IIBMS CORPORATE TRAINING ONGOING EXAM ANSWER SHEETS PROVIDED WHATSAPP 91 9924764558
SECTION I: Solve any 2 Case Studies
SECTION II: Solve any 4 questions
CASE – 1 Toyota Motor Company’s Toyota Technical Training Institute in India
In August 2007, one of the world’s leading automobile manufacturers, Toyota Motor Corporation (TMC), announced that its joint venture in India, Toyota Kirloskar Motor Private Limited (TKM) had set up a technical school called Toyota Technical Training Institute (TTTI), on the outskirts of Bangalore, India. The company said that TTTI was meant for those who had passed out of middle school (Class 10) but could not continue their education due to financial or other constraints. TMC projected the setting up of this institute as a corporate social responsibility initiative that was aimed at benefiting a disadvantaged section of Indian society by increasing their employability. At the institute’s opening ceremony held on August 1, 2007, TMC’s Executive Vice President, Mitsuo Kinoshita, said, “I am confident that the establishment of TTTI will contribute to the betterment of Indian society by cultivating the power of the nation’s youth.”
The seeds of this institution were reportedly sown in the year 2005, when Atsushi Toyoshima (Toyoshima), Managing Director, TKM, visited a number of technical institutes in India. He felt that the curriculum in these institutions was outdated and not in sync with the requirements of the industry. Analyst noted that despite the 4,500-odd technical institutes in the country, the kind of products they were churning out were not of much use to the manufacturing companies. For a company like Toyota, which had aggressive growth plans in the rapidly growing Indian automobile market, this was a major hindrance as the company had little talent to choose from. This prompted Toyoshima to ask the management at Japan to set up a technical institute in India on the lines of Toyota Technical Skills Academy (TTSA).
The company’s decision to start the TTTI in India was first announced in March 2007. “In addition to making automobiles, we believe in proactively contributing to society by consolidating the knowledge and know-how within Toyota to develop capable human resources and thus contribute to the development of a prosperous society,” said Toyoshima. The company placed advertisements for a three-year technical skills program in the local newspapers and started accepting applications from the next month for the selection of the first batch of 60 students. The institute would provide the courses, boarding, and lodging free-of-cost, and also pay each trainee a stipend in the range of Rs. 1,800-2,200 per month. Promising trainees would also be provided with fellowships (US$180 AND US$230) and a chance to join the company after successfully completing the course. Around 5,000 applicants applied for the program. Subsequently in June 2007, an admission test was held and 64 trainees were selected for the first batch.
The TTTI was established at a cost of Rs. 220 million (US$5.6 million). The institute was spread across a 48,726 square meter area within the premises of the TKM facility at Bidadi, Bangalore. It initially started its operations with a total staff strength of 25, including 17 teaching staff, headed by V Ramamurthy and T Somanath (Somanath) as Dean and Principal respectively. Through the three-year residential program, the company sought to provide the trainees with the skills of Monozukuri. The institute offered four practical-oriented courses in painting, welding, automobile assembly, and mechatronics. The courseware was similar to that of TTSA, but was adapted keeping the Indian market in mind. The students were also provided lessons in subjects such as English, and History, self-improvement courses such as Yoga and Home Science, and lessons in cleanliness, grooming and discipline.
In addition to academic sessions, the trainees would gain significant exposure to the company’s famous Toyota Production System and the Toyota Way. Toyoshima said, “We hope the students will be able to appreciate various aspects of Monozukuri or skilled manufacturing in the Toyota Way. They will not just learn but also practice Monozukuri.
Though the company hoped to employ all the trainees once they had completed the program, the trainees were not under any compulsion to join the company. Somanath said, “It is a corporate social responsibility initiative for us. Analysts too agreed that the company was indeed making a positive difference in the life of the trainees. They were not only getting a taste of a better life and had a better future to look forward to, but were also in a position to send home a part of their stipend.
According to the company, TTTI was still in the testing phase and the first batch would be like a test case for the future. The institute would train approximately 180 trainees across three academic years. The management at the company felt that keeping the future growth of the Indian market in mind, setting up the TTTI in India made good business sense. India was one of the world’s fastest growing car markets and was poised to grow at an astounding 14.9 percent through 2010, according to Frost & Sullivan. According to some estimates, by 2010, the number of cars sold in India annually would double to 3 million, compared to 2007. In such a scenario, TKM had to quickly ramp up its presence in the market. As of 2007, TKM had a mere 4 percent market share in India.
Analyst noted the company was lagging far behind its competitors and felt that this initiative would TKM become more competitive in the future. They expected TTTI to play a key role in the development of human resources at the company and to help bolster the company’s production operations in India in the future. Some industry watchers also pointed out that between 2002 and 8 Monozukuri is a Japanese word consisting of two words mono (products) and zukuri (process of making). But the meaning of the word goes beyond the combined meaning of the two words to encompass ‘excellence, skill, spirit, zest, and pride in the ability to make things very well.’ (Source: Kozo Saito, “Development of the University of Kentucky – Toyota Research Partnership: Monozukuri: PART I,” Energia, Vol.17.No.4, 2006.)
2007, TKM had suffered due to labor unrest in its facilities in India, and viewed this initiative as an attempt by the company to breed loyalty on the shop floor. Business Week noted, “Another, ulterior motive was ensuring labor loyalty. For the past five years, Toyota India has suffered a series of strikes and a lockout, with labor unions protesting in support of better wages and against the dismissal of two of their members. Training youth in-house helps build loyalty for Toyota on the assembly line.
- Describe the probable reasons for the setting up of the TTTI in India. Describe the direct and indirect benefits accruing to TKM by running the TTTI. What, according to you, are the short-term and long-term benefits to the company?
- The TTTI trainees were not under any compulsion to join the company (TKM) once they had completed the training program. What are the possible advantage(s) and disadvantage(s) of such a policy?
- In your opinion, will similar training initiative be successful in the service sector? Explain in the context of a few service industries that you are familiar with.
