Nokia falls into the arms of Microsoft

Because of the variety of topics (also resembling the chair-structure of the
Export-oriented Management programme), applicants receive 2 texts with
different focus areas, and select the one that they prefer to discuss. We
want to give applicants a good chance that they get a text they want to
work with. A selection of texts used for the application process (admission
of the 2011/12 cohort) can be found below; the articles might be a good
read, actually. Enjoy!
Nokia falls into the arms of
Microsoft
Feb 11th 2011, 9:57 by The Economist online
IT LOOKS, in a way, like a stealth takeover. In September Stephen Elop,
one of Microsoft's leading lights, becomes boss of Nokia, a troubled
Finnish handset-maker. Five months later, Mr Elop will make Windows
Phone, Microsoft's operating system for smartphones, its "primary
platform" for such devices. Yet this is only one of the radical decisions
Nokia's new boss announced on February 11th, shortly after sending his
staff an apocalyptic memo warning them that they were standing on a
burning oil platform and risked being consumed by the flames. The firm
will henceforth have just two distinct businesses, smartphones and massmarket
mobiles, and get a new operational structure and leadership team,
more of whom will come from outside Finland.
This is an astonishing upheaval for what was once one of Europe‟s hottest
firms. Nokia‟s problems are symptomatic for much of Europe‟s mobilephone
industry. In the 1990s Europe appeared to have beaten even
Silicon Valley in mobile technology. European telecoms firms had settled
on a single standard for mobile phones. Handsets became affordable,

Europe was the biggest market for them and the old continent‟s standard
took over the world, with Europe leading the way with constant
innovation.
This changed with the emergence of smartphones, in particular Apple‟s
iPhone in 2007. Nokia still ships a third of all handsets, but Apple pulls in
more than half of the profits, despite having a market share of barely 4%.
More Americans now have smartphones than Europeans.
Nokia, along with the rest of Europe‟s mobile industry, is also being
squeezed in both simple handsets and networking equipment. Cheap
mobile phones based on chips from MediaTek, a company based in
Taiwan, are increasingly popular in developing countries. This system and
its users now account for more than one-third of the phones sold globally.
At its most fundamental, this shift is the result of Moore‟s Law, which
holds that microprocessors double in computing power every 18 months.
The first generations of modern mobile phones were purely devices for
conversation and text messages. The money lay in designing desirable
handsets, manufacturing them cheaply and distributing them widely. This
played to European strengths. The necessary skills overlapped most of all
in Finland, which explains why Nokia, a company that grew up producing
rubber boots and paper, could become the world leader in handsets.
Nowadays the focus is on software and data services. This is where
America, in particular Silicon Valley, is hard to beat. Companies like Apple
and Google know how to build overarching technology platforms. And the
Valley boasts an unparalleled ecosystem of entrepreneurs, venture
capitalists and software developers who regularly spawn innovative
services.

The perils of dallying
Nokia realised its world was changing and was working on a touch-screen
phone much like the iPhone as early as 2004. Realising the importance of
mobile services, it launched Ovi, an online storefront for such things in
2007, a year before Apple opened its highly successful App Store.
But turning a Finnish hardware-maker into a provider of software and
services is no easy undertaking. Nokia dallied and lost the initiative.
Historically, Nokia has been a highly efficient manufacturing and logistics
machine capable of churning out a dozen handsets a second and selling
them all over the world. Planning was long-term and new devices were
developed by separate teams, sometimes competing with each other—the
opposite of what is needed in software, where there is a premium on
collaborating and doing things quickly.
Teaming up with Microsoft has its benefits, says Ben Wood of CCS Insight,
another market-research firm. Given his background, Mr Elop could surely
make such a partnership work. And it could help Nokia make a comeback
in America, where its market share is in the low single digits. On the other
hand, argues Mr Wood, Windows Phone 7 has not been a huge success so
far
Still, the partnership is good news for Microsoft, which has struggled to
create momentum behind Windows Phone 7 despite a huge investment in
development and marketing. Both firms will now focus on establishing the
platform as an alternative to Android and the iPhone.
QUESTION 1: Please summarise the article so that you can explain the main points in
2-3 minutes.
QUESTION 2: Why are more and more people switching to smartphones?
QUESTION 3: Nokia is also producing a range of smartphones. Why is
Nokia still losing ground to Apple and other manufacturers?

Who needs paper?
A new digital paper tests a new
model for news
Rupert Murdoch's iPad Daily
Feb 3rd 2011 | from ECONOMIST PRINT EDITION
EIGHT years ago Apple launched iTunes, a digital store selling music
singles for 99 cents apiece. For record companies ravaged by piracy, it
seemed like a good deal. Only later did many come to regret allowing
another company to set retail prices and to get between them and their
customers. On February 2nd Apple and Rupert Murdoch‟s News
Corporation launched the Daily, an iPad newspaper that will cost 99 cents
a week. It will not dominate the digital news market the way iTunes came
to rule the digital music market. But it sets a disruptive precedent or two.
The Daily is a mixture of the newfangled and the old-fashioned. It has
whizzy graphics, including video and “360-degree” pictures. Sport fans
can receive the twitterings of their favourite players. Unlike most
websites, though, the Daily is available only in America. It features
outmoded things such as editorials and paid reporters. Although it can be
updated to take in breaking news, it is primarily a daily, not an hourly.
In one sense it is a trailblazer. The Daily is the first product to offer
recurring subscriptions through Apple‟s store. So far most publishers have
been obliged to sell single issues of newspapers and magazines on the
iPad. As a result, sales are erratic: Wired, a technology magazine with a
beautiful app, sold 100,000 digital copies last June but just 24,400 in
December. The Daily‟s sales model is better than that. But not much
better.
There is the price, for one thing. Ken Doctor, the author of
“Newsonomics”, reckons many people will be willing to pay 99 cents a
week for news. That “what-the-hell price” could become a benchmark. The
Daily is thinly staffed and will cost less than half a million dollars a week
to put out. Many established newspapers and magazines, including some
owned by News Corporation, want to charge considerably more than 99
cents a week. They believe the experience of reading a newspaper or
magazine on the iPad is a good substitute for the original thing, and fear
undercutting their paper products.

They have a bigger worry. In the absence of a means to sell subscriptions
through the app store, publications from People magazine to The
Economist to News Corporation‟s Wall Street Journal have deployed their
own systems for controlling access. Some sell single issues while allowing
free access to people who already pay for the paper or web product
(“existing print subscribers click here”). In effect, they are using the iPad
as a delivery system for content paid for outside Apple‟s ecosystem. That
means Apple does not take a 30% cut of sales. More important,
particularly for ad-dependent American publications, it means they can
keep tabs on subscribers.
This opportunity may be closing. In the past month Apple has advised at
least two European publishers to stop bypassing its payment system. It is
unclear whether, having set up a subscription system for the Daily, Apple
will try to force publishers to use it. As Mr Murdoch acknowledged this
week, Apple rules the tablet market. Publishers have come to wish it were
not so.
The Daily totaled $30 million to set up and will cost $500,000 to run
weekly. Subscription will be the larger part of their revenue model at first,
but they expect to be moving towards a 50/50 revenue split with ads later
in the year. Launch advertisers include HBO, Macy‟s, Paramount, Pepsi
Max, Range Rover, Verizon, and Virgin Atlantic Airways.
Murdoch expects The Daily to be on all major tablets, but says “last year,
this year and maybe next year belong to iPad.” Murdoch sees the The
Daily has a revival of quality journalism in the digital realm.
Murdoch‟s other publications, The Wall Street Journal, The Times and The
Sunday Times, have all introduced paywalls for their websites. The Daily
joins the ranks of other paid-for newspaper apps on the iPad including
Esquire, the New Yorker, Vanity Fair and Glamour.
QUESTION 1: Please summarise the article so that you can explain the main points in
2-3 minutes.
QUESTION 2: What is the role of newspapers today?
QUESTION 3: How does a newspaper generate revenue?

