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www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/ZENITH INTERNATIONAL JOURNAL OF BUSINESSECONOMICS & MANAGEMENT RESEARCH (ZIJBEMR)VOL.2 - ISSUE 3; MARCH 2012; ISSN 2249 8826SR. NO. CONTENTS PAGE NO.1.2.AN ENCOUNTER WITH MIGRANTS ON THE LINE OF PUSH-PULL THEORYDR. IPSEETA SATPATHY, DR. B. C. M. PATNAIK,PRABIR KUMAR PRADHANTHE ROLE OF INFORMATION AND COMMUNICATIONTECHNOLOGY (ICT) ON THE LEVEL OF EXPORTS OFSMALL AND MEDIUM-SIZED ENTERPRISES (SMEs): ANEXPLORATORY STUDY1-1213-283.4.5.6.7.VAHID RANGRIZBASEL II REGULATORY COMPLIANCE AMONG ASIA-PACIFIC COUNTRIESDR. MANDEEP KAUR, SAMRITI KAPOOREMOTIONAL INTELLIGENCE DEVELOPSORGANIZATIONAL LEARNING CAPABILITIESDR. J. VENKATESH, MR. D. BALAJIA SEARCH FOR MEASURING QUALITY IN ENGINEERINGEDUCATION: AN EMPIRICAL STUDYDR. KAUSHIK MANDAL, CHANDAN KUMAR BANERJEEEVALUATION OF MASTER'S DEGREE STUDENTS'SATISFACTION OF EDUCATIONAL SERVICES IN IRAN(CASE STUDY: NEYSHABUR UINVERSITY)TOORAJ SADEGHI, DR. BAHAREH HAAJ ALI BEYGIA STUDY ON TECHNICAL ANALYSIS OF DERIVATIVESTOCK FUTURES AND THE ROLE FOR DEBT MARKETDERIVATIVES IN DEBT MARKET DEVELOPMENT IN INDIA29-4243-4950-6768-8081-988.NENAVATH SREENUEMPIRICAL STUDY ON OPINIONS OF THE AGENTS ABOUTTHE SERVICE RENDERED BY LIC OF INDIADR.J.ARUL SURESH, DR.S.RAJA MOHAN99-106

www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/9.10.11.12.13.14.15.16.17.18.19.COMPOSITE INDICATORS OF FINANCIALCOMPETITIVENESS: A CRITICAL ASSESSMENTDR.A.VIJAYAKUMARBEST PRACTICES IN CHANGE MANAGEMENTJ.SHEEBA ROSALINELNG SHIPPING BUSINESS VERSUS DRY CARGO SHIPPINGMARKET – A COMPARATIVE STUDYS.KAMALAKANNAN, DR.B.MADHAVANRETAILER’S EOQ DECISION FOR FINITE HORIZON TOREDUCE THE IMPACT OF BULLWHIP EFFECTSACHIN GUPTASTUDENTS INTENTION TOWARDS ENTREPRENEURSHIP:A REVIEW OF EMPIRICAL STUDIESDR. MOHSIN SHAIKHAN ANALYTICAL STUDY OF INDEX MUTUAL FUNDS ININDIADR. YOGESH KUMAR MEHTAWOMENS PARTICIPATION IN MICRO, SMALL ANDMEDIUM ENTERPRISESDR. DIL PAZIR, SHOKIT HUSSAINRELATIONSHIP MARKETING: PERSPCTIVES ANDIMPLICATIONSMOHAMMAD RIZWAN ALAMPROSPECTS AND PROBLEMS OF INDIAN RURALMARKETSV V DEVI PRASAD KOTNI‘PERMISSION MARKETING’- INTERRUPTION ISREPLACED BY INVITATIONJ.J.SOUNDARARAJFINANCIAL PERFORMANCE OF FMCG COMPANIES ININDIA: A COMPARATIVE STUDY BETWEEN BRITANNIAINDUSTRIES AND DABUR INDIA107-131132-141142-150151-164165-170171-182183-194195-199200-213214-221222-232DR. BHASKAR BAGCHI, DR. BASANTA KHAMRUI

www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/20.21.22.FINANCIAL PERFORMANCE OF LIFE INSURANCECOMPANIES AND PRUDUCTSV.NEELAVENIDOES THE FINANCIAL INCLUSION HELPS MUTUAL FUNDSIN INDIA?DR. B. AMARNATH, DR. S. RAGHUNATHA REDDY,MR. THULASI KRISHNA.KA CONCEPTUAL STUDY ON FLUCTUATION OF RUPEE INRELATION TO DOLLARMEHUL RAITHATHA233-258259-265266-274

1www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/AN ENCOUNTER WITH MIGRANTS ON THE LINE OF PUSH-PULLTHEORYDR. IPSEETA SATPATHY*; DR. B. C. M. PATNAIK**; PRABIR KUMAR PRADHAN***ABSTRACT*Associate Professor,School of Management,KIIT University, Bhubaneswar, Odisha.**Associate Professor,School of Management,KIIT University, Bhubaneswar, Odisha.***Ph. D Research Scholar,School of Management,KIIT University, Bhubaneswar, Odisha.The push-pull theory of migration tries to explain the migration of rural labour to urban areas.The socio economic- and cultural conditions have always governed the migration of workers.The push away from the impoverished village and the pull and promise of city life combine toproduce a roaming team of migrants. The migrants expect more stable and rewardingemployment in the city and hope to find there more adequate health facilities and bettereducation for children. The present study is an attempt to understand the ground realities. Forthis purpose we targeted only the migrants of rural area to urban area and we ignore the rest. Thestudy is focused to Khurda District of Odisha, as it is in the Capital region and at the same time itmakes true representation of Odisha.KEYWORDS: Migration, Rural, Urban and Perception.______________________________________________________________________________INTRODUCTIONThe evaluation of the industrial working class in India has been the direct outcome of thecountry’s industrial development and a considerable increase in its population. The increasingpopulation put a heavy pressure on land facing many landless persons to seek alternativeemployment elsewhere. The British induced land tenures implied high taxation and insecurity forthe tillers of the soil, which made them indebted. The growing indebtness and the diminishingcapacity of the land to sustain them pushed them into nearby cities for employment. The numberof such job-seekers further increased following the disintegration of cottage and villageindustries under the impact of competition generated by British imports. The Royal Commissionon Labour (1931) concluded that labourers do not come to the city for its attraction or a betterlife; economic pressures in the village force them to move to city. The commission observed thatthe driving force in migration comes entirely from one end of the channel, that is, the village end.The industrial worker is not prompted by the lure of city life or by any great ambition. The cityhas no attraction for him, and when he leaves the village, he has seldom an ambition beyond thatof securing the necessities of life. Few industrial workers would remain in industry, if they could

2www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/secure significant food and clothing in the village. They are pushed, not pulled, to the city. Thegreat majority of these workers were at heart villagers, for they were brought up in the villages.They had the village traditions and retained contact with the villagers.OBJECTIVE OF THE STUDY To understand the various factors responsible for the migration from rural tourban. To understand the perception level of the migrants. To suggest some corrective steps towards this issue.LIMITATIONS OF THE STUDY The study is limited to Khurda District of Odisha The sample size is limited; it may not give the exact picture. The period of study is for 3 months i.e August 2011 to October 2011.SAMPLE &METHODOLOGY OF THE STUDYFor the purpose of the study 200 questionnaires distributed and the sampling technique adoptedis stratified random sampling. Finally, 118 responses received, this includes 42 femalerespondents. Simple percentage method followed for presenting the data in simple way. Theanalysis carried on the basis of Factors that push from rural area Factors that pull towards the urban area.RESPONDENTS ON THE BASIS OF AGE GROUPAge group Frequency Percent Cumulative percentLess than 20 24 20.34 20.3420-30 37 31.36 51.7030-40 28 23.73 75.4340-50 16 13.56 88.99More than 50 13 11.01 100Total 118 100

3www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Source: Compiled from field surveyRESPONDENTS ON THE BASIS OF EDUCATIONAL BACK GROUNDEducation Frequency Percent Cumulative percentLess than 10 thclass57 48.31 48.31Under graduates 49 41.53 89.84Post Graduates 12 10.16 100Total 118 100Source: Compiled from field surveyFINDINGS OF THE STUDYPUSH FROM RURAL AREA1. Do you believe that increasing pressure of population in land in rural area leads to migration?Gender F CA % A % N % DA % CDA %Male 76 49 64.47 10 13.16 1 1.3 9 11.84 7 9.23Female 42 27 64.29 8 19.05 2 4.76 3 7.14 2 4.76Total 118 76 18 3 12 9Source: Compiled from filed survey, F- Frequency, CA-Completely Agee, A-Agree, N-Neutral,DA- Dis Agree & CDA- Completely Disagree.INTERPRETATION: Responding to this 64.47% of male and 64.29% of female completelyagreed. Only 11.84% of male and 7.14% of female did not agree. Similarly, 9.23% of male and4.76% of female did not agree.

4www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Chart -1: increasing pressure of population in land in rural area leads to migration6050403020MaleFemale100CA A N DA CDA2. Do you believe that agriculture is pursued by mostly small and marginal farmers assubsistence not for commercial venture is one of the reasons for migration to urban area?Gender F CA % A % N % DA % CDA %Male 76 38 50 9 11.84 5 6.58 14 18.42 10 13.16Female 42 26 61.90 8 19.05 3 7.14 3 7.14 2 4.77Total 118 64 17 8 17 12Source: Compiled from filed survey, F- Frequency, CA-Completely Agee, A-Agree, N-Neutral,DA- Dis Agree & CDA- Completely Disagree.INTERPRETATION: Answering to this 50% of male and 61.90% of female completelyagreed. 6.58% of male and 7.14% of female were neutral and rest belongs to other remainingcategory.4035302520151050Chart -2:agriculture is pursued by mostly small and marginal farmers as subsistencenot for commercial venture is one of the reasons for migration to urban areaCA A N DA CDAMaleFemale

5www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/3. Do think that increasing number of landless agriculture labour forces the rural mass to urbanarea?Gender F CA % A % N % DA % CDA %Male 76 41 53.95 13 17.11 6 7.89 6 7.89 10 13.16Female 42 24 57.14 9 21.43 3 7.14 4 9.52 2 4.77Total 118 65 22 9 10 12Source: Compiled from filed survey, F- Frequency, CA-Completely Agee, A-Agree, N-Neutral,DA- Dis Agree & CDA- Completely Disagree.INTERPRETATION: Participating to this question 53.95% of male and 57.14% of femalestrongly supported the view. 13.16% of male and 4.77% of female completely disagreed and restjoined the other category.454035302520151050Chart - 3: increasing number of landless agriculture labour forces the rural mass tourban areaCA A N DA CDAMaleFemale4. Do you think that ill treatment by the high caste people to schedule caste and other depressedclass compels the migration?Gender F CA % A % N % DA % CDA %Male 76 27 35.53 12 15.79 6 7.89 15 19.74 16 21.05Female 42 22 52.38 9 21.43 4 9.52 4 9.52 3 7.15Total 118 49 21 10 19 19Source: Compiled from filed survey, F- Frequency, CA-Completely Agee, A-Agree, N-Neutral,DA- Dis Agree & CDA- Completely Disagree.

6www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/INTERPRETATION: Joining to this query, 35.53% of male and 52.38% of female completelyagreed. 19.74% of male and 9.52% of female disagreed to this.302520151050Chart - 4:ill treatment by the high caste people to schedule caste and other depressedclass compels the migrationCA A N DA CDAMaleFemale5. Do you think that indebtness and exploitation by the money lenders force the rural people tourban area?Gender F CA % A % N % DA % CDA %Male 76 32 42.11 17 22.37 7 9.21 12 15.79 8 10.52Female 42 31 73.81 6 14.29 3 7.14 1 2.38 1 2.38Total 118 63 23 10 13 9Source: Compiled from filed survey, F- Frequency, CA-Completely Agee, A-Agree, N-Neutral,DA- Dis Agree & CDA- Completely Disagree.INTERPRETATION: Responding to this 73.8% of female, 42.11% of male completely agreed.9.21% of male and 7.14% of female decided to be neutral and rest belongs to others.35302520151050Chart - 5:indebtness and exploitation by the money lenders force the rural people tourban areaCA A N DA CDAMaleFemale

7www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/6. Do you agree that other family problem compels the rural people to urban area?Gender F CA % A % N % DA % CDA %Male 76 34 44.74 18 23.68 8 10.53 10 13.16 6 7.89Female 42 29 69.05 6 14.29 2 4.76 3 7.14 2 4.76Total 118 63 24 10 13 8Source: Compiled from filed survey, F- Frequency, CA-Completely Agee, A-Agree, N-Neutral,DA- Dis Agree & CDA- Completely Disagree.INTERPRETATION: Answering to this 44.74% of male, 69.05% of female supported the viewcompletely. 13.16% of male and 7.14% of female disagreed. 4.76% of female and 7.89% of malecompletely disagreed.Chart - other family problem compels the rural people to urban area4035302520151050CA A N DA CDAMaleFemale7. Do you feel that because of low agricultural productivity people migrate to the urban areafrom rural area?Gender F CA % A % N % DA % CDA %Male 76 27 35.53 15 19.74 7 9.21 17 22.37 10 13.15Female 42 31 73.81 4 9.52 6 14.29 1 2.38 - -Total 118 58 19 13 18 10Source: Compiled from filed survey, F- Frequency, CA-Completely Agee, A-Agree, N-Neutral,DA- Dis Agree & CDA- Completely Disagree.

8www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/INTERPRETATION: Responding to this 35.53% of male and 73.81% of female completelyagreed. 22.37% of male and 2.38% of female disagreed.35302520151050Chart - 7:because of low agricultural productivity people migrate to the urban areafrom rural areaCA A N DA CDAMaleFemalePULL FROM URBAN AREA8. Do you believe that for earning better income in urban area people migrate from rural area?Gender F CA % A % N % DA % CDA %Male 76 43 56.58 10 13.16 6 7.89 7 9.21 10 13.16Female 42 32 76.19 6 14.29 4 9.52 - - - -Total 118 75 16 10 7 10Source: Compiled from filed survey, F- Frequency, CA-Completely Agee, A-Agree, N-Neutral,DA- Dis Agree & CDA- Completely Disagree.INTERPRETATION: Participating to this 76.19% of female and 56.58% of male completelyagreed. From the female side there were no respondents for disagree and completely disagree.Chart -8:for earning better income in urban area people migrate from rural area5040302010MaleFemale0CA A N DA CDA

9www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/9. Do you think that for better livelihood and life style rural people migrate to the urban area?Gender F CA % A % N % DA % CDA %Male 76 54 71.05 9 11.84 8 10.53 3 3.95 2 2.63Female 42 26 61.90 6 14.29 5 11.90 4 9.52 1 2.39Total 118 80 15 13 7 3Source: Compiled from filed survey, F- Frequency, CA-Completely Agee, A-Agree, N-Neutral,DA- Dis Agree & CDA- Completely Disagree.INTERPRETATION: Joining to this 71.05% of the male and 61.90% of female agreedcompletely. Only 2.39% of female and 2.63% of male completely disagree.60Chart -9: for better livelihood and life style rural people migrate to the urban area50403020MaleFemale100CA A N DA CDA10. Do you feel that for better employment opportunity in urban area people come to urban areafrom rural area?Gender F CA % A % N % DA % CDA %Male 76 58 76.32 7 9.21 6 7.89 3 3.95 2 2.63Female 42 31 73.81 6 14.29 3 7.14 2 4.76 -Total 118 89 13 9 5 2Source: Compiled from filed survey, F- Frequency, CA-Completely Agee, A-Agree, N-Neutral,DA- Dis Agree & CDA- Completely Disagree.INTERPRETATION: Responding to this 76.32% of male, 73.81% of female completelyagreed. 2.63% of male and no respondents from female category towards completely disagree.

10www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/706050403020100Chart - 10: for better employment opportunity in urban area people come to urbanarea from rural areaCA A N DA CDAMaleFemale11. Do you believe that for the better health facility people come to urban area from rural area?Gender F CA % A % N % DA % CDA %Male 76 46 60.53 11 14.47 5 6.58 10 13.16 4 5.26Female 42 30 71.43 4 9.52 3 7.14 2 4.76 3 7.15Total 118 76 15 8 12 7Source: Compiled from filed survey, F- Frequency, CA-Completely Agee, A-Agree, N-Neutral,DA- Dis Agree & CDA- Completely Disagree.INTERPRETATION: Answering to this 9.52% of female, 14.47% of male agreed. 71.34% offemale and 60.53% of male completely agreed.50454035302520151050Chart - 11:for the better health facility people come to urban area from ruralareaCA A N DA CDAMaleFemale

11www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/12. Do you agree that for better education for children, people migrate to urban area from ruralareas?Gender F CA % A % N % DA % CDA %Male 76 54 71.05 11 14.47 6 7.89 3 3.95 2 2.64Female 42 33 78.57 5 11.90 2 4.76 1 2.38 1 2.39Total 118 87 16 8 4 3Source: Compiled from filed survey, F- Frequency, CA-Completely Agee, A-Agree, N-Neutral,DA- Dis Agree & CDA- Completely Disagree.INTERPRETATION: For this majority agreed from male and female category both. Only2.64% of male and 2.39% of female did not agree.6050403020100Chart - 12:for better education for children, people migrate to urban area fromrural areasCA A N DA CDAMaleFemaleCONCLUDING NOTESince independence there has been explosive growth of big cities due to migration. The higherrate of population growth in the urban areas is due to migration of rural population to cities. Ithas been estimated that 45 percent of the annual increase in urban population is due to migrationfrom rural areas. This creates problem in the urban area. This is bound to happen. However, as70% of population resides in the villages and unfortunately even after 64 years of independencewe are not able to provide the basic needs of the rural people like education, health and otherissues. There is a need for political will among the political parties. The need of the hour is tofacilitate Urban Amenities in Rural Area (UARA). This will definitely contribute for controllingthe migration issues. Through financial inclusion (FI), the rural population should be brought inthe mainstream of banking this will also help to avoid the exploitation of money lenders in therural area. It also important that only opening schools, colleges or hospitals in the rural area willnot solve the problem. The serious involvement of the people associated with these schools,colleges and hospitals is also needed. Most of the time it found that the employees do not attendto this rather they prefer to stay in the urban areas and if this mind set is not changed the gap ofrural urban will be increased and there will be continuation of migration trend. Alternative

12www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/employment opportunity should be created to control the disguised labour in the rural area.Proper connectivity to the rural area should be made this will definitely help to improve thestandard of living of the rural people. During our study we concluded that “Always keep hopingfor good, as the famous Japanese thought says- “Keep a green tree in your heart, the birds willautomatically come”REFERENCE Gupta, Op.(1972)- “Volume Factor and Characteristics of Migration of Urban Delhi “, inIndia Census Century Seminar, Vol. I, office of the Registrar-General of India, Ministryof Home Affairs, New Delhi, p-87. Lakadawala, D.T (1963)- Work wages and well being in an Indian Metropolis: AnEconomic Survey of Bombay, pp- 1963. Srivastava, Ravi & Sasikumar S.K(2003)-“An Overview of Migration in India, Itsimpacts and key issues” Paper presented in Regional Conference on Migration, June 22-24, Dhaka.

13www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/THE ROLE OF INFORMATION AND COMMUNICATIONTECHNOLOGY (ICT) ON THE LEVEL OF EXPORTS OF SMALL ANDMEDIUM-SIZED ENTERPRISES (SMEs): AN EXPLORATORY STUDYABSTRACTVAHID RANGRIZ**Ph.D. in Economics and Co-operation Department, Mysore University,Mysore - 570017, Karnataka, India.The challenges of export related to a particular market knowledge to which I intended mybusiness, marketing a distinctive product that can compete with local and national products, theproduction efficiency and so on. To meet these challenges and promote the success of export,I will focus on innovation and to ensure a distinctive product, competitive intelligence forstrategic information, market research on customer needs, collaboration to reduce uncertaintyand accelerate the development of products/services suitable. In this perspective, information andcommunication technology (ICT) can be used to support all these activities by accelerating theachievement of rich and relevant information and facilitate its dissemination in thecompany, promoting innovation and enabling collaborations between the various partners. Thisis what I propose to test by studying the relationship between ICT and export relationshipsthrough innovation, collaboration, intelligence activities and research marketing information,also taking into account profile and objectives of the Chief of the small and medium-sizedenterprises (SME).KEYWORDS: Collaboration, innovation, information and communication technology (ICT),intelligence activities, Level of exports, small and medium-sized enterprises (SMEs), researchmarketing.______________________________________________________________________________1. INTRODUCTIONAs noted by the introduction of the OECD report (2000) on small and medium-sized enterprises(SMEs) access to international markets, there is little accurate data on trends in the internationalactivities of SMEs. But the first observation is that the weakness of the commitment of thesecompanies in international activities. Doing business abroad is more complex than compromiseon national or local markets (St-Pierre, 2003). Preference is often given to the domestic market,or those of the same culture and same language, (Boutary, 2004; Rutashobya and Jaensson,2004). However, multiply the stories of small and medium enterprises in the conquest ofextremely distant markets, and „success stories‟ highlighting the companies „champions‟,developing niche strategies that can become leaders in a global market and thus participate in therankings of international companies. The latter seem to show that anything is possible, thedistance is not insurmountable, and the brakes to international development can be lifted. Theadvent of networked computing tools in the early 80's then the development of the Internet haverenewed approach foreign markets and suggests that their contribution to bringing togetherdifferent actors, regardless of their location, could be decisive . Thus, were affected the terms of

14www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/the customer relationship, both in the preparation phase of contacts and negotiation of offers inthe monitoring of this relationship (Vandermerwe and Chadwick, 1989), and similarly, thedistance (e.g. prospecting) leaders, those Marchesnay (2000) calls „nomadic‟ or „enterprising‟seemed possible in better conditions, through a link easy, frequent and inexpensive place withtheir anchor.Some studies emphasise the facilitating role of information and technology communication(ICT) in relation to the environment or the client (Desmet 2000, Abidi in 2001), while others,particularly researchers' PMIstes, highlight the use of partial (Gadille and Irribarne, 2000;Boutary, 2001).I want to explore this paradoxical observation. The aim of this paper is to analyse, throughthe review of the key factors in export, the relationship between ICT and export relationshipsthrough innovation, collaboration, intelligence activities and research marketing information,also taking into account the profile and objectives of the Chief of the SME.2. KEY FACTORS IN THE EXPORT2.1. THE IMPORTANCE OF INNOVATIONThe development of exports requires that innovation effort is sustained via an adaptationof certain product characteristics or requests the client partners and distributors. To avoid aposition that Marchesnay (2003) describes of „interstitial‟ requires a deliberate effort to stand outat all times of competition. Moreover, as shown by several studies, SME exporters appear moreinnovative than others (St-Pierre, 2003), market mainly of medium and high technology(Mahone and Choudhry, 1995), have specific expertise very oriented towards the needs of theircustomers (Ageron, 2001), and their employment a team deeply rooted in the field (Fimbel andGomez, 2003). The work of Yang and al. (2004) on Taiwanese manufacturing SMEs alsohighlight the positive impact of R & D on the propensity to export, these activities thusincreasing the rate of business innovation and their ability to offer the market products abroaddistinctive. For their part, Tseng et al. (2004), in a survey of U.S. SMEs, show that technologicalcapability (the ability to develop new products and new processes) help SMEs improve theirinternational expansion.2.2. THE BUSINESS INTELLIGENCE AND MARKETING RESEARCHAs shown by Julien et al. (1995) is a strategic decision that leads managers to undertake atechnological and marketing and not the reverse. The choice of position in the internationalmarket led SMEs to pursue a policy of access and information flow dynamics. Even if theknowledge is original, even if the passion lives on the leader and he can communicate it to histeam leader is the ability to capture the information, control and circulation that leads to Results(Leo 1995; Monnoyer, 1995) and reduces the risks associated with the distance and culturaldifferences.Based on a survey of 50 exporting SMEs in the UK, and Tzokas Hart (1999) have shown alink between the formalism of the research activities of marketing information and exportperformance. Behind the term formalism, the authors imply a structured collection, reliable

15www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/sources, and a specific data processing both externally and within the company (Diamantopoulosand Souchon, 1999 and 1997, Leonidou and Theodosiou cited, 2004). If knowing its market andits customers are recognised as a key driver of business performance, the expertise to transforminformation into business value is not always available in SMEs and the presence of a skilledmarketing manager is a catalyst for performance (Williams, 2003).2.3. THE BUSINESS PARTNERSHIPS OR COLLABORATIONSConsciousness to have an original or a specific expertise doesn‟t necessarily lead behaviour„isolationist‟ in the SME export. Whether observations made by economists space (Perrin, 1990),or findings issued by the managers (Fourcade, 1994), the need for closeness with partners is suchthat SMEs are building a network of contacts with both suppliers and subcontractors, clients andcontractors, research centres and educational institutions as well as with public support agenciesand parastatals (Stevenson and Lundström, 2001). Collaborations or partnerships are a way toaddress the lack of resources or expertise that could hinder SME development in the internationalarena (Gemser et al., 2004). In addition, increased international competition, the advancement ofknowledge in all economic activities, reducing the product life cycle warrant even more,according to Hollenstein (2005), the interest or the need for collaboration with partners in order,as outlined Riddle and Gillespie (cited Etemad and Wright, 2003) of access to strategicinformation required to export efficiently.The owner-managers of networks (information on foreign markets: demand, design, price,distribution channels, trade fairs abroad, etc.), Can facilitate the development of internationalactivities (and Rutashobya Jaensson, 2004). These relational networks play an active role inissues such as difficult choices about computerisation. But they can be more secure thaneffective because of the highly tacit knowledge exchanged between firms (and Sgobbi Piscitello,2004; Boutary, 2001). Tseng et al. (2004) also noted that as the company focuses on domesticnetworks of relationships, the lower the degree of international expansion. The role of networksgrows with the intensification of international engagement. Antennas, partnerships help tomaintain a presence with the customer and understanding their expectations (Leo and Philippe,2006). Without assuming the reasons for their introduction, the work of the OECD (2004) havealso reported a doubling of participation of SMEs in more or less formalised networks between1988 and 2000.3. THE ROLE OF ICT ON THE DEGREE OF SME EXPORTThe ICT are very diverse. In concrete terms in business, ICT is considered quite different intwo ways: first, technologies that are around the Internet and facilitate the collection andreporting, on the other hand, computer applications developed through the digitisation ofinformation (Salançon, 2005). They allow too, and this leads to talk of ICT on them, easiercommunication of data to different people, from the simple exchange of information (setting upan accounting and transmission to the Heads workshop or project) at a networking company. TheICT technology project is to facilitate information management (collection, processing, anddissemination) in the problem areas mentioned above in SMEs: lack of financial resources,human resources or time. The use of the Internet is a form of easy answers, quick andeconomical to the question of information. The consultation of websites provides access, with

16www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/very few resources, geared down to information, potentially relevant for better strategic decisionmaking (choice of markets, contacts) and a reduction in uncertainty management SMEs.Another use is noticed in SMEs using ICT to create „link‟ and „proximity‟ ICT will be usedto reinforce strong relational skills. It wills then guide and/or advice prospects, customers, andforeign distributors. I am then in a service logic „remote‟ that will enrich, reinforce the strategieschosen niche (Leo and Philippe, 2006) and deter companies only talk about prices. The use ofICT, including Internet and web, provide strategic advantages and operational management forSMEs such as greater integration of internal and external processes, closer relationships withcustomers and other business partners , access to richer information improving decision-makingand better access to external resources (Raymond et al. 2005). Tatoglu and Kula (2003) adds tothese advantages the direct link with customers, suppliers and distributors, as well as the fact thattransactions are facilitated, even in a context of international activities in which the simultaneousphysical presence of buyers and sellers is not necessarily required. ICT via e-mail, also appear asa tool to strengthen trade relations (Lee and Jang, 1998, Madrid, 2002), a means, via the website,to increase the international visibility (Houghton et Winklhoffer, 2004; Sgobbi and Piscitello,2004). These technologies can also support an electronic marketing, allowing a reduction ofdirect costs of access to international markets (Brynjolfsson and Smith, 1999; Tatoglu and Kula,2003). Meanwhile, other researchers point to a gap between the technological project and usesrecorded (Orlikowski, 1996, and Gadille Irribarne 2000). If indeed the use of the Internet as ameans of access to information seems to be generalised (OECD, 2000), many field investigationsshow that it is probably necessary to dig ICT exports and the relationship (and Sgobbi Piscitello,2004; and Winklhoffer Houghton, 2004). These technologies are the subject of investments madeoutside the desired rationality, their uses are more or less integrated in the operation, possiblyaffecting a small part of business functions, creating islands and too isolated that the overallperformance is improved. The question of the effectiveness of ICT remains unanswered,especially vis-à-vis the international business. If these technologies are tools that SMEs can taketo find a close relationship with the players remote, they cannot, as suggested by Giddens (1994),envisaged exclusively, without attention to maintaining or the creation of a trust with „the othersaway‟. Maintenance of practices before the use of ICT (face to face meetings, for example) is, inthis respect, important (Sgobbi Piscitello, 2004).4. THE INFLUENCE OF THE BACKGROUND AND OBJECTIVES OF THE LEADEROF ICT ADOPTIONResearchers have often shown the influence of attitude and profile of the Chief, on thestrategic direction of the company and its organisation. The assumption can be made of the sameinfluence on the mode of integration and appropriation of ICTs. The experience and training ofthis officer are the factors inhibiting the use of technology (and Mykytyn Riemenschneider,2000). Moreover, as suggested by Raymond et al. (2005), experience and a high level ofeducation should raise the head of the SMEs of the importance of using IT to the extent that theycan promote information management and uncertainty in the context of international affairs.This favourable attitude toward IT has been studied by Jeffcoate et al. (2002) suggest that,in a prescriptive model, the leader of SMEs proactive and focusing on high growth targets shouldbe more to use these technologies than others. In addition, this leader will be more oriented

17www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/towards an export strategy and internationalisation, it will be more sensitive tools, businesspractices and technologies to help meet its development objectives and at cost relativelysmall. As shown by Tseng et al. (2004) in interviews with owner-managers, they seek to developand use technology as a strategic asset. Finally, Raymond and St-Pierre (2005) show thateducation and experience of the Chief of the SME positively influence the adoption ofproduction system technology „sophisticated‟ as productivity gains and operational performancethat can result.In summary, the previous review of the literature to assume that the export rate of SMEs isrelated to its degree of innovation, his interest in collaborations, the presence of marketingresearch and intelligence activities. These activities are influenced by the use of ICT, in turn;depend on the profile and objectives of the chief of the SME. This analytical framework ispresented in the following figure and will be tested on a sample of Canadian manufacturingSMEs.FIGURE 1; PROFILE AND OBJECTIVES OF THE CHIEF OF THE SMEObjectives of theleaderImportance prospectingclientICTExternal communicationnetworkManager ProfileAge, education, interestin exportingMarketing researchCollaborationInnovationExport% of sales made abroad5. PRESENTATION OF THE METHODOLOGY AND RESULTS5.1. DESCRIPTION OF THE SAMPLE, VARIABLES AND METHODOLOGYThis statistical study will be conducted from data collected on Canadian SMEExporters through a benchmarking activity. This is a database of „secondary‟ which wasnot formed specifically to carry out this research, which justifies some variables in the model aremeasured indirectly. Moreover, my study will be enriched by the availabilityof additional variables, which are not found in other studies. Thus, to my knowledge, this is thefirst study to test on one sample, all the relationships presented in my conceptual model.The sample consists of 294 exporting SMEs from different sectors of thetransformation (see Table1). Table2 outlines the characteristics of the sample.

18www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TABLE 1; DISTRIBUTION OF FIRMS BY INDUSTRYSectorNMetal products 87Rubber, plastic 50Wood 35Electrical 20Cabinet 14Food drink 14Other 74Total 294TABLE 2; BRIEF DESCRIPTION OF THE SAMPLEVariable Average value MedianSales ($) 10060590 5652077Number of employees 76 49Age of firm 24 years 20 yearsExport ratio 28.4% 20.0%R& D Budget in % of sales 2.5% 1.1%The literature does not identify with great precision the key elements that would,unequivocally, the determinants of exporting SMEs. Given the lack of consensus on theseelements or variables and the fact that I can have access to relatively extensive information, Iused factor analysis to test the model components. This method of analysis brings together anumber of variables in factors that express a complementary content,providing a „concept‟ richer than each variable taken separately. The variables identified inthe literature, which have been added other variables available in the databaseand, individually, were correlated with exports, and helped to obtain the factors presented inTable3. Variables with a factor loading greater than 0.35, as proposedby Tabachnick and Fidell (1996), were retained in the construction of factors.

19www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TABLE 3; KEY FACTORS IN THE EXPORT PROFILE AND OBJECTIVES OF THELEADERDescription of variablesCoeff. saturationFactor: Marketing ResearchProspecting for customers abroad through a home seller (Yes or No) .68Usual frequency of realization of new customers or markets (1 = low, 5 =very high)Academic training of designated official for marketing / sales (school,college, university).67.53Factor: CollaborationCollaboration in Design / R & D with a research centre (yes or no) .65Collaboration in Design / R & D with a house of education (yes or no) .59Collaboration with a vendor production (yes or no) .62Collaboration with a production house of education (yes or no) .59Distribution collaboration with a client (yes or no) .55Factor: InnovationPresence of a designated research and development (RD) .78Marketing a product under its own label (Yes or No) .76Ratio: Budget allocated for the improvement of products (% of Sales) .49Factor: Objectives of the leaderImportance of new customers / markets (1 = low, 5 = very high) .81Importance of market research with existing customers (1 = low, 5 = veryhigh).81Factor: Profile of the leaderSpecial interest of the leader for export (yes or no) .75Training activities for the head (average hours per month) .75

20www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/The results of factor analysis show that the factor „market research‟ is composed ofvariables related to prospecting for customers abroad, the usual frequency of realisation of newcustomers/markets and academic training to the designated official service marketing/sales in theSME. The factor „day‟ consists of information sources used to develop products/markets orInternet, the government and specialised magazines or newspapers and technologicaldevelopment over the government. The factor „collaboration‟ means the partners with which theSME is working to design activities / R & D, research centres and educational institutions;production collaborations with suppliers and educational institutions, and collaborations indistribution with customers. Factor „Innovation‟ is related to the budget for the improvement ofproducts, the presence of a designated R & D and commercialisation of products under the labelof the company. The factor „goals of the leader‟ is determined by the importance given by theofficer to search for new customers / markets and its interest in carrying out market research withexisting customers of the company. Finally, the factor 'profile officer "is represented by theinterest that attaches to the export manager and intensity of training his company gives it.Once the factors identified, I used a correlation analysis to test the relationships betweenkey factors in export and, on the one hand, the adoption of ICT and on the other hand, the exportrate.5.2. VERIFICATION OF THE MODEL SEARCHCorrelation analysis is to verify the relationship between the profile and objectives of theofficer and the use of ICT, ICT use and key factors in export, the export of key factors and therate of exports, and finally, the use of ICT and the rate of export. The use of ICT is measured byusing an external communications network (Internet, extranet), while the export rate is measuredby the percentage of sales abroad. Tables 4 and 5 present the correlation coefficients ofSpearman. Figure 2 presented an overview of the results as the following diagram.TABLE 4; CORRELATION BETWEEN THE USE OF ICT, THE LEADER OFTHE SMES AND THE KEY FACTORS EXPORT (PROBABILITIES)Factors leadingFactor: Profile of the leader .04409(.4514)Factor: Objectives of the leader .11110(.0571)Key factors in exportFactor: Marketing Research .08548(.1437)

21www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Factor: Collaboration .08776(.1333)Factor: Innovation .12288(.0352)TABLE 5; CORRELATION BETWEEN THE KEY FACTORS OF EXPORT AND THEEXPORT RATE (PROBABILITY)Factor: Marketing Research .25511(

22www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/FIGURE 2; OVERVIEW OF THE RESULTSMarketing productlabelResponsiblefor designR & D.76 .78 .49Budgetfor productimprovementProfile of the leaderAge,Education, Interest inexportingInnovation.48 .70 .61 .72 .17.04 .12Developmentinproduct/marketGovernmentDevelopment inproduct/market,revenue,newspaper,magazine, etc.Development inproduct/marketInternetDevelopmentintechnologyGovernmentICT(Externalcommunicationnetwork).12.09 .13Collaboration.65 .59 .62 .59 .55Exports(% of sales).26.11R&D DesignteachingstandardsProductionsuppliersProductionteachingDistributionclientR& D DesignResearchcentreMarketing researchObjectives leader(importance prospecting client).53 .67Sales trainingmanagerFrequencyrealisationprospectingThe results confirm in part the analysis model that was presented earlier. Correlationanalysis between the use of ICT and the key factors of export shows that ICT promote innovationamong SMEs and intelligence activities, but marginally more research collaborations andmarketing information. These results are in the same direction as the existing literature withregard to linking ICT/Innovation and ICT/monitoring activities: the technology involved in thedevelopment of operational advantages to facilitate the innovation process. Also, I make

23www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/information gathering easier, faster, cheaper, and thus improve the monitoring process of thecompany.However, the absence of a significant relationship between ICT and Marketing Research andICT Collaborations seem surprising. The lack of association with the factor „market research‟may be explained by the construction of my factor measures the degree of formalisation andprofessionalization of these activities. The use of indicators relating to prospecting may partiallyexplain an action-oriented behaviour and the very ground in foreign markets. In this period salesand prospecting, the emphasis is certainly placed on making contacts face to face and on theconclusion of contracts of sale. The measure does not, in my model, the use of ICT in theexchange of contract documents, supporting documents or even the negotiation of thecommercial offer.Moreover, it seems difficult to explain that ICT do not promote collaboration. Indeed, sincethe direct relationship between ICT and export is positive and significant, it is difficult to believethat companies do not use these technologies to support some relationships with partners. Twotypes of explanations are possible: it is possible both that these technologies are not implementedin order to further integrate business processes and internal and external to strengthen ties withits partners. It would be interesting to identify all participants in the network business and checkfor links through ICT between the company and some of its partners. It is possible that otherSMEs mobilise collaborations (which actually appears in the second part of my model), butwithout using ICT. The literature on the use of networks of SME supports this interpretation,showing a preference for informal relationships based on trust, and to gather information rich,non-aggregated, and much contextualised.In the second part of the model, the correlation analysis between the key factors in exportand export rate shows that the latter is positively influenced by the degree of innovation,collaboration and marketing research. However, the monitoring activities as I have measured,data collection technology to the government or commercial data collection from the samesources, the Internet and magazines, are related negatively to rate exporting SMEs. This result issurprising, both in terms of the literature that the intuition that can anticipate the benefits ofmonitoring activities. Two directions can be given to understanding this result. The first ismethodological: in-depth analysis of the data revealed that the factor „sleep‟ is highly correlatedwith a variable measuring the degree of concentration of customers of the company. Companieswith a Customer focused often the status of subcontractors and are dependent on the rate ofdevelopment of their clients. This is particularly true of companies working with a customerorders are imposed on certain ways of doing as well as investments in new technologies, inequipment as well as in processes production. Julien et al. (2003) noted that these companies„dependent‟ realise a lot of intelligence activities in order to find ways to make the most effectiveto meet the requirements of their contractors, especially in technology. In this regard,government agencies are often called upon for various forms of support I provide to SMEs, bothin informational or financial. The negative correlation between sleep and export may well be asampling effect.The second way of interpretation is on the steps of the export process. It is possible thatmonitoring activities are linked to phases of pre-export process or in its early stages, duringwhich the results (here measured by the rate of export) are generally low or non-existent. Once

24www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/the process is initiated, the company is oriented towards action and leaves the businessintelligence activities, a phenomenon that may explain the negative link between these activitiesand identified the rate export. An overall look at the verification of analytical model leads us toconclude that ICT affect certain business functions, which do not influence the rate of allexports. Beyond the explanatory factors mentioned above, I want to introduce a furtherreflection: the literature on behaviour to introduce ICT in SMEs shows behaviours that are notentirely rational nor supported by the idea of a necessary strategic alignment. There is the „crafts‟more or less important, opening the door to investments in a variety of tools without priorconsideration of an overall pattern of integration. Account in particular of financial means thecompany; these tools can range from simple Web site to the establishment of an ERP. Thesetools are involved in the management efficiency. But I can remain islands of efficiency, for thepurpose for which I was created, or the person who decided to purchase. The uses are thenisolated. This efficiency „partial‟ is valued as part of the technological project: the tools areeffective for the function to which I am dedicated. But it cannot be the same way in the largerproject of business development. This may explain the existing links between ICT and keyfactors of export in the absence of connection between some of these same factors and the rate ofexport. This analysis is supported by another result of my tests: I confirm that the use of anexternal communication network (ICT) is also influenced by the objectives leadership andinterest in exporting. This result confirms the hypothesis of Tseng et al. (2004) about thestrategic importance that can provide technology for the development of the company. But it alsostresses the importance of the vision of this leader, to integrate into his thinking throughout theanalysis model.6. CONCLUSIONS, LIMITATIONS AND FUTURE RESEARCHThe aim of this paper was to present the results of an exploratory study conducted on theinfluence of ICT on the export rate of SMEs. From secondary data, I worked to create ananalysis model in two stages: a first look was on the links between ICT and activities (sleep,innovation, research and marketing collaborations). In a second step, I verified the existence oflinks between these activities and the export rate.My research results do not support all relations included in the model, a positive correlationbetween ICT as a communication network with the environment and monitoring activities andinnovation, and between activities Innovation, research and development partnership marketingand export rates. I show that the role of ICT on the export of SMEs, particularly through theirinfluence on innovation and other strategic, is no longer justified. However, no relationshipbetween ICT and partnership activities and market research leads us to introduce otherconsiderations, on the specific behaviour of SMEs in the mobilisation of networks andinformation searches or the nature and stages of the export process. ICTs are not integrated orused in all circumstances, it is necessary to undertake further research to clarify theircontributions at different stages of export and thereby convince more SME managers to do theinstallation. Like all statistical studies, it has some limitations that are primarily methodological.By working with secondary data limits the depth of certain relationships, like that should existbetween the day and export. This variable monitoring could be supplemented by the inclusion ofvariables for the whole process of processing and dissemination of information within thecompany. Because according to the importance of ownership and the degree of integration in

25www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/different functions of the tools purchased, the effectiveness of the assembly may vary widely.Moreover, the absence of the expected relationship leads us to wonder about the differentcontexts in which monitoring activities can be conducive to a particular development strategy.My results also show that studies on samples of SMEs are not homogeneous can hidespecific behaviours that should be highlighted. If literature has already highlighted the benefits ofICT on strengthening links between customers and suppliers, their usefulness in the exportprocess has yet to be studied, taking particular account of the different countries, clients, andrates export targets. The question is also under the technical promise of ICT, their effectivenessin finding, beyond the geographical distances and cultural differences, proximity to SMEs sodear. It would also be interesting to characterise the behaviour in the use of technology andcomputer applications based on the strategic leadership of exporting firms and this, byconducting in-depth analysis of stratified samples. The interest of the leader in ICT is animportant factor in his decision to include them in the company, but also to deploy applications.It seems that these two points concerning the use and sophistication of the alignment betweenoverall strategic direction, particularly internationalisation strategy, and use of ICT in SMEsrequire further research.REFERENCESAbidi, A. (2001). “Internet and Commerce International”, the AIM Conference, p.251.Ageron, B. (2001). “Building a capacity to respond to a PMI abroad: a tested model ofthe facts of Bilkey and Tesar”, International Review SME, vol.14, no.2.Boutary, M. (2001). “ICT to the aid of the international activity of SMEs”, InternationalConference of Network Management, Tunisia, 25-26 October.Boutary, M. (2004). “Small and medium-sized enterprises and international markets:Proximity and relocation”, Paper presented at the XVIII Rent, November 25,Copenhagen, Denmark, Managing Complexity and Change in SMEs.Brynjolfsson, E. and Smith, M. (1999). “Frictionless commerce: A comparison ofInternet and Conventional Retailers”, working paper: MIT Sloan School of Management.Diamantopoulos, A. and Souchon, A. L. (1999). “Measuring export information use:Scale development and validation”, Journal of Business Research, vo.46, p.1-14.Etemad, H. and Wright, R.W. (2003). “Internationalisation of SMEs: Toward a NewParadigm”, Small Business Economics, vol.20, p.1-4.Fimbel, E. and Gomez, M.L. (2003). “There is no strategy without a strategist”,Expansion Management Review, June, p.87-99.Fourcade, C. (1994). “Localisation versus globalisation: Strategies of small businesses”,39 th ICSB World Conference, Strasbourg, June, p.119-126.

26www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Gadille, and Irribarne M., (2000). “Diffusion of the Internet in SMEs”, Networks, no.104, p.61-91.Gemser, G., Brand, M.J. and Sorge, A. (2004). “Exploring the internationalisationprocess of Small Businesses: a study of Dutch old and new economy FIRMS”,Management International Review, vol.22, no.2, p.127-150.Giddens, A. (1994). “The consequences of modernity”, Ed L'Harmattan, p.186.Hart, S. and Tzokas, N. (1999). “The impact of marketing research activity on SMEexport performance: Evidence from the UK”, Journal of Small Business Management,vol.37, no.2, p.63-76.Hollenstein, H. (2005). “Determinants of International Activities: Are SMEs different?”,Small Business Economics, no.24, p.431-450.Houghton, K. and Winklhofer, H. (2004). “The effect of website and E-commerceadoption on the relationship Between SMEs and Their Export Intermediaries”,International Small Business Journal, vol.22, no.4, p.369-388.Jeffcoate, J., Chappell, C. and Feindt, S. (2002). “Best practice in SME adoption of e-commerce”, Benchmarking: An International Journal, vol.9, no.2, p.122-132.Julien, P.-A., Lachance, R., Raymond, L., Jacob, R. and Ramangalahy, C. (1995).“Technology watch in the Quebec manufacturing SMEs”, Journal of Research GREPME,University of Quebec at Trois Rivieres, Canada.Julien, P.-A., Raymond, L., Jacob, R. and Abdul-Nour, G. (2003). “The companynetwork:ten years of experience of the Chair Bombardier Recreational Products”,university of Quebec, p.498.Kula, V. and Tatoglu, E. (2003). “An exploratory study of Internet adoption by SMEs inEmerging Market Economy year”, European Business Review, vol.15, no.5, p.324-334.Lee, Jang and D.J., J.I. (1998). “The role of relational exchange Between Exporters andImporters: evidence from small and medium sized Australian Exporters”, Journal ofSmall Business Management, vol.36, no.4, p.12-23.Leo, P.-Y. (1995). “International development strategies, in Julien P.-A., P.-Y. Leo and J.Philippe”, SMEs and large markets, L'Harmattan, p.220.Leo, P.-Y. and Philippe, J. (2006). “IT, New Deal for International Development SMEservices?”, Research Paper.Leonidou, SC and Theodosiou, M. (2004). :The export marketing information system: anintegration of the extant knowledge”, Journal of World Business, no.39, p.12-36

27www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Madrid, C. (2002). “Impact of ICT on supply chain”, 2 nd conference on marketing trendsin Europe, Paris.Mahone, C.E. and Choudhry, P.K. (1995). “Small and medium sized Manufacturers andTraders”, Multinational Business Review, vol.3, no.2, p.17-27.Marchesnay, M. (2000). “The paradox of global/local at the mercy of the capitalists”, theSFER Symposium, JuneMarchesnay, M. (2003). “Small business: out of ignorance, in Marchesnay M. (coord.)”,The Small Business Kit, French Review of Management, vol.29, no.144, p.107-118Monnoyer, M.-C. (1995). “Information Literacy for export, in Julien P.-A., P.-Y. Leo andJ. Philippe”, SMEs and large markets, L'Harmattan, p.220.OECD (2000). “Outlook Information Technology”, Paris.OECD (2004). “Promoting Entrepreneurship and Innovative SMEs in a global economy”,2 nd OECD Conference of Ministers responsible for SMEs.Orlikowski, W.-J. (1996). “Improvising Organisational Transformation over Time: aSituated change perspective”, Information Systems Research, vol.7, no.1.March.Perrin, J.-C. (1990). “Industrial organisation, the territorial component”, Journal ofIndustrial Economics, no.51.Piscitello L. and Sgobbi, F. (2004). “Globalisation, e-business and SMEs: Evidence fromthe Italian district of Prato”, Small Business Economics, no.22, p.333-347.Raymond, L. and St-Pierre, J. (2005). “Antecedents and performance outcomes ofadvanced manufacturing systems sophistication in SMEs”, International Journal ofOperations & Production Management, vol.25, no.6, p.514-533.Raymond, L. Bergeron, F. and Blili, S. (2005). “The assimilation of e-business inmanufacturing SMEs: determinants and effects on growth and Internationalisation”,Electronic Markets, vol.15, no.2, p.106-118.Riemenschneider, and C.L. Mykytyn, P.P. (2000). “What small business executives HaveLearned about managing information technology”, Information and Management, vol.37,p.257-269.Rutashobya, L. and Jaensson, J.-E. (2004). “Small Firms' Internationalisation fordevelopment in Tanzania: Exploring the Phenomenon network”, International Journal ofSocial Economics, vol.31, no.1/2, p.159-173.Salançon A. (2005). “ICT and development of food businesses: the case of LanguedocRoussillon”, MOISA Joint Research Unit, INRA Montpellier, Studies Series no.7.

28www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/St-Pierre, J. (2003). “Relationship between export, organisational development andfinancial position of Canadian SMEs”, SME International Review, vol.16, no.2, p.61-82.Stevenson, L. Lundström and A. (2001). “Patterns and trends in entrepreneurship/ SMEpolicy and practice in ten economies”, Swedish Foundation for Small Business Research,Stocholm.Tabachnick, B. and Fidell, L. S. (1996). “Using multivariate statistics”, New York, NY:HarperCollins College Publishers.Tseng, C.-H., Tansuhaj, P. S. and Rose, J. (2004). “Are Strategic Asset contributions orConstraints for SMEs to go international? An empirical study of the U.S. ManufacturingSector”, Journal of American Academy of Business, vol.5, no.1/2, p.246-255.Vandermerwe, S. and Chadwick, M. (1989). “The internationalisation of service”,Service Industry Journal, vol.9, no.1, January, p.79-93.Williams, J.E.M. (2003). “Export information use in small and medium-sized industrialcompanies: An application of Diamantopoulos' and Souchon's scale”, InternationalMarketing Review, vol.20, no.1, p.44-66.Yang, C.-H., Chen, J.-R. and Chuang, W.-B. (2004). “Technology and Export Decision”,Small Business Economics, vol.22, no.5, p.349-365.

30www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/the launching of new capital adequacy framework known as Basel II (Bank Indonesia, 2008).The accord is a cornerstone of current international financial architecture and itsrecommendations have been acknowledged as a new paradigm in risk management andsupervision. Its aim is to establish risk sensitive capital allocation and improving the quality ofrisk management at banks thereby to strengthen the security and soundness of financial system.Advocators of Basel II believe that creation of such an international standard can help to protectthe international financial system from type of problems that might arise should a major bank orseries of banks collapse. Although, Basel accord regulations are primarily intended for banks inG-10 countries yet the guiding principles embodied in three pillars are generally suitable for anybank in the jurisdiction. The Basel Committee believes that the safety of banks around the globeis achieved at its best by national supervisors by fully implementing the three pillars of theaccord and by adoption of Core Principles of Effective Banking Supervision in their respectivejurisdictions. This in turn will enhance countries prospective for successfully integrating withworld economy and gaining the benefits of international capital flows (RBI, 2000). With a viewto improve soundness, to improve stability of banking system and to achieve harmonization,bank regulators in Asia Pacific region also supported the broad objectives of Basel II andconsented for its implementation according to degree of development of their financial marketswhich would help them to maintain and improve their global competitiveness.2. RESEARCH DESIGN OF THE STUDY2.1 NEED OF THE STUDYNew Basel norms for capital adequacy i.e. Basel II have been drawing a lot of attention all overthe world, not just in banking industry but in the entire financial system. The goal for the Basel IIframework is thus to promote the adequate capitalization of banks and to encourageimprovement in risk management, thereby strengthening the stability of financial system.Implementation of Basel II norms globally, in order to achieve harmonization at internationallevel in adopting best standards is the prime concern of Basel Committee. A number of countrieshave started implementing the new capital adequacy rules following the worldwide consensusamong central bankers that bank’s capital levels should be regulated to enhance global bankingstability (Makwiramiti, 2008).In Asia Pacific region also, bank regulators have begun their march towards this ambitiousproject. Basel II implementation in Asia- Pacific countries is occurring at the time of heightenedrisk and highly complex and competitive environment. In this environment, the implementationof Basel II presents a powerful lever for banks to significantly augment both their long termresilience and competitive advantage. It promises greater financial stability through closeralignment of risk with capital (Aziz, 2008). Asia- Pacific countries have wide diversity inbanking and financial markets and Basel II implementation requires consideration of their ownspecific issues and circumstances to develop an appropriate strategy to incorporate capitaladequacy and risk management framework. Although, much regulatory framework for thestructure has gradually been developed in Asia Pacific countries with an objective to ensure itsenvisaged implementation yet level of regulatory compliance achieved is still an unveiled issue.The present study aims to shed light on Basel II regulatory compliance in Asia Pacific countriesalong with specific challenges encountered by them in its adoption.

31www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/2.2 OBJECTIVES OF THE STUDYTo examine the Basel II Regulatory Compliance among advanced and developingcountries of Asia Pacific region.To bring into light major challenges faced by countries of Asia- Pacific region inadopting Basel II framework.2.3 DATABASE AND RESEARCH METHODOLOGYThe present study is based on secondary data. For the purpose of study, bifurcation of countriesinto two groups i.e. advanced and developing countries was taken from World EconomicOutlook Database, 2011. As far as selection of advanced and developing countries of AsiaPacific region is concerned, the countries with GDP more than $150 bn in the year 2010 wereselected from each group, for the purpose of study. From advanced and developed countries ofAsia Pacific Region, 6 countries namely Australia, Japan, Taiwan, Korea, Singapore and HongKong and from emerging and developing countries group, 7 countries i.e. India, China, Thailand,Malaysia, Pakistan, Philippines and Indonesia were found to meet the criteria for inclusion in thestudy. Secondary documents used in the study were World Economic Outlook Database, 2011and websites of central banks of sampled countries in the Asia Pacific Region. Moreover, thevarious publications of Basel Committee have also been explored for the purpose of the study.3. BASEL II REGULATORY COMPLIANCE AMONG ASIA-PACIFIC COUNTRIESAsia Pacific Countries vastly differ in terms of sophistication of banks and presents a relativelyunique situation from a banking regulation perspective. (Deloitte, 2005). Banks in Asia Pacificregion range from full-service and global banks in developed economies to small, local andlimited service banks in emerging countries (KPMG, 2008). With the release of Basel II by BISin 2004, regulatory bodies in Asia Pacific countries have announced their support for broadobjectives of Basel II and believed that the framework will provide further incentives forimprovements in risk management and supervision. Although, Banks in Asia- Pacific region arespending millions of dollars in achieving envisaged implementation of Basel II Accord yet thegeneral level of Basel II implementation in the Asia Pacific region is widely diverse. In general,banks in Asian region do not mandate banks to adopt specific approaches. Asian banks are freeto choose appropriate approach that commensurate with their risk profile depending upon size,complexity and other considerations. At the same time regulatory authorities have encouragedtheir supervised banks to continuously improve and upgrade their risk management capabilitiesto be able to adopt sophisticated and advanced approaches (Yao, 2009). The Basel II regulatorycompliance among developing and advanced countries is discussed as follows:3.1. DEVELOPING ECONOMIES OF ASIA PACIFIC REGIONThe major developing countries of Asia Pacific include India, China, Thailand, Malaysia,Pakistan, Philippines and Indonesia. There is also a wider variation between the generalapproaches across these countries and consequently in the level of progress achieved till date.

32www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Table 1 indicates compliance to Basel II framework by developing and emerging economies ofAsia Pacific region.TABLE 1: BASEL II REGULATORY COMPLIANCE AMONG DEVELOPINGECONOMIES OF ASIA PACIFIC REGIONCountryBasel II Regulatory CompliancePhilippinesIndiaChinaThailandMalaysiaPakistanThe Basel II capital adequacy framework was implemented byregulatory authority of Singapore in 2007 by first adoptingstandardized approaches and then subsequently migrating towardsadvanced approaches of Basel II by 2010.Basel II was adopted by India in 2008 by beginning with most basicapproaches and gradually moving towards advanced approaches afterseeking RBI approval.The Chinese banks with overseas presence were required to adoptBasel II starting from the year 2010. Those not ready by the prescribeddeadline were allowed grace period up-to year 2013.Thai banking sector moved to full implementation of Basel II at theend of 2008. Though by the end 2009, many of the banks in Thailandstarted migrating towards advanced approaches.Malaysia adopted the standardized approach from January 2008 anddetailed the parameters for the implementation of the more advancedapproaches adopted by 2010.State Bank of Pakistan required all banks in Pakistan to implementBasel II norms from 2008 with initial adoption of standardizedapproaches and then moving towards advanced approaches subject tothe prior written approval of State Bank of Pakistan.IndonesiaBanks in Indonesia implemented Basel II framework by initiallyadopting the simplest approaches by 2008. Subsequently, bankscapable of meeting all requirements were allowed to move towards themore sophisticated approaches by 2011.Source: Various press releases and websites of central banks of sampled countries

33www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Table 1 reveals compliance to Basel II framework by sampled emerging economies of AsiaPacific Region. The extent of regulatory compliance among developing and emerging countriesof Asia Pacific region is briefly discussed as under:3.1.1. PHILIPPINESThe revised capital adequacy framework was adopted by Bangko Sentral ng Pilipinas (BSP) in2007. Consistent with Basel II recommendations, the Monetary Board of Philippines approvedmajor methodological revisions to the calculation of minimum capital that universal banks,commercial banks and their subsidiary banks and quasi-banks should hold against actual creditrisk exposures. The Monetary Board’s early approval of the implementing guidelines for Basel IIsignified BSP commitment to deep and far-reaching banking reforms to strengthen the bankingindustry. It also reflected BSP confidence in the fundamental soundness and ability of theindustry to make the necessary adjustments to be fully compliant with international standards(http://www.bsp.gov.ph). Regulators in Philippines directed universal and regular commercialbanks as well as their subsidiary banks and quasi-banks, to adopt the standardized approaches ofBasel II by 2007 and subsequently migrate to advanced approaches of Basel II by 2010 (Prenio,2008). In 2009, BSP issued circular containing guidelines on compliance with Basel IIrequirements which became effective in January, 2011. Upon effectiveness of this circular in2011, BSP completed implementation of Basel II for all banks (www.bsp.gov.ph).3.1.2. INDIAKeeping in view its goal to have consistency and harmony with international standards, Basel IIwas adopted by India and Reserve Bank of India (RBI) directed that Indian banks having foreignbranches and foreign banks operating in India should migrate to Basel II norms from March 31,2008 and all other commercial banks, excluding local area banks and regional rural banks, wererequired by RBI to adopt Basel II norms not later than March 31, 2009. RBI had stated thatminimum Capital Adequacy Ratio requirement should be 9% and Tier I capital of banks shouldbe at least 6 %. Further, the Government of India had stated that public sector banks must have acapital cushion with a CAR of at least 12%, higher than the threshold of 9% by RBI (AnnualReport, RBI, 2005-06, and 2006-07). India had adopted most basic approaches by April 2009and regulators are of view that migration to most advanced approaches will take place afterdevelopment of adequate skills both at bank and supervisory level.3.1.3. CHINAChina initially rejected Basel II in the aftermath of QIS3, although subsequently, a multi-tierapproach for large complex banks with overseas presence was followed and these banks weremandated to adopt Basel II starting from year 2010 (CRBC, 2007). The largest banks areexpected to become Basel II compliant on IRB (Internal Rating Based) approach between 2010-2013. IRB banks were also required to adopt the internal models for market risk, and the range ofoptions on operational risk including AMA (Advanced Measurement Approach) (KPMG, 2008).Those not ready by the prescribed deadline are allowed grace period up-to year 2013.Otherbanks including the foreign bank subsidiaries may choose to apply for adoption as and whenready until then they are permitted to continue with Basel I. “The strategic significance of Basel

34www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/II meant that Basel II was an “inevitable choice for Chinese banks” in the face of “extensive andfierce competition” and simultaneously, a crucial opportunity for building national banks into“real modern commercial banks” that will enable them to venture out into the internationalmarket for further growth” (Cho, 2010 and CRBC, 2007).3.1.4. THAILANDBasel II was adopted by the Bank of Thailand in 2008. The Bank of Thailand intended togradually raise the overall standard of the Thai banking industry by implementing the Basel II inThai commercial banks. The Bank of Thailand was of view that banks should adopt the Basel IIaccording to the degree of their operational complexity. In January 2008, most banks in Thailandbegan to provide parallel reports to the Bank of Thailand (BOT) using both the existingcalculations for required capital and those which are required under Basel II. After a year ofparallel reporting, the Thai banking sector moved to full implementation at the end of 2008. Bythe end of 2009 many of the banks in Thailand started migrating towards advanced approaches(Sophonpanich, 2007).3.1.5. MALAYSIABank Negara Malaysia (BNM) implemented the Basel II framework in 2008. Malaysia adoptedthe standardized approach from January 2008 and detailed the parameters for the implementationof the more advanced approaches to be adopted by 2010. According to a mandate set by thecentral bank, all banks in Malaysia were required to compute their capital adequacy ratios underBasel II from January 2008. In addition, banking institutions adopting the new capital adequacyframework from 2008 were also subject to a capital requirement for operational risk based oneither the basic indicator, standardized or alternative standardized approaches (Aziz, 2008).3.1.6. PAKISTANState Bank of Pakistan required all banks in Pakistan to implement Basel II norms from 2008.Pakistan adopted standardized approach for credit risk and Basic indicator / StandardizedApproach for operational risk from 1st January 2008 and Internal Ratings Based (IRB) approachfrom 1st January 2010. State Bank of Pakistan advised banks to conduct parallel run of twoyears for IRB approaches starting from 1st January 2008 before migrating to IRB approach. TheSBP instructions further required that adoption of Foundation or Advanced IRB or Credit andInternal Models Approaches for Market Risk subject to the prior written approval of State Bank,and banks/DFIs were advised to approach the State Bank for necessary approval (www.sbp.org.).3.1.7. INDONESIABank Indonesia conducted parallel run in 2008 and implemented the framework by initiallyadopting the simplest approaches by 2008. Subsequently, any bank capable of making thenecessary system changes and meeting all requirements adequately were allowed to movetowards the more sophisticated approaches upon Bank Indonesia’s (BI) approval. According toBI’s roadmap of implementing Basel II in Indonesia, it is expected to migrate to advancedapproaches by 2011(http://www.bi.go.id).

