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Masters Program in Business Administration (MBA)

 

Note :- Solve any 4 Case Study

             All Case Carry equal Marks.

CASE I

A GLOBAL PLAYER?

 

This is one game that India has permanently lost to its arch-rival Pakistan – manufacturing and exporting sports goods. Historically, when India and Pakistan were one before 1947, Sialkot, now in Pakistan, used to be the world’s largest production centre for badminton, hockey, football, volleyball, basketball, and cricket equipment. After the creation of Pakistan, Jalandhar became the second centre after Hindus in the trade migrated to India. Soon Jalandhar overtook Sialkot and till the early 1980s it remained so. However when the face of the trade began to change in the 1980s and import of quality leather and manufacturing equipment became a necessity for quality production, Pakistan wrested the initiative as India clung it its policies of discouraging imports through high duties and restrictions. As it was, the availability of labor and skills was a common factor in both Sialkot and Jalandhar, but with Sialkot having the advantage of easier entry, most of the world’s top sports manufactures and procedures developed an association with local industry in Sialkot that continues even today. Ten years later, in the early 1990s, when Manmohan Singh liberalised the norms for importing equipment and raw material required for producing sports goods, it was too late as majority of the global majors had already shifted base to Sialkot.

 

In 1961 the late Narinder Mayor started the first large scale sports goods manufacturing unit, Mayor & Company, thereby laying the foundation of an organized industry. Even today, more than 70 percent of the industry functions in an unorganized manner. Starting with soccer balls, Mayor expanded to produce inflatable balls like volleyballs, basketballs, and rugby balls. Today his two sons Rajan & Rajesh have built it up into five companies engaged in a wide array of businesses, though sports goods remain the group’s core business. While the parent trading company, Mayor & Company, remains the leading revenue-earner to the tune of Rs. 55 crore annually out of a total group turnover of Rs. 85 crore-plus, Mayor’s second venture, the Indo-Australian Mayor International Limited, is spinning another Rs. 15 crore. Mayor International is a 100 per cent export-oriented unit (EOU) exclusively manufacturing and exporting golf and tennis balls.

 

 

 

 

            The product portfolio of the company comprises the following:

Inflatable Balls

  • Soccer balls and footballs (Professional, Indoor, Match and Training, leisure toy)
  • Volley balls, rugby balls (Volley balls and Beach Volley Balls)
  • Australian rugby, hand balls (English League, Union and touch) (Australian rules, Australian Rugby League balls with laces)

Boxing Equipment

  • Boxing and punching balls (Boxing and Punching Balls, Head Gear, Gloves, Punching Mitts and Kits Punching Bags & Bag Sets)
  • Gloves
  • Goal keeper’s gloves (Football / Soccer)
  • Boxing gloves

Cricket Equipment

  • Worldwide distributor for Spading Cricket Bats, Balls and Protective equipment.

 

HOCKEY EQUIPMENT

  • Worldwide distributor for Spading Hokey Sticks, Balls & Protective equipment

 

Based in Delhi, Rajan Mayor, 41 is the CMD of the group, which also comprises an IT division working on B2B and B2C solutions; Voyaguer World Travels in the tourism sector; a houseware exports division specializing in stainless steel kitchenware, ceramics, and textiles; and a high school. Younger brother Rajesh, 34, is the executive director and looks after all the divisions operating in Jalandhar. Technical director Katz Nowaskowski divides his time equally between India and Australia, where he looks after the group’s interests. “While inflatable balls are our prime competence in our core business, we are presently focusing on golf balls, for which we are the sole producers in South Asia. Out of a total Rs. 300 crore of sports goods business generated in domestic market, most of which is supplied by the unorganized players, golf balls constitute a miniscule amount and therefore we came up with a 100 per cent EOU for producing golf balls. Later the same facility was utilized with little moderation for tennis balls too,” says Nowaskowaski.

 

            Clarifying that the sports good industry in India only includes playing equipment and not apparels or shoes, D K Mittal, chairman of the Sports Goods Export Promotion Council and joint secretary in the Ministry of Commerce, has certified Mayor group as the number one exporter since 1993 till date, barring 1996. However, SGEPC secretary Tarun Dewan points out that being the number one exporter does not mean that Mayor is the number one brand being exported. “Actually we have tie ups Dunlop, Arnold Palmer, and Fila for manufacturing golf balls. For footballs and volleyballs we have association with Adidas, Mitre, Puma, Umbro, and Dunlop. We manufacture soccer World Cup and European Cup replicas for Adidas, which is a huge market. Only 400 balls used for actual play in the World Cup are manufactured in Europe & that too only for sentimental reason, otherwise we are capable of delivering products of the same, if not better quality. Now since we manufacture balls for them, we cannot antimonies them by producing balls of similar quality with our own brand name. Secondly, I agree that competing with such big quaint in the world market in terms of branding is a task that is well beyond our reach at the moment. However, we are trying to brand ourselves in the domestic market and that is one of the prime focus in the coming year,” says Rajan.

 

            Coca-Cola, Unilever, McDonald’s, American Airlines, Disney club, and other such big brands come up with huge orders at tines for golf balls with their logos for promotional schemes. However, there is no mention of the producing country since these companies do not want to show that balls they deliver in the US are being produced in Asia, “Not only is our quality good enough; labour in India is cheap enough to churn out a much less expensive product in the end. Yet, the main threat to our industry comes from countries like Taiwan and China, who have already cornered a chunk of world markets in tennis, badminton, and squash rackets. This is primarily because of two reasons – slow response to our needs in tune with the market requirements from the government and lack of infrastructure. And most importantly, tags ‘Made in China’ or ‘Made in Taiwan’ are more acceptable in the West than ‘Made in India’ or ‘Made in Pakistan’. One of the mottos of the Mayor group has been to make ‘Made in India’ an acceptable label in the West. For that we stress quality, timely delivery, and competent rates. Yet, a lot depends on perception value, which in our case is sadly on the negative side, much owing to our government’s stance over the years. Things might be improving, but the pace is very slow and as our economy drifts towards a free market scenario supinely, it might just prove to be too little too late in the end,” says Rajesh.

 

            Today, Mayor group is sitting pretty as its competitors, Soccer International Sakay Trades, Savi, Wasan, Cosco, Nivia and Spartan are only trying to catch up in the inflatables category. With 1.2 million dozen golf balls, Mayor is way ahead of its competitors. The company is planning to enhance its manufacturing capacity to 1.5 million dozen golf next fiscal. With approval from the world’s two top golf associations – the US PGA and RNA of Scotland, demand for its product is not a problem, the company’s senior marketing officials point out. With the markets in Mayor’s current export destinations – Europe, North America, Australia, and Nw Zealand – all set to expand in the coming years after the present slump, Mayor wants to expand its sports goods business that caters to 60 per cent of its overall exports. Though 40 per cent of exports come from house ware manufactured in Delhi and Mumbai, with export centres in the same countries for its sports goods, just about maintaining this business at its present state, and concerning entirely on sports goods is what the mayors are intent on.

 

            With nearly 2000 skilled workforce; quality certification from ISO 9001:2000 and ISO 14001: 2004; and having spread to more than 40 countries, Mayor and Company is obviously sitting pretty.

Questions

 

  1. What routes of globalization has the Mayor group chosen to go global? What other routes could it have taken?
  2. What impediments are coming in the Mayor group’s way becoming a major and active player in international business?
  3. Why is ‘Made in India’ not liked in foreign markets? What can be done to erase the perception?

 


CASE II

ARROW AND THE APPAREL INDUSTRY

 

Ten years ago, Arvind Clothing Ltd., a subsidery of Arvind Brands Ltd., a member of the Ahmedabad based Lalbhai Group, signed up with the 150-year old Arrow Company, a division of Cutlet Peabody & Co. Inc., US, for licensed manufacture of  Arrow shirts in India. What this brought to India was not just another premium dress shirt brand but new manufacturing philosophy to its garment industry which combined high productivity, stringent in-line quality control, and a conducive factory ambience.

 

                        Arrow’s first plant, with a 55,000 sq. ft. area and capacity to make 3,000 to 4,000 shirts a day, was established at Bangalore in 1993 with an investment of Rs. 18 crore. The conditions inside – with good lighting on the workbenches, high ceilings, ample elbow room for each worker, and plenty of ventilation, were a decided contrast to the poky, crowded, and confined sweatshops characterizing the usual Indian apparel factory in those days. It employed a computer system for translating the designed shirt’s dimensions to automatically mark the master pattern for initial cutting of the fabric layers. This was installed, not to save labour but to ensure cutting accuracy and low wastage of cloth.

 

                        The over two-dozen quality checkpoints during the conversion of fabric to finished shirt was unique to the industry. It is among the very few plants in the world that makes shirts with 2 ply 140s and 3 ply 100s cotton fabrics using 16 to 18 stitches per inch. In March 2003, the Bangalore plant could produce stain-repellant shirts based on nanotechnology.

 

                        The reputation of this plant has spread far and wide and now it is loaded mostly with export orders from renowed global brands such as GAR, Next, Espiri, and the like. Recently the plant was identified by Tommy Hilfiger to make its brand of shirts for the Indian market. As a result, Arvind Brands has had to take over four other factories in Bangalore on wet lease to make the Arrow brand of garments for the domestic market.

 

                        In fact, the demand pressure from global brands which want to out outscore from Arvind Brands, is so great that the company has had to set up another large for export jobs on the outskirts of Bangalore. The new unit of 75,000 sq. ft. has cost Rs. 16 crore and can turn out 8,000 to 9,000 shirts per day. The technical collaborates are the renowned C&F Italia of Italy.

 

                        Among the cutting edge technologies deployed here are a Gerber make CNC fabric cutting machine, automatic collar and cuff stitching machines, pneumatic holding for tasks like shoulder joining, threat trimming and bottom hemming, a special machine to attach and edge stitch the back yoke, foam finishers which use air and steam to remove creases in the finished garment, and many others. The stitching machines in this plant can deliver up to 25 stitches per inch. A continuous monitoring of the production process in the entire factory is done through a computerized apparel production management system, which is hooked to every machine. Because of the use of such technology, this plant will need only 800 persons for a capacity which is three that of the first plant which employs 580 persons.

 

                        Exports of garments made for global brands fetched Arvind Brands over Rs. 60 crore in 2002, and this can double in the next few years, when the new factory goes on full stream. In fact, with the lifting of the country-wise quota regime in 2005, there will be a surge in demand for high quality garments from India and Arvind is already considering setting up two more such high tech export-oriented factories.

 

                        It is not just in the area of manufacture but also retailing that the arrow brand brought a wind of change on the Indian scene. Prior to its coming, the usual Indian shirt shop used to be a clutter of racks with little by way of display. What Arvind Brands did was to set up exclusive showrooms for Arrow shirts in which the functional was combined with the aesthetic. Stuffed racks and clutter were eschewed. The products were displayed in such a manner that the customer could spot their qualities from a distance. Of course, today this has become standard practice with many other brands in the country, but Arrow showed the way. Arrow today has the largest network of 64 exclusive outlets across India. It is also present in 30 retail chains. It branched into multi-brand outlets in 2001, and is present in over 200 select outlets.

 

                        From just formal dress shirts in the beginning, the product range of Arvind Brands has expanded in the last ten years to include casual shirts, T-shirts, and trousers. In the pipeline are light jackets and jeans engineered for the middle age paunch. Arrow also tied up with the renowed Italian designer, Renato Grande, who has worked with names like Versace and Marlboro, to design its Spring / Summer Collection 2003. The company has also announced its intention to license the Arrow brand for other lifestyle accessories like footwear, watches, undergarments, fragrances, and leather goods. According to Darshan Mehta, President, Arvind Brands Ltd., the current turnover at retail price of the Arrow brand in India is about Rs. 85 crore. He expects the turnover to cross Rs. 100 crore in the next few years, of which about 15 per cent will be from the licensed non-clothing products.

 

                        In 2005, Arvind Brands launched a major retail initiative fir all its brands. Arvind Brands licensed brands (Arrow, Lee and Wrangler) had grown at a healthy 35 per cent rate in 2004 and the company planned to sustain the growth by increasing their retail presence. Arvind Brands also widened the geographical presence of its home-grown brands, such as Newport and Ruf-n-Tuf, targeting small towns across India. The company planned to increase the number of outlets where its domestic brands would be available, and draw in new customers for readymades. To improve its presence in the high – end market, the firm started negotiating with an international brand and is likely to launch the brand.

 

                        The company has plans to expand its retail presence of Newport Jeans, from 1200 outlets across 480 towns to 3000 outlets covering 800 towns.

 

                        For a company ranked as one of the world’s largest manufacturers of denim cloth and owners of world famous brands, the future looks bright certain for Arvind Brands Ltd.

Company Profile     

Name of the Company : Arvind Mills
Year of Establishments : 1931
Promoters : Three brothers – Katurbhai, Narottam Bhai and Chimnabhai
Divisions : Arvind Mills was spilt in 1993 into three units – textiles, telecom and garments. Arvind Brands Ltd. (textile unit) is 100 per cent subsidiary of Arvind Mills.
Growth Strategy : Arvind Mills has grown through buying – up of sick units, going global and acquisition of Germanand US brand names.

 

 

Questions

  1. Why did Arvind Mills choose globalization as major route to achieve growth when domestic market was huge?
  2. Hoe does lifting of Country-wise quota regime’ help Arvind Mills?
  3. What lessons can other Indain business learn from the experience of Arvind Mills?


CASE III

 

AT THE RECEIVING END ! 

Spread over 121 countries with 30,000 restaurants, and serving 46 million customers each day with the help of more than 400,000 employees, the reach of McDonald’s is amazing. It all started in 1948 when two brothers, Richard and Maurice ‘Mac’ McDonald, built several hamburger stands, with golden arches in southern California. One day a traveling salesman, Ray Kroc, came to sell milkshake mixers. The popularity of their $O. 15 hamburgers impressed him, so he bought the world franchise rights from them and spread the golden arches around the globe.

 

McDonald’s depends on its overseas restaurants for revenue. In fact, 60 percent of its revenues are generated outside of the United States. The key to the company’s success is its ability to standardize the formula of quality, service, cleanliness and value, and apply it everywhere.

 

The company, well known for its golden arches, is not the world’s largest company. Its system wide sales are only about one-fifth of Exxon Mobil or Wal-Mart stores. However, it owns one of the world’s best known brands, and the golden arches are familiar to more people than the Christian cross. This prominence, and its conquest of global markets, makes the company a focal point for inquiry and criticism.

 

McDonald is a frequent target of criticism by anti-globalization protesters. In France, a pipe-smoking sheep farmer named Jose Bove shot to fame by leading a campaign against the fast food chain. McDonald’s is a symbol of American trade hegemony and economic globalization. Jose Bove organized fellow sheep farmers in France, and the group led by him drove tractors to the construction site of a new McDonald’s restaurants and ransacked it. Bove was jailed for 20 days, and almost overnight an international anti-globalisation star was borne. Bove, who resembles the irrelevant French comic book hero Asterix, traveled to Seattle in 1999, as part of the French delegation to lead the protest against commercialization of food crops promoted by the WTO. Food, according to him, is too vital a part of life to be trusted to the vagaries of the world trade. In Seattle, he led a demonstration in which some ski-masked protestors transhed at McDonald’s/ As Bove explained, his movement was for small farmers against industrial farming, brought about by globalization. For them, McDonald’s was a symbol of globalization, implying the standardization of food through industrial farming. If this was allowed to go on, he said, there would no longer be need for farmers. “For us”, he declared, “McDonald’s is a symbol of what WTO and the big companies want to do with the world”. Ironically, for all of Bove’s fulminations against McDonald’s, the fast food chain counts its French operations among its most profitable in 121 countries. As employer of about 35,000 workers, in 2006, McDonald’s was also one of France’s biggest foreign employers.

 

Bove’s and his followers are not the only critics of McDonald’s. Leftists, anarchists, nationalists, farmers, labor unions, environmentalists, consumer advocates, protectors of animal rights, religious orders and intellectuals are equally critical of the fast food chain. For these and others, McDonald’s represents an evil America. Within hours after US bombers began to pound Afghanistan in 2001, angry Pakistanis damaged McDonald’s restaurants in Islamabad and an Indonesian mob burned an American flag.

 

McDonald entered India in the late 1990s. On its entry, the company encountered a unique situation.  Majority of the Indians did not eat beef but the company’s preparations contained cow’s meat nor could the company use pork as Muslims were against eating it.  This left chicken and mutton.  McDonald’s came out with ‘Maharaja Mac’, which is made from mutton and ‘McAloo Tikki Burger’ with chicken potato as the main input.  Food items were segregated into vegetarian and non-vegetarian categories.

 

            Though it worked for sometimes, this arrangement did not last long.  In 2001, three Indian businessmen settled in Seattle sued McDonald’s for fraudulently concealing the existence of beef in its French fries.  The company admitted its guilt of mixing miniscule quantity of beef extract in the oil. The company settled the suit for $10 million and tendered an apology too.  Further, the company pledged to label the ingredients of its food items, and to find a substitute for the beef extract used in its oil.

 

            McDonald’s succeeded in spreading American culture in the East Asian countries.  In Hong Kong and Taiwan, the company’s clean restrooms and kitchens set a new standard that elevated expectations throughout those countries.  In Hong Kong, children’s birthdays had traditionally gone unrecognized, but McDonald’s introduced the practice of birthday parties in its restaurants, and now such parties have become popular among the public.   A journalist set forth a ‘Golden Arches Theory of Conflict Prevention’ based on the notion that countries with McDonald’s restaurants do not go to war with each other.  A British magazine, The Economist, paints an yearly ‘Big Mac Index’ that uses the price of a Big Mac in different foreign currencies to access exchange rate distortions.

 

Questions :

  1. What lessons can other MNCs learn from the experience of McDonald’s?
  2. Aware of the food habits of Indians, why did McDonald’s err in mixing beef extract in the oil used for fries?
  3. How far has McDonald’s succeeded in strategizing and meeting local cultures and needs?

 


CASE IV

 

BPO-BANE OR BOON ?

Several MNCs are increasingly unbundling or vertical disintegrating their activities. Put in simple language, they have begun outsourcing (also called business process outsourcing) activities formerly performed in-house and concentrating their energies on a few functions. Outsourcing involves withdrawing from certain stages/activities and relaying on outside vendors to supply the needed products, support services, or functional activities.

 

Take Infosys, its 250 engineers develop IT applications for BO/FA (Bank of America). Elsewhere, Infosys staffers process home loans for green point mortgage of Novato, California. At Wipro, five radiologists interpret 30 CT scans a day for Massachusetts General Hospital.

 

2500 college educated men and women are buzzing at midnight at Wipro Spectramind at Delhi. They are busy processing claims for a major US insurance company and providing help-desk support for a big US Internet service provider – all at a cost upto 60 percent lower than in the US. Seven Wipro Spectramind staff with Ph.Ds in molecular biology sift through scientific research for western pharmaceutical companies.

 

Another activist in BPO is Evalueserve, headquartered in Bermuda and having main operations near Delhi. It also has a US subsidiary based in New York and a marketing office in Australia to cover the European market. As Alok Aggarwal (co-founder and chairman) says, his company supplies a range of value – added services to clients that include a dozen Fortune 500 companies and seven global consulting firms, besides market research and venture capital firms. Much of its work involves dealing with CEOs, CFOs, CTOs, CLOs and other so-called C-level executives.

 

Evalueserve provides services like patent writing, evaluation and assessment of their commercialization potential for law firms and entrepreneurs. Its market research services are aimed at top-rung financial service  firms, to which it provides analysis of investment opportunities and business plans. Another major offering is multilingual services. Evalueserve trains and qualifies employees to communicate in Chinese, Spanish, German, Japanese and Italian, among other languages. That skill set has opened market opportunities in Europe and elsewhere, especially with global corporations.

 

ICICI Infotech Services in Edison, New Jersey, is another BPO services provider that is offering marketing software products and diversifying into markets outside the US. The firm has been promoted by $2-billion ICICI Bank, a large financial institution in Mumbai that is listed on the New York Stock Exchange.   

 

In its first year after setting up shop in March 1999, ICICI Infotech spent $33 million acquiring two information technology services firms in New Jersy – Object Experts and lvory Consulting – and Command Systems in Connecticut. These acquisitions were to help ICICI Infotech hit the ground in the US with a ready book of contracts. But it soon found US companies increasingly outsourcing their requirements to offshore locations, instead of hiring foreign employees to work onsite at their offices. The company found other native modes for growth. It has started marketing its products in banking, insurance and enterprise source planning among others. It has ear——- $10 million for its next US market offensive, which would go towards R & D and back-end infrastructure support, and creating new versions of its products to comply with US market requirements. It also has a joint venture – Semantik Solutions GmbH in Berlin, Germany with the Fraunhofer Institute for Software and Systems Engineering, which is based in Berlin, Germany with the Fraunhofer Institute for Software and Systems Engineering, which is based in Berlin and Dortmund, Germany, Fraunhofer is a leading institute in applied research and development with 200 experts in software engineering and evolutionary information.

 

A relatively late entrant to the US market, ICICI Infotech started out with plain vanilla IT services, including operating call centers. As the market for traditional IT services started weakening around mid-2000, ICICI Infotech repositioned itself as a “Solutions” firm offering both products and services. Today, it offers bundled packages of products and services in corporate and retail banking and insurance, among other areas. The new offerings include data center and disaster recovery management and value chain management services.

 

ICICI Infotech’s expansion into new overseas markets has paid off. Its $50 million revenue for its latest financial year ending March 2003 has the US operations generating some $15 million, while the Middle East and Far East markets brought in another $9 million. It now boasts more than 700 customers in 30 countries, including Dow Jones,  Glaxo – Smithkline, Panasonic and American Insurance Group.

 

The outsourcing industry is indeed growing from strength. Though technical support and financial services have dominated India’s outsourcing industry, newer fields are emerging which are expected to boost the industry many times over.

 

Outsourcing of human resource services or HR BPO is emerging as big opportunity for Indian BPOs with global market in this segment estimated at $40-60 billion per annum. HR BPO comes to about 33 percent of the outsourcing revenue and India has immense potential as more than 80 percent of Fortune 1000 companies discuss offshore BPO as a way to out costs and increase productivity.

 

Another potential area is ITES/BPO industry. According to a NASSCOM Survey, the global ITES/BPO industry was valued at around $773 billion during 2002 and it is expected to grow at a compounded annual growth rate of nine percent during the period 2002-06. NASSCOM lists the major indicators of the high growth potential of ITES/BPO industry in India as the following :

 

During 2003-04, The ITES/BPO segment is estimated to have achieved a 54 percent growth in revenues as compared to the previous year. ITES exports accounted for $3.6 billion in revenues, up from $2.5 billion in 2002-03. The ITES-BPO segment also proved to be a major opportunity for job seekers, creating employment for around 74,400 additional personnel in India during 2003-04. The number of Indians working for this sector jumped to 245,500 by March 2004. By the year 2008, the segment is expected to employ over 1.1 million Indians, according to studies conducted by NASSCOM and McKinsey & Co. Market research shows that in terms of job creation, the ITES-BPO industry is growing at over 50 percent.

 

Legal outsourcing sector is another area India can look for Legal transcription involves conversion of interviews with clients or witnesses by lawyers into documents which can be presented in courts. It is no different from any other transcription work carried out in India. The bottom-line here is again cheap service. There is a strong reason why India can prove to be a big legal outsourcing industry.

 

India, like the US, is a common-law jurisdiction rooted in the British legal tradition. Indian legal training is conducted solely in English. Appellate and Supreme Court proceedings in India take place exclusively in English. Indian legal opinions are written exclusively in English. Due to the time-zone differences, night time in the US is daytime in India which means that clients get 24 hour attention, and some projects can be completed overnight. Small and mid-sized business offices can solve staff problems as the outsourced lawyers from India take on the time consuming labour intensive legal research and writing projects. Large law firms also can solve problems of overstaffing by using the on-call lawyers.

 

Research firms such as Forrester Research, predict that by 2015, more than 489,000 US lawyer jobs, nearly eight percent of the field, will shift abroad.

 

Many more new avenues are opening up for BPO services providers. Patent writing and evaluation services are markets set to boom. Some 200,000 patent applications are written in the western world annually, making for a market size of between $5 billion and $7 billion. Outsourcing patent writing service could significantly lower the cost of each patent application, now anywhere between $12,000 and $15,000 apiece – which help expand the market.                    

 

            Offshoring of equity research is another major growth area. Translation services are also becoming a big Indian plus. India produces some 3,000 graduates in German each year, which is more than in Switzerland.

 

            Though going is good, the Indian BPO services providers cannot afford to be complacent, Phillippines, Mexico and Hungary are emerging as potential offshore locations. Likely competitor is Russia, although the absence of English speaking people there holds the country back. But the dark horse could be South Africa and even China.

 

            BPO is based on sound economic reasons. Outsourcing helps gain cost advantage. If an activity can be performed better or more cheaply by an outside supplier, why not outsource it ? Many PC makers, for example, have shifted from in-house assembly to utilizing contract assemblers to make their PCs. CISCO outsources all productions and assembly of its routers and switching equipment to contract manufacturers that operate 37 factories, all linked via the Internet.

