BUSINESS ENVIRONMENT ISMS MBA EXAM ANSWER SHEETS PROVIDED WHATSAPP 91 9924764558
Masters Program in Business Administration (MBA 4 SEM)
( Semester IV )
Note :- Solve any 4 case study
All case carries equal marks
Case No : 1
REMAINS OF A DREAM
This is a tragic story, narrated in first person, of an entrepreneur who became bankrupt for no fault of him, without producing anything, mostly because of the irresponsible political and government environment. This case study, documented by Bibek Debroy and P.D. Kaushik and published in Business Today is reproduced here with permission.
In the 1980s, I worked as a chemical analyst for a transnational in Germany , but kept thinking about shifting to India .
Opportunity knocked when I saw an advertisement by the Uttar Pradesh government inviting NRI professionals to start a chemical unit in the newly identified Basti Chemical Industrial Complex. I hail from Lucknow . Hence, this was attractive. I inquired from the Indian High Commission and was told that there is single window clearance for NRI investors. The brochure said several things about the benefits – excise and sales tax holiday for five years, uninterrupted power supply, low rate of interest on loans, and clearance of application within 30 days.
I started the application formalities for a chemical unit. Once the application was accepted, I requested for long leave from my employers. I also inquired from my relatives in Lucknow and was told that the Uttar Pradesh government’s intentions are clear, and developmental work is progressing at fast speed.
Every now and then, I received a letter from the ministry of industry in Uttar Pradesh to furnish some paper or the other, as part of procedural formalities. After three months, I received my provisional sanction letter for allotment of land, and term loan. The letter also stated that within six months, I must take possession of the land, and initiate construction. Otherwise, the deposited amount (Rs 1 lakh as part of my contribution) will be forfeited. I resigned from the company, and shifted permanently to India , since my employer turned down my request for long leave.
On reaching the complex, I was surprised to see that the Uttar Pradesh State Industrial Development Corporation (UPSIDC) had actually developed the land in terms of markers, and signboards, compared to what I had seen on my last visit.
Though roads were not fully laid, it was evident that work was in progress. I took possession of my land and started construction.
Meanwhile, I approached the UPFC for granting me the term loan for ordering the plant and machinery. The first obstacle came from the Uttar Pradesh State Electricity Board (now Uttar Pradesh Power Corporation). The electricity supply to the complex was not yet available. On inquiring, I was told that the plan had been sanctioned, but required clearance from the power ministry, before undertaking further work. The approximate time to get grid supply ranged between four and six months.
The next obstacle came from the Uttar Pradesh Financial Corporation (UPFC). It could release the first instalment after I completed construction till the plinth level. I continued work with the help of a diesel generating set. It took another month to reach the plinth level.
But before I could request UPFC to release my first instalment, I received a letter from UPFC that I had to deposit interest against the amount paid to the UPSIDC for land possession. This was a shock, because interest had to be paid even before anything was produced.
But I had no alternative, because the first insatlment was due. The UPFC promptly released the first instalment after inspecting the construction. It helped me continue construction work, and also book for plant and machinery.
Six months went by. Construction was almost complete. I had received three instalments from the Uttar Pradesh Financial Corporation (UPFC). Each time the payment of interest was due, the required sum was adjusted from the instalment released. If there was any shortfall in money required for construction, I paid from my own pocket.
But after nine months, my coffers went empty. Machinery suppliers were after me, for payment. UPFC insisted on interest payments, because this was the last instalment of my term loan and interest due couldn’t be deducted from future instalments. I borrowed from family and friends and paid up. Then I received the final instalment from UPFC for plant and machinery, with another notice that the yearly instalment for the principal was due.
Within two months, machinery was commissioned at the site. But electricity was yet to reach the complex. In the previous year, I had visited the Uttar Pradesh State Electricity Board (UPSEB) office innumerable times. I also approached the industry association to assist me. But all my efforts were in vain. This did not help me, or others like me, to get the grid supply.
There were 14 other who were in the same boat. The biggest company of them all – obviously with contacts at higher levels – arranged for grid supply from the rural feeder. But that plan also did not take off, because the rural feeder supplied poor quality power for a mere six hours. A process industry requires 24 hours of uninterrupted electricity supply without load fluctuations. It is precisely because of this that all 15 of us, who were waiting for electricity, had insisted on industrial power from UPSEB.
All plans failed. Captive generation was not a viable alternative now. And we continued to wait for the grid supply. We met the former minister for industry and pleaded our case. He assured us that he would take up the case with the power ministry.
Meanwhile, I defaulted on interest payment. So did the others. The final blow came in the Assembly elections, when both the sitting : Member of Legislative Assembly, from Basti, and the state industrial minister lost their seats. Suddenly, everything – from road construction work, to the laying of sewer and phone lines – came to a standstill.
Only the police post and the UPSKB rural feeder office remained. The new incumbent in the industrial ministry hailed from Saharanpur , so the thrust of the ministry changed. Basti was not on their priority list anymore. After waiting for tow years, UPSEB was not able to connect the complex with grid supply.
In the end, UPFC initiated recovery action and sealed my unit. Besides, they claimed that I could not get NRI treatment, with preferential interest rates, because I had permanently moved to India . Thus, there were also plans to file a case against me on account of misinforming the corporation. Experts suggested I should file for insolvency if I wanted to avoid going to prison. This I did in 1994. I spent Rs. 15 lakh from my own pocket.
Now, all that remains of an entrepreneurial dream is a sealed chemical unit in Basti and a complex legal tangle.
I was better off working for the transnational in Germany . Power does not come out of the barrel of a gun. A gun’s barrel comes of power, especially when the latter does not exist.
- Identify and analyse the environmental factors in this case.
- Who were all responsible for this tragic end?
- It is right on the part of the government and promotional agencies to woo entrepreneurs by promising facilities and incentives which they are not sure of being able to provide?
- Should there be legislation to compensate entrepreneurs for the loss suffered due to the irresponsibility of public agencies? What problems are likely to be olved and created by such a legislation?
- What are the lessons of this case for an entrepreneur and government and promotional agencies?
Case No : 2
THE COSTS OF DELAY
The public sector Indian Oil Corporation (IOC), the major oil refining and marketing company which was also the canalizing agency for oil imports and the only Indian company I the Fortune 500, in terms of sales, planned to make a foray in to the foreign market by acquiring a substantial stake in the Balal Oil field in Iran of the Premier Oil. The project was estimated to have recoverable oil reserves of about 11 million tonnes and IOC was supposed to get nearly four million tonnes.
When IOC started talking to the Iranian company for the acquisition in October 1998, oil prices were at rock bottom ($ 11 per barrel) and most refining companies were closing shop due to falling margins. Indeed, a number of good oil properties in the Middle East were up for sale. Using this opportunity, several developing countries “made a killing by acquiring oil equities abroad.’’
IOC needed Government’s permission to invest abroad. Application by Indian company for investing abroad is to be scrutinized by a special committee represented by the Reserve Bank of India and the finance and commerce ministries. By the time the government gave the clearance for the acquisition in December 1999 (i.e., more than a year after the application was made), the prices had bounced back to $24 per barrel. And the Elf of France had virtually took away the deal from under IOC’s nose by acquiring the Premier Oil.
The RBI, which gave IOC the approval for $15 million investment, took more than a year for clearing the deal because the structure for such investments were not in place, it was reported.
- Discuss internal, domestic and global environments of business revealed by this case.
- Discuss whether it is the domestic or global environment that hinders the globalization of Indian business.
- Even if Elf had not acquired Premier Oil, what would have been the impact of the delay in the clearance on IOC?
- What would have been the significance of the foreign acquisition to IOC?
- What are the lessons of this case?
Case No : 3
Balsara Hygiene Products Ltd., which had some fairly successful household hygiene products introduced in 1978 a toothpaste, Promise, with clove oil (which has been traditionally regarded in India as an effective deterrent to tooth decay and tooth ache) as a unique selling proposition. By 1986 Promise captured a market share of 16 per cent and became the second largest selling toothpaste brand in India . There was, however, an erosion of its market share later because of the fighting back of the multinationals. Hindustan Lever’s Close-up gel appealed to the consumers, particularly to the teens and young, very well and toppled Promise form the second position.
Supported by the Export Import Bank of India ’s Export Marketing Finance (EMF) programme and development assistance, Balsara entered the Malaysian market with Promise and another brand of tooth paste, Miswak.
The emphasis on the clove oil ingredient of the Promise evoked good response in Malaysia too. There was good response to Miswak also in the Muslim dominated Malaysia . Its promotion highlighted the fact that miswak (Latin Name : Salvadora Persica) was a plant that had been used for centuries by as a tooth cleaning twig. It had reference in Koran. Quoting from Faizal-E-Miswak, it was pointed out that prophet Mohammed used “miswak before sleeping at night and after awakening.’’ The religious appeal in the promotion was reinforced by the findings of scientists all over the world, including Arabic ones, of the antibacterial property of clove and its ability to prevent tooth decay and gums.
