Applying the Pareto Principle in Real Life

Pareto Principle or the "principle of vital few" states that roughly 80% of the effects comes from 20% of the causes. It is a very common anecdote used to describe several business problems & their solutions- like 80% of the revenue comes from 20% of your business i.e.core competency but fascinatingly it has several unique real life applications:

(1) 80% of the exam comes from 20% of the course content!

(2) 20% of the people you know account for 80% of the total amount of your mobile bill..!

(3) 80% of the wealth in India is in the hands of 20% of the population

(4) 80% of the times you wear clothes which form 20% of your wardrobe

(5) If you are a regular at quiz competitions, you would know what i mean-80% of the questions are answered by 20% of the participants

(6) In races, for ex: horse racing, 80% of the races are won by 20% of the horses

(7) If you invest in equities- 80% of your profit would be coming from 20% of the portfolio(out performer stocks), likewise if you are running into losses you would observe that 80% of your losses are due to 20% of the entire portfolio (laggard stocks)

(8) In the music and entertainment industry, one would observe- 80% of the popularity or fame is achieved by 20% of the work done (though generalizations can't be made, but this phenomenon has been observed quite often),
Ex: If an artist has 3 hit singles out of an album of 10 songs, his/her album would sell even though the rest of the album is not worth listening

(9) & Finally, 80% of the happiness in your life is due to 20% of the activities/events that take place :)

Do note that the numbers '80' & '20' do not matter here, it can be much higher like '95' & '5' but the main concept to be kept in mind is that certain activities account for majority of the output in your life

-By: Tejas Singh

Understanding the Dynamics of the Oil & Gas Industry

Inflation is sky-rocketting these days and one of the major factors impacting the rising inflation includes the rise in prices of oil related commondities.



When reading articles about the oil & gas industry in newspapers and magazines there's industry specific jargon that one may not be aware with. To acquaint with the same, this article looks at some of the commonly used terms. While reading, you would also understand how oil industry actually works..



Firstly we shall bifurcate the oil and gas industry according to the nature of work done-it can be divided into mainly two categories-upstream and downstream sectors. The upstream sector includes companies engaged in exploration and production of oil & gas. The downstream sector is into the refining as well as the selling & distribution of oil & gas products. So all the products made from oil refining-including LPG, gasoline & diesel oil are produced by the downstream sector. Oil Marketing Companies (OMC) are part of the downstream sector. Popular OMC's in India include Indian Oil, HPCL, BPCL etc. Upstream companies in India include-Oil India, ONGC & GAIL.



Although the prices of petrol have been deregularized and there is much hue & cry amongst the price-sensitive aam aadmi, the fact remains that diesel & LPG is adminstered at prices lower than the international prices. OMC's suffer heavy losses due to difference between the selling price(i.e. the price at which is sold finally to the Indian consumers) and the market price (the price at which it is sold internationally). This is called under-recoveries. The burden of under-recoveries is borne by the government (which provides cash compensation to OMC's), Upstream Co.'s (in the form of price discounts to OMC's) & finally by the OMC's themselves. The large chunk, however is borne by the government which is almost equal to 70%. One may think that the losses of OMC's should subside due to deregualtion of petrol last year. However, the irony here is that petrol constitutes only a tiny portion of the fiscal burden that the government has to bear due to under-recoveries. Diesel and LPG consitute the large chunk.



Recently oil touched the $100 per barrel mark (& rising...) due to the political turmoil in Egypt and the middle east, this would definetely hit the balance sheets and financial reports of OMC's bad.



Although OMC's suffer heavy losses due to under-recoveries, the concept of losses and under-recoveries should not be used interchangably. Under-recoveries occur due to difference in the market price and the selling price of oil products whereas losses occur if cost exceeds the selling price.



If we carefuly look at the quarterly and the annual financial statements of OMC's, we would find there is great variablity in the profitability position amongst consecutive time intervals. This is due to the fact government compensation to the OMC's for under-recoveries is often delayed. Due to this OMC's profits yo-yo widly according to when they receive the compensation from the government. When there is delay in compensation, OMC's infuse huge amounts of cash to keep the show going.