35www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/From the above discussion, it became clear that emerging economies of Asia Pacific haveundertaken a relative cautious approach considering the state of sophistication of their bankingmarkets and to give more time to local banks to collect the extensive data required by revisedframework. Of emerging banking market countries of Asia Pacific, Philippines was first to movetowards new accord in 2007, which reflected BSP strong commitment to banking reforms tostrengthen the banking industry in Philippines. Moreover banks in India, Malaysia, Indonesia,Thailand and Pakistan began to gradually move towards capital adequacy ratios under Basel IIfrom year 2008 with simplified approaches and are now upgrading skills and risk managementinfrastructure to seep to more sophisticated approaches. However, China will take more time as itinitially rejected Basel II in the aftermath of QIS 3, although subsequently banks with overseasoperations were required to become Basel II compliant by beginning its implementation from thyear end-2010.3.2. ADVANCED COUNTRIES OF ASIA PACIFIC REGIONBasel II Regulatory Compliance among advanced economies of Asia Pacific is examined byexploring various publications, press releases and websites of Central banks of these countries.The compliance and implementation status of Basel II framework in the developed economieshas been shown in Table 2.TABLE 2: BASEL II REGULATORY COMPLIANCE AMONG ADVANCEDCOUNTRIES OF ASIA PACIFICCountryJapanHong KongBasel II Regulatory ComplianceBasel II was implemented covering all the deposit-taking financialinstitutions from the end of March 2007.In Hong Kong, all locally incorporated banks and financialinstitutions adopted Basel II on 1 st January 2007. While most haveadopted either standardized approach or simplified approach forcredit risk, others are developing IRB capabilities to gain regulatoryapproval.Taiwan Taiwan’s banks began phased implementation of Basel II in 2007using the standardized approaches when calculating minimum capitalrequirements.AustraliaBasel II was implemented by Australian Prudential RegulatoryAuthority (APRA) on 1 st January 2008, by making available allapproaches at the earliest date prescribed by Basel Committee forBanking Supervision.South Korea South Korea adopted Basel II capital framework in January 2008

36www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/with simpler approaches.SingaporeBasel II rules came into effect in Singapore on 1 Jan. 2008. They areapplicable to all locally-incorporated banks. Regulatory authorities inSingapore made all approaches available and banks were encouragedto adopt the approach as per their risk profile in each risk category.Source: Various press releases and websites of central banks of sampled countriesThe above table shows regulatory compliance to Basel II framework by sampled developedeconomies of Asia Pacific Region. From the table we can well figure out that almost alladvanced economies have migrated to new capital adequacy framework with simpler approachesand now have started switching towards more sophisticated approaches and even many of themhave successfully moved towards advanced approaches. A brief description of regulatorycompliance among advanced and developed countries of Asia Pacific is discussed as under:3.2.1. JAPANJapanese financial institutions are among the earliest adopters of Basel II who implementedframework in year 2007 covering all the deposit-taking financial institutions. Japan hasintroduced proper regulation concerning banks’ trading books based on Basel II. The FinancialServices Agency (FSA) intended to properly implement “Enhancements to the Basel IIframework”, including issues on complicated financial products, as published by the BCBS inJuly 2009. The FSA has required banks to assess the extent of the overall adequacy of theircapital in the light of their risk profiles based on the Guidelines for Supervision, and has alsomonitored whether those banks have implemented proper risk management and measures toretain adequate capital in terms of both quality and quantity considering the guidelines(www.financialstabilityboard.org/publications).3.2.2. HONG KONGHong Kong was one of the first jurisdictions, not just in Asia Pacific but globally, to implementBasel II. In Hong Kong, all locally incorporated banks and financial institutions adopted Basel IIon 1 st January 2007. Most banks had initially adopted either standardized approach or simplifiedapproach for credit risk while subsequently many banks have developed capabilities formigrating to sophisticated approaches like Foundation and Advanced Internal Rating BasedApproach.3.2.3. TAIWANAlthough, Taiwan is not a member of the Bank for International Settlements, yet in compliancewith directives issued by the Financial Supervisory Commission (FSC), all domestic banks (i.e.local banks) in Taiwan were required to implement Basel II from 2007 in a phased manner tobest synchronize with international trends and strengthen risk management practices in thedomestic banking industry. Taiwan’s banks began to calculate their regulatory capitalrequirements in accordance with the Basel II rules from first quarter of 2007. As of April 2008,Taiwan’s banks were required to file internal capital adequacy assessment results and risk

37www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/indicators along with self-assessment reports to the FSC on an annual basis for compliance withPillar 2. As regards Pillar 3, banks were required to establish a special section on their websitesto disclose information on capital adequacy and risk management with effect from April 2008(Financial Stability Report, 2008). Taiwan’s regulations on Basel II allowed banks to chooseamong several different approaches to calculate minimum capital requirements. In 2007, allbanks in Taiwan used the standardized approach for both credit and market risk, and either thebasic indicator approach or the standardized approach for operational risk when calculatingminimum capital requirements. A bank in Taiwan must obtain approval from the FinancialSupervisory Commission (FSC) prior to adopting the internal ratings-based approaches to creditrisk, the internal model to market risk, and either the standardized approach or the advancedmeasurement approaches to operational risk (http://www.frsglobal.com/regions/taiwan.html).3.2.4. AUSTRALIAIn January 2008, the new global capital regime for banks, known as the Basel II Framework, wasimplemented in Australia through APRA’s (American Prudential Regulatory Authority)prudential standards. APRA operates a sound supervisory system that meets Basel IIrequirements and builds on the strong regulatory and supervisory process already in place priorto Basel II (IMF report, 2010). In Australia, Basel II rules apply to all authorized deposit-takinginstitutions (ADIs). As provided for in Basel II, APRA has exercised a number of discretions tomake the Framework more relevant in the Australian market and to simplify it for the manysmaller ADIs. However, APRA felt little benefit in implementing the standardized andfoundation IRB approaches ahead of the advanced approaches. Thus, APRA implemented allBasel II approaches on 1 st January 2008, the earliest date that the BCBS made the advancedapproaches available (APRA Insight, 2008). APRA received eight applications from ADIsseeking approval to use the advanced approaches from January 1, 2008. Of these applications,APRA accredited four ADIs to use both the IRB approach to credit risk and an AMA approachfor operational risk from January 1, 2008. Two ADIs were accredited to use only an AMAapproach to operational risk from the same date. In Australia, Pillar 3 disclosures have beenimplemented from September 30, 2008, through a prudential standard, APS 330(IMF Report, 2010).3.2.5. SOUTH KOREAThe Basel II framework was implemented in South Korea in January 2008. South Koreainstitutionalized the liquidity risk management standards in line with BCBS liquidity principleson September 30, 2009. It is also contributing to develop new liquidity standards to ensurestronger liquidity risk management under Working Group on Liquidity of BCBS. Korea isactively participating in BCBS discussions on developing internationally agreed rules to improvethe quantity and quality of bank capital and to discourage excessive leverage. Several FSSreports (from 2008 through 2010) detail the diligent steps taken by the supervisors to enhanceregulations and improve financial sector soundness.(www.financialstabilityboard.org/publications)

38www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/3.2.6. SINGAPOREMonetary Authority Singapore (MAS) supports the broad objectives of Basel II and believes thatit will incentivize improvements in risk management, as well as complement MAS supervisoryobjectives. MAS’ has implemented Basel II in Singapore for all Singapore-incorporated bankson 1 January 2008 (www.mas.sg). Basel II rules apply to all locally-incorporated banks inSingapore. MAS has prescribed a minimum Capital Adequacy Ratio (CAR) that is above thecurrent minimum Basel requirement. Further, where appropriate, additional supervisory capitaladd-on may be prescribed above the minimum CAR, based on supervisory assessment of the netrisk profile of a given bank. Singapore banks, for their own commercial reasons, hold substantialbuffers above the regulatory minimum. Moreover, MAS has also circulated the latest BCBSliquidity risk management guidance to the banks to help them in concerned practices(www.financialstabilityboard.org/publications). Regulatory authorities in Singapore have madeall approaches available and banks were encouraged to adopt the approach as per their riskprofile in each risk category (Yao, 2009).In nutshell, among advanced and developed banking market economies of Asia Pacific, Japanesefinancial institutions along with Taiwanese and Hong-Kong banks were among the first moversto Basel II requirements as these economies closely followed timelines suggested by Basel IIstandard i.e. January 2007. While Australian banks implemented all of the Basel II approaches atthe earliest date i.e. 2008 that the BCBS prescribed for implementation of advanced approaches.Basel II was implemented in South Korea and Singapore in January 2008 where bankingregulators in Singapore also made all the approaches available and banks were encouraged toadopt the approach according to their risk profile. So, almost all regulators in these sampledcountries have migrated to Basel II framework by the year end 2008 by starting itsimplementation firstly with simplified approaches in initial years and then subsequently movingtowards advanced and sophisticated approaches.4. BASEL II IMPLEMENTATION: CHALLENGES FOR BANKS IN ASIA PACIFICREGIONGlobal and regional banks in Asia Pacific are facing a phenomenon familiar to bankers in manyother jurisdictions – a formidable and increasing array of regulatory requirements (Deloitte,2005). Effective implementation of Basel II in Asia Pacific region requires a deeperunderstanding of challenges encountered by banks for smooth implementation of framework inthe region. The multi-dimensional challenges for banks operating in Asian countries varyaccording to market specific to that region and state of risk management architecture andcapabilities of respective banks. Some of the major challenges are discussed as under: RESOURCE CONSTRAINTS: The major peculiar challenge for Asia Pacificinstitutions is shortage of skilled and experienced human resources. So, banks in theregion have to deal with resource and technical expertise implications in trying toimplement the more complex and advanced approaches for credit risk and operationalrisk. While institutions in the region have made major strides in recent years to gear upthe risk management, the cadre of risk management professions is still relatively small. Inaddition to attract and retain human resources with expertise and high skill set,

39www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/institutions can also use external expertise to support risk management process. But thefocus should be on building in house expert capabilities to achieve envisagedimplementation. DATA LIMITATIONS: Many of the Asia Pacific banks are encountering issues such asdata collection and data accuracy and availability. The use of advanced approaches underrevised framework requires banks to collect and store multiple years’ historical data onborrower default, rating histories, and loss data. Furthermore, data collected is often notsufficient to cover a full economic cycle, thereby exacerbating implementation issues.Some analysts have suggested that this problem is more acute in Asia, as cycles in Asianeconomies historically have been longer than those in more mature economies (Yao,2009). Beyond data availability, data quality is also a major issue that banks have to dealwith. Historically, the risk data that was used in the risk management process was forinternal use only, and may not have been of auditable quality – after all, data that is 90%or 95% accurate may be fine for risk measurement and management informationpurposes. Pillar 3 raises the bar considerably in respect of the quality of this data (Cadiou,and Mars, 2008). RISK MANAGEMENT ARCHITECTURE: Robust risk management architecture isprerequisite for successful implementation of advanced approaches. But many of thewell- established banks in Asian region are still less aware of risk management issues i.e.their risk management infrastructure is not well aligned with international standards. Ifbanks in the region are to derive real benefits of advanced approaches they need a soundrisk identification and management framework backed by sufficient systems and controls.Furthermore, risk management system should be flexible enough to adapt changingbusiness environment. COST OF COMPLIANCE: Another challenge that came into scene is the highcompliance cost of Basel II. There is substantial increase in operational cost due togreater operational challenges in management and production of data. According tosurvey conducted by KPMG in Asia Pacific region in 2008, cost of compliance was ratedas major impediment in implementation of Basel II. Further, the expenditure onInformation Technology was considered as single largest cost of implementing Basel IIby FSI survey on non BCBS countries as quoted in Conford, 2006. CROSS BORDER SUPERVISORY CHALLENGES: To achieve harmonized anduniversal application of Basel II framework, there is a dire need for enhanced cooperationand coordination between home and host country supervisors. It is mainly true forinternationally active banks, including those with operations in Asia that areimplementing the advanced approaches in cross-border locations. Some major crossborderissues include the implementation of different approaches in differentjurisdictions, differences in implementation timelines, information sharing betweensupervisors, and validation and approval of various models (Yao, 2009). In a surveyconducted on low income countries, results showed lack of communication andcooperation between cross border supervisors on Basel II issues (Gottschalk and Griffith-

40www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Jones, 2006).Therefore adequate information sharing and coordination between home–host supervisors is identified as major challenge.5. CONCLUSIONThough Basel II implementation level is quite diverse within Asia Pacific region, yet almost allthe jurisdictions in Asia Pacific, whether in advanced and developed markets or in emergingmarkets have migrated to Basel II norms. Many of the institutions in these jurisdictions havebegun to move towards sophisticated and advanced approaches after using simpler approaches.While, most of mature banking markets have already moved from simplified to advancedapproaches, many of emerging banking economies are still preparing and developing theircapabilities to migrate to advanced approaches. So, the implementation of Basel II norms inproper sense will change regulatory landscape of the world financial economy, but the task ofcoordinating and integrating it is quite challenging. To play down the Basel II implementationissues and to get improved business benefits beyond strict regulatory compliance, banks in Asianregion need to address the challenges in an efficient way. So, there is need to take severalmeasures to enhance the ability of banks for its envisaged application. Continuous and concertedefforts on the part of banks are required to upgrade skills of existing staff and to attract and retainright mix of talent in banks. Basel II assigns considerable importance to cross bordercoordination. Enhanced cooperation between supervisors is indispensable especially for crossborder supervision of complex international banking groups. Banks need to consider Basel II as acatalyst to strengthen risk management issues but not as a panacea for all risk managementproblems. However, effective implementation of Basel II will surely be a success factor forbanks and would aid them to survive and grow in the new risk sensitive environment.REFERENCESAPRA Insight (2008), “The Implementation of Basel II in Australia”, downloaded from:http://www.apra.gov.au/Insight/upload/Insight_Issue_2_2008_implementation_baselII_aust.pdfon March 27, 2011Aziz, Z. A. (2008), “Basel II Implementation and the Development of Asia's Financial System:Experiences, Challenges and Regional Cooperation”, Governor's Keynote Address at the 4thSEACEN/ABAC/ABA/PECC Public-Private Dialogue for the Asia Pacific Region, downloadedfrom : http://www.bnm.gov.my/index.php?ch=9&pg=15&ac=283, on April 24, 2011Bank Indonesia (2008), “Understanding Basel II: At a Glance”, downloaded from:http://www.bi.go.id/web/en/Perbankan/Implementasi+Basel+II/Dokumentasi+Basel+II/basel0.htm on May 15, 2011Cadiou, C. and Mars, M. (2008), “Basel II Pillar 3: Challenges for Banks”, The Journal- GlobalPerspectives on Challenges and Opportunities, December, pp. 30-35.China Banking Regulation Commission, (2007), “The Guidelines on the Implementation of theNew Basel Accord by China Banking Sector”, downloaded from:http://www.cbrc.gov.cn/chinese/home/jsp/docView.jsp?docID=200703190C3356986BEDAB3AFF45DA32BF983500 on May 15, 2011

41www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Cho, Y. ((2010), “Regulatory Convergence to Basel II and the Road Ahead for Basel III”,downloaded from: http://www.icffr.org/getdoc/7eb6813b-6a85-49b3-87e5-54e5b3a3934b/Young-CHO-Research-Prize-Essay.aspx on June 16, 2011Conford, A. (2006), “The Global Implementation of Basel II: Prospects and OutstandingProblems”, downloaded from: http:/papers.ssrn.com/sol3/ papers.cfm?abstract_id= 1278049 onApril 4, 2011Deloitte (2005), “Understanding the Framework: Adopting the Basel II Accord in Asia Pacific”,downloaded from: http://www.deloitte.com/assets/Dcom-Malaysia/Local%20Assets/Documents/02720_Basel_II_Adopting_SCRN.PDF on May 23, 2011Deloitte (2005), “From Framework to Execution: Effective Planning and Implementation of theBasel II Accord in Asia Pacific”, downloaded from: http://www.deloitte.com/assets/Dcom-Malaysia/Local%20Assets/Documents/02720_Basel_II_Planning_SCRN.PDF on June 30, 2011Financial Stability Report (2008), “Box 3 Implementation of Basel II in Taiwan”, downloadedfrom: http://www.cbc.gov.tw/public/Attachment/931716213871.pdf , on June 23, 2011Gottschalk, R.,Griffith- Jones, S. (2006) , “Review of Basel II Implementation in Low-IncomeCountries”, downloaded from: www.stephanygj.net/ papers/Basel_II_in_ LICs_Dec2006.pdf onSeptember 29, 2010International Monetary Fund Report (2010), “Australia: Basel II Implementation Assessment”,IMF Country Report No. 10/107, downloaded from:http://www.imf.org/external/pubs/ft/scr/2010/cr10107.pdf , on May 14, 2011KPMG (2008), “Basel II in Asia Pacific Banking Sector Survey 2008: Implementing OperationalRisk Management”, downloaded from:http://www.kpmg.com/ZA/en/IssuesAndInsights/ArticlesPublications/Documents/Basel%20II%20in%20the%20Asia%20Pacific%20Banking%20Sector%20Survey%202008.pdf on April 19,2011KPMG (2008), “Risk Management Priorities for Asia Pacific Financial Institutions: Basel II andBeyond”, downloaded from:http://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/Documents/rm_aspac_fi_0807.pdf, on June 2, 2011Makwiramiti, A. M. (2008), “The Implementation of the New Capital Accord (Basel II): AComparative Study of South Africa, Switzerland, Brazil and the United States”, downloadedfrom: http://eprints.ru.ac.za/1607/1/MAKWIRAMITI-MCOMM-TR09-18.pdf on June 15, 2011Prenio, J.Y. (2008), “Pro-Cyclicality Impact of Basel II in the Philippines”, downloaded from:http://www.seacen.org/GUI/pdf/publications/research_proj/2008/rp72/8-chap7.pdf on June 19,2011

42www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Reserve Bank of India (2000), “Annexes to the Consultative Paper on a New Capital AdequacyFramework”, downloaded from: http://www.rbi.org.in/scripts/PublicationsView.aspx?id=1847on June 10, 2011Sophonpanich, C. (2007), “Basel II - Thailand Prepares to Meet an Important Milestone”,downloaded from: http://www.aba.org.tw/images/upload/newsletter/SpecialFeature200711.pdfon: March 31, 2011Yao, W. (2009), “BASEL II Implementation in Asia”, Asia Focus, downloaded from:http://www.frbsf.org/publications/banking/asiafocus/2009/asia_focus_april_09.pdf on March 31,2011WEBSITESwww.financialstabilityboard.org/publicationshttp://www.frsglobal.com/regions/taiwan.htmlwww.sbp.orghttp://www.bi.go.idwww.bis.orgwww.mas.sghttp://www.bsp.gov.phAnnual Report of Reserve Bank of India for the year 2005-06 and 2006-07Websites of central banks of sampled countriesWorld Economic Outlook Database, 2011

43www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/EMOTIONAL INTELLIGENCE DEVELOPS ORGANIZATIONALLEARNING CAPABILITIESABSTRACTDR. J. VENKATESH*; MR. D. BALAJI***Associate Professor,School of Management Studies,Anna University of Technology Coimbatore, Jothipuram Post,Coimbatore – 641047, Tamil Nadu, India.**Full Time Ph.D Research Scholar,School of Management Studies,Anna University of Technology Coimbatore, Jothipuram Post,Coimbatore – 641047, Tamil Nadu, India.The purpose of this paper is to analyze the relationship between emotional intelligence (EI) andorganizational learning capability (OLC). The internal and external influences interacting withevery individual’s state of mind causes a complex “Psychophysiological Experience” calledEmotions. Effective and efficient ways of handling emotions with respect to an environment,situation and people is EI. The well being of employees is enhanced only managing theiremotions constructively. The management of emotions both intra-personally and inter-personallydevelops and sustains a better environment within every individual and also to the organizationalenvironment. Commitment is a multidimensional construct in which affective and normativecommitment are considered relatively more desirable from an organizational point of view.When seeking to improve employees’ organizational learning capabilities should take intoaccount the link between EI and OLC as this paper proposes the concept of mutual correlationbetween emotional intelligent and organizational learning capabilitiesKEYWORDS: Emotional intelligence, Organizational Commitment, Organizational LearningCapabilities.______________________________________________________________________________1. INTRODUCTIONThe Goleman (2001, p. 14), concept of emotional intelligence (EI), at the most general level,refers to the abilities to recognize and regulate emotions in ourselves and in others. Salovey andMayer (1990, p. 189) understand EI as the ability to monitor one’s own and others’ emotions, todiscriminate between them, and to use the information to guide one’s thinking and actions.Publications from Salovey and Mayer (1990) and Goleman (1995) represent the beginning of theEI era in the academic and practitioner contexts, respectively. The construct of EI has receivedincreasing attention in a variety of literature bases, such as competency management (Capaldo etal., 2006). Following this view, EI might be considered as a group of individual competenciesessential for organizational performance.

44www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/EI can affect an individual’s success in an organization (Goleman, 2001). According to popularopinion and workplace testimonials, EI increases performance and productivity (Lam and Kirby,2002). However, EI literature over-relies on expert opinion, anecdote, and unpublished surveys(Zeidner et al., 2004). The review by these authors underlines the scant, and sometimes highlycontroversial, empirical evidence used to support the importance of EI in the workplace andrecommends that scientific studies are carried out in organizations. Very little empirical researchanalyzes the relationship between EI and job satisfaction, which has probably been the mostextensively researched work attitude in the organizational behavior literature (Blau, 1999).Zeidner et al. (2004) suggest that EI could be acutely sensitive to possible factors, and, unlikeconventional ability, EI may have both positive and negative associations with performance,depending on contextual factors. Bar-On’s (1997) study is the only research that reports a modestrelationship between total EI scores and job satisfaction. However, this direct positive effectcould be due to the sample, comprised of a group of individuals in higher level occupations.Abraham (2000) found that although EI was related to job satisfaction, this was moderated by anenvironmental characteristic: job control. It is not sufficient to hire emotionally intelligentemployees; for them to thrive, the environment must offer autonomy in decision making. In sum,some EI people are satisfied with their jobs while others are not. This might be mediated bycertain organizational conditions or characteristics. In our research we will analyze a particularenvironmental characteristic: that which facilitates organizational learning. The concept oforganizational learning has expanded greatly over the last few years, both in the field of researchand among practitioners. One of the main reasons for this growth in importance lies in the newcharacteristics of the business environment (Dodgson, 1993; Easterby-Smith et al., 1998). Theconcept of organizational learning capability (OLC) (Dibella et al., 1996; Goh and Richards,1997; Hult and Ferrell, 1997; Yeung et al., 1999) emphasizes the importance of the facilitatingfactors for organizational learning. Goh and Richards (1997, p. 577) define it as theorganizational and managerial characteristics that facilitate organizational learning or allow anorganization to learn. The aim of this research is to analyze whether more emotionally intelligentpeople tend to derive greater satisfaction from their jobs, through certain working conditions thatfacilitate organizational learning and commitment. Understanding the conditions under which EIinfluences job satisfaction will help to determine its potential importance for organizations,specifically through the lenses of the new competencies management literature. On the otherhand, it will relate important and new concepts being used by organizations, such ascompetencies management and organizational learning.2. EMOTIONAL INTELLIGENCEEI is a relatively new and growing field of research, essential for many areas such as businessand management. Peter Salovey and John Mayer first planned and proposed their theory of EI in1990. Over the intervening decades, theorists have generated several definitions of EI. Based onan analysis of the literature, Zeidner et al. (2004) consider that there are two models of EI:mental ability models and mixed models. Mental ability models focus on aptitude for processingaffective information, in which EI is viewed as a well defined and conceptually related set ofcognitive abilities for the processing of emotional information and regulating emotionadaptively. EI is “the ability to monitor one’s own and others’ emotions, to discriminate betweenthem, and to use the information to guide one’s thinking and actions” (Salovey and Mayer, 1990,p. 189). Those who conceptualize EI as a fairly well defined set of emotion-processing skills

45www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/(Mayer et al., 1999, 2000) endeavor to assess EI with objective performance tests, such assolving problems or identification of emotions in pictures. Mixed models conceptualize EI as adiverse construct, including aspects of personality as well as the ability to perceive, assimilate,understand, and manage emotions. These mixed models include motivational factors andaffective dispositions. Bar-On (1997, p. 16), describes EI as “an array of non-cognitivecapabilities, competencies, and skills that influence one’s ability to succeed in coping withenvironmental demand and pressures”. Goleman (1998, 2001) suggests that two domain facetsdefine the competencies associated with EI: ability – awareness versus management of emotion;and target – whether competence relates to self versus others. EI is thus described by fourcomponents: self awareness of emotions, social awareness or awareness of emotions in others,management of emotions in self and management of emotions in others.Guest and Conway (2004) define wellbeing in terms of six constructs including: a manageableworkload; personal control over the job; support from colleagues and supervisors; positiverelationships at work; a reasonably clear role and a sense of control of involvement in changes inthe organization. These parameters of well beings are possible, only by the unique sense ofemotional intelligence. There are intra-personal and inter-personal competencies of EI, whichpredominantly explain the notion of well being, both to oneself and to the social environment.In some cases, wellbeing is also defined in terms of strain. Strain is defined as psychological,physical or behavioral responses to stressors (Le Fevre et al., 2003). Several stressors influencethe wellbeing level in a workplace. The term stressor is used to indicate job or organizationalconditions that require adaptive responses from employees (Jex, 1998). If an employee’sresponse to a stressor is either neutral or even positive then it is not considered as a strain(Cooper and Quick, 1999). The negative impact of strain upon an employee’s efficiency,effectiveness, satisfaction and performance are well-documented. Amongst other outcomes,strain is manifested in the form of job dissatisfaction, anxiety, depressed mood, headache,coronary heart disease, absenteeism, poor performance and turnover (Jex, 1998; Cooper et al.,2001), which are again the outcome of emotional fatigue. And from this the clear indication isrevealed that the roots of negative outcomes are due to emotional influence causing imbalance.A number of researches are enhanced investigating well being of employees including topperforming leaders and leadership traits in relation to EI. Many authors (Gardner, 1999;Goleman et al., 2002; Kouzes and Posner, 1995; Wheatley, 1999) recognize the necessary shiftfrom old-school management to true leadership. They describe traditional management aspromoting methodical, detached, micro-managing supervisors who have extreme control over anemployees’ every step and actively separate any emotion from the workplace, similar to thetransactional style of leadership. When these same authors turn to describe successful leadershiptraits, their descriptions portray leaders who are aware and have an understanding of their ownand other’s emotions, and are able to use that understanding to effectively motivate, inspire,challenge, and connect with others, an approach aligned with the transformational style ofleadership. In Kouzes and Posner’s (1995) qualitative illustration of leader’s proudest moments,leader reflections were described in terms of feelings, emotions, and challenges. These authorsoffer that transformational leadership traits and experiences such as these are more highlycorrelated with employee satisfaction and performance effectiveness than are transactional traits.

46www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/3. ORGANIZATIONAL COMMITMENTThe concept of organizational commitment has been treated as a variable of interest in its ownright and a variety of definitions and measures have been proposed (Mowday et al., 1982; Meyeret al., 1998; Coyle-Shapiro et al., 2006). The concept has attracted more attention recently fromorganizational scientists, perhaps due to changes taking place in employment practices that havearisen from the international employment marketplace and increased alternatives for skilledemployees in a global economy (Sullivan and Arthur, 2006). Skilled workers therefore have theopportunity to move organizations in an effort to develop their careers without feeling the needto remain with the same organization for any given period of time. At the same time, theevidence suggests that it is proving difficult for organizations to find suitably qualified andexperienced replacements for employees who leave (Shields and Ward, 2001). Notwithstandingthese developments in employment practices, there are aspects of the employment relationshipthat have evolved due to sustained membership in a given environment over an extended period(Sels et al., 2004). In an effort to retain employees who demonstrate high levels of performance,organizations are willing to foster positive organizational attitudes like job satisfaction andorganizational commitment in general (Griffith et al., 2000). In a recent study, Payne andHuffman (2005) have observed the positive relationship between mentoring and organizationalcommitment and negative relationship with turnover behavior. It is on this count thatorganizational commitment gets associated with a concern for employee retention, which hasbeen seen as a major issue for many organizations. Therefore, it might be concluded thatorganizational commitment can be seen as an important variable to consider particularly if anorganization’s goal is to develop a stable workforce on whose continued membership it cancount.The construct of commitment has been viewed in the main as a composite of three maincomponents representing affective, normative and continuance aspects of commitment (e.g.Meyer and Allen, 1984, 1991; Meyer et al., 1993, 1998; Coyle-Shapiro et al., 2006). Allen andMeyer (1990) define affective commitment as an employee’s emotional attachment to,identification with and involvement in the organization. Continuance commitment is sometimestermed as calculative commitment (Mathieu and Zajac, 1990; Hackett et al., 1994) as it is basedon the cost that an employee associates with leaving an organization. Normative commitmentmay be viewed as an employee’s feelings of obligation to remain with the organization, and incontrast to affective and continuance commitment, it focuses on the “right or moral thing to do”by concentrating on the obligation and/or moral attachment of employees that are producedthrough the socialization process binding employees to the organization’s goals and values(Allen and Meyer, 1990; Thomas and Anderson, 1998). Organizational commitment is related topositive outcomes in organizations such as organizational citizenship behavior (Shore et al.,1995; Coyle-Shapiro et al., 2006), low turnover intention (Mowday et al., 1982; Allen andMeyer, 1996) and increased satisfaction (Becker and Billings, 1993). For example, in a recentmeta-analytic study, Riketta (2002) noted a higher correlation between attitudinal commitmentand performance through organizational citizenship behavior and in-role behavior. In brief,affective, continuance and normative commitment represent psychological states that haveimplications on whether an employee remains with an organization.

47www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Commitment is a multidimensional construct in which affective and normative commitment areconsidered relatively more desirable from an organizational point of view. In this study, we aimto identify individual level experience that influence affective and normative commitmentpositively and continuance commitment negatively. It can be assumed that an individual with agood emotional intelligence and hence of wellbeing will be cognitively attached to anorganization by evaluating their potential gain or loss, and that both affective and normativecommitment belong to a positive affective mental state whilst continuance commitment can belinked to the cognitive domain of our personality. A person who is committed to his/herorganization for emotional and moral reasons may portray more genuine relational feelingscompared to thinking of the employment relationship as a profit and loss transaction(Rousseau, 1995).4. ORGANIZATIONAL LEARNING CAPABILITYThe organizational and managerial factors that assist the organizational learning process or allowan organization to learn (Dibella et al., 1996; Goh and Richards, 1997; Hult and Ferrell, 1997;Yeung et al., 1999) is the concept of Organizational learning capability. The importance of thefactors that facilitate organizational learning has traditionally been dealt with in the learningorganization literature, which mainly focuses on the development of normative models for thecreation of a learning organization. This literature proposes a variety of facilitating factors oforganizational learning (Easterby-Smith and Araujo, 1999). However, research from bothorganizational learning and the learning organization literatures has suggested factors thatfacilitate learning (Chiva, 2004). Following a comprehensive literature review, Chiva et al.(2007) identified five essential facilitating factors of organizational learning: experimentation,risk taking, interaction with the external environment, dialogue and participative decisionmaking. Experimentation can be defined as the degree to which new ideas and suggestions areattended to and dealt with sympathetically. Experimentation is the most heavily supporteddimension in the OL literature (Hedberg, 1981; Nevis et al., 1995; Tannenbaum, 1997; Weickand Westley, 1996; Ulrich et al., 1993; Goh and Richards, 1997; Pedler et al., 1997). Nevis et al.(1995) consider that experimentation involves trying out new ideas, being curious about howthings work, or carrying out changes in work processes. Risk taking can be understood as thetolerance of ambiguity, uncertainty, and errors. Sitkin (1996, p. 541) goes as far as to state thatfailure is an essential requirement for effective organizational learning, and to this end, examinesthe advantages and disadvantages of success and errors. Interaction with the externalenvironment is defined as the scope of relationships with the external environment. The externalenvironment of an organization is defined as factors that are beyond the organization’s directcontrol of influence. Environmental characteristics play an important role in learning, and theirinfluence on organizational learning has been studied by a number of researchers (Bapuji andCrossan, 2004, p. 407). Dialogue is defined as a sustained collective inquiry into the processes,assumptions, and certainties that make up everyday experience (Isaacs, 1993, p. 25). Someauthors (Isaacs, 1993; Schein, 1993; Dixon, 1997) understand dialogue to be vitally important toorganizational learning. Although dialogue is often seen as the process by which individual andorganizational learning are linked, Oswick et al. (2000) show that dialogue is what generatesboth individual and organizational learning, thus creating meaning and comprehension.Participative decision making refers to the level of influence employees have in the decisionmakingprocess (Cotton et al., 1988). Organizations implement participative decision making to

48www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/benefit from the motivational effects of increased employee involvement, job satisfaction andorganizational commitment (Daniels and Bailey, 1999; Latham et al., 1994; Witt et al., 2000;Scott-Ladd and Chan, 2004).5. CONCLUSIONAlthough the concept of EI is based on extensive research evidence, the organizationalapplications of EI “tend to be based on derivative arguments and largely anecdotal descriptions”(Dulewicz and Higgs, 2000, p. 231). Consequently, more validated empirical research is needed.EI is becoming one of the most important individual competencies for organizations, and hasbeen theoretically related to organizational performance and to individual variables likeorganizational commitment. This paper proposes that OLC plays a significant role indetermining the effects of EI on organizational commitment. EI should thus be conceptualized asa fit between person and environment; a purely individual attribute does not seem to make sense.The role of OLC can be explained by the fact that emotionally intelligent individuals tend towork in conditions that propitiate their emotional and social abilities (teamwork, risk taking,dialogue, participation, etc.), and consequently they are likely to have higher levels oforganizational commitment. OLC might thus be considered as a stimulating working context,where emotionally intelligent people can develop their competencies and organizationalcommitment. Therefore, competencies (Capaldo et al., 2006) need to be managed through acertain contextual, organizational or managerial situation. In order to suggest some implicationsfor human resource management, one might conclude that under certain conditions (OLC),emotionally intelligent people are more likely to be satisfied and vice versa. The most importantimplication for human resource management is the correlation between people’s emotionalcapability and the organizational commitment. This research considers organizationalcommitment as the result of the relationship between people (EI) and their environmental orworking conditions (OLC), precisely.REFERENCESEarley, P.C. and Ang, S. (2003), Cultural Intelligence: An Analysis of Individual Interactionsacross Cultures, Stanford University Press, Palo Alto, CA.Earley, P.C. and Gibson, C.B. (2002), Multinational Work Teams: A New Perspective, LawrenceErlbaum, Hillsdale, NJ.Earley, P.C. and Peterson, R.S. (2004), “The elusive cultural chameleon: cultural intelligence asa new approach to intercultural training for the global manager”, Academy of ManagementLearning and Education, Vol. 3 No. 1, pp. 100-15.Earley, P.C., Ang, S. and Tan, J. (2006), CQ: Developing Cultural Intelligence at Work, StanfordUniversity Press, Palo Alto, CA.Gabel, R.S., Dolan, S.L. and Cerdin, J.L. (2005), “Emotional intelligence as predictor of culturaladjustment for success in global assignments”, Career Development International, Vol. 10 No. 5,pp. 375-95.

49www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Gelfand, M.J., Nishii, L.H., Holcombe, K.M., Dyer, N., Ohbuchi, K. and Fukuno, M. (2001),“Cultural influences on cognitive representations of conflict: Interpretations of conflict episodesin the United States and Japan”, Journal of Applied Psychology, Vol. 86, pp. 1059-74.Goleman, D. (1995), Emotional Intelligence, Bantam Books, New York, NY.Goleman, D. (1998), Working with Emotional Intelligence, Bantam Books, New York, NY.Goleman, D. (2001), “Emotional intelligence: Issues in paradigm building”, in Cherniss, C. andGoleman, D. (Eds), The Emotionally Intelligent Workplace, Jossey-Bass, San Francisco, CA, pp.13-44.

50www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/ABSTRACTA SEARCH FOR MEASURING QUALITY IN ENGINEERINGEDUCATION: AN EMPIRICAL STUDYDR. KAUSHIK MANDAL*; CHANDAN KUMAR BANERJEE***Assistant Professor, Department of Management Studies,National Institute of TechnologyDurgapur - 713209, West Bengal, India.**Research Scholar, Department of Management Studies,National Institute of Technology,Durgapur - 713209, West Bengal, India.Today, technology initiates a paradigm shift to meet the challenges of a new generation and forwhich engineering education is the major medium to convene these challenges. We havewitnessed the increasing demand for skilled engineers in recent times, but lack of acquisition ofappropriate practical skill and industry orientation is a subject of concern for this sector.Therefore, the gaps in existing engineering program are anticipated. Hence, a transformation isessential to develop a new program to plug the gaps. This paper describes the methodology fordeveloping a scale to identify the dimensions of an ideal engineering program and aims todetermine the gaps between academia and industry on the perception of quality of an idealprogram. We have collected 260 valid responses from faculties and industry executives onthirteen items, related to the quality with an objective to measure their perceptions of quality onan ideal program. We employ Factor analysis to identify the underlying dimensions of theselected items and independent „t‟ test result shows the discrepancy between the twostakeholders on the quality of an ideal program. The outcome duly proposes certainrecommendations to minimize the gaps in order to ensure quality of engineering program.KEYWORDS: Engineering education, Ideal program, Industry executives, faculty, Factoranalysis, quality.______________________________________________________________________________1.0 INTRODUCTIONEngineering education is a service, provided by technical education institutes to differentstakeholders (students, parents, alumni, industry, society etc.), related to it. In today's globalmarket environment where there are intense competitive pressures, service quality continuesto compel the attention of engineering educational institutions. Now, quality assessment inhigher education is of global interest, because government and public demand for accountabilityfrom higher education institutions has steadily increased over the past decades (Brennan,Fedrowitz, Huber, & Shah, 1999). Institutions now realize that a best quality program is anintegral part of overall quality of an educational institute. Therefore, develop of a qualityprogram is a strategic weapon for the institutes to distinguish themselves and gaining acompetitive advantage. In general, quality of an institute is measured through the programs, itoffers. If the quality of an academic program is of high quality then it can produce good quality

51www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/manpower as well. Therefore, the most common approaches to quality assessment in aneducational institute are based on its reputation and resources (Astin, 1985). Globalizationevident the transnational of the service sector and education is one of the most visible forms of it.Hence, the quality of engineering education has to be assessed from the educators and industrypoint of view from time to time and changes should be made accordingly, because they are thekey assessors of the quality of a student. The assessment of engineering program will help us tofind out the gaps, if any, with in the program, which may be upgraded and an ideal program canbe developed for engineering education.We have witnessed the tremendous growth of engineering education in India during the lastdecades (Banerjee et.al, 2007) due to the participation of private engineering institutes.Therefore, the supplies of qualified engineers have been increased. Today, engineering firms,university, and engineering institutions together can contribute to the development of a countryby producing good professionals who can address the sustainable living challenges of the 21stCentury (Desha et.al, 2007).For our research, we have focused on the engineering colleges ofWest Bengal, where a good number of private engineering institutes have been developed.Government of West Bengal has developed a technical university named West Bengal Universityof technology (WBUT) to enhance the scope of engineering education in the state. Today, thereis 86 engineering institutes altogether under WBUT, out of which 79 institutes are private and 7are Government institutes with a intake capacity of 28,100 approximately (Reported by Ghosh,2010). The participation of private engineering institutes has reduce the dependence ongovernment funding in education sector but increasing competitive pressures have prompted aneed to focus on quality and customer service provided by those institutes. The private educationentrepreneurs of West Bengal have invested a lot in the infrastructure development andmarketing of the courses. However, their attention towards providing the quality education is stillunder question.Previous studies in this field have not focused on these issues, which needs immediate attention,because of diversified need of industrial sector. In spite of rapid development in engineeringeducation, the industry still complains of an absence of quality engineers. In this consequence,the quality of program provided by the engineering education institutions need to be evaluatedfrom educators and industry point of view and changes should be made accordingly in order tomeet the global challenges. In the next part, we have discussed the literatures on this issue to setour objectives for the present research.2.0 REVISIT TO EXISTING LITERATUREToday, quality is not just for manufacturers; rather it is a prime focus for service providers aswell. Being an important mediator, education service providers are now taking initiative toimprove its services, because, they realize the importance of quality to tackle global challengeslike clients‟ satisfaction, competition and maintain international standards. There are manydifferent perceptive of the term “quality,” which often reflect the interests of differentstakeholders in higher education. Though, the priority of different stakeholders is likely to bedifferent on the dimensions of quality according to their interest and motivations. Therefore,designing of an ideal program for higher education, like engineering, is a complex mission,because education is a multi stakeholder (employer, students, faculties, Institutes, eduprenures

52www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/and Govt.) segment with varied expectations. In general, technical education is a practiceoriented,intangible, and multiple-stakeholder service (Mahapatra et.al, 2007). Here, idealprogram denotes a program with excellent quality and standard. Many researchers have usedService quality gap model (Parasuraman et al., 1985; 1988; 1991; 1994) to measure servicequality in various educational institutes. However, its application is limited in the field ofeducation. Therefore, Mahapatra et.al (2007) develops an integrative scale EduQUAL(Education Quality) for evaluating service quality for the education sector. Several researchershave investigated the criteria for quality of higher education based on the perceptions ofstakeholders like society, administration; faculty, alumni, or student with their varied expectationlevel, but no research has been conducted to measure the quality of a program. Although,reputation of an institution mainly depends on the quality of programs, they offer. In this context,we can mention the research of Faganel (2010), which focuses on the most important qualitydimensions for different stakeholders for measuring service quality in technical education.Today‟s engineering core program is full of requisite technical skills and training but lacking inmanagement skills, which is essential for the overall development of an engineer. Vandeveer(2000) presents a balanced program of conceptual, technical, and interpersonal skills to bridgethe gap between engineering education and leadership skill development. However, qualityeducation is the joint responsibility of both academia and industry. Tan et.al. (2004) offer anenhanced approach of SERVQUAL for measuring student satisfaction similarly Khan et.al.(2011) evaluate the perceived teaching service quality in higher education for students‟satisfaction. Singh et.al, (2011) outline the key gaps between expectations and perceptions of thefaculty of higher education and suggests a framework for closing the gap. Stodnick et.al, (2008)attempts to measure the service quality of the classroom teaching in higher education by usingSERVQUAL scale. Tyran et.al. (2006), Hasan (2008) and Slade et.al (2000), examine therelation between service quality dimensions and overall service quality. Oliveira (2009) appliedthe SERVQUAL scale and its application success in an engineering institution to measure theservice quality expectation of the students. Velasco (2000) discussed that an educationalinstitution has to spread knowledge and develop skills in the students that are needed to beproductive for gainful employment in the discipline one is trained for. Bateson (2001) stated thatquality is generally considered an attribute in consumer choices.It is evident from the current literature study that the engineering education program must becapable to confront the local challenges and explore global opportunities. Chong et.al. (2006)reveals an outcome- based quality measurement instrument to evaluate the quality oftransnational education. The education of engineers must be competent enough to prepare themfor the multi-disciplinary and changing nature of the problems they will face. Certainly, there is agap between industry needs and institutes supply. Researchers have done several research worksby using the SERVQUAL-based gap model. Chua, 2004; Joseph et al., 2005; Shanahan andGerber, 2004 describe the use of this model for assessing quality practices by providingguidelines for improvements. However, its inadequate application in the field of engineeringeducation leads to develop a generic scale for this purpose.Therefore, it is found that the previous researches in this segment have reflectedadministrators' or faculty priorities, as they are the primary assessor of quality in educationsector. Until date, the perceptions of the major stakeholders like industry and faculty on thequality criteria of a program is ignored and left unaddressed. Hence, it calls for determination the

53www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/perception of faculty and industry on the criteria for the quality of a program. None of theseprevious studies focuses on the quality of a program from faculty and industry point of view. Inthis study, we have attempted to identify the crucial factors of an ideal program for engineeringand technology and intend to find out the gaps between faculty and industry executives regardingthe quality of an engineering program.3.0 RESEARCH OBJECTIVESThe prime purpose of the present research is to recognize an ideal program, acceptable toboth industry and academia and be able to address the common quality aspirations of theengineering students. The present study aims at the following:1. The prime objective is to develop a reliable construct, which helps to measure the qualityof engineering and technology program, considering all the parameters concerning this issue.2. The other objective of this study is to identify gaps between the faculty and industryexecutives regarding the requirement of quality of an ideal program for engineering andtechnology.. 4.0 METHODOLOGYWe have developed methodology for research corresponding to the objectives of the researchwe set for. For fulfilling first objective, we have used normal procedure suggested by Churchill(1979) for development of the construct for identifying dimensions for measurement of aprogram quality. For the purpose of the second objective, we have analyzed the differences inopinion item wise. It is not out of place to mention that all these items are generated from expertopinion and for carrying out necessary tasks for the fulfillment of first objective4.1 SCALE DEVELOPMENT AND RELIABILITY TESTWe have developed a scale to perform the objectives of the present research and to evaluatethe views of the important stakeholders regarding the dimensions of an ideal program forengineering.TABLE-1: QUESTIONNAIRE USED FOR THE SURVEYSl..V1V2V3V4Statements used for the surveyThe ability of oral and written, both types of communications are essential for engineeringstudents.A modern updated course of engineering should arrange global training of the students.A good course of engineering should impart „On-Job training‟ to the students.Course should be designed to match with entry-level requirements in the industry.

54www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/V5V6V7V8V9One year practical training is must for a course like engineering.Two months practical training is sufficient for a course like engineering.Engineering Course should only be accredited by global agenciesOnly practical hands on training/project based learning supported by as less as possiblelecture should require for Engineering course.Performance in the practical training should be evaluated by persons of the industryconcerned and should be credited in the scorecard.V10 An ideal engineering course should have an understanding of professional and ethicalresponsibility.V11 An engineering course is necessarily designed to understand the impact of engineeringsolutions in a global and societal context.V12 Engineering course should have more focus on basic sciences even biological sciences.V13 Engineering course should only emphasis on specific engineering applications.For this purpose, we ensured the involvement of faculty members from various engineeringinstitutes and engineers working as executives in industries. We have conducted a survey byconsulting a group of experts in the field of the engineering education and industry.Considering the views of the experts a questionnaire containing 27 survey items was prepared.The questionnaire consists of two parts. The Part-A gathering the background information of therespondent and the Part-B initiates the detail queries to ensure a like interpretation to allrespondents. Finally, after initial screening, we select 13 items for survey as per the rule of scalepurification, suggested by Churchil (1979) ( See Table No.1). We requested the respondents toanswer the queries in the second phase of survey in a 7-point continuous scale ranging from one,fully disagree to seven fully agree. We have also planned to check internal consistency of thescale by deploying Cronbach‟s α. Furthermore, we have thought that for identification of latentfactors, we would estimate the reliability of each factor again by employing Cronbach‟s α(Malhotra, 2009).5.0. SAMPLE SELECTION AND DATA COLLECTIONFor the second phase of survey, we have designed the sample unit by multi-stagestratification. We have limited our scope to West Bengal and private educational entrepreneurs.Therefore, we have selected primarily one University of West Bengal, which is 100% dominatedby private entrepreneurial capital. The survey sample included faculties from engineeringinstitutes and executives from industries, who are the stakeholders of West Bengal University ofTechnology (WBUT) (See Figure No.1). Out of all Universities, offering engineering courses,

55www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/we have selected West Bengal university of Technology (WBUT), because only WBUT ishaving private engineering institutes under its affiliation.SamplingList out all the engineering institutes underWBUTList out the private engineering institutes.Create a pool of engineering institutesRandomly selected 12 engineering institutesfrom the pool.List out Core-subject faculty for engineering.List out Non-core subject faculty forengineering.Randomly selected 130 no‟s of Core and 70no‟s of Non-core (ancillary) faculty ofengineeringList out the industries visits for campusinterview in the said engineering institutes.List out the potential industries forcampus interview in the said institutes.List out industries where alumni of the saidengineering institutes are workingRandomly selected 11 Industries from thepool.List out Upper-level executives andMiddle-level executives from selectedindustries.Randomly selected 100 no‟s of Upper-leveland 150 no‟s of Middle-level managers forsurvey.Questionnaire given for surveyFIGURE 1: SAMPLING PROCESSInitially we list out all the private engineering institutes under WBUT and select 12 privateengineering institutes randomly from the pool of private engineering institutes under WBUT. Wehave list out the core and non-core subject faculties from the said institutes and screen thembased on experiences. We have considered the faculties with five years or more experience forsurvey. After selecting the sample, we have selected 130 faculties, teaching core-subjects (majorsubjects) and 70 faculties of non-core (ancillary) subjects randomly and given questionnaire tothem. Samples from industries have been selected from the pool of regular and potentialindustries visit those engineering institutes for campus interview. We have also considered theindustries where the alumni of those selected engineering institutes are working. We haveselected eleven such industries and list out the upper and middle level managers for survey. Wehave listed out the executives with more than five years of experience for survey. After selection,we select randomly 100 upper-level managers and 150 middle-level managers of those industriesand given questionnaire to them.For the faculty survey, we contact with 200 faculty members and finally provide 150questionnaires to them. Out of 100 no. of core faculty, 90 have responded where 67 responses

56www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/have been found from male faculties and 23 from female faculties. The response rate of corefaculties is found to be 90% for them. Similarly, 39 non-core faculties have been responded outof 50 questionnaire given to them, among them 29 responses have been received from malefaculties and 10 from female faculties with a responses rate of 78% for them (See Table No. 2).In the industry executives‟ survey, we have contacted with 250 executives and finally have sent158 questionnaires to them. Out of 58 upper-level executives, 47 have been responded where 40responses are from male executives and 7 from female executives with a response rate of 81%.Likewise, 84 responses have been received from middle-level executives out of 100questionnaires given, out of which 70 responses are received from male executives and 14 fromfemale executives with a response rate of 84%. We observed primarily that the respondents fromboth groups have identified a different component or have identified same component withvarying importance.PopulationTABLE 2: DETAILS OF SAMPLENo. ofpeoplecontactedNo. ofquestionnairegivenNo. ofrespondentsMale Female % ofresponseFaculty–Core subject 130 100 90 67 23 90%Faculty – Non-core 70 50 39 29 10 78%Upper level 100 58 47 40 07 81%ManagersMiddle level 150 100 84 70 14 84%managersTotal 450 308 260 206 546.0. ANALYSISWe have used appropriate statistical tools for analyzing the data collected for presentanalysis. For identification of latent dimension of construct for measuring of the program fromthe 13 item responses, we have employed „Factor Analysis‟. For checking the reliability of theconstruct, we have used Cronbach‟s α. Further, to see whether difference in relation to expectedquality of the program exists between academia and industry or not, we have executedindependent sample„t‟ test. All of these are explained in the following section one by one.6.1. FACTOR ANALYSISWe measure the useful statistics Kaiser-Meyer-Olkin (KMO) to test the sample adequacyof a factor analysis. A high value (between .5 & 1.0) indicates that factor analysis is adequate interms of sample (Malhotra, 2009). The value of the KMO measure of sampling adequacy in caseof present research is 0.702, which signifies the adequacy of the sample. Bartlett„s test ofsphericity is used to check whether the appropriate inter correlation exists in between variablesfor running factor analysis or not. The greater the value of test statistic, factor model becomesmore appropriate, as it signifies higher interconnection among variables. For the present researchthe approximate chi-square value is 638.261 with 78 degrees of freedom, which is significant at

57www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/.05 levels (See Table No. 3). Hence, considering all the above facts, we are eligible to employfactor analysis to identify the latent dimensions of an ideal program for engineering andtechnology.TABLE-3: TEST STATISTICSTest Value RemarksKaiser-Meyer-Olkin Measure of Sampling0.702 Sample is adequateAdequacy.Approx. Chi-Square 683.261 Sufficient proof ofBartlett's Test of Sphericity Degree of freedom 78 interrelationship exists. FactorProbability value 0. 000 analysis can be done.We have used principal component analysis to determine the minimum number of factorsthat will account for maximum variance in the data (for all those eigenvalues scores more than1). This initial solution is then rotated by using varimax method with Kaizer Normalization toselect the variables with high loading on a particular factor. The principal component analysisalong with varimax rotation reduces the 13 variables in to three factors (See Table No.: 4). Allthose factors are having corresponding eigenvalue greater than 1. Each factor is composed ofvariable, which is having factor loading of more than 0.50 (Hair et. al 2009). Three factors areextracted with 50.467 % cumulative variance.

58www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TABLE-4: RESULT OF FACTOR ANALYSIS & REGRESSION ANALYSISItemsDegreeofindustry focusness oftheprogramV6 0.744V13 0.653V8 0.647V12 0.627V7 0.620QualityrelatedtoprogramandpedagogyDegreeofindustryreadiness of theprogramReliability(Cronbach's Alpha)VarianceExplainedImportance of theFactor**0.709 22.18% 43.97%R294.8%Compositereliability0.793V3 0.730V11 0.697V1 0.690V10 0.689V9 0.5390.702 18.26% 36.19%98.6%0.803V5 0.77093.9V2 0.744 0.616 10.01% 19.84%%V4 0.667Extraction Method: Principal Component Analysis. Rotation Method: Varimax withKaiser Normalization.Rotation Method: Varimax with Kaiser NormalizationRotation converged in 5 iterations.** (% Variation Explained by the Factor/Total Cumulative Variance)0.772Table: 4 shows the factors after rotation. Percentage of variance explained by cumulativetotal variance explained for each factor which can be considered to be the importance of the saidextracted factor (Guha and Chakraborty, 2002). Factor 1 represents 43.97 % (i.e. 22.18/50.467)of extracting factor„s variance explained. Likewise factor 2, & 3 each represents 36.19% & 19.84% respectively. This analysis reveals three interpretable factors contained five, five, and threeitems respectively (See Table no.: 4). Further, we have named the factors for the purpose ofunique representation of the latent factor behind items grouped under the particular factor.Latent dimension behind factor 1 represents the industry orientation of the program. Thisfocuses on the academic excellence based on industry need. This factor stresses on the extent ofindustry focus ness of the program with an equal blend of lectures, practical and communicationskill. Hence, we have named this factor as – Degree of industry focus ness of the program. Itemsunder factor 2 describe the latent dimension behind the exposure of the program. It focuses on

59www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/the quality aspects of the engineering and technology program in order to cope up with thechanging needs of skilled engineers in the industry.Hence, we have provided the name, to the second factor as - Quality related to programand pedagogy. Items under factor 3 describe that up to what extent the existing engineering andtechnology program is ready to meet the requirement of the industry. This factor points out theemployable qualities of the program according to the industry. It highlights the fact that theengineering and technology program should be competent enough to prepare students as a readymade solution for the industry. We find - Degree if industry readiness of the program, is theappropriate name for the third factor.The result of the exploratory factor analysis indicates that each of the three factorsdeveloped through the scale is competent enough to identify the quality dimensions of an idealengineering and technology course. Therefore, we can conclude that the identified factors aresignificance for developing an ideal program for engineering and technology program.6.2. ANALYSIS OF RELIABILITY OF THE CONSTRUCTThe internal consistency or the reliability of the actual survey data of two groups ofstakeholders (Engineering faculties and Industry executives) has been tested by computingCronbach‟s Alpha. The values of alpha for three dimensions are 0.709, 0.702, and 0.616 and thecomposite reliability (CR) for three dimensions is 0.793, 0.803, and 0.772 (Table 4). As thevalues of alpha well exceed the obligatory requirement of > 0.60, and their composite reliabilityvalues are well acceptable, they establish satisfactory internal consistency and reliability of theestablished scales (Nunnally, 1978). In summing up, we can say that the entire construct is validbecause in almost all the 90-95% cases the criteria holds strong.6.3. STATISTICAL EXPLANATIONWe use regression techniques to understand the explanatory power of independent variablewhich is unobserved (factor score) by dependent variables which is an observed score on itemcomes under said factors. We get R2 value of four factors are 94.8%, 98.6% and 93.9% (SeeTable No.:4) which reproduces a better perception of the various dimensions essential fordeveloping an ideal program for engineering and technology program. It proves how observevariables perfectly converge to unobserved one. We have also examined the t-test whichmeasures the significance of the partial correlation of variables reflected in each factor. The Fstatistic is the regression mean square (MSR) divided by the residual mean square (MSE). Theregression degrees of freedom are the numerator and the residual degrees of freedom is thedenominator degrees of freedom for the F statistic. The total number of degrees of freedom is thenumber of cases minus 1. If the significance value of the F statistic is small (smaller than say0.05) then it means that the independent variables do a good job of explaining the variation in thedependent variable. If the probablity value of F is larger than say 0.05 then the independentvariables do not explain the variation in the dependent variable. The independent variablesinvolved with every dependent variable (i. e. Four extracted factors) are not measured indifferent units, so the unstandardized coefficients or betas are an attempt to make the regressioncoefficients more comparisons. Therefore, the first objective of this research that is developing a

60www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/reliable and valid construct relating to the quality and effectiveness of engineering andtechnology program has been fulfilled considering all the parameters concerning this issue.6.4. GAP ANALYSIS BETWEEN FACULTY AND INDUSTRY EXECUTIVESWe have also executed statistical testing for the purpose of identification of gaps between twostakeholders of the education system i.e. „Faculty‟ and „Industry executives‟.TABLE-5: INDEPENDENT SAMPLES T TEST AND LEVEN’S TESTFactorsF-1(Degreeofindustryfocusness)F-2(Qualityrelated toprogramandpedagogy)V6V7V8V12V13V1V3V9V10V11Levene's Test for Equalityt-test for Equality of Meansof VariancesF Sig. t df Significance Remarks*EVA-7.836 258 0.0006.759 0.01Gap exists**EVNA -7.846 251.715 0.000EVA-5.596 258 0.000 Gap exists7.972 0.005EVNA -5.602 253.773 0.000EVA-4.741 258 0.000 Gap exists1.214 0.272EVNA -4.744 257.093 0.000EVA-7.488 258 0.000 Gap exists2.084 0.15EVNA -7.496 253.654 0.000EVA-4.291 258 0.000 Gap exists14.797 0EVNA -4.299 246.167 0.000EVA5.355 258 0.000 Gap exists44.018 0EVNA 5.336 209.605 0.000EVA7.111 258 0.000 Gap exists29.665 0EVNA 7.09 224.625 0.000EVA0.257 258 0.797 Gap does8.298 0.004EVNA 0.257 244.315 0.797 not existEVA3.941 258 0.000 Gap exists14.134 0EVNA 3.931 233.025 0.000EVA4.284 258 0.000 Gap exists43.878 0EVNA 4.269 213.412 0.000V2 EVA-2.082 258 0.038 Gap existsF-32.572 0.11EVNA -2.083 257.419 0.038(Degree V4 EVA-4.204 258 0.000 Gap existsof2.732 0.1EVNA -4.207 256.796 0.000industryreadinessV5 EVA-5.454 258 0.000 Gap existsof the EVNA 14.965 0program)-5.465 244.02 0.000*EVA: Equal variance assumed, ** EVNA: Equal variance not assumed

61www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Our research question was whether faculty and industry executives assigned equalimportance to each of the item considered for the present work or not. It is because, if both thegroup assigned equal or quasi-equal importance to the most of the items that would mean forequality in perception in the parameter of the program quality between said two groups.Otherwise, we extract the meaning that there are gaps exist between faculty and industryexecutives in different parameters of program quality. As a result of this discussion we havedeveloped a generalized hypothesis which can be useful for all 13 items.H 0 : There is no gap between mean perception of faculty and mean perception of industryexecutives in relation to item i.H A : There is gap between mean perception of faculty and mean perception of industryexecutives in relation to item i.Where, i = item 1 to item 13 (See Table No.1)For solving the hypothesis, we have employed independent sample t test, but for employingindependent sample t test, it is necessary to check whether the variance of the two populationsare equal or not. We have employed two different term of independent sample t test statistics, i)variances between the two populations are equal, ii) variances between the two populations arenot equal. We tested by Levene test, whether population variances are equal or not. Output of theLevene test result put in either situation i) or situation ii). Based on situation, statistics ofindependent sample t test are applied. Results are shown in Table 5.From this, it is clear that there are significant gaps between the faculty and industryexecutives on the quality of the program. The probability value of t test in twelve out of thirteenitems shows a value of 0.000, which is < 0.05, which means the gaps between the faculty and theindustry executives are significant in all the twelve items. Hence, we accept hypothesis H A for allthe twelve items. Only one item (V9) shows a value of 0.797, which is > 0.05. It means there isno gap exists here. Therefore, we accept null hypothesis or H 0 in this case. From the abovediscussion, it is apparent that gaps are exists between faculty and industry in all most all thedimensions defining quality of an engineering program.7.0. EDUCATION PRIORITY GAP ANALYSISFor finding the gaps between faculty and industry executives, we have calculated the mean valueof all the dimensions under the extracted factors. The average mean value of dimensions underthe three factors is calculated to find out the relative importance of the factors (Table 6). As table6 illustrates that for all the statements the mean scores are significantly above the cut point (3)(Zeshan, 2010). It proves that both the engineering faculty and industry executives are agreeingthat the three factors important for designing a program for engineeringThe ranking of the factorsare shown as per their average mean values. The result shows that faculty provide highestimportance (Rank 1) to factor 3, followed by factor 1(Rank 2) and factor 2 (Rank 3). On theother hand industry executives awards highest rank (Rank 1) to factor 2 followed by factor 3(Rank2) and factor 1 (Rank 2). Further, we have calculated the overall gape score between thefactors as per the average mean value. We have found significant gaps between the engineeringfaculty and industry executives regarding the importance of this factor for defining quality of a

62www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/program. The over all gap scores in rank have been calculated to find out the overall importanceof the factors in terms of quality of a program. This indicates that the views of faculty andindustry executives are different regarding the significance of these factors for an idealengineering program. From the Table 6 it is found that the highest gap score is for Factor 2(Quality related to curriculum and pedagogy) which is ranked I and Factor 3 (Degree of industryreadiness of the program) which is ranked II. This is because these are the real cause for concernfor the engineering program, which needs immediate attention for the improvement of quality.As can be seen from the results, the quality of the engineering program is mainly depends on thequality of its curriculum and pedagogy. This means that there is a large gap between faculty andindustry executives regarding the quality of curriculum and pedagogy of the engineeringprogram, which ultimately affect the industry ready ness of the engineering program at the end.Second largest gap is the gap on industry readiness of the engineering program, which needed tobe bridged at the priority after the first dimension. Then comes the third dimension (Factor 1),Degree of industry focus ness of the program, which is ranked III. So this dimension would beneeding less attention or they come next in the priority according. Hence, the other objective ofthis study that is to identify gaps between the faculty and industry executives regarding thequality of an ideal program for engineering and technology has been accomplished.

63www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TABLE-6: RELATIVE RANKING AND IMPORTANCE OF THE DIMENSIONSFactorF-1Engineering FacultyMeanValueItemsV6 5.3721V7 5.4884V8 5.0233V12 6.0853V13 5.3333AveragemeanvalueAveragemeanvaluewiseRank5.46048 2Factor(F)F-1Industry ExecutivesMeanValueItemsV6 3.4809V7 4.2824V8 4.0458V12 4.7786V13 4.4351AveragemeanvaluewiseRankAveragemeanvaluewiseRank4.20456 3Overall gapscoresinAveragemeanvalue1.25592OverallGaponRankIIIF-2V1 5.1163V3 4.9147V9 5.1550V10 5.3411V11 4.92255.08992 3F-2V1 6.1756V3 6.1832V9 5.2061V10 5.9924V11 5.77865.86718 1-0.77726IF-3V2 6.0233V4 6.3721V5 6.51166.30233 1F-3.V2V45.63365.69975.7320.60256 2II87V5 5.7329Over All Gap Score For The Factors = 1. 081238.0. OUTCOME AND RECOMMENDATIONSPresent research provides two important outcomes related to the quality of anengineering program (See figure No. 2). One of the most significant outcomes of this paper is to

64www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/develop a tool for measuring quality of an ideal engineering program. This paper finds out threeimportant factors related to the quality of an engineering program. The other significant outcomeof this paper is to identify the gaps between the two important stakeholders, faculty and industryexecutives on the quality of an ideal engineering program. The gaps exist between thestakeholders, because of their varied priorities regarding the quality of the program. However,the gap should be plugged to improve the quality of the program.8.1. PROPOSED RECOMMENDATIONPresent research develops a tool for measuring quality of an engineering program, whichis a new contribution to this field and this tool can be used to measure the quality of otherprograms as well. The newly developed tool can be used by the academia to check and enhancethe quality of their existing academic programs, because it is important for them to maintain thestandard of their program to get a competitive edge in the market. Similarly, industry can use thistool to measure the quality of the program for accrediting the same. Therefore, this newlydeveloped tool can be a handy weapon for both the academia and industry regarding themeasurement of quality of the academic program.Present research reveals few significant gaps between the faculty and industry executives interms of quality of an ideal engineering program. Necessary measures can be taken to plug thesegaps (Figure 2).The first gap (Gap I) is the gap between faculty and industry executives onIndustry focusness of the program. To plug the gap few measures can be recommended. 1) AnAcademia-Industry interactions should be developed to make the engineering program moreindustry oriented. The academia should arrange seminars, symposium, and workshop jointly withthe industry to improve the industry focus ness of the program. 2) The practical issues, which areimportant for industry orientation, should be highlighted in the program 3) Training of thefaculties should be arranged at industry similarly industry executives might be trained atengineering institutes to enhance the industry focus ness of the program.The Second gap (Gap II) is the gap on industry readiness of the program between faculty andindustry executives. This paper suggests few recommendations to close this gap too. As per therecommendations, 1) Academia can provide more industrial and on-the-job training to thestudents to make them precisely ready for the industry. 2) Institutes can involve the industryexperts by assigning guest lectures to them for the betterment of the students. It will certainlyhelp the students to interact with the industry experts and understand the exact requirement of theindustry, which will help them to be more industry-ready. 3) The program of engineering shouldbe properly accredited by the industry to make it more significant and acceptable for theindustry. The above-mentioned recommendations can be useful to plug the gap related to degreeof industry readiness of the program.The Third gap (Gap 3) is the gap on the quality related to curriculum and pedagogy of theprogram. This paper recommends few measures to minimize this gap, such as, 1) a joint workshop on engineering curriculum and pedagogy can be arranged where faculty and industryexperts can provide important inputs regarding the development of an ideal program forengineering. 2) A joint syllabus committee can also be formed from faculty and industry expertsto enhance the quality of the syllabus of engineering and make it more industry-centric and

65www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/realistic. 3) The examination pattern can be amended by involving industry experts to the system.The industry experts can evaluate a part of the practical examination to make the evaluationsystem more relevant.Dimensions Gaps Recommendations to plug the gapsFACTOR-1(Degree of industryfocus ness)Gap-1II1. Industry-Academia interaction.2.Highlighting practical issues in syllabus.3.Training of faculty in industries and industryexecutives in institutes.FACTOR-2(Quality related toprogram and pedagogy)FACTOR-3(Degree of industryreadiness of program)Gap-IGap-IIGaps1. Arrange joint work shop for designing aprogram for engineering.2) A joint syllabus committee can be formed tomake the syllabus realistic.3) The examination pattern can be amended byinvolving industry.1.Provide industrial and on-the-job training to thestudents.2) Arrange guest lectures from industry experts.3) Industry accreditation of the program.FIGURE 2: PROPOSED RECOMMENDATIONS8.0. CONCLUSIONSThe major contribution of this paper is providing a systematic and integrated tool for measuringthe quality of an engineering program. As the quality of an academic program largely depends onthe human behavior, the quality dimensions and items under each dimension of the measuringinstrument usually differ depending on the perception of quality among the consumers. However,in the educational sectors, academia and industry are considered the most important stakeholders,but their perception for quality is different. In this context, the newly developed survey-basedinstrument can act as a useful tool to measure quality of all academic programs from thestakeholder‟s point of view. This instrument is a pioneer in this field as there is no such specificinstrument available for this purpose.The other important contribution of this paper is to investigate and reveal the gapsbetween the faculty and Industry executives on the quality of an engineering program. The gapsbetween faculty and industry must be bridged to improve the quality of the engineering programand enhance the quality of an engineering education as a whole. This paper identifies threeimportant gaps between faculty and industry executives related to the quality of an idealengineering program and suggests few recommendations as well. These useful recommendationscan be used to improve the quality of an engineering program, which will certainly develop theskilled and professional engineers to serve not only the industry and the country but to the entiresociety all together.