 

            Secondly, the activity (outsourced) is not crucial to the firm’s ability to gain sustainable competitive advantage and won’t hollow out its core competence, capabilities, or technical knowhow. Outsourcing of maintenance services, data processing, accounting, and other administrative support activities to companies specializing in these services has become common place. Thirdly, outsourcing reduces the company’s risk exposure to changing technology and / or changing buyer preferences.

 

            Fourthly, BPO streamlines company operations in ways that improve organizational flexibility, cut cycle time, speedup decision making and reduce coordination costs. Finally, outsourcing allows a company to concentrate on its crore business and do what it does best. Are Indian companies listening? If they listen, BPO is a boon them and not a bane.

Questions

  1. Which of the theories of International trade can help Indian services providers gain competitive edge over their competitors?
  2. Pick up some Indian services providers. With the help of Michael Porter’s diamond, analyze their strengths and weaknesses as active players in BPO.
  3. Compare this case with the case given at the beginning of this chapter. What similarities and dissimilarities do you notice? Your analysis should be based on the theories explained in this chapter.

 


CASE V

 

THE SAGA CONTINUES

 

It was the talk of the town in Bangalore during the late 1970s and early 1980s. The plant was coming up on the Bangalore – Yelahanka Road, about 20 km from the city. Everything the people over three did became a folklore. The buildings were huge with wonderful architecture, beautifully built with wide roads and huge spaces. Should a situation demand, the entire plant could be dismantled, bundled up, loaded into trucks and ferried to other places. Lighting inside the building had to be seen to be believed. Interiors had to be seen to be believed. Washrooms, stores, reception, canteen, healthcare, had to be seen to be believed. It had never happened elsewhere. It was amazing, the boss was not addressed as Sir, he was called Mr. —- and so ! The yellow painted buses on the city roads made a delightful sight. Legends were fold about the two gentlemen who founded the company.

 

An interesting story is told about how one of the surviving founders (Larsen who lived till 2003) visited the Bangalore plant once a year, he stayed in a hotel on his own, hired his own cab, went to the plant and greeted every employee, from the top brass down to the last person in the hierarchy. Story is also told about how, on one such visit Larsen went to the reception and asked for permission to enter the plant. Not knowing who he was, the young lass in reception room made him wait for half-an-hour. By luck, someone recognized him.

 

A budding author captured all these and many more in his first book, which became a big hit with all the teachers and students in different colleges buying and reading it.

 

If cannot be anything other than L & T, the huge engineering and construction multi-plant organization, founded in 1938 by two Danish engineers, Henning Holck – Larsen and Soren Kristin Toubro.

 

Henning Holck – Larsen and Soren Kristin Toubro, school – mates in Denmark, would not have dreamt, as they were learning about India in history classes that they would, one day, create history in that land. In 1938, the two friends decided to forgo the comforts of working in Europe and started their own operation in India. All they had was a dream. And the courage to dare. Their first office in Mumbai (Bombay) was so small that only one of the partners could use the office at a time! Today, L & T is one of India’s biggest and best known industrial organizations with reputation for technological excellence, high quality of products and services and strong customer orientation.

 

As on today, L & T is a 62 business conglomerate with turnover of Rs. 18,363 crore (2006-07), with the script commanding Rs. 2400 in the bourses.

 

No, L & T is not sitting pretty. It want to hit Rs. 30,000 crore turnover mark by 2010 and is busy restructuring, sniffing new pastures, grooming new talent and projecting the new company credo – “It’s all about Imagineering.” With the sole idea of creating several MNCs within, with footprints across nations, L & T is shedding the old economy and embracing the emergent opportunities and challenges.

 

Stagnant Revenues and Low Margins

Not everything went the L & T way.

In the late nineties, the macro environment was —– inspiring with stagnant revenues and low margins, and L & T’s core strength, its engineers, were being constantly weaned away by the fast-growing software sector. So, the general comment around the bourses was about the credibility of the company, ‘L & T is a, good company but its stock price, for some reason or the other, is fixed at the Rs. 140-210 band. So the company had to change by keeping its core intact. As s senior executive remarks. “L & T was perceived to be un –sexy and we had to create a new buzz around the campuses.” The metamorphosis must echo through a whimper, not a bang. Even before the company divested its cement business in 2003, which accounted for 25% of its total sales, there were years of incremental and low visibility organizational moves towards a new L & T.

 

At a 52-week high of Rs. 2400, the L & T scrip today looks dapper, a far cry from the nineties when the stock price was in a state of flux. Much of the change started as a ripple way back in 1999 when Naik took over as the CEO. He visited employees at all levels across the organization and asked them what it took to transform the company. The insights were mapped and implemented. “None of our employees thought that we build shareholder value. They thought we build monuments,” the chairman reminisces. The focus on people became stronger and formed the basis of restructuring. It became the first old economy company to provide stock options to its employees.

 

When Naik came to the helm, he set upon himself a 90 – day transformational agenda. Portfolios were reviewed and a vision clearly chalked out. He drew up a simple, brief, “ L & T has to be a multinational company and it has to deliver shareholder value at any cost. At the end of 90 days, between July 22 and July 24, 1999, the company launched Project Blue Chip, which essentially fast – tracked projects. The moot point was to complete all projects by February of the new millennium. Strategy formation teams were formed, portfolios reviewed and structures were optimized. Young leadership was brought to the fore and the business streamlining process kicked in.

 

Hiving off from 1999-2001, L & T went about debottle- necking its cement plants. They were modernized and capitalized were raised from 12 million tones to 16 million tones annually, with minimum costs. The mantra really was to grow the business and then divest it as cement fell in the non-core category.

 

So, in September 2003, L & T sold its cement business to the Aditya Birla Group, which resulted in the company’s Economic Value Add (EVA), an important indicator of the financial health of the company, swinging from a negative Rs.350-crore to a positive Rs.50-crore immediately. The move also enabled L&T to reduce its debt-equity ratio from 1:1 to 0.2:1. Analysts took a positive view of the demerger, and re-rated L&T as AAA from AA+ in 2004. From then on, began L&T’s transformation into a lean and mean machine. In 2004, the company envisaged a growth curve for the next five years. This marked the beginning of Project Lakshya, which was centered around people, operations, capabilities and new ventures. The company set out with over 300 initiatives in hand, and also placed a rigorous risk management system. For instance, any project above Rs. 1,000-crore needed the signature of the chairman. Project Lakshya is known for targeting and selecting the right projects.

 

By now, the Indian economy had started witnessing unprecedented boom and despite divesting the cement business, the L&T turnover scaled the Rs. 10,000 crore mark. Alongside, the lucrative Middle East market was booming and L&T forayed into six countries in the Gulf with joint ventures. “The idea was to develop a mini L&T in the region,” observes a senior company executive. The company also set up manufacturing facilities in China to leverage the cost structure. Exports in 2007 constituted 18% of net sales. With soaring revenues and operating margins, L&T started benchmarking itself with the best in the world. Suddenly, the notion of an Indian MNC became a reality.

 

L&T has big plans to foray into new businesses. The new businesses are:

 

Ship-building: L&T is getting into ship-building by building a world-class facility, and already has a small shipyard in Hazira. Will build complex ocean going ships for the first time in India.

 

Power equipment: It is getting into power equipment in a big way. A JV with Mitsubishi for super critical boilers, formed another with Toshiba for turbines on the way.

 

Financial services: L&T is rapidly increasing its presence in infrastructure finance. It is also planning to come up with a $1 billion infrastructure fund.

 

Railways: A new area, L&T aims to be an end-to-end solutions provider for the railways, from track-laying to signaling to transmission, and others.

 

The global economic meltdown has hit L&T also, but lightly. Its order book at Rs. 71,650cr has not grown as expected. Delay in finalization of several government projects as well as the slowdown in the overseas markets are the key reasons for the lax in order inflow. The company, however, has maintained its forecast of a 25 percent growth in its order book for the fiscal 2010.

 

L&T’s, IT and financial subsidiaries too witnessed lackluster performance with profits remaining stagnant.

 

L&T’s focus areas in future would be the Middle East and China in view of the booming infrastructure market there.

 

Thus, for an institution that has grown to legendary proportions, there cannot and must not be an ‘end’. Unlike other stories, the L&T saga continues.

 


 

 

QUESTIONS

  1. Having a strong presence in India, what drives L&T to think of emerging a strong MNC ?
  2. What challenges lies ahead of L&T ? How does it prepare to cope with them ?
  3. Will the L&T Saga continue ?


CASE VI

THE ABB PBS JOINT VENTURE IN OPERATION

 

ABB Prvni Brnenska Strojirna Brno, Ltd. (ABB-PBS), Czechoslovakia was a joint venture in which ABB has a 67 per cent stake and PBS a.s. has a 33 per cent stake. This PBS share was determined nominally by the value of the land, plant and equipment, employees, and goodwill, ABB contributed cash and specified technologies and assumed some of the debt of PBS. The new company started operations on April 15, 1993.

 

            Business for the joint venture in its first two full years was good in most aspects. Orders received in 1994, the first full year of the joint venture’s operation, were higher than ever in the history of PBS. Orders received in 1995 were 21/2 times those in 1994. The company was profitable in 1995 and ahead of 1994s results with a rate of return on assets of 2.3 per cent and a rate of return on sales of 4.5 per cent.

 

            The 1995 results showed substantial progress towards meeting the joint venture’s strategic goals adopted in 1994 as part of a five-year plan. One of the goals was that exports should account for half of the total orders by 1999. (Exports had accounted for more than a quarter of the PBS business before 1989, but most of this business disappeared when the Soviet Union collapsed), In 1995 exports increased as a share of total orders to 28 per cent up from 16 per cent the year before.

 

            The external service business, organized and functioning as a separate business for the first time in 1995, did not meet expectations. It accounted for five per cent of all orders and revenues in 1995, below the 10 per cent goal set for it. The retrofitting business, which was expected to be a major part of the service business, was disappointing for ABB-PBS, partly because many other small companies began to provide this service in 1994, including some started by former PBS employees who took their knowledge of PBS-built power plants with them. However, ABB-PBS managers hoped that as the company introduced new technologies, these former employees would gradually lose their ability to perform these services, and the retrofit and repair service business would return to ABB-PBS.

 

            ABB-PBS dominated the Czech boiler business with 70 per cent of the Czech market in 1995, but managers expected this share to go down in the future as new domestic and foreign competitors emerged. Furthermore, the west European boiler market was actually declining because environmental laws caused a surge of retrofitting to occur in the mid-1980s, leaving less business in the 1990s. Accordingly ABB-PBS boiler orders were flat in 1995.

 

            Top managers at ABB-PBS regarded business results to date as respectable, but they were not satisfied with the company’s performance. Cash flow was not as good as expected. Cost reduction had to go further. “The more we succeed, the more we see our shortcomings”, said one official.

 

Restructuring

            The first round of restructuring was largely completed in 1995, the last year of the three-year restructuring plan. Plant logistics, information systems, and other physical capital improvements were in place. The restructing included :

  • Renovating and reconstructing workshops and engineering facilities
  • Achieving ISO 9001 for all four ABB-PBS divisions (awarded in 1995)
  • Transfer of technology from ABB (this was an ongoing project)
  • Installation of an information system
  • Management training, especially in total quality assurance and English language
  • Implementing a project management approach.

 

            A notable achievement of importance of top management in 1995 was a 50 per cent increase in labour productivity, measured as value added per payroll crown. However, in the future ABB-PBS expected its wage rates to go up faster than west European wage rates (Czech wages were increasing about 15 per cent per year) so it would be difficult to maintain the ABB-PBS unit cost advantage over west European unit cost.

 

The  Technology Role for ABB-PBS

The joint venture was expected from the beginning to play an important role in technology development for part of ABB’s power generation business worldwide. PBS a.s. had engineering capability in coal-fired steam boilers, and that capability was expected to be especially useful to ABB as more countries became concerned about air quality. (When asked if PBS really did have leading technology here, a boiler engineering manager remarked, “Of course we do. We burn so much dirty coal in this country, we have to have better technology”).

 

However, the envisioned technology leadership role for ABB-PBS had not been realised by mid-1996. Richard Kuba, the ABB-PBS managing director, realised the slowness with which the technology role was being fulfilled, and he offered his interpretation of events :

 

“ABB did not promise to make the joint venture its steam technology leader. The main point we wanted to achieve in the joint venture agreement was for ABB-PBS to be recognised as a full-fledged company, not just a factory. We were slowed down on our technology plans because we had a problem keeping our good, young engineers. The annual employee turnover rate for companies in the Czech Republic is 15 or 20 per cent, and the unemployment rate is zero. Our engineers have many other good entrepreneurial opportunities. Now we’ve begun to stabilise our engineering workforce. The restructuring helped. We have better equipment and a clean and safer work environment. We also had another problem which is a good problem to have. The domestic power plant business turned out to be better than we expected, so just meeting the needs of our regular customers forced some postponement of new technology initiatives.”

 

ABB-PBS had benefited technologically from its relationship with ABB. One example was the development of a new steam turbine line. This project was a cooperative effort among ABB-PBS and two other ABB companies, one in Sweden and one in Germany. Nevertheless, technology transfer was not the most important early benefit of ABB relationship. Rather, one of the most important gains was the opportunity to benchmark the joint venture’s performance against other established western ABB companies on variables such as productivity, inventory, and receivables.

 

Questions

  1. Where does the joint venture meet the needs of both the partners? Where does it fall short?
  2. Why had ABB-PBS failed to realized its technology leadership?
  3. What lessons one can draw from this incident for better management of technology transfers?

 


CASE VII

 

PERU

Peru is located on the west coast South America. It is the third largest nation of the continent (after Brazil and Argentina), and covers almost 500,000 square miles (about 14 per cent of the size of the United States). The land has enormous contrasts, with a desert (drier than the Sahara), the towering snow-capped Andes mountains, sparking grass-covered plateaus, and thick rain forests. Peru has approximately 27 million people, of which about 20 per cent live in Lima, the capital. More Indians (one half of the population) live in Peru than in any other country in the western hemisphere. The ancestors of Peru’s Indians were the famous Incas, who built a great empire. The rest of the population is mixed and a small percentage is white. The economy depends heavily on agriculture, fishing, mining, and services. GDP is approximately $115 billion and per capita income in recent years has been around $4, 300. In recent years the economy has gained some relative and multinationals are now beginning to consider investing in the country.

 

            One of these potential investors is a large New York based that is considering a $25 million loan to the owner of a Peruvian fishing fleet. The owner wants to refurbish the fleet and add one more ship.

 

            During the 1970s, the Peruvian government nationalized a number of industries and factories and began running them for the profit of the state. In most cases, these state-run ventures became disasters. In the late 1970s, the fishing fleet owner was given back his ships and allowed to operate his business as before. Since then, he has managed to remain profitable, but the biggest problem is that his ships are getting old and he needs and influx of capital to make repairs and add new technology. As he explained it to the New York banker: “Fishing is no longer just an art. There is a great deal of technology involved. And to keep costs low and be competitive on the world market, you have to have the latest equipment for both locating as well as catching and then loading and unloading the fish.”

 

            Having reviewed the fleet owner’s operation, the large multinational bank believers that the loan is justified. The financial institution is concerned, however, that the Peruvian government might step in during the next couple of years and again take over the business. If this were to happen it might take and additional decade for the loan to be repaid. If the government were to allow the fleet owner to operate the fleet the way he has over the last decade, the loan could be repaid within seven years.

 

            Right now, the bank is deciding on the specific terms of the agreement. Once these have been worked out, either a loan officer will fly down to Lima and close the deal or the owner will be asked to come to New York for the signing. Whichever approach is used, the bank realizes that final adjustments in the agreement will have to be made on the spot. Therefore, if the bank sends a representative to Lima, the individual will have to have the authority to commit the bank to specific terms. These final matters should be worked out within the next ten days.

 

Questions

  1. What are some current issues facing Peru? What is the climate for doing business in Peru today?
  2. What type of political risks does this fishing company need to evaluate? Identify and describe them.
  3. What types of integrative and protective and defensive techniques can the bank use?
  4. Would the bank be better off negotiating the loan in New York or in Lima? Why?

 


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Note :- Solve any 4 Case Study

             All Case Carry equal Marks.

CASE I

 

Sunder Singh

Sunder Singh had studied only up to high school. He was 32-years of age, lived alone in a rented room, and worked eight-hour shift at one petrol pump, then went to the other one for another eight-hour shift. He had a girl friend and was planning to marry.

 

One day when he returned from work, he got a note from his girl friend that she was getting married to someone else and he need not bother her. This was a terrible shock to Sunder Singh and he fell apart. He stopped going to work, spent sleepless nights, and was very depressed. After a month, he was running Iowan his savings and approached his earlier employers to get back his job, but they would not give him a second chance. He had to quit his rented room, and sold few things that he had. He would do some odd jobs at the railway station or the bus terminal.

 

One day, nearly two years ago, he was very hungry and did not have any money and saw a young man selling newspapers. He asked him what he was selling and he told him about Guzara (an independent, non-profit, independent newspaper sold by the homeless, and economically disadvantaged men and women of this metro city). Sunder Singh approached the office and started selling the newspaper. He did not make a lot of money, but was good at saving it. He started saving money for a warm jacket for next winter.

 

He was reasonably happy; he had money to buy food, and no longer homeless and shared a room with two others. One day, with his savings he bought a pair of second-hand Nike shoes from flea market.

 

Sunder Singh is not unique among low-income consumers, especially in large cities, in wanting and buying Nike shoes. Some experts believe that low-income consumers too want the same products and service that other consumers want.

 

The working poor are forced to spend a disproportionate percent of their income on food, housing, utilities, and healthcare. They solely rely on public transportation, spend very little on entertainment of any kind, and have no security of any kind. Their fight is mainly day-to-day survival.

 

 

 

QUESTIONS

  1. What does the purchase of a product like Nike mean to Sunder Singh?
  2. What does the story say about our society and the impact of marketing on consumer behavior?


 

CASE II

Key to Buyers’ Minds

 

Consumer buying research has turned a new leaf in India. The era of demographics seems to be on the backbench. Now, Marketing Research people are less likely to first ask you about your age, income, and education etc. Instead, there is a distinct shift towards inquiries about attitudes, interests, lifestyles, and behaviour – in short towards a study of consumers’ minds called psychographics.

 

Pathfinders, the marketing research wing of Lintas, occasionally came out with its highly respected “Study on Nation’s Attitudes and Psychographics (P:SNAP). The first in this series was released in 1987 with an objective to develop a database of lifestyles and psychographics information on the modem Indian women. The second was in 1993, and the third in 1998. Pathfinders choose woman for the study because of the belief that more often than not, in urban areas, it is the woman who makes buying decision.

 

The Pathfinders’ study involves interviewing over 10,000 women over the entire country and segmenting them in clusters according to their beliefs, attitudes, lifestyles, and lastly their demographics profile. The idea is to identify groups of consumers with similar lifestyles who are likely to behave towards products or services.

 

For advertisers and advertising agencies, this profile helps enormously. For example, an advertiser may want to give a westernised touch to a commercial. The profile of the target customer, as revealed by this study, tells the advertising people the perimeter within which she/he must stay, otherwise the ad may become an exaggerated version of westernised India.

 

For the purpose of this study, Pathfinders divided the Indian women in 8 distinct cluster of varying values and lifestyles. Figures from two studies are available publicly and are given below:

 

Cluster 1987 (%) 1993 (%)
Troubled homebody 15.9 18.3
Tight-fisted traditionalist 14.8 10.0
Contended conservative 7.0 9.3
Archetypal provider 13.0 8.8
Anxious rebel 14.1 15.8
Contemporary housewife 19.2 22.1
Gregarious hedonist 8.7 6.6
Affluent sophisticate 7.3 9.1

 

The studies seek to track the macro level changes and movements within these 8 clusters in a period of time.

 

We note from the table that in 1987, 8.7% of the women could be classified as “gregarious hedonist” – those who consider their own pleasure to be supreme in life. ‘In 1993, this figure fell to 6.6%. The “troubled homebody” segment – those with large families and low-income, increased from 15.9% in 1987 to 18.3% in 1993.

 

Information, such as this, is obviously useful to assess the collective mood. That’s why Pathfinders have an impressive list of clients fort heir P:SNAP, which includes Hindustan Lever, Cadbury, Johnson and Johnson, and Gillette.

 

SOME PSYCHOGRAPHICS PROFILES OF INDIAN WOMEN

 

Rama Devi, the Contended Conservative

The lady lives a ‘good’ life – she is a devoted wife, a dotting mother of two school-going sons, and a God fearing housewife. She has been living her life by the traditional values she cherishes – getting up at the crack of dawn, getting the house cleaned up, having the breakfast of ‘Aloo Parathas’ ready in time before the children’s school-bus honks its horn, laying down the dress her ‘government servant’ husband will put on after his bath, and doing her daily one-hour Puja. She fasts every Monday for the welfare of her family, looks at the ‘freely mixing’ and ‘sexually liberal’ youngsters with deep disdain and cannot understand the modem young woman’ s 19reed’ for money, jewellery, and jobs.

 

Her one abiding interest outside the household is the Ganesh Mandir that she has visited every Wednesday, ever since she got married. She lacks higher education and hence has little appreciation for the arts, the literature, and the sciences. Her ample spare time is spent watching the TV, which is her prime source of entertainment and information.

 

Shobha, the Troubled Homebody

Shobha married young to the first person she fell in love with, Prakash. Four children came quickly before she was quite ready to raise a family. Now, she is unhappy. She

 

is having trouble in making ends meet on her husband’s salary who is employed as clerk in a private business and is often required to work up to late hours. She is frustrated, as her desire for an idyllic life has turned sour. She could not get education beyond high school and hence there are hardly any job opportunities for her. Her husband also keeps on complaining of the long hours of backbreaking work he has to put in. He consumes country-made liquor routinely.

 

Shobha finds escape in Black and White TV soap operas and films that transport her into the world of her dreams. She watches TV almost all through the day and her children roam around in the locality streets and cannot expect any help from their’ ever-grumbling’ mother. Purchases are mostly limited to ‘essentials’ and any discretionary purchases are postponed till it becomes possible.

 

Neeru, the Archetypal Provider

Neeru epitomises simplicity. Her life is untangled. It runs on a set timetable with almost clockwork precision. She works as a primary school teacher in a rural government school about 50 kilometers from her district town residence. She is married to a social worker in an NGO whose income is erratic. Her three children, two teenaged sons and l0-year old daughter are getting school education.

 

The day begins with the lady getting up before anybody else and finishing the household chores as fast as she can. There is no room for delay as the State government ‘Express’ bus, on which she ravels to her school will be at the bus stop across the road precisely at 8.00 A.M. If she misses that, the next ordinary bus comes at 11.15 A.M, quite useless as it will reach her school only at 1.00 P.M. The school closes at 2.00 P.M. There are private Jeeps running sporadically, but the fare is high and Neeru does not believe in wasting hard earned money. Besides, she travels on husband’s ‘free pass’. Neeru prides herself on her monthly savings ofRs.1000 for the last many years. The money will go toward the wedding of her daughter.

 

Vandana, the tight-fisted traditionalist

For Vandana, saving money is ‘in-born’ discipline. When she was young and unmarried, she remembers her mother was extremely tight-fisted and ran the household in under Rs.800 per month. It was the necessity of those times as her father retired at a princely salary of Rs.1800 per month. All through her childhood, she saw deprivation and hardship. She would not join the annual class picnic in her school days as it meant’ avoidable expenditure’.

 

Now she is married and mother of two school going children. The husband works in a bank as a clerk. He has taken all the loans that he could from the bank and invested the money in real estate. As a result of monthly deductions toward repayment of loans, his take home salary is now very little. But Vandana can manage. The school dresses are sewn by her at home, the stationary required comes from a wholesale market, and the books are second-hand from ‘friends’, cultivated for the purpose. On birthdays, Vandana prepares a sweet dish at home and they spend on a film. There is a cow and calf at home, being kept as a source of revenue and milk. She sells half the milk to a neighbour and the family consumes the rest. Life in general is hard and frugal. There is a colour TV at home, but they disconnected the cable connection ever since the rates went up. Now they watch Doordarshan only.

 

Aditi, the Anxious Rebel

Daughter of a Freedom Fighter, Aditi has always fought her values and principles.

People still remember when she walked out of the exam half in a huff as a mark of protest against mass cheating’ sanctioned’ by the centre superintendent in a tough paper. While every body else passed with high marks, Aditi failed.

 

Even though she repeated the paper, Aditi never learned to swim along the flow. She always swam against the current. She joined the Communist Party in her college and gave rousing speeches against the teachers and authorities. This resulted in her getting very poor marks and left her jobless.

