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AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
SUBJECT: BUSINESS ENVIRONMENT
(MARKS : 80)
GROUP A:
CASE 1
Q1) Imagine that you are in-charge of a major chemical plant, manufacturing points. At present, the
general awareness about the mandatory requirements for chemical industry is very low. Even if the
compliance record is maintained, it is not disclosed to all employees. (25 marks)
In a recent seminar of the company, many experts from industry associations like Confederation of
Indian Industries (CII), conducted the seminar. The dangers of non-compliance of ISO 14001 EMS
certification and Trade Sanctions, which are likely to increase, were discussed. Even the senior
managers were involved and a lot of serious discussions took place.
After a span of one month, the In-charge (i.e. you!) received a call from the top management, who
want you to find out more about the ISO Certification. The management, wants to help you, with the
help of other employees to list the critical aspects that have potential environmental impact.
You may be feeling that you have only some vague ideas about air pollution in paint industry
and water pollution, due to paint manufacture. You may also recall the newspaper clipping on
internationalization of paint manufacturing practices, which states the following points:
i) What are the activities that are critical to the company’s environmental management
certification?
ii) List the activities which have potential environmental impacts in a pint industry.
iii) List the legal requirements.
iv) Is there a trade related issue involved in this case
v) Explain, how your company can prepare itself towards certification.
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
CASE 2 :
Q2) XYZ company is an equal opportunity employer. XYZ Co has always upheld the
spirits of freedom, human welfare, fair practices and fair treatment to all employees. It has the image
of a socially responsible company in India. XYZ Co., has never involved itself in any study deals,
even if it could bring good profits. (15 Marks)
Also, XYZ Co. is a major IT solution provider. XYZ has immense potential for providing
consultancy services in the African nations and South East Asian countries. A request was received
from an African country, stating that they have an assignment for two years. The following
conditions are to be fulfilled.
a) Employees should not bring families with them during the assignment.
b) Women managers should not accompany the team.
c) The country and the collaborating company are not responsible if any accident or any other
untoward incidents take place.
Please answer the following questions :
i) Should XYZ Co take up the assignment?
ii) How can XYZ Co maintain business viability and growth without compromising on basic rights
and values enshrined? In the mission statement of the company?
iii) What alterations may be sought in the agreement and why?
GROUP – B
Environmental Pollution:
CASE 3
Q3) On the night of December 23, 1983 a dangerous chemical reation occurred in the Union
Carbide factory in Bhopal, when a large amount of water got into the MIC i.e. Methyl Isocyanate
storage tank. When the leak was detected by workers at 11.30 pm, their eyes began to tear and burn.
The rest is history. About 40 tons of MIC poured out of the tank for nearly 2 hours and escaped into
air, spreading within 8 km down wind, About 4000 people were killed in sleep or as they fled in
terror, hundreds of thousands were injured or effected the victims who were almost entirely the
poorest members of the population. The poisonous gas, caused death and left the survivors with
lingering disability and diseases.
The Bhopal disaster was a result of the combination of legal, technological, organizational and
human errors. The long term effects were made worse by the absence of systems to care for and
compensate the victims. Also, the safety standards and maintenance procedure at the Union Carbide
plant had been deteriorating and ignored for months.
Questions :
i) From Bhopal Tragedy, what an industrial manager learns? What safety procedures are to be
followed. Study the case deeply and state what were the defects of MIL unit. In view of this case,
prepare a disaster management plan, which could cover be useful to a chemical company. (10 Marks)
Q 4)
i) List the methods of waste management in the order of preference. (5 Marks)
ii) What are the advantages of solid waste incernaton? (5 Marks)
iii) Define hazardous waste (5 Marks)
iv) List the legal provisions in the Environment Protection Act pertaining to hazardous waste
(5 Marks)
Q 5)
i) Discuss the role of CPCB (Central Pollution Control Board) in the pollution control activities in
India. (2 Marks)
ii) Mention the salient points of the 3 Acts : (2 Marks)
 The Air (prevention and control of pollution) Act 1981
 The Water (prevention and control of pollution) Act 1974
 The Environment (Protection) Act 1986
iii) Explain the very elements of EIA (Environmental Impact Assessment) – different types of
Impact Assessments – the benefits of EIA – The EIA process, key points to remember while
conducting an effective EIA. (2 Marks)
iv) Compare and contrast “polluter pays principle” with “beneficiary pays principle”. (2 Marks)
v) What are the tenets of Risk management – explain the steps involved through a chart. (2Marks)

MARKS: 80
COURSE:DMS
SUB : BUSINESS MANAGEMENT
N. B. : 1) Attempt any Four cases
2) All cases carry equal marks.
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.
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
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.
QUESTIONS
1. Identify and analyse the environmental factors in this case.
2. Who were all responsible for this tragic end?
3. 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?
4. 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 legislation?
5. What are the lessons of this case for an entrepreneur and government and
promotional agencies?
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.
QUESTIONS
1. Discuss internal, domestic and global environments of business revealed by this
case.
2. Discuss whether it is the domestic or global environment that hinders the
globalization of Indian business.
3. Even if Elf had not acquired Premier Oil, what would have been the impact of
the delay in the clearance on IOC?
4. What would have been the significance of the foreign acquisition to IOC?
5. What are the lessons of this case?
No : 3
NATURAL THRUST
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.
QUESTIONS
1. Explain the environmental factors which Balsara used to its advantage.
2. What is the strength of AAII to market ayurvedic toothpaste in USA?
No : 4
THE SWAP
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.
QUESTIONS
1. Examine the internal and external factors behind Reliance’s decision for the
swap deal.
2. What environmental changes could make swap deal unattractive in future?
3. Could there be any strategic reason behind the decision to import and export
naphtha?
4. Should Reliance import and export naphtha even if it does not provide any
profit advantage?
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.
QUESTIONS
1. Why did Telco land itself in the problem (supply problem in respect of AC
kits)?
2. If the allegation about the supplier is right, discuss its implications for the
supplier.
3. Evaluate the ethical issues involved in the case. (Also consider the fact Maruti
was 50 per cent Government owned.)
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.
QUESTIONS
1. Discuss the reasons for the initial failure of P & G in Japan.
2. Where did P & G go wrong (if it did) in the evaluation of the Indian market
and its strategy?
3. Discuss the reasons for the difference in the performance of P & G in India and
China.

AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
SUB: BUSINESS PLANNING & POLICY MANAGEMENT
Instructions:
1. Maximum marks : 80 Marks
2. Attempt any 8 questions
3. Illustrate with examples wherever applicable
Q1) XYZ Ltd. Wishes to adopt the cost-leadership business strategy for one of its SBUs. How
should it ensure operational effectiveness in terms of productivity, processes, people and pace?
If, after 1 year, the company wishes to change over to a differentiation business strategy,
identify the changes it should bring in its approach to attain operational effectiveness.
(10 marks)
Q2) Take an example of any service institution of your choice (example: hospital) and suggest how
operational control will work in such an institution. (10 marks)
Q3) Discuss the importance of strategic changes for the following organizational systems (a)
Information, (b) Control, (c) Appraisal, (d) Motivation, (e) Development and (f) Planning
(10 marks)
Q4) Take an example of an Indian company. What steps should it undertake for resource allocation
for implementing its strategies? What difficulties could be expected while doing so and how can
they be dealt with? (10 marks)
Q5) In what way is the concept of life cycle and SWOT analysis helpful in making strategic choice
at the business level? (10 marks)
Q6) Explain why business policy is a capstone, integrative course. How can an understanding of
business policy help in a career choice? (10 marks)
Q7) Explain the meaning of strategic management in your own words. Identify the roles that CEOs
play in strategic management. (10 marks)
Q8) Describe the essential characteristics of a mission statement. In what different ways can a
mission statement be formulated? (10 marks)
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Q9) Explain the technique of ‘balanced scorecard’.
OR
Q9) Explain the term ‘corporate restructuring’. (10 marks)
Q10) Explain the following terms: (10 marks)
1) Cost leadership
2) Differentiation
3) Focus

SUB: CORPORATE LAW
MARKS: 80
N.B.: 1 Attempt any Twelve Questions
2) Last two Questions are compulsory
Q.1. In the following statements only one is correct statement. Explain Briefly?
(5 Marks)
i) An invitation to negotiate is a good offer.
ii) A quasi-contract is not a contract at all.
iii) An agreement to agree is a valid contract.
Q.2. A ship-owner agreed to carry to cargo of sugar belonging to A from Constanza to Busrah. He knew
that there was a sugar market in Busrah and that A was a sugar merchant, but did not know that he
intended to sell the cargo, immediately on its arrival. Owning to Shipment’s default, the voyage was
delayed and sugar fetched a lower price than it would have done had it arrived on time. A claimed
compensation for the full loss suffered by him because of the delay. Give your decision. Explain
Briefly? (5 Marks)
Q.3. The proprietors of a medical preparation called the “Carbolic Smoke Ball” published in several
newspapers the following advertisement:-
“£ 1000 reward will be paid by the Carbolic Smoke Ball Co. to any person who contracts the
increasing epidemic influenza after having used the Smoke Ball three times daily for two weeks
according to printed directions supplied with each ball. £ 1000 is deposited with the Alliance Bank
showing our sincerity in the matter.
On the faith in this advertisement, the plaintiff bought a Smoke Ball and used it as directed. She was
attacked by influenza. She sued the company for the reward. Will she succeed? Explain Briefly
(5 Marks)
Q.4. Fazal consigned four cases of Chinese crackers at Kanpur to be carried to Allahabad on the 30th May,
1987. He intended to sell them at the Shabarat festival of 5th June 1987. The railway discovered that
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
the consignment could not be sent by passenger train and asked Fazal either to remove them or
authorize their dispatch by goods train. He took no action and the goods arrived at Allahabad a
month after they were booked.
Fazal filed a suit against Railways for damages due to late delivery of the goods which deprived him
of the special profits at the festival sale. Decide & explain briefly ?
(5 Marks)
Q.5. ‘Lifeoy’ Soap company advertised that it would give a reward of Rs. 2000 who contracted skin
disease after using the ‘Lifeoy’ soap of the company for a certain period according to the printed
directions. Mrs. Jacob purchased the advertised ‘Lifeboy’ and contracted skin disease inspite of
using this soap according to the printed instructions. She claimed reward of Rs. 2000. The claim is
resisted by the company on the ground that offer was not made to her and that in any case she had
not communicated her acceptance of the offer. Decide whether Mrs. Jacob can claim the reward or
not. Give reasons. Explain briefly? (5 Marks)
Q.6. In each set of statements, only one is correct. State the correct statements & Explain briefly?
a) i) A bailee has a general lien on the goods bailed.
ii) The ownership of goods pawned passes to the pawnee.
iii) A gratuitous bailment can be terminated by the bailor even
before the stated time.
b) i) A substituted agent is as good an agent of the agent as a subagent.
ii) An ostensible agency is as effective as an express agency.
iii) A principal can always revoke an agent’s authority. (5 Marks)
Q.7. A, an unpaid seller, sends goods to B by railway. B becomes insolvent
And A sends a telegram to Railway authorities not to deliver the goods to B. B. goes to the Parcel
office of Railway Yard and by presenting R. R. (Railway Receipt) takes delivery of the goods and
starts putting them in the cart. Meanwhile the Station Master comes running with the telegram in
hand and takes possession of the goods from B. Discuss the rights of A and B to the goods in
possession of Railway authorities. (5 Marks)
Q.8. X needs Rs. 10,000 but cannot raise this amount because his credit is not good enough. Y whose
credit is good accommodates. X by giving him a pronote made out in favour of X, though Y owes
no money to X. X endorses the pronote to Z for value received. Z who is holder in due course the
pronote to Z for value received. Z who is holder in due course demands payment from Y. Can
refuse and plead the arrangement between him and X Explain briefly?
(5 Marks)
Q.9. Will C has the right of further negotiation in the following cases: (B signs the endorsements)
Explain briefly? (5 Marks)
i) ‘Pay C for my use’
ii) ‘Pay C’)
iv) ‘Pay C or order for the account of B’
Q.10. A promissory note was made without mentioning any time for payment. The holder added the
words’ on demand on the face of the instrument. State whether it amounted to material alteration
and explain the effect of such alteration. Explain briefly? (5
Marks)
Q.11. State whether the following instruments are valid promissory notes:
i) I promise to pay Rs. 5000 to B on the dearth of ‘B’s uncle provided that D in his will gives
me a legacy sufficient for the promise of payment of the said sum.
ii) I hereby acknowledge that I owe X Rs. 5,000 on account of rent due and I agree that the said
sum will be paid be me in regular installments.
iii) I acknowledge myself indebted to B in Rs. 5000 to be paid on demand for value received.
(5 Marks)
Q.12. A Payee holder of a bill of exchange. He endorses it in blank and delivers it to B. B endorses in full
to C or order. C without endorsement transfers the bill to D. State giving reasons whether D as
bearer of the bill of exchange is entitled to recover the payment from A or B or C. Explain briefly?
(5 Marks)
Q.13. Write a short note on the Doctrine of Indoor Management? Explain briefly?
(5 Marks)
Q.14. The shareholders at an annual general meeting passed a resolution for the payment of dividend at a
rate higher than that recommended by the Board of Directors. Examine the validity of the resolution.
Explain briefly? (5
Marks)
Q.15. In a prospectus issued by a company the Managing Director stated that the company had paid
dividend every year during 1921 – 27, which was a fact. However, the company had sustained losses
during the relevant period and had paid dividends out of secret reserves accumulated in the past.
Examine the consequences of the observation made by the Managing Director. Explain briefly?