66www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/REFERENCESAstin, A. W. (1985). Achieving educational excellence: A critical assessment of priori- ties andpractices in higher education. San Francisco: Jossey-Bass.Banerjee R, Muley V..P (2007). Engineering education in india, Draft Final report, September14, 2004.Bateson, J. E. G.; Hoffman, K. D. (2001), Marketing de serviços. 4. ed. Porto Alegre: Bookman,Brazil.Brennan, J., Fedrowitz, J., Huber, M., & Shah, T. (Eds.). (1999). What kind of university?International perspectives on knowledge, participation and governance. Buckingham UK: OpenUniversity Press with Society for Research into Higher Education.Chong, B. K. and Crowther, F. (2006), “A New Framework for Measuring the Quality ofOutcomes-Based Engineering Education”, 35th ASEE/IEEE Frontiers in Education Conference,October 19-22, Indianapolis, IN.Chua, Clare. 2004. Perception of quality in higher education. AUQA Occasional Publication.Proceedings of the Australian Universities Quality Forum 2004, 1-7Churchill, G.A. Jr (1979) A paradigm for developing better measures of marketing constructs.Journal of Marketing Research, 16, pp. 64–73.Desha, J.K., Hargroves, K., Smith, M.H., and Stasinopoulos, P. (2007), The importance ofsustainability in engineering education: a toolkit of information and teaching material.Engineering training & learning conference, September 12-13.Faganel, A. (2010), Quality perception gap inside the higher education institution. InternationalJournal of academic research. 2 ( 1), 213-215.Ghosh, G., Problem of plenty: Engineering seats lying vacant in West Bengal. BusinessStandard, Kolkata, August, 2010.Guha A , Chakraborty D (2002) “Relative position of HDI across Indian states: some exploratoryresearch” Artha Beekshan, vol.II , no: 3 , (Dec) , 170.Hasan, H.F.A., Ilias, A., Rahman, A.R., Razak, M.Z.A. (2008). Service Quality and StudentSatisfaction: A Case Study at Private Higher Education Institutions. International BusinessResearch, July, 2004 Vol. 1, No. 3, pp.163-175.Joseph, M., Yakhou, M. and Stone, G. (2005) „An educational institutions quest for servicequality: customers‟ perspective‟, Quality Assurance in Education, Vol. 13, No. 1, pp.66–82.Khan M.M., Nawaz, M.M. and Naqvi, I.H. (2011), Teaching quality in higher education: whatdo we need to improve? Interdisciplinary journal of research in business, 2011, Vol 1, No.4, 37-42.

67www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Mahapatra, S.S. and Khan M.S. (2007), A neural network approach for assessing quality intechnical education: an empirical study. International journal of productivity and qualitymanagement, 2007, Vol 2, No 3, 287-306.Nunnally, C. Jum. (1978). Psychometric Theory. New York: McGraw Hill Book Co.Oliviera, J.O - Ferreira, E.C: Adaptation and application of the SERVQUAL scale in highereducation In: POMS 20th Annual Conference, Orlando, USA: 2009.Parasuraman, A., Zeithaml, V.A. & Berry, L.L. (1985) A conceptual model of service qualityand its implications for future research. Journal of Marketing, 49, 41–50.Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1988), “SERVQUAL: A Multiple-Item ScaleFor Measuring Consumer Perceptions Of Service Quality”, Journal Of Retailing, Spring, Volume64, Number 1, pp. 12-40.Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1991), “Refinement And Reassessment OfThe SERVQUAL Scale”, Journal Of Retailing, Winter, Volume 67, Number 4, pp. 420-450.Rajasingh, S and Rajasekaran, B. (2011), Perceptual Chasm Between Industry and AcademicLeaders on the Quality of Higher Education. Academic Leadership the online journal, Volume 9Issue 2 .Rigotti, S. & Pitt, L. (1992) SERVQUAL as a measuring instrument for service provider gaps inbusiness schools. Management Research News, 15, 9–17.Shanahan, P. and Gerber, R. (2004) „Quality in university student administration: stakeholders‟conceptions‟, Quality Assurance in Education, Vol. 12, No. 4, pp.166–174.Stodnick, M., Rogers, P., 2008. Using SERVQUAL to measure the quality of the classroomexperience. Decision Sciences Journal of Innovative Education 6 (1), 115-133.Tan, K.C. & Kek, S.W. (2004). Service Quality in Higher Education Using an EnhancedSERVQUAL Approach. Quality in Higher Education, Vol. 10, No. 1, April 2004; 18-24.Tyran & Ross, 2006. Service Quality Expectations And Perceptions: Use Of The ServqualInstrument For Requirements Analysis. Issues in Information Systems.7(1),357-362.Vandeveer, R.C. (2000), gap management: balancing engineering education and leadershipskills development. Www.docin.com/p-56149060.html.Velasco, A.L. (2000). Enhancing Engineering education through Total Quality Management.Proceedings of the sixth AEESEAP Triennial Conference, Indonesia.Zeshan, A., Afridi, T., Khan, M.K., (2010), Assessing service quality in business schools:Implications for improvement. 3rd international conference on assessing quality in highereducation, 6th – 8th December, 2010, Lahore – Pakistan.

68www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/EVALUATION OF MASTER'S DEGREE STUDENTS' SATISFACTIONOF EDUCATIONAL SERVICES IN IRAN(CASE STUDY: NEYSHABUR UINVERSITY)ABSTRACTTOORAJ SADEGHI*; DR. BAHAREH HAAJ ALI BEYGI***Business Management Department,Department of Business Management, Neyshabur Branch,Islamic Azad University, Iran.**Business Management Department,Department of Business Management, Neyshabur Branch,Islamic Azad University, Iran.Today universities and educational institutes have important responsibilities/duties towardseconomical/social/political and cultural growth and development and also training human forces.In order to perform these important duties, universities need suitable patterns and tools toevaluate and ensure programmers' trend and the most important issue, evaluation of students'satisfaction of services presented in the university, since students are the only judges who canjudge whether this is reached or not. The purpose of this research is to evaluate the effectivefactors on Master's degree students' satisfaction of educational services Neyshabur's IslamicAzad University about the services presented by the university.This research is applied in terms of goal, while it is descriptive/Survey in terms of method.Conformational factor analysis method was used to test the research's assumptions, whilecustomer's satisfaction index in Malaysia (MCSI) was used as the research's basis. Samplingmethod was simple random method and the statistical society of the research was Neyshabur'sIslamic Azad University students. Data collection tool of this research was questionnaires whichwere filled in by 206 students and then the data were analyzed in order to analyze/evaluatestudents' satisfaction.KEYWORDS: satisfaction, students' satisfaction, service quality, understood quality, master'sdegree.______________________________________________________________________________INTRODUCTIONToday, students' ideas/viewpoints about all dimensions of their educational lives by universitiesand educational institutes about their satisfaction of the services presented by the university areanalyzed/ evaluated. In this regard, the present research was performed with the purpose ofanalyzing/evaluating the effective factors on students' satisfaction by Neyshabur's Islamic AzadUniversity master's program.In most countries of the world, students are considered as the initial customers of a universityeven before they are susceptible to pay the tuition. Indeed students are direct receivers of the

69www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/services presented by the university. They play an active role in definition of service presentationand satisfaction by requesting training courses via registering or showing their un-satisfaction byleaving the university. This research investigates the viewpoints of master's degree studentsabout various dimensions such as the university's professors, staffs, facilities and welfareservices, etc. Indeed obtaining and maintaining students must be the priority of most universities'plans due to the tendency to increase the population of students in universities along thegovernment's goals.Therefore students' satisfaction is a very important issue for universities and their managementwhich is the purpose of a continuous attempt to maximize their satisfaction and minimize theirun-satisfaction and therefore maintain students and improve the university's performance. Todayuniversities compete with each other for attracting students by presenting pre-defined services ordedicated ones and their evaluation is done along improving the service quality. Due to thegrowth in inter-university competition, their goal should be quality improvement.Students are considered as assets for the university which must be maintained and possiblyincreased. Today universities have become presenters of relational services in which supply anddemand (supplier and receiver) cooperate with each other so that they get ever-increasingsatisfaction of the students (Arambewela & Hall, 2009).Due to the fact that in this university, students pay in response to the services they receive, theservices given to students must obey a series of standards that so that the tuition paid for themajor and they should be conformed to their expectations in master's degree level so that itwould bring about their satisfaction. Service presentation on a standard level requires changeswhich must be in the university and the establishment of quality improvement strategy isimportant for the university. The higher the service quality, the more satisfied the students.Therefore satisfaction is based on the students' cognition of service quality.In fact what is presented to the students by the university is a collection of goods and serviceswhich are inseparable consisting of three elements:1. Physical r financial goods2. Presenting body services- clear services3. Mental- marginal services4. For a university, financial services include training and teachings, slides presentation,complementary published texts and recommended texts. In addition they include physicalfacilities such as seminar halls and training rooms and service levels, furniture,decoration, lighting, design and also subsidiary services such as foods and entertainmentfacilities.Clear services include staffs' knowledge level, professors' teaching abilities, teaching quality,ease of meeting with the staffs, the difficulty level of the subjects and work volume.

70www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Marginal services include staffs' behavior toward the student such as cooperation, caring for thestudent if having problem, respect to his/her feelings and beliefs, ease of access to staffs and theirabilities/deserve. In addition it includes the ability of the university's environment so that thestudent would feel free, deserved, self-esteem and profession being transferred by theenvironment in seminars and training being conformed to the felling that the students' benefitsare considered in the university besides the rewards with the attempt done by the student inexams and work during the semester. All of the above-mentioned items are based on thestudents' cognitions about different parts of services and the data required for collecting students'feedback are usually gathered via questionnaire (Douglas et. al, 2006).Rowley (2003) identified four main reasons for collecting students' feedback:1. Providing examinable evidences so that the students would have the opportunity forsaying their opinions about their lessons and that tis information would lead to theirimprovement.2. Encouraging the students to learning3. It is an opportunity for universities to examine/present indices which help the reputationof the university in the market.4. Providing an opportunity for the students to declare their satisfaction level of theireducational experienceKeeping the customers satisfied is something which leads to customer's loyalty. Researchesperformed by Jones & Sasser Jr (1995) on 30 organizations from five different markets showedthat where customers have a right to make decision, the relationship between satisfaction andloyalty is leaner, i.e. loyalty increases with increase in satisfaction (Douglas et. al, 2006).Customer's loyalty is manifested in different forms in his/her behavior. Jones & Sasser Jrclassified the methods of measuring loyalty into three important classes:1. Tendency to repurchase2. Initial behavior: organizations have access to information about customers' differentreactions. They can follow five kinds of behaviors which show the customer's repurchase,i.e. newness, abound, quantity, maintenance and life-time.3. Secondary behavior: for example, customer's references, confirms and whispers are allvery important forms of customer's behavior for an organization.Transforming these into the university's services includes the following items: decision tocontinue education on a higher level in the same university, using welfare services such aslibrary, foods and IT and finally tendency to recommend the university to friends and relatives(Douglas & McClelland, 2008).

71www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/EFFECTIVE FACTORS ON STUDENTS' SATISFACTIONResearchers such as Price et al (2003) reported the effect of facilities on the student's decision tochoose the university. Researchers investigated several universities during 2 years to determinethe students' reasons for selecting a special university. The average results of these two yearswere relatively the same.The first eight reasons were as follow: having proper training course, access to computer, qualityof library services, good educational reputation, having silent and quiet environments, access toself-learning environments, and quality of public transportation across the city and goodbehavior of the personnel with the students. It is clear that the students' cognition of theuniversity's facilities is one of the effective/important factors on their decisions for registration(Douglas et. al, 2006).Deming (1982) declared that the ideas of most of people are formed based on the individualsthey see whether they are satisfied or not or in between. In order to present high quality servicesto the students, universities should manage every aspect of the student's cooperation with allother services, especially the ones including the individuals. Services are presented from oneperson to another which can whether make the image of a university or destroy it. In order tomake satisfaction in the student, all staffs of a university should obey quality service directives tothe customers, whether they are Frontline Contact Staffs who participate in training ormanagement or non-contact ones in management or managerial roles.A new study by Sohail & Shaikh (2004) on 310 male Saudi Arabian college students in oil andminerals faculty of Shaah Fahad University showed that "contact personnel" are the mostdecisive factor in evaluating service quality by students, though physical environment, lightingdesign, classes, appearance of the building and floors and he overall cleanliness are meaningfullyeffective on understanding the concept of service quality by the students.Banwet & Datta (2003) found that satisfied students are loyal, while unsatisfied ones probablyparticipate in another conference presented by the same spokesman or they would chooseanother unit/course taught by the same person.The higher the service quality, the more satisfied the students would be, therefore satisfaction isbased on their expectation/understanding of service quality. According to their researches,Parasuraman et al (1985) declared that service quality and therefore satisfaction as a viewpointshould be measured on three levels, i.e. cognitive, affection and behavioral. Satisfaction is a clearexchangeable dimension which is related to receiving sensational aspects.On the other hand, service quality is the result of a cognitive process which is more relationaland therefore points to external evaluations and feelings. Indeed they are both non-clearevaluations of service experience based on the comparison between a standard and theunderstood performance, although satisfaction is more an experimental issue, while qualityevaluation does not necessarily indicate personal experience (Petruzzellis et al, 2006).

72www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/MASTER'S PROGRAM AS A SERVICEAccording to Oldfield & Baron's ideas, master's program may be a special service. On the otherhand, for Hennig _ Thuran et al., educational services are related to service marketing field.Recent authors have pointed out that educational services are different from other professionalservices for various reasons. Educational services play a major role in students' lives that needmotivation and mental skill to reach their goals considerably.In addition, educational services have several properties. They are mainly intangible, mortal andheterogeneous in which professors' educational attempts are produced and consumedsimultaneously by professors and students which are parts of the educational experience. Due tothe unique properties of services, service quality cannot be measured in the same way (Gruber etal, 2010).STUDENTS AS THE CUSTOMERS OF MASTER'S PROGRAM SERVICESCustomer's satisfaction is often used interchangeably with quality. Quality is repeatedly definedas conformity with customer's expectations. Customer is the receiver of the service. Todayuniversities increasingly work in a competitive business environment which in turn increases thenumber of universities and marketing-oriented behaviors in them considerably. Students areconsidered as the customers and master's program is purchased as the product (Maxwell Brown,2006, 55)Another research declares that the customer is accepted as a general principle in master'sprogram. The customers of master's program are college students, staffs, professors (faculties),families, the society and industries. Among various customers of master's program, studentsattract the most attention to them who are considered as the main customers of master's program(Sahney et al, 2006). In addition, Douglass and Douglass insisted on the fact that students shouldconsidered as the main customers of the university.As mentioned above, in service marketing, students are identified as the customers of master'sprogram and universities, since they buy services and educational/welfare facilities by theuniversity as the product.SERVICE QUALITY AND SATISFACTIONService field insists on the understood quality which is obtained from the comparison ofcustomers' expectations of the services presented to them with their understanding of the realperformance. In master's program, quality is a complicated/multi-dimensional concept. Inaddition, quality lacks a unified clear definition. As a result, it is agreed that there is not the bestdefinition and the best way for measuring service quality yet.Any beneficiary in master's program (e.g. college students, the government and professionalorganizations) has its special viewpoint about service quality. This research mostly focuses on aspecial beneficiary in master's program: college students who are considered as the customers ofeducational services due to paying tuitions. They receive/utilize the trainings presented by theuniversity which causes that they would be the initial customers of educational activities.

73www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Authors such as Sander et al (2000), Germler and McCollough (2002) and Hill (1995)considered the students as the initial customers of master's program services, however thisviewpoint does not mean that other ideas are not important or correct. In this field, Guolla(1999) pointed out that college students may play the role of Clients, producers and products.Based on the findings obtained in the field of service quality, O'Neill and Palmer (2004) definedservice quality as follow: the difference between what a college student expects and his/hercognition of what he/she really receives.There are several definitions of satisfaction in the field of services and consumer marketing.Oliver (1997) declared that satisfaction may be defined as a practical pleasant research whichmeans that consumers understand that consumption satisfied needs, wishes, goals, etc. to someextent which is pleasant. Therefore is the feeling of a consumer that provides the consumption ofresults for satisfaction standard in comparison with non-satisfaction (Gruber et al, 2010).The concept of satisfaction in master's program has been extended too. Researches indicate thatstudents' satisfaction is a complicated/multi-dimensional concept. Reference to the definitions ofOliver and Desarbo (1989), Elliott and Shin (2002) of satisfaction show that they describedstudents' satisfaction as the desirability of mental evaluation of a student of differentresults/experiences related to education and that students' satisfaction forms continuously by therepetition of experiences in student's life.The findings of previous researches show that satisfied students may attract new students amongtheir friends and relatives for the university via Word Of Mouth advertisements. In addition, itindicates that students' satisfaction has a positive influence on their motivation. Service qualityand students' satisfaction are fundamentally different concepts. While quality is a generalviewpoint, satisfaction is related to specialized transaction.Authors such as Farrell et al. (2001), Cronin et al. (2000) and others considered the understoodquality as a background of satisfaction, while other researchers such as Parasuraman et al. (1988)and Bitner (1990) considered customer's satisfaction as background for service quality.Most authors believe that service quality is a prerequisite for customer's satisfaction. Zeithaml etal. (2008) were among the ones who pointed out that service quality and customer's satisfactionare basically different concepts. Satisfaction is considered as a more extensive concept thanservice quality, while service quality is mentioned as a part of satisfaction. They assume thatcustomer's satisfaction is not only affected by the concepts of service quality, but alsopersonal/positional factors and price affect customer's satisfaction too. In addition in the field ofmaster's program, Browne et al (1998) and Guolla (1999) supported that assumption that thequality of services understood by students is a background for their satisfaction (Gruber et al,2010).CONCEPTUAL MODEL OF THE RESEARCHCustomer's satisfaction index in Malaysia (MCSI) is a national economical index which showsthe customers' evaluation about the quality of services presented by governmental organizationsand institutes in Malaysia. This index was established in 2000. Customer's satisfaction index in

74www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Malaysia (MCSI) has eased the way for making strategic decision-making in organizations inthis country by providing proper information about customers. Besides other economical indicessuch as consumers' price and gross production index, this national index is identified as one ofthe important criteria for evaluating the organizations in this country.The main MCSI model is depicted in graph 1. This model is a structured model including sixhidden variables in which the factors of customer's satisfaction include three hidden variableswhich are in the order of understood quality, customer's expectation and understood value. Onthe other hand, results of customer's satisfaction include two hidden variables including theunderstood image of service and customer's loyalty.FIGURE 1- NATIONAL MODEL OF CUSTOMER'S SATISFACTION INDEX INMALAYSIARESEARCH'S ASSUMPTIONSAccording to the goals under consideration and also the research's conceptual mode, theassumptions of this research are:Assumption 1: understood quality is effective on students' satisfaction.Assumption 2: understood value is effective on students' satisfaction.Assumption 3: students' expectations are effective on understood value.Assumption 4: understood quality is effective on understood value.Assumption 5: students' satisfaction is effective on the image of the services presented by theuniversity.

75www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Assumption 6: students' satisfaction is effective on their loyalty.Assumption 7: services image is effective on students' loyalty.Assumption 8: there is an indirect effect between the understood quality and students'satisfaction via the understood value.Assumption 9: there is an indirect effect between students' expectations and their satisfaction viathe understood value.RESEARCH'S METHODResearches may be classified based on various criteria/basics that provide conditions on the basisof which the researches may be classified. Present research is applied in terms of goal, becauseits results may be used for increasing the quality of the university's services and therefore thestudents' satisfaction of master's program, while it is descriptive in terms of the classification ofresearches based on the procedure of data collection, i.e. research's scheme, since it describes thespecifications of the sample and then extends them to the statistical society. Descriptiveresearches are in turn in several classes among which the Survey type is used in this research.Survey research acts to describe, predict and analyze the relationship among the variables.Therefore it can be said that the procedure of the present research is descriptive-survey.Conformational factor method was used in order to examine the research's assumptions, whilenational model of customer's satisfaction index in Malaysia (MCSI) was used as the basis of theresearch.STATISTICAL SOCIETYOur statistical society of the research is Neyshabur's Islamic Azad University master's degreestudents.SAMPLING METHOD AND THE DETERMINATION OF THE SAMPLE'S VOLUMESampling method was simple random method. Dou to the utilization of factor analysis method inorder to examine the research's assumptions and using Smart PLS software for analyzing thedata, there is a wide spectrum of estimates in order to determine the sample's volume. Thissoftware is not sensitive to the number of the sample's volume. It is recommended in someregions that 300 items are enough, although 100 items may suffice for clarity of the factors'structure, albeit there is no necessity which shows that the better the sample's volume, the better(Maxwell Brown, 2006, 335). 260 questionnaires were distributed in the present research amongwhich 229 questionnaires were returned among which 206 ones were perfect and analyzablewhich were statistically analyzed by using Smart SPL and SPSS software.

76www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/DATA COLLECTION TOOLBoth library and field methods were used for data collection in this research such that librarymethod was used for identifying the indices and variables, research's literature and history, whilefield method was used for collecting data from the statistical sample.The data collection tool from the statistical sample was questionnaire which consisted of twoparts:‣ General questions: these questions try to collect general/population-oriented informationabout responders. This part consists of 9 questions.‣ Special questions: this part consists of 47 questions which are classified into 6 divisionsas follow: Understood quality Understood value Students' satisfaction Loyalty Expectations Service image15 questions3 questions4 questions8 questions13 questions4 questionsUnderstood quality, understood value, students' satisfaction, loyalty and service image weremeasured by 34 Lickert's scale five-score questions (from 1: completely disagreed to 5:completely agreed). In addition, students' expectations were measured by 13 Lickert's scale fivescorequestions (from 1: completely unimportant to 5: very important).RESEARCH TOOL'S VALIDITYIn this research, a questionnaire was received for collecting data which was constructed based onthe indices declared by four researchers (Martensen, Gronholdt, Eskildsen and Kristensen) in astudy in 2000 and then its validity was confirmed with the help of the advisor professor andrevised/modified by some experts in the field of marketing.RESEARCH'S RELIABILITYIn this research, internal consistency method was used in order to estimate the stability. The mostimportant internal consistency index was Cronbach's alpha test which shows to some extent thequestions of the test are able to measure a unified ability or specification. Pre-test method wasused to determine the questionnaire's stability. For this purpose, 10 questionnaires weredistributed through the statistical sample under consideration. As seen in the table below, all

77www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/figures show that the questionnaire designed for performing the research had the necessarystability.TABLE 1- CRONBACH'S ALPHA VALUEValue of Cronbach's alpha0.9160.7840.600.8990.7530.8510.837Number of questions4715344813StructureOverall questionnaireUnderstood qualityUnderstood valueServices imageSatisfactionLoyaltyExpectationsDATA ANALYSIS METHODConclusion and descriptive fields were used for performing data analysis. Descriptive statisticsinclude abound tables, mean, standard deviation, etc. in addition, assumptions test was used onconclusion levels. Structural Equation Model (SEM) was used for testing the research'sassumptions which is a statistical model for investigating the linear relationships among hidden(unobserved) variables and clear (observed) ones. Smart PLS2 and SPSS16 software were usedfor performing data analysis.RESULTS OF THE RESEARCH'S ASSUMPTIONS STUDYAs seen in table 2, the influence of understood quality and understood value on students'satisfaction is direct and acceptable and also the effect of understood value on understood qualityis direct and meaningful. According to the results, students' satisfaction has a direct influence ontheir mental image of the university's services and making loyalty in them in regards to theuniversity. In addition, the effect of mental image of services and the students' loyalty in relationto the university is direct and meaningful.

78www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TABLE 2- TEST RESULTS OF THE RESEARCH'S ASSUMPTIONSTest resultT statisticalvaluePath directionAssumptionDeclarationaccepted5.93effect of understood quality onsatisfaction1stassumptionDeclarationaccepted7.14effect of understood value onsatisfaction2ndassumptionDeclarationdenied0.99effect of expectations onunderstood value3rdassumptionDeclarationaccepted11.73effect of understood quality onunderstood value4thassumptionDeclarationaccepted17.21effect of satisfaction on serviceimage5thassumptionDeclarationaccepted5.19effect of satisfaction on loyalty6thassumptionDeclarationaccepted13.29effect of device image on loyalty7thassumptionDeclarationaccepted5.86Effect of quality via value onsatisfaction8thassumptionDeclaration denied0.98Effect of expectations via value onsatisfaction9thassumptionRESULTS AND DISCUSSIONUnderstood quality is one of the factors with a positive effect on students' satisfaction. Thequality understood by students about welfare facilities, educational services, professors, staffs,educational environments, etc. has a direct effect on their satisfaction of the university.On the desirable level, understood quality make satisfaction in students and the desirable level ofsatisfaction makes a positive thought in the students about the university followed by theprobability of making loyalty in the student in regards to the university which causes that he/shewould prefer the university to other universities and also suggest it to others or even decide tocontinue education on higher levels in the same university which in turn would have more longtermadvantages.

79www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/In addition, it can be declared that another dimension that has a positive effect on students'satisfaction is the understood value. The high level of the understood value by the student inregards to the services presented by the university and the major would affect satisfaction more iftuition and expenses paid on this level are conformed to students' expectations which would leadto increase the probability of the understood value and finally satisfaction. In the case ofsatisfaction, it would increase the probability of making a positive mental image and finallyloyalty in the student. In addition there is the possibility that the students suggest studying on thislevel to others, while they decide to continue education on higher levels in the same universitywhich would bring about long-term advantages for the university being considered as acompetitive advantage.In general, it can mentions according to the results that most of the master's program students ofNeyshabur's Islamic Azad University are interested in their majors and most of them believe thattheir interest in their majors have increased since entering the university and theirscience/knowledge has improved after education. Most students are satisfied with the major theystudy in. they believe that their majors have a good future, marketplace and also social status. Itcan be declared that most students have a positive viewpoint about their majors and for most ofthem the major and master's program are valuable. They have never thought about refuse andmost of them tend to continue their education on PhD level. They believe that they would choosethe same major again if they have another opportunity for attending the entering test. In generalit can be concluded that most students are interested in their majors and are satisfied withchoosing this major and study in it. In addition, they feel loyal in relation to their majors. Ingeneral we can say that they have a positive mental image about their majors and master'sprogram.In addition it can be said based on the results that in general most responders are satisfied withthe professors of master's program. They believe that the professors of master's program have ahigh scientific level and qualified professors teach at university and access to them at universityis easy. They believe that professors encourage the students in regards to their majors/lessons.However they believe that their teaching qualities should be better. In addition, most respondersbelieve that the staffs of the university do not respond to the students' needs well in differentsegments and access to them is not possible when necessary.In addition, they are not satisfied with the welfare facilities of the university. They believe that ewelfare facilities and educational services of the university are not high quality which shows thepoorness of the university's educational services. They believe that the quality of seminars andconferences held in the university was weak. In addition, most responders believe that theexpenses they paid did not conform to their expectations, i.e. the university has not satisfied theexpectations of the students.This research confirms previous studies performed by Petruzzellis (2006), Douglas & Douglas(2006) and Gruber et al (2010) all of who found that the most important aspect of services at auniversity are related to the main services, i.e. professors and their teaching methods. In addition,this research confirms previous studies performed by Prise et.al (2003) and Douglas & Douglas(2006) that say it seems that welfare facilities of the university are parts of the services affectiveon students' satisfaction.

80www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/When a student registers at university, it is the quality of teaching and training that leads tohis/her satisfaction or non-satisfaction, since students accept the building, class and physicalfacilities of the university if not desirable for them provided that teaching, professors and staffsare on an acceptable level, because the above-mentioned elements are parts of the main serviceswhich may be presented in the best way by the university leading to the students' satisfaction. Inregards to improving service quality and as a result, students' satisfaction, the introduction ofstandards for different segments of the university is necessary.Today all universities of the world compete for obtaining/maintaining students whose purpose isto increase their satisfaction and decrease their non-satisfaction which would be possible only ifthe services presented by the university are on a standard level. It can be declared that studentsare the only judges who can judge whether this is reached or not. Therefore the investigation ofstudents' satisfaction must be done in regular periods and presenting the universities' servicesmust be set on that basis in order to lead satisfaction more than before.REFERENCES1. Arambewela Rodney & Hall John, (2009), ”An empirical model of international studentsatisfaction”, Asia pacific Journal of Marketing and Logistics, Vol. 21 No. 4, pp. 555-5692. Douglas Jacqueline & Douglas Alex & Barnes Barry, (2006), “Measuring studentsatisfaction at a UK university”, Quality Assurance in Education, Vol. 14 No.3, pp.251-2673. Douglas Jacqueline & McClelland Robert, (2008), “The development of a conceptualmodel of student satisfaction with their experience in higher education”, QualityAssurance in Education, Vol. 16 No. 1, pp.19-354. Gruber Thorsten & Fub Stefan & Voss Roediger, (2010), “ Examining studentsatisfaction with higher education services”, International Journal of Public sectorManagement, Vol. 23 No. 2, pp.105-1235. Maxwell Brown Robert, (2006), "Drivers of student satisfaction and student loyalty in anAustralian university setting" thesis is presented for the degree of Doctor of philosophy inthe graduate school of management at the university of Western Australia6. Price, I., Matzdorf, F., Smith, L. and Agahi, H. (2003), “The impact of facilities onstudent choice of university”, Facilities, Vol. 21 No. 10, pp. 212-22.7. Petruzzellis Luca & D’Uggento Angela Maria & Romanazzi Salvatore, (2006), “StudentSatisfaction and quality of service in Italia universities”, Managing Service Quality, Vol.16, No. 4, pp 349-3648. Sahney, S.D.K.Banwet & S. Karunes (2006), " An Integrated Framework for Quality inEducation: Application of Quality Function Deployment, Interpretive StructuralModeling and Path Analysis "Total Quality Management, Vol. 17, No.2.

81www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/A STUDY ON TECHNICAL ANALYSIS OF DERIVATIVE STOCKFUTURES AND THE ROLE FOR DEBT MARKET DERIVATIVES INDEBT MARKET DEVELOPMENT IN INDIAABSTRACTNENAVATH SREENU**Research Scholar,School of Management Studies,University of Hyderabad.This research paper attempts to collect literature from various sources in on attempt to answerthree pertinent questions related to the derivatives growth and model in Indian. This paperexamine the analyzes recent trends in derivate in emerging markets, institutional. Obstacles tomore diversified and adequate funding sources for the derivative market, and the vulnerabilitiesassociated with the currently available sources. The main trends in emerging markets derivativeinclude an increase in derivative and stagnation or a decline in bank lending and equity issues.As a result, in part, of a series of policy measures, derivative have become a relevant source offunding in some Indian market, the paper also briefly reports on major changes in the financingof derivative market growth in India and considers its implications for the extant theories of law,finance and corporate governance. And analyzes the potential limits of organizational growth inderivative market and explores the implications of integration and diversification for antitrustpolicy.KEYWORDS: derivative, finance, market industries and growth.______________________________________________________________________________INTRODUCTIONAs Indian securities markets continue to evolve, market participants, investors and regulators arelooking at different ways in which the risk management may be efficiently met through theintroduction of Derivative markets. Through the use of derivative products, it is possible topartially or fully transfer price risks by locking in asset prices. As instruments of riskmanagement, these generally do not influence the fluctuations in the underlying asset prices.Derivatives are risk management instruments, which derive their value form an underlying asset.The underlying asset can be bullion, index, share, bonds, currency, interest etc. banks, securitiesfirms, companies and investors to hedge risks, to gain access to cheaper money and to makeprofit, uses derivatives. Derivatives are likely to grow even at a faster rate in future.However, the advent of modern day derivative contracts is attributed to the need for farmers toprotect themselves from any decline in the price of their crops due to delayed monsoon, oroverproduction. The first „futures‟ contracts can be traced to the Yodoya rice market in Osaka,Japan around 1650. These were evidently standardized contracts, which made them much liketoday‟s futures. The Chicago Board of trade (CBOT), the largest derivative exchange in the

82www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/world, was established in 1848 where forward contracts on various commodities werestandardized around 1865. From then on, futures contracts have remained more or less in thesame form, as we know them today.DERIVATIVESDerivatives are defined as financial instruments whose value derived from the prices of one ormore other assets such as equity securities, fixed-income securities, foreign currencies, orcommodities. Derivative is also a kind of contract between two counter parties to exchangepayments linked to the prices of underlying assets.DEFINITIONIn the Indian context the Securities Contracts (Regulation) Act, 1956 (SC(R) A) defines“derivative” to include-1. A security derived from a debt instrument, share, loan whether secured or unsecured, riskinstrument or contract for differences or any other from of security.2. A contract which derives its value from the prices, or index or prices, of underlyingsecuritiesThe above definition conveys that Derivatives are financial products and derive its value fromthe underlying assets. Derivatives are derived from a matter financial contract called theunderlying.OBJECTIVESThe following are the major objectives of the study.1. To present a theoretical framework relating to derivative market in India.2. To observe the daily price movement of selected stock futures.3. To identify the buying and selling signals to the selected scripts.DEVELOPMENT OF DERIVATIVE MARKETS IN INDIADerivatives markets have been in existence in India in some form or other for a long time. In thearea of commodities, the Bombay Cotton Trade Association started futures trading in 1875 and,by the early 1900s India had one of the world‟s largest futures industry. In 1952 the governmentbanned cash settlement and options trading and derivatives trading shifted to informal forwardsmarkets. In recent years, government policy has changed, allowing for an increased role formarket-based pricing and less suspicion of derivatives trading. The ban on futures trading ofmany commodities was lifted starting in the early 2000s, and national electronic commodityexchanges were created. In the equity markets, a system of trading called “badla” involving someelements of forwards trading had been in existence for decades. However, the system led to anumber of undesirable practices and it was prohibited off and on till the Securities and Exchange

83www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Board of India (SEBI) banned it for good in 2001. A series of reforms of the stock marketbetween 1993 and 1996 paved the way for the development of exchange-traded equityderivatives markets in India. In 1993, the government created the NSE in collaboration withstate-owned financial institutions. NSE improved the efficiency and transparency of the stockmarkets by offering a fully automated screen-based trading system and real-time pricedissemination. In 1995, a prohibition on trading options was lifted. In 1996, the NSE sent aproposal to SEBI for listing exchange-traded derivatives. The report of the L. C. GuptaCommittee, set up by SEBI, recommended a phased introduction of derivative products, and bilevelregulation (i.e., self-regulation by exchanges with SEBI providing a supervisory andadvisory role). Another report, by the J. R. Varma Committee in 1998, worked out variousoperational details such as the margining systems. In 1999, the Securities Contracts (Regulation)Act of 1956, or SC(R) A, was amended so that derivatives could be declared “securities.” Thisallowed the regulatory framework for trading securities to be extended to derivatives. The Actconsiders derivatives to be legal and valid, but only if they are traded on exchanges. Finally, a30-year ban on forward trading was also lifted in 1999. The economic liberalization of the earlynineties facilitated the introduction of derivatives based on interest rates and foreign exchange. Asystem of market-determined exchange rates was adopted by India in March 1993. In August1994, the rupee was made fully convertible on current account. These reforms allowed increasedintegration between domestic and international markets, and created a need to manage currencyrisk. Figure 1 shows how the volatility of the exchange rate between the Indian Rupee and theU.S. dollar has increased since 1991.7 the easing of various restrictions on the free movement ofinterest rates resulted in the need to manage interest rate risk.DERIVATIVES INSTRUMENTS TRADED IN INDIAIn the exchange-traded market, the biggest success story has been derivatives on equity products.Index futures were introduced in June 2000, followed by index options in June 2001, and optionsand futures on individual securities in July 2001 and November 2001, respectively. As of 2005,the NSE trades futures and options on 118 individual stocks and3 stock indices. All these derivative contracts are settled by cash payment and do not involvephysical delivery of the underlying product (which may be costly). Derivatives on stock indexesand individual stocks have grown rapidly since inception. In particular, single stock futures havebecome hugely popular; accounting for about half of NSE‟s traded value in October 2005. Infact, NSE has the highest volume (i.e. number of contracts traded) in the single stock futuresglobally, enabling it to rank 16 among world exchanges in the first half of 2005. Single stockoptions are less popular than futures. Index futures are increasingly popular, and accounted forclose to 40% of traded value in October 2005. The growth in volume of futures and options onthe Nifty index, and shows that index futures have grown more strongly than index options NSElaunched interest rate futures in June 2003 but, in contrast to equity derivatives, there has beenlittle trading in them. One problem with these instruments was faulty contract specifications,resulting in the underlying interest rate deviating erratically from the reference rate used bymarket participants. Institutional investors have preferred to trade in the OTC markets, whereinstruments such as interest rate swaps and forward rate agreements are thriving. As interest ratesin India have fallen, companies have swapped their fixed rate borrowings into floating rates to

84www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/reduce funding costs. Activity in OTC markets dwarfs that of the entire exchange-tradedmarkets, with daily value of trading estimated to be Rs. 30 billion in 2004INSTRUMENTS AVAILABLE IN INDIAFinancial derivative instruments: The National stock Exchange (NSE) has the followingderivative products:Products Index Futures Index Options Futures onIndividualSecuritiesOptionsIndividualSecuritiesonUnderlyingInstrumentS&P CNX Nifty S&P CNX Nifty 30 securitiesstipulated bySEBI30 securitiesstipulated bySEBIType European AmericanTrading Cycle Maximum of 3-Month tradingcycle.Same as indexfuturesSame as indexfuturesSame as indexfuturesAt any point intime,there will be 3contracts available:1) near month,2) mid month &3) far monthdurationExpiry DayLast Thursday oftheexpiry monthSame as indexfuturesSame as indexfuturesSame as indexfuturesContract SizePermitted lot sizeisSame as index As stipulated by As stipulated by

85www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/200 & multiplesfuturesNSE (not lessNSE (not lessthereofthan Rs.2 lacs)than Rs.2 lacs)Price Steps Re.0.05 Re.0.05Base Price-First day oftradingpreviousclosingNifty valuedayTheoretical valueof the optionscontract arrived atprevious dayclosing value ofunderlyingSame as Indexoptionsbased on Black-securityScholes modelBase Price-Daily settlementdaily close priceDaily settlementSame as IndexSubsequentpricepriceoptionsPrice Bands Operating rangesarekept at + 10 %Operating rangesfor are kept at99% of the baseOperatingranges are keptat + 20 %Operatingranges for arekept at 99% ofpricethe base priceQuantityFreeze20,000 units orgreater20,000 units orgreaterLower of 1% ofmarket wideSame asindividualposition limitfuturesstipulated foropen positionsor Rs.5 croresBSE also offers similar products in the derivatives segment.DERIVATIVES USERS IN INDIAThe use of derivatives varies by type of institution. Financial institutions, such as banks, haveassets and liabilities of different maturities and in different currencies, and are exposed todifferent risks of default from their borrowers. Thus, they are likely to use derivatives on interestrates and currencies, and derivatives to manage credit risk. Non-financial institutions are

86www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/regulated differently from financial institutions, and this affects their incentives to usederivatives. Indian insurance regulators, for example, are yet to issue guidelines relating to theuse of derivatives by insurance companies. In India, financial institutions have not been heavyusers of exchange-traded derivatives so far, with their contribution to total value of NSE tradesbeing less than 8% in October 2005. However, market insiders feel that this may be changing, asindicated by the growing share of index derivatives (which are used more by institutions than byretail investors). In contrast to the exchange-traded markets, domestic financial institutions andmutual funds have shown great interest in OTC fixed income instruments. Transactions betweenbanks dominate the market for interest rate derivatives, while state-owned banks remain a smallpresence (Chitale, 2003). Corporations are active in the currency forwards and swaps markets,buying these instruments from banks. Why do institutions not participate to a greater extent inderivatives markets? Some institutions such as banks and mutual funds are only allowed to usederivatives to hedge their existing positions in the spot market, or to rebalance their existingportfolios. Since banks have little exposure to equity markets due to banking regulations, theyhave little incentive to trade equity derivatives. Foreign investors must register as foreigninstitutional investors (FII) to trade exchange-traded derivatives, and be subject to position limitsas specified by SEBI. Alternatively, they can incorporate locally as a broker-dealer. FIIs have asmall but increasing presence in the equity derivatives markets. They have no incentive to tradeinterest rate derivatives since they have little investments in the domestic bond markets (Chitale,2003). It is possible that unregistered foreign investors and hedge funds trade indirectly, using alocal proprietary trader as a front (Lee, 2004).THE NEED FOR A DERIVATIVES MARKETThe derivatives market performs a number of economic functions:1. They help in transferring risks from risk averse people to risk oriented people2. They help in the discovery of future as well as current prices3. They catalyze entrepreneurial activity4. They increase the volume traded in markets because of participation of risk averse peoplein greater numbers5. They increase savings and investment in the long runTHE PARTICIPANTS IN A DERIVATIVES MARKET1. Hedgers use futures or options markets to reduce or eliminate the risk associated with priceof an asset.2. Speculators use futures and options contracts to get extra leverage in betting on futuremovements in the price of an asset. They can increase both the potential gains and potentiallosses by usage of derivatives in a speculative venture.

87www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/3. Arbitrageurs are in business to take advantage of a discrepancy between prices in twodifferent markets. If, for example, they see the futures price of an asset getting out of linewith the cash price, they will take offsetting positions in the two markets to lock in a profit.TYPES OF DERIVATIVES1. FORWARDS: A forward contract is a customized contract between two entities, wheresettlement takes place on a specific date in the future at today‟s pre-agreed price.2. FUTURES: A futures contract is an agreement between two parties to buy or sell anasset at a certain time in the future at a certain price. Futures contracts are special types offorward contracts in the sense that the former are standardized exchange-traded contracts3. OPTIONS: Options are of two types - calls and puts. Calls give the buyer the right butnot the obligation to buy a given quantity of the underlying asset, at a given price on orbefore a given future date. Puts give the buyer the right, but not the obligation to sell agiven quantity of the underlying asset at a given price on or before a given date.4. WARRANts: Options generally have lives of upto one year, the majority of optionstraded on options exchanges having a maximum maturity of nine months. Longer-datedoptions are called warrants and are generally traded over-the-counter.5. LEAPS: The acronym LEAPS means Long-Term Equity Anticipation Securities. Theseare options having a maturity of upto three years.6. BASKETS: Basket options are options on portfolios of underlying assets. Theunderlying asset is usually a moving average or a basket of assets. Equity index optionsare a form of Basket options.7. SWAPS: Swaps are private agreements between two parties to exchange cash flows inthe future according to a prearranged formula. They can be regarded as portfolios offorward contracts. The two commonly used swaps are: INTEREST RATE SWAPS: These entail swapping only the interest related cash flowsBetween the parties in the same currency. CURRENCY SWAPS: These entail swapping both principal and interest between theParties, with the cash flows in one direction being in a different currency than those Inthe opposite direction.8. SWAPTIONS: Swaptions are options to buy or sell a swap that will become operative at theExpiry of the options. Thus a swaption is an option on a forward swap. Rather than haveCalls and puts, the swaptions market has receiver swaptions and payer swaptions. A receiverswaption is an option to receive fixed and pay floating. A payer swaption is an Option to payfixed and receive floating.

88www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/FACTORS DRIVING THE GROWTH OF FINANCIAL DERIVATIVES1. Increased volatility in asset prices in financial markets,2. Increased integration of national financial markets with the international markets,3. Marked improvement in communication facilities and sharp decline in their costs,4. Development of more sophisticated risk management tools, providing economic agents awider choice of risk management strategies, and5. Innovations in the derivatives markets, which optimally combine the risks and returnsover a large number of financial assets leading to higher returns, reduced risk as well astransactions costs as compared to individual financial assets.FUNCTIONS OF DERIVATIVE MARKETThe following are the various functions that are performed by the derivatives markets. They are: Price in an organized derivatives market reflects the perception of market participationsabout the futures and let the prices of underlying to the perceived future level. Derivatives market helps to transfer risks from those who have them but may not likethem to those who have an appetite for them. Derivative trading acts as a catalyst for new entrepreneurial activity. Derivatives markets help increase savings and investment in the long run.THE ECONOMIC ROLE OF DERIVATIVESDerivative markets provide three essential economic functions:Risk managementPrice discoveryTransactional efficiencyRISK MANAGEMENTThe principal benefit of the Derivative market is that it provides the opportunity for riskmanagement through Hedging.

89www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/RISKS INVOLVED IN DERIVATIVESRisk can be defined as “The possibility or probability of loss”. Derivatives are used toseparate risks from traditional instruments and transfer these risks. The fundamental risksinvolved in derivatives business includes following:CREDIT RISKThis is the risk of a counterpart to perform its obligations as per the contract. Also known asdefault or counterpart risk, it differs with different instruments.MARKET RISKMarket risk is a risk of financial loss as a result of adverse movements of prices of theunderlying asset.LIQUIDITY RISKThe inability of a firm to arrange a transaction at prevailing market prices is termed asliquidity risk.Related to liquidity of separate products.Related to the funding of activities of the firm including derivatives.LEGAL RISKDerivatives cut a cross judicial boundaries therefore the legal aspects Associated with thedeal should be looked into carefully.Risk management/Hedging strategies can be broadly grouped into three categories:1. Inventory hedging to protect the value of existing portfolio of assets.2. Anticipatory hedging to sell/buy derivatives especially forwards and futures instead ofthe anticipated inflows (assets)/ outflows (liabilities). A classic example is that ofexporters and importers who sells/buys currency futures/options.3. Return enhancement hedge using derivatives to create synthetic securities, which miniccash assets.PRICE DISCOVERYThe second major function of derivative market is price discovery. This is a process ofproviding equilibrium prices that reflect current and prospective demands on current andprospective supplies, and making these prices visible to all.

90www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TRANSACTIONAL EFFICIENCYDerivative markets allow institution to transact more efficiently than otherwise. They reduce thedirect cost of transacting in cash/financial markets are also provided, through clearing houses, anefficient mechanism to deal with counter party risk.INTRODUCTION TO FUTURESA Futures contract is an agreement between two parties to buy or sell an asset at a certain time inthe future at a certain price. Future markets were designed to solve the problems that exist inforward markets. But unlike forward contracts, the futures contracts ate standardized andexchange traded. To facilitate liquidity in the futures contracts, the exchange specifies certainstandard features of the contract. It is a standardized contract with standard underlyinginstrument, a standard quantity and quality of the underlying instrument that can be delivered, (orwhich can be used for reference purposes in settlement) and a standard timing of such settlement.The standardized items in a futures contract are:o Quantity of the underlyingo Quality of the underlyingo Date and Month of Deliveryo The units of Price quotations and Minimum price changeso Location of settlementTYPES OF FUTURESOn the basis of the underlying asset they derive, the futures are divided into following types. STOCK FUTURESThe stock futures are the futures that have the underlying asset as the individual securities.The settlement of the stock futures is of cash settlement and the settlement price of the futureis the closing price of the underlying security. INDEX FUTURESIndex futures are the futures, which have the underlying asset as an Index. The Indexfutures are also cash settled. The settlement price of the Index futures shall be the closingvalue of the underlying index on the expiry date of the contract. COMMODITY FUTURESIn this case, the underlying asset is a commodity. It can be an agricultural commodity likewheat corn, or even a precious asset like gold, silver etc.

91www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/ FINANCIAL FUTURESIn this case, the underlying assets are financial instruments like money market paper,Treasury Bills, notes, bonds etc. CURRENCY FUTURESCurrency futures are those in which the underlying assets are major convertiblecurrencies like the U.S. dollar, the Pound Sterling, the Euro and the Yen etc.MARGINSMargins are the deposits, which reduce counter party risk, arise in a futures contract.These margins are collected in order to eliminate the counter party risk. There are three types ofmargin.INITIAL MARGINSWhenever a futures contract is signed, both buyer and seller are required to post initialmargin. Both buyer and seller are required to make security deposits that are intended toguarantee that they will infact be able to fulfill their obligation. These deposits ate Initial marginsand they are often referred as performance as performance margins. The amount of margin isroughly 5% to 15% of total purchase price of futures contract.MARKING OF MARKET MARGINThe process of adjusting the equity in an investor‟s account in order to reflect the changein the settlement price of futures contract is known as MTM Margin.MAINTENANCE MARGISThe investor must keep the futures account equity equal to or grater than certainpercentage pf the amount deposited as Initial Margin. If the equity goes less than that percentageof Initial margin, then the investor receives a call for an additional deposit of cash known asMaintenance Margin to bring the equity up to the Initial margin.PRICING THE FUTURESThe fair value of the futures contract is derived from a model known as the Cost of Carry model.This model gives the fair value of the futures contract.COST OF CARRY MODELF=S (1+r-q) tWhereF – Futures Price

92www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/S – Spot price of the UnderlyingR – Cost of Financingq – Expected Dividend Yieldt – Holding Period.THE ROLE FOR DEBT MARKET DERIVATIVES IN DEBT MARKETDEVELOPMENTThe traditional focus in debt market development has been to obtain a liquid market for interestrate products which yields the rate of time preference for various maturities. Often it is felt thatthere is an innate sequencing of market development, where countries should embark upon debtderivatives after core issues of the spot market have been properly addressed. A liquid spotmarket for interest rates is clearly valuable in the establishment of interest rate derivatives.However, interest rate derivatives provide important feedback mechanisms through whichmarket efficiency can be obtained in the spot interest rate market itself: Derivatives trading canlead to improvements in the liquidity of the spot market since interest rate derivatives improvethe ability of economic agents to reduce their vulnerability to interest rate volatility. Manydeveloping countries have started out on financial sector reforms in an environment with fixedinterest rates and a repressed financial sector. Moving away from this regime towards greaterinterest rate flexibility imposes costs upon economic agents who are used to fixed interest rates.From a political economy standpoint, it is useful to develop institutional mechanisms forderivatives trading on a spot price before undertaking economic reforms which would increasethe volatility of that price. Interest rate derivatives reduce the political cost of moving away froma repressed interest rate market.The spot market for interest rates, in numerous countries, is notorious for non-transparency,barriers to market access, and hence poor liquidity and market efficiency. The entrenched natureof intermediation and regulation on the spot market often make it difficult for policy makers tomake progress in terms of making improvements on it. In this situation, policy makers generallyhave an opportunity to start afresh on interest rate derivatives, in terms of moving towards muchmore transparent markets, opening up access to the market to all economic agents, and obtainingliquidity and market efficiency. It is often possible to obtain a situation where price discovery isfocused upon the derivative market, which would then drive prices on the spot market. Tradingin interest rate derivatives market enhances liquidity of the interest rate spot market through threechannels:1. Arbitrage between spot and derivative market generates a new order flow for the spotmarket.2. Access to derivatives, which can be used in hedging systematic risk factors, reduces theeconomic cost of holding undiversified inventories in spot market trading and henceimproves the supply of liquidity on the spot market.

93www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/3. Access to leveraged speculation on interest rates on the interest rate derivative marketsincreases the supply of research and forecasting about interest rates. This reducesuncertainty about future interest rates, and helps to narrows spreads on the spot market.METHODOLOGYThe Methodology of the study consists ofSource of data collectionStatistical toolData AnalysisSOURCE OF DATA COLLECTIONThe data had been collected through Primary and Secondary sources.PRIMARY SOURCESThe data had been collected through project guide and staff of the Company.SECONDARY SOURCESThe data had been collected through Books, Journals and Websites.STATISTICAL TOOLThe data collected from the above sources have been analysed through „Moving AverageMethod‟, which is one of the popular statistical tool in technical analysis is considered for thestudy. To examine the underlying trend by smoothing of the data and to provide the Buy and Sellsignals to the selected stocks this method serves the best. Moving averages are used along withthe price of the scrip. The stock price may intersect the moving average at a particular point.Downward penetration of the rising average indicates the possibility of a further fall and gives„sell‟ signal. Upward penetration of the falling average would indicate the possibility of thefurther rise and gives the „buy‟ signal.SIGNIFICANCE OF THE STUDYThe present study on Derivative futures is very much appreciable on the grounds that it givesdeep insights about the stock futures market. It would be essential for the perfect way of tradingin stock futures. The study elucidates the role of derivative futures in Indian financial markets.Studies of this type are more useful to academicians and scholars to make further insights intothe various aspects of derivative futures in similar organizations. An investor can choose theright underlying for investment, which is risk free. The study included the changes in daily pricemovement and buying and selling signals to the selected stocks. These helps the investor to takeright decisions regarding trading in derivative stock futures

94www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/LIMITATIONS OF THE STUDY1. The study is limited by time and cost factors.2. The sample size chosen is limited to stock futures of ten underlying scrip‟s.3. The limited period of study may not be detailed and full-fledged in all aspects.GROWTH OF DERIVATIVES MARKET IN INDIAEquity derivatives market in India has registered an "explosive growth" and is expected tocontinue the same in the years to come. Introduced in 2000, financial derivatives market in Indiahas shown a remarkable growth both in terms of volumes and numbers of traded contracts. NSEalone accounts for 99 percent of the derivatives trading in Indian markets. The introduction ofderivatives has been well received by stock market players. Trading in derivatives gainedpopularity soon after its introduction. In due course, the turnover of the NSE derivatives marketexceeded the turnover of the NSE cash market. For example, in 2008, the value of the NSEderivatives markets was Rs. 130, 90,477.75 Cr. whereas the value of the NSE cash markets wasonly Rs. 3,551,038 C. If we compare the trading figures of NSE and BSE, performance of BSE isnot encouraging both in terms of volumes and numbers of contracts traded in all productcategories. Among all the products traded on NSE in F& O segment, single stock futures alsoknown as equity futures, are most popular in terms of volumes and number of contract traded,followed by index futures with turnover shares of 52 percent and 31 percent, respectively. Incase of BSE, index futures outperform stock futures.PRODUCT WISE TURNOVER OF F&O AT NSE FROM 2000-2008Stock future Index future Stock option Index option52 31 13 4NSE DERIVATIVES SEGMENT TURNOVERRS IN CRYearsIndexfutureStockfutureIndexoptionStockoptionInterest ratefutureTotalAveragedailyturnover20102009200820072583617.923820667.272558863.557548563.232358916.901362110.88149498.40359136.550007650896.8013090477.75735624246938.0252153.30

95www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/20062539574383096779190619379504824174295432005151375527916973384691802530254698219220200477214714840561219431688362022130610101072003554446130593952816217207043986283882002439522865339246100131010192617522148351515376525163---23654102365---------11Source: Complied from NSE websiteNSE CASH & DERIVATIVES SEGMENT TURNOVERRS IN CRYear Cash Segment Derivatives SegmentYear cash segment derivate segment2010-09 3,551,038 13090477.752009-08 1,945,285 73562422008-07 1,569,556 48241742007-06 1,140,071 25469822006-05 1,099,535 21306102005-04 617,989 4398622004-03 513,167 1019262003-02 1,339,510 2365Source: Complied From NSE Website

96www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/AVERAGE DAILY TRANSACTION AT NSE IN DERIVATIVES AND CASHSEGMENTRS IN CRYears Derivate segment Cash segment2010-09 52153.30 14.1482009-08 29543 7,8122008-07 19220 6,2532007-06 10107 45062006-05 8388 4,3282005-04 1752 2,4622004-03 410 2,0782003- 02 11 5 , 3 3 7Source: Complied from NSE website and NSE fact book 2010STATUS OF INDIAN DERIVATIVES MARKET VIS-A VIS GLOBAL DERIVATIVESMARKETThe derivatives segment has expanded in the recent years in a substantial way both globally aswell as in the Indian capital market. The figures revealed by Futures Industry Association (FIA)Annual Volume Survey and reported here under bring out the fact that more than 15 billionfutures and options contracts were traded during 2009 on the 54 important exchanges that reportto the FIA, reflecting a remarkable increase of 28% from the previous year. Looking back at thelast four years, it can be worked out that these figures reflect that the growth rate was 29 % in2008, 19% in 2008, 12% in 2007, and 9% in 2006. From the same table it also follows that of thetotal volume traded globally over the period 2000-07, the US exchanges alone constituted asmuch as 35 percent share. presents the break down of derivatives volume by region and it isclearly evident that after North America with a share of about 40 percent, Asia-Pacific occupiesthe second slot with a share of 28 percent and Europe falls at the third place with its contributionof 24 percent. If we compare the turnover-wise performance of the derivatives segments over thelast five years, it may be noticed from an inspection of the relevant columns. the Indian segmenthas expanded phenomenally as compared to the global segment. The turnover of the NSEderivatives segment in 2006-08 stood at Rs. 2130610 crores. It grew to an astonishing level ofRs.13090477 crores during the year 2007-09, displaying a more than six-time increase over the

97www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/five year period. In marked contrast, at the global level the increase was less than even two-fold:the turnover was $ 8163 million in 2003 and $ 15187 million in 2007.GLOBAL TREND IN TURNOVER OF DERIVATIVES TRADINGYear US exchange Non-US exchange Global2002 1313.65 1675.80 2989.452003 1578.62 2768.70 4347.322004 1844.90 4372.38 6217.282005 2172.52 5990.22 8162.542006 2795.21 6069.50 8864.712007 3525.00 6448.67 9973.672008 4616.73 7245.48 11862.212009 6137.20 9049.47 15186.672002-09 23983 (35.48) 43620 (64.52) 67604 (100)CONCLUSIONInnovation of derivatives have redefined and revolutionised the landscape of financial industryacross the world and derivatives have earned a well deserved and extremely significant placeamong all the financial products. Derivatives are risk management tool that help in effectivemanagement of risk by various stakeholders. Derivatives provide an opportunity to transfer risk,from the one who wish to avoid it; to one, who wish to accept it. India‟s experience with thelaunch of equity derivatives market has been extremely encouraging and successful. Thederivatives turnover on the NSE has surpassed the equity market turnover. Significantly, itsgrowth in the recent years has surpassed the growth of its counterpart globally.REFERENCES1. Chitale, Rajendra P., 2003, Use of Derivatives by India‟s Institutional Investors: Issuesand Impediments, in Susan Thomas (ed.), Derivatives Markets in India, Tata McGraw-Hill Publishing Company Limited, New Delhi, India.2. FitchRatings, 2004, Fixed Income Derivatives---A Survey of the Indian Market,www.fitchratings.com www.fitchratings.com

98www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/3. Gambhir, Neeraj and Manoj Goel, 2003, Foreign Exchange Derivatives Market in India---Status and Prospects, Susan Thomas (ed.), Derivatives Markets in India, Tata McGraw-Hill Publishing Company Limited, New Delhi, India.4. Gorham, Michael, Thomas, Susan and Ajay Shah, 2005, India: The Crouching Tiger,Futures Industry.5. Lee, Rupert, 2004, Seeing Double, FOW. ISMR, Indian Securities Market: A Review,2004, National Stock Exchange of India Limited, Mumbai, India.6. Jogani, Ashok and Kshama Fernandes, 2003, Arbitrage in India: Past, Present and Future,in Susan Thomas (ed.), Derivatives Markets in India, Tata McGraw-Hill PublishingCompany Limited, New Delhi, India.7. Nair, C. G. K., 2004, Commodity Futures Markets in India: Ready for “Take Off”?National Stock Exchange of India Limited, Mumbai, India8. „Trading statistics of Derivatives segment at BSE‟, available at: www.bseindia.com(accessed on May 30,2009)9. Bodla, B. S. and Jindal, K. (2008), „Equity Derivatives in India: Growth Pattern andTrading Volume Effects‟, The Icfai Journal of Derivatives Markets, Vol. V, No. 1, pp.62-10. Harish, A. S. (2001) „Potential of Derivatives Market in India‟, The ICFAI Journal ofApplied Finance, Vol. 7, No.5, pp 1-24http://www.indiainfoline.com/news/showleader.asp?lmn=1&storyId=34411. National Stock Exchange website Business Line July 27,2002 Bombay Stock Exchangewebsite DSP Merrill Lynch website 'Options, Futures, And Other /derivatives' - John C.Hull12. Berkowitz, J. (1999), „Dealer polling with noisy reporting of interest rates‟, Journal ofFixed Income 9, 47–54.13. Black, F. (1971), „Towards a fully automated exchange, Part I and II‟, Financial AnalystsJournal 27.14. Bloomfield, R. & O‟Hara, M. (1999), „Market Transparency: Who wins and who loses?‟,RFS 12(1), 5–35.15. Cita, J. & Lien, D. (1992), „Constructing accurate cash settlement indices: The role ofindex specifications‟, Journal of Futures Markets 12(3), 339–360.16. Cita, J. & Lien, D. (1997), „Estimating cash settlement price: The bootstrap and otherestimators‟, Journal of Futures Markets 17(6), 617–632.

99www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/EMPIRICAL STUDY ON OPINIONS OF THE AGENTS ABOUT THESERVICE RENDERED BY LIC OF INDIAABSTRACTDR.J.ARUL SURESH*; DR.S.RAJA MOHAN***Assistant Professor,Department of Commerce,Loyola College,Chennai-34, India.**Professor,Alagappa Institute of Management,Alagappa University,Karaikudi, India.The Life Insurance Corporation of India is the largest state-owned life insurance companyin India, and also the country's largest investor. It is fully owned by the Government of India. Italso funds close to 24.6% of the Indian Government's expenses. It has assets estimated of 13.25trillion. It was founded in 1956 with the merger of 243 insurance companies and providentsocieties. The LIC of India is rendering more services to the respondents to promote theirmarketing activities like, „meet DO periodically‟, „time norms of all services‟, „complaints areconsidered without delay‟, „provide out of pocket expenses‟, „reasonable travelling expenses‟,„interest free vehicle advance‟, „free complimentary copy of Yogakshema‟, and so on. theresearcher have been applied multiple regression analysis to the level of satisfaction of theAgents.KEYWORDS: LIC services, Marketing , Agencyship, Guidelines.______________________________________________________________________________1.1 INTRODUCTIONThe LIC of India is rendering more services to the respondents to promote their marketingactivities like, „meet DO periodically‟, „time norms of all services‟, „complaints are consideredwithout delay‟, „provide out of pocket expenses‟, „reasonable travelling expenses‟, „interest freevehicle advance‟, „free complimentary copy of Yogakshema‟, and so on. The study unit of LICof India renders good services to the respondents. But all of them are not aware of these servicesequally. The awareness differs from place to place.1.2 METHODOLOGYThis study is an empirical research based on survey method. It is a blend of both descriptive andthe analytical methods of study. An interview schedule was prepared separately for finding outthe attitude of the agents towards the service rendered by LIC of India. This was helpful to knowthe marketing strategy of the LIC of India.The secondary data have been collected from books,journals newspapers and so on.

100www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/1.3 PRE TEST AND RELIABILITY TESTA pilot study was undergone by the researcher in order to identify the research problemand tools. Based on this, the researcher has decided to use structured interview schedules. With aview to identify the variable for constructions of the interview schedules, the researcher obtainedan in-depth review of previous studies. Moreover, discussions were held with the agents of LICof India, Madurai Division. In the light of the information gathered, the interview schedules wereconstructed for this study to collect data from the agents of LIC of India about their services.Thepre test was done to collect the primary data before the field work. This study was conductedamong 200 Agents with a time interval of 6 months by using random sample technique. The pretest brought to light a few changes and the changes were incorporated. The need for informationabout the respondents was felt and hence included in the final questionnaire. The Corn Bach‟sAlpha test was administered to the sample to find out reliability of the questionnaire. Theresponses were scored and these sets of scores of each test were treated through correlation forworking out the reliability co-efficient. The reliability is statistically significant. Those arefurnished in the following Table 1.1.TABLE 1.1THE RELIABILITY OF QUESTIONNAIRESSl.Number Number of AlphaType of QuestionnaireNo. of items Samples ValuePercentage1 Agents 152 50 0.8651 86.511.4 SAMPLE DESIGNAs per the instructions given by IRDA, the LIC of India opened branches in rural andsemi urban and urban areas. The LIC of India Madurai Division is located in six districts. Thereare about 25 branches in this division.The researcher has selected all these branches under census method for this study. Thereare about 200 agents were selected at random in order to obtain their opinion of the serviceoffered by LIC of India. That is, 8 agents from each branch were selected.1.5 DATA PROCESSINGAfter completing the data collection, a thorough check was made. The whole interviewschedule was processed for coding the data in a computer. Then, the cross tables were preparedby using experts and appropriate tools were framed to get good results.