CASE – 2 Dealer Training Programs – A New Trend
In India, the corporate training market was pegged at Rs 25 billion (by the end of 2004) and was growing at a rate of 30% annually. Though sales training was not new concept in Indian industry, the trend of extending sales training initiatives to business partners was slowly catching up. The automobile companies were among the first to implement dealership training programs. For example, when Maruti Udyog Limited (Maruti) got the highest rank in customer satisfaction in the JD Power Asia Pacific India customer satisfaction index (CSI) study in 2000, it launched ‘Project Hat Trick’ in consultation with NIS Sparta, a leading training and consulting organization. The project aimed at creating excitement among the service staff (of the dealers) and also imparting the knowledge and know-how required to satisfy the customer. As part of the project, the service supervisors were trained on the aspect of customer delight and managers were trained on leadership and business planning aspects. The service mechanics were given training in the areas of self-empowerment and behavioral interventions. This also helped to bring about attitudinal changes in the dealer segment to meet the demands of customers. Consequently, Maruti received the award for the next two consecutive years. In 2002, it topped in four out of five factors of the customer satisfaction index (CSI) and received the highest score of 124 as against the industry of 118.
Speaking on the issue of training in the automobile sector, Vijay Kohli, Vice-President, NIS Sparta, said, “Training in this sector is also quite different from others as here the customer expects sales executives to know the features, advantages, and benefits of each and every part of your vehicle. Not only that, the customer also expects the executives to know the technical side and the product advantages over others to make his/her decision.
Consumer appliances manufacturers were also focusing on these areas in light of cut-throat competition, increased customer expectations, and the increased complexity of the product line. For example, Philips India Ltd. (Philips) a leading consumer appliances company, launched a dealer training program in 2000 called ‘Unique Selling Program’ (USP) aimed at creating awareness about its products among the dealer sales personnel as well as to enhance their softselling skills. The training program consisted of the following elements – role play, presentations, hands-on-demos, and group working. The role plays enabled the participants to comprehend the features of the products thoroughly. The hands-on demos trained the participants on conducting product demonstrations to the customers. In the group working module, participants were allowed to team up with other members and conduct demos without the help of the trainers. Through this program, Philips aspired to enhance the salesperson’s selling skills, communication skills, and sales closing techniques. The company conducted 40 such training programs covering 25 cities across India. The program was a success as it helped the company to improve its market share in big stream audios and CD-VCRs segment by 80% and in the Walkman market by 20%. Speaking about the success of the program, Rajeev Karwal, Philips India senior vice-president (consumer electronics), said, “The company has benefited from this exercise as the USPs have helped in reinforcing the superiority and product differentiation of Philips products in the dealer salesman’s mind, resulting in increased confidence in the Philips brand.” Buoyed by the success of the program, Philips decided to make USP a regular feature and conduct the program twice every year.
Dealer training programs were also being increasingly adopted by FMCG product companies. Sensing the need for training its business partners, HLL, the leading FMCG company in the country, launched an ambitious sales training initiative aimed at distributors’ salesforce called ‘Project Dronacharya’ in 2003. Under this program, HLL planned to train nearly 10,000 retail stockists’ salespeople spread across 70 cities in a phased manner. The training program covered various aspects of the sales process including merchandising, route planning, cross-selling, and upselling. The training job was entrusted to leading training organization NIS Sparta. The training program involved 139 trainers called ‘Dronacharyas’ accompanying the retail sales stockists’ men (RSSM) on the field and explaining what their shortcomings were and how they could improve their skills. Within eights months of the launch of the program, HLL saw good results. The total lines sold per day (TLSD) and sales target improved by 15%. Some distributors achieved sales above Rs 10 million.
Another prominent example in the FMCG sector was the Gujarat Cooperative Milk Marketing Federation (GCMMF) (the brand owner of Amul), India’s largest food products marketing organization. GCMMF also undertook a similar initiative called ‘Amul Yatra’. Under this program, the company trained all its 3,000 distributors and their sales force on various aspects such as the Federation’s philosophy and culture, procedures, and operational systems. The training program also aimed at improving their selling skills.
Commodity product manufacturers like Tata Chemicals too focused on training their business partners. In 2002, the company conducted a training program for its business associates aimed at strengthening the brand equity of Tata salt, the largest selling iodized salt brand in India. Tata Chemicals initiated these training programs as a part to its strategy to develop a long-term relationship with marketing and distribution partners, to improve the synergy between the company and the channel members, as well as to leverage on the resources effectively and efficiently. During the first phase of this initiative, the company conducted a five-day training program called ‘owner management program’, wherein the channel members and distributors were provided training in marketing and strategy skills. The objectives of this program were to :
- Equip participants with marketing concepts, techniques, and functional inputs.
- Help them comprehend organizational decisions and responses in the face of evolving markets and consumers.
- Help identify opportunities and successfully manage an enterprise.
- Enhance value propositions in transitional markets.
- Make informed and progressive decisions based on the marketing mix.
In the next phase, the company conducted an intensive sales training program for the sales force of Tata Salt channel members and distributors. In this program, participants were trained to get a better focus of the market with a suitable sales strategy. It also helped the participants in managing markets for profits and growth.
- Indian companies, which used to focus mainly on sales training programs for their own sales force, are now extending these initiatives to their business partners. What are the major reasons behind the increasing prominence of such initiatives among Indian companies? Also throw light on the advantages and disadvantages of outsourcing the training activities to third parties.
- Behind every successful dealer is a smiling and efficient dealer salesperson. Explain the relative importance of dealers in the consumer durables industry over and above those in the FMCG industry. How have consumer durable players improved the performance of their dealers through training?
CASE – 3 Enhancing the Credibility of the Training Function: Involving Line Managers in Sales Training
“Rakesh let me make it clear to you that I can’t allocate any more money for training. I can understand why you want to conduct a training program on coaching skills for the line managers, but I can’t help you in this regard. Not for another year at the very least. In fact, I may have to curtail your training budget for next year as we are going through a lean phase,” said Sanjay Shah (Shah), the CEO of Dirc2U, a direct sales company that dealt in a range of consumer appliances. From his tone, it was clear that he would not entertain any further discussion on this topic.
