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INDIAN INSTITUTE OF PLANNING AND MANAGEMENT CHENNAI

GLOBAL OPPORTUNITY AND THREAT ANALYSIS (GOTA REPORT) SUBMITTED BY NAME


AGANES ANGEL. T PRAVEENRAJ. U

BATCH
PGP/SS/10-12 PGP/SS/10-12

PHONE NO
9952956821 9952956721

EMAIL ID
agi.kushi@gmail.com pravii89@gmail.com

SECTION
IIPM-FINANCE(01) IIPM-HR(11)

ROMINIC ALEXANDER PGP/SS/10-12 JANAGARAJ PGP/SS10-12

STARTING DATE ENDING DATE

: 9-01-2011 : 20-01-2011

COUNTRY VISITED: UNITED STATES OF AMERICA

FACULTY NAME SIKKA

: RATNESHWAR BANERJEE AND NUPUR

ABSTRACT

A two week GLOBAL OPPORTUNITY AND THREAT ANALYSIS (GOTA) Training and exposure visit was organized as a part of the curriculum of IIPM, by the management. The training programme was specially designed for the students of M.B.A. The main objective of the visit was to increase the knowledge and the competence of the participants in: 1. Their forte by the management practices, policies and the theories of the international organization and acquaintances with global economy. 2. Method and techniques employed in various industries during planning, implementation and their evaluation with a special focus on quality, production and profitability. 3. Developing the skill in analytical analysis, i.e. a problem has many solutions. Only cost effective, efficient and sustainable solution is to be developed and followed.

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4. Communication and moderation skill relevant for guiding the project team, training of the staff and handling of the target groups as well as agencies co-operating in the implementation of the projects.

This was facilitated by organizing class room lectures in the Darden School of Business, Virginia, USA. The exposure emphasized on the planning process with a special focus on marketing, finance and accounting, global economy and quality concern of the end product. GOTA resulted with the improvement of the managerial behavior of the participating students of the institute. Development and adoption of the positive attitude towards various issues of the management and marketing of the product took place amongst the students. This report also contains the PEST analysis of United States and an overview of one lecturer. The lecture was given by Prof. Ronald T. Wilcox on the topic Kalashnikov : Whats in a name?.

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ACKNOWLEDGEMENT

We would like to express our sincere gratitude to all those people who have been inspirational and instrumental in drafting this project.

We express our sincere thanks to Prof. R Krishnan, Dean (Academics) for organizing the tour, which has helped us in gaining the international exposure to Global Management.

We would like to thank Prof. Ratneshwar Banerjee and Prof. Nupur Sikka for making the trip both knowledge gaining and as well as fun filled experience and invaluable support by Prof. Sonal Chatterji for helping us in US Visa documentation and training us accordingly.
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Last but not the least, we would like to thank all our friends for their enjoyable company which made the trip to Virginia a once in a life time experience. Their kind co-operation and enthusiasm made it a memorable trip.

TABLE OF CONTENTS

S.NO 1

CONTENTS PEST Political Analysis Economical Analysis Social Analysis Technological Analysis Review and Research Retail Industry in USA Conclusion Bibliography

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PEST ANALYSIS OF USA


INTRODUCTION TO THE USA
The United States of America (also referred to as the United States, the U.S., the USA, or America) is a federal constitutional republic comprising fifty states and a federal district. The country is situated mostly in central North America, where its forty-eight district, lie the by Canada to contiguous between north states and Washington, D.C., the Pacific and Atlantic the capital bordered

