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Bachelors Program in Business Management (BBA) Year-II
Specialization: – Business Administration
(i) Attempt any four Cases
(ii) All Cases carry equal marks.
Case 1 :-
“ Left or Right?”
Rajinder Kumar was a production worker at Competent Motors Limited (CML), which made components and accessories for the automotive industry. He had worked at CML for almost seven years as a welder, along with fifteen other men in the plant. All had received training in welding, both on the job and through company-sponsored external programmes. They had friendly relations and got along very well with one another. They played volleyball in the playground regularly before retiring to the quarters allotted by the company. They ate together in the company canteen, cutting jokes on each other and making fun of anyone who dared to peep into their privacy during lunch hour. Most of the fellows had been there for quite some time, except for two men who had joined the ranks only two months back.
Rajinder was generally considered to be the leader of the group, so it was no surprise that when the foreman of the department was transferred and his vacancy was announced, Rajinder applied for the job and got it.
There were only four other applicants for the job, two from mechanical section and two from outside. When there was a formal announcement of the appointment on a Friday afternoon, everyone in the group congratulated Rajinder. They literally carried him snacks and celebrated the event enthusiastically.
On Monday morning, Rajinder joined duty as Foreman. It was company practice for all foremen to wear blue jacket and a white shirt. Each man’s coat had his name badge sewn onto the left side pocket. The company had given two pairs to Raijnder. He was proud to wear the coat to work on Monday.
People who saw him from a distance went upto him and admired the new blue coat. There was a lot of kidding around calling Rajinder as ‘Hero’, ‘Raja Babu’ and ‘Officer’ etc. One of the guys went back to his locker and returned with a long brush and acted as though he were removing dust particles on the new coat. After about five minutes of horseplay, all of the men went back to work.
Rajinder went back to his office to get more familiar with his new job and environment there.
At noon, all the men broke for lunch and went to the canteen to eat and enjoy fun as usual. Rajinder was busy when they left but followed after them a few minutes, later. He bought the food coupon, took the snacks and tea and turned to face the open canteen. Back in the left side corner of the room was his old work group; on the right hand side of the canteen sat all the other foremen in the plant all observed in their blue coats.
At that point of time, silence descended on the canteen. Suddenly both groups looked at Rajinder anxiously, waiting to see which group he would eat with.
- Whom do you think Rajinder will eat with? Why?
- If you were one of the other foremen, what could you do to make Rajinder’s transition easier?
- What would you have done if you were in Rajinder’s shoes? Why?
Case 2 :-
Dr. Reddy Instruments is a medium-sized the Industrial Estate on the outskirts of Hyderabad. The company is basically involved with manufacturing surgical instruments and supplies for medical professionals and hospitals.
About a year ago, Madhuri, aged 23, niece of the firm’s founder, Dr. Raja Reddy, was hired to replace Ranga Rao quality control inspector, who had reached the age of retirement. Madhuri had recently graduated from the Delhi College of Engineering where she had majored in Industrial Engineering.
Balraj Gupta, aged 52, is the production manager of the prosthesis dept., where artificial devices designed to replace missing parts of the human body are manufactured. Gupta has worked for Dr. Reddy Instruments for 20 years, having previously been a production line supervisor and, prior to that, a worker on the production line. Gupta, being the eldest in his family, has taken up the job quite early in life and completed his education mostly through correspondence courses.
From their first meeting, it looked as though Gupta and Madhuri could not get along together. There seemed to be an underlying animosity between them, but it was never too clear what the problem was.
Venkat Kumar, age 44, is the plant manager of Dr. Reddy instruments. He has occasionally observed disagreements between Madhuri and Gupta on the production line, Absenteeism has risen in Gupta’s department since Madhuri was hired as quality control inspector. Venkat secretly decided to issue a circular calling for a meeting of all supervisory personnel in the production and twelve quality control departments. The circular was worked thus:
Attention: All Supervisors Production Quality Control Departments
A meeting is schedule on Monday, Feb 20, at 10 a.m. in room 18. The purpose is to sort out misunderstanding and differences that seem to exist between production and QC personnel.
Sd. Venkat Kumar
Venkat starred the meeting by explaining why he had called it and then asked Gupta for his opinion of the problem. The conversation took the following shape:
Gupta: That Delhi girl you recruited is a ‘fault finding machine’ in our dept. Until she was hired, we hardly even stopped production. And when we did, it was only because of a mechanical defect. But Madhuri has been stopping everything even if ‘one’ defective part comes down the line.
Madhuri: That’s not true. You have fabricated the story well.
Gupta: Venkat, our quality has not undergone any change in recent times. It’s still the same, consistently good quality it was before she came but all she wants to do is to trouble us.
Madhuri: May I clarify my position at this stage? Mr. Gupta, you have never relished my presence in the company. I still remember some of the derisive remarks you used to make behind my back. I did take note of them quite clearly!
Suresh (another quality control supervisor): I agree with Madhuri Venkat. I think that everyone knows that the rules permit quality control to stop production if rejections exceed three an hour. This is all Madhuri has been doing.
Gupta: Now listen to me. Madhuri starts counting the hour from the moment she gets the first reject. Ranga Rao never really worried about absolute reject rule when he was here. She wants to paint my department in black. Is not that true Riaz Ahmed?
Ahmed (another production supervisor): It sure is Gupta. Every time Maduri stops production, she is virtually putting the company on fire. The production losses would affect our bonuses as well. How long can we allow this ‘nuisance’ to continue?
Thirty minutes later Madhuri and Gupta were still lashing out at each other. Venkat decided that ending the meeting might be appropriate under the circumstances. He promised to clarify the issue, after discussion with management, sometime next weel.
- Should Venkat have called a meeting to sort out this problem? Why or Why not?
- What do you say about the rule calling for production to halt if there are more than three rejects in an hour? Should it have been enforced? Explain.
- What do you feel is the major problem in this case? The solution?
Case 3 :-
M/s. ABC Ltd. is a medium – sized engineering company production a large-range of product lines according to customer requirements. It has earned a good reputation as a quick and reliable supplier to its customers because off which its volume of business kept on increasing. However, over the past one year, the managing director of the company has been receiving customer complaints due to delays in dispatch of products and at times, the company has to pay substantial penalty for not meeting the schedule in time.
The managing director convened an urgent meeting of various functional managers to discuss the issue. The Marketing Manager questioned the arbitrary manner of giving priority to products in manufacturing line, causing delays in products that are in great demand and over-stocking of products which are not required immediately. Production control manager complained that he does not have adequate staff to plan and control the production function; and whatever little planning he does, is generally overlooked by shop floor manager. Shop floor manager complained of unrealistic planning, excessive machine breakdowns, power failure, shortage of materials for schedule. Maintenance manager, say that he does not get important spares required for equipment maintenance because of which he cannot repair machines at a faster rate. Inventory control manager says that on the one hand the company often access him of carrying too much stock and on the other hand people are grumbling over shortages.
Fed up by mutual mud-slinging, the managing director decided to appoint you, a bright management consultant with training in business management to suggest way and means to put his “house in order”.
- How would you examine if there is any merit in the remarks of various functional managers?
- What, in your opinion, could be the reasons for different managerial thoughts in this case?
- How would you design a system of getting correct information about job status to identify delays quickly?
- List some scientific decision aids that you may prescribe to improve the situation.
Case 4 :-
In Search of Greener Pastures
Rohit joined ABC Ltd., a heavy engineering unit, having a turnover of about Rs. 20 crores, in the junior management cadre as a direct recruit. During his tenure with the company, Rohit proved to be a dedicated and sincere worker which earned him quick promotions in the organization. He had made a mark in whichever department he had worked and his departmental heads were happy with his work. After serving the company for a period of ten years, Rohit felt that there was no scope for further improvement in his position and started applying for better jobs commensurate with his experience. He finally succeeded in getting a job but his new employer wanted him to join within one month. To this, Rohit pleaded inability, as he was required to give three month’s notice to his present employer, as per company rules. However, he said he would discuss the matter with the personnel manager and try to reduce the period to one month by paying two month’s salary in lieu of the required notice. Rohit accordingly, submitted his resignation to the present employer and requested the departmental head to recommend his case to the personnel manager for relieving him after one month. The departmental head, said that he would discuss the matter with the personnel manager and try his best to help him. However, the latter turned down Rohit’s request stating that the rules require him to give three month’s notice and that the alternative suggested by Rohit was not acceptable.
When Rohit learnt about the personnel manager’s response, he approached his prospective employer to explain his difficulty, which was beyond his control, and requested them to extend his joining period to three months. This was acceptable by them, as a special case.
The departmental head took up Rohit’s case with the management and suggested that in future, the officers who resigned may be permitted to give one month’s notice and two month’s salary in lieu of a further two month’s notice, if required, so as to ensure against any unnecessary delay in the work of the department. But, the management refused to accept this proposal, stating clearly that the company’s policy cannot be changed.
- Did the management take a correct decision in Rohit’s case under the circumstances?
- What steps should the departmental head take to do not adopt an indifferent attitude towards their work during the three month’s notice period?
- If you were in the position of the management, how would you have handled the situation?
Case 5 :-
Ramesh Publishing Company
Mr. Ramesh was the founder of a publishing company specializing in accounting books. Within a short span of time, the company prospered and grew very fast. Its sales rose from Rs 60,000 the first year to Rs 6lakhs three years later. The editing, production and sales staff grew almost as fast.
But the company was having problems, and of late uncertainly and confused grew in the company. New people were making decisions to the best of their ability but many of them did not fit together. One of Mr. Ramesh’s key associates suggested that the company ought to have better planning and certainly needed clear policies to guide decisions making, but Mr. Ramesh was unimpressed. His response was that if he took time off to plan and develop policies today, he might not have a company tomorrow, and that he had no choice but to spend his time meeting today’s problems as they came up.
- If you were one of the newer managers in the company and had taken a course in the basics of management, what would you say to Mr. Ramesh?
- Outline exactly how would you show him that planning and policy making are important to the company if it has to grow effectively.
Case 6 :-
THE Marquee Garment Retailer
I knew we were right, Neil Simon thought himself as the steward brought him a glass of Cardhu single malt. The Whisky felt good after week when he was allowed to drink nothing but champagne by his hosts in India. Ah, but then they had reason to celebrate. Simon signaled to the steward that he’d like a refill – he planned to take his time over the second one – and thought about the week that had been.
Simon, the director-in-charge of international franchise operations at Smith & Robin, a $8-billion marquee garment retailer, had arrived in India exactly seven days back, with mixed feelings. He’d been at S&R Less the eight months-he had been hired when the company decided to abandon its twenty-year old strategy of expanding geographically through owned outlets as against franchised ones-but he knew the India trip was one of those things that could make or break his career.
This wasn’t his first visit to India. He’d visited it as a backpacker in his second year at collage, then as a middle-level executive of a cola company, and then again, soon after he joined S&R. It was during the last visit that he noticed the kind of brand equity the company enjoyed in India. S&R was a know name and there was huge demand for its offerings. The grey market did a thriving business in both real S&R products, smuggled into the country, and ersatz ones. So, he had gone back and made case for India.
“Let us go in now and seed the market and leverage our equity there “He’d told the board. Convincing the board hadn’t made his job any easier. Then, there were tales of poor infrastructure, horror stories about how foreign investors were treated, and wholly inappropriate real estate options. Worse, some members of the board weren’t fully convinced about the ‘franchise strategy’, S&R had moved to. “I see that we are shutting three of our profitable shops in London, “one of the board members Barbara Rutherford had shifted. Fortunately for Simon, the chairperson lucy Walters had to come to his rescue. “we decide that franchising was the best way to grow last year Barbara; this meeting isn’t about that.
Finally, a compromise had been reached. S&R would enter the country through one or two pilot outlets’. To Simon went the task of finding a suitable franchise. That had been easy. The Kathuria family that ran S&R Malaysia franchise had business interests in India, and it hadn’t taken Simon much to convince them to take on the India franchise.
The two Kathuria-owned franchise store had opened in upmarket malls, Delhi and Mumbai, the previous week and Simon had winged it down to be there at the opening. The Mumbai outlet 7,000 square feet large; the Delhi one, 3,000 square feet. And both sold a range of garments for men and women, lingeries, and toiletries-all imported , and all under the S&R brand name, in keeping with the company’s policy of only selling the best quality products sourced at the least possible cost at all its outlets.
The tariff regime in India made some prices look Ludicrous-a women’s shirt cost over Rs2, 500; men’s jeans, Rs3,200-and made S&R, which was perceived to be a high-end value-for-money brand into a premium one with aspirational trimmings. Indeed, the only other stores that stocked merchandise of compatable prices were boutiques devoted to designer wear.
|S&R’S Long–term Prospects|
|Best-case Scenario Worst-case Scenario|
|· Indian customers continue treating S&R as
an aspirational brand.
· The company is able to sustain its premium pricing in India.
· S&R repeats the Delhi-and Mumbai-model in other metros.
· The scalability across centers makes S&R’s local franchise profitable.
|· The novelty factors surrounding S&R’s launch wears off.
· Customers start asking questions about the super-premium positioning.
· Sales plateau in the Delhi and Mumbai stores.
· The franchise shows no interest in expanding a loss-making operation.
