Corporate Governance Caselet 1 Real Juice Company The company is in the business of producing and marketing fruit juices. Ritu joshi and Rohit Jain were looking at the ad copy and turning it over and over again in their mind. The copy read, \"The best fitness plan for you real fruit, honest juice and no sugar. This was the main copy line. The more Ritu joshi repeated this line in her mind the uneasier she became. Something is wrong in the copy, she said to Rohit jain, the marketing head. We cannot say best for health when we know for sure that the juice contain preservatives and food color. Rohit jain said, I dont see if anything is wrong in this. With food colors and preservatives added we couldnt say it is best. This is what is wrong m replied Ritu. Rohit said, but this is hyperbole and permitted by law. There is nothing wrong in saying this. Have you not almost noticed all detergent brands say for best wash or whitest wash? This is simply a way of putting your claim of brands superiority. We are not talking about detergent washes and fabrics it is a health and fitness fruit juice. We could not say something like, a great way to plan your fitness programme or something like that. We are saying real fruit, honest juice, and no sugar ... not a word about food color and preservatives. Any consumer can contest our claim.\" Rohit Jain though for a moment then said, \"let us get the legal opinion from our lawyer, Amit soni, to be on the safe guard. Amit listened to what Ritu had to say then said, \"Companies use advertising to provide information to consumers and offer alternatives in a competitive market situation. Advertising is false when it says A=B and that is not true. But the ad is misleading; it falls under the category of unfair trade practice.\" Loudly reading the ad copy, Amit said\" hyperbole such as best, newest most effective way, are permissible and consumers are unlikely to take such claims with ant seriousness. When a brand says its air-conditioner is best or most efficient, consumers know that this is just a manner of speech and do not truly believe and put their money on such claims. \"Yes, Real juice passes the legal test fine, but ethically it wont be correct,\" said Ritu joshi. \"Please understand. Here you are not making a claim,\" said Amit soni. Amit soni said,\" comparative advertising is healthy but the advertiser must be clear about the claims to be made. In this case, you are saying that Teal juice is good because it comes in cans and bottled drinks are not as good. This is a direct attack on bottled drinks. Advertiser does not disclose all the parameters they have considered in their conclusion of best. They may select some major ones or may cheese to highlight the trivial ones and ignore the major ones. These things happen every day and are not strictly provided under the law. There must be prima facie evidence of damage or misrepresentation to establish a case of unfair trade practice.\" \"so, we are legally safe,\" said Rohit jain. \"We will reword this campaign, but our other campaigns have passed to muster.\" Ritu joshi felt differently, she said, \"legally we may safe, but we have to also take an ethical view.\" We must not forget that our primary platform is health and fitness. This convenience angle is also crating and impression of good for health. I believe that as responsible advertisers, we have to be more concerned about the ethical aspects than merely the legal angle. This is where we come to the line between what is legal and what is ethical. We may be legally right but our act could be unethical if the word or pictures in the ad could lead the consumer to believe something that is not true. The aura of the fitness instructor used as endorser creates an impression that the information is coming to consumers from an environment where there are people whose opinion consumers view as being correct. Otherwise why use the instructor as endorser.\" Question: 1. Analyze the issues in the case. 2. Why should advertiser bother about ethics if the ads measure up to legal parameters Caselet 2 Over the course of Microsofts history, the board has developed corporate governance practices to help it fulfill its responsibilities to shareholders to oversee the work of management and the companys business results. The governance practices are memorialized in these guidelines to assure that the board will have the necessary authority and practices in place to review and evaluate the companys business operation as needed and to make decision that are independent of the companys management. The guidelines are also intended to align the interests of directors and management with those of Microsofts shareholders. The guidelines are subject to future refinement or changes as the board may find necessary or advisable for Microsoft in order to achieve these objectives. Board composition and selection: independent Directors 1. Board Size: The board believes 8 to 10 is an appropriate size based on the companys present circumstances. The board periodically evaluates whether a larger or smaller slate of directors would be preferable 2. Selection of Board members: All members are elected annually by the companys shareholders, except as noted below with respect to vacancies. The board may fill vacancies in existing or new directors positions. 