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A quick trivia: After the collapse of Bretten Woods, one of the key reasons why the US Dollar bounced back was because oil per barrel was denominated in terms of USD. Sufficient oil reserves & a resurgent demand of US currency helped the US Dollar get back on track..!

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By:Tejas Singh

The LAWMAN- Section 138 of The Negotiable Instruments Act, 1881

What would you do when your creditor is standing in front of you and you have an empty pocket or on a general ground, what do a businessman do to its supplier’s payment if he don’t have sufficient funds? The easiest way a debtor can think of making a payment is through a cheque, no matter whether in his bank account, he has sufficient funds or not. Atleast he was getting the goods on time against which he was making payment for. What a general feeling would be, that the debtor made a big fool of his creditor. So here I write this article to make you realize the big repercussions you might have to face for the smartness you performed.

This smart man should have realized that Indian lawmakers are smarter. This case of Dishonor of cheque comes under Section 138 of Negotiable Instruments Act 1881. The lawmakers with time realized that this offence is much higher than what can be called as corporate offence and that people take it lightly. They therefore transformed it into a criminal offence.

According to law, a person who draws such kind of cheque has following punishments-

• Ø  Fine which may extend upto double the amount or
• Ø  Imprisonment whose term may extend upto 2 years or
• Ø  Both

But there are some requirements which need to be fulfilled for this kind of punishments to be exercised or in other words, this law to be applicable. They are:-

That is all about how Law deals with these smart people. But over the time it was realized that people can try to find loopholes even in this.

Like I give you an example:-

Suppose the drawer is informed about this law and still has drawn a cheque without sufficient bank balance.

Now what he does is, he gave a command to his bank to have “Stop Payment” of that particular cheque.

When creditor sues him in a court under this section, he vehemtly refuses, feeling that section doesn’t apply to him as it says the dishonor reason to be “insufficiency of funds”  and here it is “Stop Payment”. The drawer feels he has an easy escape, but sorry to him as it is not that simple.

For this simple reason the judges have given law words “insufficiency of funds” a wider meaning which include- 

• ü  Stop Payment
• ü  Closure of Account (Another smartness, after drawing he might close his account in bank)
• ü  Signature differ (yes this is also punishable under section 138, you might be feeling that this could happen unintentionally as well but then if he is genuine, he must have made payment in those 15 days of grace period!!!!).

This is generally known as mischief rule.

So in future never try such smartness, less you may have to face some real difficulties.

By- Aman Maggu

Our Fatboy- Air India, Truly Indian!

Our oldie, goldie Air India, given birth by J.R.D. Tata in 1932 with an aim to have India's own flying baby, is upset with this cruel world where a company, which was till two decades ago the sole bread winner in the airspace of the country, is no longer asked for by its fellow countrymen, let alone the swarms of foreigners coming to India to smirk at the slum dogs here. Tata's baby, which has grown up since, and exponentially, especially around the belly area, is seeming to be too heavy for its step daddy, our government, which can't stop it crying. Adopted in 1953 and scientifically experimented upon in 2007 when it was merged with its half brother, Indian Airlines, the experiment has gone haywire (as usual) and given life to such a monster (NACIL- National Aviation Company of India Limited) that the step daddy is desperately trying to find its mother so that it can save itself from the responsibility.

Its current godfather, Mr Praful Patel is feeding the fat NACIL at regular intervals, be it Rs 800 Crores past year, Rs 1200 crores in the coming weeks or Rs 3000 Crores promised in the coming 2 years. The fatboy is all too happy to have such a sincere godfather. But what can the godfather do, when the fatboy is threatening to go on a suicide mission if it is not nourished adequately. Why should it bother when the employer of the stepdaddy is giving him handsome salary (the taxpayer) because the employer can't fire the stepdaddy (these trade unions have five year contracts but all of them have the same shitty employees). Its another matter that the stepdaddy doesn't have money for distributing the grains to the poor family members of the employer.


