Infographic: History of Marketing Channels

As this blog is visited mostly by MBA aspirants, I have something very interesting for you: an infographic history of Marketing. I found this here.

If you wish to copy this, please acknowledge this blog! 

Click on the picture for a larger view.

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Reflections on Friendship

Sometime in 1991, I bought a book titled, Treasury of Courage and Confidence, by Norman Vincent Peale. The book is a compilation of stories on human instincts and emotions. There is one particular story on friendship that caught my imagination and which I remember to this day.

I have put that story, with my own title, in the picture below; I shot this photograph at the ITR, a DRDO lab located at Chandipur-on-Sea. I hope you like this reflection on friendship.

The Explainer: Stock Market - Part I

Last week, I started 'The Explainer' - a feature on explaining important political and economic issues. Initially I was skeptical of your response; however, your response to the first article on FDI was overwhelming and extremely positive. Thank you!

The Explainer this Friday will focus on 'Stock Markets'. In the space below, I have explained a lot of stock market terms, like dividend and demat accounts. I will try to explain these complicated terms in a layman's language.

What is the basic difference between a Private Company and Public Company?

In a private limited company, the minimum number of people required to start the business is two (2); in other words, you require a minimum of two people to contribute to the capital. In a public limited company, seven (7) people are required to start the business.

As for the maximum members who can contribute to the capital of a private company, it is 50. In the case of a public limited company, it is unlimited; in other words, a public company can have lakhs of people contributing to the capital base. For example, Reliance Industries, a public limited company, has more than two million shareholders.

In a very simple way, the people who start the company are called promoters.

What is a 'Share'?

The total capital of a company is divided into a large number of units. Each unit is given an equal value; such value is called par value (also called face value). Each such unit (with an equal value) is called a ‘share’. In short, a share is a unit of capital.

Example:

Let us say that you and six of your friends wish to start a public limited company, with Rs10,00,00,000 (Rs Ten Crore). Now you do not wish to invest a lot of your own money in the company because there is an inherent risk associated with it (like you may lose your entire investment if the company goes bankrupt!). So follow a simple principle of investment: use OPM – Other Peoples’ Money!

To make it easy for people to invest in small parts, you divide the total capital of Rs10 crore into 1 crore units, each with an equal value of Rs10. In this example, Rs10 crore is the total capital of the company, the total number of shares is 1 crore, and Rs10 is the par value (also called face value) of each share of the company.

The company now comes out with a prospectus, asking people to subscribe to the capital of the company. Let us say, I have bought 2000 shares of your company, at Rs10 each, for a total investment of Rs20,000. So now I have become a shareholder of your company; in other words, a co-owner of your company. 

What is Dividend?

There are different names for the returns gained on various kinds of investments. For example, when you invest money in a Fixed Deposit, the return is called ‘interest’. Similarly when you invest in shares, the return on such investment is called dividend. 

Let me open this up. A dividend is that part of the profit that is distributed among shareholders. Each share-holder will receive her share of the dividend in ‘proportion’ to her share holding (as a part of the total shares issued). In other words, dividend can be termed as distributed profit.

Recall that I had purchased 2000 shares. Now if the company declares a dividend of 20% on the face value of the share, then the dividend would be Rs2 per share. So, the total dividend I would receive would be Rs4000 (2000 shares x 2 per share).

  

What is a Stock Exchange?

A stock exchange is a marketplace where the shares of public limited companies are bought and sold. In India, the two main stock exchanges are the National Stock Exchange (NSE; India's largest) and the Bombay Stock Exchange (BSE; Asia's oldest, established 1875).

What comprises a Stock Market?
There are two major components in a stock market: primary market and secondary market.

What is a Primary Market?
The primary market can also be called capital market. It is a market in which newly issued shares are sold and purchased, via application. Hence, the primary market is also known as ‘new issues market’.

You must have seen ads of companies coming out with new issue of shares: in other words, these companies are raising fresh capital and are asking members of the public to buy shares (by subscribing to the capital) at the quoted par value and thus become shareholders.

What is a Secondary Market?

In this kind of a market, you deal in shares which already exist. In other words, it is a market in which previously issued shares are traded. Trading in such shares is done through a stock exchange.

Can you buy / sell shares on a stock exchange directly?

No. One needs membership of a stock exchange to be able to buy / sell shares on a stock exchange. The membership of a stock exchange comes with a very high price tag; hence it is difficult for common people like you and me to directly trade shares on a stock exchange.

So, how do you buy / sell shares?

We can buy / sell shares by approaching a stock broker, who is already a registered member of a stock exchange. There are a large number of stock brokers in the market (like Motilal Oswal and Anand Rathi) who can help us buy / sell shares.

Recall again that I had bought 2000 shares. Now if I wish to sell these shares, I need to have two things: (1) approach a stock broker to find a buyer and (2) own a demat account.

The easy part is that a stock broker can help me find a buyer on the stock market and help me dispose of my shares.

What is a demat account?
Demat stands for dematerialisation. In the past, when you purchased shares, you received hard / physical copies of certificates as proof of ownership of shares (just like a fee receipt or a fixed deposit receipt).

However, in order to avoid legal hassles like stealing of share certificates (and tax transparency) and administrative problems like crumpled share certificates, demat accounts were introduced.

A demat account can be opened with a bank or a stock broking house, for which the bank charges a fee. It works like a normal bank account or like your email account. In the most basic way, when you purchase shares, an electronic entry is entered in your demat account that mentions such a purchase. Similarly when you sell shares, another entry is made which reflects such a sale. In other words, a hard copy of your demat account will look like the passbook of your savings account.