(5 Marks)
Q.16. A buys from B 400 shares in a company on the faith of a share certificate issued by the company. A
tender to the company a transfer deed duly executed together with B’s share certificate. The
company discovers that the certificate in the name of B has been fraudulently obtained and refuses to
register the transfer. Advise A. Explain briefly? (5 Marks)
Q.17. A insured his house against fire. Later while insure, A killed his wife, severely injured his only son,
set fire to the house and died in the fire. The son survived and sued the insurer for the fire loss,
advice the insurer. Explain briefly? (5 Marks)
Q.18. a) Satrang Singh admitted his only infant son in a private nursing home. As a result of strong dose of
medicine administered by the nursing attendant, the child has become mentally retarded. Satrang
Singh wants to make a complaint to the District Forum under the Consumer Protection Act, 1986
seeking relief by way of compensation on the ground that there was deficiency in service by the
nursing home. Does his complaint give rise to a consumer dispute? Who is the consumer in the
instant case? Explain briefly?
b) Smart booked a motor vehicle through one of the dealers. He was informed subsequently that the
procedure for purchasing the motor vehicle had changed and was called upon to make further
payment to continue the booking before delivery. On being aggrieved, Smart filed a complaint with
the State Commission under the Consumer Protection Act, 1986. Will he succeed? Explain briefly?
c) Brittle and Company, a small-scale industry, sought nursing and financing facilities from its bankers
by means of grant of further advances and adequate margin money in anticipation of good demand
for its products. In failing to obtain this and having become sick, it proceeds against its bankers
under the Consumer Protection Act, 1986, Will it succeed? Explain briefly?
(5 Marks)
Q.20. X who was working as a truck driver had taken a general insurance policy to cover the risk of
injuries for a period from 1.11.1998 to 30.11.1999. He renewed the policy for a further period of one
year on 10.11.1999. On the same day, he met with an accident and suffered multiple injuries
including fractures. X submitted the claim along with documents to the insurance company. The
insurance company repudiated the claim on the ground that the premium for the renewed policy was
received in the office only at 2.30 p.m. on 10.11.1999, while the accident had taken place at 10.00
a.m. on that day and hence there was no policy at the time of accident. Will X succeed if he files a
complaint against the insurance company for this claim? Explain briefly?
(5 Marks)
Q.19 Avinash booked his goods with Superfast Freight Carriers at Delhi for being carried to Ferozabad.
The goods receipt note mentioned that all the disputes would be subject to jurisdiction of the
Mumbai Court. Avinash lodged a complaint for certain deficiency in service against the transporter
in the District Forum at Delhi. Superfast Carriers contested that District Forum at Delhi had no
jurisdiction to entertain the complaint as the head office of the transporter was at Mumbai and the
jurisdiction has been clearly stated in the goods receipt not. Is the contention of the transporter
tenable? Explain briefly? (5 Marks)
Q.20. With reference to the provisions of the Consumer Protection Act, 1986, decide the following giving
reasons in support of your answer.
i) Sukh Dukh Ltd. dispatched certain consignments of goods by road through Fastrack Roadways Ltd.
The goods were unloaded and stored in a godown enroute on the suggestion of consignee. A fire
broke out in the neighbouring godown spread to the godown and goods were destroyed. The
Fastrack Roadways Ltd. claimed that there was neither negligence nor deficiency in service on their
part and goods were being carried at “Owner risk” and since no special premium was paid, they were
not responsible for the loss caused by fire. Whether Fastrack Roadways Ltd. is liable to pay
damages to consignor?
ii) Life Insurance Corporation (LIC) formulated a scheme called ‘salary saving scheme’ under which
employees of an organisation could buy an insurance policy. Premium due on each policy was
collected by the employer from the salary of the employees nor did it issue any premium notice.
When the widow of the deceased employee made a claim to LIC on the death of her husband, the
LIC repudiated the claim on the ground that four installments of premium had not been paid. The
widow was approached the consumer forum for redressal. Is the LIC liable for deficiency in service?
Explain?
iii) Raman booked a ticket from Delhi to New York by Lufthansa Airlines. The airport authorities in
New Delhi did not find any fault in his visa and other documents. However, at Frankfurt airport
authorities instituted proceedings of verification because of which Raman missed his flight to New
York. After necessary verification, Raman was able to reach New York by the next flight. The
airline authorities’ tendered apology to Raman for the inconvenience caused to him and also paid as
goodwill gesture a sum of Rs. 5,000. Raman intends to institute proceedings under the Consumer
Protection Act, 1986 against Lufthansa Airlines for deficiency in service. Will he succeed?
(10 Marks )
Q.21. With reference to the provisions of the Consumer Protection Act, 1986, decide the following giving
reasons in support of your answer.
i) Sohn sent all relevant documents in an envelope regarding consignment of goods to a buyer in the
USA through Fast Service Couriers. The documents did not reach the buyer as a consequence of
which the buyer could not take delivery of the goods. By the time the duplicate copies of the
document had been received by the buyer, the season of the goods was over. He claimed that he had
suffered a loss of US $ 5,000 as a result of the negligence of the courier. The State Commission
ordered the payment to be made by the Fast Service Couriers, but the National Commission in appeal
reversed the order and ordered payment of US $ 100 only as per the receipt issued by the Fast
Service Courier to the consignor at the time of the dispatch of the latter. Advise Sohan.
ii) Mahesh purchased a machine from Astute Ltd. to operate it himself for earning his liverhood. He
took the assistance of a person to assist him in operating the machine. The machine developed fault
during the warranty period. He filed a claim in the consumer forum against the company for
deficiency in service. Astute Ltd. alleged that Mahesh did not operate the machine himself but had
appointed a person exclusively to operate the machine. Will Mahesh succeed?
iii) Pillai purchased a car by taking a loan from Kerala cooperative Bank Ltd. and gave post-dated
cheques to the bank not only in respect of repayment of loan instalments but also of premium of
insurance policy for two succeeding years. On the expiry of the policy. Pillai’s car met with an
accident. Will Pillai succeed in getting a claim against the
Bank ? (10 Marks)

COURSE : DMS
Marks : 80
SUB : FINANCIAL MANAGEMENT
Attempt any Four cases cases carries equal marks.
NO. 1
ZIP ZAP ZOOM CAR COMPANY
Zip Zap Zoom Company Ltd is into manufacturing cars in the small car (800 cc) segment. It was set up 15
years back and since its establishment it has seen a phenomenal growth in both its market and profitability.
Its financial statements are shown in Exhibits 1 and 2 respectively.
The company enjoys the confidence of its shareholders who have been rewarded with growing
dividends year after year. Last year, the company had announced 20 per cent dividend, which was the
highest in the automobile sector. The company has never defaulted on its loan payments and enjoys a
favourable face with its lenders, which include financial institutions, commercial banks and debenture
holders.
The competition in the car industry has increased in the past few years and the company foresees
further intensification of competition with the entry of several foreign car manufactures many of them being
market leaders in their respective countries. The small car segment especially, will witness entry of foreign
majors in the near future, with latest technology being offered to the Indian customer. The Zip Zap Zoom’s
senior management realizes the need for large scale investment in up gradation of technology and
improvement of manufacturing facilities to pre-empt competition.
Whereas on the one hand, the competition in the car industry has been intensifying, on the other
hand, there has been a slowdown in the Indian economy, which has not only reduced the demand for cars,
but has also led to adoption of price cutting strategies by various car manufactures. The industry indicators
predict that the economy is gradually slipping into recession.
Exhibit 1 Balance sheet as at March 31,200 x
(Amount in Rs. Crore)
Source of Funds
Share capital 350
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Reserves and surplus 250 600
Loans :
Debentures (@ 14%) 50
Institutional borrowing (@ 10%) 100
Commercial loans (@ 12%) 250
Total debt 400
Current liabilities 200
1,200
Application of Funds
Fixed Assets
Gross block 1,000
Less : Depreciation 250
Net block 750
Capital WIP 190
Total Fixed Assets 940
Current assets :
Inventory 200
Sundry debtors 40
Cash and bank balance 10
Other current assets 10
Total current assets 260
-1200
Exhibit 2 Profit and Loss Account for the year ended March 31, 200x
(Amount in Rs. Crore)
Sales revenue (80,000 units x Rs. 2,50,000) 2,000.0
Operating expenditure :
Variable cost :
Raw material and manufacturing expenses 1,300.0
Variable overheads 100.0
Total 1,400.0
Fixed cost :
R & D 20.0
Marketing and advertising 25.0
Depreciation 250.0
Personnel 70.0
Total 365.0
Total operating expenditure 1,765.0
Operating profits (EBIT) 235.0
Financial expense :
Interest on debentures 7.7
Interest on institutional borrowings 11.0
Interest on commercial loan 33.0 51.7
Earnings before tax (EBT) 183.3
Tax (@ 35%) 64.2
Earnings after tax (EAT) 119.1
Dividends 70.0
Debt redemption (sinking fund obligation)** 40.0
Contribution to reserves and surplus 9.1
* Includes the cost of inventory and work in process (W.P) which is dependent on demand (sales).
** The loans have to be retired in the next ten years and the firm redeems Rs. 40 crore every year.
The company is faced with the problem of deciding how much to invest in up gradation of its plans
and technology. Capital investment up to a maximum of Rs. 100 crore is required. The problem
areas are three-fold.
 The company cannot forgo the capital investment as that could lead to reduction in its market share
as technological competence in this industry is a must and customers would shift to manufactures
providing latest in car technology.
 The company does not want to issue new equity shares and its retained earning are not enough for
such a large investment. Thus, the only option is raising debt.
 The company wants to limit its additional debt to a level that it can service without taking undue
risks. With the looming recession and uncertain market conditions, the company perceives that
additional fixed obligations could become a cause of financial distress, and thus, wants to determine
its additional debt capacity to meet the investment requirements.
Mr. Shortsighted, the company’s Finance Manager, is given the task of determining the additional debt
that the firm can raise. He thinks that the firm can raise Rs. 100 crore worth debt and service it even in years
of recession. The company can raise debt at 15 per cent from a financial institution. While working out the
debt capacity. Mr. Shortsighted takes the following assumptions for the recession years.
a) A maximum of 10 percent reduction in sales volume will take place.
b) A maximum of 6 percent reduction in sales price of cars will take place.
Mr. Shorsighted prepares a projected income statement which is representative of the recession years.
While doing so, he determines what he thinks are the “irreducible minimum” expenditures under
recessionary conditions. For him, risk of insolvency is the main concern while designing the capital
structure. To support his view, he presents the income statement as shown in Exhibit 3.
Exhibit 3 projected Profit and Loss account
(Amount in Rs. Crore)
Sales revenue (72,000 units x Rs. 2,35,000) 1,692.0
Operating expenditure
Variable cost :
Raw material and manufacturing expenses 1,170.0
Variable overheads 90.0
Total 1,260.0
Fixed cost :
R & D —
Marketing and advertising 15.0
Depreciation 187.5
Personnel 70.0
Total 272.5
Total operating expenditure 1,532.5
EBIT 159.5
Financial expenses :
Interest on existing Debentures 7.0
Interest on existing institutional borrowings 10.0
Interest on commercial loan 30.0
Interest on additional debt 15.0 62.0
EBT 97.5
Tax (@ 35%) 34.1
EAT 63.4
Dividends —
Debt redemption (sinking fund obligation) 50.0*
Contribution to reserves and surplus 13.4
* Rs. 40 crore (existing debt) + Rs. 10 crore (additional debt)
Assumptions of Mr. Shorsighted
 R & D expenditure can be done away with till the economy picks up.
 Marketing and advertising expenditure can be reduced by 40 per cent.
 Keeping in mind the investor confidence that the company enjoys, he feels that the company can
forgo paying dividends in the recession period.
He goes with his worked out statement to the Director Finance, Mr. Arthashatra, and advocates raising
Rs. 100 crore of debt to finance the intended capital investment. Mr. Arthashatra does not feel comfortable
with the statements and calls for the company’s financial analyst, Mr. Longsighted.
Mr. Longsighted carefully analyses Mr. Shortsighted’s assumptions and points out that insolvency
should not be the sole criterion while determining the debt capacity of the firm. He points out the following
:
 Apart from debt servicing, there are certain expenditures like those on R & D and marketing that
need to be continued to ensure the long-term health of the firm.
 Certain management policies like those relating to dividend payout, send out important signals to the
investors. The Zip Zap Zoom’s management has been paying regular dividends and discontinuing
this practice (even though just for the recession phase) could raise serious doubts in the investor’s
mind about the health of the firm. The firm should pay at least 10 per cent dividend in the recession
years.
 Mr. Shortsighted has used the accounting profits to determine the amount available each year for
servicing the debt obligations. This does not give the true picture. Net cash inflows should be used
to determine the amount available for servicing the debt.
 Net Cash inflows are determined by an interplay of many variables and such a simplistic view should
not be taken while determining the cash flows in recession. It is not possible to accurately predict
the fall in any of the factors such as sales volume, sales price, marketing expenditure and so on.
Probability distribution of variation of each of the factors that affect net cash inflow should be
analyzed. From this analysis, the probability distribution of variation in net cash inflow should be
analysed (the net cash inflows follow a normal probability distribution). This will give a true picture
of how the company’s cash flows will behave in recession conditions.
The management recognizes that the alternative suggested by Mr. Longsighted rests on data, which are
complex and require expenditure of time and effort to obtain and interpret. Considering the importance of
capital structure design, the Finance Director asks Mr. Longsighted to carry out his analysis. Information on
the behaviour of cash flows during the recession periods is taken into account.
The methodology undertaken is as follows :
(a) Important factors that affect cash flows (especially contraction of cash flows), like sales volume,
sales price, raw materials expenditure, and so on, are identified and the analysis is carried out in
terms of cash receipts and cash expenditures.
(b) Each factor’s behaviour (variation behaviour) in adverse conditions in the past is studied and future
expectations are combined with past data, to describe limits (maximum favourable), most probable
and maximum adverse) for all the factors.
(c) Once this information is generated for all the factors affecting the cash flows, Mr. Longsighted
comes up with a range of estimates of the cash flow in future recession periods based on all possible
combinations of the several factors. He also estimates the probability of occurrence of each estimate
of cash flow.
Assuming a normal distribution of the expected behaviour, the mean expected value of net cash
inflow in adverse conditions came out to be Rs. 220.27 crore with standard deviation of Rs. 110
crore.
Keeping in mind the looming recession and the uncertainty of the recession behaviour, Mr.
Arthashastra feels that the firm should factor a risk of cash inadequacy of around 5 per cent even in the most
adverse industry conditions. Thus, the firm should take up only that amount of additional debt that it can
service 95 per cent of the times, while maintaining cash adequacy.
To maintain an annual dividend of 10 per cent, an additional Rs. 35 crore has to be kept aside.
Hence, the expected available net cash inflow is Rs. 185.27 crore (i.e. Rs. 220.27 – Rs. 35 crore) Analyse
the debt capacity of the company.