Rakesh Sharma (Sharma) had been working as the training manager (TM) in Dirc2U for the past three years. During this period he had single-handedly taken care of all the training and development (T&D) activities of the company. Of late, he felt that despite a contemporary training program, the sales force was unable to internalize the training due to lack of support from the line managers in the field. Sharma, who had ample experience in sales and sales force management before getting into the training function, understood the significance of the role of line managers in reinforcing the class room training. His repeated proposals to conduct a training program on coaching for the line managers had fallen on deaf ears. But Sharma knew that he could not let the situation drift any longer. The company had failed to achieve its revenue targets in the previous year. This year too, it was struggling to reach 75 percent of the projections. Since it was difficult to measure the return on investment (ROI) of training, the training budget tended to get the chop during tough times. In such a situation, Sharma could expect some cuts in his budget for the next year. Yet he knew that in tough times there was a greater need for T&D interventions. He also knew that if things got even tougher, and the company decided to cut costs even more, the job of the TM would be one of the first to go.
Sharma was almost certain that he would convince Shah regarding the importance of this specific T&D plan for the line managers. But no amount of persuasion could budge Shah. Sharma’s hope of involving the line managers in making sales training more effective seemed unlikely, at least in the short term. Now he had to find dome other way to make the sales training more effective. He also decided to look at ways to project the importance of training to the top management.
Before joining as the TM in Dirc2U, Sharma had worked in another direct sales company for ten years in various capacities – sales representative (SR), area manager (AM), and then regional manager (RM). During his tenure there, he had developed an interest in T&D. Three years ago, when he saw the advertisement for the post of training manager in Dirc2U, he immediately applied for the post. Though he did not have any formal qualifications for the job, his ten years of experience in the sales function saw him through the interview process. Sharma was in the habit of regularly updating himself on issues related to this job and his other interests. In addition to his experience of providing on-the-job training (OJT), the interview panel headed by Shah was impressed by his understanding of different issues related to the training function.
A lot had changed since then. Sharma had conducted about 50 training programs in three years. He had conducted basic sales training courses for new entrants as well as refresher courses for all sales people on an annual basis. His long stint in the industry helped him to design very contemporary and, at times, innovating training courses. During implementation of the training programs, Sharma generally avoided the over-used lecture method as much as he could. His training programs had lots of scope for interaction, experience-sharing, feedback and practice. He facilitated understanding of key issues through the use of real life stories and anecdotes. This made his sessions informative as well as interesting. Many of the trainees were attracted towards his personality due to his cheerful countenance and as he was very approachable. He used a lot of role-plays to reinforce the learning points and skills, and assess the transfer of learning/skills. He also made it a point to visit key customers with the SRs whenever there were no training programs. This helped him to understand important operational issues and be in sync with the changing requirements of the industry, and uncover training needs. Sharma believed that the training programs were quite contemporary and the quality was better than the industry average. But despite this, Sharma was left with the feeling that the organization was not getting the best results out of the training programs.
During his field visits with some of the SRs he had trained, Sharma observed that the SRs were not practicing what they were taught in the classroom. One of the SRs who had done very well in the training program explained, “The training was very informative and I learnt a lot from the program. However, real world situation require us to adapt our knowledge according to the situation. My boss told me that we have to be more practical in our dealings with the customers.”
Sharma was aware that most line managers had this attitude. He knew how important line managers were for reinforcing initial training, but it was often these people who could also unknowingly do a lot of harm. It was not uncommon for a line manager to comment, “Congratulation! You have done exceptionally well in the training program. Now, let me show you how things are done in the real world.” Comments like this could prevent the trainees from obtaining the optimal benefits from the training program. Sharma made a mental note to discuss the issue with Shah.
“I get your point. Such things happen in every organization. But, you have to find out the best way to solve your problem,” said Shah.
Sharma had come prepared for the meeting. For the last six months, he had been working on a project to prepare some training modules for the line managers. The course was on coaching skills for line managers. Sharma contended that though coaching was a vital part of a line manager’s responsibility, many of them didn’t actually know how to do it. He argued that if a formal coaching system was put in place, the line managers could reinforce the classroom training; this would lead to the overall development of the sales force. After Sharma’s presentation of the detailed training proposal, Shah said, “I am impressed. But to tell you the truth, we won’t be able to implement such a program for another one or two years. We have to really ramp up our presence in the market and I can’t afford to bring the managers out of the market for a training program at this juncture. Moreover, we are in the process of cutting costs to meet the profit budget, as we are struggling to meet the revenue budget. We have to wait till things get better before we can do this.”
“But all our expenditure on training is being wasted, without the support of the line manager. What so you suggest we do about that in the mean time?” Sharma asked.
Shah retorted, “Well, you are the training manager. You have to make the most of the resources you have. Speak to the line managers, persuade them to see things your way.”
“Don’t you think they should be the ones to approach me with their problems?” asked Sharma.
Shah replied, “If they are not doing so, you should give them a reason to approach you. Just because you are a training manager does not mean that they will approach you. They have to see that you are a useful resource for them. They have to see results.”
“We are not getting the optimum results out of our training programs due to the non-involvement of the managers. You are saying they have to see results before getting involved…it’s a chicken-and-egg story…let us initiate some thing from our side…this training program could be the first step,” said Sharma.
Shah replied, “You can forget about this training program for the time being…If you ask me, the answer would be to conduct fewer training programs and focus more on ensuring that the programs are effective in increasing the sales…and believe me, there will be fewer training programs now, as the training budget is going to be cut.”
Sharma was very disappointed. He said, “Sir, I understand we are going through a lean phase. But, don’t you think there is a greater need for training in such a situation?”
“I will be happy to allocate you the money. Show me some results. I should know what is the ROI from training,” said Shah. Sharma could detect a hint of sarcasm in Shah’s words. Both the men knew how hard it was to ascertain the ROI from training.
The discussion went on for a few more minutes, but no amount of persuasion could change Shah’s position.
From the time he joined Dirc2U, Sharma had dreamed of putting a training organization in place about five years, with a team of at least three more training managers. The meeting with Shah had made him realize that the very credibility of the training function in the company was at stake now. With his job on the line, Sharma, personally, had even more at stake.
Sharma now had to figure out how to get the line managers more involved in sales training. He also had to work towards earning more credibility for the training function in the eyes of the various stakeholders.
Sharma understood that getting the involvement of the line managers was easier said than done. There wee many conflicts of interest. He recalled that the line managers had not been very responsive to the overtures made by him on earlier occasions. Many did not feel that training was helpful to them. He had even heard some line managers complaining about how man-days were lost due to training. They felt that their team members were better off in the field doing some work rather than attending a training program on a “vacation paid for by the company.” Some managers even felt that a person who was not born with the skills to be a salesman could not be trained to become one. Line managers were also heard saying that on-the-job training (OJT) was the best form of training a person can get. In fact, during the lunch break at an earlier training program, a newly appointed AM had told Sharma, “My take on training is ‘push them off the cliff, and they will learn how to fly’. I feel that classroom training is a waste of time and money…on-the-job training is sufficient.”
