Wednesday, July 25, 2012

Back to The Golden 100s!

In Order to Fight Illegal cash Transaction, The Government should Immediately ban Rs.1000 and Rs.500 Currency Notes

Cash transactions are the most difficult ones to trace. And this is the most important reason behind the success of hawala or money laundering. Today, hawala is not only used to transfer funds from one place to other to avoid taxes, but is also widely used to fund a gamut of illegal activities ranging from a variety of small crimes to even terror funding.

Today, hawala is executed through multiple routes; be it through postal deliveries, rail transport, water transport or air transport. However, with the introduction of Rs.1000 currency notes, both the volume and value of hawala transactions have increased exponentially.

In order to reduce this illegal practice, it’s important for the government to immediately ban Rs.500 and Rs.1000 notes from normal circulation. Most of the countries across the world have 100 as their highest denominations in currency notes. Even the United States retired their currency notes of $500, $1000, $5000 and $10,000 way back in 1969 and today have $100 as their highest valued currency.

In the case of India where the inflation doesn’t allow things to be purchased at low price (in rupee terms), one does require higher value currency notes. But more than 90% of the people in India rarely use the bigger bills, and the 3-4% highly fortunate people rely on plastic money for high value transactions. Thus, banning of these notes will largely affect those who are into illegal trade or tax evasions. In any case, high volume transactions should never be undertaken through the cash route.

The government should concurrently give an event window for those with black money to deposit the same back with the tax authorities on payment of a pre-decided fine amount.


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Tuesday, July 24, 2012

Stratagem-INTERNATIONAL-MCDONALD’S VS. SUBWAY: IS BIGGER BETTER?

Despite Losing out to Rival Subway on The Number Global Outlets, McDonald’s still Scores on Key Business Metrics and is Easily Winning The Palate game in key Emerging markets. B&E gets through to Subway and Global Analysts for an Insider into The Famed Rivalry. 

But McDonald’s clearly scores with a more winnable business model that aims to foster trust among franchisees. Analysts like Equity Research Vice President and Restaurants Analyst Steve West from Stifel Nicolaus tells B&E, “McDonald’s isn’t ‘worried’ about any competitor. They note what the competition is doing, but they focus more on looking ahead and executing their own growth strategy.” But there’s another key difference here too. While Subway works entirely on a franchise model (there’re no company-owned restaurants), McDonald’s owns 20% of its restaurants. This enables McDonald’s to create newer benchmarks in best practices and to replicate these best practices to all its franchisees globally, which helps to drive innovation, menu expansion, management practices, and better quality control. So far, both models have worked – but the Mac has worked clearly better. The number of customers coming to McDonald’s is constantly increasing, with over 62 million people trying out its products daily. The average spend per customer visit at McDonald’s restaurant has also increased from $2.79 in 2006 to $3.28 in 2010, and could rise further due to increasing spend from emerging markets (McDonald’s is planning to open at 490 new locations across Asia, the Middle East, Africa and Australia, a figure equal to its rest of the world new location plans). The chain forecasts that its expansion effort could drive sales growth up by 5% and income up by 7%. And they’re not even looking at Subway while telling that. No kidding...

“In 2010, we Sold 2.5 billion Sandwiches Globally”
Les Winograd, Public Relations Specialist, Subway

B&E: Congrats on Subway becoming the largest QSR chain globally. What does this signify for the food services industry in general and Subway in particular? Les Winograd (LW): We are proud of the efforts of everyone on Team Subway for making us one of the largest and most recognisable brands in the world. Becoming the largest QSR signifies that the franchise model works well. There are many people out there looking for career opportunities who are very interested in joining an established team and a well recognised brand. And particularly at Subway, it confirms that our franchisees not only are hard working and dedicated, but that they also strongly believe in the brand, the products and their ability to grow within the Subway system. Without the franchisees, the Subway chain would not be where it is today.

B&E: What will be your next challenge?
LW: The Subway team has a history of setting and reaching goals. While we are continuously focused on providing franchise opportunities and great tasting food at a good value with exceptional service, our short term goal for 2011 is to open more than 2,000 new locations around the world.