The India –strategy’s detractors at HQ had raised objections over the size of the Delhi outlet (“S&R isn’t associated with cramped buying spaces”) and the price-tags (“Indians aren’t dumb, you know). But Simon managed to steer clear of the flak. The fact that leading consulting firms estimated India’s organized retail business to zoom from Rs 5,500 crore in 2000, to Rs 35,000 crore in 2005, helped his cause.
Then, he had landed in India; the Kathurias had welcomed him like he was royality; he had been allowed to drink nothing but champagne (“Here’s to the stop reopening”; “ Here’s to our first sale”, “Here’s to our first individual sale over Rs 100,000”….); and things had gone like a dream.
The launches had coincided with India’s equivalent of the Christmas season-the festival of lights, they called it, Diwali. The two stores’ initial stock had been sold out in three days flat. And the fact that some of the products still carried their dollar prices-an oversight by the stores and a full 40 per cent lower than their prices in Indian rupees, thanks to the duties- hadn’t deterred shoppers. True, there appeared to be more demand for lingerie and cosmetics, but the other products had takers too.
Simon was surprised by the reaction. He knew that he would have to wait a few months to understand the real demand for S&R products in India. Only once the initial novelty had worn off, would the company have better idea of what Indian customers bought, and what they did not. He was also aware that while the mere fact S&R products were available in the country could have encouraged customers to overlook the 40 percent mark-up (thanks to import duties), they’d soon move to the ‘value’ buying behaviour Indians were famous for.
Simon had raised these issues at his last meeting with the Kathurias, but they were still celebrating the phenomenal success of their opening gambit and their only response had been to ply Simon with, what else, more champagne. Still, he had to admit, it had been a good beginning.
Simon signaled the steward for another refill. What the heck.. he’d earned it.
- Has Smith & Robin (S&R) chosen the right entry strategy for the Indian market?
- “S&R has taken a risk in entering a market that is large, but offers little flexibility in terms of price and business environment” Discuss.
- What kind of advance planning and strategic thinking should go into S&R’s corporate planning efforts so that the Indian consumer gets ‘value for money’?
Bachelors Program in Business Management (BBA) Year-I
Note :- Solve any 4 case study
All case carries equal marks
Case No : 1
Although many people believe that the World Wide Web is anonymous and secure from censorship, the reality is very different. Governments, law courts, and other officials who want to censor, examine, or trace a file of materials on the Web need merely go to the server (the online computer) where they think the file is stored. Using their subpoena power, they can comb through the server’s drives to find the files they are looking for and the identify of the person who created the files.
On Friday June 30, 2000, however, researches at AT & T Labs announced the creation of Publius, a software program that enables Web users to encrypt (translate into a secret code) their files – text, pictures, or music – break them up like the pieces of a jigsaw puzzle, and store the encrypted pieces on many different servers scattered all over the globe on the World Wide Web. As a result, any one wanting to examine or censor the files or wanting to trace the original transaction that produced the file would find it impossible to succeed because they would have to examine the contents of dozens of different servers all over the world, and the files in the servers would be encrypted and fragmented in a way that would make the pieces impossible to identify without the help of the person who created the file. A person authorized to retrieve the file, however, would look through a directory of his files posted on a Publius – affiliated website, and the Publius network would reassemble the file for him at his request. Researchers published a description of Publius at www.cs.nyu.edu/waldman/publius.
Although many people welcomed the way that the new software would enhance freedom of speech on the Web, many others were dismayed. Bruce Taylor, an antipornography activist for the National Law Center for Children and Families, stated : “It’s nice to be anonymous, but who wants to be more anonymous than criminals, terrorists, child molesters, child pornographers, hackers and e-mail virus punks.” Aviel Rubin and Lorrie Cranor, the creators of Publius, however, hoped that their program would help people in countries where freedom of speech was repressed and individuals were punished for speaking out. The ideal user of Publius, they stated, was “a person in China observing abuses of human rights on a day – to – day basis.”
- Analyze the ethics of marketing Publius using utilitarianism, rights, justice, and caring. In your judgement, is it ethical to market Publius ? Explain.
- Are the creators of Publius in any way morally responsible for any criminal acts that criminals are able to carry out and keep secret by relying on Publius ? Is AT & T in any way morally responsible for these ? Explain your answers.
- In your judgment, should governments allow the implementation of Publius ? Why or why not ?
Case NO. 2
A JAPANESE BRIBE
In July 1976, Kukeo Tanaka, former prime minister of Japan , was arrested on charges of taking bribes ($ 1.8 million) from Locjheed Aircraft Company to secure the purchase of several Lockheed jets. Tanaka’s secretary and serial other government officials were arrested with him. The Japanese public reacted with angry demands for a complete disclosure of Tanaka’s dealings. By the end of the year, they had ousted Tanaka’s successor, Takeo Miki, who was widely believed to have been trying to conceal Tanaka’s actions.
In Holland that same year, Prince Bernhard, husband of Queen Juliana, resigned from 300 hundred positions he held in government, military, and private organizations. The reason : He was alleged to have accepted $ 1.1 million in bribes from Lockheed in connection with the sale of 138 F – 104 Starfighter jets.
In Italy , Giovani Leone, president in 1970, and Aldo Moro and Mariano Rumor, both prime ministers, were accused of accepting bribes from Lockheed in connection with the purchase of $ 100 million worth of aircraft in the late 1960s. All were excluded from government.
Scandinavia , South Africa , Turkey , Greece , and Nigeria were also among the 15 countries in which Lockheed admitted to having handed out payments and at least $ 202 million in commissions since 1970.
Lockheed Aircraft’s involvement in the Japanese bribes was revealed to have begun in 1958 when Lockheed and Grumman Aircraft (also an American firm) were competing for a Japanese Air Force jet aircraft contract. According to the testimony of Mr. William Findley, a partner in Arthur Young & Co. (auditors for Lockheed), in 1958 Lockheed engaged the services of Yoshio Kodama, an ultra right – wing war criminal and reputed underworld figure with strong political ties to officials in the ruling Liberal Democratic Party. With Kodama’s help, Lockheed secured the Government contract. Seventeen years later, it was revealed that the CIA had been informed at the time (by an American embassy employee) that Lockheed had made several bribes while negotiating the contract.
In 1972, Lockheed again hired Kodama as a consultant to help secure the sale of its aircraft in Japan . Lockheed was desperate to sell planes to any major Japanese airline because it was scrambling to recover from a series of financial disasters. Cost overruns on a government contract had pushed Lockheed to the brink of bankruptcy in 1970. Only through a controversial emergency government loan guarantee of $ 250 million in 1971 did the company narrowly avert disaster. Mr. A. Carl Kotchian, president of Lockheed from 1967 to 1975, was especially anxious to make the sales because the company had been unable to get as many contracts in other parts of the world as it had wanted.
This bleak situation all but dictated a strong push for sales in the biggest untapped market left-Japan. This push, if successful, might well bring in revenues upward of $ 400 million. Such a cash inflow would go a long way towards helping to restore Lockheed’s fiscal health, and it would, of course, save the jobs of thousands of firm’s employees. (Statement of Carl Kotchian)
Kodama eventually succeeded in engineering a contract for Lockhed with All – Nippon Airways, even beating out McDonnell Douglas, which was actively competing with Lockheed for the same sales. To ensure the sale, Kodama asked for and received from Lockheed about $9 million during the period from 1972 to 1975. Much of money allegedly went to then – prime minister Kukeo Tanaka and other government officials, who were supposed to intercede with All – Nippon Airlines on behalf of Lockheed.
According to Mr. Carl Kotchian, “ I knew from the beginning that this money was going to the office of the Prime Minister.” He was, however, persuaded that, by paying the money, he was sure to get the contract from All-Nippon Airways. The negotiations eventually netted over $1.3 billion in contracts for Lockheed.
In addition to Kodama, Lockheed had also been advised by Toshiharu Okubo, an official of the private trading company, Marubeni, which acted as Lockheed’s official representative. Mr. A. Carl Kotchian later defended the payments, which he saw as one of many “Japanese business practices” that he had accepted on the advice of his local consultants. The payments, the company was convinced, were in keeping with local “ business practices.”
Further, as I’ve noted, such disbursements did not violate American laws. I should also like to stress that my decision to make such payments stemmed from my judgment that the (contracts) …… would provided Lockheed workers with jobs and thus redound to the benefit of their dependents, their communities, and stockholders of the corporation. I should like to emphasize that the payments to the so-called “ high Japanese government officials” were all requested y Okubo and were not brought up from my side. When he told me “ five hundred million yen is necessary for such sales,” from a purely ethical and moral standpoint I would have declined such a request. However, in that case, I would most certainly have sacrificed commercial success….. (If) Lockheed had not remained competitive by the rules of the game as then played, we would not have sold (our planes) ……… I knew that if we wanted our product to have a chance to win on its own merits, we had to follow the functioning system. (Statement of A. Carl Kotchian)
In August, 1975, investigations by the U.S. government led Lockheed to admit it had made $ 22 million in secret payoffs. Subsequent senate investigations in February 1976 made Lockheed’s involvement with Japanese government officials public. Japan subsequently canceled their billion dollar contract with Lockheed.
In June 1979, Lockheed pleaded guilty to concealing the Japanese bribes from the government by falsely writing them off as “marketing costs”. The Internal Revenue Code states, in part. “ No deduction shall be allowed….. for any payment made, directly or indirectly, to an official or employee of any government …. If the payment constitutes an illegal bribe or kickback.’ Lockheed was not charged specifically with bribery because the U.S. law forbidding bribery was not enacted until 1978. Lockheed pleaded guilty to four counts of fraud and four counts of making false statements to the government. Mr. Kotchian was not indicated, but under pressure from the board of directors, he was forced to resign from Lockheed. In Japan , Kodama was arrested along with Tanaka.
- Fully explain the effects that payment like those which Lockheed made to the Japanese have on the structure of a market.
- In your view, were Lockheed’s payments to the various Japanese parties “bribes” or “extortions” ? Explain your response fully.
- In your judgment, did Mr. A. Carl Kotchian act rightly from a moral point of view ? (Your answer should take into account the effects of the payments on the welfare of the societies affected, on the right and duties of the various parties involved, and on the distribution of benefits and burdens among the groups involved.) In your judgment, was Mr. Kotchian morally responsible for his actions ? Was he, in the end, treated fairly ?
- In its October 27, 1980, issue, Business Week argued that every corporation has a corporate culture – that is, values that set a pattern for its employee’s activities, opinions and actions and that are instilled in succeeding generations of employees (pp.148-60) Describe, if you can, the corporate culture of Lockheed and relate that culture to Mr. Kotchian’s actions. Describe some strategies for changing that culture in ways that might make foreign payments less likely.
Case NO. 3
THE NEW MARKET OPPORTUNITY
In 1994, anxious to show off the benefits of a communist regime, the government of China invited leading auto manufacturers from around the world to submit plans for a car designed to meet the needs of its massive population. A wave of rising affluence had suddenly created a large middle class of Chinese families with enough money to buy and maintain a private automobile. China was now eager to enter joint ventures with foreign companies to construct and operate automobile manufacturing plants inside China . The plants would not only manufacture cars to supply China’s new internal market, but could also make cars that could be exported for sale abroad and would be sure to generate thousands of new jobs. The Chinese government specified that the new car had to be priced at less than $5000, be small enough to suit families with a single child (couples in China are prohibited from having more than one child), rugged enough to endure the poorly maintained roads that criss-crossed the nation, generate a minimum of pollution, be composed of parts that were predominantly made within China, and be manufactured through joint – venture agreements between Chinese and foreign companies. Experts anticipated that the plants manufacturing the new cars would use a minimum of automation and wuld instead rely on labor – intensive technologies that could capitalize on China ’s cheap labor. China saw the development of a new auto industry as a key step in its drive to industrialize its economy.
The Chinese market was an irresistible opportunity for General Motors, Ford and Chrysler, as well as for the leading Japanese, European and Korean automobile companies. With a population of 1.2 billion people and almost double digit annual economic growth rates, China estimated that in the next 40 years between 200 and 300 million of the new vehicles would be purchased by Chinese citizens. Already cars had become a symbol of affluence for China’s new rising middle class, and a craze for cars had led more than 30 million Chinese to take driving lessons despite that the nation had only 10 million vehicles, most of them government – owned trucks.
Environmentalists, however, were opposed to the auto manufactures’ eager rush to respond to the call of the Chinese government. The world market for energy, particularly oil, they pointed out, was based in part on the fact that China , with its large population, was using relatively low levels of energy. In 1994, the per-person consumption of oil in China was only one sixth of Japan ’s and only a quarter of Taiwan ’s. If China were to reach even the modes per person consumption level of South Korea , China would be consuming twice the amount of oil the United States currently uses. At the present time, the United States consumes one forth of the world’s total annual oil supplies, about half of which it must import from foreign countries.
Critics pointed out that if China were to eventually have as many cars on the road per person as Germany does, the world would contain twice as many cars as it currently does. No matter how “ pollution – free” the new car design was, the cumulative environmental effects of that many more automobiles in the world would be formidable. Even clean cars would have to generate large amounts of carbon dioxide as they burned fuel, thus significantly worsening the greenhouse effect. Engineers pointed out that it would be difficult, if not impossible, to build a clean car for under $5000. Catalytic converters, which diminished pollution, alone cost over $200 per car to manufacture. In addition, China ’s oil refineries were designed to produce only gasoline with high levels of lead. Upgrading all its refineries so they could make low-lead gasoline would require an investment China seemed unwilling to make.
