Monday, February 28, 2011

Eurotrip Day 3 - Praha!

Today we got into the true spirit of Praha.

The Monday began with a presentation by Mr.Roman Joch, Director of the Civic Institute. This was possibly the best start to the day because it was an engaging presentation on the Czech society as a whole. Mr. Joch discussed the socio-cultural shifts, and the effects the Communist regime has had on the Czechs. He also spoke about some of the major macroeconomic trends that are prevalent in Europe and some of the implications of the Czech Republic becoming a member of the European Union. All in all, the session gave us a good foundation for analyzing companies for the rest of our visit.

The second session of the morning was by folks from Moody's Analytics. They were basically economists and discussed the Czech Republic's smooth transition into a free-market economy from a socialist economy. They also gave us insights into real convergence as opposed to nominal convergence and discussed how Czech companies initially faced problems with the collapse of th communist block. Export is the main driver of the Czech economy. Right now the Government is providing a lot of subsidies to increase Foreign Direct Investments, which is what is helping the GDP. However, this is not a sustainable model, especially for an aging populace, and must be viewed as a means to fuel growth.

We also discussed the fiscal and monetary policies of the Czech National Bank. Initially the Koruna was pegged to a basket of USD and Deutschmark. However, after a crisis in May 1997, the rising inflation led to inflation targeting through indirect methods. This means adjustment of interest rates as opposed to pegging the currency. As interesting as this sounds, I must stop here. I shall include more details in my official report.

After a quick lunch (we chose to go to Sunway of all places!), we (Group B) visited Lindab which is a company specializing in ventilation and building components. Group A visited a similar company called Janka Engineering. Both the groups were given tours of the facilities and a good insight into each company's supply chain operations.

The evening was something all of us were waiting for with bated breath. We went on a Brewery Tour of a local brewery that has been in existence since 1499. It was a small and beautiful facility. We were all first shown a short video and served some authentic Czech beer. I could not tell the difference, but some of my fellow MBA students who were beer enthusiasts said this was one of the best beers they had tasted. Apparently, this beer is made completely with barley and this is how beer is supposed to be made (corrections welcome). Our tour guide was a jolly old man who actually looked like he absolutely enjoyed his work. He was also the master brewer. After showing us around the facility, he gave us all beer glasses. Since this place is just a short walk from the place we are staying, we might go back there some time before we return.

Tomorrow we will be heading to GE Money Bank and DHL. More updates after we get back.

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