3) Board membership criteria: The governance and nominating committee works with the board on the annual basis to determine the appropriate characteristics, skills and experience for the board as a whole and its individual board members, the board takes into accounts many factor including general understanding of marketing, finance and other discipline relevant to the success of a large publicity - traded company in todays business environment; understanding of Microsofts business on a technical level. 4) Board Composition: Mix of management and independent directors. The board believes that, except during periods of temporary vacancies, a majority of its directors must be independents. 5) Term Limits: Director who have served on the board for an extended period of time are able to provide valuable insight into the operation and future of the company based on their experience with an understanding of the companys history, policies and objectives. 6) Retirement Policy: The board believes that 75 is an appropriate retirement age for outside directors. 7) Directors with significant job changes: The board believes that any director who retires from his or her present employment, or who materially changes his or her position, should tender resignation to the board. 8) Selection of CEO and Chairman: The board selects the companys CEO and Chairman in the manner that it determines to be in the best interests of the companys shareholders. Board meetings: involvement of Senior Management 9) Board meeting-agenda: The Chairman of the board and CEO, taking into account suggestions from other members of the board, will set the agenda for each board meeting, and will distribute the agenda in advance to each director. 10) Advance distribution of material: All information relevant to boards understanding of matters to be discussed at an upcoming board meeting should be distributed in writing or electronically to all members in advance. 11) Access to employees: The board should have access to company employees in order to ensure that directors can ask all questions and glean all information necessary to fulfill their duties. 12) Executive session of independent directors: The independent directors of the company will meet regularly o executive session, i.e., with no management directors or management present, at least three times each fiscal year. Performance Evaluation: Succession Planning 13) Annual CEO Evaluation: The chair of the governance and nominating committee leads the independent directors in conducting a review at least annually of the performance of the CEO and communicates the result of the review to the CEO. 14) Succession Planning: As part of the annual officer evaluation process, the compensation committee works with the CEO to plan for CEO succession, as well as to develop plan for interim succession for the CEO in the event of an unexpected occurrences. 15) Board self-evaluation: The governance and nominating committee is responsible for conducting an annual evaluation of the performance of the full board and reports its conclusion to the board. Compensation 16) Board compensation review: Company management should report to the board on an annual basis as to how the companys director compensation practices compare with those of other large public corporations. 17) Directors' stock ownership: The board believes that, in order to align the interests of directors and shareholders, directors should have a significant financial stake in the company. Committees 18) Number and types of committees: The board has 5 committees- an Audit committee, a compensation committee, governance and nominating committee, a finance committee, and an antitrust compliance committee. The board may add new committees or remove existing committees as it deems advisable in the fulfillment of its primary responsibilities. a. Audit committee b. Compensation committee c. Governance and Nominating committee d. Finance committee 19) Composition of committee: Committee chairperson. The audit, compensation, governance and nominating and antitrust compliance committees consist solely of independent directors. 20) Committee Meetings and Agenda: The chairperson of each committee is responsible for developing, together with relevant company managers, the committee's general agenda and objectives and for setting the specific agenda for committee meeting. Miscellaneous 21) Review of governance guidelines: The practices memorialized in these guidelines have developed over a period of years. The board expects to review these guidelines at least every two years as appropriate. Questions: 1. List the number and types of committees. 