B&E: In terms of revenue and profits McDonald’s is still the leader. How do you plan to close this revenue gap?
LW: Ours are two different business models. While it is exciting to have more locations than anyone else in the QSR industry, our focus has been and remains to offer great tasting products to consumers at a good value and to work with our franchisees to provide a support system that will help them run a successful business. Our growth is a result of our ability to offer franchisees the opportunity to own and operate their own businesses that follow a proven and simple operational model, coupled with all the hard work, dedication and support provided by our team members around the world. Out goal has remained the same as it was 46 years ago: to provide a delicious sandwich, at a great value, in a comfortable environment with exceptional customer service.

B&E: Where does Subway see itself in the next five years?
LW: Our largest area of growth and opportunity today is in the International market. We have five regional offices and numerous country offices equipped to attract franchisees and provide support for their stores. We have a very strong international team in place that know the territories. Our success is on two levels wherever we go. First our business model attracts people with an entrepreneurial spirit - people who want to succeed at owning and operating their own business. And we have a strong support staff in place to help franchisees reach their goals. The second is the product itself. At Subway restaurants we provide a choice for people. And with that choice are a number of healthier options made exactly the way you want them.

B&E: What is the average footfall per day in Subway restaurants globally?
LW: Unfortunately, we cannot provide statistical information on customer visits. However, we can tell you that in 2010 we sold approximately 2.5 billion sandwiches around the globe.

B&E: What will be the winning business model for QSRs in the future, takeaways or the proper dine-in experience?
LW: It is not proper for us to speculate as to what will work for others, however, we feel that our model, which includes 100% franchised locations, food customised to order right in front of each customer, minimal equipment and space requirements, flexibility in floor plans and a focus on service, value and healthier options, is what worked well for us.


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Friday, July 20, 2012

It’s a Dry World, Literally

Desertification of World’s arable land poses a Great Threat to Human Civilization, and Coordinated Action is a must

By the year 1994, when the UN General Assembly declared ‘June 17’ as the “World Day to Combat Desertification and Drought,” one-third of the earth was converted into desert. Shockingly, desertification of the world’s arable land since decades has been slowly and steadily threatening and endangering livelihoods of millions of inhabitants, benefitted by relative ignominy in the minds of global leadership. It first came to public notice during 1968-1974, when the great Sahelian drought and famine in Africa killed 2,00,000 people and millions of their animals. This forced UN to initiate actions to combat desertification, particularly in Africa.

UN responded and addressed the issue of desertification of arable land on a global scale 34 years ago in 1977, by organising the first international conference in Nairobi, Kenya to promote public awareness and the implementation of the UN Convention to Combat Desertification. Since then, efforts have been taken up globally as well as by nations individually, yet fertile dry lands have been continuously becoming deserts at an alarming clip.

The United Nations Environment Programme (UNEP) has indicated a serious threat from desertification. Horrifyingly, according to the US Bureau of Land Management study, over 40% of continental American land is at risk of desertification. Over the last five decades, over 1.2 billion hectares of land – equivalent to the area of China and India combined, has experienced soil deterioration in developing countries. Another research by the journal of Life Cycle Assessment (LCA) that measured the degradation of the planet’s soil concluded that 38% of the world is made up of arid regions at risk of desertification. What is more shocking is that more than 20,000 square miles of land worldwide is getting converted into desert land annually.

This poses the greatest danger to inhabitants as well as to ecology. UNEP has estimated that the livelihoods of over 1 billion people are in danger in over 100 countries, due to arable lands transforming into deserts. Gradual desertification is forcing thousands of people from Africa to migrate to Europe. Researches show that a prime reason for Mexicans to migrate to US is that their dry lands are fast turning into deserts. Over 16.66% of the population of Mali and Burkina Faso has already been displaced due to desertification. Moreover, the economic impact is huge. As per UNEP, it costs the world around $42 billion every year. Desertification in the poorest continent Africa costs some $9 billion per year and a whopping $21 billion per year in Asia. It costs some $5 billion in North America, $3 billion each in Australia & South America and $1 billion in Europe.
 

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Thursday, July 19, 2012

Rise now, but Shine Later!

After Hitting The Bottom in 2009, The Global Aviation Industry finally retuned to black in 2010 across all Continents. But with fuel Prices Posing a threat, can The Industry Sustain it’s Profitability in 2011?