NO. 2
COOKING LPG LTD
DETERMINATION OF WORKING CAPTIAL
Introduction
Cooking LPG Ltd, Gurgaon, is a private sector firm dealing in the bottling and supply of domestic LPG for
household consumption since 1995. The firm has a network of distributors in the districts of Gurgaon and
Faridabad. The bottling plant of the firm is located on National Highway – 8 (New Delhi – Jaipur), approx.
12 kms from Gurgaon. The firm has been consistently performing we.” and plans to expand its market to
include the whole National Capital Region.
The production process of the plant consists of receipt of the bulk LPG through tank trucks, storage
in tanks, bottling operations and distribution to dealers. During the bottling process, the cylinders are
subjected to pressurized filling of LPG followed by quality control and safety checks such as weight,
leakage and other defects. The cylinders passing through this process are sealed and dispatched to dealers
through trucks. The supply and distribution section of the plant prepares the invoice which goes along with
the truck to the distributor.
Statement of the Problem :
Mr. I. M. Smart, DGM(Finance) of the company, was analyzing the financial performance of the company
during the current year. The various profitability ratios and parameters of the company indicated a very
satisfactory performance. Still, Mr. Smart was not fully content-specially with the management of the
working capital by the company. He could recall that during the past year, in spite of stable demand pattern,
they had to, time and again, resort to bank overdrafts due to non-availability of cash for making various
payments. He is aware that such aberrations in the finances have a cost and adversely affects the
performance of the company. However, he was unable to pinpoint the cause of the problem.
He discussed the problem with Mr. U.R. Keenkumar, the new manager (Finance). After critically
examining the details, Mr. Keenkumar realized that the working capital was hitherto estimated only as
approximation by some rule of thumb without any proper computation based on sound financial policies
and, therefore, suggested a reworking of the working capital (WC) requirement. Mr. Smart assigned the task
of determination of WC to him.
Profile of Cooking LPG Ltd.
1) Purchases : The company purchases LPG in bulk from various importers ex-Mumbai and Kandla, @
Rs. 11,000 per MT. This is transported to its Bottling Plant at Gurgaon through 15 MT capacity tank
trucks (called bullets), hired on annual contract basis. The average transportation cost per bullet exeither
location is Rs. 30,000. Normally, 2 bullets per day are received at the plant. The company
make payments for bulk supplies once in a month, resulting in average time-lag of 15 days.
2) Storage and Bottling : The bulk storage capacity at the plant is 150 MT (2 x 75 MT storage tanks)
and the plant is capable of filling 30 MT LPG in cylinders per day. The plant operates for 25 days
per month on an average. The desired level of inventory at various stages is as under.
 LPG in bulk (tanks and pipeline quantity in the plant) – three days average production / sales.
 Filled Cylinders – 2 days average sales.
 Work-in Process inventory – zero.
3) Marketing : The LPG is supplied by the company in 12 kg cylinders, invoiced @ Rs. 250 per
cylinder. The rate of applicable sales tax on the invoice is 4 per cent. A commission of Rs. 15 per
cylinder is paid to the distributor on the invoice itself. The filled cylinders are delivered on
company’s expense at the distributor’s godown, in exchange of equal number of empty cylinders.
The deliveries are made in truck-loads only, the capacity of each truck being 250 cylinders. The
distributors are required to pay for deliveries through bank draft. On receipt of the draft, the
cylinders are normally dispatched on the same day. However, for every truck purchased on pre-paid
basis, the company extends a credit of 7 days to the distributors on one truck-load.
4) Salaries and Wages : The following payments are made :
 Direct labour – Re. 0.75 per cylinder (Bottling expenses) – paid on last day of the month.
 Security agency – Rs. 30,000 per month paid on 10th of subsequent month.
 Administrative staff and managers – Rs. 3.75 lakh per annum, paid on monthly basis on the last
working day.
5) Overheads :
 Administrative (staff, car, communication etc) – Rs. 25,000 per month – paid on the 10th of
subsequent month.
 Power (including on DG set) – Rs. 1,00,000 per month paid on the 7th Subsequent month.
 Renewal of various licenses (pollution, factory, labour CCE etc.) – Rs. 15,000 per annum paid at the
beginning of the year.
 Insurance – Rs. 5,00,000 per annum to be paid at the beginning of the year.
 Housekeeping etc – Rs. 10,000 per month paid on the 10th of the subsequent month.
 Regular maintenance of plant – Rs. 50,000 per month paid on the 10th of every month to the vendors.
This includes expenditure on account of lubricants, spares and other stores.
 Regular maintenance of cylinders (statutory testing) – Rs. 5 lakh per annum – paid on monthly basis
on the 15th of the subsequent month.
 All transportation charges as per contracts – paid on the 10th subsequent month.
 Sales tax as per applicable rates is deposited on the 7th of the subsequent month.
6) Sales : Average sales are 2,500 cylinders per day during the year. However, during the winter months
(December to February), there is an incremental demand of 20 per cent.
7) Average Inventories : The average stocks maintained by the company as per its policy guidelines :
 Consumables (caps, ceiling material, valves etc) – Rs. 2 lakh. This amounts to 15 days consumption.
 Maintenance spares – Rs. 1 lakh
 Lubricants – Rs. 20,000
 Diesel (for DG sets and fire engines) – Rs. 15,000
 Other stores (stationary, safety items) – Rs. 20,000
8) Minimum cash balance including bank balance required is Rs. 5 lakh.
9) Additional Information for Calculating Incremental Working Capital During Winter.
 No increase in any inventories take place except in the inventory of bulk LPG, which increases in the
same proportion as the increase of the demand. The actual requirements of LPG for additional
supplies are procured under the same terms and conditions from the suppliers.
 The labour cost for additional production is paid at double the rate during wintes.
 No changes in other administrative overheads.
 The expenditure on power consumption during winter increased by 10 per cent. However, during
other months the power consumption remains the same as the decrease owing to reduced production
is offset by increased consumption on account of compressors /Acs.
 Additional amount of Rs. 3 lakh is kept as cash balance to meet exigencies during winter.
 No change in time schedules for any payables / receivables.
 The storage of finished goods inventory is restricted to a maximum 5,000 cylinders due to statutory
requirements.
NO. 3
M/S HI-TECH ELECTRONICS
M/s. Hi – tech Electronics, a consumer electronics outlet, was opened two years ago in Dwarka, New Delhi.
Hard work and personal attention shown by the proprietor, Mr. Sony, has brought success. However,
because of insufficient funds to finance credit sales, the outlet accepted only cash and bank credit cards. Mr.
Sony is now considering a new policy of offering installment sales on terms of 25 per cent down payment
and 25 per cent per month for three months as well as continuing to accept cash and bank credit cards.
Mr. Sony feels this policy will boost sales by 50 percent. All the increases in sales will be credit
sales. But to follow through a new policy, he will need a bank loan at the rate of 12 percent. The sales
projections for this year without the new policy are given in Exhibit 1.
Exhibit 1 Sales Projections and Fixed costs
Month Projected sales without instalment
option
Projected sales with instalment
option
January Rs. 6,00,000 Rs. 9,00,000
February 4,00,000 6,00,000
March 3,00,000 4,50,000
April 2,00,000 3,00,000
May 2,00,000 3,00,000
June 1,50,000 2,25,000
July 1,50,000 2,25,000
August 2,00,000 3,00,000
September 3,00,000 4,50,000
October 5,00,000 7,50,000
November 5,00,000 15,00,000
December 8,00,000 12,00,000
Total Sales 48,00,000 72,00,000
Fixed cost 2,40,000 2,40,000
He further expects 26.67 per cent of the sales to be cash, 40 per cent bank credit card sales on which a 2 per
cent fee is paid, and 33.33 per cent on instalment sales. Also, for short term seasonal requirements, the film
takes loan from chit fund to which Mr. Sony subscribes @ 1.8 per cent per month.
Their success has been due to their policy of selling at discount price. The purchase per unit is 90
per cent of selling price. The fixed costs are Rs. 20,000 per month. The proprietor believes that the new
policy will increase miscellaneous cost by Rs. 25,000.
The business being cyclical in nature, the working capital finance is done on trade – off basis. The
proprietor feels that the new policy will lead to bad debts of 1 per cent.
(a) As a financial consultant, advise the proprietor whether he should go for the extension of credit
facilities.
(b) Also prepare cash budget for one year of operation of the firm, ignoring interest. The minimum
desired cash balance & Rs. 30,000, which is also the amount the firm, has on January 1. Borrowings
are possible which are made at the beginning of a month and repaid at the end when cash is
available.
NO.4
SMOOTHDRIVE TYRE LTD
Smoothdrive Tyre Ltd manufacturers tyres under the brand name “Super Tread’ for the domestic car market.
It is presently using 7 machines acquired 3 years ago at a cost of Rs. 15 lakh each having a useful life of 7
years, with no salvage value.
After extensive research and development, Smoothdrive Tyre Ltd has recently developed a new tyre,
the ‘Hyper Tread’ and must decide whether to make the investments necessary to produce and market the
Hyper Tread. The Hyper Tread would be ideal for drivers doing a large amount of wet weather and off road
driving in addition to normal highway usage. The research and development costs so far total Rs.
1,00,00,000. The Hyper Tread would be put on the market beginning this year and Smoothdrive Tyrs
expects it to stay on the market for a total of three years. Test marketing costing Rs. 50,00,000, shows that
there is significant market for a Hyper Tread type tyre.
As a financial analyst at Smoothdrive Tyre, Mr. Mani asked by the Chief Financial Officer (CFO),
Mr. Tyrewala to evaluate the Hyper-Tread project and to provide a recommendation or whether or not to
proceed with the investment. He has been informed that all previous investments in the Hyper Tread project
are sunk costs are only future cash flows should be considered. Except for the initial investments, which
occur immediately, assume all cash flows occur at the year-end.
Smoothedrive Tyre must initially invest Rs. 72,00,00,000 in production equipments to make the
Hyper Tread. They would be depreciated at a rate of 25 per cent as per the written down value (WDV)
method for tax purposes. The new production equipments will allow the company to follow flexible
manufacturing technique, that is both the brands of tyres can be produced using the same equipments. The
equipments is expected to have a 7-year useful life and can be sold for Rs. 10,00,000 during the fourth year.
The company does not have any other machines in the block of 25 per cent depreciation. The existing
machines can be sold off at Rs. 8 lakh per machine with an estimated removal cost of one machine for Rs.
50,000.
Operating Requirements
The operating requirements of the existing machines and the new equipment are detailed in Exhibits 11.1
and 11.2 respectively.
Exhibit 11.1 Existing Machines
 Labour costs (expected to increase 10 per cent annually to
account for inflation) :
(a) 20 unskilled labour @ Rs. 4,000 per month
(b) 20 skilled personnel @ Rs. 6,000 per month.
(c) 2 supervising executives @ Rs. 7,000 per month.
(d) 2 maintenance personnel @ Rs. 5,000 per month.
 Maintenance cost :
Years 1-5 : Rs. 25 lakh
Years 6-7 : Rs. 65 lakh
 Operating expenses : Rs. 50 lakh expected to increase at 5 per cent annually.
 Insurance cost / premium :
Year 1 : 2 per cent of the original cost of machine
After year 1 : Discounted by 10 per cent.
Exhibit 11.2 New production Equipment
 Savings in cost of utilities : Rs. 2.5 lakh
 Maintenance costs :
Year 1 – 2 : Rs. 8 lakh
Year 3 – 4 : Rs. 30 lakh
 Labour costs :
9 skilled personnel @ Rs. 7,000 per month
1 maintenance personnel @ Rs. 7,000 per month.
 Cost of retrenchment of 34 personnel : (20 unskilled, 11 skilled, 2 supervisors and 1 maintenance
personnel) : Rs. 9,90,000, that is equivalent to six months salary.
 Insurance premium
Year 1 : 2 per cent of the purchase cost of machine
After year 1 : Discounted by 10 per cent.
The opening expenses do not change to any considerable extent for the new equipment and the
difference is negligible compared to the scale of operations.
Smoothdrive Tyre intends to sell Hyper Tread of two distinct markets :
1. The original equipment manufacturer (OEM) market : The OEM market consists primarily of the
large automobile companies who buy tyres for new cars. In the OEM market, the Hyper Tread is
expected to sell for Rs. 1,200 per tyre. The variable cost to produce each Hyper Tread is Rs. 600.
2. The replacement market : The replacement market consists of all tyres purchased after the
automobile has left the factory. This markets allows higher margins and Smoothdrive Tyre expects
to sell the Hyper Tread for Rs. 1.500 per tyre. The variable costs are the same as in the OEM
market.
Smoothdrive Tyre expects to raise prices by 1 percent above the inflation rate.
The variable costs will also increase by 1 per cent above the inflation rate. In addition, the Hyper Tread
project will incur Rs. 2,50,000 in marketing and general administration cost in the first year which are
expected to increase at the inflation rate in subsequent years.
Smoothdrive Tyre’s corporate tax rate is 35 per cent. Annual inflation is expected to remain constant
at 3.25 per cent. Smoothdrive Tyre uses a 15 per cent discount rate to evaluate new product decisions.
The Tyre Market
Automotive industry analysts expect automobile manufacturers to have a production of 4,00,000 new cars
this year and growth in production at 2.5 per year onwards. Each new car needs four new tyres (the spare
tyres are undersized and fall in a different category) Smoothdrive Tyre expects the Hyper Tread to capture
an 11 per cent share of the OEM market.
The industry analysts estimate that the replacement tyre market size will be one crore this year and
that it would grow at 2 per cent annually. Smoothdrive Tyre expects the Hyper Tread to capture an 8 per
cent market share.
You also decide to consider net working capital (NWC) requirements in this scenario. The net
working capital requirement will be 15 per cent of sales. Assume that the level of working capital is
adjusted at the beginning of the year in relation to the expected sales for the year. The working capital is to
be liquidated at par, barring an estimated loss of Rs. 1.5 crore on account of bad debt. The bad debt will be a
tax-deductible expenses.
As a finance analyst, prepare a report for submission to the CFO and the Board of Directors,
explaining to them the feasibility of the new investment.
