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Euro Zone, snakes and ladders

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Preeti
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BANGALORE, INDIA: The period 2009-2011 has been a game of snakes and ladders. After the 2008-2009 global financial crisis, a new set of winners and losers have emerged, especially among global banks and global companies. Something similar could be happening ever since the Euro zone crisis precipitated in mid 2011.

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In the second half of 2011, business media from the US and UK reported the Euro zone crisis from the perspective of stock markets. The noise level was so great that one could have missed out useful signals. There was much speculation about a Euro zone break-up and collapse of the Euro currency. Sometimes, TV anchors and experts overstated the challenges faced in Asia while underestimating the resilience of global companies and global banks.

In May 2012, a report on the top 1,000 banks separated facts from fiction. Despite holding 45 pc of banking assets, Western European banks generated only 6.3 pc of global profits in 2011. Yet, many of them did not sell off or cut back on their US subsidiaries or US related businesses.

Asian banks demonstrated resilience in many ways. They were profitable and expanded their global footprint during 2011. Japan's top three banks, Mitsubishi UFJ, Mizuho Financial Group Inc. and Sumitomo Mitsui beat American banks in the M&A game. Together, they bought assets and businesses across Europe, taking advantage of the rising Yen. Top Chinese banks also expanded across Asia and Africa, beating global banks from the US and Europe.

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Euro zone crisis and globalization are changing the competitive landscape across industries. During 2011, Hyundai and Kia improved their share of the European market, beating their Japanese and European rivals.

Facing challenges in Europe, Volkswagen expanded significantly in the US and in China. Hit by natural disasters in Asia, Honda and Toyota are fighting back to gain market share in the US during 2012. During 2011, Unilever improved its revenue share of the developing market to 56 pc. Although P&G is ahead in absolute terms, its respective share is still 37 pc.

In forthcoming articles, I will cover more about the changing landscape of global companies and global banks from the perspective of Indian IT exporters.

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Indian IT exporters need to perform a deep dive into how their major clients in Europe stand in the 2011-2012 game of snakes and ladders. How did they perform in 2011 and could a new set of winners and losers emerge by 2012-end? Here are some tips.

Look out for winners affected by the Euro zone crisis, and losers who surprise you. Try to "separate the signal from the noise". While doing a deep dive, look for challenges faced by a major client or a client's competitor across the Atlantic. Also look for global M&A and cross border M&A.

(K R Kashyap is a Bangalore-based management consultant with 25 years of experience in Tata Unisys Ltd. (now part of TCS) and IBM. His areas of expertise include, project management, risk management and business development functions)

(The views expressed by the author are his own and not of CIOL)

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