“Crisis is part of the airline industry’s genetic profile. And still it survives, more or less intact,” stated Peter Harbison, Executive Chairman, Centre for Asia Pacific Aviation (CAPA) when the industry body released its outlook for the global aviation industry for 2009 titled, “A Year of Great Opportunities. Don’t waste it!”. But little did Harbison or CAPA know that the series of events thereafter would ensure that the industry dips down to a historic low, in terms of demand. While the man made disaster (read global financial melt down) started it all, nature wasn’t too kind to the aviators either. Volcanic ash to heavy snow-fall, every event took its toll on the industry. As per calculations put forward by International Air Transport Association (IATA), the global industry lost a mind-boggling $81 billion in terms of revenue in 2009. However, with green shoots of recovery (from recession) germinating across the world, the aviators have managed to turn the demand for mobility into unexpected profits. Though the growth is based on a lower base of 2009, it’s certainly a welcome trend reversal for the industry.

Estimates suggest that in 2010, Asia Pacific carriers recorded a 9% year-on-year increase in passenger demand, while European carriers grew by 5.1%, North American carriers by 7.4%, Middle Eastern airlines by 17.8% (on back of a 13.2% capacity increase), Latin American airlines 8.2% (despite a 1.1% decrease in December) and African Airlines by 12.9%. What makes this growth more worthwhile is that it has not only brought the financial statements of most of the carriers back in black, but has also helped them outperform the market benchmarks with a 28% rise (IATA data). And most importantly, they have achieved this despite sharp rise in fuel prices. But the salient question remains, can the sector manage to sustain the positive bottom-line that it has witnessed after a lot of struggle and hardship?

Before getting into the possibilities of bottom-line sustainability, one first needs to recognise what could be the challenges for the industry in 2011. The airline business is highly exposed to unanticipated shocks and air travel demand fluctuates with economic cycles and environmental factors. At the same time, travellers’ expectations are changing faster than ever, calling for improvements in business models. As such, aviation is an industry, which yields one of the lowest returns on equity even in the best of times.

Apart from economic conditions, government regulations, unionisation & infrastructural problems, the other biggest near term risk looming large is on the oil price front. On the back of recovering global demand and thus economy, fuel prices have again started heading north in leaps and bounds. Considering aviation fuel price, the IATA index shows a 33.1% rise in the same over the past 12 months, and it is expected to escalate further. Airlines are planning to levy additional charges to make up for the loss from high fuel prices, but there is no doubt that this phenomenon is going to hurt the operations of air carriers; for free fares, if not for anything else.


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Wednesday, July 18, 2012

Are Poor Allowed to File Cases Free?

Monetary aid for Legal Cases needs to be Urgently taken to More People

Chief Justice A. P. Shah once said that “it would take the court approximately 466 years” to clear pending criminal cases alone! The number of cases pending in our country was over a staggering 31.1 million as of June 30, 2009; including 27 million pending in subordinate courts, 4 million in High Courts and 50,659 cases in the Supreme Court. A large section of India’s poor is involved in many such cases in the HC and SC. But legal expenditures incurred in fighting such cases have long shattered the ceiling and are only moving upwards. This makes it imperative that the underprivileged multitudes be provided with more legal and monetary aid.

While the Supreme Court has such provisions under the National Legal services Authority (NALSA) established in 1987 – where the lower income groups and weaker sections of the society can fight cases free of cost – this service is applicable only to people whose annual income is less than Rs.50,000. It is provided to industrial workmen, beggars, disabled people, victims of natural calamities, SC/ST, et al. For those who do not fall under NALSA – and whose sum of dispute is below Rs.20, 000 – a minimum court fee of Rs.250 is charged. For every increase of Rs.1,000, an added 0.5% is charged as court fee (for example, the overall revenue from court-fees for 2007-08, 2008-09 and 2009-10 in SC amounted to Rs.11.9 million, Rs.128 million and Rs.133 million respectively. The budgetary allocation to the SC in 2009 was above Rs.1 billion).

There is a definite case for taking the benefit of the NALSA service beyond its traditional target audience. It’s naive for instance, to keep Rs.50,000 as the legal dividing line for assistance. For a family of four with one earning member, even a Rs.200,000 annual income is in reality equivalent to being as poor, yet not getting the NALSA service.

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