The abominable gas man:
How technological change and
new pipelines improve energy
security
Europe's gas pipelines
Oct 14th 2010 | from ECONOMIST PRINT EDITION
FOR years, the idea that Europe might get gas from the Caucasus and
beyond, breaking Russia‟s monopoly on east-west pipelines, seemed
fanciful. Not anymore. The leading contender, the Nabucco pipeline,
backed by the European Union, is gaining speed (see map). Last month
the project won promises of $5 billion in loans from the World Bank, the
European Investment Bank and the European Bank for Reconstruction and
Development.
Nabucco is not yet a done deal. Two big members of the consortium, RWE
of Germany and OMV of Austria, said on October 8th that they had
postponed to next year a final decision on whether to invest.
Another problem is the source of gas. At first Nabucco needs 8 billion
cubic metres (bcm) a year from Azerbaijan, but it wants a lot more to be

fully viable. Turkmenistan is the best option: it has fallen out with Russia,
thawed relations with Azerbaijan, and built a pipeline from its onshore
gasfields to the Caspian coast. Gas could continue from there either by a
pipeline across the Caspian (though Russia objects) or, more
cumbersomely, by tanker.
Nabucco is not the only party interested in Azeri gas. The authorities in
Baku continue to flirt with Russia (though any pipeline going northward
would have to cross the unstable north Caucasus). Two rival projects aim
to bring Azeri gas to southern Italy via Turkey and Greece. That would not
help gas-hungry central Europe. But the costs and politics of the Adriatic
route are simpler.
As Turkey flexes its muscles, other countries plot to bypass it. A new
scheme, the Azerbaijan-Georgia-Romania Interconnector (AGRI), aims to
use an existing trans-Caucasus pipeline, and then tankers across the Black
Sea. From the Romanian port of Constanta, it would then go through an
existing pipeline to Hungary. AGRI will not carry as much gas as
Nabucco‟s planned annual target of 38 bcm. But it is cheaper to build,
costing perhaps €1.2 billion ($1 billion), and will save on Turkish transit
fees.
For its part, Russia is continuing to push its rival South Stream project,
which would go, expensively, across the bottom of the Black Sea,
bypassing Ukraine. But crucial bits are missing. Russia‟s ill-run and debtridden
gas industry has little extra capacity. Bulgaria is still furious about
having its gas supplies cut off during the Russian-Ukrainian gas row in
January 2009. Sofia wants to lessen the country‟s energy dependence on
Russia, not increase it.
Russia may be down, but it is not out. The Nord Stream pipeline on the
Baltic seabed is being built, bringing Russian gas directly to Germany and
reducing dependence on transit countries such as Belarus and Ukraine.
Russia‟s new gas contract with Poland could tie that country to supplies
from the east until 2037.
Stealthily but successfully, the commission has been liberalising Europe‟s
gas market. A new directive makes it compulsory for all gas pipelines to
be reversible, meaning that they can be used not just for funnelling gas
into Europe, but also for moving it around the continent. That weakens
the position of monopoly suppliers such as Russia.
The most important shift, however, is not on land but at sea. The big
worries over European energy security came when the world gas market
was tight. But the price of gas has plunged, chiefly because America, now
well supplied with shale gas, has stopped importing it.
Nabucco remains important as an insurance policy, and as a sign that the
EU‟s common energy policy is more than talk. But it also looks like an

answer to a problem that technology and the market may already be
solving.
QUESTION 1: Please summarise the article so that you can explain the main
points in 2-3 minutes.
QUESTION 2: What do we need (natural) gas for?
QUESTION 3: Why is there such a strong political debate on gas supply?
The takeover of Cadbury by Kraft
seems to symbolise a hollowingout
of corporate Britain. The
truth is rather more complicated
Foreign takeovers in Britain
Mar 25th 2010 | from ECONOMIST PRINT EDITION
THE Thames Valley provides two contrasting examples of what happens
when foreign companies buy British ones. Any day now the Scottish &
Newcastle (S&N) brewery beside the M4 motorway at Reading will brew its
last barrel after more than 150 years of operation. Its closure was

announced two years ago, weeks after S&N was bought by Carlsberg, of
Denmark, and Heineken, of the Netherlands, and carved up between
them. There‟s little of Scotland, Newcastle or Berkshire left in what is now
Heineken UK, a subsidiary of a Dutch lager-maker. Heads of departments
such as marketing and product development are now in Amsterdam.
About 40km to the north, the BMW MINI factory in Oxford makes more
than 200,000 cars a year. MINI is a survivor of BMW‟s otherwise failed
attempt to turn around Britain‟s ailing Rover group in the 1990s. Whereas
the original Mini sold in large numbers but was an underpriced lossmaker,
foreign ownership and capital have made the new version a global
commercial success. Four out of five cars made in Oxford are exported;
one in six BMWs sold is a MINI. The other surviving bit of Rover, Jaguar
Land Rover, is on its third foreign owner—Tata Motors, of India—after
Ford failed to turn it round. Tata‟s first move was to proclaim a ten-year
plan to develop the two British brands; their outlook is at last looking
brighter.
Britons these days are more likely to be found crying into their beer than
celebrating successes like MINI. Cadbury, a venerable chocolate-maker, is
just the latest household name to be swallowed by foreigners after a
hostile takeover bid. Its recent purchase by Kraft Foods, an American
company, has come to illustrate a complex set of anxieties: that Britain
will lose jobs and skills, and that whereas British firms are open to
takeover, their foreign predators are often protected against becoming
prey themselves. There is something to these worries, but it is far from
clear that Britain is a net loser. Purchases go both ways—and many British
firms have found new strength under foreign owners.
For 30 years the consensus has been that Britain has more to gain than to
lose from its open embrace of globalisation. It has welcomed the presence
of foreign investors, by and large, as a vote of confidence in the country‟s
business climate. British companies have also been eager purchasers
abroad: this month Prudential, an insurer, agreed to pay $35.5 billion for
the Asian assets of once-mighty American International Group.
Repatriated earnings have flowed into British pension funds.
Britain has enjoyed a strong inflow of foreign direct investment. It has
consistently attracted more than any other European country. According
to Dealogic, a financial-information firm, foreigners have spent $1 trillion
on acquiring 5,400 British companies in the past decade. The British have
spent less on foreign firms, $750 billion, but have snapped up a larger
number, just over 6,000 (see chart).