Note: Whenever I write the next part of this article (if it is not on next Friday), I will focus on stock brokers, like bulls and bears and a few more stock market terms like wash sales.

(Read The Explainer: Stock Market - Part II and Part III)

(Please select your reaction to this post in the footer below. Thank you.)

Microsoft: An Infographic History

Microsoft is the largest software maker in the world. Check out this infographic capturing the history of the Redmond, Washington-based software giant.  

Click on the picture for larger view.

Since I do not remember the Web site where I collected this infographic (downloaded a few months back), the copyrights, if any, belong to its creator(s).

Unsolved Mystery: Reactions to Post Disappear!

As you know, in the footer to each post, I have included Reactions to the Post via check boxes, like - Is this Post - Knowledge Add, Cool, Stupid. 

Till about 4 pm on July 12, the post titled The Explainer: Foreign Direct Investment had 62 Knowledge Add and 18 Cool reactions (with 0 Stupid). 

Currently, I find that there are only 50 Knowledge Add and 16 Cool; effectively, this means that reactions have disappeared! 

How can this happen? If you can throw some light on this, please post comment.

U.S. cuts Pakistan's Pocket Money

The U.S. has announced that it has withheld U.S.$800 million in military aid to Pakistan. The amount is almost one-third of the total annual military aid from the U.S. to the Pakistani military. 

Since the launch of the War on Terror by the U.S. in the wake of the September 11 (2001) terror attacks, Pakistan has received over U.S.$10 billion in military aid from the U.S. for fighting terrorists.

(However, this move does not affect the U.S. pledge of U.S.$1.5 billion in annual economic and development assistance to Pakistan through 2014.) 

In an interview with ABC News, Bill Daley, White House Chief of Staff, said this: “The truth of the matter is, our relationship with Pakistan is very complicated. Obviously, they’ve been an important ally in the fight on terrorism. They have been the victim of enormous amounts of terrorism. But right now they’ve taken some steps that have given us reason to pause on some of the aid which we’re giving to the military, and we’re trying to work through that. It’s a complicated relationship and a very difficult complicated part of the world. Obviously there's still a lot of pain that the political system in Pakistan is feeling by virtue of the raid that we did to get Osama bin Laden. Something that the president felt strongly about. We have no regrets over. But the Pakistani relationship is difficult, but it must be made to work over time. But until we get through these difficulties, we’ll hold back some of the money that the American taxpayers have committed to give." 

Among the major reasons behind the U.S. decision to pull the plug on military aid to Pakistan, here are a few: 

(a)  Pakistan's two-faced approach to fighting terror: For several years now, Pakistan's military has fought against the Pakistani Taliban while turning a Nelson's Eye to the dangerous Afghan Taliban and the Haqqani terrorist network. 

While the Pakistani Taliban is fighting the Pakistani State, i.e. the political and military establishment (hence the Paki military action against the group), the main targets of the Afghan Taliban and the Haqqani network are the U.S.-led international forces. 

Both the Afghan Taliban and the Haqqani network are used by Pakistan to gain strategic depth in Afghanistan to install a pro-Pakistan (and an anti-India) government in Kabul after the American and other international forces withdraw from Afghanistan. 

(b)  The Raymond Davis Affair: Raymond Davis, a CIA contractor, was arrested by Pakistan security forces after he killed two Pakistani men who he alleged were trying to rob him. Though he was released after blood money (compensation money in exchange of withdrawal of criminal case) was paid to the families of the victims, the case whipped up a frenzy against the U.S. across Pakistan. 

The Pakistani government, under tremendous public pressure and trying to show some spine, asked the U.S. to withdraw all CIA contractors and other special operations forces from Pakistani territory. This action, coupled with Pakistan's selective against terror groups, rattled the Americans. 

(c)  OBL's Killing: Osama bin Laden was found and killed by the U.S. special forces in a mansion, close to Pakistan's main military academy. The world, especially the U.S., was rattled by the fact that the world's most wanted terrorist was living securely in one of Pakistan's most garrisoned towns. Since then, there have been allegations of Pakistani complicity - especially of the ISI or the military - in harboring OBL.

Says Bruce Reidel, an expert on South Asian affairs:  "Not only is the U.S.-Pakistan relationship in a downward spiral, it doesn't look like there is any bottom in sight. It is hard to imagine things betting better and easy to imagine things getting worse. Foreign aid is never popular, and foreign aid for a country hiding enemy No. 1 is particularly unpopular."

Two days ago, Admiral Mike Mullen even alleged that Pakistan government was behind the  recent killing of journalist Saleem Shahzad, who had reported on terrorist sympathisers in the Pakistani navy. 

Now, Pakistan has hit back at the U.S. move to cut military aid. Putting on a brave face, a Pakistani military spokesman said that, "Pakistan does not need foreign aid for anti-terror operations. We conducted Swat and Waziristan operations without any aid." 

Brave words but Pakistan would need more than brave words to stay afloat. In the days to come, we will see many anti-U.S. Pakistanis parroting 'Look, the Americans have shown their true colours. They are betrayers and would dispose of us like a condom once the act is finished!"

As for the Americans, they do not know if their gamble will pay off. OBL is dead but anti-American terror groups are rampant and are in fact, thriving.

Let us see who blinks first: the U.S. or Pakistan.

(You can access the full transcript of the Bill Daley interview on ABC News here.) 

Reflections on Life

For this weekend, no music videos; just these reflections on life. I found this here.