Hunger list of the fatboy is long- Rs 40000 crore worth of loans outstanding, including Rs 12000crores in working capital loans, expenditure of Rs63 crore for every Rs 50 crore earned. Net Loss of Rs 5500 crore in 2009-10. And when the daddy tells it to loose some weight, it just is too lazy and unwilling to shred those precious fat cells giving warmth under the belly.


The godfather is thinking of a magic wand to make the fatboy leaner and meaner, having an IPO in the market, considering the heart whelming response in the recent PSU issues. Seeing the morale of Mr Praful Patel, we are also thinking of having an IPO of Kaleidoscope, encouraged by our potential investors' warm smiles in the farewell video. Atleast we will have a greater subscription than the NACIL.


But hey, next time, if you are planning to fly, try Air India. You will face some problems ( may be a lot of them) but there is light at the end of the dark tunnel ( or so we are made to believe). May be the baby will stop crying or atleast will stop 'leaking' on our shirts!

By- Rahul Bansal

The paradox of 'race', racism and sport

The word 'racism' has been tossed around the past few years in almost every sphere of life —ranging from politics, to the military and the world of sports — the term is used to excuse and disregard a whole host of sins. Sometimes acceptable, often not, charges of racism against minorities are almost very common today.

Sports signifies sportsmanship and brings about a strong feeling of unity. Sports can empower, influence and inspire millions.

There is a popular belief that sport is a merit based game - largely free from the damaging effects of racism. But the truth lies in the fact that more often or not, fortunately or unfortunately, these terms have been associated with each other for quite some time now.

The paradox of race, racism and sports, which started as a political issue some time back has now become a source of mind games for some against those players whose ancestors have a faced a life of misery with this sensitive issue. As early as 18^th century, when the Americans introduced the game of Golf and blacks were forced to serve as the “caddies” assumed their supremacy over the game and the Blacks, serving it as a statement for the world.

Sport provides enough evidence of racial and biological differences between white, black and Asian athletes.

During 1936 Berlin Olympics Games, Jesse Owens caused an uproar by winning four gold medals and thus eradicating Hitler’s ideas of “White Supremacy”. This historical incident not only led to Hitler’s failure to acknowledge the greatness of Owens but also resulted in US President Roosevelt refusal to invite Jesse to white House as he couldn’t afford to offend conservative voters by being seen with Owens who was by then one of the most famous black sports people. He even had to stay and eat in ‘black-only’ hotels when they travelled. The few ‘white-only’ hotels that let the African American athletes stay made them use the back door instead of the stairs and the elevator.

Racism in Sport is a problem which is manifest around the world. It has led to a wide range of controversial incidents which have been reported in the media.

Dean Jones, the former Australia Test batsman turned TV commentator, was sacked in 2006 by his employers, Ten Sports, for calling South African cricketer Hashim Amla a 'terrorist' on live television. In a twist to the controversy, Jones said that his remark was not directed at Amla but to his South African teammate Nicky Boje.

Broadcaster Kelly Tilghman was suspended from The Golf Channel after joking about Tiger Woods being "lynched in a back alley" during final round coverage of the Mercedes-Benz Championship.

People might just have a perception that racism is prevalent only in sports where Western countries seem to dominate but the facts contradict this argument. It is as prevalent in other sports like cricket, golf and athletics.

Racism is also seen as something that comes with the cultural background of the sportsperson. Formula One driver Lewis Hamilton was jeered by the crowds wearing blackface and chanting nasty comments at him in Spain, a country known for its racism intolerance.

Some movies like Goal and Bend It Like Beckham have emphasized the extent of racism in sports. Derogatory terms are generally used to entice players resulting in a number of mishaps on the field. Agitated and offended players often get engulfed into a brawl resulting in a much affected match.

The governing bodies of some sports have implemented specific policies to control racism however in some countries and competitions racism in sport continues to be a significant human rights issue.

