Top 10 Most Valuable Brands 2013

1. Apple ($87.3bn )
   
   
   
   
   
2. Samsung ($58.8bn)

3. Google ($52.1bn)

4. Microsoft  ($45.5bn)

5. Walmart ($42.3bn)

6. IBM ($37.7bn)

7. General Electric ($37.1bn)

8. Amazon ($36.7bn)

9. Coca-Cola ($34.2bn)

10. Verizon ($30.7bn)

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Money Laundry

Money laundering is the process of concealing the source of money obtained by illicit means. What does it means in simple terms is, it’s the act of making money that comes from Source A, look like it comes from Source B. In most cases criminals are trying to disguise the origins of money obtained through illegal activities so it looks like it was obtained from legal sources. Money laundering happens in basic three paces:

1) Placement - Cash is introduced into the financial system by some means 

2) Laying - Involves carrying out complex financial transactions in order to camouflage the illegal source 

3) Integration -  Entails acquiring wealth generated from the transactions of the illicit funds 

Making money is an aim of most of Criminal acts. It affects both directly and indirectly. So most organized criminal groups make sure to launder this money to prevent it being associated with criminal activities.  Cash is what those Criminal organizations get last and it’s a considerable risk to Criminals. Cash is also bulky and cumbersome to handle in large quantities. When cash enters the legitimate economy, it is particularly vulnerable to identification and law enforcement intervention. 

To avoid this, those organizations buy assets, or else they change locations including going abroad. Also use that cash to try and introduce it into the legitimate economy through businesses with a high cash turnover.

This is what has happened with British banking giant HSBC recently as the case ended up HSBC Holdings PLC agreed to pay a record $1.92 billion in fines to U.S. authorities. The bank violated federal laws by laundering money from Mexican drug trafficking and processing banned transactions on behalf of Iran, Libya, Sudan and Burma.

In the end, HSBC Holdings HSBC Holdings PLC admitted for having poor money laundering controls and apologized.

"We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organization from the one that made those mistakes" HSBC Chief Executive Stuart Gulliver said.

Reference

BBC: HSBC to pay $1.9bn in US money laundering penalties http://www.bbc.co.uk/news/business-20673466  

BBC: HSBC money laundering report: Key findings http://www.bbc.co.uk/news/business-18880269

USA Today: HSBC will pay $1.9 billion for money laundering http://www.usatoday.com/story/money/business/2012/12/11/hsbc-laundering-probe/1760351/

SOCA: Serious Organized Crime Agency http://www.soca.gov.uk/threats/money-laundering

Photo:

http://www.unodc.org/images/money-laundering/money_laundering_scheme_big.jpg

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Hedging

                        

                  

Hedging is a method that in practice to reduce the risk of loss caused by the price fluctuation. It consists of the purchase or sale of equal quantities of the same or very similar commodities in two different markets at approximately the same time, with the expectation that a future change in price in one market will be offset by an opposite change in the other market. Basically Hedging is a risk management strategy used in limiting or offsetting probability of loss from fluctuations in the prices of commodities, currencies, or securities. In effect, Hedging is a transfer of risk without buying insurance policies. Hedging is also common in the securities and foreign-exchange markets. 

Advantages of Hedging

1. Hedging using futures and options are very good short-term risk-minimizing strategy for long-term traders and investors.

2. Hedging tools can also be used for locking the profit.

3. Hedging enables traders to survive hard market periods.

4. Successful hedging gives the trader protection against commodity price changes, inflation, currency exchange rate changes, interest rate changes, etc.

5. Hedging can also save time as the long-term trader is not required to monitor/adjust his portfolio with daily market volatility.

6. Hedging using options provide the trader an opportunity to practice complex options trading strategies to maximize his return.