 

Later, Aditi joined an NGO and now works on social issues. She says she is a creature of the mind, not materialism. Her favourite dress is a long flowing Kurta, and slacks. She wears loosened hair and chappals. She reads voraciously. Financially, she is independent and lives with her parents. Her disdain for the institution of marriage and contempt for the modern Indian male keep her single and unattached. She will continue-to be so as she prefers this status, but may adopt a baby later in life.

 

Reema, the Gregarious Hedonist

Just 19, and Reema is already divorced. Her father is a wealthy businessman. During Reema’s childhood, her father was mostly away in Dubai and Africa, trying to amass a fortune. That he did but he lost on his chance to be a good father. Both his children started feeling like’ orphans’ after their mother got involved with another man.

 

Reema was ever longing for her family when alone came Harsh, her private high school tuition teacher. Harsh was all of 22 and very caring. He was tall, handsome, and very popular in school and many girls had a crush on him. Reema was sixteen then and a great fan of Harsh. For her, Harsh was a prize catch as he combined the loving qualities of a father with a mix of being a good teacher. She was soon dazzled and surrendered in a physical relationship.

 

Marriage followed. She never understood how Harsh changed overnight from a caring father figure to a demanding husband. And she could never cope with the six hours she had to spend in the kitchen everyday. Why should she do the cooking, she asked Harsh, as it was something that the ‘Ayas’ did? The reality of a humdrum middle-class existence hit her hard and she soon walked out of ‘the hell’.

 

Her father understood her need to recover and made her allowance rather generous. He bought her a Red Sports Car and got her an admission in a private college.

 

College is entertainment for her. She attends college only on days when there is some function like a cultural evening or the sports meet. Now, Reema spends on alcohol, dresses, parties, and holidays. She consumes a mood elevating drug every evening and keeps sending SMS messages on her mobile to her friends all through the night. For her, life means ‘buying pleasure endlessly’.

 

Shruti, the Contemporary Housewife

Shruti is an urbane woman. She is well educated and genteel. She is an officer in a national bank, and active in her club affairs and community activities. Socialising is an important part of her life. She is a doer, interested in watching cricket, politics, and current affairs. Her life is hectic as she has a lot to do for home and office everyday. Still she often enjoys viewing movies on TV every week.

 

Shruti shops for Sarees, jewellery, and cosmetics for herself on a regular basis. However, family needs come before her own needs. Her home is a double income household and she has one kid. All the modern gadgets are present and the standard of living is upper middle-class.

 

 

 

 

 

Momeeta, the Affluent Sophisticate

Momeeta was born Mamta, but elevated herself to Momeeta after marriage to a business tycoon. Momeeta is an elegant woman with style. She lives in Mumbai because that is where she wants to be. She likes the economic and social aspects of big city living and takes advantage of her’ contacts’. She has built up friendship and cultivated the city bigwigs by inviting them to the numerous parties she throws in her luxurious penthouse.

 

Momeeta is a self-confident, on-the-go woman, and not a homebody. She is fashion conscious and clothes herself in the latest designer dresses. Even at 40, she can carry off a mini with aplomb. She is financial very secure and hence does not shop with care. She shops for quality, exclusivity, and the brand name, not the price. She frequently travels abroad, buys expensive gifts for friends, and has an international understanding on what is “chic” at the moment.

 


Three psychographics profiles of Indian women and their food shopping habits:

 

Type I Type II Type III
Money conscious Careful shopper Gourmet/satisfaction
Food shopping is done  on necessity and is postponed as long as possible.

 

Makes out shopping lists and makes weekly/ monthly purchases. General liking for food shopping and food related activities.
Minimum amount of money spent. This is enabled through comparative evaluation of many shops, even if it takes more time. Can purchase larger quantities if there is an incentive like lower prices or a gift scheme. Food budget is flexible. Collects and files food recipes. Experiments with new food products and methods of cooking. Likes to exhibit her culinary skills to her friends and family.

 

Operates within the food budget. Does not buy larger quantities to save money.

 

Checks labelling for price, nutrition and expiry date information Spends a lot of time in kitchen as preparing food is an enjoyable activity.
Price and immediate outflow of cash is the dominant purchase concern. Goes for tried and trusted brands even if they cost a little more. This is an important purchase concern. Food items are bought either based on the past satisfaction from them or for their novelty value. Unknown food items are purchased if they excite the senses. This is the dominant purchase concern.
Who fits in where?

Shobha, Neeru, and Vandana,

 

Shruti, Aditi, and

Rama Devi

 

Momeeta (she is a food lover).

 

(Prof Deepak Khanna, colleague, has developed these profiles based on his perceptions of certain personality types).

 

 

 

 

 

 

 

 

QUESTIONS

  1. Explain how the above-mentioned information is likely to benefit a marketer?
  2. Which of the above mentioned types are likely to respond to sales promotion? Explain.
  3. A manufacturer of personal care products in the premium segment starts frequent sales promotions. What is likely to be the impact on the above-mentioned types?

 


 

 

Case III

Star Airways

 

Star Airways offered passengers air services within the country and served a territory of 18, 000 sq. miles with an expanding population of over 70 lakh of people who are potential users of the airline services. The geographic diversity and scattered business and commercial cities have led to steady increase in the number of people who use air travel. The clientele includes business people, as well as individuals on non-business trips, holidays, and leisure trips etc. As a result, the passenger traffic had been increasing steadily since the firm started operations in 1983. In the last three years, however, the growth has not been consistent with the growth pattern showed by the company in the last fifteen years – as against a healthy growth of 13 per cent, the sales have marginally improved, registering a growth of 6 per cent.

 

The company’s early success was due to the pioneering concepts used by it in the airline industry, which was dominated by large private and government operators with little market orientation. The launch of the company’s services coincided with a boom in the aviation sector and reduced government dominance, which opened up the skies for private operators. Besides this, the company offered a host of innovations in the customer service functions such as smaller and newer planes, convenient schedules, free gifts, comfortable seats, exclusive terminals, express baggage-check, and airport-to hotel transit for its first and business class clients. In turn the fares charged by the company were premium in the category and almost 15 per cent higher than the industry average. The company president in the following words justified this move: ”We are selling entirely on the basis of providing quality experience to our clients. Our services, ambience, and commitment to safety and time-bound schedule, all surpass the standards of the industry.”

 

During the first ten years of operations the company faced no direct competition. The only problems faced by the marketing staff were (a) the price, (2) the need to convince clients that air service was more efficient than other alternatives, (c) identifying the customers, and more importantly (d) developing the image of a dependable service. The consumers, who till now were forced to put up indifferent service offered by large government operators, did not offer much resistance and were agreeable to try out new company. Once customers were convinced, retaining them was very easy. Hence the company enjoyed immense

 

loyalty from its clients with almost 40 per cent of them being regular users. Sales were handled by the sales division as well as by some independent sales representatives.

 

In early 1990s the company faced direct competition for the first time with a new company coming up with smaller planes and all other advantages which were previously associated with Star Airways. The growing business had made the market very lucrative and hence in the next three years, four major competitors were also vying for the market share. The company slowly lost to these competitors and could manage to retain only 30 per cent of market share by the end of 1994. All the competitors were engaged in aggressive promotion and soon started a ‘price war’ in order to outdo one another. For the next six months, each of them offered big discounts and gifts (such as TV / audio systems) with the return ticket on different routes. The most profitable and commercia1ly viable routes were the major targets of these price related competitions. The consumer was the ultimate beneficiary and in short time, the companies started facing losses due to this price-cutting.

 

   Star Airways had so far remained out of this ‘price-war’ and lost its market share on the competitive routes very rapidly.  It was able to retain the clients on other routes, which were not a part of this intense competition.  Unhappy an anxious about this state of affairs, the company vice president, marketing, developed a marketing plan with several components.  The initial part of the plan consisted of a market research done on a cross-section of existing clients as well as the clients of competitors and the following observations were made :

 

  • Star Airways was considered a quality-oriented company but many felt that it was getting stodgy.
  • The satisfaction with crew and schedules had declined over the last 5 years amongst regular customers.
  • The clients felt that the airline was losing its edge over customer service because it was non­flexible.
  • The prices offered by competitors are less and they provide only a fraction of services offered by Star Airways. This was the main reason of clients switching over to competitors. As many as 70 per cent respondents considered the costs as the most important factor in deciding on the airline.
  • Some deciding factors and their relative importance to clients were found to be following this pattern.
Feature offered by airline Importance of feature as the deciding factor Rank of feature in decision making influence
Price 67% 1
Ambience and food 9% 3
Punctuality 14% 2
Services & convenience 7% 4
Free gifts etc. 3% 5

 

The second phase of the plan included a massive advertising and promotion plan. The VP marketing, Anil Saxena, felt that the company needed to advertise it’s dedication to quality and rebuild an image of being a customer-oriented airline. He began discussions with the advertising agency to launch a campaign in the near future.

 

After a month, the agency came out with the following recommendations:

 

  • The campaign is to be completed in four months time and the budget will be 351akh.
  • The company would reach 85% of target audience, once in a month by direct mail.
  • Four times a month a TV commercial will be aired on a business show time. The audience TRP is consistent and highest in this category of shows.
  • Star Airways would build the campaign theme around ‘quality and customer service initiatives’ .
  • The direct mail letter would be sent to a database of 85,000 clients in four months. The letter will contain information on the airline and again stress on the same theme of’ quality and customer service’.

 


 

QUESTIONS

 

  1. What is likely to be the decision process in case of choosing an airline?
  2. Would this plan suggested by the vice president help in convincing the customers to use Star Airways? Give your reasons.

 


Case IV

 

Mouse-Rid

 

One hot May morning, Shobha, general manager of Innotrap India Ltd., entered her office in Delhi. She paused for a moment to contemplate the quote, which she had framed and hung on a wall facing her table.

 

“If a man can make a better mousetrap than his neighbour, the world will make a beaten path to his door.” She vaguely recalled that probably it was Ralph Waldo Emerson who said this. Perhaps, she wondered, Emerson knew something that she didn’t. She had the better mousetrap – Mouse­-Rid – but the world didn’t seem all that excited about it.

 

Shobha had just returned from a Trade Fair in Kolkata. Standing in the trade show display booth for long hours and answering the same questions hundreds of times had been tiring. Yet, this show had excited her. The Trade Fair officials held a contest to select the best new product introduced at the show. Of the more than 150 new products, her mousetrap had won first place. Two women’s magazines had written small articles about this innovative mousetrap, however, the expected demand for the trap had not materialised. Shobha hoped that this award might stimulate increased interest and sales.

 

A group of investors who had obtained rights to market this innovative mousetrap in India had formed Innotrap India in January 2001. In return for marketing rights, the group agreed to pay the inventor and patent holder, a retired engineer, a royalty fee for each trap sold. The group then appointed Shobha as the general manager to develop and manage Innotrap India Ltd.

 

The Mouse-Rid, a simple yet clever device, is manufactured by a plastics firm under contract with Innotrap India Ltd. It consists of a square, plastic tube measuring about 6 inches long and one and one-half inches- square. The tube bends in the middle at a 30-degree angle, so that when the front part of the tube rests on a flat surface, the other end is elevated. The elevated end holds a removable cap into which the user places bait (piece of bread, or some other titbit). A hinged door is attached to the front endofthe tube. When the trap is “open”, this door rests on two narrow “stills” attached to the two bottom corners of the door.

 

 

The trap works with simple efficiency. A mouse, smelling the bait enters the tube through the open end. As it moves up the angled bottom toward the bait, its weight makes the elevated end of the trap drop downward. This elevates the open end, allowing the hinged door to swing closed, trapping the mouse. Small teeth on the ends of stills catch in a groove on the bottom of the trap, locking the door closed. The mouse can be disposed of live, or it can be left alone for a few hours to suffocate in the trap.

 

Shobha felt the trap had many advantages for the consumer when compared with traditional spring-loaded traps or poisons. Consumers can use it safely and easily with no risk for catching their fingers while loading. It poses no injury or poisoning threat to children or pets.

 

Shobha’s personal and informal inquiries with acquaintances and friends suggested that women are the best target market for the Mouse-Rid. Most women stay at home and take care of household chores and their children. Thus, they want a means of dealing with the mouse problem that avoids any kind of risks. To reach this market,

Shobha decided to distribute Mouse-Rid through grocery stores, and kitchenware stores. She personally contacted a supermarket and some departmental stores to persuade them to carry the product, but they refused saying that they did not sell such contraptions. She avoided any wholesalers and other middlemen.

 

The traps were packaged in a simple cardboard, with a suggested retail price ofRs.150 for a piece. Although this price made Mouse-Rid about five 1;0 six times more expensive than standard traps, those who bought it showed little price resistance.

 

To promote the product, Shobha had budgeted approximately Rs. 300,000 toward advertising in different women’s magazines, such as Grah Shobha, and Good Housekeeping. Shobha was the company’s only salesperson, but planed to employ sales people soon.

 

Shobha had forecasted Mouse-Rid’s first year sales at 2 million units. Through Aril, however, the company had sold only few thousand units. She wondered if most new products got to such slow start, or if she was doing something wrong.

 

Shobha knew that the investor group believed that Innotrap India Ltd. had a “once-in-a­ lifetime chance” with its innovative mousetrap. She sensed the group’s impatience. To keep the investors happy, the company needed to sell enough traps to cover costs and make a profit.

 

 

 

 

QUESTIONS

  1. Has Shobha identified the best target market for Mouse-Rid? Why or why not?
  2. Does Shobha have enough needed data on consumer behaviour? What type of consumer research should Shobha conduct?
  3. What type of advertising can influence consumers for this type of product?

 


Case V

 

Golden Glow Soap

 

Anil Mahajan absent -mindedly ran his finger over the cake of soap before him. He traced the name ‘Golden Glow’ embossed on the soap as he inhaled its unmistakable sesame fragrance. It was a small soap, almost like a bar of gold. There were no frills, no coloured packaging, and no fancy shape. Just a golden glow and the fragrance of sesame and Lucida font that quietly stated’ Golden Glow’.

 

Mahajan smiled wanly and clasped the soap in his hands, as if protecting it from an unseen predator. He was wondering with quiet concern if the 30-year-old brand would last long. Sensi India, where Mahajan was marketing manager, was taking a long, hard look at the soap, as it was proving to be a strain on resources.

 

There were varying stories about how Golden Glow was launched. Some said the brand was a ‘gift’ from the departing English parent company. Others claimed that it was created for the then chairman’s British wife, as the Indian climate did not agree with her skin. They also claimed that the lady also coined the copy “The honest soap that loves your skin” was also coined by the lady. The line had stuck through three decades. Only the visuals had changed, with newer models replacing the older ones.

 

Zeni was basically a speciality products company producing household hygiene, fabricare, and dental care products. Golden Glow was the only soap in its product mix, produced and marketed by Sensi. Its reliable quality and value delivery had earned it a lot of respect in the market. Golden Glow equity was such that Sensi was known as the Golden Glow Company. Indeed, the brand name Golden Glow denoted purity, reliability, and gentle skincare.

 

In 1994, Sensi UK increased its stake in the Indian subsidiary to 51%. Within months, all of Sensi’s products were given a facelift, thanks to the inflow of foreign capital. New packaging, new fragrances, new formulations and more variants were introduced.

 

 

 

 

 

Only Golden Glow was left untouched. For, although it had a growing skincare business following some strategic acquisitions in Europe in the early eighties, Sensi UK was not a soap company. The UK marketing team ran an audit of every brand and product in the company’s portfolio. But when it came to Golden Glow, it faltered. “We don’t know this one,” officials at the parent company said.

 

“We don’t want this one to be touched,” Mahajan had said protectively, a sentiment tliat was endorsed by the managing director, Rajan Sharma. “Golden Glow is too sacred, we will leave it as it is,” he said.

 

But the UK marketing team was confounded. What was a lone soap doing in the midst of toilet cleaners and fabric protectors; they wondered, however they somehow agreed that their proposed revamp strategy would only look at up-gradation, not tinkering with what wasn’t broken.

 

Indeed, for 30 long years no one had tampered with the Golden Glow brand. And Mahajan felt there was no reason to start now. Golden Glow, in his view, was a self-sustaining brand. That was a bit of an understatement because advertising for the brand was moderate and Sensi India had never used any promotional gimmick for it.

 

Now, after four years of nurturing the other categories, Sensi UK had decided to launch its Vio range of skincare products in India. But Golden Glow’s presence and profile was a major roadblock to Vio’s success. “It will create dissonance, confuse our skincare equity and deter the articulation of Vio’s credo. It will stand out as a genetic flaw,” argued the UK marketing head. “You need to do a rethink on Golden Glow.”

 

Mahajan protested. “Why? It has such a strong equity and loyal following. So much has been invested in it all these years. Why give up all that?”

 

Rajan, however, had another idea. “Let us then extend the Golden Glow brand.” He said It was the simplest solution. Companies were now investing heavily in creating new equities for their brands. But in Golden Glow’s case, Sensi was already sitting on a brand with a terrific equity. He felt that extending this equity to other categories, such as skincare products would be successful.

 

 

 

But Golden Glow needed a new positioning before it could be extended. Till a few years ago, it had been in premium category, priced at Rs.15. Then new brands with specific positioning and higher price tags entered the market. This created a level above Rs.15 soaps and pushed Golden Glow down to the mid-priced range. So Golden Glow’s price was not commensurate with its premium position and image.

 

Over the years, Golden Glow had become so sacred that Sensi India had been too scared to do anything to it. As a result, the soap was left with niche category of loyal users. This category neither shrank or increased, just kept getting older and older, and with it the brand also kept growing older. For example, when Mahajan’s wife had her first baby at 25, her mother had recommended Golden Glow for her dry skin and also for baby’s tender skin because it contained sesame oil. That was in 1979. Today, Mahajan’s daughter had turned 21 and was being wooed by Dove, Camay, even Santoor, and Lifebuoy Gold, with their aggressive advertising. Golden Glow had begun to lose its image of being contemporary as newer brands came in with newer values.

 

Today, at 46, Mahajan’s wife still used Golden Glow, but when she recommended Golden Glow to her daughter, she said, “But Golden Glow is a soap for mothers, for older people.”

 

That was a major problem. The Golden Glow brand had aged, and Sensi India hadn’t even been aware of it. While its equity had grown with its users, its personality had aged considerably in the last 30 years. “I don’t think you can keep the personality young, unless you keep renewing the brand. The objective now is to widen your equity so that your image becomes young,” continued Rajan. “For instance, if today you were to personify a Golden Glow user now, it would be a woman of 45 years using the same brand for many years, who is aver-se to experimenting, very skincare conscious, very trusting, and very one-dimensional. As you can see, this is not a very competitive personality. These are the strengths of our Golden Glow, but these are also its weaknesses,” he analysed.

 

 

 

 

 

 

 

The context had changed. Today, youth demanded brands that stood for freedom and fearlessness. They demanded bold brands that dared to cure, not just p;eserve. “Preservation is for old people. Those are the attributes being presented in evolved markets,” said Rajan. To make Golden Glow contemporary, the attributes had to be re-framed, he felt. “You can’t make a young brand trusting caring, loving, without adding other attributes to it. Today, youth stands for freedom, for laughter, for frankness, for forthrightness. That’s what Close Up, Lifebuoy Gold, Vatika, and other brands propagate. So, either come clean and say it is for older skin which needs trust and kindness, or reposition the brand,” said Rajan.

 

Repositioning was also necessary to address another anomaly in Golden Glow’s image: its perceived premium. Sensi India had been unable to do anything about Golden Glow slipping into the mid-price range following the entry of more expensive brands. Now, as Rajan mulled over the brand extension plan, Mahajan felt that Golden Glow’s premium positioning was its core equity and that had to be maintained.

 

“If you are premium priced in the consumer’s mind, your extensions are automatically perceived as premium. So, if you don’t present the other products as premium, the consumer will not see them as extensions of the brand,” he said. “For example, if you are to launch a shampoo which is priced lower than Sunsilk, but higher than Nyle and Ayur, then whatever the rationale, the consumer will not accept your product. “It is not the Golden Glow I know,” will be the feeling,” he said.

 

Mahajan felt that since premium positioning was one of Golden Glow’s equity values, it would be very difficult to convince consumers that the brand was being extended without hanging on to this particular value. “Will they buy your rationale that the very same values and equity would now be available at a low price? To be in the premium segment now, you have to price it at Rs 35 or 40, almost on a par with Dove,” he said. “With Dove retailing at Rs 45, Golden Glow will be perceived as a cheaper option.”

 

“We can’t simply raise the price,” said Rajan. “What are we offering for that increase? You can ‘t add value because you don’t want to tamper with the brand. The consumers will then ask, “Golden Glow used to be so cheap, what has happened now? The user will forget that 15 years ago, Rsl0 was expensive, because all her comparisons would be in today’ s context,” said Rajan.

 

“So what’s the option?” asked Mahajan. “You don’t have to be expensive to be premium,” said Rajan. Golden Glow already has the image of a premium brand, thanks to its time-tested core values of purity, credibility, and reliability. What we can do is reinforce the premium through communication and positioning. In fact) we should have tinkered with Golden Glow long ago. That is what HLL did with Lux. It also launched a bridge brand, Lux International, in the premium category,” said Rajan.

 

“How could we have done anything to the brand?” asked Mahajan. “The product had such a strong following. It stood for gold, for sesame oil, for its subtle earthy perfume. We changed the packaging periodically, but that’s all we could do. Remember the time we brought out a transparent green Golden Glow with the fragrance of lime? It bombed in the market.”

 

Rajan was not in favour of the premium positioning. It appeared very short sighted to him, given the bigger plan to extend the brand. “Where are the volumes in the premium segment? He asked. “For some reason, every manufacturer feels that skincare can be an indulgence of only the moneyed class. As a result, there is a crowd in the premium end of the market. Do we want to be yet another player in the segment?”

 

Fifteen years ago, Golden Glow was perceived as a premium product. But today, globa1brands like Revlon, Coty, and Oriflame were delivering specific premium platforms. Golden Glow did not have a global equity. ‘Let us revisit the brand and examine what it stood for 15 years ago and examine the relevance of those attributes in today’s context,” suggested Rajan. “Golden Glow stood for care, consciousness, love, quality and all that. But today, are these enough to justify a premium position?” he asked Mahajan. “These attributes are viable in the mid-priced segment.” He said.

 

“The mid-priced brand is the proverbial washer-man’s dog,” said Mahajan. “You don’t know whether you are at the bottom end of the premium range or at the top-end of the low-priced range. You end up creating an image of being on the opportunity fence. It is a mere pricing ploy, with no strategic value.”

 

 

 

 

 

QUESTIONS

  1. Discuss the nature of problem(s) in this case?
  2. Suggest the kind of consumer research needed?
  3. How should Golden Glow be positioned/ repositioned to bring about the desired change among consumers? Give your reasons.


 

CASE VI

 

 

Impact of Retail Promotions on Consumers

 

Shoppers’ Delight, a large retail store, had above-average quality and competitive prices. It advertised its retail promotions in local newspapers. Its TV advertising was mainly aimed at building store image and did not address retail promotions. The management knew it well that they had to advertise their retail promotions more, but they did not feel comfortable with the effectiveness of present efforts and wanted to better understand the impact of their present promotions.

 

To better understand the effectiveness of present efforts, a study of advertising exposure, interpretation, and purchases was undertaken. Researchers conducted 50 in-depth interviews with customers of the store’s target market to determine the appropriate product mix, price, ad copy and media for the test. In addition, the store’s image and that of its two competitors were measured.

 

Based on the research findings, different product lines that would appeal to the target customers were selected. The retail promotion was run for a full week. Full-page advertisements were released each day in the two local Hindi newspapers, and also in one English newspaper that devotes six pages to the coverage of the state.

 

Each evening, a sample of 100 target market customers were interviewed by telephone as follows:

 

  1. Target customers were asked if they had read the newspaper that day. This was done to determine their exposure to advertisement.
  2. After a general description of the product lines, the respondents were asked to recall any related retail advertisements they had seen or read.

3,       If the respondents were able to recall, they were asked to describe the ad, the promoted products, sale prices, and the name of the sponsoring store.

  1. If the respondents were accurate in their ad interpretation, they were asked to express their intentions to purchase.
  2. Respondents were also asked for suggestions to be incorporated in future promotions targeted at this consumer segment.

 

Immediately after the close of promotion, 500 target market customers were surveyed to determine what percentage of the target market actually purchased the promoted products. It also determined which sources of information influenced them in their decision to purchase and the amount of their purchase.

 

Results of the study showed that ad exposure was 75 per cent and ad awareness level was 68 per cent and was considered as high. Only 43 percent respondents exposed to and aware of the ad copy could accurately recall important details, such as the name of the store promoting the retail sale. Just 43 per cent correct interpretation was considered as low. Of those who could accurately interpret the  ad copy, 32 per cent said they intended to respond by purchasing the advertised· products ‘ and 68per cent sad they had no intention to buy. This yields an overall intention to buy of 7 per cent. The largest area of lost opportunity was due to those who did not accurately interpret the ad copy.