Some of the car companies were considering submitting plans for an electric car because China had immense coal reserves which it could burn to produce electricity. This would diminish the need for China to rely on oil, which it would have to import. However, China did not have sufficient coal burning electric plants nor an electrical power distribution system that could provide adequate electrical power to a large number of vehicles. Building such an electrical power system also would require a huge investment that the Chinese government did not seem particularly interested in making. Moreover, because coal is a fossil fuel, switching from an oil – based auto to a coal – based electric auto would still result in adding substantial quantities of carbon dioxide to the atmosphere.
Many government officials were also worried by the political implications of having China become a major consumer of oil. If China were to increase its oil consumption, would have to import all its oil from the same countries that other nations relied on, which would create large political, economic and military risks. Although the United States imported some of its oil from Venezuela and Mexico , most of its imports came from the Middle East – an oil source that China would have to turn to also. Rising demand for Middle East oil would push oil prices sharply upward, which would send major shocks reverberating through the economics of the United States and those of other nations that relied heavily on oil. State Department officials worried that China would begin to trade weapons for oil with Iran or Iraq , heightening the risks of major military confrontations in the region. If China were to become a major trading partner with Iran or Iraq , this would also create closer ties between these two major power centres of the non-Western world – a possibility that was also laden with risk. Of course, China might also turn to tapping the large reserves of oil that were thought to be lying under Taiwan and other areas neighboring its coast. However, this would bring it into competition with Japan , South Korea , Thailand , Singapore , Taiwan , the Phillippines, and other nations that were already drawing on these sources to supply their own booming economies. Many of these nations, anticipating heightened tensions, were already puring money into their military forces, particularly their navies. In short, because world supplies of oil were limited, increasing demand seemed likely to increase the potential for conflict.
- In your judgment, is it wrong, from an ethical point of view, for the auto companies to submit plans for an automobile to China ? Explain your answer ?
- Of the various approaches to environmental ethics outlined in this chapter, which approach sheds most light on the ethical issues raised by this case ? Explain your answer.
- Should the U.S. government intervene in any way in the negotiations between U.S. auto companies and the Chinese government ? Explain ?
Case NO. 4
WAGE DIFFERENCES AT ROBERT HALL
Robert Hall Clothes, Inc., owned a chain of retail stores that specialized in clothing for the family. One of the Chain’s stores was located in Wilmington , Delaware . The Robert Hall store in Wilmington had a department for men’s and boy’s clothing and another department for women’s and girl’s clothing. The departments were physically separated and were staffed by different personnel : Only men were allowed to work in the men’s department and only women in the women’s department. The personnel of the store were sexually segregated because years of experience had taught the store’s managers that, unless clerks and customers were of the same sex, the frequent physical contact between clerks and customers would embarrass both and would inhibit sales.
The clothing in the men’s department was generally of a higher and more expensive quality than the clothing in the women’s department. Competitive factors accounted for this : There were few other men’s stores in Wilmington so the store could stock expensive men’s clothes and still do a thriving business, whereas women’s clothing had to be lower priced to compete with the many other women’s stores in Wilmington. Because of these differences in merchandise, the store’s profit margins on the men’s clothing was higher than its margins on the women’s clothing. As a result, the men’s department consistently showed a larger dollar volume in gross sales and a greater gross profit, as is indicated in Table 7.11.
Because of the differences shown in Table 7.11 women personnel brought in lower sales and profits per hour. In fact male salespersons brought in substantially more than the females did (see Tables 7.12 and 7.13)
|Men’s Department||Women’s Department|
TABLE 7. 12
|Male Sales per Hour
|Female Sales Per Hour
|Excess M Over F (%)|
As a result of these differences in the income produced by the two departments, the management of Robert Hall paid their male salespersons more than their female personnel. Management learned after a Supreme Court ruiling in their favor in 1973 that it was entirely legal for them to do this if they wanted. Wages in the store were set on the basis of profits per hour per department, with some slight adjustments upward to ensure wages were comparable and competitive to what other stores in the area were paying. Over the years, Robert Hall set the wages given in Table 7.14. Although the wage differences between males and females were substantial, they were not as large as the percentage differences between male and female sales and profits. The management of Robert Hall argued that their female clerks were paid less because the commodities they sold could not bear the same selling costs that the commodities sold in the men’s department could bear. However, the female clerks argued, the skills, sales efforts, and responsibilities required of male and female clerks were “substantially” the same.
TABLE 7. 13
|Male Gross Profits per Hour
|Female Gross Profits Per Hour
|Excess M Over F (%)|
TABLE 7. 14
|Male Earnings per Hour
|Female Earnings Per Hour
|Excess M Over F (%)|
- In your judgment, do the managers of the Robert Hall store have any ethical obligations to change their salary policies ? If you do not think they should change, then explain why they have an obligation to change and describe the kinds of changes they should make. Would it make any difference to your analysis if, instead of two departments in the same store, it involved two different Robert Hall Stores, one for men and one for women ? Would it make a difference if two stores (one for men and one for women) owned by different companies were involved ? Explain each of your answers in terms of the relevant ethical principles upon which you are relying.
- Suppose that there were very few males applying for clerks’ jobs in Wilmington while females were flooding the clerking job market. Would this competitive factor justify paying males more than females ? Why ? Suppose that 95 percent of the women in Wilmington who were applying for clerks’ jobs were single women with children who were on welfare while 95 percent of the men were single with no families to support. Would this need factor justify paying females more than males ? Why ? Suppose for the sake of argument that men were better at selling than women; would this justify different salaries ?
- If you think the managers of the Robert Hall store should pay their male and female clerks equal wages because they do “substantially the same work” then do you also think that ideally each worker’s salary should be pegged to the work he or she individually performs (such as by having each worker sell on commission) ? Why ? Would a commission system be preferable from a utilitarian point of view considering the substantial book keeping expenses it would involve ? From the point of view of justice ? What does the phrase substantially the same mean to you ?
Case NO. 5
Eighteen – year old Shawn “NAPSTER” Fanning, then a freshman at Northeastern University, dropped out of school and founded Napster Inc. (website was at w.w.w.napster.com) in San Mateo, California in May 1999. Two months earlier, working in his college dorm room, he had developed both a website that let users locate other users who were willing to share whatever music files they had in MP3 format on the hard drives of their computers and a software program (called “Napster) that let users copy these music files from each other over the Internet. When an early free version of the program he posted on Download.com received more than 300,000 hits and was named “Download of the week,” he decided to devote himself full time to developing his program and website. The final version of his version of his program was officially released August 1999, and in May 2000, with more than 10 million people – most of them students on college campuses where Napster was especially popular – signed up at its website, Shawn’s company received $ 15 million of start – up funds from venture capital firms in California’s “Silicon Valley.”
Fanning grew up in Brockton , Massauchettes, the son of a nurse’s aid and the stepson of a truck driver, in a family of four half-brothers and half-sisters. He got the nickname “Napster” during a basketball game when a player commented on his closely cropped sweaty head of hair. Fanning had taught himself programming and had held several summer programming jobs.
The company Shawn helped establish gave the Napster program away for free and charged users nothing to use its website to post the URL addresses where personal copies of music could be downloaded. Nevertheless, a month later, Shawn found himself embroiled in a legal and ethical controversy when two record tables, two musicians (Metallica and Dr. Dre), and two industry trade groups of music companies (the National Music Publishers Association and the Recording Industry Association of America) filed suits against his young company claiming that Napster’s software was enabling other to make and distribute copies of copyrighted music that the musicians and companies owned.
On June 12, the two industry trade groups filed preliminary injunctions against the company demanding that it remove all the songs owned by their member companies from Napster’s song directories. According to the two groups, a survey of 2555 college students showed a correlation between Napster use and decreased CD purchases. College students were outraged, especially fans of Metallica and Dr. Dre. Supporters of Napster argued that Napster allowed people to hear music that they then went out and purchased, so Napster actually helped the music companies. Music sales had increased by over $500 million a year since Napster had started to operate, but the music companies claimed that this was a result of a booming economy. Supporters of Napster also argued that individuals had a moral and legal right to lend other individuals a copy of the music on the CDs that they had purchased. After all, they argued, the law explicitly stated that an individual could make a copy of copyrighted music he or she had purchased to hear the music on another player. Moreover, according to Fanning, Napster was not doing anything illegal, and the company was not responsible if other people used its software and website to copy music in violation of copyright law any more than a car company was responsible when its autos were used by thieves to rob banks. Much of the music that was downloaded using Napster, they claimed, was in the public domain (i.e.not legally owned by anyone) and was being legally copied. The music companies countered that an individual had no right to give multiple copies of their music to others even if the individual had paid for the original CD. If everyone was allowed to copy music without paying for it, they charged, eventually the music companies would stop producing music and musicians would stop creating it. Other musicians claimed, however, that Napster and the Web gave them a way to put their music before millions of potential fans without having to beg the music companies to sponser them.
In March 2000, the band Metallica hired consultant PDNet to electronically “evesdrop” on users who assumed they were anonymously accessing Napster’s website. The following week the band’s lawyers handed Napster a list with the names of 300, 000 people that Metallica claimed had violated its copyrights using Napster’s service and that Metallica now wanted removed from Napster’s services. Fanning complied with the demand of Metallica, whose drummer, Lars Ulrich, was one of his musical heros. “If they want to steal our music,” said Ulrich, “ why don’t they just go down to Tower Records and grab them off the shelves ?” Many young people protested that the bands should not be alienating their own fans in this way. One fan posted a note on an MP3 chat room : “Give me a break ! I have been dropping 16 bucks an album for Metallica’s music since I was a teenager. They made a fortune off us and now they accuse us of stealing from them. What nerve !” Howard King, a Los Angeles lawyer for Metallica and Dr. Dre, stated that “I don’t know Shawn Fanning but he seems to be a pretty good kid who came up with a sensational program. But this sensational program has allowed people to take music without paying ………. Shawn probably had no idea of the legal ramifications of what he created. I’m sure the though never crossed his mind.”
In August 2000, a federal judge in San Francisco , Marilyn Patel, responded to the suit against Napster. Judge Patel called Shawn’s company a “monster” and charged that the only purpose of Napster was to copy pirated music without paying for it. The judge ordered Napster to remove all URLS from its website that referenced material that was copyrighted.
Judge Patel’s ruling would have shut down the company’s website immediately. But a few days later, an appeals court reversed Judge Patel and allowed the company to continue operating. The reprieve was only temporary. On Monday February 12, 2001 , the Ninth Circuit Court of Appeals in San Francisco affirmed Judge Patel’s ruling. The company attempted to circumvent the ruling by negotiating agreements with the music companies that would pay them certain annual fees in return for withdrawing the suit.
Napster was not the only software that allowed individuals to swap files from
One personal computer to another over the Internet. The software program named “Gnutella” let individuals swap any kind of files – music, text, or visuals – over the Internet, but Gnutella did not operate a centralized index like the website that Napster had established. Observers predicated that if Napster was put out of business, numerous underground websites would be created providing the kind of listing service that the company had earlier provided on its website. Already a website named zeropaid.com provided free copies of Gnutella and many other Napster clones that users could download and use to share digital music files with each other. Unlike Napster, these software products did not require a central website to connect users to each other, making it impossible for music companies to find and target single entity whom they could sue. Many observers predicated that Napster was only the beginning of an upheaval that would revolutionize the music industry, forcing music companies to lower their prices, make their music easily available on the Internet, and completely change their business models.
- What are the legal issues involved in this case, and what are the moral issues ? How are the two different kinds of issues different from each other, and how are they related to each other ? Identify and distinguish the “systemic, corporate and individual issues” involved in this case.
- In your judgment, was it morally wrong for Shawn Fanning to develop and release his technology to the world given its possible consequences ? Was it morally wrong for an individual to use Napster’s website and software to copy for free the copy righted music on another person’s hard drive ? If you believe it was wrong, then explain exactly why it was wrong. If you believe it was not morally wrong, then how would you defend your views against t he claim that such copying is stealing ? Assume that it was not I illegal for an individual to copy music using Napster. Would there be anything immoral with doing so ? Explain ?
- Assume that it is morally wrong for a person to use Napster’s website and software to make a copy of copyrighted music. Who, then, would be morally responsible for this person’s wrong doing ? Would only the person himself be morally responsible ? Was Napster, the company, morally responsible ? Wash shawn Fanning morally responsible ? Was any employee of Napster, the company, morally responsible ? Was the operator of the server or that portion of the Internet that the person used morally responsible ? What if the person did not know that the music was copyrighted or did not think that it was illegal to copy copyrighted music ?
- Do the music companies share any of the moral responsibility for what has happened ? How do you think technology like Napster is likely to change the music industry ? In your judgment, are these changes ethically good or ethically bad ?