Now Britons aren‟t so sure that they have got a good deal and fear factory
closures and job losses. As head offices close, power shifts abroad and
Britain risks becoming a “branch factory” economy. When companies need
to cut capacity, they will chop factories far from home first. Renault shut
its Belgian factory in the late 1990s, rather than close one in France;
Peugeot closed its British one a few years ago for the same reason. Kraft‟s
purchase of Cadbury has also touched this nerve. Cadbury had intended to
close its factory at Keynsham, near Bristol; Kraft said during the takeover
battle that it would keep the plant open, but then changed its mind.
The worry is not just about the quantity of jobs but also about their
quality. The moan is that high-value head-office jobs and R&D skills will
drift abroad. For Cadbury this means that as the head office in Uxbridge
yields to Kraft‟s in Illinois, British knowledge will be dissipated. Talented
Britons may have to search for work abroad if there are fewer outlets for
their skills at home. As the pool of know-how dries up, Britain will in turn
become less attractive to foreign businesses seeking to do anything more
complicated than basic work or serving the local market.
QUESTION 1: Please summarise the article so that you can explain the main points in
2-3 minutes.
QUESTION 2: Why do consumers eat chocolate?
QUESTION 3: Why are the British so unhappy about the sale of
Cadbury‟s?

Hollywood goes global
Feb 17th 2011 | LOS ANGELES | from ECONOMIST PRINT EDITION
THE film-awards season, which
reaches its tearful climax with the
Oscars next week, has long been
only loosely related to the film
business. And this year‟s awards
are less relevant than ever. The
true worth of a film is no longer
decided by the crowd that
assembles in the Kodak Theatre—
or, indeed, by any American. It is
decided by youngsters in countries
such as Russia, China and Brazil.
Hollywood has always been an
international business, but it is
becoming dramatically more so. In the past decade total box-office
spending has risen by about one-third in North America while more than
doubling elsewhere (see chart). Thanks to Harry Potter, Sherlock Holmes
and “Inception”, Warner Bros made $2.93 billion outside North America
last year, smashing the studio‟s previous record of $2.24 billion. Falling
DVD sales in America, by far the world‟s biggest home-entertainment
market, mean Hollywood is even more dependent on foreign punters.
The rising foreign tide has lifted films that were virtually written off in
America, such as “Prince of Persia” and “The Chronicles of Narnia: the
Voyage of the Dawn Treader”. Despite starring the popular Jack Black,
“Gulliver‟s Travels” had a disappointing run in North America, taking $42m
at the box office so far. But strong turnout in Russia and South Korea
helped it reach almost $150m in sales elsewhere.
The growth of the international box office is partly a result of the dollar‟s
weakness. It was also helped by “Avatar”, an eco-fantasy that made a
startling $2 billion outside North America. But three things are particularly
important: a cinema boom in the emerging world, a concerted effort by
the major studios to make films that might play well outside America and
a global marketing push to make sure they do.
Russia, with its shrinking teenage population, is an unlikely spot for a boxoffice
boom. Yet cinema-building is proceeding apace, and supply has
created demand. Last year 160m cinema tickets were sold in Russia—the
first time in recent years that sales have exceeded the country‟s
population. Plus the times are getting harder for Russian movie-makers:
This month Vladimir Putin, Russia‟s prime minister, said the government

would spend less money supporting Russian film-makers and more on
expanding the number of screens.
Growth is much quicker in China, where box-office receipts reached $1.5
billion last year. China‟s regulator has claimed that cinema screens are
going up at a rate of three per day. The government allows only 20 non-
Chinese films into the market each year, virtually guaranteeing big
audiences for those that make the cut. Punters and censors alike warm to
family films and movies that seem to reflect China‟s central place in the
world. Thus, expect long queues for “Kung Fu Panda 2” this summer.
Unfortunately, Hollywood has learned that great sales in China do not
always translate into great profits. In America distributors tend to receive
50-55% of box-office receipts. In China, where Hollywood must use a
domestic distributor, the proportion is roughly 15%. American films may
be yanked in favour of domestic ones (“Avatar” had to make way for
“Confucius” last year). The World Trade Organisation has ordered China to
reform, but few moguls expect it to.
The success of a film outside America is not purely a marketing matter. As
foreign box-office sales have become more important, the people who
manage international distribution have become more influential, weighing
in on “green-light” decisions about which films are made. The studios are
careful to seed films with actors, locations and, occasionally, languages
that are well-known in target countries. Sony cites the foreign success of
“The Green Hornet” (Taiwanese hero, Austrian-German villain) and
“Resident Evil: Afterlife” (Japanese location) as evidence of that strategy.
The growing internationalisation of the film business suits the biggest
outfits, and not just because they can afford explosions. The major
studios‟ power lies not so much in their ability to make good films—plenty
of smaller operations can do that—but in their ability to wring every
possible drop of revenue from a film. With their superior global marketing
machines and their ability to anticipate foreign tastes, they are
increasingly dominating the market. For everyone else, there is a chance
to win a gold statue.
QUESTION 1: Please summarise the article so that you can explain the main
points in 2-3 minutes.
QUESTION 2: Why are the foreign markets increasingly important for
Hollywood?
QUESTION 3: What is the role of the distributors in the movie industry?

Hungry for power
Electricity in Brazil
Feb 10th 2011 | SÃO PAULO | from ECONOMIST PRINT EDITION
IT WAS not a “blackout”, said Edison Lobão, merely a “temporary
interruption of the electricity supply”. Brazil‟s energy minister was
speaking on February 4th after nearly 50m people across eight states in
the country‟s north-east had spent most of the night without power.
Engineers are still investigating, but their preliminary conclusion is that a
component in a substation failed just after midnight. That caused safety
systems to malfunction, and transmission lines and then a power station
to shut down.
Mr Lobão is trying to reserve the b-word [blackout] for something more
serious, which his government is determined to avoid: a big and sustained
mismatch between electricity supply and demand. That last happened in
2001-02, after decades of growing energy use and low investment were
followed by drought (70% of Brazil‟s power comes from hydroelectric
dams.) Back then, only rationing kept the lights on, and the after-effects
dampened demand for some years.
Electricity use is growing strongly once more, rising by 7.8% last year.
That is partly because Brazil‟s economy is booming. But even if this
changes, power use is unlikely to fall. Brazilians who have recently levered
themselves out of poverty would give up much else before unplugging
their first-ever fridges and washing machines. Luz Para Todos (Light for
All), a government rural-electrification programme launched by Dilma
Rousseff, the president, when she was energy minister, has hooked up
more than 2.4m homes since 2003, and is continuing. The government
reckons demand for electricity will rise by 5% a year over the next decade.
Officials plan to mobilise investment totalling some 214 billion reais ($128
billion), from both private and public sources, in order to meet it.
Some of that will go on new fossil-fuel and nuclear plants, and some on
biomass and wind energy. But the biggest chunk is for new hydroelectric
projects. They are controversial, particularly the Belo Monte dam
approved for the Xingu, a tributary of the Amazon in the northern state of
Pará. This has been redesigned to avoid throwing a huge wall across the
river. But it will still be Brazil‟s second-biggest hydroelectric plant (after
Itaipu), generating up to 11,230MW, will flood 500 square kilometres and
will displace 20,000 people, mainly Indians.