 

The post-promotion survey indicated that only 4.2 per cent of the target market customers made purchases of the promoted products during the promotion period. In terms of how the buyers learned of the promotion, 46 per cent mentioned newspaper A (Hindi), 27 per cent newspaper B (Hindi), 8 per cent newspaper (English), and 15 per cent learned about sale through word-of mouth communication.

 

The retail promotion was judged as successful in many ways, besides yielding sales worth

 

Rs 900,000. However, management was concerned about not achieving a higher level of ad comprehension, missing a significant sales opportunity: It was believed that a better ad would have at least 75 per cent correct comprehension among those aware of the ad. This in turn would almost double sales without any additional cost.

 

 

 

 

 

 

 

 

 

 

QUESTIONS

 

  1. Why would some consumers have high-involvement levels in learning about this sales promotion?

2          Is a level of 75 per cent comprehension realistic among those who become aware of an ad?  Why or why not?

  1. Do you think such promotions are likely to influence the quality image of the retail store? Explain.

 

 

 


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Masters Program in Business Administration (MBA)

Specialization : Supply chain Management

Note: – Solve any 5 Questions

           All case carries equal marks

 

Q.1. Read the following case and answer the questions given at the end.

Passenger Interchange

In most major cities the amount of congestion on the roads is increasing. Some of this is due to commercial vehicles, but by far the majority is due to private cars.There are several ways of controlling the number of vehicles using certain areas. These include prohibition ofcars in pedestrian areas, restricted entry, limits onparking, traffic calming schemes, and so on. A relatively new approach has road-user charging, where cars pay afee to use a particular length of road, with the fee possibly changing with prevailing traffic conditions.

Generally, the most effective approach to reducing traific congestion is to improve public transport. These services must be attractive to people who judge them by a range of factors, such as the comfort of seating, amount of crowding, handling of luggage, availability offood, toilets, safety, facilities in waiting areas. availabilityof escalators and lifts, and so on. However, the dominant considerations are cost, time and reliability.

Buses are often the most flexible form of public transport, with the time for a journey consisting of four parts :

  • joining time, which is the time needed to get to a bus stop
  • waiting time, until the bus arrives
  • journey time, to acnrallg do the travelling
  • leaving time, to get from the bus to the final destination.

Transport policies can reduce these times by acombination of frequent services, well-planned routes, and bus priority schemes. Then convenient journeys andsubsidised travel make buses an attractive alternative.

One problem, however, is that people have to changebuses, or transfer between buses and other types of transport, including cars, planes, trains, ferries and trams.Then there are additional times for moving between onetype of transport and the next, and waiting for the nextpart of the service. These can be minimised by an integrated transport system with frequent, connecting services at ‘passenger interchanges’.

Passenger interchanges seem a good idea, but theyare not universally popular. Most people prefer a straight-through journey between two points, even if this is less frequent than an integrated service with interchanges. The reason is probably because there are more opportunities for things to go wrong, and experiences suggests that even starting a journey does not guarantee that it will successfully finish.

In practice, most major cities such as London and Paris have successful interchanges, and they are spreading into smaller towns, such as Montpellier in France. For theten years up to 2001, tbe population of Montpellier grewby more than 8.4 per cent, and it moved from being the 22nd largest town in France to the eighth largest. It has good transport links with the porti of Sete, an airport, inland waterways, main road networks and a fast rail linkto Paris. In 2001, public transport was enhanced with a 15 kilometre tramline connecting major sites in the towncentre with other transport links. At the same time, buses were rerouted to connect to the tram, cycling was encouraged for short distances, park-and-ride services were improved, and journeys were generally made easier, As a result, there lns been an increase in use of publlc transport, a reduction in the number of cars in the town centre, and improved air quality. When the tram opened in 2000, a third of the population tried it in the first weekend, and it carried a million people within seven weeks of opening. In 2005, a second tramline will add 19 kilometres to the routes.

Questions :

(a) Are the problems of moving people significantly different from the problems of moving goods or Services?

(b) What are the benefits of public transport over private transport ? Should public transport be encouraged and, if so, how ?

(c) What are the benefits of iniegrated public transport systems ?

 

 

 

 

 

 

 

 

 

 

 

 

 

Q 2 . Read the following case and answer the questions given at the end.

Kozmo, the Online convenience store to shut down

New York-based Kozmo, the 3-year-old company announced that it would stop delivery service in all nine cities it operates. New York-based Kozmo, which dispatched legions of orange-clad deliverymen to cart goods to customers’ doors, is the latest dot.com dream to evaporate in the market downturn. Amazon com, venture capital firm Flatiron Partners and coffee giant Starbucks were among the investors in Kozmo.

Kozmo said in December that investors promised a total of $30 million in private funding. But last month the company learned that an investor had backed out of a $6 million commitment. Kozmo executives had been working on a merger deal with Los Angeles-based PDQuick, another online grocer, sources said. The deal collapsed when funding that was promised to PDQuick did not materialize. Sources said Kozmo still has money but decided to close now and liquidate to ensure that employeesc ould receive a severance package.

Just last month, Kozmo Chief Executive Gerry Burdo was upbeat about Kozmo’s future, saying he was looking to steer Kozmo away from its Internet-only business model and toward a “clicks and bricks” approach. But some analysts say Kozmo’s business model only made sense in the context of a densely packed city such as New York. Vern Keenan, a financial analyst with Keenan Vision, said the service had a chance to work in only a few other cities around the world, such as Lonclon, Stockholm or Paris. “This seemed like a dumb idea from the beginning,” Keenan said. “This grew out of a New York City frame of mind and it simply didn’t translate.”

Kozmo was started by a pair of twenty-something former college roommates. They got the idea for the company on a night when they craved videos and snacks and wished a business existed that would deliver it to them. Kozmo offered free delivery and charged competitive prices when it launched in New York. Though customers loved the service, the costs of delivery were high.

After co-founder and former Chief Executive Joseph park stepped down, Burdo slashed Kozmo’s overhead, instituted a delivery fee and oversaw several rounds of layoffs. The company also closed operations in San Diego and Houston. Burdo said last month that profitability was not far away. The company had reached a milestone last December when it reported profits at one of its operations for the first time. Kozmo later saw two more operations reach profitability as a result of brisk holiday business.

Online delivery companies have been among the most ravaged by the Internet shakeout. Kozmo’s rival in New York, Urbanfetch, shuttered its consumer operations last fall. Online grocers such as Webvan and Peapod have also struggled, and smaller operations such as Streamline.com and ShopLink.com have dosed down. Peapod was days away from closing last year when Dutch grocer Royal Ahold agreed to take a majority stake.

From the very beginning, supply chain management was to be a core competency of Kozmo. The promising dot.com would deliver your order everything from the latest video to electronics equipment in less than an hour. The technology was superior, the employees were enthusiastict, the customers were satisfied. But eventually, Kozmo ran out of time and money.

Questions:

(a) What, in your opinion, is the major reason for the failure of Kozmo?

(b) Do you think that Kozmo promised what its supply chain could not bear? What could have prevented its shut-down?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q 3 Read the following case and answer the questions given at the end.

Case Study:

ABL is one of the leading Producers of medical instrumentation. It manufactures equipment for use in Hospital. This large, high tech machines cost significant amount. Each machine is tailored to hospital requirements and installed in a specially prepared space. These units are manufactured in ABL’s plant in UK and shipped for installation to hospitals all around the world. ABL’s Supply chain manager has passion for integrated supply chain management.

He and his team always have multiple improvement projects underway. Their goals up are:

  • Bring the order to delivery cycle time down below three weeks. While improving quality and lower cost.
  • Involving product designer to change the design for easier manufacturing, installation and customization.
  • Reducing supplier base so that 20 key supplier provide about 90 percent of supplier volume.
  • Obtaining the same performance from the internal supplier that is expected of external.
  • Involving suppliers in evaluation, design and analysis process.
  • Using simple order transaction based on electronic media.
  • Enhance Customer Satisfaction.
  • Measures monitor and improve the same systematically.

Currently ABL is using a state of the art ERP software couple with SCM functions. It has also developed information system for their suppliers. ABL has also lined up with expressway, a leading logistic company by which the delivery times are monitored continuously. ABL believes in delivering a perfect order.

Questions:

  1. What is ABL’s strategy for good supply chain Management?
  2. Give any two goals set up by ABL and list their implications on ABL.
  3. What is the software being use at ABL? Apply that software to theoretical used and explain.
  4. What is perfect order in this case?

 

 

 

Q 4 Read the following case and answer the questions given at the end.

Case Study:

Farm Equipment manufactured limited (FEML), established in 1965. Is one of the world’s leading producers of agriculture equipments. FEML’s latest efforts on supplier relationship have their origins in the plant redefining its business strategies during the 1990s. As a result of their redefinition, the factory was focused on sheet steel stampings, weddings, assembly and paint as core manufacturing process. With this strategy purchased passed costs began to represent an increasing percentage of the FEMS’s manufactured costs. This laid the first corner stone in FEML’s re-examination of supplier relations. The second corner stone fell in place when, because of capacity constraints, steel stamping dept was unable to fill the factory’s total stamping requirements and this led to the development of external stamping sources.

Now the third corner stone was laid: Discussion began to arise as to whether the internal stamping dept should be treated the same as external stamping suppliers with the implication that the internal stamping dept should compete for business and receive the same level of support at any other outside source.

Typically FEMC’s suppliers are small and medium sized manufacturers. Increasingly, such companies have been under industry wide competitive pressure to reduce overhead and trim costs. Many of them have reduced their employees to minimum necessary to run daily operations. Planning and implementation of new manufacturing strategies is beyond the capabilities of these companies because of lack of manufacturing strategies is beyond the capabilities of these companies because of lack of expertise. This realization led to the fourth and final corner stone. A vigorous debate began on “why don’t strategic outside sources receive the level of support provided to FEML’s internal sources”?

In 1995, Mr. sonawala, GM-scm at FEMC’s jeadquarters, initiated a pilot supplies development programme.  The aim was to resolve the debate via a pilot experiment to support 16 suppliers. An agreement was forged with the pilot suppliers that would entitle FEML to share in any savings obtained from the improvements over next 18 months. FEML’s engineers were sent out to work with the suppliers who participated in the project. The result showed price reduction that resulted for FEML enabled it to more than recoup the investment it made.

Based on these results, in 2001, the FEML works formed a dedicated supplier development group on providing resource to assist strategic supplies in implementing SCM. Recent improvement efforts have targeted lead – time reduction in supplier’s factories. In addition to providing personnel to work at the supplier’s facilities, FEML has provided training and education for supplier’s staff. As a result of these efforts, FEML has seen reduction of more than 90./. in lead time at some supplier’s and resulting price reductions to FEML (after providing suppliers share) have been as much as 15./..

Questions:

  1. What should be the basis for sharing benefits between FEML and its suppliers?
  2. “Managing lead time is more important than reducing the inventory in a supply Chain”. Defend the statement in the context of FEML.
  3. Explain the brief performance indicators at FEML and its suppliers end.
  4. List at least four factors on which suppliers of FEML needs to be evaluated.

 

Q 5. “There are many possible structures for supply chain, but the simplest view has materials converging on an organisation through tiers of supplers and products diverging through tiers of customers.” Elaborate.

Q 6. Elobrate clearly the meaning of “World-Class” in World-Class Supply Chain Management (WCSCM). What are the features of World-Class Companies ? Give your answer highlighting different characterisrtics pertaining to management level, quality control, operations/production and technological advances.

Q 7. What are the essential dlfferences in the Supply Chain Management of Products vs. Services? Discuss the application of Supply Chain Managernent principles in Financial Services.

 


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Case No : 1

REMAINS OF A DREAM

 

This is a tragic story, narrated in first person, of an entrepreneur who became bankrupt for no fault of him, without producing anything, mostly because of the irresponsible political and government environment. This case study, documented by Bibek Debroy and P.D. Kaushik and published in Business Today is reproduced here with permission.

In the 1980s, I worked as a chemical analyst for a transnational in Germany , but kept thinking about shifting to India .

Opportunity knocked when I saw an advertisement by the Uttar Pradesh government inviting NRI professionals to start a chemical unit in the newly identified Basti Chemical Industrial Complex. I hail from Lucknow . Hence, this was attractive. I inquired from the Indian High Commission and was told that there is single window clearance for NRI investors. The brochure said several things about the benefits – excise and sales tax holiday for five years, uninterrupted power supply, low rate of interest on loans, and clearance of application within 30 days.

I started the application formalities for a chemical unit. Once the application was accepted, I requested for long leave from my employers. I also inquired from my relatives in Lucknow and was told that the Uttar Pradesh government’s intentions are clear, and developmental work is progressing at fast speed.

Every now and then, I received a letter from the ministry of industry in Uttar Pradesh to furnish some paper or the other, as part of procedural formalities. After three months, I received my provisional sanction letter for allotment of land, and term loan. The letter also stated that within six months, I must take possession of the land, and initiate construction. Otherwise, the deposited amount (Rs 1 lakh as part of my contribution) will be forfeited. I resigned from the company, and shifted permanently to India , since my employer turned down my request for long leave.

On reaching the complex, I was surprised to see that the Uttar Pradesh State Industrial Development Corporation (UPSIDC) had actually developed the land in terms of markers, and signboards, compared to what I had seen on my last visit.

Though roads were not fully laid, it was evident that work was in progress. I took possession of my land and started construction.

Meanwhile, I approached the UPFC for granting me the term loan for ordering the plant and machinery. The first obstacle came from the Uttar Pradesh State Electricity Board (now Uttar Pradesh Power Corporation). The electricity supply to the complex was not yet available. On inquiring, I was told that the plan had been sanctioned, but required clearance from the power ministry, before undertaking further work. The approximate time to get grid supply ranged between four and six months.

The next obstacle came from the Uttar Pradesh Financial Corporation (UPFC). It could release the first instalment after I completed construction till the plinth level. I continued work with the help of a diesel generating set. It took another month to reach the plinth level.

But before I could request UPFC to release my first instalment, I received a letter from UPFC that I had to deposit interest against the amount paid to the UPSIDC for land possession. This was a shock, because interest had to be paid even before anything was produced.

But I had no alternative, because the first insatlment was due. The UPFC promptly released the first instalment after inspecting the construction. It helped me continue construction work, and also book for plant and machinery.

Six months went by. Construction was almost complete. I had received three instalments from the Uttar Pradesh Financial Corporation (UPFC). Each time the payment of interest was due, the required sum was adjusted from the instalment released. If there was any shortfall in money required for construction, I paid from my own pocket.

 

 

 

 

But after nine months, my coffers went empty. Machinery suppliers were after me, for payment. UPFC insisted on interest payments, because this was the last instalment of my term loan and interest due couldn’t be deducted from future instalments. I borrowed from family and friends and paid up. Then I received the final instalment from UPFC for plant and machinery, with another notice that the yearly instalment for the principal was due.

Within two months, machinery was commissioned at the site. But electricity was yet to reach the complex. In the previous year, I had visited the Uttar Pradesh State Electricity Board (UPSEB) office innumerable times. I also approached the industry association to assist me. But all my efforts were in vain. This did not help me, or others like me, to get the grid supply.

There were 14 other who were in the same boat. The biggest company of them all – obviously with contacts at higher levels – arranged for grid supply from the rural feeder. But that plan also did not take off, because the rural feeder supplied poor quality power for a mere six hours. A process industry requires 24 hours of uninterrupted electricity supply without load fluctuations. It is precisely because of this that all 15 of us, who were waiting for electricity, had insisted on industrial power from UPSEB.

All plans failed. Captive generation was not a viable alternative now. And we continued to wait for the grid supply. We met the former minister for industry and pleaded our case. He assured us that he would take up the case with the power ministry.

Meanwhile, I defaulted on interest payment. So did the others. The final blow came in the Assembly elections, when both the sitting : Member of Legislative Assembly, from Basti, and the state industrial minister lost their seats. Suddenly, everything – from road construction work, to the laying of sewer and phone lines – came to a standstill.

Only the police post and the UPSKB rural feeder office remained. The new incumbent in the industrial ministry hailed from Saharanpur , so the thrust of the ministry changed. Basti was not on their priority list anymore. After waiting for tow years, UPSEB was not able to connect the complex with grid supply.

 

In the end, UPFC initiated recovery action and sealed my unit. Besides, they claimed that I could not get NRI treatment, with preferential interest rates, because I had permanently moved to India . Thus, there were also plans to file a case against me on account of misinforming the corporation. Experts suggested I should file for insolvency if I wanted to avoid going to prison. This I did in 1994. I spent Rs. 15 lakh from my own pocket.

Now, all that remains of an entrepreneurial dream is a sealed chemical unit in Basti and a complex legal tangle.

I was better off working for the transnational in Germany . Power does not come out of the barrel of a gun. A gun’s barrel comes of power, especially when the latter does not exist.

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 a legislation?
  5. What are the lessons of this case for an entrepreneur and government and         promotional agencies?

 

 

 

 

 

 

 

 

 

 

 

Case No : 2

THE COSTS OF DELAY

The public sector Indian Oil Corporation (IOC), the major oil refining and marketing company which was also the canalizing agency for oil imports and the only Indian company I the Fortune 500, in terms of sales, planned to make a foray in to the foreign market by acquiring a substantial stake in the Balal Oil field in Iran of the Premier Oil. The project was estimated to have recoverable oil reserves of about 11 million tonnes and IOC was supposed to get nearly four million tonnes.

When IOC started talking to the Iranian company for the acquisition in October 1998, oil prices were at rock bottom ($ 11 per barrel) and most refining companies were closing shop due to falling margins. Indeed, a number of good oil properties in the Middle East were up for sale. Using this opportunity, several developing countries “made a killing by acquiring oil equities abroad.’’

IOC needed Government’s permission to invest abroad. Application by Indian company for investing abroad is to be scrutinized by a special committee represented by the Reserve Bank of India and the finance and commerce ministries. By the time the government gave the clearance for the acquisition in December 1999 (i.e., more than a year after the application was made), the prices had bounced back to $24 per barrel. And the Elf of France had virtually took away the deal from under IOC’s nose by acquiring the Premier Oil.

The RBI, which gave IOC the approval for $15 million investment, took more than a year for clearing the deal because the structure for such investments were not in place, it was reported.

 

 

 

 

 

 

 

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?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 ?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case 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?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case No : 5

A QUESTION OF ETHICS

 

TELCO opened bookings for different models of its proud small car Indica in late 1998. The consumer response was overwhelming. Most of the bookings were for the AC models, DLE and DLX. The DLE model accounted for more than 70 per cent of the bookings.

Telco has planned to commence delivery of the vehicles by early 1999. However, delivery schedules for the AC models were upset because of some problems on the roll out front. According to a report in The Economic Times dated 13 March 1999 , Telco officials attributed the delay to non-availability of air conditioning kits.

 

Subros Ltd. supplies AC kits for the DLE version and Voltes is the vendor for the DLX version. Incidentally, Subros is also the AC supplier to Maruti Udyog Ltd.

 

Telco officials alleged that Subros was being pressured by the competitor to delay the supply of kits. “If this continues, we will be forced to ask Voltas to supply kits for the DLE version too,’’ a company official said.

 

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.)

 

 

 

 Case No : 6

DIFFERENT FOR GAMBLE

 

Product and Gamble (P & G), a global consumer products giant, “stormed the Japanese market with American products, American managers, American sales methods and strategies. The result was disastrous until the company learnt how to adapt products and marketing style to Japanese culture. P & G which entered the Japanese market in 1973 lost money until 1987, but by 1991 it became its second largest foreign market.’’

P & G acclaimed as “the world’s most admired marketing machine’’, entered India , which has been considered as one of the largest emerging markets, in 1985. It entered the Indian detergent marketing the early nineties with the Ariel brand through P & G India (in which it had a 51 percent holding which was raised 65 per cent in January 1993, the remaining 35 per cent being hold by the public). P & G established P & G Home products, a 100 per cent subsidiary later (1993) and the Ariel was transferred to it. Besides soaps and detergents, P & G had or introduced later product portfolios like shampoos (Pantene) medical products (Viks range, Clearasil and Mediker) and personal products (Whisper feminine hygiene products, pampers diapers and old spice range of men’s toiletries).

The Indian detergent and personal care products market was dominated by Hindustan Lever Ltd. (HLL). In some segments of the personal care products market the multinational Johnson & Johnson has had a strong presence. Tata group’s Tomco, which had been in the red for some time, was sold to Hindustan Lever Ltd. (HLL). HLL, a subsidiary of P & G’s global competitor, has been in India for about a century. The take over of Tomco by HLL further increased its market dominance. In the low priced detergents segment Nirma has established a very strong presence.

 

 

 

Over the period of about one and a half decades since its entry in India , P & G invested several thousand crores. However, dissatisfied with its performance in India , it decided to restructure its operations, which in several respects meant a shrinking of activities – the manpower was drastically cut, and thousands of stockists were terminated. P & G, however holds that, it will continue to invest in India . According to Gary Cofer, the country manager, “it takes time to build a business category or brand in India . It is possibly an even more demanding geography than others.’’

China , on the other hand, with business worth several times than in India in less than 12 years, has emerged as a highly promising market for P & G. when the Chinese market was opened up, P & G was one of the first MNCS to enter. Prior to the liberalisation, Chinese consumers had to content with shoddy products manufactured by government companies. Per capita income of China is substantially higher than India ’s and the Chinese economy was growing faster than the Indian. Further, the success of the single child concept in China means higher disposable income.

Further it is also pointed out that for a global company like P & G, understanding Chinese culture was far easier since the expat Chinese in the US was not very different from those back home where as most Indian expats tended to adapt far more to the cultural nuances of the immigrant country.

One of P & G’s big in India was the compact technology premium detergent brand Ariel. After an initial show, Ariel, however, failed to generate enough sales – consumers seem to have gone by the per kilo cost than the cost per wash propagated by the promotion. To start with, P & G had to import the expensive state-of-the-art ingredients, which attracted heavy customs duties. The company estimated that it would cost Rs. 60 per kilo for Ariel compared to Rs. 27 for Surf and Rs. 8 for Nirma. Because of the Rupee devaluation of the early 1990s, the test market price of Rs. 35 for 500 gms was soon Rs. 41 by the time the product was launched. HLL fought Ariel back with premium variants of Surf like Surf Excel.

 

 

 

It is pointed out that, “in hindsight, even P & G managers privately admit that bringing in the latest compact technology was a big blunder. In the eighties, P & G had taken a huge beating in one of its most profitable markets, Japan, at the hands of local company Kao. Knowing the Japanese consumer’s fondness for small things, Kao weaved magic with its new-found compact technology. For a company that prided itself on technology, the drubbing in Japan was particularly painful. It was, therefore, decided that compacts would now be the lead brand for the entire Asia-Pacific region. When P & G launched Ariel in India , it hoped that the Indian consumer would devise the appropriate benchmarks to evaluate Ariel. As compacts promised economy of sue, P & G hoped that consumers would buy into the low-cost-per-wash story. But selling that story through advertising was particularly difficult, especially sine Indian consumers believed that the washing wasn’t over unless the bar had been used for scrubbing. Even though Ariel was targeted at consumer with high disposable income, who represented half the urban population, consumers simply baulked at the outlay.

 

Thereafter, one thing led to another. Ariel’s strategy of introducing variants was a smart move to flank Lever at every price point by cleverly using the brand’s halo effect. And by supporting the brand in mass media and retaining the share of voice. By 1996, it had become clear that Ariel’s equity as a high-performance detergent had begun to take a beating. Its equity as a top-of-the-line detergent was getting eroded….Nowhere in P & G’s history had a concept like Super Soaker been used to gain volumes…. It was decided that Super Soaker would no longer be supported, nor would Ariel bar be supported in media.

 

 

 

 

 

 

 

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 . 

 


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Masters Program in Business Administration (MBA)

 

Note :- Solve any 4 case study

           All case carries equal marks

CASE I

NAVEEN FISHERIES  LTD.

 

The managing director of Naveen Fisheries Ltd. (NFL) received a message from one of the members of the crew that their mechanized boats had sunk at sea off Paradeep Port Trust due to unfavorable weather. The other directors of NFL ascertained the detailed information regarding the incident. All the promoters were fresh graduates.

 

Naveem, Praveen, Nagain, Ravi and Chandra were the promoters of the organization (NFL at Vishakhapattanam) with a capital contribution of Rs. 25 lakh each. Three of them had an engineering background. The other two were commerce graduates. They had thought of designing the vessels themselves so that the cost each mechanized boat would be reduced from Rs. 30 lakhs (if they bought them) to Rs. 22 Lakh. They designed three boats and these were sent out with a newly – appointed crew. Two vessels were sent to Paradeep and the third to Kakinada. Unfortunately, the weather was unfavourable. All the vessels sank. The crew also did not have experience. Two workers were injured and the rest arrived sagely. There was significant damage to the vessels and the residue was considered scrap. The cost of scrap of the vessels was nominal. As their working capital was scarce, and they were unable to invest more capital, they were in a dilemma whether to continue the business or not.