101www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/1.6 FRAMEWORK OF ANALYSISIn order to know the difference in their satisfaction level, the Multiple Regression hasbeen applied.The extent of satisfaction level of the customers on the utilisation of leisure services andthe factors that affect the various predictor variables (independent variables) of this study areexplained by Multiple Regression Analysis. Totally nine independent variables were identifiedfor regression analysis. It is a multivarient technique. It explains the inter-relationship betweenthe total set off observed variables. Totally 13 independent variable were identified forregression analysis. Multiple regressions are mainly based on equation wherein the predictorvariables coefficients are found out. The general Multiple Liner Regression equation is.Y = a 0 + a 1 x 1 + a 2 x 2 + ……………….. + a n x nWhere Y is the dependent variablesa 0 is constanta 1 ,a 2 ……….a n are the regression coefficients for the independent variablesx 1, x 2 ………x n respectively.The analysis starts with estimating the coefficient and the constants (a 0 ). Among theavailable methods of analysis of multiple regressions, one method used here is stepwiseregression method. Initially the equation starts with no predictor variables; then, at first step, thevariable with maximum correlation with the dependent variable is selected based on a selectioncriterion. Here, the variables whose F-value is 10.592 and the associated probability for F-test isless than or equal to 0.05 is considered for inclusion in the equation. Also once the variable isincluded in equation then it is again considered for removal from the equation to avoid multicollinearityproblem. Here the removal criterion is F-value less than 1.88 associated with aprobability of 0.05. This level is maintained so that all the variables included in the equation arenot considered again for removal.Once the variable enters and remains in the equation, the next variable with highestpositive/negative partial correlation is selected and considered for entry and, if satisfied, it is thenadded to the equation. Now the variables so far included in the equation are checked forremoval. This process continues until all the variables satisfying their inclusion and removal arefit in the equation.1.7 VARIABLES SELECTED FOR THE ANALYSIS ARE1. Age2. Gender3. Educational qualification

102www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/4. Annual income5. Number of years dealing with LIC6. Undergone Training7. Average amount of policy taken by policyholders8. Overall score on Physical facilities9. Want LIC to be privatized10. Overall score on guidelines11. Overall score on agencyship12. Overall score on job satisfaction13. Problem faced by RespondentsThe following Table 6.23 gives the results of stepwise regression analysis, giving detailsof multiple R, R 2 step inclusion of variables in the regression equation. However, for theproblem under study all the variables identified have been included in the equation.TABLE 1.1REGRESSION ANALYSIS OF RESPONDENTSSl. No B Std. Error t Sig.(Constant) 11.809 7.1161. Age -.942 .668 -1.410 Ns2. Gender (1=Male, 0=Female) -2.178 1.863 -1.170 Ns3. Educational qualification -.389 .724 -.537 Ns4. Annual income 8.160E-02 .592 .138 Ns5. How long you have been dealing LIC ofIndia-.341 .625 -.545 Ns

103www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/6. Attended Training (1=Yes, 0=No) -2.300 1.614 -1.425 Ns7. Average amount of policy taken bypolicy holders1.010 .782 1.291 Ns8. Overall score on Physical facilities .288 .067 4.316 **9. Want LIC privatized (1=Yes, 0=No) 1.960 1.591 1.232 Ns10. Overall score on guidelines .381 .169 2.254 **11. Overall score on agencyship .319 .102 3.137 **12. Overall score on job satisfaction .164 .090 1.820 Ns13. Did you face problems (1=Yes, 0=No) -1.665 1.285 -1.296 Ns**Significant at 5% levelNS. Not Significant.R R Square F Sig..667 .445 10.592 **Table 1.1 gives the details of variables included in the equation and correspondingregression co-efficient. Simple correlation value of each predicator variable with the dependentvariables and partial correlation of each variable with the dependent variable is also presented.Partial correlation is another important statistics which tells us what is the correlation eachpredictor variable with that of the level of satisfaction in the utilisation of leisure service(dependent variable) in the equation is concerned, when the effect of remaining predictorvariables is held constant.In the same Table the column marked„t‟ and significant, represents the values of „t‟ –Test statistic and what level it is significant respectively for each regression coefficient. Theresults of multiple regression analysis show that age, gender, educational qualification, annualincome, number of years dealing with LIC of India, attended training, average amount of policytaken by policyholders, want LIC of India to be privatised, overall score on job satisfaction,problem faced by respondents and so on are not significant at 5% level, and overall score onphysical facilities, overall score on guidelines and overall score on agencyship are significant at5% level.

104www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/The R 2 value witnessed with 0.667, which indicates that the regression is well fit with 67per cent and the F value is 10.592 and it is significant at 5 % level.Using the regression coefficient, the regression equation evolved is as follows.The equation is = 11.809-.942 (Age)-2.178 (Gender)-.389 (Educational qualification)8.160E-02(Annual income)-.341 (Number of years dealing with LIC)-2.300 (Attended Training )1.010 (Average amount of policy taken by policyholders).288 (Overall score on Physical facilities)1.960 (Want LIC to be privatized).381 (Overall score on guidelines).319 (Overall score on agencyship).164 (Overall score on job satisfaction)-1.665 (Problem faced by Respondents)The equation suggests that the factors such as annual income, average amount of policytaken by policyholders, overall score on physical facilities, want LIC of India to be privatized,overall score on guidelines, overall score on agencyship, overall score on job satisfaction, arepositively correlated and at the same time it is noted that the factors such as age, gendereducational qualification, number of years dealing with LIC of India, attended training, problemfaced by respondents are negatively correlated with the level of satisfaction about servicerendered by LIC of India.1.8 FINDINGSThe researcher has used Multiple Regression analysis, which suggests the factors such as“annual income, average amount of policy taken by policyholders, overall score on physicalfacilities, demand that LIC of India to be privatised, overall score on guidelines, overall score onagencyship, overall score on job satisfaction”, are positively correlated and at the same time it isnoted that the factors such as age, gender, educational qualification, number of years dealing

105www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/with LIC, attended training , problem faced by respondents are negatively correlated with thelevel of satisfaction about service rendered by LIC of India.1.9 SUGGESTIONSThe life insurance corporation has to concentrate on the development of the agents, who are theprime and the principal promoters of the LIC of India polices at the grass root level to fit in thisglobal markets and challenge the world wide completion. Agency job can be made attractive tothe educated youth by giving job-option of becoming a development officer or a branch manageron the basis of their education along with a consistent achievement of the stipulated higherperformance.Appropriate and regular training and development programmes must be designed andimplemented intensively to stimulate the dormant agents who are just fulfilling the minimumrequirements. Special development programmes in the form of refresh course can be planned tostrengthen the relationship between the organisation and the agents to improve their attitudestowards the job and the organisation and the professional status. Moreover, steps can be taken toimpart the importance of marketing and persuade the agent to spend enough times in servicingthe old customers.The programme of sales promotion has to be modified to encourage the agents to sell allthe varieties of policies offered by the LIC in addition to the present system of the number ofpolicies sold and the quantum of the sum assured mobilised.1.10 CONCLUSIONLife Insurance Corporation is a service oriented industry. It is purely dependent onagents. LIC should provide quality of service to the Agents such as good commission, goodreward, easy process of loan, fastest process of document verification and so on that plays animportant role in motivating the agents. An agent is a primary source for procurement ofinsurance business and as such his role is the corner stone for building a solid edifice of LifeInsurance Corporation. To effect a good quality of life insurance sale, an agent must beequipped with technical aspects of insurance knowledge, must process analytical ability toanalyse human needs, must be abreast of up-to-date knowledge of merits and demerits of otherinstruments of investment available in the financial market and must be endowed with a burningdesire of social service and overall this must possess and develop an undeterred determination toservice as a life insurance salesman.REFERENCES1. L. Madhok, “Role of Agents/Intermediaries in Insurance Marketing”, The Insurance Times,March 1989, p.5.2. Ibid.3. E. Henry Garrets, Statistics in Psychology and Education, Longmans Green and Company,1955, p.325.

106www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/4. http://en.wikipedia.org5. Tripathi, Personnel Management and Industrial Relations, Sultan Chand and Sons. 2000.6. Mason Haire, Psychology in Management, McGraw Hill, New York, 1964.

107www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/COMPOSITE INDICATORS OF FINANCIAL COMPETITIVENESS:A CRITICAL ASSESSMENTABSTRACTDR.A.VIJAYAKUMAR**Associate Professor in Commerce,Erode Arts and Science College,Erode – 638009,Tamilnadu, India.Competitiveness is concerned with the ability of firms to perform better than rivals whereperformance is dependent on both financial and non-financial conditions of the firm. Thisstudy empirically examines the financial competitiveness in Indian automobile companies forthe period between 1996-97 to 2008-09. In order to analyse the overall financialcompetitiveness of the selected companies, 42 variables are considered under elevenindicators such as profitability, assets utilization, cost effectiveness, liquidity, working capitalefficiency, long-term solvency, market value, foreign trade, productivity performance ,valueaddedperformance and macro economic variables. Factor analysis has been applied toidentify the factors that are significantly contributing the financial competitiveness. Out of 42variables, 13 factors have been extracted and these thirteen factors put together explain76.122 per cent of the total variance.KEYWORDS: Financial Competitiveness, Profitability, Assets Utilisation,Cost Effectiveness, Liquidity, Solvency and Productivity.___________________________________________________________________________INTRODUCTIONThe Indian Industrial Sector has undergone fundamental regulatory changes in recent times asa consequence of the economic reforms program put together between 1988 and 1991. Indiamoved away from the control era towards the „open‟ economy model. The policy changes inthe automobile industry took place in two phase i.e. pre-liberalisation (total control andpartial de-control) and post-liberalisation periods. The automobile industry in India grewunder a highly regulated and protected economic environment over the period 1950 to 1985.The initial changes, introduced in 1985, eased the licensing requirements. Though thesemeasures represented a “domestic liberalisation” the policy environment continued beinggeared towards imposing trade and investment regulations, constraining the growth of bigbusiness houses and regulating exchange rates (Narayanan 2001) 1 . Liberalisation ofeconomic policies and outward orientation introduced since 1991 brought about a dramaticchange in this industry. Growth trends of key industry indicators such as industry volumes,export performance and domestic sales are improving every year with a steady rate. Domesticmanufacturers acting as a global hub for exports is also gaining acceptance. Domestic playersmaintain capacity utilization at a healthy level. Consolidation of the industry has gainedmomentum. Foreign automobile firms have arrived and are in queue. There is a long list offoreign companies that are forging alliances with their Indian counterparts. (Burange andShruthi Yamini 2008) 2

108www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/FINANCIAL COMPETITIVENESS OF FIRMSThe Oxford Dictionary of Economics defines the term competitiveness as “the ability tocompete in markets for goods or services”. Competitiveness can be observed from differentperspectives, through products, firms, industry and branches of the economy. At each level ofaggregation, there are different measures or indicators of competitiveness. Anothersignificant discussion on the concept of competitiveness of firms was published by ADB(2003) 3 . It states that competitiveness of firms can be defined as a firm‟s ability to surviveunder competition and being competitive implies succeeding in an environment where firmstry to stay ahead of each other by reducing prices, by increasing the quality of their currentproducts and services, and by creating new ones. A firm‟s competitiveness can thus beexamined as a function of various factors.As competitiveness is linked to a large number of variables, defining it is in itself a researchproblem. Keeping this in mind, an effort has been made to build up a competitiveness thatcan measure a firm‟s competitive position in the industry which it can sustain in medium tolong-run. In this part of analysis, an attempt has been made to bring out the competitiveflavour of the Indian automobile industry. Intense competition has gripped the industry inrecent years with major world players entering the market bringing better technology andexperience. Therefore the study on competitiveness of firms in the industry in domesticmarket, in the present state is interesting to examine.METHODOLOGYThe variables that compose the competitiveness for Indian automobile industry have beenidentified on the basis of factors related to competitiveness at the firm level, considering thespecific issues peculiar to the Indian automobile industry. Competitiveness is concerned withthe ability of firms to perform better than rivals, where performance is dependent on bothfinancial and non-financial conditions of the firm. For this purpose, profitability, assetsutilization, cost effectiveness, liquidity, working capital efficiency, long-term solvency,market value, foreign trade, productivity performance and value-added performance aregrouped under financial indicators and other indicators such as, sales and marketing strategy,consumer satisfaction, technological issues, human resources and growth variables aregrouped under non-financial indicators. However, non-financial indicators beyond the scopeof the study, an attempt has been made in this study to analysis the financial indicators whichhelp to measures the competitiveness of the firms selected for the study in Indian AutomobileIndustry. The sub-indicators which are used to construct the financial competitiveness of thefirm are listed in Table 2. All of these sub-indicators are grouped into ten main indicators thatclearly describe its components.Financial ratios are one of the most common tools of managerial decision making. Financialratios involve the comparison of various figures from the financial statements in order togain information about a company‟s performance. It is the interpretation, rather than thecalculations that makes financial ratios a useful tool for business managers. Ratios may serveas indicators, clues or red flags regarding noteworthy relationship between variables used tomeasure the firm‟s performance in terms of profitability, asset utilization, liquidity, leverage,market valuation etc.,There are basically two uses of financial ratio analysis: to track individual firm performanceovertime, and to make comparative judgments regarding firm performance. Firm

109www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/performance is evaluated using trend analysis- calculating individual ratios on a per-periodbasis, and tracking their values over time. This analysis can be used to spot trends thatmay be cause for concern, such as an average collection period for outstandingreceivables or a decline in the firm‟s liquidity status. In this role, ratios serve as a red flag fortroublesome issues or as benchmarks for performance measurement. Another common usageof ratios is to make relative performance comparisons. For example, comparing a firm‟sprofitability to that of a major competitor or observing how the firm stacks up versus industryaverages enables the user to form judgement concerning key areas such as profitability ormanagement effectiveness.SAMPLING DESIGNKeeping in view the scope of the study, it is decided to include all the companies underautomobile industry working before or from the year 1996-97 to 2008-09. There are 26companies operating in the Indian automobile industry. But, owing to several constraints suchas non-availability of financial statements or non-working of a company in a particular yearetc., it is compelled to restrict the number of sample companies to 20. The companies underautomobile industry are classified into three sectors namely; Commercial vehicles, Passengercars and Multi-utility vehicles and Two and three wheelers. For the purpose of the study allthe three sectors have been selected. It accounts for 73.23 per cent of the total companiesavailable in the Indian automobile industry. The selected 20 companies include 5 undercommercial vehicles, 6 under passenger cars and multi-utility vehicles and 9 under two andthree wheeler sectors. It is inferred that sample company represents 98.74 percentage ofmarket share in commercial vehicles, 89.76 percentage of market share in passenger cars andMulti-utility vehicles and 99.81 percentage of market share in two and three wheelers. Thus,the findings based on the occurrence of such representative sample may be presumed to betrue representative of automobile industry in the country.The study is mainly based on secondary data. The major source of data analysed andinterpreted in this study related to all those companies selected is collected from“PROWESS” database, which is the most reliable on the empowered corporate database ofCentre for Monitoring Indian Economy (CMIE). Besides prowess database, relevantsecondary data have also been collected from BSE Stock Exchange Official Directory, CMIEPublications, Annual Survey of Industry, Business newspapers, Reports on Currency andFinance, Libraries of various Research Institutions, through Internet etc.FINANCIAL COMPETITIVENESS – FACTOR ANALYSISIn order to analyse the overall financial competitiveness of the selected companies underthree sectors of Indian automobile industry. 42 variables are considered under elevenindicators. In order to draw conclusions on the overall financial competitiveness, a statisticaltechnique called Factor Analysis with Principal Component method is applied. Factoranalysis is used to reduce a set of „n‟ variables into another set of „K‟ (where K

110www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/The financial competitiveness of the selected companies of Indian automobile industryconcentrates on 11 sub-indicators namely profitability, assets utilization, cost effectiveness,liquidity, working capital efficiency, solvency, market values, export performance, valueadded, productivity and macro economic variables. For this purpose the profitability ratiosused for the analysis are Operating Profit Margin Ratio (OPMR), Net Profit Margin Ratio(NPMR), Return On Capital Employed (ROCE), Return On Total Assets (ROTA), andReturn On Net worth (RONW). The assets utilization ratios such as Total Assets TurnoverRatio (TATR), Fixed Assets Turnover Ratio (FATR), Working Capital Turnover Ratio(WCTR), Inventory Turnover Ratio (ITR) and Debtors Turnover Ratio (DTR), costeffectiveness ratios such as Raw Material (RMTSR), Wages (WTSR), Factory Overhead(FOTSR), Administration and Selling and Distribution Overhead (ASDTSR), FinancialCharges (FCTSR), (all as percentage to total sales) and Total Cost as Percentage to TotalSales (TCTSR), liquidity ratios such as Current Ratio (CR), Quick Ratio (QR) and CashPosition Ratio (CPR), working capital efficiency ratios such as Raw Material Holding Period(RMHP), WIP Holding Period (WIPHP), Finished Goods Holding Period (FGHP),Receivables Holding Period (RHP), Payables Payment Period (PPP) and Cash ConversionCycle Period (CCCP), solvency ratios such as Debt-Equity Ratio (DER), Interest CoverageRatio (ICR), Proprietary Ratio (PR), Long-term Debt to Total Debt ratio (LTDTDR) andCapital Gearing Ratio (CGR), Market value ratios such as Earnings Per Share (EPS), Price-Earnings Ratio (PER), Book-Value Per Share (BVPS) and Dividend Yield Ratio (DYR),Export as Percentage to Total Sales (ETSR), Value added ratios such as Economic ValueAdded (EVA) and Market Value Added (MVA), Total Factor Productivity (TFP) and Macro-Economics variables such as Gross Domestic Product (GDP) Interest Rate (IR), MoneySupply (MS) and Whole Sale Price Index (WPI) are used for the analysis. The results of thefactor analysis are presented in Table 1.Fourty two ratios pertaining to financial competitiveness of the Indian Automobile Industryused in factor analysis is presented in Table 120. Table 120 gives the rotated factor loadings,communalities, eigen values and the percentage of variance explained by the factors. Out of42 ratios, 13 factors have been extracted and these thirteen factors put together explain thetotal variance of these ratios to the extent of 76.122 per cent. In this industry the shortageinformation by grouping the data set into factors are of 23.878 per cent during the studyperiod. The communalities vary from 40 per cent to 99 per cent suggesting that the extractedfactors are sufficient to account for most of the variations existing in the data. This inferenceis confirmed by the total variation explained by the analysis. Table 120 reveals that thehypothetical variables that are highly loaded in the first factor includes profitability ratio suchas NPMR, cost effectiveness ratios such RMTSR, WTSR, ASDTSR and TCSR, workingcapital efficiency ratios such as PPP and CCCP and export performance ratio ETSR. Since,more cost effectiveness ratios are loaded in the factor, it is termed as Cost factor. This factortotally contributes 14.741 per cent. The Macro- Economic factor such as IR, GDP, MS andWPI are highly loaded in the second factor. Its contribution to the total variance is 12.425 percent. The profitability ratios such as ROCE, the assets utilization ratios such as TATR andsolvency ratio such as PR and LTDTDR are highly loaded in the third factor. So, this factor istermed as Profitability and Solvency factor. This factor totally contributes 8.178 per cent tothe total variance.In the fourth factor the hypothetical variables which are highly loaded includes costeffectiveness ratio FCTSR, working capital efficiency ratios such as RMHP and WIPHP andproductivity factor such as TFP and this factor can be termed as Working Capital andProductivity factor. It‟s contribution is 6.387 per cent to the total variance. The variables

111www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/which are highly loaded in the fifth factor includes profitability ratio such as RONW andsolvency ratios such as DER and CGR. This factor is termed as Profitability and Solvencyfactor which contributes 5.660 per cent to the total variance. The profitability ratios such asOPMR and cost effectiveness ratio such as FOTSR are highly loaded in the sixth factor and itcan be termed as Profitability and Cost factor. Its contribution to the total variance is 5.358per cent. The liquidity ratios such as CR, QR and CPR and working capital efficiency ratiosuch as FGHP are highly loaded in the seventh factor and its contribution to the total varianceis 4.605 per cent. It is named as Liquidity factor.In the eighth factor the hypothetical variables which are highly loaded includes market valueratios such as EPS and BVPS and value added ratio such as MVA and it is called Marketvalue and Value added factor. Its contribution to the total variance is 4.309 per cent. Theassets utilization ratios such as FATR and ITR and market value ratio such as PER are highlyloaded in the ninth factor and this factor can be termed as Assets utilization and Market valuefactor. Its contribution to the total variance is 3.606 per cent. The tenth factor is highly loadedwith working capital efficiency ratio such as DTR and solvency ratio such as ICR and it canbe termed as Working capital and Solvency factor and its contribution to the total variance is3.094 per cent. Profitability ratio such as ROTA and value added ratio such as EVA arehighly loaded in the eleventh factor and it can be named as Profitability and Market Valuefactor and its contribution to the total variance is 2.786 per cent. Similarly, working capitalefficiency ratio such as RHP and Market value ratio such as DYR include in the twelfthfactor and it is called a Working capital and Market value factor and its contribution to thetotal variance is 2.539 per cent. The thirteenth factor is highly loaded with working capitalturnover ratio and it can be termed as Working capital factor and its contribution to the totalvariance is 2.432 per cent.The results of the test show that with the significant value 0.000, there is significantrelationship among the variable chosen. KMO test yields a result of 0.636 which state thatfactor analysis can be carried out appropriately for the 42 variables that are taken for thestudy.Zaltman and Burger (1975) have suggested the following as criteria of factor analysissignificance.(i) The eigen value is greater than 1.(ii) The loadings of the factors after varimax rotation are larger than 0.3(iii)cent.The variance explained of all factors in the factor analysis is greater than 40 per(iv)No variable loads significantly on more than one factor.The factor analysis performed above rates satisfactory on all the above said four criteria.OVERALL FINANCIAL COMPETITIVENESS OF THE FIRMIn the present study, the ten broad categories of indicators were considered such asprofitability, asset utilization, cost effectiveness, liquidity, working capital efficiency,solvency, market value, foreign trade, productivity and value added performance to determinethe financial competitiveness of the selected companies in the Indian automobile Industry.

112www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/The company‟s performances are ranked according to the sub-indicators. After ranking toeach component of sub-indicators, these rank scores are aggregated into a composite score.The aggregation of rankings is an additive nature. The aggregate index for each of the tenbroad indicators is derived first using relevant variables (sub-indicators). The formula usedfor this is given below:V1ni x ini 1where, V i is i th indicator, x i is the i th sub-indicators, n is the number of sub-indicators with inthe indicators. This composite competitive index can be used to measure a firm‟s competitiveposition in the industry which it can sustain in medium to long-run. In the context ofpolicy analysis, indicators are useful in identifying trends and drawing attention to particularissues. It can also be helpful in benchmarking or monitoring performance.OVERALL FINANCIAL COMPETITIVENESS OF THE FIRM – SECTOR WISEANALYSIS:The sector wise composite financial competitive index and ranks of the firms forindicators are presented in the Table 2. In the commercial vehicles sector, Eicher Motors Ltdcomes first. This result is largely due to its position in profitability, assets utilization andsolvency indicators. However the company‟s performance in productivity and value added isscored on 4 th position among the selected companies. Tata Motors Ltd is at the secondposition in the competitiveness index. It can be noted here that this company has 1 st ranks incost effectiveness, working capital, market value and value added indicators; still it has gotsecond ranking in the overall index mainly because of poor performance in profitability,liquidity and solvency indicators where it stands 4 th . In the list of competitive performance3 rd , 4 th and 5 th positions are held by Swaraj Mazda Ltd, Ashok Leyland Ltd and Bajaj TempoLtd. It is noted that Ashok Leyland Ltd should stand first with regard to liquidity, foreigntrade and productivity indicators. However the company‟s performance in assets utilizations,working capital efficiency and cost effectiveness is very low.Among the passenger cars and multiutility vehicles sector companies, Honda Siel Cars IndiaLtd comes first. This may be due to its position in the assets utilization, cost effectiveness andliquidity indicators. The good competitive position it enjoys in productive performance isbecause of its highest capacity utilization and assets productivity. Maruti Udyog Ltd is at thesecond position in the competitiveness index. It is noted that this company has 1 st rank in twoindicators namely profitability and solvency and 2 nd ranks in assets utilization, costeffectiveness, market value, foreign trade and value added indicators. The performance wiseMahindra and Mahindra Ltd is doing well as it stands at number 3 position. It is noted thatthis company has 1 st ranks in value added indicator; it has got third ranking in the overallindex mainly because of poor performance in assets utilization, working capital and costeffectiveness indicators. In the list of competitive performance, 4 th , 5 th and 6 th positions areheld by Hyundai Motors India Ltd, Ford India Private Ltd and Hindustan Motors Ltd.Hyundai Motors India Ltd holds 1 st position in market value and foreign trade. However, costeffectiveness and productivity have pulled it down to this position. Similarly, Ford IndiaPrivate Ltd holds 1 st position in working capital efficiency and productivity, but profitabilityand liquidity have pulled it down to this position.

113www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/The competitiveness rankings among two and three wheelers sector companies, Hero HondaMotors Ltd is at the first position. It is noted here that this company has 1 st ranks sixindicators namely profitability, assets utilization, cost effectiveness, working capital, marketvalue and productivity. Bajaj Auto Ltd is at the second position in the competitiveness index.The performance wise TVS Motor Company Ltd hold third positions which may be due toassets utilization, working capital, cost effectiveness and market value indicators. In the listof competitive performance, 4 th , 5 th , 6 th and 7 th positions are held by Maharashtra ScootersLtd, Majestic Auto Ltd, Kinetic Motor Company Ltd and Kinetic Engineering Ltd. ScootersIndia Ltd and LML Ltd performance in all the indicators is very poor. Hence, this company‟sare placed in the 8 th and 9 th position.FINANCIAL COMPETITIVENESS OF THE FIRM – INDIVIDUAL RANKINGSThe overall competitiveness rankings for the selected companies of Indian automobileindustry presented in Table 4 and Table 4. In the overall competitiveness rankings, HeroHonda Motors Ltd comes first. This result is largely due to its position in the productivityperformance and working capital efficiency. The good competitive position it enjoys inproductive performance is because of its highest capacity utilization and technology upgradation. However the company‟s performance in foreign trade and liquidity is scored verylow and is on 18 th position in the list of sample firms. Bajaj Auto Limited is at the secondposition in the overall competitiveness rankings. The performance wise Honda Siel CarsIndia Ltd is doing well as it stands at number 3 position. The company holds 1 st position inassets utilization, cost effectiveness and liquidity. Maruti Udyog Ltd stands at the fourthposition. It can be noted here that this company has 1 st ranks in profitability and solvencyindicators; still it has got fourth ranking in the overall index mainly because of poorperformance in productivity and working capital indicators. In this list of overall competitiveperformance, 5 th , 6 th and 7 th positions are held by TVS Motor Company Ltd, Eicher MotorsLtd and Mahindra and Mahindra Ltd, with little difference in the total scores. Nevertheless,strength of TVS Motor Company is its working capital and assets utilization indicators.Eicher Motors Ltd is doing well in assets utilization, solvency, profitability and workingcapital indicators whereas productivity performance is relatively poor. Value added andprofitability indicators are strongest for Mahindra and Mahindra Ltd, which is offset byworking capital and assets utilization indicators.Tata Motors Ltd, Hyundai Motors India Ltd and Swaraj Mazda Ltd are 8 th , 9 th and 10 th in thelist of overall competitiveness rankings. All are very close with each other although TataMotors Ltd is exceptionally good in value added, working capital, assets utilization and costeffectiveness and average in other indicators. Hyundai Motors India Ltd‟s strength seems tobe market value and export where it has 1 st position but because of productivity, profitabilityand cost effectiveness the overall score is low. Whereas Swaraj Mazda Ltd had averageperformance in all the indicators of competitiveness. Companies such as MaharashtraScooters Ltd, Ashok Leyland Ltd and Ford India Private Ltd are on the 11 th , 12 th and 13 thrankings respectively in the list of index of competitiveness being very close in scoring.Ashok Leyland Ltd is ranked 1 st in productivity and foreign trade indicator and Ford IndiaPrivate Ltd ranked 1 st in productivity performance. In case of other indicators, all these threefirms show average performance. Bajaj Tempo Ltd, Hindustan Motors Ltd and Majestic AutoLtd are 14 th , 15 th and 16 th in the list of competitive rankings. All are very close to each otherand very poor performance in all the indicators. Scooters India Ltd, Kinetic Motor CompanyLtd, Kinetic Engineering Ltd and LML Ltd had very poor performance in all the indicators of

114www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/competitiveness and stands 17 th , 18 th and 19 th and 20 th rankings respectively in the list ofindex of competitiveness.CONCLUSIONFactor analysis has been applied to identify the factors that are significantly contributing thefinancial competitiveness. Out of 42 variables, 13 factors have been extracted and thesethirteen factors put together explain 76.122 per cent of the total variance. If the industry isclassified in segments then it can be seen that passenger cars and multiutility vehicles isdominated followed by two and three wheeler sector and commercial vehicles sector. Thecommercial vehicles sector is obviously ruled by Eicher Motors Ltd where as the passengercars and multiutility vehicles sector is dominated by Honda Siel Cars India Ltd and MarutiUdyog Ltd. Further, two and three wheeler sector is dominated by Honda Motors Ltd andBajaj Auto Ltd.REFERENCES1. Burange L.G., and Shruti Yamini (2008). “ Competitiveness of Firms in IndianAutomobile Industry”, Working Paper UDE(CAS)23/(8)/1/2008, University ofMumbai, JEL Code(s):L62.2. Booysen, Frederick (2002). “An overview and Evaluation of Composite Indices ofDevelopment, Social Indicators Research 59, pp.115-151.3. Gooroochum, Nishaal and Guntur Sugiyarto(2004).”Measuring Competitiveness inthe Travel and Tourism Industry, Dicussion Paper 7, Tourism and Travel ResearchInstitute, Nottingham University, U.K.4. Khisty, Vasant (2000), “Globalisation and Competitiveness of Indian AutoComponent Industry, Associated with RAHA- World Independent Writers‟ Home inExile, World News, Kabul Press.5. Ministry of Heavy Industries and Public Enterprises(2006a). Automotive MissionPlan 2006-2016, Government of India, New Delhi.6. Narayanan, K.(2001), “Liberalisation and the Differential Conduct and Performanceof Firms: A Study of the Indian automobile Sector, Dicussion Paper Series –A.No.414, The Institute of economic Research, Hitotsubashi University and UnitedNations University Instutute of Advanced studies, Japan.7. Society of Indian Automobile Manufacturers(2007), Market Share Analysis Report,Report VII, SOP 11-F-09/01, New Delhi.8. Prahalad, C.K. and Hamel,G.,(1990). “ The core competence of the corporation”,Harvard Business Review, 68(3):79-81.9. Singh, Neelam(2004). “ Strategic Approach to strengthening the InternationalCompetitiveness in Knowledge Based Industries: The case of Indian AutomotiveIndutry, RIS Dicussion Paper Series No.82, Research and Information System for theNon-Aligned and other Developing countries, New Delhi.

115www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/VariablesTABLE 1SUMMARY OF FACTOR ANALYSIS – ROTATED FACTOR LOADINGS(WHOLE INDUSTRY)Factors1 2 3 4 5 6 7 8 9 10 11 12 13CommunalityOperatingMarginNet ProfitMarginReturn onCapitalEmployedReturn onTotal Assets-.029 .057 .105 -.017 -.161 .877 -.018 .054 .070 .032 .088 .005 .027 .828-.967 .063 .025 .018 -.013 .163 .030 .27 .036 .017 .012 .004 .016 .971-.015 -.201 .758 -.016 -.031 .066 .105 .002 .041 -.008 .410 -.115 .054 .818-.019 -.113 .186 -.062 -.219 .087 .083 .007 .244 .087 .702 .030 .155 .699Return on NetworthTotal AssetsTurnoverFixed AssetsTurnover-.031 -.190 .227 -.177 -.489 .144 .075 -.038 .262 .011 .376 .266 .098 .677-.045 .047 .827 .039 -.038 -.148 -.128 .051 .228 .119 -.128 .051 .040 .820-.054 .026 .155 -.078 .014 -.253 -.054 .028 .663 .161 .152 .108 -.058 .605

116www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/VariablesFactors1 2 3 4 5 6 7 8 9 10 11 12 13CommunalityWorkingCapitalTurnoverInventoryTurnoverDebtorsTurnoverRM as % ofTotal CostWages as %of Total CostFactoryOverhead as% to TotalCost-.010 -.050 -.007 -.042 .023 .011 -.105 -.003 -.149 .030 .027 .075 .809 .700-.055 .233 .064 -.250 -.140 -.169 .096 .215 .466 .142 .427 -.218 .108 .706-.010 .007 .026 -.085 -.063 -.014 .134 -.034 -.024 .856 .017 -.097 -.011 .775.568 .022 .018 .088 .078 -.357 .143 .104 .286 .155 -.006 .098 .119 .626.750 .064 -.024 -.012 -.022 .617 -.027 -.020 -.015 -.012 -.052 .002 -.023 .954-.030 .098 -.105 .328 .338 .722 .035 -.011 -.199 -.049 -.111 -.010 -.043 .822Administration and sellingandDistributionOverhead toTotal Cost.985 -.037 -.003 -.057 -.005 -.007 -.033 -.025 -.038 -.021 -.004 -.007 -.011 .978

117www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/VariablesFactors1 2 3 4 5 6 7 8 9 10 11 12 13CommunalityFinancialCharges toTotal CostTotal Cost as% on Sales.004 -.017 -.218 .548 .338 -.104 .072 -.091 -.415 -.040 -029 -.009 -.079 .668.979 .012 -.020 -.028 .007 .181 -.023 -.011 -.005 -.004 -.026 .006 -.009 .995Current Ratio -.088 -.122 .127 .010 -.078 -.053 .739 .005 -.040 .219 -.056 .313 -.137 .763Quick Ratio -.037 .111 .077 -.007 .084 .058 .783 .008 .164 .034 .078 .118 -.132 .708Cash PositionRatioRaw MaterialHoldingPeriod-.009 .001 -.188 -.126 .004 -.012 .723 -.006 -.012 -.025 -.019 -.279 .175 .683-.018 -.032 -.128 .885 -.006 .029 -.039 -.081 -.151 .019 -.115 -.047 -.075 .853Work – in –ProgressHoldingPeriodFinishedGoodsHoldingPeriod-.031 .118 -.115 .744 .205 .271 .026 -.139 -.154 -.087 -.129 .135 -.090 .792-.080 -.052 .133 .077 .034 -127 .404 -.328 -.323 .010 -.190 .329 .087 .578

118www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/VariablesFactors1 2 3 4 5 6 7 8 9 10 11 12 13CommunalityReceivablesHoldingPeriodPayablesPaymentPeriodCashConversionCycle PeriodDebt EquityRatioInterestCoverageRatio.059 .033 -.071 .304 .562 .095 .189 -.069 .019 -.186 .000 .470 -.072 .728.991 -.039 -.011 .004 -.017 .013 -.043 -.026 -.018 -.014 -.003 -.004 -.010 .986-.989 .039 .004 .056 .039 -.007 .050 .015 .008 .006 -.006 .023 .004 .988-.008 .021 .042 .005 .851 -.031 -.089 -.012 -.027 .002 -.186 -.026 -.017 .771-.005 .094 .025 -.050 -.025 .002 .008 -.026 .034 .837 .041 -.006 .020 .718ProprietaryRatio-.013 -.043 .812 -.251 -.064 .112 .036 .069 .130 .047 .005 .1534.100E-5.790Long – TermDebt to TotalDebtCapital-.008 -.115 .838 -.152 .160 .009 .063 -.036 -.155 -.078 .078 -.091 -.045 .815-.001 .002 .074 .018 .884 .022 .080 -.038 -.035 -.036 .037 -.045 .086 .810

119www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/VariablesGearing RatioFactors1 2 3 4 5 6 7 8 9 10 11 12 13CommunalityEarnings PerSharePriceEarningsRatio.Book Valueper Share-DividendYield RatioExport as %to Total Sales-.021 -.062 -.033 .001 .241 .006 -.032 .795 .009 .014 .150 .002 -.050 .721-.016 -.026 .016 -.029 -.068 .120 .133 -.066 .519 -.173 -.117 080 -.137 .381-.015 -.043 .046 -.063 -.110 .004 -.028 .853 -.022 -.020 .051 .080 -.050 .762-.018 -.116 -.003 -.015 -.064 -.018 .058 .007 -.009 -.066 -89 .704 .060 .533.539 .208 -.065 .385 .147 -.197 -.053 .032 -.289 -.076 .25 -.171 -.056 .673EconomicValue AddedMarket ValueAddedTotal FactorProductivity-.021 .103 -.008 -.080 -.013 -.067 -.118 .140 -.171 -.018 .570 .104 -.185 .455-.017 -.019 .055 -.018 -.145 .004 .036 .708 .026 -.047 -.045 -.086 .093 .548-.043 .118 -.030 .746 -.099 -.008 -.119 .137 .280 -.116 .031 .017 .174 .740Interest Rate .041 -.476 -.140 -.015 .020 .104 -.265 -.012 -.135 .091 .239 .086 -.456 .629

120www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/VariablesFactors1 2 3 4 5 6 7 8 9 10 11 12 13CommunalityGrossDomesticProductMoneySupplyWhole SalePrice Index-.016 .967 -.100 .052 .027 .063 -.025 -.046 -.007 0.52 .030 -.043 -.045 .963-.013 .963 -.102 .052 .036 .064 -.033 -.045 -.006 .059 .035 -.053 -.052 .959-.022 .983 -.064 .048 .027 .036 .020 -.041 .013 .034 -.015 -.052 .039 .983Eigen Value 6.191 5.218 3.435 2.683 2.377 2.250 1.935 1.810 1.514 1.299 1.170 1.066 1.021% ofVariance14.74112.4258.178 6.387 5.660 5.358 4.605 4.309 3.606 3.094 2.786 2.539 2.432 76.122Cum. %Variance14.74127.16635.34341.73147.39152.74957.35661.66665.27268.36571.15173.69076.122Kaiser – Meyer – Olkin Measure of Sampling AdequacyBartlett’s Test of Shericity- 0.636- 6.848 E 3 (Sigx.000)Source: Computed from the Annual ReportsExtraction Method : Principal Component AnalysisRotation Method : Varimax with Kaiser Normalization

121www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TABLE 2FINANCIAL COMPETITIVENESS – SCORES AND RANKS OF THE FIRMS FOR INDICATORS (SECTOR WISE)CompaniesOverallIndexProfitabilityIndexAssetsUtilisation IndexCostEffectivenessLiquidityIndexWorkingcapitalEfficiency IndexSolvencyIndexMarketValueIndexForeignTradeIndexProductivityPerformanceIndexValueAddedPerformanceIndexScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankAshokLeylandLtd10.4742.4024.4053.0041.3014.3052.2023.0031.0011.0013.003TataMotorsLtd9.5023.0042.2022.6014.0042.0013.4042.7012.0022.0021.501BajajTempoLtd12.2654.6053.6043.6054.3053.5043.0033.2555.0055.0052.502EicherMotorsLtd8.3212.2012.0012.8531.6022.1621.8012.7523.0034.0043.504SwarajMazda9.9232.8032.8032.8023.6033.0034.6053.2044.0043.0034.505

122www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/CompaniesOverallIndexProfitabilityIndexAssetsUtilisation IndexCostEffectivenessLiquidityIndexWorkingcapitalEfficiency IndexSolvencyIndexMarketValueIndexForeignTradeIndexProductivityPerformanceIndexValueAddedPerformanceIndexScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankLtdHindustanMotorsLtd12.6365.6054.4054.6055.3054.5065.8064.0065.0054.0042.503Mahindra andMahindra Ltd8.5832.2024.6063.8043.0034.1653.8042.2544.0042.0021.501MarutiUdyogLtd7.8221.6012.2022.8023.3343.6641.4012.0022.0025.0052.002HyundaiMotorsIndiaLtd9.7043.6043.8035.0062.6022.8322.8030.5011.0016.006 - -

123www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/CompaniesOverallIndexProfitabilityIndexAssetsUtilisation IndexCostEffectivenessLiquidityIndexWorkingcapitalEfficiency IndexSolvencyIndexMarketValueIndexForeignTradeIndexProductivityPerformanceIndexValueAddedPerformanceIndexScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankHondaSielCarsIndiaLtd7.4112.6031.8011.6011.0013.0032.0022.2036.0063.003 - -FordIndiaPrivateLtd10.8855.4064.2043.0035.6062.8015.2052.5053.0031.001 - -BajajAutoLtd6.8422.4023.6032.6023.3333.0033.0033.0044.0043.0031.001LMLLtd14.2998.2086.8087.0087.3386.3376.4576.7581.0017.0073.503MaharastraScooters Ltd10.0342.8034.8045.5064.3345.0042.2012.702 - -9.0095.005

ZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/www.zenithresearch.org.in124CompaniesOverallIndexProfitabilityIndexAssetsUtilisation IndexCostEffectivenessLiquidityIndexWorkingcapitalEfficiency IndexSolvencyIndexMarketValueIndexForeignTradeIndexProductivityPerformanceIndexValueAddedPerformanceIndexScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankTVSMotorCompany Ltd8.0333.0042.6524.0036.3362.8324.8052.7536.0064.0043.554KineticMotorCompany Ltd13.8268.4096.2077.5094.6656.1666.4065.7565.0058.0087.507HeroHondaMotorsLtd6.6111.8012.6012.5017.0071.5012.6022.5017.0071.0012.002KineticEngineering Ltd13.8977.2077.4096.0073.3027.5098.2097.0093.0036.0067.006Majestic AutoLtd12.6555.4055.6065.1647.6695.6657.0086.7072.0022.0028.009

125www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/CompaniesOverallIndexProfitabilityIndexAssetsUtilisation IndexCostEffectivenessLiquidityIndexWorkingcapitalEfficiency IndexSolvencyIndexMarketValueIndexForeignTradeIndexProductivityPerformanceIndexValueAddedPerformanceIndexScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScooters IndiaLtd13.2485.8065.4055.1851.3317.1684.4045.5058.0085.0057.558Source: Computed

126www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TABLE 3OVERALL RANKINGS AND SCORES OF AUTOMOBILE FIRMSCompany Rank ScoreHero Honda Motors Ltd 1 6.61Bajaj Auto Ltd 2 6.84Honda Siel Cars India Ltd 3 7.41Maruti Udyog Ltd 4 7.82TVS Motor Company Ltd 5 8.03Eicher Motors Ltd 6 8.32Mahindra and Mahindra Ltd 7 8.58Tata Motors Ltd 8 9.50Hyundai Motors India Ltd 9 9.70Swaraj Mazda Ltd 10 9.92Maharashtra Scooters Ltd 11 10.03Ashok Leyland Ltd 12 10.47Ford India Private Ltd 13 10.88Bajaj Tempo Ltd 14 12.26Hindustan Motors Ltd 15 12.63Majestic Auto Ltd 16 12.65Scooters India Ltd 17 13.24Kinetic Motor Company Ltd 18 13.82Kinetic Engineering Ltd 19 13.89LML Ltd 20 14.29Industry Average 10.34Source: Computed

127www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TABLE 4FINANCIAL COMPETITIVENESS – OVERALL SCORES AND RANKS OF THE FIRMS FOR INDICATORSCompaniesProfitabilityIndexAssetsUtilisation IndexCostEffectivenessIndexLiquidityIndexWorkingcapitalEfficiency IndexSolvencyIndexMarketValueIndexForeignTradeIndexProductivityPerformanceIndexValueAddedPerformanceIndexOverallIndexScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankAshokLeylandLtd2.4054.40123.0081.3024.30132.2043.00111.0011.0013.00810.4712TataMotorsLtd3.00102.2032.6034.00112.0023.40102.7072.0042.0041.5029.508BajajTempoLtd4.60133.6083.60104.30123.50103.0083.25145.00135.00132.50612.2614EicherMotorsLtd2.2032.0022.8571.6042.1631.8022.7593.0074.00103.5098.326SwarajMazda2.8082.8072.8053.60103.0074.60133.20134.00103.0074.50129.9210

128www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/CompaniesProfitabilityIndexAssetsUtilisation IndexCostEffectivenessIndexLiquidityIndexWorkingcapitalEfficiency IndexSolvencyIndexMarketValueIndexForeignTradeIndexProductivityPerformanceIndexValueAddedPerformanceIndexOverallIndexScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankLtdHindustanMotorsLtd5.60164.40124.60135.30154.50145.80164.00155.00134.00102.50612.6315Mahindra andMahindra Ltd2.2034.60143.80113.0064.16123.80112.2544.00102.0041.5028.587MarutiUdyogLtd1.6012.2032.8053.3383.66111.4012.0022.0045.00132.0047.824HyundaiMotorsIndiaLtd3.60123.80105.00142.6052.8352.8070.5011.0016.0016 - -9.709

129www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/CompaniesProfitabilityIndexAssetsUtilisation IndexCostEffectivenessIndexLiquidityIndexWorkingcapitalEfficiency IndexSolvencyIndexMarketValueIndexForeignTradeIndexProductivityPerformanceIndexValueAddedPerformanceIndexOverallIndexScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankHondaSielCarsIndiaLtd2.6071.8011.6011.0013.0072.0032.2036.00163.007 - -7.413FordIndiaPrivateLtd5.40144.20113.0085.60162.8045.20152.5053.0071.001 - -10.8813BajajAutoLtd2.4053.6082.6033.3383.0073.0083.00114.00103.0071.0016.842LMLLtd8.20196.80197.00197.33196.33186.45186.75191.0017.00183.50914.2920MaharastraScooters Ltd2.8084.80155.50174.33135.00152.2042.707 - -9.00205.001310.0311

ZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/www.zenithresearch.org.in130CompaniesProfitabilityIndexAssetsUtilisation IndexCostEffectivenessIndexLiquidityIndexWorkingcapitalEfficiency IndexSolvencyIndexMarketValueIndexForeignTradeIndexProductivityPerformanceIndexValueAddedPerformanceIndexOverallIndexScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankTVSMotorCompany Ltd3.00102.6564.00126.33172.8354.80142.7596.00164.00103.55118.035KineticMotorCompany Ltd8.40206.20187.50204.66146.16176.40175.75175.00138.00197.501513.8218HeroHondaMotorsLtd1.8022.6052.5027.00181.5012.6062.5057.00181.0012.0046.611KineticEngineering Ltd7.20187.40206.00183.3077.50208.20207.00203.0076.00167.001413.8919Majestic AutoLtd5.40145.60175.16157.66205.66167.00196.70182.0042.0048.001712.6516

131www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/CompaniesProfitabilityIndexAssetsUtilisation IndexCostEffectivenessIndexLiquidityIndexWorkingcapitalEfficiency IndexSolvencyIndexMarketValueIndexForeignTradeIndexProductivityPerformanceIndexValueAddedPerformanceIndexOverallIndexScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScoreRankScooters IndiaLtd5.80175.40165.18161.3337.16194.40125.50168.00195.00137.551613.2417IndustryAverage4.054.054.004.014.204.053.553.783.803.8810.34Source: Computed

132www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/ABSTRACTBEST PRACTICES IN CHANGE MANAGEMENTJ.SHEEBA ROSALINE**Lecturer,Xavier Institute of Management and Entrepreneurship,Electronic city Phase II, Hosur Road,Bangalore - 560100.Innovations are the not only the integral part of organizational development but also drivingforces for a country’s economic growth. For effective change management, innovationsshould be consistent and systematic. In the current scenario, companies are facing perplexingproblems in managing change. Mastering change management is an art that has to be learntand implemented with care. For change management to be effective it is essential to takesteps to implement change in all the three levels of management namely strategic, tactical andfunctional. Competency based change management can be followed so as to reap the benefitsof achieving the performance excellence. Risk taking behavior is an essential quality thatforms an integral part while dealing with change and hence the change managers have todevelop competencies to overcome the uncertainties in the organizations. Proactiveapproaches can be followed to ensure successful implementation of change in anyorganization.KEYWORDS: Best practices, Change, Competency, performance, Innovation, Proactive.___________________________________________________________________________INTRODUCTION“Competence means a skill and the standard of performance while competency refers tobehavior by which it was achieved. Competence is what people do and competency meanshow people do it”.-Rowe , 1995Innovation is often associated with changes that are positive. Innovations are the drivingforces for a country’s economic growth. Innovations in general can be in the form of a newtechnology or product that seek value addition and increases the strength of the organization.First of the all, the change managers need to identify the practices that are ineffective withrespect to organizational performance. Then they have to go for the innovative best practicesthat aid in the achievement of strategic objectives of the organization.For effective change management, innovations should be consistent and systematic. There arefive categories of adopters of innovations namely innovators, early adopters, early majority,late majority and laggards. The degree to which the individual is quick in adopting to newideas is called innovativeness. The innovativeness of the adopters are Innovators-2.5 %,EarlyAdopters-13.5%,Early Majority-34%,Late Maority-34%,Late Majority-34% and Laggard-16%.(Rogers, E. 1962).The Boston Consulting group and Mckinsey surveys showed thatabout 70 % of the sample innovation is one of the top three strategic corporate priority. Withchanging technologies it is required to change duties and responsibilities.

133www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/To remain competitive and survive in the global scenario, organizations may have to changetheir culture. Companies must proactively respond to the significant business changes in thebusiness world. The yo-yo impact on organizational culture that involves expansion andcontraction of company operations is one of the major changes that can take place inorganizations. (Luthans, 1995). Restructuring, multitasking, outsourcing, short-termcontracts are the various changes that are taking place in organization.Changes should be considered as opportunities and must be effectively utilized. Informationtechnology, telework, part-time contracts, self employment, portfolio concept andadaptability are the influencing change oriented factors that affect managers. (Malone,2006).The dimensions of people and change are to be taken into account for the implementation ofthe change management process. Change can be successful when both the dimensions occursimultaneously. The more systematic, the management practices are the more effective is thechange implementation. The change process consists of how well the resources are utilizedand in what way for achieving performance excellence. By adopting the best practices inchange management, employees get motivated and contribute towards the achievement oforganizational objectives. Moreover the employee’s commitment to support the changeinitiative is also high. The management practices should also involve activities that reinforcechange.CORE VALUES-DETERMINANTS OF COMPETENCIESIn the business lexicon, core values are defined as the principles that guide anorganization’s internal conduct as well as its relationship with the external world. Core valuesfind place in the mission statement of the organization. The core values of an organizationentail the strategies that are adopted to achieve the mission. Organizations strive for reachingthe level of perfection through shared commitment towards the values which in turn help tobuild a culture.For an example, the core values of Google include-Focus on the user and all else will followIt’s best to do one thing really, really wellDemocracy on the web worksCore values form an integral part of any business. They provide an insight about what thecompany is all about. It helps in establishing the identity of the company. Any decision takenby the company depends on the core values which comprise of rules and regulations. In theplanning process at the strategic level, establishing core values plays a vital role. Thecompanies that have created core values have come up well in the business world. Customerservice, excellence, integrity, quality of services are some of the core values of a company.Core values in a company are one of the components of a business vision and the othersbeing the core purpose and goals. It is the unique characteristic of core value that they do notchange with respect to changing environment. Core values are the foundation on which acompany rests.Core values provide an insight into how to think and incorporate in the day-to-day businessactivities. Core values form an integral part in determining the success of a business. The

134www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/methodologies involved in decision-making and problem–solving are the core values in acompany. The quality of the business can be brought into focus before the customers usingthe core values. Creating core values is one of the key areas of strategic planning. Thestrategic level of approach is needed while considering core competencies. Corecompetencies are strength to the organizations that act as basis for value addition towardscompetency building. The continuous enhancement of both products and services are possibleby utilizing core competencies (Prahlad & Hamel, 1990).HOW MANAGERS DEAL WITH RESISTANCE TO CHANGE?Resistance management can be either proactive or reactive. The former resistancemanagement is the systematic way of determining the origin of resistance and plan formitigating them. The latter is in response to the resistance and necessary steps are to be takento overcome it. The first step in a resistance management plan is to identify change and thendefine strategies for managing change. The third step would be to review the managementapproach and finally communicate the resistance management plan to managers.Leaders’ mentoring, strategic planning, communication and building organizationalrelationships are considered to be the levers of change management process. Change has tobe purposeful to reorganize a company. During the strategic change management process thenovel vision is developed to achieve the objectives and more essentially it should be alignedin the right direction. People do not resist change and they resist being changed. Changecannot be enforced upon, change has to be gradual. Good leaders are good communicators.Good communication is vital in process of change to allay fears and promote right kind ofenthusiasm. Employee involvement is the best weapon to counter adversities. Managingchange is like managing two opposite forces viz. the desire for stability and desire for changelike two crossbars each swinging in opposite direction (Moid, & Khwaja, 2008).There could be several reasons for why people resist change. It may be due to poorcommunication, fear of unknown; reward is inadequate, peer pressure, climate of mistrust,and personal conflicts. The change agent has to extend his support in identifying the rightpositive changes to the members of the organization. It is necessary that the change leadersmust use the specific skills in leading the employees towards the deliberate changes.Managers handle resistance through various means like facilitation, education, involvement,negotiation and coercion. The major change in the organization lies in cultural change andfocuses on the attitudes and behaviors of the employees. Change in organizations meanchange in people. The change Kaleidoscope can help managers design a context sensitiveapproach to change within their organization. The outer ring relates to the organizationalstrategic changes. The middle ring represents the characteristic features of change. The innerring between the establishes the relationship between the various alternatives that areavailable to change agents. (Balogun, 2001).Employee involvement should be available to improve the responsiveness and progress of themembers of the organization which directly improves organization’s effectiveness andproductivity. Companies like BHEL, TATA Motors, SAIL and Ford have increased andintensified the value of worker’s involvement through enriched forms of works. Highinvolvement organization that are developed on the basis of factors such as job description,open information system, selection of highly motivated employers help in high level of

135www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/employee participation in an organization. This results in employee retention for a long timethat directly contributes to organizational development and change. (HRM Review, 2011.)Whenever there is resistance to change it is a clear indication that there is an issue related tocommunication and the need of the hour is to clearly define the vision and the changemanagement strategy. To achieve effectiveness in organizational change, the polarities are tobe managed properly. A combination of real time strategic change management and polaritymanagement can be much helpful in an organization to plan the needed changes and adaptthem to the new emerging culture. This integrated approach can help in developing the abilityto manage changes in future (Jacobs, 2010).SUCCESSFUL IMPLEMENTATION OF CHANGEOrganizational change should not be done for the sake of change but be associated with theperformance of organizations .Successful implementation of change is possible whenindividuals work towards the achievement of the organizational goals. There are two aspectsof managing change one is technical and the other one is cultural. The employees should fullyget engaged in the change management process. The first and the foremost step in thesuccessful implementation of change would be to define change. Then the people should beprepared for change, use the right levers for change and then communicate to the employeesin the organization. The introduction of any new technology is much easier that to implementthe planned changes in the organization. The people need to accept changes. Understandingthe need for change, believing that change is desirable, commitment, perseverance, specificgoals, clear accountability and rewarding the new behavior are some of the success factorsfor organizational change. (Adams, 2003).ADKAR model (Prosci, 1998) is a goal oriented change model that focuses on theactivities for achieving the change management results. It lays emphasis on Awareness,Desire, Knowledge, Ability and Reinforcement. Managers can use the ADKAR Model inorder to identify the gaps in change management process. It can also be used to diagnoseemployee resistance to change and support the employees as they undergo the changeprocess. Finally the change management plan can be developed for the employees. ADKARModel can not only help in identifying the reasons for gaps in implementing changes but alsoplan for a successful change.Kotter, J. P. (1996) suggested eight factors for a change to be successful. They areestablishing a sense of urgency, creating a guiding coalition, developing a vision and strategycommunicating the change vision, empowering employees, generating short term wins,consolidating gains and anchoring new approaches. Communication is a critical factor thatcan help in overcoming the resistance to employees. Successful change implementationdepends on leaders. From an instance the leadership style (charismatic) of the manager canbring about desired changes among the attributes of the employees.It is mandatory that organizations identify and cope up with change. Dependence only onexplicit knowledge prevent leaders from coping with change. Companies have to create newfutures so that they can survive in the long run. They can no longer be extensions of past.They must be leaps of faith into tomorrow. Leaders should be pragmatic and not satisfiedwith analyzing situation using empirical data and deductive reasoning ; but also inductivethrough ideals and dreams.( Nonaka, & Takenchi, 2011).Managers face difficulty incommunicating change in corporate identity without diluting brand equity. (Argenti, 2007).

136www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Business acumen, interpersonal understanding, credibility, communication and ability torealign the policies and practices are the competencies that would have greater implicationsfor human resource professionals in workforce reduction scenario. (Waraich, & Bhardwaj,2010).TABLE 1. COMPETENCIES REQUIRED FOR CHANGES. No. Area Competencies1.Analytical SkillsCognitiveConceptual Skills2. Functional /Technical Depth of knowledgeDissemination of expertiseBreadth of Knowledge and Skillsexpertise acquisition motive3. Personal Self controlSelf confidenceOrganizational commitmentFlexibilityInitiativeCommunication4. Inter-personal Inter-personal relationsDeveloping cooperative working relationshipService orientationInterpersonal understandingNegotiation

137www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/5. Problem solving Self awarenessContracting skillsSensing & diagnosing skillslinking skillsSource:http://www.egyankosh.ac.in/bitstream/123456789/35274/1/Unit-15.pdfBEST PRACTICES IN CHANGE MANAGEMENTSTRATEGIC CHANGE MANAGEMENTThere has been a shift towards strategic level in the field of Human resource management dueto the changes that are taking place globally. The changes in the strategy has a greaterinfluence on the functions of human resources like recruitment, training and development ,performance management. It is necessary to add value when managing change strategically.In the changing business scenario, the human resource professionals should create innovativeapproaches to manage change. The plan of where you are now to where you want to be is ashift from one end of the polarity to another which can create resistance among theemployees. Managing of polarities greatly influences decision-making in companies.Cultures prevailing in corporate are unique and innovation introduced in one organizationmay not work out for other conditions.Effective change management requires the skills to predict the need and deal it. Once theplans are formulated the next step would be to encourage the participation of the employeesso that the feedback is received from the concerned change areas. Finding the rightmotivators of change can be a challenging task for a human resource professional. The abilityto motivate others towards plianting to changes is highly recommendable. This can beachieved through anticipating difficulties in gaining acceptance, communicating with keypeople who are involved in the change process and considering the consequences of change.Persuasion is a talent that requires fitnesse, sensitivity and timing.( Fritz, Roger,2006).Thefirst step towards strategic change management is to analyze the strategies. In this stage theanalysis of the organization’s external and internal environment comprising of the strengthand weakness is carried out. This determines the effectiveness and efficiencies in achievingthe organization’s objectives. In the next level the choices for taking strategic directions areconsidered. This stage includes the fixing of strategic vision, creating values and fixing theobjectives. In the third stage the methodology is adopted to shift the organization fromcurrent to the future position. The final step entails the implementation stage that alsoincludes the feedback along with review measures to be undertaken.Eric Douglas has postulated three principles, the first insisting on to focus on first fivepercent, the second on defining the root cause of the problem and the third being finding aguide who can offer examples from other organizations. The six rings model that includespurpose, core values, vision, goals, objectives and actions has been emphasized for strategic

138www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/planning during change management. Besides assessing the reactions of the human resources,the technologies and resources are assessed to implement change.Change management takes place in an organization when the integrity is challenged due totechnological changes. Communication plays a vital role in the change process. Once changeoccurs in an organization, the next stage is to communicate. In many cases the reason forfailure of projects is poor communication. In areas of information technology there are twoissues namely business effectiveness and transformation. In the absence of goodcommunication network systems, the projects fail. This in not only restricted to IT but also tonon-It areas.The best way to achieving success is to transmit the information clearly in a two way process(Krigsman, 2011).) Strategic motivators highly refer to the leadership qualities of the changeagents who have an eye for the reinventing and reengineering activities in the organizations.It becomes necessary to communicate the company’s vision among the employees whileinitiating changes so that they can adapt to the new culture.PROACTIVE CHANGE MANAGEMENTThe reactive approach to solving the issues is a conventional approach to changemanagement. In proactive approach of change management, solutions are created well inadvance anticipating the problems. This is done by fixing objectives after predicting futureand establishing a plan for the future issues. The interactive system of management cansupport the managers in building up the change management process. The managers getinvolved with the people even before any problem arises. Employees dislike change as itreflects uncertainty.The human resource professionals who act as change agents need the concepts and principlesbehind change management that would be very much helpful to taking decisions. But wehave to accept the fact that predictions cannot be made at all times hence the reactiveapproach may find place under certain situations. There has always been the debate whetherchange management should be proactive or reactive. Proactive change management entailsthe attitude of anticipating and grabbing the opportunities by overcoming the threats.Among the two schools of thought of handling change namely crisis driven change andproactive change management, the latter is considered to be the best method as it createscompetitive advantage to the organization. Proactive change management is the systematicapproach to identifying the origin of change, critical gaps and addressing them before theyoccur in organizations. This method of change management involves excessive planning wellahead of the change process. The good example of proactive approach is resistancemanagement plan. The first and the foremost step would be to define and then identify theresistance to change. Then work out the strategy for change, review the resistance approachand finally communicate it to the managers for implementation.Proactive change is a dynamic process that involves visionary practices. In case of thereactive change management, the role of the change managers is to manage resistance toemployees and dealing with the effects of change. Change management is like a race againsttime to cope up with the changing global scenario. Hence it can be seen in organizations thatmanagers hardly find time in going through the process of proactive change management.

139www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/COMPETENCY BASED CHANGE MANAGEMENTA competency describes a cluster or group of related knowledge, skills , abilities (KSAs) andother attributes associated with high performance in an occupational role. (Mirabile,1997)Competency of a professional is determined through the level of knowledge, capacity toutilize skills, attitudes and values towards HR function. (Chandra & Kabra, 2000). Thedevelopment of a competency model starts with identification of general competencies for ajob role. Once the competencies are validated, addition of technical and local competenciesprovide a comprehensive competency model. Competency models play a major role incommunication and they focus on superior performance. They provide a common platformfor success and framework for thinking about excellence. They bolster dissemination ofinformation and open communication (Kormanik et al. ,2009).Effective communication skills, team development, coaching, quality, information andresource management are the competencies that are required by a leader for managingchange.BCG approach towards change management can be followed in organizations .BCGhas six dimensions such as creating an agenda for change, mobilizing the organization,converting change into business, managing for results, sustaining change and communicatingstrategically. Most of the team development activities take place with the initiation of changein organizations. The change must come from within organizations and people must be awareof the need for change. Managers who face changes have to think on a long term basis byfollowing economic approach or organizational development approach. It is very difficult tofind managers with the managerial competencies that are required for implementation ofchange in an organization. (Hellriegel & Slocum. 2005).But it has been observed that companies focus on business process and very rarely onleadership. Driving a lasting change has to take place from the top management. Thisincludes entrepreneurial spirit, commitment to resources, methods to follow and right type oforganization (Shermon, 2008).Change management differs from the routine human resourceactivities and therefore the hr professionals have to focus on the soft softer issues like jobsatisfaction, job progression, work autonomy apart from hard issues such as salary, serviceconditions would gain increasing prominence. (Krishnan, T.K.2010).CONCLUSIONNew technologies have lead to employment opportunities in emerging sectors and therequired skills have undergone a change. For reaping the competitive advantage thecompanies have to evolve innovative practices in all the major areas of business. In order tosustain in the long run an organization should focus on enhancing its ability to adapt to thechanging environment. Change should not be considered as an event but as an ongoingprocess that takes place in the business cycle. It is imperative that strategic approach has to beclubbed with the ethical approach during the change management process. Change not onlyinvolves the financial aspects but also the human side that covers the emotions and attributesof the employees. Values exist in working environment and organizational culture is a clearindicator of values. Organizations should identify the relationship between values andorganizational changes so that they can face the changes that are taking place with respect toculture and values. Thus competency based change management should be value driven andthere is a dire need to go for an eclectic mix of both proactive and reactive methods inmanaging change.

140www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/REFERENCESAdams, J. (2003). Successful Change paying attention to the intangibles, OD Practitioner,Retrieved from http://www.eartheart-ent.com/docs/SuccessfulChange1.pdfArgenti, P. (2007). Strategic Corporate Communications, Tata McGraw Hill, Mumbai.Fritz, R. (2006). Rate yourself as a manager, Pustak Mahal , New Delhi.Balogun,J.(2001). Management Quarterly, Retrieved from http://www.tomorrowsleaders.com/ A5569D/icaew/content.nsf/ DocumentLookup/ICAEWSTR0109/$file/ MQ10+ Strategy.pdfChandra, A & Kabra, S. (2000). Human Resource strategy – Architecture for change,Response Books, New Delhi.Core values, Retrieved from http://www.businessdictionary.com/definition/core-values.htmlDouglas, E. (2009). Strategic Change Management Retrieved fromhttp://www.leadingresources.com/learning/tools/strategicplanning/changemanagement/Hellriegel & Slocum. (2005). Organisational Behaviour .Southwestern Thomson Learning .Jacobs, R. W, Johnson, B. & McKeown, F. (2010). How to Add Value in ContinuingStrategic Change Managing Polarities, About.com Guide, Retrieved fromhttp://humanresources. about. com/od/changemanagement/a/value_change.htmKrigsman, M. (2011).Change Management and Communications for IT success Retrievedfromhttp://www.zdnet.com/blog/projectfailures/change-management-and-communications-for-itsuccess/12455Krishnan,T. N. (2010). Technological change and employment relations in India The IndianJournal of Industrial Relations 45(3), 367-380.Kormanik, M.B, Leher, P.R. & Wimmick, T.A. (2009). General competencies for the HRDscholar-Practitioner Perspectives from across the profession Advances in Developing HumanResources 11(4) , 486-606.Kotter, J. P. (1996), Leading change. Cambridge, MA: Harvard Business School Press.Luthans, F.(1995), Organizational Behavior McGraw – Hill Inc, USA.Malone, S. A. (2006), Management Update- 24x7 House, New DelhiMirabile, R.J. (1997), Everything you wanted to know about competency modeling Trainingand Development 51, 73-77.Moid, S. (2008). The acrobatics of change concepts, techniques, strategies and executionSage Publications, New Delhi.