Sharma wouldn’t have had any issue with such an attitude if the line managers were indeed concerned about training their team members. In his earlier company, he had trained many SRs in the field as he perceived that the quality of formal classroom training was poor. But often, OJT was merely teaching the SRs some thumb rules and shortcuts that did more harm than good in the long run.
To make his case that training was useful, Sharma began by collecting the pre-training and post-training sales data of the SRs. Although he had to follow up a number of times with some RMs before he received the data, once the data was tabulated and analyzed, Sharma felt that the effort had been well worth it.
On analyzing the pre-training sales figures and comparing them with sales figures after three months and six months of training, some patterns began to appear. Sharma found that in most cases individuals or teams who had received training along with their first line managers were more likely to have performed better than those individuals or teams whose managers did not attend the training program. He also found that SRs whose managers were more enthusiastic about training were doing better than SRs whose managers were skeptical. He also found that some of the teams who were doing exceptionally well had line managers who were true champions of training. They used to consult him regarding sales training-related quite regularly. They were also the ones who regularly provided feedback and suggestions to him on how to make the training program more effective. The problem was that such managers were few and according to Sharma this was, in part, responsible for the poor sales performance of the company.
Though this information was significant, Sharma knew that it would not be enough to convince Shah. He had very little data to support the conclusion he had reached and Shah would probably dismiss his findings as flawed. It was difficult to attribute the sales to training alone, as there are so many other factors that impacted sales. Moreover, he felt that it would be too early to go back to Shah. He decided to do some further groundwork before approaching the CEO. He decided to go with these findings to the national sales manager (NSM), Sanjeev Rao (Rao), instead.
Rao had been heading the sales function at Dirc2U ever since the inception of the company five years ago. Though he was not a big champion of training, Rao understood the importance of training.
After going through the report, Rao said, “Very interesting…Managers do have a role in helping reinforce classroom training. So, how can I help you?”
“I wish we had greater involvement of the line managers in sales training,” said Sharma.
Rao said, “If the line managers feel that their objectives are in alignment with your objectives, they will definitely work with you. Why don’t you talk to them, and show them this report?”
“I will do that right away. But I also expect you to speak up for this initiative with your team,” said Sharma.
“You can count on me.”
It was six months since Sharma had that interaction with Rao. In addition to setting up open lines of communication with the RMs and AMs, Sharma, had also started involving them in designing the training programs. Trainees came to programs with an assessment of their strengths, weaknesses, etc., from the line managers; after training they went to the field with assessment of the training manager and individual development plans to be followed up by line managers. That Rao championed the cause also helped attain this breakthrough. Now, more line managers have started approaching Sharma with their problems or suggestions.
“They (the line managers) are so involved because you have involved them in training process. Most of all, as they have understood that your objectives are no different from their objectives and that training helps them in achieving their objectives. Some line managers have witnessed a positive change in their sales figures that they attribute to training. The stature of training has grown in the eyes of the line managers,” said Rao.
“Thanks to you. Do you think we can take this partnership to the next level with a formal training program on coaching skills for the line managers?” asked Sharma.
“Suits me,” Rao replied.
During the period, Sharma had also accumulated data to project the direct (such as new skills learnt), indirect (such as before and after analyses of improvement in closing sales calls) and long-term benefits of training (such as improved customer relationship). He felt that this data would be helpful in linking training to the bottomline results. He had also started networking with other T&D professionals in the industry. Insights gained from such networking helped him forge better partnerships with the sales force as well as explore ways to project the benefits of training to the top management. With more line managers approaching him with their problems, it had become necessary for him to continuously upgrade his knowledge.
Sharma believed that after another three months he would be in a position to put forward a strong case for a training program for managers in front of Shah.
- Discuss the importance of line managers in reinforcing initial classroom training. What are the issues and challenges faced by training managers in partnering with the line managers? How can these be overcome? In your opinion, how did Sharma succeed in forging a partnership with the line managers?
- Training is viewed as a cost. Although experts opine that training is needed the most when a company is going through tough times, it is in such situations that training budgets are most likely to be slashed. What are the problems in ascertaining the ROI of training? How can training link training to bottom-line results?
SECTION II: Solve any 4 questions.
- If you were going to use online technology to identify training needs for customer service representatives for a web-based clothing company, what steps would you take to ensure that the technology was not threatening to employees?
- What could be done to increase the likelihood of transfer of training if the work environment conditions are unfavorable and cannot be changed?
- Why would a company use a combination of face-to-face instruction and Web-based training?
- What does “managing diversity” mean to you? Assume you are in charge of developing a diversity training program. Who would be involved? What would you include as the content of the program?
- Why should companies be interested in helping employees plan their careers? What benefits can companies gain? What are the risks?
- Discuss how new technologies are likely to impact training in the future
Attempt all Cases.
Case 1: PROMOTING THE PROTÉGÉ
The die was cast. Prem Nath Divan, executive chairman of Vertigo, the country’s largest engineering project organization, decided to switch tracks for a career in academics. Divan was still six years short of the company’s retirement age of 65. His premature exit was bound to create a flutter at the Vertigo board. Having joined Vertigo as a management trainee soon after college, he had gradually risen through the hierarchy to take a board position as the marketing director of the firm at 32. He had become the president five years later and the youngest chairman of the company at 45. But, by the time he was 50, the whizkid had acquired a larger than life image of a role model for younger managers and a statesman who symbolized the best and brightest face of Indian management.
On his wife’s suggestion that it would be wise to discuss the move with one of his trusted colleagues before making a formal announcement of his intention to seek premature retirement, Divan called on Ramcharan Saxena, a solicitor who has been on the Vertigo board for over a decade. Sexena was surprised at Divan’s plan. But he was unfazed. “If that is what you want to do for the rest of your life, we can only wish you well”, he told him. “The board will miss you. But the business should go on. We should get down to the task of choosing a successor. The sooner it is done, the better.