On January 26th the environment ministry gave contractors the go-ahead
to start clearing land for Belo Monte. Like other big projects, it has been
repeatedly delayed by legal challenges from environmentalists, who prefer
biomass, wind and energy-saving measures, and by the need to obtain
environmental licences at each stage. Those are reasons why Brazilian
firms want to build dams across the border in Peru. It would be better for
Brazil‟s government to decide on each scheme according to the overall
trade-off between energy security and environmental protection, with the
environment ministry thereafter restricting itself to overseeing
implementation, says Rodrigo Moita, an energy specialist at Insper, a São
Paulo business school.
One way or another, Brazil is likely to avoid a new energy crunch,
concluded a recent study by IPEA, a government-linked think-tank. But
both cost and reliability are growing problems. Taxes mean that on
average electricity costs two-thirds more in Brazil than in the United
States. But the IPEA researchers expect the average price to rise further.
Relying on hydro-generation in the Amazon means that electricity supply
will be vulnerable to droughts and depend on long distribution lines to
bring power to the populous south. These will be hard to maintain.
The strain is starting to show. Brazil suffered 91 big blackouts during 2010,
up from 48 in 2008. In big cities short, localised power cuts are becoming
common. One occurred when The Economist recently visited the research
laboratory in Rio de Janeiro of Petrobras, Brazil‟s oil giant. They have been
happening at least once a week this (southern-hemisphere) summer, said
the lab‟s boss. Brazilians may have to get used to “temporary
interruptions” every time they turn up their air-conditioners.

QUESTION 1: Please summarise the article so that you can explain the main points in
2-3 minutes.
QUESTION 2: Luz Para Todos (Light for All) is Brazil‟s programme to
connect rural areas to the power grid. Why is it important to have
electricity available?
QUESTION 3: Brazilian firms want to build dams across the border in Peru.
What are their reasons behind this wish?
Angela in Wunderland - What
Germany’s got right, and what it
hasn’t
Germany's economy
Feb 3rd 2011 | from ECONOMIST PRINT EDITION
THE West has rightly marvelled at China‟s economic miracle. Less noticed
is a minor miracle in its own midst. It is time to pay attention to
Germany‟s new Wirtschaftswunder.
Germany had a savage recession as manufacturing orders dried up, but its
economy has since bounced back strongly, expanding by 3.6% last year,
far faster than most other rich economies. For sure, this was partly a
“bungee effect” after a particularly deep downturn, but it is no one-year
wonder. By several measures, including keeping unemployment down (it
is at its lowest since 1992) and the prosperity reflected in the growth of
GDP per head, Germany was the star performer among the rich G7
countries over the past ten years Germans entered 2011 in their most

optimistic mood since 2000, according to Allensbach‟s polls. Business
confidence is at its highest since the Ifo institute began tracking it 20
years ago.
What‟s Germany‟s secret? It helps that the country did not experience a
property or credit bubble, and that it has kept its public finances
admirably under control. But above all Germany‟s success has been
export-driven: unlike most other big rich economies it has maintained its
share of world exports over the past decade, even as China has risen.
This is not—advocates of an active industrial policy please note—thanks to
a special genius among German policymakers for picking winners, though
businesses have benefited from strong state-supported research
institutions. Luck has played a part. Germany has a cheaper-labour
hinterland right on its doorstep in central Europe that has helped
companies raise efficiency and hold down pay. Meanwhile, German firms
happen to produce exactly the things that a booming China wants, from
luxury cars to the machinery that enables Chinese factories to be the
workshops of the world. So Germany has been a big winner on both the
supply side and the demand side of globalisation. The euro also provided a
bonanza, thanks to (unsustainable) demand in places like Spain and
Greece.
But there has been plenty of skill, too. German companies have excelled
at seeking out unglamorous but profitable niches, and then focusing
relentlessly on being the best. This is particularly true of the Mittelstand,
the small and not-so-small companies that are the backbone of the
German economy. The likes of Koenig & Bauer (which makes printing
presses), Leitz (wood-processing machines) and RUD (industrial chains)
may not be household names, but they are world-beaters.
Such traditional German virtue is now all the more effective thanks to
liberalising reforms of recent years. Under Gerhard Schröder, a Social
Democrat who was Angela Merkel‟s predecessor as chancellor, the socalled
Hartz reforms made labour markets more flexible and made work a
bit more attractive compared with living on unemployment benefits. And
with the loosening of banks‟ cross-shareholdings, German business is a
less cosy and cosseted affair; bosses are freer to cull underperforming
operations and to focus on growth.
German businesses also took a gamble during the downturn. With the
help of government subsidies they held on to their workers, betting that
order books would quickly fill up again. They did, so German companies
retained the skills and the manpower to respond quickly to the upturn.
All this explains why German leaders can sound a little smug these days.
In Davos last week Mrs Merkel invited fellow Europeans to learn from
Germany‟s experience. Follow the German model, the message seems to
be, and all will be well.

However this recipe can be questioned as well: Germany‟s economic boost
dependents on foreign demand, reflected in an excessive current-account
surplus of 5% of GDP last year, while consumer spending is feeble. If
every European country followed that example it would be a recipe for a
slump.
QUESTION 1: Please summarise the article so that you can explain the main
points in 2-3 minutes.
QUESTION 2: Describe the economic ties between Germany and China.
QUESTION 3: What are the main reasons for the new
“Wirtschaftswunder”?

Bling is back
A surprising recovery in luxury
goods
Luxury goods
Oct 21st 2010 | from ECONOMIST PRINT EDITION
“IN THE dark days of the recession people didn‟t want to show the bling.”
(bling is a slang term for jewellery) says Alisa Moussaieff, owner and
managing director of Moussaieff, a London jewellery shop. Some of her
wealthy customers bought diamonds or other gems as an investment
during the financial crisis, since paper assets seemed so dodgy at the
time. Rather than flaunting their purchases before recession-pinched
passers-by, however, they asked for plain white shopping bags. As the
global economy mends, such restraint is wearing off. Yet even the luxury
industry‟s boosters did not expect such a cork-popping recovery.
On October 14th Moët Hennessy Louis Vuitton (LVMH), the world‟s biggest
luxury-goods company by sales, reported a 14% increase in sales in the
first nine months of the year, after correcting for such factors as currency
fluctuation. Burberry, a British clothing firm, also reported double-digit
sales growth in the six months to the end of the September. On October
28th, PPR, a French retail and luxury group, is expected to report strong
results.
“The strength of the recovery was a surprise,” says Claudia D‟Arpizio, a
luxury-goods expert in the Milan office of Bain & Company, a consultancy.
Big brands such as Louis Vuitton and Hermès are the main winners. With
their deep pockets, they were able to continue to open new shops and
invest in the business during the crisis.
Luxury has always been a cyclical industry, but in the past decade it has
soared and plunged like a well-dressed bungee-jumper. The early 2000s
were grim: terrorist attacks in America, a global outbreak of SARS and the
war in Iraq all tempered people‟s appetites for international travel and
frivolous purchases. From 2004 to 2007, however, luxury shoppers
worked themselves into a frenzy of indulgence. Then, as the financial
crisis bit, they stopped. Last year the global luxury market shrank by 8%.
But the luxury recovery that began towards the end of 2009 has now
gathered momentum. Bain predicts 10% growth for this year.