141www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Nonaka, I. & Takenchi, H. (2011), The wise leader Harvard Business Review pp: 58-67Our Change Management Competencies (2008). Retrieved from http://www.bcg.com/expertise_impact/capabilities/ organization/change_ management/competencies.aspx.Our philosophy Ten things we know to be true (2005).Retrieved fromhttp://www.google.com/ corporate/tenthings.htmlPrahlad,G .K. & Hamel, G. (1990),The core competence of the corporation HarvardBusiness http://tleinc.com/PDFS/FILES/resources/ The%20Core%20 Competencies%20of%20the%20 Corp.pdfProactive change management .(2011). Retrieved fromhttp://www.orgchart.net/wiki/Proactive _ Change_ ManagementProsci Change Management Series(2011).Retrieved fromhttp://www.prosci.com/prosci_change_ series. pdfRogers, E. (1962). Diffusion of innovations, New York: Free Press, New York.Rowe, C.(1995),Clarifying the use of competence and competency models in recruitment,assessment and staff development Industrial and Commercial Training,27: 12-17Shermon, G. (2008), Competency based HRM Tata Mcgraw Hill Publishing CompanyLimited, New Delhi.Waraich, S.B. & Bhardwaj, G.(2010), Workforce reduction and human resourcecompetencies: An exploratory studies The Indian Journal of Industrial Relations vol. 46(1).pp. 100-11.

142www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/LNG SHIPPING BUSINESS VERSUS DRY CARGO SHIPPINGMARKET – A COMPARATIVE STUDYABSTRACTS.KAMALAKANNAN*; DR.B.MADHAVAN***Marine Engineer, Research Scholar,AMET University, Chennai, India.**Professor, Management Studies,AMET University, Chennai, India.Natural gas is one of the “Big Three” fossil fuels that make up the vast majority of world’senergy consumption along with coal and oil. As a cleaner burning fuel than both oil and coal,with less carbon emissions, natural gas has been seen as an increasingly attractive fuel source.According to the latest report from EIA The International Energy Outlook (2010), the totalnatural gas consumption worldwide is expected to increase by 44%, from 4.9 trillion m3 in2007 to 7.2 trillion m3 in 2035, of which about 30% volume is traded internationally and therest is absorbed by domestic production. Nowadays, the transportation of natural gas ismainly done by pipeline and by shipment in the form of liquefied natural gas (LNG). Thelatter one transported around 27% of world trade volume in 2009 and the figure is stillgrowing. LNG projects are highly capital intensive and technologically sophisticated. It costsseveral billion dollars to construct facilities for the LNG supply chain (gas exploration,liquefaction, transportation and regasification). Commitments to such high investment lead tothe LNG projects to set a template for the business. Security of supply is paramount: longtermplanning and close cooperation between sellers and buyers resulted in long-term, rigidcontracts with shipping tied in. Given such industrial pattern, LNG shipping boasts its owncharacteristics in contrast to the other shipping industries, e.g. the container and bulk sectors.What are the unique features of the LNG shipping market compared to dry market segments?And what are the reasons behind such features? These questions are the motivation for thisstudy. Hence, the aim of this paper is to explore the answers of these questions by acomparative study with container and bulk markets (Both are dry markets) on twodimensions: shipowners’ structure characteristics and fleet composition. Severalconcentration measures are applied for analyzing the numbers and size of ship owners and thedistribution of transport capacity among the owners within the three shipping segments.Moreover, the development of the LNG fleet, its size evolution and distribution will also beexamined in order to draw some conclusions on its fleet features. The same studies for thecontainer and bulk sectors are also included in this paper. The LNG (Liquefied natural gas)shipping market has witnessed a rapid development in recent years in line with the risingworld LNG trade. The purpose of this paper is to explore unique features of the LNGshipping market compared to two other dry market segments: container and dry bulk. More inparticular, the characteristics of the LNG shipping market are examined by providing acomparative analysis on shipowners’ structure and fleet development. Several concentrationmeasures are applied to test the ownership concentration and size distribution of ship ownersin the three markets. In addition, the evolution of the LNG fleet and a comparison of the shipsize distribution with container and bulk sectors are also studied within this paper.KEYWORDS: LNG, Q-flex, Q-max, Container, Bulk, Concentration, Fleet Development.___________________________________________________________________________

143www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/INTRODUCTIONLNG is natural gas stored and transported in liquid form at atmospheric pressure at atemperature of -161 o C (-256 o F). Liquefied gas occupies a volume corresponding of 1/600 ofthe gas in the gaseous state which eases the transportation process and allows LNG to beshipped in specialized carriers. Most studies indicate that LNG shipping is more competitivein cases where pipeline transportation is not feasible due to geographic constraints or noteconomic, particularly for medium and long distances. With the development of the LNGspot trade, LNG shipment also offers diversity and flexibility of gas supply around the worldand assists to shape a global gas market.Traditionally, the LNG industry has been a highly structured one, tied to long term contractsof 20 years or more. Due to the massive cost of building the facilities, finance was onlyavailable if banks could see long term guarantees of a project’s viability in place. The supplychain was characterized by fixed contracts with destination clauses to prevent cargoes beingdiverted into markets other than those stipulated. In the early of 1990s, the LNG world tradewas firmly divided between the Atlantic Basin and Asia Pacific markets. There was minimaltrade between these two regions, and consequently little or no market or price interactionThompson et al (2009). Specific import terminals serviced specific contracts, with theshipping capacity contracted for specific routes, meaning that vessel supply and demand werenormally very closely matched, with few vessels spare for short term or spot operations.However, with debottlenecking and the expansion of liquefaction plants in exportingcountries, more surplus volume was offered which either effectively rolled into long-termcontracts and sold to the same buyers or flowed into the alternative markets. As a result of thelatter a short-term market started to emerge and regionalization of the industry began to breakdown. Other drivers favouring the short-term market include:• Flexibility of supply: once the long-term buyers could not absorb the contractedvolume, with more flexible contract terms (i.e. no destination restriction clause), thesellers can divert the cargo to alternative buyers in order to arbitrage prices betweenthe markets;• Quick response to gas demand: once natural events occurred upon buyers (i.e.pipeline supply is curtailed or a sudden increase of seasonal demand), the buyers cansearch for gas from alternative supplies.With the growth of the short-term trade, a new global and competitive gas market is in themaking. But “the long-term contracts would be still alive and well” Jensen (2004) since nosupplier has yet undertaken to build a new facility on a speculative basis without a contractedoutlet.Nowadays, the LNG trade is taking place in three main trading bases, one covering theAsia/Pacific and the other the Atlantic (including the Mediterranean), while the Middle East,sitting between these two blocs, benefits from its geographical advantage of being able totrade with both markets.The Asia/Pacific market is the largest and longer established of the three markets. The regionhas been dominated for some time by Japan, which imported 36% of all LNG traded in 2009,and 57% of Asia’s imports. Second comes South Korea, with Taiwan and India forming a

144www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/third layer of importers. China is a nascent presence that will soon become a major importerbased on the new regasification capacities being built there. Exports in this market remaindominated by Indonesia and Malaysia, but Australia is not far behind having increased itsexports significantly in 2009, by 19.4% over 2008. Long-contracts still influence this marketespecially on the export side, but South Korean and China, two major importers for spotcargo, take some volume from the Atlantic base.The main consuming nations in the Atlantic market are in Western Europe and NorthAmerica. Spain, the largest importer in Europe, accounted for 11.3% of all imports in 2009;France and the USA imported 5.3% each and the UK, the fastest growing importer in Europe,accounted for 4.4%. On the export side, Algeria is the largest producer in this market, withTrinidad and Tobago and Nigeria forming a second tier leaving Egypt a step behind.Equatorial Guinea only started operations in 2007 and is already the next largest exporter. Inthe Middle East, Qatar is by far the largest exporter in the world, exporting commodity toboth Asia/Pacific and Atlantic markets accounting for 20.3% of all trade volume in 2009.Besides, Oman and Abu Dhabi are fast growing sellers in that region. It is notable that bothAtlantic and the Middle East are more active in the short-term market where 90% of worldspot volume flows out to the consuming markets.COMPARATIVE STUDYA. LNG SHIPPING MARKET STRUCTUREThe LNG industry originally developed as a niche business where a relatively small numberof sellers and buyers used a traditional approach with ships dedicated to bilateral trades forlong-term contracts. Due to the large capital requirements of LNG projects together with thehigh risks involved, the market participants were limited to the so-called “super majors”.Buyers were either government monopolies or franchised utility companies from OECDcountries. Sellers were typically either major oil companies or national oil companies ofproducing countries. Hence, financial creditworthiness for the project was usually not anissue. In order to structure a risk sharing system among the participants, the long-termcontract between buyer and seller was central to the project. The risk sharing logic wasembodied in the phrase “the buyer takes the volume risk and the seller takes the price risk”Jensen (2004). Hence most contracts featured take-or-pay provisions to assure buyer offtakeat some minimum level and a price escalation clause to transfer responsibility for energyprice fluctuations to the seller. Although long-term contracts were common, the point ofdelivery might be either F.O.B or D.E.S, depending on which party assumed the tankertransportation responsibility. Tankers might be owned by either buyer or seller orindependent shipowners, but traditionally were dedicated to a specific trade, usually for thelife of the contract.After the 1990s the buyers wanted more flexibility to their supplies because more parties sawthe potential of LNG projects. As a result, LNG shipping became under the control ofdifferent parties. Therefore, LNG shipping moved away from a position where it is traded onspecific routes to more flexible trades (spot trade is growing). Also buyers started to moveupstream and participated in upstream activities such as shipping. Sellers also started to movealong the chain, becoming minority owners in shipping as occasionally in regasificationplants.

145www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/By far, as part of the global trend towards privatization of the energy markets, thetransformations taking place in the LNG market are heavily influenced by deregulation andliberalization in both the upstream and downstream gas markets. The ongoing changes haverecently resulted in more cooperation agreements and the setting up of creative consortiumsbetween market players. Nowadays, it can be found that some independent shipownerscooperate with upstream gas sellers by investing in liquefaction projects (i.e. in 2004, GolarLNG had a corporation with the BG group). Some other shipping companies invest withdownstream buyers in import terminals or even take over the role of refrigeration terminalsby converting ships to floating gas production or regasification units Engelen & Dullaert(2010).One of the most noticeable changes in the market structure (which has both contributed toand benefited from the new short term market place) has been the emergence of companiesthat invest throughout the LNG supply chain. There are an increasing number of firms whohave a portfolio of liquefaction interests which they use to supply product to a portfolio ofimport terminals using vessels they control specifically for this purpose. Such group mainlyincludes a number of oil majors like Shell, BP, ExxonMobil, ConocoPhillips; utilities such asBG, ENI and Osaka Gas; private companies like Mitsui and Statoil; and quasi-governmentcompanies like Sonatrach and Qatar Petroleum Clarkson (2010).The market structure in LNG shipping only recently started to receive attention in academicliterature. Jensen (2004) pointed out that, although long-term contracts in LNG have been thevehicle for sharing the large up-front investment risks that characterize LNG projects, theshort-term trading is growing fast in recent years. The study also shows that declining costsof delivering LNG, the growing diversity of supply sources and a loosening of the traditionalrigid industry structure have created a system which can transmit price signals freely betweenisolated regional gas systems, therefore arbitrage trade is developed. However, as the authornoted, the increase of physical flows between regions does not imply a global market. Sincethe long term contract still remains a mainstay of international trade, the growth of short-termtrade volume and price arbitration are limited accordingly. Thus, a LNG global market maywell not live up to its expectations. Dorigoni et al. (2008) conclude that LNG shipping isintrinsically related to LNG sector dynamics, especially since the owners of tankers arecompanies controlled by gas producers and to a lesser extent by gas importers. This impliesthat long-term contracts are often used.Gkonis and Psaraftis (2009) used a game theoretic approach to study competition in LNGshipping. The conclusions contain three key points for strategic decision-making by shippinglines. First, shipping companies must take into account the capacity each company supplies tothe market. Second, the greater versatility and adaptability achieved by having smallervessels in the fleet should be compared to the economies of scale advantages that a portfolioconsisting of large scale vessels enjoys. Finally, non-cooperative collusion may exist in theLNG shipping business.Engelen and Dullaert (2010) examined transformations in gas shipping aimed atunderstanding the features of the gas shipping market, distinct with other main merchantmarkets (dry, tanker and container markets). They demonstrate that the LNG shipping marketis transforming and evolving to a more competitive setting. The operational efficiency in theLNG market can be increased significantly when sellers take a more thorough stance towardscontracting tonnage on the back of product supply. More flexible contracts will be used in amarket with more dispersed sellers and buyers.

146www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/B. CONCENTRATION MEASURESAfter discussing the evolution in the LNG shipping market in the last decades, the question ishow the market structure exactly looks like in the LNG shipping industry and how thenumber and size of companies in the market is distributed. The number and size distributionof firms is a key element of market structure which reflects to some extent the nature ofcompetition in the market concerned.Concentration measures are the most widely used indicators of market structure. In thissection, the most common measures are used for market concentration and aim to apply thesemeasures to examine the market structure in the LNG shipping market in the next section. Inthis study, it is focussed on one aspect of market structure, i.e. the concentration level ofcapacity control by shipowners. Thus looking at the vessel supply side of the market, not thedistribution of actual ship operators or the competition between these shipping lines. Theshipowners’ structure does not necessarily reflect the level of competition between shippinglines since various forms of chartering contracts make that shipowners are not necessarily theship operators.N-FIRM CONCENTRATION RATIO: measures the share of the industry’s n largest firmsin some measure of total industry size. The formula for the n-firm concentration ratio is asfollows:Si is the share of the i-th largest firm in total industry sales, assets or employment. And n isthe number of firms in the industry. There are no set rules for the choice of n, the number oflarge firms to be included in the calculation of CRn. The most common concentration ratiosare n=4 or 8, which means the four and the eight largest firms. Concentration ratios areusually used to show the extent of market control of the largest firms in the industry and toillustrate the degree to which an industry is oligopolistic.For most practical purposed, both the choice of n and the choice of size measure may not betoo crucial. For example, Bailey and Boyle (1971) find that n-firm concentration ratios forseveral values of n are highly correlated. In practice, an attractive property of the n-firmconcentration ratio is that it requires size data on the top n firm only, together with thecorresponding aggregate size measure for the entire industry. In other words, the datarequirements are less demanding than for the other concentration measures. However, the useof data for the top n firms only is also a limitation, in the sense that no account is taken of thenumber and size distribution of firm that are outside the top n. Furthermore, no account istaken of the size distribution within the top n firms. It also does not provide a lot but providesa more complete picture of industry concentration than does the concentration ratio.HERFINDAHL-HIRSCHMAN (HH) INDEX: Hirschman (1945;1950) both suggested aconcentration measure based on the sum of the squared market shares of all firms in theindustry. The HH index is calculated as follows:

147www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Si is the market share of firm i, and N is the total number of firms in the industry. Themaximum value of HH=1 occurs when the size distribution of the N firms is highly skewed.In the most extreme case, one dominant firm has a market share only which means theindustry consists of a singly monopoly producer. The minimum values of HH= 1/N occurswhen the industry consists of n equal-size firms. In this case, each firm has a market share ofSi= 1/N1. A practical difficulty with the HH index is its requirement for individual size dataon all of the industry’s member firms. The HH index provides a greater degree ofdiscrimination than the concentration ratio. As a result, when the two indicators offerdiffering signals the former one is likely to be more reliable.There is also a normalized HH index (HH*) for comparison with different markets. Whereasthe HH index ranges from 1/N to one, the normalized HH index ranges from 0 to 1. It iscomputed as:Where N is the number of firms in the market, and HH is the usual HH Index, as above.LORENZ CURVE AND GINI COEFFICIENT: A Lorenz curve named after Lorenz(1905) shows a cumulative frequency curve that compares the distribution of a specificvariable with the uniform distribution that represents equality. A diagonal line represents thisequality distribution. The greater the deviation of the Lorenz curve from this line, the greaterthe inequality is Notteboom (2006). The Gini coefficient named after Corrado Gini (1912) isusually defined mathematically based on the Lorenz curve. The formula definition for theGini coefficient is as follows:The Gini coefficient can range from 0 to 1. A low Gini coefficient indicates a more equaldistribution, with 0 corresponding to complete equality, while higher Gini coefficientindicates more unequal distribution, with 1 corresponding to complete inequality. The Ginicoefficient is the most common statistical measure of diversity or inequality which wasinitially developed to measure the degree of concentration/inequality in income distribution(Kendall and Stuart 1969; Allison 1978). It is however quite common to use the Giniinequality index in studies on maritime industry especially on port system concentration. Forexample, Ducruet et al. (2009) identified 34 academic studies on port concentration between1963 and 2008.C. SHIP OWNER’S CONCENTRATION ANALYSISThis analysis uses the measures above to examine shipowners’ concentration and sizedistribution features in the LNG shipping market, compared with the container and bulkshipping sectors. The size measure we use relates to the ownership of transport capacity ofeach ship owner in each market. The analysis is based on an extensive database of Clarksoncontaining the situation for March 2011. There are 56 owners holding 363 tankers with 51.9mm3 in total in the LNG market. The container market counts 622 owners possessing 4985

148www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/ships with a total capacity of 14.2m TEU. The dry bulk sector is crowded with 1608 ownershaving 8236 bulk carriers with 544.5m dwt.As discussed above, most of LNG fleet capacity is owned by oil and gas majors, and just asmall part falls into independent shipping companies committed to long term contracts by lifeof the ship. There is nearly no speculative activity in this market. Thus, most of the ownersare also operators. For these reasons, the ownership of tanker capacity can also be seen as agood indicator to examine the LNG shipping market concentration and thus the level ofcompetition in the market. This is however not the case in the container and bulk marketswhere the vessel owner is not necessarily the vessel operator and thus the supplier of vesselservices to the customer base. Hence, charter contracts (voyage, time and bareboat) are verycommon in the dry bulk market. Container shipping lines typically own less than half of thevessels they operate and charter in the remaining part.CONCLUSIONThrough the analysis of market concentration in the Shipping markets, the followingconclusions can be made on the characteristics of the LNG shipping market:• The LNG shipping market is a rather small market compared to the container and bulkmarket segments.• The LNG shipping market is more concentrated than the container and bulk shipping sectorsin terms of distribution of transport capacity among the owners. It was noted that in thecontainer market some shipowners chart out vessels to liner service providers who are actualship operators, and many asset players do speculative activities by selling and purchasingships in the bulk sector. Thus, the ownership of a vessel as size measure might not be anaccurate indicator to examine the shipping market structure in these two segments.Nevertheless it is estimated that the container shipping market is more concentrated if onetakes into account alliances, consortia, or discussion agreements where liner shippingcompanies share vessels and schedules. But for the bulk sector, many small and individualshipping companies offer identical services transporting raw materials over the world. Themarket is rather competitive.• The LNG shipping market is less unequally distributed than the container and bulk markets.This seems surprising given the higher concentration level in the LNG market as shown bythe normalized HH index. The reason for this seeming contradiction between concentrationlevels and inequality levels can be examined and that illustrates the distribution amongowners by average ship size and number of ships owned. It can be concluded that in the LNGmarket, the fleet size of the owners is mostly determined by the number of ships not the shipsize (most common average ship size is 130,000-150,000m3), except for Qatar gas who is theonly LNG tanker owner possessing the largest tankers at this moment. In contrast, thecontainer market is filled with some large shipowners (many of which also act as shippinglines) who hold a huge vessel capacity both in number and size of the vessels. At the othersside of the market there are a large number of small shipowners who typically own smallervessels. A similar situation can be found in the bulk market.Natural gas is becoming more important as a clean energy source. LNG shipping can beeconomically operated on medium and long distances. Cost reductions in all segments of theLNG supply chains and changing world geography in LNG trade have triggered a lot of new

149www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/investments in LNG shipping. LNG shipping was initially based on dedicated long-termcontracts and regionally based trade flows. Such limited fluidity leads to an immature market.However the emergence of the short-term/spot trade and the liberalization of the gas marketmade LNG shipping a most promising area in the shipping industry. The focus in this paperwas on the unique features of the LNG shipping market in terms of its vessel ownershipstructure and fleet development compared to the container and bulk markets. The mainconclusions of our analysis are as follows:• LNG shipping is highly interlinked with LNG projects which normally commit for a longterm planning (20 years or more). Tankers are mostly purpose-built for special projects andtrades dedicated to the life of the contract. Despite the growth of the short-term trade inrecent years, long-term contracts will continue to be dominant as project investors have tosecure their return on investment for the capital intensive facilities. The strong link betweenLNG projects and LNG shipping is unique for this market. In the container and bulk markets,ships are not built to serve cargo flows related to specific projects. Instead, vessels are builtand bought/sold following more general market dynamics and influenced by an overallmarket sentiment.• The LNG shipping market structure initially was characterized by an oligopoly formed by afew large state-controlled or regulated oil and gas companies and a few independentshipowners. The liberalization trends in both the upstream and downstream gas marketsresulted in the emergence of more independent shipping companies who cooperate withupstream gas sellers in liquefaction projects or with downstream buyers in import terminals.Contrary to the container and bulk markets where vessel chartering is widely spread, theshipowners in the LNG market typically also act as ship operator.• The LNG shipping market is a rather small market compared to the container and bulkmarket segments where there are a small number of owners with relative small transportcapacity. The LNG market is more concentrated in terms of vessel ownership than thecontainer and bulk shipping sectors (examined by concentration ratio, HH index). But,according to the Gini coefficients and Lorenz curves, the LNG shipping market is lessunequally distributed than the container and bulk markets. The reason for this ratherinteresting combination of higher concentration and lower inequality is that the averagetanker size is centralized in the range of 130,000-150,000m3, which cannot make largeplayers heavily weigh their market share. However, the container and bulk markets are filledwith some large companies holding huge capacities both in number and vessel size and manysmaller companies with smaller vessel sizes.• The LNG fleet keeps growing in recent years both in numbers and ship size. Especially withthe delivery of large tankers from Qatar gas (Q-Flex, Q-Max), the average size is nowreaching 142,092m3. However, the most common vessel size (i.e. the range of 130,000-150,000m3, which used to be represented as a LNG project standard constitutes 69.5% of thefleet. In the container and bulk sectors, ship sizes are diversified by trading routes, parcel sizeand trade flow.The development of the LNG fleet is in line with the growth of LNG trade. The 1980s were ableak period for the LNG business, characterized by high energy prices and a collapse indemand for natural gas, when interest in LNG projects including the ships to transport it wasminimal. The revival in demand for gas in the 1990s brought a lot of new projects, withaccompanying ship orders promoting a second period of steady fleet growth until the early

150www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/years of the 21st century. The glut of new projects that were approved at that time sent theorder book spiralling. In the period 2000-2003 around 20 vessels a year were ordered at acost of in excess of $12 billion, but 2004 was when things really took off. Thus this papergives the good comparative study of LNG Shipping market with other dry markets.REFERENCES[1] Dorigoni, S., Mazzei, L., Pontoni, F., Sileo, A. (2008) LNG shipping: a descriptiveanalysis,Report for IEFE Universita Bocconi, Milan[2] Allison, P.D., (1978) Measures of inequality, American Sociological Review 43: 865-880[3] Energy Information Administration (2010) The international energy outlook 2010[4] Gkonis, K. G., Psaraftis, H. N. (2009) The LNG market: a game theoretic approach tocompetition in LNG shipping. Maritime Economics and Logistics, 11(2), 227-246[5] Jensen, J.T. (2003) The LNG revolution, The Energy Journal of the InternationalAssociation for Energy Economics, 24(2)[6] Nikhalat, H., Zavitsas, K., Bell, M.G.H., Elhajj, M.(2010) Predicting the future of LNGMarket: A Review and Comparison of Oil and LNG Industries Performance Indicators andRisk Factors, Annual Conference of the International Association of Maritime Economists,Lisbon, 7-9 July 2010.[7] Valais, M., Chabrelie, M.F., Lefeuvre, T. (2001) World LNG prospects: favourableparameters for a new growth era, 18th World Energy Congress, Buenos Aires, 21-25October.[8] Wang, S., Notteboom, T. (2010) World LNG shipping: Dynamics in Markets, Ships andTerminal Projects, in: Notteboom (ed.), Current Issues in Shipping, Ports and Logistics,Antwerp University Press: Brussels, 129-153.

151www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/RETAILER’S EOQ DECISION FOR FINITE HORIZON TO REDUCETHE IMPACT OF BULLWHIP EFFECTABSTRACTSACHIN GUPTA**Assistant Professor,Maharaja Agrasen Institute of Management Studies,Delhi.A phenomenon that is now well known as the bullwhip effect suggests that the variability inthe orders increases as they move up the supply chain from retailers to wholesalers tomanufacturers to suppliers. This effect is observed in a range of industries, modeled byseveral authors and various remedies have been suggested. Most of the authors explore thecause of bullwhip effect. Demand signal processing, non-zero lead times, order batching,supply shortages, and price fluctuations are the major reasons for bullwhip effect to occur. Inthis paper, the impact of push marketing strategies on bullwhip effect has been explored. Thebullwhip effect starts at the retailers end and its effect lasts upto the point of suppliers.Furthermore, this paper also explores the optimal order quantity for retailers under certainconditions, in case of pull marketing strategies such that the total cost per unit time atretailer‘s end is minimum. A mathematical model has been developed suggesting thesituations under which a supplier takes the decision about whether to fill the order or not. Byeliminating or controlling this effect, it is possible to increase product profitability, reducingthe useless costs such as stock-out and obsolescence costs.KEYWORDS: Supply chain management, Bullwhip effect, Push marketing strategies,Optimal order quantity.___________________________________________________________________________1. INTRODUCTIONOver the past decade, the traditional purchasing and logistics functions have evolved into abroader strategic approach to materials and distribution management known as Supply ChainManagement (SCM). Supply Chain Management consists of network of organizationsrelated to each other in different activities (like flow of material, information or finance) thatproduce value in form of product or service to satisfy customer. Supply Chain Managementcan be applied to large companies with several sites, covering large geographical area withthe aim to satisfy large number of people with different types of products or services. Inbroad sense, supply chain management is inter-organizational supply chain which doesdifferent types of functions like marketing, production, procurement, logistic, finance, etc.The utmost need of governing supply chain management is to get competitive advantage; theorganizations which apply supply chain management are able to optimize resources andhence improve its functions and survive in the market.Supply Chain Management deals with competitiveness which can be improved by reducingcost, optimizing use of resources, increasing flexibility to deal with customer demand andfrequent changes in customer demand, providing superior quality of products and services,utilizing information and communication technology. There are various facets of supply

152www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/chain management. Besides competitiveness and customer service, strong integrationbetween sub-functional departments within the organization and outside the organizations,i.e. network and inter-organization collaboration, is very much required to implement asuccessful and effective supply chain. Supply chain management should be process orientatedand equipped with advance planning. It should also look into customer behavior, change indemand and technology, forecasting of finance, material, etc. Foundation of supply chainmanagement includes purchasing, resource allocation and requirement, manufacturing ofgoods or services, logistics, marketing, finance, statistics and operational research,accounting, information technology, organizational theory, and so on.Different authors have given the different definitions of supply chain management. Tan et al.defined it as a capability which is to enhance competitive advantage. Berry et al. (1994)defined supply chain in terms of information and trust. Jones and Riley (1987) defined it as―An integrative approach to dealing with the planning and control of the materials flow fromsuppliers to end-users.‖ Christopher (1992) defined it in terms of upstream and downstreamoperation. Another definition of supply chain management emerges from the transportationand logistics literature of the wholesaling and retailing industry, emphasizing the importanceof physical distribution and integrated logistics. There is no doubt that logistics is animportant function of business and is evolving into strategic supply chain management (Newand Payne, 1995).FIG. 1. ACTIVITIES AND FIRMS IN A SUPPLY CHAIN. SOURCE: NEW ANDPAYNE (1995)As it can be noted from Figure 1, process integration in terms of information exchange playsvery important role to make supply chain management effective. Information is to flow fromcustomer to retailer, retailer to wholesaler and then wholesaler to manufacturer, this flow ofinformation is termed as upstream information.

153www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/On the basis of the information various activities like planning, manufacturing, distributionand marketing are performed to attain some functional objectives under system constraints.Information exchange within supply chain is main pillar to make it successful and effective.If either desired information or in-flow of information is having any error then it causes a bigproblem. The problem in deformation of the information while it goes upstream in supplychain is termed as Bullwhip effect. Any fluctuation in demand at customer end results in bigdeviation at manufacturer end. Even it has been seen that if demand is constant it gives adistorted picture to the manufacturer about the quantity to produce.FIG. 2. DEMAND AMPLIFICATION OF TIME SERIES TO BE VIEWEDTHROUGH THE ‘‘FILTER’’ LENS. SOURCE: BERRY AND TOWILL, 1995Suppose for a particular period, demand of a certain product is not known to retailer, thenretailer would have high stock in order to overcome the uncertainty and the same informationis passed to the wholesaler and then to the manufacturer. In that case manufacturer wouldproduce the product in more quantity than it must have produced. So the inventory levelbecomes high only due to lack of information of demand at retailer‘s end. Higher inventoryresults in blocking of working capital for the firm. The blocking of working capital reducesthe operational efficiency of the firm. When the number of supply chain increases, thecomplexity becomes larger and the aggregate inventory becomes much higher. Thisaggregate inventory results in loss of opportunity cost, reduces the required efforts, integrityand flow of information between partners.According to the study of R. Metters (1997), the retailer‘s end cost of carrying inventory ofproduct for a year equals at least 25 percent of what they pay for the product. Two-weekinventory reduction represents a cost savings nearly equal to 1 percent of sales or the averageretailer profit equals about 2 percent of sales so saving is enough to increase profit by 50percent. Campbell soup found that after it introduced the program, profit of its product grewtwice as compared to earlier profit.

154www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Procter and Gamble (P&G) is the company which named this phenomenon as bullwhip effectafter seeing the great variation between the order they are producing and actual sales of theproduct ―pampers diapers.‖ They observed that diaper with uniform demand created a waveof changes up the supply chain due to very minor changes in demand. HP also found greatvariability in the sale of printers; HP found it difficult to fulfill the orders on time and in orderto meet the time it resulted in the increase in cost. Studies of apparel and grocery industryhave shown a similar phenomenon in order as they move upstream in supply chain from retailto manufacturing. Nearly in all types of companies bullwhip effect has been observed likeCampbell soup in consumer product IBM and Motorola in electronics, General Motors inautomobiles and Eli Lilly in pharmaceuticals, etc.Supply chain management has received attention since the early 1980s, yet conceptually themanagement of supply chains is not particularly well understood, and many authors havehighlighted the necessity of clear definitional constructs and conceptual frameworks onsupply chain management (Saunders, 1995, 1998; New, 1995; Cooper et al., 1997; Babbarand Prasad, 1998). Saunders (1995) warns that pursuit of a universal definition may lead tounnecessary frustration and conflict, and also highlights the fragmented nature of the field ofsupply chain management, drawing as it does on various antecedents including industrialeconomics, systems dynamics, marketing, purchasing and inter-organizational behavior. Thescientific development of a coherent supply chain management discipline requires thatadvancements be made in the development of theoretical models to inform our understandingof supply chain phenomena. As an illustration, the application of Forrester's (1961) industrialdynamics model applied to supply chains (the Forrester Effect, also known as bullwhip effector whipsaw effect) exemplifies such a model. Its value lies in the ability to aid understandingof the actions of materials flow across a chain, and has provided a basis for furtheradvancement of understanding supply chain dynamics (for example, see Sterman, 1989;Towill, 1992; Van Ackere et al., 1993; Lee et al., 1997). Cooper et al. (1997) support thisview, pointing to the fact that whilst supply chain management as a concept is a recentdevelopment, much of the literature is predicated on the adoption and extension of older,established theoretical concepts.Forrester (1961) initiated analysis of this variance amplification phenomenon i.e. thebullwhip effect. His work has inspired many authors to develop business games todemonstrate the bullwhip effect. The well-known Beer Game originated from MIT at the endof the fifties and Sterman (1989) reports on the major findings from a study of theperformance of some 2000 participants. Kaminsky and Simchi-Levi (1998), Kaminsky et al.(2000) developed a computerized version of the beer game. There is certainly no lack ofempirical evidence from real-world supply chains. Lee et al. (1997a, b) identify five majorcauses of the bullwhip effect: demand signal processing, non-zero lead times, order batching,supply shortages and price fluctuations. Of these Disney and Towill (2003b) consider leadtime and demand signal processing to be of particular importance. Remedies includesynchronizing capacities and lead times (Lee et al., 1997; Towill, 1997), increasedcoordination among companies (Metters, 1997), vendor-managed inventory (Disney andTowill, 2003b) and including demand variability in pricing decisions (Naish, 1994). In termsof management science techniques, Yao and Dong-Qing (2001) indicates that demandforecasting and ordering policies are two key methods of controlling the bullwhip effect andPaik and Seung-Kuk (2003), in a statistical study, identified demand forecasting as one of thesignificant variables for bullwhip control. Miyaoka and Hausman (2004) also found thatimproved forecasting could reduce fluctuations in manufacturing production levels.

155www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Out of the various above mentioned factors that results in bullwhip effect, there are manyother factors also that are causes bullwhip. The marketing strategies like push and pullmarketing strategies leads to fluctuation in demand.The push marketing strategies the production and distribution strategies are based upon theforecast rather than on specific customer demand. It is applied to the supply chain where theuncertainty of demand is small and production and distribution are based on long termforecast.Most marketing activity in push strategy is directed at distributors and retailers in order to getthem to carry the product and promote it to the consumers. The sales force, price incentives,retailers advertising and other forms of trade promotions are used to push the product throughthe distribution channel (agents, wholesalers, retailers, and others) to consumers.The present study focuses on the impact of push marketing strategies on retailers orderquantity.The retailers have two choices either he fills the order under the impact of push marketingstrategy where the benefits are provided to it or fill the usual order. A mathematical model isformed that shows the optimal order quantity for the retailer such that total cost per cycle perunit time is minimum. The research paper is further divided into several sections. The nextsection discusses the assumption and notations used through the research paper. In section 3,the mathematical formulation for retailer‘s optimal decision with algorithm is discussed.Later on an algorithm is discussed in section 4 and section 5 is having concluding remark.2. ASSUMPTIONS AND NOTATIONS1. Demand is deterministic and occurring with constant rate.2. Lead time is negligible, supply is instantaneous.3. Shortages are not allowed.4. The value of money is constant over a period of time, cycle length.λ: Demand rateA: ordering cost per orderc: cost of unit itemI: Inventory carrying ChargeQ: Ordering quantity without the impact of push marketing strategyT: cycle length of Quantity QQ 1 : ordering quantity under the impact of push marketing strategy. (Q 1 > Q)T 1 : cycle length of Quantity Q 1 .B: benefits given to the retailers under the push strategies.

156www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/I p : Interest paid to incurred more inventories to take the benefits of Push Strategy.TC: Total Cost per cycle per unit time3. MODEL FORMULATIONThis section consists of two parts. In first part, the retailer decision without the impact ofpush marketing strategy is discussed where as in second part the total cost is if takes the orderaccording to push marketing strategy where he has to fill the order more than usual quantity.3.1 RETAILER’S DECISION WITHOUT THE IMPACT OF PUSH MARKETINGSTRATEGYThis section is further divided into two cases, describe below.Case I: When the cycle length T is integral multiple of T 1 .Q 1QTT 1FIG.3 COMPARISON OF INVENTORY LEVEL IN OPTIMAL ORDER QUANTITYQ WITH THE QUANTITY Q 1 THAT IS PROVIDED UNDER PUSH MARKETINGSTRATEGY IF THE T IS INTEGRAL MULTIPLE OF T 1Case II: When cycle length T is not a integral multiple of T 1 .Q 1QTT 1T k

157www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/FIG. 4 COMPARISON OF INVENTORY LEVEL IN OPTIMAL ORDER QUANTITYQ WITH THE QUANTITY Q 1 THAT IS PROVIDED UNDER PUSH MARKETINGSTRATEGY IF THE T IS NOT AN INTEGRAL MULTIPLE OF T 1In both cases, we have,Case I: leti.e. n cycles are formed within the time span of T.Total cost per cycle isTotal cost per cycle per unit time for the 1 st cycle (the cycle that start at time 0) is given byNow, to minimize this total cost, using the principal of maxima and minima put(2)This implies,Or(3)This is economic order quantity (EOQ) for retailer and also known as Wilson formula.So, every time retailer orders fix order quantityminimum.so that total cost per cycle per unit time is

158www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Total cost per cycle per unit time for the 2 nd cycle (the cycle that start at time T) is given byTotal cost per cycle per unit time for the 3 rd cycle (the cycle that start at time 2T) is given byProceed in the same manner and assuming that there are ‗n‘ such cycle exist,(4)(5)Total cost per cycle per unit time for the n th cycle (the cycle that start at timegiven by) isConsidering ‗i‘ be the worth of money in economy per unit time, we have to evaluate thepresent value of total cost per cycle per unit time for all cycles that are dispersed at differentpoint of time.Now since, we are taking assumption that the value of money remains same throughout thecycle and using the fact that majority of the total cost like purchasing cost, ordering cost andrent of the warehouse etc. (inventory carrying cost) that occurs at start of the cycle.The following figure shows present value of total costs that occurred different point of time,0 T 2 T 3T --------------------------- T(6)FIG 5. PRESENT VALUE OF TOTAL COSTS THAT OCCURRED DIFFERENTPOINT OF TIMESo, the total present value, P of cost incurred in all cycle is given by,(7)

159www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Considering,Then the present value will be,=Now, if we take the special case such as, the value of money remain same though out thewhole term i.e. planning horizon. Taking limit(8)Hence, the present value in this case is given by,Case II:If the cycle length of economic order quantity that is T is not an integral multiple of T 1 , thenthere exists another cycle say T k .(9)In this case, the total number of cycle are sayunit per unit time that is to be incurred is given by,and the present value of the total cost per3.2 RETAILER’S DECISION UNDER THE IMPACT OF PUSH MARKETINGSTRATEGYLet B be the amount of benefit given at time 0 (zero),Now if retailer takes the benefit which is of Rs. B, then order quantity will increased to Q 1 .To purchase more quantity then Q, retailer has to take a loan which is having a interest rate(10)the total interest paid during the cycle is given by,The interest paid per unit time is given by,This can be rewrite as, (11)

160www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Now, the total cost per cycle per unit time is given by,Now the change in total cost if retailer‘s prefer to fill the order under the impact of pushstrategy and under the condition of case I, is given by,(13)and the change in total cost if retailer‘s prefer to fill the order under the impact of pushstrategy and under the condition of case II, is given by4. ALGORITHM TO FIND THE RETAILER’S OPTIMAL DECISIONThe following steps can be taken to estimate the optimal cost for the retailerStep 1. Find the minimum Q, cycle length T using equation (3) and (1).Step 2. Knowing the value of on which wholesaler agrees to pay benefits , compute T 1using equation (1).Step 3. Check whether T is integral multiple of T 1 or not.If it is a integral multiple go to step 4, otherwise go to step 5.Step 4. Compute the value of total cost using equation (8), and go to step 6Step 5. Compute the value of total cost using equation (10) and go to step 7(14)Step 6. Compute using equation(13) and go to step 8.Step 7. Compute using equation(14) and go to step 8.Step 8. Compare the value obtain in equation (13) or equation (14) with ,If, , then purchase quantity Q 1 otherwise purchase Q.

161www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/5. CONCLUDING REMARKIn this paper optimal strategy for retailer to fill the order has been discussed under the impactof push marketing strategy in supply chain management. Once the wholesaler able to get thenumber of retailers that took the advantage of benefits provided by the organizations, the totalnumber of units can be estimated correctly at retailer‘s end. By estimating the correctdemand, the fluctuations present in the order quantity at retailers end can be taken underaccount and hence results in reducing the bullwhip effect.BIBLIOGRAPHYBabbar, S., Prasad, S., 1998. International purchasing, inventory management and logisticsresearch: an assessment and agenda. International Journal of Operations and ProductionManagement 18 (1), 18-36.Baganha, M.P., Cohen, M.A., 1998. The stabilising effect of inventory in supply chains.Operations Research 46 (3), 572–583.Berry, D., Towill, D.R., 1995. Reduce costs—use a more intelligent production and inventorypolicy. BPICS Control Journal 21 (7), 26–30.Berry, T., Ahmed, A., 1997. The consequences of interfirm supply chains formanagementaccounting. Management Accounting 75 (10), 74}75.Bertrand, J.W.M., 1986. Balancing production level variations in complex productionsystems. International Journal of Production Research 24 (5), 1059–1074.Blackburn, J.D., 1991. The Quick Response Movement in the Apparel Industry: A CaseStudy in Time-Compressing Supply Chain, in Time-Based Competition: The NextBattleground in American Manufacturing. Irwin, Homewood, IL.Boccadoro, M., Martinelli, F., Valigi, P., 2006. H-infinity control of a Supply Chain model.In: Proceedings of the 45th IEEE Conference on Decision and Control, pp. 4387–4392.Bonney, M.C., Popplewell, K., 1988. Design of production control systems: Choice ofsystems structure and systems implementation sequence. Engineering Costs and ProductionEconomics 15, 173–189.Bonney, M.C., Popplewell, K., Matoug, M., 1994. Effect of errors and delays in inventoryreporting on production system performance. International Journal of Production Research35, 93–105.Cachon, G., Randall, T., Schmidt, G.M., 2007. In search of the bullwhip effect.Manufacturing and Service Operations Management 9 (4), 457–479.Chen, F., Drezner, Z., Ryan, J., Simchi-Levi, D., 2000a. Quantifying the bullwhip effect in asimple supply chain: The impact of forecasting, lead times, and information. ManagementScience 46 (3), 436–443.Chen, F., Ryan, J., Simchi-Levi, D., 2000b. The impact of exponential smoothing forecastson the bullwhip effect. Naval Research Logistics 47 (4), 271–286.

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165www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/STUDENTS INTENTION TOWARDS ENTREPRENEURSHIP:A REVIEW OF EMPIRICAL STUDIESABSTRACTDR. MOHSIN SHAIKH**Professor & Head,Department of Management Studies,S.K.N College of Engineering, Pune.Entrepreneurship plays a great role in the economic growth and development of the country,more so in a rapidly developing country like India. Entrepreneurship development today hasassumed great significance as it is a key to economic development. The objective ofindustrial development, regional growth and employment generation depend uponentrepreneurial development. Entrepreneurs are the seed of industrial development and itsfruits are greater employment opportunities, increase in per capita income, higher standard ofliving and balanced regional development. Recently there has been a growing interest inundertaking and intensifying actions promoting and supporting the idea of entrepreneurshipas an attractive alternative to wage employment among students. The current paper attemptsto review and analyze the empirical studies undertaken to find out the entrepreneurialintention among university students and find out the factors influencing their decision toventure in entrepreneurship.KEYWORDS: Entrepreneurship, Entrepreneurial intention, Students entrepreneurialintention, Venture creation.___________________________________________________________________________INTRODUCTIONThe shortage of job opportunities in the formal sector is one of the major problems faced bythe graduates in the country. Because of this shortage entrepreneurship was viewed with greatinterest and encouraged ever since in a many economies, more so in developing and underdeveloped economies. Internationally entrepreneurship is deemed to be of vital importancefor economic development and growth desperate desire for growth among the developingcountries have placed the spotlight squarely on entrepreneurship as a major factor in thesuccess of capitalist economies. If we want entrepreneurship to be considered as a potentialcareer or job option, we have to raise the level of awareness of entrepreneurial qualitiesalready present in the society in general and the students in particular. The third world policymakers are especially interested in entrepreneurship and its noticeable economic impact ondeveloping societies they view entrepreneurship, small business venturing and job creation asa counterbalancing high unemployment, slow economic growth and high birth ratesprevailing in many third world economies. Entrepreneurship is currently fashionable in manydeveloped countries. It is a golden age of entrepreurship.Present day entrepreneurs have theskills and funding that entrepreneurs of the past decades only dreamt about. Just as important,becoming an entrepreneur has become an acceptable alternative to working for acorporation.Entrepreners are the new heroes and role models. Magazines are developed fortheir exploits, books are written for their benefit, and society applauds their initiative andindependence.

166www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Entrepreneurship development today has assumed great significance as it is a key toeconomic development. The objective of industrial development, regional growth andemployment generation depend upon entrepreneurial development. Entrepreneurs are theseed of industrial development and its fruits are greater employment opportunities, increasein per capita income, higher standard of living and balanced regional development.Entrepreneurs have altered the direction of national economies, industries and markets. Theyhave invented new products and developed organisations and the means of production tobring them to market. They have introduced quantum leaps in technology and moreproductive uses of the existing resources. They have forced the reallocation of resourcesaway from existing users to new and more productive uses. Many innovations havetransformed the society and altered the pattern of living and many services have beenintroduced to alter or create new service industries.ENTREPRENEURIAL INTENT AMONG STUDENTS: Recently there has been agrowing interest in undertaking and intensifying actions promoting and supporting the idea ofentrepreneurship as an attractive alternative to wage employment among students. There areseveral reasons for this interest. Firstly well educated entrepreneurer’s are expected to createventures that grow faster than their counterparts. The importance of education to successfulperformance of new ventures is well recognized by management parishioners andresearchers. secondly due to the process of restructuring in organisations followingintensified competition in the market worldwide, previous advantages with wage employmentin large ,established enterprises, such as job security or reward for loyalty have lost on theiractuality, thus increasing the desirability of self employment. The unemployment amonggraduates has also been increasing.Over the years the decision to become an entrepreneur has been analysed using differentmethodologies. Researchers began looking for the existence of certain personality traits thatcould be associated with entrepreneurial ability. Later studies have pointed out to theimportance of different characteristics such as age, gender, origin, religion, level of studies,labour experience etc. They are usually called as demographic variables. Both theseapproaches have allowed the identification of significant relationship among certain traits ordemographic characteristics of the person. However their predictive capacity has been verylimited. From the theoretical perspective, these approaches have been criticized, both for theirmethodological and conceptual problems and for their low explanatory capacity.Since the decision to become an entrepreneur may be considered as voluntary and conscious,it seems reasonable to analyze how that decision is taken. In this sense, entrepreneurialintention would be a previous and determinant element towards performing entrepreneurialbehaviour. In turn the intention to carry out a given behaviour will depend on the person’sattitude towards that behaviour. A more favorable attitude would increase the intention ofcarrying it out. In this manner this “Attitude Approach” would be preferable to thosetraditionally used approaches used, such as the trait or the demographic approaches. Thusattitude would measure the extent to which individual positively or negatively evaluatessomething. Attitudes are relatively stable, but may change according to time and situation.

167www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/REVIEW OF EMPIRICAL STUDIES IN ENTREPRENEURIAL INTENTIONAMONG STUDENTS1) Ethen Duyglues in his study of 170 MBA students tried to investigate whetherentrepreneurs and non entrepreneurs have systematically different psychologicalcharacteristics, especially in terms of proactive behaviour or personality. He used theentrepreneurship model proposed by Kostova (1997). The model suggests that amongother things, those certain entrepreneurial activities and these characteristics makethem different from non-entrepreneurs. It was found that 67.9 percent of the studentswere found to be entrepreneurially inclined. The income of the family and professionof the family members was found to be a significant factor that influences theentrepreneurial orientation of students. A strong relationship between proactivebehaviour and entrepreneurship orientation was found in the study.2) Malin, B. Morris, K. Alan C, Jennie, E,, in a study of 421 students, facing careerdecision respondent asked them to indicate on a scale from 0-100 how likely it wasfor them to start a firm within the next 5 years, how attraction starting a firm for theaverage person was, how attractive it was for them, how feasible for the averagepeople was to start a fun and how feasible it was for them. Additional an 18 itemmeasure on intentions using likes scale was used. It was found that social norms andself efficacy had a direct relationship on desirability and feasibility respectively. Itwas also found that desirability and feasibility were associated with entrepreneurialintention. Those with strong intentions had a strong desirability towards new ventures.3) Hytti et al in their study of Turku University students in Finland tried to investigatehow people with an academic degree perceive entrepreneurship as a personal careeralterative. It was found that in case of Engineering discipline people with lowerengineering degree are more inclined to peruse entrepreneurship where as those withhigher engineering degree the option is less frequent within the business and socialstudies the trend seems to be opposite ; the more educated person act as entrepreneursmore frequently than the person with a lower degree. It was found that men are about2.5 times likely to perceive entrepreneurship as personally desirable as well asfeasible and similarly 2.5 times more likely to start a form in next 5 years. The age ofthe respondents also explains the perceptions regarding entrepreneurship. Thelikelihood for finding entrepreneurship personally desirable increases for the youngpeople (under 30) and prime age people (31 years) compared to middle aged and olderpeople (above 45 years). It was also found that students with an engineeringbackground are less likely to set up a firm compound to management or naturalscience background.4) Evan, d (2005), investigated the role of entrepreneurial attitudes and entrepreneurialself-efficacy on an individual’s intention to engage in entrepreneurial behaviour.Their sample consisted of 414 students surveyed at the beginning of their firstentrepreneurship class in MBA programs in Australia (46), China (39), India (204)and Thailand (125) between 2003 and 2004. They measured the entrepreneurialintentions of the students using a 7 point scale ranging from very unlikely (1) to verylikely (7) over eight items measuring intentions to engage in a range ofentrepreneurial behaviour. Their result found that individuals who prefer moreincome, more independence and more ownership have high entrepreneurial intentions.The study found no relationship between risk propensity and entrepreneurial intention

168www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/significant positive relationships were also found between entrepreneurial selfefficacy and entrepreneurial intention.5) Erich, J (2003), in his study examined key factors influencing student’s intent tocreate a new venture. He investigated the affect of individual’s attitude in general andtowards self-employment on their choice of entrepreneurial career. The sample forhis study consisted of 1326 students from of universities in Austria. The attitudetowards entrepreneurship was the most relevant predictor of entrepreneurial intentamong students. Similarly the attitude towards autonomy had a strong and highlysignificant impact on student’s interest to becoming an entrepreneur. Attitude towardsmoney have a strong positive impact on entrepreneurial intent. The university actionsto foster the aspiration to start a business leads to the stronger willingness to becomean entrepreneurs6) Douglas, E., (1999), in his study investigated the relationship between the intention tostart one’s own business and individuals attitude towards income, independence, riskand work effort. Results of his study suggest that individuals having more positiveattitude towards independence and risk are characterised by higher willingness tobecome an entrepreneur.7) Francisco and Yi-wen Chen tested the entrepreneurial intention model adapted fromthe theory of planned behaviour on a sample of 533 individuals from two differentcountries Spain and Taiwan, demographic variables have relatively few significanteffect on entrepreneurial intention. The effect of gender (being male) and having workexperience had a considerable effect on self-efficacy. The influence of personal actionon entrepreneurial intention is largest in Spain, where as self-efficacy has strongestinfluence on entrepreneurial intention in Taiwan.8) Francisco, L in his study of 141 university students tested the intention model ofentrepreneurship. The model assumes that external variables (demographic orbackground characteristics) do not directly affect the intention of performing a givenbehaviour or behaviour itself. That effect would be only indirect, through theirinfluence on the antecedents as: entrepreneurial knowledge, perceived feasibility(self-efficacy). It was found that attitude towards entrepreneurship and perceivedfeasibility has greatest affect on intention / social norms, on the other hand, contributevery weakly to explaining intention. A high co-relation was found between attitudeand feasibility. Knowing an entrepreneur and being familiar with the businessenvironment makes students more confident about their own capacity of becomingentrepreneurs.9) Stefanie, K et all in their study examined the relationship of psychological constructentrepreneurial orientation (EO) with business success in a sample of 248 SouthAfrican business owners. The results revealed significant relationship betweenentrepreneurial orientation and business success. The most component E.O.component for performance were the owner’s achievement orientation and personalinitiative.10) Nikolous & Luthje (2004) in their study compared the entrepretieurial intention ofstudents of two German Universities with the corresponding results for a leadinginstitution in this field, Massachusetts institute of Technology (MIT). The sample

169www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/consisted of 928 students from two German Universities and M.I.T. in US. The threeconstructs used for the study were attitude towards being self employed, willingnessto take risks, need for independence and locus of control. The findings indicate that atMIT students entrepreneurial intentions are stronger and more ambitious in terms ofbusiness growth. It was found that the personality traits associated withentrepreneurship were similarly distributed among all the students. MIT students hada higher willingness to take risks and stronger internal locus of control, but at thesame time showed a lower need for independence. The personality predispositions didnot explain the entrepreneurial intentions. Thus the perception of the environment wasfound to explain these differences. MIT students rated the environmental factors morefavorable than their German counterparts.DISCUSSION AND CONCLUSION: The analysis of the empirical studies carried outbrings out some interesting and encouraging aspects about the entrepreneurial intention ofstudents. It was found that majority of the students (67%) were interested in pursuingentrepreneurial careers. The educational background of the students also has an influence ontheir intention to venture into entrepreneurship. It was found that engineering student weremore likely to venture into entrepreneurship than their management and natural sciencecounterparts. One disturbing aspect that was revealed in the studies was that as the level ofeducation increases the likelihood of venturing into entrepreneurship decreasing. It could bedue to the reason that the acquiring of higher education increases their chances of getting agood job as there is demand of technical manpower in industries. The traditional genderinfluences also emerge as male students are more likely start their business than femalestudents. The age of the students also have an influence on their entrepreneurial intention as itwas found that students in the age group 30-35 were more inclined towards entrepreneurshipthan the middle aged. Psychological traits like attitude, autonomy, independence, selfefficacy and ownership have a greater influence on their intention to start business than thesocial and demographic factors.Thus in order to create entrepreneurial campuses and inculcate entrepreneurship amongstudents the above factors should be taken into consideration.REFERENCES1. Ethem, Duv (2008), Institutional profiles and Entrepreneurship Orientation: A case ofTarkish Graduate (2008) Students, MPRA Paper No. 7247, Izmir, Turkey.2. Malin, B. Morris, K. Alan C, Jennie, E, (2007) Trying to be entrepreneur? A Greatspecific challenge to the Intentions model, paper presented at the Babson collegiateentrepreneurship Research conference, Madrid.3. Hytti, V, Passio, Kais U.P., Tommi, (2005), Entrepreneurial Intentions of UniversityStudents and graduates - A finish perspective, working paper, small business institute,Turku school of Economics and business administration, Turku, Finland4. Evan, D, (2005), Individual Intentions towards entrepreneurship Vs Entrepreneurship,working paper, University of Sunshine Coast, Sippy Downs, Australia5. Erich, J, Schwarz, D, (2003), A structural model of entrepreneurial intent amongstudents: Findings from Austria, worker, 3rd inter rent online publication

170www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/6. Douglas, E., (1999) Entrepreneurship as a career choice. Attitudes entrepreneurialintentions and utility maximizations, Frontiers of Entrepreneurship Research, BabsonCollege, Wellesley, Massachusetts.7. Francisco, L, Yi-wen, C (2006), Testing the entrepreneurial intention model on a twocountry sample, working paper 06/7, Department d'Economia de iEmpresa, Spain.8. Francisco, L, Intention - based models of entrepreneurship education, working paper,university of service, Spain.9. Stefanie, K, Michael, F, Christian, F, Jens, V, Entrepreneurial Orientation: Apsychological model of success among South African small business ownersEuropean Journal of work and organisational psychology. Unkhttp//www.tandf.co.uk/journals/pp/1359432X.html.10. Uikolaus, F, Christian, L. (2004), Entrepreneurial intentions of Business students : ABenchmarking study, International Journal of innovation and Technologymanagement 1(3), pp 269-288

171www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/AN ANALYTICAL STUDY OF INDEX MUTUAL FUNDS IN INDIAABSTRACTDR. YOGESH KUMAR MEHTA**Associate Professor, College of Law and Legal Studies,Teerthanker Mahaveer University, Moradabad.The present study encompasses the appraisal of index mutual fund schemes and considersonly those whose performance has been rated by credit rating agency. Study found that bothHDFC Index Fund–SPP and HDFC Index Fund-SPP(PA) performed exceptionally wellduring the past three years, giving same maximum return i.e. 4.09% vis-à-vis an averagereturn of 2.63% of similar category funds.These also outperformed with the Benchmark Index BSE 30 (1.12) and NIFTY (1.65) overthe period of three years. Besides these two funds, ICICI Prudential Index Fund (3.03) alsoperformed well in comparison to other funds of the same category as well as with benchmarkindices. Under investment plan, both Tata IF-NP-OA and ICICI Pru-IF funds increased theirinvestment in equity with cash adjustment.Study also found that each fund has its own unique features regarding portfolio selection andtheir management Under sector allocation, ICICI Pru-IF allocated 44.2% in miscellaneous,13.98% in OGPR, and 7.30% in power generation, transmission and equipment (PGTE). It isalso found that under OGPR, Tata IF invested maximum (25.11%), while the other fundsinvesting in it are UTI Master IF (18.26%), ICICI (13.98%), and HDFC (10.07%).The top three sectors for investment are banking, computer software education and OGPR, inwhich maximum (65.45%) was invested by ICICI Prudential-IF followed by UTI Master IF-Growth (49.42%). Thus, it may be concluded that among all, both HDFC Index Fund-SensexPlus Plan and HDFC Index Fund-Sensex Plus Plan (PA) brilliantly outperformed in itsoperations keeping the low risk.INTRODUCTIONThe MF industry is a growing and profitable industry. The market has been expanding thoughthe competition in the industry has been fierce. Mutual fund investment is the best option forevery investor. Only a small part of the household savings in India is channelised to thecapital market. An efficient portfolio management with full information would be helpful forthe investor to take wise decision under complex market situations.Index funds mainly invest in the securities that form the part of one or the other Index. Itsobjective is to track a specified share index and offer returns equal to the return from thatIndex. Index funds are investment funds set up to specifically match the performance of anaggregate stock market series such as the Standard & Poor's 500 Composite Index. Finally,because of the interest in international diversification, there has been an attempt to derive aninternational stock index fund that invests in the principal stocks of major foreign countries.

172www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/The gross mobilisation of resources by all mutual funds during 2006-07 stood at Rs.1938493 crores compared to Rs. 1098149 crores during the previous year showing anincrease of 76.5%. The net mobilisation of resources by all mutual funds reached to Rs.93985 crores in 2006-07, which was highest ever in a single year. The large mobilization ofresources increased the assets under management by all mutual funds to Rs. 326292 crores ason March 2007 from the previous year’s Rs. 231862 crores. The mutual funds havetraditionally been the active participant in the debt segment of Indian stock market.The heightened activities of mutual funds in the equity segment in 2005-06 did not continueat the same pace in 2006-07. During 2006-07, the combined investment in debt and equitywas Rs. 61606 crores compared to Rs. 51103 crores in 2005-06, indicating a rise of 20.6%.Bulk of this investment was in the debt segment; their total inflow in to the debt segment wasRs. 52543 crores as against Rs. 36801 crores in 2005-06.The findings of analysis of different types of open-ended index funds (Top 5 openended)during last five years (Dec, 2003 to 2008) are presented below in various Tables.Wherever, the duration is different it has been mentioned.RESEARCH METHODOLOGYWith the entry of private sector mutual funds, a new scene has been developed in the mutualfund industry. Here an attempt is made to analyse the facts of total resources mobilisation andoverall performance of the sector funds.OBJECTIVE OF STUDYThe prime objective of the research is to appraise the operation of mutual funds in India, inthe light of the role they were expected to play, as a significant constituent of the IndiaFinancial System. The following are the specific objectives of this study:1. To analyse the operations of mutual funds under review.2. To examine the investment pattern of mutual funds with a view to judging theeffectiveness of their portfolio management.3. To study the returns disbursed by mutual funds to their investors, and also to checkrisk adjusted performance of funds.4. To study the returns disbursed by mutual funds with respective benchmark index.SCOPE OF STUDYThe mutual funds were assigned to play the economic development for the country as a newfinancial instrument. The mutual funds s industry has registered a healthy growth in the pastfew years. The study would help potential investors as well as academicians for furtherdetailed study.PERIOD OF STUDYThe period of study is covered from the year 2001-02 to 2007-08, i.e. seven years to presentthe best and latest position.

173www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/SOURCE OF INFORMATIONThe study is mainly based on secondary sources of information collected from varioussources and websites.TOOL, TECHNIQUES AND MODELS USEDThe tools and techniques used in the present study, to get meaningful quantitativeresults, are average, percentage weight-age, correlation and performance measures. A newmodel Sortino is also used to measure the performance of portfolio. This model measures thedownside risk. The other three models used are Fama, Treynor and Sharpe.PLAN OF STUDYThe analysis is based on available relevant information, which is arranged in the tabular form.The major emphasis is given on trend that how they are performing.SIGNIFICANCE OF STUDYThe present study will be of immense help to the corporate executives, professionals andacademicians especially for the Government to create competitive environment for trueinvestors. The present research work is supposed to be useful especially to present andpotential investors in India and abroad. It will also help the society at large, government,academicians, and managers of asset management companies as well as the regulatoryauthorities.LIMITATIONS OF STUDYEvery effort is made to make this research study reliable, objective and dependable. Despitethese efforts, however, the study may suffer from some limitations. Considerable reliance isbased on secondary source of information. In spite of these limitations a sincere effort ismade to make study as for as possible, analytical, objective and reliable.1. PERFORMANCE OF INDEX MUTUAL FUNDSTable 1 presents the performance of top five open-ended sector funds during last5 years. Table clearly shows that from the date of inception, both HDFC IndexFund-Sensex Plus Plan and HDFC Index Fund-Sensex Plus Plan (PA) recordedequal and highest returns (21.43%) though these have third largest fund size(Rs. 28.32 crore). It may be noted that over a period of five years and more,both these funds have maintained their monopoly in the market. As far asexpense ratio is concerned, it is 1.23 in case of both these funds, which ishigher than UTI MIF (0.75). The portfolio turnover ratio is found to be secondlargest i.e. 241.54 in case of HDFC funds. The expense should be kept atminimum so that investors may get returns close to the Index fund return.

