A BUSINESS LETTER MASTER OF INTERNATIONAL BUSINESS CENTER FOR MANAGEMENT STUDIES JAMIA MILLIA ISLAMIA NEW DELHI

1. Volume 1, Issue 9
March 2012
Mi`bytes
Masters of International Business
Centre for management Studies
BUSINESS LETTER
Jamia Millia Islamia University
Microfinance: An Effective Tool to Eradicate Poverty
The Reserve Bank of India various ways how such ser- member of the group (usually
(RBI) defines microfinance vices can assist low income a manageable number of
as “the provision of thrift, people will be discussed about five) is liable if one or
credit and other financial demonstrating that even the more members default on the
services and products of very poorest can benefit from the loan. The joint liability serves
small amounts to the poorer provision of small loans. This as collateral, since even if an
in rural, semi-urban and ur- is a view that is still ques- individual project fails and
ban areas for enabling them tioned in the academia. some of the borrowers are
to raise their income levels unable to pay, the group as a
and improve their living India has been a forefront whole might still manage the
standards.” participant in using micro- debt. In economic terms, this
Microfinance has emerged as finance as a tool of poverty also cuts down on the need
a needful programme to the alleviation as microfinance is for the bank to monitor its
needs of the most underprivi- used both by government and borrowers, since the borrow-
leged people. The concern Reserve Bank of India as a ers will have the incentive to
over today is ever increasing means for poverty alleviation monitor themselves. One
poverty and there is an urgent with credit support from the clear advantage to putting
need of empowering, ena- banking system. RBI and borrowers into groups is that
bling the most neglected sec- NABARD regulate the micro- it creates a support group
tions of the society through finance operations of the mechanism.The major chal-
organized support to all pov- banking sector as a part of lenge faced by the Micro-
erty alleviation programmes. their overall banking opera- finance Institutions (MFIs) is
Considering the paucity of tions. The informal group the higher interest rates
funds with poor people, the lending in India started in charged on loans. In order for
need of the hour is to provide 1986-87 when the NABARD microfinance institutions to
adequate credit to the needy supported and funded an ac- remain viable, in large part
people to enable them to un- tion research project on due to high administrative
Inside this issue: dertake entrepreneurial activi- „Saving and Credit Manage- costs associated with small
ty. ment of Self-Help Group‟s. loans, they either need to be
The large numbers of wom- heavily subsidized or to
Corporate Speaks 2 The concept of providing en‟s organizations like, SE- charge relatively high interest
financial services to low in- WA (Self Employed Wom- rates. While on the surface,
come people is much older en‟s Association), Working this appears contrary to the
News Bits 3 than still believed by many Women‟s Forum (WWF) etc operating objectives of micro-
development practitioners were also involved in micro- finance (or, at the very least,
and bankers around the finance activities.One feature of poverty relief), it should be
Inside Consumer Mind 3 world. This is important since common to many microcredit emphasized that while interest
it underlines the contribution programs is that loans are rates of 30 percent, 50 per-
that microfinance institutions only offered to small groups cent,
Quote for the Month 4 (MFIs) can make to the de- of people, not to individuals.
velopment of the financial Each member of the peer Cont…..on Page 4
sector in their respective group has his or her own
countries. Subsequently the business plan, but every

2. Page 2 Mi`bytes
CORPORATE SPEAK
Mr. Kaushik Chattopadhyay
ITD
Godfrey Phillips
Q1. What are the different risks which you face in domestic and international market?
A. Risks in domestic market are different from risks in international market. For instance in domestic busi-
ness the major risk might be government rules and regulation whereas in international market primary risk
for us is currency fluctuation but we keep Gross Margin Contribution (GMC) at a reasonable level to mini-
mise the same. Another important risk which we face is Credit Risk, although ECGC takes care of this risk,
but still we cannot give credit to every market. For Example Europe Banking is strong and our Letter of
Credit is pretty safe but in Africa it is risky to work even on Letter of credit which is considered as one the
safest method of making payment, as banks have gone bankrupt in Africa. Economic sanctions and political
instability are other risks which we face in international market.
Q 2.How do you promote your Brands as cigarette is injurious to health?