Market intelligence revealed that there was a growing preference in the advanced counties for nature based products. Balsara tied up with Auromere Imports Inc. (AAII), Los Angeles . An agency established by American followers of Aurobindo, an Indian philosopher saint. Eight months of intensive R & D enabled Balsara to develop a tooth paste containing 24 herbal ingredients that would satisfy the required parameter. Auromere was voted as the No. 1 toothpaste in North Eastern USA in a US Health magazine survey in 1991.
The product line was extended by introducing several variants of Auromere. A saccharine free toothpaste was introduced. It was found that mint and menthol were taboo for users of homoeopathic medicines. So a product free of such mints was developed. Auromere Fresh Mint for the young and Auromere Cina Mint containing a combination of cinnamon and peppermint were also introduced. When the company relaised that Auromere was not doing well in Germany because of the forming agent used in the product, it introduced a chemical free variant of the products.
- Explain the environmental factors which Balsara used to its advantage.
- What is the strength of AAII to market ayurvedic toothpaste in USA ?
Case No : 4
The Economic Times, 20 October 2000 , reported that Reliance Industries entered into a swap deal for the export and import of 36 cargoes of naphtha over the next six months. Accordingly, three cargoes of 50,000 tonnes each were to be exported every month from Reliance Petroleum’s Jamnagar refinery and three cargoes of the same amount were to be imported to the Reliance Industries’ Hazira facility. The deal was done through Japanese traders Mitsubishi, Marubeni, ltochu, IdCmitsu and Shell. The export was done at around Arabian Gulf prices plus $22.
Reliance, needs petrochemical grade naphtha for its Hazira facility which is not being produced at Jamnagar . Therefore, its cracker at Hazira gets petrochemical grade naphtha from the international markets in return for Reliance Petroleum selling another grade of naphtha from its Jamnagar refinery to the international oil trade.
If RIL imports naphtha for Hazira petrochemical plant, the company does not have to pay the 24 per cent sales tax, which it will have to pay on a local purchase, even if it is from Reliance Petro. Besides Reliance Petro will also get a 10 per cent duty drawback on its crude imports if it exports naphtha from the refinery at Jamnagar .
The export of naphtha with Japanese traders is being looked as a coup of Reliance as it gives the company an entry into the large Japanese market.
Indian refineries have a freight advantage over the Singapore market and can quote better prices.
- Examine the internal and external factors behind Reliance’s decision for the swap deal.
- What environmental changes could make swap deal unattractive in future?
- Could there be any strategic reason behind the decision to import and export naphtha?
- Should Reliance import and export naphtha even if it does not provide any profit advantage?
Case No : 5
A QUESTION OF ETHICS
TELCO opened bookings for different models of its proud small car Indica in late 1998. The consumer response was overwhelming. Most of the bookings were for the AC models, DLE and DLX. The DLE model accounted for more than 70 per cent of the bookings.
Telco has planned to commence delivery of the vehicles by early 1999. However, delivery schedules for the AC models were upset because of some problems on the roll out front. According to a report in The Economic Times dated 13 March 1999 , Telco officials attributed the delay to non-availability of air conditioning kits.
Subros Ltd. supplies AC kits for the DLE version and Voltes is the vendor for the DLX version. Incidentally, Subros is also the AC supplier to Maruti Udyog Ltd.
Telco officials alleged that Subros was being pressured by the competitor to delay the supply of kits. “If this continues, we will be forced to ask Voltas to supply kits for the DLE version too,’’ a company official said.
- Why did Telco land itself in the problem (supply problem in respect of AC kits)?
- If the allegation about the supplier is right, discuss its implications for the supplier.
- Evaluate the ethical issues involved in the case. (Also consider the fact Maruti was 50 per cent Government owned.)
Case No : 6
DIFFERENT FOR GAMBLE
Product and Gamble (P & G), a global consumer products giant, “stormed the Japanese market with American products, American managers, American sales methods and strategies. The result was disastrous until the company learnt how to adapt products and marketing style to Japanese culture. P & G which entered the Japanese market in 1973 lost money until 1987, but by 1991 it became its second largest foreign market.’’
P & G acclaimed as “the world’s most admired marketing machine’’, entered India , which has been considered as one of the largest emerging markets, in 1985. It entered the Indian detergent marketing the early nineties with the Ariel brand through P & G India (in which it had a 51 percent holding which was raised 65 per cent in January 1993, the remaining 35 per cent being hold by the public). P & G established P & G Home products, a 100 per cent subsidiary later (1993) and the Ariel was transferred to it. Besides soaps and detergents, P & G had or introduced later product portfolios like shampoos (Pantene) medical products (Viks range, Clearasil and Mediker) and personal products (Whisper feminine hygiene products, pampers diapers and old spice range of men’s toiletries).
The Indian detergent and personal care products market was dominated by Hindustan Lever Ltd. (HLL). In some segments of the personal care products market the multinational Johnson & Johnson has had a strong presence. Tata group’s Tomco, which had been in the red for some time, was sold to Hindustan Lever Ltd. (HLL). HLL, a subsidiary of P & G’s global competitor, has been in India for about a century. The take over of Tomco by HLL further increased its market dominance. In the low priced detergents segment Nirma has established a very strong presence.
Over the period of about one and a half decades since its entry in India , P & G invested several thousand crores. However, dissatisfied with its performance in India , it decided to restructure its operations, which in several respects meant a shrinking of activities – the manpower was drastically cut, and thousands of stockists were terminated. P & G, however holds that, it will continue to invest in India . According to Gary Cofer, the country manager, “it takes time to build a business category or brand in India . It is possibly an even more demanding geography than others.’’
China , on the other hand, with business worth several times than in India in less than 12 years, has emerged as a highly promising market for P & G. when the Chinese market was opened up, P & G was one of the first MNCS to enter. Prior to the liberalisation, Chinese consumers had to content with shoddy products manufactured by government companies. Per capita income of China is substantially higher than India ’s and the Chinese economy was growing faster than the Indian. Further, the success of the single child concept in China means higher disposable income.
Further it is also pointed out that for a global company like P & G, understanding Chinese culture was far easier since the expat Chinese in the US was not very different from those back home where as most Indian expats tended to adapt far more to the cultural nuances of the immigrant country.
One of P & G’s big in India was the compact technology premium detergent brand Ariel. After an initial show, Ariel, however, failed to generate enough sales – consumers seem to have gone by the per kilo cost than the cost per wash propagated by the promotion. To start with, P & G had to import the expensive state-of-the-art ingredients, which attracted heavy customs duties. The company estimated that it would cost Rs. 60 per kilo for Ariel compared to Rs. 27 for Surf and Rs. 8 for Nirma. Because of the Rupee devaluation of the early 1990s, the test market price of Rs. 35 for 500 gms was soon Rs. 41 by the time the product was launched. HLL fought Ariel back with premium variants of Surf like Surf Excel.
It is pointed out that, “in hindsight, even P & G managers privately admit that bringing in the latest compact technology was a big blunder. In the eighties, P & G had taken a huge beating in one of its most profitable markets, Japan, at the hands of local company Kao. Knowing the Japanese consumer’s fondness for small things, Kao weaved magic with its new-found compact technology. For a company that prided itself on technology, the drubbing in Japan was particularly painful. It was, therefore, decided that compacts would now be the lead brand for the entire Asia-Pacific region. When P & G launched Ariel in India , it hoped that the Indian consumer would devise the appropriate benchmarks to evaluate Ariel. As compacts promised economy of sue, P & G hoped that consumers would buy into the low-cost-per-wash story. But selling that story through advertising was particularly difficult, especially sine Indian consumers believed that the washing wasn’t over unless the bar had been used for scrubbing. Even though Ariel was targeted at consumer with high disposable income, who represented half the urban population, consumers simply baulked at the outlay.
Thereafter, one thing led to another. Ariel’s strategy of introducing variants was a smart move to flank Lever at every price point by cleverly using the brand’s halo effect. And by supporting the brand in mass media and retaining the share of voice. By 1996, it had become clear that Ariel’s equity as a high-performance detergent had begun to take a beating. Its equity as a top-of-the-line detergent was getting eroded….Nowhere in P & G’s history had a concept like Super Soaker been used to gain volumes…. It was decided that Super Soaker would no longer be supported, nor would Ariel bar be supported in media.
- Discuss the reasons for the initial failure of P & G in Japan .
- Where did P & G go wrong (if it did) in the evaluation of the Indian market and its strategy?
- Discuss the reasons for the difference in the performance of P & G in India and China .
Masters Program in Business Administration (MBA 4 SEM)
( Semester IV )
Specializations :- Human Resource Management
Note: – Solve any 4 Case Study
All Case Carry equal Marks.