Pockets of confidence in America help. Luxury sales there slumped by
18% last year. This year shoppers are feeling less shy about showing off,
and department stores are gleefully stocking up with pretty stuff for the
holiday season.
The mood in China is even blingier. Luxury sales grew 20% even during
the industry‟s annus horribilis last year and are forecast to boom by an
astounding 30% this year. In five years China, which already accounts for
a tenth of global demand for luxury goods, is predicted to be the thirdlargest
market for them.
The boom has caught some firms with their elegant trousers down.
Despite nationwide strikes in France, Louis Vuitton, a peddler of posh
handbags, does not have sufficient stock to cater to the sudden increase
in demand. Anxious to save enough goodies for Christmas, the company is
closing its flagship shop on the Champs-Elysées in Paris earlier each day
and raising its prices in the euro zone.
Yet the good times for luxury firms will probably not last. Next year Bain
predicts that growth will slow to 3-5%. The strength of the euro will hurt
the top firms, which are disproportionately Italian or French and often
lovingly hand-craft their products within the euro area. Tax increases in
Europe will make the rich feel poorer and less inclined to splash out.
Consumer confidence is crucial. If people feel glum, they don‟t buy
baubles.
QUESTION 1: Please summarise the article so that you can explain the main
points in 2-3 minutes.
QUESTION 2: How would you define “luxury products”?
QUESTION 3: Who buys luxury products?

A more complicated game:
The West’s financial crisis has
shaken public confidence in its
leading central banks. Yet it has
also led to an expansion of their
duties and powers
Feb 17th 2011 | WASHINGTON, DC | from ECONOMIST PRINT EDITION
IN TWO days, two prominent central bankers, one on each side of the
Atlantic, headed for the exit. Few people were surprised when Kevin
Warsh tendered his resignation from the Federal Reserve on February
10th. Rather more people were taken aback when rumours started to fly
that Axel Weber would stand down as president of Germany‟s Bundesbank
and thus rule himself out as the next president of the European Central
Bank (ECB), a job for which he had been the front-runner. The rumours
were confirmed on February 11th.
The timing was coincidental. Yet the two men have something in common.
Both were uneasy about changes in the way that central banks conduct
themselves—specifically, about the unprecedented forays into financial
markets by the Fed and the ECB. Mr Weber publicly opposed the ECB‟s
decision last May to start buying the bonds of member countries‟
governments. His colleagues, he believed, were intruding dangerously into
fiscal policy. Mr Warsh, similarly though more quietly, fretted that the
Fed‟s policy of quantitative easing (QE)—the purchase of government
bonds with newly printed money—was fomenting new imbalances in the
global economy and steering the Fed into treacherous political waters.

Since the financial crisis in 2007
central banks have expanded their
remits, either at their own initiative
or at governments‟ behest, well
beyond conventional monetary
policy. They have not only
extended the usual limits of
monetary policy by buying
government bonds and other assets
(see chart). They are also taking on
more responsibility for the
supervision of banks and the
stability of financial systems. Their new duties require new
“macroprudential” policies: in essence, this means regulating banks with
an eye on any dangers for the whole economy. And their old monetarypolicy
tasks are not getting any easier to perform. Central banking is
becoming a more complicated game.
The new duties also bring new risks. Before the crisis, a political
consensus had emerged: central banks should be run by technocrats, free
of interference by government, pursuing one goal, price stability, with one
tool, short-term interest rates. Many gave up the supervision of banks to
other regulators. The connection between interest rates and inflation may
not have been exact, but at least central banks had plenty of theory and
evidence to guide them. In contrast, the effects of unconventional
monetary policy, such as bond purchases, are largely unknown.
Proponents argue that with interest rates at or near zero, it is a sensible
way of keeping credit flowing and preventing deflation. Opponents say
that it bails out profligate treasuries and risks recreating the speculative
bubbles that led to the financial crisis in the first place.
Financial stability is politically a more treacherous mission than price
stability, notes David Archer of the Bank for International Settlements
(BIS), a co-ordinating body for central banks. During booms,
macroprudential measures, such as restraints on lending, will tend to
arouse anger, and if they avert a crisis, the public will never know. Yet if a
crisis strikes, the public, with perfect hindsight, will blame the central
bank for not acting sooner. “The relationship between the central bank
and government is likely to become more difficult and more political,” he
adds.
The way we were
In a sense, central banks have returned to their roots. The first central
banks were created to handle the sovereign‟s financial affairs and issue a
national currency. That endowed them with competitive advantages that
led naturally to becoming lenders of last resort to commercial banks.
Because such lending created moral hazard and the risk of loss, they also
became those banks‟ supervisors. Only later did monetary policy—
managing economic growth and inflation—become a primary duty. Charles
Goodhart, a monetary historian and a former member of the Bank of

England‟s monetary-policy committee, has noted, “The monetary (macro)
functions of central banks were largely grafted onto the supervisory
functions.”
QUESTION 1: Please summarise the article so that you can explain the main
points in 2-3 minutes.
QUESTION 2: What is the name of the Austrian central bank?
QUESTION 3: What are the primary duties of the cental banks?

The Panama Canal
A plan to unlock prosperity
Ten years ago this month Panama took possession of the canal that bears
its name. It has high hopes for a $5.25 billion expansion of the waterway
Dec 3rd 2009 | PANAMA CITY | From The Economist print edition
The Panama is a vital artery of world trade. Since the 1970s, however,
merchant vessels have been growing too big to pass through it. The
largest container ships today can carry more than 12,000 boxes, whereas
the biggest that can fit in the canal carry only 4,500. Since the mid-1990s
it has become obvious that the bottleneck would need to be cleared, or
the canal would become a backwater.
In September 2007, even as the world economy slid into recession and
global trade fell for the first time in a quarter of a century, the Panama
Canal Authority (ACP) started digging. The whole project should be
finished in 2014 at a cost of $5.25 billion, more than a fifth of Panama‟s
GDP last year. Of this, $3 billion will come from retained earnings, the rest
from bilateral and multilateral lenders, led by the Japan Bank for
International Cooperation, the European Investment Bank and the Inter-
American Development Bank.
The expansion—one of the world‟s biggest transport projects—was
controversial when first mooted in around 2001. Some feared that it
would cripple a small country whose public debt then amounted to 71% of
GDP, and that extra dams would flood rural land, displacing peasants and
threatening water supplies. Yet Panamanians voted heavily in favour of
expansion in a referendum in 2006 after concessions to soften the
environmental impact: there will be no extra dam and the new locks will
recycle most water.
The ACP will also been able to charge more. Since 1998 the average toll
has risen by 70%. In May, for example, the price per container went up
from $63 to $72. (Container ships are usually charged by capacity,
regardless of load. Cruise liners pay $120 per berth.) The canal has
revenues of $2 billion and costs of only $600m. Spare cash goes into the
Panamanian treasury, through a revenue royalty and dividends. In the
fiscal year that ended in September, the treasury pocketed $760m.
The ACP believes that the expansion, once completed, will boost Panama‟s
annual growth rate by 1.2 percentage points, helping GDP grow to 2.5
times the 2005 level by 2025. That, estimates the authority, would lift
100,000 Panamanians out of poverty: today 1m are poor in a population
of 3.4m. But the mechanism by which a wider canal will raise the living