Case NO. 6
WORKING FOR ELI LILLY & COMPANY
Eli Lilly, the discoverer of Erythromycin, Darvon, Ceclor, and Prozac, is a major pharmaceutical company that sold $6.8 billion of drugs all over the world in 1995, giving it profits of $2.3 billion. Headquartered in Indianpolis , Minnesota , the company also provides food, housing, and compensation to numerous homeless alcoholics who perform short-term work for the company. The work these street people perform, however, is a bit unusual.
Before approving the sale of a newly discovered drug, the U.S. Food and Drug Administration requires that the drug be put through three phases of tests after being tested on animals. In phase I, the drug is taken by healthy human individuals to determine whether it has any dangerous side effects. In Phase II, the drug is given to a small number of sick patients to determine dosage levels. In Phase III, the drug is given to large numbers of sick patients by doctors and hospitals to determine its efficacy.
Phase I testing is often the most difficult to carry out because most healthy individuals are reluctant to take a new and untested medication that is not intended to cure them of anything and that may have potentially crippling or deadly side effects. To secure test subjects, companies must advertise widely and offer to pay them as such as $250 a day. Eli Lilly, however, does not advertise as widely and pays its volunteers only $85 a day plus free from and board, the lowest in the industry. One of the reasons that Lily’s rates are so low is because, as a long time nurse at the Lily Clinic is reported to have indicated, “ the majority of its subjects are homeless alcoholics” recruited through word of mouth that is spread in soup kitchens, shelters, and prisons all over the United States . Because they are alcoholics, they are fairly desperate for money. Because they alcoholics, they are fairly desperate for money. Because phase I testes can run several months, test subjects can make as $4500 – an enormous sum to people who are otherwise unemployable and surviving on handouts. Interviews with several homeless men who have participated in Lily’s drug tests and who describe themselves as alcoholics who drink daily suggest that they are, by and large, quite happy to participate in an arrangement that provides them with “easy money”. When asked, one homeless drinker hired to participate in a Phase I trail said he had no idea what kind of drug was being tested on him even though he had signed an informed – consent form. An advantage for Lilly is that this kind of test subject is less likely to sue if severely injured by the drug. The tests run on the homeless men, moreover, provide enormous benefits for society. It has been suggested, in fact, that in light of the difficulty of securing test subjects, some tests might be delayed or not performed at all if it were not for the large pool of homeless men willing and eager to participate in the tests.
The Federal Drug Administration requires that people who agree to participate in Phase I tests must give their “ informed consent” and must take a “ truly voluntary and a uncoerced decision.” Some have questioned whether the desperate circumstances of alcoholic and homeless men allow them to make a truly voluntary and uncoerced decision when they agree to take an untested potentially dangerous drug for $ 85 a day. Some doctors claim that alcoholics run a higher risk because they may carry diseases that are undetectable by standard blood screening and that make them vulnerable to being severely named by certain drugs. One former test subject indicated in an interview that the drug he had been given in a test several years before had arrested his heart and “ they had to put things on my chest to start my heart up again.” The same thing happened to another subject in the same test. Another man indicated that the drug he was given had made him unconscious for 2 days while others told of excruciating headaches.
In earlier years, drug companies used prisoners to test drugs in Phase I tests. During the 1970s, drug companies stopped using prisoners when critics complained that their poverty and the promise of early parole in effect were coercing the prisoners into “Volunteering”. When Lilly first turned to using homeless people during the 1980s, a doctor at the company is quoted as saying, “ We were constantly talking about whether we were exploiting the homeless. But there were a lot of them who were willing to stay in the hospital for four weeks.” Moreover, he adds. “Providing them with a nice warm bed and good medical care and sending them out drug – and alcohol – free was a positive thing to do.”
A homeless alcoholic indicated in an interview that when the test he was participating in was completed, he would rent a cheap motel room where I’ll get a case of Miller and an escort girl have sex. The girl will cost me $ 200 an hour.” He estimated that it would take him about two weeks to spend the $ 4650 Lily would pay him for his services. The manager at another cheap motel said that when test subjects completed their stints at Lily, they generally arrived at his motel with about $ 2500 in cash : “ The guinea pigs go to the lounge next door, get drunk and buy the house a round. The idea is, they can party for a couple of weeks and go back to Lily and do the next one.”
- Discuss this case from the perspective of utilitarianism, rights, justice and caring. What insight does virtue theory shed on the ethics of the events described in this case ?
- “ In a free enterprise society all adults should be allowed to make their own decisions about how they choose to earn their living.” Discuss the statement in light of the Lily case.
- In your judgment, is the policy of using homeless alcoholics for test subjects morally appropriate ? Explain the reasons for your judgment. What does your judgment imply about the moral legitimacy of a free market in labor ?
- How should the managers of Lily handle this issue ?
Bachelors Program in Business Management (BBA) Year-III
Note :- Solve any 4 Case Study
All Case Carry equal Marks.
Sunder Singh had studied only up to high school. He was 32-years of age, lived alone in a rented room, and worked eight-hour shift at one petrol pump, then went to the other one for another eight-hour shift. He had a girl friend and was planning to marry.
One day when he returned from work, he got a note from his girl friend that she was getting married to someone else and he need not bother her. This was a terrible shock to Sunder Singh and he fell apart. He stopped going to work, spent sleepless nights, and was very depressed. After a month, he was running Iowan his savings and approached his earlier employers to get back his job, but they would not give him a second chance. He had to quit his rented room, and sold few things that he had. He would do some odd jobs at the railway station or the bus terminal.
One day, nearly two years ago, he was very hungry and did not have any money and saw a young man selling newspapers. He asked him what he was selling and he told him about Guzara (an independent, non-profit, independent newspaper sold by the homeless, and economically disadvantaged men and women of this metro city). Sunder Singh approached the office and started selling the newspaper. He did not make a lot of money, but was good at saving it. He started saving money for a warm jacket for next winter.
He was reasonably happy; he had money to buy food, and no longer homeless and shared a room with two others. One day, with his savings he bought a pair of second-hand Nike shoes from flea market.
Sunder Singh is not unique among low-income consumers, especially in large cities, in wanting and buying Nike shoes. Some experts believe that low-income consumers too want the same products and service that other consumers want.
The working poor are forced to spend a disproportionate percent of their income on food, housing, utilities, and healthcare. They solely rely on public transportation, spend very little on entertainment of any kind, and have no security of any kind. Their fight is mainly day-to-day survival.
- What does the purchase of a product like Nike mean to Sunder Singh?
- What does the story say about our society and the impact of marketing on consumer behavior?
Key to Buyers’ Minds
Consumer buying research has turned a new leaf in India. The era of demographics seems to be on the backbench. Now, Marketing Research people are less likely to first ask you about your age, income, and education etc. Instead, there is a distinct shift towards inquiries about attitudes, interests, lifestyles, and behaviour – in short towards a study of consumers’ minds called psychographics.
Pathfinders, the marketing research wing of Lintas, occasionally came out with its highly respected “Study on Nation’s Attitudes and Psychographics (P:SNAP). The first in this series was released in 1987 with an objective to develop a database of lifestyles and psychographics information on the modem Indian women. The second was in 1993, and the third in 1998. Pathfinders choose woman for the study because of the belief that more often than not, in urban areas, it is the woman who makes buying decision.
The Pathfinders’ study involves interviewing over 10,000 women over the entire country and segmenting them in clusters according to their beliefs, attitudes, lifestyles, and lastly their demographics profile. The idea is to identify groups of consumers with similar lifestyles who are likely to behave towards products or services.
For advertisers and advertising agencies, this profile helps enormously. For example, an advertiser may want to give a westernised touch to a commercial. The profile of the target customer, as revealed by this study, tells the advertising people the perimeter within which she/he must stay, otherwise the ad may become an exaggerated version of westernised India.
For the purpose of this study, Pathfinders divided the Indian women in 8 distinct cluster of varying values and lifestyles. Figures from two studies are available publicly and are given below:
|Cluster||1987 (%)||1993 (%)|
The studies seek to track the macro level changes and movements within these 8 clusters in a period of time.
We note from the table that in 1987, 8.7% of the women could be classified as “gregarious hedonist” – those who consider their own pleasure to be supreme in life. ‘In 1993, this figure fell to 6.6%. The “troubled homebody” segment – those with large families and low-income, increased from 15.9% in 1987 to 18.3% in 1993.
Information, such as this, is obviously useful to assess the collective mood. That’s why Pathfinders have an impressive list of clients fort heir P:SNAP, which includes Hindustan Lever, Cadbury, Johnson and Johnson, and Gillette.
SOME PSYCHOGRAPHICS PROFILES OF INDIAN WOMEN
Rama Devi, the Contended Conservative
The lady lives a ‘good’ life – she is a devoted wife, a dotting mother of two school-going sons, and a God fearing housewife. She has been living her life by the traditional values she cherishes – getting up at the crack of dawn, getting the house cleaned up, having the breakfast of ‘Aloo Parathas’ ready in time before the children’s school-bus honks its horn, laying down the dress her ‘government servant’ husband will put on after his bath, and doing her daily one-hour Puja. She fasts every Monday for the welfare of her family, looks at the ‘freely mixing’ and ‘sexually liberal’ youngsters with deep disdain and cannot understand the modem young woman’ s 19reed’ for money, jewellery, and jobs.
Her one abiding interest outside the household is the Ganesh Mandir that she has visited every Wednesday, ever since she got married. She lacks higher education and hence has little appreciation for the arts, the literature, and the sciences. Her ample spare time is spent watching the TV, which is her prime source of entertainment and information.
Shobha, the Troubled Homebody
Shobha married young to the first person she fell in love with, Prakash. Four children came quickly before she was quite ready to raise a family. Now, she is unhappy. She is having trouble in making ends meet on her husband’s salary who is employed as clerk in a private business and is often required to work up to late hours. She is frustrated, as her desire for an idyllic life has turned sour. She could not get education beyond high school and hence there are hardly any job opportunities for her. Her husband also keeps on complaining of the long hours of backbreaking work he has to put in. He consumes country-made liquor routinely.
Shobha finds escape in Black and White TV soap operas and films that transport her into the world of her dreams. She watches TV almost all through the day and her children roam around in the locality streets and cannot expect any help from their’ ever-grumbling’ mother. Purchases are mostly limited to ‘essentials’ and any discretionary purchases are postponed till it becomes possible.
Neeru, the Archetypal Provider
Neeru epitomises simplicity. Her life is untangled. It runs on a set timetable with almost clockwork precision. She works as a primary school teacher in a rural government school about 50 kilometers from her district town residence. She is married to a social worker in an NGO whose income is erratic. Her three children, two teenaged sons and l0-year old daughter are getting school education.
The day begins with the lady getting up before anybody else and finishing the household chores as fast as she can. There is no room for delay as the State government ‘Express’ bus, on which she ravels to her school will be at the bus stop across the road precisely at 8.00 A.M. If she misses that, the next ordinary bus comes at 11.15 A.M, quite useless as it will reach her school only at 1.00 P.M. The school closes at 2.00 P.M. There are private Jeeps running sporadically, but the fare is high and Neeru does not believe in wasting hard earned money. Besides, she travels on husband’s ‘free pass’. Neeru prides herself on her monthly savings ofRs.1000 for the last many years. The money will go toward the wedding of her daughter.
Vandana, the tight-fisted traditionalist
For Vandana, saving money is ‘in-born’ discipline. When she was young and unmarried, she remembers her mother was extremely tight-fisted and ran the household in under Rs.800 per month. It was the necessity of those times as her father retired at a princely salary of Rs.1800 per month. All through her childhood, she saw deprivation and hardship. She would not join the annual class picnic in her school days as it meant’ avoidable expenditure’.
Now she is married and mother of two school going children. The husband works in a bank as a clerk. He has taken all the loans that he could from the bank and invested the money in real estate. As a result of monthly deductions toward repayment of loans, his take home salary is now very little. But Vandana can manage. The school dresses are sewn by her at home, the stationary required comes from a wholesale market, and the books are second-hand from ‘friends’, cultivated for the purpose. On birthdays, Vandana prepares a sweet dish at home and they spend on a film. There is a cow and calf at home, being kept as a source of revenue and milk. She sells half the milk to a neighbour and the family consumes the rest. Life in general is hard and frugal. There is a colour TV at home, but they disconnected the cable connection ever since the rates went up. Now they watch Doordarshan only.
Aditi, the Anxious Rebel
Daughter of a Freedom Fighter, Aditi has always fought her values and principles.
People still remember when she walked out of the exam half in a huff as a mark of protest against mass cheating’ sanctioned’ by the centre superintendent in a tough paper. While every body else passed with high marks, Aditi failed.
Even though she repeated the paper, Aditi never learned to swim along the flow. She always swam against the current. She joined the Communist Party in her college and gave rousing speeches against the teachers and authorities. This resulted in her getting very poor marks and left her jobless.
Later, Aditi joined an NGO and now works on social issues. She says she is a creature of the mind, not materialism. Her favourite dress is a long flowing Kurta, and slacks. She wears loosened hair and chappals. She reads voraciously. Financially, she is independent and lives with her parents. Her disdain for the institution of marriage and contempt for the modern Indian male keep her single and unattached. She will continue-to be so as she prefers this status, but may adopt a baby later in life.
Reema, the Gregarious Hedonist
Just 19, and Reema is already divorced. Her father is a wealthy businessman. During Reema’s childhood, her father was mostly away in Dubai and Africa, trying to amass a fortune. That he did but he lost on his chance to be a good father. Both his children started feeling like’ orphans’ after their mother got involved with another man.