Case 1 :-
Meeting the Challenge of Sexual Harassment
At an office of Goldman, Sachs and Company in Boston, some male employees allegedly pasted photos of bare-breasted women on company newsletters, next to biographies of new female employees (suggesting that the photos were pictures of the new staff members). Copies of the newsletters were circulated around the office. Sexist literature such as “The Smart Man’s Creed or Why Beer Is Better Than Women” (“After you’ve had a beer, the bottle is still worth a dime”) was allegedly also distributed. Kristine Utley, a former Goldman sales associate, has made these allegations in a suit charging that the environment at Goldman, Sachs constitutes sexual harassment. Fired for refusing a transfer to a New York office, she is suing to gain reinstatement and damages and to eliminate the harassment.
Joanne Barbetta has filed a similar suit seeking damages for harassment caused by an environment that she asserted “was poisoning my system.” Ms. Barbetta reports that during her tenure as a clerk at Chemlawn, male employees circulated pornographic magazines and pinup posters. She viewed a slide presentation that included suggestive pictures (e.g., a nude woman) put there, according to management, “to keep the guys awake.” After these experiences and continual breast-grabbing by a male employee, Ms. Barbetta quit.
Marie Regab, formerly an 18-year employee of Air France, has filed similar charges concerning the Washington office where she worked as a salesperson. She alleges that several characteristics of the office environment combined to create harassment, including propositions by one of her bosses, circulation of Playboy and Penthouse magazines in the office, and open discussion of sexual activity by male employees. “It was sickening and an insult to women in the office,” she claims. Ms. Regab was fired; she is suing to gain reinstatement, for $1.5 million in damages, and to eliminate the harassment in the office.
These three situations are examples of a growing number of suits being filed by women who charge that a sexist environment in the workplace constitutes sexual harassment and that their employers are therefore liable. Plaintiff actions in this area have been fueled by the Supreme Court’s ruling that sexist behavior that creates an “intimidating, hostile, or offensive working environment” is sexual harassment and violates Title VII of the 1964 Civil Rights Act.
The Court’s ruling has spurred an increasing number of companies to act to prevent sexual harassment in the workplace and to deal with if effectively when the problem occurs. Other factors have also triggered company action. Employers are realizing that the costs of harassment can be high in terms of lowered productivity, absenteeism, and turnover. One study of female employees in the federal government concluded that the government loses about $200 million each year to the effects od sexual harassment. Costs can also be high if an employee sues. Even if the plaintiff opts for an out- of-court settlement, the costs of these settlements are often in six figures, and it’s the company that pays. Companies are also realizing that sexual harassment is a very real issue in today’s workplace; from 20 to over 50 percent of working women have experienced sexual harassment (and so have at least 15 percent of male employees).
Thus, companies are tackling the issue; the more effective strategies developed so far contain four primary features:
- Training programs the educate employees concerning the meaning of sexual harassment and the behaviors that constitute a hostile and harassment workplace: Training is especially important simply because men and women often differ in their perception of what constitutes harassment. Most training is in the form of seminars and workshops, often with films and videos. Philip Morris USA conducts a mandatory training program for its field managers that include viewing a video called “Shades of Gray”. General Motors conducts an awareness seminar for employees and offers this benchmark for judging the appropriateness of office conduct: “would you be embarrassed to see your remarks or behavior in the newspaper or described to your own family?”
Du Pont has developed one of the most comprehensive antiharassment programs in business (begun in 1981). Recently, the corporation added a $500,000 course on personal safety, rape, and harassment prevention primarily for its female employees (many of whom are moving into traditionally male jobs at Du Pont such as agricultural products sales). The course offers no-nonsense advice on how to handle a harasser. For example, if a male customer fondles a women’s knee, Du Pont advises that she “firmly remove his hand . . . and then say, ‘Let’s pretend this didn’t happen. “If she receives a verbal proposition, Du Pont advises that she say, “No, I wouldn’t want our business relationship to be jeopardized in any way.” About 1,600 employees have completed the course.
Like General Motors, Du Pont offers its employees a guideline for evaluating their behavior. Said a Du Pont spokesman, “We tell people, it’s harassment when something starts bothering somebody.”
Some other companies provide advice concerning how to handle harassment. One popular piece of advice: Document the incident as soon as possible by describing on paper what happened in full detail and talking to someone informally about the incident. A relatively mild case of harassment can be handled by taking to the harasser, explaining what he or she did , how it made you feel, and telling the harasser to stop. In a more serious situation, communicating these points via a certified letter sent to the harasser, with the victim keeping a copy, is often recommended (and reportedly proves to be quite effective).
- An internal complaint procedure: Ideally, the procedure provides for fast action and confidentiality and ensures that the employee can report the problem to a manager who is not involved in the harassment. Some companies encourage employees to report a problem to their immediate supervisor but also designate an individual (often a woman) in the HR department as someone employees can speak with in cases where the immediate supervisor is involved in the problem. To ensure speedy action, some companies require that an investigation begin within 24 hours after the harassment complaint has been reported. Ideally, the procedure also stipulates how investigations will be conducted.
- Speedy, corrective action that solves the problem: If the investigation supports the employee’s claims, corrective action is quickly taken. Such action can range from simply talking to the harasser to discharge, depending on the severity of the offense. One federal agency requires offending employees to publicly apologize to the individuals they’ve harassed. Staffing changes also sometimes occur. Our New York bank faced a problem of a highly talented male executive who generated much profit for the bank-and also several costly EEOC complaints from his secretaries. The bank solved the problem by assigning the executive an all-male secretarial staff. Corrective action is particularly important because it communicates to both victims and potential offenders that harassment will not be tolerated.
- A written and communicated antiharassment policy. The written policy is documented and distributed to all employees. The policy contains a definition of harassment, the company’s position prohibition harassment, the grievance procedure, and penalties.
While a growing number of companies are implementing antiharassment policies, the courts have yet to establish consistent record concerning the issue of “hostile environment” as illegal harassment. For example, a federal district court in Michigan dismissed a claim by Vivienne Rabidue that sexual posters and obscene language in her office at Osceola Refining Co. constituted illegal sexual harassment.
However, Joanne Barbetta has won the first round of her court battle with Chemlawn. The judge hearing her complaint rejected Chemlawn’s motion to dismiss the suit; he has ordered Ms. Barbetta’s case to trial. Chemlawn is expected to present a vigorous defense, asserting that the men involved in the newsletter incident have been disciplined and that the situations Ms. Barbetta cites fall far short of creating a hostile, harassing environment because they occurred “over the course of two years.”
- Assumes that you are an HR executive for a company that manufactures and sells agricultural products (for example, fertilizers and grain feeds). The company’s workforce of 1,200 employees is 70 percent male and 30 percent female. Drawing from this case and the chapter content, develop an antiharassment policy and program. What are the major challenges you see in implementing the program?
- Many experts assert that reported cases of sexual harassment represent only a small percentage of the total number of incidents that actually occur in the workplace. If their assertion is true, why do so many cases go unreported? How would your HRM policy on harassment address this situation?
- As research indicates, people differ widely in their perceptions of sexual harassment. What is a harmless remark to one individual can be an annoying, even infuriating insult to another. In your view, what separates harmless conduct from harassing behavior? In the same vein, when does a sexist environment become a hostile, harassing one?
Case 2 :-
Are New Recruits Looking for Work – Life Balance?
Anyone who has tried to balance his or her time between a busy job and a fulfilling personal life knows challenging this can be. An Indisputable fact is that work and personal lives are interconnected. Companies know this. Potential recruits also know this. It’s become more of an issue in recent years due to some important demographic changes that are affecting many workers. For example, companies are experiencing rising demand for the expansion of child care and elder care programs. This is not surprising given the aging of the U.S. population and that Gen Xers are starting to have families. Thus, many recruits who are members of the “sandwich generation” (i.e., they are sandwiched between elderly parents and young children and therefore have to provide care both sets of family members) consider as part of their employment decisions the number and type of work-life balance programs that potential employers offer. Other demographic changes that are contributing to this rise in the demand for work-life balance programs include the increase of single parents entering the workforce and an increase of dual-career couples. In both cases, parents who shoulder care-giving responsibilities often seek flexible work arrangements and more flexible career cycles. Flexible career cycles allow individuals to leave their career tracks temporarily to raise a child, care for sick parent, and so on. These individuals are welcomed back to work and placed back into career-oriented positions.
Are companies using work-life balance programs to attract top candidates to join their firms? The answer is yes. Whirlpool attempts to attract recruits with the company’s family friendly culture. To illustrate, the company arranged for housing for an intern and his family for the entire summer.
At Xerox, two executives successfully share one job so that they can have more time at home with their young children. After 10 years, the job sharing arrangement is working whereby both executives report high levels of satisfaction with the arrangement, and the company has been able to retain two productive and experienced employees.
Flextime programs that allow employees limited control over which days and hours they have to be working at the office are becoming popular at many companies. For example, an employee may prefer to work a 4-day/10-hours-a-day week instead of a traditional 5-days/8-hours-a-day week. The shorter workweek may allow the employee to attend children’s sporting events, provide weekend care for an elderly parent, or engage in other important activities. Companies such as Hewlett-Packard, Merrill Lynch, Deloitte Touche, and Cigna have implemented flextime programs.