174www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TABLE 1: PERFORMANCE OF INDEX FUNDSMutual fundschemeInceptiondateReturnssinceinception(%)Fund size(crore)ExpenseratioPortfolioturnoverratioHDFC IF-SSP July 10, 2002 21.43 28.32 1.23 241.54HDFC IF-SSP(PA)July 10, 2002 21.43 28.32 1.23 241.54ICICI Pru IF Feb 25, 2002 15.61 34.51 1.25 379.00UTI Master IF-GrJune 01,1998 10.79 35.51 0.75 018.46Tata IF-NP-OA Feb 24, 2003 15.88 06.70 1.50 011.00Source: mutualfundsofindia.com2. INVESTMENT PATTERN OF INDEX MUTUAL FUNDSInvestment pattern of top five open-ended MF schemes under different categories arepresented and discussed in Tables 2. It is clear from the asset allocation column that underinvestment plan, both Tata IF-NP-OA and ICICI Pru-IF funds increased their investment inequity with cash adjustment. Both HDFC IF-SPP and HDFC-(PA) invested 80.54% in equity.TABLE 2: INVESTMENT PATTERN OF INDEX FUNDMutualFundsStocks (%of net asset)Sector allocation(%)Top 3Sectors(%)Assets allocation (%)Equity Debt Cash TotalHDFCIndexFund –SensexPlus PlanSBI 7.17,Bharati Air7.17, RIL6.87,InfosysTech 6.50,ITC 5.55,IBk 5.20,L&T 4.12,Dr Reddylab 3.93,HDFC L3.81, ONGC3.20Banks 15.19,Compswedu 10.41,CA 19.47, OGPR10.07, Pharma9.92, Telecom7.93, Tobacco &Pan Mashala 5.55,H&C 0.97, PGTE0.87, Trans & Tr1.99, Auto & AutoAncill. 3.53,Engg.Ind Mch 4.46Banks15.19,Compswedu10.41, CA19.4780.54 00 19.46 100

175www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/HDFCIndexFund –SensexPlus Plan(PA)N A N A NA NA NA NA NAICICIPrudentialIndexFundNifty Misc.44.17, RIL5.88, ONGC4.88, NTPC4.33,Bharati Air4.19,InfosysTech 2.34,SBI 2.27,BHEL 2.19,ITC 2.15,TCS 1.80Banks 5.32,Compswedu 6.15,CA (-0.33), Misc.44.17, OGPR13.98, PGTE 7.30,Steel 1.27, Tele6.37, Tobacco &PM 2.15, Finance1.38, Metals 1.22,H&C 1.24, Elect.& Equip. 2.49, Div.1.70, Etr 0.15,Pharma 1.53Banks 5.32,Compswedu6.15, CA(-0.33)100.33 00 -0.33 100UTIMasterIndexFund –GrowthRIL 13.64,InfosysTech 9.37,ITC 7.11,Bharati TV6.92, IBk6.07, L&T5.94, SBI4.82,HDFCL5.49, ONGC4.62, HDFCBk 5.16Auto & AutoAncill.2.67, Banks16.16, Compswedu15.00, OGPR18.26, PGTE 5.84,Tele 9.11, T&Pm7.11, Finance 5.49,Engg. & Indl. Mch.5.94, Elect. &Equip. 3.62, CA0.03, Div. 3.99Banks16.16,Compswedu15.00,OGPR18.2699.86 0.11 0.03 100TataIndexFundNifityPlan –Option ARIL 11.83,ONGC 7.51,NTPC 5.81,Bharati Air5.62, DLF3.94, RCVL3.77,BHELL3.61, L&T3.18, IBk3.06,InfosysTech 2.94Auto & AutoAncill. 2.99, Banks8.23, Compswedu9.53, PGTE 10.66,OGPR 25.11, Steel4.82, Telecom10.89, T&PM 2.74,Div. 1.79, Elect. &Equip. 4.59, Engg.& Indl Mch. 3.18,CA (-1.42),Finance 2.35, H&C5.50, Pharama 2.53Compswedu9.53, PGTE10.66,OGPR25.11101.42 00 -1.42 100Source: mutualfundsofindia.com

176www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Under sector allocation, ICICI Pru-IF allocated 44.2% in miscellaneous, 13.98% inOGPR, and 7.30% in power generation, transmission and equipment (PGTE). It is also foundthat under OGPR, Tata IF invested maximum (25.11%), while the other funds investing in itare UTI Master IF (18.26%), ICICI (13.98%), and HDFC (10.07%). It may be noted thatfunds preferred banking, computer software education, OGPR, PGTE and Telecom sectors.Under stock, it is found that funds commonly invested in RIL, Infosys Technology,Barti Airtel, ONGC and Televenture stocks. Besides these, funds also preferred BHEL, L&T,ICICI, SBI and ITC.The top three sectors for investment are banking, computer software education andOGPR, in which maximum (65.45%) was invested by ICICI Prudential-IF followed by UTIMaster IF-Growth (49.42%).3. COMPARISON OF PORTFOLIO COMPOSITION OF INDEX MUTUAL FUNDSThe comparison of portfolio composition of top five open-ended mutual funds ofdifferent categories is presented in Table 3. Generally, companies with low growth prospectsoffer a high dividend yield and low capital gains and vice versa. Among various ratios, theP/E ratio is the most popular financial statistic used in the stock market which is affectedmainly by growth prospects, risk characteristics, share holders orientation, corporate imageand degree of liquidity etc. The market price of the share is however, based mainly on howthe market assesses it’s earning power. The higher return on equity increases P/B ratio.Therefore, P/B ratio is more significant for assessing the returns from stocks.Analysis of the Table 3 shows that HDFC Index Fund-Sensex Plus Plan recordedmaximum returns (13.34%) among all; HDFC Index Fund–Sensex Plus Plan (PA) also hasthe same returns, during the last five years. The fund has the following: lowest dividendyield (1.44%); highest P/B ratio (4.96); P/E ratio-20.06. Fund has market capitalisation of Rs.90,615.83 crore with minimum (33.26%) under top five holdings spread over 36 differentstocks. ICICI Index Fund has P/E ratio of 19.39, P/B ratio of 4.56, and divided yield of1.45% with market capitalisation of Rs.1,05,193.32 crore and holds 63.46% under top fiveholdings in 51 stocks. Study also found that company has efficiently and effectivelymonitored their portfolio.TABLE 3: COMPOSITION OF INDEX FUNDSMutual FundSchemePERatioPBRatioDividend Yield(%)StockNumberTop Five Holdings(%)HDFC IndexFund – SensexPlus PlanHDFC IndexFund – SensexPlus Plan (PA)ICICIPrudential20.06 4.96 1.44 36 33.26NA NA NA NA NA19.39 4.56 1.45 51 63.46

177www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Index FundUTI MasterIndex Fund –GrowthTata IndexFund NifityPlan – OptionA20.26 4.88 1.47 31 43.10NA NA NA 52 34.71Source: mutualfundsofindia.com4. RISK ADJUSTED PERFORMANCE OF MUTUAL FUNDSThe risk adjusted performance of top five open-ended index funds of different categoriessubject to the market risks are given in Table 4. Generally, specific risk factor is associatedwith the close-ended schemes. The performance of a mutual fund is measured in terms ofreturns with portfolio risk by considering Sharpe, Treynor, Fama, Sortino and Beta includingstandard deviation and correlation. It may be noted that tables contain the values of aboveparameters calculated for recent data i.e. Dec, 2008 and accordingly the performance of fundsduring last one year is discussed.TABLE 4: RISK ADJUSTED PERFORMANCE OF INDEX FUNDSMutualFundsSchemeStandardDeviationBetaCo-relationMeanFamaEugenTreynor Sharpe SortinoHDFC IndexFund – SensexPlus PlanHDFC IndexFund – SensexPlus Plan (PA)ICICIPrudentialIndex Fund4.95 0.84 0.83 -1.03 0.05 -1.34 -0.23 -0.394.95 0.84 0.83 -1.03 0.05 -1.34 -0.23 -0.395.85 1.02 1.00 -1.14 0.15 -1.23 -0.21 -0.36UTI MasterIndex Fund –GrowthTata IndexFund NifityPlan – OptionA5.82 1.00 0.99 -1.25 0.04 -1.35 -0.23 -0.415.73 1.00 0.98 -1.23 0.03 -1.34 -0.23 -0.39Source: mutualfundsofindia.com

178www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Analysis of the Table 4 shows that lowest total risk (4.95) of both HDFC Index Fund-Sensex Plus Plan and HDFC Index Fund-Sensex Plus Plan (PA) coupled with the largeportfolio has reduced the risk level. Beta (0.84) shows that index return would cause 0.84%change in return. Also, in terms of returns this fund outperformed throughout the studyperiod. It is expected that ICICI Pru.IF with positive correlation one will perform better in themarket. Thus, it may be concluded that among all, both HDFC Index Fund-Sensex Plus Planand HDFC Index Fund-Sensex Plus Plan (PA) brilliantly outperformed in its operationskeeping the low risk.5. COMPARISON OF MUTUAL FUND’S NAV AND RETURNS WITH AVERAGEPERFORMANCE OF SIMILAR CATEGORY FUNDSThe comparison of net asset value and return of top five index funds of differentcategory are presented in Table 5 which shows that NAV of both HDFC Ind exFund-Sensex Plus Plan (PA) and HDFC Index Fund-Sensex Plus Plan toppedamong the index fund list with Rs. 112.67 and also outperformed. The averageNAV of similar category funds was Rs. 62.02. In terms of returns also, thesefunds topped the list, irrespective of duration.TABLE 5: NAV AND RETURNS OF INDEX FUNDSReturns (%)RankScheme1-Month3-Months6-Months1-Year3-Years5-YearsNAV(Rs)1HDFC IndexFund-Sensex PlusPlan4.53 -19.75 -23.66-47.034.09 13.34 112.672HDFC IndexFund-Sensex PlusPlan (PA)4.53 -19.75 -23.66-47.034.09 13.34 112.673ICICI PrudentialIndex Fund6.01 -23.53 -27.90-50.343.03 10.79 026.994UTI MasterIndex Fund-Gr4.84 -25.24 -31.28-53.000.50 10.47 029.585Tata Index Fund-Nifty Plan-Option A6.22 -24.31 -29.70-52.301.16 10.20 017.67Av. Performance ofSimilar Category Funds6.72 -22.74 -24.63-49.192.63 -- 62.02Source: mutualfundsofindia.com, Note: Return calculated for less than 1-Year are absolutereturns and returns calculated for more than 1-Year are compounded annualised.

179www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/6. COMPARISON OF DIVIDEND DISBURSED BY MUTUAL FUNDSTable 6 presents a comparative study of top five index funds of different categoryregarding dividend distribution. The data included herein is generally for last five years. Theduration is variable because dividends have not been distributed on a regular basis.Table shows the dividends paid by index funds. During the last 5 years, only TataIndex Fund Nifty Plan-OA disbursed dividends of 15% and 45% during 2004 and 2003respectively. The data about rest of the funds figures were not available.TABLE 6: DIVIDEND DISBURSED BY INDEX FUNDSMutual Funds SchemeHDFC IndexFund – SensexPlus PlanHDFC IndexFund – SensexPlus Plan (PA)ICICI PrudentialIndex FundUTI MasterIndex Fund –GrowthTata Index FundNifity Plan –Option ADividend rate(%)Dividend rate(%)Dividend rate(%)Dividend rate(%)Dividend rate(%)NA NA NA NANA NA NA NA15(03.03.2004)45(25.11.2003)NA NA NA NA NANA NA NA NA NANA NA NA NA NASource: mutualfundsofindia.com7. COMPARISON OF MUTUAL FUND’S RETURNS WITH BENCHMARK INDEXAND AVERAGE RETURNSThe comparison of top five open-ended mutual fund’s returns with benchmark indexand average returns is presented in Table 7. The performance of mutual funds of differentcategories considering last five years is discussed below. The above comparison is alsoshown through graphical presentation in Fig.1.The comparative study of shows that both HDFC Index Fund–SPP and HDFC Index Fund-SPP(PA) performed exceptionally well during the past three years, giving same maximumreturn i.e. 4.09% vis-à-vis an average return of 2.63% of similar category funds. These alsooutperformed with the Benchmark Index BSE 30 (1.12) and NIFTY (1.65) over the period ofthree years. Besides these two funds, ICICI Prudential Index Fund (3.03) also performed wellin comparison to other funds of the same category as well as with benchmark indices.

180SchemeReturns (%)www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TABLE 7: INDEX FUNDS-BENCHMARK COMPARISONRankScheme1-Month3-Months6-Months1-Year3-Years5-Years1HDFC Index Fund-SensexPlus Plan4.53 -19.75 -23.66-47.034.09 13.342HDFC Index Fund-SensexPlus Plan (PA)4.53 -19.75 -23.66-47.034.09 13.343 ICICI Prudential Index Fund 6.01 -23.53 -27.904 UTI Master Index Fund-Gr 4.84 -25.24 -31.28-50.34-53.003.03 10.790.50 10.475Tata Index Fund-NiftyPlanOA6.22 -24.31 -29.70-52.301.16 10.20Av. Performance of Similar CategoryFunds6.72 -22.74 -24.63-49.192.63 --BSE 30 6.86 -24.45 -27.82NIFTY 8.14 -24.02 -26.26-51.63-50.711.12 --1.65 --Note: Return calculated for less than 1-Year are absolute returns and returns calculated formore than 1-Year are compounded annualised.20100-10-20-30-40-50Month0 10 20 30 40HDFC IFHDFC IFPAICICIUTITata IFAv. PerformanceBSE 30NIFTY-60FIG. 5.9: MONTH WISE INDEX FUNDS

181www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/CONCLUSIONFindings of the study show that among all, both HDFC Index Fund-Sensex Plus Planand HDFC Index Fund-Sensex Plus Plan (PA) brilliantly outperformed in its operationskeeping the low risk. The top three sectors for investment preferred were banking, computersoftware education and oil and gas, petroleum refineries in which maximum was invested byICICI Prudential-IF followed by UTI Master IF-Growth. It is further found that under stock,funds commonly invested in RIL, Infosys Technology, Bharti Airtel, oil and natural gascommission and televenture stocks. Besides these, funds also preferred BHEL, L&T, ICICI,SBI and ITC.Both HDFC Index Fund–SPP and HDFC Index Fund-SPP (PA) performedexceptionally well and also outperformed with the Benchmark Index BSE 30 and NIFTYover the period of three years. Both HDFC Index Fund-Sensex Plus Plan and HDFC IndexFund-Sensex Plus Plan (PA) recorded equal and highest returns and have maintained theirmonopoly in the market. Therefore we come to this conclusion that public sector mutualfunds of this category performed brilliantly and maintained their monopoly.REFERENCES1. Gurusamy, S., (2005) "Merchant Banking and Financial Services", Thomson- VijayNicole Imprints Private Limited, Chennai.2. Gangadhar, V. and G.Rameshbabu, (2006) “Investment Managent”, AnmolPublication Pvt. Ltd., New Delhi.3. Khatri, D.K., (2006) “Investment Management and Security Analysis-Text andCases”, Macmillan India Ltd., Delhi.4. Machiraju, H.R., (2006) “Indian Financial System”, Second Ed., Vikas PublishingHouse Pvt. Ltd., New Delhi.5. Mehta, Yogesh K. and Rathore, G.S., (2007) “Emerging Trends of Mutual Funds inIndia in Current Environment: An Analytical Approach towards Public Sector andPrivate Sector Mutual Funds”, Indian Journal of Public Enterprises, 23(43), pp. 86-97.6. Mehta, Yogesh K. and Rathore, G. S., (2008) “Analysis of Public Sector and PrivateSector Mutual Funds: A Case study of Selected Debt Funds”, Indian Journal ofPublic Enterprises, 23(44), pp. 126-132.7. Pandian, P., (2006) “Security Analysis and Portfolio Management”, Vikas PublishingHouse Pvt. Ltd., New Delhi.8. SOMS, (1991) “Security Analysis and Portfolio Management, Member CourseCommittee”, IGNO University, New Delhi.9. Sadhak, H., (1997) “Mutual Funds in India Marketing Strategies and InvestmentPractices”, Second Ed., Response Books, New Delhi.

182www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/10. Sadhak, H., (2003) “Mutual Funds in India: Marketing Strategies and InvestmentPractices”, 2 nd Edition, Response Books, Sage Publications Inc., New Delhi, pp.154.11. SOMS, (1996) "Research Methodology for Management Decisions", IGNOUniversity, New Delhi.12. Varshney, P.N., (1992) “Money Market Mutual Funds”, Banking Finance, January.13. www.amfiindia.com14. www.bseindia.com15. www.mutualfundsindia.com16. www.nseindia.com17. www.rbi.org.in18. www.sebi.gov.in

183www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/WOMENS PARTICIPATION IN MICRO, SMALL AND MEDIUMENTERPRISESABSTRACTDR. DIL PAZIR*; SHOKIT HUSSAIN***Assistant Professor, School of Management Studies,BGSBU, Rajouri, (J&K) 185131, India.**Research Scholar School of Management Studies,BGSBU, Rajouri, (J&K)185131, India.Women have a pivotal role in the economic advancement of a country. Over the yearswomen‟s share in the labor force is continuously rising. Moreover Asian women now holdskey positions in government as well as in private sector and many have also gone intomanaging their own business enterprises. These small and medium enterprises contribute to acountry‟s development, help reduce poverty and promote self -reliance among people.Besides these contributions, MSMEs are also considered as an important institution forwomen, especially in rural areas which are actively involved in economic activities not onlyas hired workers but also as budding entrepreneurs. Women‟s entrepreneurship developmentin Asian countries like in other parts of the developing world has also a tremendous potentialin empowering women and transforming society in the region. Women‟s have generated wideinterest and advocacy in building regional links and networks among women organizations inAsia. They continue to share ideas and best practices for improving their capacity and skillsas cooperative leaders and entrepreneurs.Present study seeks to interpret the role of various MSMEs in developing the status of womenin rural areas. Moreover this paper further highlight various schemes designed andimplemented by MSMEs for developing and enhancing women entrepreneurship in ruralareas.KEYWORDS: MSMEs, women entrepreneurs, enterprises, economic, employment etc.___________________________________________________________________________INTRODUCTIONFirstly it is very important to explain the concept of micro small and medium enterprises.Micro; A micro enterprise is that where investment in plant and machinery (original costexcluding land and buildings and the items specified by the ministry of small scale industriesdoes not exceed Rs 25 lakh. The total no of employee‟s ranges in micro enterprises is (2-9)Small ; A small enterprise where the investment in plant and machinery (original costexcluding land and building and the items specified by the ministry of small scale industriesis more than 25 lakh but does not exceeds Rs 5 crore. The total no of employees‟ ranges insmall enterprises is (10-49) Medium; A medium enterprise is an enterprise where theinvestment in plant and machinery (original cost excluding land and building and the itemsspecified by the ministry of small scale industries dated 5 th October 2006. Is more than Rs 5crore but does not exceed Rs 10 crore.the total no of employees ranges in medium enterprisesis 50-250.

184www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/In most economies smaller enterprises are much greater in many sectors. SMEs are alsoresponsible for driving innovation and competition in India , the micro and small enterprisessectors play a vital role in the overall industrial economy of the country it is estimated that interm of value the sector accounts for about 39% of the manufacturing output and 33% of theexport of the country . Further in recent years the MSMEs sector has consistently registeredhigher growth rate compared to the overall industrial sector. The major advantage of thesector is its employment potential at low capital cost as per available statistics this sectoremployees estimated 31millions person spread over 12.8 million enterprises and the laborintensity .It is not possible to imagine a world with out women in the society. Both men andwomen complete each other and play important role in each others life and contribute equallytowards the society. But still it is most unfortunate that in many places of the world womenare still not given equal status in the society. But now things are changing with time. Thepresent paper tries to understand how and what role SMES are playing in improving thecondition of women in rural area of Rajouri (J&K). Moreover this paper further highlightvarious schemes designed and implemented by MSMEs for developing and enhancingwomen entrepreneurship in rural areasNow as far as the topic women participation in micro small and medium enterprises isconcerned in the past women are considered only as a house wife and they are not free tomove and thus the education of women is also effected a lot and hence it create a lot ofcommunication gap among them. But in modern time they are fully acquainted with thefacilities provided by the state and central government as in eight five year plan in 1992.These types of activities encouraged the women and the literacy rate of women is alsoimproving day by day. As Mahatma Gandhi said that (if we teach a single girl it means weare teaching the whole society. Now the time has come the women are meeting shoulderswith the men. As my topic is concentrated on the women participation in micro small and,medium enterprises in district Rajouri. I analyze that there is a lot of problem in womeneducation especially in rural areas and there is still need of improving the education system inthis rajouri district. the women literacy rate of this district is almost 11% from this statisticswe can say that there is still a lot of backwardness in education system .As we know thatwithout education every thing is not possible in the fields like participation in MSMEs,advancement of the society etc. there is a still need of women empowerment in these hillyand remote areas.In spite of the enormous importance of the micro, small and medium enterprises (MSME)sector to the national economy with regards to job creation and alleviation of object povertyamong improvised women .the degree of recognition and strategic support provided to thesector is grossly inadequate. Although several economists have argued that the promotion ofwomen entrepreneurs is a prerequisite for overall economic growth and alleviation of poverty, women entrepreneurs have not been provided with meaningful assistance from the nationalgovernment in terms of recognition , access to finance and skills required for operating smallbusinesses and enterprises profitably and efficiently . Although the MSME sector in Indiaprovides livelihood to 49% of all employed women in India .The strategic support it receivesfrom the national government has been minimal .The plight of destitute women has beensignificantly improved due to MSMEs in countries such as Bangladesh , Singapore,japan,china, south Korea, Taiwan and Malaysia. The success achieved in each of the abovecountries is mostly attributed to support to MSMEs in terms of policy, respect for the basicrights and needs of women, The availability of resources such as finance, good infrastructure,

185www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/skills, and appropriate technology and an enabling macro-economic environment forattracting international investors .However small businesses and enterprise constitute the onlylivelihood available to the majority of improvised women in India. women depends onMSMEs as a source of livelihood essentially because national government fail to meet theirrequirements for survival and entrepreneurial aspiration , economic have actively engagedand earn their livelihood in small enterprises where Govt policies , regulations, ownersbusiness skills, availability of finance , appropriate business trainings and market mattermost for their survival . Surveys conducted by the World Bank 2005 .The world tradeorganization (2002) the ministry of finance and economic development of India 2003.Women entrepreneur in India institute new business and enterprises at a rate twice as fast asmen and they find it harder at the outset of grow their business to the next higher level.Existing literature from the Asian developing countries suggests that there are threecategories of women entrepreneur.1. Chance, 2. Force and 3. CreatedThese different categories are based on how their business started, or what are their mainreasons or motivations to open their own businesses. Chance entrepreneurs are those whichstart a business without any clear goals or plans. Their businesses probably evolved fromhobbies to economic enterprises over time .Forced entrepreneurs are those who werecompelled by circumstances (e.g. death of a spouse, family facing financial difficulties) tostart their businesses. Their primary motivation hence leads to financial. Createdentrepreneurs are those located, motivated, encouraged and developed through, for instancesentrepreneurship development program according to study of Das (2000). The most commonreason were given either financial reason or to keep busy .He found that only about fifth ofwomen were drawn to entrepreneurship by Pull factor, for instance the need for a challenge,the urge to try something on their own and to be independent and to show others that they arecapable of doing well in the businesses.CATEGORIES OF WOMEN ENTREPRENEUR (BY REASON /MOTIVATIONSFOR STARTING THE BUSINESS) IN ASIAN DEVELOPING COUNTRIESCategoryChance entrepreneursMain reason/Motivation-To keep busy-Was hobby-Family /spouse had businessForce entrepreneurs-Financial/ needed the moneyCreated or pulled entrepreneurs-Controlled over time / flexibility-Challenge by something ones own/-Showothers I could it-To be independent/-Self satisfaction-Example to children-Employment to other/do something -worthwhileSource Das(2000)

186www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/SUPPORTIVE MEASURES FOR WOMEN'S ECONOMIC ACTIVITIES ANDENTREPRENEURSHIP• Direct and indirect financial support• Yojna schemes and programmes•Technological trainings and awards• Federations and associationsDIRECT AND INDIRECT FINANCIAL SUPPORT• Nationalized banks• State financial corporations• Direct industries centers•Differential rate schemes•Mahila Udyug Needhi Schemes•Small Industries Development Bank of India (SIDBI)•State Small Industrial Development Corporations (SSIDS)YOJNA SCHEMES AND PROGRAMMES•Nehru Rojgar Yojna•Jacamar Rojgar Yojna•DWACRA•TRYSEMTECHNOLOGICAL TRAININGS AND AWARDS•Stree Shakti Package by SBI•Entrepreneurship Development Institute of India•Trade related Entrepreneurship Assistance and Development (TREAD)•National Institute of Small Business Extension Training (NSIBET)•Women‟s University of Mumbai

187www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/FEDERATIONS AND ASSOCIATIONS•National Alliance of Young Entrepreneurship (NAYE)•India Council of Women Entrepreneurs, New Delhi•Self Employed Women Associations (SEWA)•Associations of Women Entrepreneurs of Karnataka (AWEK)•World Association of Women Entrepreneurs (WAWE)•Associated Country Women of the World (ACWW)Objectives Of The StudyIn order to analyze the women participation in micro small and medium enterprises thefollowing objectives have been formulated:1. To know the ratio of women participations as entrepreneurs.2. To examine the constraints faced by women entrepreneurs in Rajouri District.LITERATURE REVIEWAMAHS AND ADMASSIE,(2004)Women are disadvantaged due to culture, religion and traditional. An average 5.5%,10.5%and 7% of female headed enterprises managed to get credit from banks, micro financeiqqub schemes and personal donation respectively. The corresponding figure for male headedfirm was 12.7%, 8.4% 13.75 and 4.6% respectivelyAMHA AND NARAYANA,(2004)Have reported women do not have adequate access to finance from commercial banks andthey rely heavily an indigenous social capital schemes. The key challenge face by the sectoris lack of access to finance a favorable term from commercial banks and the plight of womenenterprises has not improved much between 1991-2003.GILLIAN MANN,(2002)Briefing note on Assessing the impact of Enterprise Development Interventions in relationto (DFID‟s) Department For International Development Target strategy paper “Better Healthfor Poor People “.by Gillian Mann, February 2002.The services such as providing service toenable people to start a business, developing an enterprise culture, providing service to enableSMEs to continue and expand. May be financial or Business Development Services (BDS).The former include microfinance (saving and credit services to assist in business growth).Business Development Services include training, market information and the development ofnew markets .Enterprise development aims to increase income and improve livelihoods.

188www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/KEBEDE, (2002)Has shown that only one in three small businesses survive to their third anniversary , and thatthe likely hood of survival of small firms operated by women entrepreneurs is closelyassociated with the degree of support given to women in terms of access to finance ,improved skills and an enabling macro economic environment.CLEVES, GOULD & GUTIERREZ,(2004).Hazard ratios are used as an econometric measure effect. The study aims to identify keydifferentials factors of long term survival and viability in small businesses and enterprisesthat affect women entrepreneurs fare in comparison with their male counterparts. Feasiblerecommendations are made in order to improve the plight of women entrepreneurs, and tohelp them improve their economic contribution to the national economy.WONG, (1992)The concept paper emphasized the significance of Master Plan. SME Master Plan wasprepared which aimed at integration of the programmes of public and private bodies that wereproviding assistance to small and medium enterprises. The SME Master Plan, later referred toas Enterprise Development Plan, was a blue print for development of small Enterprises andwas to achieve its goals through a network of state and private agencies.CARL LEIDHAM, (2001)The contribution of Micro Small and Medium Enterprises in generating employment andincome has become increasingly recognized around the world.MSEs effect the lives andlivelihood of so many people, that they constitute a large portion of enterprises in developingcountries, and that this is where skills are most lacking, it would make MSEs a key focalpoint for any enterprise development project aimed at increasing economic growth andimproving livelihoods. In any economy that is not performing well, where downsizing andunemployment levels are rising, it is often the small businesses that survive.VANDER MEIJ AND HEIJINDER, (2004)The authors review the literature on the impact of such interventions and that the literature isnot rich, he defined Community Based Rehabilitations‟ (CBR) as “A strategy withincommunity development for the rehabilitation, equalization of opportunities and socialintegration of all people with disabilities .CBR draws on the resources and efforts of peoplewith disability, their families and their communities, as well as govt. People with disabilities“. However, they present almost no evaluations of such rehabilitationsMEYANATHAN, (1994)The author reviews the literature on Small Scale Industries Development Programme “FosterFather Business” partnership and linkages. A “Foster Father Business” is a large enterprisethat has access to various markets and is thus in a position to help small size firms market andtheir products .The arrangement has the effect of the “foster Father” promoting themanagement, access to technology and improved production techniques of the small scalefirms . Another related policy interventions is the “Localization” or “deletion” programme inwhich small and medium-size firms are assisted to manufacture parts and components for the

189www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/major assembly firm‟s .Under the programme, both inputs and technical assistance areprovided to clusters of small scale manufacturing firms.ITOH AND URATA, (1999)Relies mainly on inter-firm linkages, subsidy and tax measures and training to enhanceproduction techniques and product quality. There are, however programmes which integrateindividualized advisory services. The major form of inter-firm linkages through which firmsupgrade their technology is subcontracting. The parent firms which are usually largeenterprises are usually at the top of a pyramidal or multi-tier structure, parent firms normallytrain the workers of the subcontractors and upgrade their machines so that they can be suresupplies or parts produced by SMEs meet the required standards. Subsidies to small andmedium size firms and their industry Associations are meant to encourage them to undertakeresearch and development.GUROL &ATSAN (2006)According to the author six personality characteristics are used to conceptualize theentrepreneurship. There are ; need for achievement, locus of control, risk taking propensity,tolerance for ambiguity, innovativeness, and self confidence, as well as highlighted inindependent variables in this study that influence the entrepreneurial process ; there are needfor achievement , risk taking, tolerance for ambiguity, and locus of control, self efficacy andgoal setting.RESEARCH METHODOLOGYIn a nutshell, research methodology envelopes the following:Research Design: Descriptive.Research PlanData Source: Primary Data.Research Approach: Survey Research.Research Instrument: Questionnaire.Sampling Plan: Convenience Sampling.SAMPLING UNITIn the present study, Rajouri district has been taken. Rajouri district consists of seven Tehsils.We have taken 175 samples for analyzing the performance on the basis of womenparticipation in this area. We have taken 25 samples per Tehsil, from which primary data wascollected during the time period from August 2011 to September 2011.STATISTICAL PACKAGE USED: Statistical Package for the Social Sciences (SPSS)17.0 was used.

190www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/STATISTICAL METHOD: Statistical methods used for the research purpose are:Reliability Analysis.Validity Analysis.Frequency Analysis.Reliability CoefficientsN of Cases = 175.0N of Items = 15Alpha = .732TABLE I: RELIABILITY ANALYSISThe value of the Cronbach Alpha is .732 and it comes out to be greater than .6 and it impliesthat the data we have collected is reliable.TABLE II: VALIDITY ANALYSISANOVA WITH FRIEDMAN'S TESTSum ofSquares df Mean SquareBetween People 142.856 99 1.443Friedman'sChi-SquareSigWithinPeopleBetween Items 38.756 a 14 2.768 69.993 .000Residual 736.444 1386 .531Total 775.200 1400 .554Grand Mean = 3.96Total 918.056 1499 .612a. Kendall's coefficient of concordance W = .042.The significance value is .000 and it is acceptable as it is less than .001 so it shows that thevalue of “Chi Square” is also significant which reflects that data we have collected is valid.And also the tabulated value of F comes out to be 4 which is less than the calculated value off i.e.69.993.

191www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/StatementsN Range Minimum Maximum MeanStatistic Statistic Statistic Statistic StatisticTABLE III: DESCRIPTIVE STATISTICSStd.Deviation Variance Skewness KurtosisStd.Error Statistic Statistic StatisticStd.ErrorStatisticb10 175 3 2 5 3.61 .106 1.063 1.129 -.294 .241 -1.130 .478b11 175 4 1 5 3.82 .105 1.048 1.099 -1.080 .241 .889 .478b14 175 4 1 5 3.88 .089 .891 .794 -.985 .241 1.283 .478b13 175 4 1 5 3.89 .079 .790 .624 -1.808 .241 4.744 .478b12 175 3 2 5 3.89 .084 .840 .705 -.624 .241 .063 .478b3 175 3 2 5 3.90 .075 .745 .556 -1.180 .241 1.835 .478b7 175 3 2 5 3.90 .061 .611 .374 -1.029 .241 2.643 .478b8 175 3 2 5 3.92 .094 .939 .882 -.659 .241 -.341 .478b15 175 2 3 5 3.95 .039 .386 .149 -.497 .241 3.783 .478b1 175 4 1 5 3.98 .068 .681 .464 -1.539 .241 6.175 .478b4 175 2 3 5 4.01 .064 .643 .414 -.009 .241 -.527 .478b2 175 3 2 5 4.04 .053 .530 .281 -.784 .241 4.174 .478b6 175 2 3 5 4.18 .056 .557 .311 .048 .241 -.054 .478b9 175 3 2 5 4.23 .090 .897 .805 -1.073 .241 .427 .478b5 175 2 3 5 4.26 .054 .543 .295 .092 .241 -.363 .478Valid N(list wise)Std.Error

192www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/This table is used to know which of the case is more popular or having more weight age whenit comes to higher mean value. As the mean and the standard deviation are not diversified sowe can say that the data is relevant. This table helps us to know about the ratio of womenparticipations as entrepreneurs.CONCLUSIONAn enabling macro economic environment is a key requirement for a free market economy.Business operated by women were particularly disadvantaged with regards to access tofinance, shortage of managerial and technical skills and inability to convert profit back intoinvestment .More than half of women entrepreneurs who failed (53%) were unable to securebadly needed loans from the commercial banks. At a time when an economy without a wellfunctioning financial sector is unable to generate the rate of growth and investment neededfor promoting viability in business operated by poorly equipped –women. This shows thatintervention is needed by the national govt of India if the acute shortage of financeexperienced by small business and enterprises is to be alleviated efficiently by fundamentallyrationalizing the lending principles of commercial bank of India. Results from this study haveshown that the presence of a macroeconomic policy aimed at creating an enabling businessenvironment is crucially needed for the growth and expansion of small enterprises operatedby women in Rajouri. Policy related is a key determinant of survival based on experience.The presence of well defined business laws and property rights improves the likelihood ofsurvival in most small businesses. Removing gender based barriers and promotingcompetition and entrepreneurial activities with a specific focus on women is essential for thecreation of vibrant business and enterprises that could ultimately improve the plight ofimprovised women in Rajouri District.RECOMMENDATIONSBased on the findings of the study. the following recommendation are made so that wherepossible remedial actions can be taken with a view to assist small businesses and enterprisesoperated by women in Rajouri .women entrepreneurs constitute the majority of operators inthe micro enterprises sector in addition to facing gender related challenges . They suffer fromthe unfair denial of operating licenses, severe tax assessment, lack of access to finance,shortage of skills and lack of training opportunities. The national government should alleviatethese challenges by introducing an enabling macro economic environments and by usinglegislature tools, awareness camp and education with a view to remove chronic barriers toeconomic growth and to minimize the incidence of gender related discrimination againstwomen entrepreneur. This goal can be achieved by improving the degree of participation ofimprovised and disadvantaged women in the economy .To this end ,tailor made loan andtraining programmers directed at women should be implemented and aggressively promoted.Access to finance must be made significantly easier .This can be done by attracting foreigncompetitors to come into the local market ,commercial banks and micro lenders must begiven an incentive so that they come up with innovative money lending mechanisms to smallbusinesses and enterprises owned operated by poor women.Competition among financial sectors should be encouraged and non-governmentalorganizations should be allowed to enter the money lending business. This implies that thenational govt needs to rationalize its current policy on financial institution operating in thecountry.

193www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/REFERENCESAbdel-Malek, T (1978).Export Marketing Orientation in Small Firm, “Americanjournel of business, (31), 25-34.Bell,J (1996).The Internationalization Of small computer Software Firms-A furtherChallenge to „stage‟theorie,”Europian Journel of Marketing,29(8,60-75).Bilkey,W J and Tesar ,G(1977). “The Export Behavior of Small Sized WisconsinManufacturing Firm,” General of International business Studies, (8)1, 93-8.Buckley, P andcasson, M (1976).The Future Of The Multinational enterprises, NewYork,NY:holmes andMeirer.Calof J L and Vivers,V(1995). “International Behavior of Small and Medium -SizedSouth African Enterprises,”Journel of Small Business Management, 33(4), 71-79.Freeman,S;Edward Rand Schroder(2006) „How Smaller Born Globel Firms UseNetworks and Alliances to Overcome Constraints to Rapid Internationalization,Journel of international Marketing,14(3)33-63.Moini, a H (1995),”An Inquiring into Successful Exporting: Expending theCoordination Configuration Framework,”journel of Small International marketing,10(3), 49-72.Svante‟A(2004).”International Activities in Small Firms: Exmaining FactorsInternationization and Expert Growth of Small Firms, “Canadian Journel ofAdministrative Sciences, 21(1), 22-34.Walters,P G P and Sammie,S(1990).“A Model for Accessing Performance in SmallUS firms, “Entrepreneurship theory and Practice, 1(2), 33-50.Davidson, W H and McFetidge, D G (1985). “International Technology Transactionsand the Theory of the Firm, “journal of industrial economics, 32(3), 253-264.Anderson, E and Gatignon, H (1986).”Modes of Foreign Entry; A Transaction CostAnalysis and Propositions, “Journal of International Business Studies, 17(3), 1-26.Annual Report, 2008-09. Ministry of Micro, Small and Medium Enterprises,www.msme.gov.inCorporate Governance Reforms in India (May, 2002) by Ananya Mukherjee Reed,Journal of Business Ethics, Vol.37, No.3, PP-249-268.SMES and Industrial Clusters; Lessons for India from Italian Experience (2001) byjanina Vol.36, No.49 (Dec.8-14, 2001), PP.4532-4533.The challenge of Employment in India; An informal Economy Perspective,

194www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Volume-1, Main Report, National Commission for Enterprises in the unorganizedsector (NCEUS), April, 2009, www.nceus.gov.in/.Biswas, Pradip Kumar .2003.Rural Industrialization in West Bengal; institutions,innovations and growth. New Delhi; Manak Publishers.Ramesh, Babu P.2001,”Organisational Structure, Labour relations and employment inKanchapuram silk weaving.”NLI Research studies series NO; 021/2001, V.V.GiriNational Labour Institute.Wie, T.K (1993).Industrial Structure and Small and Medium Enterprise Developmentin Indonesia Washington, D.C, U.S.A; The World Bank.Einarsson, A (2002), Entrepreneurship as a part of the creative industries within thecultural sector in a small society, Iceland.UK.SMEs and industrial clusters ;Lessons for India from Italian Experiences (2001) byJanina Gomes, Economic and Political Weekly, Vol.36 No.49(Dec.8-14,2001).pp.4532-4533.National Commission for Enterprises in the Unorganized Sector, www.nceus.gov.inReport on Effect of Economic Slowdown on Employment in India (October-December,2008),Ministry of Labour and Employment, Government of India, January,2009, www.labourbureau.nic.in

195www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/RELATIONSHIP MARKETING: PERSPCTIVES AND IMPLICATIONSABSTRACTMOHAMMAD RIZWAN ALAM**Sr. Lecturer, Business Department,Preston University,Ajman, UAE.Relationship marketing has emerged as one of the newest forms of marketing phenomenon.Amidst ever fierce competitive climate, its need and role have increased multifold. Thisoffers competitive advantage to the marketer. The technological advances have furthercatalyzed its operation in all the markets-B2B, B2C, and C2. This paper is intended to haveoverview on the various dimensions of relationship marketing, such as exchange, socialmedia, CRM, culture, attitude, emotional bond, competition, technology referring to therelevant literature. The implication is that this marketing is still evolving as an alternatemarketing approach, which is relatively powerful. However, it is not and cannot be asubstitute to the traditional marketing. However, it can be safely concluded that the firms arecompellingly adopting this to improve financial performance.KEYWORDS: Competition, CRM, relationship marketing, social media, technology.___________________________________________________________________________INTRODUCTIONMarketing in one form or the other can be traced back to the time older than transaction, andit then used to be more of unconscious and unplanned effort by the marketers. But, today,marketing in its best forms and formats in academia or industry precedes, intervenes,succeeds, and even circumvents the transaction to generate the most sought after performance- profitability. Last thirty years have witnessed a dramatic improvements in relationshipmarketing. This arguably catalyzed the exchange process universally. All across this timespan, relationship marketing continued to be in the backyards of marketing with varyingdegrees of its roles. Thereafter, It got its pace accelerated in trade and commerce since 1980s.Today, relationship marketing has incredibly and compellingly been vital for almost allmarketers on earth. To many firms, it has been a proven recipe for the commercial success.Relationship marketing-from backyard to vanguard, indeed!What is this, then? It is undeniably making billion dollar difference in the balance sheet ofmany a global fortune 500 corporate across the global market. Its ignorance ormismanagement is a surefire way to put the firm at loss.Taxonomically, it has been called by many names, such as relational marketing, customerrelationship, database marketing, direct marketing, one-to-one marketing, micromarketing,customer relationship management, etc. Relationship is at the core of all these forms ofmarketing, albeit. This creates, maintains, and keeps customers. Ziethaml and Bitner (2003)view “relationship marketing (or relationship management) is a philosophy of doing business,a strategic orientation that focuses on keeping and improving current customers rather thanon acquiring new customers.” Relationship marketing in the consumer market is defined asattracting, maintaining, and enhancing consumer relationships in order to meet the objectives

196www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/of both parties involved (Berry 1995). "Relationship marketing is attracting, maintaining and--in multi-service organizations--enhancing customer relationships" (Berry, 2000). The coretheme of all relationship marketing perspectives and definitions is its focus on cooperativeand collaborative relationship between the firm and its customers, and/or other marketingactors (Sheth and Pravitiya,1999).NATURE OF RMRelationship marketing involves two types of transactions- social exchange and discreteexchange. First proposed social exchange theory which draws on the disciplines ofbehavioral psychology and elementary economics in proposing the principles of socialexchange (Kanagal, 2005). Under this theory, parties benefit from the exchange in terms ofmonetary and non-momentary elements like love, esteem, affection, approval, power,sentiments, respects and so on. Relationship marketing (RM) is effective when both theparties-buyer and seller are almost on equal footing-almost same size otherwise, justrelationship marketing does not last longer. While discrete exchange involves classicalcontractual law whereby contractual gap is reduced resulting from a set of understandings.The emphasis in this exchange is the deal-oriented.In consumer goods, relationship marketing is effective for the channel partners, businessunits, while industrial market, the role of relationship marketing is very vital and complex aswell.Various perspectives and implications are detailed as listed below:CRMThe term is defined as “a business strategy that maximizes profitability, revenue, andcustomer satisfaction by organizing around customer segments, fostering behavior thatsatisfies customers and implementing customer-centric process” (Francis Buttle, 2009).Added, Customer Relationship Management is a comprehensive strategy and process ofacquiring, retaining, and partnering with selective customers to create superior value for thecompany and the customer” (Atul, and Jagdish, 2002)Some take these two terms interchangeably. Though both ultimately aim at financial gains,the approach of the two varies substantially. RM essentially operates on socio-psychologicalbonds, such as attitude, belief, value systems all directed to result in quantifiable transactionvalue, while the CRM or eCRM heavily functions on database of the customers, suppliers,business units, etc. CRM, in itself facilitates RM. Therefore, we can say RM is, in part, afunction of CRM.SOCIAL MEDIASocial media has emerged as a very powerful alternative to the traditional media merely inless than decade time. This offers unimaginably the fastest and cheapest media to target theaudience through this platform, This includes blogs, wikis, social-networking sites and otheronline communities, and virtual worlds" (Weinberg, 2008). Social network sites, such asfacebook, MySpace, LinkedIn, twitter, and so on are some of the stronger platforms to targetthe market especially teens and adults segments. They typically provide a variety of ways forusers to interact, through chat, messaging, email, video, voice chat, file-sharing, blogging anddiscussion groups. (Jothi, et.al, 2011). Wise firms are spending time and money to capitalize

197www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/on this baby media. The firms are diligently designing, developing and implementing socialnetwork through which RM is also being employed. Therefore, no aspiring companies canunderestimate the usefulness of social network sites where the marketers can educate,interact, and build trust sneaking through relationship marketing and influencing buyingbehavior which is usually real-time based.CULTUREThe dimensions of culture postulated by Hofstede in 1983 are power distance, individualism,uncertainty avoidance, masculinity, long term orientation, and indulgence (Green andKeegan, 2006). These elements are also ingredients of relationship marketing in a marketwith diverse culture, such as UAE, Singapore, and the UK. "Culture is more often a source ofconflict than of synergy. Cultural differences are a nuisance at best and often a disaster."(Hofstede, 2001). RM often benefits from when the dyad of buyer and seller or even multipleparties involved in the actual or potential transaction share common culture or sub-culture ina market. Some marketers need not market relatively more on trust building, emotional bond,etc., if company and customers belong to the same culture. Cultural commonness often rootedinto the parties home town or association with alma mater, etc., helps relationship marketingfunction better resulting in favorable transaction. But, this is not true to giant and professionalfirms where the system governs most of the functions, though the same system is prone tocultural pull in the fluid marketplace. It is remarkable point that the same culturalcommonness galvanizing RM is at times antagonistic to the other parties being professional.This is where RM needs to identify the customer's untold needs and offers the products aspromised and serve all across the value chain. Different cultures demand different offeringsespecially when the product is in clash with socio-religious elements. Take Apple, forinstance, it hardly faces any culture issues across the global market, while fast food giants,KFC or McDonald's does. In this context, a diligent RM with strategies, techniques, andtechnology is potent to resolves the underlying issues.COMPETITIONThe application of relationship marketing is more realized when the customers have productsubstitutes or alternatives together with ability and willingness. The degree of competition(namely pure competition, monopolistic competition, oligopolistic competition, andmonopoly competition) to which firm is faced with determines the impact of relationshipmarketing. The degree of competition and the usage of RM is positively related to each other.Marketing research has shown that building strong customer relationships is a means forgaining a competitive advantage for firms (McKenna 1991; Reichheld 1993). Kanagal (2005)views that the elements of Porter's model of completion- the firm's marketing strategy,implementation of this strategy, and the industry context are influenced by RM. This isespecially true when a firm is media rich and tech-savvy. The use of RM offers competitiveadvantage especially in business-to-business market. The seller, more often faced with price,astutely engages in relation building with the buyers. The supplier develops a knack in sailingthrough gatekeeper to the purchaser to the decision making unit by using building rapport orapplying RM, which consequently sidelines his competitor.TECHNOLOGYTechnology is a facilitator to RM. Firms using state-of the art technologies, such as highspeed Internet, mobile phones, PDAs, other related latest hand held gadgets, Web 2.0, e-

198www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/commerce, equipments of various types and sizes, heavy machineries, etc., have far greatercompetitive advantage than the ones with fewer technologies. Good number of companies aretaking advantage of social networking sites like facebook, Business Process Outsourcing(BPO), Knowledge Processing Outsourcing (KPO), internet marketing etc. All these forms oftechnology, among others are enablers of RM.PROFITABILITYAny business activity stands for profitability. RM is also directed in the same vein. This isessentially employed to generate more revenues. The firm integrates this strategy and tacticsinto the quarterly or annual plan. Though the use of this technique does not guaranteesuccess, as uncontrollable variable always interplays with the firm's controllable variable, yetthis is used as mediating agent and often influences the profitability of the firm.FRAMEWORK OF RMFirm's- Goal- Policy- Market Status- Marketing Mix- Resources- Culture-Competitiveness- InnovativenessDiscreteExchangeRelationshipMarketingSocialExchangeTotal EnvironmentFIGURE 1ProfitabilityFigure 1 depicts the four key variables of RM- firm's internal elements, discrete exchange,social exchange, and environment, which, together with RM affects profitability of anorganization. This model can be applied to any type of organization anywhere and for anyproduct.MNAGERIAL IMPLICATIONRelationship marketing has assumed increasing importance for the mangers and decisionmakers in all types of organizations in general and private firms in particular. Last twodecades have witnessed a dramatic shift in marketing discipline. Traditional marketing isloosing its cutting edge and is being supplemented by the newer form of marketing -relationship marketing. Relationship marketing is a compelling reality. The managers arefinding this as a cutting edge amidst cut-throat competition. But, a word of caution is thatrelationship marketing must be an additional or complementary approach of marketingwithout compromising the standards of other elements of marketing or communication mix,as they are prerequisite. Managers need to "customize CRM solutions to the specific types of

199www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/relationships the company is managing and retrain customer-facing employees to be sensitiveto the relational clues they receive and send" (Avery and Fournier, 2011). Customer expectsextra care, effective communication, quick solution, partnering which should be preferablymore than the competitors for the same price. "Don't just talk at consumers -- work with themthroughout the marketing process"( Weinberg et al, 2008).CONCLUSIONRelationship marketing is one of the recent marketing phenomena, which is employed toenhance business through social exchange along with traditional discrete exchange. The needof relationship marketing is increasingly realized as the market is faced with the fiercestcompetition ever. Also, the customer has become more choosy, demanding, and need moreattention. To satisfy such customers, relationship approach of marketing is more financiallyrewarding than just the typical traditional marketing approach.REFERENCESAvery,J. Fouriener S. (2011): "Putting relationship back into CRM", MIT SaloanManagement Review, April 01, USABerry, Leonard L. (1995), "Relationship Marketing of Services - Growing Interest, EmergingPerspectives," Journal of the Academy of Marketing Science, 23(4), 236-245.Buttle, F. (2008): “Customer Relationship Management: Concepts and Technologies”, Pub.Elsevier, USAGreen, M. and Keegan, W. (2006): "Global Marketing", 5th edition, p.126-128, pub. PearsonInternational, UKHofstede, Geert (2001). Culture's Consequences: comparing values, behaviors, institutions,and organizations across nations (2nd ed.). Thousand Oaks, CA: SAGE Publications. ISBN9780803973237. OCLC 45093960.Jothi,P. et al (2011) "Analysis of social networking sites: A study on effectivecommunication strategy in developing brand communication", Journal of Media andCommunication Studies Vol. 3(7), pp. 234-242, July 2011Kanagal, N. (2005): Role of Relationship Marketing in competitive marketing strategy",Journal of Management and Marketing Research, P.2McKenna, Regis (1991), "Relationship Marketing: Successful Strategies for the Age of theCustomer", Reading MA: Addison-WesleySheth J. and Pravitiya,A. (1999): ("The domain and conceptual foundations of relationshipmarketing" Sage publication,USAWeinberg B. et. al. (2008): "The Secrets of Marketing in a Web 2.0 World",http://online.wsj.com/article/SB122884677205091919.html, accessed January 12, 2011Zeithmal,V. and Bitner, M.(2003): “ Service Marketing: Integrating Customer Focus AcrossThe Firm”, 3 rd edition, Tata McGraw-Hill, New Delhi

200www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/PROSPECTS AND PROBLEMS OF INDIAN RURAL MARKETSABSTRACTV V DEVI PRASAD KOTNI**Assistant Professor,Department of Management Studies,GVP College for Degree and PG Courses,Rushikonda, Endada, Visakhapatnam,Andhra Pradesh, India.In recent years, rural markets have acquired significance, as the overall growth of theeconomy has resulted into substantial increase in the purchasing power of the ruralcommunities. Rural Markets are defined as those segments of overall market of anyeconomy, which are distinct from the other types of markets like stock market, commoditymarkets or Labor economics. Typically, a rural market will represent a community in a ruralarea with a population of 2500 to 30000. On account of green revolution, the rural areas areconsuming a large quantity of industrial and urban manufactured products. In this context, aspecial marketing strategy, namely, rural marketing has emerged to satisfy the needs of ruralconsumers. Hence, it is proposed to undertake this study to find out various ways to tap thepotential rural markets. The main aim of this study is to observe the potentiality of IndianRural Markets and finding out various problems are being faced by rural markets. This paperattempts to provide a brief literature on rural marketing and finally offers policyrecommendations for better performance of rural markets by adopting SWOT analysis matrixto rural markets.KEYWORDS: Rural Markets, Rural Marketing, Market Potential, Marketing Myopia.___________________________________________________________________________INTRODUCTIONThe concept of Rural Marketing in India Economy has always played an influential role inthe lives of people. In India, leaving out a few metropolitan cities, all the districts andindustrial townships are connected with rural markets. The rural market in India is not aseparate entity in itself and it is highly influenced by the sociological and behavioral factorsoperating in the country. The rural population in India accounts for around 627 million,which is exactly 74.3 percent of the total population. Rural Markets are defined as thosesegments of overall market of any economy, which are distinct from the other types ofmarkets like stock market, commodity markets or Labor economics. Rural Markets constitutean important segment of overall economy, for example, in the USA, out of about 3000countries, around 2000 counties are rural, that is, non-urbanized, with population of 55million. Typically, a rural market will represent a community in a rural area with a populationof 2500 to 30000. The concept of rural marketing in India is often been found to formambiguity in the minds of people who think rural marketing is all about agriculturalmarketing. However, rural marketing determines the carrying out of business activitiesbringing in the flow of goods from urban sectors to the rural regions of the country as well asthe marketing of various products manufactured by the non-agricultural workers from rural tourban areas. To be precise, Rural Marketing in India Economy covers two broad sections,

201www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/namely - Selling of agricultural items in the urban areas and Selling of manufactured productsin the rural regions. The Registrars of Companies in different states chiefly manage, the ruralmarket in India brings in bigger revenues in the country, as the rural regions comprise of themaximum consumers in this country. The rural market in Indian economy generates almostmore than half of the country's income. Rural marketing in Indian economy can be classifiedunder two broad categories. These are: The market for consumer goods that comprise of bothdurable and non-durable goods and the market for agricultural inputs that include fertilizers,pesticides, seeds, and so on.NEED FOR THE STUDYRural Markets are defined as those segments of overall market of any economy,which are distinct from the other types of markets like stock market, commodity markets orLabor economics. The so-called urban markets are crowded and saturated and the share ofagriculture in GDP is going down but India still lives in her villages. Such a potential marketwas being ignored by corporate sector and small and medium industries. Hence it is proposedto study the potentiality and problems of rural market with a special reference to Indian RuralMarket.OBJECTIVES OF THE STUDYRural markets, as part of any economy, have untapped potential. There are severaldifficulties confronting the effort to fully explore rural markets. The concept of rural marketsin India, as also in several other countries, like China, is still in evolving shape, and the sectorposes a variety of challenges, including understanding the dynamics of the rural markets andstrategies to supply and satisfy the rural consumers. The objectives of this study includeobserving the dynamics of Indian Rural Markets over a period of time, reviewing theliterature of rural markets and rural marketing, outlining the potentiality of rural markets withrespective to different segments like FMCG, Automobiles, Retail etc. The study alsoconcentrates on the problems faced by rural markets and finally offering suggestions toovercome the problems and tapping the potentiality of the rural markets at maximum level.METHODOLOGY OF THE STUDYIn order to study the various problems and prospects of rural markets, to find out thefacts, to analyse the findings and to offer suggestions – a tool, namely, SWOT AnalysisMatrix has been adopted. The inputs for this matrix have been collected from past studies ofrural marketing, reports published by various institutions etc.REVIEW OF LITERATUREDEFINING RURAL MARKET- NSSO (Census) defined rural market as a Market with population density less than400 sq km., 75% of male working population is engaged in agriculture and noMuncipal Corporation / board.- Planning Commission of India defined rural market as towns up to 15,000 populationsare considered as rural market.

202www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/- NABARD defined as all locations with a population up to 10,000 considered as ruralarea.- The Consumer electronics giant LG Electronics defined as all places other than sevenmetro cities of India.- The Sahara group defined as commercial establishments located in areas serving lessthan 1000 population are rural markets.(Source: The Rural Marketing Book – Text & Practice, Kashyap. P and Ruat. S (2007))DEFINING RURAL MARKETING- National Commission on Agriculture defined Rural Marketing as ―decisions toproduce salable commodities involving all aspects of the market system or structure,both functional and institutional, based on technical and economic considerations andincludes the pre and post harvest operations‖.- Several Rural NGOs defined rural marketing as Marketing products produced in ruralarea to urban areas. Or Marketing Products produced in rural areas in rural markets.- Several Corporates defined Rural marketing as ―function that manages all activitiesinvolved in assessing, stimulating and converting the purchase power of ruralconsumers into effective demand for specific products and services to createsatisfaction and a better standard of living for achieving organisational goals.PHASES IN RURAL MARKETINGPHASE ONE (PRE 1960’S)- Marketing Rural Products in Rural Areas and Urban Areas.- Agriculture inputs in rural areas.- Agriculture Marketing.- Farming methods were primitive and mechanisation was low.- Markets unorganised.PHASE TWO (1960S TO 1990S)- Green Revolution.- Companies like Mahindra & Mahindra, Sri Ram Fertilisers and IFFCO Emerge.- Rural Products were also marketed through agencies like KVIC.

203www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/PHASE THREE (1990S AND PRESENT)- Demand for Consumables and durables rise.- Companies find urban markets declining.CHARACTERISTICS OF RURAL MARKETINGSome of the important features or characteristics of Rural Marketing in IndiaEconomy are being listed below:- With the initiation of various rural development programmes there have been anupsurge of employment opportunities for the rural poor. One of the biggest causebehind the steady growth of rural market is that it is not exploited and also yet to beexplored.- The rural market in India is vast and scattered and offers a plethora of opportunities incomparison to the urban sector. It covers the maximum population and regions andthereby, the maximum number of consumers.- The social status of the rural regions is precarious as the income level and literacy isextremely low along with the range of traditional values and superstitious beliefs thathave always been a major impediment in the progression of this sector.- The steps taken by the Government of India to initiate proper irrigation,infrastructural developments, prevention of flood, grants for fertilizers, and variousschemes to cut down the poverty line have improved the condition of the ruralmasses.DEMOGRAPHIC DETAILS OF INDIAN RURAL MARKETS- About 285 million live in urban India whereas 742 million reside in rural areas,constituting 72% of India's population resides in its 6, 27,000 villages.- The number of middle income and high income households in rural Indian is expectedto grow from 46 million to 59 million.- Size of rural market is estimated to be 42 million households and rural market hasbeen growing at five times the pace of the urban market.- More government rural development initiates.- Low literacy rate- Increasing agricultural productivity leading to growth of rural disposable income.- Lowering of difference between taste of urban and rural customers.

204www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/SIGNIFICANCE OF RURAL MARKETINGRural market is getting an importance because of the saturation of the urban market.As due to the competition in the urban market, the market is more or so saturated as most ofthe capacity of the purchasers has been targeted by the marketers. So the marketers arelooking for extending their product categories to an unexplored market i.e. the rural market.This has also led to the CSR activities being done by the corporate to help the poor peopleattain some wealth to spend on their product categories. Here we can think of HLL (now,HUL) initiatives in the rural India. One of such project is the Project Shakti, which is not onlyhelping their company attain some revenue but also helping the poor women of the village toattain some money which is surely going to increase their purchasing power. Also this willincrease their brand loyalty as well as recognition in that area. Similarly we can think of theITC E-Chaupal, which is helping the poor farmers get all the information about the weatheras well as the market price of the food grains they are producing. In other view theseactivities are also helping the companies increase their brand value. So as it is given abovethe significance of the rural market has increased due to the saturation of the urban market aswell as in such conditions the company which will lead the way will be benefited as shownby the success of HUL and ITC initiatives.In recent years, rural markets have acquired significance in countries like China andIndia, as the overall growth of the economy has resulted into substantial increase in thepurchasing power of the rural communities. On account of the Green Revolution in India, therural areas are consuming a large quantity of industrial and urban manufactured products. Inthis context, a special marketing strategy, namely, rural marketing has taken shape.Sometimes, rural marketing is confused with agricultural marketing – the later denotesmarketing of produce of the rural areas to the urban consumers or industrial consumers,whereas rural marketing involves delivering manufactured or processed inputs or services torural producers or consumers. Also, when we consider the scenario of India and China, thereis a picture that comes out, huge market for the developed products as well as the laborsupport. This has led to the change in the mindset of the marketers to move to these parts ofthe world.Rural India buys small packs, as they are perceived as value for money. There isbrand stickiness, where a consumer buys a brand out of habit and not really by choice. Brandsrarely fight for market share; they just have to be visible in the right place. Even expensivebrands, such as Close-Up, Marie biscuits and Clinic shampoo are doing well because of deepdistribution, many brands are doing well without much advertising support — Ghadi, a bigdetergent brand in North India, is an example.The Indian rural market has a huge demand base and offers great opportunities tomarketers. Two-thirds of Indian consumers live in rural areas and almost half of the nationalincome is generated here. The reasons for heading into the rural areas are fairly clear. Theurban consumer durable market for products like colour TVs, washing machines,refrigerators and air conditioners is growing annually at between 7 per cent and 10 per cent.The rural market is zooming ahead at around 25 per cent annually. "The rural marketis growing faster than urban India now," says Venugopal Dhoot, chairman of the Rs 989 -crore (Rs billion) Videocon Appliances. "The urban market is a replacement and up gradationmarket today," adds Samsung's director, marketing, Ravinder Zutshi.

205www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/REASONS FOR IMPROVEMENT OF BUSINESS IN RURAL AREA- Socio-economic changes (lifestyle, habits and tastes, economic status)- Literacy level (25% before independence – more than 65% in 2001)- Infrastructure facilities (roads, electricity, media)- Increase in income- Increase in expectationsPROSPECTS OF RURAL MARKETSThe Indian growth story is now spreading itself to India's hinterlands. The ruralconsumer market, which grew 25 per cent in 2008, is expected to reach US$ 425 billion in2010-11 with 720-790 million customers, according to a white paper prepared by CII-Technopak, in November 2009. The figures are expected to double the 2004-05 market sizeof US$ 220 billion. The Union Budget for 2010-11 has hiked the allocation under theNational Rural Employment Guarantee Act (NREGA) to US$ 8.71 billion in 2010-11, givinga boost to the rural economy.FMCG SECTOR: According to figures released by market researcher Nielsen, demand forpersonal care products grew faster in rural areas than urban areas during the period January-May 2010. In shampoos, rural demand grew by 10.7 per cent in value terms, while in urbanmarkets, it rose by 6.8 per cent. Similarly, toothpaste sales grew by 9.1 per cent in rural Indiaand by 4.4 per cent in urban markets. Several fast moving consumer goods (FMCG)companies such as Godrej Consumer Products, Dabur, Marico and Hindustan Unilever(HUL) have increased their hiring in rural India and small towns in order to establish a localconnect and increase visibility. Swiss FMCG giant, Nestle plans to make further inroads intothe rural markets. The company has asked its sales team to deliver "6,000 new sales pointsevery month in rural areas" to expand its presence in Indian villages, according to AntonioHelio Waszyk, Chairman and Managing Director, Nestle India.RETAIL SECTOR: The rural retail market is currently estimated at US$ 112 billion, oraround 40 per cent of the US$ 280 billion Indian retail market, according to a study paper,'The Rise of Rural India', by an industry body. Hindustan Unilever (HUL) is planning tosignificantly increase its rural reach. According to Harish Manwani, Chairman, HUL, thequality and quantity of rural coverage will go up to the extent that "what we have done in thelast 25 years we want to do it in the next two years." Currently HUL products reachapproximately 250,000 rural retail outlets and the company intends to scale it up to nearly750,000 outlets in two years time. Direct selling firm Tupperware India, known for its storagecontainers plans to foray into the rural markets in the next two-three years. "We have solidplans for the rural market. We are working on bringing products for rural people as well,"said Asha Gupta, Managing Director, Tupperware India. Castrol India is pushing its ruralsales by building up a distribution infrastructure to reach out to all villages. According toRavi Kirpalani, Chief Operating Officer, Castrol India, "Our distribution now reaches 5,000-7,000 towns and villages, but we are planning to take our products to six lakh villages with apopulation of less of 5,000.''

206www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/AUTOMOBILE SECTOR: Car sales in rural India have been on the increase in the lastthree years since the government announced various schemes such as farm loan waiver etc,for the rural population. Maruti Suzuki's share of rural sales has increased from 3.5 per centto 17 per cent in the last three years. Mahindra & Mahindra (M&M) is now selling moreScorpios in rural and semi-urban markets. Scorpio sales have increased from 35 per cent to50 per cent in the last two years. Toyota Kirloskar Motor (TKM), in which Japan's ToyotaMotor Corp holds an 89 per cent controlling stake, is planning at selling 40 per cent of itscars in rural markets in India. According to Hiroshi Nakagawa, Managing Director, TKM,"We are aggressively expanding our dealership footprint in India and quite a significantportion of this will be in country's heartland. By end of 2010, we plan to have 150 dealersacross the country." Yamaha is also planning a major initiative in rural India by launchingmore models in the affordable price range in 2010. "We are very strong in Tier 1 and Tier IIcities. Now onwards, our focus will be rural India (Tier III towns). We will launch moremodels in the affordable price range to dominate the rural market," according to PankajDubey, National Business Head, India Yamaha Motor. At present, around 15 per cent of itssales come from the rural market and Dubey sees this demand increasing substantially in2010. Tata Motors is also making efforts to sell its pick up truck Ace in rural markets. It hasalready opened 600 small outlets for the Ace in rural and semi-urban markets. It has also tiedup with 117 public sector, gramin (rural) and co-operative banks to help small entrepreneursbuy the vehicle.ESTIMATED ANNUAL SIZE OF THE RURAL MARKETTABLE 1: ESTIMATED ANNUAL SIZE OF THE RURAL MARKETFMCGDurablesAgri-Inputs (including tractors)Rs. 65,000 CroreRs. 5,000 CroreRs. 45,000 Crore2 / 4 Wheelers Rs. 8,000 CroreSource: NCAER Report, 2011In 2001-02, LIC sold 55% of its policies in rural India. Of two million BSNL mobileconnections, 50% are in small towns / villages. Of the 6.0 lakh villages, 5.22 lakh have aVillage Public Telephone (VPT). 41 million Kisan Credit Cards have been issued (against 22million credit-plus-debit cards in urban), with cumulative credit of Rs. 977 billion resulting intremendous liquidity. Of the 20 million Rediffmail sign-ups, 60% are from small towns. 50%of transactions from these towns are on Rediff online shopping site. 42 million ruralhouseholds (HHs) are availing banking services in comparison to 27 million urban HHs.Investment in formal savings instruments is 6.6 million HHs in rural and 6.7 million HHs inurban.