A. No doubt, there are lot of restrictions in this trade because of the product having a negative connotation
attached to it, however it provides new challenges for the business manager to adapt to. In India there is a
Law COTPA (Cigarette and other tobacco Prohibited Act) which bans media advertising. So the only point
of advertising we are left with is the point of sales like Kirana stores and Pan shops that too with POS mate-
rial. In international Market there is a provision called FCTC which is a framework which restricts the con-
sumption of tobacco products worldwide. We respect the same and believe that smokers make a conscious
decision to smoke and should not be incited to do the same. We take care to modify our Product & promo-
tional practices complying with the same. Marketing of Cigarette though difficult have now moved the
concept from the customer to the Intermediaries in the channel. Trade marketing is a key now a day to en-
hance market share. With respect to Consumer marketing sampling of new products and attractive POP
materials along with merchandise in certain markets are still allowed. ATL have been literally wiped out as
a marketing tool for us, though bill boarding is still allowed in certain countries like Tanzania.
Because of these restriction companies have to be dynamic in their approach and need to think out of the
Box to adapt and develop market.
Q3. What are the current changes in the market environment, which will impact Godfrey Phillips India
business globally?
A. There has been a recent development where people are getting inquisitive about ethics of tobacco prod-
ucts including cigarette. As people will get more empowered and knowledgeable then they will take a con-
scious decision, so i think cigarette consumption will decrease over a period of time but will not fall drasti-
“Marketing of tobacco cally as it is an addictive product. Consequently industry will hit a mark where it will become stagnant and
competition will be fierce given that rules and regulations also change at a drastic pace. The companies
is difficult ” which are able to adapt would rule the roost.
Q4. Which market do you see as potential market for your product?
A. Europe and North America are on slide because of rules and regulations and consumer empowerment. In
Africa & Latin American markets which are key markets for us we have seen a sudden spurt in demand of
cheap and poor quality cigarettes. We want to provide an affordable but a quality product to those custom-
ers. At the same time to cater to markets in developed countries our packaging plays a major role because it
shows a premium image of the product. We at Godfrey Phillips are adept in catering to the needs of our
customer.
South-East Asia is on the rise because lots of illicit cigarette follow route of South-East Asia to make in-
roads into European and North American market.
“100 of the Fortune 500
companies have R&D in In- Q5. How do you overcome cultural barriers while promoting your brand?
A. First of all the brand name is chosen as such that it does not offend the feeling of any sect or religion. For
dia ” instance, in South Africa majority of the population is black but majority of consumers are white so while
targeting the segment a thorough market research is done on that segment‟s believe and practices so we do
not offend any of their cultural practice. For e.g Soccer is the most popular sport in Africa and companies
take note of the same in order to carve out new Cigarette package. Also colors are used as per the lifestyle
“India is among 4 countries of the customers. Flashy colours are accepted in Africa whereas in Developed countries packaging need to
carry a royal image.
that make Supercomputers”
Q6. What will be your advice to international business students from Jamia Millia Islamia?
A6. First of all come with fresh mind and with a sense of adaptability as you will be in foreign territory
frequently and you might face cultural or a social barrier and Best of luck for your future.

3. Volume 1, Issue 9 Page 3
GUEST COLOUMN INSIDE THE CONSUMER’S BRAIN
What won‟t retailers do to understand what consumers want, and how to lure them? They‟ve left no
stone unturned in unraveling this mystery. They have quizzed consumers, asked them to fill out
forms, tracked them inside the shop and used mounds of point-of-sale data to figure them out better.
Now, the highest science employed in the pursuit of understanding man is coming to the aid of retail-
ers.
Welcome to the world of „neuromarketing‟. Coined in 2002 by Ale Smidts, a professor of marketing
research at Rotterdam School of Management, the term simply means studying a consumer‟s brain
activity and examining its responses to various stimuli. It‟s about researchers using advanced technol-
ogy, like functional magnetic resonance imaging, to understand why a consumer decides the way she
decides. Or using sensors to figure out how heartbeats respond when a buyer decides to spend her
hard-earned money on a brand.
The Subconscious Play
“Neuromarketing excels at diving to the subconscious level, where as much as 95% of all decisions
are made,” says AK Pradeep, founder of neuromarketing research firm NeuroFocus. “The subcon-
scious level is where critical marketing objectives, such as initial product or service interest, purchase
intent and brand loyalty, are formed.” So measuring at that level makes sense.
NeuroFocus, set up in 2005, tries to do precisely that. “They [companies] can test their brands, prod-
ucts, packaging designs, in-store marketing and advertising,” says Pradeep. “They can test their in-
vestor relations, human resource materials and the effectiveness of their spokespersons, and they can
test all the things that their competitors have as well. And much more.”
