created to search for a repeatable and scalable business model. It can come up in any form and sizes. It is generally a new initiative taken up with a fresh and innovative idea. The idea of startups became popular across the globe during late 90s.This is regarded as the era of dot-com boom or Internet bubble i.e. the period of commercial growth of internet with the advent of www. By this time, the innovative and creative masses of the country started dreaming of Silicon Valley styled business models.1999-2002 was the period in which foundation of this new ecosystem was laid down in India.

India, with 63% young population i.e. below 30 years, offered a huge pool of potential talent that could be tapped and channeled to give fruitful results. First Mover Advantage became the new challenge among the new potential entrants. The major concern was Capital to be invested. The money flowed in from US, Europe and Australia resulted in more in 100 Venture Capitals. Angel groups and seed funding were the other modes of fund raising.

Starting a new venture is always tedious task which needs a lot of planning and creativity. There are several roadblocks that any entrepreneur faces while initiating a startup. The major challenges being,

• Lack of Capital
• Market Problems
• Business Model Failure
• Poor Team management
• Product problems

Though India has proven to be a land of great business minds, as it is already seeing large successful businesses such as Flipkart, Just Dial, MakeMyTrip that are catering to this customer base. Many more are still in league like Myntra, Snapdeal. These ecommerce giants have contributed to the growth of Indian ecommerce ecosystem and now India is being regarded as the fastest growing market for e-commerce. Still, there are several other concerns which are particularly affecting Indian entrepreneurs. India being a culture driven country has several barricades for aspiring entrepreneurs.

“Playing it Safe” Approach

Working as an employee of a well known organization is considered secure job than taking risk to join a startup no matter how impressive is the idea behind. The Indians lacks in risk taking abilities which results in poor entrepreneurial skills.

Academic Institutions are designed for jobs

Academic institutes in India make the students well prepared to adapt corporate culture and unfortunately they lay little emphasis on enhancing entrepreneurial skills. When it comes to mentorship and guidance to budding entrepreneurs, India has fewer options.

Social Mindset

The common Indian mindset says that getting a job with a big brand improves career growth more than a startup. Working at larger organizations is more socially valuable than working with startups. It is quite common to see people working in startups being pressured from home to take up better jobs with larger organizations.

Limited income

India, being a developing country has majority of citizens lying in Middle Income Group. Most of the families do not have surplus disposable income at their end and thus they are not in state to make investments in
starting up a new venture. This makes chance to join a startup, a liability rather than an opportunity.

Funding

Taking into consideration the high interest rates and lengthy processes involved in getting funded, debt as a source of funding is also not a viable option. Unlike the scenario in the US, personal funding becomes difficult as people are not financially stable here and have family responsibilities to take on.
Although in years past the investment focus in India was on infrastructure and real estate, early stage venture capital is arriving. Many of the top Silicon Valley venture capitalists have offices across India, and there’s a vibrant new community of angel investors, including groups such as the Indian Angel Network and the Mumbai Angels.

Patience

India is often described as “beautiful chaos.” Traffic, time, and even commitments have a different flexibility in India, so the most unexpected needs to be expected. One should have enough patience and courage to understand, adjust and execute according to various cultural differences existing at every few miles in the country.

Selling is hard

Indian market is highly price sensitive and competent. Thus, selling premium products here becomes a challenge. Especially for startups, as they have to compete with other giants already existing in the market. Trust building becomes the essential concern.

Regulations

India is fraught with complex rules and regulations. Enforcement can be uneven and unpredictable. According to the latest tax policy, startup firms are mandated to pay income tax on the premium they have charged over their fair market, while selling shares to unregistered investors, including private equity and venture funds. Thus, navigating bureaucracy becomes another barricade for budding entrepreneurs.

Raise capital

Although in years past the investment focus in India was on infrastructure and real estate, early stage venture capital is arriving. Many of the top Silicon Valley venture capitalists have offices across India, and there’s a vibrant new community of angel investors, including groups such as the Indian Angel Network and the Mumbai Angels.

Sonika Singhal
MBA IT, IIIT Allahabad

‘OIL PRICE’: THE BIGGER RISK INDIA HAS TO MITIGATE

ravi — Tue, 15 Apr 2014 03:40:27 +0000

In this modern era of 21^st century, nothing can be thought of without energy. It is the immense and inevitable requirement for modern economic development.