2. Discuss the Performance evaluation planning in brief. ______________________________________________________________________ Finance Management Caselet 1 TOUAX is a French company and is currently Europe's no. 1 in shipping containers and river barges, and no. 2 in modular building and freight railcars. The group provides operating leases to customers around the world, both on its own account and for third-party investors. On June 24, 2009, TOUAX announced that its capital increased by waiving preferential subscription rights but with priority for existing shareholders, launched on 18 June 2009 for a total of E17, 851,519.76 (gross) through the issue of 936,596 new shares which were subscribed in the entirely. Following partial application of the extension clause, 952,747 shares were placed or 101.72% of the issue; total proceeds were E18, 159,357.82. This rights issue has enabled the Group to strengthen its financial structure, to position itself with advantage for possible acquisitions of tangible stock, and to grasp opportunities thrown up by the crisis (purchase of shipping containers, modular buildings, river barges and railcars, for hiring out on mainly long-term leases). 370,062 new shares allotted under absolute entitlement were subscribed or 39.51% of the total number of new shares issue. Another 555,685 shares were applied for subject to cutting back in the event of over subscription, and orders for these were all filled. Another 27,000 shares had been applied for by the general public, and following partial application of the extension clause it proved possible to fill orders for all of these. All the result of the right issue, TOUAX is well placed to respond to the boom in corporate outsourcing of non-core assets, and every day provides over 5,000 customers with quick and flexible leasing solutions. TOUAX is now listed on Euronext in Paris - NYSE Euronext Compartment C (ISIN Code FR0000033003), and features in the SBF 250 Index. Questions: 1. After analyzing the case, do you think all the companies that can afford, should opt for right issue to improve their financial status? 2. What do you analyze as the two main advantages of the right issue? Case let 2 In mid-February 1994, the British paper, the Sunday times ran on article that alleged that a 1 billion sterling ($ 750 M) sale of equipment by British companies to Malaysia was secured only after bribes had been paid to Malaysian government officials and after the British overseas development administration (ODA) had agreed to approve a 234 million sterling grant to the Malaysian government for a hydroelectric dam of (according to the Sunday times) dubious economic value. The clear implication was that UK officials, in their enthusiasm to see British companies win a large defence contract, had yield to pressures from \"corrupt\" Malaysian officials for bribes - both personal and in the form of the 234 million sterling development grants. What happened next took everyone by surprise. The Malaysian government promptly announced a ban on the impact of all British goods and services into Malaysia and demanded an apology from British Government. Officially the ban applied only to government orders for British goods and services; the private sector was free to busy as it chose. However, British companies with experience in the region were nervous that the private sector would follow the governments lead in shunning British products. At stake was as much as 4 billion sterling in British exports and construction activities in Malaysia and a presence in one of the worlds fastest growing developing economies (Malaysias economic growth has averaged 8% per annum since 1989). In announcing the ban, Malaysias Prime Minister, Dr Mahathir Mohammad, noted that the British media portrays Malaysians as corrupt because \" They are not British and not white\"...And \"we believe the foreign media must learn the fact that developing countries, including a country led by brown Moslem, have the ability to manage their own affairs successfully\". The British government responded by stating, it could not tell the British press what and what not to publish, to which Dr Mahathir replied there would be \"no contracts for British press freedom to tell lies\". At the same time, the British government came under attack from members of parliament in Britain, who suspected the government acted unethically and approved the ODA hydroelectric grant to help British companies win orders in Malaysia. Questions: 1. If you are the CEO of a British company that now faces the loss of a lucrative contract in Malaysia because of the dispute. What action should you take? 2. How do you think British government should respond to the Malaysian action? Human Resource Management Case let 1 Star Automobiles Ltd. Pimpary is in the field of manufacturing of two wheelers. They manufacture and market mopeds. These are available in the brand names 'arrow' and 'double arrow' where 'arrow' is their traditional product and 'double arrow' is the improved version. The company was started about 20 yrs ago. Their product 'arrow' enjoys a reasonably good reputation and they were comfortable in the market. However, with the entry of the new generation of fuel-efficient mopeds the company started losing its market. They immediately started developing the improved 'double arrow' but by the time they came out with this new model the competitors had already strengthened their position in the market. The arrow model was still acceptable by a segment of the market as it was cheapest vehicle. 