Related to flextime is telecommuting, which allows employees to work in their home part or full time while being connected to the office via the Internet, phone lines, and the like. Although some managers and supervisors fear a loss of control from this type of work-family arrangement, companies like Pfizer have been careful to create an effective telecommuting policy. For example in order to qualify for this program, Pfizer employees are required to demonstrate that the work can be accomplished odd-site to no more than two per week.
Work-life balance programs such as job sharing, flextime, and telecommuting are designed for both retaining current employees and attracting potential employees to the firm. As new college graduates increasingly find themselves providing care to both their aging parents and young children, the value of these programs will only increase. Undoubtedly, this will make work-life friendly companies more attractive in the marketplace.
- Why is there a need for companies to offer work-family balance programs such as flextime, telecommuting, and job sharing?
- Of the three programs discussed above, which be the most important program for you personally when deciding whether or not to join an employer? Why?
- Some organizations do not believe in offering any of these work-life balance programs. What do you think their reasoning is? Explain.
Case 3 :-
Creative Staffing Solutions: A Pipeline of Human Assets
Finding the talent, competence, and expertise needed to operate a business, run a project, or grow a company is always a challenging job. In the recent labor market, even with an economic downturn, firms have had difficulty finding enough employees who are skilled in specific areas such as management information technology, software programming, and technical sales.
There are also firms interested in attracting people willing to work part-time or on a temporary basis to develop and complete a particular project. A temporary work basis differs from “traditional” temporary assignments, which often last a week or two while a permanent employee is ill or on vacation. Instead, some companies want people who can stay on the job for six months or a year.
Creative Staffing Solutions (CSS), a temporary and alternative staffing firm, provides workers to companies “Temping,” as it used to be called, is a $40 billion industry as more and more companies turn to staffing agencies for help. Companies are willing to pay for these employees. “For high-tech workers, this is an employee’s market,” notes Marc Brailov of the American Electronics Association. “It is very important for Internet companies to create and offer incentives to attract and retain employees.” That’s where Creative Staffing Solution (CCS) comes in.
CSS, a minority-owned firm founded by Mel Rhone, now has clients ranging from small companies to large organizations such as AT & T, Hershey’s, and Lockheed Martin. CSS specializes in finding IT professionals, engineers, computer programmers, and other high-tech workers for its clients. On one side of the process, a CSS manager meets with and interviews the HR manager at the client firm to determine the firm’s needs. On the other side, CSS managers screen, interview, and test prospective job candidates’ work history, grammar, spelling, math, computer skills, and so forth. CSS makes it possible for the job hunters to post their resumes on the CSS Web site, where staffing managers can review them. In addition, CSS’s staffing managers peruse Internet job sites in search of potential matches.
According to CSS managers, the alternative staffing solution meets the needs of both the company and the worker. Firms obtain screened, highly skilled, and motivated workers for a designated period. Currently, many high-tech firms prefer to hire temporary workers. They like to hire people to complete a specific project, such as development of a new computer system. Workers also benefit. “You get to make your own schedule,” remarks CSS staffing manager Joy Thomas. Because CSS tests and trains candidates, people who want to improve their job skills can find plenty of opportunity through the company. Some workers are looking to change careers but are afraid to make a total commitment without knowing whether they will like the new field. Filling a temporary position can give them a good taste for what the field will be like. Occasionally CSS sends a worker to fill one temporary position at a company, and the person moves on to a completely different job at the firm. The arrangement gives both parties convenience and flexibility.
Rhone foresees a future in which temporary and alternative staffing will be routine in American industry, and he wants his company to be ready to grab every opportunity that comes its way. A study by National Association of Temporary and Staffing Services found that 90 percent of companies surveyed employ temporary help. “Companies are incorporating temp workers in long-term plans, whereas 15 years ago they used temps just to fill occasional holes,“ remarks Richard Wahlquist, executive vice president of the association. The same holds true for today’s workers. “The way Americans seek work has fundamentally shifted-so many young adults look to temp agencies first, to get a taste of different fields, that we are a central part of the job search process,” says Wahlquist. Creative Staffing Solution intends to remain part of the process as well.
- How can Creative Staffing Solutions create a learning environment for job candidates before they accept a position or while they are between positions?
- What type of job candidates would use the temporary job support and services provided by a firm like CSS?
- What difficulties might Creative Staffing Solutions have to deal with in using electronic job and resume posting?
Case 4 :-
Human Resource Planning and Virtual Human Resource Management
Just a few years ago, computer technology offered a revolutionary change in human resource management. Organizations experimented with computerized skills inventories, pay and benefits administration, and applicant tracking systems. Today, the revolution continues but is undergoing fundamental changes as computer technology and the Internet grow at unprecedented rates. Human resource management is moving away from a mainframe technology to the world of virtual reality, with the Internet at its core. Although many forces drive this change, one of the most important is the globalization of business. As organizations spread their operations and personnel worldwide, the need for a truly global, integrated human resource information system has reached critical levels. The most obvious answer-virtual human resource management on the World Wide Web.
Surveys indicate that in the past year alone, the percentage of U.S. companies using the Web for its HR system has almost doubled. As recently as 1997, approximately 27 percent of surveyed organizations reported such use. Now that number has reached 50 percent, and almost 75 percent of organizations indicate they plan to integrate their HR activities with the Web sometime during the next two years.
The most common uses of the Internet in human resource planning are in corporate communications, applicant and resume tracking, and benefits and retirement planning. In the area of recruiting, Human Inc. has created one of the most advance applicant identification and tracking systems in the world. Humana is an HMO with approximately 20,000 employees and 6 million subscribers. Their human resource recruiters can rapidly identify, contact, and track qualified applicant, Softshoe Select, provided by and linked to Hotjobs.com. This software automatically searches millions of individual Web pages looking for resumes that meet any need that Humana may have. While setup costs are relatively large (a one-time fee of $50,000 for licensing and configuration in addition to a $2,000 per month lease), organizations such as Humana find that the costs are well worth the efforts. Humana, for example, estimates that it previously spent an average of $128 in advertising to find a single qualified applicant’s resume. Today, they estimate that the cost is approximately $.06. For Humana, that translates into an annual savings of $8.3 million.
The Internet is also helping revolutionize a number of other human resource planning activities for many organizations, Citibank, for example, has a single global HRIS that maintains a detailed skills inventory, compensation database, and HR practices for 98 countries and 10,000 managerial personnel worldwide. Numerous other global employers have created employee self-service compensation and benefits systems that allow employees from around the globe to manage many of their own HR activities. For example, employees at Shell Oil Company manage their retirement plans, maintain and/or change health care coverage, and track other personally relevant information all through an automated self-service system.
Use of the Internet in these kinds of human resource planning activities is not, however, without danger. The ease of access to so much information always has the potential to create both legal and ethical abuse, both by employees and by external “hackers,” or unauthorized users of the systems. Organizations must take all necessary precautions to safeguard the privacy and integrity of these virtual human resource systems. The challenges are immense, but the organizational consequences can be invaluable.
- How has the emergence of the Internet changed the way that organizations plan and mange their human resource needs?
- What kinds of future human resource activities might we see developed over the next several years?
- What are the legal and ethical issues surrounding the use of the Internet by Individual employees for human resource activities? Are you concerned about violations of your own privacy because of these kinds of Web applicants?
- What specialized skills will the future HRIS professional need in order to effectively manage an organization’s virtual human resource function?
Case 5 :-
Toyota in France: Culture Clash?
Hiroaki Watanabe, the Japanese general manager of the first major Toyota plant in Valenciennes, France (and in continental Europe), has a lot at stake. He is in charge of a modern and efficient $570 million Toyota Motor factory designed to manufacture the Yaris, a subcompact car. The plant was designed to employ 2,000 workers. Currently, there are about 200 Japanese managers and 150 Japanese trainers on staff. The remaining employees are mostly French. Culturally speaking, there were many potential areas of conflict between the Japanese and French customs. For example, the plant holds calisthenics at 8:00 A.M. every morning to avoid starting off the day “cold” and being more prone to injuries. This is a common Japanese practice that is not frequently done in France. Also, the plant does not serve wine at lunch, a common practice in other French organizations. As is common in other Japanese firms, blue and gray windbreaker jackets are made available with the word “Toyota” on the back and the employee’s name on the front.
To help bridge these and other potential cultural gaps, the leadership of the venture needs to understand the potential cultural clashes that these issues can cause. How did Mr. Watanabe prepare himself for this high-profile assignment? Although fluent in English, he decided that he would learn French and as much about French culture as possible. After all, the vast majority of workers at the plant would be from northern France. To prepare himself, he traveled to France as a tourist and visited the Toyota plant in Canada. He conducted interviews in French, with assistance of an interpreter, in order to improve his language skills.