“I think the choice is quite obvious, “said Divan, “Ranjan Warrior. He is good and …” Divan was taken aback to see Saxena grimace. “You don’t have anything against him, do you?” he asks him. “No, no,” said Saxena, “He is good. A financial strategist and a visionary. His conceptual skills have served the company well. But he has always had staff role with no line experience. What we need is someone from operations. Like Richard Crasta.”
“Richard known things inside out alright”, said Divan, “But he is just a doer. Not fire in the belly. Vertigo needs someone who understands the value of power and known how to use it. Like me. Like Ranjan.”
“That is just the problem, “said Saxena. “Prem, let me tell you something. Ranjan is a man in your own image. Everyone known that he is your protégé. And are never popular. He has generated a lot of resentment among senior Veritigo executives and there would be a revolt if he were to succeed you. An exodus is something we can’t afford to have on our hands. We should think of someone else in the interest of stability to top management.” Divan could not believe what he heard. He had always prided himself on his hands – on style and thought he had his ear to the ground. “How could I lose touch?” he wondered, somewhat shaken.
“When you are the boss, people accept your authority without question,” continued Saxena. “In any case, you have been successful at Vertigo and it is difficult to argue with success. But the moment you announce your intention to leave, the aura begins to fade away. And in deciding on your successor, the board will seek your opinion, with due regard to your judgment. The board member must do what in their view is right for the company. Having said that, may I also mention that if there is a showdown in the boardroom, you could always choose to stay on ? We would like it. Or we could bring in an outsider.”
“I have finalized my career plans and there is no question of staying on beyond six months from now,” said Divan. “The board is scheduled to meet next month. Let us shelve the matter till then. In the meantime, I rely on you, Ram, to keep this discussion between the two of us.”
“Of course yes,” said Saxena.
On his way home, Divan thought about the matter in detail. Bringing an outsider would undo all his life’s work at Vertigo. There were considerations like cuture and compatibility which were paramount. The chairman had to be an inside man. “Richard lacks stature, “Divan said to himself. “Ranjan is the one I have been grooming, but heavens, the flip side of it all had missed me completely. There is no way I can allow a split at the top just before I quit. I must leave on a high note in my own interest. I must find a way out of he imminent mess.”
- What should Divan do?
CASE: I ARROW AND THE APPAREL INDUSTRY
Ten years ago, Arvind Clothing Ltd., a subsidiary of Arvind Brands Ltd., a member of the Ahmedabad based Lalbhai Group, signed up with the 150- year old Arrow Company, a division of Cluett Peabody & Co. Inc., US, for licensed manufacture of Arrow shirts in India. What this brought to India was not just another premium dress shirt brand but a new manufacturing philosophy to its garment industry which combined high productivity, stringent in-line quality control, and a conducive factory ambience.
Arrow’s first plant, with a 55,000 sq. ft. area and capacity to make 3,000 to 4,000 shirts a day, was established at Bangalore in 1993 with an investment of Rs 18 crore. The conditions inside—with good lighting on the workbenches, high ceilings, ample elbow room for each worker, and plenty of ventilation, were a decided contrast to the poky, crowded, and confined sweatshops characterising the usual Indian apparel factory in those days. It employed a computer system for translating the designed shirt’s dimensions to automatically mark the master pattern for initial cutting of the fabric layers. This was installed, not to save labour but to ensure cutting accuracy and low wastage of cloth.
The over two-dozen quality checkpoints during the conversion of fabric to finished shirt was unique to the industry. It is among the very few plants in the world that makes shirts with 2 ply 140s and 3 ply 100s cotton fabrics using 16 to 18 stitches per inch. In March 2003, the Bangalore plant could produce stain-repellant shirts based on nanotechnology.
The reputation of this plant has spread far and wide and now it is loaded mostly with export orders from renowned global brands such as GAP, Next, Espiri, and the like. Recently the plant was identified by Tommy Hilfiger to make its brand of shirts for the Indian market. As a result, Arvind Brands has had to take over four other factories in Bangalore on wet lease to make the Arrow brand of garments for the domestic market.
In fact, the demand pressure from global brands which want to outsource form Arvind Brands is so great that the company has had to set up another large factory for export jobs on the outskirts of Bangalore. The new unit of 75,000 sq. ft. has cost Rs 16 crore and can turn out 8,000 to 9,000 shirts per day. The technical collaborators are the renowned C&F Italia of Italy.
Among the cutting edge technologies deployed here are a Gerber make CNC fabric cutting machine, automatic collar and cuff stitching machines, pneumatic holding for tasks like shoulder joining, threat trimming and bottom hemming, a special machine to attach and edge stitch the back yoke, foam finishers which use air and steam to remove creases in the finished garment, and many others. The stitching machines in this plant can deliver up to 25 stitches per inch. A continuous monitoring of the production process in the entire factory is done through a computerised apparel production management system, which is hooked to every machine. Because of the use of such technology, this plant will need only 800 persons for a capacity which is three times that of the first plant which employs 580 persons.
Exports of garments made for global brands fetched Arvind Brands over Rs 60 crore in 2002, and this can double in the next few years, when the new factory goes on full stream. In fact, with the lifting of the country-wise quota regime in 2005, there will be surge in demand for high quality garments from India and Arvind is already considering setting up two more such high tech export-oriented factories.
It is not just in the area of manufacture but also retailing that the Arrow brand brought a wind of change on the Indian scene. Prior to its coming, the usual Indian shirt shop used to be a clutter of racks with little by way of display. What Arvind Brands did was to set up exclusive showrooms for Arrow shirts in which the functional was combined with aesthetic. Stuffed racks and clutter eschewed. The product were displayed in such a manner the customer could spot their qualities from a distance. Of course, today this has become standard practice with many other brands in the country, but Arrow showed the way. Arrow today has the largest network of 64 exclusive outlets across India. It is also present in 30 retail chains. It branched into multi-brand outlets in 2001, and is present in over 200 select outlets.
From just formal dress shirts in the beginning, the product range of Arvind Brands has expanded in the last ten years to include casual shirts, T-shirts, and trousers. In the pipeline are light jackets and jeans engineered for the middle-aged paunch. Arrow also tied up with the renowned Italian designer, Renato Grande, who has worked with names like Versace and Marlboro, to design its Spring / Summer Collection 2003. The company has also announced its intention to license the Arrow brand for other lifestyle accessories like footwear, watches, undergarments, fragrances, and leather goods. According to Darshan Mehta, President, Arvind Brands Ltd., the current turnover at retail prices of the Arrow brand in India is about Rs 85 crore. He expects the turnover to cross Rs 100 crore in the next few years, of which about 15 per cent will be from the licensed non-clothing products.