'Double arrow' is new generation vehicle. It was costlier than Jet but its performance was much superior. It is compared favorably with the competitors' products; however it was yet to gain a foot hold in the market. The company had to refurbish the marketing activities in order to get back their market share. They employed young sales engineer to launch a strong sales drive. Mr. Ramesh Tiwari, Btech and a diploma holder in marketing got selected and was put on the job. Mr. Ramesh Tiwari started well in his new job. He was given a territory to contact the prospective customers' and to book the orders. The company had introduced a new financial assistance scheme. Under this scheme, buyers were given easy loans. It was particularly advantageous for group booking by employees working in an organization. Mr. Ramesh Tiwari was able to contact people in different organization, arrange for group bookings and facilitate the loans. His performance was good in the first year and in the second year of his service. The company had its own system of rewarding those whose performance happened to be good. They usually arranged a paid holiday trip for the good performer along with his wife. Mr. Ramesh Tiwari was accordingly informed by the marketing manager to go to Chennai with his wife on company expenses. Mr. Ramesh Tiwari asked him as to how much it would cost to the company. The marketing manager calculated and told him that it would cost about 8000/-. He quickly asked him whether he could get that 8000/- in cash instead of the trip as he had better plans. The marketing manager countered this saying that it might not be possible to doso. It was not the trading of the company, however he would check with the personnel manager. After a couple of days, Mr. Tiwari was informed that it would not be possible to give him a cash reward. Mr. Tiwari grudgingly went for the trip and returned. On his return, he was heard complaining to one of his colleagues his little daughter was also along with him. The marketing manager and the personnel manager thought he was a bit too fusy about the money and some of his colleagues also thought so. During the subsequent days Mr. Ramesh Tiwari's performance was not all that satisfactory this showed his lukewarm attitude towards his job and the subordinates. Questions: 1. Did the personnel manager handle the issue properly? 2. What is your recommendation to avoid such situations in future? Case let 2 In 1950, with the enactment of the Insurance Act, Government of India decided to bring all the insurance companies under one umbrella of the Life Insurance Corporation of India (LIC). Despite the monopoly of LIC, the insurance sector was not doing well. Till 1995, only 12% of the country's people had insurance cover. The need for exploring the insurance market was felt and consequently the Government of India set up the Malhotra Committee. On the basis of their recommendation, Insurance Development and Regulatory Authority (IRDA) Act was passed in parliament in 2000. This moved allowed the private insurers in the market with the strong foreign partners with 74:26% stakes. XYZMoon life was one of the first three private players getting the license to operate in India in the year 2000. XYZ Moon life Insurance was a joint venture between the XYZ Group and Moon Inc. of US. XYZ started off its operations in 1965, providing finance for industrial development and since then it had diversified in to housing finance, consumer finance, mutual funds and now its latest venture was Life Insurance. Its foreign partner Moon Inc. had its presence in Asia since the past 75 years catering to over 1 million customers across 11Asian countries. Within a span of two years, twelve private players obtained the license from IRDA.IRDA had provided certain base policies like, Endowment Policies, Money back Policies, Retirement Policies, Team Policies, Whole Life Policies, and Health Policies. They were free to customize their products by adding on the riders. In the year 2003, the company becomes one of the market leaders amongst the private players. Till 2003, total market share of private insurers was about 4%, but Moon Life was performing well and had the market share of about 30% of the private insurance business. In June 2002, XYZ Moon Life started its operations at Nagpur with one Sales Manager(SM) and ten Development Officers (DO). The role of a DO was to recruit the agents and sell a career to those who have an inclination towards insurance and could work either on part time or full time basis. They were very specific in recruiting the agents, because their contribution directly reflected their performance. All DOs faced three challenges such as Case Rate (number of policies), case size (amount of premium), and recruitment of advisors by natural market, personal observations, nominators, and center of influence. Incentive of offered by the company to development officers and agents were based on their performance, which resulted in to internal competition and finally converted into rivalry. In August 2002, a branch manager joined along with one more sales manager and ten development officers. Initially, the branch was performing well and was able to build their image in the local market. As