 

Case I Questions:

  1. What were the reasons for the sinking of the vessels?
  2. How could they reorganize the businesses?

 


 

CASE II

 

MNC CORPORATION

At MNC Corporation, a foreman of inspection noticed a mistake in the assembly of transmitter cases. The foreman, a shy man when speaking to his immediate superiors, mentioned this matter to the senior supervisor in a weak, ineffectual manner. The senior supervisor nodded his head and continued to work on a report that he was writing. Later, a production slowdown occurred, and it was discovered that this flaw in the transmitter was the cause. The chief of production engineering, upset because this error had passed inspection unnoticed, reproved the senior supervisor in a brusque manner.

The senior supervisor called in the foreman of inspection and asked why this error had not been brought to his attention. The foreman said, “I told you the other day they were missing same of the punch-outs in those transmitter cases.” The senior supervisor said, “Yes, but you did not pound the desk when you told me!”

 

Case II Questions:

  1. Why did the communication problem arise?
  2. What do you suggest to prevent the communication problem?


 

CASE III

 

MEHTA BANK LTD

 

Venkataraman was an officer in a leading nationalized bank with years of service to his credit. During his long period of service, he worked in different capacities and sections. His attitude and behavior made him a trusted in the organization. Having been posted in a big branch based in a large city, he was not keen on getting further promotions.

 

On one occasion, when he was working as an incharge of the draft issue section, he issued bundles of drawing books from the main stock of the security forms of the branch and kept the same in his custody in an almirah provided to him. One fine morning, he removed three drawing books out of the stock of books valued below Rs. 10,000 which he had in his own custody and kept them in his house. He then started issuing drafts in various names form his house out of the aforesaid stolen drawing books by allotting correct branch serial numbers obtained from the branch register under his control. The drafts were deposited in different banks/branches of the same bank in different accouns opened in the names of the payees of the drafts. These accounts were introduced by the bank employees, and some of them were in different representations only, like Mr. Venkataraman Aiyar, Mr Venkataraman Iyengar, etc. The drafts thus deposited were presented in clearing and were passed in the normal course without any doubt or suspicion. In the evening, he would visit the concerned drawee offices and collect such paid drafts.

 

Having found this technique successful, he tried his hand at yet another. This time he started issuing drafts in fictitious names or in the names of his close relatives drawn on outstations without any vouchers or deposits. After a few days, he would cancel the same drafts by allowing the credits to the respective accounts in his own branch by debiting the head office accounts. He continued to do this for about three months, causing a loss of over Rs. 700,000 to the bank.

 

The fraud came to light thanks to the presence of mind exercised by on e of the officers at another local office. He found that on the previous day also, he had paid a similar draft with the leaf number previous to the draft presented now. In his view, it was not possible for such a big office to avoid consumption of draft leaved in this fashion. Consequently, the matter was taken up with the issuing branch. Unfortunately for Venkataraman, someone else was working as the incharge of the draft issue section on that day. On checking up the records, it transpired that no such draft was issued. This led to promt investigations and detection of the whole fraud committed by Venkataraman.

 

Case III Questions:

  1. How do you view the present fraud case: a human failure or a system failure?
  2. What are the main issues in the case, and how can our present system of control prevent such fraud?
  3. How would you manage the situation on detection?


 

CASE IV

SHAHID FABRICS

 

Mr. Lateef, Chairman of Shahid Fabrics, a Hyderabad-based garments and piece goods firm which exported all its products to the USA, faced a decision in August 1985. The US government had imposed quota restrictions which reduced the exports of his firm by 40 percent. He had to find a new market for his products.

 

Shahid Fabrics was one of Pakistan’s major exporters of garments and piece goods. Its share was 25 percent of the exports of these goods of the whole country. It was established in 1954 as a producer of cotton cloth and later, in 1966, it extended production to include garments and piece goods. It had eight local production units and the total number of employees was 8,000. All its garments and piece goods were exported, and branded according to customer specification. All the goods were exported to the USA and the sales of the firm amounted to US$ 100 million. In 1984, the US government imposed quota restrictions. By August 1985, Shahid Fabrics exports had been reduced by 40 percent.

 

Mr. Lateef believed that finding new markets was the only way to survive. The possible alternatives according to him were the EEC countries, the USSR, the Middle Eastern Arab countries and the other Asian countries. The EEC was a very good potential market, but Europeans were very tough buyers. It would be necessary to segregate the EEC from other buyers because of their existing specifications with regard to style, colour and packing. The USSR too was a potential market as far as demand was concerned, but the country did not have enough money in foreign exchange.

 

The Middle Eastern Arab countries had money, but their requirements were small due to their smaller population. Second, these countries preferred not to buy Pakistani goods directly from Pakistan$. They would rather like to buy the same Pakistani goods, branded differently from other Western countries, say France.

 

Asia was a big market, but the Asian countries, including turkey, were Shahid Fabrics’ competition in the international market. Mr. Lateef was deeply concerned with the loss of 40 percent of his export goods. He was eager to determine which new market offered the highest potential. He wondered what specific information he could use to help his decision.

 

 

 

 

Case IV Questions:

  1. What information should Mr. Lateef develop to evaluate foreign markets?
  2. Where should he look for this information?
  3. Develop a framework to help Mr. Lateef identify his best potential foreign markets.

 


 

CASE V

WESTWARD EXPORTS LTD.

 

Mr. Abdul Ahmed, Production Manger, Westward Exports Ltd, Karachi, faced a decision in 1984. the rejection rate of their exports of readymade garments was 20 percent of total production. He also felt that their productivity was not as high as it might have been.

 

Westward Exports Ltd. was a large Pakistani company exporting ladies fashion garments made of pure cotton. Their main product items were blouses, skirts, dresses, shirts, pants, etc. their main overseas markets were the USA, Europe and Japan, and production was Rs. 100 million. They had about 2,000 workers engaged in production through their various subcontractors.

 

Production was carried out by 138 subcontractors. They did not utilize assembly line production: each individual worker carried out all the jobs required on each garment. The machinery and equipment used by the machines had a low output, and were not suited to high technology application. Mr. Abdul knew that male workers performed 60 percent of the total production and the rest was done by females. He also knew that while male workers were always willing to work overtime, their absentee rate was greater than that of women. Abdul felt that productivity could be higher, and he wondered how he should approach this issue.

 

The company purchased raw material (grey cloth) from several sources and had it dyed by different concerns, which sometimes caused variation in the colors. Both dyeing and inferior stitching caused the rejection rate, to rise to 20 percent of their total production. Mr. Abdul was worried about this high rate of rejection, and wondered what sequence of steps he should take to help reduce this high rejection rate.

 

Case V Questions:

  1. What alternatives are available to Mr Abdul?
  2. Other than purchasing higher technology machinery, in what ways might Mr Abdul increase the effectiveness and efficiency of the dyeing and stitching operations?

 


 

CASE VI

BABA BEARINGS COMPANY

 

The quality circle Sigma was started in the heat treatment section of Baba Bearings Company with seven members.

The members prepared the following list of various factors affecting the productivity of the heat treatment section.

  1. Distortion of bearing races in sealed quench furnaces.
  2. Loss of productivity and energy in sealed quench furnaces.
  3. Excess consumption of LPG.
  4. Rejection of cages due to scaling during annealing.
  5. Shrinkage in tapered roller bearing outer rings.
  6. Broadly, bearing are manufactured in the following three stages: (a) Turning, (b) Heat Treatment, and (c) Grinding.

 

The circle members, in their brainstorming session, gave priorities to the study aspects with the help of Pareto analysis. Distortion of bearing races in sealed quench furnaces was a major factor affecting the productivity. Hence, the circle decided to take this up for study. Turned rings in the soft condition are hardened and tempered. After heat treatment, it was noted that about 30 percent of the rings were beyond the specified limits of distortion (ovality). These rings were subject to straining for rectification.

 

Straining is a laborious process involving extra manpower and time. It affected schedules and deliveries to customers. The cause and effect diagram was employed for analysis, and the following causes identified:

 

  • Design of heating elements
  • Mesh baskets distortion

 

The members collected data regarding the heating element. Rings are loaded into the furnace keeping in a mesh basket in layers. The rings are heated by corrtherm heating elements; the heat is made to circulate uniformly throughout the furnace by a circulating fan. After the hardening process, it was observed that in general, the rings arranged at the sides of the basket adjacent to the heating elements showed greater ovality (50 per cent) than those at the centre (17 percent).

 

The members felt that rings at the sides were directly exposed to the radiant heat of the elements, and this resulted in a temperature gradient within the cross-section of the rings, causing more distortion. The temperature adjacent to the heating elements was higher by 26 degree Celsius than at the centre of the furnace.

 

Case VI Questions:

  1. What are the measures to be taken to avoid direct effect of heat?
  2. Design a quality improvement process for the bearings company.

 

 


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Business Administration

 

 

Note :-

(i) Attempt any four Cases
(ii) All Cases carry equal marks.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case 1 :-

“ Left or Right?”

Rajinder Kumar was a production worker at Competent Motors Limited (CML), which made components and accessories for the automotive industry. He had worked at CML for almost seven years as a welder, along with fifteen other men in the plant. All had received training in welding, both on the job and through company-sponsored external programmes. They had friendly relations and got along very well with one another. They played volleyball in the playground regularly before retiring to the quarters allotted by the company. They ate together in the company canteen, cutting jokes on each other and making fun of anyone who dared to peep into their privacy during lunch hour. Most of the fellows had been there for quite some time, except for two men who had joined the ranks only two months back.

Rajinder was generally considered to be the leader of the group, so it was no surprise that when the foreman of the department was transferred and his vacancy was announced, Rajinder applied for the job and got it.

There were only four other applicants for the job, two from mechanical section and two from outside. When there was a formal announcement of the appointment on a Friday afternoon, everyone in the group congratulated Rajinder. They literally carried him snacks and celebrated the event enthusiastically.

On Monday morning, Rajinder joined duty as Foreman. It was company practice for all foremen to wear blue jacket and a white shirt. Each man’s coat had his name badge sewn onto the left side pocket. The company had given two pairs to Raijnder. He was proud to wear the coat to work on Monday.

People who saw him from a distance went upto him and admired the new blue coat. There was a lot of kidding around calling Rajinder as ‘Hero’, ‘Raja Babu’ and ‘Officer’ etc. One of the guys went back to his locker and returned with a long brush and acted as though he were removing dust particles on the new coat. After about five minutes of horseplay, all of the men went back to work.

Rajinder went back to his office to get more familiar with his new job and environment there.

At noon, all the men broke for lunch and went to the canteen to eat and enjoy fun as usual. Rajinder was busy when they left but followed after them a few minutes, later. He bought the food coupon, took the snacks and tea and turned to face the open canteen. Back in the left side corner of the room was his old work group; on the right hand side of the canteen sat all the other foremen in the plant all observed in their blue coats.

At that point of time, silence descended on the canteen. Suddenly both groups looked at Rajinder anxiously, waiting to see which group he would eat with.

QUESTIONS:

  1. Whom do you think Rajinder will eat with? Why?
  2. If you were one of the other foremen, what could you do to make Rajinder’s transition easier?
  3. What would you have done if you were in Rajinder’s shoes? Why?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case 2 :-

“Naughty Rule”

Dr. Reddy Instruments is a medium-sized the Industrial Estate on the outskirts of Hyderabad. The company is basically involved with manufacturing surgical instruments and supplies for medical professionals and hospitals.

About a year ago, Madhuri, aged 23, niece of the firm’s founder, Dr. Raja Reddy, was hired to replace Ranga Rao quality control inspector, who had reached the age of retirement. Madhuri had recently graduated from the Delhi College of Engineering where she had majored in Industrial Engineering.

Balraj Gupta, aged 52, is the production manager of the prosthesis dept., where artificial devices designed to replace missing parts of the human body are manufactured. Gupta has worked for Dr. Reddy Instruments for 20 years, having previously been a production line supervisor and, prior to that, a worker on the production line. Gupta, being the eldest in his family, has taken up the job quite early in life and completed his education mostly through correspondence courses.

From their first meeting, it looked as though Gupta and Madhuri could not get along together. There seemed to be an underlying animosity between them, but it was never too clear what the problem was.

Venkat Kumar, age 44, is the plant manager of Dr. Reddy instruments. He has occasionally observed disagreements between Madhuri and Gupta on the production line, Absenteeism has risen in Gupta’s department since Madhuri was hired as quality control inspector. Venkat secretly decided to issue a circular calling for a meeting of all supervisory personnel in the production and twelve quality control departments. The circular was worked thus:

 

Attention: All Supervisors Production Quality Control Departments

 A meeting is schedule on Monday, Feb 20, at 10 a.m. in room 18. The purpose is to sort out misunderstanding and differences that seem to exist between production and QC personnel.

Sd. Venkat Kumar

Plant Manager

 

 

Venkat starred the meeting by explaining why he had called it and then asked Gupta for his opinion of the problem. The conversation took the following shape:

Gupta: That Delhi girl you recruited is a ‘fault finding machine’ in our dept. Until she was hired, we hardly even stopped production. And when we did, it was only because of a mechanical defect. But Madhuri has been stopping everything even if ‘one’ defective part comes down the line.

Madhuri: That’s not true. You have fabricated the story well.

Gupta: Venkat, our quality has not undergone any change in recent times. It’s still the same, consistently good quality it was before she came but all she wants to do is to trouble us.

Madhuri: May I clarify my position at this stage? Mr. Gupta, you have never relished my presence in the company. I still remember some of the derisive remarks you used to make behind my back. I did take note of them quite clearly!

Suresh (another quality control supervisor): I agree with Madhuri Venkat. I think that everyone knows that the rules permit quality control to stop production if rejections exceed three an hour. This is all Madhuri has been doing.

Gupta: Now listen to me. Madhuri starts counting the hour from the moment she gets the first reject. Ranga Rao never really worried about absolute reject rule when he was here. She wants to paint my department in black. Is not that true Riaz Ahmed?

Ahmed (another production supervisor): It sure is Gupta. Every time Maduri stops production, she is virtually putting the company on fire. The production losses would affect our bonuses as well. How long can we allow this ‘nuisance’ to continue?

Thirty minutes later Madhuri and Gupta were still lashing out at each other. Venkat decided that ending the meeting might be appropriate under the circumstances. He promised to clarify the issue, after discussion with management, sometime next weel.

QUESTIONS:

  1. Should Venkat have called a meeting to sort out this problem? Why or Why not?
  2. What do you say about the rule calling for production to halt if there are more than three rejects in an hour? Should it have been enforced? Explain.
  3. What do you feel is the major problem in this case? The solution?

 

 

Case 3 :-

ABC LIMITED

M/s. ABC Ltd. is a medium – sized engineering company production a large-range of product lines according to customer requirements. It has earned a good reputation as a quick and reliable supplier to its customers because off which its volume of business kept on increasing. However, over the past one year, the managing director of the company has been receiving customer complaints due to delays in dispatch of products and at times, the company has to pay substantial penalty for not meeting the schedule in time.

The managing director convened an urgent meeting of various functional managers to discuss the issue. The Marketing Manager questioned the arbitrary manner of giving priority to products in manufacturing line, causing delays in products that are in great demand and over-stocking of products which are not required immediately. Production control manager complained that he does not have adequate staff to plan and control the production function; and whatever little planning he does, is generally overlooked by shop floor manager. Shop floor manager complained of unrealistic planning, excessive machine breakdowns, power failure, shortage of materials for schedule. Maintenance manager, say that he does not get important spares required for equipment maintenance because of which he cannot repair machines at a faster rate. Inventory control manager says that on the one hand the company often access him of carrying too much stock and on the other hand people are grumbling  over shortages.

Fed up by mutual mud-slinging, the managing director decided to appoint you, a bright management consultant with training in business management to suggest way and means to put his “house in order”.

QUESTIONS:

  1. How would you examine if there is any merit in the remarks of various functional managers?
  2. What, in your opinion, could be the reasons for different managerial thoughts in this case?
  3. How would you design a system of getting correct information about job status to identify delays quickly?
  4. List some scientific decision aids that you may prescribe to improve the situation.

 

 

 

 

Case 4 :-

In Search of Greener Pastures

Rohit joined ABC Ltd., a heavy engineering unit, having a turnover of about Rs. 20 crores, in the junior management cadre as a direct recruit. During his tenure with the company, Rohit proved to be a dedicated and sincere worker which earned him quick promotions in the organization. He had made a mark in whichever department he had worked and his departmental heads were happy with his work. After serving the company for a period of ten years, Rohit felt that there was no scope for further improvement in his position and started applying for better jobs commensurate with his experience. He finally succeeded in getting a job but his new employer wanted him to join within one month. To this, Rohit pleaded inability, as he was required to give three month’s notice to his present employer, as per company rules. However, he said he would discuss the matter with the personnel manager and try to reduce the period to one month by paying two month’s salary in lieu of the required notice. Rohit accordingly, submitted his resignation to the present employer and requested the departmental head to recommend his case to the personnel manager for relieving him after one month. The departmental head, said that he would discuss the matter with the personnel manager and try his best to help him. However, the latter turned down Rohit’s request stating that the rules require him to give three month’s notice and that the alternative suggested by Rohit was not acceptable.

When Rohit learnt about the personnel manager’s response, he approached his prospective employer to explain his difficulty, which was beyond his control, and requested them to extend his joining period to three months. This was acceptable by them, as a special case.

The departmental head took up Rohit’s case with the management and suggested that in future, the officers who resigned may be permitted to give one month’s notice and two month’s salary in lieu of a further two month’s notice, if required, so as to ensure against any unnecessary delay in the work of the department. But, the management refused to accept this proposal, stating clearly that the company’s policy cannot be changed.
QUESTIONS:

  1. Did the management take a correct decision in Rohit’s case under the circumstances?
  2. What steps should the departmental head take to do not adopt an indifferent attitude towards their work during the three month’s notice period?
  3. If you were in the position of the management, how would you have handled the situation?

 

 

Case 5 :-

Ramesh Publishing Company

Mr. Ramesh was the founder of a publishing company specializing in accounting books. Within a short span of time, the company prospered and grew very fast. Its sales rose from Rs 60,000 the first year to Rs 6lakhs three years later. The editing, production and sales staff grew almost as fast.

But the company was having problems, and of late uncertainly and confused grew in the company. New people were making decisions to the best of their ability but many of them did not fit together. One of Mr. Ramesh’s key associates suggested that the company ought to have better planning and certainly needed clear policies to guide decisions making, but Mr. Ramesh was unimpressed. His response was that if he took time off to plan and develop policies today, he might not have a company tomorrow, and that he had no choice but to spend his time meeting today’s problems as they came up.
QUESTIONS:

  1. If you were one of the newer managers in the company and had taken a course in the basics of management, what would you say to Mr. Ramesh?
  2. Outline exactly how would you show him that planning and policy making are important to the company if it has to grow effectively.

 

 

 

 

 

 

 

 

 

 

Case 6 :-

THE Marquee Garment Retailer

I knew we were right, Neil Simon thought himself as the steward brought him a glass of Cardhu single malt. The Whisky felt good after week when he was allowed to drink nothing but champagne by his hosts in India. Ah, but then they had reason to celebrate. Simon signaled to the steward that he’d  like a refill  – he planned to take his time over the second one – and thought about the week that had been.

Simon, the director-in-charge of international franchise operations at Smith & Robin, a $8-billion marquee garment retailer, had arrived in India exactly seven days back, with mixed feelings. He’d been at S&R Less the eight months-he had been hired when the company decided to abandon its twenty-year old strategy of expanding geographically through owned outlets as against franchised ones-but he knew the India trip was one of those things that could make or break his career.

This wasn’t his first visit to India. He’d visited it as a backpacker in his second year at collage, then as a middle-level executive of a cola company, and then again, soon after he joined S&R. It was during the last visit that he noticed the kind of brand equity the company enjoyed in India. S&R was a know name and there was huge demand for its offerings. The grey market did a thriving business in both real S&R products, smuggled into the country, and ersatz ones. So, he had gone back and made case for India.

“Let us go in now and seed the market and leverage our equity there “He’d told the board. Convincing the board hadn’t made his job any easier. Then, there were tales of poor infrastructure, horror stories about how foreign investors were treated, and wholly inappropriate real estate options. Worse, some members of the board weren’t fully convinced about the ‘franchise strategy’, S&R had moved to. “I see that we are shutting three of our profitable shops in London, “one of the board members Barbara Rutherford had shifted. Fortunately for Simon, the chairperson lucy Walters had to come to his rescue. “we decide that franchising was the best way to grow last year Barbara; this meeting isn’t about that.

Finally, a compromise had been reached. S&R would enter the country through one or two pilot outlets’. To Simon went the task of finding a suitable franchise. That had been easy. The Kathuria family that ran S&R Malaysia franchise had business interests in India, and it hadn’t taken Simon much to convince them to take on the India franchise.

The two Kathuria-owned franchise store had opened in upmarket malls, Delhi and Mumbai, the previous week and Simon had winged it down to be there at the opening. The Mumbai outlet 7,000 square feet large; the Delhi one, 3,000 square feet. And both sold a range of garments for men and women, lingeries, and toiletries-all imported , and all under the S&R brand name, in keeping with the company’s policy of only selling the best quality products sourced at the least possible cost at all its outlets.

The tariff regime in India made some prices look Ludicrous-a women’s shirt cost over Rs2, 500; men’s jeans, Rs3,200-and made S&R, which was perceived to be a high-end value-for-money brand into a premium one with aspirational trimmings. Indeed, the only other stores that stocked merchandise of compatable prices were boutiques devoted to designer wear.

 

                                                                         S&R’S Long–term Prospects  

 

                Best-case Scenario                                                                     Worst-case Scenario        

 

·         Indian customers continue treating S&R as

an aspirational brand.

 

·         The company is able to sustain its premium pricing in India.

 

·         S&R repeats the Delhi-and Mumbai-model in other metros.

 

·         The scalability across centers makes S&R’s local franchise profitable.

·         The novelty factors surrounding S&R’s launch wears off.

 

·         Customers start asking questions about the super-premium positioning.

 

·         Sales plateau in the Delhi and Mumbai stores.

 

·         The franchise shows no interest in expanding a loss-making operation.

The India –strategy’s detractors at HQ had raised objections over the size of the Delhi outlet (“S&R isn’t associated with cramped buying spaces”) and the price-tags (“Indians aren’t dumb, you know). But Simon managed to steer clear of the flak. The fact that leading consulting firms estimated India’s organized retail business to zoom from Rs 5,500 crore in 2000, to Rs 35,000 crore in 2005, helped his cause.

Then, he had landed in India; the Kathurias had welcomed him like he was royality; he had been allowed to drink nothing but champagne (“Here’s to the stop reopening”; “ Here’s to our first sale”, “Here’s to our first individual sale over Rs 100,000”….); and things had gone like a dream.

The launches had coincided with India’s equivalent of the Christmas season-the festival of lights, they called it, Diwali. The two stores’ initial stock had been sold out in three days flat. And the fact that some of the products still carried their dollar prices-an oversight by the stores and a full 40 per cent lower than their prices in Indian rupees, thanks to the duties- hadn’t deterred shoppers. True, there appeared to be more demand for lingerie and cosmetics, but the other products had takers too.

Simon was surprised by the reaction. He knew that he would have to wait a few months to understand the real demand for S&R products in India. Only once the initial novelty had worn off, would the company have better idea of what Indian customers bought, and what they did not. He was also aware that while the mere fact S&R products were available in the country could have encouraged customers to overlook the 40 percent mark-up (thanks to import duties), they’d soon move to the ‘value’ buying behaviour Indians were famous for.

Simon had raised these issues at his last meeting with the Kathurias, but they were still celebrating the phenomenal success of their opening gambit and their only response had been to ply Simon with, what else, more champagne. Still, he had to admit, it had been a good beginning.

Simon signaled the steward for another refill. What the heck.. he’d earned it.

QUESTION:

  1. Has Smith & Robin (S&R) chosen the right entry strategy for the Indian market?
  2. “S&R has taken a risk in entering a market that is large, but offers little flexibility in terms of price and business environment” Discuss.
  3. What kind of advance planning and strategic thinking should go into S&R’s corporate planning efforts so that the Indian consumer gets ‘value for money’?

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Masters Program in Business Administration (MBA 4 SEM)

( Semester IV )

 

Note :- Solve any 4 case study

            All case carries equal marks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case No : 1

REMAINS OF A DREAM

 

This is a tragic story, narrated in first person, of an entrepreneur who became bankrupt for no fault of him, without producing anything, mostly because of the irresponsible political and government environment. This case study, documented by Bibek Debroy and P.D. Kaushik and published in Business Today is reproduced here with permission.

In the 1980s, I worked as a chemical analyst for a transnational in Germany , but kept thinking about shifting to India .

Opportunity knocked when I saw an advertisement by the Uttar Pradesh government inviting NRI professionals to start a chemical unit in the newly identified Basti Chemical Industrial Complex. I hail from Lucknow . Hence, this was attractive. I inquired from the Indian High Commission and was told that there is single window clearance for NRI investors. The brochure said several things about the benefits – excise and sales tax holiday for five years, uninterrupted power supply, low rate of interest on loans, and clearance of application within 30 days.