The scenario of the Sports industry is under going a much awaited transformation. A perfect example to support this line of thought is IPL that is taking place every year. Players from various backgrounds come together for only one cause, and that is to win the IPL trophy. These matches broke all notions of sports and racism that had crippled the minds of players and audiences for so many years. Pakistani player cheered for their Indian teammate while the Australians backed up their English counterparts. The matches enabled the world to be concised to something as small as the “Kolkata Knight Rider or “The Delhi Daredevils”

The just concluded Football World Cup in South Africa provided an opportunity both to take a fresh look at the issue of racism in sport, and to enhance sport's tremendous potential to undermine racism, xenophobia9racial intolerance) and similar forms of intolerance in wider society.

In many sporting nations across the world, a sport is akin to a religion. People who can’t understand each other due to linguistic differences still share a love for the same sport. It is for this reason that the fight against racism must triumph, that the love for sport doesn’t diminish.

-By:Rishabh Kant

The story of Low Interest Rates in Japan-"Cheap Money"

Japan is a land of savers. The high rate of savings rate is largely attributed to the demographic trends in the economy-the Japanese population is aging rapidly & as older people have a lesser propensity to consume-they tend to spend less of their income.

The period 1991-2000 is termed as the "Lost Decade" in the history of Japanese economy. It was considered to be a period of stagnant growth because the Japanese economy was bearing the after-effects of the speculation bubble of late 1980's.

So, the early 1990's saw-the high savings rate coupled with a slow economy. The slowing down of the economy increased the level of job insecurity in a country where citizens were used to lifetime employment. To ensure they have enough money in their hands to meet contingencies-the savings rate increased even more which drove down borrowing. All these factors led to the presence of "cheap money"- that is loan available at unbelievably low interest rates-with short term borrowing often below even 1%.

Due to sharp difference interest rates offered by Japanese bank & a U.S. bank (say), the U.S. investors took advantage of the cheap interest rates by investing their money in Japan & converting them into dollars later. But all this involved a lot of gamble! If the yen appreciated in value more than the interest rate advantage of borrowing the yen, the U.S. investor would actually LOSE money. This happened during the time when sub-prime crisis was at its peak (2007-2008) & there was declining interest rates in the U.S economy.This period saw the fall in dollar relative to the yen and many investors lost their money due to this.

Indeed, if we were to strictly follow the theory taught in the books of international finance-low interest rates will be offset by anticipated appreciation while high interest rates will be offset by anticipated depreciation.


Another interesting thing to note is the difference in the savings & consumption habits of a Japanese and an American. They are extremely opposite-poles apart..! The Japanese like to save & the Americans like to live for today-& consume. The age of consumerism without doubt haunts the American economy.


-Tejas Singh

Still a Long Way to Go for China to attain Financial Liberalization...

What is Financial Liberalization

Financial Liberalization is the process of breaking away from a state of financial repression (which is commonly associated with govt. fixing of interest rates to its adverse consequences on the financial sector as well as on the country's economy). So Financial Liberalization is freeing interest rates, reducing reserve requirements to eliminate the directed credit schemes, while stabilizing the price level. But it is a narrow definition, an obsolete one.

Now, Financial Liberalization also involves easing of portfolio restrictions on banks, changes in the ownership of banks, encouraging competition among banks, integration of domestic entities to international markets and changes in the monetary policy. It includes a freely functioning of foreign exchange markets and eliminating restrictions on current payments and transfers.

What is the state of Banking System in China

(We will be limiting ourselves to the banking system in China after 1949 when the present govt. of People's Republic of China (PRC) came into power.)

Rapid nationalization and consolidation of Chinese banks took place in the initial years of PRC taking over and banking sector was the first sector to be completely socialized. However during the 1980's, banking system expanded and diversified to support reforms. First Stock Exchanges were opened in 1986 which were although small in size of operations like the Shanghai Stock Exchange.

Now lately, Chinese banks are functioning more like banks than before. China's banking system has remained in the government's hands even though banks have gained more autonomy. The People's Bank of China (PBOC) is China's central bank which formulates and regulates its monetary policy. PBOC has full autonomy in applying the monetary instruments like setting interest rates for commercial banks. China Banking Regulatory Commission (CBRC) took over the supervisory role from PBOC in 2003.

The Big Four

There are four mammoth government owned banks in China controlling majority of the money in the financial system of China.