Oceans,

and Mexico to the south. The state of Alaska is in the northwest of the continent, with Canada to the east and Russia to the west across the Bering Strait. The state of Hawaii is an archipelago in the mid-Pacific. The country also possesses several territories in the Caribbean and Pacific. At 3.79 million square miles (9.83 million km2) and with over 308 million people, the United States is the third or fourth largest country by total area, and the third largest both by land area and population. It is one of
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the world's most ethnically diverse and multicultural nations, the product of large-scale immigration from many countries. The U.S. economy is the world's largest national economy, with an estimated 2010 GDP of $14.7 trillion (23% of nominal global GDP and 20% of global GDP at purchasing power parity). In the 19th century, the United States displaced native tribes, acquired land from France, Spain, the United Kingdom, Mexico, and Russia, and annexed the Republic of Texas and the Republic of Hawaii. Disputes between the agrarian South and industrial North over the expansion of the institution of slavery and states' rights provoked the American Civil War of the 1860s. The country accounts for 43% of global military spending and is a leading economic, political, and cultural force in the world. United States has operated under a two-party system for most of its history. Democratic Party, founded in 1824, and the Republican Party, founded in 1854.However third party was operated by the name of Progressive in 1912. Democratic Party: Democratic Party is considered center-left or "liberal" Republican Party: The Republican Party is considered center-right or "conservative" Barack Obama: He is the winner of the 2008 presidential election. The 44th U.S. president

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POLITICAL ANALYSIS
As we all know U.S.A is world power now a day and its politicians and government had many impacts on the overall economy of the world. From our point of view U.S.A had following political factors:

Environmental regulation and protections: The environment law foundation (ELF) is helps peoples use the law to protect and improve their environment and quality of life.

Tax policies: The USA new government collected revenue from the custom duties and selective taxes termed excise taxes on such items as liquor, tobacco, sugar and certain legal document.

International trade regulation and restrictions: The government of USA makes lot of polices about trade. Tariff policy etc

Consumer protection law: consumer protection law designed to ensure fair Trade competition and free flow of truthful information in the market. High Political stability: The United States has enjoyed 135 years of political stability since the end of the Civil War

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Freedom of the press. United States Ranked 36th In The World For Press Freedom The public's right to know is one of the central principles of American society

Strong infrastructure. America's Top 5 Cities Offering the Best Infrastructure VANCOUVER,, ATLANTA, MONTREAL, TORONTO, WASHINGTON Reducing poverty and inequality. Periods of strong economic growth, which bring more jobs and higher wages, have helped reduce poverty but have not eliminated it entirely.

FISCAL POLICY: Fiscal policy is considered any changes the government makes to the national budget in order to influence a nations economy. The approach to economic policy in the United States was rather laissez-faire until the Great Depression.

MONETARY POLICY: Monetary policy concerns the actions of a central bank or other regulatory authorities that determine the size and rate of growth of the money supply. In the United States, the Federal Reserve is in charge of monetary policy, and implements it primarily by performing operations that influence short term interest rates.

Foreign relations and military: The foreign policy of the United States is the policy for which the United States interacts with foreign nations and sets standards of interaction for its organizations, corporations and individual citizens.

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ECONOMICAL ANALYSIS
The United States has a capitalist, mixed economy, which is fueled by abundant natural resources, a well-developed infrastructure, and high productivity. According to the International Monetary Fund, the U.S. GDP of $14.870 trillion constitutes 24% of the gross world product at market exchange rates and almost 21% of the gross world product at purchasing power parity (PPP). It has the largest national GDP in the world, though it is about 5% less than the GDP of the European Union at PPP in 2008. The country ranks ninth in the world in nominal GDP per capita and sixth in GDP per capita at PPP. The United States is the largest importer of goods and third largest exporter though exports per capita are relatively low. In 2008, the total U.S. trade deficit was $696 billion. Canada, China, Mexico, Japan, and Germany are its top trading partners. In 2007, vehicles constituted both the leading import and leading export commodity.
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Japan is the largest foreign holder of U.S. public debt, having surpassed China in early 2010. The United States ranks second in the Global Competitiveness Report. In 2009, the private sector was estimated to constitute 55.3% of the economy, with federal government activity accounting for 24.1% and state and local government activity (including federal transfers) the remaining 20.6%. The economy is postindustrial, with the service sector contributing 67.8% of GDP, though the United States remains an industrial power. The leading business field by gross business receipts is wholesale and retail trade; by net income it is manufacturing. Chemical products are the leading manufacturing field. The United States is the third largest producer of oil in the world, as well as its largest importer. It is the world's number one producer of electrical and nuclear energy, as well as liquid natural gas, sulfur, phosphates, and salt. While agriculture accounts for just less than 1% of GDP, the United States is the world's top producer of corn and soybeans. The New York Stock Exchange is the world's largest by dollar volume. Coca-Cola and McDonald's are the two most recognized brands in the world. In August 2010, the American labor force comprised 154.1 million people. With 21.2 million people, government is the leading field of employment. The largest private employment sector is health care and social assistance, with 16.4 million people. About 12% of workers are unionized, compared to 30% in Western Europe.
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The World Bank ranks the United States first in the ease of hiring and firing workers. In 2009, the United States had the third highest labor productivity per person in the world, behind Luxembourg and Norway. It was fourth in productivity per hour, behind those two countries and the Netherlands. Compared to Europe, U.S. property and corporate income tax rates are generally higher, while labor and, particularly, consumption tax rates are lower.