I started the application formalities for a chemical unit. Once the application was accepted, I requested for long leave from my employers. I also inquired from my relatives in Lucknow and was told that the Uttar Pradesh government’s intentions are clear, and developmental work is progressing at fast speed.

Every now and then, I received a letter from the ministry of industry in Uttar Pradesh to furnish some paper or the other, as part of procedural formalities. After three months, I received my provisional sanction letter for allotment of land, and term loan. The letter also stated that within six months, I must take possession of the land, and initiate construction. Otherwise, the deposited amount (Rs 1 lakh as part of my contribution) will be forfeited. I resigned from the company, and shifted permanently to India , since my employer turned down my request for long leave.

On reaching the complex, I was surprised to see that the Uttar Pradesh State Industrial Development Corporation (UPSIDC) had actually developed the land in terms of markers, and signboards, compared to what I had seen on my last visit.

Though roads were not fully laid, it was evident that work was in progress. I took possession of my land and started construction.

Meanwhile, I approached the UPFC for granting me the term loan for ordering the plant and machinery. The first obstacle came from the Uttar Pradesh State Electricity Board (now Uttar Pradesh Power Corporation). The electricity supply to the complex was not yet available. On inquiring, I was told that the plan had been sanctioned, but required clearance from the power ministry, before undertaking further work. The approximate time to get grid supply ranged between four and six months.

The next obstacle came from the Uttar Pradesh Financial Corporation (UPFC). It could release the first instalment after I completed construction till the plinth level. I continued work with the help of a diesel generating set. It took another month to reach the plinth level.

But before I could request UPFC to release my first instalment, I received a letter from UPFC that I had to deposit interest against the amount paid to the UPSIDC for land possession. This was a shock, because interest had to be paid even before anything was produced.

But I had no alternative, because the first insatlment was due. The UPFC promptly released the first instalment after inspecting the construction. It helped me continue construction work, and also book for plant and machinery.

Six months went by. Construction was almost complete. I had received three instalments from the Uttar Pradesh Financial Corporation (UPFC). Each time the payment of interest was due, the required sum was adjusted from the instalment released. If there was any shortfall in money required for construction, I paid from my own pocket.

 

 

 

 

But after nine months, my coffers went empty. Machinery suppliers were after me, for payment. UPFC insisted on interest payments, because this was the last instalment of my term loan and interest due couldn’t be deducted from future instalments. I borrowed from family and friends and paid up. Then I received the final instalment from UPFC for plant and machinery, with another notice that the yearly instalment for the principal was due.

Within two months, machinery was commissioned at the site. But electricity was yet to reach the complex. In the previous year, I had visited the Uttar Pradesh State Electricity Board (UPSEB) office innumerable times. I also approached the industry association to assist me. But all my efforts were in vain. This did not help me, or others like me, to get the grid supply.

There were 14 other who were in the same boat. The biggest company of them all – obviously with contacts at higher levels – arranged for grid supply from the rural feeder. But that plan also did not take off, because the rural feeder supplied poor quality power for a mere six hours. A process industry requires 24 hours of uninterrupted electricity supply without load fluctuations. It is precisely because of this that all 15 of us, who were waiting for electricity, had insisted on industrial power from UPSEB.

All plans failed. Captive generation was not a viable alternative now. And we continued to wait for the grid supply. We met the former minister for industry and pleaded our case. He assured us that he would take up the case with the power ministry.

Meanwhile, I defaulted on interest payment. So did the others. The final blow came in the Assembly elections, when both the sitting : Member of Legislative Assembly, from Basti, and the state industrial minister lost their seats. Suddenly, everything – from road construction work, to the laying of sewer and phone lines – came to a standstill.

Only the police post and the UPSKB rural feeder office remained. The new incumbent in the industrial ministry hailed from Saharanpur , so the thrust of the ministry changed. Basti was not on their priority list anymore. After waiting for tow years, UPSEB was not able to connect the complex with grid supply.

 

In the end, UPFC initiated recovery action and sealed my unit. Besides, they claimed that I could not get NRI treatment, with preferential interest rates, because I had permanently moved to India . Thus, there were also plans to file a case against me on account of misinforming the corporation. Experts suggested I should file for insolvency if I wanted to avoid going to prison. This I did in 1994. I spent Rs. 15 lakh from my own pocket.

Now, all that remains of an entrepreneurial dream is a sealed chemical unit in Basti and a complex legal tangle.

I was better off working for the transnational in Germany . Power does not come out of the barrel of a gun. A gun’s barrel comes of power, especially when the latter does not exist.

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 a legislation?
  5. What are the lessons of this case for an entrepreneur and government and         promotional agencies?

 

 

 

 

 

 

 

 

 

 

 

Case No : 2

THE COSTS OF DELAY

The public sector Indian Oil Corporation (IOC), the major oil refining and marketing company which was also the canalizing agency for oil imports and the only Indian company I the Fortune 500, in terms of sales, planned to make a foray in to the foreign market by acquiring a substantial stake in the Balal Oil field in Iran of the Premier Oil. The project was estimated to have recoverable oil reserves of about 11 million tonnes and IOC was supposed to get nearly four million tonnes.

When IOC started talking to the Iranian company for the acquisition in October 1998, oil prices were at rock bottom ($ 11 per barrel) and most refining companies were closing shop due to falling margins. Indeed, a number of good oil properties in the Middle East were up for sale. Using this opportunity, several developing countries “made a killing by acquiring oil equities abroad.’’

IOC needed Government’s permission to invest abroad. Application by Indian company for investing abroad is to be scrutinized by a special committee represented by the Reserve Bank of India and the finance and commerce ministries. By the time the government gave the clearance for the acquisition in December 1999 (i.e., more than a year after the application was made), the prices had bounced back to $24 per barrel. And the Elf of France had virtually took away the deal from under IOC’s nose by acquiring the Premier Oil.

The RBI, which gave IOC the approval for $15 million investment, took more than a year for clearing the deal because the structure for such investments were not in place, it was reported.

 

 

 

 

 

 

 

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?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 ?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case 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?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case No : 5

A QUESTION OF ETHICS

 

TELCO opened bookings for different models of its proud small car Indica in late 1998. The consumer response was overwhelming. Most of the bookings were for the AC models, DLE and DLX. The DLE model accounted for more than 70 per cent of the bookings.

Telco has planned to commence delivery of the vehicles by early 1999. However, delivery schedules for the AC models were upset because of some problems on the roll out front. According to a report in The Economic Times dated 13 March 1999 , Telco officials attributed the delay to non-availability of air conditioning kits.

 

Subros Ltd. supplies AC kits for the DLE version and Voltes is the vendor for the DLX version. Incidentally, Subros is also the AC supplier to Maruti Udyog Ltd.

 

Telco officials alleged that Subros was being pressured by the competitor to delay the supply of kits. “If this continues, we will be forced to ask Voltas to supply kits for the DLE version too,’’ a company official said.

 

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.)

 

 

 

 Case No : 6

DIFFERENT FOR GAMBLE

 

Product and Gamble (P & G), a global consumer products giant, “stormed the Japanese market with American products, American managers, American sales methods and strategies. The result was disastrous until the company learnt how to adapt products and marketing style to Japanese culture. P & G which entered the Japanese market in 1973 lost money until 1987, but by 1991 it became its second largest foreign market.’’

P & G acclaimed as “the world’s most admired marketing machine’’, entered India , which has been considered as one of the largest emerging markets, in 1985. It entered the Indian detergent marketing the early nineties with the Ariel brand through P & G India (in which it had a 51 percent holding which was raised 65 per cent in January 1993, the remaining 35 per cent being hold by the public). P & G established P & G Home products, a 100 per cent subsidiary later (1993) and the Ariel was transferred to it. Besides soaps and detergents, P & G had or introduced later product portfolios like shampoos (Pantene) medical products (Viks range, Clearasil and Mediker) and personal products (Whisper feminine hygiene products, pampers diapers and old spice range of men’s toiletries).

The Indian detergent and personal care products market was dominated by Hindustan Lever Ltd. (HLL). In some segments of the personal care products market the multinational Johnson & Johnson has had a strong presence. Tata group’s Tomco, which had been in the red for some time, was sold to Hindustan Lever Ltd. (HLL). HLL, a subsidiary of P & G’s global competitor, has been in India for about a century. The take over of Tomco by HLL further increased its market dominance. In the low priced detergents segment Nirma has established a very strong presence.

 

 

 

Over the period of about one and a half decades since its entry in India , P & G invested several thousand crores. However, dissatisfied with its performance in India , it decided to restructure its operations, which in several respects meant a shrinking of activities – the manpower was drastically cut, and thousands of stockists were terminated. P & G, however holds that, it will continue to invest in India . According to Gary Cofer, the country manager, “it takes time to build a business category or brand in India . It is possibly an even more demanding geography than others.’’

China , on the other hand, with business worth several times than in India in less than 12 years, has emerged as a highly promising market for P & G. when the Chinese market was opened up, P & G was one of the first MNCS to enter. Prior to the liberalisation, Chinese consumers had to content with shoddy products manufactured by government companies. Per capita income of China is substantially higher than India ’s and the Chinese economy was growing faster than the Indian. Further, the success of the single child concept in China means higher disposable income.

Further it is also pointed out that for a global company like P & G, understanding Chinese culture was far easier since the expat Chinese in the US was not very different from those back home where as most Indian expats tended to adapt far more to the cultural nuances of the immigrant country.

One of P & G’s big in India was the compact technology premium detergent brand Ariel. After an initial show, Ariel, however, failed to generate enough sales – consumers seem to have gone by the per kilo cost than the cost per wash propagated by the promotion. To start with, P & G had to import the expensive state-of-the-art ingredients, which attracted heavy customs duties. The company estimated that it would cost Rs. 60 per kilo for Ariel compared to Rs. 27 for Surf and Rs. 8 for Nirma. Because of the Rupee devaluation of the early 1990s, the test market price of Rs. 35 for 500 gms was soon Rs. 41 by the time the product was launched. HLL fought Ariel back with premium variants of Surf like Surf Excel.

 

 

 

It is pointed out that, “in hindsight, even P & G managers privately admit that bringing in the latest compact technology was a big blunder. In the eighties, P & G had taken a huge beating in one of its most profitable markets, Japan, at the hands of local company Kao. Knowing the Japanese consumer’s fondness for small things, Kao weaved magic with its new-found compact technology. For a company that prided itself on technology, the drubbing in Japan was particularly painful. It was, therefore, decided that compacts would now be the lead brand for the entire Asia-Pacific region. When P & G launched Ariel in India , it hoped that the Indian consumer would devise the appropriate benchmarks to evaluate Ariel. As compacts promised economy of sue, P & G hoped that consumers would buy into the low-cost-per-wash story. But selling that story through advertising was particularly difficult, especially sine Indian consumers believed that the washing wasn’t over unless the bar had been used for scrubbing. Even though Ariel was targeted at consumer with high disposable income, who represented half the urban population, consumers simply baulked at the outlay.

 

Thereafter, one thing led to another. Ariel’s strategy of introducing variants was a smart move to flank Lever at every price point by cleverly using the brand’s halo effect. And by supporting the brand in mass media and retaining the share of voice. By 1996, it had become clear that Ariel’s equity as a high-performance detergent had begun to take a beating. Its equity as a top-of-the-line detergent was getting eroded….Nowhere in P & G’s history had a concept like Super Soaker been used to gain volumes…. It was decided that Super Soaker would no longer be supported, nor would Ariel bar be supported in media.

 

 

 

 

 

 

 

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 . 

 

 

 

Masters Program in Business Administration (MBA 4 SEM)

( Semester IV )

 

Note :- Solve any 4 case study

            All case carries equal marks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case No : 1

REMAINS OF A DREAM

 

This is a tragic story, narrated in first person, of an entrepreneur who became bankrupt for no fault of him, without producing anything, mostly because of the irresponsible political and government environment. This case study, documented by Bibek Debroy and P.D. Kaushik and published in Business Today is reproduced here with permission.

In the 1980s, I worked as a chemical analyst for a transnational in Germany , but kept thinking about shifting to India .

Opportunity knocked when I saw an advertisement by the Uttar Pradesh government inviting NRI professionals to start a chemical unit in the newly identified Basti Chemical Industrial Complex. I hail from Lucknow . Hence, this was attractive. I inquired from the Indian High Commission and was told that there is single window clearance for NRI investors. The brochure said several things about the benefits – excise and sales tax holiday for five years, uninterrupted power supply, low rate of interest on loans, and clearance of application within 30 days.

I started the application formalities for a chemical unit. Once the application was accepted, I requested for long leave from my employers. I also inquired from my relatives in Lucknow and was told that the Uttar Pradesh government’s intentions are clear, and developmental work is progressing at fast speed.

Every now and then, I received a letter from the ministry of industry in Uttar Pradesh to furnish some paper or the other, as part of procedural formalities. After three months, I received my provisional sanction letter for allotment of land, and term loan. The letter also stated that within six months, I must take possession of the land, and initiate construction. Otherwise, the deposited amount (Rs 1 lakh as part of my contribution) will be forfeited. I resigned from the company, and shifted permanently to India , since my employer turned down my request for long leave.

On reaching the complex, I was surprised to see that the Uttar Pradesh State Industrial Development Corporation (UPSIDC) had actually developed the land in terms of markers, and signboards, compared to what I had seen on my last visit.

Though roads were not fully laid, it was evident that work was in progress. I took possession of my land and started construction.

Meanwhile, I approached the UPFC for granting me the term loan for ordering the plant and machinery. The first obstacle came from the Uttar Pradesh State Electricity Board (now Uttar Pradesh Power Corporation). The electricity supply to the complex was not yet available. On inquiring, I was told that the plan had been sanctioned, but required clearance from the power ministry, before undertaking further work. The approximate time to get grid supply ranged between four and six months.

The next obstacle came from the Uttar Pradesh Financial Corporation (UPFC). It could release the first instalment after I completed construction till the plinth level. I continued work with the help of a diesel generating set. It took another month to reach the plinth level.

But before I could request UPFC to release my first instalment, I received a letter from UPFC that I had to deposit interest against the amount paid to the UPSIDC for land possession. This was a shock, because interest had to be paid even before anything was produced.

But I had no alternative, because the first insatlment was due. The UPFC promptly released the first instalment after inspecting the construction. It helped me continue construction work, and also book for plant and machinery.

Six months went by. Construction was almost complete. I had received three instalments from the Uttar Pradesh Financial Corporation (UPFC). Each time the payment of interest was due, the required sum was adjusted from the instalment released. If there was any shortfall in money required for construction, I paid from my own pocket.

 

 

 

 

But after nine months, my coffers went empty. Machinery suppliers were after me, for payment. UPFC insisted on interest payments, because this was the last instalment of my term loan and interest due couldn’t be deducted from future instalments. I borrowed from family and friends and paid up. Then I received the final instalment from UPFC for plant and machinery, with another notice that the yearly instalment for the principal was due.

Within two months, machinery was commissioned at the site. But electricity was yet to reach the complex. In the previous year, I had visited the Uttar Pradesh State Electricity Board (UPSEB) office innumerable times. I also approached the industry association to assist me. But all my efforts were in vain. This did not help me, or others like me, to get the grid supply.

There were 14 other who were in the same boat. The biggest company of them all – obviously with contacts at higher levels – arranged for grid supply from the rural feeder. But that plan also did not take off, because the rural feeder supplied poor quality power for a mere six hours. A process industry requires 24 hours of uninterrupted electricity supply without load fluctuations. It is precisely because of this that all 15 of us, who were waiting for electricity, had insisted on industrial power from UPSEB.

All plans failed. Captive generation was not a viable alternative now. And we continued to wait for the grid supply. We met the former minister for industry and pleaded our case. He assured us that he would take up the case with the power ministry.

Meanwhile, I defaulted on interest payment. So did the others. The final blow came in the Assembly elections, when both the sitting : Member of Legislative Assembly, from Basti, and the state industrial minister lost their seats. Suddenly, everything – from road construction work, to the laying of sewer and phone lines – came to a standstill.

Only the police post and the UPSKB rural feeder office remained. The new incumbent in the industrial ministry hailed from Saharanpur , so the thrust of the ministry changed. Basti was not on their priority list anymore. After waiting for tow years, UPSEB was not able to connect the complex with grid supply.

 

In the end, UPFC initiated recovery action and sealed my unit. Besides, they claimed that I could not get NRI treatment, with preferential interest rates, because I had permanently moved to India . Thus, there were also plans to file a case against me on account of misinforming the corporation. Experts suggested I should file for insolvency if I wanted to avoid going to prison. This I did in 1994. I spent Rs. 15 lakh from my own pocket.

Now, all that remains of an entrepreneurial dream is a sealed chemical unit in Basti and a complex legal tangle.

I was better off working for the transnational in Germany . Power does not come out of the barrel of a gun. A gun’s barrel comes of power, especially when the latter does not exist.

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 a legislation?
  5. What are the lessons of this case for an entrepreneur and government and         promotional agencies?

 

 

 

 

 

 

 

 

 

 

 

Case No : 2

THE COSTS OF DELAY

The public sector Indian Oil Corporation (IOC), the major oil refining and marketing company which was also the canalizing agency for oil imports and the only Indian company I the Fortune 500, in terms of sales, planned to make a foray in to the foreign market by acquiring a substantial stake in the Balal Oil field in Iran of the Premier Oil. The project was estimated to have recoverable oil reserves of about 11 million tonnes and IOC was supposed to get nearly four million tonnes.

When IOC started talking to the Iranian company for the acquisition in October 1998, oil prices were at rock bottom ($ 11 per barrel) and most refining companies were closing shop due to falling margins. Indeed, a number of good oil properties in the Middle East were up for sale. Using this opportunity, several developing countries “made a killing by acquiring oil equities abroad.’’

IOC needed Government’s permission to invest abroad. Application by Indian company for investing abroad is to be scrutinized by a special committee represented by the Reserve Bank of India and the finance and commerce ministries. By the time the government gave the clearance for the acquisition in December 1999 (i.e., more than a year after the application was made), the prices had bounced back to $24 per barrel. And the Elf of France had virtually took away the deal from under IOC’s nose by acquiring the Premier Oil.

The RBI, which gave IOC the approval for $15 million investment, took more than a year for clearing the deal because the structure for such investments were not in place, it was reported.

 

 

 

 

 

 

 

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?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 ?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case 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?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case No : 5

A QUESTION OF ETHICS

 

TELCO opened bookings for different models of its proud small car Indica in late 1998. The consumer response was overwhelming. Most of the bookings were for the AC models, DLE and DLX. The DLE model accounted for more than 70 per cent of the bookings.

Telco has planned to commence delivery of the vehicles by early 1999. However, delivery schedules for the AC models were upset because of some problems on the roll out front. According to a report in The Economic Times dated 13 March 1999 , Telco officials attributed the delay to non-availability of air conditioning kits.

 

Subros Ltd. supplies AC kits for the DLE version and Voltes is the vendor for the DLX version. Incidentally, Subros is also the AC supplier to Maruti Udyog Ltd.

 

Telco officials alleged that Subros was being pressured by the competitor to delay the supply of kits. “If this continues, we will be forced to ask Voltas to supply kits for the DLE version too,’’ a company official said.

 

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.)

 

 

 

 Case No : 6

DIFFERENT FOR GAMBLE

 

Product and Gamble (P & G), a global consumer products giant, “stormed the Japanese market with American products, American managers, American sales methods and strategies. The result was disastrous until the company learnt how to adapt products and marketing style to Japanese culture. P & G which entered the Japanese market in 1973 lost money until 1987, but by 1991 it became its second largest foreign market.’’

P & G acclaimed as “the world’s most admired marketing machine’’, entered India , which has been considered as one of the largest emerging markets, in 1985. It entered the Indian detergent marketing the early nineties with the Ariel brand through P & G India (in which it had a 51 percent holding which was raised 65 per cent in January 1993, the remaining 35 per cent being hold by the public). P & G established P & G Home products, a 100 per cent subsidiary later (1993) and the Ariel was transferred to it. Besides soaps and detergents, P & G had or introduced later product portfolios like shampoos (Pantene) medical products (Viks range, Clearasil and Mediker) and personal products (Whisper feminine hygiene products, pampers diapers and old spice range of men’s toiletries).

The Indian detergent and personal care products market was dominated by Hindustan Lever Ltd. (HLL). In some segments of the personal care products market the multinational Johnson & Johnson has had a strong presence. Tata group’s Tomco, which had been in the red for some time, was sold to Hindustan Lever Ltd. (HLL). HLL, a subsidiary of P & G’s global competitor, has been in India for about a century. The take over of Tomco by HLL further increased its market dominance. In the low priced detergents segment Nirma has established a very strong presence.

 

 

 

Over the period of about one and a half decades since its entry in India , P & G invested several thousand crores. However, dissatisfied with its performance in India , it decided to restructure its operations, which in several respects meant a shrinking of activities – the manpower was drastically cut, and thousands of stockists were terminated. P & G, however holds that, it will continue to invest in India . According to Gary Cofer, the country manager, “it takes time to build a business category or brand in India . It is possibly an even more demanding geography than others.’’

China , on the other hand, with business worth several times than in India in less than 12 years, has emerged as a highly promising market for P & G. when the Chinese market was opened up, P & G was one of the first MNCS to enter. Prior to the liberalisation, Chinese consumers had to content with shoddy products manufactured by government companies. Per capita income of China is substantially higher than India ’s and the Chinese economy was growing faster than the Indian. Further, the success of the single child concept in China means higher disposable income.

Further it is also pointed out that for a global company like P & G, understanding Chinese culture was far easier since the expat Chinese in the US was not very different from those back home where as most Indian expats tended to adapt far more to the cultural nuances of the immigrant country.

One of P & G’s big in India was the compact technology premium detergent brand Ariel. After an initial show, Ariel, however, failed to generate enough sales – consumers seem to have gone by the per kilo cost than the cost per wash propagated by the promotion. To start with, P & G had to import the expensive state-of-the-art ingredients, which attracted heavy customs duties. The company estimated that it would cost Rs. 60 per kilo for Ariel compared to Rs. 27 for Surf and Rs. 8 for Nirma. Because of the Rupee devaluation of the early 1990s, the test market price of Rs. 35 for 500 gms was soon Rs. 41 by the time the product was launched. HLL fought Ariel back with premium variants of Surf like Surf Excel.

 

 

 

It is pointed out that, “in hindsight, even P & G managers privately admit that bringing in the latest compact technology was a big blunder. In the eighties, P & G had taken a huge beating in one of its most profitable markets, Japan, at the hands of local company Kao. Knowing the Japanese consumer’s fondness for small things, Kao weaved magic with its new-found compact technology. For a company that prided itself on technology, the drubbing in Japan was particularly painful. It was, therefore, decided that compacts would now be the lead brand for the entire Asia-Pacific region. When P & G launched Ariel in India , it hoped that the Indian consumer would devise the appropriate benchmarks to evaluate Ariel. As compacts promised economy of sue, P & G hoped that consumers would buy into the low-cost-per-wash story. But selling that story through advertising was particularly difficult, especially sine Indian consumers believed that the washing wasn’t over unless the bar had been used for scrubbing. Even though Ariel was targeted at consumer with high disposable income, who represented half the urban population, consumers simply baulked at the outlay.

 

Thereafter, one thing led to another. Ariel’s strategy of introducing variants was a smart move to flank Lever at every price point by cleverly using the brand’s halo effect. And by supporting the brand in mass media and retaining the share of voice. By 1996, it had become clear that Ariel’s equity as a high-performance detergent had begun to take a beating. Its equity as a top-of-the-line detergent was getting eroded….Nowhere in P & G’s history had a concept like Super Soaker been used to gain volumes…. It was decided that Super Soaker would no longer be supported, nor would Ariel bar be supported in media.

 

 

 

 

 

 

 

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 . 

 

 

Masters Program in Business Administration (MBA 4 SEM)

( Semester IV )

 

Note :- Solve any 4 case study

            All case carries equal marks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case No : 1

REMAINS OF A DREAM

 

This is a tragic story, narrated in first person, of an entrepreneur who became bankrupt for no fault of him, without producing anything, mostly because of the irresponsible political and government environment. This case study, documented by Bibek Debroy and P.D. Kaushik and published in Business Today is reproduced here with permission.

In the 1980s, I worked as a chemical analyst for a transnational in Germany , but kept thinking about shifting to India .

Opportunity knocked when I saw an advertisement by the Uttar Pradesh government inviting NRI professionals to start a chemical unit in the newly identified Basti Chemical Industrial Complex. I hail from Lucknow . Hence, this was attractive. I inquired from the Indian High Commission and was told that there is single window clearance for NRI investors. The brochure said several things about the benefits – excise and sales tax holiday for five years, uninterrupted power supply, low rate of interest on loans, and clearance of application within 30 days.

I started the application formalities for a chemical unit. Once the application was accepted, I requested for long leave from my employers. I also inquired from my relatives in Lucknow and was told that the Uttar Pradesh government’s intentions are clear, and developmental work is progressing at fast speed.