207www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/OPPORTUNITIES OF RURAL MARKETSIn the early 2000s, around 700 million people, i.e. 70% of the Indian population livedin 6,27,000 villages, in rural areas. Of this, 90% were concentrated in villages withpopulation less than 2000. According to a study conducted in 2001 by the National Councilfor Applied Economic Research (NCAER), there were as many "middle income and above"households in rural areas as there were in urban areas.Infrastructure is improving rapidly - In 50 years only, 40% villages have beenconnected by road, in next 10 years another 30% would be connected. More than 90%villages are electrified, though only 44% rural homes have electric connections. Ruraltelephone density has gone up by 300% in the last 10 years; every 1000+ population isconnected by STD. Social indicators have improved a lot between 1981 and 2001 - Numberof "pucca" houses doubled from 22% to 41% and "kuccha" houses halved (41% to 23%).Percentage of BPL families declined from 46% to 27%. Rural literacy level improved from36% to 59%. Low penetration rates in rural areas, so there are many marketing opportunitiesTABLE 2: COMPARISON OF USAGE B/W URBAN AND RURAL AREASDurables Urban Rural Total (% of Rural HH)CTV 30.4 4.8 12.1Refrigerator 33.5 3.5 12Source: NCAER Report, 2011TABLE 3: COMPARISON OF USAGE B/W URBAN AND RURAL AREASFMCGs Urban Rural Total (% of Rural HH)Shampoo 66.3 35.2 44.2Toothpaste 82.2 44.9 55.6Source: NCAER Report, 2011Marketers can make effective use of the large available infrastructure –TABLE 4: RURAL MARKETS INFRASTRUCTUREPost Offices 1,38,000Haats (periodic markets) 42,000Melas (exhibitions) 25,000Mandis (agri markets) 7,000

208www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Public Distribution Shops 3,80,000Bank Branches 32,000Source: NCAER Report, 2011Proliferation of large format Rural Retail Stores, which have been successful also -DSCL Haryali StoresM & M Shubh Labh StoresTATA / Rallis Kisan KendrasEscorts Rural StoresWarnabazaar, Maharashtra (Annual Sale Rs. 40 crore)ANALYSIS AND DISCUSSIONSA SWOT analysis matrix has been developed to interpret the prospects and problemsof rural markets. SWOT analysis matrix contains Strengths, Weaknesses, Opportunities andThreats of Rural Markets. After defining SWOTs of rural markets, Opportunities arecompared against Strengths and then Weaknesses to draw SO and WO Strategies. Threats arealso compared against Strengths and then Weaknesses to draw ST and WT Strategies asshown in the table 5.TABLE 5: SWOT ANALYSIS MATRIX OF INDIAN RURAL MARKETSFactorsExternal FactorsInternalStrengths (S)S1: Large Indian RuralPopulationS2: Good GovernmentSupportS3: Availability ofProducts,Raw MaterialsWeakness (W)W1: Lack of goodInfrastructureW2: Lack of physicaldistributionnetworksW3: Low consumption levelsW4: Less Research andDevelopmentActivities on RuralMarkets

209Threats (T)www.zenithresearch.org.inOpportunities (O)ZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/O1: Growing IncomeLevelsRuralConsumersO2: Growing LiteracyLevelsO3: Growing qualityConsciousnessO4: Changing SocioeconomicLifestylesO5: IncreasinginfrastructureFacilitiesSO Strategies1. Companies have tocustomizethe products accordingtoconsumerdemographics. (S1,S3, O1, O4)2. Companies have tostrengthen supplychains withgovt. support andInfrastructure. (S2, O5)3. Companies have tolaunchbranded products inruralMarkets too due toincreasinglevels of quality andLiteracy.(S3, O2, O3)WO Strategies1. As the consumer levels ofquality,Literacy and Income aregrowing,need for good infrastructurelikeroadways, communication,availability of retail outletsshouldbe available for effectiveruralmarketing. (W1,W2,O1,O2,O3, O5)2. Companies have toconcentrate onResearch Activities toobserve therural consumer behavior,usagelevels, consumptionpatterns,observing rural life style.(W3,W4, O4)T1: Increasing greymarketT2: GrowingCompetitionT3: Less Knowledgelevels onProductIdentificationST Strategies1. Companies have toeducateconsumers inidentifyingtheir product and usage.(S1, S3, T2, T3)2. Government has toimplement laws, rulesandregulations effectivelyso that grey market canbecontrolled. (S2, T1)WT Strategies1. Improve extension systemandtransfer of technology togross-rootlevel. (W1, W2, T2)2. Building Strong BrandIdentity cansolve the problem ofproductidentification and greymarketproducts. (T1, T3, W3, W4)

210www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/PROBLEMS OF RURAL MARKETS- The development of appropriate communication systems to rural market may cost upto six times as much as reaching an urban market through established media, needrural communication facilities.- The problems of physical distribution and channel management adversely affect theservice as well as the cost aspect. The existent market structure consists of primaryrural market and retail sales outlet. The structure involves stock points in feeder townsto service these retail outlets at the village levels. But it becomes difficult maintainingthe required service level in the delivery of the product at retail level.- Rural consumers are cautious in buying and decisions are slow and delayed. They liketo give a trial and only after being personally satisfied, do they buy the product.- Culture is a system of shared values, beliefs and perceptions that influence thebehavior of consumers. There are different groups based on religion, caste,occupation, income, age, education and politics and each group exerts influence onthe behavior of people in villages.- As a general rule, rural marketing involves more intensive personal selling effortscompared to urban marketing. Marketers need to understand the psyche of the ruralconsumers and then act accordingly. To effectively tap the rural market a brand mustassociate it with the same things the rural folks do. This can be done by utilizing thevarious rural folk media to reach them in their own language and in large numbers sothat the brand can be associated with the myriad rituals, celebrations, festivals, melasand other activities where they assemble.- Life in rural areas is still governed by customs and traditions and people do not easilyadapt new practices. For example, even rich and educated class of farmers does notwear jeans or branded shoes.- An effective distribution system requires village-level shopkeeper, Mandal/ Talukalevelwholesaler or preferred dealer, distributor or stockiest at district level andcompany-owned depot or consignment distribution at state level. The presence of toomany tiers in the distribution system increases the cost of distribution.- Television has made a great impact and large audience has been exposed to thismedium. Radio reaches large population in rural areas at a relatively low cost.However, reach of formal media is low in rural households; therefore, the market hasto undertake specific sales promotion activities in rural areas like participating inmelas or fairs.- Many rural areas are not connected by rail transport. Kacha (wet) roads becomeunserviceable during the monsoon and interior villages get isolated.- There are not enough opportunities for education in rural areas. The literacy level is aslow (36%) when compared to all- India average of 52%.

211www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/- Demand for goods in rural markets depends upon agricultural situation, as agricultureis the main source of income. Agriculture to a large extent depends upon monsoonand, therefore, the demand or buying capacity is not stable or regular.RECOMMENDATIONS FOR EFFECTIVE RURAL MARKETING PRACTICES- The Government has to develop infrastructure facilities like roadways, railways etc.,in rural areas so as to reach large Indian rural market.- The rural communication facilities like telecommunication systems, internet facilities,broadcasting systems etc., have to be improved so that there will not be anycommunication gap among players of the rural market segments.- Effective Supply Chain Management practices can bring down the various costsassociated with rural markets like distribution cost, cost of communication, customercost, cost of sale etc.- Educating rural consumers is the key to successful rural marketing. Rural consumersneed to be educated in all aspects like usage of the products, gathering productinformation, consumer rights, laws and regulations, getting the right product at rightplace at right cost in right time.- The efficient marketing is predominantly influenced by efficient distribution system itmeans products such ultimate consumer in the quickest time possible at minimumcost.- The state marketing board or federation or market committees also the producers,traders and sellers have necessarily to be consulted as they have the principle interesttowards its use.- Suitable structure of support prices for various farm commodities adjusted from timeto-time.Adequate arrangement of agricultural produce on support price, if the pricefalls below the level.- Rural marketing is the nerve center of a rural economy; rural markets are the channelsfor the movements of goods and services as well as to promote cultural integration.- Greater Need for Strategic Rural Marketing Practices Which includes- Client and location specific promotion- Joint or cooperative promotion- Bundling of inputs- Developmental marketing- Unique selling proposition (USP)- Extension services

212www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/CONCLUSION- Business ethics- Partnership for sustainability- Management of demandThere were almost twice as many "lower income households" in rural areas as inurban areas. There were 2.3 million "highest income" households in urban areas as against1.6 million in rural areas. NCAER projections indicated that the number of "middle incomeand above" households was expected to grow to 111 million in rural India by 2007, comparedto 59 million in urban India. Gone were the days when a rural consumer had to go to a nearbytown or city to buy a branded product. The growing power of the rural consumer was forcingbig companies to flock to rural markets. At the same time, they also threw up majorchallenges for marketers. In rural markets, customs and beliefs play important role in successor failure of any product. Therefore every marketer has to concentrate on rural markets apartfrom the matured urban markets. The role of government is very vital in solving the problemsof rural markets. Development of infrastructure and effective implementation of laws, rulesand regulations will protect of interest of rural consumer.REFERENCESAMBEKAR YADAV J B (1992), Communication and Rural Development, MittalPublications (New Delhi). 1992.DEVI PRASAD KOTNI V V (2011), BOSE K S, HEMA SUNDAR M, ―Andhra PradeshMarine Fish Exports: Prospects and Problems‖, Fishing Chimes, Vol.30, No.12, March 2011,pp 65 – 68.DEVI PRASAD KOTNI V V (2011), ― The Banned Surrogate Marketing as brand newBrand Extension Advertising‖, International Journal of Research in Commerce andManagement (e-Journal), Vol. 2, No.4, April 2011, pp 85-89.DEVI PRASAD K V V (2010), ―Human Resource Development at National Level‖, HRDTimes, Vol.12, No.4, April 2010, pp 44-45.DEVI PRASAD KOTNI V V (2011), ― Dynamics of Direct Marketing: A Special referenceto Email Marketing‖, Computing, Business Applications and Legal Issues, edited by RashmiAgrawal, Reema Kurana, Narayan C Debnath, Excel Books, 2011, pp 28-35, pp 171-179.DEVI PRASAD KOTNI V V (2010), ― Making CRM Successful through HRD Systems‖,Contemporary Management – Issues and Challenges, edited by A.Suryanarayana, K.Kalidas,Smitha Sambrani, Y.Jahangir, Himayala Publishing House, Hyderabad, 2010, pp 126-132.ELJELLY, A(2004), Liquidity Profitability Trade off An empirical Investigation in anEmerging Market, International Journal of Commerce & Management, Vol 14 (2), 2004.GOPAL SWAMY T P, Rural Marketing, Wheeler publishings (New Delhi) 1998.

213www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/MANOHAR LAL JALAN (1988), Marketing of Agricultural Inputs, Himalaya PublishingHouse (Delhi). 1988.MISRA, S.K. (2000). Indian Economy, Himalaya Publishing House, 18th Edition, p. 739New Delhi.MULVIHILL, DONALD F (1951), "Marketing Research for the Small Company", Journal ofMarketing, Vol. 16, No. 2, Oct., 1951, pp. 179–183.RAJAGOPAL, Development of Agricultural Marketing in India, Print well (Jaipur).RAJ KUMAR SINGH (1990), Agricultural Price Policy in India, Print well Publishers –(Jaipur). 1990.RAVINDRANATH V. BADI AND NARANYANSA V. BADI, Rural Marketing, HimalayaPublishing, 2004.REKHA BALU (2001), "Strategic innovation - Hindustan Lever Ltd.,"www.fastcompany.com, June 2001, Issue 47, p- 120.STUART, EWEN. Captains of Consciousness: Advertising and the Social Roots of theConsumer Culture, Basic Books, ISBN13: 9780465021550, ISBN10: 0465021557.PRADEEP KASHYAP, Rural Marketing, Biztantra publications 2006.NCAER Report, 2011.CMIE report 1997.

214www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/‘PERMISSION MARKETING’- INTERRUPTION IS REPLACED BYINVITATIONABSTRACTJ.J.SOUNDARARAJ**Assistant Professor,Loyola College (Autonomous),Chennai - 600034,Tamilnadu. India.Permission Marketing is a strategy that gains popularity among the marketers because of itssuitability in the present world of commercial clutter. Increasing commercial clutter andincreasing promotional cost have compelled the marketers to look for a good strategy ofreaching out to the target customers suitably. The concept of „Permission Marketing‟obviously overcomes these challenges for the marketers and in addition, it serves twoimportant purposes for the customers. It is certain that Permission Marketing helps thecustomers to reduce the search cost and avoid the clutter. The foremost advantage ofPermission marketing from the view point of the marketers is that it facilitates effective„Target Precision with suitable Permission Intensity‟.KEYWORDS: Permission, Permission Intensity, Target Precision, Commercial Clutter,Co-creation Marketing, Opt-in, Opt-out.___________________________________________________________________________INTRODUCTIONMarketing at present is considered to be a competition for attracting the attention of people,more specifically the target customers. Unlike the present, three decades back the customerswere giving their attention when it was requested for by the marketers. The marketers wouldhave interrupted the Television programmes and the customers would have listened to whatwas said by them. The marketers were allowed to keep a billboard or a hoarding at anyvantage point of a city to communicate with the people pass through. The people also enjoyedsuch marketing communication. It is not true at present and anymore. The average globalconsumers see or hear more than one million marketing messages that are almost more than3,000 per day. It is humanly impossible for anyone to pay attention to all the messages towhich they get exposed. The interruption strategy, followed by the marketers was reallyeffective in reaching the customers when there was no commercial clutter in any availablemedium. But, now there are many things with which the people are made busy and find notime to respond to the interruptions. So, the interruptions are either ignored or complained bythe people. Today, the important attribute of a Television is “cluttered with commercials”. Itis more apt to say that television and commercial clutter are inseparable. Still, the cost of eachsecond of telecasting an advertisement in TV during the prime time is increasing fastly.Similarly, the other available media such as, Web, Print, etc are also no exceptions to thecommercial clutter. The challenge for the marketers today is to persuade consumers tovolunteer attention- “to raise their hands” (Godin‟s phrase)- to agree to learn more about acompany and its offering.

215www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/“PERMISSION MARKETING- MEANING„Permission Marketing‟ is also called as „Invitational Marketing‟. It is the opposite ofInterruption marketing, used by the marketers traditionally. Permission marketing is aboutbuilding and maintaining a profitable and long-lasting relationship with the customers thatfacilitates better interaction and communication with them. Among the few people who havedefined the concept „Permission Marketing‟, the pioneer and perhaps the father of theconcept, Seth Godin has defined the concept in a convincing way. In his words, Permissionmarketing is “turning strangers into friends, and friends into customers”. PermissionMarketing is a like a blessing, given for the marketers to effectively communicate with theirtarget customers overcoming the challenges of the increasing commercial clutter. It is moreof a privilege given to the marketers to deliver desired and relevant communication to thepeople who actually want to earn their attention. For example, a potential investor interestedin investing his money on mutual funds approaches Bajaj Capital and requests the peoplethere to send the messages related to the forthcoming issue of new mutual fund schemes fromSundaram BNP Paribas. The Investment advisor/ client executive from Bajaj Capital sendsmessages to the customer on the requested aspect. The messages could be delivered eitherthrough post or e-mail or SMS using Mobile phones or communication over phone. Suchcommunication from Bajaj Capital to the customer will be much appreciated by the customer.WHAT IS PERMISSION MARKETING?A clear understanding over the concept „Permission Marketing‟ will enhance themarketers to apply it in its real sense. The points, discussed below would give suchunderstanding of permission marketing. Attracting the attention of the customers is imperative for the marketers toreach out to them with relevant marketing information. Permission marketing recognizes theexpectation of the best consumers who normally look at the marketing communication as adisturbance and ignore them. This concept realizes that treating people with due respect is thebest way to earn their attention. For example, the employees who play the role of „peoplegreeters‟ in an organization moves forward to the customers who step into the businesspremises and look for someone to help them to go a particular section in the businesspremises where they can buy what exactly they want to buy. In this situation, the greeting andreadiness of the people greeters give the customers a positive attitude towards the businessenterprise and makes the shopping very pleasant. The moment, customers look for someoneto guide them properly within the business premise, it should be understood that theysymbolically give permission to receive the information / guidance. When the employeesrespond to the permission of the customers, it is well received and appreciated by them. „Pay attention‟ is an important aspect in Permission marketing. Thepermission marketers understand that when a customer decides to pay attention, he is actuallypaying the marketers with something that is precious. The customers‟ attention should beutilized before their desire expires. The customers‟ attention is an important asset which hasto be valued profitably and not to be wasted. The meaning of real permission, given by a customer could be wellunderstood with reference to a situation wherein if the marketer stops the communication, thecustomer complains. The real permission is different from presumed permission. Forinstance, a marketer somehow comes to know the e-mail address of a customer, does not

216www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/mean that the customer concerned has given permission to the marketer. Moreover, if thecustomer does not complain, it does not mean that the permission is granted. If a customer of an organization feels unhappy on not receiving the desiredinformation from a marketer, it is a failure on the side of the marketer to utilize thepermission, given to him. For instance, if a customer is unhappy because he has not receivedhis favourite newspaper for a day or two. The permission, given is unutilised. The process of obtaining permission from a customer is almost similar to theprocess of getting into dating with someone. The marketer does not have to open up the saleat first sight. It should be progressive. Permission obtained from a customer does not have to be formal but it has tobe obvious. For instance, an individual obviously has permission to request his friend forfinancial help. It does not matter whether the request is honoured or not, but a colleague doesnot have implied permission to request another counterpart for financial support. The payment of subscription is an overt act of permission. Therefore, thosewho have subscribed for a news paper and / or magazine are more valuable than the otherswho might buy the same from the shops. There is a permanent commitment on the part of theformer than the latter to buy the news paper and/ or magazine. The interaction between a customer and a marketer could be had andcontinued for the life time of both, just based on a small and single permission, given once.For example, distribution of a news letter. Permission marketing discourages marketers to obtain permission that cannotbe honoured within their present capabilities. They need not assume that they can do more inthe future. The marketers are therefore directed not to obtain permission from the customersbased on assumptions and prediction about the future that is not certain. The marketers can honour the permission of different customers in differentstyle and manner. The new technological advancements really facilitate the marketers to treatand respond to different customers differently, perhaps in a more customised way. The concept „Co-creation marketing‟ proposed by Sheth, Sisodia and Sharma(2000) envisions a system where marketers and consumers participate in determining andshaping the marketing mix. Hence, permission marketing can be viewed as focusing on thecommunication aspect of wider concept called Co-creation marketing.OPT-IN Vs OPT-OUTThere are two notions namely, opt-in and opt-out that are very much related topermission marketing. Opt-in means that the situation where a customer explicitly volunteersand gives consent to receive marketing communication. In the case of opt-out, the marketersinitiate contact with the potential customers and then provide them an option of not receivingfuture messages. Few among those experts who deal with permission marketing opine thatpermission marketing is based the notion of opt-in rather than opt-out. The other expertsargue that permission marketing is based on both the notions. It is of both opt-in and opt-out.The opinion of the latter is more reliable for a reason that opt-in refers to the entry into a

217www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/relationship by a customer voluntarily and opt-out refers to the entry into a relationship notsolicited, but there exists a provision for a customer to exit anytime.WHEN DOES ‘PERMISSION’ EXPIRE?Obtaining permission from the customers to whom a marketer desires to sendcommunication is primary and vital in creating and building profitable relationship withthem. Such permission may expire for the following reasons:Permission may expire because the customers have received many permission basede-mails. The first „permission given‟ soon gets lost for any one marketer in themixture of many messages.Permission may expire when the rules, backing it change. For instance, if a customergives permission to do Job- „X‟, the marketer then adds in one new job of „Y‟, thenew addition breaks the agreed rules and thereby the permission originally given,dies.Permission may expire when the marketer pushes the customer very hard. Permissionshould simply open the door to a mutual relationship. It is not a contract that bindsanyone to anyone else.Permission may expire when the customer feels that the value of benefits out of it ismore to the marketer than the customer.In this juncture, if a marketer is desirous to survive his permission, he has to reward it, renewit and above everything, make it perceived to be more beneficial to the customer and less tothe marketer.RELEVANCE OF PERMISSION MARKETINGBefore the concept „Permission Marketing‟ gained acceptance among the users, DonPeppers and Martha Rogers threw their idea in the year 1993 for the requirement of a strategylike „Permission Marketing‟. According to Don and Martha, there are two ways available infront of the companies to increase sales. One way is, selling more to its‟ few existingcustomers. The other way is, selling few to many customers. The former way recommendsconcentrating on focusing the existing customer base whereas, the latter requires thecompany to search for more and more new customers to increase the sales. The argument isnot for ranking which way is superior. Each is good in different situations. The point to beunderstood is that when both are applicable in a situation, the former way is better andeconomical than the latter one. It is obvious that attracting and satisfying new customers isfew times costlier than retaining the existing customers. Latter in 1999, Seth Godin coinedand introduced the concept „Permission Marketing‟. In his words, it could be understood thatpermission marketing is a new way of selling the marketing offers in which a potentialcustomer gives his consent in advance to receive marketing communication on his/ herdesired areas and categories. Followed by, the marketers plan the marketing communication /messages to match with the interest of the customers. In addition, there are few other reasonsthat have led permission marketing to gain good acceptance among the users.The cost of reaching out to a customer using permission marketing is much lowwhereas, the benefit from it is valued to be more.

218www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Consumers provide permission to the marketers to send them certain types ofpromotional messages. This really contributes for reducing clutter and search costs forthe customer while the same improves target precision for marketers. Target precisionrefers to accurately identifying suitable target customers for a product or service.Permission Marketing may be a technique to reduce privacy concerns of individuals.The same point has been shared by Sheehan and Hoy (2000).Promotion of high degree innovation, new product introduction and promotion oftransportation services could be efficiently done using Opt-out notion of permissionmarketing.CRITICAL EVALUATION OF THE EXISTING PERMISSION MARKETINGMODELSThe four models of permission marketing are critically evaluated in this part of thearticle. „Permission Intensity‟ is the key differentiator among the models of permissionmarketing. It refers to the degree to which a consumer empowers a marketer in the context ofa communicative relationship. Consumers define the boundaries of their relationship withcompanies in relation to the permission given. In some cases, the consumers are muchreceptive to the messages from the companies and in others, the companies are held on a tightleash. For example, there are two scenarios, discussed as follows. In the first one, theconsumer provides a marketer his or her e-mail address and permits the marketer to send onepromotional message a month. Example, Requisition of Gmail alert by a user on a desiredtopic. No other information is provided. In the second one, the consumer provides detailedinformation about all his requirements, tastes, and permits the marketer to send him / her asmany messages as possible on the topic. It is obvious that in the second case, the consumerhas given a greater role for the marketer and hence, this case represents greater permissionintensity.High permission intensity is characterised by three factors. They are, high informationquantity, high information quality, and information usage flexibility. First, a consumerprovides detailed information in his or her self-interest, it results in the willingness toparticipate in an exchange of more information. Second, the consumer realises that he or shecan receive quality information for effective decision on an aspect if he or she maintainsquality in the details, furnished to the marketers. Third, the consumer participates in theexchange with few constraints/ restrictions on how that can be used by the marketer todevelop marketing communication.Each marketer should find the optimal value of the number of customers they want toserve and the level of permission intensity, provided to him or her. These two aspects greatlyinfluence the models of permission marketing and the choice of a model by the marketers.MODEL-1DIRECT RELATIONSHIP MAINTENANCEWhen customers want to ask for a very little information from the marketers, thismodel is used. This model is backed by low permission intensity, direct contact withadvertiser and minimal targeting.

219www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/MODEL-2PERMISSION PARTNERSHIPWhen a customer provides a portal or media site with the permission to send him orher promotional messages on given category, this model is used. After receiving thispermission, the portal or media site alerts its partners who wish to send out promotionaloffers, related to the topic. This model is backed by low to medium permission intensity,contact through an intermediary and low targeting.MODEL-3AD MARKETWhen a customer provides detailed information to an infomediary about what heexactly wants, this model of permission Marketing is used. The infomediary uses theinformation of the customer and identify the sources / advertisers. The messages supplied bythese sources will be carefully analysed to check whether they are in consistent with theinterest / want of the customer. This model is backed by high permission intensity, contactthrough an infomediary and high targeting.MODEL-4PERMISSION POOLWhen the customers provide permission to different sources / companies to send themmessages on the promotional offers, this model is used. These different firms that are givenwith the permission pool the information, provided by the customer and their response aswell at a point of an infomediary who sends out suitable messages to the customer. Thismodel is backed by high permission intensity, contact through an infomediary and other firmsand high targeting.The difference between model- 1 and other three models is that in model-1, acustomer directly contacts the marketer and gives him permission to send relevantinformation whereas, in other models, there is an intermediary to transact with both thecustomer and the marketers to match their demand and supply of information. In practice,models 2, 3 and 4 are popular.CONCLUSIONIn the present environment that is surrounded with higher degree of commercialclutter, it is a real challenge for the marketers to find a suitable way to communicate withtheir potential target customers. The days of using interruption to interact with the customershave all gone and will not come back for sure. In spite of the commercial clutter that existspresently, the marketers should reach out to the customers and effectively communicate withthem, if they want to survive and prosper in their business. The best way identified is„Permission Marketing‟ that helps the marketers to obtain permission from the customers inadvance and communicate with them in the way it is intended for by the customers. Thecustomers don‟t like someone unknown or not permitted to disturb them with their ownpreferences. Perhaps, the customers prefer to interact with appropriate marketers who aregiven with the permission. Moreover, permission given for a particular objective cannot beused for another objective. The concept of „Permission Marketing‟ facilitates effective Targetprecision with the required permission intensity. It could be concluded that „PermissionMarketing‟ clears the route to the customer from the commercial clutter. Therefore, themarketers are suggested to use this strategy to effectively reach out to their target customers.

220www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/REFERENCESBloom, Paul N, George R. Milne & Robert Adler (1994), Avoiding misuse of newinformation technologies: legal and societal considerations, Journal of Marketing, 58(1), 98-110Cranor, Lorrie F. & Brian A. LaMacchia (1998), Spam!,Don Peppers and Martha Rogers (1993), The One to One Future, Currency/DoubledayGodin, Seth (1999), Permission Marketing: „Turning Strangers into Friends andFriends into Customer‟. Simon & Schuster LtdHagel, John & Marc Singer (1999), Net Worth, Harvard Business School press,Boston, MA.Hoffman, Donna L. & Thomas P. Novak (1996), Marketing in hypermedia computer–mediated environments: Conceptual foundations, Journal of marketing, 60(3), 50-69.Hoffman, Donna L. & Thomas P. Novak (1997), New metrics for new media: towardthe development of web measurement standards, World Wide Web Journal, Winter,2(1), 213-246.http://jcmc.indiana.edu/vol6/issue2/krishnamurthy.htmlhttp://sethgodin.typepad.com/seths_blog/2008/01/permission-mark.htmlhttp://www.clickz.com/clickz/column/1700135/permission-is-dead-long-livepermissionhttp://www.fastcompany.com/magazine/14/permission.htmlhttp://www.marketingterms.com/dictionary/permission_marketing/Keller, Kevin Lane & Richard Staelin (1987), Effects of quality and quantity ofinformation on decision effectiveness, Journal of Computer Research, 14(2), 200-214.Milne, George R & Mary Ellen Gordon (1993), Direct mail privacy-efficiency tradeoffswithin an implied social contract framework, Journal of Public Policy &Marketing, 12(2), 2006-.Samoriski, Jan H. (1999), Unsolicited Commercial E-mail, the internet and the firstamendment: another free speech showdown in cyberspace?, Journal of Broadcasting& Electronic media, 43(4), 670-689.Sheehan, Kim B & Mariea G. Hoy (1999), Flaming, Complaining, abstaining: howonline users respond to privacy concerns, Journal of Advertising, 28(3), 37-51.

221www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Sheth, Jagdish N., Rajendra S Sisodia & Arun Sharma (2000), the antecedents andconsequences of customer-centric marketing, Journal of the Academy of MarketingScience, 28(1), 55-66.Shiman, Daniel R. (1996), When e-mail becomes junk mail: the welfare implicationsof the advancement of communications technology, Review of IndustrialOrganization, 11(1), 35-48.

222www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/FINANCIAL PERFORMANCE OF FMCG COMPANIES IN INDIA:A COMPARATIVE STUDY BETWEEN BRITANNIA INDUSTRIESAND DABUR INDIAABSTRACTDR. BHASKAR BAGCHI*; DR. BASANTA KHAMRUI***Assistant Professor, Department of Commerce,Alipurduar College, Jalpaiguri, West Bengal.**Assistant Professor, Department of Commerce,Dr. Gour Mohan Roy College, Burdwan, West Bengal.In this paper, an attempt has been made to examine the financial performance of two leadingFMCG companies in India – Britannia Industries and Dabur India, over a period of ten years(2000-01 to 2009-10). FMCG sector in India has been experiencing a phenomenal pace ofgrowth since last decade, thanks to increasing consumer incomes and rapidly changingconsumer tastes and preferences. Large scale and low cost production, modern retailingstrategies, branding and maintenance of intense distribution network have given FMCGs anedge over others in raising hovering revenues. In this study, we have used various accountingratios and statistical tools like, linear regression analysis and multiple correlation analysis.The results reveal that though Britannia Industries is passing through hard times in terms ofprofitability, Dabur India is enjoying its enhanced performance and continuous growth in thesector.KEYWORDS: Britannia Industries, Dabur India, FMCG, Liquidity Analysis, ProfitabilityAnalysis.___________________________________________________________________________I INTRODUCTIONThe Indian FMCG sector is the fourth largest sector in the economy with a total market sizein excess of US$ 13.1 billion. It has a strong MNC presence and is characterized by a wellestablished distribution network, intense competition between the organized and unorganizedsegments and low operational cost. Availability of key raw materials, cheaper labour costsand presence across the entire value chain gives India a competitive advantage. FMCGcompanies are among the top contenders that pursue the brand positioning process toestablish their products in the market. Despite recent inflationary pressures and price hikes,various FMCG companies continued their growth momentum through product diversificationand introducing new variants of the existing products. Moreover the FMCG companies arealso successful in passing on the increasing cost to consumers through a well-thought-outblend of price hikes, reduction in packaged size and alternative product mix.The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billionin 2015. Penetration level as well as per capita consumption in most product categories likejams, toothpaste, skin care, hair wash etc in India is low indicating the untapped marketpotential.

223www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/In 2009-10, Britannia Industries Limited (BIL) experienced hard times in its businessdue to unprecedented inflationary pressures on the consumer food basket as well ascommodity inflation for the food industry along with strong challenge from new and existingplayers in the sector. Consequently, whilst profit from operations declined by 778 MM, itcontinued to focus on its growth strategy led by its power brands and at the same timerestructured operations to reduce cost. Britannia bakery brands including cake, rusk and breadgrew by 23.90% with biscuit brands outpacing market growth. Britannia Industries Limitedwas ranked as the ‘Most Respected FMCG Company’ by Business World in 2010. It hasreported a market capitalization of 5504 crores and turnover of 3400 crores in 2009-10,with biscuits contributing around 3000 crores.(http://www.britannia.co.in/Britannia_AR_2010).Another FMCG major Dabur India Limited has marked its presence with significantachievements, and today commands a market leadership status. Over the years Dabur Indiahas improved performance with innovation and strong distribution channels. Its keycategories have strengthened its presence and out performed peers in the FMCG sector. Inaddition, the company is successful in reviving its presence in the semi-urban and ruralmarkets. It has three major strategic business units – Consumer Care Division, ConsumerHealth Division and International Division (http://www.dabur.com/About%20Dabur-History). It has been ranked as ‘7 th Most Respected Company’ in the FMCG space in Indiawith market capitalization of 16968 crores and turnover of 2897.60 crores for thefinancial year 2009-10 (http://www.indiainfoline.com/Markets/Company/.../Dabur-India.../500096).With this background, the present study aims at analyzing the financial performanceof two leading FMCG companies in India, Britannia Industries Limited and Dabur India. Thenext section of this paper states the objectives of the study. Section III is the researchmethodology that shapes the entire study and section IV analyses the findings of the study.This paper ends with a brief concluding remark in section V.II OBJECTIVESKeeping in view the importance of FMCGs in India’s economic and socialdevelopment, the study generally aims at evaluating the financial performance of the twoleading FMCG companies – Britannia Industries and Dabur India, over a period of 10 years(2000-01 to 2009-10). The specific objectives of the study are:i. To study the profitability and liquidity trend of the selected FMCG companies.ii.iii.Comparative analysis of the selected companies based on the given ratios.To analyze the factors determining the behaviour of profitability and liquidity.III METHODOLOGYThe study covers two leading companies in the FMCG segment – Britannia Industriesand Dabur India. The relevant data have been collected from secondary sources like,Economic Survey, Statistical Abstract India, Monthly Review of the Indian Economy byCentre for Monitoring Indian Economy (CMIE), Prowess Database of CMIE and ReserveBank of India (RBI) Monthly Bulletin.

224www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/In order to analyze profitability and liquidity of the selected FMCG companies,various accounting ratios and statistical tools like, multiple regression analysis andcorrelation analysis have been used. The study has been undertaken for a period of 10 yearsfrom 2000-01 to 2009-10.IV ANALYSIS AND FINDINGSThis section deals with behaviour of profitability and liquidity of the selected FMCGcompanies using accounting and statistical measures.PROFITABILITY ANALYSISProfitability analysis shows how efficiently the firm is applying its resources to getthe maximum returns. In the present study, the following ratios have been selected foranalyzing profitability of Britannia Industries and Dabur India.‣ EARNING RATIO OR NET PROFIT MARGIN (NPM) = (NET PROFIT/SALES) X100‣ CAPITAL TURNOVER RATIO (CTR) = SALES/CAPITAL EMPLOYED‣ RETURN ON INVESTMENT (ROI) = (NET PROFIT/SALES) X (SALES/CAPITALEMPLOYED)‣ RETURN ON SHAREHOLDERS EQUITY (ROSE)= (NET PROFIT AVAILABLE FOR EQUITY SHAREHOLDER/ EQUITYSHAREHOLDERS FUND) X 100TABLE 1 PROFITABILITY RATIOS OF BRITANNIA INDUSTRIESYear NPM (%) CTR (times) ROI (%) ROSE (%)2000-01 5.51 3.2 17.63 29.002001-02 14.53 2.8 40.68 55.002002-03 7.65 3.1 23.72 25.002003-04 8.25 3.7 30.53 28.002004-05 9.92 3.5 34.72 34.002005-06 8.55 3.1 26.51 27.002006-07 4.75 3.8 18.05 18.002007-08 7.38 3.5 25.83 25.00

225www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/2008-09 5.65 3.9 22.04 22.002009-10 3.38 4.2 14.20 29.00TABLE 2 PROFITABILITY RATIOS OF DABUR INDIAYear NPM (%) CTR (times) ROI (%) ROSE (%)2000-01 6.96 2.2 15.31 21.002001-02 5.87 2.2 12.91 16.002002-03 7.30 2.4 17.52 21.002003-04 9.31 3.7 34.44 38.002004-05 12.02 3.5 42.07 44.002005-06 14.07 3.2 45.02 42.002006-07 15.70 4.1 64.37 62.002007-08 15.09 4.0 60.36 60.002008-09 15.48 3.3 51.08 51.002009-10 15.10 3.8 57.38 58.00Source: CMIE. Results Computed.There was a steep fall in npm of britannia industries in 2002-03 (table 1) and again in2006-07, and finally in 2009-10 the npm plunges down to 3.38%, which is the lowest ever inlast 10 years, indicating that the company is going through rough weather. Consequently, roiwas also affected which also recorded its lowest ever 14.20% in 2009-10, during last 10years. However, the company was able to maintain satisfactory ctr, though rose of britanniaindustries is much lower than dabur india. On the other hand, it has been found that in spite ofglobal economic recession in recent past, dabur india (table 2) sustained a good npm, roi androse, which is far better than britannia industries. Even, dabur india was capable to boost itsroi and rose by more than 6.00% in 2009-10.REGRESSION ANALYSISIMPACT OF NPM AND CTR ON ROIRoi is one of the most important financial indicators. It is the product of npm and ctr.Therefore, roi may be considered as dependent variable and npm and ctr as independentvariables and both are equally important factors to maximize the profit of the firm. Anattempt has been made here to analyze the impact of these two variables (npm and ctr) on roiwith the help of following multiple regression model:

226www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Y= A + B 1 X 1 + B 2 X 2 + EWhere,Y = ROI; X 1 = NPM; X 2 = CTRb 1 , b 2 = Regression Co-efficiente = Error and a = InterceptHERE, THE VALUES OF DIFFERENT COMPONENTS OF THE REGRESSION MODELOF BRITANNIA INDUSTRIES AND DABUR INDIA HAVE BEEN SHOWN.TABLE 3REGRESSION CO-EFFICIENT OF INDEPENDENT VARIABLES ON ROI OFBRITANNIA INDUSTRIESIndependent variable Regression co-efficient Standard Error T-valueNPM 3.204 0.340 9.429CTR 9.980 1.842 5.419Constant -29.740 3.487 -8.529R 2 0.990F-Statistics 341.788* Significant at 5% level.In case of Britannia Industries (Table 3), a unit increase in NPM results in an increasein ROI by 3.204 units. On the contrary, a unit increases in CTR results in an increase in ROIby 9.980 units. This impact of two independent variables on ROI indicates that the influenceof CTR is more than that of NPM on ROI. From the regression statistics, we have, R 2 =0.990. This means that 99.00% of variation in ROI is explained by NPM and CTR and only1.00% is accounted by error.TABLE 4REGRESSION CO-EFFICIENT OF INDEPENDENT VARIABLES ON ROI OFDABUR INDIAIndependent variable Regression co-efficient Standard Error T-valueNPM 2.675 0.215 12.442CTR 10.330 1.072 9.640Constant -29.263 4.357 -6.716

227www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/R 2 0.962F-Statistics 88.343*Significant at 5% level.From table 4, it can be seen that a unit increase in npm of dabur india, results anincrease in roi by 2.675 units. On the other hand, a unit increases in ctr results an increase inroi by 10.330 units. Hence, the effect of ctr is more than the influence of npm on roi. Fromthe regression statistics, we have, r 2 = 0.962. This means that 96.20% of variation in roi isexplained BY BOTH INDEPENDENT VARIABLES AND 3.80 % IS ACCOUNTED BYERROR.CORRELATION ANALYSIS OF PROFITABILITY RATIOSThe correlation matrix table amid various profitability ratios (table 5 and table 6)shows both positive and negative association. In case of britannia industries (table 5), ctr hadnegative association with the other three ratios (npm, roi, and rose). For dabur india (table 6),very high positive relationship between all the ratios has been observed. Highest positivecorrelation was found between roi and rose of dabur india (table 6).TABLE 5CORRELATION ANALYSIS AMONG PROFITABILITY RATIOS OF BRITANNIAINDUSTRIESCORRELATIONSRATIOS NPM CTR ROI ROSENPM1 -.745(*) .963(**) .827(**)CTR-.745(*) 1 -.582 -.566ROI.963(**) -.582 1 .739(*)

228www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/ROSE.827(**) -.566 .739(*) 1* Correlation is significant at the 0.05 level (2-tailed).** Correlation is significant at the 0.01 level (2-tailed).TABLE 6CORRELATION ANALYSIS AMONG PROFITABILITY RATIOS OF DABURINDIACORRELATIONSRATIOS NPM CTR ROI ROSENPM1 .838(**) .973(**) .958(**)CTR.838(**) 1 .928(**) .941(**)ROI.973(**) .928(**) 1 .995(**)ROSE.958(**) .941(**) .995(**) 1** Correlation is significant at the 0.01 level (2-tailed).LIQUIDITY ANALYSISLiquidity means the ability of a firm to meet its current obligations. Adequateliquidity indicates sound financial position of a firm while insufficient liquidity reflects poorcredit worthiness. The following ratios have been analyzed and interpreted to assess theliquidity position of Britannia Industries and Dabur India for the present study:

229www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/‣ CURRENT RATIO (CR) = CURRENT ASSETS/CURRENT LIABILITIES‣ QUICK RATIO (QR) = QUICK ASSETS/CURRENT LIABILITIES‣ SUPER QUICK RATIO (SQR) = (CASH + BANK)/CURRENT LIABILITIES‣ DEBT-EQUITY RATIO (DER) = EXTERNAL EQUITIES OR DEBTS/ EQUITYCAPITALTABLE 7 TABLE 8LIQUIDITY RATIOS OF BRITANNIAINDUSTRIESYear CR QR SQR DER2000-01 1.51 1.03 0.20 0.792001-02 1.83 1.35 0.36 0.532002-03 1.98 1.46 0.44 0.422003-04 2.03 1.14 0.05 0.102004-05 1.66 0.94 0.09 0.062005-06 1.75 0.88 0.17 0.042006-07 1.85 0.94 0.21 0.012007-08 2.47 1.23 0.18 0.152008-09 2.22 1.26 0.15 0.032009-10 1.75 0.90 0.07 1.09LIQUIDITY RATIOS OF DABURINDIAYear CR QR SQR DER2000-01 3.63 2.41 0.21 0.562001-02 3.35 2.13 0.17 0.542002-03 2.68 1.58 0.24 0.272003-04 1.51 0.85 0.07 0.152004-05 1.21 0.67 0.04 0.152005-06 1.87 1.27 0.20 0.052006-07 1.79 1.23 0.18 0.052007-08 2.26 1.62 0.21 0.032008-09 2.83 2.05 0.43 0.192009-10 2.72 2.04 0.38 0.14Source: CMIE. Results computed.Britannia industries able to maintain more or less satisfactory cr (table 7) during thestudy period. Though qr was slightly less than one (0.88 to 0.94) during some time of thestudy period, but for the remaining six years the ratio found to be acceptable. Sqr rangedbetween 0.05 and 0.44. The der was below one for the entire study period except for 2009-10.This implies better short term and long term liquidity position of the firm, though cr and qrneed to be improved.CR of Dabur India (Table 8) varied between 1.21 and 3.63. QR was between 0.67 and2.41, which signifies better short term liquidity of the firm, in comparison to BritanniaIndustries. DER was less than one, throughout the study period. Thus, in order to enjoy

230www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/healthy long term liquidity condition, both Britannia Industries and Dabur India continued tokeep DER below one.CORRELATION ANALYSIS OF LIQUIDITY RATIOSHere, the correlations between different liquidity ratios of britannia industries anddabur india have been analyzed (table 9 and table 10). For britannia industries, a positiveassociation has been observed between sqr and other three ratios (cr, qr and der). In case ofdabur india, positive relationship has been observed amid cr with other three ratios and alsoamong qr with other three ratios.TABLE 9CORRELATION ANALYSIS AMONG LIQUIDITY RATIOS OF BRITANNIAINDUSTRIESCORRELATIONSRATIOSCR QR SQR DERCR1 .535 .036 -.424QR.535 1 .697(*) -.033SQR.036 .697(*) 1 .101DER-.424 -.033 .101 1* Correlation is significant at the 0.05 level (2-tailed).

231www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TABLE 10CORRELATION ANALYSIS AMONG LIQUIDITY RATIOS OF DABUR INDIACORRELATIONSRATIOSCR QR SQR DERCR1 .970(**) .550 .776(**)QR.970(**) 1 .690(*) .629SQR.550 .690(*) 1 -.013DER.776(**) .629 -.013 1** Correlation is significant at the 0.01 level (2-tailed).* Correlation is significant at the 0.05 level (2-tailed).V CONCLUSIONThe year 2009-10 witnessed unprecedented commodity inflation, particularly insugar, wheat and milk products, coupled with a fiercely competitive environment. Thisadverse economic scenario and harder competition in the sector had a high adverse impact onmargins and profitability of Britannia Industries. A steep fall in NPM and ROI indicatestough times for the company in the coming days. Moreover, the company also needs toimprove its short term liquidity situation.On the contrary, Dabur India continued to ride on its growth path by maintaininggood NPM, ROI and ROSE even during the period of global economic recession. In 2009-10,Dabur India was capable to boost its ROI and ROSE by more than 6.00%. The company alsoshowed good performance in terms of maintaining both short term and long term liquidity.But, it is suggested that Dabur India should marginally enhance its long term borrowings soas to take the benefit of ‘Trading on Equity’.

232www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/REFERENCES1. Centre for monitoring indian economy (cmie) (2001-02 to 2009-10). Monthly reviewof the indian economy. New delhi: cmie.2. centre for monitoring indian economy (cmie) (2000-01 to 2009-10). Prowessdatabase. New delhi: cmie.3. Government of india (1990-91 to 2009-10). Economic survey. New delhi: ministryof finance, department of economic affairs, government of india.4. Reserve bank of india (1995 to 2010). Monthly bulletin. Mumbai: department ofstatistics and information management, reserve bank of india.5. Government of india (1990 to 2008). Statistical abstract india. New delhi: ministryof statistics and programme implementation, central statistical organization,government of india.6. Website: http:// www.britannia.co.in/britannia_ar_2010http://www.dabur.com/about%20dabur-historyhttp://http://www.indiainfoline.com/markets/company/.../dabur-india.../500096

233www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/FINANCIAL PERFORMANCE OF LIFE INSURANCE COMPANIESAND PRUDUCTSABSTRACTV.NEELAVENI**Lecturer,School of commerce and management,Dravidian university, kuppam.Future is associated with uncertainty. Uncertainty is a universal risk for the mankind. Suchtype of risk is to be controlled or avoided or financed by everybody. Many types of riskmanagement techniques are there. Insurance is one of the best risk financing techniques.With reforms of regulations and opening up of the insurance sector to the privatemanagement in the year 1999, it can be seen the tough competition in the insurance industry.The number of General insurance and Life insurance companies have been increasing in the21st century. The ultimate person is an investor or customer, who has to get the updateinformation, observe keenly the performance of the companies and their attractive products.The evaluation of financial performance of the life insurance companies is essentially neededto select a best life insurance policy. Five life insurance companies are randomly selected atthe time of 2002-03 and evaluated its performance in this endeavor.___________________________________________________________________________INTRODUCTIONThe article presents a brief profile of the companies that have been selected as sample units.The companies that are covered: LIC, ICICI Prudential Life Insurance Company Limited,Bajaj Allianz Life Insurance Company Limited, Birla Sunlife Insurance Company Limitedand ING Vysya Life Insurance Company Private Limited.1. LIFE INSURANCE CORPORATION OF INDIAThe symbol of Life Insurance Corporation of India (LIC) gives the message of protection tolight the lamps of security in as many homes as possible and to help the people in providingprotection to their families. 1 The LIC was established in the year 1956 with following mainobjectives.1. Meeting the various life insurance needs of the community that would arise in the changingsocial and economic environment.2. Spreading life Insurance widely, particularly to the rural areas and to the socially andeconomically backward classes with a view to reaching all insurable persons in the countryand providing them adequate financial cover against death at a reasonable cost.3. Maximizing mobilization of people‟s savings through insurance.4. Providing good returns to the policyholders (insureds) by investing in attractive securities.1 Tryst with Trust, the LIC Story, PR& publicity, Yogakshema, (Bombay; 1991), Pp.45-46.

234www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/5. Acting as trustee of the insured public in their individual and collective capacities.6. The vision of the Corporation is "a trans-nationally competitive financial conglomerate ofsignificance to societies and pride of India". The mission of the Corporation is that to exploreand enhance the quality of life of people through financial security by providing products andservices of aspired attributes with competitive return, and by rendering resources foreconomic development.The enforcement of New Economic Reforms in 1991 coupled with the formation ofInsurance Regulatory and Development Authority Act (IRDA) of 2000 (which started issuinglicenses to private life insurers) has diluted the monopoly position of the LIC. Inspite of 22new players from the private sector, LIC continues to dominate the business with itswidespread activities. Large number of agents numbering over a million and the variety ofproducts introduced. At the end of August 2008, LIC accounted for about 60 per cent of totalpremium underwritten by the life insurance sector. LIC has played a significant role inspreading life insurance and mobilization of people‟s money for people‟s welfare. Themarket share as at 30.06.2009 is 62.45% in premium and 69.88% in policies. During thefiscal year of 2008-09 the LIC has 3.58 crores policies and sum assured of Rs.3, 90,053crores. In the year 2008-09, LIC settled over 149 lakh claims for an amount of Rs.37, 893crores in individual life insurance business. Out of total maturity claims settled over 97%were settled on or before the date of maturity and over 93% of the total non early deathclaims were settled within 20 days of intimation.The LIC has subsidiary companies such as LIC Nepal, LIC Sri Lanka and Life InsuranceCorporation of India International. LIC International is a joint venture offshore companypromoted by LIC which commenced its operations in July, 1989 with the objective ofoffering policies denominated in US $ to NRIs residing in the Gulf. LIC Nepal was formed in2001 in joint venture with Vishal Group of Industries, Nepal. LIC Lanka was formed in2003 in joint venture with Bartleet Group of Companies. Sri Lanka LIC Housing Financewas established on 19 June, 1989 in Dubai with the objective of providing long term financefor construction of houses or apartments. LIC Housing Finance Limited Care Homes, awholly owned subsidiary of LIC Housing Finance Corporation builds assisted communityliving centers for senior citizens.The LIC has been functioning with head office located at Mumbai, 8 zonal offices and 105divisional offices in India. It has at least 2048 branches located in different cities and townsof India along with satellite offices attached to about 807 branches, 114916 employees andhave a network of around 1.3 million agents by June 2009. LIC‟s ECS and ATM premiumpayment facility is an addition to customer convenience. With a vision of providing easyaccess to its policyholders, LIC has launched its SATELLITE SAMPARK offices. Thesatellite offices are smaller, leaner and closer to the customer. The digitalized records of theoffices will facilitate anywhere servicing and many other conveniences in the future. Existingas a towering insurance company over 53 years, LIC has acquired almost monopoly power insale of life insurance policies in India. LIC has extended its activities in 12 countries otherthan India with the objective of catering to the insurance needs of Non Resident Indians.The organizational chart of LIC can be framed as below.

235www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/CENTRAL OFFICEMUMBAI8 ZONAL OFFICESBhopal, Chennai,Hyderabad, Kanpur,Kolkata, New Delhi,PatnaFOREIGN OFFICESUnited Kingdom, Mauritius, Fiji105 DIVISIONAL OFFICES2048 BRANCH OFFICES807 SATELLITE OFFICESTABLE: 1COMPOUND ANNUAL GROWTH RATE (%)Variables from Financial StatementsCAGR (%) of LICShare Capital 0.00Fixed Assets 16.64Current Assets 09.63Cash and Bank Balances 5.37Current Liabilities 24.44Net Working Capital 3.79Policy Liabilities 17.41Total Income 20.51Premium Income 19.13Income from Investments 23.24

236www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Other Income (03.90)Profit Before Tax 11.44Insurance Benefits delivered 21.26Commission Paid 16.34Operating Expenses 15.09FIGURE: 12520151050-5CAGR (%) of LICShare CapitalFixed AssetsCurrent AssetsCash and Bank BalancesCurrent LiabilitiesNet Working CapitalPolicy LiabilitiesTotal IncomePremium IncomeIncome from InvestmentsOther IncomeProfit Before TaxInsurance Benefits deliveredCommission PaidOperating ExpensesTable: 1 shows that the Compound Annual Growth Rates of several variables of the LIC. TheCAGR of fixed assets of LIC is 16.64%. The growth rate of current liabilities is recorded ashighest (24.44). The growth rate of Income from investments and Insurance benefits areconsidered as good. And the corporation‟s other income is showing negative growth rate.The corporation has issued number of insurance products in order to satisfy the customerneeds and requirements. Some of these products are discussed in the following lines.JEEVAN NISCHAYLIC‟s Jeevan Nischay is a single premium, guaranteed return and closed ended plandesigned for giving financial protection to the policyholders. The plan is sold only forexisting customers. The eligibility age to enter into the policy is from 18 years to 50 years.The range of sum assured is Rs. 10,000 – Rs. 10, 00,000. The policy terms are available interms of 5, 7 and 10 years. There will be higher maturity incentive for the policyholder whowill pay premium amount is Rs. 25,000 or more. There will be loan facility after completionof one year. It can be surrendered after one year of commencement of the policy. Deathbenefit is five times the single premium during the first policy year, after that it is equal tosum assured. Maturity benefit is sum assured plus loyalty additions.

237www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/NEW BIMA GOLDNew Bima Gold is a special plan, where premiums paid over the term of plan is paidback during the policy term in installments and life insurance cover is available not onlyduring the term but also during the extended term of the plan. Eligibility age to enter intoplan starts from 14 years to 57 years. The maximum maturity age is 75 years. The policy isavailable in terms of 12, 16 and 20 years. The range of sum assured is Rs. 50,000 tounlimited. The sum assured is in multiples of Rs. 5000. 15% of sum assured paid as survivalbenefit for every four years. Death benefit is an amount equal to sum assured under the basicplan on death of the life assured during the policy term provided the life cover is in force.Payment of an amount equal to 50% of sum assured under the basic plan on death of the lifeassured during the extended term provided all the premiums under the policy have been paid.The extended term shall be half of the policy term after the expiry of the policy term. Therewill be loan facility, surrender value and guaranteed surrender value. In addition accidentaldeath and disability benefits, optional rider benefits and paid up value are available in thispolicy.CONVERTIBLE TERM ASSURANCE POLICYThe Convertible Term Assurance Policy is designed to meet the needs of investorswho are initially unable to pay the larger premium required for a whole life or endowmentassurance policy, but they have hope to pay for such a policy in the near future. Thepolicyholders have an option of converting a policy into endowment assurance or limitedpayment whole life assurance. The range of sum assured amount is Rs.50, 000 – 1, 00,00,000. The term of the policy is 5 to 7 years. Premium can be paid yearly, half-yearly,quarterly and monthly up to maximum of 55 years old of insured. The survival benefit is notapplicable and the sum assured is payable only in the event of death of the life assured beforethe expiry of the specified term.TWO - YEAR TEMPORARY ASSURANCE POLICYThe Two – year Temporary Assurance Policy is designed for people who speciallyrequire insurance cover against risk for a short period like two years. It is without profit plan.The premium can be paid at once. There is no survival benefit, surrender value and loanavailability. The eligibility age to enter into the policy starts from 18 years to 60 years. Sumassured amount is from Rs. 50,000 to 1, 00,000. Death benefit is total sum assured amount.THE ENDOWMENT ASSURANCE POLICYThe Endowment Assurance Policy is suitable for people of all ages and social groupswho wish to protect their families from a financial distress. It is saving oriented plan. Themain features of this policy are moderate premiums, more bonuses and high liquidity. Theeligibility age to subscribe the policy is in between of 12 - 65 years. The sum assured amountstarts from Rs. 50,000 to unlimited. The term of the policy starts from 5 years to 55 years.The premiums are paid annually, half-yearly, quarterly and monthly. The sum assured is paidonly at the end of the policy term or death of the policyholder whichever is earlier. Loanfacility is available for the policy. The disability benefit is available in respect of the Rs.20,000 sum assured on any one‟s life. Accident benefit can be availed by the insured onpayment of extra premium of Rs. 1 per Rs. 1000 sum assured per year.

238www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/JEEVAN ANANDJeevan Anand is a combination of endowment and whole life plans. It providesfinancial protection against death throughout the lifetime of the life assured with theprovision of payment of lump sum at the end of the selected term of his/her survival.Premiums can be paid monthly, quarterly, half-yearly and yearly. As it is with-profits plan,the policyholder can participate in the profits of the corporation in the form of bonus. Simplereversionary bonuses declare per thousand sum assured annually at the end of each financialyear. Additional bonuses are also paid for certain minimum period. Survival benefit of theplan is sum assured and vested bonuses at the end of the term. Death benefit is sum assuredamount plus all declared bonuses. Accident benefit is sum assured amount up to Rs. 5 lacs.Extra benefits can be opted by the insured on extra premiums. The facility of surrender valueis available. The guaranteed surrender value is paid after paying 3 years or more premiumsand the value is 30% of the basic premium excluding first year‟s premium.WHOLE LIFE POLICYWhole life policy is suitable for people of all ages who wish to protect their familiesfrom financial crisis. The premium is payable lump sum called as single premium. Thepremiums are paid yearly, half – yearly, quarterly and monthly. The policy will be chosen inbetween of 35 years and 80 years. The policy is with – profit plan and the profit will bedistributed to policyholders in the form of bonus. Simple reversionary bonuses are declaredper thousand sum assured annually at the end of each financial year. Additional bonus is alsopaid for certain minimum period. The sum assured plus bonuses paid in a lump sum upon thedeath of the life assured. As it does not have a maturity date, an option is to take the sumassured plus all bonuses at any time after 40 years from the date of commencement of thepolicy. Optional benefits can be added to basic plan for extra protection at cost of additionalpremium. Surrender value is available. On earlier termination of the plan, the guaranteedsurrender value is 30% of the basic premiums paid excluding the first year‟s premium. Thevalue is 90% in case of a single premium policy.JEEVAN NIDHIJeevan Nidhi is with - profit and deferred annuity plan. The amount of sum assured,guaranteed additions and bonuses is used to generate a pension for the policyholder. The ageof eligibility to enter into the policy starts from 18 years to 65 years. The terms of policy are6 - 35 years for single premium policies and 5 - 35 years for regular premium policies.Premiums are paid yearly, half-yearly, quarterly and monthly. The minimum sum assuredamount is Rs. 50,000. Minimum annual premium is Rs. 3000 and single premium is Rs.10,000. The annuity is paid to the life assured as long as insured alive. The annuity increasesevery year at a simple interest rate of 3% per annum. The annuity is paid to the life assuredfor periods of 5 or 10 or 15 or 20 years as chosen by insured. The purchase price of theannuity is paid as death benefit. Loan facility is not available in this policy. The maximumsum assured under the basic plan subject to a limit of Rs. 5, 00,000 taking all critical illnessriders. Rebate of 2% on yearly premium and 1% on half – yearly premium can be availed bythe insured. In case of death due to any accidents the sum assured will be paid as accidentbenefit. Sum assured will be paid over a period of 10 years in monthly installments. Termassurance and critical illness rider are as optional riders. Critical illness rider will be payablein case of diagnosis of defined categories of critical illness subject to certain terms andconditions. The policyholder can revive his/her lapsed policy by paying arrears of premium

239www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/together with interest rate within a period of five years from the date of unpaid premium. Theinterest rate is 9% charged. Grace period of 30 days will be available for payment ofpremium which can be paid yearly, half- yearly or quarterly. The policyholder can return thepolicy to the corporation within 15 days, if he / she is not satisfied.JEEVAN KISHOREThe plan is an endowment assurance plan available for children who have less than 12 yearsof age. The policy can be purchased by any parent or grandparent. There will be riskcoverage either after two years from the date of commencement of the policy or from theimmediate policy anniversary, following the completion of 7 years age of child whichever islater. Premiums are paid monthly, quarterly, half-yearly and yearly. It is with-profits plan andpolicyholder can get the participation in the profits of the corporation in the form of bonus.Simple reversionary bonus paid per Rs. 1000 sum assured annually at the end of eachfinancial year. Final bonus may also be paid for certain minimum period. Maturity benefitsare sum assured and bonuses are paid at the end of policy term. Death benefits of sumassured and bonuses on death of the life assured. Premium waiver benefit is available ondeath of proposer. Surrender value is available and guaranteed surrendered value is aftercompletion of 3 or more policy years.THE MONEY BACK POLICYThe money back assurance plan that provides financial protection against death throughoutthe term of plan along with the periodic payments on survival at specified durations duringthe term. Survival benefits are payable only at the end of the endowment period. In the eventof death at any time within the policy term, the death claim comprises full sum assuredbenefit is payable. Premiums are payable yearly, half- yearly, quarterly and monthly orthrough salary deductions as opted by insured. As it is with - profit plan, policyholders getprofits in the form of bonuses. Simple reversionary bonuses will be declared per thousandsum assured annually at the end of each financial year. Additional bonuses are also paid forcertain minimum period. Survival benefits are paid certain percentage of sum assured at theend of the specific duration. The sum assured and bonuses are payable in a lump sum uponthe death of the life assured during the policy term irrespective of the survival benefits paidearlier. There are optional benefits that can be added to the basic plan for extra protection forconsideration of paying additional premium. As it is long-term policy, surrender values areavailable on earlier termination of the policy.BIMA BACHATBima Bachat is one of the money back policies. It offers financial security and assurance tothe policyholder and his/her family. Policyholder is required to pay only one premium, whichdepends on the duration of the policy taken and life insurance available till the date ofmaturity. Eligibility age to enter in to the policy starts from 15 years to 66 years andmaximum maturity age is 75 years. There are terms to choose among 9, 13 and 15 years.Sum assured starts from Rs. 20,000. The policyholder will receive 15% of the sum assured atthe end of every 3 rd and 6 th policy year and so on. The policy is having surrender value andloan facility. The guaranteed surrender value is available only after completion of premiumpaid at least one policy year, the value is equal to 90% of the single premium paid.