the industry was dynamic in nature, there were frequent opportunities bubbling in the market. In order to capitalize the outside opportunities, one sales manager left the organization in January 2003. As the sales manager was a real performer, he was able to convince all the good performers at XYZ Moon Life Insurance to join the new company. In April 2004, the company faced a grave problem, when the Branch Manager left the organization for greener pastures. To fill the position, in May 2004, the company appointed a new branch manager, Shashank Malik, and a sales manager, Rohit Pandey. The branch manager in his early thirties had an experience of sales and training of about 12 years and was looking after two branches i.e., Nagpur and Nasik. Malik was given one Assistant Manager and 25 Development Officers. Out of that, ten were reporting to him. He was given the responsibility of handling all the operations and the authority to make all the decisions, while informing the Branch Manager. Malik opined that the insurance industry is a sunrise industry where manpower plays an important role as the business is based on relationship. He wanted to encourage one-to-one interaction, transparency and discipline in his organization. While managing his team, he wanted his co-workers to analyze themselves i.e., to understand their own strengths and weaknesses. He wanted them to be result-oriented and was willing to extend his full support. Finally, he wanted to introduce weekly analysis in his game plan along with inflow of new blood in his organization. Using his vast experience, he began informal interactions among the employees, by organizing outings and parties, to inculcate the feelings of friendliness and belonging. He wanted to increase the commitment level and integrity of his young dynamic team by facilitating proper channelization of their energy. He believed that proper training could give his team a proper understanding of the business and the dynamics of insurance industry. Questions: 1. If you were Malik, what strategies would you adopt to solve the problem? 2. With high employee turnover in insurance industry, how can the company retain a person like Malik? Corporate Governance 1.What are the scopes of corporate governance? ------ 5 marks 2. Discuss the basic rights of shareholders? ------ 5 marks 3. List the type of \"Auditors\". ------ 5 marks 4. Write a short note on corporate social responsibility. ------ 5 marks 5. Define corporate governance; explain the principles of corporate governance? ----------------- 15 marks 6. Distinguish between the Anglo-American Model and the German Model. ----------------- 15 marks Finance Management 1. Write a short note on Interest Rate Parity System for exchange rates. ------ 5 marks 2. What are Direct & Indirect Quotes of exchange rates? ------ 5 marks 3. What is International Mutual Fund? ------ 5 marks 4. Briefly describe \"swaps in foreign exchanges markets. ------ 5 marks 5. Discuss the factors that affect foreign exchange market. Explain the different types of foreign exchange quotations. -------------------------------- 15 marks 6. What do you mean by balance of payment? What are the key components of balance of payment ? -------------------------------- 15 marks Case let 1 Managing Exchange Rate Risk (20 marks) Mahindra International (India) imported spares of an engine from a US manufacturer for $ 5,000 per annum at a price of $ 2.5 per piece. The average exchange rate during 2001-02 was Rs. 47.70/$. The Indian company imported the spares also from a British manufacturer. In fact, it had diversified its import in view of reducing the risk associated with the supply. The import from the USA was competitive in view of the fact the same spares imported from the UK was slightly costlier. The American spares cost Rs. 119.25 per piece, while the British spares cost Rs. 120.00 per piece. In 2002-03, US dollar appreciated to Rs. 48.40 with the result that the cost of American spares turned higher than the British spares. In the sequel of the appreciation of US dollar, the Indian importer cut its demand from 2,000 pieces to 500 pieces. The loss to the US exporter was colossal. But at the same time, the Indian Importer suffered a lot. It had to pay a higher price for the US spares in terms of rupee. And also, it had to divert its import from the USA to the UK insofar as the pound sterling did not appreciate during this period. All this happened in the wake of the exchange rate changes. Questions: 1. Mention the loss borne by the US exporter in the sequel of appreciation of dollar. 