In 2005, Arvind Brands launched a major retail initiative for all its brands. Arvind Brands licensed brands (Arrow, Lee and Wrangler) had grown at a healthy 35 per cent rate in 2004 and the company planned to sustain the growth by increasing their retail presence. Arvind Brands also widened the geographical presence of its home-grown brands, such as Newport and Ruf-n Tuf, targeting small towns across India. The company planned to increase the number of outlets where its domestic brands would be available, and draw in new customers for readymades. To improve its presence in the high-end market, the firm started negotiating with an international brand and is likely to launch the brand.
The company has plans to expand its retail presence of Newport Jeans, from 1200 outlets across 480 towns to 3000 outlets covering 800 towns.
For a company ranked as one of the world’s largest manufactures of denim cloth and owners of world famous brands, the future looks bright and certain for Arvind Brands Ltd.
Name of the Company : Arvind Mills
Year of Establishment : 1931
Promoters : Three brothers–Katurbhai, Narottam Bhai, and Chimnabhai
Divisions : Arvind Mills was split in 1993 into
Units—textiles, telecom and garments. Arvind Ltd. (textile unit) is 100 per cent subsidiary of Arvind Mills.
Growth Strategy : Arvind Mills has grown through buying-up of sick units, going global and acquisition of German and US brand names.
- Why did Arvind Mills choose globalization as the major route to achieve growth when the domestic market was huge?
- How does lifting of ‘Country-wise quota regime’ help Arvind Mills?
- What lessons can other Indian businesses learn form the experience of Arvind Mills?
Case 1 -HOW GENERAL MOTORS IS COLLABORATING ONLINE The ProblemDesigning a car is a complex and lengthy task. Take, for example, General Motors (GM). Each model created needs to go through a frontal crash test. So the company builds prototypes that cost about one million dollars for each car and tests how they react to frontal crash. GM crashes these cars, makes improvements, then makes new prototypes and crashes them again. There are other tests and more crashes. Even as late as the 1990s, GM crashed as many as 70 cars for each new model. The information regarding a new design and its various tests, collected in these crashes and other tests, has to be shared among close to 20,000 designers and engineers in hundreds of divisions and departments at 14 GM design labs, some of which are located in different countries. In addition, communication and collaboration is needed with design engineers of the more than 1,000 key suppliers. All of these necessary communications slowed the design process and increased its cost. It took over four years to get a new model to the market. The SolutionGM, like its competitors, has been transforming itself into an e-business. This gradual transformation has been going on since the mid-1990s, when Internet band width increased sufficiently to allow Web collaboration. The first task was to examine over 7,000 existing legacy IT systems, reducing them to about 3,000, and making them Web-enabled. The EC system is centered on a computer-aided design (CAD) program from EDS (a large IT company, subsidiary of GM). This system, known as Unigraphics, allows 3-D design documents to be shared online by both the internal and external designers and engineers, all of whom are hooked up with the EDS software. In addition. Collaborative and Web-conferencing software tools, including Microsoft’s NetMeeting and EDS’s eVis, were added to enhance teamwork. These tools have radically changed the vehicle-review process. To see how GM now collaborates with a supplier, take as an example a needed cost reduction of a new seat frame made by Johnson Control GM electronically sends its specifications for the seat to the vendor’s product data system. Johnson Control’s collaboration systems (eMatrix) is integrated with EDS’s In graphics. This integration allows joint searching, designing. Tooling, and testing of the seat frame in real time, expediting the process and cutting costs by more than 10 percent.Another area of collaboration is that of crashing cars. Here designers need close collaboration with the test engineers. Using simulation, mathematical modeling, and a Web-based review process. GM is able now to electronically “Crash” cars rather than to do it physically. The ResultsNow it takes less than 18 months to bring a new car to market, compared to 4 or more years before, and at a much lower design cost. For example, 60 cars are now “Crashed” electronically, and only 10 are crashed physically. The shorter cycle time enables more new car models, providing GM with a competitive edge. All this has translated into profit. Despite the economic show down. GM’s revenues increased more than 6 percent in 2002. while its earnings in the second quarter of 2002 doubled that of 2001. Questions: 1. Why did it take GM over four years to design a new car?2. Who collaborated with whom to reduce the time-to-market?3. How has IT helped to cut the time-to-market?
CASE – 1 Dabur India Limited: Growing Big and Global
Dabur is among the top five FMCG companies in India and is positioned successfully on the specialist herbal platform. Dabur has proven its expertise in the fields of health care, personal care, homecare and foods.
The company was founded by Dr. S. K. Burman in 1884 as small pharmacy in Calcutta (now Kolkata), India. And is now led by his great grandson Vivek C. Burman, who is the Chairman of Dabur India Limited and the senior most representative of the Burman family in the company. The company headquarters are in Ghaziabad, India, near the Indian capital New Delhi, where it is registered. The company has over 12 manufacturing units in India and abroad. The international facilities are located in Nepal, Dubai, Bangladesh, Egypt and Nigeria.
S.K. Burman, the founder of Dabur, was trained as a physician. His mission was to provide effective and affordable cure for ordinary people in far-flung villages. Soon, he started preparing natural remedies based on Ayurved for diseases such as Cholera, Plague and Malaria. Due to his cheap and effective remedies, he became to be known as ‘Daktar’ (Indianised version of ‘doctor’). And that is how his venture Dabur got its name—derived from Daktar Burman.
The company faces stiff competition from many multi national and domestic companies. In the Branded and Packaged Food and Beverages segment major companies that are active include Hindustan Lever, Nestle, Cadbury and Dabur. In case of Ayurvedic medicines and products, the major competitors are Baidyanath, Vicco, Jhandu, Himani and other pharmaceutical companies.
Vision, Mission and Objectives
Vision statement of Dabur says that the company is “dedicated to the health and well being of every household”. The objective is to “significantly accelerate profitable growth by providing comfort to others”. For achieving this objective Dabur aims to:
- Focus on growing core brands across categories, reaching out to new geographies, within and outside India, and improve operational efficiencies by leveraging technology.