standards of the country‟s people—particularly its least fortunate—remains
murky.
At the Atlantic end of the canal lies the Colón Free Zone, the world‟s
second-biggest re-export centre, trailing Hong Kong. Last year $9.1
billion-worth of merchandise was unloaded there; re-exports, after
relabelling, repackaging and so forth, amounted to $9.7 billion. At the
Pacific terminus, Panama City is home to dozens of banks, serving
Colombians and Venezuelans with dollar savings as well as Central
Americans, and thousands of companies, attracted by its favourable tax
treatment of offshore business. Despite the global recession, the skyline
continues to sprout apartment towers of dizzying heights.
It is too much to expect even such a huge project to solve all a country‟s
economic troubles. It will bring jobs in ancillary services; and the extra
money could, if used wisely, ease some pressing problems. Most people
think that economic diversification is the best way to reduce poverty.
Given that so many poor people work in farming, improving productivity
there is most important. This means bringing techniques, equipment and
seeds up to global standards, and cultivating Panama‟s most promising
crops, such as bananas and coffee (its Geisha bean is especially prized).
In particular, Panama is short of refrigeration capacity to preserve its
produce.
On top of this, social services, primarily health care and education, also
need improvement. Although Panama‟s social spending per person is
among the highest in Latin America, its students‟ standardised test results
rank near the bottom. Both Mr Martinelli‟s ministers and independent
analysts attribute this disappointing showing to a powerful teachers‟ union
and an inefficient civil service.
The government could use its extra income to foster rural development in
any number of ways. It could also build more schools, universities, clinics
and hospitals, or hire more or better teachers or doctors.
QUESTION 1: Please summarise the article so that you can explain the
main points in 2-3 minutes.
QUESTION 2: Why is transportation by ship so important nowadays?
QUESTION 3: What are the reasons for expanding the canal?

Toyota Hegemony
Fades as `Big Damage'
Brings Sony-Style
Decline
By Alan Ohnsman, Makiko Kitamura and Jeff Green - Jan 12, 2011
1:25 AM GMT+0100 BLOOMBERG BUSINESSWEEK
After owning several Toyota Motor Corp. vehicles
over the past 17 years, Randy Sterling traded in
his Tacoma pickup this month for Ford Motor
Co.‟s F-150 truck.
“The recent problems with Toyota caused me to have a closer look at Ford,”
said Sterling, a contractor in Blenheim, Ontario, referring to record recalls of
more than 8 million vehicles, most for defects tied to unintended acceleration.
“The recalls, how they‟d treated some of their customers, it just concerned
me.”
Customers such as Sterling underscore the challenge Toyota President Akio
Toyoda, in Detroit this week for the North American International Auto Show,
faces as he seeks to put the recall crisis behind him. With its reputation
tarnished, the Toyota City, Japan-based company‟s 2010 U.S. sales dropped
even as industrywide car demand rose. The loss of once-tried-and-true
customers marks the beginning of the world‟s largest automaker‟s quest to
restore its image and win back market share, said analyst Maryann Keller.
“In terms of quality, they were the default brand,” said Keller, founder of
Maryann Keller & Associates, a consulting company in Stamford, Connecticut.
“Now they‟re just one of the pack.”
Toyota was the only large automaker to post a sales decline last year in the
U.S., historically its most profitable market. Its deliveries fell 0.4 percent to
1.76 million Toyota, Lexus and Scion vehicles, in contrast to an industrywide
increase of 11 percent, the first since 2005.
Sony Analogy
Just as Japanese electronics makers such as Sony Corp. lost ground in the
past decade to Apple Inc. in music players and to Samsung Electronics Co.
and LG Electronics Inc. in televisions, damage to Toyota‟s brand has left it
vulnerable to a growing challenge from rivals including Ford and Hyundai
Motor Co.
“The reason Toyota became famous was one word, and that was „quality,‟”
said Jez Frampton, chief executive officer of Interbrand Corp. in New York “In
the same way, you used to buy a Sony because you believed in something,
and that something was quality.”

The recalls inflicted “big damage” on Toyota, Toyoda told reporters Jan. 10 in
Detroit. Still, the carmaker‟s Camry sedan remained the top-selling U.S.
passenger car while its Lexus brand led luxury car sales, he said.
“Toyota cars are safe,” the chief executive said. “I‟d like you to expect more
good things to come from us.”
Rising Challengers
Toyoda‟s job is likely to get more difficult this year. A resurgent General
Motors Co. has emerged from bankruptcy and targeted Toyota‟s Prius hybrid
with the Chevrolet Volt while Nissan Motor Co. has introduced the all-electric
Leaf, for which Toyota has no equivalent. Hyundai has climbed up the quality
rankings to seize market share and in China, the world‟s biggest market,
GM‟s and Volkswagen AG‟s manufacturing capabilities and sales dwarf those
of Toyota.
“Toyota‟s real challenge will be in the coming years as new buyers, who do
not automatically assume that Toyota is the safest and most reliable vehicle,
put the Toyota products up against competitors,” said Alexander Edwards,
president of San Diego-based market researcher Strategic Vision Inc.
Toyota dropped 17 percent in Tokyo trading in 2010, making the shares the
biggest drag on Japan‟s Topix index, which declined 1 percent. Nissan fell 4.6
percent last year, while Ford rose 68 percent in New York and Hyundai
climbed 43 percent in Seoul. Toyota gained 1.6 percent to 3,510 yen as of
9:22 a.m. today in Tokyo.
Prius Hybrid
Toyota pioneered the hybrid car with the Prius. It hasn‟t yet brought out an
electric vehicle, falling behind Nissan and Mitsubishi Motors Corp. If the
technology proves successful and Toyota doesn‟t keep up, it will be similar to
Sony‟s failure to dominate the transition to compact discs from cassette
players, according to Yuuki Sakurai, who helps oversee the equivalent of $8.4
billion as chief executive officer at Fukoku Capital Management Inc. in Tokyo.
“The key is whether Toyota can ride this wave,” he said. “More and more
competitors will appear, and the question will be: Who can build it the
cheapest?”
QUESTION 1: Please summarise the article so that you can explain the main
points in 2-3 minutes.
QUESTION 2: What is the advantage of a hybrid car?
QUESTION 3: Why is Toyota losing its once-loyal customers?