No. 5
COMPUTATION OF COST OF CAPITAL OF PALCO LTD
In October 2003, Neha Kapoor, a recent MBA graduate and newly appointed assistant to the Financial
Controller of Palco Ltd, was given a list of six new investment projects proposed for the following year. It
was her job to analyse these projects and to present her findings before the Board of Directors at its annual
meeting to be held in 10 days. The new project would require an investment of Rs. 2.4 crore.
Palco Ltd was founded in 1965 by Late Shri A. V. Sinha. It gained recognition as a leading producer
of high quality aluminum, with the majority of its sales being made to Japan. During the rapid economic
expansion of Japan in the 1970s, demand for aluminum boomed, and palco’s sales grew rapidly. As a result
of this rapid growth and recognition of new opportunities in the energy market, Palco began to diversify its
products line. While retaining its emphasis on aluminum production, it expanded operations to include
uranium mining and the production of electric generators, and finally, it went into all phases of energy
production. By 2003, Palco’s sales had reached Rs. 14 crore level, with net profit after taxes attaining a
record of Rs. 67 lakh.
As Palco expanded its products line in the early 1990s, it also formalized its caital budgeting
procedure. Until 1992, capital investment projects were selected primarily on the basis of the average return
on investment calculations, with individual departments submitting these calculations for projects falling
within their division. In 1996, this procedure was replaced by one using present value as the decision
making criterion. This change was made to incorporate cash flows rather than accounting profits into the
decision making analysis, in addition to adjusting these flows for the time value of money. At the time, the
cost of capital for Palco was determined to be 12 per cent, which has been used as the discount rate for the
past 5 years. This rate was determined by taking a weighted average cost Palco had incurred in raising funds
from the capital market over the previous 10 years.
It had originally been Neha’s assignment to update this rate over the most recent 10-year period and
determine the net present value of all the proposed investment opportunities using this newly calculated
figure. However, she objected to this procedure, stating that while this calculation gave a good estimate of
“the past cost” of capital, changing interest rates and stock prices made this calculation of little value in the
present. Neha suggested that current cost of raising funds in the capital market be weighted by their
percentage mark-up of the capital structure. This proposal was received enthusiastically by the Financial
Controller of the Palco, and Neha was given the assignment of recalculating Palco’s cost of capital and
providing a written report for the Board of Directors explaining and justifying this calculation.
To determine a weighted average cost of capital for Palco, it was necessary for Neha to examine the
cost associated with each source of funding used. In the past, the largest sources of funding had been the
issuance of new equity shares and internally generated funds. Through conversations with Financial
Controller and other members of the Board of Directors, Neha learnt that the firm, in fact, wished to
maintain its current financial structure as shown in Exhibit 1.
Exhibit 1 Palco Ltd Balance Sheet for Year Ending March 31, 2003
Assets Liabilities and Equity
Cash
Accounts receivable
Inventories
Total current assets
Net fixed assets
Goodwill
Total assets
Rs. 90,00,000
3,10,00,000
1,20,00,000
5,20,00,000
19,30,00,000
70,00,000
25,20,00,000
Accounts payable
Short-term debt
Accrued taxes
Total current liabilities
Long-term debt
Preference shares
Retained earnings
Equity shares
Total liabilities and
equity shareholders
fund
Rs. 8,50,000
1,00,000
11,50,000
1,20,00,000
7,20,00,000
4,80,00,000
1,00,00,000
11,00,000
25,20,00,000
She further determined that the strong growth patterns that Palco had exhibited over the last ten years were
expected to continue indefinitely because of the dwindling supply of US and Japanese domestic oil and the
growing importance of other alternative energy resources. Through further investigations, Neha learnt that
Palco could issue additional equity share, which had a par value of Rs. 25 pre share and were selling at a
current market price of Rs. 45. The expected dividend for the next period would be Rs. 4.4 per share, with
expected growth at a rate of 8 percent per year for the foreseeable future. The flotation cost is expected to
be on an average Rs. 2 per share.
Preference shares at 11 per cent with 10 years maturity could also be issued with the help of an
investment banker with an investment banker with a per value of Rs. 100 per share to be redeemed at par.
This issue would involve flotation cost of 5 per cent.
Finally, Neha learnt that it would be possible for Palco to raise an additional Rs. 20 lakh through a 7
– year loan from Punjab National Bank at 12 per cent. Any amount raised over Rs. 20 lakh would cost 14
per cent. Short-term debt has always been usesd by Palco to meet working capital requirements and as
Palco grows, it is expected to maintain its proportion in the capital structure to support capital expansion.
Also, Rs. 60 lakh could be raised through a bond issue with 10 years maturity with a 11 percent coupon at
the face value. If it becomes necessary to raise more funds via long-term debt, Rs. 30 lakh more could be
accumulated through the issuance of additional 10-year bonds sold at the face value, with the coupon rate
raised to 12 per cent, while any additional funds raised via long-term debt would necessarily have a 10 –
year maturity with a 14 per cent coupon yield. The flotation cost of issue is expected to be 5 per cent. The
issue price of bond would be Rs. 100 to be redeemed at par.
In the past, Palco had calculated a weighted average of these sources of funds to determine its cost of
capital. In discussion with the current Financial Controller, the point was raised that while this served as an
appropriate calculation for external funds, it did not take into account the cost of internally generated funds.
The Financial Controller agreed that there should be some cost associated with retained earnings and need to
be incorporated in the calculations but didn’t have any clue as to what should be the cost.
Palco Ltd is subjected to the corporate tax rate of 40 per cent.
From the facts outlined above, what report would Neha submit to the Board of Directors of palco
Ltd?
NO. 6
ARQ LTD
ARQ Ltd is an Indian company based in Greater Noida, which manufactures packaging materials for food
items. The company maintains a present fleet of five fiat cars and two Contessa Classic cars for its
chairman, general manager and five senior managers. The book value of the seven cars is Rs. 20,00,000 and
their market value is estimated at Rs. 15,00,000. All the cars fall under the same block of depreciation @ 25
per cent.
A German multinational company (MNC) BYR Ltd, has acquired ARQ Ltd in all cash deal. The
merged company called BYR India Ltd is proposing to expand the manufacturing capacity by four folds and
the organization structure is reorganized from top to bottom. The German MNC has the policy of providing
transport facility to all senior executives (22) of the company because the manufacturing plant at Greater
Noida was more than 10 kms outside Delhi where most of the executives were staying.
Prices of the cars to be provided to the Executives have been as follows :
Manager (10) Santro King Rs. 3,75,000
DGM and GM (5) Honda City 6,75,000
Director (5) Toyota Corolla 9,25,000
Managing Director (1) Sonata Gold 13,50,000
Chairman (1) Mercedes benz 23,50,000
The company is evaluating two options for providing these cars to executives
Option 1 : The company will buy the cars and pay the executives fuel expenses, maintenance expenses,
driver allowance and insurance (at the year – end). In such case, the ownership of the car will lie with the
company. The details of the proposed allowances and expenditures to be paid are as follows :
a) Fuel expense and maintenance Allowances per month
Particulars Fuel expenses Maintenance allowance
Manager
DGM and GM
Director
Managing Director
Chairman
Rs. 2,500
5,000
7,500
12,000
18,000
Rs. 1,000
1,200
1,800
3,000
4,000
b) Driver Allowance: Rs. 4,000 per month (Only Chairman, Managing Director and Directors are
eligible for driver allowance.)
c) Insurance cost: 1 per cent of the cost of the car.
The useful life for the cars is assumed to be five years after which they can be sold at 20 per cent
salvage value. All the cars fall under the same block of depreciation @ 25 per cent using written down
method of depreciation. The company will have to borrow to finance the purchase from a bank with interest
at 14 per cent repayable in five annual equal instalments payable at the end of the year.
Option 2 : ORIX, The fleet management company has offered the 22 cars of the same make at lease for the
period of five years. The monthly lease rentals for the cars are as follows (assuming that the total of
monthly lease rentals for the whole year are paid at the end of each year.
Santro Xing Rs. 9,125
Honda City 16,325
Toyota Corolla 27,175
Sonata Gold 39,250
Mercedes Benz 61,250
Under this lease agreement the leasing company, ORIX will pay for the fuel, maintenance and driver
expenses for all the cars. The lessor will claim the depreciation on the cars and the lessee will claim the
lease rentals against the taxable income. BYR India Ltd will have to hire fulltime supervisor (at monthly
salary of Rs. 15,000 per month) to manage the fleet of cars hired on lease. The company will have to bear
additional miscellaneous expense of Rs. 5,000 per month for providing him the PC, mobioe phone and so
on.
The company’s effective tax rate is 40 per cent and its cost of capital is 15 per cent.
Analyse the financial viability of the two options. Which option would you recommend? Why?

AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
PAPER NO 2
HUMAN RESOURCE MANAGEMENT
CASE STUDY : 1
A policy is a plan of action. It is a statement of intention committing the management to a general course of
action. When the management drafts a policy statement to cover some features of its personnel programmes,
the statement may often contain an expression of philosophy and principle as well. Although it is perfectly
legitimate for an organization to include its philosophy, principles and policy in one policy expression.
Q1) Why organizations adopt personnel policies explain the benefits?
Q2) What are the sources and content of personnel policies?
Q3) Explain few personnel policies?
Q4) Explain principles of personnel policies?
CASE STUDY : 2
Recruitment is understood as the process of searching for and obtaining applicants for jobs, from among
whom the rights people can be selected. Theoretically, recruitment process is said to end with the receipt of
applications, in practice the activity extends to the screening of applications so as to eliminate those who are
not qualified for the job.
Recruitment refers to the process of receipt of applications from job seekers. In reality, the term is used to
describe the entire process of employee hiring. These are recruitment boards for railways, banks and other
organization.
Q1) Explain in detail the general purpose of recruitment?
Q2) Explain factors governing Recruitment?
Q3) Explain the Recruitment process with diagram?
Q4) Explain Recruitment planning?
CASE STUDY : 3
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Navin AGM materials, is fuming and fretting. He bumped into Kiran, GM Materials, threw the resignation
letter on his table, shouted and walked out of the room swiftly.
Navin has reason for his sudden outburst. He has been driven to the wall. Perhaps details of the story will
tell the reasons for Navin’s bile and why he put in his papers, barely four months after he took up his
assignment.
The year was 2005 when Navin quit the prestigious Sail plant at Mumbai. As a manager material Navin
enjoyed the power. He could even place an order for materials worth Rs 25 lakh. He needed nobody’s prior
approval.
Navin joined a pulp making plant located at Pune as AGM Materials. The plant is owned by a prestigious
business house in India. Obviously perks, designation and reputation of the conglomerate lured Navin away
from the public sector.
When he joined the pulp making company, little did Navin realize that he needed prior approval to place an
order for materials worth Rs 12 lakhs. He had presumed that he had the authority to place an order by
himself worth half the amount of what he used to do at the mega steel maker. He placed the order material
arrived, were recived, accepted and used up in the plant.
Trouble started when the bill for Rs 12 lakh came from vendor. The accounts department withheld payment
for the reason that the bill was not endorsed by Kiran. Kiran rused to sign the bill as his approval was not
taken by Navin before placing the order.
Navin felt fumigated and cheated. A brief encounter with Kiran only aggrarated the problem. Navin was
curtly told that he should have known company rules before venturing. Navin decided to quit the company.
Q1) Does the company have an orientation programme?
Q2) If yes how effective is it?
Q3) How is formal Orientation programme conducted?
Q4) If you were Navin what would have you done?
CASE STUDY : 4
Bitter it may taste, shrill it may sound, and sleepless nights it may cause, but it is true. In a major shake up
Airbus. The European aircraft manufacturers has thrown a big shock to its employees. Before coming to the
details of the shock, a peep into the company’s resume.
Name Airbus
Created 1970
President CEO : Vijay M.
Employees 57000
Turnover 26 Bn (Euro)
Total Aircraft sold (Feb
2007)
7187
Delivered 4598
Headquarters Paris (France)
Facilities 16
Rival Boeing
Airbus announced on February 27, 2007 that it would shed 10,000 jobs across four European contries and
sell six of its unit. N the same day the helpless workers did what was expected of them – downed tools and
staged protests. The protesting workers at Airbus’s factory at Meaulte, northern France, were seen picketing
outside the factory gate after holding up production a day earlier. To be fair to Airbus, its management
entered talks with unions before the job loss and sale was formally announced. But the talks did not mollify
the agitated workers.
Job sheating and hiring of units are a part of Power and restructuring plan unleashed by Airbus to save itself
from increasing loss of its ground to the arch rival, Boeing Co.
Airbus Power & Strategy was first mooted in October 2006 but sparkled a split between France & Germany
over the distribution of job losses and the placement of future ones. Later the two countries agreed to share
both job losses and new technology.
The power and plan, if finalized, would mean a 3 per cent reduction to Airbus’s 55000 employee strength.
Q1) Why should Power and focus on shedding jobs to save on cost?
Q2) Are there no alternative strategies?
Q3) Will the proposed shedding of jobs and scale of six units help airbus survive the intense competition
from Boeing?
Q4) Comment on the whole issue?

AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
SUBJECT : INTERNATIONAL BUSINESS
COURSE : Total Marks : 80
CASE 1 (20 Marks)
Kodak started selling photographic equipment on Japan 1889 and by the 1930s it had a dominant position in
the Japanese market. But after World War II, U.S occupation forces persuaded most U.S companies including
Kodak to leave Japan to give the war torn local industry a chance to recover. Kodak was effectively priced out
of the market by tariff barriers; over the next 35 years Fuji gained 70% share of the market while Kodak saw
its share slip to miserable 5%. During this period Kodak limited much of its activities in Japan.
This situation persisted until early 1980s when Fuji launched an aggressive export drive, attacking Kodak in
the north American and European markets. Deciding that a good offence is the best defense, in 1984 and the
next six year, Kodak outspent Fuji in Japan by a ratio of more than 3 to 1. It erected mammoth $ 1 million near
signs as land marks in many of the Japan’s big cities and also sponsored Sumo wrestling, Judo, and tennis
tournaments and even the Japanese team at the 1988 Seoul Olympics. Thus Kodak has put Fuji on defensive,
forcing it to divert resources from overseas to defend itself at home. By 1990’s, some of Fuji’s best executives
had been pulled back to Tokyo.