1-      The Industrial and Commercial Bank of China (CBC) is the largest bank in China.

2-      The Bank of China (BOC) specializes in foreign exchange transactions of trade finance.

3-      China Construction Bank specializing in medium to long term credit for long term specialized projects like infrastructure and housing.

4-      The Agricultural Bank of China (ABC) specializes in providing funds to China's agricultural sector and offers banking services to farmers and other rural institutions.

In 1995, the operations of the ‘big four’ were commercialized. These are the first tier banks.

There are also second tier banks in China which are having much better asset quality and profit base. These were supposed to be run by private players but even now, major shareholders of these banks are local governments, and state owned and State controlled enterprises.

There are also more than 200 foreign banking institutions in China but they only play a limited role. Throughout the history of PRC, banking system has exerted close control over the finance and money supply.

Firstly, the interest rates for Chinese banks as well as foreign banks holding the deposits of Chinese citizens are regulated. But from 148 categories of interest rates, only 34 categories now reside under the regulation of the govt. The interest rates for rest are simplified or market driven.

Secondly, at the present indirect financing remains the main channel of financing for business companies. It implies that the stock markets have a very limited and highly regulated role, in case companies want to raise money, where companies (firms) can directly borrow from the public (households). Majorly, they will have to access banks which have all the deposits from general public and borrow the money. Due to this, assets of the banking sector are above 80% of the total assets of the entire financial sector. The BIG FOUR accounted for more than 61% of the loans. Second tier banks have assets somewhere around 14% of the total.

Major Restriction - All govt. departments, publicly and collectively owned economic units and social, political, military and educational organizations were required to hold their financial balances as bank deposits. They were also instructed to keep just enough cash to meet daily expenses. Payments for goods and services exchanged by economic units were only done through banks. “This helped to minimize the need for currency and minimize black money”, is what they say. It meant that besides one’s petty expenses, all other monetary transactions were to be done through banks. Considering that the online banking has just been introduced in China in August, 2010, one could imagine how restrictive and harassing this regulation has been for the Chinese corporations and institutions.

China is slowly de-regulating its banking system to keep pace with the rapid development it is encountering in the past decades. But there is still a long way to go for PRC to become financially liberal and stimulate savings and investments. The sequence of reforms, as in China national policy, is to liberalize the interest rate of foreign currency before that of domestic currency, lending before deposit. Large amount and long term before small amount and short term. As the first step, PBOC liberalized the interest rates for foreign currency loans and large deposits but the interest rates for savings deposits and loans in local currency will still take a long time before being liberalized.

There are still many weaknesses in the regulatory and legal system of China. For eg. there is no legal code to handle bankruptcy of financial institutions nor any regulations governing electronic transactions etc. Beside low capital base of asset quality, banks in China also suffer from poor corporate governance and lack of adequate risk management skill.

I recently saw news on the net that – Chains To Launch New Internet Banking System on August 30, 2010. It will allow depositors to check their separate bank accounts information and make "real-time" inter-bank transfers at one place. It’s mainly online banking system introduced very late in a booming economy hindering growth of commerce. Well.. better late than never.

By- Rahul Bansal
A sincere thanks to Amrita Ma'am for helping me.

Capitalism is a flawed system but other systems are much worse...

If perfection were really an available option, the choice of economic and political system would be irrelevant. In an imperfect world, with limited resources, [the basic problem of economics-scarcity!], the choice is not between capitalism and socialism but imperfect capitalism and imperfect socialism. Note that no country can be purely capitalistic or purely socialistic in nature. [See Notes at the end of the article if you want to know what exactly capitalism, socialism & communism mean]

Despite all its faults, if we were to closely observe the disordered picture of economic progress that we have made in the 20^th & 21^st century-capitalism as the choice of economic system is the clear winner.

Indian Scenario

First let us look into the Indian scenario. Our country has been steadily becoming more capitalistic in nature over the years. In fact, capitalism accounts form 3/4^th of our GDP. A sector wise analysis substantiates this.