Disadvantages of Hedging

1. Hedging involves cost that can eat up the profit.

2. Risk and reward are often proportional to one other; thus reducing risk means reducing profits.

3. For most short-term traders, e.g.: for a day trader, hedging is a difficult strategy to follow.

4. If the market is performing well or moving sidewise, then hedging offer little benefits.

5. Trading of options or futures often demand higher account requirements like more capital or balance.

6. Hedging is a precise trading strategy and successful hedging requires good trading skills and experience.

Hedging is a familiar house hold term in Sri Lanka for quite a some time now. The Ceylon Petroleum Corporation entered into a hedging agreement with five local and international banks to buy crude oil at a capped price of $130 per barrel. The deal went sour when the oil prices fell below US$ 50 in the world market and CPC stood to lose nearly US$ 500 million. Supreme Court intervened and in November 2008 the Court ordered the CPC to suspend the controversial hedge payments to banks until a Central Bank probe into the matter is over.

The three foreign banks, CITI Bank, Standard Chartered Bank and Deutsche Bank sought redress with the arbitration panel in Singapore and Commercial High Court in London. Case ended CPC losing a $60 million hedging case against Deutsche Bank after a U.S.-based arbitrator ruled in favor of the bank.

                                       

References

Times Online: Sri Lanka's CPC loses $60 mln hedging case vs Deutsche Bank http://www.sundaytimes.lk/index.php?option=com_content&view=article&id=26390:sri-lankas-upr-sessions-open-in-un-geneva&catid=1:latest-news&Itemid=547

Sri Lanka prepares to challenge the ruling on hedging case against Deutsche Bank http://www.colombopage.com/archive_12A/Nov04_1352007696CH.php

Photo:

http://www.marinebusiness.com.au/images/dmImage/StandardImage/hedge600.gif

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Google In China - A case study

 Executive Summary

Form the year 2002 onwards, Internet giant Google went many hardships in China due to government’s censorship over internet. Apart from that Google’s China rival Baidu.com was behind the scene as they intended to grab the market share which hold by the Google.com

The purpose of this case study is to study and understand how such a multi-national company went wrong unable to understand the culture in a country.

The study highlights the impact that Google had to undergo during 2002-2010 period of time in China.  As a result of the pressure that Google faced in China, ultimate decision was to pull out and established company’s search engine in Hong Kong as Google.com.hk. For not maintaining a good relationship with Chinese government let Google in a terrible position as they had to pull out from a well growing Chinese internet market, which was a huge blow in Google’s financial perspectives.

The analysis of Google in China have shown how inter personal relationships in businesses, especially in terms of China, affects the company’s profit, image and success. Understanding each country’s culture is a must and it immensely helps to provide a sound service towards its customers.

Introduction

Google is an American multinational internet software corporation which was first incorporated on September 4, 1998 and the public offering followed on August 19, 2004. Google specialized in internet search, cloud computing and advertising technologies. Also Google owns the most popular video site YouTube. Google is the world’s largest search engine. It hosts and develops a number of internet-based services and generates profits from advertising by AdWords program, a system Google has developed to assist in marketing products or services.

The company founded by Larry Page and Sergey Brin, two Stanford graduate students. This program began as a college research project, which gain immense success later. The project was supposed to implement an innovative technology that would analyses webpages and retrieve the most pertinent information for any given query.

Google’s mission statement from the outset is “To organize the world's information and make it universally accessible and useful" and the company's unofficial slogan is "Don't be evil". Google’s unofficial slogan is said to recognize that large corporations often maximize short-term profits with actions that may not be in the best interests of the public. Supposedly, by instilling a Don't Be Evil culture, the corporation establishes a baseline for honest decision-making that disassociates Google from any and all cheating. This in turn enhances the trust and image of the corporation, which may outweigh short-term gains from violating the Don't Be Evil principles (Birch, 2010). 