Reema was ever longing for her family when alone came Harsh, her private high school tuition teacher. Harsh was all of 22 and very caring. He was tall, handsome, and very popular in school and many girls had a crush on him. Reema was sixteen then and a great fan of Harsh. For her, Harsh was a prize catch as he combined the loving qualities of a father with a mix of being a good teacher. She was soon dazzled and surrendered in a physical relationship.
Marriage followed. She never understood how Harsh changed overnight from a caring father figure to a demanding husband. And she could never cope with the six hours she had to spend in the kitchen everyday. Why should she do the cooking, she asked Harsh, as it was something that the ‘Ayas’ did? The reality of a humdrum middle-class existence hit her hard and she soon walked out of ‘the hell’.
Her father understood her need to recover and made her allowance rather generous. He bought her a Red Sports Car and got her an admission in a private college.
College is entertainment for her. She attends college only on days when there is some function like a cultural evening or the sports meet. Now, Reema spends on alcohol, dresses, parties, and holidays. She consumes a mood elevating drug every evening and keeps sending SMS messages on her mobile to her friends all through the night. For her, life means ‘buying pleasure endlessly’.
Shruti, the Contemporary Housewife
Shruti is an urbane woman. She is well educated and genteel. She is an officer in a national bank, and active in her club affairs and community activities. Socialising is an important part of her life. She is a doer, interested in watching cricket, politics, and current affairs. Her life is hectic as she has a lot to do for home and office everyday. Still she often enjoys viewing movies on TV every week.
Shruti shops for Sarees, jewellery, and cosmetics for herself on a regular basis. However, family needs come before her own needs. Her home is a double income household and she has one kid. All the modern gadgets are present and the standard of living is upper middle-class.
Momeeta, the Affluent Sophisticate
Momeeta was born Mamta, but elevated herself to Momeeta after marriage to a business tycoon. Momeeta is an elegant woman with style. She lives in Mumbai because that is where she wants to be. She likes the economic and social aspects of big city living and takes advantage of her’ contacts’. She has built up friendship and cultivated the city bigwigs by inviting them to the numerous parties she throws in her luxurious penthouse.
Momeeta is a self-confident, on-the-go woman, and not a homebody. She is fashion conscious and clothes herself in the latest designer dresses. Even at 40, she can carry off a mini with aplomb. She is financial very secure and hence does not shop with care. She shops for quality, exclusivity, and the brand name, not the price. She frequently travels abroad, buys expensive gifts for friends, and has an international understanding on what is “chic” at the moment.
Three psychographics profiles of Indian women and their food shopping habits:
|Type I||Type II||Type III|
|Money conscious||Careful shopper||Gourmet/satisfaction|
|Food shopping is done on necessity and is postponed as long as possible.
|Makes out shopping lists and makes weekly/ monthly purchases.||General liking for food shopping and food related activities.|
|Minimum amount of money spent. This is enabled through comparative evaluation of many shops, even if it takes more time.||Can purchase larger quantities if there is an incentive like lower prices or a gift scheme. Food budget is flexible.||Collects and files food recipes. Experiments with new food products and methods of cooking. Likes to exhibit her culinary skills to her friends and family.
|Operates within the food budget. Does not buy larger quantities to save money.
|Checks labelling for price, nutrition and expiry date information||Spends a lot of time in kitchen as preparing food is an enjoyable activity.|
|Price and immediate outflow of cash is the dominant purchase concern.||Goes for tried and trusted brands even if they cost a little more. This is an important purchase concern.||Food items are bought either based on the past satisfaction from them or for their novelty value. Unknown food items are purchased if they excite the senses. This is the dominant purchase concern.|
|Who fits in where?
Shobha, Neeru, and Vandana,
Shruti, Aditi, and
Momeeta (she is a food lover).
(Prof Deepak Khanna, colleague, has developed these profiles based on his perceptions of certain personality types).
- Explain how the above-mentioned information is likely to benefit a marketer?
- Which of the above mentioned types are likely to respond to sales promotion? Explain.
- A manufacturer of personal care products in the premium segment starts frequent sales promotions. What is likely to be the impact on the above-mentioned types?
Star Airways offered passengers air services within the country and served a territory of 18, 000 sq. miles with an expanding population of over 70 lakh of people who are potential users of the airline services. The geographic diversity and scattered business and commercial cities have led to steady increase in the number of people who use air travel. The clientele includes business people, as well as individuals on non-business trips, holidays, and leisure trips etc. As a result, the passenger traffic had been increasing steadily since the firm started operations in 1983. In the last three years, however, the growth has not been consistent with the growth pattern showed by the company in the last fifteen years – as against a healthy growth of 13 per cent, the sales have marginally improved, registering a growth of 6 per cent.
The company’s early success was due to the pioneering concepts used by it in the airline industry, which was dominated by large private and government operators with little market orientation. The launch of the company’s services coincided with a boom in the aviation sector and reduced government dominance, which opened up the skies for private operators. Besides this, the company offered a host of innovations in the customer service functions such as smaller and newer planes, convenient schedules, free gifts, comfortable seats, exclusive terminals, express baggage-check, and airport-to hotel transit for its first and business class clients. In turn the fares charged by the company were premium in the category and almost 15 per cent higher than the industry average. The company president in the following words justified this move: ”We are selling entirely on the basis of providing quality experience to our clients. Our services, ambience, and commitment to safety and time-bound schedule, all surpass the standards of the industry.”
During the first ten years of operations the company faced no direct competition. The only problems faced by the marketing staff were (a) the price, (2) the need to convince clients that air service was more efficient than other alternatives, (c) identifying the customers, and more importantly (d) developing the image of a dependable service. The consumers, who till now were forced to put up indifferent service offered by large government operators, did not offer much resistance and were agreeable to try out new company. Once customers were convinced, retaining them was very easy. Hence the company enjoyed immense loyalty from its clients with almost 40 per cent of them being regular users. Sales were handled by the sales division as well as by some independent sales representatives.
In early 1990s the company faced direct competition for the first time with a new company coming up with smaller planes and all other advantages which were previously associated with Star Airways. The growing business had made the market very lucrative and hence in the next three years, four major competitors were also vying for the market share. The company slowly lost to these competitors and could manage to retain only 30 per cent of market share by the end of 1994. All the competitors were engaged in aggressive promotion and soon started a ‘price war’ in order to outdo one another. For the next six months, each of them offered big discounts and gifts (such as TV / audio systems) with the return ticket on different routes. The most profitable and commercia1ly viable routes were the major targets of these price related competitions. The consumer was the ultimate beneficiary and in short time, the companies started facing losses due to this price-cutting.
Star Airways had so far remained out of this ‘price-war’ and lost its market share on the competitive routes very rapidly. It was able to retain the clients on other routes, which were not a part of this intense competition. Unhappy an anxious about this state of affairs, the company vice president, marketing, developed a marketing plan with several components. The initial part of the plan consisted of a market research done on a cross-section of existing clients as well as the clients of competitors and the following observations were made :
- Star Airways was considered a quality-oriented company but many felt that it was getting stodgy.
- The satisfaction with crew and schedules had declined over the last 5 years amongst regular customers.
- The clients felt that the airline was losing its edge over customer service because it was nonflexible.
- The prices offered by competitors are less and they provide only a fraction of services offered by Star Airways. This was the main reason of clients switching over to competitors. As many as 70 per cent respondents considered the costs as the most important factor in deciding on the airline.
- Some deciding factors and their relative importance to clients were found to be following this pattern.
|Feature offered by airline||Importance of feature as the deciding factor||Rank of feature in decision making influence|
|Ambience and food||9%||3|
|Services & convenience||7%||4|
|Free gifts etc.||3%||5|
The second phase of the plan included a massive advertising and promotion plan. The VP marketing, Anil Saxena, felt that the company needed to advertise it’s dedication to quality and rebuild an image of being a customer-oriented airline. He began discussions with the advertising agency to launch a campaign in the near future.
After a month, the agency came out with the following recommendations:
- The campaign is to be completed in four months time and the budget will be 351akh.
- The company would reach 85% of target audience, once in a month by direct mail.
- Four times a month a TV commercial will be aired on a business show time. The audience TRP is consistent and highest in this category of shows.
- Star Airways would build the campaign theme around ‘quality and customer service initiatives’ .
- The direct mail letter would be sent to a database of 85,000 clients in four months. The letter will contain information on the airline and again stress on the same theme of’ quality and customer service’.
- What is likely to be the decision process in case of choosing an airline?
- Would this plan suggested by the vice president help in convincing the customers to use Star Airways? Give your reasons.
One hot May morning, Shobha, general manager of Innotrap India Ltd., entered her office in Delhi. She paused for a moment to contemplate the quote, which she had framed and hung on a wall facing her table.
“If a man can make a better mousetrap than his neighbour, the world will make a beaten path to his door.” She vaguely recalled that probably it was Ralph Waldo Emerson who said this. Perhaps, she wondered, Emerson knew something that she didn’t. She had the better mousetrap – Mouse-Rid – but the world didn’t seem all that excited about it.
Shobha had just returned from a Trade Fair in Kolkata. Standing in the trade show display booth for long hours and answering the same questions hundreds of times had been tiring. Yet, this show had excited her. The Trade Fair officials held a contest to select the best new product introduced at the show. Of the more than 150 new products, her mousetrap had won first place. Two women’s magazines had written small articles about this innovative mousetrap, however, the expected demand for the trap had not materialised. Shobha hoped that this award might stimulate increased interest and sales.
A group of investors who had obtained rights to market this innovative mousetrap in India had formed Innotrap India in January 2001. In return for marketing rights, the group agreed to pay the inventor and patent holder, a retired engineer, a royalty fee for each trap sold. The group then appointed Shobha as the general manager to develop and manage Innotrap India Ltd.
The Mouse-Rid, a simple yet clever device, is manufactured by a plastics firm under contract with Innotrap India Ltd. It consists of a square, plastic tube measuring about 6 inches long and one and one-half inches- square. The tube bends in the middle at a 30-degree angle, so that when the front part of the tube rests on a flat surface, the other end is elevated. The elevated end holds a removable cap into which the user places bait (piece of bread, or some other titbit). A hinged door is attached to the front endofthe tube. When the trap is “open”, this door rests on two narrow “stills” attached to the two bottom corners of the door.
The trap works with simple efficiency. A mouse, smelling the bait enters the tube through the open end. As it moves up the angled bottom toward the bait, its weight makes the elevated end of the trap drop downward. This elevates the open end, allowing the hinged door to swing closed, trapping the mouse. Small teeth on the ends of stills catch in a groove on the bottom of the trap, locking the door closed. The mouse can be disposed of live, or it can be left alone for a few hours to suffocate in the trap.
Shobha felt the trap had many advantages for the consumer when compared with traditional spring-loaded traps or poisons. Consumers can use it safely and easily with no risk for catching their fingers while loading. It poses no injury or poisoning threat to children or pets.
Shobha’s personal and informal inquiries with acquaintances and friends suggested that women are the best target market for the Mouse-Rid. Most women stay at home and take care of household chores and their children. Thus, they want a means of dealing with the mouse problem that avoids any kind of risks. To reach this market,
Shobha decided to distribute Mouse-Rid through grocery stores, and kitchenware stores. She personally contacted a supermarket and some departmental stores to persuade them to carry the product, but they refused saying that they did not sell such contraptions. She avoided any wholesalers and other middlemen.
The traps were packaged in a simple cardboard, with a suggested retail price ofRs.150 for a piece. Although this price made Mouse-Rid about five 1;0 six times more expensive than standard traps, those who bought it showed little price resistance.
To promote the product, Shobha had budgeted approximately Rs. 300,000 toward advertising in different women’s magazines, such as Grah Shobha, and Good Housekeeping. Shobha was the company’s only salesperson, but planed to employ sales people soon.
Shobha had forecasted Mouse-Rid’s first year sales at 2 million units. Through Aril, however, the company had sold only few thousand units. She wondered if most new products got to such slow start, or if she was doing something wrong.
Shobha knew that the investor group believed that Innotrap India Ltd. had a “once-in-a lifetime chance” with its innovative mousetrap. She sensed the group’s impatience. To keep the investors happy, the company needed to sell enough traps to cover costs and make a profit.
- Has Shobha identified the best target market for Mouse-Rid? Why or why not?
- Does Shobha have enough needed data on consumer behaviour? What type of consumer research should Shobha conduct?
- What type of advertising can influence consumers for this type of product?
Golden Glow Soap
Anil Mahajan absent -mindedly ran his finger over the cake of soap before him. He traced the name ‘Golden Glow’ embossed on the soap as he inhaled its unmistakable sesame fragrance. It was a small soap, almost like a bar of gold. There were no frills, no coloured packaging, and no fancy shape. Just a golden glow and the fragrance of sesame and Lucida font that quietly stated’ Golden Glow’.
Mahajan smiled wanly and clasped the soap in his hands, as if protecting it from an unseen predator. He was wondering with quiet concern if the 30-year-old brand would last long. Sensi India, where Mahajan was marketing manager, was taking a long, hard look at the soap, as it was proving to be a strain on resources.