Crops are planted & produced in our country according to expected prices/profits. Of course, other variables matter such as rainfall, irrigation and fertilizer use. But the driving force is profits. Capitalism, therefore, defines 17 per cent of India’s GDP, namely agriculture.

Services account for 55% of GDP, if you deduct the government’s share-there is still 40% of the GDP contributed by the private sector.

Some 2/3^rd’s of the manufacturing sector/industry which accounts for 28% of GDP, is purely private. That is another 18% approximately. Moreover most PSU’s are more profit oriented than ever.

Therefore we can comfortably say that capitalism accounts for approximately 75% of our country’s GDP.

Strength of Capitalism

Strength of capitalism lies in the incentive structure mechanism that is integral in a capitalist society. A simple example would help explain why capitalism is better than socialism.

Suppose, there are 4 students in a class- Rahul, Vishal, Aakriti & Tejas. They are awarded grades according to their performance.

The grades awarded were: Aakriti: “A”, Rahul: “B”, Vishal: “C”, Tejas: “D”

According to new rules, the college authorities decide that each student shall be given the same grade i.e. “C”. The new move de-motivates high performers like Aakriti and Rahul as they don’t have any incentive to perform better. Lack of incentive mechanism reduces everyone’s performance and efforts as they know irrespective of how they perform; they are going to get the same grade. Anyone who complained about the new system was chucked out of the chool or suffered severe punishment.

The earlier performance based incentive mechanism represents capitalism in real life, while the new system stands for socialism.

The case of Soviet Union and China-Transition from Socialism/Communism to Capitalism

Prior to 1991, the soviet economy was the second largest in the world, but during its last years as USSR, it suffered huge budget deficits and severe shortage of food, which ultimately resulted in its collapse.

From 1949-1978 China was a soviet style planned economy, during the Era of Mao’s regime. After the death of Mao Zedong, Deng Xiaoping began to reform the economy and transformed into market oriented economy-this started from 1978. The rest as they say is history-China’s meteoric rise as an economic powerhouse pulled millions out of poverty and its economic muscle is only next to U.S.

Even Fidel Castro in a recent interview has admitted that the Communist model has failed in Cuba!

SOCIALISM-The Big Lie of the 20^th Century?

Many term socialism as the big lie of 20^th Century. The strength of capitalism over socialism can be attributed to basically 2 reasons:

(a)Profits & Losses (b) Prices determined by Market Forces

Profits and Losses: In a centrally planned economy there is no way to accurately determine the success or failure of various programs. Which programs should be expanded or which should be contracted/terminated? –cannot be determined in a socialist economy.

In capitalism, since the firms operate with profit motive, there is greater efficiency and competitiveness to deliver superior customer service. Take for example: the telecom services sector in India,there are numerous competitive players in the market like Airtel, Vodafone, Reliance, Tata etc. offering so many different schemes to woo the Indian mobile phone user.

Prices determined by market forces: Capitalism ensures that market prices transmit information about relative scarcity and then efficiently co-ordinates economic activity.

Example: Take the example of OPEC oil crisis of 1970’s. OPEC countries restricted the supply of oil, hence the oil prices increased drastically. Consumers started driving less, car-pooling more, and started using public transportation for commuting. Producers in turn got the incentive of exploring and developing alternative fuels of energy resources.

In Socialism, since price of commodities are set by the government, they are either too high or too low- [in most cases] which leads to constant shortages or surpluses. The commodity prices do not change with the market forces of demand and supply which leads to problems.

Not all is right with Capitalism

Ill effects of capitalism are not due to capitalism but due to corruption of capitalism. There are numerous examples- right from Enron, WorldCom, Satyam to the recent BP oil disaster.

Obsession with the “bottom line” means that the broader concerns of stakeholders are sacrificed for the narrower interests of shareholders.

What we don’t need is “Crony Capitalism” where success of a business is dependent on favoritism-shown by ruling government in the form of tax breaks, government grants and other incentives. Take for example: the recent Vedanta controversy-if Anil Aggarwal had managed to strike a deal with the government for expanding its operations in tribal-occupied Orrisa through favoritism shown by the government-it would have been an example of crony capitalism. {But we must commend the firm stance taken by Jairam Ramesh, the environment minister and PM Manmohan Singh against the issue}

We need Sustainable Capitalism: is a new brand of capitalism which takes into account the long term view includes socio economic development and environmental sustainability.