2. What strategy the Indian importer needs to follow to hedge the exchange rate risk? Case let 2 ABN Amro Bank and Correspondent Banking in India (20marks) ABN AMRO bank has emerged as a major correspondent bank owing to a large network. In India, it operates in six major cities, viz. Baroda, Chennai, Kolkata, Mumbai, New Delhi and Pune. Being a correspondence bank, its product offerings are found primarily in the area of trade and clearing. It is doing well in these owing to strong tie-up with local Indian banks reaching 350 centers across the country. As a result, payments are effected speedily and effectively. Cash Management The customized products in the area of cash management include cheques payable at par at all its branches across the country, apart from traditional collection services, such as collection of outstation/upcountry cheques drawn on other banks. ABN AMRO is a member of all major clearing centers in the major financial centers. It has an electronic delivery system and structures multilateral netting of cash. Trade Services Under trade services, the Bank offers a comprehensive range of products, such as: 1. LC reimbursement 2. Indian rupee trade payments 3. Handling documentary bills for collection 4. Bills negotiation 5. Letter of credit advising 6. Letter of credit confirmation 7. Guarantees Treasury Services Treasury services at ABN AMRO Bank (India) are available round-the-clock. Rupee funding at its treasury desk is provided at competitive rates along with advice on market trends and rates. It provides also advisory services on the request of financial institutions and corporate in the area of regulatory, economic and financial matters including depository services. Questions: 1. Describe the network of ABN AMRO Bank in India. 2. What role does it play for global cash management? Security Analysis and Portfolio Management 1. What does \" (Beta) mean in risk management? ------ 5 marks 2. Write a note on \"options & \"future derivatives. ------ 5 marks 3. Define Capital market theory. ------- 5 marks 4. Write a short note on CAPM. ------- 5 marks 5. What do you mean by risk management? Elaborate the various kinds of systematic and nonsystematic risks. -------------------------------- 15 marks 6. What do you mean by Portfolio management? What are the methods of calculating portfolio performance evaluation? -------------------------------- 15 marks Human Resource Management (25 marks) 1. Discuss the various methods of Appraisal? ------ 5 marks 2. Briefly explain 'On the job and Off the job' methods of Training and Development. ------ 5 marks 3. Explain the objectives of 'Performance Appraisal'. ------ 5 marks 4. Differentiate between HRM and HRD concept. ------ 5 marks 5.What do you mean by Quality of Work Life? Discuss the various techniques for improving the Quality of work life with the principles of QWL? -------------------------------- 15 marks 6. Discuss the basic concepts of management development. What is the important of management development in the changing business? -------------------------------- 15 marks Case let 1 Introduction to the Organization: (20 marks) XYZ Company was established 20 years ago, to manufacture gearbox components for diesel engines. It employs around 250 people, having a head office, which employs a wide range of personnel who are generally well educated and enthusiastic about their work, and a factory, which employs semiskilled local people who are generally disinterested in the products of the company and who have an instrumental attitude to work, seeing salary as the only reward. Brief Description of the Problem: The performance of the company has not been good and the records revealed the following facts: Wastage within the factory was costing the company approximately Rs.100,000 a month. There was wide spread differences in individual work standards. Processes were non-standardized resulting in repeated problems. Management made all decisions and cascaded the results down to employees. The top management become concerned about the performance of the factory and they hired. Mr. Tanmoy Deb, an OD consultant to study the problem and suggest specific changes to relationship and tasks with the following objectives: To review and improve communication systems. To restructure the organization and to review teamwork and quality practices. To review leadership issues across all levels. Mr. Tanmoy Deb carried out discussions, interviews and surveys and made the following observation: There' and 'us' attitude was widely prevalent between head office and factory personnel. Production personnel lacked technical skills. Factory employees felt alienated from sharing the Company's success. Production systems were adhoc and defective because of frequent variation in standards set. Many times raw material was found to be of inferior quality. Rigidly defined job descriptions. Questions: 1. What in your view are the central human resource issues involved in this case? 2. What Strategy should Mr. Tanmoy Deb develop and implement for improving the present system? Case let 2 Introduction to the Organization: (25marks) XYZ Company is an existing profit making FMCG Company. The company has 600 personnel and has branches all other the country. It has a separate training department with a Training Manager, Mr. A.P. Mohan as its head who is supported by two qualified training officers. Mr. Mohan has been in the company for the last 8 years and is very efficient. Brief Description of the problem: Mr. Mohan wants to have the organization. He is fed up with organization politics. He is dissatisfied and in fact frustrated. There are several reasons attachment to it. First and foremost is that he is not paid adequately despite the fact that he has brought 12% growth in revenue to the company. Second reason