Type           Industry                          Founded                Founders           Headquarters       Area served   Revenue                Employees       Web site

Public Internet, Computer software Melno park, California, U.S (September 4, 1998) Sergey Brin, Larry Page Mount View, California, U.S World wide US$ 37.905 billion(2011) 32467(2011) Google.com  (Source: http://finance.yahoo.com/q/ks?s=GOOG)

Case Background 

Google launched the Google.com in China in the begging of 21st century, but that was operated from outside of China, California-USA. As from financial point of view, Google saw China as a dynamic and fast growing market despite of increasing competition. China’s internet market is about 105 million in 2006 which represented only 8% of the Chinese population (Kalathil,2003). According to Google’s 2006 projections Chinese internet market was expected to grow from 105 million users to 250 million users by 2010 (Google, 2006). The main advantage with this U.S.-based version of Google.com, company was able to control an estimated 25% of the Chinese search market by 2002 and to avoid Chinese government censorship completely. (Kalathil, 2003)

Current Chinese government functions under the leadership of Communist Party., who more keen on protecting the country’s government and political situation by out coming threats. Chinese Government takes any action at any cost to prevent those situations. This is done through various ways of rules. But the ultimate purpose is crystal clear, Government needs a smooth flow within country. 

One of the government’s main concerns is the Internet. The Chinese state was able to block 90% of websites about the “Tiananmen massacre,” 31% of sites about independence movements in Tibet, and 82% of sites with a derogatory version of the name of former President Jiang Zemin. Chinese censorship was effective, though not total, and that information was available, though on a limited scale. (Human Rights Watch, 2006)

Chinese Ministry of Public Security is using a system call “Great Fire Wall” to block their citizens from seeing some overseas news reports and searching various words and pornography in search engines.

The Great Fire Wall

The “Great fire wall” or The Golden Shield program was initiated in 1998 and began operations in 2003 (McLaughlin, 2006). It has been nicknamed the Great Firewall of China in reference to its role as a network firewall and to the ancient Great Wall of China. A major part of the project includes the ability to block content by preventing IP addresses from being routed through and consists of standard firewalls and proxy servers at the Internet gateways. The system also selectively engages in DNS cache poisoning when particular sites are requested. 

The Stakeholders 

In Chinese internet market Google’s major competitors Yahoo and MSN each had entered Chinese market as Internet Services Providers (ISP) earlier. In addition, Chinese search engine Baidu.com was the major competitor that Google.com faced in China.

As for the rules in the game, when a company, whether it is a Well-financed multi-national or a domestic corporation, they have to do it in the way Chinese government want. Otherwise company can take their business elsewhere. This factor hugely matters when establishing an early position in market dominance in China. Good favors with the government vital towards long-term profitability, means any businesses wishing to operate in China must do so with the blessings of the Communist Party, the ruling party known for its pervasive corruption and widespread human rights abuses. Yet China is a country where the term free market is still being defined and where the power of ‘Guanxi’ (informal personal connections), can place western notions of business ethics on shaky ground. (Kalathil, 2003)

Case Issue

In the fall of 2002, this problem struck for Google. Suddenly, in early September, computer users in China could not access Google.com. The Chinese government had blocked access to the site. Users were diverted to rival Chinese search site, Baidu.com, the heavily censored Chinese search engine. Two weeks later, it again became possible to access Google.com, but government censorship had been heightened, making the search engine far slower and less reliable. Chinese users found that Google.com was down over 10% of the time; Google News was never available; and Google Images was available only 50% of the time. ( Lin, 2004)

Google Co-founder Sergey Brin and many technology professionals in China believe it was the result of an effort by a Chinese competitor, Baidu.com, to gain market share at Google’s expense through pulling strings in the government. The stoppage could also have been due to heightened internet security in anticipation of a November 2002 shift in political leadership (McLaughlin, 2006). Whatever the cause, Google was left offering users in China a slow and less-than-satisfactory version of Google.com. Moreover, Baidu.com, now Google’s chief rival in China, began to grow, blossoming from a 3% market share player in 2002 to a 63.7% market share player in fall 2006, they drag the young Chinese crowd by catering in large part to young users looking to download MP3 files. Concurrently, Google dropped its market share from 25% in 2002 to 19.2% in 2006 (McLaughlin, 2006).