240www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/2. ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITEDIndustrial Credit and Investment Corporation of India (ICICI) was established in 1955 withthe objective of extending financial assistance for industrial development. 2 Later, it became agroup company. The ICICI Group offers a wide range of banking products and affiliates inthe areas of personal banking, investment banking, life and general insurance, venture capitaland asset management. The ICICI Group entered in the field of banking as ICICI Bank, inthe field of life insurance business as ICICI Prudential Life Insurance Company, in the fieldof general insurance business as ICICI Lombard General Insurance business, in the field ofnon-banking business as ICICI Securities Limited, in the field of dealer of governmentsecurities as ICICI Securities Primary Dealership Limited, in the field of mutual funds asICICI Prudential Asset Management and in the field of equity organizations as ICICIVenture.ICICI Bank was set up in 1994 and developed as the largest private sector bank in India, andit is the largest issuer of credit cards in India. 3 It was the first bank to offer a wide network ofATMs. The ICICI Bank is also a pioneer in providing banking products and financialservices to corporate and retail customers. The products of the bank are loans, credit cards,savings, investment for vehicles, insurance etc. The value of total assets of the bank is $120.61 billion as on 31march 2009. The ICICI Bank currently has subsidiaries in the UnitedKingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong,Sri Lanka, Qatar, Dubai, International Finance Centers, and representative offices in UnitedArab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. And itsUK subsidiary has established branches in Belgium and Germany. ICICI Bank's equityshares are listed on Bombay Stock Exchange and the National Stock Exchange of IndiaLimited and its American Depositary Receipts (ADRs) are listed on the New York StockExchange (NYSE).The ICICI and Prudential Plc came together and established ICICI Prudential Life InsuranceCompany Limited. Prudential Plc is a United Kingdom-based financial services companyfounded on 30 May 1848 in Hatton Garden in London as the Prudential Mutual AssuranceInvestment and Loan Association to provide loans for professionals and working people. 4 In1854, the company began selling the relatively new concept of industrial branch insurancepolicies to the working class population for low premiums through agents who operate asdoor to door salesmen. It was converted into a limited company in 1881. The company wasfirst listed on the London Stock Exchange in 1924.The company has over 21 millioncustomers worldwide. It has operations in 12 countries in Asia associate with UK. It foundedthe Egg internet bank, which was sold to Citigroup in 2007.The ICICI and Prudential have shares of 74% and 26% resepectively in ICICI Prudential LifeInsurance Company. The company started its business in December 2000. It has tied up withICICI bank, Bank of India, Federal Bank, Lord Krishna Bank, and some of co-operativebanks, NGOs, MFIs and other corporations. Currently, the company has 2000 branches morethan 274,500 advisors and 20 bancassurance partners all over India. The ICICI Prudentialwas the first company to receive the rating of „AAA‟ from Fitch ratings.2 3 4

241www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/The vision of the company is to be the dominant life, health and pensions player built ontrust. Values of the company are integrity, customer oriented, boundary less, ownership, andpassion. Understanding the needs of customers and offering them superior products andservices, leveraging technology to service customers quickly, developing and implementingsuperior risk management and investment strategies to offer sustainable and stable returns topolicyholders, providing an enabling environment to foster growth and learning foremployees and building transparency in all dealings are the main goals of the company.As on 31 December 2006 it captured over 360 cities or towns in India. The companyrecorded a total new business premium of Rs. 51.6 billion during fiscal year of 2007 ascompared to Rs.26.0 billion during fiscal year of 2006, thereby growth of 98.4% observed.As per the information of 14 June 2007, among all private players, ICICI Prudential toppedby rising with its premium income of 84.5 per cent is equal to Rs 271 crore and had 9.08 percent of the market share. The company completed eight full years of operations, during thisperiod it sold over seven million policies and acquired assets of worth Rs. 28,000 crore. Itsustained its leadership position with an overall market share of 11.8 per cent. For the yearended 31 March 2008, it wrote nearly 3 million policies and it has a network of 1,956 offices,2,91,000 advisors, as well as 21 bank partners. The ICICI Prudential has undertaken andoffered unique programme, Pragati Ki Anokhi Paathsaala (PKAP) for the rural children ofIndia. PKAP aims to bring out the inherent creative skills amongst children and expose themto the unique and thought provoking learning methods. The ICICI Prudential Life is the onlylife insurance company in India providing local language sales literature and customersupport. As on 31 March 2009, the company offered customer support in ten languagesincluding Hindi, Punjabi, Gujarati, Telugu, Malayalam, Kannada, Tamil, Bengali andMarathi in addition to English. ICICI Prudential Life has also partnered with e-governancekiosks in Andhra Pradesh - aponline.com and Rajasthan - emitra.com, to enable consumersrenew their policies in their kiosks.TABLE: 2COMPOUND ANNUAL GROWTH RATE (%)Variables from Financial StatementsCAGR (%) of ICICIShare Capital 18.9Fixed Assets 30.25Current Assets 41.49Cash and Bank Balances 38Current Liabilities 56.1Net Working Capital 77.69Policy Liabilities 41.22Total Income 86.4

242www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Premium Income 69.13Income from Investments 155.27Other Income 17.06Profit Before Tax -209.65Insurance Benefits delivered 201.82Commission Paid 49.3Operating Expenses 46.77FIGURE: 2250200150100500-50-100-150-200-250CAGR (%) of ICICIShare CapitalFixed AssetsCurrent AssetsCash and Bank BalancesCurrent LiabilitiesNet Working CapitalPolicy LiabilitiesTotal IncomePremium IncomeIncome from InvestmentsOther IncomeProfit Before TaxInsurance Benefits deliveredCommission PaidOperating ExpensesTable: 2 shows that the Compound Annual Growth Rates of several variables of the LIC. TheCAGR of fixed assets of LIC is 30.25%. The growth rate of commission paid is recorded ashighest (49.3%). The growth rate of Income from investments is considered as good. And thecorporation‟s profit before tax is showing negative growth rate.The company has offered different types of plans under the different categories based on theneeds of the policyholders. Some of these plans are discussed in the following lines.ICICI PRU ELITE PENSIONICICI Pru Elite Pension is a unique unit-linked pension policy designed for specificcustomers. It enables to pay flexible premiums for a limited period and making top-ups also.The eligibility age to enter into the policy is starts from 18 years to 74 years. The range of

243www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/policy term is 6-62 years. The minimum premium is to be paid is Rs. 3,00,000 per annum.Maximum sum assured is equal or above of Rs. 25,00,000. The term of the premiumpayment is 3 years. The range of vesting age is 50 -80 years. Policyholder can chose the datefrom which the pensions will be received. Among eight investment funds, policyholder canselect any funds based on their financial goals and risk profile with switching facility of fourtimes a year, at no cost. There is a facility of additional allocation of units at the end of every5 th policy year at the rate of 1.5% of the average of the daily fund values, if due premiums arepaid in first three policy years.ICICI PRU PURE PROTECTICICI Pru Pure Protect entitles the policyholder to insure life and provide total security tohis/her family at a very affordable cost. The eligibility age to enter into policy is starts from18 years to 65 years. The maximum maturity age is 75 years. The minimum annual premiumis Rs.2400 per annum. Premiums are paid yearly, half-yearly and monthly. The maximumsum assured is Rs.25,00,000. The term of the policy is in between of 10 – 30 years. Deathbenefit is sum assured amount and no maturity benefit. Additional benefits like accidentaldeath and disability benefit rider and waiver of premium riders are available along with taxbenefits.ICICI PRU PINNACLEICICI Pru Pinnacle is a unit linked insurance policy which gives downside protection.Policyholder can enjoy insurance protection for a longer period with limited premiumpayment. The eligibility age to enter in to the policy is starts from 8 years to 65 years.Maximum maturity age is 75 years. Maximum sum assured is 5 multiples of annualpremiums. The minimum premium is Rs. 50,000 per annum for the term of 3 years. Premiumis paid half-yearly and yearly. The term of the policy is 10 years. Death benefit is higher ofsum assured or fund value with partial withdrawal facility from 6 th policy year onwards.Maturity benefits are paid either higher of fund value or guarantee value with additionalallocations. The fund value is equal to units multiplied with net asset value.ICICI PRU LIFE TIME MAXIMAICICI Premium Life time Maxima is unique strategy that entitles the policyholder to gainthrough his/her funds invested in the equity markets and also provides an insurance cover.The eligibility age to enter into the policy starts from 0 to 65 years. Maximum maturity age is75 years. The sum assured amount is five multiples of annual premiums. The policy termsare 10,15,20,25 and 30 years. Minimum premium is Rs. 24,000 per annum. Premiums arepaid monthly, half-yearly and yearly. It provides to investors multiple investment optionswhich are triggers of portfolio strategy and fixed portfolio strategy. Additional allocation ofunits allowed from 6 th year onwards which results more than 100% allocation to fund onpremium payment. Death benefit is higher of either sum assured or fund value by allowingpartial withdrawals every 3 years starting from 6 th policy year. Maturity benefits are paid asfund value and based on chosen options.SAVE ‘N’ PROTECTSave „n‟ Protect policy is suitable for long term investors to meet long term objectives. Theminimum sum assured amount is Rs. 50,000. The term of the policy starts from 10 to 20

244www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/years. Investor can enter into the policy from 0 to 60 years. The maximum maturity age is 70years. The minimum premium is Rs. 6,000 per annum. The premiums are paid annually, half– yearly, and monthly. Death benefits as well as maturity benefits are sum assured andguaranteed bonus. Insured can enjoy 5 years extended life coverage period at 50% of the sumassured after the maturity of the policy.CASH BAKCash Bak insurance plan is a fixed term insurance plan, which provides money at regularintervals to keep the policyholders financially sound. The eligibility age to enter into thepolicy starts from 16 years to 55 years. The minimum sum assured starts from Rs.75,000.Guaranteed additions are received as additional sums at the rate of 3.5% compoundedannually on the sum assured for the first four years. Maturity benefit is 50% of sum assuredand guaranteed additions. On the death of the policyholder, the nominee will be entitled toreceive sum assured along with guaranteed addition for the first four years along with bonus.SMART KID REGULAR PREMIUM PLANSmart Kid Insurance plan is a fixed term insurance plan that provides funds at regularintervals. It is an exclusively education insurance plan which is offered by the company in 3choices of Smart Kid New Unit Linked Regular Premium, Smart Kid New Unit LinkedSingle Premium and Smart Kid Regular Premium. Basically it is unit linked plan and enablethe insured and insured‟s child to accumulate wealth by virtue of the performance of theunderlying market linked instrument. The minimum premium is Rs. 10,000 per annum whichwill be invested in the selected funds. The minimum sum assured is 5 times of annualpremium. The term of the policy will be calculated as the difference between child‟s currentage and the age of the child when the policy matures. In this policy Smart Kid Unit LinkedSingle Premium is another choice. For which the premium is paid Rs. 50,000 onwards.Another option is Smart Kid Regular Premium which has guaranteed bonus option. Thebonus is 3.5% per annum for the first 4 premium paying years and an annual vested bonus insubsequent years. The regular payouts are paid for the education of a child. Income benefitrider is another option to make attractive the policy. Accidental death disability rider andwaiver of premium riders ensure the child stays double protected at all times. The premiumwill be calculated based on 3 factors such as sum assured, policy tenure and age of thepolicyholder.LIFE TIME GOLDLife Time Gold is a regular premium unit - linked policy that offers potentially higher returnsthrough the multiplier that invests in the top 50 large cap companies. It offers protectivebenefits of an assurance cover and financial security for insured‟s family. Insured can investfor a minimum of 10 years and a maximum of 75 years. There are 7 investment funds areavailable, among the funds, policyholder can select any funds of Flexi Growth, R.I.C.H.,Multiplier, Flexi balanced, Balancer, Protector and Preserver based on his/her financial goalsand risk profile. The eligibility age to enter in to the policy is in between of 0-65 years. Themaximum age of maturity of the policy is 75 years. Minimum premium is Rs. 20,000/- perannum. The minimum sum assured amount is 5 times of annual premium, subject tominimum of Rs. 1,00,000. Systematic withdrawal facility is available in installments from 4 thyear onwards. Maturity benefit is fund value. Death benefit is higher of either fund value or

245www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/sum assured. Switching is possible between funds any time to adjust a portfolio based oninsured‟s financial goals and risk profiles. Switching of 4 times a year is allowed at no cost.3. BAJAJA ALLIANZ LIFE INSURANCE COMPANY LIMITEDThe Bajaj Group is one of the biggest two and three wheeler manufacturers in the world. 5Bajaj Allianz Life Insurance Company Limited was incorporated by both the Bajaj Groupand the Allianz SE., which is a Germany based company and one of the largest assetmanagers in the world. Allianz SE has over 115 years of financial experience over 70countries. It is a leading insurance conglomerate and one of the largest asset managers in theworld. The objective of Allianz life Insurance company is to become loyalty leader in allchosen markets and further strengthen its sales channels with a special focus on recruiting,training and developing agents. It has been managing assets worth over Rs. 55,00,000 crore.Allianz SE has its head office in Munich. Allianz Group provides more than 60 millioncustomers worldwide with a comprehensive range of services in the areas of property andcasualty insurance, life and health insurance, asset management and banking.Bajaj Allianz Life Insurance is in the fields of both life insurance and general insurance.Currently, it has presence in more than 550 locations with over 60,000 insurance consultants.Bajaj Allianz Life Insurance Company is a large private sector life insurance company interms of number of policies. It has taken the lead amongst private sector life insurancecompanies in proving its superior management & marketing skills. It has a strong retail focusto become the most profitable private life insurance company. The company announcedhealthy profits of Rs. 63 crore for the financial year 2006-07. In June 2008, Bajaj Allianzentered into partnership with Thomas Cook India to provide travel finance. Bajaj Allianz LifeInsurance ensures excellent insurance and investment solutions by offering customizedproducts, supported by the best technology.TABLE: 3COMPOUND ANNUAL GROWTH RATE (%)Variables from Financial StatementsCAGR (%) of Bajaj AllianzShare Capital 0.16Fixed Assets 32.91Current Assets 50.54Cash and Bank Balances 47.02Current Liabilities 69.96Net Working Capital -313.075

246www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Policy Liabilities 92.52Total Income 126.08Premium Income 107.41Income from Investments 251.82Other Income 8.05Profit Before Tax -254.46Insurance Benefits delivered 256.41Commission Paid 86.17Operating Expenses 68.09FIGURE: 33002001000-100-200-300-400CAGR (%) of Bajaj AllianzShare CapitalFixed AssetsCurrent AssetsCash and Bank BalancesCurrent LiabilitiesNet Working CapitalPolicy LiabilitiesTotal IncomePremium IncomeIncome from InvestmentsOther IncomeProfit Before TaxInsurance Benefits deliveredCommission PaidOperating ExpensesTable: 3 shows that the Compound Annual Growth Rates of several variables of the LIC. TheCAGR of income form investments of LIC is 251.82% which is good. The growth rate ofinsurance benefits delivered is also good (256.41%). The growth rates of total income andpremium income are considered as not bad. And the corporation‟s profit before tax and networking capital are showing negative growth rate.The company has been offering various types of policies under various categories. Some ofthese plans are discussed as under.

247www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/NEW RISK CARENew Risk Care is a term assurance plan with regular or single premium payment options tosecure life at lowest possible cost. Life insurance cover is available at lowest possible price.The policy is non-participating and traditional term assurance plan with additional riderbenefits. Premiums are paid annually, half–yearly, quarterly and monthly with regularintervals. Maximum age of maturity is 65 years. A lapsed policy can be revived within 2years from first unpaid premium by paying all due regular premiums along with interest.Surrender value is not available and there is no conversion facility. Accidental death benefit,accidental permanent total or partial disability Benefit, critical illness benefit and hospitalcash benefit are attractive features of the plan.INVEST GAINInvest Gain is specially designed with unique combination of benefits that help insured todevelop a sound financial portfolio for his/her family. The plan gives 4 times of life cover ata little extra cost. There is limited payment option is available. Accidental death benefit,disability benefit, critical illness benefit, hospital benefit and family income benefit areadditional benefits offered by the company on additional premiums. In case of death oraccidental or total permanent disability of insured, all future premiums are waived and 1% ofthe sum assured is paid monthly, Maturity benefit is in the form sum assured along withaccrued bonuses.LIFE TIME CARE ECONOMYLife Time Care Economy is a whole life endowment plan with profits. The sum assured andthe bonus is payable only to the beneficiary upon the death of the policyholder. A terminalbonus may be paid on death or survival after age of 80 years. Premiums should be paid for atleast 15 years. Accidental permanent, total or partial disability benefit and waiver ofpremium benefit will be paid at each policy anniversary. The benefits include accidentaldeath cover, disability cover, critical illness cover hospital cash cover and waiver of premiumbenefits. Premiums are paid yearly, half –yearly, quarterly and monthly. Housing loans andgeneral loans are available. A full sum assured and bonus are generally payable as maturitybenefits. The survival benefits are not applicable. Full sum assured and bonuses are paid asdeath benefits. And also accidental and death benefits are additional benefits.FUTURE INCOME GENERATORFuture Income Generator facilitates the investor to save money which will become wealth infuture. The plan is an alternative to superannuation and provident funds. The flexibleretirement plan helps to policyholder to maintain their lifestyle and create a monthly incomethat will last him/her all the means to enjoy it. It is a smart saving plan. Financialindependence from work is necessary to everybody, so the policyholder need not to worry ofincome after their retirement. It is a specialized retirement solution for housewives, so that,they become financially independent. Open market option is allowed to purchase animmediate annuity from the company or any other life insurers recognized by IRDA.

248www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/SWARNA VISHRANTISwarna Vishranti is a plan, which enables the policyholder to spend life in retirement stagewith happiness. There is an option to take a tax-free on lump sum up to 33% of sum assuredcum accrued bonuses. Accidental death benefit and disability benefit, critical illness benefitand hospital cash benefit are additional benefits available in this policy. All future premiumsare waived and 1% of sum assured is paid monthly in case of death or accidental totalpermanent, disability of the insured. The additional life insurance protection is available at anominal cost. Open market option is allowed to purchase an immediate annuity from thecompany or any other life insurers recognized by IRDA.UNIT GAIN PLUS GOLDUnit Gain Plus Gold is a combination of protection and earning attractive returns byinvesting in various combinations of securities. High allocations of profits and guaranteedlife cover can be possible. The plan has choice of seven investment funds. Additionalbenefits like accidental death benefit, critical illness benefit, hospital cash benefit, familyincome benefit and waiver of premium benefit made attractive this policy.4. BIRLA SUNLIFE INSURANCE COMPANY LIMITEDBirla Sunlife Insurance Company Limited (BSLI) is a joint venture between SunlifeAssurance Company of Canada and Aditya Birla Management Corporation limited withshareholdings of 26 percent and 74 percent respectively. 6The Aditya Birla Group, a US ($28 billion) conglomerate, is one among the largest businesshouses in India. It enjoys a leadership position in all the sectors in which it operates. It isanchored by a force of 100,000 employees, belonging to 25 nationalities. Its operations arespanned 25 countries across six continents and it is reckoned as India's first multinationalcorporation. It is headquartered at Mumbai, over 60 per cent of the group's revenue flowsfrom the overseas operations. The Group nurtures a work culture where success is built onlearning and innovation. The Group has been adjudged "The Best Employer in India andamong the top 20 in Asia" by the Hewitt, Economic Times and Wall Street Journal Study2007.Sun Life Financial Inc. is a leading international financial services organization providing adiverse range of wealth accumulation and protection products and services to individuals andcorporate customers. Tracing its roots back to 1865, Sun Life Financial and its partners todayhave operations in key markets worldwide, including Canada, the United States, the UnitedKingdom, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. As of31 March 2008, the Sun Life Financial group of companies had total assets of $ 404.7 billion.Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and Philippine(PSE) stock exchanges under ticker symbol "SLF".The head office of Birla Sunlife is located at Mumbai. It started operations in March 2001after receiving its registration license from IRDA in January 2001. Within four years oflaunch, the BSLI has cemented its position as a leading player in the private life insuranceindustry. The core strategy of the company is to create value for all its stakeholders. It6

249www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/launched innovative unit-linked insurance products. It aims at being a leader in productinnovations to cater specific customer needs. It has direct sales force of more than 60000high quality licensed insurance advisors in major cities and towns in India. The BSLI wasranked 18 th among the "TOP 25" in the "Great Places to Work - 2006 Survey".The vision of the Birla Sun Life Insurance Company Limited is to create long term valuealong with market leadership and mission of the company is to help people mitigate risks oflife, accident, health and money at all stages and under all circumstances. Birla Sun LifeInsurance has some values of passion, integrity, speed, commitment and seamlessness. Withan experience of over 9 years, BSLI has contributed significantly to the growth anddevelopment of the life insurance industry in India. It was the first Indian InsuranceCompany to introduce Free Look Period, which was made as mandatory by IRDA for allother life insurance companies. The BSLI is a pioneer player in introducing Unit Linked LifeInsurance plans amongst the private players in India. The BSLI provides insurance, mutualfund, investment and wealth management services. It was the first company which sold itspolicies through the bancassurance and the internet as well as the first private sector player tointroduce pure Term Plans in the Indian market.TABLE: 4COMPOUND ANNUAL GROWTH RATE (%)Variables from Financial StatementsCAGR (%) of Birla SunlifeShare Capital 40.75Fixed Assets 14.31Current Assets 54.21Cash and Bank Balances 59.47Current Liabilities 51.83Net Working Capital 43.72Policy Liabilities 80.96Total Income 73.37Premium Income 68.31Income from Investments 179.16Other Income 30.61Profit Before Tax 32.43Insurance Benefits delivered 72.52

250www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Commission Paid 50.5Operating Expenses 47.09FIGURE: 4180160140120100806040200CAGR (%) of Birla SunlifeShare CapitalFixed AssetsCurrent AssetsCash and Bank BalancesCurrent LiabilitiesNet Working CapitalPolicy LiabilitiesTotal IncomePremium IncomeIncome from InvestmentsOther IncomeProfit Before TaxInsurance Benefits deliveredCommission PaidOperating ExpensesTable: 4 shows that the Compound Annual Growth Rates of several variables of the LIC. TheCAGR of income from investments of LIC is 179.16%. The growth rate of insurance benefitsdelivered is recorded as good (72.52%). The growth rates of current assets cash and bankbalances and networking capital are also considered as good.The BSLI offers several types of life insurance products, some of them discussed in thefollowing linesBSLI TERM PLANBSLI Term Plan is designed for people who want to avail of the benefit of life insurance atlow cost. It is a low premium, pure risk coverage plan which takes care of investors‟ financialcommitment towards their family or dependants if any risk occurred. The entry age startsfrom 18 years to 55 years. The minimum sum assured is Rs.2,50,000 in case of singlepremium and Rs.2,00,000 in case of regular premium. The terms of the benefits paid are5,10,15,20 or 25 years. Frequency of premium payment is annually, semi-annually, quarterly,monthly and also single time payment. There will be grace period of 30 days after thepremium due date. There is no maturity benefit. Accidental death and dismemberment rider,critical illness rider and waiver of premium riders, accompanied with this plan whenever thepolicyholder choose at the time of purchase.

251www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/BSLI PREMIUM BACK TERM PLANBSLI Premium Back Term Plan is unique term plan that offers an assurance throughout thespecified term and low cost plan. In this plan the entire amount of premium paid over periodof time. The total premiums paid back over the term on maturity. Minimum sum assured isRs.2,00,000. The terms of the policy are 10, 15 and 20years. The eligibility age to enter in tothe policy starts from 18 to 50 years for the 20 years term plan and from 18 to 55 years for 10and 15 years term plan. Maximum maturity age is 70 years. The surrender value is availablebut it varies with the premium term as well as the policy year in which the plan issurrendered. Frequency of premiums paid is annually semi-annually. Premium shall be paidthroughout the benefit period. Investors can choose from eight investment fund options tomatch their risk and return profile. Switching facility is also available premium allocationpercentage into the various investment fund options during the tenure of the policy. Thefunds are Assure, protector, Builder, enhancer, creator, Magnifier, Maximizer and Multiplier.Death benefit paid is equal to coverage or face amount plus payback amount. Maturitybenefit is paid by paying total premiums incase of 100% pay back or more than premiumsincase 125% pay back. Accidental death and dismemberment, critical illness and waiver ofpremium are riders are available to choose.FLEXI SAVE PLUSFlexi Save Plus is one of the endowment plans. It is designed for the insured and his/herfamily. The plan not only offers the advantages of unit-linked plan and provides the insuredan opportunity to make large tax – free saving over a period of time. The eligibility age toenter in to the policy starts from 30 days to 60 years. Maximum maturity age is 70 years.Sum assured starts from Rs.2,00,000/- for 70 years old insured, and Rs.1,00,000/- for the rest.Premiums are paid either single time or yearly, half –yearly, quarterly and monthly. Range ofduration of the policy is 10, 15, 20, 25 or 30 years. Minimum duration of the policy is 6 yearsfor minors and 10 years for all others. And maximum duration is 35 years for minors, 52years for majors and 30 years for the rest. Policyholders can increase their premiums bypaying top-up if he/she has additional savings. The minimum amount of top up is Rs. 5000and maximum amount of top up is Rs.50,000 or an annual premium, whichever is higher.Insured can choose any investment fund among three investment funds namely Protector,Builder and Enhancer. There is a freedom of switching among the funds. A partialwithdrawal from fund value is offered at any time after three years premiums are received byinsured. Two partial withdrawals are free of cost in a year. The policy can be surrenderedwithout penalty at any time after four policy years. Guaranteed returns of 3% per annumapplies on premiums and top up premiums. The maturity benefit is higher of either fundvalue or guaranteed fund value. Death benefit is higher of either fund value or guaranteedfund or sum assured less applicable withdrawals. 100% coverage is there in case of deathdue to accident. The surrender facility is there any time during the tenure of the policy. Thesurrender charge will be zero after the four policy years. Accidental death anddismemberment riders are available. 15 days of time will be given as free look period, with inwhich insured return the policy, if he/she is not satisfied with the policy.FLEXI SECURE LIFE RETIREMENT PLAN - IIFlexi Secure Life II plan is unit linked non - participating retirement plan which helps to thepeople who save a little amount every day. It has two options of single premium plan andregular premium plan. It offers benefits to meet insured‟s specific retirement planning needs.

252www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/The eligibility age to enter the policy starts from 18 to 65 years. Insured can choose theretirement plan till the vesting age. The minimum sum assured is Rs.55,000 under the singlepremium plan and Rs.50,000 under the regular premium plan. Insured pays Rs.5,000 asregular premium. In both options he/she can top up their fund with additional savings. Theminimum amount of such top up is Rs.10,000. The policyholder can choose any one of thefunds among Nourish, Growth and Enrich. He/she may allocate premium in varyingproportions amongst available investment fund options to diversify risk. Switching facility isavailable between the investment fund options. In a year two such types of switches are freeof cost. There is an option to purchase an annuity that will provide income throughout life.CHILDREN’S DREAM PLANChildren‟s Dream Plan helps is a long-term unit - linked insurance plan that is specificallydesigned to provide financial security to the policyholder‟s child when he/she becomes anadult. It helps to insured to give the financial freedom to his/her children to achieve theirdreams. It combines a guaranteed return on savings with upside potential based on theperformance of the investment funds. However, the minimum amount will be given withguaranteed benefit at the maturity. The immediate sum assured will be paid to the child evenin absence of the insured, unfortunately. The eligibility age to enter into the policy startsfrom 18 to 60 years. The child must have 13 years old to enter into the policy. The term ofmaturity ends at 75 years old. The minimum sum assured should be Rs.50,000. Premiums arepaid yearly, half-yearly, quarterly and monthly. The policyholder may select any one amongthe three investment funds of Protector, Builder and Enhancer.FLEXI LIFE LINE PLANFlexi Life Line Plan is unit - linked, non - participating plan which gives efficient earnings inthe long term. The age of eligibility to enter in to the policy starts from 30 to 65 years. Theminimum sum assured amount is Rs.5,00,000 for 10 year period to all ages. It is Rs.3,00,000for minors and Rs.2,00,000 for majors. The maximum maturity age is 70 years for minorsand100 years for majors. The premium paying terms are 10, 15, 20 and 25 years. Thefrequency of premium payment is annually, semi annually, quarterly and monthly. There is atop up facility whenever insured has additional savings during the tenure of the policy. Therange of top ups is Rs.5,000 - Rs.50,000. A minimum guaranteed return of 3% per annumapplies on premiums. Maturity benefit is higher of either the fund value or the guaranteedfund value. The death benefit is higher of either the fund value or guaranteed fund or sumassured less all applicable partial withdrawals in the 24 months preceding the death of the lifeinsured. Partial withdrawals are allowed after three policy years or on attaining the age of 18years whichever is later. Two partial withdrawals are free of charge. The policy can besurrendered at any time during the tenure of the policy. The surrender charges will be zeroafter the 4 th policy year. Insured has the right to return the policy to the company within 15days from the date of receipt of the policy. The Policyholder may select any one among thethree funds available of Protector, Builder and Enhancer.The insured can add up riders to the base plan at a marginal extra cost. Accidental death anddismemberment benefit rider provides 100% of coverage in case of death due to accident,loss of more than one limb or sight in both the eyes, 50% coverage in case of loss of one limbor sight in one eye. Term rider provides additional amount of cover in the event of death ofthe life insured. Critical illness rider provides coverage in the event of life insured beingdiagnosed as suffering from any of four illnesses specified. Critical illness plus rider provides

253www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/a coverage in the event of life insured being diagnosed as suffering from any of specifiedillnesses. Critical illness woman rider provides coverage against several critical illnessesincluding woman specific illnesses like pregnancy complications and congenital anomalies.A premium waiver rider waives payment of future premiums on the happening of any of theunforeseen events.5. ING VYSYA LIFE INSURANCE COMPANY PRIVATE LIMITEDING group originated in 1990 by the merger of Nationale Nederlanden, NV the largest DutchInsurance Company and NMB Post Bank Groep NV. The newly formed company has beencalled the “Internationale Nederlanden Group”, market circles have abbreviated the name toI-N-G. ING Group is a world-class financial conglomerate of Dutch origin offering banking,insurance and asset management. It comprises a broad spectrum of prominent companies thatserve their clients in over 40 countries under the ING brand. One such company is the INGVysya Insurance Company Private Limited, established in September 2001. The equitypartners of the company are ING Insurance International B.V (26%), Exide Industries (50%)and other shareholders (24%).The ING Vysya Insurance with its head quarters at Bangalore is present in 229 citiesacross 251 branch offices. It distributes its products in several parts of the country through itspartner‟s presence. It has issued over 1 million policies by the end of December 2010.Itdistributes its products through two channels, the Tied Agency Force and the AlternateChannel. The Tied Agent force comprises over 50,000 ING Life Advisors, spread across thecountry. The Alternate Channels business within ING Life India is a fast growing distributionchannel, and includes the Bancassurance partner (ING Vysya Bank), referral Partners,Corporate Agents and Brokers.TABLE: 5COMPOUND ANNUAL GROWTH RATE (%)Variables from Financial StatementsCAGR(%) of ING Vysya LifeShare Capital 29.22Fixed Assets -0.46Current Assets 33.82Cash and Bank Balances 26.82Current Liabilities 44.34Net Working Capital -227.11Policy Liabilities 106.24Total Income 100.68

254www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Premium Income 86.21Income from Investments 212.59Other Income 18.63Profit Before Tax 20.14Insurance Benefits delivered 161.95Commission Paid 51.97Operating Expenses 34.81FIGURE: 5250200150100500-50-100-150-200-250CAGR(%) of ING Vysya LifeShare CapitalFixed AssetsCurrent AssetsCash and Bank BalancesCurrent LiabilitiesNet Working CapitalPolicy LiabilitiesTotal IncomePremium IncomeIncome from InvestmentsOther IncomeProfit Before TaxInsurance Benefits deliveredCommission PaidOperating ExpensesTable: 5 shows that the Compound Annual Growth Rates of several variables of the LIC. TheCAGR of income from investments of LIC is 212.59% which is highest. The growth rate ofinsurance benefits delivered is recorded as good (161.95%). The growth rates of total incomeand premium income are considered as average. And the corporation‟s net working capital isshowing negative growth rate.Given here is a comprehensive list of various insurance policies & saving plans offered byING Vysya Life Insurance Company Private Limited.

255www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/ING TERM LIFE PLUSING Term Life Plus is a term insurance product with return of premiums. There is aflexibility of surrender the policy. The eligibility age to enter into the policy starts from 18 to65 years. Maximum maturity age is 75 years. Sum assured starts from Rs. 5 Lakhs. The termof the policy is in between of 10 to 30 years. Three terms are available such as regular,limited and single premium plans. Premiums are paid annually, half- yearly quarterly ormonthly. Death benefit is sum assured amount. After completion of half of the policy term,company may return a proportion of the premium that insured has paid. There is flexiblesurrender value after completion of three regular premium payments.ING NEW BEST YEARSING New Best Years is a retirement plan gives capital guarantee and provides safety toretirement corpus. In the policy, the policyholder can choose pension payout commencementoption, top-up feature and frequency of premium payments. The eligibility age to enter intothe policy starts from 20 years to 65 years. The range of vesting age is 45-70 years.Minimum premium amount is Rs. 12,000 and top-up contribution is Rs. 20,000.ING FLEXI LIFE PLUSING Flexi Life Plus is a unit linked life insurance policy that gives dual benefit of insurancecoverage and investment opportunity. 7 It provides flexibility in premium payments either toincrease or decrease of regular premiums. The eligibility age to enter into the policy startsfrom 0 to 60 years. The range of maturity age is 18-70 years. The policy term is available interms of 10 years and 20 years. Premiums are paid annually, half-yearly, quarterly andmonthly. The minimum sum assured is 6.25 times the annualized regular premium.Maximum sum assured amount is 25 times of annualized regular premium. And theminimum top-up amount is Rs. 2000. The accumulate amount of fund will be given asmaturity benefit and allowed partial withdrawals. The plan provides an Enhance AccidentalProtection Benefit, which is an additional benefit on death due to accident.SAFAL JEEVAN ENDOWMENT PLANSafal Jeevan Endowment Plan offers comprehensive protection and savings in an easymanner. As title is “Safal Jeevan”, the policy is a simple life insurance plan gives completefreedom to choose from pre-packaged solutions and decide the time period of premiumpayment. The eligibility age to enter in to the policy starts from 18 to 45 years. Maximummaturity age is 60 years. Premium payment terms are chosen among 10, 15 and 20 years.Premiums are paid yearly, half – yearly, quarterly and monthly. Minimum premium startsfrom Rs. 2000 per annum. The plan offers death benefit, maturity benefit and in – builtaccident cover. Low premiums, availability of in built accident coverage are major benefitsof the scheme.CREATING STARCreating Star plan gives an opportunity to fulfill the children‟s needs. It offers topolicyholder a systematic and hassle-free way to pre-fund his/her child‟s education program7

256www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/by paying premiums regularly and securing the child‟s education. The eligibility age to enterinto the policy starts from 0 to 15 years for life assured and 18 to 50 years for thepolicyholder. The range of maturity age of life assured is 21 -25 years. Premiums are startsfrom Rs. 48,000/- if it is single premium, Rs.20,000/- if it is limited premiums andRs.12,000/- if it is regular premium. The premiums are paid yearly, half-yearly, quarterly andmonthly. Waiving of premiums in the unfortunate event of parent‟s death, Education payoutsin the last three years of the policy, systematic investment options and partial withdrawalbenefits are key benefits of the plan.PRIME LIFEPrime Life is a unique plan with an option of systematic withdrawals, which allows insuredto with draw money, when he/she requires it rather than borrow from some others. The planis unit linked plan that gives insured the unique advantage of savings as well as reapingreturns on investment when more than 100% of the initial allocation charges are returned. Inthe policy, Sum assured increases by 5% every year. The eligibility age to enter in to thepolicy starts from 10 to 45 years. The range of maturity age is 25 - 65 years. Yearly Premiumstarts from Rs.12,000 to Rs.60,000. Insured can increase the premiums with the help of topupswhen he/she has additional savings. Minimum top up value is Rs.2000/-. The policyterms are available in 15 year and 20 years. Policy term is equal to premium paying term.Premiums are paid yearly, half –yearly, quarterly and monthly. Sum assured is fixed which is5 times of the annualized premium. Sum assured increases every year, option to extend thepolicy term by 10 years and in – built additional accident coverage are key benefit of thepolicy.HIGH LIFE PLUSHigh Life Plus is a unit linked insurance plan. It is superlative investment plan that givesinsured the opportunity to build his/her wealth through regular systematic investments andadditional top ups as per convenience. The plan not only provides protection cover ofinvestor‟s choice, but also enhances his/her investment opportunities to earn returns with themarket. The eligibility age to enter in to the policy starts from 0 to 70 years. Maximummaturity age is 75 years. The terms of premium payment are 3 years to 25 years. Premiumsare paid annually, half- yearly, quarterly and monthly. Life coverage is based on choice ofinvestor. Death benefit includes sum assured or fund value and flexible payouts of maturitybenefit.

257www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/TABLE: 6COMPOUND ANNUAL GROWTH RATE (%)Variables fromfinancialStatementsCAGR(%) ofLICCAGR (%)of ICICICAGR (%)of BajajAllianzCAGR (%)of BirlaSunlifeCAGR(%)of INGVysya LifeShare Capital 0 18.9 0.16 40.75 29.22Fixed Assets 16.64 30.25 32.91 14.31 -0.46Current Assets 9.63 41.49 50.54 54.21 33.82Cash and BankBalancesCurrentLiabilities5.37 38 47.02 59.47 26.8224.44 56.1 69.96 51.83 44.34NetCapitalWorking3.79 77.69 -313.07 43.72 -227.11Policy Liabilities 17.41 41.22 92.52 80.96 106.24Total Income 20.51 86.4 126.08 73.37 100.68Premium Income 19.13 69.13 107.41 68.31 86.21Income fromInvestments23.24 155.27 251.82 179.16 212.59Other Income -3.9 17.06 8.05 30.61 18.63Profit Before Tax 11.44 -209.65 -254.46 32.43 20.14InsuranceBenefitsdeliveredCommissionPaidOperatingExpenses21.26 201.82 256.41 72.52 161.9516.34 49.3 86.17 50.5 51.9715.09 46.77 68.09 47.09 34.81

258www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/FIGURE: 63002001000-100-200Share CapitalCurrent Assets-300-400Current LiabilitiesPolicy LiabilitiesPremium IncomeOther IncomeInsurance Benefits deliveredOperating ExpensesCAGR (%) of LICCAGR (%) of ICICICAGR (%) of BajajAllianzCAGR (%) of BirlaSunlifeCAGR(%) of INGVysya LifeTable 6 shows that the combined financial performance of five life insurance companies interms of compound annual growth rates of the variables.CONCLUSIONLIC is a public sector life insurance Company, which is taken as one of the samplecompanies. Although it is big public sector company, in the past a decade period it is laggingbehind in some of the financial aspects. The reason is the company has been facing the toughcompetetion from private sector life insurance companies. The market share of LIC hasdecreased gradually. The financial performance of other private life insurance companies isalso good in some aspects.

259www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/DOES THE FINANCIAL INCLUSION HELPS MUTUAL FUNDSIN INDIA?ABSTRACTDR. B. AMARNATH*; DR. S. RAGHUNATHA REDDY**;MR. THULASI KRISHNA.K****Associate Professor,Department of Management Studies,S.V. University, Tirupati - 517502.**Associate Professor,Kandula School of Management,KSRMCE Campus, KADAPA – 516003.***Research Scholar,Department of Management Studies,S.V. University, Tirupati – 517502.Financial inclusion or inclusive financing is the delivery of financial services at affordablecosts to sections of disadvantaged and low income segments of society. The importance ofan inclusive financial system is widely recognized in policy circles and has become a policypriority in many countries. Several countries across the globe now look at financial inclusionas the means to more comprehensive growth, wherein each citizen of the country is able touse earnings as a financial resource that can be put to work to improve future financial statusand adding to the nation‟s progress. The Reserve Bank of India has set up Khan Commissionin 2004 to look into financial inclusion and the recommendations of the commission wereincorporated into the mid-term review of the policy (2005–06). The present article throws alight on this financial inclusion concept and how far this concept matches with Mutual Fundsand helps to grow. As Mutual Funds pool the savings of retail investors, the financialinclusion concept may be adopted experimentally. However, there are plenty of challengesahead for the fund houses to approve this concept. The article concludes that however, ifthere is broad agreement that appropriately regulated Mutual Fund activity can play a largepart in financial development in all its dimensions, these barriers can surely be addressed in acollaborative way between the three stakeholders – the investors, the fund managers and theregulators.KEYWORDS: Financial inclusion, Mutual Funds, Retail investors, Reserve Bank of India.___________________________________________________________________________INTRODUCTIONFinance has come a long way since the time when it wasn't recognized as a factor for growthand development. It is now attributed as the brain of an economic system and mosteconomies strive to make their financial systems more efficient. It also keeps policymakerson their toes as any problem in this sector could freeze the entire economy and even lead to acontagion. Financial inclusion or inclusive financing is the delivery of financial services ataffordable costs to sections of disadvantaged and low income segments of society.Rangarajan's committee defines financial inclusion defines it as "Financial inclusion may bedefined as the process of ensuring access to financial services and timely and adequate credit

260www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/where needed by vulnerable groups such as weaker sections and low income groups at anaffordable cost."The importance of an inclusive financial system is widely recognized in policy circles andhas become a policy priority in many countries. Several countries across the globe now lookat financial inclusion as the means to more comprehensive growth, wherein each citizen ofthe country is able to use earnings as a financial resource that can be put to work to improvefuture financial status and adding to the nation‟s progress. Initiatives for financial inclusionhave come from financial regulators, governments and the banking industry. The bankingsector has taken a lead role in promoting financial inclusion. Legislative measures have beeninitiated in some countries. Financial inclusion includes accessing of financial products andservices like,Savings facilityCredit and debit cards accessElectronic fund transferAll kinds of commercial loansOverdraft facilityCheque facilityPayment and remittance servicesLow cost financial servicesInsurance (Medical insurance)Financial advicePension for old age and investment schemesAccess to financial marketsMicro credit during emergencyFINANCIAL INCLUSION IN INDIAIndia has, for a long time, recognized the social and economic imperatives for broaderfinancial inclusion and has made an enormous contribution to economic development byfinding innovative ways to empower the poor. Starting with the nationalization of banks,priority sector lending requirements for banks, lead bank scheme, establishment of RegionalRural Banks (RRBs), service area approach, self-help group-bank linkage programme, etc.,multiple steps have been taken by the Reserve Bank of India (RBI) over the years to increaseaccess to the poorer segments of society. The RBI has set up Khan Commission in 2004 tolook into financial inclusion and the recommendations of the commission were incorporatedinto the mid-term review of the policy (2005–06). In the report RBI exhorted the banks witha view of achieving greater financial inclusion to make available a basic "no-frills" banking

261www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/account. In India, Financial Inclusion first featured in 2005, when it was introduced, that too,from a pilot project in Union Territory of Pondicherry, by K C Chakraborthy, the Chairmanof Indian Bank. Mangalam Village became the first village in India where all householdswere provided banking facilities.There are certain sections which are excluded financially in our country like Marginalfarmers, Landless labourers, Oral lessees, Self employed and un-organised sector enterprises,urban slum dwellers, Ethnic minorities and socially excluded groups, Senior citizens, Womenpopulation. Neither the banks nor other financial institutions are concentrating on thesesections of people because of various reasons which can be summarized as under-Lack of legal identity like voter id, driving license, birth certificates, employmentidentity card etc.Lack of basic education and financial literacyDue to lack of financial literacy and basic education, it is very difficult for thosepeople who lack both to read terms and conditions and account filling forms.Many people voluntarily excluded themselves due to psychological barriers and theythink that they are excluded from accessing financial services.Commercial banks and other financial institutions operate only in commerciallyprofitable areas and they set up branches and main offices only in that areas .Peoplewho lived in under developed areas finds it very difficult to go to such areas.Finally, people who lack basic education do not know the importance of the financialproducts like Insurance, Finance, Bank Accounts, cheque facility, etc.Considering these facts, the RBI has initiated the concept of financial inclusion as thisfinancial exclusion may create serious threat to the society and the growth of the countryeven.BENEITS OF INCLUSIVE FINANCIAL GROWTHInclusive financial growth (IFG) is a critical tool for both economic growth and humandevelopment. An inclusive financial system is one that recognizes both the market potentialand the development opportunities. Rapid and sustained poverty reduction requires inclusivegrowth that allows people to contribute to and benefit from economic growth. The benefitsprovided by inclusive finance may comprise of the following.As India needs to achieve the growth with equality, the IFG provides a smooth path.Inclusive finance will provide banking related financial transactions in an easy andspeedy way.People will have safe savings along with other allied services like insurance cover ,entrepreneurial loans , payment and settlement facility etc.,Boosting up business opportunities will definitely increase Gross Domestic Product(GDP) and which will be reflected in national income growth.

262www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/Financial access will attract global market players to our country that will result inincreasing employment and business opportunities.MUTUAL FUNDS AND INCLUSIONThe role of Mutual Funds in promoting savings continues to be insignificant in India. Despitea long history, assets of Mutual Funds in India constitute less than 10 per cent of GDP. Across-country comparison suggests that Mutual Funds are very popular all over the world.However, assets under them in India are relatively low as compared with other emergingmarket economies.One of the major reasons for relatively low activity of Mutual Funds in India is thatpenetration, especially in the rural areas remains small. This is an important issue from theperspective of financial inclusion of low-income households in the formal financial system. Itis generally perceived that Mutual Funds are popular mainly with the middle and highincomegroups and have not been found to be an attractive investment avenue for the lowincomegroups. Thus, if the sector has to grow fast, it needs to devise appropriate schemes toattract the saving of low-income groups, especially in rural areas. This is the only way toensure participation of all categories of investors in the financial markets, which is crucial forsustained development, both of the financial sector and the economy as a whole.FINANCIAL INCLUSION THROUGH MUTUAL FUNDSFinancial inclusion helps in the process of ensuring access to appropriate financial productsand services needed by vulnerable groups such as weaker sections and low-income groups atan affordable cost in a fair and transparent manner by mainstream institutional players. It hasbecome one of the most critical aspects in the context of inclusive growth and development.India has, for a long time, recognized the social and economic imperatives for broaderfinancial inclusion and has made an enormous contribution to economic development byfinding innovative ways to empower the poor. Starting with the nationalization of banks,priority sector lending requirements for banks, lead bank scheme, establishment of regionalrural banks (RRBs), service area approach, self-help group-bank linkage programme, etc.,multiple steps have been taken by the Reserve Bank of India (RBI) over the years to increaseaccess to the poorer segments of society.The Rangarajan Committee Report extended the scope of financial inclusion from thetraditional definition of opening bank accounts among the unbanked population, to providingaccess to financial services at an affordable cost to the vast sections of disadvantaged and lowincome groups. Commercial banks have been at the vanguard of the financial inclusioncrusade by opening no-frills bank accounts for low income group customers. There is a latentneed for innovative products that can address the financial needs of this segment. The IndianMutual Fund industry is poised to play a significant role by harnessing the emergingtechnological innovations and regulatory measures.While the composition of Mutual Funds, shares and debentures is less than 10 per cent of thegross household savings in India, the increase of its proportion in the household savingsbasket over the past few years is an encouraging trend. As per the data collected fromAssociation of Mutual Funds in India (AMFI), Table-1 reveals that equity and balanced funds

263www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/with 66 and more than 50 per cent of the total Assets Under Management (AUM) by retailinvestors, shows the interest towards Mutual Fund investment.TABLE-1: CATEGORY-WISE ASSETS UNDER MANAGEMENT HELD BYRETAIL INVESTORSCategory Investor 2009 2010 2011(RS. CRORE)AUM % toTotalAUM % toTotalAUM % toTotalLiquidFundsTotal 90058.84 100.00 75752.81 100.00 74699.86 100.00RetailInvestors672.65 0.75 1348.18 1.78 689.61 0.92Gilt Funds Total 5966.92 100.00 3461.02 100.00 3507.28 100.00Retail 233.15 3.91 146.93 4.25 150.23 4.28DebtFundsTotal 197452.67 100.00 314329.93 100.00 294217.44 100.00Retail 8070.63 4.09 18146.67 5.77 17836.04 6.06Total 109512.59 100.00 199810.78 100.00 197562.81 100.00EquityFundsBalancedFundsRetail 71012.71 64.84 133298.38 66.71 132318.51 66.98Total 11649.82 100.00 15783.06 100.00 17552.40 100.00Retail 7946.83 68.21 8969.41 56.83 8886.48 50.63Gold ETFs Total 743.14 100.00 1590.63 100.00 4400.20 100.00Retail 174.15 23.43 482.49 30.33 1220.68 27.74ETFs otherthan GoldFund ofFundsinvestingoverseasTotal 659.91 100.00 956.59 100.00 2516.43 100.00Retail 59.04 8.95 117.9 12.33 272.01 10.81Total 2720.89 100.00 2861.16 100.00 2520.41 100.00Retail 901.08 33.12 945.91 33.06 851.92 33.8Source: AMFI data

264www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/The participation of retail investors is highest in these categories and account for almost 67per cent of total investment in equity oriented schemes. Statistics reveal that non-metros aresteadily increasing their share in the new collections by Mutual Funds, thereby increasing thereach of Mutual Funds to hitherto un-served markets. The 3,000 investor awarenessprogrammes conducted by the fund houses covering about 280 cities and 2,50,000participants is expected to further facilitate the penetration of Mutual Fund products acrossIndia.The increasing awareness amongst investors about Mutual Fund products and the change inthe commission structure for Mutual Fund distributors is leading to a discernible shift in theproduct mix being sold to customers today. There has been a significant increase in theinflows in Systematic Investment Plans (SIP), and the introduction of daily and weekly SIPby fund houses has helped attract smaller-ticket size customers, now many financial advisorshave started advising retail investors of investing in Fixed Maturity Plans as compared tobank fixed deposits.Slew of launches by the capital protection funds, are appealing the first-time investorunwilling to take exposure to equity oriented instruments. The new investor protectionmeasures put in place by Securities and Exchange Board of India (SEBI) regarding exposureof these products to real estate paper as well as in Information Technology sector is expectedto make these more popular. Similarly, many fund houses have launched micro-SIP planswith very low threshold limits to attract both the urban and rural economically challengedcustomers to start investing in Mutual Funds. It is vital to have a technologically efficientplatform with low transaction costs and regulatory norms that are synchronised with thesocio-economic traits displayed by this customer segment, for these plans to be successful.Regulatory guidelines, especially the Know Your Customer (KYC) norms, being mademandatory from January 2011, have at times stood in the way of financial inclusion as lowincomeearners and migrants rarely have acceptable identity papers. The notification by theMinistry of Finance in December 2010 that the Aadhaar number being issued by the UniqueIdentification Authority of India (UIDAI) will be an officially valid document to satisfy KYCnorms is expected to promote the cause of financial inclusion significantly. UIDAI isexpected to complete 600 million enrolments by 2014 and thus usage of the Aadhaar numberby the Mutual Fund industry would help it to increase its reach.According to Telecom Regulatory Authority of India (TRAI), of the 700 million mobilesubscribers in India, about 225 million cell phone users reside in rural India. A surveyconducted in 2007 showed that of the 321 million earning population aged between 18 to 59years, only about 120 million Indians from rural India had bank accounts. Extensive use oftechnology is the only way to deliver financial services in a secure environment at anaffordable cost to the vast multitude of Indians that do not have access to formal financialservices.2011 has thus ushered in innovations and improvements on multiple fronts, which whenleveraged in a holistic manner will enable financial inclusion on a scale that was not possibleearlier. Mutual Funds with its array of products designed around affordable ticket size, lowertime horizon (compared to insurance), various risk-return options (depending on nature ofproduct), increasing reach as well as a distribution structure aligned to promote „stay-

265www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/invested‟ behaviour can use innovative technological delivery systems to provide access togreater level of financial services to segments that are currently deprived of the same.CHALLENGES AHEADDoes the financial inclusion helps Mutual Funds in India? Not certainly as there are plenty ofchallenges ahead for the fund houses. Still the concept of Mutual Funds is not known tomany of the investors in India. Since its inception in 1964 to till date, the Mutual Funds areconfined to the boundaries of tier-1 cities. Low investor awareness levels and financialliteracy pose the biggest challenge to channelise the household savings into Mutual Funds.Majority of the investors lack an understanding of risk-return, asset allocation and portfoliodiversification concepts. Moreover, the Indian Mutual Fund industry is governed by thestrict enforcement of SEBI (Mutual Fund) Regulations 1993. The approach of the fundhouses to reach the rural investors is a hundred million question as their profitability will beaffected. The employees of the companies may not show interest to work in rural areas. Theinfrastructure facilities also pose a problem.CONCLUSIONMutual Funds clearly have a significant role to play in financial development. Their mode ofaggregating pools of saving from a large number of retail investors and deploying theseresources in a variety of financial markets, based on different risk-return preferencessimultaneously enhances efficiency, stability and inclusion. It is also relatively easy for themto be transparent about both their strategies and outcomes.There are clearly barriers to achieving these objectives. Some of these have to do withpenetration, others with the preferences of investors, particularly with respect to duration,some more with legitimate regulatory concerns about systemic risk and yet others with gapsor imbalances in the broader regulatory framework. However, if there is broad agreement thatappropriately regulated Mutual Fund activity can play a large part in financial development inall its dimensions, these barriers can surely be addressed in a collaborative way between thethree stakeholders – the investors, the fund managers and the regulators.REFERENCES1. Amol Agarwal, “The need for financial inclusion with an Indian perspective”,Economic Research, March 3, 2008, pp.1-102. Financial inclusion, November 15 th , 2011 fromhttp://en.wikipedia.org/wiki/Financial_inclusion3. K.C. Chakrabarty, “Financial Inclusion ; A road India needs to travel” (2011),November 15 th , 2011 fromhttp://www.livemint.com/2011/09/21211250/Financial-Inclusion--A-road-I.html4. Sushmita Ghatak, “Financial inclusion through Mutual Funds” (2011), November 15 th ,2011 from http://www.indianexpress.com/news/financial-inclusion-through-mutualfunds/746909/0

266www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/A CONCEPTUAL STUDY ON FLUCTUATION OF RUPEE INRELATION TO DOLLARABSTRACTMEHUL RAITHATHA**Assistant Professor, Smt. M M K College of Commerce and Economics,University of Mumbai.Research Student, S J Mehta School of Management,IIT Bombay, Mumbai.The appreciating rupee is posing a unique set of challenges for the Indian economy. Theimpact would not be limited to macro economy alone but it will also affect down to the levelof firms under various sections of economy. This is conceptual study based on Rupee Dollarrelationship in terms of Rupee appreciation that is dollar depreciation and rupee depreciationthat is dollar appreciation. It provides valuable insights into impact of changes in currencyrelations on various sectors of economy keeping in focus economy in general and Indianeconomy in particular. Pros and Cons of currency appreciation and depreciation are studiedas boon and bane for the economic growth. It also provides suggestions or steps needed tocontrol as well as to overcome ill-effects of excessive fluctuations between rupee and dollarkeeping in view current trends.KEYWORDS: Appreciation, Currency Fluctuation, Depreciation, Rupee-Dollar.___________________________________________________________________________INTRODUCTIONGlobal economy is much more interlinked than it was earlier due to lot of trade taking placebetween different countries. It goes without saying that U.S. is major trading partner formany nations and biggest trading importer of goods and services from across the world.Change in any direction in U.S. economy is directly going to affect economy of all relatedcountries.Democratic principle and human capital has given India unique position among worldcommunity. Indian economic policies are flexible enough to get adjusted to the other nations.India has always been major country when it comes to being trading partner of U.S. whichhas always given economic and strategic support to country like India occupying strategicimportance among world community.THE POLITICAL AND ECONOMIC HISTORY OF A COUNTRY CAN BE TRACEDTHROUGH ITS CURRENCYUnder Bretton wood system in 1944 participating countries agreed to try and maintain thevalue of their currency with narrow margin against dollar and corresponding rate of gold asneeded. This made Dollar to be reserve currency and other country started accumulatingdollar as foreign reserve. This was finally abandoned in 1971 and U.S. dollar will no longerbe converted into gold. In 1980s cross border capital movements accelerated with the adventof computers and technology, extending market continuum through Asian, European and

267www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/American time zones. In 1990s further development lead to development of foreign tradeamong many countries and they started playing important role in the international economywith U.S.The impact of sluggish U.S. economy and interdependence of Indian economy on U.S.economy can not be neglected in the current global economic scenario.OBJECTIVESThis is conceptual study based on Rupee Dollar relationship in terms of Rupee appreciationthat is dollar depreciation and rupee depreciation that is dollar appreciation.It provides valuable insights into impact of changes in currency relations on various sectorsof economy keeping in focus economy in general and Indian economy in particular.Pros and Cons of currency appreciation and depreciation are studied as boon and bane for theeconomic growth. It also provides suggestions or steps needed to control as well as toovercome ill-effects of excessive fluctuations between rupee and dollar keeping in viewcurrent trends.RUPEE AND DOLLAR – AS CURRENCYDetermining what causes currency to weaken or strengthen is an evolving art and it is moreof an art than science.In India, level of foreign exchange reserve being low in the past and demand for foreigncurrencies particularly dollar being heavy, the dollar always used to be at premium.Consequently, rupee used to be weak against dollar in the foreign exchange market which ischanging now and rupee is becoming strong.MOVEMENT OF RUPEE AGAINST 1 US DOLLAR SINCE 1973[Appx. Avg. for the year]HISTORICAL INDIAN RUPEE RATE (INR)Year INR/USD Year INR/USD Year INR/USD1973 7.66 1987 12.95 2001 47.231974 8.03 1988 13.91 2002 48.621975 8.41 1989 16.21 2003 46.61976 8.97 1990 17.5 2004 45.281977 8.77 1991 22.72 2005 44.01

268www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/1978 8.2 1992 28.14 2006 45.171979 8.16 1993 31.26 2007 41.21980 7.89 1994 31.39 2008 43.411981 8.68 1995 32.43 2009 48.321982 9.48 1996 35.52 2010 45.651983 10.11 1997 36.36 Nov 2011 50.671984 11.36 1998 41.331985 12.34 1999 43.121986 12.6 2000 45TABLE 1: MOVEMENT OF RUPEE AGAINST DOLLAR SINCE 1973The above movements shows how from 70’s the rupee had regularly depreciated till 2001 andthen it has started fluctuating and also gradually appreciating due to constant change in theglobal as well as Indian economy.Interest rate is price of money and higher the supply of any normal good its price must drop.When supply of money decreases interest rate increases which makes money more costlierand it lead to the situation when foreign currency price of local currency also increases whichresults into appreciation of local currency. E.g. say, rate of interest increases from 10% to14% due to decrease in supply of money it will make value of money to increase andultimately foreign currency price of local currency increases say, between us $ & Rs. From 1US $ = Rs. 41 to Rs. 40 that is appreciation of rupee. Rate of exchange between both thecurrencies is determined by market forces which are political, economical and psychologicalin nature.RBI introduced foreign currency rupee options from 2003 to neutralise the currency risk oncountry’s large external liability portfolio and ensure smooth functioning of the markets.Foreign currency rupee options are options to purchase or sell one currency at a pricedenominated in another currency. It was with the aim to help banks, corporates, residents andnon residents to better manage their currency risks against adverse movements of the rupeeagainst foreign currency especially the dollar.Dollar is depreciating because the country has run a persistently large amount of currentdeficits and is now unable to finance it with foreign money as yield on U.S. assets havedeclined. Today overseas customers demand price sheets and catalogues denominated in theircurrency.

269www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/RUPEE APPRECIATION IN RELATION TO DOLLARThe appreciating rupee is posing a unique set of challenges for the Indian economy. Theimpact would not be limited to macro economy alone but it will also affect down to the levelof firms under various sections of economy. On 7 th may 2007 $1 US = Rs.40.57 which is 9 yrhigh rupee value against dollar. RBI has accumulated reserves by buying dollars therebyreducing its supply. Buying of dollars has released rupees that have added to money supply.Heavy dollar inflow and selling pressure from exporters have pushed rupee higher. Increasein flow of funds through foreign institutional investors is another important reason forappreciation of rupees.The appreciating rupee is going to affect various sectors of economy in different ways maybe positively or negatively.RUPEE APPRECIATION IN RELATION TO DOLLAR AS A BOON• The biggest beneficiary from appreciation of the rupee are the importers as they have topay less in terms of dollars i.e. more dollar denominated goods can be purchased bypaying lesser amount of rupee.• Since import cost will decrease energy dependent sectors will benefit more comparing toothers.• Companies that source raw materials from the global market and are largely domesticdemand driven could witness improvement in margins.• It is also beneficial for the capital goods sector as large number of equipments andmachineries are imported.• It is also a good sign for government’s financial health because in the long run a strongerrupee would be sound for the Indian economy and will bring India’s purchasing power atpar with other currencies.• Oil marketing companies like BPCL, HPCL, and IOC which import crude oil will also bebenefited.• Telecom companies like AIRTEL, Idea with huge requirement for import capitalexpenditure stand to gain from a rise in the rupee.• As far as foreign exchange markets are concerned, the rupee has become favouredcurrency. With the rupee gaining in value, there is a demand for rupees with exportersdumping dollars.RUPEE APPRECIATION IN RELATION TO DOLLAR AS A BANE• Exports which constitute about 12% of India’s $854 billion economy would have grownfaster had the rupee not appreciated to a 9 yr high and eroded earnings of the exporters.• An appreciating rupee impacts our export competitiveness adversely. Exports of goodswhich compete only on price with very low margins are expected to come down whereas

270www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/more value added exports which have higher import content or which are less pricesensitive would be less affected.• India’s foreign structure does not support strong rupee since it includes leather, textiles,gems and jewellery and most of the manufacturers and exporters are medium and smallsized who are operating on low margins and they can not absorb currency risks.• Hedging of currency is not popular in India as what it is in other developed countries dueto high costs.• For IT companies and exporters, the rising rupees means a fall in the operating marginsand increased costs as they will receive less rupees for each dollar earned.Approximately, two-thirds of India’s IT revenue is in dollar terms.• The textile business with hardly 3 to 5 % profit gets directly affected by appreciatingrupee since export will go down. As per Cotton Textile Promotion Council [Texprocil]for the year ending January, 2007 in the case of US textile import from India had grownonly by 5% whereas from China, Indonesia, Bangladesh and Cambodia it had grown by27, 26, 20 & 23 % respectively which shows that appreciating rupee has made our exportuncompetitive.• Hotel industry would be affected as major portion of their sales is from abroad and thereis appreciation of rupee.• Strengthening rupee is cause of concern for commodity sector. US being the largestimporter, majority of the Indian commodity exports are dollar denominated. The metalcompanies especially the iron-ore exporters would be badly affected as they will have togive up the gains accruing from higher global commodities prices on account of fallingdollar.RUPEE DEPRECIATION IN RELATION TO DOLLARSince independence till recently rupee was continuously depreciating. It had reached the levelof 49.09 in May, 2002. However forex inflow from service export and NRI remittancewitnessed solid growth which resulted in current account surplus and a turn around for thecountry running in trade deficits in the past. India’s medium term export policy for 2002-07has recommended gradual depreciation of the rupee to substitute direct export subsidy, whichis forbidden under WTO regime. Lower rupee helps exporter in the sense that he can lowerhis price and sell in the overseas market.RUPEE DEPRECIATION IN RELATION TO DOLLAR AS A BOON• Exports can grow faster if rupee depreciates since exporter can attract overseas buyers.• A depreciating rupee can increase our export competitiveness which is very muchessential for any economy to grow. Exporters of goods which compete on price with verylow margins can also survive in the foreign market in the sense that they can lower theprice and increase sales volume.

271www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/• India’s foreign structure also support weak rupee since it includes leather, textiles, gemsand jewellery and most of the manufacturers and exporters are medium and small sizedwho are operating on low margins and they can not absorb currency risks but weak rupeecan allow them to sell their product at lower price.• For IT companies and exporters, the falling rupees means an increase in the operatingmargins as they will receive more rupees for each dollar earned. Approximately, twothirdsof India’s IT revenue is in dollar terms.• The textile business with lower profit margins gets directly benefited by depreciatingrupee since export will go up.• Hotel industry would be affected as major portion of their sales is from abroad and thereis appreciation of rupee.• Weakening rupee is welcome step for commodity sector. US being the largest importer,majority of the Indian commodity exports are dollar denominated. The metal companiesespecially the iron-ore exporters would be benefited as they will have gains accruing fromlower global commodities prices on account of rising dollar.RUPEE DEPRECIATION IN RELATION TO DOLLAR AS A BANE• The biggest looser from depreciation of the rupee are the importers as they have to paymore in terms of dollars i.e. less dollar denominated goods can be purchased by payinghigher amount of rupee.• Since import cost will increase energy dependent sectors will lose more comparing toothers.• Companies that source raw materials from the global market and are largely domesticdemand driven could witness decrease in their profit margins.• It is not beneficial for the capital goods sector as large number of equipments andmachineries are imported and they will become costly.• It is not a good sign for government’s financial health because in the long run a weakerrupee will make India’s purchasing power lower as compare with other currencies.• Oil marketing companies like BPCL, HPCL, and IOC which import crude oil will beadversely affected as they have to pay higher import bills.• Telecom companies like AIRTEL, Idea with huge requirement for import capitalexpenditure stand to lose from a fall in the rupee value.• As far as foreign exchange markets are concerned, the rupee may lose its value ascurrency due to depreciation not being a good sign for any currency.

272www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/RUPEE APPRECIATION/DEPRECIATION IN RELATION TO DOLLAR -A NEUTRAL EFFECT• Earnings of sectors like shipping, ship building etc. are in dollars. However their expensesare usually in dollars, therefore it usually provides a natural hedge to a large extent andthey would not get highly affected.• Gems and jewellery industry, where exports are more of a value added in nature, e.g.where gold is imported, processed to create jewellery, which is exported back would beless affected.• In case of pharmaceutical companies where only a part of their export is to US and sincethey also hedge their exports do not get highly affected by rupee appreciation.SUGGESTION/STEPS TO CONTROL EXCESSIVE FLUCUATIONS• The government should guarantee minimum exchange rate and if the market movessharply against the exporters then they should be compensated with subsidy.• A range may be fixed around a particular rate say 4% around Rs.44 and the rupeemovement should be restricted around that range.• Hedging of currency is another option which needs to be made popular in India. It can bedone in various ways like forward contracts or buying options. Forward contract is theone in which future price is locked in. It can really provide safeguard against risk andhelp to survive in foreign market. Small and medium enterprises should be allowed tobook forward contract without underlying exposures or past records of export or import.• RBI should come up with measures to reduce interest rate on export credit and PublicSector banks should ensure credit to medium and small exporters under the prioritysector.• The way in which government is giving tax exemptions for service rendered in India andutilised for exports, this should be done for service rendered outside India and utilised forexports.• Incentives should be given to control cost and to remain competitive in the global market.• Forecasting is required for floating currencies by planners of long run horizons. It shouldtake into account exchange rate system, forecast horizons [may be short, medium or longrun] and exchange rate units. Accuracy, correlation with actual value and degree ofpredictability should also be taken into account.• Government need to rework its economic policy and the firms, their business models andstrategies for their success in the fluctuating foreign market.• Currency diversification is another important alternative in which trader should trapseveral countries to avoid risk of currency in any particular nation. Other currencies likeEURO and Yen should be given equal importance considering the future.

273www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/• Call options that is flexibility to buy currency at pre-determined rate and date and Putoptions that is flexibility to sell currency at pre-determined rate and date should also bemade popular in India to avoid fluctuations.• Weaker rupee is not the only solution to boost our export; in fact we should try toconsider other factors like improving infrastructure, lower interest rate for working capitalfinance, improvement in global demand and increasing competitiveness in global market.• At global level attention should be given to real assets such as gold, commodities and realassets.• If we really wish to confine the variability of our exchange rate to a relatively lowerrange, we need to make frequent use of monetary policy provided we can keep intoaccount its domestic impacts also in mind.• Impact of a rising rupee on exporter can also be offset by a falling inflation and a shift inthe basket of export goods and services that is getting diversified to export of goods andservices less vulnerable to price.• The quantum of private capital flow that India is receiving is small as compare to whatother countries are receiving therefore we should attract more of private capital.CONCLUSIONThe initial success story of India was clearly based on factor driven economy based on labourarbitrage that is providing low cost labour in comparison to another country. At this stagedevelopment is sensitive to global business cycle and exchange rate fluctuation.We need to move towards being investment driven economy that is efficiency driven in theform of infrastructure development, improving skill of work force and make that investmentwhich translate into tangible productivity across the board.Final stage which can make India to be developed economy is to be innovation driveneconomy that can create unique value of India at global economy level. We need to acceleratereform process that would make economy resistant to external shocks and changes ineconomy cycles and currency fluctuations. The bottom line is our policy should concentrateon enhancing our capability in manufacturing, promote entrepreneurship and provideincentive for innovations. We need to remember that the challenge which we are facing is notonly about currency risk but it is about moving to growth and development.REFERENCESNidhi Singh (2007) “Rupee Appreciation: Sectoral Impact on Exports and Imports”,ICAI journal, June.C.R.L.Narsimhan (2003) “Rising Rupees Hidden Massage”, The Hindu, April 3 2003.Shankar Acharya (2007) “Exchange Rate Policy” , Business Standard, April 26.Amit Kapoor (2007) “Rising Rupee and India Growth Story”, The Economics Times,August 29.

274www.zenithresearch.org.inZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 3, March 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/M K Venu (2007)“Is the us facing liquidity trap?”, The Economics Times, September4.Shruti Chauhan & Paramita Chatterjee (2007) “Ship Your Worries”, The EconomicsTimes, September 11.M.Y.Phansalkar(2005) “All about Foreign Exchange and Foreign Trade”, Publishedby English Edition.Jitendra Sahai (1982) “Dollar in India”, Published by National Publishers, 1982.Gray Shoup (2006)“Foreign Currency Management”, Published by Infinity Groups.Nagendra Chowdhary “Dynamics of Exchange Management” , ICFAI Bookswww.rbi.org.in