is that he is not consulted and constantly neglected while making decision on training aspects. Lastly, he considers himself to be a victim of politics played in the organization. Production Manager is constantly hurting him and interferes with the work. Dr. Ashok Sarao, boss of Mr. A.P. Mohan does not want him to leave the organization, as he known that the effectively will come down if he leaves Dr. Ashok tries to convince Mohan that he should adjust himself with the environment and also talk of how Mohan is constantly neglected. He talks of how politics is played in the organization and strengths and weaknesses of Mohan but does nothing to convince Mohan. Rather he says that they have to adjust, as they are part of family run business. In this setting, personal equation rather than merit works. Mohan is not convinced and says he is leaving. Questions: 1. Why a high performer like Mr. Mohan decided to leave the organization he has been long part of? 2. Do you think Mr. A.P. Mohan took the right decision to leave the organization? What would you have done if you were in his shoes? Corporate Governance 1.What are the scopes of corporate governance? ------ 5 marks 2. Discuss the basic rights of shareholders? ------ 5 marks 3. List the type of \"Auditors\". ------ 5 marks 4. Write a short note on corporate social responsibility. ------ 5 marks 5. Define corporate governance; explain the principles of corporate governance? ----------------- 15 marks 6. Distinguish between the Anglo-American Model and the German Model. ----------------- 15 marks Finance Management 1. Write a short note on Interest Rate Parity System for exchange rates. ------ 5 marks 2. What are Direct & Indirect Quotes of exchange rates? ------ 5 marks 3. What is International Mutual Fund? ------ 5 marks 4. Briefly describe \"swaps in foreign exchanges markets. ------ 5 marks 5. Discuss the factors that affect foreign exchange market. Explain the different types of foreign exchange quotations. -------------------------------- 15 marks 6. What do you mean by balance of payment? What are the key components of balance of payment ? -------------------------------- 15 marks Case let 1 Managing Exchange Rate Risk (20 marks) Mahindra International (India) imported spares of an engine from a US manufacturer for $ 5,000 per annum at a price of $ 2.5 per piece. The average exchange rate during 2001-02 was Rs. 47.70/$. The Indian company imported the spares also from a British manufacturer. In fact, it had diversified its import in view of reducing the risk associated with the supply. The import from the USA was competitive in view of the fact the same spares imported from the UK was slightly costlier. The American spares cost Rs. 119.25 per piece, while the British spares cost Rs. 120.00 per piece. In 2002-03, US dollar appreciated to Rs. 48.40 with the result that the cost of American spares turned higher than the British spares. In the sequel of the appreciation of US dollar, the Indian importer cut its demand from 2,000 pieces to 500 pieces. The loss to the US exporter was colossal. But at the same time, the Indian Importer suffered a lot. It had to pay a higher price for the US spares in terms of rupee. And also, it had to divert its import from the USA to the UK insofar as the pound sterling did not appreciate during this period. All this happened in the wake of the exchange rate changes. Questions: 1. Mention the loss borne by the US exporter in the sequel of appreciation of dollar. 2. What strategy the Indian importer needs to follow to hedge the exchange rate risk? Case let 2 ABN Amro Bank and Correspondent Banking in India (20marks) ABN AMRO bank has emerged as a major correspondent bank owing to a large network. In India, it operates in six major cities, viz. Baroda, Chennai, Kolkata, Mumbai, New Delhi and Pune. Being a correspondence bank, its product offerings are found primarily in the area of trade and clearing. It is doing well in these owing to strong tie-up with local Indian banks reaching 350 centers across the country. As a result, payments are effected speedily and effectively. Cash Management The customized products in the area of cash management include cheques payable at par at all its branches across the country, apart from traditional collection services, such as collection of outstation/upcountry cheques drawn on other banks. ABN AMRO is a member of all major clearing centers in the major financial centers. It has an electronic delivery system and structures multilateral netting of cash. Trade Services Under trade services, the Bank offers a comprehensive range of products, such as: 1. LC reimbursement 2. Indian rupee trade payments 3. Handling documentary bills for collection 4. Bills negotiation 5. Letter of credit advising 6. Letter of credit confirmation 7. Guarantees Treasury Services Treasury services at ABN AMRO Bank (India) are available round-the-clock. Rupee funding at its treasury desk is provided at competitive rates along with advice on market trends and rates. It provides also advisory services on the request of financial institutions and corporate in the area of regulatory, economic and financial matters including depository services. Questions: 1. Describe the network of ABN AMRO Bank in India. 