Source: http://www.globalbydesign.com/wp-content/uploads/blog/china_search_cnnic.jpg

The huge market potential let Google thinking in Company’s decrease in Chinese market during 2002 and 2006. So it was important to make decisions about escalating Google’s mission in China at the price of self-censoring the search engine. So in order to cope up with this problem in early 2006, Google struck a deal with China government and launched Google.cn, a version of its search engine run by the company from within China. This is a move towards transparency that distinguishes it from competitors like Baidu.com, Yahoo!, and MSN, Google.cn provides users with a brief message indicating if any pages have been censored from their search results. The message does not inform users what specific pages have been censored; it simply lets them know that censorship has occurred. The Washington Post printed a list of the words and phrases that seem to be censored by Google.cn, reporting that these words are the result of Google’s research into what they needed to censor in order to fall under Chinese legal guidelines (Worsfold, 2006).

Google’s Reaction

As the situation demands Google had to determine the extent they should self-censor Google.cn. For users of Google.com in China, searches for censored subject matter, ranging from political subjects like “democracy” and “Tibet” to religious subjects like “Falun Gong” and “Dalai Lama” to social subjects like “pornography”, would generate the same list of links as would be generated for a user based in the United States. However, if the user in China tried to open any censored links, either the user’s browser would shut down or the user would be re-directed to a non-censored site.

                                  Source: http://www.seroundtable.com/archives/060131-china.gif

Also Google had to concern on another important point related to user interests is the importance of user privacy. In early 2006, just as Google was planning to launch Google.cn, it became known that Yahoo! China had turned over private user e-mail data to the Chinese government and that this had led to the ten-year, eight-year, and four-year prison sentences of Chinese cyber dissidents Shi Tao, Li Zhi, and Jiang Lijun (Birch, 2010). In addition, Microsoft had recently shut down the blog of famous Chinese political blogger Michael Anti (a penname for Zhao Jing) at the request of the Chinese government (Birch, 2010).  Clearly any decision made by Google to enter China would have to take into account concerns about user privacy and government surveillance. In terms of expanding access to information, it was Google’s position that due to the poor quality of Google.com for users in China after 2002, Google was in fact not providing the population of China with good access to information. But despite of poor quality in Google.com, Google has kept Google.com in addition to Google.cn available for users.

Ethical Background

Even though Google.cn available in Chinese market, in a shareholder meeting, Google’s Co-founder, Sergey Brin revealed that more than 99% of searches originating in China were still performed on Google.com (Don't Be Evil, 2005). This meant that 4 months after the launch of the censored site, nearly all Chinese users were either unfamiliar with Google.cn or were happier with the slower, unreliable, yet unfiltered version of Google. The fact that the uncensored version of Google remains so heavily used in China seems to indicate that Google could discontinue its operations in China and still offer its users an acceptable level of service. The consequences of this option would appear to eliminate Google's complicity in government’s censorship and allow Google to continue to build its Chinese market. However, that’s where Great Firewall of China comes into play. Although the data that Sergey Brin mentioned suggests that for some reason the firewall permits the majority of requests for the uncensored version of Google, there is no reason to expect this pattern to continue. It is quite possible that based on government directive or technological innovation, the government could decide to completely block Google's uncensored site. 

Moral Principles that affect due to Google’s action

Google’s decision to self-censor Google.cn attracted significant ethical criticism. The company’s motto is “Don’t Be Evil,” (No censoring) and prior to entering China, Google had successfully set itself apart from other technology giants, becoming a company trusted by millions of users to protect and store their personal information. Google’s decision to accept self-censorship let the company to reexamine itself as a company and forced the international community to reconsider the implications of censorship. Google has already, along with Yahoo and Microsoft, signs an industry code of ethics to safeguard human rights and the freedom of speech online (Birch, 2010). However, Google does continue to censor results on Google.cn.