Who's to blame?
Oct 11th 2010, 19:53 by A.L.B. | BUDAPEST
LIKE Chernobyl and Bhopal, Kolontar never wanted to be on the map. Not
like this, anyway, painted red as though an angry God had directed a tidal
wave of toxic sludge on to this sleepy hamlet. People, livestock, vehicles
and possessions were all swept away until, suddenly, it stopped, leaving
houses marked with precise tidemarks.
The good news is that after days
of emergency work, the walls of
the reservoir in western Hungary
which gushed out 1 million cubic
metres of toxic sludge are holding.
The bad news is government
officials say the reservoir is so
damaged that they expect it to
give way at any moment,
unleashing a fresh deluge.
Meanwhile Zoltan Bakonyi, the
head of MAL Zrt, the aluminium
company at the heart of Hungary‟s
worst-ever environmental disaster,
has been detained by police on suspicion of endangering public safety,
causing multiple deaths and damaging the environment. Anna Nagy, a
government spokeswoman, said today that Mr Bakonyi had been held for
72 hours. The company itself will be put under the control of a state
commissioner.
This evening the death toll rose to eight after the body of an elderly
woman was found near Devecser, in western Hungary. This town, and the
nearby village of Kolontar, were hit particularly hard by the disaster. Yet
there may be more to come. A week after the flood began, when the wall
of a reservoir at the MAL plant in Ajka fractured, officials admit that the
reservoir walls are riven with cracks and a further breach is almost
inevitable. Four thousand rescue workers are engaged in a race against
time to build a massive dyke to hold back the next wave of sludge. The
news that the second eruption should be easier to deal with, the
reservoir‟s contents now being mostly toxic mud rather than water, was
meagre compensation.
A team of five EU toxicology and environmental experts has arrived in
Hungary, and will spend the week ascertaining the precise extent of the
damage to arable land, rivers and air quality. Tests by Greenpeace have
show high levels of arsenic, mercury and chrome. An unlikely extra
headache is provided by the weather. Unseasonable dry heat is drying out
the top layer of the sludge, leading to fears it could evaporate and form a

toxic cloud. In Kolontar, officials say that air toxicity levels are safe, but
they have nonetheless issued rescue workers with masks and goggles.
The village has now been completely evacuated and closed off, with
access controlled by armed police. All 800 of its residents have been
relocated. Kolontar's lower part, which was worst hit, will probably never
be habitable again. Plans have also been drawn up for an emergency
evacuation of Devecser. Many residents have already fled; those
remaining have been instructed to have a bag packed and be ready to
leave at an hour‟s notice.
Other welcome news is that officials say they have now largely eliminated
the danger to the Danube. Relief workers have been dumping large
quantities of gypsum and acetic acid into the affected waterways to
reduce their alkalinity levels, which initially reached a pH level of 13.
(Seven, or neutral, is considered ideal.) Recent checks in the Danube have
showed 8.3 at Komarom, on the Hungarian-Slovak border, and 8.18 at
Szob, north of Budapest.
Viktor Orban, the prime minister, has handled the crisis well, striding
around the stricken villages in gumboots, and channelling public anger
towards those responsible. MAL‟s initial offer of 100,000 forints ($510)
compensation to affected families caused fury (the company's executives
are believed to be among the richest in the country).
There are also questions about the role of state environmental regulators.
MAL firmly denies negligence and says recent inspections at the reservoir
found everything to be in order. Mr Orban disputes that, telling parliament
today that some of the company's employees may have been aware of the
state of the reservoir‟s walls but chose to do nothing about the problem.
QUESTION 1: Please summarise the article so that you can explain the main points in
2-3 minutes.
QUESTION 2: Who was affected by the toxic spill?
QUESTION 3: Do you know of some other regions with serious
environmental problems?

The Romani row, revisited
BUCHAREST was once known as the "Paris of the east". But Parisians
might be advised to steer clear of the Romanian capital, at least until the
latest row between the French and Romanian governments blows over.
Relations between the two countries have largely been smooth since
Romania's accession to the European Union in 2007. At least until last
August, when Nicolas Sarkozy ordered the expulsion of Romanies illegally
living in France, most of whom had Romanian citizenship. It wasn't long
until accusations of opportunism and even racism came flying France's
way.
Last month the European Commission organised a two-day conference in
Bucharest. The ostensibly bland theme of the event—“Contribution of EU
funds to the integration of Roma”—was enlivened by the politically
charged atmosphere following Nicolas Sarkozy‟s decision in the summer to
expel thousands of Romani migrants, most of them Romanian, from
France. The event was the first real get-together of Romani leaders,
Romanian government representatives and the EU since the expulsions.
No clear consensus emerged on the impact of EU funds on Romania's
Romanies, most of whom live in dire conditions. This is no great surprise
considering that red tape and ministerial incompetence has meant that
only about 1% of the €20 billion allocated to Romania in EU structural
funds has actually been spent. Government programmes for the
Romanies, such as positive discrimination for universities, barely scratch
the surface. Most of Romania's Romanies remain marginalised, with little
or no access to healthcare, education or social services.
But the conference did have two interesting outcomes. One was a
discussion of an excellent piece of research by the World Bank, which
states that the cost of educating Romania's Romanies would be far
exceeded by the contribution an educated Romani workforce would make
to the national economy. The opportunity presented by the report
suggested that all the chatter—by both government representatives and
Romani leaders—about strategy, empowerment, consultation, rights,
monitoring, community projects, exclusion, research, discrimination and
poverty was missing the point.
The second was a paper by Nicolae Gheorghe, a well-known Romani
activist and a former adviser to the OSCE on Romani issues. Mr Gheorghe
believes that Romania is not taking responsibility for the Romani issue.
The key part of his document reads:
“This is a Romanian problem, not a European one. "Getting rid of the gypsies"
has been part of the Romanian psyche since the deportations in WW2. The mass
Roma migration since EU accession serves a similar purpose of getting Roma out

of the community... All this makes me worry. The Roma as an EU citizen is a
subtle argument but the solution has to be found here, in Romania.”
Romania has come under considerable pressure from France, since the
expulsions, to come up with a new strategy for the Roma. Mr Gheorghe is
concerned that the French could use the issue as an excuse to block
Romania‟s entry into the European Union's passport-free Schengen zone,
scheduled for March 2011 (a recent EU Observer story seemed to confirm
his fears).
Mr Gheorghe also gives insight into the story of Roma migration. He says
that when small numbers of Roma migrants started to appear in French
and Italian municipalities there was initially some sympathy for them,
particularly among left-wing mayors who were willing to make an effort at
integrating these newcomers.
But two factors changed this: a flood of new Romani migrants broke down
this sympathy; and France decided on a crackdown. Although it was this
year's expulsions that made the headlines, France's move against the
Roma began back in 2005, when Mr Sarkozy, then the interior minister,
ordered his prefects to take a “firm approach towards semi-sedentary
settlements that settle mostly on the outskirts of cities.”
Mr Sarkozy took a beating in the international press over the expulsions,
and at home is as unpopular as ever. But the issue hasn‟t gone away.
While “voluntary” repatriations of Romanies from France continue, on
arriving home many of the “returnees” simply turn around and go back to
France.
QUESTION 1: Please summarise the article so that you can explain the main points in
2-3 minutes.
QUESTION 2: The Roma are regarded as minority in many different
countries. What does it mean for them?
QUESTION 3: What is the situation of the Roma in Austria?