Every now and then, I received a letter from the ministry of industry in Uttar Pradesh to furnish some paper or the other, as part of procedural formalities. After three months, I received my provisional sanction letter for allotment of land, and term loan. The letter also stated that within six months, I must take possession of the land, and initiate construction. Otherwise, the deposited amount (Rs 1 lakh as part of my contribution) will be forfeited. I resigned from the company, and shifted permanently to India , since my employer turned down my request for long leave.

On reaching the complex, I was surprised to see that the Uttar Pradesh State Industrial Development Corporation (UPSIDC) had actually developed the land in terms of markers, and signboards, compared to what I had seen on my last visit.

Though roads were not fully laid, it was evident that work was in progress. I took possession of my land and started construction.

Meanwhile, I approached the UPFC for granting me the term loan for ordering the plant and machinery. The first obstacle came from the Uttar Pradesh State Electricity Board (now Uttar Pradesh Power Corporation). The electricity supply to the complex was not yet available. On inquiring, I was told that the plan had been sanctioned, but required clearance from the power ministry, before undertaking further work. The approximate time to get grid supply ranged between four and six months.

The next obstacle came from the Uttar Pradesh Financial Corporation (UPFC). It could release the first instalment after I completed construction till the plinth level. I continued work with the help of a diesel generating set. It took another month to reach the plinth level.

But before I could request UPFC to release my first instalment, I received a letter from UPFC that I had to deposit interest against the amount paid to the UPSIDC for land possession. This was a shock, because interest had to be paid even before anything was produced.

But I had no alternative, because the first insatlment was due. The UPFC promptly released the first instalment after inspecting the construction. It helped me continue construction work, and also book for plant and machinery.

Six months went by. Construction was almost complete. I had received three instalments from the Uttar Pradesh Financial Corporation (UPFC). Each time the payment of interest was due, the required sum was adjusted from the instalment released. If there was any shortfall in money required for construction, I paid from my own pocket.

 

 

 

 

But after nine months, my coffers went empty. Machinery suppliers were after me, for payment. UPFC insisted on interest payments, because this was the last instalment of my term loan and interest due couldn’t be deducted from future instalments. I borrowed from family and friends and paid up. Then I received the final instalment from UPFC for plant and machinery, with another notice that the yearly instalment for the principal was due.

Within two months, machinery was commissioned at the site. But electricity was yet to reach the complex. In the previous year, I had visited the Uttar Pradesh State Electricity Board (UPSEB) office innumerable times. I also approached the industry association to assist me. But all my efforts were in vain. This did not help me, or others like me, to get the grid supply.

There were 14 other who were in the same boat. The biggest company of them all – obviously with contacts at higher levels – arranged for grid supply from the rural feeder. But that plan also did not take off, because the rural feeder supplied poor quality power for a mere six hours. A process industry requires 24 hours of uninterrupted electricity supply without load fluctuations. It is precisely because of this that all 15 of us, who were waiting for electricity, had insisted on industrial power from UPSEB.

All plans failed. Captive generation was not a viable alternative now. And we continued to wait for the grid supply. We met the former minister for industry and pleaded our case. He assured us that he would take up the case with the power ministry.

Meanwhile, I defaulted on interest payment. So did the others. The final blow came in the Assembly elections, when both the sitting : Member of Legislative Assembly, from Basti, and the state industrial minister lost their seats. Suddenly, everything – from road construction work, to the laying of sewer and phone lines – came to a standstill.

Only the police post and the UPSKB rural feeder office remained. The new incumbent in the industrial ministry hailed from Saharanpur , so the thrust of the ministry changed. Basti was not on their priority list anymore. After waiting for tow years, UPSEB was not able to connect the complex with grid supply.

 

In the end, UPFC initiated recovery action and sealed my unit. Besides, they claimed that I could not get NRI treatment, with preferential interest rates, because I had permanently moved to India . Thus, there were also plans to file a case against me on account of misinforming the corporation. Experts suggested I should file for insolvency if I wanted to avoid going to prison. This I did in 1994. I spent Rs. 15 lakh from my own pocket.

Now, all that remains of an entrepreneurial dream is a sealed chemical unit in Basti and a complex legal tangle.

I was better off working for the transnational in Germany . Power does not come out of the barrel of a gun. A gun’s barrel comes of power, especially when the latter does not exist.

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 a legislation?
  5. What are the lessons of this case for an entrepreneur and government and         promotional agencies?

 

 

 

 

 

 

 

 

 

 

 

Case No : 2

THE COSTS OF DELAY

The public sector Indian Oil Corporation (IOC), the major oil refining and marketing company which was also the canalizing agency for oil imports and the only Indian company I the Fortune 500, in terms of sales, planned to make a foray in to the foreign market by acquiring a substantial stake in the Balal Oil field in Iran of the Premier Oil. The project was estimated to have recoverable oil reserves of about 11 million tonnes and IOC was supposed to get nearly four million tonnes.

When IOC started talking to the Iranian company for the acquisition in October 1998, oil prices were at rock bottom ($ 11 per barrel) and most refining companies were closing shop due to falling margins. Indeed, a number of good oil properties in the Middle East were up for sale. Using this opportunity, several developing countries “made a killing by acquiring oil equities abroad.’’

IOC needed Government’s permission to invest abroad. Application by Indian company for investing abroad is to be scrutinized by a special committee represented by the Reserve Bank of India and the finance and commerce ministries. By the time the government gave the clearance for the acquisition in December 1999 (i.e., more than a year after the application was made), the prices had bounced back to $24 per barrel. And the Elf of France had virtually took away the deal from under IOC’s nose by acquiring the Premier Oil.

The RBI, which gave IOC the approval for $15 million investment, took more than a year for clearing the deal because the structure for such investments were not in place, it was reported.

 

 

 

 

 

 

 

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?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 ?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case 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?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case No : 5

A QUESTION OF ETHICS

 

TELCO opened bookings for different models of its proud small car Indica in late 1998. The consumer response was overwhelming. Most of the bookings were for the AC models, DLE and DLX. The DLE model accounted for more than 70 per cent of the bookings.

Telco has planned to commence delivery of the vehicles by early 1999. However, delivery schedules for the AC models were upset because of some problems on the roll out front. According to a report in The Economic Times dated 13 March 1999 , Telco officials attributed the delay to non-availability of air conditioning kits.

 

Subros Ltd. supplies AC kits for the DLE version and Voltes is the vendor for the DLX version. Incidentally, Subros is also the AC supplier to Maruti Udyog Ltd.

 

Telco officials alleged that Subros was being pressured by the competitor to delay the supply of kits. “If this continues, we will be forced to ask Voltas to supply kits for the DLE version too,’’ a company official said.

 

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.)

 

 

 

 Case No : 6

DIFFERENT FOR GAMBLE

 

Product and Gamble (P & G), a global consumer products giant, “stormed the Japanese market with American products, American managers, American sales methods and strategies. The result was disastrous until the company learnt how to adapt products and marketing style to Japanese culture. P & G which entered the Japanese market in 1973 lost money until 1987, but by 1991 it became its second largest foreign market.’’

P & G acclaimed as “the world’s most admired marketing machine’’, entered India , which has been considered as one of the largest emerging markets, in 1985. It entered the Indian detergent marketing the early nineties with the Ariel brand through P & G India (in which it had a 51 percent holding which was raised 65 per cent in January 1993, the remaining 35 per cent being hold by the public). P & G established P & G Home products, a 100 per cent subsidiary later (1993) and the Ariel was transferred to it. Besides soaps and detergents, P & G had or introduced later product portfolios like shampoos (Pantene) medical products (Viks range, Clearasil and Mediker) and personal products (Whisper feminine hygiene products, pampers diapers and old spice range of men’s toiletries).

The Indian detergent and personal care products market was dominated by Hindustan Lever Ltd. (HLL). In some segments of the personal care products market the multinational Johnson & Johnson has had a strong presence. Tata group’s Tomco, which had been in the red for some time, was sold to Hindustan Lever Ltd. (HLL). HLL, a subsidiary of P & G’s global competitor, has been in India for about a century. The take over of Tomco by HLL further increased its market dominance. In the low priced detergents segment Nirma has established a very strong presence.

 

 

 

Over the period of about one and a half decades since its entry in India , P & G invested several thousand crores. However, dissatisfied with its performance in India , it decided to restructure its operations, which in several respects meant a shrinking of activities – the manpower was drastically cut, and thousands of stockists were terminated. P & G, however holds that, it will continue to invest in India . According to Gary Cofer, the country manager, “it takes time to build a business category or brand in India . It is possibly an even more demanding geography than others.’’

China , on the other hand, with business worth several times than in India in less than 12 years, has emerged as a highly promising market for P & G. when the Chinese market was opened up, P & G was one of the first MNCS to enter. Prior to the liberalisation, Chinese consumers had to content with shoddy products manufactured by government companies. Per capita income of China is substantially higher than India ’s and the Chinese economy was growing faster than the Indian. Further, the success of the single child concept in China means higher disposable income.

Further it is also pointed out that for a global company like P & G, understanding Chinese culture was far easier since the expat Chinese in the US was not very different from those back home where as most Indian expats tended to adapt far more to the cultural nuances of the immigrant country.

One of P & G’s big in India was the compact technology premium detergent brand Ariel. After an initial show, Ariel, however, failed to generate enough sales – consumers seem to have gone by the per kilo cost than the cost per wash propagated by the promotion. To start with, P & G had to import the expensive state-of-the-art ingredients, which attracted heavy customs duties. The company estimated that it would cost Rs. 60 per kilo for Ariel compared to Rs. 27 for Surf and Rs. 8 for Nirma. Because of the Rupee devaluation of the early 1990s, the test market price of Rs. 35 for 500 gms was soon Rs. 41 by the time the product was launched. HLL fought Ariel back with premium variants of Surf like Surf Excel.

 

 

 

It is pointed out that, “in hindsight, even P & G managers privately admit that bringing in the latest compact technology was a big blunder. In the eighties, P & G had taken a huge beating in one of its most profitable markets, Japan, at the hands of local company Kao. Knowing the Japanese consumer’s fondness for small things, Kao weaved magic with its new-found compact technology. For a company that prided itself on technology, the drubbing in Japan was particularly painful. It was, therefore, decided that compacts would now be the lead brand for the entire Asia-Pacific region. When P & G launched Ariel in India , it hoped that the Indian consumer would devise the appropriate benchmarks to evaluate Ariel. As compacts promised economy of sue, P & G hoped that consumers would buy into the low-cost-per-wash story. But selling that story through advertising was particularly difficult, especially sine Indian consumers believed that the washing wasn’t over unless the bar had been used for scrubbing. Even though Ariel was targeted at consumer with high disposable income, who represented half the urban population, consumers simply baulked at the outlay.

 

Thereafter, one thing led to another. Ariel’s strategy of introducing variants was a smart move to flank Lever at every price point by cleverly using the brand’s halo effect. And by supporting the brand in mass media and retaining the share of voice. By 1996, it had become clear that Ariel’s equity as a high-performance detergent had begun to take a beating. Its equity as a top-of-the-line detergent was getting eroded….Nowhere in P & G’s history had a concept like Super Soaker been used to gain volumes…. It was decided that Super Soaker would no longer be supported, nor would Ariel bar be supported in media.

 

 

 

 

 

 

 

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 . 

 


BUSINESS COMMUNICATION ISMS ONGOING EXAM ANSWER SHEETS PROVIDED

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CONTACT

PRASANTH BE MBA PH.D. MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com

Doctorate in Management Studies (DMS)

 

 

Note :

(i) Attempt all four Cases
(ii) All Cases carry equal marks.

 

 

 

A Reply Sent to an Erring Customer

Dear Sir,

Your letter of the 23rd, with a cheque for Rs. 25,000/- on account, is to hand.

We note what you say as to the difficulty you experience in collecting your outstanding accounts, but we are compelled to remark that we do not think you are treating us with the consideration we have a right to expect.

It is true that small remittances have been forwarded from time to time, but the debit balance against you has been steadily increasing during the past twelve months until it now stands at the considerable total of Rs. 85,000/-

Having regard to the many years during which you have been a customer of this house and the, generally speaking, satisfactory character of your account, we are reluctant to resort to harsh measures.

We must, however, insist that the existing balance should be cleared off by regular installments of say Rs. 10,000/- per month, the first installment to reach us by the 7th.  In the meantime you shall pay cash for all further goods; we are allowing you an extra 3% discount in lieu of credit.

We shall be glad to hear from you about this arrangement, as otherwise we shall have no alternative but definitely to close your account and place the matter in other hands.

Yours truly,

 

 

Questions:

  1. Comment on the appropriateness of the sender’s tone to a customer.
  2. Point out the old – fashioned phrases and expressions.
  3. Rewrite the reply according to the principles of effective writing in business.

 


 

Case II

Advertising Radio FM Brand

A young, gorgeous woman is standing in front of her apartment window dancing to the 1970s tune, “All Right Now” by the one – hit band free.  Across the street a young man looks out of his apartment window and notices her.  He moves closer to the window, taking interest.  She cranks up the volume and continues dancing, looking out the window at the fellow, who smiles hopefully and waves meekly.  He holds up a bottle of wine and waves it, apparently inviting her over for a drink.  The lady waves back.  He kisses the bottle and excitedly says, “Yesss.”  Then, he gazes around his apartment and realizes that it is a mess. “No!” he exclaims in a worried tone of voice.

Frantically, he does his best to quickly clean up the place, stuffing papers under the sofa and putting old food back in the refrigerator, He slips on a black shirt, slicks  back his hair, sniffs his armpit, and lets out an excited , “Yeahhh!” in eager anticipation of entertaining the young lady.  He goes back to the window and sees the woman still dancing away.  He points to his watch, as if to say “Come on.  It is getting late.”   As she just continues dancing, he looks confused.  Then a look of sudden insight appears on his face, “Five,” he says to himself.  He turns on his radio, and it too is playing “All Right Now.”  The man goes to his window and starts dancing as he watches his lady friend continue stepping.  “Five, yeah,” he says as he makes the “okay” sign with his thumb and forefinger.  He waves again.  Everyone in the apartment building is dancing by their window to “All Right Now.”  A super appears on the screen: “Are you on the right wavelength?”

 

Questions:

  1. What is non – verbal communication? Why do you suppose that this commercial relies primarily on non-verbal communication between a young man and a gorgeous woman? What types of non – verbal communication are being used in this case?
  2. Would any of the non-verbal communications in this spot (ad) not work well in another culture?
  3. What role does music play in this spot? Who is the target market?
  4. Is the music at all distracting from the message?
  5. How else are radio stations advertised on TV?

 

 

 

 

 

 

 

 

 

 

 

 

 

CASE III

Arvind Pandey Caught in Business Web

Arvind Pandey is a project manager at Al Saba Construction Company in Muscat.   It s a flourishing company with several construction projects in Muscat and abroad.  It is known for completing projects on time and with high quantity construction.  The company’s Chairman is a rich and a highly educated Omani.  A German engineer is Arvind’s Vice – President for urban and foreign construction projects.

Three months ago, Al Saba had submitted a tender for a major construction project in Kuwait.  Its quotation was for $ 25 million.  In Kuwait the project was sponsored and announced by a US – based construction company called Fuma.  According to Al Saba, their bid of $ 25 million was modest but had included a high margin of profit.

On 25 April, Arvind was asked to go to Kuwait to find out from the Fuma project manager the status of their construction proposal.  Arvind was delighted to know that Fuma had decided to give his company, (Al Saba) the construction project work.  The project meant a lot of effort and money in planning the proposed construction in Kuwait.

But before Arvind could tank the Fuma project manager, he was told that their bird should be raised to $ 28 million.  Arvind was surprised. He tried to convince the Fuma project manager that his (Arvind company had the bast reputation for doing construction work in a cost effective way.  However, he could always raise the bid by $ 3 million. But he wanted to know why he was required to do so.

The Fuma manager’s reply was, “That’s the way we do our business in this part of the world, $ 1 million will go to our Managing Director in the US, I shall get $ 1 million, you, Mr. Pandey, will get $ 1 million in a specified account in Swiss Bank.

Arvind asked, “But why me?”

“So that you never talk about it to any one.”  The Fuma Project Manager said.

Arvind promised never to leak it out to any one else.  And he tried to bargain to raise the bid by $ 2 million.  For Arvind was familiar with the practice of “pay – offs” involved in any such thing.  He thought it was against his loyalty to his company and his personal ethics.  Arvind promised the Fuma project manager that the bid would be raised to $ 28 million and fresh papers would be put in. He did not want to lose the job.

He came back to Muscat and kept trying to figure out how he should place the whole thing before his German Vice President.  He obviously was at a loss.

 

Questions:

  1. Analyse the reasons for Arvind Pandey’s dilemma.
  2. Does Arvind Pandey really face a dilemma?
  3. In your view what should Arvind Pandey do? Should he disclose it to his German Vice President?

 

 

 

 

 

 

 

CASE IV

Company Accepting a Contract

A computer company was negotiating a very large order with a large size corporation.  They had a very good track record with this client.

In this corporation, five different departments had pooled their requirements and budgets.  A committee was formed which had representation from all the departments.  The corporation wanted the equipment on a long lease and not outright purchase.  Further, they wanted the entire hardware and software form one supplier.  This meant that there should be bought – out items from many suppliers since no one supplier could meet all the requirements of supply from its range of products.

The corporation provided an exhaustive list of very difficult terms and conditions and pressurized the vendors to accept.  The computer company who was finally awarded the contract had agreed to overall terms that were fine as far as their own products were concerned but had also accepted the same terms for the brought – out items.  In this case, the bought – out items were to be imported through a letter of credit. The percentage of the bought – out items versus their own manufacture was also very high.  One of the terms accepted was that the “system” would be accepted over a period of 10 days after all the hardware had been linked up and software loaded.

The computer company started facing trouble immediately on supply.  There were over 100 computers over a distance connected with one another with software on it.  For the acceptance tests, it had been agreed that the computer company would demonstrate as a pre-requisite the features they had claimed during technical discussions.

Now, as you are aware, if a Hero Honda motorcycle claims 80 km to a litre of petrol, it is under ideal test conditions and if a motorcycle from the showroom were to be tried for this test before being accepted, it would never pass the test.  In corporation’s case, due to internal politics, the corporation persons from one department – who insisted on going exactly by the contract – did not sign acceptance since the “system” could not meet the ideal test conditions.

Further, in a classic case of, “for want of a horse – shoe, payment for the horse was held up”, the computer company tried to get the system accepted and payment released.  The system was so large that at any point of time over a period of 10 days something small or the other always gave problems.  But the corporation took the stand that as far as they were concerned the contracts clearly were concerned the contract clearly mentioned that the “system” had to be tested as a whole and not module by module.

 

Questions:

  1. Comment on the terms and conditions placed by the corporation.
  2. What factors influenced the computer company’s decision to accept the contract?
  3. Was it a win – win agreement? Discuss?

 

 

BUSINESS ETHICS

 

 

 

Doctorate in Management Studies (DMS)

 

 

 

Note :- Solve any 4 case study

            All case carries equal marks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case No : 1

PUBLIUS

 

Although many people believe that the World Wide Web is anonymous and secure from censorship, the reality is very different.  Governments, law courts, and other officials who want to censor, examine, or trace a file of materials on the Web need merely go to the server (the online computer) where they think the file is stored.  Using their subpoena power, they can comb through the server’s drives to find the files they are looking for and the identify of the person who created the files.

On Friday June 30, 2000, however, researches at AT & T Labs announced the creation of Publius, a software program that enables Web users to encrypt (translate into a secret code) their files – text, pictures, or music – break them up like the pieces of a jigsaw puzzle, and store the encrypted pieces on many different servers scattered all over the globe on the World Wide Web.  As a result, any one wanting to examine or censor the files or wanting to trace the original transaction that produced the file would find it impossible to succeed because they  would  have to examine the contents of dozens of different servers all over the world, and the files in the servers would be encrypted and fragmented in a way that would make the pieces impossible to identify without the help of the person who created the file.  A person authorized to retrieve the file, however, would look through a directory of his files posted on a Publius – affiliated website, and the Publius network would reassemble the file for him at his request.  Researchers published a description of Publius at www.cs.nyu.edu/waldman/publius.

 

 

Although many people welcomed the way that the new software would enhance freedom of speech on the Web, many others were dismayed.  Bruce Taylor, an antipornography activist for the National Law Center for Children and Families, stated : “It’s nice to be anonymous, but who wants to be more anonymous than criminals, terrorists, child molesters, child pornographers, hackers and e-mail virus punks.”  Aviel Rubin and Lorrie Cranor, the creators of Publius, however, hoped that their program would help people in countries where freedom of speech was repressed and individuals were punished for speaking out.  The ideal user of Publius, they stated, was “a person in China observing abuses of human rights on a day – to – day basis.”

Questions :

  1. Analyze the ethics of marketing Publius using utilitarianism,         rights, justice, and caring.  In your judgement, is it ethical to       market Publius ?  Explain.
  2. Are the creators of Publius in any way morally responsible for any           criminal acts that criminals are able to carry out and keep secret     by relying on Publius ?  Is AT & T in any way morally       responsible     for these ?  Explain your answers.
  3. In your judgment, should governments allow the implementation of Publius ?  Why or why not ?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case NO. 2

A JAPANESE BRIBE

In July 1976, Kukeo Tanaka, former prime minister of Japan , was arrested on charges of taking bribes ($ 1.8 million) from Locjheed Aircraft Company to secure the purchase of several Lockheed jets.  Tanaka’s secretary and serial other government officials were arrested with him.  The Japanese public reacted with angry demands for a complete disclosure of Tanaka’s dealings. By the end of the year, they had ousted Tanaka’s successor, Takeo Miki, who was widely believed to have been trying to conceal Tanaka’s actions.

In Holland that same year, Prince Bernhard, husband of Queen Juliana, resigned from 300 hundred positions he held in government, military, and private organizations.  The reason : He was alleged to have accepted $ 1.1 million in bribes from Lockheed in connection with the sale of 138 F – 104 Starfighter jets.

In Italy , Giovani Leone, president in 1970, and Aldo Moro and Mariano Rumor, both prime ministers, were accused of accepting bribes from Lockheed in connection with the purchase of $ 100 million worth of aircraft in the late 1960s.  All were excluded from government.

Scandinavia , South Africa , Turkey , Greece , and Nigeria were also among the 15 countries in which Lockheed admitted to having handed out payments and at least $ 202 million in commissions since 1970.

Lockheed Aircraft’s involvement in the Japanese bribes was revealed to have begun in 1958 when Lockheed and Grumman Aircraft (also an American firm) were competing for a Japanese Air Force jet aircraft contract.  According to the testimony of Mr. William Findley, a partner in Arthur Young & Co. (auditors for Lockheed), in 1958 Lockheed engaged the services of Yoshio Kodama, an ultra right – wing war criminal and reputed underworld figure with strong political ties to officials in the ruling Liberal Democratic Party.  With Kodama’s help, Lockheed secured the Government contract.  Seventeen years later, it was revealed that the CIA had been informed at the time (by an American embassy employee) that Lockheed had made several bribes while negotiating the contract.

 

In 1972, Lockheed again hired Kodama as a consultant to help secure the sale of its aircraft in Japan .  Lockheed was desperate to sell planes to any major Japanese airline because it was scrambling to recover from a series of financial disasters.   Cost overruns on a government contract had pushed Lockheed to the brink of bankruptcy in 1970.  Only through a controversial emergency government loan guarantee of  $ 250 million in 1971 did the company narrowly avert disaster.  Mr. A. Carl Kotchian, president of Lockheed from 1967 to 1975, was especially anxious to make the sales because the company had been unable to get as many contracts in other parts of the world as it had wanted.

This bleak situation all but dictated a strong push for sales in the biggest             untapped market left-Japan.  This push, if successful, might well bring in    revenues upward of $ 400 million.  Such a cash inflow would go a long way             towards helping to restore Lockheed’s fiscal health, and it would, of      course, save the jobs of thousands of firm’s employees. (Statement of Carl Kotchian)

Kodama eventually succeeded in engineering a contract for Lockhed with All – Nippon Airways, even beating out McDonnell Douglas, which was actively competing with Lockheed for the same sales.  To ensure the sale, Kodama asked for and received from Lockheed about $9 million during the period from 1972 to 1975.  Much of money allegedly went to then – prime minister Kukeo Tanaka and other government officials, who were supposed to intercede with All – Nippon Airlines on behalf of Lockheed.

According to Mr. Carl Kotchian, “ I knew from the beginning that this money was going to the office of the Prime Minister.”   He was, however, persuaded that, by paying the money, he was sure to get the contract from All-Nippon Airways.  The negotiations eventually netted over $1.3 billion in contracts for Lockheed.

In addition to Kodama, Lockheed had also been advised by Toshiharu Okubo, an official of the private trading company, Marubeni, which acted as  Lockheed’s official representative.  Mr. A. Carl Kotchian later defended the payments, which he saw as one of many “Japanese business practices” that he had accepted on the advice of his local consultants.  The payments, the company was convinced, were in keeping with local “ business practices.”