- Be the preferred company to meet the health and personal grooming needs of target consumers with safe, efficacious, natural solutions by synthesising deep knowledge of ayurveda and herbs with modern science.
- Be a professionally managed employer of choice, attracting, developing and retaining quality personnel.
- Be responsible citizens with a commitment to environmental protection.
- Provide superior returns, relative to our peer group, to our shareholders.
Chairman of the company
Vivek C. Burman joined Dabur in 1954 after completing his graduation in Business Administration from the USA. In 1986 he was appointed Managing Director of Dabur and in 1998 he took over as Chairman of the Company.
Under Vivek Burman’s leadership, Dabur has grown and evolved as a multi-crore business house with a diverse product portfolio and a marketing network that traverses the whole of India and more than 50 countries across the world. As a strong and positive leader, Vivek C. Burman has motivated employees of Dabur to “do better than their best”—a credo that gives Dabur its status as India’s most trusted nature-based products company.
More than 300 diverse products in the FMCG, Healthcare and Ayurveda segments are in the product line of Dabur. List of products of the company include very successful brands like Vatika, Anmol, Hajmola, Dabur Amla Chyawanprash, Dabur Honey and Lal Dant Manjan with turnover of Rs.100 crores each.
Strategic positioning of Dabur Honey as food product, lead to market leadership with over 40% market share in branded honey market; Dabur Chyawanprash is the largest selling Ayurvedic medicine with over 65% market share. Dabur is a leader in herbal digestives with 90% market share. Hajmola tablets are in command with 75% market share of digestive tablets category. Dabur Lal Tail tops baby massage oil market with 35% of total share.
CHD (Consumer Health Division), dealing with classical Ayurvedic medicines has more than 250 products sold through prescription as well as over the counter. Proprietary Ayurvedic medicines developed by Dabur include Nature Care Isabgol, Madhuvaani and Trifgol.
However, some of the subsidiary units of Dabur have proved to be low margin business; like Dabur Finance Limited. The international units are also operating on low profit margin. The company also produces several “me – too” products. At the same time the company is very popular in the rural segment.
- What is the objective of Dabur? Is it profit maximisation or growth maximisation? Discuss.
- Do you think the growth of Dabur from a small pharmacy to a large multinational company is an indicator of the advantages of joint stock company against proprietorship form? Elaborate.
CASE: I Managing the Guinness brand in the face of consumers’ changing tastes
1997 saw the US$19 billion merger of Guinness and GrandMet to form Diageo, the world’s largest drinks company. Guinness was the group’s top-selling beverage after Smirnoff vodka, and the group’s third most profitable brand, with an estimated global value of US$1.2 billion. More than 10 million glasses of the popular stout were sold every day, predominantly in Guinness’s top markets: respectively, the UK, Ireland, Nigeria, the USA and Cameroon.
However, the famous dark stout with the white, creamy head was causing some strategic concerns for Diageo. In 1999, for the first time in the 241-year of Guinness, sales fell. In early 2002 Diageo CEO Paul Walsh announced to the group’s concerned shareholders that global volume growth of Guinness was down 4 per cent in the last six months of 2001 and, more alarmingly, sales were also down 4 per cent in its home market, Ireland. How should Diageo address falling sales in the centuries-old brand shrouded in Irish mystique and tradition?
The changing face of the Irish beer market
The Irish were very fond of beer and even fonder of Guinness. With close to 200 litres per capita drunk each year—the equivalent of one pint per person per day—Ireland ranked top in worldwide per capita beer consumption, ahead of the Czech Republic and Germany.
Beer accounted for two-thirds of all alcohol bought in Ireland in 2001. Stout led the way in volume sales and accounted for 40 per cent of all beer value sales. Guinness, first brewed in 1759 in Dublin by Arthur Guinness, enjoyed legendary status in Ireland, a national symbol as respected as the green, white and gold flag. It was by far the most popular alcoholic drink in Ireland, accounting for nearly one of every two pints of beer sold. Its nearest competitors were Budweiser and Heineken, which held 13 per cent and 12 per cent of the market respectively.
However, the spectacular economic growth of the Irish economy since the mid-1990s had opened up the traditional drinking market to new cultures and influences, and encouraged the travel-friendly Irish to try other drinks. Beer and in particular stout were losing popularity compared with wine or the recently launched RTDs (ready-to-drinks) or FABs (flavoured alcoholic beverages), which the younger generation of drinkers considered trendier and ‘healthier’. As a Euromonitor report explained: Younger consumers consider dark beers and stout to be old fashioned drinks, with the perceived stout or ale drinker being an old, slightly overweight man and thus not in tune with image conscious youth culture.
Beer sales, which once accounted for 75 per cent of all alcohol bought in Ireland, were expected to drop to close to 50 per cent by 2006, while stout sales were forecast to decrease by 12 per cent between 2002 and 2006.
Giving Guinness a boost in its home market
With Guinness alone accounting for 37 per cent of Diageo’s volume in the market, Guinness/UDV Ireland was one of the first to feel the pain caused by the declining popularity of beer and in particular stout. A Euromonitor report in February 2002 explained how the profile of the Guinness drinker, typically men aged 21-plus, was affected: The average age of Guinness drinkers is rising and this is bringing about the worrying fact that the size of the Guinness target audience is falling. The rate of decline is likely to quicken as the number of less brand loyal, non-stout drinking younger consumers increases.
The report continued:
In Ireland, in particular, the consumer base for Guinness is shrinking as the majority of 18 to 24 year olds consistently reject stout as a product relevant to their generation, opting instead to consume lager or spirits.
Effectively, one-third of young Irish men and half of young Irish women had reportedly never tried Guinness. A Guinness employee provided another explanation. Guinness is similar to coffee in that when you’re young you drink it [coffee] with sugar, but when you’re older you drink it without. It’s got a similar acquired taste and once you’re over the initial hurdle, you’ll fall in love with it.
In an attempt to lure young drinkers to the somewhat ‘acquired’ Guinness taste (40 per cent of the Irish population was under the age of 24) Diageo had invested millions in developing product innovations and brand building in Ireland’s 10,000 pubs, clubs and supermarkets.