All this success, however , was apparently not enough for Kodak. In may 1995, Kodak filed a petition with the
US trade office, that accured the Japanese government and Fuji of “Unfair trading practices”. According to the
petition, the Japanese government helped to create a ‘ profile sanctuary’ for Fuji in Japan by systematically
denying Kodak access to Japanese distribution channels for consumer film and paper. Kodak claims Fuji has
effectively shut Kodak products out of four distributors that have a 70% share of the photo distribution market.
Fuji has an equity position in two of the distributors, gives large year –end relates and cash payments to all
four distributors as a reward for their loyalty to Fuji, and owns stakes in the banks that finance them. Kodak
also claims that Fuji uses similar tactics to control 430 wholesale photo furnishing labs in Japan to which it is
the exclusive supplier. Moreover Kodak’s petition claims that the Japanese government has actively
encourages these practices.
But Fuji a similar counter arguments relating to Kodak in U.S. and states bluntly that Kodak’s charges are a
clear case of the pot calling the kettle back.
(a) What was the critical catalyst that led Kodak to start taking the Japanese market seriously?
(b) From the evidence given in the case do you think Kodak’s charges of unfair trading practices against Fuji
are valid? Support your answer.
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
CASE 2 (20 Marks)
Two Senior executives of world’s largest firms with extensive holdings outside the home country speak.
Company A : “We are a multinational firm. We distribute our products in about 100 countries. We
manufacture in over 17 countries and do research and development in three countries. We look at all new
investment projects both domestic and overseas using exactly the same criteria”.
The execution from company A continues, “ of course the most of the key ports in our subsidiaries are held by
home country nationals. Whenever replacements for these men are sought, it is the practice, if not the policy,
to look next to you at the lead office and pick some one (usually a home country national) you know and
trust”.
Company B : “ We are multinational firm. Our product division executives have worldwide profit
responsibility. As our organisational chart shows, the united states is just one region on a par with Europe,
Latin America, Africa etc, in each division”.
The executive from Company B goes on to explain, “the worldwide Product division concept is rather difficult
to implement. The senior executives incharge of this divisions have little overseas experience. They have been
promoted from domestic ports and tend to view foreign consumers needs as really basically the same as ours.
Also, product division executives tend to focus on domestic market, because it generates more revenue than
foreign market. The rewards are for global performance, but strategy is to focus on domestic. Most of the
senior executives simply do not understand what happens overseas and really do not trust foreign executives,
even those in key portions?
Questions :
1 Which company is truly Multinational ? Why?
2 List three differences between Company , Multi National company and Trans Multi National Company ?
CASE – 3 (20 Marks)
Strategic R & D by TNCs in Developing Countries
TNCs have had long units in developing host countries for adapting products and processes to the local
conditions, and in a few cases, to products for local markets. Since the min-1980s, however, they have also
started locating strategic R & D centres in some developing countries, for developing generic technologies
and products for regional or global markets. The main incentives for this are : (a) access to highly qualified
scientists as shortages of research personnel emerge in certain fields in industrialised countries, (b) Cost
differentials in research salaries between developing and industrialised countries, and (c) rationalisation of
operations, assigning particular affiliates the responsibility for developing, manufacturing, and marketing
particular products worldwide. Th new trends are more visible in industries dealing with new technologies,
such as microelectronics, biotechnology, and new materials. In these technologies, the location of R & D can
be geographically de-linked more easily from the location of manufacturing. It is also possible to separate R &
D in core activities from that in non-core activities. Consequently, countries like India, Israel, Singapore,
Malaysia or Brazil serve TNCs as good locations for strategic R & D.
For instance, Sony Corporation of Japan has around nine R & D units in Asian developing countries. It has
three units in Singapore conducting R & D on core components such as optical data shortage devices,
integrated chip design for audio products and CD-ROM drives, and multimedia and microchip software. It has
three units in Malaysia working on video design, derivative models and circuit blocks for new TV chases,
radio cassettes, discman and hi-fi receiver designs. It has one unit in Republic of Korea focusing on the design
of compact discs, radio cassettes, tape recorders, and car stereos. It has one in Taiwan designing and
developing video tape-recorders, minidisk players, video CDs, and duplicators. Finally, it has one unit in
Indonesia focusing on the design of audio products.
Such units often work in collaboration with science and technology institutes in the host country. For instance,
Daimler Benz has established such a unit in Bangalore, India, in collaboration with the Indian Institute of
Science to work on projects related to its vehicles and avionics business. Current work includes interface
design of avionics landing systems and smart GPS sensors for use by the group’s business worldwide.
Source: World Investment Report 1999.
Questions:
(a) Explain why MNCs have located R & D centres in developing countries?
(b) Mention the areas where R & D activities can easily be decentralised.
CASE -4 (20 Marks)
VK Ltd a multi-product Company, furnishes you the following data relating to the year 2000.
First Half of the year Second Half of the year
Sales Rs. 45,000 Rs. 50,000
Total Cost Rs. 40,000 Rs. 43,000
Assuming that there is no change in prices and variable costs and that the fixed expenses are incurred equally
in the two half years periods calculate for the year 2000.
1. The Profit Volume ration
2. Fixed Expenses
3. Break-Even Sales
4. Percentage of margin of safety.
5 marks each

AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
SUBJECT : MARKETING MANAGEMENT
Total Marks : 80
Case-1 : The use of the marketing mix in product launch
Introduction
NIVEA® is an established name in high quality skin and beauty care products. It is part of a range of brands produced and
sold by Beiersdorf. Beiersdorf, founded in 1882, has grown to be a global company specialising in skin and beauty care.
In the UK, Beiersdorf’s continuing goal is to have its products as close as possible to its consumers, regardless of where they
live. Its aims are to understand its consumers in its many different markets and delight them with innovative products for
their skin and beauty care needs. This strengthens the trust and appeal of Beiersdorf brands. The business prides itself on
being consumer-led and this focus has helped it to grow NIVEA into one of the largest skin care brands in the world.
Beiersdorf’s continuing programme of market research showed a gap in the market. This led to the launch of NIVEA
VISAGE® Young in 2005 as part of the NIVEA VISAGE range offering a comprehensive selection of products aimed at
young women. It carries the strength of the NIVEA brand image to the target market of girls aged 13-19. NIVEA VISAGE
Young helps girls to develop a proper skin care routine to help keep their skin looking healthy and beautiful.
The market can be developed by creating a good product/range and introducing it to the market (product-orientated approach)
or by finding a gap in the market and developing a product to fill it (market-orientated approach). Having identified a gap in
the market, Beiersdorf launched NIVEA VISAGE Young using an effective balance of the right product, price, promotion
and place. This is known as the marketing mix or ‘four Ps’. It is vital that a company gets the balance of these four elements
correct so that a product will achieve its critical success factors. Beiersdorf needed to develop a mix that suited the product
and the target market as well as meeting its own business objectives.
The company re-launched the NIVEA VISAGE Young range in June 2007 further optimising its position in the market.
Optimised means the product had a new formula, new design, new packaging and a new name. This case study shows how a
carefully balanced marketing mix provides the platform for launching and re-launching a brand onto the market.
Product :
The first stage in building an effective mix is to understand the market. NIVEA uses market research to target key market
segments which identifies groups of people with the same characteristics such as age/gender/attitude/lifestyle. The
knowledge and understanding from the research helps in the development of new products. NIVEA carries out its market
research with consumers in a number of different ways. These include:
• using focus groups to listen to consumers directly
• gathering data from consumers through a variety of different research techniques
• product testing with consumers in different markets.
Beiersdorf’s market research identified that younger consumers wanted more specialised face care aimed at their own age
group that offered a ‘beautifying’ benefit, rather than a solution to skin problems. NIVEA VISAGE Young is a skin care
range targeted at girls who do not want medicated products but want a regime for their normal skin.
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Competitor products tend to be problem focussed and offer medicated solutions. This gives NIVEA competitive advantage.
NIVEA VISAGE Young provides a unique bridge between the teenage market and the adult market.
The company improved the product to make it more effective and more consumer-friendly. Beiersdorf tested the improved
products on a sample group from its target audience before finalising the range for re-launch. This testing resulted in a
number of changes to existing products. Improvements included:
• Changing the formula of some products. For example, it removed alcohol from one product and used natural sea salts and
minerals in others.
• Introducing two completely new products.
• A new modern pack design with a flower pattern and softer colours to appeal to younger women.
• Changing product descriptions and introducing larger pack sizes.
Each of these changes helped to strengthen the product range, to better meet the needs of the market.
Some of these changes reflect NIVEA’s commitment to the environment. Its corporate responsibility approach aims to:
• reduce packaging and waste – by using larger pack sizes
• use more natural products – by including minerals and sea salts in the formula
• increase opportunities for recycling – by using recyclable plastic in its containers.
Price :
Lots of factors affect the end price of a product, for example, the costs of production or the business need to maximise profits
or sales. A product’s price also needs to provide value for money in the market and attract consumers to buy.
There are several pricing strategies that a business can use:
• Cost based pricing – this can either simply cover costs or include an element of profit. It focuses on the product and does
not take account of consumers.
• Penetration price – an initial low price to ensure that there is a high volume of purchases and market share is quickly won.
This strategy encourages consumers to develop a habit of buying.
• Price skimming – an initial high price for a unique product encouraging those who want to be ‘first to buy’ to pay a
premium price. This strategy helps a business to gain maximum revenue before a competitor’s product reaches the market.
On re-launch the price for NIVEA VISAGE Young was slightly higher than previously. This reflected its new formulations,
packaging and extended product range. However, the company also had to take into account that the target market was both
teenage girls and mums buying the product for their daughters. This meant that the price had to offer value for money or it
would be out of reach of its target market.
As NIVEA VISAGE Young is one of the leading skin care ranges meeting the beautifying needs of this market segment, it is
effectively the price leader. This means that it sets the price level that competitors will follow or undercut. NIVEA needs to
regularly review prices should a competitor enter the market at the ‘market growth’ point of the product life cycle to ensure
that its pricing remains competitive.
The pricing strategy for NIVEA is not the same as that of the retailers. It sells products to retailers at one price. However,
retailers have the freedom to use other strategies for sales promotion. These take account of the competitive nature of the
high street. They may use:
• loss leader: the retailer sells for less than it cost to attract large volume of sales, for example by supermarkets
• discounting – alongside other special offers, such as ‘Buy one, get one free’ (BOGOF) or ‘two for one’.
NIVEA VISAGE Young’s pricing strategy now generates around 7% of NIVEA VISAGE sales.
Place
Place refers to:
• How the product arrives at the point of sale. This means a business must think about what distribution strategies it will
use.
• Where a product is sold. This includes retail outlets like supermarkets or high street shops. It also includes other ways in
which businesses make products directly available to their target market, for example, through direct mail or the Internet.
NIVEA VISAGE Young aims to use as many relevant distribution channels as possible to ensure the widest reach of its
products to its target market. The main channels for the product are retail outlets where consumers expect to find skin care
ranges. Around 65% of NIVEA VISAGE.
Young sales are through large high street shops such as Boots and Superdrug. Superdrug is particularly important for the
‘young-end’ market. The other 35% of sales mainly comes from large grocery chains that stock beauty products, such as
ASDA, Tesco and Sainsbury’s. Market research shows that around 20% of this younger target market buys products for
themselves in the high street stores when shopping with friends. Research also shows that the majority of purchasers are
actually made by mums, buying for teenagers. Mums are more likely to buy the product from supermarkets whilst doing their
grocery shopping.
NIVEA distributes through a range of outlets that are cost effective but that also reach the highest number of consumers. Its
distribution strategies also consider the environmental impact of transport. It uses a central distribution point in the UK.
Products arrive from European production plants using contract vehicles for efficiency for onward delivery to retail stores.
Beiersdorf does not sell direct to smaller retailers as the volume of products sold would not be cost effective to deliver but it
uses wholesalers for these smaller accounts. It does not sell directly through its website as the costs of producing small
orders would be too high. However, the retailers, like Tesco, feature and sell the NIVEA products in their online stores.
Promotion
Promotion is how the business tells customers that products are available and persuades them to buy. Promotion is either
above-the-line or below-the-line. Above-the-line promotion is directly paid for, for example TV or newspaper advertising.
Below-the-line is where the business uses other promotional methods to get the product message across:
• Events or trade fairs help to launch a product to a wide audience. Events may be business to consumer (B2C) whereas trade
fairs are business to business (B2B).
• Direct mail can reach a large number of people but is not easy to target specific consumers cost-effectively.
• Public relations (PR) includes the different ways a business can communicate with its stakeholders, through, for example,
newspaper press releases. Other PR activities include sponsorship of high profile events like Formula 1 or the World Cup, as
well as donations to or participation in charity events.
Branding – a strong and consistent brand identity differentiates the product and helps consumers to understand and trust the
product. This aims to keep consumers buying the product long-term.
• Sales promotions, for example competitions or sampling, encourage consumers to buy products in the short-term.
NIVEA chooses promotional strategies that reflect the lifestyle of its audience and the range of media available. It realises
that a ‘one way’ message, using TV or the press, is not as effective as talking directly to its target group of consumers.
Therefore NIVEA does not plan to use any above-the-line promotion for NIVEA VISAGE Young.
The promotion of NIVEA VISAGE Young is consumer-led. Using various below-the-line routes, NIVEA identifies ways of
talking to teenagers (and their mums) directly.
• A key part of the strategy is the use of product samples. These allow customers to touch, feel, smell and try the products.
Over a million samples of NIVEA VISAGE Young products will be given away during 2008. These samples will be
available through the website, samples in stores or in ‘goody bags’ given out at VISAGE roadshows up and down the
country.
• NIVEA VISAGE Young launched an interactive online magazine called FYI (Fun, Young & Independent) to raise
awareness of the brand. The concept behind the magazine is to give teenage girls the confidence to become young women
and to enjoy their new-found independence. Communication channels are original and engaging to enable teenagers to
identify with NIVEA VISAGE Young. The magazine focuses on ‘first time’ experiences relating to NIVEA VISAGE Young
being their first skincare routine. It is promoted using the Hit40UK chart show and the TMF digital TV channel.