Text 10B, Export Admission 11/12, 666 words, difficulty: +
Succeeding a success
Aug 11th 2010, 12:57 by The Economist online | DELHI
IF INDIA were a nation of gamblers, the betting on who will succeed Ratan
Tata, chairman of the Tata group, would be furious. Since Tata Sons, the
holding company for India‟s second-biggest conglomerate, announced last
week that it was seeking Mr Tata‟s replacement, there has been a whirl of
speculation about whom it will appoint. Would it, in the tradition of so
many Indian companies, pick a younger relative? Or would the group
confine its search to the tiny, successful Parsi community to which the
Tatas belong? Will Mr Tata‟s successor even be an Indian? Most unusually
in India, the panel appointed to choose his successor has said it will
consider foreign candidates.
Mr Tata‟s succession is a big issue in India because of the presence the
142-year-old company has in the lives of its fast-growing middle classes,
from the salt they sprinkle on their food to the cars they drive and covet.
A vast empire, Tata has interests ranging from mineral water to steel. It
has also become a symbol of India‟s growing might overseas. In its last
financial year 65% of the group‟s revenues of $70.8 billion came from
abroad. During a recent visit to India the British prime minister, David
Cameron, remarked that Tata was now Britain‟s biggest manufacturer. Its
transformation into a global-scale group is largely thanks to two decades
of bold leadership from Mr Tata.
When he took over the group from his uncle, J.R.D. Tata, in 1991, it was
an unwieldy sprawl of 300 companies. His timing was fortunate, coinciding
as it did with Prime Minister Manmohan Singh‟s tenure as finance minister
and his unshackling of India‟s economy. Mr Tata sold a number of
unprofitable businesses and kicked the rest into shape. Today, Tata has
98 firms and is one of India‟s biggest carmakers and IT outsourcers.

These companies are impressive innovators: last year, Tata Motors
launched the world‟s cheapest car, the $2,500 Nano. Most transformative
has been the group‟s acquisitive drive overseas, starting with Tetley Tea a
decade ago. In 2007 it bought Corus, an Anglo-Dutch steelmaker, for $12
billion, constituting India‟s biggest foreign splurge; a year later, it took
Jaguar Land Rover (JLR) from Ford Motors for $2.3 billion.
Confounding the critics
Mr Tata‟s overseas shopping has drawn some scepticism, especially over
the purchase of loss-making JLR. Mr Tata has often confounded his critics,
however, and the brand‟s sales have overtaken his own estimates. On
August 10th Tata Motors posted a forecast-beating first-quarter profit,
which it said had been driven by demand for JLR‟s luxury models. But the
group‟s heady expansion will present Mr Tata‟s successor with some
challenges. Tata has a clear vision: to exploit India‟s low costs and the
West‟s spending power. Holding it all together across diverse industries
and countries, however, will take a firm hand.
Whoever takes over from Mr Tata is likely to focus on making work better
what the group already has, rather than rushing to acquire more. He will
also strive to maintain Tata‟s much-lauded “value system”, an important
part of its brand in India. Two-thirds of Tata Sons is owned by charitable
trusts which finance philanthropic activities. The group is reputed to refuse
to pay bribes, and treats its workers comparatively well.
The manner in which it appears to be seeking Mr Tata‟s replacement
certainly offers a positive example to Indian businesses. Though there is
speculation that his half-brother Noel is up for the crown, the group is
open to outsiders. That bucks a national trend. Recent research by Bain &
Company found that most Indian companies at no point discuss how chief
executives will be appointed. “In so many companies the eldest son just
becomes the boss,” says Kavil Ramachandran of the Indian School of
Business in Hyderabad. “Tata is doing a great job of setting standards
here.” And not just nationally: many emerging-market conglomerates,
especially in South-East Asia, remain in the grip of ageing founders, and
would do well to follow Tata in looking outside for their successors.
QUESTION 1: Please summarise the article so that you can explain the main points in
2-3 minutes.
QUESTION 2: Why is the selection of chairman such an important issue for
Tata?
QUESTION 3: What is the key strength of Tata?

Renren, China's Largest Social-
Networking Site, Is Said to Plan U.S.
IPO
By Serena Saitto and Brian Womack - Feb 19, 2011 1:07 AM GMT+0100 BLOOMBERG
Renren.com, China‟s largest social- networking service, is preparing for a U.S.
initial public offering (IPO) of about $500 million this year, according to three
people with knowledge of the plan.
The banks handling the IPO are Morgan Stanley, Deutsche Bank AG and
Credit Suisse Group AG, according to the people, who declined to be
identified because the matter isn‟t public. The offering could come by June,
two of the people said.
Renren.com has more than 160 million registered users, according to
Analysys International in Beijing. The site could use the IPO proceeds to woo
more visitors as it competes with local rivals Tencent Holdings Ltd. and Baidu
Inc. in the world‟s most populous Internet market. Renren -- a name that
means “everyone” in Chinese -- has similar features as Facebook Inc., which
is blocked in China.
No U.S. social-networking sites have gone public, even as their popularity
and advertising revenue soar. That‟s created pent-up demand among
investors. LinkedIn Corp., which announced plans last month to raise $175
million in an IPO, could become the first to go public.
At Renren, advertising has more than doubled each year since the site
started selling space in 2008, Donna Li, general manager of strategic
marketing and media planning at the company, said earlier this month. The
online advertising market will triple to almost $13 billion in China by 2014,
estimates Susquehanna International Group LLP.
‘Inside School’
Lillian Wang, a public-relations manager at Renren in Beijing, didn‟t
immediately return calls to her office and mobile phone seeking comment
after working hours.
Pen Pendleton, a spokesman for Morgan Stanley, declined to comment, as did
Credit Suisse‟s Duncan King. Deutsche Bank‟s Scott Helfman didn‟t
immediately respond to a request for comment.
Renren traces its roots back to 2005, when graduates of Tsinghua University
in Beijing founded Xiaonei.com, or “Inside School.” That was the year after
Mark Zuckerberg, chief executive officer of Facebook, created his service for
fellow Harvard University students.
In 2006, Xiaonei was acquired by closely held Oak Pacific Interactive Corp.,
which renamed the service Renren in 2009.

This news follows the successful IPOs earlier this week of the Youku video site
and the Dangdang e-commerce site. According to the New York Stock
Exchange, Youku‟s triple-digit first-day pop was the biggest since 2005, when
Baidu Inc rose 354 percent.
In 2008, Oak Pacific announced that it had received $430 million in private
funding. With this new move Oak Pacific Interactive joins two other Chinese
technology companies that are also planning IPOs soon. Tudou, another
video site and TaoMee, a social networking site for children.
Social networking sites such as Renren and Kaixin001, which operate like
Facebook, have grown in popularity in China in recent years, earning most of
their revenue from online advertising. These sites also benefit from a market
closed to major foreign competition.
Facebook does have some Chinese users, who circumvent censors through
so-called virtual private networks, according to data compiled by
Socialbakers.com, a site dedicated to analyzing Facebook statistics.
Facebook, the world‟s biggest social-networking site, will start reporting
financial results by April 2012, even if it doesn‟t go public, according to a
document sent to prospective investors. The company would be forced to
make disclosures because it expects to have at least 500 shareholders by the
end of this year, a threshold that makes reporting results necessary under
U.S. Securities and Exchange Commission rules, a person who reviewed the
document said last month.
QUESTION 1: Please summarise the article so that you can explain the main
points in 2-3 minutes.
QUESTION 2: Why is Renren.com trying to outgrow its competitors?
QUESTION 3: How do social-networking sites generate money?