Until the mid-1990s most Guinness in Ireland was drunk in a pint glass in the local pub. The launch of product innovations in the form of a new cooling mechanism for draft Guinness and the ‘widget’ technology applied to cans and bottles attempted to modernize the brand’s image and respond to increasing competition from other local and imported stouts and lagers.
‘A perfect head’ for canned Guinness
In 1989, and at a cost of more than £10 million, Guinness developed an ingenious ‘widget’ device for its canned draft stout sold in ‘off-trade’ outlets such as supermarkets and off-licences. The widget, placed in the bottom of the can, released a gas that replicated the draft effect.
Although over 90 per cent of beer in Ireland was sold in ‘on-trade’ pubs and bars, sale of beer in the cheaper ‘off-trade’ channel were slowly gaining in importance. The Guinness brand manager at the time, John O’Keeffe, explained how home drinkers could now enjoy a smoother, creamier head similar to the one obtained in a pub thanks to the new widget technology:
When the can is opened, the pressure causes the nitrogen to be released as the widget moves through the beer, creating the classic draft Guinness surge.
Nearly 10 years later, in 1997, the ‘floating widget’ was introduced, which improved the effectiveness of the device.
A colder pint
In 1997 Guinness Draft Extra Cold was launched in Ireland. An additional chilled tap system could be added to the standard barrel in pubs, allowing the Guinness to be served at 4ºC rather than the normal 6ºC. By serving Guinness at a cooler temperature, Guinness/UDV hoped to mute the bitter taste of the stout and make it more palatable for younger adults, who were increasingly accustomed to drinking chilled lager, particularly in the summer
A cooler image for Guinness
In October 1999 the widget technology was applied to long-stemmed bottles of Guinness. The launch was supported by a US$2 million TV and outdoor board campaign. The packaging—with a clear, shiny plastic wrap, designed to look like a pint complete with creamy head—was quite a departure from the traditional Guinness look.
The objective was to reposition Guinness alongside certain similarly packaged lagers and RTDs and offer younger adults a more fashionable way to drink Guinness: straight from the bottle. It also gave Guinness easier access to the growing number of clubs and bars that were less likely to serve traditional draft Guinness easier access to the growing number of clubs and bars that were less likely to serve traditional draft Guinness, which could be kept for only six to eight weeks and took two minutes to pour. The RTDs, by contrast, had a shelf-life of more than a year and were drunk straight from the bottle.
However, financial analyst remained sceptical about the Guinness product innovations, which had no significant positive impact on sales or profitability:
The last news about the success of the recently introduced innovations suggests that they have not had a notably material impact on Guinness brand performance.
Euromonitor estimates that, in 2000, Diageo invested between US$230 and US$250 million worldwide in Guinness advertising and promotions. However, with a cost-cutting objective, the company reduced marketing expenses in both Ireland and the UK up to 10 per cent in 2001 and the number of global Guinness agencies from six to two.
Nevertheless, Guinness remained one of the most advertised brands in Ireland. It was the leading cinema advertiser and, in terms of advertising, was second only to the national telecoms provider, Eircom. Guinness was also heavily promoted at leading sporting and music events, in particular those that were popular with the younger age groups.
The ultimate tribute to the brand was the opening of the new Guinness Storehouse in Dublin in late 2000, a sort of Mecca for all Guinness fans. The Storehouse was also a fashionable visitor centre with an art gallery and restaurants, and regularly hosted evening events. The company’s design brief highlighted another key objective:
To use an ultramodern facility to breathe life into an ageing brand, to reconnect an old company with young (sceptical) customers.
As the Storehouse’s design firm’s director, Ralph Ardill, explained:
Guinness Storehouse had become the top tourist destination in Ireland, attracting more than half a million people and hosting 45,000 people for special events and training.
The Storehouse also had training facilities for Guinness’s bartenders and 3000 Irish employees. The quality of the Guinness pint remained a high priority for the company, which not only developed pub-like classrooms at the Storehouse but also employed teams of draft technicians to teach barmen how to pour a proper pint. The process involved two steps—the pour and the top-up—and took a total of 119.5 seconds. Barmen also needed to learn how to check that the pressure gauges were properly set and that the proportion of nitrogen to carbon dioxide in the gas was correct.
The uncertain future of the Guinness brand in Ireland
Despite Guinness/DUV’s attempt to appeal to the younger generation of drinkers and boost its fading image, rumours persisted in Ireland about the brand future. The country’s leading and respected newspaper, the Irish times, reported in an article in July 2001:
The uncertainty over its future all adds to the air of crisis that is building around Guinness Ireland Group four months ago…The review is not complete and the assumption is that there is more bad news to come.
In the pubs across Ireland, the traditional Guinness drinkers looked on anxiously as the younger generation drank Bacardi Breezers, Smirnoff Ices or Californian wines. Could the goliath Guinness survive another two centuries? Was the preference for these new drinks just a fad or fashion, or did Diageo need to seriously reconsider how it marketed Guinness?
A quick solution?
In late February 2002, Diageo CEO Paul Walsh revealed that the company was testing technology to cut the waiting time for a pint of Guinness from 1 minute 59 seconds to 15-25 seconds. Ultrasound could release bubbles in the stout and form the head instantly, making a pint of Guinness that would be indistinguishable from one produced by the slower, traditional method.
‘A two-minute pour is not relevant to our customers today,’ Walsh said. A Guinness spokeswoman continued, ‘We have got to move with the times and the brand must evolve. We must take all the opportunities that we can. In outlets where it is really busy, if you walk in after nine o’clock in the evening there will be a cloth over the Guinness pump because it takes longer to pour than other drinks. Aware that some consumers might not be attracted by the innovation, she added ‘It wouldn’t be put everywhere—only where people want a quick pint with no effect on the quality.’
Although still being tested, the ‘quick-pour pint’ was a popular topic of conversation in Dublin pubs, among barmen and customers alike. There were rumours that it would be introduced in Britain only; others thought it would be released worldwide.
Some market commentators viewed the quick-pour pint as an innovative way to appeal to the younger, less patient segment in which Guinness had under-performed. Others feared that the young would be unconvinced by the introduction, and loyal customers would be turned off by what they characterized as a ‘marketing u-turn’.
- From a marketing perspective, what has Guinness done to ensure its longevity?
- How would you characterize the Guinness brand?
- What could Guinness do to attract younger drinkers? And to retain its older loyal customer base? Can both be done at the same time?