• In connection with FYI, NIVEA VISAGE Young has recognised the power of social network sites for this young audience
and also has pages on MySpace, Facebook and Bebo. The company is using the power of new media as part of the mix to
grow awareness amongst the target audience.
Conclusion
NIVEA VISAGE Young is a skincare range in the UK market designed to enhance the skin and beauty of the teenage
consumer rather than being medicated to treat skin problems. As such, it has created a clear position in the market. This
shows that NIVEA understands its consumers and has produced this differentiated product range in order to meet their needs.
To bring the range to market, the business has put together a marketing mix. This mix balances the four elements of product,
price, place and promotion. The mix uses traditional methods of place, such as distribution through the high street, alongside
more modern methods of promotion, such as through social networking sites. It makes sure that the message of NIVEA
VISAGE Young reaches the right people in the right way.
Answer the following questions:
1. Describe what is meant by a business being ‘consumer led’.
2. What are the key parts of the marketing mix? Explain how each works with the others.
3. Explain why the balance of the marketing mix is as important as any single element.
4. Analyse the marketing mix for NIVEA VISAGE Young. What are its strongest points? Explain why you think this is so.
Case-2 : SWOT analysis in action at Škoda
Introduction
In 1895 in Czechoslovakia, two keen cyclists, Vaclav Laurin and Vaclav Klement, designed and produced their own bicycle.
Their business became Škoda in 1925. Škoda went on to manufacture cycles, cars, farm ploughs and airplanes in Eastern
Europe. Škoda overcame hard times over the next 65 years. These included war, economic depression and political change.
By 1990 the Czech management of Škoda was looking for a strong foreign partner. Volkswagen AG (VAG) was chosen
because of its reputation for strength, quality and reliability. It is the largest car manufacturer in Europe providing an average
of more than 5 million cars a year – giving it a 12% share of the world car market. Volkswagen AG comprises the
Volkswagen, Audi, Škoda, SEAT, Volkswagen Commercial Vehicles, Lamborghini, Bentley and Bugatti brands. Each brand
has its own specific character and is independent in the market. Škoda UK sells Škoda cars through its network of
independent franchised dealers.
To improve its performance in the competitive car market, Škoda UK’s management needed to assess its brand positioning.
Brand positioning means establishing a distinctive image for the brand compared to competing brands. Only then could it
grow from being a small player. To aid its decision-making, Škoda UK obtained market research data from internal and
external strategic audits. This enabled it to take advantage of new opportunities and respond to threats.
The audit provided a summary of the business’s overall strategic position by using a SWOT analysis. SWOT is an acronym
which stands for:
• Strengths – the internal elements of the business that contribute to improvement and growth
• Weaknesses – the attributes that will hinder a business or make it vulnerable to failure
• Opportunities – the external conditions that could enable future growth
• Threats – the external factors which could negatively affect the business.
This case study focuses on how Škoda UK’s management built on all the areas of the strategic audit. The outcome of the
SWOT analysis was a strategy for effective competition in the car industry.
Strengths
To identify its strengths, Škoda UK carried out research. It asked customers directly for their opinions about its cars. It also
used reliable independent surveys that tested customers’ feelings. For example, the annual JD Power customer satisfaction
survey asks owners what they feel about cars they have owned for at least six months. JD Power surveys almost 20,000 car
owners using detailed questionnaires. Škoda has been in the top five manufacturers in this survey for the past 13 years. In
Top Gear’s 2007 customer satisfaction survey, 56,000 viewers gave their opinions on 152 models and voted Škoda the
‘number 1 car maker’. Škoda’s Octavia model has also won the 2008 Auto Express Driver Power ‘Best Car’.
Škoda attributes these results to the business concentrating on owner experience rather than on sales. It has considered ‘the
human touch’ from design through to sale. Škoda knows that 98% of its drivers would recommend Škoda to a friend. This is
a clearly identifiable and quantifiable strength. Škoda uses this to guide its future strategic development and marketing of its
brand image.
Strategic management guides a business so that it can compete and grow in its market. Škoda adopted a strategy focused on
building cars that their owners would enjoy. This is different from simply maximising sales of a product. As a result, Škoda’s
biggest strength was the satisfaction of its customers. This means the brand is associated with a quality product and happy
customers.
Weaknesses
A SWOT analysis identifies areas of weakness inside the business. Škoda UK’s analysis showed that in order to grow it
needed to address key questions about the brand position. Škoda has only 1.7% market share. This made it a very small
player in the market for cars. The main issue it needed to address was: how did Škoda fit into this highly competitive,
fragmented market?
This weakness was partly due to out-dated perceptions of the brand. These related to Škoda’s eastern European origins. In the
past the cars had an image of poor vehicle quality, design, assembly, and materials. Crucially, this poor perception also
affected Škoda owners. For many people, car ownership is all about image. If you are a Škoda driver, what do other people
think?
From 1999 onwards, under Volkswagen AG ownership, Škoda changed this negative image. Škoda cars were no longer seen
as low-budget or low quality. However, a brand ‘health check’ in 2006 showed that Škoda still had a weak and neutral image
in the mid-market range it occupies, compared to other players in this area, for example, Ford, Peugeot and Renault. This
meant that whilst the brand no longer had a poor image, it did not have a strong appeal either. This understanding showed
Škoda in which direction it needed to go. It needed to stop being defensive in promotional campaigns. The company had
sought to correct old perceptions and demonstrate what Škoda cars were not. It realised it was now time to say what the brand
does stand for. The marketing message for the change was simple. Škoda owners were
known to be happy and contented with their cars. The car-buying public and the car industry as a whole needed convincing
that Škoda cars were great to own and drive.
Opportunities and Threats
Opportunities
Opportunities occur in the external environment of a business. These include for example, gaps in the market for new
products or services. In analysing the external market, Škoda noted that its competitors’ marketing approaches focused on the
product itself.
Audi emphasises the technology through its strapline, ‘Vorsprung Durch Technik’ (‘advantage through technology’). BMW
promotes ‘the ultimate driving machine’. Many brands place emphasis on the machine and the driving experience. Škoda UK
discovered that its customers loved their cars more than owners of competitor brands, such as Renault or Ford.
Information from the SWOT analysis helped Škoda to differentiate its product range. Having a complete understanding of
the brand’s weaknesses allowed it to develop a strategy to strengthen the brand and take advantage of the opportunities in the
market. It focused on its existing strengths and provided cars focused on the customer experience. The focus on ‘happy
Škoda customers’ is an opportunity. It enables Škoda to differentiate the Škoda brand to make it stand out from the
competition. This is Škoda’s unique selling proposition (USP) in the motor industry.
Threats
Threats come from outside of a business. These involve, for example, a competitor launching cheaper products. A careful
analysis of the nature, source and likelihood of these threats is a key part of the SWOT process.
The UK car market includes 50 different car makers selling 200 models. Within these there are over 2,000 model derivatives.
Škoda UK needed to ensure that its messages were powerful enough for customers to hear within such a crowded and
competitive environment. If not, potential buyers would overlook Škoda. This posed the threat of a further loss of market
share.
Škoda needed a strong product range to compete in the UK and globally. In the UK the Škoda brand is represented by seven
different cars. Each one is designed to appeal to different market segments. For example:
• The Škoda Fabia is sold as a basic but quality ‘city car’
• The Škoda Superb offers a more luxurious, ‘up-market’ appeal
• The Škoda Octavia Estate provides a family with a fun drive but also a great big boot.
Pricing reflects the competitive nature of Škoda’s market. Each model range is priced to appeal to different groups within the
mainstream car market. The combination of a clear range with competitive pricing has overcome the threat of the crowded
market.
The following example illustrates how Škoda responded to another of its threats, namely, the need to respond to EU legal and
environmental regulations. Škoda responded by designing products that are environmentally friendly at every stage of their
life cycle. This was done by for example:-
• Recycling as much as possible. Škoda parts are marked for quick and easy identification when the car is taken apart.
• Using the latest, most environmentally-friendly manufacturing technologies and facilities available. For instance, areas
painted to protect against corrosion use lead-free, water based colours.
• Designing processes to cut fuel consumption and emissions in petrol and diesel engines. These use lighter parts making
vehicles as aerodynamic as possible to use less energy.
• Using technology to design cars with lower noise levels and improved sound quality. Outcomes and benefits of SWOT
analysis.
Škoda UK’s SWOT analysis answered some key questions. It discovered that:
• Škoda car owners were happy about owning a Škoda
• the brand was no longer seen as a poorer version of competitors’ cars.
However,
• the brand was still very much within a niche market
• a change in public perception was vital for Škoda to compete and increase its market share of the mainstream car market.
The challenge was how to build on this and develop the brand so that it was viewed positively. It required a whole new
marketing strategy.
Škoda UK has responded with a new marketing strategy based on the confident slogan, ‘the manufacturer of happy drivers.’
The campaign’s promotional activities support the new brand position. The key messages for the campaign focus on the
‘happy’ customer experience and appeal at an emotional rather than a practical level. The campaign includes:
• he ‘Fabia Cake’ TV advert. This showed that the car was ‘full of lovely stuff’ with the happy music (‘Favourite things’) in
the background.
• An improved and redesigned website which is easy and fun to use. This is to appeal to a young audience. It embodies the
message ‘experience the happiness of Škoda online’.
Customers are able to book test drives and order brochures online. The result is that potential customers will feel a Škoda is
not only a reliable and sensible car to own, it is also ‘lovely’ to own.
Analysing the external opportunities and threats allows Škoda UK to pinpoint precisely how it should target its marketing
messages. No other market player has ‘driver happiness’ as its USP. By building on the understanding derived from the
SWOT, Škoda UK has given new impetus to its campaign. At the same time, the campaign has addressed the threat of
external competition by setting Škoda apart from its rivals.
Conclusion
Škoda is a global brand offering a range of products in a highly competitive and fragmented market. The company must
respond positively to internal and external issues to avoid losing sales and market share.
A SWOT analysis brings order and structure to otherwise random information. The SWOT model helps managers to look
internally as well as externally. The information derived from the analysis gives direction to the strategy. It highlights the key
internal weaknesses in a business, it focuses on strengths and it alerts managers to opportunities and threats. Škoda was able
to identify where it had strengths to compete. The structured review of internal and external factors helped transform Škoda
UK’s strategic direction.
The case study shows how Škoda UK transformed its brand image in the eyes of potential customers and build its
competitive edge over rivals. By developing a marketing strategy playing on clearly identified strengths of customer
happiness, Škoda was able to overcome weaknesses. It turned its previously defensive position of the brand to a positive
customer-focused experience. The various awards Škoda has won demonstrate how its communications are reaching
customers. Improved sales show that Škoda UK’s new strategy has delivered benefits.
Answer the
1. What was the key weakness that Škoda was able to identify?
2. What strength did Škoda use to turn its brand weakness into an opportunity?
3. How has Škoda strategically addressed external threats?
4. What in your view are the important benefits of using a SWOT analysis
Case-3 : Marketing strategy for growth
Introduction
Businesses must respond to change in order to remain competitive. Developing appropriate strategies which allow them to
move forward is essential. Wilkinson is a prime example of a business that has responded to changing customer needs
throughout its history. It is one of the UK’s long-established retailers of a wide range of food, home, garden, office, health
and beauty products.James Kemsey (JK) Wilkinson opened his first Wilkinson Store in Charnwood Street, Leicester in 1930.
After the Second World War, the 1950s saw a rise in the use of labour-saving devices and DIY. Wilkinson responded by
making this type of product the focus of its sales. In the 1960s customers wanted more convenience shopping. Wilkinson
started selling groceries and supermarket goods and created the Wilko brand. In the 1980s Wilkinson extended its range of
low-cost products to include quality clothing, toys, toiletries and perfumes. In 1995 it opened a central distribution centre in
Workshop, serving stores in the north of England and in 2004, a new distribution centre opened in Wales. In 2005 Wilkinson
launched its Internet shopping service, offering over 800,000 product lines for sale online. Wilkinson currently has over 300
stores, which carry an average of 25,000 product lines. 40% of these are Wilko ‘own-brand’ products. The company’s target
is to see this element grow and to have over 500 stores by 2012.
Wilkinson’s growth places it in the top 30 retailers in the UK. Recently it has faced increasing challenges from competitors,
such as the supermarket sector. Wilkinson needed to combat this and identify new areas for growth. Over two years it
conducted extensive market research. This has helped it create a marketing strategy designed to continue growing by
targeting a new market segment – the student population. This case study focuses on how Wilkinson created and
implemented this strategy, using the findings of its market research to drive the strategy forward.
Marketing strategy aims to communicate to customers the added-value of products and services. This considers the right mix
of design, function, image or service to improve customer awareness of the business’ products and ultimately to encourage
them to buy. An important tool for helping develop an appropriate marketing strategy is Ansoff’s Matrix. This model looks at
the options for developing a marketing strategy and helps to assess the levels of risk involved with each option. Marketing
strategies may focus on the development of products or markets. Doing more of what a business already does carries least
risk; developing a completely new product for a new audience carries the highest risk both in terms of time and costs.
Based on its research, Wilkinson committed to a market development strategy to sell its products to a new audience of
students. This is a medium risk strategy as it requires the business to find and develop new customers. It also carries costs of
the marketing campaigns to reach this new group. The main focus of the strategy was to increase awareness of the brand
among students and encourage them to shop regularly at Wilkinson stores.
Market research
Market research is vital for collecting data on which to base the strategy. Market research takes one of two main forms –
primary research and secondary research. Primary research (also called field research) involves collecting data first hand.
This can take many forms, the main ones being interview, questionnaires, panels and observation. Secondary research (also
called desk research) involves collecting data which already exists. This includes using information from reports,
publications, Internet research and company files.
Both methods have advantages and disadvantages. The advantages of primary research are that it is recent, relevant and
designed specifically for the company’s intended strategy. The main disadvantage is that it is more expensive than secondary
research and can be biased if not planned well. Secondary research is relatively cheap, can be undertaken quickly and so
enables decision-making sooner. However, secondary research can go out-of-date and may not be entirely relevant to the
business’ needs.
Wilkinson undertook primary market research using questionnaires from students across the UK and secondary research
using government and university admissions data. The statistics revealed that there were three million potential student
customers.