Fall of Lehman Brothers and the Financial Meltdown-Is Capitalism to Blame?

Contrary to the popular perception, 2008 financial crisis did not take place primarily due to the ill effects of capitalism but due to seriously flawed monetary policy put in place over 2 decades ago by former fed reserve chairman- This encouraged the era of consumerism in America-people began consuming beyond their means as credit was easily available on artificially low interest rates. It increased the risk taking propensity of the average American consumer. However, one should note, that the seriously flawed monetary policy was the primary reason, not the only reason behind the financial collapse.

If Keynesian economics were to work, the current global meltdown would be shallow and short lived-the massive infusion of stimulus capital would have turned around the US economy in a short time. [Keynesian economics-advocated the intervention of central banks via fiscal and monetary policy to undo balances]

But U.S. economy is still deep down a rabbit hole-U.S. will take at least a couple of years to fully recover.

Lessons to be learnt: Many economists worldwide are preaching a new brand of Capitalism called “Controlled Capitalism”, in controlled capitalism-we need limited but controlled interventions in the free market, leaving to self regulate for most market.

From the above discussion we conclude that imperfect capitalism which is sustainable and controlled is the best choice amongst all other systems.

Note:

To put it in simple terms:

Capitalism means the economy in the hands of private sector

Socialism means the economy in the hands of public i.e. Government

Communism: is a broader term than socialism, it includes both the economy and the political system.

However the objectives of socialism and communism are largely the same.

The only exception is China-which has a Communist Government and a imperfect capitalist form of economy-

• Political System: China has a one party system i.e. the People’s Party of China (PPC) controlling the political system. China’s media is highly controlled-In a report released by “Reports without Borders” in 2005-China ranks 159^th out of 167^th in its annual freedom world index. Censorship of Media is a common practice to silence criticism about the government.


• Economy: After the era of Mao Zedong came to an end mainly from 1949-1978, China has largely been a capitalist economy and has become an economic powerhouse over three decades of market oriented reforms and becoming a more globalised and liberalized economy.

I leave you with this a deep thought- a quote by Winston Churchill
"The inherent vice of Capitalism is the unequal sharing of blessings, the inherent blessing of socialism is the equal sharing of misery!"

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By: Tejas Singh

A Case Worth a Study- BRITANNIA Industries

Chairman - Mr. Nusli Neville Wadia

Managing Director- Ms. Vinita Bali

The story of one of India's favourite brands reads almost like a fairy tale. Once upon a time, in 1892 to be precise, a biscuit company was started in a nondescript house in Calcutta (now Kolkata) with an initial investment of Rs. 295. The company we all know as Britannia today.

The beginnings might have been humble-the dreams were anything but. By 1910, with the advent of electricity, Britannia mechanised its operations, and in 1921, it became the first company east of the Suez Canal to use imported gas ovens. Britannia's business was flourishing. But, more importantly, Britannia was acquiring a reputation for quality and value. As a result, during the tragic World War II, the Government reposed its trust in Britannia by contracting it to supply large quantities of "service biscuits" to the armed forces.

As time moved on, the biscuit market continued to grow… and Britannia grew along with it. In 1975, the Britannia Biscuit Company took over the distribution of biscuits from Parry's who till now distributed Britannia biscuits in India. In the subsequent public issue of 1978, Indian shareholding crossed 60%, firmly establishing the Indianness of the firm. The following year, Britannia Biscuit Company was re-christened Britannia Industries Limited (BIL). Four years later in 1983, it crossed the Rs. 100 crores revenue mark.

On the operations front, the company was making equally dynamic strides. In 1992, it celebrated its Platinum Jubilee. In 1997, the company unveiled its new corporate identity - "Eat Healthy, Think Better" - and made its first foray into the dairy products market. In 1999, the "Britannia Khao, World Cup Jao" promotion further fortified the affinity consumers had with 'Brand Britannia'.