Are his efforts succeeding? Toyota had high hopes for this first major undertaking in continental Europe. Its goal was to increase its market share that was 3.7 percent in 2001, less than half its share in the United States in that year. In 2004, Toyota surpassed this goal by achieving a 5.3 percent market share in Europe, higher than both Mercedes and Audi. The French employees at the Toyota plant have a lot at stake when one considers that the Valenciennes area, a former coal and steel region, suffers from high unemployment with closing of many companies in heavy industry over the past 20 years. To underscore the importance of Toyota to this region, more than 30,000 people applied for the 2,000 jobs at the factory when it first opened its doors.
- What potential conflicts could arise between the Japanese managers/trainers and the French employees? Explain.
- What do you think of Mr. Watanabe’s approach to preparing himself for French culture? Do you think that his approach would be useful for American managers? Why or Why not?
- What kind of organizational culture did Mr. Watanabe want to establish at the factory in Valenciennes, France? Do you think he’ll try to manage the plant just like a Toyota factory in Tokyo? Why or Why not?
- What implications are there for the French employees of the plant if its good fortune takes a turn for the worse, and the factory consequently shuts its doors? Explain.
Case 6 :-
OSHO and Unions versus Manufactures: Is Workplace Ergonomics a Problem?
During the Industrial Revolution a century ago, workplace injuries were so commonplace that they were simply considered one of the hazards of having a job. Children and adults were often maimed or disfigured in factory accidents. Today strict regulations cover safety in the workplace, guided by the U.S. Department of Labor’s Occupational Safety and Health administration (OSHO).
During the past couple of decades, as industry itself has changed, a different type of injury has emerged; musculoskeletal disorders (MSDs). MSDs are injuries resulting from overexertion and repetitive motion, such as constantly lifting heavy loads or grabbing and twisting a piece of machinery. People who sit at computer workstations all day are susceptible to MSDs as well, particularly carpal tunnel syndrome, which affects the nerves of the hand, wrist, and arm. According to OSHO, about one third of repetitive stress injuries, or 600,000, are serious enough to require time off the job, which means that businesses pay for these injuries not only in medical costs but in lost productivity. They can also contribute to high employee turnover. No one disputes that these injuries occur. But various experts, industry leaders, and politicians argue about how severe the injuries are, who should pay for them, what should be done about them, and who takes ultimate responsibility for the safety of workers.
One aspect of the whole issue of workplace injuries is ergonomics: “The applied science of equipment design, intended to reduce operator fatigue and discomfort, or as OSHO puts it, the science of fitting the job to the worker.” Ergonomics involves everything from developing new equipment, including desk chairs that support the back properly and flexible splints to support the wrist while typing, to designing better ways to use the equipment, such as the proper way to hold a computer mouse.
OSHO has proposed new guidelines for better ergonomic standards, targeting jobs where workers perform repetitive tasks, whether they are in processing poultry or delivering packages. The proposal required employers that received reports from workers who were suffering from MSDs to respond promptly with an evaluation and follow-up health care. Workers who needed time off could receive 90 percent of their pay and 100 percent of their benefits. Not surprisingly, arguments for and against the proposal broke out. OSHO spokesperson Charles Jeffers claimed that the guidelines “will save employers $9 billion every year from what they’ve currently been spending on these problems.” Peg Seminario of the AFL-CIO noted that the guidelines did not go far enough because they did not cover “workers in construction, agriculture, or maritime, who have very serious problems.” Pat Cleary of the national Association of Manufacturers argued that “there’s a central flaw here and that is that there is no . . . consensus in the scientific or medical community about the causes of ergonomics injuries.” Debates over the proposed ruled’ merit were further clouded by the Small Business Administration’s prediction that implementing the standards would cost industries $18 billion. OSHO had forecast a mere $4.2 billion.
Just before he left office, President Bill Clinton signed the bill into law which was overturned by incoming President George Bush and the new Congress. Calling the workplace safety regulations “unduly burdensome and overly broad,” Bush signed a measure to roll back the new rules.
Where do these actions leave workers and businesses in regard to workplace injuries? Legally, businesses are not required to redesign work systems or continue full pay and benefits for an extended period after work-related injury. But if the goal of a company is to find and keep the best employees, perhaps developing good ergonomic practices makes good business sense. The high cost of treatment and turnover, not to mention lowered productivity, points toward prevention as a competitive strategy. “Good ergonomics in the office should not be a big burden in a company and may be a way to retain good employees.”
- Do you agree or disagree that ergonomics in the workplace should be covered by federal regulations? Explain your answers.
- Choose a job with which you are familiar and discuss the possibilities for repetitive stress injuries that could occur on this job and ways they could be prevented.
- Imagine that you are the human resources manager for a company that hires workers for the selected in question 2. What steps might you encourage company officials to take to identify and prevent MSDs?
Masters Program in Business Administration (MBA 4 SEM)
( Semester IV )
Specializations:- Public Relation Management
- a) Solve any 4 cases
- b) Each case carries equal marks
Case 1 :-
Reaping the benefits of customer insight
During the late 1990s, companies invested millions in customer relationship management (CRM) systems such as sales force automation, campaign management and call centre systems. Given the importance to any business of establishing and building relationships with customers, this is not surprising. But despite this rush, many companies have been disappointed by the low return of investment from CRM. Being able to handle more calls per agent or run more marketing campaigns has been of limited value.
The real returns come when business intelligence software is used to drive these operational systems. This software opens up opportunities such as up- or cross-selling in the call centre, targeting campaigns at specific customer segments and increasing the relevance of the offer made and its value to the customer, thereby increasing response rates.
The ultimate aim is to combine CRM with business intelligence to produce a ‘closed loop’ systems in which business intelligence analyses customer behaviour and produces a list of targets for a specific product or service. The campaign is managed using the CRM software and the business intelligence systems and then assess the results to produce a more refined campaign.
However, few organisations have reached this level of sophistication. As Colin Shearer, vice president of customer analytics at SPSS, a supplier of predictive analytics software, says: ‘Most companies have always dealt with their customers en masse.’
According to Mr Shearer, business intelligence software is ideal for assessing the profitability of individual customer by matching the cost of serving each one against the revenue he or she generates. The organization can then develop marketing campaigns that target its more profitable customers. At the same time, unprofitable customers can be diverted towards lower cost channels, such as automated voice systems or a website.
‘You need to identify the small percentage of very high-value customers that are generating 80 to 90 per cent of value in the company,’ he says. ‘You also interested in the trends, such as customers who are dropping out of the top to become less valuable and take their business elsewhere.
The final stage of the process is to use data mining software to predict how individual customers behave. This software uses advanced mathematics algorithms to reveal hidden paterns and relationships in sales data. The results can be used in a number of ways: to group customers into different segments according to similar behavior and characteristics; to determine which products or services a customer is likely to buy; to identify which customers are most likely to defeat to another company; or to assess how much of a credit risk a potential customer poses.
David Bradshaw, a senior analyst at Ovum, explains that such assessments once required advanced mathematical knowledge to build and run data mining models. ‘You still need people with expertise to set up the business intelligence systems, ‘he says, ‘ but business users are increasingly being trained to build, analyse and exploit segments. You are “handling over the toys “ to the business people to do the analysis themselves.’
Vodafone, the mobile network operator, has a single contacts number for its call centre and routes each caller to the appropriate team of agents for his or her segment. According to Julian Moss, UK development manager: ‘Business intelligence enables our touch points to target the right groups of customers, to understand them and to have a close relationship with them.’
Spaarbelg, a Dutch subsidiary of Aegon, the life insurer, has a growth strategy based on expanding sales to its existing customer base, rather than on acquiring new clients. It uses SPSS real-time predictive software to suggest cross-sell opportunities to agents in its inbound call centre, which handles 1m calls a year from 1.6m customers. To avoid pestering them, its agents gathered enough information in just 180,000 calls to develop a targeted recommendation. In a third of these calls, the agent determined that the customer was respective enough to make the offer and sales worth $30m.
Business intelligence reporting is also ideal for managing performance in contact centres. It can help set and track targets and spot trends, and it can provide management dashboards that display key performance indicators, such as how many calls agents are handling and how many are closed within agreed service levels. The use of business intelligence is becoming increasingly important in the face of new legislation introduced to guard against unwanted e-mail and to allow individuals to bar cold telephone calling. Mr Shearer points out that with fewer opportunities for outbound marketing, organisations, must take advantage of cross-selling at service call centres.
As Mr Bradshaw explains: ‘You may only have one chance of approaching a customer. This is pushing people into micro-segmentation of their customers. Rather than having five or six major segments, they may have many thousands, each with 100 to 1000 customers. You analyse the behavior of the micro-segments so that you know what they want to buy, how they want to buy, how they want to buy it and how to approach them.’ ‘The problem with the business intelligence vendors’. He adds, ‘is that they have targeted the technical experts. They haven’t yet really got to use their marketing analytics. They are trying to do better, but [the CRM vendors, such as Unica Corporation, Siebel and E.piphany] have targeted people actually do the marketing.