If one concerns about the Google’s action in China with their utmost priority, which is not to censor anything and secure the private things of the user, it’s a big dilemma that whether Google acting according their Slogan “Don’t be evil”. In that case while human rights advocates ask why a powerful American company like Google won't fight abroad for the same freedoms that make America great, those in the business world may interpret the move as a sign of managerial weakness on Google's part. In Company’s point of view if Google were to end its operations in China it seems fairly certain that they would have to resign themselves to life without the Chinese market. Launching Google.cn, Google has decided not to give some of the main services such as Gmail and Blogger. While adhering to government’s policy by censoring search results, Google was able to bring public attention to China's media censorship and indirectly show their disapproval of it (Birch, 2010).

Google’s action to pull out from China

In 2009 Chinese government again block Google, citing pornography as the reason. Also the government blocked Google-owned YouTube. The things got worse when in 2010 Gmail accounts were under attacked (Lin, 2011). Those Gmail accounts belonged to human rights activists that originated in the country. It describes the attack as highly sophisticated and targeted, and Google claimed that no more censor its search results. Google started to redirect all search queries from Google.cn to Google.com.hk, Google’s Hong Kong based search engine, thereby bypassing Chinese regulators and allowing uncensored simplified Chinese search results. As a special entity recognized by international treaty, Hong Kong is vested with independent judicial power and not subject to most Chinese laws, including those requiring the restriction of free flow of information and censorship of internet materials (Birch, 2010).

Discussion 

The internet giant Google lost its business in China due to lack of their understanding of Chinese government behavior. On balance we can’t argue on Google’s operation in China as it’s a human right to things correctly and perfectly. If Google were to give imperfect facts to the society, in a long run they lose the faith of their stake holders despite of they live in China or not. That factor affects Google’s global market also. Society cannot be a better place if its full of false factors. The responsibility of giving the society lays with the government, but if its harm the system within the country, Government will decide the final outcome. When it’s come to politics, different countries use different tactics to hold their power. In case of a threatening factor which is not complying with their government policies, they are well within their limits to refuse it by any means.

Reference 

Books 

Kalathil, Shanthi. "China's New Media Sector: Keeping the State In." The Pacific Review 16.4 (2003): 489-501.

Lin, Mu. "Changes and Consistency: China's Media Market After WTO Entry." Journal of Media Economics. 17.3 (2011): 177-192.

Internet Articles

Birch, Jemma.”Google in China, A timeline” 23rd of March, 2010 file:///E:/Mkt/Google%20in%20China%20%E2%80%93%20A%20Timeline.html

Don't Be Evil. 5 May 2006. "Uncensored Google.com Serves 99% of China Queries." 19 September 2006 http://www.dontbeevil.com/2006/05/uncensored-googlecom- serves-99-of.html.

Economist.com. 13 June 2002. "Survey China." 16 September 2010

http://www.economist.com/surveys/displayStory.cfm?story_id=1164570

Google. "Company Overview." 19 September 2006

 http://www.google.com/corporate/.

Human Rights Watch. "China: Human Rights Concerns for the 61st Session of the U.N. Commission." 16 September 2006  

http://hrw.org/english/docs/2005/03/10/china10296.htm.

McLaughlin, Andrew. "Google in China." Google Blog. 19 September 2006

http://googleblog.blogspot.com/2006/01/google-in-china.html.

Worsfold, P.J.”Case Study-Google in China” 18th September 2006 file:///E:/Mkt/Case%20Study%20%20Google%20in%20China.htm

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Blue Chip Companies

Blue chip companies are in which who can stood stand still in their economic positions even in a recession.  Blue chips are nationally recognized, well-established and financially sound companies. A blue-chip stock is stock in a company that well-known and highly respected with a national reputation for quality, reliability and the ability to operate profitably in any volatile economic state. Blue chips generally sell high-quality, widely accepted products and services. As far as internationally concern  Blue Chip companies Coca-Cola, General Electricals, 3M, McDonald's Corp, Wal-Mart Stores Inc., Walt Disney Co, Microsoft Corp., General Motors Corp., Hewlett-Packard Co., Boeing Co., Kraft Foods Inc., Volkswagen, Siemens, Nokia are providing solid growth to portfolios. When it comes to Indian top blue chip companies are Reliance Industries Ltd., Infosys Technologies Ltd. and ICICI Bank Ltd. As for Sri Lanka, as at now, John Keells Holdings, DFCC, Hatton National Bank, Dialog Axiata, Commercial Bank of Ceylon and Sampath Bank are excellent counters for Blue chip stocks.