A case Pradeep narrates is of a financial services client, which gave NeuroFocus six print ads and
asked the firm to determine which was the most effective. Pradeep and his team zeroed in on the one,
based on “how consumers responded at the subconscious level.” He recalls, “When I presented our
findings to the company‟s management, they told me that our winner had only been rated as
„mediocre‟ at best by the conventional research techniques.” But NeuroFocus still clinched the ac-
count. Here‟s how: “They quickly added that, to their great surprise, the ad we picked had actually
made their call centres receive a record number of inquiries from consumers.”
One of the courses Baba Shiv, Professor of Marketing, Stanford Graduate School of Business, teaches
is called „The Frinky Science of the Mind.‟ Well, he too confirms, “It‟s all happening at the instinc-
tive level, not at the rational level.”
Shiv shares an example from one of his pet themes—how perceptions about price and quality play out “70% FMCG
in the real world: in the US, when Toyota launched its Corolla in 1984, it was a spitting image of
GM‟s Geo. The same production line churned out both the cars, only the badges were different. Says purchase decisions
Shiv, “When JD Power and Associates conducted a survey after three years and asked consumers
what problems they had with these cars, the people reported more problems with the GM Geo than
are made at their
with Toyota Corolla.” In the eyes of the public, Toyota was a better brand and could do no wrong,
whereas GM manufactured cars for rough use. It had to do with the “perception” of Toyota being a
shelf”
superior brand that led to people reporting fewer problems with its cars.
Toward Awareness
A couple of questions arise. One, are the traditional market research techniques still relevant? Pradeep
says they do have a role. “For example, they can be helpful in getting at answers to factual questions.
The conscious mind can deliver that information fairly readily.”
Two, what hurdles is micromarketing facing? Education, Pradeep says. He spends a lot of time travel-
ling across the world making presentations about the potential of neuromarketing. NeuroFocus is now
present in the UK, Europe, Latin America and Asia too. Pradeep‟s book The Buying Brain is an at-
tempt to make people more aware of this tool. Indeed, the industry is seeing more action in this
sphere. Apart from Pradeep‟s works, there has been Martin Lindstrom‟s Buyology and Amazon lists
61 books on the subject. Not surprisingly, the developed world has taken to neuromarketing more
swiftly than the other nations (see: Getting A Toehold In India). Even in 2004, there was a much-
publicised „blind taste test‟ involving Coke and Pepsi, wherein cola drinks were offered to subjects
without revealing the brand name to them. Half of the subjects chose Pepsi—it produces a “stronger
response” in the brain, as Wikipedia puts it. In reality, Pepsi has far less than half the market. Coke
scores for reasons other than taste.
Now, neuroscience research firms abound—so that the industry is wondering how to unify stand-
ards—and have started enlisting experts to get a competitive edge in the market. All with the hope
that they can, finally, understand the consumer!
Deepak Goel
Business Journalist

4. CMS, MIB
Quote For the Month
E-mail: sahilbhat_12@yahoomail.com,
soobianahmed@gmail.com
Phone: 9891984210, 9871858982
“
-Steve Jobs
MICRO FINANCE
EDITOR-IN-CHIEF: Cont...from page 1
Prof. SAYED WAJID ALI
or more appear exorbitantly problems mutually.
high, they are quite low com-
pared to its alternative, the By-Luthufi M
traditional informal sector MA (HRM), JMI
STUDENT EDITORS: lending, which is usually
dominated by local elites.
SOOBIAN AHMED And the high rates are neces-
NAMITA DHAMANI sary, given the fact that there
SAHIL BHAT are always overhead costs and
transaction costs, and transac-
tion costs must accurately
INTERVIEW BY:
reflect risk.
Microfinance provides an
SOOBIAN AHMED
ambience for economic de-
SAHIL BHAT
velopment through mutual
cooperation between the
members. It is build up on the
framework of cooperative
system which includes mutual
help, identical needs, member
based ownership and legal
status. It promotes the partici-
patory finance (interest free),
risk sharing, profit sharing,
and manufacturing and pro-
duction of need based prod-
ucts. It inculcates a culture of
daily deposits and strengthens
the economic condition of the
members. Moreover they are
being trained and consulted
by the MFIs regularly and set
a mechanism for solving the
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