There were varying stories about how Golden Glow was launched. Some said the brand was a ‘gift’ from the departing English parent company. Others claimed that it was created for the then chairman’s British wife, as the Indian climate did not agree with her skin. They also claimed that the lady also coined the copy “The honest soap that loves your skin” was also coined by the lady. The line had stuck through three decades. Only the visuals had changed, with newer models replacing the older ones.
Zeni was basically a speciality products company producing household hygiene, fabricare, and dental care products. Golden Glow was the only soap in its product mix, produced and marketed by Sensi. Its reliable quality and value delivery had earned it a lot of respect in the market. Golden Glow equity was such that Sensi was known as the Golden Glow Company. Indeed, the brand name Golden Glow denoted purity, reliability, and gentle skincare.
In 1994, Sensi UK increased its stake in the Indian subsidiary to 51%. Within months, all of Sensi’s products were given a facelift, thanks to the inflow of foreign capital. New packaging, new fragrances, new formulations and more variants were introduced.
Only Golden Glow was left untouched. For, although it had a growing skincare business following some strategic acquisitions in Europe in the early eighties, Sensi UK was not a soap company. The UK marketing team ran an audit of every brand and product in the company’s portfolio. But when it came to Golden Glow, it faltered. “We don’t know this one,” officials at the parent company said.
“We don’t want this one to be touched,” Mahajan had said protectively, a sentiment tliat was endorsed by the managing director, Rajan Sharma. “Golden Glow is too sacred, we will leave it as it is,” he said.
But the UK marketing team was confounded. What was a lone soap doing in the midst of toilet cleaners and fabric protectors; they wondered, however they somehow agreed that their proposed revamp strategy would only look at up-gradation, not tinkering with what wasn’t broken.
Indeed, for 30 long years no one had tampered with the Golden Glow brand. And Mahajan felt there was no reason to start now. Golden Glow, in his view, was a self-sustaining brand. That was a bit of an understatement because advertising for the brand was moderate and Sensi India had never used any promotional gimmick for it.
Now, after four years of nurturing the other categories, Sensi UK had decided to launch its Vio range of skincare products in India. But Golden Glow’s presence and profile was a major roadblock to Vio’s success. “It will create dissonance, confuse our skincare equity and deter the articulation of Vio’s credo. It will stand out as a genetic flaw,” argued the UK marketing head. “You need to do a rethink on Golden Glow.”
Mahajan protested. “Why? It has such a strong equity and loyal following. So much has been invested in it all these years. Why give up all that?”
Rajan, however, had another idea. “Let us then extend the Golden Glow brand.” He said It was the simplest solution. Companies were now investing heavily in creating new equities for their brands. But in Golden Glow’s case, Sensi was already sitting on a brand with a terrific equity. He felt that extending this equity to other categories, such as skincare products would be successful.
But Golden Glow needed a new positioning before it could be extended. Till a few years ago, it had been in premium category, priced at Rs.15. Then new brands with specific positioning and higher price tags entered the market. This created a level above Rs.15 soaps and pushed Golden Glow down to the mid-priced range. So Golden Glow’s price was not commensurate with its premium position and image.
Over the years, Golden Glow had become so sacred that Sensi India had been too scared to do anything to it. As a result, the soap was left with niche category of loyal users. This category neither shrank or increased, just kept getting older and older, and with it the brand also kept growing older. For example, when Mahajan’s wife had her first baby at 25, her mother had recommended Golden Glow for her dry skin and also for baby’s tender skin because it contained sesame oil. That was in 1979. Today, Mahajan’s daughter had turned 21 and was being wooed by Dove, Camay, even Santoor, and Lifebuoy Gold, with their aggressive advertising. Golden Glow had begun to lose its image of being contemporary as newer brands came in with newer values.
Today, at 46, Mahajan’s wife still used Golden Glow, but when she recommended Golden Glow to her daughter, she said, “But Golden Glow is a soap for mothers, for older people.”
That was a major problem. The Golden Glow brand had aged, and Sensi India hadn’t even been aware of it. While its equity had grown with its users, its personality had aged considerably in the last 30 years. “I don’t think you can keep the personality young, unless you keep renewing the brand. The objective now is to widen your equity so that your image becomes young,” continued Rajan. “For instance, if today you were to personify a Golden Glow user now, it would be a woman of 45 years using the same brand for many years, who is aver-se to experimenting, very skincare conscious, very trusting, and very one-dimensional. As you can see, this is not a very competitive personality. These are the strengths of our Golden Glow, but these are also its weaknesses,” he analysed.
The context had changed. Today, youth demanded brands that stood for freedom and fearlessness. They demanded bold brands that dared to cure, not just p;eserve. “Preservation is for old people. Those are the attributes being presented in evolved markets,” said Rajan. To make Golden Glow contemporary, the attributes had to be re-framed, he felt. “You can’t make a young brand trusting caring, loving, without adding other attributes to it. Today, youth stands for freedom, for laughter, for frankness, for forthrightness. That’s what Close Up, Lifebuoy Gold, Vatika, and other brands propagate. So, either come clean and say it is for older skin which needs trust and kindness, or reposition the brand,” said Rajan.
Repositioning was also necessary to address another anomaly in Golden Glow’s image: its perceived premium. Sensi India had been unable to do anything about Golden Glow slipping into the mid-price range following the entry of more expensive brands. Now, as Rajan mulled over the brand extension plan, Mahajan felt that Golden Glow’s premium positioning was its core equity and that had to be maintained.
“If you are premium priced in the consumer’s mind, your extensions are automatically perceived as premium. So, if you don’t present the other products as premium, the consumer will not see them as extensions of the brand,” he said. “For example, if you are to launch a shampoo which is priced lower than Sunsilk, but higher than Nyle and Ayur, then whatever the rationale, the consumer will not accept your product. “It is not the Golden Glow I know,” will be the feeling,” he said.
Mahajan felt that since premium positioning was one of Golden Glow’s equity values, it would be very difficult to convince consumers that the brand was being extended without hanging on to this particular value. “Will they buy your rationale that the very same values and equity would now be available at a low price? To be in the premium segment now, you have to price it at Rs 35 or 40, almost on a par with Dove,” he said. “With Dove retailing at Rs 45, Golden Glow will be perceived as a cheaper option.”
“We can’t simply raise the price,” said Rajan. “What are we offering for that increase? You can ‘t add value because you don’t want to tamper with the brand. The consumers will then ask, “Golden Glow used to be so cheap, what has happened now? The user will forget that 15 years ago, Rsl0 was expensive, because all her comparisons would be in today’ s context,” said Rajan.
“So what’s the option?” asked Mahajan. “You don’t have to be expensive to be premium,” said Rajan. Golden Glow already has the image of a premium brand, thanks to its time-tested core values of purity, credibility, and reliability. What we can do is reinforce the premium through communication and positioning. In fact) we should have tinkered with Golden Glow long ago. That is what HLL did with Lux. It also launched a bridge brand, Lux International, in the premium category,” said Rajan.
“How could we have done anything to the brand?” asked Mahajan. “The product had such a strong following. It stood for gold, for sesame oil, for its subtle earthy perfume. We changed the packaging periodically, but that’s all we could do. Remember the time we brought out a transparent green Golden Glow with the fragrance of lime? It bombed in the market.”
Rajan was not in favour of the premium positioning. It appeared very short sighted to him, given the bigger plan to extend the brand. “Where are the volumes in the premium segment? He asked. “For some reason, every manufacturer feels that skincare can be an indulgence of only the moneyed class. As a result, there is a crowd in the premium end of the market. Do we want to be yet another player in the segment?”
Fifteen years ago, Golden Glow was perceived as a premium product. But today, globa1brands like Revlon, Coty, and Oriflame were delivering specific premium platforms. Golden Glow did not have a global equity. ‘Let us revisit the brand and examine what it stood for 15 years ago and examine the relevance of those attributes in today’s context,” suggested Rajan. “Golden Glow stood for care, consciousness, love, quality and all that. But today, are these enough to justify a premium position?” he asked Mahajan. “These attributes are viable in the mid-priced segment.” He said.
“The mid-priced brand is the proverbial washer-man’s dog,” said Mahajan. “You don’t know whether you are at the bottom end of the premium range or at the top-end of the low-priced range. You end up creating an image of being on the opportunity fence. It is a mere pricing ploy, with no strategic value.”
- Discuss the nature of problem(s) in this case?
- Suggest the kind of consumer research needed?
- How should Golden Glow be positioned/ repositioned to bring about the desired change among consumers? Give your reasons.
Impact of Retail Promotions on Consumers
Shoppers’ Delight, a large retail store, had above-average quality and competitive prices. It advertised its retail promotions in local newspapers. Its TV advertising was mainly aimed at building store image and did not address retail promotions. The management knew it well that they had to advertise their retail promotions more, but they did not feel comfortable with the effectiveness of present efforts and wanted to better understand the impact of their present promotions.
To better understand the effectiveness of present efforts, a study of advertising exposure, interpretation, and purchases was undertaken. Researchers conducted 50 in-depth interviews with customers of the store’s target market to determine the appropriate product mix, price, ad copy and media for the test. In addition, the store’s image and that of its two competitors were measured.
Based on the research findings, different product lines that would appeal to the target customers were selected. The retail promotion was run for a full week. Full-page advertisements were released each day in the two local Hindi newspapers, and also in one English newspaper that devotes six pages to the coverage of the state.
Each evening, a sample of 100 target market customers were interviewed by telephone as follows:
- Target customers were asked if they had read the newspaper that day. This was done to determine their exposure to advertisement.
- After a general description of the product lines, the respondents were asked to recall any related retail advertisements they had seen or read.
3, If the respondents were able to recall, they were asked to describe the ad, the promoted products, sale prices, and the name of the sponsoring store.
- If the respondents were accurate in their ad interpretation, they were asked to express their intentions to purchase.
- Respondents were also asked for suggestions to be incorporated in future promotions targeted at this consumer segment.
Immediately after the close of promotion, 500 target market customers were surveyed to determine what percentage of the target market actually purchased the promoted products. It also determined which sources of information influenced them in their decision to purchase and the amount of their purchase.
Results of the study showed that ad exposure was 75 per cent and ad awareness level was 68 per cent and was considered as high. Only 43 percent respondents exposed to and aware of the ad copy could accurately recall important details, such as the name of the store promoting the retail sale. Just 43 per cent correct interpretation was considered as low. Of those who could accurately interpret the ad copy, 32 per cent said they intended to respond by purchasing the advertised· products ‘ and 68per cent sad they had no intention to buy. This yields an overall intention to buy of 7 per cent. The largest area of lost opportunity was due to those who did not accurately interpret the ad copy.
The post-promotion survey indicated that only 4.2 per cent of the target market customers made purchases of the promoted products during the promotion period. In terms of how the buyers learned of the promotion, 46 per cent mentioned newspaper A (Hindi), 27 per cent newspaper B (Hindi), 8 per cent newspaper (English), and 15 per cent learned about sale through word-of mouth communication.
The retail promotion was judged as successful in many ways, besides yielding sales worth
Rs 900,000. However, management was concerned about not achieving a higher level of ad comprehension, missing a significant sales opportunity: It was believed that a better ad would have at least 75 per cent correct comprehension among those aware of the ad. This in turn would almost double sales without any additional cost.
- Why would some consumers have high-involvement levels in learning about this sales promotion?
2 Is a level of 75 per cent comprehension realistic among those who become aware of an ad? Why or why not?
- Do you think such promotions are likely to influence the quality image of the retail store? Explain.
Bachelors Program in Business Management (BBA) Year-I
(i) Attempt any four Cases
(ii) All Cases carry equal marks.
NAVEEN FISHERIES LTD.
The managing director of Naveen Fisheries Ltd. (NFL) received a message from one of the members of the crew that their mechanized boats had sunk at sea off Paradeep Port Trust due to unfavorable weather. The other directors of NFL ascertained the detailed information regarding the incident. All the promoters were fresh graduates.
Naveem, Praveen, Nagain, Ravi and Chandra were the promoters of the organization (NFL at Vishakhapattanam) with a capital contribution of Rs. 25 lakh each. Three of them had an engineering background. The other two were commerce graduates. They had thought of designing the vessels themselves so that the cost each mechanized boat would be reduced from Rs. 30 lakhs (if they bought them) to Rs. 22 Lakh. They designed three boats and these were sent out with a newly – appointed crew. Two vessels were sent to Paradeep and the third to Kakinada. Unfortunately, the weather was unfavourable. All the vessels sank. The crew also did not have experience. Two workers were injured and the rest arrived sagely. There was significant damage to the vessels and the residue was considered scrap. The cost of scrap of the vessels was nominal. As their working capital was scarce, and they were unable to invest more capital, they were in a dilemma whether to continue the business or not.
Case I Questions:
- What were the reasons for the sinking of the vessels?
- How could they reorganize the businesses?
At MNC Corporation, a foreman of inspection noticed a mistake in the assembly of transmitter cases. The foreman, a shy man when speaking to his immediate superiors, mentioned this matter to the senior supervisor in a weak, ineffectual manner. The senior supervisor nodded his head and continued to work on a report that he was writing. Later, a production slowdown occurred, and it was discovered that this flaw in the transmitter was the cause. The chief of production engineering, upset because this error had passed inspection unnoticed, reproved the senior supervisor in a brusque manner.