It is clear that business intelligence is needed to drive CRM activities. However, the trick is to create a closed loop systems that combines customer profitability with data mining. Only then will an organization be able to concentrate on giving profitable customers the best and most relevant products and services.
1 What is the different between business intelligence (BI) and (analytical) CRM?
2 Do you agree with the following statement in the text: ‘The ultimate aim is to combine CRM with business intelligence’? Give detailed arguments why you do or do not agree.
Case 2 :-
Customer knowledge at Centre Parcs: a life-long holiday!
Centre Parcs is a holiday resort with locations in several European countries, for example Germany, France and the Netherlands. Customer relationship management is one of its successes. The secret: ‘it is not about the value he or she wants.’
Richard Verhoeff, director of E-commerce at Center Parcs: ‘None of our customers is equal. The market and the customer do not exist for us. All that our guests have in common is the money and the time they spent with us. It is our challenge to get to know them better…. It was the objective of our yield management systems to optimize cottage rental, but nowadays we also want to actively offer services at different contact moments. Experience tells us that guests who participate in more activities are more likely to return. But before you can do this, you will have to answer questions such as: who are our guests? When do they come? What do they want? In other words: we need customer profiles. Of course, segmentation is nothing new. In most cases customer groups are distinct and differ in the value they represent for the organisation (customer value). Customer relationship management then simply means retaining the good customers and stimulating them to increase their expenditure, while in the meantime the bad customers can leave.
BPK Acxiom, a database and CRM consulting firm, approached it from a different perspective and began by analysing the emotional and instrumental values of a stay Center Parcs. These values change with the life cycle of a customer. He comes as a little child with his parents, when he is older he brings his girlfriend, and again later his family. Each of these roles asks for different approach. Also, the value of the attractions differs for each customer, depending on his life cycle, the time of his stay and the people that accompany him. Verhoeff: ‘ The swimming pool on a Saturday morning has a completely different function from that on a Sunday afternoon, when there are a lot of small children around.’
To clarify this, BPK Acxiom developed life scenarios. Peter Severens, director at BPK Acxiom: ‘We write life stories. What are the motives that drive people? Where do they come from? What are the events in their life and in specific situations? And what goods and services are consumed during these events? We map people’s life cycles and store them in the database. ‘The scenarios have been tested and refined in panel research together with a market research agency, named Signicom. It resulted in the definition of a number of customer groups and a customer-value pyramid per customer group. The value pyramid contains suggestions for product development and communication. The tone-of- voice, the actual proposition and the sales arguments match the values and preferences of the segment.
CRM Software plays an important role during the implementation of this customer group project. Center Parcs uses the forecasting software developed by DataDistilleries (now owned by SPSS) during direct and telemarketing actions. Relations are selected that have the best chance of booking during a specific period. But also, salespersons benefits from the software. Marcel Holsheimer, founder of DataDistillers: ‘Ours software helps to predict the interests of a person during a contact moment. ‘Specific phone scripts and offerings can be formulated. Verhoeff: ‘Some customer groups appreciate it if you give them a discount right from the start, others first asks for an explanation of your products and services and formats help, one should never forget that it remains people’s business.
To predict what Center Parcs’ customers are interested in, DataDistilleries can benefit from an enormous database with customer data that have been collected over the years. As early as 1984, Center Parcs started to store relationship and transaction data. However, through the years the organisation has been reactive in its use of these data. Erna ter Weele from BPK Acxiom: ‘Currently, changes are focusing on improving customer insight and exploiting this information in actions. ‘Since DataDistilleries’ software is user friendly, marketers no longer have to rely on IT specialists and can act faster. Verhoeff: ‘Time to market is very important. It you notice the occupancy rate of your park is not optimal for a particular weekend, you only have a few days to do something about it’
Although Center Parcs is pleased with the results to date, Verhoeff is convinced the potential of the system is larger. ‘Additional positive result of $3 million is a beginning. We have 3.2 million customers a year and if they spend an additional 2 per cent, revenue will increase by several tens of millions. By making more active use of the call centre in outbound actions, by stimulating cross-selling in the call centre, via the Internet and during contact moments in the park itself, revenues have to grow.’
1 Consider the way Center Parcs and its consulting and research firms profile its customers. Apply the method, described by Peter Severijins, to yourself or someone who visited a holiday park once before. What kind of customer profile can you construct?
2 What are two advantages and two disadvantages of applying this customer profiling approach?
3 In what ways can Center Parcs differentiate its marketing for different customer groups?
Case 3 :-
Project Direct: testing e-mail marketing is effective
Direct writer Proteq Direct used e-mails in experiments to acquire new customers and the result is: although the response on a physical direct mailing is higher, the costs per order for an e-mailing are lower, and in combination with a direct mailing the conversion improves. Sending more than one mailing to the same address works, but is, however, expensive.
The pros of an e-mail marketing campaign – low costs, extending the market reach – will only become evident when the medium is applied in the right way. Only few companies, however, test before they send out the bulk mailing and are confronted with disappointing low response rates.
For direct writer Proteq this was the reason to organise, together with an e-mail marketing agency, a test case for a new car insurance campaign. Finding out how effective and appropriate e-mail actually is to acquire new customers was the motive for Proteq to initiate the test… The marketing manager at Proteq Direct: ‘In traditional direct marketing it is always a trade-off. On the one hand you want to make a sharp selection to increase your response, but on the other hand you want to reach many people. We wanted to learn if with e-mailing we can increase our market reach. Besides that, an e-mailing is a lot cheaper. The economic climate and the maturity level of the market are reasons for a decrease in reponse on traditional mailing. ‘Michael Bres, managing partner of the e-mail marketing agency E-Profile: ‘It is the challenge to come up with a targeted offering and in the meantime to maintain the size of the mailing list. E-mail marketing can also seriously reduce the costs of an order.’ Peter: ‘But first we wanted to see if this was true.’
‘The subject of the mailing was a new car insurance with a price that decreases when the customers’ driving experience increases and therefore has fewer accidents and a safer driving style. Not only will the customer have a higher no-claim, but also a lower contribution. Prospects were private drivers without lease cars in the age categories of 29 to 65, living in areas with a high penetration of older and smaller cars up to a purchase price of $20,000.’ These criteria were used by E-Profile to select addresses in the online databases of Jecomputerisjelot and Testnet. Five equal experimental groups have been formed with the help of Experian; in the online database the e-mail addresses were related to names and addresses for which segmentation profiles were available in the Experian database.
Different ways were used to approach prospects; in a one-step approach or a multi-step approach, with or without a message informing the prospect of the upcoming e-mailing and with or without a physical direct mailing followed up by an e-mail as reminder.
The proposition remained the same in all mailings. Also in all experiments the main mailing was sent out at the same time. Further, by clicking through the e-mailing prospects could, in an interactive way, directly calculate their premium. Peter: ‘E-mail allows you to make an offer directly when people show interest. Therefore a functional use of the medium is to be preferred.’ There were three ways for people who did not want any e-mail offerings in the future to get off the list. Bres: ‘You could chose to be removed from all mailings, to be removed from mailings of this advertiser, or to receive mailings on selected topics.’ The sender was clearly visible on the mailing to avoid complaints about spamming. Furthermore, an e-mail address will never be used more than once or twice a month for an e-mailing. And, of course, we only mail when we have something to tell. By following this approach, the agency achieved that only 1 per cent of the receivers state they want to be removed from the list.’
E-Profile selected five equal experimental groups of 5000 consumers. Addresses were selected based upon the drivers’ experience, the geographical spread, the purchase value of the car (when new) and the kilometer usage per year. Sex was not a selection criterion. Peter: ‘men have no significantly different claiming behavior from women. Therefore it is a not a criterion. Besides that, we do not think it is a relevant segmentation criterion.’ For previous Proteq Direct mailings profile analyses were made for the best responding addresses (Ideal Profiles). A part of the mailing list was formed by these ideal Profiles.
The quality of the e-mail addresses is good as only 1 per cent of the e-mails bounced.
Mailing consumers more than once will have a positive impact on the response, but will also affect the costs. An increase in the share of e-mails in the campaign will reduce the costs per order. The Ideal Profile consumers responded best (37 per cent). The one-step approach with only the digital main mailing had the lowest response (index 41) but ranked seconds in costs. To measure what the results would be if not 5000 but 60,000 mailings were sent out, a new calculation was made in which economy of scale effects were incorporated. The Ideal Profile remains the most profitable group with an index of 89, but experimental group 4 becomes more lucrative with an index of 60 and test group 2 with only an e-mailing, will cost less than half the average cost per policy. It is the result of avoiding the physical print and postal costs.
Proteq is satisfied; e-mail appears to be an effective medium to acquire new customers. Although the response on a physical mailing is higher, e-mailings are cheaper and offer opportunities to reach a larger share of the target market. The combination of direct and e-mail has synergistic effects. Approaching consumers more than once has a positive impact on the conversion, but a negative one on the costs. Peter: ‘We will continue to develop and send out direct mailings and keep on learning in experiments. E-mail databases will be expanded and improved, profiles will be expanded and improved, profiles will be expanded and improved, profiles will be combined and for sure we will combine media in the future.’