Britannia strode into the 21st Century as one of India's biggest brands and the pre-eminent food brand of the country. It was equally recognised for its innovative approach to products and marketing: the Lagaan Match was voted India's most successful promotional activity of the year 2001 while the delicious Britannia 50-50 Maska-Chaska became India's most successful product launch. In 2002, Britannia's New Business Division formed a joint venture with Fonterra, the world's second largest Dairy Company, and Britannia New Zealand Foods Pvt. Ltd. was born. In recognition of its vision and accelerating graph, Forbes Global rated Britannia 'One amongst the Top 200 Small Companies of the World', and The Economic Times pegged Britannia India's 2nd Most Trusted Brand.

Today, more than a century after those tentative first steps, Britannia's fairy tale is not only going strong but blazing new standards, and that miniscule initial investment has grown by leaps and bounds to crores of rupees in wealth for Britannia's shareholders. The company's offerings are spread across the spectrum with products ranging from the healthy and economical Tiger biscuits to the more lifestyle-oriented Milkman Cheese. Having succeeded in garnering the trust of almost one-third of India's one billion population and a strong management at the helm means Britannia will continue to dream big on its path of innovation and quality. And millions of consumers will savour the results, happily ever after.

 

MILESTONES

1892	The Genesis - Britannia established with an investment of Rs. 295 in Kolkata
1910	Advent of electricity sees operations mechanised
1921	Imported machinery introduced; Britannia becomes the first company East of the Suez to use gas ovens
1939 - 44	Sales rise exponentially to Rs.16,27,202 in 1939 During 1944 sales ramp up by more than eight times to reach Rs.1.36 crore
1975	Britannia Biscuit Company takes over biscuit distribution from Parry's
1978	Public issue - Indian shareholding crosses 60%
1979	Re-christened Britannia Industries Ltd. (BIL)
1983	Sales cross Rs.100 crore
1992	BIL celebrates its Platinum Jubilee
1993	Wadia Group acquires stake in ABIL, UK and becomes an equal partner with Groupe Danone in BIL
1994	Volumes cross 1,00,000 tons of biscuits
1997	Re-birth - new corporate identity 'Eat Healthy, Think Better' leads to new mission: 'Make every third Indian a Britannia consumer' BIL enters the dairy products market
1999	"Britannia Khao World Cup Jao" - a major success! Profit up by 37%
2000	Forbes Global Ranking - Britannia among Top 300 small companies
2001	BIL ranked one of India's biggest brands No.1 food brand of the country Britannia Lagaan Match: India's most successful promotional activity of the year Maska Chaska: India's most successful FMCG launch
2002	BIL launches joint venture with Fonterra, the world's second largest dairy company Britannia New Zealand Foods Pvt. Ltd. is born Rated as 'One amongst the Top 200 Small Companies of the World' by Forbes Global Economic Times ranks BIL India's 2nd Most Trusted Brand Pure Magic -Winner of the Worldstar, Asiastar and Indiastar award for packaging
2003	'Treat Duet'- most successful launch of the year Britannia Khao World Cup Jao rocks the consumer lives yet again
2004	Britannia accorded the status of being a 'Superbrand' Volumes cross 3,00,000 tons of biscuits Good Day adds a new variant - Choconut - in its range
2005	Re-birth of Tiger - 'Swasth Khao, Tiger Ban Jao' becomes the popular chant! Britannia launched 'Greetings' range of premium assorted gift packs The new plant in Uttaranchal, commissioned ahead of schedule. The launch of yet another exciting snacking option - Britannia 50-50 Pepper Chakkar
2007	Britannia industries formed a joint venture with the Khimji Ramdas Group and acquired a 70 percent beneficial state in the Dubai-based Strategic Foods International Co. LLC and  65.4% in the Oman-based Al Sallan Food Industries Co. SAOG.
2008	Britannia launched Iron fortified 'Tiger Banana' biscuits, 'Good Day Classic Cookies',  Low Fat Dahi and renovated 'MarieGold'.

 Source- Powerbrands