The senior supervisor called in the foreman of inspection and asked why this error had not been brought to his attention. The foreman said, “I told you the other day they were missing same of the punch-outs in those transmitter cases.” The senior supervisor said, “Yes, but you did not pound the desk when you told me!”
Case II Questions:
- Why did the communication problem arise?
- What do you suggest to prevent the communication problem?
MEHTA BANK LTD
Venkataraman was an officer in a leading nationalized bank with years of service to his credit. During his long period of service, he worked in different capacities and sections. His attitude and behavior made him a trusted in the organization. Having been posted in a big branch based in a large city, he was not keen on getting further promotions.
On one occasion, when he was working as an incharge of the draft issue section, he issued bundles of drawing books from the main stock of the security forms of the branch and kept the same in his custody in an almirah provided to him. One fine morning, he removed three drawing books out of the stock of books valued below Rs. 10,000 which he had in his own custody and kept them in his house. He then started issuing drafts in various names form his house out of the aforesaid stolen drawing books by allotting correct branch serial numbers obtained from the branch register under his control. The drafts were deposited in different banks/branches of the same bank in different accouns opened in the names of the payees of the drafts. These accounts were introduced by the bank employees, and some of them were in different representations only, like Mr. Venkataraman Aiyar, Mr Venkataraman Iyengar, etc. The drafts thus deposited were presented in clearing and were passed in the normal course without any doubt or suspicion. In the evening, he would visit the concerned drawee offices and collect such paid drafts.
Having found this technique successful, he tried his hand at yet another. This time he started issuing drafts in fictitious names or in the names of his close relatives drawn on outstations without any vouchers or deposits. After a few days, he would cancel the same drafts by allowing the credits to the respective accounts in his own branch by debiting the head office accounts. He continued to do this for about three months, causing a loss of over Rs. 700,000 to the bank.
The fraud came to light thanks to the presence of mind exercised by on e of the officers at another local office. He found that on the previous day also, he had paid a similar draft with the leaf number previous to the draft presented now. In his view, it was not possible for such a big office to avoid consumption of draft leaved in this fashion. Consequently, the matter was taken up with the issuing branch. Unfortunately for Venkataraman, someone else was working as the incharge of the draft issue section on that day. On checking up the records, it transpired that no such draft was issued. This led to promt investigations and detection of the whole fraud committed by Venkataraman.
Case III Questions:
- How do you view the present fraud case: a human failure or a system failure?
- What are the main issues in the case, and how can our present system of control prevent such fraud?
- How would you manage the situation on detection?
Mr. Lateef, Chairman of Shahid Fabrics, a Hyderabad-based garments and piece goods firm which exported all its products to the USA, faced a decision in August 1985. The US government had imposed quota restrictions which reduced the exports of his firm by 40 percent. He had to find a new market for his products.
Shahid Fabrics was one of Pakistan’s major exporters of garments and piece goods. Its share was 25 percent of the exports of these goods of the whole country. It was established in 1954 as a producer of cotton cloth and later, in 1966, it extended production to include garments and piece goods. It had eight local production units and the total number of employees was 8,000. All its garments and piece goods were exported, and branded according to customer specification. All the goods were exported to the USA and the sales of the firm amounted to US$ 100 million. In 1984, the US government imposed quota restrictions. By August 1985, Shahid Fabrics exports had been reduced by 40 percent.
Mr. Lateef believed that finding new markets was the only way to survive. The possible alternatives according to him were the EEC countries, the USSR, the Middle Eastern Arab countries and the other Asian countries. The EEC was a very good potential market, but Europeans were very tough buyers. It would be necessary to segregate the EEC from other buyers because of their existing specifications with regard to style, colour and packing. The USSR too was a potential market as far as demand was concerned, but the country did not have enough money in foreign exchange.
The Middle Eastern Arab countries had money, but their requirements were small due to their smaller population. Second, these countries preferred not to buy Pakistani goods directly from Pakistan$. They would rather like to buy the same Pakistani goods, branded differently from other Western countries, say France.
Asia was a big market, but the Asian countries, including turkey, were Shahid Fabrics’ competition in the international market. Mr. Lateef was deeply concerned with the loss of 40 percent of his export goods. He was eager to determine which new market offered the highest potential. He wondered what specific information he could use to help his decision.
Case IV Questions:
- What information should Mr. Lateef develop to evaluate foreign markets?
- Where should he look for this information?
- Develop a framework to help Mr. Lateef identify his best potential foreign markets.
WESTWARD EXPORTS LTD.
Mr. Abdul Ahmed, Production Manger, Westward Exports Ltd, Karachi, faced a decision in 1984. the rejection rate of their exports of readymade garments was 20 percent of total production. He also felt that their productivity was not as high as it might have been.
Westward Exports Ltd. was a large Pakistani company exporting ladies fashion garments made of pure cotton. Their main product items were blouses, skirts, dresses, shirts, pants, etc. their main overseas markets were the USA, Europe and Japan, and production was Rs. 100 million. They had about 2,000 workers engaged in production through their various subcontractors.
Production was carried out by 138 subcontractors. They did not utilize assembly line production: each individual worker carried out all the jobs required on each garment. The machinery and equipment used by the machines had a low output, and were not suited to high technology application. Mr. Abdul knew that male workers performed 60 percent of the total production and the rest was done by females. He also knew that while male workers were always willing to work overtime, their absentee rate was greater than that of women. Abdul felt that productivity could be higher, and he wondered how he should approach this issue.
The company purchased raw material (grey cloth) from several sources and had it dyed by different concerns, which sometimes caused variation in the colors. Both dyeing and inferior stitching caused the rejection rate, to rise to 20 percent of their total production. Mr. Abdul was worried about this high rate of rejection, and wondered what sequence of steps he should take to help reduce this high rejection rate.
Case V Questions:
- What alternatives are available to Mr Abdul?
- Other than purchasing higher technology machinery, in what ways might Mr Abdul increase the effectiveness and efficiency of the dyeing and stitching operations?
BABA BEARINGS COMPANY
The quality circle Sigma was started in the heat treatment section of Baba Bearings Company with seven members.
The members prepared the following list of various factors affecting the productivity of the heat treatment section.
- Distortion of bearing races in sealed quench furnaces.
- Loss of productivity and energy in sealed quench furnaces.
- Excess consumption of LPG.
- Rejection of cages due to scaling during annealing.
- Shrinkage in tapered roller bearing outer rings.
- Broadly, bearing are manufactured in the following three stages: (a) Turning, (b) Heat Treatment, and (c) Grinding.
The circle members, in their brainstorming session, gave priorities to the study aspects with the help of Pareto analysis. Distortion of bearing races in sealed quench furnaces was a major factor affecting the productivity. Hence, the circle decided to take this up for study. Turned rings in the soft condition are hardened and tempered. After heat treatment, it was noted that about 30 percent of the rings were beyond the specified limits of distortion (ovality). These rings were subject to straining for rectification.
Straining is a laborious process involving extra manpower and time. It affected schedules and deliveries to customers. The cause and effect diagram was employed for analysis, and the following causes identified:
- Design of heating elements
- Mesh baskets distortion
The members collected data regarding the heating element. Rings are loaded into the furnace keeping in a mesh basket in layers. The rings are heated by corrtherm heating elements; the heat is made to circulate uniformly throughout the furnace by a circulating fan. After the hardening process, it was observed that in general, the rings arranged at the sides of the basket adjacent to the heating elements showed greater ovality (50 per cent) than those at the centre (17 percent).
The members felt that rings at the sides were directly exposed to the radiant heat of the elements, and this resulted in a temperature gradient within the cross-section of the rings, causing more distortion. The temperature adjacent to the heating elements was higher by 26 degree Celsius than at the centre of the furnace.
Case VI Questions:
- What are the measures to be taken to avoid direct effect of heat?
- Design a quality improvement process for the bearings company.
Bachelors Program in Business Management (BBA) Year-II
Note :- Solve any 4 case study
All case carries equal marks
EMPLOYEE MOTIVATION IN A GOVERNMENT ORGANIZATION”
Bhumika Services Ltd., one of the largest public sector companies of India, was serving more than 31 million customers. Along with its vast customer base, BSNL’s financial and asset bases too were vast and strong. Changing regulations, converging markets, competition and ever demanding customers had generated challenges for BSNL. The Indore division of BSNL was the first in the country, which faced competition in basic telecom services from 1998. In spite of being a government department, Indore telephones had to face the competition, and relentless efforts were put in to improve the services and provide worldclass telecom services to its customers. Among the various services offered by Indore Telecom, 197 and 183 were two special services. 197 provided non-metered enquiry services to obtain telephone numbers by simply giving the name of person/name of organization/ name and designation of person, or by giving address. 183 on the other hand, was a nonmetered enquiry service that provided similar services for distant stations. There were a large number of complaints related to these services. Complaints were either directly forwarded to the district office by customers or raised during Telephone Adalats or pointed out by correspondents during press conferences, which were conducted quarterly. Complaints ranged from non-response, long waiting time to rude responses.
- S. Baheti took charge as Area Manager (North) on July 25, 2001 In the Indore Division. Immediately after taking charge, he realized that special services like 197 and 183 required urgent attention as they were directly affecting the image of the organization amongst customers. Since most of the complaints during Telephone Adalats and press conferences were related to these services, Baheti wanted to reach the root cause of the problem, to solve it forever. In this process, he looked at the background of the employees involved in the special services and found that most of the employees were office bearers of various unions that were active in the organization. The problem was more complicated than it seemed to during interactions, the employees indicated that they were not to be blamed for poor services since they were facing a number of problems in providing services and senior officials were not paying enough attention to alleviate their problems. Defective handsets, non-operating telephone lines, disturbance in lines, jacks not making proper connections, fans and air conditioners not working properly and non availability of typewriter/computer terminals were some of the problems brought to the notice of Baheti by operators.
Further investigation revealed that in addition to these technical problems, there were some Human Resource Management problems as well, such as frequent short leave, extended breaks, uninformed leave and indifferent attitude of employees towards customers. Baheti identified that despite technical problems, some operators were sincere towards their viork and tried their best to provide better services. To improve these services, Baheti decided to use multipronged strategies. Most of the technical problems were solved immediately, other problems that could not be solved at his level were forwarded to higher authorities and pursued rigorously. As the technical problems were taken care of, efficiency of sincere employees went up. Moreover, Baheti also began regular interaction with the operators, appreciating their good work, listening to their problems and explaining them the;-i. importance of their jobs. The employees were made aware of the facts that B5NL did not enjoy a sole monopolistic position any more and had to compete with private players. So the laidback attitude towards customer complaints was not only detrimental to the image of the organization, but also could lead to a reduced market share.
After gaining the confidence of operators, the next step was to motivate them. Towards this end, Baheti started announcing the best operator of the month and recognition was given to the operator by displaying his name on the board of honor. The criteria for award were minimum 200 calls attended per day and 20 days’ attendance. In addition, based on last six months performance, three best performers were identified. Appreciation letters from Area Manager and General Manager were conferred upon these operators in a public function and prizes of their own choice were given to them. These efforts had a desired result and the performance of all the operators showed a marked improvement. The number of calls attended by some operators increased from 200 to 700 calls per day. Further, quick and polite response had reduced customer complaints. While reviewing the situation, Baheti was quite contended to see a remarkable change in the behavior of operators just four months. He wondered whether this change was a permanent phenomenon or he would have to strategize further.
- Discuss the long-term relevance of motivational techniques used by Baheti in the light of prevailing environment in the organization.
- Had you been Baheti, what other techniques you would have used to improve the special services provided by the organization?
EMPLOYEE RELATIONS AUDIT
Triveni Foods Pvt. Ltd., a multinational confectionary company, having its branches in more than 50 countries and marketing its products in about 135 countries, established one of its production units in 1988 at Mathura near Delhi. It had a workforce of nearly 320 employees and sales turnover was more than Rs. 150 crores. Being a confectionary unit, hygiene was given the upper most priority to the extent that no one was allowed to enter the production area without taking bath and wearing sterilized clothes provided by the company. The entire process was automatic and required only food specialists and labor. In order to match the required standards, emphasis was given on training and welfare of employees on regular basis. Facilities like transportation were also provided since delay by ten minutes could cause production losses at the time of shift changes.
Over a period of time due to start and workers’ redundancy, it was observed that problems like lethargy, absenteeism, violation of work practices were increasing. Absenteeism rate went up to 18 percent. Employees visited canteen for drinking water and started gossiping during working hours. Buses did not arrive on time due to which production suffered. Operators came late and left shop floor early without waiting for relievers. Employees were found hovering in administration building without any reason. It was also found that employees were violating personal hygiene standards. Malpractices were also reported with attendance process and records. These activities were having a negative impact on managerial effectiveness and performance of the unit. The management tried to take number of initiatives to overcome these problems. However, these initiatives seemed ad hoc solutions and did not serve the purpose in the long run.