MAIN SECTORS OF THE ECONOMY: RETAILING: Retailing is a major sector of the economy of the United States, indeed, it is often credited with "leading" the economy. Consumer goods are commonly obtained through international trade, but many consumer products are available that are "made in America". In 2011 it was reported that rising commodity and fuel prices and labor costs in China were exerting upward pressure on prices creating a dilemma for retailers who lost sales during the Great Recession and continue to face a weak market. Major retail firms in the United States include Wal-Mart, Montgomery Ward, Sears, Amazon.com, Target, Macy's, McDonalds, Burger King, Safeway, A & P, and The Home Depot. ENERGY: The United States is the largest energy consumer in terms of total use, using 100 quadrillion BTUs (105 exajoules, or 29000 TWh) in 2005. The U.S. ranks seventh in energy consumption per-capita after Canada and a
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number of other countries. The majority of this energy is derived from fossil fuels: in 2005, it was estimated that 40% of the nation's energy came from petroleum, 23% from coal, and 23% from natural gas. AGRICULTURE: Agriculture is a major industry in the United States and the country is a net exporter of food. With vast tracts of temperate arable land, technologically advanced agribusiness, and agricultural subsidies, the United States controls almost half of world grain exports. Agricultural products include wheat, corn, other grains, fruits, vegetables, cotton, beef, pork, poultry, dairy products, forest products, and fish. MANUFACTURING: The United States is the world's largest manufacturer, with a 2007 industrial output of US$2.69 trillion. In 2008, its manufacturing output was greater than that of the manufacturing output of China, India, and Brazil combined, despite manufacturing being a very small portion of the entire US economy as compared to most other countries. FINANCE: Measured by value of its listed companies' securities, the New York Stock Exchange is more than three times larger than any other stock exchange in the world. As of October 2008, the combined capitalization of all domestic NYSE listed companies was US$10.1 trillion. New York City is the financial capital of the world alongside London.

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SOCIAL ANALYSIS
It includes Geography, climate, and environment. The land area of the contiguous United States is approximately 1.9 billion acres (770 million hectares). The U.S. ecology is considered "mega diverse": about 17,000 species of vascular plants occur in the contiguous United States and Alaska, and over 1,800 species of flowering plants are found in Hawaii, few of which occur on the mainland. There are fifty-eight national parks and hundreds of other federally managed parks, forests, and wilderness areas. The United States is the world's third or fourth largest nation by total area (land and water), ranking behind Russia and Canada and just above or below China. The Appalachian Mountains divide the eastern seaboard from the Great Lakes and the grasslands of the Midwest The MississippiMissouri River, the world's fourth longest river system, runs mainly northsouth through the heart of the country Alaska's Mount McKinley is the tallest peak in the country and in North America The United States, with its large size and geographic variety, includes most climate types
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east of the 100th meridian, the climate ranges from humid continental in the north to humid subtropical in the south The southern tip of Florida is tropical, as is Hawaii Extreme weather is not uncommon the states bordering the Gulf of Mexico are prone to hurricanes, and most of the world's tornadoes occur within the country, mainly in the Midwest's Tornado Alley Altogether, the government owns 28.8% of the country's land area. Most of this is protected, though some is leased for oil and gas drilling, mining, logging, or cattle ranching; 2.4% is used for military purposes.