They had a combined annual spend of around £9 billion per year. This research confirmed that the choice of focusing on the
student market as a means of growth was valid. Wilkinson undertook further research to identify how to reach students and
persuade them to start shopping at Wilkinson stores. This information was used to formulate a focus strategy. This was
aimed specifically at the needs of the student ‘market segment’.
Marketing to students
Wilkinson involved 60 universities in research, using questionnaires distributed to students initially in Years 2 and 3 of a
range of universities and then to ‘freshers’ (new students) through the University and Colleges Admission Service. This
ensured the widest range of students was included to eliminate bias. It also gave a wide range of responses. From this initial
group, students were asked a second set of questions. Participants were rewarded with Amazon vouchers to encourage a good
take-up. The research focused on two areas:
1. student awareness of the Wilkinson brand and
2. reasons why students were currently not using the stores regularly.
The market research enabled Wilkinson to put together its marketing strategy. The aim was to ensure the student population
began shopping at Wilkinson stores early in their student experience. This would help to maintain their customer loyalty to
Wilkinson throughout their student years and also to develop them as future customers after university. Repeat business is
key to sustained growth. Wilkinson wanted to create satisfied customers with their needs met by the Wilkinson range of
products. A marketing campaign was launched which focused on a range of promotional tactics, specifically designed to
appeal to university students:
• Wilkinson being present at freshers’ fairs – and giving free goody bags with sample
products directly to students
• direct mail flyers to homes and student halls, prior to students arriving
• advertisements with fun theme, for example, showing frying pans as tennis racquets
• web banners
• offering discounts of 15% with first purchase using the online store
• gift vouchers
• free wallplanners.
The challenge was to get students into Wilkinson stores. The opportunity was to capture a new customer group at an early
stage and provide essential items all year round. This would lead to a committed customer group and secure repeat business.
Outcomes/evaluation
Wilkinson wanted to know what would inspire students to shop at Wilkinson more and what factors would help to attract
non-customers. The research provided significant primary information to analyse the effects of the campaign. Wilkinson used
questionnaires collected from the first year undergraduates to gather qualitative data. In addition, Wilkinson obtained
quantitative data from various other sources, including:
• redemption rates – how many people used the discount vouchers when buying
• sales analysis – how much extra business did the stores handle
• footfall in stores analysis – how many extra people went into stores.
This information helped Wilkinson to develop its plans for future marketing campaigns. It identified Motivation factors for
the student audience which would help to encourage future purchase. Key factors included products being cheaper than
competitors and easy access to stores. 23% of students questioned gave ‘distance from university’ as a reason for not
regularly visiting the store. The layout of the store was another major problem affecting repeat visits. These findings have
been taken on board by Wilkinson in its future planning of store locations and layouts.
Researching students’ opinions after the campaign showed that:
• Awareness of Wilkinson brand had significantly risen from 77% to 95% of those interviewed. This brought it in line with
Morrison supermarkets, a key competitor.
Conclusion
Wilkinson’s marketing strategy began with its corporate aim to grow and increase stores across the UK. It was facing
increased competition from supermarkets and needed to identify an area to focus on. To pursue a growth strategy, Wilkinson
used market research to identify new target customers. This enabled it to prepare marketing strategies to fit the audience.
Primary and secondary research was used to find out customer views regarding its brand. Data indicated the student market
segment was a significant area to focus on to achieve market development. A marketing campaign using data from a followup
survey was put in place. The campaign showed significant increase in students’ levels of awareness about Wilkinson and
its products. It encouraged them either to shop more or to try Wilkinson for the first time. The campaign helped to achieve
many of the business’ aims, creating increased brand awareness and repeat visits. It also helped to inform the company’s
future strategies for growth. Market research gathered will help to formulate future plans for new stores. These will be in line
with Wilkinson commitment to providing communities with affordable products across the country.
Answer the following questions
1. What is the difference between primary and secondary research? Identify one example of primary and secondary research
carried out by Wilkinson.
2. Explain why Wilkinson needed a marketing strategy to help them to grow.
3. Evaluate the benefits of the marketing campaign to Wilkinson.
4. Analyse how effective the marketing campaign was in helping Wilkinson respond to competitive pressures.
Case-4 : Extending the product life cycle
Introduction
Businesses need to set themselves clear aims and objectives if they are going to succeed. The Kellogg Company is the
world’s leading producer of breakfast cereals and convenience foods, such as cereal bars, and aims to maintain that position.
In 2006, Kellogg had total worldwide sales of almost $11 billion (£5.5 billion). In 2007, it was Britain’s biggest selling
grocery brand, with sales of more than £550 million. Product lines include ready-to-eat cereals (i.e. not hot cereals like
porridge) and nutritious snacks, such as cereal bars. Kellogg’s brands are household names around the world and include Rice
Krispies, Special K and Nutri-Grain, whilst some of its brand characters, like Snap, Crackle and Pop, are amongst the most
wellknown in the world.
Kellogg has achieved this position, not only through great brands and great brand value, but through a strong commitment to
corporate social responsibility. This means that all of Kellogg’s business aims are set within a particular context or set of
ideals. Central to this is Kellogg’s passion for the business, the brands and the food, demonstrated through the promotion of
healthy living.
The company divides its market into six key segments. Kellogg’s Corn Flakes has been on breakfast tables for over 100 years
and represents the ‘Tasty Start’ cereals that people eat to start their day. Other segments include ‘Simply Wholesome’
products that are good for you, such as Kashi Muesli, ‘Shape Management’ products, such as Special K and ‘Inner Health’
lines, such as All-Bran. Children will be most familiar with the ‘Kid Preferred’ brands, such as Frosties, whilst ‘Mum
Approved’ brands like Raisin Wheats are recognised by parents as being good for their children.
Each brand has to hold its own in a competitive market. Brand managers monitor the success of brands in terms of market
share, growth and performance against the competition. Key decisions have to be made about the future of any brand that is
not succeeding. This case study is about Nutri-Grain. It shows how Kellogg recognised there was a problem with the brand
and used business tools to reach a solution. The overall aim was to re-launch the brand and return it to growth in its market.
The product life cycle
Each product has its own life cycle. It will be ‘born’, it will ‘develop’, it will ‘grow old’ and, eventually, it will ‘die’. Some
products, like Kellogg’s Corn Flakes, have retained their market position for a long time. Others may have their success
undermined by falling market share or by competitors. The product life cycle shows how sales of a product change over
time. The five typical stages of the life cycle are shown on a graph. However, perhaps the most important stage of a product
life cycle happens before this graph starts, namely the
Research and Development (R&D) stage. Here the company designs a product to meet a need in the market. The costs of
market research – to identify a gap in the market and of product development to ensure that the product meets the needs of
that gap – are called ‘sunk’ or start-up costs. Nutri-Grain was originally designed to meet the needs of busy people who had
missed breakfast. It aimed to provide a healthy cereal breakfast in a portable and convenient format.
1. Launch – Many products do well when they are first brought out and Nutri-Grain was no exception. From launch (the first
stage on the diagram) in 1997 it was immediately successful, gaining almost 50% share of the growing cereal bar market in
just two years.
2. Growth – Nutri-Grain’s sales steadily increased as the product was promoted and became well known. It maintained
growth in sales until 2002 through expanding the original product with new developments of flavour and format. This is good
for the business, as it does not have to spend money on new machines or equipment for production. The market position of
Nutri-Grain also subtly changed from a ‘missed breakfast’ product to an ‘all-day’ healthy snack.
3. Maturity – Successful products attract other competitor businesses to start selling similar products. This indicates the third
stage of the life cycle – maturity. This is the time of maximum profitability, when profits can be used to continue to build the
brand. However, competitor brands from both Kellogg itself (e.g. All Bran bars) and other manufacturers (e.g. Alpen bars)
offered the same benefits and this slowed down sales and chipped away at Nutri-Grain’s market position. Kellogg continued
to support the development of the brand but some products (such as Minis and Twists), struggled in a crowded market.
Although Elevenses continued to succeed, this was not enough to offset the overall sales decline. Not all products follow
these stages precisely and time periods for each stage will vary widely. Growth, for example, may take place over a few
months or, as in the case of Nutri-Grain, over several years.
4. Saturation – This is the fourth stage of the life cycle and the point when the market is ‘full’. Most people have the product
and there are other, better or cheaper competitor products. This is called market saturation and is when sales start to fall. By
mid-2004 Nutri-Grain found its sales declining whilst the market continued to grow at a rate of 15%.
5. Decline – Clearly, at this point, Kellogg had to make a key business decision. Sales were falling, the product was in decline
and losing its position. Should Kellogg let the product ‘die’, i.e. withdraw it from the market, or should it try to extend its
life?
Strategic use of the product life cycle
When a company recognises that a product has gone into decline or is not performing as well as it should, it has to decide
what to do. The decision needs to be made within the context of the overall aims of the business. Kellogg’s aims included the
development of great brands, great brand value and the promotion of healthy living. Strategically, Kellogg had a strong
position in the market for both healthy foods and convenience foods. Nutri-Grain fitted well with its main aims and
objectives and therefore was a product and a brand worth rescuing.
Kellogg decided to try to extend the life of the product rather than withdraw it from the market. This meant developing an
extension strategy for the product. Ansoff’s matrix is a tool that helps analyse which strategy is appropriate. It shows both
market-orientated and product-orientated possibilities.
Extending the Nutri-Grain cycle – identifying the problem
Kellogg had to decide whether the problem with Nutri-Grain was the market, the product or both. The market had grown by
over 15% and competitors’ market share had increased whilst Nutri-Grain sales in 2003 had declined. The market in terms of
customer tastes had also changed – more people missed breakfast and therefore there was an increased need for such a snack
product.
The choice of extension strategy indicated by the matrix was either product development or diversification. Diversification
carries much higher costs and risks. Kellogg decided that it needed to focus on changing the product to meet the changing
market needs.
Research showed that there were several issues to address:
1. The brand message was not strong enough in the face of competition. Consumers were not impressed enough by the
product to choose it over competitors.
2. Some of the other Kellogg products (e.g. Minis) had taken the focus away from the core business.
3. The core products of Nutri-Grain Soft Bake and Elevenses between them represented over 80% of sales but received a
small proportion of advertising and promotion budgets.
4. Those sales that were taking place were being driven by promotional pricing (i.e discounted pricing) rather than the
underlying strength of the brand.
Implementing the extension strategy for Nutri-Grain having recognised the problems, Kellogg then developed solutions to rebrand
and re-launch the product in 2005.
1. Fundamental to the re-launch was the renewal of the brand image. Kellogg looked at the core features that made the brand
different and modelled the new brand image on these. Nutri-Grain is unique as it is the only product of this kind that is
baked. This provided two benefits:
• the healthy grains were soft rather than gritty
• the eating experience is closer to the more indulgent foods that people could be eating (cakes and biscuits, for example).
The unique selling point, hence the focus of the brand, needed to be the ‘soft bake’.
2. Researchers also found that a key part of the market was a group termed ‘realistic snackers’. These are people who want to
snack on healthy foods, but still crave a great tasting snack. The re-launched Nutri-Grain product needed to help this key
group fulfil both of these desires.
3. Kellogg decided to re-focus investment on the core products of Soft Bake Bars and Elevenses as these had maintained
their growth (accounting for 61% of Soft Bake Bar sales). Three existing Soft Bake Bar products were improved, three new
ranges introduced and poorly performing ranges (such as Minis) were withdrawn.
4. New packaging was introduced to unify the brand image.
5. An improved pricing structure for stores and supermarkets was developed.
Using this information, the re-launch focused on the four parts of the marketing mix:
• Product – improvements to the recipe and a wider range of flavours, repositioning the brand as ‘healthy and tasty’, not a
substitute for a missed breakfast
• Promotion – a new and clearer brand image to cover all the products in the range along with advertising and point-of-sale
materials
• Place – better offers and materials to stores that sold the product
• Price – new price levels were agreed that did not rely on promotional pricing. This improved revenue for both Kellogg and
the stores.
As a result Soft Bake Bar year-on-year sales went from a decline to substantial growth, with Elevenses sales increasing by
almost 50%. The Nutri-Grain brand achieved a retail sales growth rate of almost three times that of the market and most
importantly, growth was maintained after the initial re-launch.
Conclusion
Successful businesses use all the tools at their disposal to stay at theSuccessful businesses use all the tools at their disposal to
stay at the top of their chosen market. Kellogg was able to use a number of business tools in order to successfully re-launch
the Nutri-Grain brand. These tools included the product life cycle, Ansoff’s matrix and the marketing mix. Such tools are
useful when used properly.
Kellogg was able to see that although Nutri-Grain fitted its strategic profile – a healthy, convenient cereal product – it was
underperforming in the market. This information was used, along with the aims and objectives of the business, to develop a
strategy for continuing success. Finally, when Kellogg checked the growth of the re-launched product against its own
objectives, it had met all its aims to:
• re-position the brand through the use of the marketing mix
• return the brand to growth
• improve the frequency of purchase
• introduce new customers to the brand.
Nutri-Grain remains a growing brand and product within the Kellogg product family.
Answer the following questions:
1. Using current products familiar to you, draw and label a product life cycle diagram, showing which stage each product is
at.
2. Suggest appropriate aims and objectives for a small, medium and large business.
3. Consider the decision taken by Kellogg to opt for product development. Suggest a way in which it could have diversified
instead. Justify your answer.

AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
MARKS : 80
SUB: QUANTITATIVE METHODS
N. B.: 1) Answer any Sixteen
1. What is a linear programming problem? Discuss the scope and role of linear
programming in solving management problems. Discuss and describe the role
of linear programming in managerial decision-making bringing out
limitations, if any.
2. Explain the concept and computational steps of the simplex method for solving
linear programming problems. How would you identify whether an optimal
solution to a problem obtained using simplex algorithm is unique or not?
a) What is the difference between a feasible solution, a basic feasible
solution, and an optimal solution of a linear programming problem?
b) What is the difference between simplex solution procedure for a
`maximization’ and a `minimization’ problem?
c) Using the concept of net contribution, provide an intuitive explanation
of why the criterion for optimality for maximization problem is different
from that of minimization problems.
Outline the steps involved in the simplex algorithm for solving a linear
programming maximization problem. Also define the technical terms used
therein.
3. “Linear programming is one of the most frequently and successfully employed
Operations Research techniques to managerial and business decisions.’’