Characteristics of a Blue Chip Company

• Financial strength, A record of profit growth and reputation for Skilled Management;
• Established, well-known company considered to be stable and mature with a reputation for  providing high quality goods and services
• Leader in its market niche.
• In addition, companies are analyzed for their record of earnings over a relatively long period of time and future potential. Dividend payments, while not required, are considered.

Blue Chip companies of Sri Lanka

The best way to explain this point is to take couple of examples from list of Blue Chip companies in Sri Lanka. As far as I see John Keels Holdings and Aitken Spence PLC can be considered as 2 of Blue chip companies functioning in Sri Lanka. Aitken Spence PLC is an associate of Distilleries Company of Sri Lanka PLC (DCSL). DCSL is a company which stretches the scope in to vast business areas like 

• Beverages - Periceyl (Pvt) Ltd., Local spirits and exclusive agent for world renowned foreign liquor brands of the prestigious Group Pernod Ricard, France such as Royal Salute, Chivas Regal, The Glenlivet, Ballantines whiskies, Martell Cognac, Absolut Vodka, Beefeater Gin, Havana Club Rum, Jacob’s Creek, Long Mountain, Montana wines and G.H. Mumm and Perrier Jouet champagnes.
• Tele communication - Lanka Bell
• Plantations - Balangoda Plantations PLC and Madulsima Plantations PLC 
• Diversified – Melsta Logistics (Pvt) Ltd, Taxpro Industries, Browns Beach Hotel…etc.

Here the some companies DCSL own are Associates and Subsidiaries. As for an example Browns Beach Hotel which is also associated to Aitken Spence Hotels Chain became part of the DCSL Group in 2011. Above its mentioned Aitken Spence PLC is an associate of DCSL. 

Now let’s turn to John Keels Holdings (JKH), is the largest listed conglomerate on the Colombo Stock Exchange. It’s obvious that JKH have spread the wings to its full scale in each and every corner in numerous sectors.

• Airline & Aviation – Partners of Jet Airways, American Airlines, Gulf Air for Passenger services and Cargo Services
• City Hotels & Restaurants – Cinnamon Grand, The London Grill, Tea Lounge…etc.
• Financial Services - Union Assurance, John Keells Stock Brokers, John Keells Capital
• Foods & Beverages -  Keells Food Products PLC , Keels, Krest, Elephant House
• Holidays & Tours
• IT Services & BPO
• Integrated Logistics
• Plantations & Commodities
• Ports & Shipping - South Asia Gateway Terminals (Pvt) Ltd. , Lanka Marine Services (Pvt) Ltd    
• Property & Real Estate - The Monarch, The Emperor, On Three 20 and Retail Mall- Crescat Boulevard
• Resorts & Spa - Cinnamon Lodge Habarana, Chaaya Village Habarana, Chaaya Citadel Kandy, Chaaya Wild Yala, Chaaya Island Dhonveli, Chaaya Reef Ellaidhoo
• Retail & Loyalty - Keells Super, Nexus

P.S.

It's just I heard the term “Blue Chip Companies” few days ago in my CIMA class so sought about finding few facts about it. Then thought to share it with others as I didn't want to lavish the facts I learnt from my memory and writing always been one way of catharsis my leisure time.  Please do correct me in any case I’m wrong. All your opinions, suggestions, accuses and alleges are highly appreciated. Cheers!!!

Photo : http://www.sharemarketschool.com/wp-content/uploads/2010/11/blue_chips.jpg

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