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TECHNOLOGICAL ANALYSIS
In 1876, Alexander Graham Bell was awarded the first U.S. patent for the telephone. Thomas Edison's laboratory developed the phonograph, the first long-lasting light bulb, and the first viable movie camera. Nikola Tesla pioneered alternating current, the AC motor, and radio. In the early 20th century, the automobile companies of Ransom E. Olds and Henry Ford promoted the assembly line. The Wright brothers, in 1903, made the first sustained and controlled heavier-than-air powered flight. The textile industry, which had previously relied upon labor-intensive production methods, was also rife with potential for mechanization. The United States has been a leader in scientific research and technological innovation since the late 19th century. USA got advance technology in many sectors and fields like:

Agriculture: Eli Whitney develops a machine to separate the seeds of short fibered cotton from the fibers. Farmers use large tractors running on fuel, and water that runs out of pipes.

Nuclear weapons: During World War II, the Manhattan Project developed nuclear weapons, ushering in the Atomic Age.

Research and development: the bulk of research and development funding, 64%, comes from the private sector. United States leads the world in scientific research papers and impact factor.

Biotech crops: the primary developer and grower of genetically modified food, representing half of the world's biotech crops.

Technological systems and infrastructure: began to construct roads and canals to connect the disparate parts of the nation.
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Iron and steel-making: integrating a steam boiler and propulsion system. Bloomers forges were prevalent in the colonies and could produce small batches of iron to be smithies for local needs (horseshoes, axe blades, plowshares)

Petroleum: By 1879, he controlled 90% of oil refined in the US. Standard Oil used pipelines to directly connect the Pennsylvanian oilfields with the refineries in New Jersey, Cleveland, Philadelphia, and Baltimore, rather than loading and unloading railroad tank cars, which enabled huge gains in efficiency and profitability

Electricity: Edison's patents on direct current generation and illumination allowed him to dominate the initial years of electric power distribution. introduced system for alternating current generators, transformers, motors, wires and lights that allowed for convenient voltage transformation and greater transmission efficiencies

Automobiles: Evolution Industries 2XL and 3XL Belt Drive for 19912009 Sportster with Diamond Terminator Clutch. Utilizes Original Style Clutch Cable. Diamond Terminator Series D Diaphragm Clutch. With Steel Inner Drive Hub. Apart from these technological innovations they are also got ETC. advance technologies NETWORKS, in FINANCIAL SERVICES, INFORMATION TELEPHONES, HEALTHCARE

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REVIEW AND RESEARCH


Topic Speaker : Kalashnikov : Whats in a Name? : PROFESSOR WILCOX

BREIF PROFILE OF THE SPEAKER: Ronald T. Wilcox is a Professor of Business at the University of Virginias Darden Graduate School of Business Administration. He teaches courses in the MBA, doctoral, and elective programs. He has undergraduate degrees from Xavier University, and MS and Ph.D. from Washington University in St.Louis. He was formerly an Economist at the U.S Securities and Exchange Commission. His primary research areas include the marketing of financial services and marketing research methodologies. His articles have appeared in professional journals such as Marketing science, Management science, Journal of Marketing Research, Journal of Business, Journal of Retailing, Journal of Marketing and Public Policy. He is the author of the book WHAT EVER HAPPENED TO THRIFT. He has consulted for the wide variety of organizations including PNC Bank, Navy Federal, Illinois Team Works, Mass Mutual and U.S Securities and Exchange Commission. He has also provided expert testimony in legal proceedings involving the interpretation of marketing
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research information. He has twice been recognized by Business Week Magazine as an outstanding MBA teacher.