Elucidate this statement with some examples.
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AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
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4. Describe the transporation problem and give its mathematical model. Explain,
by taking an illustration, the North-West Corner Rule, the Least Cost Method
and the Vogel’s Approximation Method to obtain the initial feasible solution to
a transportation problem.
Discuss the various methods of finding initial feasible solution of a
transportation problem and state the advantages, disadvantages, and areas of
application for them.
5. What is an assignment problem? It is true to say that it is a special case of the
transportation problem? Explain. How can you formulate an assignment
problem as a standard linear programming problem? Illustrate. What do you
understand by an assignment problem? Give a brief outline for solving it.
6. What are different types of inventories? Explain. What functions does
inventory perform? State the two basic inventory decisions management must
make as they attempt to accomplish the functions of inventory just described
by you.
7. What is queuing theory? What type of questions are sought to be answered in
analyzing a queuing system? Give a general structure of the queuing system
and explain. Illustrate some queuing situations. What is queuing theory? In
what types of problem situations can it be applied successfully? Discuss giving
examples.
8. What is a replacement problem? Describe some important replacement
situations and policies. Briefly explain the costs which are relevant to
decisions for replacement of depreciable assets. Illustrate their behaviour and
explain how the optimal time for replacement of an asset can be determined.
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9. What kinds of decision-making situations may be analysed using PERT and
CPM techniques? State the major similarities between PERT and CPM. Under
what circumstances is CPM a better technique of project management than
PERT? A construction company has received a contract to build an office
complex. It has frequently engaged itself in constructing such buildings.
Which of the two network techniques, PERT and CPM, should in your opinion,
be employed by the company? Why?
10. Describe the steps involved in the process of decision making. What are payoff
and regret functions? How can entries in a regret table be derived from a
pay-off table?
11. What do you understand by Markov processes? In what areas of management
can they be applied successfully? What do you understand by transition
probabilities? Is the assumption of stationary transition probabilities realistic,
in your opinion? Why or why not?
12. Explain how the probability tree helps to understand the problem of Markov
processes. Explain the method of calculation of ending up in each absorbing
state when a chain beings in a particular transient state. What is
fundamental matrix of Markov chains? What does it calculate?
13. What is simulation? Describe the simulation process. State the major two
reasons for using simulation to solve a problem. What are the advantages and
limitations of simulation? “When it becomes difficult to use an optimization
technique for solving a problem, one has to resort to simulation’’. Discuss.
“Simulation is typically the process of carrying out sampling experiments on
the models of the system rather than the system itself.’’ Elucidate this
statement by taking some examples.
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14. A company has three offers for its existing equipment in one of the divisions.
The first buyer is willing to pay Rs. 50,000 at the end of 8 years’ period. The
second buyer offers Rs. 39,000—consisting of an immediate payment of Rs.
14,000 and Rs. 25,000 after 6 years. The third buyer agrees to buy the
equipment for Rs. 29,000 payable right away. Which is the best offer for the
company if it can earn an interest @ 8% per annum on the money received?
15. What is the difference between qualitative and quantitative techniques of
forecasting. When is a qualitative model appropriate? Briefly discuss the
Delphi method of making forecasts.
16. a) How do you distinguish between resource leveling and resource
allocation problems? State and explain an algorithm for resource
allocation.
b) Explain the following as they are used in PERT/CPM
(i) Beta distribution, and (ii) Budget over-run.
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17. The following table gives data on normal time and cost, and crash time and
cost for a project.
`Duration (Weeks) Total Cost (Rs)
Activity
Normal Crash Normal Crash
1 – 2 3 2 300 450
2 – 3 3 3 75 75
2 – 4 5 3 200 300
2 – 5 4 4 120 120
3 – 4 4 1 100 190
4 – 6 3 2 90 130
5 – 6 3 1 60 110
i) Draw the network and find out the critical path and the normal project
duration.
ii) Find out the total float associated with each activity.
iii) If the indirect costs are Rs. 100 per week, find out the optimum duration by
crashing and the corresponding project costs.
iv) With the crash duration indicated, what would be the minimum crash
duration possible, ignoring indirect costs?
18. What is a `game’ in game theory? What are the properties of a game? Explain
the “best strategy’’ on the basis of minimax criterion of optimality. Describe
the maximin and minimax principles of game theory.
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19. Explain the steps involved in solution to dynamic programming problems.
Explain the following in the context of dynamic programming:
(a) Stages
(b) States
(c) Pay-off function
(d) Recursive relationship
20. A political campaign for election to the parliament is entering its final stage
and pre-poll surveys are medicating a very close contest in a certain
constituency. One of the candidates in the constituency has sufficient funds to
give five full-page advertisements in four different areas. Based on the polling
information, an estimate has been made of the approximate number (in
thousands) of additional votes that can be polled in different areas. This is
shown below.
No. of Area
Commercial Ads A B C D
0
0
0
0
0
1 9 13 11 7
2 15 17 1 15
3 1 21 23 25
4 25 23 21 29
5 31 25 27 33
Using dynamic programming, determine how the five commercial ads be
distributed between the four areas so as to maximize the estimated number of
votes.

AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
NAME :
(NAME TO APPEAR ON THE CERTIFICATE)
REF NO :
COURSE :
SUBJECT:
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
DMS
RESEARCH METHODOLOGY
Attempt any 5 cases ,equal marks for all cases.
CASE-1 (16 Marks)
A professor is interested in following whether the “good” students finish the test earlier or later than
the others in the class. He observes a particular test and gets the following data given below
If ‘good’ students are those who get 90 and above, can the professor conclude that good students finish
the test randomly (use a 5% level of significance) ?Explain
Order of
finishing test Marks Scored
1 – 10 94 70 85 89 92 98 63 88 74 85
11 – 20 69 90 57 86 79 72 80 93 66 74
21 – 30 50 55 47 59 68 63 89 51 90 88
CASE-2 (16 Marks)
The weight (gms) of 31 books picked from a consignment are as follows:
106, 107, 76, 82, 106, 107, 175, 93, 187, 95, 123, 125, 111, 92, 86, 70, 127, 68, 130, 129, 139,
119,115, 128, 100, 186, 84,99, 113, 204, 111
Test whether this sample may be treated as random? Briefly explain?
Case-3 (16 Marks)
A local supermarket has experienced a decline in unit sales and little change in rupee value sales.
Profits have almost vanished. The chief executive in searching for ways to revitalize the operation, was
advised to increase the number of hours the market is open for business. He comes to you for advice in
structuring a research problem that will provide relevant information for decision making, Define the
research problem taking care to:
(a) state the relevant question.
(b) enumerate the alternative answers.
(c) clearly define the units of analysis and characteristics of interest.
CASE-4 (16 Marks)
According to the National Retail Federation and Center for Retailing Education at the University of
Florida, the four main sources of inventory shrinkage are employee theft, shoplifting, administrative
error, and vendor fraud. The estimated annual dollar amount in shrinkage ($millions) associated with
each of these data sources are as follows
Employee theft $ 17918.6
Shop lifting $ 15191.9
Administrative error $ 7617.6
Vendor fraud $ 2553.6
Total $43281.7
Construct a pie chart to depict these data ?
CASE-5 (16 Marks)
The market for jewellery in India is second only to that for foods and the trade is built around so-called
family jewelers. Tanishq belongs to the House of Tata and, true to the group’s policy it aims at bringing
in credibility and professionalism to the jewellery industry.
India’s jewellery market is estimated to be worth Rs. 400 billion a year and the share of the organised
sector -jewellery stores and brands managed by corporate houses – stands at about Rs. 10 billion. This
small but significant niche is largely the creation of Tanishq, a path-breaking effort that has earned a
well-deserved reputation for reliability and excellence, and for introducing pioneering concepts in an
industry where tradition once ruled. The brand has a 40% share of the organised jewellery market and
a 1% bite of the overall jewellery pie. There are more than 300,000 independent, non-branded
jewellery retailers in India.
Tanishq was a trailblazing endeavour to create a national retail chain that would provide consumers
with jewellery of reliable worth and high design value. Its entry changed, in more ways than one, the
way the Indian jewellery market operates. With 66 exclusive outlets spread across some 50 cities and a
fully integrated jewellery manufacturing facility at Hosur, in Tamil Nadu, Tanishq has emerged as one
of India’s biggest retailers.
The introduction of ‘Karatmeters’ – instruments that can be easily used by consumers to measure the
purity of gold in a non-destructive manner – at its outlets is a key innovation that has developed
tremendous equity for the brand. Another Tanishq novelty, one on which the brand’s growth strategy is
premised, is in the matter of differentiated designs, be they contemporary or traditional, Indian or
international.
Modern retail values and principles in the selling of branded jewellery in Indiaare almost completely
the handiwork of Tanishq. The brand has broken fresh ground in retailing by creating exclusive outlets
with hitherto unknown in-store ambience and hospitality touchstones. It has launched new collections
at a quicker rate than its competitors, and conducted marketing promotions and fashion shows to
enhance the shopping experience of consumers.
Although the purchase of branded jewellery is still a new experience for a whole lot of Indians, the
Tanishq brand enjoys increasing levels of consumer loyalty. In 2002, about one million people
shopped at Tanishq stores all over the country. A highlight of the brand’s success is that, while the
jewellery market growth has declined during the past two years, Tanishq has recorded an annual
growth of approximately 40%.
Besides catering to Indian consumers, Tanishq has successfully entered key export markets such as the
US, the UK, theMiddle East, Singapore and Australia. This is testimony to the brand’s ability to craft
products that meet the requirements of varied cultures and sensibilities. The brand Tanishq, like the
Tata name, has established itself as an ethical brand, earning the respect and affection of its consumers.
The Tanishq portfolio comprises a wide range of jewellery, including 18-carat studded products, 22-
carat plain-gold products, silverware and coins. Tanishq is the first brand in the jewellery category to
introduce collections designed exclusively for the modern Indian woman, especially working women.
Among the Tanishq collections that have caught the imagination of consumers are Aria and Diva.
Collection G, with a selection of over 90 designs, addressed the everyday jewellery needs of working
women. Positioned as ‘9-to-5 jewellery’, the collection is stylish and modern and is designed to suit all
forms of attire, western and Indian, casual and formal. The introduction of lightweight gold –jewellery
that looked heavy but was light in weight and on the purse –marked another milestone in Tanishq’s
brand history.
Tanishq’s retail boutiques are temples for the brand and are used as a platform for celebration, be it the
launch of a new collection, a new marketing promotion or a festival. This gives Tanishq outlets a
unique appeal and consumers an opportunity to heighten their shopping experience. One of Tanishq’s
more innovative ideas is to offer special schemes during various festivals. Tanishq has also initiated a
loyalty program called the Golden Harvest Savings Scheme, which offers buyers the benefit of getting
more jewellery than what they have paid for. The scheme allows consumers to planfuture purchases in
advance and pay for them in easy installments.
In sync with the Tata brand values, Tanishq is synonymous with trust and purity in a category that is
fraught with questionable practices. Being a member of the Tata family has meant that it can leverage
the group’s well-earned reputation for ethics and values in a business where such attributes are critical
to win the trust of consumers. Tanishq consumers can afford to take issues such as purity for granted,
and they know they can depend upon the brand to deliver quality products all the time. The brand’s
winning virtues in design and overall quality have shaped a class of discerning buyers who seek the
best in jewellery products.
Leadership and innovation are two of the other brand features that Tanishq is consistently identified
with. These values have helped the brand bond with its consumers like no other Indian jewellery
retailer.
Tanishq has deliberately moved away from mass-media advertising and focused on store promotions to
make the brand more accessible to consumers. This has been done to correct the consumer perception
that the brand is highly priced and only meant for the rich and the famous. This approach has also
ensured that Tanishq’s promotional approach is product-led.
Read the caselet carefully and answer the following questions:
1. Discuss the various bases or criteria for segmenting consumer markets. Explain Tanishq’s
segmentation and positioning strategy.
2. What are Tanishq’s key brand values or brand strengths? Explain.
3. What are the strength and weakness of Tanisq
CASE-6 (16 Marks)
A recent survey on washing machines conducted among housewives showed that most of them
belonged to middle income households, were generally employed had growing up children and
preferred a compact, easy-to-use, top-loading washing machine. They wanted a machine that gets
clothes clean and comes with a trouble-free service. If you were the marketer of Whirlpool’s washing
machine, how will you use this information for planning your marketing strategy?
CASE-7 (16 Marks)
A company wishes to launch a new tooth paste which can effectively prevent cavities and tooth decay
as well make teeth whiter. But the tooth paste markets is highly crowed with multiple brands. Design a
questionnaire to identify product attributes important to consumers and consumer purchase behaviour.
Also decide the target group on whom the questionnaire can be executed.

AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
MARKS : 80
SUB : SAFETY MANAGEMENT
N. B : All Questions are Compulsory.
Attempt any sixteen Questions.
1. What is HASAWA? Describe this in terms of the following:
a) Employees
b) Employers
c) Manufacturers
d) Suppliers
e) Occupiers of premises;
2. How many types of Fire appliances are available? Explain them.
3. What is Stress? Classify the Stressors? What are the sources of stress
among managers?
4. What is Benchmarking? Explain the process of Benchmarking in respect of
Health & Safety Management.
5. What are the Ergonomics on the occupational health?
6. Explain the concepts of BS 8800?
7. What are the parameters of Safety Monitory System? Explain them.
8. Enumerate the various occupational health initiatives?
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
9. What is the role of communication on health & safety issues?
10. Who are a Atypical workers? Give example.
11. What is MHSWR? Differentiate between MHSWR & HASAWA in terms
of employers?
12. What is Risk Management? Critically Evaluate Risk Management
strategies?
13. Describe the role of the health and safety practitioner?
14. What are the different measures (rates) used in the calculation of accident
and ill health?
15. Identify the different areas of influence, which affects the people at work?
16. What do you understand by ‘The Fire Triangle’ Explain this with
illustration.
17. (I). Based on your perception, describe the following.
a) Safety in offices
b) Safety at home
c) Safety at operational areas.
(II). In each of the above situation (a, b, & c), establish the necessary safety
norms as a part of precautionary measures.
18. Describe the basics of Electrical safety.
Explain the nomenclature ‘sound working environment’.