1 What are the pros and cons of combining a physical direct mailing with an e-mailing?
2 Why can you increase the reach of your campaign with an e-mailing?
3 What is meant by the statement that e-mailings should be used functionally?
4 How do you evaluate the sampling in this test/experiments?
5 What is the reason that the outcomes in the entire population are different from those in the sample?
6 Can you think of two other relevant experiments that Proteq might initiate in the future?
Case 4 :-
Secrets of success for going mobile
The mobile Internet has been a huge success in Japan, but can it spread as explosively in the west? I believe that it can – in fact it can spread as fast as the fixed Internet in the 1990s and the GSM mobile standard has done in the past ten years. Achieving this will require mobile operators, equipment suppliers and content providers to learn from – but also to adapt from – the Japanese business model. The power of the fixed Internet derives from its ability to create highly connected ‘nodes’ – take, for example, the Amazon website, which links millions of prospective purchasers with the items they are seeking. In mobile telephony, by contrast, the core secret to success is in the way agreement is sought between the various players involved to ensure they all get their ‘cut’ from the value chain. This ‘agreement’ force was present in building NMT, the first generation mobile standard, and has been present in different mobile initiatives ever since. As I see it, these two forces are clashing in the mobile
Internet. I argue that the force of ‘agreement’ is losing power while the force of ‘highly connected nodes’ is still very much understand, at least in the west.
To explain, let’s have a look at how the Japanese mobile Internet has developed. In 1999 – in contrast to the situation in the west – most Japanese did not have fixed (PC) Internet access in their homes, so the concept of the mobile Internet fell on to fertile ground. The Japanese emphasized open access to the Internet, but also wanted to standardize the quality of access for the user, and this led to the practice known as ‘cut in five seconds’, in which the connection would be lost if the site failed to download in five seconds.
This virtually closed access to the existing World Wide Web of 1999, but the Japanese consumer did not notice, since the web at that time was a non-Japanese medium. NTT DoCoMo, the Japanese mobile operator best known for its competitors focused on creating Japanese content. In the beginning this was free (or almost free), which meant high access rates and the emergence of the type of highly connected nodes I mentioned above.
This explains why the mobile Internet has become so popular in Japan. But can we do the same in the west – that is, create super-connected mobile nodes and introduce some form of quality criteria which in practice denies access to (or makes accessing) the ‘tradition’ web , less interesting?
I believe this can be done and already there are some initiatives (such as the ‘dotmob’ domain name that identifies specific Internet content for mobile devices, and price reductions of content) which are following this path. Free and highly interesting mobile content is one necessity along this path, which emphasizes the importance of creating ‘highly connected super nodes’ and disagrees with, or downplays, the traditional ‘Nordic agreement’ model.
Another reason for the success of the mobile internet in Japan was the ‘orchestration’ business model, which went beyond the traditional agreement model. NNT DoCoMo used its competence and market power to design and procure the handsets it wanted from Japanese suppliers and it also set the rules and price levels to content producers and suppliers.
This model, which I refer to as ‘orchestration’, has proved successful in Japan, where it was pioneered. But it has taken a long time for the west to understand the power of the Japanese model. Western players have learnt its value through a step-by-step approach of trial and error. Presently Vodafone live! and also the Nokia Ngage device might be regarded as attempts to orchestrate in the west. However, I do not believe that the ‘orchestration’ business model can be successful in the west. The next business model in the west might be based on some type of ‘cultivation’ of the market.
What is, however very clear is that the ‘Nordic force of agreement’ is losing ground. This is evident also by looking at the implication of Moore’s law on mobile business. Moore’s law implies that phones will increasingly become more like computers. This brings a completely new set of players into the market and thus simply because of the number of players in the value chain, agreement cannot be reached in the Nordic sense.
So, to spread with explosive speed the mobile Internet needs super-connected nodes and a ‘cultivating’ business model. But one can also ask if there is something that is presently slowing down the speed of introduction of the mobile Internet in the west? I would argue that SMS (text messaging) is doing this, for example, at how the Minitel slowed down the introduction of the Internet in France.
SMS is a barrier to the growth of the mobile Internet for several reasons. ‘Super-nodes’ are difficult and in some cases impossible to create with SMS. SMS value-added services are based on remembering numbers and people remember numbers rather poorly. SMS value-added services work on a national level only – it is a limit of the technology and no market (single country) in Europe, for example, is bigger than Japan, i.e. the individual size of the SMS markets limit the maximum size of the super-nodes. Third, SMS value-added services always have a price (transaction based) and thus would restrict the experimentation with free content that the creation of super-nodes would encourage.
I would like to emphasise, however, that not everything in the mobile Internet has to be super-connected or free. In fact, a lot of the content in Europe will be language-specific and thus limited in market size. The present content industry is focused on personalizing the user’s phone for a price – a lot of this industry might remain. A lot of the content will be peer-to peer in character (therefore free), but limited and unable to create highly connected nodes. But, I am arguing that super- connected nodes – as big as possible – are worth striving for and their existence is the catalyst of the fixed Internet, as it should be for the mobile Internet, too.
Interestingly the barrier SMS presents to the growth of the mobile Internet derives not only from value-added services, but might also reside in the SMS message itself. In Japan SMS has lost ground to e-mail via mobile phones for several reasons. I recognize that the Japanese did have some initial difficulties with e-mail, e.g. junk mail. However, the price of a single message bit in Japan is far below our current price level, and according to studies on communication patterns made in Japan, the way the Japanese use e-mail does not differ from the way SMS is used in the west.
It is actually also interesting to study how SMS is at the very core of the present western business models; so the barrier to a more Internet-based messaging and content culture is not necessarily a choice of the user, but something that is thoroughly embedded in western mobile operations’ business structures.
1 Analyse why the mobile Internet has become a huge success in Japan. Where do you agree or disagree with the author of this article?
2 How do you think the mobile Internet can become a success in your country? What can you learn from the Japanese best Practice case?
Case 5 :-
We have got a huge success on our hands
Cristina Zanchi, CRM director KLM
Despite difficulty market circumstances the number of KLM Flying Dutchmen (FD) members grew in a little less than six months by 20 per cent; the numbers tripled. This triumph was the reason for KLM winning the Gartner CRM Excellence Award 2004. CRM director Cristina Zanchi loves to show these glorious figures, especially to Air France. The two companies share the same CRM vision and that opens a window of opportunity for the future. ‘I am so impatient because I have the evidence of a huge success in my hands.’
Zanchi: ‘The award is a recognition for our team. I really pushed them. There are few airlines that are so focused on CRM – Continental, Lufthansa and Southwest Airlines make good progress – and there is certainly no airline that implemented CRM the way we did it. I wanted to leap forward; speed these days is as important as quality. And, yes, I am an impatient person.’ This personality trait of the Italian is her greatest strength. ‘If people think something is too complex, they slow down. Some people warned me of a mission impossible. Why would KLM pursue CRM while all fights are full? Well, then I learned to say: the chairs of Sabena and Swiss Air were also occupied, but see what happened. If you cannot enlarge your capacity you should think of another solution. You can increase the revenues per customer and that is something you achieve when you utilize your customer insight to improve the service. In interaction with customers you intensify the customer experience and therefore also the turnover.’
The reason why many airlines postpone CRM is clear to Cristina Zanchi. CRM requires large investments and the current margins in the airline industry are low. In the meantime the financial effects of CRM are vague. Several years ago KLM also withdrew a CRM initiative. ‘In 1997 KLM performed a very valuable CRM study, but the system never got implemented then. CRM software was much more expensive then and probably the organization was not up to it.’
But between 1997 and 2002 – the year the first building block of an integral CRM vision was constructed – the airline industry changed dramatically. Competition is heavy. ‘Internally, I had a good reason to sell CRM as a way to distinguish ourselves on emotional elements. We wanted to realize our positioning of reliability and comfort with a personal touch.’
The ambition of Zanchi to implement CRM quickly seems to contradict the opinion of many that CRM implementation above all requires a steady approach hard facts play a crucial role. Form the beginning she involved financial management and asked for frequent reports. Transparency is key to success and at KLM’s headquarters there is a panel the size of a man, showing all key indicators. Little planes mark the status and target. ‘To get an overview of CRM in one shot is impossible. It was my intention to split up our plan in pieces; a plan in three phases – change management, customer database and campaign management – with underlying steps. Phase one is ended and we far beyond the start of phase two now. Almost with one snap of my finger I can show you the total overview, the result we realized and the plans we have for 2005 and 2006.’