RETAIL INDUSTRY IN USA


Retail Industry:

The retail industry is a sector of the economy that is comprised of individuals and companies engaged in the selling of finished products to end user consumers. Multi-store retail chains in the U.S. are both publicly traded on the stock exchange and privately owned.

Two Types of Retailers in the Industry:

Store Retailers: Those engaged in the sale of products from physical locations which warehouse and display merchandise with the intent of attracting customers to make purchases on site.

Office Depot Store Closing Sales Starbucks Service Commitment Neiman Marcus History & Trivia

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Non-Store Retailers: Those engaged in the sale of products using marketing methods which do not include a physical location. Examples of non-store retailing include:

Infomercials Direct Response television advertising Catalogue Sales In-Home Demonstrations Vending Machines E-commerce Multi-Level Marketing

Retail Industry Trends: Wal-Marts Impact: Wal-Mart is by far the largest retailer (and company) in the U.S. and the world in terms of revenue generated. The company operates a chain of discount wholesale stores that emphasize incredibly low prices and efficiency that enables the company to offer such low prices. Wal-Mart's successful business model has pushed down prices throughout the retail industry, forcing companies to adapt their business models in order to effectively operate in the new landscape, and forced small single-store businesses out of the markets which Wal-Mart enters.
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Big box retail stores account for only a small percentage of the total number of stores in the total 'General Merchandise Stores' sector in the US. In 2008 there were 35 big box retailers with 3,451 outlets. Despite this, the industry still generated revenue of approximately $335.0 billion over the year which equates to more than half of total revenue in 'General Merchandise Stores' sector in the US Wal-mart is the largest player in the industry in the US. The chain was founded by Sam Walton in 1962. It has become an important figure in social, economic and political debates, from health care to immigration to gun control. Despite the downturn in the US, Walmart still grew in 2008 with financial turmoil seeing struggling consumers substitute high end retail with the relatively less expensive alternatives offered by Wal-Mart. Increasing importance of E-Commerce: In the past ten years the Internet has changed the landscape of the retail industry. The Internet has enabled consumers to shop for and purchase goods online from the comfort of their home. This type of E-Commerce has created successful companies such as Amazon.com and eBay. Also, E-commerce has added new dimensions to traditional retailers as nearly every major company in the retail industry sells products through their own website (note that some retailers choose to run E-commerce operations in-house while others outsource the operations to Ecommerce specialists). The profitable e-commerce market has served as a launch pad for companies like GSI Commerce (GSIC) that provide e-commerce services
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for retailers. These companies design, create and manage e-commerce sales for retailers that do not wish to run online sales in-house. E-commerce currently represents approximately 2.7% of total retail industry revenue ($104 billion annually), a number that has steadily grown in past years. As younger, Internetsavvy customers mature and Internet-usage becomes more widespread over time among consumers of all ages, E-commerce will become increasingly relevant. Product Sales: One of the most influential growth factors for retailers is product cycles. In many cases, newly innovated products (such as new flat-panel TVs or an updated line of iPods are released with high prices to maximize profits early on. Competition between consumer retailers and increased supply from manufacturers drive down prices over time until each retailer makes little profit by the end of a product's life cycle. How quickly product cycles mature drives the profit a retailer makes. There are many product cycles co-occurring at any given point in time, and these product cycles vary between retail industry sub-sectors; for example, an important product cycle in consumer electronics retail currently is flat panel HDTVs). Credit Crunch: The 2007 credit market squeeze caused by the subprime lending crisis has hurt consumer confidence which has begun to make significant negative impacts on retail sales. A range of retailers such as Target, Office Depot, Dick's Sporting Goods, J. Crew Group (JCG), and AnnTaylor Stores (ANN) have reported falling
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same store sales and challenging selling environments due to the economy's struggles. Also, trouble in the US housing market has intensified due to the credit crunch. Downturns in the housing market hurt retailers like Home