In 1996, Alok Trivedi joined the company as Head of the Department H.R. While facing these problems, he realized that the causes of these problems were deep rooted and required a proactive approach. He started with an approach called Employee Relation Audit, developed by him, where everything was to be monitored, regulated and reported on regular intervals. He along with his team prepared an action plan (Appendix 1) and corrective measures were taken accordingly. Facilities of drinking water were arranged at 3 to 4 places in the production area which stopped employees from going to canteen for this purpose. Action was taken against the late arrivals of the buses. A proper time study was done and they were given ten minutes margin so that they could report on time. Operators were frequently questioned and stringent vigilance was kept for amenities. Regular counseling was also arranged. A grievance register was also kept and effective grievance redressal was undertaken. Groups were formed called ‘Pragati’ groups for solving work related problems. Employees were frequently checked for ensuring their strict adherence to personal hygiene standards. For ensuring timely processing and printing of attendance records, training was given to al! line officers and production of records was made mandatory on shift basis.
It was further decided that based on this action plan an audit should be carried out at regular periods so that actual performance could be measured. For quantification, a 5 point. scale 0- poor, 2-below average, 3-average, 4-good, 5-v.good) audit report was prepared featuring practices, criteria for evaluation, standards, observations/comments and rating :Appendix 2). For example, in canteen criteria for evaluation there were food quality, menu, timings and unauthorized presence of the employees in the kitchen. The standards were strict adherence to the rules defined. For transportation, arrival, departure and punching of cards by drivers were the criteria for evaluation. Internal teams of auditors were asked to observe and comment against the set standards and give the rating accordingly. Performance vas evaluated on the basis of percentage, the highest point being 215. For example, if the total points scored on various parameters in a audit report was one hundred and fifty five, hen percentage score would be seventy-two (l55/215xl00 = 72 per cent). The first audit “as carried out in August 1999 and percentage of performance was sixty two.
In the year 2000, the performance rose to sixty-five per cent. Proactive approach of solving le problems was adopted. For example, registers were maintained at different work areas, write down the complaints experienced by employees and action was taken by the concerned person. A complaint of tap leaking in a bathroom was recorded in register by a workman. It was attended by a supervisor in charge and he got it repaired immediately. At times these were reviewed and signed by H.R. department and the higher management. Due to these practices, a lot of improvement was observed. Better working conditions, increased productivity, rise in employees’ commitment towards their goals and better superior -subordinate relationship could be seen. In 2001, the percentage of the performance rose to seventy two. While reviewing the Employee relation audit, Alok Trivedi was quite satisfied to note the steady though slow improvement in the figures of performance.
- Had you been in place of Alok Trivedi, what additional measures would you have taken?
- Critically analyze the Employee Relations Audit in the light of its contribution to self motivation of employees.
CA S E III
EMPLOYEE TURNOVER AT XYZ MOON LIFE INSURANCE
In 1950, with the enactment of the Insurance Act, Government of India decided to bring all the insurance companies under one umbrella of the Life Insurance Corporation of India (LIC). Despite the monopoly of LIC, the insurance sector was not doing well. Till 1995, only 12% of the country’s people had insurance cover. The need for exploring the insurance market was felt and consequently the Government of India set up the Malhotra Committee. On the basis of their recommendations, Insurance Development and Regulatory Authority (IRDA) Act was passed in parliament in 2000. This move allowed the private insurers in the market with the stop foreign players with 74:26% stake. XYZ- Moon life was one of the first three private players getting the license to operate in India in the year 2000.
XYZ Moon Life Insurance was a joint venture between the XYZ Group and Moon Inc. of US. XYZ starred off its operations in 1965, providing finance for industrial development and since then it had diversified into housing finance, consumer finance, mutual funds and now its latest venture was Life Insurance. Its foreign partner Moon Inc. was established in 1858 and had grown to be the largest life insurance and mutual fund company in the U.S. Moon Inc. had its presence in Asia since the past 75 years catering to over 1 million customers across 11 Asian countries.
Within a span of two years, twelve private players obtained the license from IRDA. IRDA had provided certain base policies like, Endowment Policies, Money back Policies, Retirement Policies, Term Policies, Whole Life Policies, and Health Policies. They were free to customize their products by adding on the riders. In the year 2003, the company became one of the market leaders amongst the private players. Till 2003, total market share of private insurers was about 4%, but Moon Life was performing well and had the market share of about 30% of the private insurance business.
In June 2002, XYZ Moon Life started its operations at Nagpur with one Sales Manager (SM) and ten Development Officers (DO). The role of a DO was to recruit the agents and sell a career to those who have an inclination towards insurance and could work either on part time or full time basis. They were very specific in recruiting the agents, because their contribution directly reflected their performance. All DOs faced three challenges such as Case Rate (number of policies), Case Size (amount of premium), and Recruitment of advisors by natural market, personal observations, nominators, and centre of influence. Incentives offered by the company to development officers and agents were based on their performance, which resulted into internal competition and finally converted into rivalry.
In August 2002, ,a Branch Manager joined along with one more Sales Manager and ten Development Officers. Initially, the branch was performing well and was able to build their image in the local market. As the industry was dynamic in nature, there were frequent opportunities bubbling in the market. In order to capitalize the outside opportunities, one sales manager left the organization in January 2003. As the sales manager was a real performer, he was able to convince all the good performers at XYZ Moon Life Insurance to join the new company. As a result of this, the organizational structure got disturbed and the development officers, who were earlier reporting to the SM had started reporting directly to the branch manager. Now, nepotism crept in and the branch manager began reallocating good agents to his favorite development officers. The sales team of another sales manager became weak (low performer). Seeing the low performance of the sales manager and his development officers, the company decided to terminate their services. As the employees’ turnover rate of the organization was more than the industry rate, the company had to continuously recruit sales agents as well as development officers to sustain itself in a highly competitive environment. The internal competition among development officers resulted into problems like, high employee turnover and dissatisfaction. Hence the branch was not able to perform as per the benchmarks set by the company. Its performance was not even comparable to that of other branches of the same company.
In April 2004, the company faced a grave problem, when the Branch Manager left the organization for greener pastures. To fill the position, in May 2004, the company appointed a new Branch Manager, Shashank Malik, and a Sales Manager, Rohit Pandey. The Branch Manager in his early thirties had an experience of sales and training of about 12 years and was looking after two branches i.e., Nagpur and Nasik.
Malik was given one Assistant Manager and 25 Development Officers. Out of that, ten were reporting to Assistant Manager and remaining fifteen were directly reporting to him. He was given the responsibility of handling all the operations and the authority to make all the decisions, while informing the Branch Manager. Malik opined that the insurance industry is a sunrise industry where manpower plays an important role as the business is based on relationship. He wanted to encourage one-to-one interaction, transparency and 4iscipline in his organization. While managing his team, he wanted his co-workers to analyze themselves i.e., to understand their own strengths and weaknesses. He wanted them to be result-oriented and was willing to extend his full support. Finally, he wanted to introduce weekly analysis in his game plan along with inflow of new blood in his organization. Using his vast experience, he began informal interactions among .the employees, by organizing outings and parties, to inculcate the feelings of friendliness and belonging. He wanted to increase the commitment level and integrity of his young dynamic team by facilitating proper civilization of their energy. He believed that proper training could give his team a proper understanding of the business and the dynamics of insurance industry.
- If you were Malik, what strategies would you adopt to solve the problem?
- With high employee turnover in insurance industry, how can the company retain a person like Malik?
FRAGRANCE COMPANY LIMITED
Petals Company Limited (PCL) was initiated in the year 1919. Since then, it had produced a number of brands which enjoyed customer loyalty. It had adapted well with the changing environment and had entered into a strategic alliance with the S & G Limited, the producer of personal care products. The new company Fragrance Company Limited Was formed as a result in 1993 with equity participation from S& G and Petals Company Limited. This company marketed the products manufactured by the PCL. This alliance had given PCL access to the latest international technology in soaps and detergents. Thus, Fragrance Company Limited was now ideally placed to offer high value, international quality products at competitive prices. It was already an exporter of toilet soaps, detergents and cosmetics. It was a private organisation headed by Dharamchand, with its company’s headquarters at Mumbai and seven units all over the country with one of the units at Faridabad. The turnover of the company was Rs 900 crores. The company marketed the products using the latest international technology in soaps and detergents.
The organization structure was traditionally hierarchical with the senior vice president at the top of the management, the supervisory heads at the middle level and the workers at the shop floor. The company had 450 permanent workers, and 150 contract workers, with an average age of 32 years. The recruitment policy framed was to employ freshers. The various departments in the organization were: purchase, finance, systems, engineering services, excise and dispatch, operations and personnel department. The personnel and administration department were headed by Gyanchand and the functions of the personnel administration department were: recruitment, selection, training, counseling, performance appraisal, internal mobility of employees, negotiation With workers, fixation and implementation of rules and regulations regarding wages, salary, allowances and benefits to the workers. The philosophy of the company was based on Total Quality Management (TQM) and Kaizen. The company was highly environment-friendly and was oriented towards customer’s satisfaction.
Fragrance was facing an acute crisis due to high rate of absenteeism among its permanent workers. The losses were soaring high. There was loss in production, and high expenses and indiscipline were also observed. The personnel administration department conducted a survey in the year 1998. They found that the rate of absenteeism was about 20% on an average. The rules and regulations regarding leave were-12-17 days of leave with pay, 7 days casual leave with pay, 5 day sick leave with pay, extra leave without any pay. The benefits were provided as per the Employees State Insurance Act. The data collected revealed that 36% of the absenteeism was due to transportation problem, 48% was because of the workers staying away from their families, 52% due to festivals, 32% due to farming, 48% on account of alcholism, 80% on account of social occasions/marriages and 76% due to sickness of family members.
The other findings were that approximately 80% of the workers were married and they had children to look after and hence had a greater tendency towards taking leave, 8% of workers possessed dual jobs ,e.g., driving for others, mechanic work etc., so they felt that they could earn more on a particular day by remaining absent; 96% of the workers did not like night shifts and they remained absent from duty; 28% of the workers were not satisfied with the working conditions i.e. canteen facilities, drinking water, social and cultural activities and cleanliness. In 1998, the company tried to reduce absenteeism by introducing conveyance allowance for attendance and night shift allowance. The scheme called Inaam; was launched in which a worker who did not avail leave in three months, received Rs 200 per month. Inhouse training was imparted to workers In order to educate them about the consequences of absenteeism. They were also sent for 3-6 months training to the Central Board of Workers Education on rotation.
Counseling sessions were held for the workers in order to increase their awareness. The company also introduced the philosophy of workers participation in the management to increase their involvement and commitment towards the work. The practice of organizing picnics, festival celebration, informal get-togethers, and sports activities were also adopted to increase the commitment. Regularity was made an important component of performance appraisal and promotion. After one year, Gyanchand was highly perplexed to see only a negligible improvement in the report of the survey conducted by the personnel administration department. The rate of absenteeism had dropped by only 3%, i.e. from. 20% to 17% in spite of introducing the aforesaid schemes.
- What role do the non-financial incentives play in motivating the workers and minimizing the rate of absenteeism?
- What innovative solutions would you suggest to minimize the rate of absenteeism?
C A S E V
Vetements Ltee is a chain of men’s retail clothing stores located throughout the province of Quebec, Canada. Two years ago, the company introduced new incentive systems for both store managers and sales employees. Store managers receive a salary with annual merit increasing based on sales above targeted goals, store appearance, store inventory management, customer complaints, and several other performance measures. Some of this information (e.g., store appearance) is gathered during visits by senior management, while other information is based on company records (e.g., sales volume).
Sales employees are paid a fixed salary plus a commission based on the percentage of sales credited to that employee over the pay period. The commission represents about 30 per cent of a typical paycheck and is intended to encourage employees to actively serve customers and to increase sales volume. Because returned merchandise is discounted from commission, sales staff are discouraged from selling products that customers do not really want.
Soon after the new incentive systems were introduced, senior management began to receive complaints from store managers regarding the performance of their sales staff. They observed that sales employees tended to stand near the store entrance waiting for customers and would occasionally argue over “ownership” of the customer. Managers were concerned that this aggression behavior intimidated some customers. It also tented to leave some parts of the store unattended by staff.
Many managers were also concerned about inventory duties. Previously, sales staff would share responsibility for restocking inventory and completing inventory reorders forms. Under the new compensation system, however, few employees were willing to do these essential tasks. On several occasions, stores experienced stock shortages because merchandise was not stocked or reorder forms were not completed in a timely manner. Potential sales suffered from empty shelves when plenty of merchandise was available in the back storeroom or at the warehouse. The company’s new automatic inventory system could reduce some of these problems, but employees must still stock shelves and assist in other aspects of inventory management.
Store managers tried to correct the inventory problem by assigning employees to inventory duty, but this has created resentment among the employees selected. Other managers threatened sales staff with dismissals if they did not do their share of inventory management. This strategy has been somewhat effective when the manager is in the store, but staff members sneak back onto the floor when the manager is away. It has also hurt staff morale, particularly relations with the store manager.
To reduce the tendency of sales staff to hoard customers at the store entrance, some managers assigned employees to specific areas of the store. This also created some resentment among employees stationed in areas with less traffic or lower-priced merchandise. Some staff openly complained of lower paychecks because they were assigned to a slow area of the store or were given more than their share of inventory duties.
- What symptom(s) exist in this case to suggest that something has gone wrong?
- What are the root causes that have led to these symptoms?
- What actions should the organization take to correct these problems?