Further, as I’ve noted, such disbursements did not violate American laws.          I should also like to stress that my decision to make such payments            stemmed from my judgment that the (contracts) …… would provided   Lockheed workers with jobs and thus redound to the benefit of their          dependents, their communities, and stockholders of the corporation.  I should like to emphasize that the payments to the so-called “ high           Japanese government officials” were all requested y Okubo and were not      brought up from my side.  When he told me “ five hundred million yen is necessary for such sales,” from a purely ethical and moral standpoint I       would have declined such a request.  However, in that case, I would most    certainly have sacrificed commercial success….. (If) Lockheed had not remained competitive by the rules of the game as then played, we would       not have sold (our planes) ……… I knew that if we wanted our product to have a chance to win on its own merits, we had to follow the functioning           system.  (Statement of A. Carl Kotchian)

In August, 1975, investigations by the U.S. government led Lockheed to admit it had made  $ 22 million in secret payoffs.  Subsequent senate investigations in February 1976 made Lockheed’s involvement with Japanese government officials public.  Japan subsequently canceled their billion dollar contract with Lockheed.

In June 1979, Lockheed pleaded guilty to concealing the Japanese bribes from the government by falsely writing them off as “marketing costs”.  The Internal Revenue Code states, in part.  “ No deduction shall be allowed….. for any payment made, directly or indirectly, to an official or employee of any government …. If the payment constitutes an illegal bribe or kickback.’  Lockheed was not charged specifically with bribery because the U.S. law forbidding bribery was not enacted until 1978.  Lockheed pleaded guilty to four counts of fraud and four counts of making false statements to the government.  Mr. Kotchian was not indicated, but under pressure from the board of directors, he was forced to resign from Lockheed.  In Japan , Kodama was arrested along with Tanaka.

 

 

 

 

Questions :

  1. Fully explain the effects that payment like those which Lockheed             made to the Japanese  have on the structure of a market.  
  2. In your view, were Lockheed’s payments to the various Japanese            parties “bribes” or “extortions” ?  Explain your response fully.
  3. In your judgment, did Mr. A. Carl Kotchian act rightly from a       moral   point of view ?  (Your answer should take into account the effects of the payments on the welfare of the societies affected, on          the right and duties of the various parties involved, and on the         distribution of benefits and    burdens among the groups involved.)        In your judgment, was Mr. Kotchian morally responsible for         his       actions ?  Was he, in the end, treated fairly ?
  4. In its October 27, 1980, issue, Business Week argued that every             corporation has a corporate culture – that is, values that set a     pattern for its employee’s activities, opinions and actions and that           are instilled in succeeding generations of employees (pp.148-60)         Describe, if you can, the corporate culture of Lockheed and relate that culture to Mr. Kotchian’s actions.  Describe some strategies            for changing that culture in ways that    might make foreign    payments less likely.

 

 

 

 

 

 

 

 

 

Case NO. 3

 

THE NEW MARKET OPPORTUNITY

In 1994, anxious to show off the benefits of a communist regime, the government of China invited leading auto manufacturers from around the world to submit plans for a car designed to meet the needs of its massive population.  A wave of rising affluence had suddenly created a large middle class of Chinese families with enough money to buy and maintain a private automobile.  China was now eager to enter joint ventures with foreign companies to construct and operate automobile manufacturing plants inside China .  The plants would not only manufacture cars to supply China’s new internal market, but could also make cars that could be exported for sale abroad and would be sure to generate thousands of new jobs.  The Chinese government specified that the new car had to be priced at less than $5000, be small enough to suit families with a  single child (couples in China are prohibited from having more than one child), rugged enough to endure the poorly maintained roads that criss-crossed the nation, generate a minimum of  pollution, be composed of parts that were predominantly made within China, and be manufactured through joint – venture agreements between Chinese and foreign companies.  Experts anticipated that the plants manufacturing the new cars would use a minimum of automation and wuld instead rely on labor – intensive technologies that could capitalize on China ’s cheap labor.  China saw the development of a new auto industry as a key step in its drive to industrialize its economy.

The Chinese market was an irresistible opportunity for General Motors, Ford and Chrysler, as well as for the leading Japanese, European and Korean automobile companies.  With a population of 1.2 billion people and almost double digit annual economic growth rates, China estimated that in the next 40 years between 200 and 300 million of the new vehicles would be purchased by Chinese citizens.  Already cars had become a symbol of affluence for China’s new rising middle class, and a craze for cars had led more than 30 million Chinese to take driving lessons despite that the nation had only 10 million vehicles, most of them government – owned trucks.

 

Environmentalists, however, were opposed to the auto manufactures’  eager rush to respond to the call of the Chinese government.  The world market for energy, particularly oil, they pointed out, was based in part on the fact that China , with its large population, was using relatively low levels of energy.  In 1994, the per-person consumption of oil in China was only one sixth of Japan ’s and only a quarter of Taiwan ’s.  If China were to reach even the modes per person consumption level of South Korea , China would be consuming twice the amount of oil the United States currently uses.  At the present time, the United States consumes one forth of the world’s total annual oil supplies, about half of which it must import from foreign countries.

Critics pointed out that if China were to eventually have as many cars on the road per person as Germany does, the world would contain twice as many cars as it currently does.  No matter how “ pollution – free” the new car design was, the cumulative environmental effects of that many more automobiles in the world would be formidable.  Even clean cars would have to generate large amounts of carbon dioxide as they burned fuel, thus significantly worsening the greenhouse effect.  Engineers pointed out that it would be difficult, if not impossible, to build a clean car for under $5000.  Catalytic converters, which diminished pollution, alone cost over $200 per car to manufacture.  In addition, China ’s oil refineries were designed to produce only gasoline with high levels of lead.  Upgrading all its refineries so they could make low-lead gasoline would require an investment China seemed unwilling to make.

Some of the car companies were considering submitting plans for an electric car because China had immense coal reserves which it could burn to produce electricity.  This would diminish the need for China to rely on oil, which it would have to import.  However, China did not have sufficient coal burning electric plants nor an electrical power distribution system that could provide adequate electrical power to a large number of vehicles.  Building such an electrical power system also would require a huge investment that the Chinese government did not seem particularly interested in making.  Moreover, because coal is a fossil fuel, switching from an oil – based auto to a coal – based electric auto would still result in adding substantial quantities of carbon dioxide to the atmosphere.

Many government officials were also worried by the political implications of having China become a major consumer of oil.  If China were to increase its oil consumption, would have to import all its oil from the same countries that other nations relied on, which would create large political, economic and military risks.  Although the United States imported some of its oil from Venezuela and Mexico , most of its imports came from the Middle East – an oil source that China would have to turn to also.  Rising demand for Middle East oil would push oil prices sharply upward, which would send major shocks reverberating through the economics of the United States and those of other nations that relied heavily on oil.  State Department officials worried that China would begin to trade weapons for oil with Iran or Iraq , heightening the risks of major military confrontations in the region.  If China were to become a major trading partner with Iran or Iraq , this would also create closer ties between these two major power centres of the non-Western world – a possibility that was also laden with risk.   Of course, China might also turn to tapping the large reserves of oil that were thought to be lying under Taiwan and other areas neighboring its coast.  However, this would bring it into competition with Japan , South Korea , Thailand , Singapore , Taiwan , the Phillippines, and other nations that were already drawing on these sources to supply their own booming economies.  Many of these nations, anticipating heightened tensions, were already puring money into their military forces, particularly their navies.  In short, because world supplies of oil were limited, increasing demand seemed likely to increase the potential for conflict.

Questions :

  1. In your judgment, is it wrong, from an ethical point of view, for     the auto companies to submit plans for an automobile to China          ?          Explain your  answer ?
  2. Of the various approaches to environmental ethics outlined in this           chapter, which approach sheds most light on the ethical issues         raised by  this case ?  Explain your answer.
  3. Should the U.S. government intervene in any way in the    negotiations between U.S. auto companies and the Chinese    government ?  Explain ?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case NO. 4

 

WAGE DIFFERENCES AT ROBERT HALL

Robert Hall Clothes, Inc., owned a chain of retail stores that specialized in clothing for the family.  One of the Chain’s stores was located in Wilmington , Delaware .  The Robert Hall store in Wilmington had a department for men’s and boy’s clothing and another department for women’s and girl’s clothing.  The departments were physically separated and were staffed by different personnel : Only men were allowed to work in the men’s department and only women in the women’s department.  The personnel of the store were sexually segregated because years of experience had taught the store’s managers that, unless clerks and customers were of the same sex, the frequent physical contact between clerks and customers would embarrass both and would inhibit sales.

The clothing in the men’s department was generally of a higher and more expensive quality than the clothing in the women’s department.  Competitive factors accounted for this : There were few other men’s stores in Wilmington so the store could stock expensive men’s clothes and still do a thriving business, whereas women’s clothing had to be lower priced to compete with the many other women’s stores in Wilmington.  Because of these differences in merchandise, the store’s profit margins on the men’s clothing was higher than its margins on the women’s clothing.  As a result, the men’s department consistently showed a larger dollar volume in gross sales and a greater gross profit, as is indicated in Table 7.11.

Because of the differences shown in Table 7.11 women personnel brought in lower sales and profits per hour.  In fact male salespersons brought in substantially more than the females did (see Tables 7.12 and 7.13)

Men’s Department Women’s Department
 

 

Year

 

Sales

($)

Gross Profit

($)

Percent Profit

($)

 

Sales

($)

Gross Profit

($)

Percent Profit

($)

1963 210,639 85,328 40.5 177,742 58,547 32.9
1964 178,867 73,608 41.2 142,788 44,612 31.2
1965 206,472 89,930 43.6 148,252 49,608 33.5
1966 217,765 97,447 44.7 166,479 55,463 33.5
1967 244,922 111,498 45.5 206,680 69,190 33.5
1968 263,663 123,681 46.9 230,156 79,846 34.7
1969 316,242 248,001 46.8 254,379 91,687 36.4

TABLE 7. 12

 

Year

Male Sales per Hour

($)

Female Sales Per Hour

($)

Excess M Over F (%)
1963

1964

1965

1966

1967

1968

1969

38.31

40.22

54.77

59.58

63.18

62.27

73.00

27.31

30.36

33.30

34.31

36.92

37.20

41.26

40

32

64

73

71

70

77

 

            As a result of these differences in the income produced by the two departments, the management of Robert Hall paid their male salespersons more than their female personnel.  Management learned after a Supreme Court ruiling in their favor in 1973 that it was entirely legal for them to do this if they wanted.  Wages in the store were set on the basis of profits per hour per department, with some slight adjustments upward to ensure wages were comparable and competitive to what other stores in the area were paying.  Over the years, Robert Hall set the wages given in Table 7.14.  Although the wage differences between males and females were substantial, they were not as large as the percentage differences between male and female sales and profits.  The management of Robert Hall argued that their female clerks were paid less because the commodities they sold could not bear the same selling costs that the commodities sold in the men’s department could bear.  However, the female clerks argued, the skills, sales efforts, and responsibilities required of male and female clerks were “substantially” the same.

TABLE 7. 13

 

Year

Male Gross Profits per Hour

($)

Female Gross Profits Per Hour

($)

Excess M Over F (%)
1963

1964

1965

1966

1967

1968

1969

15.52

16.55

23.85

26.66

28.74

29.21

34.16

9.00

9.49

11.14

1143

12.36

12.91

15.03

72

74

114

134

133

127

127

 

 

TABLE 7. 14

 

Year

Male Earnings per Hour

($)

Female Earnings Per Hour

($)

Excess M Over F (%)
1963

1964

1965

1966

1967

1968

1969

2.18

2.46

2.67

2.92

2.88

2.97

3.13

1.75

1.86

1.80

1.95

1.98

2.02

2.16

25

32

48

50

45

47

45

 

Questions :

  1. In your judgment, do the managers of the Robert Hall store have any      ethical obligations to change their salary policies ?  If you do not think they should change, then explain why they have an obligation          to change and describe the kinds of changes they should make.        Would it make any difference to your analysis if, instead of two         departments in the same store, it involved two different Robert Hall        Stores, one for men and one for women ? Would it make a difference if     two stores  (one for men and one for women) owned by different          companies were involved ?  Explain each of your answers in terms of      the relevant ethical principles upon which you are relying.
  2. Suppose that there were very few males applying for clerks’ jobs in         Wilmington while females were flooding the clerking job market.      Would this competitive factor justify paying males more than females      ?  Why ?  Suppose that 95 percent of the women in Wilmington who             were applying for clerks’ jobs were single women with children who        were on welfare while 95 percent of the men were single with no   families to support.  Would this need factor justify paying females      more than males ?  Why ?  Suppose for the sake of argument that men     were better at selling than women; would this justify different       salaries ?

 

 

  1. If you think the managers of the Robert Hall store should pay their         male and female clerks equal wages because they do “substantially          the same work” then do you also think that ideally each worker’s             salary should be pegged to the work he or she individually performs        (such as by having each worker sell on commission) ?  Why ? Would a         commission system be preferable from a utilitarian point of view             considering the substantial book keeping expenses it would involve ?      From the point of view of justice ?  What does the phrase        substantially the same mean to you ?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case NO. 5

 

NAPSTER’S REVOLUTION

Eighteen – year old Shawn “NAPSTER” Fanning, then a freshman at Northeastern University, dropped out of school and founded Napster Inc. (website was at w.w.w.napster.com) in San Mateo, California in May 1999.  Two months earlier, working in his college dorm room, he had developed both a website that let users locate other users who were willing to share whatever music files they had in MP3 format on the hard drives of their computers and a software program (called “Napster) that let users copy these music files from each other over the Internet.  When an early free version of the program he posted on Download.com received more than 300,000 hits and was named “Download of the week,” he decided to devote himself full time to developing his program and website.  The final version of his version of his program was officially released August 1999, and in May 2000, with more than 10 million people – most of them students on college campuses where Napster was especially popular – signed up at its website, Shawn’s company received $ 15 million of start – up funds from venture capital firms in California’s “Silicon Valley.”

Fanning grew up in Brockton , Massauchettes, the son of a nurse’s aid and the stepson of a truck driver, in a family of four half-brothers and half-sisters. He got the nickname “Napster” during a basketball game when a player commented on his closely cropped sweaty head of hair.  Fanning had taught himself programming and had held several summer programming jobs.

The company Shawn helped establish gave the Napster program away for free and charged users nothing to use its website to post the URL addresses where personal copies of music could be downloaded.  Nevertheless, a month later, Shawn found himself embroiled in a legal and ethical controversy when two record tables, two musicians (Metallica and Dr. Dre), and two industry trade groups of music companies (the National Music Publishers Association and the Recording Industry Association of America) filed suits against his young company claiming that Napster’s software was enabling other to make and distribute copies of copyrighted music that the musicians and companies owned.

 

On June 12, the two industry trade groups filed preliminary injunctions against the company demanding that it remove all the songs owned by their member companies from Napster’s song directories.  According to the two groups, a survey of 2555 college students showed a correlation between Napster use and decreased CD purchases.  College students were outraged, especially fans of Metallica and Dr. Dre. Supporters of Napster argued that Napster allowed people to hear music that they then went out and purchased, so Napster actually helped the music companies.  Music sales had increased by over $500 million a year since Napster had started to operate, but the music companies claimed that this was a result of a booming economy.  Supporters of Napster also argued that individuals had a moral and legal right to lend other individuals a copy of the music on the CDs that they had purchased.  After all, they argued, the law explicitly stated that an individual could make a copy of copyrighted music he or she had purchased to hear the music on another player.  Moreover, according to Fanning, Napster was not doing anything illegal, and the company was not responsible if other people used its software and website to copy music in violation of copyright law any more than a car company was responsible when its autos were used by thieves to rob banks.  Much of the music that was downloaded using Napster, they claimed, was in the public domain (i.e.not legally owned by anyone) and was being legally copied.  The music companies countered that an individual had no right to give multiple copies of their music to others even if the individual had paid for the original CD.  If everyone was allowed to copy music without paying for it, they charged, eventually the music companies would stop producing music and musicians would stop creating it.  Other musicians claimed, however, that Napster and the Web gave them a way to put their music before millions of potential fans without having to beg the music companies to sponser them.

In March 2000, the band Metallica hired consultant PDNet to electronically “evesdrop” on users who assumed they were anonymously accessing Napster’s website.  The following week the band’s lawyers handed Napster a list with the names of 300, 000 people that Metallica claimed had violated its copyrights using Napster’s service and that Metallica now wanted removed from Napster’s services.  Fanning complied with the demand of Metallica, whose drummer, Lars Ulrich, was one of his musical heros.  “If they want to steal our music,” said Ulrich, “ why don’t they just go down to Tower Records and grab them off the shelves ?”  Many young people protested that the bands should not be alienating their own fans in this way.  One fan posted a note on an MP3 chat room : “Give me a break !  I have been dropping 16 bucks an album for Metallica’s music since I was a teenager.  They made a fortune off us and now they accuse us of stealing from them.  What nerve !”  Howard King, a Los Angeles lawyer for Metallica and Dr. Dre, stated that “I don’t know Shawn Fanning but he seems to be a pretty good kid who came up with a sensational program.  But this sensational program has allowed people to take music without paying ………. Shawn probably had no idea of the legal ramifications of what he created.  I’m sure the though never crossed his mind.”

In August 2000, a federal judge in San Francisco , Marilyn Patel, responded to the suit against Napster.  Judge Patel called Shawn’s company a “monster” and charged that the only purpose of Napster was to copy pirated music without paying for it.  The judge ordered Napster to remove all URLS from its website that referenced material that was copyrighted.

Judge Patel’s ruling would have shut down the company’s website immediately.  But a few days later, an appeals court reversed Judge Patel and allowed the company to continue operating.  The reprieve was only temporary.  On Monday February 12, 2001 , the Ninth Circuit Court of Appeals in San Francisco affirmed Judge Patel’s ruling.  The company attempted to circumvent the ruling by negotiating agreements with the music companies that would pay them certain annual fees in return for withdrawing the suit.

Napster was not the only software that allowed individuals to swap files from

One personal computer to another over the Internet.  The software program named “Gnutella”  let individuals swap any kind of files – music, text, or visuals – over the Internet, but Gnutella did not operate a centralized index like the website that Napster had established.  Observers predicated that if Napster was put out of business, numerous underground websites would be created providing the kind of listing service that the company had earlier provided on its website.  Already a website named zeropaid.com provided free copies of Gnutella and many other Napster clones that users could download and use to share digital music files with each other.  Unlike Napster, these software products did not require a central website to connect users to each other, making it impossible for music companies to find and target single entity whom they could sue.  Many observers predicated that Napster was only the beginning of an upheaval that would revolutionize the music industry, forcing music companies to lower their prices, make their music easily available on the Internet, and completely change their business models.

Questions :

  1. What are the legal issues involved in this case, and what are the moral issues ? How are the two different kinds of issues different        from each other, and how are they related to each other ?  Identify         and distinguish the “systemic, corporate and individual issues”           involved in this case.  

 

  1. In your judgment, was it morally wrong for Shawn Fanning to        develop and release his technology to the world given its possible   consequences ?  Was it         morally wrong for an individual to use          Napster’s website and software to copy            for free the copy righted        music on another person’s hard drive ? If you believe it was wrong, then explain exactly why it was wrong.  If you believe it was          not       morally wrong, then how would you defend your views against t      he claim that such copying is stealing ?  Assume that it was not I    illegal for an individual to copy music using Napster.  Would there           be anything immoral with doing so ?  Explain ?

 

  1. Assume that it is morally wrong for a person to use Napster’s website     and      software to make a copy of copyrighted music.  Who, then,     would be morally responsible for this person’s wrong doing ?        Would             only the person himself be     morally responsible ?  Was   Napster,          the company, morally responsible ? Wash shawn Fanning morally            responsible ?  Was any employee of Napster, the company,              morally responsible ?  Was the operator of the server or that portion       of the Internet that the person used morally responsible ?  What if the       person did not know that the music was copyrighted or did not think that it was illegal to copy copyrighted music ?

 

  1. Do the music companies share any of the moral responsibility for             what has happened ?  How do you think technology like Napster is       likely to  change the music industry ?  In your judgment, are these             changes ethically good or ethically bad ?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case NO. 6

 

WORKING FOR ELI LILLY & COMPANY

Eli Lilly, the discoverer of Erythromycin, Darvon, Ceclor, and Prozac, is a major pharmaceutical company that sold $6.8 billion of drugs all over the world in 1995, giving it profits of $2.3 billion.  Headquartered in Indianpolis , Minnesota , the company also provides food, housing, and compensation to numerous homeless alcoholics who perform short-term work for the company.  The work these street people perform, however, is a bit unusual.

Before approving the sale of a newly discovered drug, the U.S. Food and Drug Administration requires that the drug be put through three phases of tests after being tested on animals.  In phase I, the drug is taken by healthy human individuals to determine whether it has any dangerous side effects.  In Phase II, the drug is given to a small number of sick patients to determine dosage levels.  In Phase III, the drug is given to large numbers of sick patients by doctors and hospitals to determine its efficacy.

Phase I testing is often the most difficult to carry out because most healthy individuals are reluctant to take a new and untested medication that is not intended to cure them of anything and that may have potentially crippling or deadly side effects.  To secure test subjects, companies must advertise widely and offer to pay them as such as $250 a day.  Eli Lilly, however, does not advertise as widely and pays its volunteers only $85 a day plus free from and board, the lowest in the industry.  One of the reasons that Lily’s rates are so low is because, as a long time nurse at the Lily Clinic is reported to have indicated, “ the majority  of its subjects are homeless alcoholics” recruited through word of mouth that is spread in soup kitchens, shelters, and prisons all over the United States .  Because they are alcoholics, they are fairly desperate for money.  Because they alcoholics, they are fairly desperate for money.  Because phase I testes can run several months, test subjects can make as $4500 – an enormous sum to people who are otherwise unemployable and surviving on handouts.  Interviews with several homeless men who have participated in Lily’s drug tests and who describe themselves as alcoholics who drink daily suggest that they are, by and large, quite happy to participate in an arrangement that provides them with “easy money”.  When asked, one homeless drinker hired to participate in a Phase I trail said he had no idea what kind of drug was being tested on him even though he had signed an informed – consent form.  An advantage for Lilly is that this kind of test subject is less likely to sue if severely injured by the drug.  The tests run on the homeless men, moreover, provide enormous benefits for society.  It has been suggested, in fact, that in light of the difficulty of securing test subjects, some tests might be delayed or not performed at all if it were not for the large pool of homeless men willing and eager to participate in the tests.

The Federal Drug Administration requires that people who agree to participate in Phase I tests must give their “ informed consent” and must take a “ truly voluntary and a uncoerced decision.”  Some have questioned whether the desperate circumstances of alcoholic and homeless men allow them to make a truly voluntary and uncoerced decision when they agree to take an untested potentially dangerous drug for $ 85 a day.  Some doctors claim that alcoholics run a higher risk because they may carry diseases that are undetectable by standard blood screening and that make them vulnerable to being severely named by certain drugs.  One former test subject indicated in an interview that the drug he had been given in a test several years before had arrested his heart and “ they had to  put things on my chest to start my heart up again.”  The same thing happened to another subject in the same test.  Another man indicated that the drug he was given had made him unconscious for 2 days while others told of excruciating headaches.

In earlier years, drug companies used prisoners to test drugs in Phase I tests.  During the 1970s, drug companies stopped using prisoners when critics complained that their poverty and the promise of early parole in effect were coercing the prisoners into  “Volunteering”.  When Lilly first turned to using homeless people during the 1980s, a doctor at the company is quoted as saying, “ We were constantly talking about whether we were exploiting the homeless.  But there were a lot of them who were willing to stay in the hospital for four weeks.”   Moreover, he adds.  “Providing them with a nice warm bed  and good medical care and sending them out drug – and alcohol – free was a positive thing to do.”

A homeless alcoholic indicated in an interview that when the test he was participating in was completed, he would rent a cheap motel room where I’ll get a case of Miller and an escort girl have sex.  The girl will cost me $ 200 an hour.”  He estimated that it would take him about two weeks to spend the $ 4650 Lily would pay him for his services.  The manager at another cheap motel said that when test subjects completed their stints at Lily, they generally arrived at his motel with about $ 2500 in cash : “ The guinea pigs  go to the lounge next door, get drunk and buy the house a round.  The idea is, they can party for a couple of weeks and go back to Lily and do the next one.”

Questions :

  1. Discuss this case from the perspective of utilitarianism, rights, justice     and caring.  What insight does virtue theory shed on the ethics of    the events  described in this case ?
  2. “ In a free enterprise society all adults should be allowed to make           their own decisions about how they choose to earn their living.”          Discuss the statement  in light of the Lily case.
  3. In your judgment, is the policy of using homeless alcoholics for test         subjects morally appropriate ?  Explain the reasons for your             judgment.  What does  your judgment imply about the moral   legitimacy of a free market in labor ?
  4. How should the managers of Lily handle this issue ?