We have a lot many sources of energy out of which crude oil is one of the most important and highly used while talking in the perspective of India. If we put some light to the past figures of India’s energy consumption, near about one-third of India’s energy requirement is met through crude oil, most of which is imported from outside… In the fiscal year 2012-13 India imported crude oil worth USD 169.25 billion, which was actually more than one-third of her total import bill. This shows the highly dependency of Indian energy requirement on crude oil. Hence, any sort of fluctuation in oil prices in the international market can definitely hinder the growth trajectory of Indian economy if, proper attention is not being given to it.

What has made global crude oil so volatile?

Way back from 2002, the crude oil price has risen significantly and even a slight up & down represent significant movement in macroeconomic variables. Both demand and supply side factors have derived high uncertainty in energy sector. Also, some geopolitical factors of counties having major oil-reserves have impacted the crude oil prices. American sanction on Iran, tension in the Korean peninsula, Arab spring in MENA region, all this has led to crude oil volatility.

Risk to Economic Stability

India use to shield their citizens from oil price shocks by allowing subsidies, the burden of which is passed to nation debt. Taking some facts & figures , the under recovery in diesel and kerosene by oil marketing companies in India 2012-13 was to the tune of Rs 1.21 lakh crore , which adds to nation debt Servicing such a huge amount of debt itself impairs the economic growth and creates a high risk to the economic stability.

Key to manage this Risk

Looking at the corporate level, companies can ensure stable profits by hedging oil price risk through various market instruments like oil future contract. However, to mitigate the macroeconomic level risk it is required that some sort of sovereign hedging program which has been even taken by many of the oil importing nation should be implemented.

Ghana began its hedging program in 2010

Panama & Morocco started such in 2013

There were some reports regarding Indonesia planning to hedge in 2013.

Reference: Economics Times, A Beginners Guide to Fuel Hedging – Futures, 2013

Dinesh Singh Adhikari
MBA IT, IIIT Allahabad

THE ROLE OF ECONOMICS IN MANAGEMENT

ravi — Tue, 15 Apr 2014 03:39:50 +0000

The discipline of business management which gained worldwide acceptance soon after the advent of large scale production in the USA and Europe in the early 20th century is ever evolving and still there are no signs of a final call. Big time entrepreneurs and career managers have emphasized the unequivocal contributions of ‘tools of economics’ in moulding it according to current needs and requirements. The Great Depression of the 1930s, the two world wars and the later oil crises have made all the more important in achieving efficiency at the highest levels.

Economics which has its genesis in the Greek word is all about managing scarce resources whether human or physical, in order to get the best out of them. Intensely increasing competition and the quest to present something unheard and unseen of, is driving firms and giant multinationals to adopt the quintessential ‘cost-benefit’ analysis of microeconomics. The basic principle requires a rational individual or a firm to equate its cost and benefits at the margin before undertaking any investment. Any such investment is worth undertaking only up to the point where the firm’s marginal profits equals its marginal cost (marginal cost and benefit calculations require basic calculus and the result is easy to interpret).
Recent studies have revealed the new pace with which consumers are altering their preferences thus making it important for firms to take a tab of these changes and responding appropriately. The theory of consumer behavior which was one of the first to be developed by early economists comes handy in this regard by introducing the concept of demand and supply elasticity. A concept similar to the on taught at intermediate level physics. The only difference is, it deals with individuals and firms rather than springs and quantitatively measures how consumers and producers respond to a given change in price, income and other related variables which affect consumer choices.

Economics not only aides business managers to function efficiently at a micro level but also guides them through turmoil at an aggregate level- the economy itself. Important macroeconomic variables like GDP growth rate, unemployment, inflation, current account balance and exchange rates are the indicators of general economic sentiments across the country and elsewhere. High GDP growth rates and reasonable rates of inflation ease the government’s burden over budget deficits (excess of government expenditure over income). Lower budget deficit in the short run and the resulting decline in debt in the long run create an optimistic environment in the market for goods and assets.

Some other areas where the subject of economics has played a decisive role in shaping management policies are:
• Firms paying pollution tax in return for emitting poisonous gases and discharging affluent into water bodies. This tax equals the value of the damage done to society and adds to the production costs of the firms. Simple tools of economics help in minimizing this cost.
• Hiring a skilled labor force out of a big unemployment pool.
Summarizing the above details we find decisional important roles in directing, organizing and controlling for decision making are much important at each level .Mainly to exercise as much control and influence over market to drive high efficiency.

Raghvendra Tolia
Electronics and Communication, IIIT Allahabad