Depot and Lowe's directly, but also hurts consumer electronics retailers like Best Buy and Circuit City because consumers who have recently purchased a home are more often to purchase new home theater and entertainment products to complement their new residence. Importance of Retail Sales: The Retail Sales report is an important leading indicator because it gives us a glimpse into what the upcoming quarterly Gross Domestic Product (GDP) number a number that gives an idea of how fast the economy is growing or shrinking might look like. Consumers make up approximately 70 percent of the United State's GDP. So if consumers are out there spending their money, GDP will probably show that the economy is growing, and vice versa. Retail Sales and Unemployment: The Retail Sales report also gives a glimpse into what the future unemployment picture might look like. Unemployment tends to rise when the economy slows down or shrinks, and it tends to decline when the economy is strong and growing. Retail Sales affecting the GDP gives an idea of how the economy might be performing, it gives an insight into how the GDP numbers would affect unemployment.
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Retail Sales and Company Profits: The Retail Sales report provides a crucial glimpse into how individual retailers will most likely perform in the future. When retail sales are up, you know that earnings and profits at retailers like Walmart (NYSE: WMT), Home Depot (NYSE: HD) and Macy's (NYSE: M) are going to be growing. Conversely, when retail sales are down, earnings and profits at most retailers are going to be down. However, Walmart does seem to be one retailer that is able to buck that trendthanks to its position as a discount retailer that thrives during difficult economic times. Second most Profitable Industry in USA :Retail industry is second among all the US industries as far as growth is concerned. Yearly turnover of the US retail industry has been around US$4 trillion. Retail industry in the United States of America is expected to maintain the same trend of growth in future as well. This industry provides huge employment opportunities for the Americans. The United States is home to a number of leading brands in global retain industry like Wal-Mart, Apple store, Disney store, and many more. Wal-Mart alone employs more than 1 million people in the US and nearly 400,000 across the globe. Yearly sales turnover of retail industry in the United States is huge and it accounts for more than 12% of total trade volume of all the US based businesses. US retail industry is primarily characterized by prevalence of single-store businesses. These businesses account for nearly 95% of retailers doing business
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in the country. Total volume of transactions of single-store businesses is less than half of the yearly transaction of retail industry in the United States of America. Gross margin varies for different segments of the US retail industry; but generally it remains under 33% for most of the segments. American retail industry provides more than 11% of total employment opportunities in the country. In the coming years, this sector is expected to provide more than 14% of total employment opportunities in the country. According to available data, the industrys total sale volume in 2007 was nearly US$4,500 billion, while the corresponding figure in the 2006 that was around US$3,900 billion. At the same time, e-commerce retail sale that was around US$122 billion in 2006, contributed nearly US$131 billion in 2007.

CONCLUSION The world faces a critical challenge to improve the production with a quality concern on one hand and address the issue on the sustainability on the other hand. Human resource development plays a dominant role in this direction. IIPM took a lead in addressing the issue by organizing GOTA in the beginning
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of the course to provide a glimpse of the management issues facing the global economy. The participants after the visit are well informed, highly motivated and have developed the alternatives to various problem solution in their mind. The tour undoubtedly increased the knowledge, skill and improved the managerial behavior. It delivered multi-disciplinary learning which will complement and supplement the course. It also offered the insight into latest research and development in areas like: management, finance and accounting, marketing, strategy, global economy and sustainable development. It has deepened the awareness and understanding of the workings of the global economy and brought a new perspective and inspiration for the entrepreneurial learning.

Bibliography: GOTA case studies by Darden School of Bussiness.

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http://retailindustry.about.com/od/statisticsresearch/p/retailindustry.htm http://www.wikinvest.com/industry/Retail http://en.wikipedia.org/wiki/PEST_analysis

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