2. What role does it play for global cash management? Security Analysis and Portfolio Management 1. What does \" (Beta) mean in risk management? ------ 5 marks 2. Write a note on \"options & \"future derivatives. ------ 5 marks 3. Define Capital market theory. ------- 5 marks 4. Write a short note on CAPM. ------- 5 marks 5. What do you mean by risk management? Elaborate the various kinds of systematic and nonsystematic risks. -------------------------------- 15 marks 6. What do you mean by Portfolio management? What are the methods of calculating portfolio performance evaluation? -------------------------------- 15 marks Human Resource Management (25 marks) 1. Discuss the various methods of Appraisal? ------ 5 marks 2. Briefly explain 'On the job and Off the job' methods of Training and Development. ------ 5 marks 3. Explain the objectives of 'Performance Appraisal'. ------ 5 marks 4. Differentiate between HRM and HRD concept. ------ 5 marks 5.What do you mean by Quality of Work Life? Discuss the various techniques for improving the Quality of work life with the principles of QWL? -------------------------------- 15 marks 6. Discuss the basic concepts of management development. What is the important of management development in the changing business? -------------------------------- 15 marks Case let 1 Introduction to the Organization: (20 marks) XYZ Company was established 20 years ago, to manufacture gearbox components for diesel engines. It employs around 250 people, having a head office, which employs a wide range of personnel who are generally well educated and enthusiastic about their work, and a factory, which employs semiskilled local people who are generally disinterested in the products of the company and who have an instrumental attitude to work, seeing salary as the only reward. Brief Description of the Problem: The performance of the company has not been good and the records revealed the following facts: Wastage within the factory was costing the company approximately Rs.100,000 a month. There was wide spread differences in individual work standards. Processes were non-standardized resulting in repeated problems. Management made all decisions and cascaded the results down to employees. The top management become concerned about the performance of the factory and they hired. Mr. Tanmoy Deb, an OD consultant to study the problem and suggest specific changes to relationship and tasks with the following objectives: To review and improve communication systems. To restructure the organization and to review teamwork and quality practices. To review leadership issues across all levels. Mr. Tanmoy Deb carried out discussions, interviews and surveys and made the following observation: There' and 'us' attitude was widely prevalent between head office and factory personnel. Production personnel lacked technical skills. Factory employees felt alienated from sharing the Company's success. Production systems were adhoc and defective because of frequent variation in standards set. Many times raw material was found to be of inferior quality. Rigidly defined job descriptions. Questions: 1. What in your view are the central human resource issues involved in this case? 2. What Strategy should Mr. Tanmoy Deb develop and implement for improving the present system? Case let 2 Introduction to the Organization: (25marks) XYZ Company is an existing profit making FMCG Company. The company has 600 personnel and has branches all other the country. It has a separate training department with a Training Manager, Mr. A.P. Mohan as its head who is supported by two qualified training officers. Mr. Mohan has been in the company for the last 8 years and is very efficient. Brief Description of the problem: Mr. Mohan wants to have the organization. He is fed up with organization politics. He is dissatisfied and in fact frustrated. There are several reasons attachment to it. First and foremost is that he is not paid adequately despite the fact that he has brought 12% growth in revenue to the company. Second reason is that he is not consulted and constantly neglected while making decision on training aspects. Lastly, he considers himself to be a victim of politics played in the organization. Production Manager is constantly hurting him and interferes with the work. Dr. Ashok Sarao, boss of Mr. A.P. Mohan does not want him to leave the organization, as he known that the effectively will come down if he leaves Dr. Ashok tries to convince Mohan that he should adjust himself with the environment and also talk of how Mohan is constantly neglected. He talks of how politics is played in the organization and strengths and weaknesses of Mohan but does nothing to convince Mohan. Rather he says that they have to adjust, as they are part of family run business. In this setting, personal equation rather than merit works. Mohan is not convinced and says he is leaving. Questions: 1. Why a high performer like Mr. Mohan decided to leave the organization he has been long part of? 2. Do you think Mr. A.P. Mohan took the right decision to leave the organization? What would you have done if you were in his shoes