CRM targets are defined as a sort of acronyms: CARE, Customer acquisition, Activation, Retention and Extension. The entire KLM organization is organized around these objectives; everyone has his target. From August 2003 onwards KLM applied the first instruments of E.piphany’s CRM suite. The centralized customer database became operational in December 2003. The software company presented a solution that was as ingenious as it was simple: build a software layer above the current systems – ranging from booking, checking-in to customer complaint handling – and import the data you need to fill your virtual customer model. As a consequence employees will not only see the check-in data on their screen, but also directly get information about past customer behavior and preferences.
Zanchi: ‘The turnaround in airline marketing is that we do not sell flights any more, but processes. We sell lounges, gates, websites, seat environments… We need to understand our customers and their wishes. The database allows us to get a complete view, no matter if it is about the lounge or about onboard facilities – real time at the end of this year. A simple example. Among our Flying Dutchman members there are several people with of height of 1.95 – 2.05 meters. Every time they make a reservation they have to ask for a seat with additional space. Why can an airline not remember this? Or, why would you not reassure a customer with a bad luggage experience during check-in that his baggage has, been checked-in properly? KLM check-in stewards will get a signal on their screen that the customer previously had a problem and needs reassurance. The screen will give indications on the way to start a dialogue. Customer satisfaction has risen sharply since we give customers this type of attention.’
KLM’s next step is to identify individual customers and customer wishes to introduce one-to-one marketing. Mass marketing through television has been replaced by focused ‘dialogue marketing’ in which use is made of customer profiles. Flying Dutchman members are categorized based upon age, customer profitability, recency (date of the last flight) and frequency of flying. For passengers who have not flown with KLM in the last twelve months a re-activation campaign has been developed; ‘ if you fly with us between now and the coming six months you can double your Flying Dutchman points’. Also campaigns are adapted to customers’ wishes and hobbies, such as golf and sailing.
Another objective is to win new FD members. ‘The Flying Dutchman programme is our starting point, we have to be able to identify our customer. A new customer, however, has no past. So we start with an incubation period; we start broad. If this new FD customer did not fly for a month, he will receive an e-mail with opportunities. If he does fly, he will receive different information after four weeks. We start a dialogue with the customer tailoring information to his segment, profitability and behaviour.’
In the past seven months the database with e-mail addresses tripled. ‘Of course, we strive towards online communication. The costs are lower and besides that the response is higher than offline; between 5 and 12 per cent.’
At the moment the customer experience is being improved. Flying Dutchman Platinum and Gold members are printed separately on the boarding lists and get a label ‘special and valuable’. Employees are trained in master classes to improve their services towards FD members even in future. Changing the mindset will take years, says Zanchi. It sounds uncommon for on airline with a cabin crew that has a service orientation by nature. ‘The difference is we enable our people with tools now.’ Besides that, additional attention is given to complaint handling.
‘Complaints are a gift. A complaining customer gives you another chance. We think we should respond to customers if in their eyes something goes wrong; within five working days we react. Letters are being signed by the CEO, Leo van Wijk. In doing so we give the customer the opportunity to give feedback and the new customer information.’ Within less than a year the number of FD customers increased by 20 per cent and the profit 5 per cent. The payback time of CRM tools was less than Zanchi expected initially. Under the current circumstances, with SARS, the war is Iraq, this is tremendous. Cristina Zanchi will miss no opportunity to present these results, especially to Air France. The partner shares the same vision and in some situations the same tools are applied or existing systems can be integrated. But the new alliance and the new decision procedures mean a slight delay for CRM. ‘I am so impatient because I have the proof of mega success in my hands. In the future the database will count twelve million customers. Twelve million. A world of opportunities.’
Next year she hopes to make her big bang, although she makes a correction to this statement. Maybe she is too fast. ‘First the training programme, the alliance with Air France and the culture changes. Then the opportunities are almost unlimited.’
1 If you were a member of the CRM Award Jury, what would be the reason(s) for you to choose Klm as the winning company of this global award?
2 Where do you criticize KLM’s CRM approach?
3 What are the major risks for KLM’s CRM future?
Case 6 :-
Life of novice call centre agent
These days, more and more young people entering the workforce are applying for jobs at call centres. Since Asia is at the heart of the growing call centre industry, the Philippines have become one of the biggest providers of this service, along with India and China. But how attractive is the job of a novice call centre agent.
Gracious accommodation. Pilipinas Teleserv Inc., the company that care of the NSO Helpline Plus and DFA Passport Direct Service, among others, was gracious enough to accommodate me. Malou Bermio, operations head and Hr and training manager, took charge of my training and job performance. Since a few hours of training would not sufficiently prepare me for the more difficult jobs, I was assigned to the order processing area for a food outlet.
Waking up early on Wednesday morning, I went to their headquarters in Quiapo. Taking the elevator to the fourth floor, I was greeted by the sight of a pool table. At least it’s not just all work and no play, I thought. And so my tutelage in the world of customer care began. Although training depends on the type of service the company offers, it usually covers four essential skills: phone ethics, phone skills or verbal communication, customer service and phonetics.
Your tone of voice must match the script to delivered, and you must learn how to project a professional telephone image. Trainees also learn the military alphabet, since spelling needs to be accurate. A good part of the training, at least in the order processing service, has to do with learning the company background. The history of the company, the pioneers of the company and the decisions that were crucial in making the company attain a certain competitive advantage are all taken up. I also had to study the food outlet’s menu.
Amazing system. When the battle officially began, I was led past the busier areas of a wide carpeted room, where every station had a customer care officer (CCO) catering to the needs of the customer. The least busy part of the room was where I found myself. But it was no reason to slack off. This was, after all, my first (and only) day on the job. After Malou led me to my station, I was introduced to their computer systems. As the CCO enters the customer’s particulars, the computer tells him whether the person is the new customer or not, and what branch will deliver his order. Then, the CCO simply uses the mouse to click on the customer’s order by scrolling down the menu, which is conveniently classified into sizes and flavours. The bill is also automatically displayed. It’s no wonder, then, that placing delivery calls now is much shorter and has less chance of getting the orders mixed up.
About an hour later, after learning the program options by heart, or so I thought, I was introduced to a pleasant girl by the name of Jasmin – my buddy for the day. While waiting for my turn at the headsets and watching Jasmin take calls. I decided to invent a name for myself (Tammy). In a way, this job is a bit like having another side of yourself show through.
First blooper. The first call came from a computer shop. Jasmin and I put on our headsets – she was assigned to listen in on the conversation in case I forgot something in the script. Noise filtered in from the caller’s background, so the speaker could not hear himself, or me for that matter, very well. My first blooper was rattling off the standard greetings: ‘Good afternoon, this is Tammy speaking, may I have your telephone number?’ without releasing the ‘mute’ button. But during the rest of the call, Delusional Me actually thought I did okay, taking the customer’s order, thanking him and even remembering to inform him of the new loyalty programme that started that day. I ended the call, feeling relieved and strangely accomplished, and turned to Jasmin for her verdict. She was laughing as she took off her headset. ‘You forget to recap the order!’ she said.
Rats. Well, so much for breaking the ice. And yet as the hours wore on, the calls became easier and the waiting time in between made me fidgety and impatient. Since distractions such as reading materials or music are prohibited to enable the CCOs to focus more on the job, just staying put was something I had to get used to. The waiting time between the first and second calls was a bit torturous for me, so the ringing of the phone was like the tinkling bell of an ice cream cart in the middle of summer.
Bad luck. From the noise in the background, I could tell this call was coming from a guy in a bowling alley. Another noisy call: I was getting anxious at the thought that this was a streak of bad luck. But I managed to finish the call. When working intensely on a task, you become more aware of the things you use the most. Here, I became conscious of how my throat felt dry after taking a call. I periodically needed to sip water and warm up my voice to make sure I could still speak. You also need hand-eye-voice coordination; the voice to keep talking to the customer, and the hands and eyes to enter all the information in the computer system. You need to break some habits when it comes to enter all the information in the computer system. You need to break some habits when it comes to the phone; I could never end up saying ‘Thank you for using [name of company] delivery service; please order with us again’ as a parting shot. Despite being glued to my station for most of the day, to say that the job was mind-numbering and sedentary is largely inaccurate. Flexibility is essential, especially in the mental aspect. You need to be alert all the time. Two other skills required are diplomacy and confidence, since the ability to interact with people is hard to fake when dealing with irate customers.
Although I don’t think anyone would recommend doing this job for a lifetime, it does address the big problem of employment in our country. Whether you are taking the job because you want a break before graduate studies, or you want earn to help your family or you’ve simply no idea what to do for now, working at the call centre may prove to be an enjoyable and fulfilling experience. Not only will it keep you in the workforce, you also get to help people with their needs.
At the end of the day, like most jobs out there, it’s good money for an honest day’s work.
Special thanks to Raffy David and Malou Bermio, Call Pilipinas Teleserv Inc.
1 What are the pros and cons of outsourcing call centre activities to countries such as the Philippines, India, etc.?
2 The quality of a contact depends to a large extent on the people working in the call centre (and, of course, on the resources they have). How will you evaluate the quality of the workforce here? Mention positive and negative aspects. What are your recommendations to improve the quality?